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2015

Aging In Place

By | 2015, Money Moxie, Newsletter | No Comments

There are a lot of benefits out there just for seniors! In upcoming blog posts, we will feature a few of these that you can take advantage of. Today, we would like to feature a program called Silver Sneakers.

Silver Sneakers was created to help you take control of your health. This program is an insurance-benefit health-and-fitness program for people who are over age 65.
If you qualify, you will have access (for free or at low cost) to over 13,000 workout facilities and classes around the nation, which are geared specifically towards active older adults.

To see if you are eligible, check out www.silversneakers.com. Get fit, have fun, and make friends!

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Worst-Case Planning May Be Your Best Financial Tool

By | 2015, Executive Message | No Comments

Dear Valued Financial Partners and Friends,

You may profit by learning how we, as wealth managers at Smedley Financial, engage in two different processes on your behalf. Both on the financial planning side and on the investment management side, we strive to turn the tables upside down by asking the tough “What if” questions.

Regarding your financial planning with us, we first look at the positive side of helping you plan your financial future. But then we flip things upside down and strive to plan for worst-case scenarios as well.

What if you needed more money in your emergency fund? Where will the money come from? What if you or your spouse became disabled? What if you or your spouse died prematurely? What if the younger or healthier spouse dies first? Would you or your survivors be financially okay? What if one or both of you lives 10 or 15 years longer than you expect? What if one or both of you have to go to an assisted living facility? Where will the funds come from? What if you die without a will and possibly a trust? What will happen to your estate?

We hope you can see how this type of reverse thinking in your financial planning is not only beneficial, but essential.

Regarding our investment management philosophy, we strive to emulate this same type of reverse thinking. Rather than being persuaded by best investment case scenarios, the Smedley investment management team continually seeks to ask
itself the tough questions. Over the past 34 years, we at Smedley Financial have seen many people make financial mistakes–some serious and some not so serious.

What if high returns, you know, too good to be true, are promised? Many people lose much of their life savings and perhaps their homes because of the promise of high returns. What if you change your mind and want your money back the next day? Can you get your money back without severe penalties? What if something goes wrong in the future with a proposed investment? What if an investment stops performing? What if an investment drops in value? Who is minding your portfolio and continually looking out for your best interest? When someone boldly states how much money he or she made on an investment ask, “How much risk did you take to get that return?” Are you properly diversified and allocated?

Keep in mind the Will Rogers adage, “I am not as concerned about the return on my money as the return of my money.”
As a nationally recognized Wealth Manager, Smedley Financial’s motto is, “Your financial success is our passion!”

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

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Don’t Make Yourself an Easy Target

By | 2015, Money Moxie, Newsletter | No Comments

Identity theft seems to be always in the news and people want to make sure they are mitigating the risk.

Hacker

Just this last week, a student at the University of Utah discovered he was the target of identity theft. The thief applied and was approved for multiple accounts in the victim’s name and was making purchases. The individual even updated bank information using a new email address he created, unbeknownst to the victim.

What can we learn from this?

  1. Shred anything with personal information.
  2. Check your credit report for suspicious activity.
  3. If you feel you have become a victim, place an immediate freeze on your credit. This prohibits someone from applying for a loan or credit card in your name until you remove the freeze.

Another place identity thieves love is the junk yard. They search through the wrecked and totaled vehicles that potentially contain mountains of papers that can be used to steal your identity.

KSL News recently investigated and found a lot of information that had unknowingly been left in vehicles: bank information, medical records, checkbooks, and tax information,1 all of which contained the perfect recipe for identity thieves: names, address, Social Security, and bank account numbers.

What can we do to make sure our vehicle isn’t a potential jackpot for identify thieves?

  1. Clean out your vehicle regularly.
  2. Don’t store sensitive documents in your vehicle.
  3. Double check all locations, i.e. console, glove box, trunk, and underneath seat, before selling or letting your vehicle be towed after an accident.

An additional item that must not be overlooked is your online presence. It seems like every website requires a login. Some ask for a user ID. Others want your email address. The password requirements differ: letters, numbers, special characters, or all three.

The best passwords are longer than 8 characters; include a combination of letters, numbers, and special characters; and are changed every 3 months.

How can you keep track of and secure your passwords?

  1. Memorize them.
  2. Write them down and keep the list secure.
  3. Use a phrase you can remember that is hard to guess. Add variations at the beginning or end.
  4. Have your Internet browser remember them.
  5. Use installed software that remembers them.

