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Sharla J Jessop CFP

How Do You Stack Up?

By | 2020, Money Moxie, Newsletter | No Comments

It is no secret that Americans need to save more for retirement. The amount of money an individual or couple will need to carry them through their retirement years varies based on numerous factors, including age, standard of living, location, expected fixed income sources – like a pension and Social Security – and more. Everyone needs to know where they stand based on their specific needs. Have they saved enough, or do they need to save more? Here are some shocking statistics that illustrate that Americans are falling short.

Source: Federal Reserve’s Survey of Consumer Finances

This chart shows the average retirement savings account balance of active savers. Averages can be deceiving as there are many balances far above the number shown. The issue lies in the realization that there are a significant number of accounts with balances far below the average. This creates a future financial crisis for these savers. Living today on the income they receive is doable. However, it will be almost impossible for these savers to maintain their standard of living in their elder years if they continue at the same rate of saving.

We are not proponents of Rule of Thumb planning. We prefer planning using actual key information specific to each client’s situation. But, in this situation, it helps us illustrate a reality. This chart shows how much someone should have in their retirement savings based on age. The amount shown is a multiple based on a $100,000 income.

Rule of thumb would say, based on the desired income amount you want in retirement, you should have saved a multiple of your current income. The amounts illustrated are multiples of a $100,000 income. For example, if you are age 45, you should have already saved 3 to 4 times your income. If you are 65, you should have saved 9 to 11 times your income. How are you doing?

The good news is there is always hope. If you are not on track, regardless of your age or situation, we can help create a roadmap to get you back on track, one step at a time. Contact one of our Wealth Advisors for more information.

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Happy New Year

By | 2020, Money Matters, Newsletter | No Comments

Making 2020 Count Financially 

I’m not one to harp on New Year’s Resolutions, but I do want to make sure you are aware of opportunities that will help you reach your financial goals. I thought I would share a couple of tips you may want to think about, possibly share with your friends and family, and implement for yourself.

Define your goals

From year-to-year, the top investments are going to rotate. We are often asked, “What should I invest in?” A better question may be, “What am I investing for?”  Defining a goal and then matching your investment strategy to that goal will help you stay on track. Keeping your focus on the goal rather than day-to-day movement in the market will help you manage the emotional side of investing. This is critical when market volatility increases.

Put investing on autopilot

We find that over time investors who have a systematic approach to saving are more consistent in their efforts. Waiting until the end of the week, the month, or the year before deciding to put money aside can diminish the urgency of saving and your ability to reach a goal. The 401(k) is a wonderful example; every pay cycle money goes directly into an investment for the future – automatically. Once you make the initial decision to contribute, no further action is required. The same can be done in an account outside of your retirement plan.

Increase contributions for 2020

If you are not making a maximum contribution to your 401(k), consider increasing the amount you will contribute this year, even if it’s a small increase. The limit for 2020 increased to $19,500. Often employees contribute only enough to get the employer’s full matching contribution – which is great! However, with fewer employers offering pension plans, the burden to save for retirement falls to the employees. Saving smaller amounts early on makes a significant difference in how much you will have when you get to retirement. If your employer doesn’t offer a 401(k), consider putting away up to $6,000 in an IRA or Roth IRA.

Make up for lost time

For anyone who will be 50 or older this year – there is at least one advantage – you can make up for lost time. The catch-up provision allows you to sock away additional money for the future. The 401(k) catch-up limit increased in 2020 to $6,500. For IRA and Roth IRA, the catch-up remains at $1,000.

Simplify your portfolio

It is not unusual to have several jobs throughout the course of your career. That being said, having multiple plans with past employers can be cumbersome and difficult to monitor. Consider consolidating these plans, making it more effective to track your investments, and determine if they are on track to help you reach your goals. 

We wish you a prosperous New Year!

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Who Do You Trust?

By | 2019, Money Moxie, Newsletter | No Comments

We like to think of our families, particularly our children, as centered individuals who understand the value of maintaining important family relationships. If you don’t think your family fits into this blissful picture, don’t take it to heart. Family dynamics can be challenging, and relationships can be fragile. This is especially true when there are difficult circumstances.

