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The Life of a Centenarian

By | 2018, Money Moxie | No Comments

We are experiencing a longevity wave; worldwide more people are living to age 100 and beyond – and Americans are leading the pack. Today’s centenarians are living relatively active lives. The secret may be preparing physically, mentally, and financially.

Physical mobility does not begin at retirement. It’s something you have to work on throughout life. Centenarians who enjoy an active lifestyle do so because they adopted an active lifestyle early on that includes regular physical activity. Finding a like-minded community gives these active seniors a sense of purpose and a reason to make an effort each day. Activities such as pickleball, swimming, and dancing have gained popularity among retirees.

Mental outlook has a significant bearing on a centenarian’s sense of wellbeing. You have met them; these are the people who seem to have an endless smile and a consistent, positive outlook on life – regardless of their personal situation. Keeping an active mind is every bit as important as staying physically active. Staying involved in a community and regularly getting together with friends provide a sense of belonging and help prevent feelings of isolation and loneliness.

Financially, these folks have weathered many changes. Most receive some type of pension along with Social Security benefits, which provide an income base, and investments help supplement their income needs. However, they are facing a challenge they may not have believed would occur. Longevity. The longer they live, the more difficult it will be to maintain their standard of living as inflation takes its toll.

Cost of living increases (COLA) are built-in to Social Security benefits, but many pensions do not provide COLAs. Inflation’s impact steadily eats away at the purchasing power of money. For someone who will be retired for 30 to 40 years, the reality can be disheartening. And while general inflation over a long period of time averages 3 percent, retirees face an even steeper inflation trend when it comes to medical costs, which increase between 5 and 6 percent annually.

You have heard us say it before, but the statistic warrants repeating. A married couple age 65 today has a 50 percent chance that one of them will live to age 92. That is both exciting and alarming. What can you do to prepare financially? Save as much as you can – then save some more!

Pensions are becoming obsolete for future retirees. In 1979, 30 percent of retirees had pension benefits. In 2014, that number had dropped to 2 percent, and the downslide continues. Without a pension to help provide a portion of retirement income, we have to pick up the slack. Rather than living only for today, we must look to the future. This is difficult, especially when faced with “present bias” – weighing today twice as heavy as the future. Planning for a longer life is essential, and it requires a balanced perspective now.

While we cannot make up for lost time, we can start saving more today. Adopt a mindset of preparing for the future. Each year increase the amount you are saving, even if by just one percent. When you reach centenarian status, you will appreciate every dollar you saved. Not sure you are saving enough or what to expect when you reach retirement age? Let us help you determine your retirement goals and map out a plan to get started. If you are closing in on retirement, let us help you create a retirement income plan. We can determine your sources of income when you retire and how to make your nest egg last as long as you do.

 

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You Can Contribute More to Your Retirement in 2019

By | 2018, Money Moxie, Newsletter | No Comments

Good news is coming for those looking to max out their retirement plans. In 2019, the contribution limits will be raised on most retirement accounts. This opens the door to higher tax deductions, more tax-deferred growth, and better savings ratios.

Employee contribution limits for the 401(k), 403(b), and 457 plans will be raised to $19,000 annually. For those individuals age 50 and older, an extra $6,000 contribution is allowed. The ceiling on SIMPLEs climbs to $13,000 with an additional $3,000 for those 50 and older. Both traditional IRAs and Roth IRAs will jump to a $6,000 annual limit with a $1,000 extra contribution for those born before 1970.

Deduction phaseouts for traditional IRAs of active plan participants will also start at higher levels in 2019, from adjusted gross incomes of $103,000 – $123,000 for married couples filing jointly and $64,000 – $74,000 for single filers. Roth IRA AGI phaseouts will increase to $193,000 – $203,000 for couples and $122,000 – $137,000 for individuals.

If you have questions about how these changes can impact your financial plan, please call us to schedule a review with one of our Wealth Managers.

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Your Leading Indicators

By | 2018, Executive Message, Money Moxie | No Comments

Dear Financial Partners and Friends!

