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I’m a Single Parent. How Can I Get Ahead Financially?

As a single parent, you need to understand the financial strategies that can stretch your income and help you lay the groundwork for a secure future. Consider the following lessons to help improve your family’s bottom line:

Identify Your Goals

You can’t have a financial plan without first defining your financial goals. Start by recording all of your short-, medium-, and long-term financial goals.

For example, a child’s education could be one of the biggest expenses in your future. Setting aside money for emergencies and planning for retirement are other important goals you’ll need to keep in mind while raising a family. Don’t let day-to-day concerns distract you from such important goals. Plan for today and tomorrow.

Be a Better Budgeter

To pursue your family’s goals, it’s necessary to manage your household’s cash flow. That involves tracking income and spending, eliminating unnecessary costs, and living within the confines of a realistic budget.

For example, if you spend $2 each work day on a take-out coffee, that amounts to about $40 each month. By eliminating that minor expense from your budget, you could easily save almost $500 per year.

Say No to Debt

High-interest credit card debt can make it extremely difficult to get your budget in order. If you have an outstanding balance, consider paying it off as aggressively as possible. The savings in interest alone could allow you to address other important financial goals.

It’s also a good idea to review your credit history, commonly referred to as your credit report, to make sure that the information it contains about your past use of credit is accurate.

Capitalize on Tax-Advantaged Accounts

Once you free up some cash, apply it toward your goals. But first, learn about the savings and investment opportunities available to you. Keep in mind that tax-deferred investment accounts may enable you to grow the value of your assets more significantly than taxable accounts. Examples of such accounts include 401(k) plans and IRAs for retirement planning.

For college goals, Section 529 college savings plans. These plans are state-sponsored investment programs that allow tax-free withdrawals for college expenses. College savers who contribute to their home state’s 529 plan may be eligible for state tax breaks.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution
Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

 

The Importance of Emergency Savings

Did you know that most financial experts recommend setting aside enough money to cover three to six months’ worth of expenses in the event of a major financial surprise?

That’s because a well-funded emergency account has the potential to get you through tough times without the need to spend other savings, such as assets earmarked for retirement and college.

The following tips will help you start saving more right away:

Stick to a Budget: Creating a budget is easier and more important than you may think. Just write down the amount of your household’s total monthly after-tax income, and then identify how much money you need to spend every month on bills, groceries, etc. Next, subtract the latter amount from the former. The difference represents the amount of money available to be set aside for important goals, such as accumulating emergency savings. Try to maintain financial discipline by avoiding unnecessary “impulse items” that aren’t in your budget or on your shopping list.

Buy in Bulk: When it comes to smart shopping, bigger is often better. That’s because buying one item at a time is usually more expensive than buying larger quantities. For example, instead of purchasing one can of food at a time, you may be able to find the same items at a much lower “unit cost” when they’re packaged and sold in bulk at a discount retailer or shoppers’ club. While you’ll spend more up front, the “economies of scale” may help improve your bottom line within a month or two.

Reduce the Cost of Debt: Every month, millions of Americans spend their hard-earned money on interest and finance charges that arise from carrying personal debt, such as credit card balances. Take advantage of today’s exceptionally low interest rates by transferring high-interest debt to a single, low-rate account. Then, if you own a home, consider paying off the entire balance with a tax-deductible home equity loan. And needless to say, don’t use credit to buy things you can’t really afford.

Finally, whenever you’re expecting a tax refund, bonus or other windfall, be sure to put it to good use. Paying off debt and saving for the future are almost always better strategies than spending without a plan.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution
Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

 

Your Advisor: A Partner in Pursuing Lifelong Financial Goals

The right financial advisor can become a trusted resource for all your important financial goals.
Need help managing your financial life? An investment professional is a tremendous resource to tap for financial planning information throughout your lifetime. For instance, your financial advisor can help you with:

Short-term savings: Avoid piling up debt when unexpected expenses come your way by having at least three months of living expenses available at all times. If you don’t have an “emergency” fund, your financial advisor can help you figure out how to build one.

Investing for long-term goals: Your investment professional can help you determine how much you will need to retire and then work with you to build a portfolio to pursue the kind of retirement you have in mind. He or she can also help you come up with creative funding solutions for your children’s education.

