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Gauging Your Financial Well-Being

September 22nd, 2014 | No Comments | Posted in Financial News

Six signs that you are in good shape.

124151650How well off do you think you are financially? If your career or life takes an unexpected turn, would your finances hold up? What do you think will become of the money you’ve made and saved when you are gone?

These are major questions, and most people can’t answer them as quickly as they would like. It might help to think about six factors in your financial life. Here is a six-point test you can take to gauge your financial well-being.

Are you saving about 15% of your salary for retirement? That’s a nice target. If you’re earning good money, that will probably amount to $10-20,000 per year. You are probably already saving that much annually without any strain to your lifestyle. Annual IRA contributions and incremental salary deferrals into a workplace retirement plan will likely put you in that ballpark. As those dollars are being invested as well as saved, they have the potential to grow with tax deferral – and if your employer is making matching contributions to your retirement account along the way, you have another reason to smile.

Do you have an emergency fund? Sadly, most Americans don’t. In June, Bankrate polled U.S. households and found that 26% of them were living paycheck-to-paycheck, with no emergency fund at all.1

A strong emergency fund contains enough money to cover six months of expenses for the individual who maintains it. (Just 23% of respondents in the Bankrate survey reported having a fund that sizable.) If you head up a family, the fund should ideally be larger – large enough to address a year of expenses. At first thought, building a cash reserve that big may seem daunting, or even impossible – but households have done it, especially households that have jettisoned or whittled down debt. If you have done it, give yourself a hand with the knowledge that you have prepared well for uncertainty.1

Are you insured? As U.S. News & World Report mentioned this summer, about 30% of U.S. households don’t have life insurance. Why? They can’t afford it. That’s the perception.2

In reality, life insurance is much less expensive now than it was decades ago. As the CEO of insurance industry group LIMRA commented to USN&WR, most people think it is about three times as expensive as it really is. How much do you need? A quick rule of thumb is ten times your income. Hopefully, you have decent or better insurance coverage in place.2

Do you have a will or an estate plan? Dying intestate (without a will) can leave your heirs with financial headaches at an already depressing time. Having a will is basic, yet many Americans don’t create one. In its annual survey this spring, the budget legal service website RocketLawyer found that only 51% of Americans aged 55-64 have drawn up a will. Just 38% of Americans aged 45-54 have drafted one.3

Why don’t more of us have wills? A lack of will, apparently. RocketLawyer asked respondents without wills to check off why they hadn’t created one, and the top reason (57%) was “just haven’t gotten around to making one.” A living will, a healthcare power of attorney and a double-check on the beneficiary designations on your investment accounts is also wise.3

Not everyone needs an estate plan, but if you’re reading this article, chances are you might. If you have significant wealth, a complex financial life, or some long-range financial directives you would like your heirs to carry out or abide by, it is a good idea. Congratulate yourself if you have a will, as many people don’t; if you have taken further estate planning steps, bravo.

Is your credit score 700 or better? Today, 685 is considered an average FICO score. If you go below 650, life can get more expensive for you. Hopefully you pay your bills consistently and unfailingly and your score is in the 700s. You can request your FICO score while signing up for a trial period with a service such as TransUnion or GoFreeCredit.4

Are you worth much more than you owe? This is the #1 objective. You want your major debts gone, and you want enough money for a lifetime. You will probably always carry some debt, and you can’t rule out risks to your net worth tomorrow – but if you are getting further and further ahead financially and your bottom line shows it, you are making progress in your pursuit of financial independence.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – dailyfinance.com/2014/09/03/why-american-wages-arent-rising/ [9/3/14]
2 – money.usnews.com/money/personal-finance/articles/2014/07/16/do-you-have-enough-life-insurance [7/16/14]
3 – forbes.com/sites/nextavenue/2014/04/09/americans-ostrich-approach-to-estate-planning/ [4/9/14]
4 – nerdwallet.com/blog/credit-score/credit-score-range-bad-to-excellent/ [9/4/14]

Taking Taxes Into Account When Saving & Investing

September 22nd, 2014 | No Comments | Posted in Financial News

It isn’t always top of mind, but it should be.

shutterstock_126752345How many of us save and invest with an eye on tax implications? Not that many of us, according to a recent survey from Russell Investments (the global asset manager overseeing the Russell 2000). In the opening quarter of 2014, Russell polled financial services professionals and asked them how many of their clients had inquired about tax-sensitive investment strategies. Just 35% of the polled financial professionals reported clients wanting information about them, and just 18% said their clients proactively wanted to discuss the matter.1

Good financial professionals aren’t shy about bringing this up, of course. In the Russell survey, 75% of respondents said that they made tax-managed investments available to their clients.1

When is the ideal time to address tax matters?The end of a year can prompt many investors to think about tax issues. Investors’ biggest concerns may include any sudden changes to tax law. Congress often saves such changes for the eleventh hour. Sometimes they present opportunities, other times unwelcome surprises.