Leading economic indicators are predictive changes that give us clues about the future direction of the economy. Lagging indicators are after the fact. They confirm what has already happened.

Just as the economy has leading and lagging indicators, so does your personal financial preparedness. Regardless of your age, or alternatively, your personal lifecycle, ask yourself where you are in the following questions.

  1. Do you have a three-to-six-month emergency fund that matches your net income?
  2. Are you free of all debt?
  3. If you were to die suddenly, would your family have enough money to live now and through retirement?
  4. Do you have enough money saved for retirement? (See graph below.)
  5. Are the beneficiaries and contingent beneficiaries on your retirement accounts, life insurance policies, etc., the way you desire?
  6. Have you created will(s) and trust(s) and ensured they are up to date?

If you answered “Yes,” to all of these leading indicators, then you are financially prepared for the future. If you answered “Yes,” to most of these, then you are on the right path. If you answered “No,” to most of these, then you should take immediate action. Please come and talk with one of our expert wealth managers who have the experience, credentials, and training to get you to and through your retirement years.

So many changes can take place within a year’s time, that when it comes to your personal finances, it is better to be safe than sorry. The most important people in your life depend on you. Will they be harmed or helped by your preparation or lack thereof?

Bullish Best Wishes,

Roger M. Smedley, CFP®
CEO

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How Much Money Will You Need in Retirement?

By | 2018, Executive Message, Money Moxie | No Comments

Dear Financial Partners and Friends!

If we were to ask what percentage of your final salary you will need in retirement, you could probably come up with an answer off the top of your head. In reality, determining what you will need to live on and making sure you have enough to meet that need is extremely complex.

A front-page article in the Wall Street Journal’s Wealth Management section on September 4, 2018, by Dan Ariely & Aline Holzwarth, made this astute observation: “Answering a question as complex as this requires knowledge far beyond most people’s grasp—and far beyond the grasp of many professionals.”

Why is retirement planning so difficult? Because it’s all about longevity, the future cost of federal and state taxes, cost of property taxes, cost of health care, cost of long-term care, the opportunity cost of being too conservative or the penalty cost of being too aggressive, cost of living, as well as daily living and possible travel expenses, just to name a few. Retirement cash-flow planning is not for the faint of heart.

While many think that health care cost will be the largest expense in retirement, the surprise is that for most folks, taxes are the single, largest expense. It’s impossible to generalize for everyone, but taxes are levied on withdrawals from qualified retirement accounts such as IRAs, 401(k)s, and pensions. If you have too much income, your Social Security benefits may also be taxed during retirement.

Integrating tax planning with cash-flow planning may help bring considerable and tangible benefits. Preserving your hard-earned dollars through tax planning is crucial in delivering and providing a sustainable cash flow during your retirement years. Having said this, melding tax planning and cash-flow planning is very complicated.

The great news is that you don’t have to go it alone. At Smedley, we can help you navigate the white waters of retirement tax planning and cash-flow planning. Please come and talk with one of our expert wealth managers who have the experience, credentials, and training to guide you to and through your retirement years. Your financial success is our passion at Smedley Financial.

Best Wishes,

Roger M. Smedley, CFP®
CEO

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Retire without Debt

By | 2018, Newsletter | No Comments

Only 38% of American retirees are debt free. The type of debt may surprise you—mortgage, credit card, auto loan, and even student loan. The impact of debt on a fixed income can be distressing as it reduces discretionary spending and, in some cases, forces retirees to cut their standard of living.

Source: Society of Actuaries® 2017 Risks and Process of Retirement Survey – Report of Findings

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Could You Unknowingly Disinherit Your Kids?

By | 2018, Money Moxie | No Comments

The answer is yes! Most people spend countless hours determining how their money will be divided among their family and loved ones. They even go so far as to have it formalized in their will or trust.

Unfortunately, when it comes to naming the beneficiaries on 401(k) and other retirement accounts, most people spend only minutes making this important decision. Furthermore, many have not reviewed the decisions in 10, 20, or even 30 years. A lot can change during that period of time (additional children, death, divorce).