Estate planning: Contrary to popular thinking, estate planning is not just for the wealthy. Creating a will and naming a health care proxy (someone who makes medical decisions for you if you are incapacitated) and durable power of attorney (someone designated to decide financial matters if you are unable to do so) can make sure your wishes are honored. Consider using a qualified professional to develop an appropriate plan.

Three Tips for a Smooth Financial Meeting

Prepare for an appointment with a financial advisor by keeping this pre-meeting checklist in mind.

  1. Organize your thoughts and set priorities. Think about your financial goals and time frames. Your advisor will be able to help you review these issues and match them to your tolerance for investment risk. Also discuss your top areas of financial concerns, such as reducing debt.
  2. Gather the appropriate paperwork. You’ll likely need to bring financial documents, such as investment account statements and tax returns, to your first meeting. Call in advance and ask what documents would be helpful.
  3. Prepare questions for your advisor. It’s important that you feel comfortable with your advisor and the services provided. Ask about the type and level of advice you should expect. Talk about how often you should meet for a “checkup” or to rebalance your portfolio.1

Source/Disclaimer:

1Rebalancing strategies may involve tax consequences, especially for non-tax-deferred accounts.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

 

Doing the Math — How Much Will You Need for Retirement?

Even though calculating a retirement savings goal is key to pursuing and maintaining a confident financial outlook, the Employee Benefit Research Institute reported in 2013 that just 46% of American workers have figured out how much money they will need to accumulate for retirement.1 And more than half admit that they are behind schedule when it comes to planning and saving for retirement. Are you?

Planning Matters

What’s important to realize is that the exercise of calculating a retirement savings goal does more than simply provide you with a dollars and cents estimate of how much you’ll need for the future. It also requires you to visualize the specific details of your retirement dreams and to assess whether your current financial plans are realistic, comprehensive and up-to-date.

Action Plans

The following action-oriented strategies will help you do a better job of identifying and pursuing your retirement savings goals:

  • Double-check your assumptions. Before you do anything else, answer these important questions: When do you plan to retire? How much money will you need each year? Where and when do you plan to get your retirement income? Are your investment expectations in line with the performance potential of the investments you own?
  • Use a proper “calculator.” The best way to calculate your goal is by using one of the many interactive worksheets now available free of charge online and in print. Each type features questions about your financial situation as well as blank spaces for you to provide answers.

An online version will perform the calculation automatically and respond almost instantly with an estimate of how much you may need for retirement and how much more you should try to save to pursue that goal. If you do the calculation on a paper worksheet, however, you might want to have a traditional calculator on hand to help with the math. Remember that your ultimate goal is to save as much money as possible for retirement regardless of what any calculator might suggest. (After all, when was the last time you heard a retiree complain about having saved too much money in his or her 401(k) plan?)

  • Contribute more. Are you among the almost three quarters of retirement savers who say they could set aside an extra $20 each week? If so, here’s some motivation to actually do it: Contributing an extra $20 each week to your plan could provide you with an additional $51,389 after 20 years or $130,237 after 30 years, assuming 8% annual investment returns.2

At the very least, you should try to contribute at least enough to receive the full amount of your employer’s matching contribution (if offered). It’s also a good idea to increase contributions annually, such as after a pay raise.

Retirement will likely be one of the biggest expenses in your life, so it’s important to maintain an accurate price estimate and financial plan. Make it a priority to calculate your savings goal at least once a year.

Source/Disclaimer:

1Source: Employee Benefit Research Institute, 2013 Retirement Confidence Survey, 2013. 2This example is hypothetical and for illustrative purposes only. Investment returns cannot be guaranteed.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

Financial Review Checklist

You don’t need to wait until the beginning or the end of the year for a financial review, especially if your investment mix, risk tolerance, or time horizon has changed recently. When meeting with your financial advisor, consider whether the following areas of your life are on track.

Retirement Planning — Have you determined approximately when you expect to retire and how much you need to accumulate as a nest egg? If your retirement is close at hand or if you are already retired, your financial advisor can help you calculate how much you can withdraw for annual living expenses without depleting your assets.