Do not make your passwords the same. If one of your logins is compromised, the hacker will try it on your other logins. Another tip: do not write them on a sticky note next to your computer.

We have had many clients ask us about purchasing an identity theft protection product like LifeLock, IDShield, or LegalShield. You can do many things they do for free to protect your identity, such as monitoring your bank accounts, credit card statements, and your credit reports. However, this can be time-consuming.

For a monthly fee, these services monitor your personal information and send you alerts if any suspicious or fraudulent activity ensues. Each of these differs in price and the services they provide.

If this is something you would like, do your homework and research them to find one that offers the right balance of features for the price you are willing to pay.

Identity thieves work around the clock. Unfortunately, they’ve made it their job. Follow these steps to make it harder and don’t make yourself an easy target.

 

1. Mike Headrick and Tania Mashburn, “Piles of Personal Data Discovered in Salvage Yards,” KSL.com, November 9, 2015.

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Inflation

By | 2015, Money Moxie, Newsletter | No Comments

Inflation

Inflation plays a part in our lives whether you are a new parent, seasoned grandparent, or the tooth fairy. Planning ahead will help to minimize your stress when inflation rears its ugly head.

• College savings accounts let you put money aside to cover the costs of higher education. Assets grow tax-deferred and can be used tax-free for allowed expenses.

• Cafeteria plans can be used to cover basic health care costs, glasses, dental work and braces, and even day care with tax-free money. If you know you are going to spend the money, do it before giving Uncle Sam a cut. Check with your employer to see if they offer cafeteria accounts.
At retirement, the shift to living on a fixed income can be harsh. At this stage, incomes are fixed and even compress over time.

Overall, inflation may be flat, but many services retirees need continue to rise; take for instance health care, long-term care, and housing.

One way to protect your income from the impact of inflation is through a retirement income plan. Understanding how and when each of your dollars will be used to provide income during retirement allows us to implement strategies to help protect your nest egg against inflation and other major factors.

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Is the Dollar in Danger?

By | 2015, Money Moxie, Newsletter, Viewpoint | No Comments

The dollar has ruled supreme as the global reserve currency for over seven decades. It is the preferred means of payment, value, and reserve. As the most trusted currency on earth, it rewards Americans with lucrative privileges. While the dollar’s dominance is unlikely to last forever, a change would be difficult.

Dominant Dollar
The dollar’s source of power comes from trust and economics. We have a stable government a deep financial system. Against these benchmarks, other currencies fail. Our economic production represents 23 percent of global GDP.1 It is safer, easier, and less expensive to trade assets here than any other place on earth.

Profitable Privileges
The U.S. dollar is roughly 5 percent stronger than it would be if it were not the global reserve currency because foreign investors, corporations, and governments purchase dollars.2 This raises the value of our assets (real estate, stocks, etc.) as Americans and helps us enjoy a higher standard of living. Imported goods and overseas travel are especially more affordable. The impact of this wealth effect is estimated to be as high as 0.5 percent of GDP,2 which would be an increase of $900 billion for Americans this year.

In addition, almost 90 percent of world trading is done in dollars.3 This saves U.S. corporations money and lowers financial volatility.

The dollar’s status also increases demand for our government debt. According to Wikipedia, 63 percent of all reserves in the world are dollar-denominated debt. This demand lowers borrowing costs and saves our government an estimated half of one percent on interest.2

Greenback Drawback
In order to maintain the greenback’s place at the top, our government must borrow from and pay interest to everyone else. In addition, our strong dollar makes labor more expensive here. That is one of the reasons why jobs have been going overseas for decades.

Approximately 30 percent of S&P 500 companies get half their revenue from outside the United States. The strong dollar makes exports more expensive in foreign markets and may shave 0.4 percent from the U.S. economy this year.4

Challenging Change
Dethroning the dollar would be a process. It is not something that any group of individuals could change with a vote (Russian President Vladimir Putin has tried).

China is the world’s second largest economy. Should its yuan be considered a strong alternative? It is doubtful because the Chinese government wants a weak currency. It decided to lower the yuan’s value by 2 percent in August. This deliberate devaluation destroys trust, and no country has ever established the global currency through devaluation. This helps explain why the yuan is used in less than 3 percent of world trade while the dollar is used in 45 percent.5

Now What?
Extremely positive things are happening for the dollar and many experts are worried that the dollar may be too attractive. Between April 2014 and April 2015 the dollar appreciated 13 percent6 (a massive move for currency). Now, the Federal Reserve is conflicted over whether to raise rates because it may cause the dollar to strengthen even more.