Retirement accounts are distributed based on who is listed on a company’s signed-beneficiary form. Even if you have elected to have your assets divided a specific way in your will or trust, if your 401(k) does not match it will not happen.

Reviewing your beneficiary designations can prevent an undesirable outcome at your death. If you have questions or need help in reviewing your beneficiary designations give our office a call (800) 748-4788.

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Good Planning Could Save Your Retirement

By | 2018, Executive Message, Money Moxie | No Comments

As individuals, many of our philosophies and habits about money and finances originate from our personal experiences and from the experiences we have observed from those around us–parents, family, friends.

Good or bad, we engage in behaviors that we believe will bring us financial success and happiness. If we see someone suffer from a financial shock, like the loss of a job, we think: “I am not going to live paycheck to paycheck. I am going to build an emergency savings account so that I will have money to fall back on.”

So, what happens when people plan based on preconceived ideas developed from bad information? This poor planning will kill your retirement dreams. And unfortunately, it’s more common than you think.

I recently came across a report compiled by the Society of Actuaries–2017 Risks and Process of Retirement Survey. The focus was retirement concerns and preparation and overall financial wellness among pre-retirees and retirees. It covered everything from debt in retirement, to housing concerns, to the impact of financial shocks, to working longer. It also covered the sense of well-being and preparedness among pre-retirees and retirees that use an advisor and have implemented a plan.

After reading the report, I was surprised at the percentage of retirees that felt unprepared for the financial aspects of retirement and their income needs. I included some of the highlights in the graphics on the next page. My conclusion? Many retirees have too much debt, poor spending habits, and would benefit from the help of a financial advisor.

We are so grateful for the opportunity to help you, our clients, plan for a successful financial future. We thoroughly enjoy creating each plan, focusing on the known and preparing for the unknown events that may impact you. Thank you for allowing us to help you on your financial journey.

Best Wishes,

Sharla J. Jessop, CFP®
President

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Financially Savvy Women

By | 2018, Money Moxie | No Comments

Just Getting Started

You are starting your financial life with a blank canvas. . . you are the artist. You can create a lifetime of financial freedom if you start with a few simple habits and follow them purposefully.

3 Tips to get you headed in the right direction:

1. Get a handle on your spending and keep debt at a minimum. Save for the things you want rather than borrowing. It may take longer but the reward will be that much sweeter.

2. Determine your top three financial goals—build emergency savings, get out of debt, buy a car, save for a down payment for a home, etc.—and create a plan of action.

3. Let compound interest work for you. Contribute to a 401(k), IRA, or Roth IRA and be sure to capture the full company match.

Settling Into Life

Mid-life offers the opportunity to regroup. Your family has a routine, your career is well underway, and you are looking to the future. This is an ideal time to create or refine your financial plan.

You may have up to 20 years before your retirement dream becomes a reality. Focusing on these items will help you reach your goals:

Increase your retirement contribution. If you are falling short, you still have time to make an impact.

Get rid of mortgage debt before you retire. Debt in retirement can reduce your standard of living and prevent you from living the way you had hoped.

Update your financial plan. Make adjustments if needed.

On Your Own

Suddenly single. . . now what? You may find yourself unexpectedly on your own. While the prospects of being on your own may seem overwhelming, we are here to help guide you through this transition.

4 items to focus on first. Taking control of your financial situation will give you confidence and peace of mind:

1. Sources of income. They may include your salary, insurance proceeds, assets from a settlement.

2. Outgoing expenditures. What expenses will you have monthly and annually.

3. Update documents. Insurance and retirement plan beneficiaries.

4. Review portfolio and plan. This includes investment holdings and options. Make sure they still meet your needs.

Reaping Life’s Rewards

You are living the life you’ve dreamed of and enjoying your standard of living. Count on living a long life. Now is the time to get your house in order—so to speak. What’s your financial legacy? Money . . . or financial values.

Top goals. These are the things that should be top on your list:

Review your income plan. Make sure your money lasts as long as you do.

