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Financial planner

5 Things You Need to Know About Social Security

By | 2019, Money Moxie, Newsletter | No Comments

1) The age you start taking benefits matters

You can start Social Security benefits as early as age 62, but that may not be your best option. If you take Social Security before your full retirement age, the amount you get per month will be reduced. For most people, full retirement age is between ages 66 and 67, depending on when you were born. If you take benefits at age 62, you will only get about 70% of your full benefit. This also works the other way around. If you wait until 70, your benefit will grow 8% per year until age 70. This can be a great way to maximize the benefit you get from Social Security.

2) You may be eligible for a benefit under your spouse’s record

If you don’t qualify for Social Security benefits from your own work record, you may qualify for a spousal benefit. If you are married and your spouse qualifies for Social Security, you are eligible to receive half of your spouse’s Social Security amount along with your spouse receiving their own full amount.

3) Your Social Security may be taxed

Up to 85% of your Social Security could be taxable, depending on what your income is. To figure this out, take half of your Social Security and add that amount to any other taxable income you may have. That includes any money you’re taking out of tax-deferred retirement accounts. If that number is above $34,000 for single filers or $44,000 for married filing jointly, then 85% of your Social Security will be taxed.

4) Social Security was not meant to be the main source of retirement income

The government did not originally intend Social Security to fully replace income for every retiree. It was only ever meant to be a supplement and cover less than half of your income needs. This means you need to make sure your savings for retirement are adequate, so you have enough income in retirement.

5)Social Security is not going bankrupt

Social Security isn’t going bankrupt, but things will likely be changing. Estimations say the Social Security trust fund reserves will be depleted by 2034 unless changes are made. There have been many proposed solutions. None of them are particularly attractive, but something must be done. While nothing is official yet, here are some possible solutions:
-Raising the full retirement age
-Raising the amount of income subject to Social Security tax (currently at $132,900)
-Raising the Social Security tax rate
-Reducing cost of living adjustments, which help Social Security keep pace with inflation
-Reducing benefit amounts

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Is Your Brain Risking Your Financial Success?

By | 2019, Newsletter | No Comments

The world is full of information, yet our brains are only capable of processing a certain amount. If we had to analyze every aspect of every situation or decision, we would never get anything done. In order to cope, our brains have created shortcuts to help us make sense of things. These cognitive shortcuts – known as heuristics – are rules of thumb or educated guesses. In many cases, being approximately right is good enough. However, there are times when these shortcuts are not good. Recognizing when they are creeping into our decision-making will help us determine if they are helpful or hurtful in our current situation. This is critical when it comes to your money.

Overconfidence

While confidence is good, overconfidence exaggerates our abilities and can cause us to underestimate the risk of being wrong. For example, you may pick a stock that is growing. If the stock price continues to go up, you conclude that you have a good strategy or a natural talent. However, when the stock plummets, you distance yourself from the truth, believing it was just bad luck. An overconfident person may even repeat the same mistake over and over again.

Framing

When we have already made up our minds, we place our existing perspective on all new information that comes our way. For example, expecting a drop in the stock market, you put a negative spin on any good news. People who frame eventually get a big surprise when they find out the cost of being wrong.

Anchoring

Every one of us has experiences that form our opinions. When we anchor ourselves to these opinions, we ignore anything that doesn’t fit our views. If you lost money investing in a recession, you might conclude that the stock market is too risky. Even when presented with a better perspective of its potential growth, you may still feel like there is too much risk.

Herding

Have you ever found yourself doing something you would not do on your own? Going along with what a larger group is doing, whether those actions are rational or not, even in the face of unfavorable outcomes is known as herding. You hear that investors are selling, so you sell, or you hear they are buying, so you buy more without considering how it impacts your financial plan.

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A Confession from a Successful Investment Advisor

By | 2017, Executive Message, Money Moxie, Newsletter | No Comments

Dear Friends and Financial Partners!

That’s quite a headline, “A Confession from a Successful Investment Advisor.” Here’s the confession:

The truth is astonishingly simple, “If we’ve been at all successful, it’s because you, our clients, have been successful. Our success only comes through your success.” Since June 4, 1982, when we became a Registered Investment Advisor, we have always strived to put your best financial interest first.

Over the years, many clients have shared with us how we helped them send their children through college or on missions, retire early, or live comfortably during their declining years. They have told us how our financial planning and investment management have allowed them to maintain lifestyle, travel, and handle life’s major medical expenses.