Diversification — During the past several years, investors have experienced considerable volatility as many types of stocks declined and rose in sync. But longer term, owning a mix of different types of investments may help to stabilize your portfolio when one area of the financial markets experiences a downturn.

Risk Tolerance — How do you react when a portion of your portfolio declines in value? Your financial advisor can help you craft a mix of stock, bond, and other investments (known as asset allocation) that suits your feelings about risk and your investment horizon.* Remember that even if you are a conservative investor, earning a rate of return that exceeds the rate of inflation is critical when pursuing long-term goals.

Net Worth — Have your total assets minus total liabilities (such as loans and credit card debt) gone up or down during the past year? Many investors may be facing a smaller net worth because of declines in the value of stock and real estate holdings. If this describes you, don’t despair. Consider whether you can start saving more in an attempt to rebuild your assets. Or you may want to review your asset allocation to determine whether an adjustment could help you build wealth over the long term.

Estate Planning — Do you have a will? Have you reviewed your beneficiary designations? Have you considered the tax implications of transferring your estate to your heirs? If your estate plan was prepared some years ago, it may be time for a review to make sure it is appropriate for your current circumstances.

Everyone’s financial life is unique, and you may face other considerations that are important in the short term. By taking time to review your finances at mid-year, you may ultimately find yourself further along in pursuing long-term goals.

Source/Disclaimer:

*Asset allocation does not ensure a profit or protect against a loss.

Stock investing involves risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner


Required Attribution
Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

 

Estate Planning Checklist

Is your estate plan up-to-date? Use this checklist to pinpoint potential shortcomings.
One of the first steps you’ll take in the estate planning process is determining how much planning you’ll need to undertake. Two key components of your initial needs evaluation are an estate analysis and a settlement cost analysis. The estate analysis includes an in-depth review of your present estate-settlement arrangements. This estate analysis will also disclose potential problems in your present plan and provide facts upon which to base decisions concerning alterations in your estate plan. An estate settlement cost analysis summarizes the costs of various estate distribution arrangements. In estimating these costs, the analysis tests the effectiveness of any proposed estate plan arrangement by varying the estate arrangement, the inflation and date of distribution assumptions, as well as specific personal and charitable bequests. Remember, estate planning is very complex. And while a simple will may adequately serve the estate planning needs of some people, you should meet with a qualified legal advisor to be sure you are developing a plan that is consistent with your objectives. In addition, be sure to recognize that estate planning is also an ongoing process that may require periodic review to ensure that plans are in concert with your changing goals. Because estate planning often entails many facets of your personal finances, it often involves the coordinated efforts of qualified legal, tax, insurance, and financial professionals. Body:

Key Points

Because you’ve worked hard to create a secure and comfortable lifestyle for your family and loved ones, you’ll want to ensure that you have a sound financial plan that includes trust and estate planning. With some forethought, you may be able to minimize gift and estate taxes and preserve more of your assets for those you care about.

A Needs Evaluation

One of the first steps you’ll take in the estate planning process is determining how much planning you’ll need to undertake. No two situations are alike. And even individuals who don’t have a great deal of wealth require some degree of planning. On the flip side, those with substantial assets often require highly complex estate plans.

Two key components of your initial needs evaluation are an estate analysis and a settlement cost analysis. The estate analysis includes an in-depth review of your present estate-settlement arrangements. This estate analysis will also disclose potential problems in your present plan and provide facts upon which to base decisions concerning alterations in your estate plan.

For example, you may believe that your current arrangements are all taken care of in a will that leaves everything to your spouse. However, if you’ve named anyone else as a beneficiary on other documents — life insurance policies, retirement or pension plans, joint property deeds — those instructions, not your will, are going to govern the disposition of those assets. You want to ensure that all your instructions work harmoniously to follow your exact wishes. In addition, you may want to consider alternative asset ownership arrangements under certain circumstances. An estate plan that leaves everything to a surviving spouse enjoys the unlimited marital deduction against all estate taxes but fails to take advantage of the decedent spouse’s applicable exclusion amounts against estate taxes under federal and state law. This may result in a larger estate tax burden at the death of the second spouse. Yet these are taxes that can potentially be minimized with careful estate planning. While your spouse will receive your estate free of estate taxes if he or she is a U.S. citizen, anything your spouse receives above his or her federal applicable exclusion amount may eventually be subject to estate taxes upon his or her death.1 Many states also have their own estate tax regimes and apply different (lower) estate tax applicable exclusion amounts, which you will need to consider with your estate planning professional.

