Are You Maximizing Your Employee Benefits?

For many of you, your salary and bonus are likely just a part of the total compensation you receive from your employer. Why not give yourself a raise by learning about and taking advantage of all your company benefits? This article will help you ensure that you’re making the most of the benefits your employer offers.

Retirement Plans

Your company’s 401(k) plan can play an important role in your future financial security. If your employer matches contributions, you should be contributing at least enough to get the maximum match. If you plan to max out your contributions, make sure you don’t do so too early in the year and potentially miss out on the matching.

For those of you that are considered highly compensated, your employer may also provide a nonqualified deferred compensation plan with matching to cover wages above the qualified limit. It is important to find out how the plans interact and how you can maximize your benefit.

Stock Options and RSUs

Some companies still grant employee stock options as a form of compensation. These can add significant value to your long-term financial success, but they can be complicated and have additional risk that needs to be considered.

 
  • Risk of termination before vesting

  • Risk of market volatility in the stock price

  • Risk of asset concentration

 

There are also several tax considerations that need to be evaluated when working with stock options and RSUs. I recommend working with a financial advisor to determine what works best for you.

Health Insurance

Many companies subsidize health insurance coverage for their employees, and some offer a choice of different plans.

 
  • HMOs generally have lower premiums and lower costs to access health care but limit which providers you can see.

  • PPOs allow you to choose any physician, but they charge higher fees if you decide to see an out-of-network provider.

 

Before selecting a plan, I recommend confirming that your doctor is a preferred provider.

If one of your health insurance choices is a high-deductible health plan, you may have the option to set aside money in a health savings account (HSA) to pay for qualified health care expenses on a pretax basis. HSA contributions remain in your account until you use them, distributions for qualified medical expenses are tax-free, and the account is portable. Some companies even contribute to employees’ HSA accounts.

Flexible Spending Account

Your company may offer flexible spending accounts (FSAs) for a variety of expenses, including health care, dependent care, transportation, and parking. If you have any of these qualified expenses, you may benefit by having pretax money taken out of your paycheck to fund them. For example, if it costs you $100 per month to park at work, you can set aside that amount in an FSA to cover the expense. By contrast, you’d have to earn $157.36 to pay for this expense after taxes, assuming a total tax rate of 36.45 percent.

Life and Disability Insurance

Some employers provide life insurance coverage equal to a multiple of your salary. In many cases you may be able to purchase group supplemental life insurance coverage through payroll deductions. While this can be convenient, the coverage amounts and features may be limited, so I recommend shopping the market to ensure that you’re getting coverage at the best price.

Your employer may also pay for long-term disability insurance. LTD payments from an employer-paid policy are taxable to you; if you pay the premiums, you will receive LTD payments tax-free. If your company gives you the option of paying for your own LTD coverage, you should weigh the cost of covering the premiums yourself versus the benefit of receiving tax-free payments.

Additional Benefits

Some companies offer employee discounts on everything from wireless plans and vision care to movie tickets, hotels, and car rentals. Your employer may also offer reimbursement for certain education expenses.

I see far too often employees missing out on key employer benefits. Working with an adviser and doing a little research could be well worth your while! Contact Us today so we can help you maximize your benefits.

Take Charge of Your Student Debt Repayment Plan

Student loans are a lot like a ball and chain, slowing down what could be a perfectly good financial plan. Outstanding student loan debt in the United States has tripled over the last decade, surpassing both auto and credit card debt to take second place behind housing debt as the most common type of household debt. Today, more than 44 million Americans collectively owe more than $1.4 trillion in student debt. Here are some strategies to pay it off.

Look to your employer for help

The first place to look for help is your employer. While only about 4% of employers offer student debt assistance as an employee benefit, it's predicted that more employers will offer this benefit in the future to attract and retain talent.

Many employers are targeting a student debt assistance benefit of $100 per month.3 That doesn't sound like much, but it adds up. For example, an employee with $31,000 in student loans who is paying them off over 10 years at a 6% interest rate would save about $3,000 in interest and get out of debt two and a half years faster.

Understand all your repayment options

Unfortunately, your student loans aren't going away. But you might be able to choose a repayment option that works best for you. The repayment options available to you will depend on whether you have federal or private student loans. Generally, the federal government offers a broader array of repayment options than private lenders. The following payment options are for federal student loans. (If you have private loans, check with your lender to see which options are available.)

