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Leah Nelson

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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Don’t Bite Off More Than You Can Chew

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How Much Home Debt is Too Much?

You’ve decided to buy a house. Congratulations! Now, what? How do you know how much home you can afford? The last thing you want to do is take out more debt than you can handle. Remember, lenders will approve you for a loan with payments much higher than you should ever pay on a monthly basis! It’s up to you to know how much you can really afford.

Flexibility

Consider your budget. Are vacations a priority? What about other interests and goals? You need to keep your monthly debt payments under 36 percent of income, so you have the financial flexibility.
(Sharla’s recommendation of 28 percent on page 5 was for housing debt only, while the 36 percent is for total debt.)

Interest Rate

Something else that will affect your budget is the interest rate on your mortgage. Even a small change in interest rates can significantly impact how much you can afford. If interest rates go up, or your credit history is a little rough, you won’t be able to afford as much home since you will have to pay more in interest.

Total Debt

Your monthly mortgage expenses and all other debt payments should not exceed 36 percent of your gross monthly income. Add your potential mortgage payment and other debt payments (car loans, credit card debt, student loans, etc.) together, then divide by your before-tax monthly income.

For example, if John is considering a housing payment of $1,800 (including mortgage, insurance, property taxes), a car payment of $300, and a student loan payment of $150, that would equal $2,250. Divide by his $6,500 monthly, and we have the percentage. These fixed expenses would be 34 percent of John’s gross income (under 36 percent, so he should be in the clear).

Monthly Payment

To get the price of a house you can afford, search for a mortgage calculator online and plug in the numbers. Going back to my previous example, we determined that John could afford a mortgage payment of $1,800 per month. If he gets a 4 percent interest rate and has $20,000 for a down payment and closing costs, with a loan of 30 years, he could afford a home that is around $285,000.

Down Payment

The amount of your down payment will also factor into how much you can spend on a home. The more expensive the house, the bigger down payment you will need. The bigger your down payment, the less your mortgage and payment will be.

If you have a 20 percent down payment, your monthly payment will be much less since you won’t be required to have mortgage insurance.

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Rock Steady Boxing

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We had the opportunity to hear and participate in a presentation given by Sherrie Bickley, a coach for Rock Steady Boxing. Rock Steady Boxing is a fitness class designed specifically for people with Parkinson’s disease.

The program focuses on specific skills and motions that are difficult to do or that begin to deteriorate when someone has Parkinson’s. They practice vocalization and learn how to get up off the floor if they fall. They learn the benefits of living a healthy and active life, along with the benefits boxing can have for people diagnosed with Parkinson’s disease.

The results Sherrie has seen have been incredible. We even got to meet one of the boxers in a Rock Steady Boxing class and hear how it has improved his life!

Sherrie showed us what she called “the world’s shortest boxing class.” We learned a few boxing punches, and she took us through the basic outline of what she does in a Rock Steady Boxing class. We had a great time learning about boxing!

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IRAs & 401(k)s

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Planning for retirement is daunting, especially if you don’t know where to start. In this article, we’ll walk through the basics of two common retirement accounts and two different ways you can contribute to them so you can make a more informed decision.

An IRA (individual retirement accounts) and a 401(k) serve similar purposes. They are both accounts that are used for retirement. They both have penalties for withdrawing money before age 59½ and the option to make traditional or Roth contributions.

So, which should you choose? If you don’t have the option to contribute to a 401(k) then, of course, an IRA is the better choice. However, if you have the 401(k) as an option, that is usually a good option, especially if the company is matching part of your contributions, it is always a good idea to take advantage of an employer match. It’s basically free money!

Another thing to consider is whether to contribute to a traditional account or a Roth account.

The primary difference between traditional contributions and Roth contributions is when they are taxed. Traditional contributions go into the account pre-tax, and everything is taxed as ordinary income when distributions are taken. In Roth accounts, the money is taxed before it is contributed, and the distributions are taken tax-free. Another bonus to Roth accounts, you can pass them to your heirs tax-free as well.

Depending on your personal situation, one account or the other may be more advantageous to you. In simple terms, if you are in a low tax bracket now, contributing to the Roth is a good idea. Tax rates are relatively low right now, and it’s likely that they will be higher in the future. If you pay tax now, while in a low tax bracket, you will benefit from it because you won’t have to pay taxes at the possibly higher rate in the future.

