Gambling – with Your Retirement?

To encourage better investment behavior, the Nasdaq stock exchange plans to reward investors willing to commit. In 2016, the exchange introduced plans for an “Extended Life Order.” In today’s fast-paced world, how long a commitment does the Nasdaq want for an extended life trade? One second!

Information travels fast in 2017 and the stock market seems to hit highs every week. Nevertheless, I believe it is the patient, long-term investors that should benefit the most.

It’s hard to define long-term perfectly, but it is a lot more than one second–possibly somewhere above 315 million seconds, which is around ten years.

With this in mind, I think it is a good time to consider what kind of investor we want to be and what attributes we need to be successful.

Speculator/Gambler
Investing is different than gambling in many fundamental ways. However, it is still possible for investors to speculate with their savings. A speculator trades often based on short-term events hoping that a price will continue to rise or fall—anticipating a quick exit in a couple months, weeks, days, or less.

Investor
An investor purchases ownership in a company to help it raise money for profitable projects. As an owner, investors may even receive dividends.

Attributes for Success
To help determine what kind of investor you are, ask yourself, “How much would you accept in a year instead of $1,000 right now?”

Let’s hope your answer isn’t too far off one thousand dollars. The greater your number, the less financial patience you have—and patience is crucial to gaining wealth. It impacts spending, savings, and investing.

Combine patience with a little courage and then an investor truly has a chance at participating in the long-term opportunities that the markets have to offer.

Warren Buffett is one of the wealthiest individuals in the world. He built his fortune by being greedy when others were fearful and fearful when others were greedy. He purchased stocks in some of the most frightening times like during the Great Recession of 2008-2009.

Is Buffett a speculator or an investor? He certainly has patience and courage. When asked about his ideal time frame for holding an investment, Warren Buffett replied: “Forever!” Now that is an “extended life” commitment!

 

Sources: “Enhancing Long-Term Liquidity-Nasdaq Introduces the Extended Life Order” Nelson Griggs, Nasdaq.com, August 18, 2016
“Investor or Speculator: Which One Are You?” Jason Zweig, WSJ, December 10, 2016

Research by SFS. The Dow Jones index is often considered to represent the U.S. stock markets. One cannot invest directly in an index. Diversification does not guarantee positive results. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not a recommendation to purchase any type of investment.

Ransomware Gets Personal

It was an ordinary Tuesday late afternoon for John Doe; catching up with friends and family on Facebook and sifting through his email before dinner. As he was scrolling, he noticed an email from an old acquaintance he hadn’t heard from in a while. Normally, John is hesitant to click on an email that is unfamiliar as he knows it typically is junk, but he hadn’t heard from this person in ages and was curious what the email was about. John clicked on the attachment and that is when the problems began.

When opened, the attachment appeared empty and didn’t include any information. John responded to his friend. While waiting for a reply, he noticed his computer was really slow and then a large pop window appeared on the screen with an ugly picture of a clown and the words, “Your computer files have been encrypted…you must pay the ransom or your files will be deleted.”

What just happened? John was hacked with a malicious file by cybercriminals under the guise that it came from someone he knew. He subsequently paid the ransom to the hackers to get his files back.

Does this happen often? Alarmingly, YES! Cybercriminals are no longer just going after companies, but individuals like you and me, and they are doing it at an alarming rate. These online scams infect your computer in different ways including opening email attachments, clicking on links in emails, or sometimes even visiting a valid website that has been compromised by cybercriminals.

So what can we do to protect ourselves from these attacks?

Backup all of your files religiously. Use an online backup that does it automatically for you like Backblaze, Crashplan, or Carbonite.

Ensure that you are doing updates on your computer for both Mac/Windows operating systems and the various software programs that you have installed including Java, Adobe Reader, Flash, etc. This will ensure that any vulnerabilities that have been discovered and pose a threat are eliminated.

Handle email with caution. Cybercriminals are getting better at disguising their phishing emails.

No matter how authentic the email looks, don’t open attachments or click on links inside unsolicited emails from friends, businesses, the IRS, or your bank. If it seems strange, call that person and verify they really sent you the file or link. Is it inconvenient? Yes, but it’s better than paying money or losing all of your files. It’ll be worth the extra precaution in the long run.

If you have been hit by ransomware, you have some difficult decisions to make. If your files are not backed up, you can either pay the cybercriminals for an encryption key to unlock them, or lose all the files and start over.

If your files are backed up with an online company, you can have someone help you wipe the hard drive and download your backup files. All of this takes time and is extremely inconvenient. It’s better to be cautious and verify the sender before clicking on attachments or links. If you are a victim of an attack, the FBI asks that you file a complaint through their IC3 site at IC3.gov.

Sharla Jessop–President of Smedley Financial

Dear Friends and Financial Partners!