The problem is that your time frame can be pretty short once December rolls around. You can’t always pull off that year-end charitable donation, gift of appreciated securities, or extra retirement plan contribution; sometimes your financial situation or sheer logistics get in the way. It is better to think about these things in July or January, or simply year-round.

While thinking about the tax implications of your investments year-round may seem like a chore, it may save you some money. Your financial services professional can help you stay aware of the tax ramifications of certain financial moves.

Think about taxes as you contribute to your retirement accounts. Do you contribute to a qualified retirement plan at work? In doing so, you can lower your taxable income (and your yearly tax liability). Why? Those contributions are made with pre-tax dollars. In 2014, you can contribute up to $17,500 to a 401(k) or 403(b) account or the federal government’s Thrift Savings Plan. If you are 50 or older this year, you can put in up to $23,000 into these accounts. The same is true for most 457 plans. This can reduce your taxable income and lower your tax bill.2,4

Think about where you want to live when you retire. Certain states have high personal income tax rates affecting wealthy households, and others don’t levy state income tax at all. If you are wealthy and want to retire in a state with higher rates, a Roth IRA may start to look pretty good versus a traditional IRA. Withdrawals from a Roth IRA aren’t taxed (assuming the Roth IRA owner follows IRS rules), because contributions to a Roth are made with after-tax dollars. Distributions you take from a traditional IRA in retirement will be taxed.2

What capital gains tax rate will you face on a particular investment? In 2013, the long-term capital gains tax rate became 20% for high earners, up from 15%. On top of that, the Affordable Care Act Surtax of 3.8% effectively took the long-term capital gains tax rate to 23.8% for investors earning more than $200,000.2,3

Greater capital gains taxes can actually be levied in some cases. Take the case of real estate depreciation. If you sell real property that you have depreciated, part of your gain will be taxed at 25%. The long-term capital gains tax rate for collectibles is 28%. Own any qualified small business stock? If you have owned it for over five years, you typically can exclude 50% of any gains from income, but the other 50% will be taxed at 28%. Lastly, if you sell an asset you’ve held for less than a year, the money you realize from that sale will be taxed at the short-term rate (i.e., regular income), which could be as high as 39.6%.2,3

Are you deducting all you can? The mortgage interest deduction is not always noticed by taxpayers. If a home loan exceeds $1.1 million, interest above that amount may not qualify for a deduction. Itemizing can be a pain, but may bring you more tax savings than you anticipate.2

A tax-sensitive investing approach is always specific to the individual. Therefore, any strategyneeds to start with an in-depth discussion with your tax or financial professional.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – russell.com/us/newsroom/press-releases/2014/russell-survey-advisors-say-tax-aware-investment-strategies-not-top-of-mind.page? [4/29/14]
2 – foxbusiness.com/personal-finance/2014/08/07/investments-and-tax-planning-go-hand-in-hand/ [8/7/14]
3 – bankrate.com/finance/money-guides/capital-gains-tax-rates-1.aspx [3/27/14]
4 – irs.gov/uac/IRS-Announces-2014-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$17,500-to-their-401%28k%29-plans-in-2014 [11/4/13]

Debunking a Few Popular Retirement Myths

September 22nd, 2014 | No Comments | Posted in Financial News

Certain misconceptions ignore the realities of retirement.

shutterstock_164435726Generalizations about money & retirement linger. Some have been around for decades, and some new clichés have recently joined their ranks. Let’s examine a few.

