Living a Financially Balanced Life

By | 2020, Money Matters, Newsletter | No Comments

Applying a balanced perspective has an impact in many areas of our lives, from eating to working to playing. Finances, today and in the future, should receive the same balanced approach.

When thinking of our financial plans, we tend to look to the future, but what about today? It is important to establish financial goals and work towards them, but it is also essential to live your current life with joy.

We work hard and save wherever possible with a goal to enjoy life in retirement. This is commendable and vital if we want to maintain our lifestyle into retirement. However, it is too often that people plan for future adventures and then are not able to enjoy them because of health issues or even death.

Keep in mind the little things.
To stay balanced within your budget, or spending plan, be sure to give yourself some mad money. I am not proposing that you throw caution to the wind, but within your monthly budget, permit yourself to spend a predetermined amount on something that brings you joy even if that means getting an ice cream cone or pedicure. Nothing can take the wind out of your sails or blow up your spending plan quicker than eliminating all of the little things that make you happy.

Enjoy adventure along the way.
Rather than thinking you will take a huge trip when you retire, include adventure and fun in your life now. When you look back on your life, the memories you have with your family and friends will be what you remember. I can honestly say I have not had a client reminisce about days they spent in the office or attending business meetings, or cleaning the house. They talk about time spent with family, traveling, charity work, or doing something they love.

One of our motivations is to help our clients create Life Centered Plans. This is different from a typical financial plan because it focuses not only on saving for future goals but also helping clients use the money they currently have to do things that bring them joy now.

We all have a limited time left to live our lives. I challenge you to spend that time living a financially balanced life!

If you would like more information on Life Centered Planning, contact us at 801-355-8888.

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No One Can Predict The Future

By | 2020, Money Moxie | No Comments

No one can predict the future. Especially not me. On my LinkedIn page in March 2019, I posted: “I wouldn’t be surprised that we have some good growth in stocks for (2019). You usually have good growth right before a recession. However, 2020 could be a challenging year.” I had no idea it would be as challenging as it has been!

Even though I was right, I was not predicting the future. I was just following statistics and other economic indicators. Little did I know that a global pandemic would stall the U.S. (and world) economy and send it into a freefall. This yanked the 1st quarter into the red. Now, all we need to meet the technical definition of a recession is for the 2nd quarter to be negative as well.

Stocks are not the economy. There has never been a better example of this than the year 2020. The economy is hurting. Consumer spending is down double digits, and unemployment is near 20 percent.

Stocks, on the other hand, have been improving as the government has printed money. Some pundits think stocks have already bottomed and are just headed up from here. Others think we will head lower towards the mid-March bottom. Some have even suggested that this economy looks a lot like a depression. These are all conjectures. No one can predict the future.

This uncertainty leads people to question their financial future: Will I be able to pay my bills for the next 6 months? Will I be able to retire when I planned? Will my nest egg be enough to see me through retirement?

Years ago, questions like this led us at SFS to create a system that is simple yet powerful. It is designed for times like these. The goal is to provide an inflation-adjusted income for the rest of your life, regardless of the storms that may come. It helps remove a lot of the uncertainty around the security of your finances.

We call it a Lifetime Income Plan. The concept is simple: you segment your assets into time frames based on when you will need income. The assets set aside to generate income for the next 5 years should be conservative and protected.

The successive 5-year time segments should be moderate to aggressive, depending on the time frame and your personal risk tolerance. This system can be used whether you are already in retirement or just starting to save for the future.

While the design is simple, the application can be much more complex. As always, we recommend consulting with one of our Certified Financial Planners (CFP®) who are well versed in income distribution strategies.

No one knows exactly how things will turn out with the Coronavirus and how large or long-lasting the impact will be. However, with careful planning, you can help prepare your financial future for any storm that comes.

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What To Do With Your 401(k), If…

By | 2020, Money Moxie | No Comments

1: You are still employed by the sponsor company

Keep investing! The 401(k) implements an effective purchasing strategy called dollar- cost averaging. This strategy involves making regular and continuous fixed-dollar investments. But it is more than just a payroll deduction plan. Dollar-cost averaging removes the risk of trying to time the market.

By using dollar-cost averaging in a long-term investment account, the average cost per share ends up being less than the average price per share. This is because you buy less shares when prices are high and more shares when prices are low. In other words, volatility can work in your favor. So keep investing.

2. You are no longer working for the sponsor company but are employed elsewhere

You have some options.