Smedley Financial Services, Inc.® is pleased to announce that Sharla J. Jessop, CFP®, was elected and has accepted the position as President of Smedley Financial, effective immediately. Sharla was elected by acclamation at our annual Board of Directors meeting in February 2017.

Sharla officially joined forces with Roger on March 1, 1994. Sharla had previously worked as an insurance agent for 10 years in Ogden and Salt Lake City. Shortly after starting, Sharla astutely passed four exams in four months.

Sharla became a Certified Financial Planner® certification holder on October 10, 2006. This includes meeting rigorous professional standards and passing multiple challenging examinations plus a 2-day, 10-hour comprehensive exam.

One of the best things about Sharla is her love for people. With Sharla, you, our clients, have always been first and foremost in her mind. She has always put your best interests first. Her ethics are above reproach.

Sharla has always been a powerhouse. From the beginning she has demonstrated great drive, energy, and ability. In so many ways Sharla has been fearless. She has met challenge after challenge. Sharla has always been teachable. If she didn’t know something, Sharla wouldn’t stop researching until she found the correct answer.

What you may not know about Sharla is that she is well-respected nationally. Many of her peers throughout the United States seek her input on a regular basis. Sharla has made time for mentoring new advisors throughout the United States.

So, at Smedley, we are entering a new era. I’ll still be around as the Chief Executive Officer (CEO).

Bullish Best Wishes,

Roger M. Smedley, CFP®

CEO

2017 Tax Update

2017 Tax Deadline: April 18th
For you procrastinators, there is some good news regarding taxes this year: the tax filing deadline has been moved back to April 18th because the 15th falls on a Saturday and Monday the 17th is a holiday in the District of Columbia. However, you should not wait until the bitter end.

Even if you have to pay, we recommend submitting your return a week in advance just to avoid any possible issues. If you are due a refund, why wait? Get your money now! If you have more questions about tax brackets or other important numbers, please check out our website.

IRA/Roth IRA Contributions
Don’t rob from your future self. Make a payment to your future security. As with taxes, you also have until April 18th to make contributions into your IRA or Roth IRA. (But don’t wait that long or you risk missing the deadline!) Remember that IRA contributions lower your current taxes. They make sense if you are in a high tax bracket now and you will be in a lower one at retirement.

Roth contributions do not lower your current taxes, but they do grow tax free. If you are currently in a low tax bracket and will be in a higher one at retirement, or if you are a long way from retirement, then Roth contributions may be the best option for you.

You can contribute $5,500 total per person to an IRA or Roth. If you are over age 50, you can make a catch-up contribution of $1,000 for a total of $6,500 per year.

If you are eligible for a 401(k) through work and if your income exceeds a certain amount, your ability to deduct IRA contributions or make Roth contributions may be limited. Please consult with your CPA or check out our website to get more information regarding the phase-out limits.

Tax Forms
All of the tax forms have been mailed out, including the delayed tax reporting on non-retirement accounts. We are sorry (especially to the accountants) that the IRS has allowed delays in order for reporting companies to provide more accurate information.

If you still haven’t seen your tax forms, log in to your myStreetscape account and download the forms under the documents section. If you do not have a login, go to www.mystreetscape.com and click “register.” Then follow the prompts to create an account. You can use the same myStreetscape login to go paperless for the future.

In April, myStreetscape is being renamed to Wealthscape. You will be able to use the same login credentials after the transition.

Qualified Charitable Distributions
We’ve had several questions, from clients and accountants, regarding Qualified Charitable Distributions (QCD) that were sent directly to charities.
A quick recap: If you are over 70 ½ years old, a QCD allows you to donate part or all of your Required Minimum Distribution (RMD) to a charity and avoid paying tax on it.

The 1099-R’s sent by National Financial Services (NFS) show the total amount of distributions and are not reduced by the amount of the QCD. So, the tax preparer should reduce the amount reported on the 1099 by the amount of the QCD to come up with the taxable amount of IRA distributions.

The QCD should NOT be included as an itemized deduction. The potential benefit of the QCD is to remove the IRA distribution from your income, which may lessen the amount of Social Security subject to tax or help you avoid Alternative Minimum Tax (AMT). Smedley Financial does not give tax advice. Please consult a qualified CPA to get additional detail.

Source: http://www.smedleyfinancial.com/financial/2017-key-numbers.php. Tax advice is not provided by Securities America representatives; therefore it is important to coordinate with your tax advisor regarding your specific situation.

Attention All Women!

The Smedley Financial “Just for Women” event is just around the corner. Save the date Thursday, May 11, 2017.

Last year’s “Just for Women” event marked the beginning of our initiative to create a community to empower and inspire women in all aspects of their personal and financial lives. We hope to see you there!

Click here to see the invitation.