“When I’m retired, I won’t really have to invest anymore.” Many people see retirement as an end instead of a beginning – a finish line for a career. In reality, retirement can be the start of a new and promising phase of life that could last a few decades. If you stop investing entirely, you can risk losing purchasing power; even moderate inflation can devalue the dollars you’ve saved.1

“My taxes will be lower when I retire.” You may earn less, and that could put you in a lower tax bracket. On the other hand, you may end up waving goodbye to some of the deductions and exemptions you enjoyed while working, and state and local taxes will almost certainly rise with time. So while your earned income may decrease, you may end up losing a comparatively larger percentage of it to taxes after you retire.1

“I started saving too late, I have no hope of retiring – I’ll have to work until I’m 85.” If your nest egg is less than six figures, working longer may be the best thing you can do. You will have X fewer years of retirement to plan for, so you can keep earning a salary, and your savings can compound longer. Don’t lose hope: remember that you can make larger, catch-up contributions to IRAs after 50. If you are 50 or older this year, you can put as much as $23,000 into a 401(k) plan. Some participants in 403(b) or 457(b) plans are also allowed that privilege. You can downsize and reduce debts and expenses to effectively give you more retirement money. You can also stay invested (see above).1,2

“I should help my kids with college costs before I retire.” That’s a nice thought, but you don’t have to follow through on it. Remember, there is no retiree “financial aid.” Your student can work, save or borrow to pay for the cost of college, with decades ahead to pay back any loans. You can’t go to the bank and get a “retirement loan.” Moreover, if you outlive your money your kids may end up taking you in and you will be a financial burden to them. So putting your financial needs above theirs is fair and smart as you approach retirement.

“I’ll live on less when I’m retired.” We all have the cliché in our minds of a retired couple in their seventies or eighties living modestly, hardly eating out and asking about senior discounts. In the later phase of retirement, couples often choose to live on less, sometimes out of necessity. The initial phase of retirement may be a different story. For many, the first few years of retirement mean traveling, new adventures, and “living it up” a little – all of which may mean new retirees may actually “live on more” out of the retirement gate.

“No one really retires anymore.” Well, it is true than many baby boomers will probably keep working to some degree. Some people love to work and want to work as long as they can. What if you can’t, though? What if your employer shocks you and suddenly lets you go? What if your health won’t let you work 40 hours or even 10 hours a week? You could retire more abruptly than you believe you will. This is why even workaholics need a solid retirement plan.

There is no “generic” retirement experience, and therefore, there is no one-size-fits-all retirement plan. Each individual, couple or family needs a strategy tailored to their particular money situation and life and financial objectives.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – tiaa-cref.org/public/advice-guidance/education/financial-ed/empowering_women/retirement-myths [8/29/14]
2 – 401k.fidelity.com/public/content/401k/Home/HowmuchcanIcontrib [8/29/14]

Adjusting to Retirement

September 22nd, 2014 | No Comments | Posted in Financial News

What people don’t always realize about life after work.

shutterstock_215260558If you have saved and invested consistently for retirement, you may find yourself ready to leave work on your terms – with abundant free time, new opportunities, and wonderful adventures ahead of you. The thing to keep in mind is that the reality of your retirement may not always correspond to your conception of retirement. There will inevitably be a degree of difference.

Some new retirees are better prepared for that difference than others. They learn things after leaving work that they wished they could have learned about years earlier. So with that in mind, here are a few of the little things people tend to realize after settling into retirement.

Your kids may see your retirement differently than you do. Some couples retire and figure on spending more time with kids and grandkids – they hang onto that five-bedroom home even though two people are living in it because they figure on regular family gatherings, or they move to another state to be closer to their kids. Then they find out that their children didn’t really count on being such frequent company.

Financial considerations come into play here as well. Keeping up a big home in retirement can cost big dollars, and if you move to another area, there is always the chance that a promotion or the right job offer could make your son or daughter relocate just a few years later. The average American worker spends 4.6 years at a given job, and less than 10% of U.S. workers in their twenties and thirties stay at the same job for a decade.1

Medicare falls short when it comes to dental, vision & hearing care. Original Medicare (Parts A & B) will pay for some things – cataract surgery and yearly glaucoma tests for people at risk for that disease, for example, as well as dental procedures that are deemed necessary prior to another medical procedure covered under Medicare. These are exceptions to the norm, however, and as people’s sight, teeth and hearing become more problematic as they age, it can be frustrating to realize what Medicare won’t cover.2

You may lose the impulse to work a little. These days, most retirees at least think about working part-time. Actually doing that may not be as easy as it first seems. It is a lot harder to get hired at age 65 than it is at age 45 – no one is denying that – and part-time work tends toward the mundane and unfulfilling. If you are able to earn income as a consultant or through other types of self-employment, you may be truly satisfied by the work you do and be able to set your own schedule, too.