(1) You can take a partial or full distribution. In most cases, this is a taxable event and may carry additional tax penalties. In rare situations, is this a good idea. Speak with a professional advisor before choosing this option.

(2) You can leave your 401(k) with your previous company. You can no longer contribute to it, but it will continue to perform based on the investments you have selected.

(3) If your new employer offers a 401(k) and you are eligible for it, you can roll your old 401(k) into your new 401(k) plan. This is a tax-free rollover, and you will need to select new investments based on what the new plan offers.

(4) You can roll the old 401(k) into an IRA. In most cases, this is what we recommend. An IRA gives the account owner more control, more investment options, and better planning opportunities than a 401(k). Like a 401(k), an IRA is a retirement account with annual maximum contribution limits and early withdrawal penalties. A rollover is not considered a contribution, and therefore any amount can be rolled.

3. You are no longer working for the sponsor company and are not employed

You have the same options as above, with the obvious exception of rolling to your new 401(k). If you are retired, however, the rollover option to the IRA may be even more appealing. When it comes time to take distributions from your retirement accounts, the IRA has some significant advantages. Some of these include better risk management strategies, tax-saving distribution strategies, and avoiding mandatory distributions from Roth accounts.

4. You need financial help due to COVID-19

The CARES Act allows some individuals to take early withdrawals from retirement accounts in 2020 without the early withdrawal penalty. If you have been diagnosed with COVID-19, have a spouse or dependent diagnosed with COVID-19, or have experienced a layoff, furlough, reduction in hours, have been unable to work, or lack childcare because of COVID-19, you may qualify. Withdrawals may impact your tax liability, so speak with a financial advisor before taking an early distribution.

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Facing Coronavirus Uncertainty, Think Long Term

By | 2020, Executive Message, Money Moxie | No Comments

I often include the phrase, “Past performance does not guarantee future results,” to remind us that uncertainty will always be an integral part of investing. I also repeat the words, “Long term,” frequently to help keep perspective in the face of uncertain times.

Warren Buffett understands uncertainty and long-term investing. He is one of the wealthiest individuals on the planet and one of the best investors of all time. Recently he gave us a glimpse into how he is viewing the extreme pessimism and optimism on Wall Street. On May 2, 2020, Warren Buffett conducted a virtual shareholder meeting. In the discussion, we learned that Buffett has been selling some and holding much of his investment portfolio during the Covid-19 pandemic. With around $137 billion in cash, many people thought Buffett would be buying aggressively. We also learned how he is viewing short-term and long-term investing now that he is 89 years old:

I hope I’ve convinced you to bet on America. Not saying that this is the right time to buy stocks if you mean by “right,” that they’re going to go up instead of down. I don’t know where they’re going to go in the next day, or week, or month, or year. But I hope I know enough to know, well, I think I can buy a cross section and do fine over 20 or 30 years. And you may think, for a guy, 89, that that’s kind of an optimistic viewpoint. But I hope that really everybody would buy stocks with the idea that they’re buying partnerships.

At the age of 89, Buffett is still thinking 20 to 30 years into the future. That’s an important lesson for all of us because the likelihood of making money increases with time.

The Dow Jones index is made up of 30 stocks, so it’s not a comprehensive example, but it is perhaps the oldest index. Over the last 100 calendar years, the probability of a positive return in any given year was 69%. That’s not bad, but that means that 31% were negative. Now that’s uncertainty. At the extremes, the Dow lost over 50% (1931) and gained 63% (1933). That’s what we call short-term.

I would define long-term as 10 years or more. It makes a big difference. The Dow was positive 83% of the 10-year periods and 96% of the 20-year periods. Only during the Great Depression were the 20-year numbers negative, but any investor who could have stayed invested would have done well in the latter half of the Depression and in the decades to come. Through these 100 years, the Dow averaged a 5.7% annual return (and that does not even include dividends).

So, while uncertainty will probably always be difficult to embrace, time can be our ally. Warren Buffett is choosing to think this way at the age of 89. I firmly believe that the same perspective will be beneficial to us as we continue through the 2020 Coronavirus pandemic and beyond.

*The Dow Jones index is often used to represent the U.S. stock market. One cannot invest directly in an index and of course, past performance does not guarantee future results.

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3 Things You Should Know – CARES Act

By | 2020, Money Moxie | No Comments

Back in March, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed. It was designed as a stimulus bill that would provide relief and assistance to millions of Americans affected by the pandemic. Here are three things you should know about the CARES Act.