Call us at 800-748-4788 for more details or to register!

Retirement is Full of Surprises

Retirement was only a few years away for Dan and Patti, and they knew it was time to get everything in order. Living in sunny southern California was wonderful, but they felt it was not the best place for them to retire. It was crowded, the cost of living was high, the traffic deplorable, and it would not allow them to be debt-free at retirement. All things pointed to finding a new city to retire to.

Five years ago, Dan and Patti started their search. Resources, such as Forbes 10 best places to retire, helped them create a list of potential cities. Some cities were easy to check off–they didn’t meet Dan and Patti’s list of must haves:

  • Small but with services including a hospital and modern medical facilities
  • Home price that allowed them to retire debt-free
  • Outdoor activities
  • Favorable tax structure
  • Growing economy
  • Community activities like continuing education

By 2015 they had created a short-list and began visiting the cities to get a feel for the local culture and people.

One year from their proposed retirement date they started planting the seeds in their new city. They purchased a home that could be rented until they were ready to move. They started preparing their home in California to go on the market. The wheels were in motion.

Throughout this five-year process they planned, reviewed, and updated their retirement and income distribution plans. This helped them feel financially confident about this exciting, but unnerving, life transition. It also gave them the financial framework to make their important decisions.

Today, Dan and Patti are living their retirement dream. They are excited about building their new network of friends, doctors, and social connections in their new community. Their new favorite saying is “We don’t have to if we don’t want to because we are retired!”

Some of the challenges they faced throughout the transition into retirement:
Timing the sale of their home
Continuation of medical coverage for a younger spouse
Slow response from employer’s human resource department regarding retirement benefits
Keeping important papers close at hand during the move
Finding temporary place to live until their new home was ready
Small things such as getting a library card while temporarily living outside of the city

Controlling your own time
Less stress and more fun is how Rolayne describes retirement. After a long and rewarding career she decided it was time to turn in her walking papers and she hasn’t looked back. Rolayne says she is busier now than she was before, but now she sets the pace.

Retiring gave Rolayne more time to help care for her aging father before he passed away; something she is thankful she was able do.
She lives an active lifestyle and as an outdoor enthusiast, regardless of the season, she can be found taking a hike or snow shoeing in the mountains. She also enjoys the flexibility retirement offers so she can spend more of her time volunteering for her church. Basically, she is doing what she wants, when she wants and loving every minute.

Retirement is delightful; however, there was some trepidation getting to this point. Navigating health care in retirement was a big concern. Rolayne found that putting the various pieces of Medicare and supplemental coverage together was frustrating and overwhelming.

While there are numerous resources available, it was still difficult to make sure she had the right coverage for her situation. Rolayne sought help from a health insurance professional who could review her options and help her find the right coverage.

Without a pension to provide a stable monthly income, Rolayne knew she needed a plan for using the nest egg she had created. Longevity runs in her family; her income distribution plan is designed with the goal of helping her nest egg provide income throughout her retirement years.

Looking forward to retirement
Retirement should be an exciting phase of life. While transitioning from a career into retirement can be stressful, a plan can help relieve some of that stress and provide a better understanding and framework for this chapter of life.

Using years of experience, we have helped clients navigate the many obstacles of this transition. Let us help you.

How Much Should You Save For Retirement?

Research shows that we, as Americans, are saving far too little to support retirement lifestyles similar to our current lifestyles. There are three major headwinds that make things worse: people are living longer and will need more money, companies are doing away with pension programs, and Social Security benefits may be reduced if action isn’t taken to shore up the Social Security trust fund.

The pendulum has swung from the World War II generation of savers to the Baby Boom generation of spenders. Inertia has a way of making the pendulum swing back to where we will become savers again.

A perfect example is the Millennial generation. Their first financial experience is the “Great Recession” of 2008 and now they are outpacing the other generations for retirement savings. Rather than wait for outside forces to compel you, start to supersize your savings to make sure your retirement will be everything you dream.

Reference the infographic to see how you stack up to other people in your age group. The infographic shows how many times of your salary you should have saved, an example of how much that is, and what the median savings amount is per age.

Notice how the people in their 20s and 30s are on track for retirement savings. It is really in 40s, 50s, and 60s where people fall behind. This is due to a myriad of reasons such as not saving enough, losing a job, or a major medical expense.

If you are on track for retirement, congratulations. Keep up the good work. If you feel like you are behind, don’t despair. The best thing you can do is to get your ship sailing in the right direction: Get out of debt, pay down your mortgage, and start socking away money.

You should be saving 10-15 percent of your own money towards retirement. If that doesn’t seem possible, try to increase your retirement savings by 2 percent now and then increase it 1 percent each year.

Saving for the future is not always easy, but it is worth it. If you want a personalized analysis to see if you are on track for retirement, please contact one of our private wealth managers.