Retirement income comes with income taxes. While retirees anticipate (and certainly appreciate) distributions from an IRA or an employer-sponsored retirement plan, few retirees map out a sequence or strategy intended to let them take distributions from retirement and investment accounts with the least tax impact. Generally speaking, you want to draw down your taxable accounts first, then the tax-advantaged accounts, and lastly your tax-free accounts. This way, you are giving the retirement money that is taxed least more time to compound.

Under the typical model withdrawal scenario, this sequencing a) offers the potential to reduce the tax bite from all these distributions, b) promotes greater longevity for retirement savings. The wealthier the retiree is and the higher the projected rate of return for his or her portfolio, the more sense the strategy usually makes. If a retiree has very low taxable income or large unrealized gains on taxable assets, it may not be wise to follow this rule of thumb. Health and longevity factors also influence withdrawal strategies, of course.3

Retirees also need to know something about the IRS rules for retirement accounts – if the assets are withdrawn too soon or used for an inappropriate purpose, penalties can result and tax advantages can be lost.

Retirement is a transition, but it isn’t a solution. There are people that are really eager to retire, people that come to believe that retirement will wipe away all that is dull and restrictive from their lives. Retiring often leads to a rewarding new phase of life, but it won’t solve health issues, family dilemmas or business or money problems.

You may have plenty of time on your hands. If you and/or your spouse have routinely worked 50-60 hours a week, it can be tough to come down from that once you are retired. Your urge to be productive will persist, and sooner or later, you will find ways to stay busy, contribute and make a difference. Thinking about how you will spend your time in retirement before retirement is wise, as you don’t want to risk staring at (or climbing) the walls.

Adjusting to retired life takes a bit of time for everyone. Adjustment can become easier with a candid recognition of certain retirement realities.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – marketwatch.com/story/americans-less-likely-to-change-jobs-now-than-in-1980s-2014-01-10 [1/10/14]
2 – ncoa.org/enhance-economic-security/benefits-access/how-to-get-help-for-dental.html [4/17/14]
3 – tiaa-crefinstitute.org/public/institute/research/trends_issues/ti_taxefficient_1006.html [10/06]

Monthly Economic Update – September, 2014

September 22nd, 2014 | No Comments | Posted in Monthly Economic Update

Weekly Economic Update

5 Pain-Relieving Gadgets That May Actually Work

September 22nd, 2014 | No Comments | Posted in Lifestyle

We take a look at the science behind five pain-relief gadgets that sound wacky but just might make a difference.

The Posture Fix That Will Save Your Back

Courtesy of Lumo Lift
What: Lumo Lift, $100

What for: Pain in the upper back, shoulders and lower back (it’s all connected, as you know).

How it works: The tinier, shinier, more sophisticated version of the Lumo Back, which monitors posture with a sensor worn on a belt, the Lumo Lift tracks posture with a sensor clipped on your chest with a pair of magnets. You hunch, it hums.

Why it might help: Any physical therapist will be happy to tell you how our bad posture is leading to tight upper body muscles and lots of unnecessary back pain. We promise in yoga class that we’re going to start living like there’s a wire attached to our head pulling us up, up, up…and as soon as we walk out the door, we’re bent over our phones. An O magazine editor who tried Lumo Back said it was the thing that finally made her consistently conscious of her posture; this new version promises to do that and more.

One more thing: The Lumo Lift also tracks steps, and research shows that regular exercise (walking counts!) helps ameliorate back pain.

A Cuff That’s Like A Hug For Sore Knees


Courtesy of DJO Global

What: Cryo/Cuff, $80

What for: This cuff, a standard in knee surgeons’ offices, is commonly recommended for injuries to the meniscus.

How it works: Picture an ice-filled blood pressure cuff—but designed to fit over your knee instead of your bicep.

Why it might help: The combo of compression and ice helps keep inflammation down, says Daniel F. O’Neill, MD, EdD, a New Hampshire orthopedic surgeon and the author of Knee Surgery, who uses this device with patients all the time. Less inflammation means less pain and more mobility, and that’s key for long-term recovery. Any rehab plan for your knees needs to include stretches and exercises that will build strength and help with alignment and flexibility, O’Neill says. He recommends trying the cuff in the morning, when you’re most likely to be stiff, as well as after finishing the rehab routine recommended by your physical therapist, to prevent inflammation and swelling.

One more thing: For compression and ice on-the-go, try these Dr. Cool freeze-and-wear recovery wraps (not as compressing, not as cold, but also not as bulky or pricey, $25$35 each.)