Update your estate planning documents. Do they meet your goals? Determine the best way to pass assets to the next generation.

Have a family meeting. If you want your family to be involved, they need to know what to expect.

Designate a trusted contact who can help you financially.

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One-Trick Financial Advisors

By | 2018, Money Moxie | No Comments

It pains me to say this of a profession that I love, but too many financial advisors are just one-trick salesmen who want to make a quick buck.

How do you spot a one-trick financial advisor? Their answer to EVERY question is either life insurance or an annuity. However, they won’t tell you that is what they are offering.

You’ll hear phrases like, “If you invest with us you can take your money out TAX-FREE in retirement.” Or “Do you want double-digit returns with NO DOWNSIDE RISK?” These “advisors” are throwing out flashy fishing lures to hook you. Here is what those phrases really mean.

The way you can take out your money “TAX-FREE in retirement” is by using an insurance policy that is either whole life or indexed universal life. You build up cash value in the policy over years and you can take a LOAN that is potentially tax-free.

However, the “advisors” usually don’t mention upfront that this is a life insurance policy. They just want to get you hooked before they share all of the details. They also rarely mention that if you take out too much, then you surrender the policy and may be subject to a large tax bill, blowing up the possibility of tax-free income.

To “avoid DOWNSIDE RISK” you use an indexed annuity–also from an insurance company. You lose some upside potential to avoid some downside risk. Of course, the insurance company takes a healthy cut and the “advisor” gets a nice paycheck too.

However, the sales person usually glosses over the fact that your money will be locked up for 7-10 years and that there are hefty penalties to get out early.

Now, it may sound like I am against insurance and annuities, which is not true. I sell them when they fit a client’s needs. I am against how one-trick financial advisors use them as “the only thing you need.” They tout their products as the hottest-thing-since-sliced-bread, but there is no one-size-fits-all product.

In reality, there are many good opportunities to use life insurance and/or annuities as ONE PART of your plan. However, doing so should be tied back to meeting your goals.

Life insurance is essential to protect your family if you pass away too soon or great if you want to leave a larger inheritance. Indexed annuities are good as a CD replacement for money that you don’t need for 7-10 years. It should typically be 20% or less of your portfolio.

I’ve seen too many good people get stuck in products that they don’t understand and many times don’t even need.

To get what you really need, use a holistic planner with a CFP® designation, like the advisors at SFS. We understand the nuances of investment products and use your goals to determine which to use.

So, if you have any questions about something you heard on the radio or from a friend, call us. We are happy to talk about all investment products–how they work and if they fit your financial goals.

 

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, and CERTIFIED FINANCIAL PLANNER™, in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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Your Future Is Here. Now What?

By | 2017, Money Moxie, Newsletter | No Comments

You’ve worked hard for your future and now it is here. Thirty-six holes, a fishing trip, and a dip in the hot springs–and it’s only Thursday. Now what?

Maybe you have always dreamed of working with 4H or the Boys and Girls Club of America. Perhaps you’ve realized that you need a little bit more income in retirement for the lifestyle you want; or you retired early and want health insurance until Medicare kicks in.

If any of these situations sounds familiar, it might be worth considering an encore career. Some encore careers are part-time roles in similar industries, while others involve finding a new role.

Luckily, there are several resources available for those considering an encore career. The AARP website (www.aarp.org) has a section on encore careers while organizations like encore.org (www.encore.org) aim to create a movement to give back to communities.

There is also another resource that you may be overlooking: SFS. Hopefully, a successful career and your relationship with us has put you on the path to financial freedom.

We can help you develop an income distribution plan using your current assets to subsidize your new, probably reduced income, and to ensure your monthly income is sustainable.

In addition to helping with the transition, we can help you throughout your encore career. We will continue to monitor your financial health and manage income distribution while also providing advice on things like health insurance, Medicare, and Social Security strategies.

Discuss the options for an encore career with us. It can be a great way to continue being involved in your community and it can help with your financial freedom.

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