Unexpected Retirement Expenses

Preparing for a successful retirement takes years of planning, saving, and dreaming about the years when you will no longer be working. When planning for retirement we recommend you think about the amount of monthly income you need to maintain your lifestyle.

However, there are some expenses you may not think of before retiring.

1. Home Repairs: Before retiring take inventory of the age of your house. What are some of the items that may need to be updated? Then come up with a plan for how to have cash on hand to pay for each of those repairs.

Some of the most expensive items include your home’s: HVAC, roof, pipes, septic system, deck, siding, and plumbing.

Planning for home repairs can alleviate a lot of financial burden by either repairing items before retirement or by creating a reserve home repair fund, in addition to an emergency fund.

2. Healthcare Costs: Did you know the average couple will spend about $250,000 on healthcare during their retirement? Even if you believe you will not spend that much on healthcare, it is a good idea to plan for the unexpected, especially with the rising cost of healthcare.

Although Medicare is available at the age of 65, it does not cover all medical expenses. There are additional premiums and expenses for prescription coverage. Dental and vision insurance is not covered by Medicare, so private insurance will be needed if you would like this coverage.

If you are planning to retire before the age of 65, be sure to know how much the cost of private healthcare will be. The premiums are a lot more than individuals think.

3. Purchasing Power: The average price of a movie ticket in 1974 was $2.00. Fast-forward to 2015, the average price was $8.50! That is a 3.4 percent increase in cost per year and a good example of the power of inflation.

Inflation is hard to see as it happens slowly over time, yet it is crucial to plan for in retirement.

• If you retired today with a monthly income of $3,000 and an inflation rate of 3 percent, in the year 2040 you would need about $6,000 per month to maintain the same standard of living.

• Outpacing inflation with a risk appropriate, diversified portfolio can help to minimize the risk of purchasing power.

4. Spending too much early on in retirement: Yay! You made it to retirement. You’ll have more free time, which often means spending more money. It might be spent on visiting loved ones, traveling, golfing, lunching, or starting new hobbies.

Before you retire, make sure to have a realistic amount of money you will spend each month. Make sure to include your day to day expenses, healthcare costs, taxes, home repairs, utilities, travel expenses, and any other items that may be important to you.

5. Longevity: If you know the exact day you will pass away, planning for retirement is easy. That’s not the way life goes. If we plan based solely on previous generations’ life spans, we may not plan for a long enough lifespan.

Planning beyond age 90 is a more conservative plan. Although you may need to reduce your monthly income, you will have a well-rounded plan that will help your income last for your lifetime.

Planning for retirement can be a daunting task, yet with the right team on your side you can be set up for success and live out the retirement of your dreams.

Trumponomy: Make the Economy Great Again?

Income Tax Cuts
Republicans want to simplify income tax brackets from 7 to 3 and allow everyone to pay less. It could be like an economic sugar rush. The question is: Will it turn into enough growth that it will help not hurt the national debt?

Corporate Taxes
Currently at 35 percent, a drop to 15 percent could be a shot of adrenaline to profits (according to The Wall Street Journal, with deductions, companies average 29 percent). There is also a plan to help corporations bring cash home from overseas. Do companies boost productivity or just spend on dividends and stock buybacks? Good for investors either way, but long-term we need productivity.

Infrastructure Spending
Trump promised a $500 billion stimulus, but more debt isn’t popular. Implementation will take some time and the actual budget may be smaller than promised (unless President Trump gets support from Democrats who have been working to pass infrastructure stimulus for years).

U.S. Debt
Americans are not watching this as closely as they were a couple years ago, but our debt is about to reach $20 trillion. If we ignore it, interest rates will rise and our debt will only get worse–Time to balance the budget?

 

Department of Labor Benefit to SFS Investors

The full impact of the new Department of Labor (DOL) ruling is hard to determine. But for investors, the positive impact is beginning now. Over the last year the financial industry has been befuddled by the proposed, and now final, ruling.

The goal of the DOL is to simplify the investment process for investors, giving them resources to easily determine costs associated with their investments and the cost of services provided by their financial professional. While the notion to help investors is without question a good one, changes will take months to implement and will not be in full effect until May 2017.

The good news – our investors are benefiting from the changes now. In an effort to level the playing field for all investors, investment companies are working to reduce the costs to use their investments. Low cost shares have been available to institutional investors for years. These low cost shares will now be available in the Smedley Financial managed portfolios.

We are excited about this change as the lower costs are directly reflected in your investment return.

Over the next several months we will be in contact with our investors to explain changes to the investment program and how they will benefit from the new investment platform. Watch for information in your monthly statement regarding the changes in your portfolio(s).

We welcome your questions and feedback and invite you to contact us at 800-748-4788.