 

Standard plan: You pay a certain amount each month over a 10-year term. If your interest rate is fixed, you'll pay a fixed amount each month; if your interest rate is variable, your monthly payment will change from year to year (but it will be the same each month for the 12 months that a certain interest rate is in effect).

Extended plan: You extend the time you have to pay the loan, typically anywhere from 15 to 30 years. Your monthly payment is lower than it would be under a standard plan, but you'll pay more interest over the life of the loan because the repayment period is longer.

You have $31,000 in student loans with a 6% fixed interest rate. Under a standard plan, your monthly payment would be $344, and your total payment over the term of the loan would be $41,300, of which $10,300 (25%) is interest. Under an extended plan, if the term were increased to 20 years, your monthly payment would be $222, but your total payment over the term of the loan would be $53,302, of which $22,302 (42%) is interest.

Graduated plan: Payments start out low in the early years of the loan, then increase in the later years of the loan. With some graduated repayment plans, the initial lower payment includes both principal and interest, while under other plans the initial lower payment includes interest only.

Income-driven repayment plan: Your monthly payment is based on your income and family size. The federal government offers four income-driven repayment plans for federal student loans only:

 
 
  • Pay As You Earn (PAYE)

  • Revised Pay As You Earn (REPAYE)

  • Income-Based Repayment (IBR)

  • Income-Contingent Repayment (ICR)

 
 

You aren't automatically eligible for these plans; you need to fill out an application (and reapply each year). Depending on the plan, your monthly payment is set between 10% and 20% of your discretionary income, and any remaining loan balance is forgiven at the end of the repayment period (generally 20 or 25 years depending on the plan, but 10 years for borrowers in the Public Service Loan Forgiveness Program). For more information on the nuances of these plans or to apply for an income-driven plan, visit the federal student aid website at studentaid.ed.gov.

 

Can you refinance?

Yes, but only with a new private loan. (There is a federal consolidation loan, but that is different.) The main reason for trying to refinance your federal and/or private student loans into a new private loan is to obtain a lower interest rate. You'll need to shop around to see what's available.

If you refinance, your old loans will go away and you will be bound by the terms and conditions of your new private loan. If you had federal student loans, this means you will lose any income-driven repayment options.

Watch out for repayment scams

Beware of scammers contacting you to say that a special federal loan assistance program can permanently reduce your monthly payments and is available for an initial fee or ongoing monthly payments. There is no fee to apply for any federal repayment plan.

Still Need Help?

Student loans can be complicated and can have a significant impact on your long-term financial success. It’s important to develop the right plan for your unique situation. Don’t let your student loan debt derail your financial progress Contact Us for a free consultation.

How Accurate is Your W-4 Withholding?

As you are probably aware, in most cases federal income taxes are withheld from your paychecks. But did you know just how much control you have over the amount that is actually being withheld? In this blog post we’ll discuss the importance of having an accurate W-4 holding, including how recent changes to the tax code present a unique situation for taxpayers in 2018.

W-4 Breakdown

Let’s start with how the W-4 actually works. In a nutshell, your employer adjusts your gross pay and calculates how much federal income tax to withhold from your paycheck based on the withholding allowances you claim on Internal Revenue Service (IRS) Form W-4 (Employee’s Withholding Allowance Certificate). Each allowance you claim exempts a portion of your income from federal tax withholding and thereby increases what you receive in your paycheck. So, if you claim too many allowances, not enough tax will be withheld from your paycheck, and you will owe the IRS come April 15. If you claim too few allowances? An unnecessarily high amount of tax will be withheld from your paycheck, and you will get a tax refund.

Of course, no one wants to get hit with a large tax bill. But getting a tax refund is not necessarily a better option. It simply means you have paid more than your share in federal income tax and essentially have given the federal government an interest-free loan. As such, the optimal result from a cash flow and financial planning standpoint is to land right in the middle: maximizing income received in each paycheck without owing additional taxes when you file.

Time to check your W-4 Withholding

Best practice is to review your W-4 annually. It is especially important to check when you experience a major life event, such as marriage, birth or adoption of a child, a spouse getting or losing a job, or a significant pay raise or pay cut. Each of these events can directly affect the amount of tax you will owe. This year presents a unique situation, however, because the implementation of the Tax Cut and Jobs Act means that everyone’s tax situation has changed in 2018. With seven new income tax brackets, many people, making the same income in 2018 that they did in 2017, will find themselves in a lower tax bracket. This means more money in their paychecks in 2018 compared with 2017. The new tax law also increased the standard deductions across the board and eliminated miscellaneous itemized deductions.