As a fiduciary, we strive to put ourselves in your shoes, endeavoring to give you the best advice based on our professional financial knowledge. So thank you, thank you for trusting us with your financial concerns and assets.

We are grateful to be your financial and investment advisor. By far the most gratifying—not just satisfying—part of our job is seeing you reach your financial goals throughout your lifetime.

Bullish Best Wishes,

Roger M. Smedley, CFP®
CEO

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Why You Should Care About The Fiduciary Standard

By | 2016, Money Moxie, Newsletter | No Comments

There has been a great deal of media attention surrounding the Department of Labor’s (DOL) recent ruling regarding the “Fiduciary Standard,” and with good reason. Tony Robbins, self-help author and motivational speaker, recently asked random people walking down Wall Street, “What is a fiduciary?” With the exception of one individual, the answer was, “I don’t know.”

This made me wonder – Do our clients understand the benefits of working with a fiduciary?

When Smedley Financial Services, Inc.® began back in 1982 as a registered investment advisor, we became a fiduciary. We have always believed that putting our clients’ interests before our own is the best way to create a lasting partnership with the people we serve.

fiduciary standard

What is the Fiduciary Standard?
The Fiduciary Standard requires that we avoid conflicts of interest. Our recommendations must meet your needs and be in your best interest.

In contrast, financial professionals such as brokers, insurance salespersons, and other advisors operating under the “suitability standard” are merely required to ensure an investment is suitable for a client when purchased. There is little obligation to offer a better investment nor a requirement to monitor those investments in the future.

Why the big concern?
As company pension plans have diminished, Americans now must set aside more of their income to help supplement their own retirement income. This can be a daunting, time consuming task.

At the same time, the retirement investment landscape has only grown more complicated. Lack of investor savvy and awareness regarding retirement account types, not to mention the emerging number of investments available within those accounts, has led investors to rely on the counsel of professionals.

Unfortunately, not all professionals are alike. The new DOL rule seeks to level the playing field, requiring all financial professionals to follow the new Fiduciary Standard. Isn’t it sad that a law must be put in place forcing financial professionals to do the right thing?

Will the rule protect investors?
The new DOL rule will require more work for financial professionals, but hopefully it will also protect investors saving for retirement.

The DOL also states that cheaper is not always better. Price cannot be the only determining factor when making a decision, especially one as important as your financial future.

Consider what you are getting for the fee you are paying. Does your fee include an advisor that will help you determine your financial goals, prioritize those goals, and design a plan to help reach your goals? Will you get ongoing monitoring of your goals and the investments you are making? What if something changes? Who will be there to help address the changes in your life that may impact your financial destiny? What will happen during periods of increased market volatility and who will help you determine if your investments are too aggressive or too conservative?

These are just a few of the concerns that must be considered, but are often overlooked when the primary focus is having lower fees.

You are our primary concern. We invite you to call or come in and sit down with us anytime you have questions. We welcome your call.

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You Need a Wealth Manager—Now More Than Ever

By | 2015, Executive Message, Money Moxie | No Comments

Dear Valued Financial Partners and Friends,

Now more than ever, most people need a Wealth Manager. While financial conditions are constantly changing, your own financial goals do not. Remember our two guiding principles: “Protect what you have. Then seek to acquire more.” As your Wealth Manager, here are some of the roles Smedley Financial can play for you.

Financial Bodyguard: As your financial bodyguard, we can help protect what you have acquired. Our goal is to prevent clients from making serious and costly financial mistakes. We can serve as a devil’s advocate and sounding board, thus helping you through the process of making wise financial choices.

Financial GPS: With respect to your personal financial goals, you always need to know where you are. As an integral part of your financial GPS system, we can let you know whether or not you are on track.

Financial Lighthouse: You need to know you are headed in the right direction, particularly at difficult times. We can help you maintain a proper course through good times and bad. Naturally, this includes not only bull and bear stock markets, but through your sunny days and, more importantly, through your rainy days and dark nights.

Experienced Guide: With respect to the thousands of financial decisions made during your lifetime, you need an experienced team of certified investment professionals to serve as your guide. While some financial decisions may be changed as circumstances and opportunities present themselves, some financial decisions may be made only once. We can help guide you through the jungle of important financial decisions in your life.

Risk Barometer: With respect to risk management, you need to know when to take risk and how much risk to take. Both of these points are equally important. As your risk barometer or gauge, we help you determine the type and amount of risk you need and want to take. Investment management is all about minimizing your risk taking.