No Required Minimum Distributions for 2020
This year, you will not have to take out a required minimum distribution from your qualified retirement accounts. The waiver for this year also includes any inherited retirement accounts.

We know many of our clients also like to take advantage of qualified charitable distributions to donate their required distributions directly from their IRAs to a charity, tax-free. If you are over age 70 ½, you can still do this in 2020. It may even be advantageous for you to donate money from your IRA to a charity. This year, since you won’t be required to take money out, it will require more evaluation than in previous years to determine if it is still beneficial for you.

Unemployment Benefits
Unemployment benefits have been expanded, and individuals will be eligible for an additional $600 weekly benefit through July 31, 2020. Additionally, individuals will also have 13 weeks of federally funded benefits through 2020 for people who exhaust their state benefits. Another added benefit from the CARES Act is for people who would not normally qualify for unemployment benefits like independent contractors, part-time workers, and self-employed individuals. They will now also be eligible for benefits.

Penalty-free Withdrawals from Retirement Accounts
The 10% early-distribution penalty tax that normally applies to distributions made before age 59 ½ is waived for distributions up to $100,000 relating to Coronavirus. You must be impacted by COVID-19 for the waiver to apply; this would include being diagnosed with Coronavirus, being unable to work due to lack of child care available, or being furloughed, laid off, or have reduced hours.

While you will still have to pay income tax on any withdrawal, you’ll be able to spread the payment of those taxes over three years. If you decide to repay the withdrawal back into your account within three years, you will not owe income tax, and it will not be counted toward yearly contribution limits.

*Remember to speak to one of our wealth advisors before making the decision to tap into your retirement account.

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The State of Retirement

By | 2020, Money Moxie | No Comments

When asked, “When are they going to retire?” Most people reply with a specific age or date, something they have pinpointed and are looking forward to with anticipation. Unfortunately, only 53 percent of retirees leave the workforce based on their planned time-frame. Forty-seven percent are unexpectedly forced into retirement at an early age. This staggering number supports the importance of having a retirement plan that prepares you for all outcomes, those you anticipate, and those you don’t.

In a Federal Reserve study of non-retirees, 40 percent responded they feel their retirement savings are on track.

Sadly, 25 percent responded that they have not prepared for retirement and have no retirement savings. This can be due to many factors. They may work for a company that does not provide employees with retirement savings options such as a 401(k). Often they feel like they should do something but are overwhelmed and do not know how to start or where to turn for advice. If you are in this situation, please reach out to us for assistance.

The number of DIY investors with self-directed accounts changes as they reach their retirement years. This could be for a number of reasons. One is the complexity of turning a lifelong savings plan into an income-producing plan. Like climbing a mountain, the greatest risk comes on the way down. The same is true with retirement savings. Many fear taking on the wrong type of risk and jeopardizing their future income.

Source for all data: Federal Reserve Bank of St. Louis

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A Tribute to Money Smart Women and Moms

By | 2020, Money Matters | No Comments

May brings a time to reflect on women and the influence they have or have had in our lives. Whether it is a mother, grandmother, sister, daughter, or a good friend, we can all think of someone we love that has inspired us.

Helping others is an innate, nurturing quality of most women. If we have the knowledge, we want to share it with those around us. This is especially valuable when it comes to sharing our knowledge of money.

It was not that long ago that people did not talk openly about money. Thankfully, times have changed. Money has an impact on each of us, from earning a living, to buying groceries, to paying for college, to saving for retirement. It touches almost every aspect of our daily lives, and at some point, we developed ideas and values surrounding money.

Looking back, I can see how the lessons I learned at an early age helped to create a foundation for my financial decisions today – saving, living within my means, investing in my future, and giving back, all principals that were taught to me when appropriate. The lessons do not stop there. How we earn money is important as well. Do something you enjoy, give it one hundred percent, and treat others fairly, are some of the cornerstones I try to build on.

The decisions we make surrounding money are unspoken examples to those who are watching, and the message we send is important. Think of your situation, who helped form your financial values?

You can share your money smarts with others by talking openly about money and sharing your experiences, good and bad. Stories are a great way to do that. It helps others connect with the message you want to convey, and it makes you seem more relatable. Remember, no one is perfect; sharing your hardships and failures is just as important as sharing your successes.

We make a difference in the lives of others, even if we are not mothers. If we share our experiences, we can help others make better financial decisions and become successful, financial speaking.

I admire you for mentoring those around you. You are generous beyond measure, with your time, talents, knowledge, and, when possible, your money.

I wish each of you a wonderful Mother’s Day.