So what does this mean to you?

The amount you will owe in federal income tax, the deductions you will be able to take, and the amount that should be withheld from your paycheck will have all likely changed.

Finding your “Sweet Spot”

The simplest and most accurate way to determine your appropriate W-4 withholding election is to use the IRS Withholding Calculator, available on the IRS’s website. Keep in mind that this calculator is designed for most taxpayers.

The calculator will ask for your filing status, your family situation, your income, your current withholding, and other information that could affect your 2018 taxes. If the calculator recommends adjusting your withholding, there’s no need to wait! You can adjust your W-4 withholding with your employer at any time, and the change will be reflected in your future paychecks.

Want to learn more?

Of course, this is a general discussion of ensuring accurate W-4 withholdings. If you have additional questions or would like more in-depth information about your withholding, feel free to reach out to me for a free consultation.

 

2018 Commonwealth Financial Network®

How Will Tariffs Impact Your Investments?

I know this may come as a shock, but fundamentally, the topic of tariffs is actually good. Government leaders implement tariffs on foreign products and services to restrict imports by tacking on additional taxes or fees. The goal is to make foreign products less attractive to domestic consumers.

Tariff supporters argue that they helps correct trade inequities and boost domestic production and growth. They believe that well-targeted tariffs foster fair trade and create a more open and robust international marketplace, despite the tension in the short run.

Those against the idea argue that establishing tariffs is a highly arbitrary fix to flaws in a very complex international market that will lead to unnecessary and unproductive trade wars that historically have ended tragically.

What's Going On Now?

 
  • President Trump has threatened to implement tariffs on nations to correct trade imbalances, unfair exporting practices and marketplace offenses.
  • Trump imposed tariffs on Chinese goods as punishment for the country’s intellectual property theft.
  • The U.S. trade deficit with China has reached a record high of more than $375 billion.
  • Trump has also instituted tariffs on steel and aluminum shipments from Canada, Mexico, and the European Union.
 

Who Will It Help? Who Will It Hurt?

First, who is expected to gain from the U.S. policy on tariffs?

 
  • U.S. steel producers stand to gain significantly. The 25% steel tariff makes a strong argument to go for domestic steel.
  • The U.S. aluminum market has been growing with the implementation of tariffs.
  • Foreign firms serving the markets affected by U.S. tariffs may benefit.
 

Second, who is expected to get the short end of the tariff stick?

 
  • American whiskey exports may suffer. U.S. whiskey producers shipped $737 million in bourbon to Europe in the 12 months prior to March 31.
  • Harley-Davidson and other U.S. motorcycle manufacturers say tariffs will put the brakes on production.
  • Prices for beer and soda, in aluminum cans, may rise.
 

Tariff Impact on Stock Market

Tariffs—and the potential for a trade war—will loom heavy on the stock market, most analysts believe. But by how much, to what extent, and in what direction remains unanswered.

Investors, at this point, are breathing a little easier, as the U.S. stock market seems to be adjusting to the news of the tariffs. Traditional wisdom suggests trade wars don’t produce positive, short-term results. However, Trump’s reasoning rests on the premise that vast trade imbalances favoring foreign countries has unfairly put the brunt of global economic development on U.S. shoulders.

While U.S. stocks have largely climbed to unprecedented heights following Trump’s “Tax Cuts and Jobs Act” and other economic incentives in late 2017 and early 2018, the market has undergone some remarkable shifts, including the sudden 12% drop in February 2018.

We help our clients wade through the challenges and opportunities of the market, on both the personal and professional levels. When you invest in developing a relationship with an independent financial professional, you invest in your future.

Contact us today to learn more!

 

Certain sections of this commentary contain forward-looking statements based on reasonable expectations, estimates, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict.

Credit Card Dos and Don'ts

The Basics: A credit card is issued by a financial company that gives the holder an option to borrow funds, usually at the point of purchase. Credit cards charge interest and are used primarily for short-term financing. Interest typically begins to be charged one month after a purchase is made, and borrowing limits are pre-set according to an individual’s credit rating.

If you're like me, you probably receive multiple offers weekly from credit card companies seeking new customers with easy to complete applications. In fact, I'd be willing to bet you have one or two sitting in your mailbox right now! These of course are almost always unsolicited. Before you sign on the dotted line and mail in one of those application, you need to know more. Here are some dos and don’ts regarding credit cards.