At Smedley Financial, we can play multiple roles for you in our role as your Wealth Manager. Remember, your financial success is our passion!

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

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Comfortable Versus Competent

By | 2015, Executive Message, Money Moxie, Newsletter | No Comments

Dear Valued Financial Partners and Friends,

It’s one thing to feel comfortable making financial decisions before and during retirement. It’s quite another to be financially competent during those same time periods.

Working with retirement dollars just before and during retirement may be successfully compared to hypothermia. In the final stages of hypothermia people often feel calm and comfortable. Quoting from the Mayo Clinic’s official website, “Someone with hypothermia usually isn’t aware of his or her condition because the symptoms often begin gradually. Also, the confused thinking associated with hypothermia prevents self-awareness. The confused thinking can also lead to risk-taking behavior.” People making it to retirement may share a similar state of mind.

Spending-down assets may seem easy, but financial decisions made before withdrawing even $1 from retirement accounts or signing employer or Social Security forms may well determine how long your money will last. (Neither Social Security’s nor your employer’s representatives will have all the facts about your total financial picture.)

We could share dozens of stories about costly financial mistakes and risks that didn’t need to be taken. In retrospect, many of those financial decisions affected both the husband and the wife. Ultimately, most of those uninformed decisions had the greatest impact on the quality of life of the surviving spouse. Here are other areas of concern.

Overconfidence: Just like entitlement is the first step in theft or fraud, overconfidence usually leads to unwise financial decisions. Retirement decisions are often a one-time-only proposition, without a chance for a do-over. Retirement planning can be complex and many things can go wrong. Our experience may help eliminate or reduce these costly decisions.

Enamorment: You have worked hard to build your retirement nest egg, but may have never worked with the size of the dollars in your nest egg. Enamorment with those very dollars could lead to your financial downfall. Even if your dollars have reached a critical mass that will sustain your lifestyle, beware! We all know of lottery winners, professional athletes, and others who have earned or inherited millions of dollars only to have that money gone in just a few years.

Too many people make financial decisions based on their coworker’s or neighbor’s situation. We help you make financial decisions based on your unique financial situation. Our competence can help you feel comfortable and confident. Let us help you. Remember, your financial success is our passion!

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

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Financial Four-Letter Words

By | 2015, Newsletter | No Comments

There are some four-letter words that cause parents and financial advisors to cringe. Unfortunately, you may have been exposed to these words and had to cover your ears so you did not have to hear the profane language.

At the risk of damaging your sensitive ears or eyes, I will share with you some sentences and/or scenarios where those words might be used and how you can combat them with positive four-letter words.

Picture this: A young couple just moved into a brand new home in your neighborhood that seems to put all of the other homes to shame. Not only that, but there is a new boat parked behind a new truck on the RV pad. You wonder how in the world these young people can afford to live like this. This four-letter word is called “debt” and often goes along with “shop.” The truth is that many of these people can’t afford to live like that for long.

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Many in the young generation believe they can have everything now and they don’t have to work for years to accumulate wealth like their parents did. Unfortunately, there are many established adults that have fallen into the same debt trap. As they near retirement, they still have a large mortgage, car payments, and worst of all, credit card debt.

To combat this, we need to introduce two positive four-letter words, “work” and “save.” Many young people believe that “work” is a bad four-letter word, but they are wrong. As Colin Powell said, “A dream doesn’t become reality through magic; it takes sweat, determination, and hard work.”1 Both young and established can learn to “save” rather than spend. It isn’t always easy to set money aside, especially when others around you may seem to have so much. Just remember that you should “live like no one else, so later you can live like no one else.”2

A four-letter word often muttered in frustration by parents is “kids!” This word often makes financial planners frustrated as well, especially when parents put their own retirement at risk in order to help “kids” out.

In the early years, parents may fail to put contributions into their retirement plans because they are taking care of their “kids.” In later years, parents may take out too much money from their savings to help their “kids” out.

To save parents from their kids, the parents must create a “plan” and learn to stick to it. In the early years, stay dedicated to saving your money in your “401k” or “Roth” IRA. Use the opportunity to teach your kids about saving and planning.