It’s not uncommon to have family members struggling with drug dependency, divorce, mental health, poor spending habits, or lack of financial independence. The list is inexhaustible. Sometimes there are family members who cannot get along. However, rather than sidestepping these sensitive issues, they should be addressed.

These emotionally consuming issues can become roadblocks when it comes to designing your estate plan. So much so that many take the position, “I’m not going to worry about it. I’ll let my kids handle it when I’m gone.” Unfortunately, rather than bringing families together during times of crisis, this approach can have the opposite effect. It can pit one family member against another.

It is common for families to name one or two of their children to act as trustee or co-trustees and personal representatives. This works well in families where children get along, there are no special circumstances, and your estate is straightforward. In these situations, you may feel confident your children can handle your estate the way you intend.

In our visits with clients, we often hear that they don’t want to burden their children. However, making them trustees when there are difficult circumstances may do just that–create a burden. Luckily, the situation can be remedied by using an independent trustee when designing your family trust. Upon your death, as trustee, they handle all distributions from the trust and assist in the sale of assets when needed. Their responsibility is to handle your estate the way you want. They deal with your family in a kind and understanding way, but they are also diplomatic. They can make hard decisions, something that may be hard for a family member who wants to take care of others or could be easily manipulated.

Avoiding conflicts of interest is critical when it comes to finding an outside trustee. You want things handled your way, not the bank or brokerage firm’s way. When researching an outside trustee, we recommend finding one that is independent. This means he or she is not affiliated with a large company.

Let us help you maintain healthy family relationships. If you think you may need the service of an independent trustee, give us a call. We can share our research and advise you on a trustee that may work well with your family.

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Sharing Your Financial Stories With The Next Generation

By | 2019, Money Moxie, Newsletter | No Comments

We have the delightful opportunity to work with multi-generation clients. The difference in each generation surrounding what they value, how they view money, and where they place importance on things versus experiences is fascinating. Each generation has a different outlook on life and their opinions surrounding happiness.

In our work with multi-generations, we find it exciting to see how youth gain a different perspective when they hear what their grandparents or parents did to earn money when they were young. It provides them with a sense of understanding and appreciation for the sacrifices of older generations. I believe it also deepens the relations between the generations. I certainly value the stories I have heard about the financial challenges, successes, and failures of my parents and grandparents.

We are preparing for a youth financial summer camp next year. It will provide young people the opportunity to learn about money while they are still forming ideas and habits they can take into adulthood. One of our presentations will focus on ways they can make money through creative summer jobs. For this purpose, we are compiling information to share with the next generation and would love to learn about your experience as a youth. In the next month, we will be sending an email asking a few basic questions such as:

As a teenager, what did you do for summer work?
How much did you earn doing that job?
How many hours did you work each day?
What time did you go to work?
How did you get to and from work (walk, bus, parent, bike)?
What did you love about that job?
What valuable lessons did you learn?

Please help us by answering the questions. Your response will be anonymous unless you wish to be recognized. Thank you in advance for helping us guide future generations to financial success! Thank you for your business and your friendship.

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Are you feeling anxious about the market?

By | 2019, Money Matters, Newsletter | No Comments

If your answer is yes, you are not alone. We are emotional creatures. When things get rocky, or we perceive they are rocky, we can make decisions that feel good at the time, but in the long run, are not in our best interest. Let me share an example you may relate too.

You have worked hard and saved diligently for years, and finally, you have reached your financial goal, be it: saving for retirement, building a nest egg for a future purchase, or another purpose altogether. You feel a sense of relief – I did it! Once you reach this target number, every emotion you have regarding the market going forward may be tied to that target number.

How do you feel when you see that number going down? For some, the feeling is panic! All we can think is, “It took me forever to get to this point and I cannot afford to lose anything.” This is an emotional response. You have abandoned future perspective and are focusing only on the here and now. We often see this response to market volatility when someone is getting close to retiring or has retired. Suddenly, our long-term perspective is tomorrow afternoon. We have completely discounted the value of market performance over time.