 
"Do not save what is left after spending, but spend what is left after saving."
                                    - Warren Buffett
 
 

Dos

Shop around. The credit card industry is very competitive, so compare interest rates, credit limits, grace periods, annual fees, terms, and conditions.

Read the fine print. The application is a contract, so read it thoroughly before you sign it. Watch for terms such as “introductory rate,” and be sure you know when that introductory rate of interest expires.

Pay your bill in full each month. Pay off your statement each month in full and on time; otherwise, you will begin paying interest charges and may be charged late fees. Paying off your bill each month can also help ensure that you stay out of debt.

Track your spending. Look closely at your credit card statements each month to be sure that you actually approved the charges that appear. Mistakes can happen, and you don’t want to pay more than you agreed to.

Pay attention to changes in your credit agreement. Occasionally, the credit card company will send you updates on the contract you have with it. If you don’t pay attention, you could miss something important.

 
 

Don’ts

Don’t spend money you don’t have. Buying things without the money in your savings account can lead you down a dangerous path. Before you know it, you could be in a lot of debt with no way to pay it off.

Stay below your maximum credit limit. Creditors want to see that you know how to use your card wisely. Keeping your balance low and making payments in full are good ways to do that. Just because the option to spend more is there doesn’t mean that you should take advantage of it.

Don’t sign up for store credit cards just to receive a discount. Opening a credit line at a store to obtain a discount on a purchase then and there may not be a good idea. Remember that credit cards affect your credit score and that opening too many can actually hurt it. Plus, store credit cards tend to have much higher interest rates than those offered by financial institutions.

Don’t apply for additional credit cards if you have balances on others. Pay your balances on existing cards before you open new accounts. Getting in this habit will make you less likely to open too many accounts.

Don’t give your credit card to someone else. Whether you authorize it or not, giving your credit card to someone else to use is against the law.

 

Although having a credit card is important in helping you to establish a credit history, they are often misused. A credit card can be a powerful tool in the hands of a responsible individual, but it can be even more powerful in a destructive way in the hands of someone who is unaware of its pitfalls. Keep these tips in mind before obtaining and using a credit card.

Building Your Budget: Start With The Basics

A budget is an estimate of income and expenses for a set period of time. Creating a budget can help you get control of your finances and achieve important financial goals, including buying a car, saving for college, purchasing a home, and providing for a family. It can also be beneficial in meeting unexpected financial challenges, such as losing a job. Honestly I know this doesn't sound fun or exciting, but budgeting will help you improve every aspect of your financial life, and the earlier you begin, the better off you’ll be.

Write down your financial goals.

Before you start evaluating how much you can actually save each month to achieve your important goals, you should consider setting some near-term financial goals. This is essential to tracking your progress. So you need to:

 

· Determine what percentage of your paycheck you would like to save.

· Decide how much money you would like to save each month or how much money you need to save in order to achieve one of your longer-term financial goals.

· Consider how much money you want to allocate to future purchases, as well as how much you want to contribute to an emergency fund and a retirement plan.

 

Whether your goal is to put away a couple of hundred—or a few thousand—dollars every year, you need to know what that amount is. Once you have a realistic idea regarding how much you’d like to save, review the steps below, which can help you determine precisely how much you actually can save.

Next Steps

 

1. Track your income for a month. Figure out how much you make per month. Think in terms of your net income, that is, the amount of money you actually take home (i.e., your net pay) after federal, state and local taxes; contributions to employer-sponsored health insurance; and so forth have been subtracted from your gross pay.

2. Track your expenses for a month. This is the most important step to budget creation. You should record every purchase you make—without exception. No dollar should escape accountability. If you bank online, it is extremely easy to track noncash expenses and debit card charges by simply exporting the information from your user login to a spreadsheet.  

3. Create spending categories. Split your expenses into luxury items and necessities. Necessities would include rent, groceries, car payments, insurance, utilities, and so on. Luxuries would include dining out, entertainment, and other unnecessary items (e.g., extra trips to Starbucks).

To be safe, you should include your saving goal as a necessary item, so you would be less likely to sacrifice saving for other luxuries. Excel is a wonderful tool for this because you can color code your expenses, making it more obvious to tell which type of expense is which.

4. Evaluate your budget. This is the final step in budget preparation. Take a good look at your expenses. Do you see numerous luxury items that you can live without? One benefit to having expenses displayed on an electronic spreadsheet is the ability to make quick and easy calculations. You can set limits on your spending based on the results of your calculations. 