The so called “experts” and conspiracy theorists will continue to beat their drums. No matter how logical their arguments appear, their poor predictions are meant to create fear.

Discussing the dollar’s status into the future and working hard to maintain its credibility is vital. If we do this, I believe it is safe to say that the days of the strong dollar will be with us for many, many years to come.

 

1. Derek Bacon, “Dominant and Dangerous,” The Economist, October 2015.
2. Richard Dobbs, David Skilling, Wayne Hu, Susan Lund, James Manyika, Charles Roxburgh, “An Exorbitant Privilege? Implications of Reserve Currencies for Competitiveness,” McKinsey & Company, December 2009.
3. Milton Ezrati, “Currencies: Yuan Wrong to Rule Them All,” Lord Abbett, November 2015.
4. Chris Matthews, “The Strong Dollar: Your Enemy or Friend?” Fortune, March 2015.
5. Fion Li, “Yuan Overtakes Yen as World’s Fourth Most-Used Payment Currency,” Bloomberg, October 2015.
6. Federal Reserve Bank of St Louis.

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Social Security Changes

By | 2015, Money Moxie, Newsletter | No Comments

With the stroke of a pen, a favorite Social Security filing strategy has been taken off the table. The Bipartisan Budget Act of 2015 was signed November 2nd and eliminated most of the “File and Suspend” options after April 30, 2016. Below is a summary of the recent changes.

File and Suspend
• Currently: A person who is at or past their full retirement age (FRA) can file for their benefits but suspend receiving them, allowing a spouse to collect off of their record.

• Through April 30, 2016: Anyone age 66 or older can still file and suspend to allow an eligible spouse to collect a benefit off their record.

• After April 30 2016: “File and Suspend” will no longer allow a spouse to collect benefits off of the filer’s record unless the filer takes a benefit. For a spouse to collect a benefit, filers must collect their own benefit and forgo delayed retirement credits. If an individual suspends benefits, all spousal and dependent benefits will be suspended.

Restricted Application for Spousal Benefits
• Currently: A spouse who is at or past FRA, and who has not received any benefits, can choose either a spousal benefit only (referred to as a Restricted Application) or his or her own individual benefit.

• Anyone 62+ by the end of 2015 is grandfathered and retains the ability to restrict their claim to spousal benefits only if they wait to collect until they reach their FRA.

Individuals who are younger than 62 will not have the choice of which benefit they collect when they reach FRA. Regardless of their age, they will be “deemed” to have filed for the highest benefit. They will no longer have the option to restrict their benefit to their spousal benefit only.

 

Smedley Financial and its advisors do not provide personal tax advice. It is important to coordinate with your tax advisor regarding your situation.

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Year-End Tax Tips

By | 2015, Money Moxie, Newsletter | No Comments

As the end of 2015 approaches, here are some year-end tax tips that may help you save some of your hard-earned money.

Piggy Bank

• Tax harvesting – This is one way to turn a curse into a blessing. If you have an investment with large capital gains that you haven’t wanted to sell for tax reasons, just look to see if you have another non-retirement investment that is underwater. If you sell both investments, you can use the losses in the poor-performing investment to offset the gains of the good performer.

• Lost a job or retired early – You may consider a Roth conversion if your taxable income is low. Low-income years can result in more deductions than taxable income, which means that you may be able to convert part or all of an IRA into a Roth without much tax consequence.

• Roth conversions – If you have been contemplating converting money from an IRA into a Roth for 2015, just remember that the conversion has to take place before the end of the year.

• Watch for approval of Qualified Charitable Distributions (QCD’s) – Congress hasn’t approved QCD’s yet, and they may not this year. They have a history of waiting until the last minute. If congress does approve QCD’s and you are over age 70.5, you can donate part or all of your Required Minimum Distribution to a charity. This donation reduces your taxable income and may mean that less of your Social Security is subject to tax.

 

Smedley Financial and its advisors do not provide personal tax advice. It is important to coordinate with your tax advisor regarding your situation.