I realize you may not enjoy looking at charts but bear with me for just a minute. Look at the two charts below. How do you feel about the chart on the left? How do you feel about the chart on the right? Believe it or not, the chart on the left is merely a subsection, representing a 90-day period, from the chart on the right, which illustrates a 5-year period. The difference is when viewing volatility over a longer time period it feels more comfortable than it does when viewed in a short period of time.

It is so easy to adopt a myopic view when emotionally, we feel like we should flee to safety. What the two charts teach us is that volatility is subjective and can be controlled by how often we look at our account balance. Now, look at the next two charts showing the exact 5-year period. The chart of the left represents the market value at the end of each quarter. The chart the right represents the market value each day. My guess is you feel better about the smoother chart to the left.

Managing your emotions during times of increased market volatility is challenging but can be done. Here are a few tips to help you through the volatile times.

1) Try to review your account no more than quarterly.

2) When you hear concerning news in the media remember; their job is to sell headlines and stories not to give personalized investment advice to you.

3) If you are feeling concerned, reach out to us. That is why we are here.

We have information regarding your financial situation, your financial plan, your investments, and the markets. We will give you advice and perspective that will help you stay on track.

*The illustrations are for educational purposes and are not indicative of an actual investment return. The Standard and Poor’s 500 (S&P 500) index is often considered to represent the U.S. stock market. Investments cannot be made directly into an index. Historical performance does not guarantee future results.

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Early Retirement: A Lifestyle Change

By | 2019, Money Moxie, Newsletter | No Comments

Retiring early has a whole new meaning for Financial Independence, Retire Early (FIRE) adopters. With a goal to retire from the 9 to 5 rat race, those willing to make sacrifices can transition to a new lifestyle as early as
age 35.

The idea behind FIRE is living a frugal lifestyle so that you can create financial independence. This means living on much less and saving 50% to 70% of your income for the future. At the same time, the money you live on is focused on paying off debt as quickly as possible. Frugal habits would include eating in, shopping at thrift stores, buying food and supplies on sale, and enjoying at-home entertainment. It’s not as easy as it sounds.

Truth be told, most FIREs have had high-paying careers or were entrepreneurs. Their high incomes allowed them to save a great deal of money and still live comfortably while preparing for an early retirement. Not easy for the average American worker earning $60,000 or someone who lives in an area with high cost of living.

FIRE adopters are not retiring in the traditional sense. They are merely focusing their time on things that they enjoy and making a difference in the world. The majority have created income by blogging, teaching, or keeping a part-time job that offers lifestyle flexibility and health insurance benefits.

You may think this sounds great. How do you get started? Before you jump on board, there are things to consider. Most of us get insurance through a group plan where some of the cost is paid by an employer. For most, leaving the workforce before age 65 (Medicare age) means finding insurance in the marketplace. This can be costly because you pick up the full tab.

Leaving a lucrative job early also means you are missing out on your peak earning years. As we immerse ourselves in a career, we gain knowledge and experience, making us more valuable to employers and increasing our income over time. FIRE’s take the employer out of the picture. Their value is based on what they can market and deliver.

Saving for the future is also a concern. Without continued contributions to retirement-type accounts, like 401(k), IRA, or Roth IRA, your future income and lifestyle can be at risk. Forfeiting an employer match or profit-sharing contribution means you will need to bump up saving for future needs.
This can all be overcome with good planning and meticulous monitoring.
If you think the FIRE idea is for you, here are ideas to get you started:

(1) Determine why you want to achieve Financial Independence and Retire Early. What does that look like once you reach the goal?

(2) Figure out where you stand now. What is your net worth (total assets minus liabilities)?

(3) Where is your money going? You need to track how you spend every dollar.

(4) What expenses can be cut to reach a 50 percent savings rate?

(5) Pay off high-cost debts first.

(6) Build an emergency fund – six months’ worth of net expenses – in case you get in a financial bind.

(7) Take full advantage of tax advantaged savings accounts: IRAs and Roth IRAs.

(8) Find a side job to bring in extra money that can help pay off debt and build savings.

(9) Get advice from a Smedley Advisor to help develop a plan and track your progress.