 

Besides preparing yourself for big purchases later in life, your budget can help save you from going into debt in the event of an emergency that requires you to unexpectedly spend a large amount of money.

Check your budget frequently

Keep in mind that it’s important to check your budget frequently to be aware of any changes that may have occurred in your financial situation. Every three months is a good rule of thumb for tracking your spending habits. Not doing so could result in overspending, under saving, and therefore delaying your big financial goals.

What are you waiting for? Get started now!

Now that you know how valuable a budget can be to your financial future and achieving your dreams, what are you waiting for? No doubt you’ll want to begin a savings program as soon as possible. Begin by considering the steps outlined here. Our Wealth Wise Plan program would provide you with personalized financial portal to help you track, monitor and improve your budget and cash flow situation. Contact Us today!

Should You Consolidate Your Retirement Accounts?

If you’re like many of the young professionals I work with every day, myself included, you’ve probably had a few different jobs at this point in your career. In many cases you may have started saving for retirement using the available employer plan or even an individual retirement account (IRA). As you change jobs, it may make sense to consolidate all of your savings into one account to achieve a coordinated investment plan.

Why consolidate?

Consolidating your retirement accounts offers several potential benefits:

 

Less administrative hassle. You’ll receive just one account statement, making it easier to keep track of your funds. Consolidating your accounts also simplifies required minimum distribution calculations and tracking. You’d be surprised how often we discover clients have additional accounts they forgot they even had.

No overlap. If you have multiple accounts, that doesn’t necessarily mean that your investments are properly diversified. In fact, your money may be invested in similar asset classes with significant overlap. Consolidating your retirement accounts gives you a clearer view of your asset allocation picture, as well as any adjustments you may need to make.

Easier rebalancing. Any retirement savings account requires periodic rebalancing to keep it in line with your objectives. By consolidating your accounts, you’re more likely to achieve a cohesive investment strategy.

Proper Beneficiary Management. I can’t tell you how often we see clients with multiple IRAs and 401k plans, all with different beneficiary designations. Even more shocking is how often that information is incorrect or outdated. Consolidation makes it much easier to keep these up to date and accurate.

 

How to consolidate

Moving a retirement account to a new employer plan or to an IRA can be done via direct rollover or trustee-to-trustee transfer.

With a trustee-to-trustee transfer, the funds are sent directly from one plan to another. The plan administrator will make the check payable to your new IRA custodian (never to you directly). That is why this type of transfer is often referred to as a direct rollover. Unlike regular rollovers, there is no tax withholding requirement for this type of transaction. When requesting a transfer from your employer’s plan or another retirement account, be sure to use the right terms to avoid unwanted tax consequences. If you’re unsure, contact your financial planner for assistance.

Should you move your employer plan to an IRA?

A former employer will generally let you keep your money in its retirement plan for as long as you want. You may also choose to move those savings to an IRA. Before making the switch to an IRA, however, it’s wise to consider the following factors:

 

Investment choices. An employer’s 401(k) plan may be lower cost, but your choice of investments will be limited, as 401(k) plan sponsors tend to simplify the investment decision for employees by reducing the number of options. With an IRA, you have a potentially unlimited choice of investments, including individual stocks, mutual funds, and alternative investments rarely offered by employer plans.

Control over distributions. Another benefit of IRAs is that you have more control over when your retirement savings are paid to you. Distribution requirements vary among IRA providers, so be sure to understand the choices available to you and your beneficiaries.

Creditor protection. If creditor protection is a concern, both employer plans and IRAs safeguard your retirement savings from creditors to a certain extent. Employer plans generally offer better protection than IRAs do, however. The level of protection an IRA offers depends on your state laws.

Early withdrawal. One reason to keep funds in an employer account, at least temporarily, is that you may need to tap into your retirement savings before you reach age 59½. There is no tax penalty for taking a distribution from your former employer’s plan after you reach age 55. Although you’ll still pay income taxes, you will avoid the 10-percent penalty for early withdrawal, which would be assessed if you withdrew funds from an IRA before age 59½. Exceptions to the penalty on early IRA distributions include:

 
 
  • Unreimbursed medical expenses that amount to more than 10 percent of your adjusted gross income
  • Disability
  • Distributions from a beneficiary IRA upon the death of the original IRA owner
  • Qualified higher-education expenses
  • Qualified first-time home purchase
  • Distributions under a “substantially equal payment” plan, per Section 72(t) of the Internal Revenue Code
 

A Retirement Strategy That Works For You

As you can see there are some great benefits to consolidating your retirement accounts, however, there are many factors that should be considered. I recommend working with a financial planner to determine what is right for you. Please feel free to reach out to me if you have questions. I'd rather develop the best strategy for you and help you implement it properly, than you potentially creating issues trying to do it yourself.