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Rightsizing For Retirement

By | 2015, Money Moxie | No Comments

Most seniors prefer to stay in their own homes as long as possible – we refer to this as aging in place. This is more likely to happen with sufficient retirement funds and a willing family close by to help when needed. However, there are many reasons to consider rightsizing your home as retirement grows near. Before making a decision to rightsize, consider these scenarios:

Moving to a state or city to reduce your cost of living.
If your career has kept you in the same location, retirement may be a great time to consider a move. This is especially true if you live in an area with higher costs of living. In looking for a new location consider these points:

  • Personal visit: Take a trip and spend some time in the areas that you may want to call home. Stay at a local hotel. Visit local restaurants and grocery stores. Go to the local parks, malls, and entertainment districts.
  • Talk to the locals: You can learn more about an area, good and bad, from the people who live there. They are generally happy to share what they love about an area. They can also steer you to other acceptable areas.
  • Property tax: Contact the county assessor’s office to find out how local property taxes stack up based on home size in the locations you desire.
  • State and local tax: There are seven states that do not charge income tax. But you have to do some research. They make up the difference through sales, property, excise, and franchise taxes.

Getting closer to children and grandchildren.
If your children have moved out of state, you may consider relocating closer to them. This creates the opportunity to be more involved in their lives and build a closer relationship. You may also have the support of your children as you age.

Family Meal

Acquiring a home more conducive to entertaining.
This generally means having fewer bedrooms and more common area. As your family grows, the holiday parties and family gatherings include more people; suddenly your five-bedroom home feels cramped.

  • Floor plan: Consider a new floor plan with fewer bedrooms and a large family room and kitchen area. It may also mean a smaller home in a planned unit development (PUD) for seniors, offering a clubhouse, park, or even a swimming pool that residents can use to entertain.
  • Neighborhood living: If you age in a single family home, there may come a time when you can no longer keep up with the physical demands of taking care of the yard and exterior of your home. You can hire someone to do the work or rely on your family members to step in and help out. Either way there may be a cost.
  • Planned community living: One benefit that is easily overlooked in a PUD community is living among neighbors in a similar stage of life. These communities offer planned events and entertainment. Landscaping and maintenance of common area buildings are included in the association dues.

Converting real estate appreciation into income.
For many, the motivation behind a move may be cash flow. Downsizing allows a homeowner to take a portion of the capital they have amassed in their home and use it to supplement retirement income. While this may be true, there are some hurdles to overcome.

Homeowners may find their home sold for less than they had planned and the new home may cost as much as the one left behind. When all is said and done, there may be little cash left over to supplement income.

Get the details before putting your house on the market. A real estate agent can provide you with comparison of home sales in your particular area, having the same size and features to gauge the value of your home. When looking for your new home, contemplate the costs and fees associated with the purchase as well as any ongoing expenses that might be incurred. Having the details before you make a move will help prevent a financial blunder.

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Untimely Disasters – How to Protect Your Home

By | 2015, Money Moxie | No Comments

Disasters are going to happen. There have been a number of them this year. Unfortunately, we don’t know when or what will happen next. It might be a forest fire, electrical fire, hurricane, tornado, flood, or earthquake. You can’t protect yourself from every disaster, but there are steps to help you put the odds in your favor.

Start by making a checklist of all the items you feel cannot be replaced. Save this list where it can be located quickly. This will help avoid an important item being left behind as your mind is racing during an emergency.

Examples of items for your list:

  • Home and auto insurance paperwork
  • Automobile titles
  • Healthcare information
  • Passports, marriage and birth certificates
  • Wills and trusts
  • Memorabilia, keepsakes, heirlooms
  • Photos (not already backed up digitally)
  • Statements: banking, mortgage, credit cards
  • Investments and retirement information
  • A few years of tax returns

Many of these are available online. Of the items that are not available digitally, scan them to your computer and save them on your home computer and in your backup location (preferably off site or in a fireproof safe).

If your home is destroyed, the insurance company will want a list of damaged items. The best way to do this is with pictures or video. Start with the exterior of the home and yard. Then move through each room, closet, and storage area. Label the pictures or videos and save them to your computer (and your backup). Remember to update as necessary.

This might be a good time to check with your insurance to make certain you have proper coverage to rebuild or repair your home in the event of a disaster. Go through scenarios that concern you to confirm you are covered. (Many policies do not cover floods or earthquakes.)

As we have seen, disasters can happen anytime, anywhere, and to anyone. Take time to be prepared should disaster regrettably strike.

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Open Enrollment

By | 2015, Money Moxie | No Comments

For most employees fall is the season to enroll in many of the benefits offered by their company. It is a good time to review your options and make sure you are taking advantage of the benefits available to you. Here are the most common open enrollment benefits:

• Participation in 401(k), 403(b), or other company-sponsored retirement plans

• Health insurance plan selection

• Planned spending account contributions (Cafeteria plan)

• Beginning or increasing group life and disability income benefits

Don’t let this opportunity pass you by. If you miss the open enrollment period, you may not be eligible to enroll or make changes for another year.

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