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What Women Should Know About Social Security

By | 2019, Money Matters, Newsletter | No Comments

Retirement is on everyone’s radar. Whether you are preparing for a future date or beginning retirement now, you need to know where your money will come from once the paychecks stop rolling in.

One retirement income source that is very confusing is Social Security. It is fraught with complicated options. From understanding how your benefit is calculated to determining the best time to begin receiving your benefit, the process can be painful. I want you to understand the nuances so you can be informed about your options and better prepared to make critical decisions.

To begin, almost everyone reading this article is eligible to receive Social Security benefits in some form. However, eligibility for retirement benefits is based on several factors. If you have worked at least 10 years, you are eligible for benefits based on your own earnings. If you are now or have been married, you may qualify for benefits based on a spouse’s earnings. The challenge is knowing which benefit to claim and how to maximize your income.

Something many women are surprised to know is that Social Security retirement benefits may be available even if you never worked outside of your home. If you are now or have been married, you can claim a benefit based on your spouse’s earnings record. This is in addition to what your spouse or ex-spouse will receive. At your full retirement age (FRA), you can receive 50% of your spouse’s benefit at their FRA. For example, if your spouse’s benefit at FRA is $1,800, you would receive $900 monthly. A spousal benefit does not increase beyond FRA. 

If you are divorced and have not remarried, you may be entitled to a spousal benefit. To receive this benefit, you must have been married for at least 10 years. You are entitled to the benefit even if your ex-spouse remarries.

Timing of benefits has a lifelong impact, and you should have a well thought out plan before signing up. For instance, beginning your benefits at the earliest age possible, age 62, will lock you into a reduced benefit for the rest of your life. To receive your full benefit, you must wait until you reach full retirement age. Stop thinking age 65 (that’s for Medicare). When it comes to Social Security, FRA is somewhere between age 66 and 67 – based on the year you were born. But it gets better, for every year you wait beyond your FRA up to age 70, your benefit will increase by 8% – locked in for the rest of your life.

The following chart shows a monthly benefit of $1,800 taken at a full retirement age of 66, and how it would change if taken earlier or later. For example, if taken at age 62, the benefit would be reduced to $1,350, and if taken at age 70, the benefit would increase to $2,376. That’s significant! A $1,026 difference each month – $12,312 annually.

There can be additional downfalls when taking Social Security early. If you take Social Security benefits before your FRA and you continue to work, you may be penalized. If you are under FRA for the entire year, $1 of your benefit will be withheld for every $2 you earn over the annual earnings limit ($17,640 in 2019). The earnings limit is higher in the year you reach FRA ($46,920 in 2019). The bottom line – you may not be getting as much as you think by taking your benefit early.

Understanding Social Security can be difficult and making the wrong decision can be costly. Don’t go it alone. Let us help you analyze your options so you can make the best possible choice regarding your benefit and future income.

If you have not started your Social Security benefit and are over age 55, watch for our Social Security seminar and webinar coming in the fall

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A New Housing Paradigm

By | 2019, Money Moxie, Newsletter | No Comments

Since the housing crisis and recession of 2008, the American dream of homeownership has changed. Younger generations are weighing the benefits of owning their own home with the freedom that renting provides–flexibility to move for work and to avoid responsibilities and expenses that come with ownership. Plus, they are weighing the additional amenities that can be enjoyed from some rental communities: pool, fitness center, dog park, common use areas, etc.

Aging boomers are also considering changes. They are also interested in reducing responsibility, as well as downsizing their homes. Having someone care for the lawn and shovel the snow is enticing. Not to mention the fun of living among neighbors near their own ages.

5 things to consider before purchasing a home:

(1) Your monthly mortgage payment should not equal more than 28% of your gross monthly income. This includes principal, interest, taxes, and insurance.

(2) Avoid mortgage insurance. It does not benefit you. You can do this by making a down payment of 20 percent or more. If you can’t put down at least 20 percent, then once you have 20 percent equity, check on removing the mortgage insurance.

(3) Plan for extra expenses! If your home is new, this will include window coverings, appliances, and landscaping. If buying an existing home, plan on costs for updating and fixing known and unknown problems.