On the other hand, if you are in a high tax bracket now and expect to be in a lower tax bracket in the future, it would be prudent to make traditional contributions. The money will avoid taxes now and will be taxed later when your tax rate is lower.

Now that you’re armed with information, you can make a better decision as to when, where, and how to contribute! Please call us with any questions.

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Financial Basics

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The world of credit can be a mysterious one, to say the least. There is a lot of misinformation when it comes to credit and how to build it. Here are three things you need to know:

How Credit Scores Are Determined
(1) Your payment history makes up the most significant percentage of your credit score, so it is imperative that you make payments on time!
(2) Credit bureaus also look at the amount of money you owe compared to how much credit is available to you. The smaller the amount you owe, the better your credit score will be.
(3) The other, smaller portions pertain to the types of credit you have, like installment loans such as a car loan or mortgage, and revolving credit like credit card debt. (4) Any new credit you’ve applied for is also examined.

Your credit score can range anywhere from 300-850 and can affect many things, like the interest rate you can get on loans and mortgages, and it can even determine whether you are accepted to rent a place to live.

Credit Cards Aren’t Bad, but You Need to be Careful
I have heard many times that credit is bad and you should never use it. That simply isn’t true, but credit does need to be used wisely.

If misused, credit can get you into trouble. Instead, make sure you are paying off your entire credit card balance on time each month. If you only make the minimum payments, you will be charged interest and it will become a never-ending cycle of payments and even higher debt. Making the minimum payment will not make a dent in what you owe.

How to Check Your Credit Report
It is important to check your credit report a few times a year to make sure it is correct. There are three credit bureaus: Equifax, Experian, and TransUnion. Each one is required to give you one free report every year. The easiest way to request your report is at annualcreditreport.com. If your report is not correct, reach out to the credit bureau. Its representatives should help you with the process of correcting it.

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How Can I Stay Calm When the Market Isn’t?

By | 2018, Money Moxie, Newsletter | No Comments

2018 has been a year of market volatility, and that can be scary at times. When market volatility hits, here are three things that can help you stay calm.

1. Focus on the Long-Term
When we create financial plans, we focus on your long-term goals. When market volatility strikes, think to yourself, “Have my goals changed? Do I want anything different out of my investments than I wanted before?” If your long-term goals haven’t changed, then you are still okay. If your long-term goals have changed, talk to your financial advisor and see what the best course of action is.

Before you make any knee-jerk reactions to market volatility, focus on the long-term. We don’t want to sell out, lock in losses, and not have the opportunity to benefit from the market growth that will come later.

2. Trust Diversification
Investing in a diversified portfolio is even more critical when market volatility is high. We keep our portfolios diversified to help lessen the effects of market volatility. The basic idea of diversification is to spread your investments across many different areas of the market in order to reduce the risk. It usually works when things get rough because you don’t have all of your money in the part of the market that is losing the most.

With your diversified investments, you are likely to still lose in a down market, but you should lose a little less. Most of the time, a diversified portfolio will come out ahead of a non-diversified portfolio after enduring the ups and downs of a market cycle. Remember, diversification works!

3. Volatility = Opportunity
You’ve probably heard this saying your whole life: “Buy low, sell high.” That is the right mindset to have when it comes to investing, and we all know it. However, as humans, our emotions get in the way, and we convince ourselves to do the exact opposite.

Why would we ever be tempted to buy high and sell low? It is common to feel comfortable investing into something that has been going up because we assume it will continue. Again, we believe the trend will continue when the market is falling and is at a low point. As an investor, it is helpful to remember that changing our strategy based on how we feel can often be counter-productive.

Market volatility can create major opportunities to buy in at lower points. Try looking at it this way: if you find a nice coat, you’d be more likely to buy it at 10% off, right? It’s the same way with investing. We want to buy at a “discount” to maximize the value we can get out of an investment. It can be hard to remember this in volatile times, which is why it is essential to have a professional who is experienced and educated in your corner to help you make sound investment
decisions.

 

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Open Enrollment is Now

By | 2018, Money Moxie | No Comments

Healthcare open enrollment is upon us. Here are some things to keep in mind.

1. Medicare Advantage Plans vs. Medigap Plans: Medicare Advantage plans wrap all of Medicare into one plan. Medigap, also known as Supplement Insurance, plans are separate from Medicare and help pay for medical care not covered under traditional Medicare. The premiums are charged in addition to Medicare Parts A, B, & D and are usually more expensive.

