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Tuesday, October 04, 2016

Erosion of Entitlements? Will Social Security disappear?

Times are hard, and they are made even more difficult by the uncertainty of the unknown. There has been much discussion regarding a program taken for granted by many, Social Security, and the shaky foundation upon which it stands in the future. For people who have paid into this program for their entire lives, the thought that it may all disappear is frightening. Many retirees rely on it to support themselves in the later years of their lives.

So is Social Security going to completely disappear? Is this fact or fiction?

The truth lies somewhere in between. The real impact of the government’s shrinking cash flow is that those monthly payments may begin to decrease.  In all likelihood, Social Security will be around for years to come, albeit with diminishing returns. This does, however, create a quandary for those workers caught in the middle of the transition, who have paid a great deal into the program but might retire with fewer benefits than those before them.

What is certain is that something has to change in the government’s practices to keep Social Security alive and well. Several solutions have been proposed, such as instituting a more progressive payroll tax or raising the retirement age, but their ultimate bearing on the future of Social Security is still ambiguous. It may be advantageous to factor this potential decline in future payments into your planning process in preparation for the worst, however. 


Posted by: Patrick Carroll at 10:37 AM
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Tuesday, October 04, 2016

Comprehensive Financial Planning

Financial planning is not about money.

That phrase sounds counterintuitive, right?

The fact is that financial planning is not just about money. It is about the fusion of lifestyle choices and fiscal responsibility, wedded together to create the best possible impact for your specific life. Financial planning is holistic and takes care of your potential needs. It has to be tailored directly to you, because your life is unlike any other.

Real, comprehensive financial planners do not sell a product- they sell a process. Getting a plan made for your future is great, but it will not be nearly as effective as if it was refined specifically for you year upon year. Planning ahead is long-term and requires a financial planner who knows you as well as you know yourself.

Wealth Strategies Group is a source of sound, comprehensive financial planning. Our Lifestyle Protection Process™ is effective because it focuses on your life goals, not on the sale of financial products. We grow along with you and adjust to any unforeseen circumstances or a change in your objectives.

Lifestyles change. Why shouldn’t your financial plan?


Posted by: Patrick Carroll at 10:15 AM
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Tuesday, October 04, 2016

Why Aren't You Maxing Out Your 401(k)?

Your 401(k) is your friend. For years, employers have wondered: why don’t people contribute more to their 401(k)s? At many large companies, the majority of employees contribute too little, and some find it a hassle to even fill out the paperwork. Most people don’t speak “financial” and don’t look at financial magazines or websites. It’s “boring.” So they mentally file “401(k)” under “boring.” But the advantages of a 401(k) should not bore you; they should motivate you.

Tax-deferred growth and compounding. The money in your 401(k) compounds year after year without tax penalties. The earlier you start, the more compounding you get. Let’s say you put $2,400 annually in a 401(k) starting at age 30, and for the sake of example, let’s assume you get an 8% annual return. How much money would you have at 65? You would have a retirement nest egg of $437,148 from putting in $200 per month. But if you started putting in that $200 a month five years later, you would have only $285,588. You can put up to $18,000 into a traditional or “safe harbor” 401(k), and if you turn 50 or are older than 50 this year, you can put in an additional $6,000 in “catch-up” contributions. You can contribute up to $12,500 to a SIMPLE 401(k), with “catch-up” contributions of up to $3,000 if you are 50 or older. These annual contribution limits are indexed for inflation.

Potential matching contributions. Who would turn down free money? Big companies will often match an employee’s 401(k) contributions. Usually, the corporate match is 50¢ for each dollar up to 6% of your salary.

Reducing your taxable income. Many employees don’t recognize this benefit. Your 401(k) contributions are pulled out of your wages before taxes are withheld (pre-tax dollars). So you get reduced taxable income and tax-free growth; you pay taxes on 401(k) assets when you withdraw them from the plan. With the Roth 401(k), the contributions are after-tax (no reduction in taxable income), but you can enjoy both tax-free compounding and tax-free withdrawals.

Why not take advantage? If you don’t contribute greatly to your 401(k), 403(b), or 457 plan, you are ignoring a great retirement savings opportunity. Talk to your financial advisor about your 401(k) and other great resources to save for retirement.


Posted by: David Shober at 10:14 AM
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Monday, August 15, 2016

How Millennials Can Get Off to a Good Financial Start

It is now more important than ever to start saving and accumulating your wealth from a young age. With Millennials just starting out in the workplace, there is ample time to start planning a steady and successful financial future. These principles will allow you to get off to a running start in your fiscal life:

Reduce your student loan debt: College is more expensive than ever, and you may be saddled with student debt. Don’t freak out. Instead, think long-term and try to wipe out your debt while saving at the same time. In a few years, you might find yourself surprised at how much freer you feel.

Start saving for retirement: Every penny counts. It may sound corny, but starting a few years earlier than your peers and keeping up-to-date on your funds will put you far ahead of the game. A big decision is whether or not you’ll want to go with a traditional or Roth IRA. Most companies offer the traditional, but the Roth is an alternative that has been growing in recent years since it allows you to withdraw earnings tax-free.*

Watch your credit score: This is something you can begin work on from a young age. Credit plays a large factor in qualifying for a loan and the interest rate that comes along with said loan. Taking steps earlier to maintain a good credit score, such as paying credit card bills on time, will only serve to benefit you in the long run.

Invest regularly: Interest rates may generally seem low and not worth putting money towards, but the money can still add up over time (especially when compounded annually). After all, saving is almost always a safer strategy than saving.

*To qualify for the tax free penalty free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to $10,000 lifetime maximum).  Before taking any specific action, be sure to consult with your tax professional.

 

 

 


Posted by: David Shober at 11:27 AM
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Monday, August 15, 2016

Mid-Life Money Errors

So you’ve reached a certain age in your life, probably around 40-60, and you think you know it all when it comes to your financial planning. Unfortunately, many middle-aged people fall prey to the same mistakes on a consistent basis. Following these tenets can help you to secure your assets:

Stay away from increased risk: You might fall behind in your savings. That’s OK. Just be sure to keep your portfolio consistent, as too much volatility may be a bad thing. You don’t want to lose what you’ve taken so long to build up over the years- play it safe.

Don’t just build your wealth- protect it: People all too often focus on moving their wealth up, up, up and fail to play defense with their savings. Being fiscally conservative is a great way to gradually increase your funds, while minimizing possible risk.

Prioritize your own savings over everything else: It may be tempting to start investing full-speed ahead in college funds for your children. But keep in mind that college has scholarships and financial aid- your retirement fund does not.  

Don’t assume your peak earning years are ahead: Hope is a wonderful emotion, but it is best to be realistic when considering your future income. Don’t overestimate your earnings and end up in a financial rut because of it. 


Posted by: Patrick Carroll at 11:24 AM
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