In the later years, learn to “give” responsibly. Allowing your kids to struggle can be highly beneficial. You don’t need to help them out of every tight jam or it might teach them learned helplessness.3

One big four-letter word that people seem to ignore during good times is “risk.” Most people want to get a good return, but “only when the tide goes out do you discover who’s been swimming naked.”4 We have seen too many people get caught by a “scam” and “lose” their shirt because they ignored the warning signs.

Be sure to take a balanced approach with your investments based on a solid “plan.” Some of your investments can be on the riskier side, but you should always have some money with less “risk.”
Now, wash your mouth out with soap and stop saying the bad four-letter words. To feel financially prepared, focus on the good four-letter words: work, save, 401k, Roth, give, and plan.

  1. http://inspirationfeed.com/inspiration/quotes-inspiration/100-inspirational-quotes-about-hard-work
  2. http://www.debtfreeadventure.com/live-like-no-one-else
  3. http://www.empoweringparents.com/Learned-Helplessness-Are-You-Doing-Too-Much-for-Your-Child.php
  4. http://www.brainyquote.com/quotes/quotes/w/warrenbuff383933.html
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Don’t Self-sabotage Your Investments

By | 2015, Executive Message | No Comments

Dear Valued Financial Partners and Friends,

In the January-February 2015 issue of Money Moxie®, I addressed how Black Swan Events will—at some unpredictable point—affect your investments. The bottom line was, while Black Swan Events are unpredictable, you must control your reactions to these non-controllable events. Now, I would like to talk to you frankly about common ways we have seen some very smart people self-sabotage their own investments.

“I got out of the stock market during the drop, but I never got back in.” Or, alternatively, “I simply didn’t know when to get back in the market. No one rang a bell.”

“I repeatedly told my advisor to keep me in cash throughout the year because of market uncertainty.” (The reality: This individual missed out when the market went higher.)

“The stock market’s going to drop to such and such a point, then I’ll get back in.” (The reality: The stock market never fell to the point predicted and kept going up.)

Defensive reasoning or self-justification are other names for committing financial self-sabotage. Often people, some very smart people, are their own worst financial enemies because of egos, i.e. trying to be smarter than the market.

We have had prospective clients bring their investment statements to us to compare and what is surprising to these people is how staying invested trumps their own trading decisions. (Of course, there are no guarantees or promises of past performance being repeated.)

When worried about Black Swan Events, don’t let your emotions get in the way of making money. Don’t let fear ruin your retirement. Instead, talk to one of our wealth advisors. We have the time, financial talent, and financial training to help you prepare for and navigate through difficult times.

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

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Black Swan Events & Your Investments

By | 2015, Executive Message, Money Moxie, Newsletter | No Comments

Dear Valued Financial Partners and Friends,

Black Swan Events are events that are unexpected and unprecedented. They are rare and have an extreme impact when they occur. The concept of a Black Swan Event was popularized in Nassim Nicholas Taleb’s book, “The Black Swan: The Impact of the Highly Improbable” (Penguin, 2008).

Some modern day Black Swan Events include the sudden outbreak of World War I, the surprise attack on Pearl Harbor in December 1941, and the sudden terrorist attacks in the United States in September 2001.

Shortly after September 11, 2001, I attended a financial presentation where the instructor had prepared two charts and adjusted them to the same scale. The first chart was the S&P 500 Stock Index in the days just before and immediately following the surprise military strike at Pearl Harbor on Saturday, December 7, 1941. In my mind the instructor’s graph documented and encapsulated the general public’s human, sell-off reaction to this Black Swan Event as evidenced by the size of the stock market drop.

The second chart was the S&P 500 Stock Index in the days immediately surrounding the surprise terrorist attacks on Tuesday, September 11, 2001. Again, this second chart depicted our human, sell-off reaction to another rare, but major Black Swan Event by the size of the stock-market drop.

Now the magic! Remembering both charts were adjusted to the same scale, when superimposed, the two charts became indistinguishable! In 2001, our sell-off reaction, our human behavior was, for all practical purposes, identical to that of our predecessors—some 60 years earlier—by dropping approximately the same percentage.

The bottom line: No one knows when the next Black Swan Event will occur. Whether man-made or not, Black Swan Events will continue. Earl Nightingale stated in his book, The Essence of Success,“Only eight percent of your worries are worth concerning yourself about. Ninety-two percent are pure fog with no substance at all.”

Black Swan Events will inevitably happen in the future. The challenge is to stay invested so that you don’t miss out on market opportunities. Don’t allow your personal emotions to keep you from reaching your long-term goals.

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

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