2. Take Advantage of a Health Savings Account (HSA) or Flexible Spending Account (FS). HSAs have higher contribution limits–$3,350/year for individuals and $6,750/year for families. The money in an HSA will roll over year after year; money not used in an FSA is forfeited. FSA contributions are limited to $2,650/year. To qualify for an HSA, you must be enrolled in a high-deductible health plan. Earnings and withdrawals are not taxed in either account as long they are used for qualified medical expenses.

Contributing to an HSA can be as advantageous as contributing to a retirement plan. Since the money in an HSA will roll over every year, you can use it in retirement to pay for eligible medical expenses.

3. Know the Dates of Open Enrollment! Affordable Care Act open enrollment is November 1st through December 15th. Employers often have their open enrollment around this time as well.

4. Take Advantage of Wellness Incentives. Health insurance providers often have incentives. They can be as simple as going to the doctor for a general health assessment. Incentives may include additional HSA contributions, lower premiums, or even gift cards.

5. Compare Costs: High-deductible plans have lower premiums, but out-of-pocket maximums increase with high medical expenses. Other plans with higher premiums may cover more expenses because of the lower deductible and maximums. Make sure you weigh the pros and cons of each plan.

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Smedley Financial’s New Advisors

By | 2018, Money Moxie, Newsletter | No Comments

We are pleased to introduce two new advisors at Smedley Financial, Jordan Hadfield, and Leah Nelson. In our search for new advisors, we focused on people who had an in-depth education in all facets of financial planning and advising and demonstrated a high level of integrity. We were fortunate to find two amazing individuals with these sought-after qualities. If you have not had the opportunity to meet them yet, we hope you will over the next several months.

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Jordan Hadfield

On May 27th, 2012, I climbed into the right seat of a small aircraft next to a student pilot and took off down the runway. I was flying a Diamond DA20, and this trip was taking me from Provo to Lake Havasu to Catalina Island then up the coast to San Francisco and over to Lake Tahoe before heading back home. We flew low and slow, trying to take in the changing scenery and beautiful landscapes.

I was well on my way to becoming a professional pilot and hoped to land a full-time job flying very soon. That plan changed when I met my beautiful wife and realized a career in aviation would require constantly flying away from what matters most to me, my family. I now have two amazing boys and a little girl who rule my world. I have a bachelor’s degree in Personal Financial Planning from Utah Valley University and I am working towards my Certified Financial Planner® designation. Although I miss flying, I couldn’t be happier with what I’m doing now.

I used to chart my way across the United States and experience the freedom of flying. I now chart investments and retirement accounts to bring financial freedom to others. I find both activities to be exciting, but the latter gives me a sense of gratification that flying never did. I’m also a drummer. I love photography. And I work as a professional skydiver.

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Leah Nelson

For my whole life, I have watched many people around me struggle and make bad financial decisions. Seeing this inspired me to make the decision to become a financial advisor.

I graduated from Utah Valley University with a bachelor’s degree in Personal Financial Planning and successfully passed my Certified Financial Planner® (CFP®) exam.

I want to be on the client’s side helping them make good financial decisions to lessen the stress they feel because of their finances. I have always had a desire to serve people, and I’m glad I’ve chosen the financial services industry to help people reach some of their most important life goals.

In my free time, I am involved in musical theater. Music is one of my favorite things, and I enjoy passing the time by playing the piano, ukulele, or singing. I also love traveling. I’m lucky to have a sister that is willing to be my travel buddy! I love spending time with my family as well. They are fun to be around, and I love seeing what silly thing my nephew will do next. I am so excited to be part of Smedley Financial!

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Just for Women – Cooking with Herbs

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Rufo Dina, the executive chef at Archibald’s Restaurant in Gardner Village, gave us a cooking demonstration on how to cook with herbs. He prepared the two recipes below and they were a hit!

Other tips from Rufo:

  • Add dry spices to food early so they have time to soften up.
  • Use less dry spices because the flavor is more concentrated and potent.

Bruschetta
Dice tomatoes and mix in a little olive oil, fresh chopped basil, chopped garlic, salt, and pepper. Place on sliced, toasted baguette. Then top with fresh mozzarella and balsamic glaze.

Fried Green Tomatoes
Slice green tomatoes, coat in all-purpose flour, dip in buttermilk and then coat with panko breadcrumbs. Place tomatoes in hot oil (about 350°F). Fry until slightly browned on each side.

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