An estate settlement cost analysis summarizes the costs of various estate distribution arrangements. In estimating these costs, the analysis tests the effectiveness of any proposed estate plan arrangement by varying the estate arrangement, the inflation and date of distribution assumptions, as well as specific personal and charitable bequests.

Estate planning is very complex. And while a simple will may adequately serve the estate planning needs of some people, you should meet with a qualified legal advisor to be sure you are developing a plan that is consistent with your objectives.

Finally, be sure to recognize that estate planning is also an ongoing process that may require periodic review to ensure that plans are in concert with your changing goals. In addition, because estate planning often entails many facets of your personal finances, it often involves the coordinated efforts of qualified legal, tax, insurance, and financial professionals.

Estate Planning Checklist

Bring this checklist to a qualified legal professional to discuss how to make your plan comprehensive and up-to-date.

Part 1 — Communicating Your Wishes

  • Do you have a will?
  • Are you comfortable with the executor(s) and trustee(s) you have selected?
  • Have you executed a living will or health care proxy in the event of catastrophic illness or disability?
  • Have you considered a living trust to avoid probate?
  • If you have a living trust, have you titled your assets in the name of the trust?

Part 2 — Protecting Your Family

  • Does your will name a guardian for your children if both you and your spouse are deceased?
  • If you want to limit your spouse’s flexibility regarding the inheritance, have you created a qualified terminable interest property (QTIP) trust?
  • Are you sure you have the right amount and type of life insurance for survivor income, loan repayment, capital needs, and all estate settlement expenses?
  • Have you considered an irrevocable life insurance trust to exclude the insurance proceeds from being taxed as part of your estate?
  • Have you considered creating trusts for family gift giving?

Part 3 — Reducing Your Taxes

  • If you are married, are you taking full advantage of the marital deduction?
  • Is your estate plan designed to take advantage of your applicable exclusion amount?1
  • Are you making gifts to family members that take advantage of the $14,000 annual gift tax exclusion?
  • Have you gifted assets with a strong probability of future appreciation in order to maximize future estate tax savings?
  • Have you considered charitable trusts that could provide you with both estate and income tax benefits?

Part 4 — Protecting Your Business

  • If you own a business, do you have a management succession plan?
  • Do you have a buy/sell agreement for your family business interests?
  • Have you considered a gift program that involves your family-owned business, especially in light of “estate freeze” rules? (These rules were enacted by Congress to prevent people from artificially freezing their estate values for tax purposes.)

Points to Remember

  1. A plan helps to determine the most advantageous means of owning family properties.
  2. Planning may help minimize estate and income taxes, administrative expenses, executor’s commissions, and attorney’s fees.
  3. Your plan may help to provide adequate income to your survivors.
  4. By planning, you can preserve the assets you have worked hard to accumulate.
  5. An estate plan can help provide funds for debt repayment, if desired, and educational expenses.
  6. An estate plan can help provide adequate and available money to meet known and anticipated settlement expenses upon your death.
  7. Estate planning often involves the coordinated efforts of qualified legal, tax, insurance, and financial professionals.

Source/Disclaimer:

1The estate tax exemption is $5.43 million for 2015, with a top tax rate of 40%.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

Redefining Retirement in the 21st Century

For good or for worse, gone are the days of a “golden” retirement where anyone over age 65 was expected to fritter away the days with idle pursuits. As people live longer and healthier lives, retirement is beginning to take on a whole new look — one filled with new activities and occupations. Increasingly, today’s older American stays working longer and doesn’t hesitate to change jobs — or careers — in the pursuit of keeping life interesting. In fact, as life expectancy continues to increase, so does time spent in “retirement,” making retirement planning all the more important. Social Security, once the mainstay of a retiree’s income, now provides only a portion of necessary funds; together with pension funds, they make up scarcely half of the aggregate income of today’s retirees. You will need to rely on your own personal savings and investments for the majority of your income in retirement. To prepare for this new and expanded version of retirement, you’ll need to develop a financial plan suited to your specific vision of the future. Working with a financial planner can help you identify the key factors — time, inflation, and taxes — to plan around and help you choose among investment types and asset classes. With proper planning, you can make retirement whatever you want it to be. Body:

Key Points

When a man retires and time is no longer a matter of urgent importance, his colleagues generally present him with a clock. – R.C. Sheriff The days may be over when a gold watch is a somewhat ironic and less-than-useful gift for a retiree. If the experts are on target, retirement in the next century will scarcely resemble the conventional image of lazy days spent on cruise ships and golf courses. You might plan to open a business of your own. Or perhaps you’ll return to school for that graduate degree you never had the chance to complete. Of course, you’ll probably still find time to sit back and put your feet up.

Creating a New Life Cycle

At the turn of the 20th century, the average life expectancy was 47 years. Today, the average American newborn can look forward to about 78 years of life. What’s more, the average life expectancy for today’s 65-year-old has increased to 84, according to the National Center for Health Statistics.

 

What’s behind this trend? Some causes are obvious, such as improved health care, both early on in the form of preventive medicine and during the later years of life. Medical advances, including hypertension drugs and hip replacements, allow older Americans to remain active. Healthier lifestyles are also a contributing factor.

“People are treating their bodies with greater respect,” said Dr. Sanford Finkel of the Buehler Center on Aging at Northwestern University. “They’re giving up smoking, learning to eat right, and exercising regularly. Inevitably, these trends lead to healthier, longer, more productive lives.”

The result is a new way of thinking about age. In her best-selling book, New Passages, Gail Sheehy argues that the “mid-life passage” generally thought to take place at age 40 now occurs a decade later. The period between ages 45 and 65 is no longer middle and old age, according to Sheehy, but a “second adulthood.” Psychologist Ken Dychtwald, chief executive officer of Age Wave Inc., a California-based consulting firm, also sees new lines being drawn. Using his model, ages 25 to 40 represent young adulthood, while ages 40 to 60 comprise a new stage known as “middlescence.” Next comes late adulthood (60 to 80), followed by old age (80 to 100), and very old age (100+).

But perhaps more important than the categories is the effect that longer, healthier lives may have on the traditional life cycle of education, work, and retirement. It will be replaced by a less linear cycle, according to Dychtwald, who predicts short-term retirements, followed by any combination of career shifts, part- or flex-time work, entrepreneurial endeavors, and continuing education peppered with occasional “mini-retirements.”

Plan for the New Retirement

So what does this redefined retirement mean to you? There is no one answer. In the coming decades, “retirement” will mean something different to each of us. Regardless of your decision, you’ll need to design a financial plan suited to your specific vision of the future.

Retirement Income — A good starting point might be to examine your sources of retirement income. If you pay attention to the financial press, you’ve probably come across at least a few commentators who speak in gloom-and-doom terms about the future for American retirees, decrying a lack of savings and warning of the imminent growth of the elderly population.

True, there is widespread concern about at least one traditional source of income for retirees — Social Security. Under current conditions, Social Security funds could fall short of needs by 2033, according to the Social Security Administration. But the reality is that Social Security was intended only to supplement other sources of retirement income. In fact, Social Security benefits account for only 36% of the aggregate income of today’s retirees, according to the Social Security Administration.1

Even pension plans, once considered a staple of retirement income, only account for 18% of the retirement-income pie. In recent years, employers have been moving from traditional defined benefit plans based on salary and years of service to defined contribution plans, such as 401(k) plans, funded primarily by the employees.

This shift makes it even more important for individuals to understand their goals and have a well-thought-out financial plan that focuses on the key source of retirement income: personal savings and investments. Given the potential duration and changing nature of retirement, you may want to seek the assistance of a professional financial planner who can help you assess your needs and develop appropriate investment strategies.