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Unprecedented Times

By | 2020, Newsletter | No Comments

It is unprecedented times like these that bring people together with a common focus and a shared desire. Protecting the lives of our family, friends, and community has become top of mind, and our daily efforts reflect that devotion.

While times have changed, our commitment has not waivered. Your financial success and well-being are our top priorities. We are diligently working to stay abreast of the changing financial landscape and keep you on track to meet your financial goals.

When creating financial plans, we are continually watching for bumps in the road that could prevent our clients from reaching their goals. Financial markets and the associated volatility are not unexpected. In fact, market volatility, as a risk, is built into every plan we create, whether you are working toward future retirement or enjoying retirement now.

Having had the opportunity to help clients through multiple bear markets, and numerous market corrections, we know that sticking with your plan delivers the best opportunity to achieve financial success.

We will continue to use email and social media to stay connected and keep you informed. We will resume sending postal mailings when COVID-19 restrictions have been lifted.

I invite you to contact one of our wealth managers to discuss your situation, get answers to your questions, and hear what Smedley Financial is doing to help protect your financial future. We are working remotely and are still available.

I want to thank those who have reached out to us, concerned about our well-being. Your thoughtfulness is very much appreciated.

It is our greatest hope that you and your loved ones stay healthy and safe.

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What You Need to Know About the CARES Act

By | 2020, Newsletter | No Comments

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES) stimulus bill was passed. It will provide relief and assistance to millions of Americans affected by the pandemic. This article will highlight some of the most important parts of the recently passed bill.

No Required Minimum Distributions for 2020

This year you will not have to take a required minimum distribution (RMD) from your qualified retirement accounts. The waiver for this year also includes any inherited IRAs or 401ks. RMDs are calculated based on your account value on December 31st of the previous year. Last year was a great year for the stock market, meaning your 2020 RMD was based on your account value at the end of a great year when the Dow was around 28,000.

With the recent events due to COVID-19, the market has taken a tumble, and you would now be forced to take money out at a low point, which is the opposite of what you want to do when investing. No RMDs in 2020 can end up being helpful for many retirees and could save them money on their taxes this year.

If you already took your RMD for this year, you won’t benefit from the waiver, but there is a bright side. You probably took your distribution when the market was at a high point, and that is a good thing.

We know many of our clients also like to take advantage of qualified charitable distributions to donate their required distributions from their IRA to a charity, tax-free. If you are over age 70 ½, you can still do that this year and it may still be advantageous for you to donate money from your IRA to a charity. This year, since you won’t be required to take money out, it will require more evaluation than in previous years to determine if it is still beneficial for you.

Payments to Individuals

Most individuals will receive a direct payment from the federal government. This is technically a refundable tax credit for 2020. It will be based on 2019 taxes (2018 if you haven’t filed yet). You must have a Social Security number and not qualify as a dependent of another individual.

The amount is $1,200 per adult plus $500 for each qualifying child under age 17. Rebates will be phased out for those with adjusted gross income above $75,000 ($150k if married filing jointly, $112k if filing as head of household). The rebate will be reduced by $5 for every $100 in income over the threshold.

Unemployment Benefits

Individuals will be eligible for an additional $600 weekly benefit through July 31, 2020. Additionally, individuals will have 13 weeks of federally funded benefits through 2020 for people who exhaust state benefits.

People who would not normally qualify for unemployment benefits like independent contractors, part-time workers, and self-employed individuals will be eligible for benefits.

Penalty-free Withdrawals from Retirement Accounts

The 10% early-distribution penalty tax that normally applies to distributions made before age 59 ½ is waived for distributions up to $100k relating to coronavirus. While you’ll still have to pay income tax on any withdrawal, you’ll be able to spread the payment of those taxes over three years. If you decide to repay the withdrawal back into your account within three years, you will not owe income tax, and it will not be counted toward yearly contribution limits.

*Remember to speak to your financial advisor before deciding to tap into your retirement account.

No Charitable Contribution Limits for 2020

For those who itemize deductions, this act suspends charitable contribution limits for 2020. To benefit from this, you need to donate to a qualified charity and not a donor-advised fund. Usually, deductible contributions are capped at 60% of your adjusted gross income, but the new bill allows you to deduct 100% of the contribution.

Student Loans

If you have a student loan held by the federal government, you will automatically get a six-month payment suspension (ends September 30, 2020), and interest will not accrue during that time.

If you have any questions about how this stimulus bill will affect you, please reach out to us, and we will be happy to help you!

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