4) Keep the loan term as short as possible without financially boxing yourself in. A 15-year mortgage should have a lower rate than a 30-year mortgage. Always try paying extra principal each month.

(5) Keep money available for emergencies in a dedicated savings account. Using a credit card or a loan for emergencies will compound your problems.

5 things to know before downsizing:

(1) Ask yourself if your current home can be modified or updated to accommodate your needs as you age. You can always pay for someone to care for the yard.

(2) Increased demand for patio-style homes and planned living communities has driven up the prices. You may find that selling your large home to downsize may not be worth the price.

(3) Determine what you want. Some retirees want to be close to family or need a place to host family. Others are looking to get away or want an adult community.

(4) Understand the additional costs of Home Owners Association (HOA) fees that cover the services, upkeep, and common areas. Get a copy of the HOA contract and consider asking about its current financial condition.

(5) Protect your retirement. Avoid debt. Remember, using savings to purchase a retirement home may create future liquidity problems.

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Get in the Right Lane

By | 2019, Money Matters, Newsletter | No Comments

Missing a freeway exit can be extremely aggravating. Once missed, you are required to drive farther away from your destination. It can happen for many reasons; being in the wrong lane, missing an exit sign, or heavy traffic preventing you from getting over. Once you realize you have missed the exit, you immediately begin making corrections so you can exit at the next opportunity.

Financial success can be like the freeway. You may be headed in the right direction, but are you making the right decisions? Here are some behaviors that may keep you from reaching your financial destination:

  1. Spending more than your planned budget. One of the greatest concerns of retirees is running out of money. The goal of a financial plan is to make sure your money lasts as long as you do, even if you live to 100. If you are depleting your nest egg too quickly, you should change lanes. 

  2. Giving money to kids. When adult children are having financial troubles, giving them money may seem like the right thing to do. That is not the case. In most situations, it just prolongs the problem. If you are bailing out your adult children, you should change lanes.

  3. Paying for things you don’t use. This could be a gym membership, a storage unit to hold more stuff, or the RV and toys that rarely get used. Letting go of these things has financial and psychological benefits. You no longer worry that these items are going unused. You can rent an RV for a vacation if you want, and most of the stuff you are storing is of higher value to you than it may be to your kids. Ask them what they would like to have and get rid of the rest. It’s refreshing! If you are paying for things you don’t need, you should change lanes.

Look at your financial goals. Are you on target to reach your financial destination? If not, I challenge you to make a lane change – make the needed corrections and continue to move forward. Don’t let anything keep you from reaching your financial destination. Having a plan can keep you headed in the right direction and the right lane.

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Women Face Unique Challenges. Good Decisions are Essential.

By | 2019, Executive Message, Money Matters, Newsletter | No Comments

This year marked the 4th anniversary of our Just for Women conference and the launch of Smedley Financial’s Just for Women community. Hooray!

We want to thank the women who have participated in our community. Together, we have created a meaningful experience that engages, empowers, and educates women of all ages and from all social and economic backgrounds.

Women face many unique challenges when it comes to financial security: longer life expectancies; the likelihood that they will be in the driver’s seat, financially speaking; reduced pension payouts and retirement account balances due to periods away from the workforce to raise children or care for an aging parent. This reality makes it even more important that they set precedence regarding finances. Women should become more educated, build financial confidence, and most importantly–make good financial decisions.

Good decision-making will have a more significant impact on financial success than skill and talent combined, regardless of your gender. Dalbar, an independent research firm, has confirmed this. Their 25 years of research has found that investors’ performance has suffered significantly due to poor decision-making. Decisions which have been emotionally based or made in the “heat of the moment” tend to end with poor results.

This issue recaps some of the highlights of our Just for Women conference. If you were not able to attend, please make it a priority to join us next year — mark your calendar for May 8, 2020. Hopefully, our women’s community will help ignite a financial passion in everyone who participates.

If you would like to receive our Just for Women – Money Matters email, send us a request at [email protected] Provide your name and email, and we’ll make sure you receive the next issue.

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