As you move through the various stages of the new retirement, perhaps working at times and resting at others, your plan may require adjustments along the way. A professional advisor can help you monitor your plan and make changes when necessary. Among the factors you’ll need to consider:

Time — You can project periods of retirement, reeducation, and full employment. Then concentrate on a plan to fund each of the separate periods. The number of years until you retire will influence the types of investments you include in your portfolio. If retirement is a short-term goal, investments that provide liquidity and help preserve your principal may be most suitable. On the other hand, if retirement is many years away, you may be able to include more aggressive investments in your portfolio. You will also need to keep in mind the number of years you may spend in retirement. Thirty years of retirement could soon be commonplace, requiring a larger nest egg than in the past.

Inflation — Consider this: An automobile with a price tag of $20,000 today will cost $29,600 in just 10 years, given an inflation rate of just 4%. While lower-risk fixed-income and cash equivalents may play an important role in your investment portfolio, if used alone they may leave you susceptible to the erosive effects of inflation. To help your portfolio keep pace with inflation, you may need to maintain some growth-oriented investments. Over the long-term, stocks have provided returns superior to other asset classes.2 But also keep in mind that stocks generally involve greater short-term volatility.

Taxes — Even after you retire, taxes will remain an important factor in your overall financial plan. If you return to work or open a business, for example, your tax bracket could change. In addition, should you move from one state to another, state or local taxes could affect your bottom line. Tax-advantaged investments, such as annuities and tax-free mutual funds, may be effective tools for meeting your retirement goals. Tax deferral offered by 401(k) plans and IRAs may also help your retirement savings grow.

Prepare Today for the Retirement of Tomorrow

To ensure that retirement lives up to your expectations, begin establishing your plan as early as possible and consider consulting a professional. With proper planning, you can make retirement whatever you want it to be.

Points to Remember

  1. As people live longer and healthier lives, retirement begins to take on a whole new look.
  2. You’ll need to develop a financial plan suited to your specific vision of the future.
  3. Under current conditions, Social Security funds could fall short of needs by 2033.
  4. You will need to rely on your own personal savings and investments for the majority of your income in retirement.
  5. Keys to determining your financial plan are time, inflation, and taxes.

Source/Disclaimer:

1Source: Bureau of Labor Statistics, November 2009. (Most recent available data.) 2Past performance is no guarantee of future results.

Stock investing involves risk including loss of principal. No strategy assures success or protects against loss. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

Naming Beneficiaries: What You Need to Know

A major issue in estate planning is whom to name as beneficiaries on life insurance policies, pension plan accounts, IRAs, and annuities. This important decision often doesn’t take into account the substantial estate and income tax consequences the beneficiary may incur.

So before you name a beneficiary, you may wish to gain a basic understanding of beneficiary designations.

One of the first things you need to know is that, in many cases, beneficiary designations supersede a will. That said, not only is naming a beneficiary important, it is equally important to make sure that your beneficiary arrangements are consistent with your other estate planning documents.

Not All Beneficiary Designations Are the Same

You can name a beneficiary for many different financial products and investment vehicles. And each has some subtle nuances that are sometimes difficult to discern. In addition, because naming a beneficiary is a legal arrangement, there is certain language you must use to ensure your wishes are accurately recorded and executed. That’s why it is important to consult with a qualified financial professional when making decisions about beneficiaries. Aside from determining whom you will name as your beneficiary, you’ll also need to consider the following:

  • Age of beneficiary Most policies and plans will not directly transfer assets to minors until a trustee or guardian is approved by a court.
  • Ability of beneficiary to manage assets Perhaps a trust set up in the person’s name would be better than a direct transfer.
  • Pension plans Unless waived by the spouse in writing, the law requires a spouse to be the primary beneficiary of the account.

Professional Assistance a Must

Naming beneficiaries is a complex matter that requires a great deal of forethought to help ensure that your decisions are in concert with your financial and estate planning goals. A qualified financial professional can assist you in reviewing your beneficiary designation and help you make choices that are appropriate for your situation.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

The Roth Individual Retirement Account

A Roth IRA allows you to avoid future taxation of your retirement funds by making nondeductible contributions now. Contributions for the 2015 tax year can be made any time beginning January 1, 2015, up to and including April 15, 2016.