The Most Stylish Neck Protector


Courtesy of Sleeper Scarf
What: The Sleeper Scarf, $65

What for: Helping you deal with a sore, achy neck when you’re traveling.

How it works: It’s a scarf! It’s a neck pillow! It’s an inflatable travel neck pillow hidden in a scarf!

Why it might help: You know that a neck pillow makes it easier to sleep while you’re sitting upright, but there’s also research that shows it can aid in the relief of chronic neck pain, says Raphael Castro, DC, a chiropractor in Rockland County, New York, who is a fan of the Sleeper Scarf. When you nod off with your head tipped sideways, you risk overstretching the ligaments in your neck. Even when you wake up and release the pressure, the ligaments remain strained, leading to a stiff neck and potentially long-term neck problems later. A neck pillow (or cervical pillow, as it’s known to doctors) keeps the spine and head in alignment, Castro says.

One more thing: Castro adds that neck pillows can also prevent cervicogenic headaches, which are often caused by stress to the neck and involve a steady, non-throbbing pain at the back and base of the skull.

A Stretching Device That Could Save Your Soles


Courtesy of Medi-Dyne
What: The ProStretch Plus, $40

What for: Plantar fasciitis (aka heel pain)

How it works: This rocker has a V-shaped platform to help stretch out the inflamed muscles and tissues on the bottom of the foot.

Why it might help: While the research on stretching as a cure for plantar fasciitis is inconclusive, one systematic review published in 2011 did suggest that stretches that get directly to the plantar fascia (which runs along the bottom of the foot) may provide better short-term relief than stretching the Achilles or other parts of the lower leg. The catch is that the bottom of the foot is a notoriously tricky area to stretch.

One more thing: These wobbly, unstable devices are ideal for those who have already used them under the supervision of a PT (they tend to be big fans). If you’ve never used one and you’re naturally klutzy, you might want to try orthotics instead: Hillary Brenner, DPM, a podiatrist in Manhattan, recommends models from Powersteps and Superfeet. The clinical research is inconclusive for this treatment, too, but Brenner says that 90 percent of her patients claim the orthotics helped their pain.

A Different Kind Of Pad You Wear When You’ve Got Cramps


Courtesy of Pfizer
What: ThermaCare Menstrual Heat Wraps, $7 for three

What for: Period cramps

How it works: Adhesive tabs help keep these single-use heating pads in place against your lower abdomen, where they deliver soothing warmth for up to 8 hours.

Why they might help: This is a modern, high-tech, low-cost version of the old-fashioned hot water bottle. Victorian maidens swore by this treatment, and the American Congress of Obstetricians and Gynecologists likes it, too. The long-standing theory is that the heat relaxes muscle contractions. Some newer research also suggests that applying warmth activates heat receptors located at the site of injury, which in turn block chemical messengers that trigger your body to recognize pain.

One more thing: These products can get hot enough to cause minor burns if applied wrong or left on for too long, and you’re introducing them into some highly sensitive territory. Be sure to read all the fine print before trying for yourself.

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NASA Picks Two Firms To Build ‘Space Taxis’

September 22nd, 2014 | No Comments | Posted in Fun

NASA has chosen SpaceX and the Boeing Corporation to build spacecraft to ferry astronauts to the International Space Station, the space agency announced in a press conference held today at Kennedy Space Center in Florida. The agency will award a combined $6.8 billion to the firms for the first phase of the program.

“This is the fulfillment of the commitment President Obama made to end our reliance on the Russians,” NASA Administrator Charles Bolden said during the conference.

In a blog post published in conjunction with the announcement, he added, “NASA has set the stage for what promises to be the most ambitious and exciting chapter in the history of human space flight.”

The so-called space taxis are expected to provide an alternative to the Russia’s Soyuz capsules, which since the Space Shuttle program ended in 2011 have been the only ride for astronauts bound to and from the ISS.

Chicago-based Boeing, a long-term partner of NASA, has designed a seven-passenger spacecraft called the CST-100.

SpaceX, headquartered in Hawthorne, Calif., has been ferrying cargo but no crew members to the ISS since 2012. The firm is expected to produce a seven-passenger version of its Dragon capsule.

SpaceX is led by CEO Elon Musk, who also owns electric car company Tesla Motors.

The agency hopes to send the first crews up in 2017, the Associated Press reported.

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This Is How A Stock Is Born

September 22nd, 2014 | No Comments | Posted in Financial News

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