Rules of the Roth IRA

Following is a partial summary of the rules for Roth IRAs.

  • Contributions to a Roth IRA are nondeductible regardless of your income level or participation in an employer-sponsored retirement plan.
  • Contributions are limited to $5,500 a year ($11,000 for couples) for the 2015 tax year. Investors aged 50 and older can make an additional $1,000 “catch up” contribution annually.
  • Income thresholds determine whether you are eligible for a Roth IRA. For 2015, single taxpayers with modified adjusted gross incomes (MAGIs) between $116,000 and $131,000, and married couples filing jointly with MAGIs between $183,000 and $193,000 are eligible for a partial contribution. Taxpayers earning less than these thresholds may make the full contribution. Those earning more are not eligible.
  • Qualified distributions are tax free. To qualify, you must have maintained the Roth IRA for five years and:
    • Be at least 59½ years old.
    • Withdraw up to $10,000 (lifetime limit) and use the money for a first-time home purchase.
    • Become permanently disabled.

Conversion of a Traditional IRA to a Roth IRA

There are no longer any income restrictions on converting a traditional IRA to a Roth IRA. (Prior to 2010, taxpayers with MAGIs of more than $100,000 were prohibited from making the conversion.) If you have a traditional IRA and your contributions were not tax deductible, investment earnings and capital gains will be taxed but contributions will not. The withdrawal from your traditional IRA will count as income but will not affect your eligibility for the Roth conversion.

If you have a traditional IRA that has declined in value because of the recent stock market downturn, you may want to consider whether converting to a Roth IRA is appropriate given your situation. You may be paying taxes on a smaller amount than you would have several years ago.

Because IRA rules are complex, ask your financial advisor whether maintaining a Roth IRA, or converting a traditional IRA to a Roth account, is suitable given your situation.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-2796
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

Clearing Financial Hurdles on the Road to Retirement

When friends and loved ones finally raise their glasses to bid you a long and healthy retirement, you do not want to be worrying about how your bills will get paid. That is why it is so important to participate in your company’s retirement plan now.

On the road to retirement, however, other financial challenges are likely to crop up — such as medical or financial emergencies or care of a loved one — which might tempt you to lower your plan contributions or stop them entirely to free up necessary cash. But doing so could be a costly mistake.

Here are a few steps you can take now to help overcome these hurdles as they arise and make sure that your retirement savings strategy continues uninterrupted.

1. Maintain an Emergency Account

Financial planners often offer the following rule of thumb: Have three to six months’ worth of living expenses set aside in a bank savings account to cover emergencies. An emergency account can help you in case of job loss, and it also can help you pay for unexpected household needs such as a new hot water heater or car radiator.

2. Plan Your Long-Term Care Strategy

Healthy, active, and independent — these are adjectives you might use to describe yourself and your family members. But someday you may need to depend on someone else for care, or someone may unexpectedly need to depend on you.

Medicare offers limited coverage in such cases, and state-provided Medicaid kicks in only if you meet certain asset and income requirements, which vary by state. People who qualify for Medicaid generally live near the poverty level.

One way to protect your assets during a health-related crisis is by purchasing long-term care insurance, which covers costs typically not paid by Medicare, such as nursing home care. The policies can be a bit pricey, but in the long run, they may prove worth the expense. A trusted insurance agent can help you investigate long-term care insurance options.

3. Check Life and Disability Insurance Coverage

It is smart to regularly check that you have enough insurance coverage. Your life and disability coverage generally should replace enough of your income so that your family’s current and future needs are met — including everyday living expenses, short- and long-term debts, education for your children, and retirement for your spouse.

4. Develop a Budget That Meets All Needs

Last but not least, develop a budget that will meet your needs, including insurance and emergency savings. Start by tracking your spending for one month to see where the money goes. Then develop a written budget of necessary expenses, which should include debt obligations, mortgage or rent, utilities, insurance, and personal savings. Live on a set allowance each week to make sure you do not spend more than you can afford.

By following these four simple strategies, you may be able to overcome most financial challenges that lie ahead. Most important, these strategies will help you keep your commitment to saving for retirement.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-796 /
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.