Is a 529 the Best Way to Save for College?

For parents with aspirations of sending their children to college, the costs associated with doing so can be daunting. For decades, the price of higher education has risen at a rate close to three times that of the Consumer Price Index. And although the rate of increase recently has subsided to some degree, this expense continues to be among the most significant faced by parents. 

Let's consider the following statistics:

 
  • According to Trends in College Pricing 2017 produced by The College Board, a nonprofit organization serving students and schools, the average published tuition and fees for in-state students at public four-year colleges and universities for 2017–2018 are $20,770.
  • In addition, the study states that the average published tuition and fees at private four-year colleges and universities for 2017–2018 are $46,950.
 

There is no question that the pursuit of higher education will come at a substantial cost.  You may be searching for the best way to save for that moment when your child leaves home and the bills roll in. To celebrate National 529 Day, let's take a closer look at 529 plans and their effectiveness when it comes to saving for college.

What is a 529 plan anyway?

Excellent question and probably a great place to start! A 529 plan is a qualified tuition savings program listed in section 529 of the Internal Revenue Code. While these plans are governed by federal law, the 529 plan itself is sponsored by the individual state and managed by a mutual fund company that provides the underlying investment choices for the plan. If the state savings plan meets the federal requirements, the plan’s balance and the future distributions from the plan receive favorable tax treatment.

Income tax benefits

A 529 plan provides some very nice tax benefits, with the primary benefit found in the tax treatment of contributions, earnings, and distributions. Contributions to a 529 plan are typically invested in a mixture of stock and bond mutual funds. Similar to an IRA, the earnings on the contributions are tax deferred; however, unlike a traditional IRA, distributions from the 529 plan are tax free, as long as they are used to pay for qualified higher education expenses.

Qualified higher education expenses are defined as expenses incurred for the enrollment and attendance of a full- or part-time student at an eligible educational institution. Common qualifying expenses for both full- and part-time students include tuition, books, supplies, and associated fees.  For a detailed list of what is included, visit www.savingforcollege.com

The Tax Cuts and Jobs Act of 2017 includes an expansion of 529 savings plans that allows families to save for K−12 expenses as well as college expenses. 529 plans will be able to use qualified distributions of up to $10,000 per year, per student, for elementary and secondary school expenses.

The effect on financial aid

529 plans not only provide substantial income, gift, and estate tax savings, but they also often have minimal effects on financial aid. 529 plans owned by parents are considered parental assets; this means they are assessed at a rate of 5.64 percent when determining how much a family is expected to contribute to tuition costs. Plans owned by students are considered student assets; student assets are assessed at a much higher rate of 20 percent. Qualifying distributions from 529 plans also receive advantageous treatment when determining eligibility for the subsequent year of financial aid. 

A wise choice

When considering all of the options available to parents, a 529 plan offers the most beneficial means to save for college. Tax deferral on the growth of underlying investments, tax-free withdrawals for qualifying higher education expenses, the possibility of a state income tax deduction, the low impact on eligibility for financial aid, and the gift and estate tax benefits make a 529 plan an excellent vehicle for saving toward higher education goals.

If you'd like to discuss what makes the most sense for you, please don't hesitate to give us a call. 

 

The fees, expenses and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that a college-funding goal will be met. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10% penalty. By investing in a plan outside of your state residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance and administrative/management fees and expenses.

What is the Big Deal with Bitcoin?

I certainly wasn't surprised when I started getting the "should I buy Bitcoin" questions - the media attention alone drives people to it. The troubling part though, is in many cases these questions are coming from people who aren't following any of the basic personal finance principles.

I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
                                                   - Warren Buffett

Easily one of my favorite quotes from Warren Buffett and for good reason - investor behavior never fails!

"Cryptocurrency" is arguably the most popular buzzword in the global economy right now. While Bitcoin is currently the most well-known cryptocurrency, most people don't understand it beyond the hype and reported skyrocketing value.

The overarching goal of any cryptocurrency is to replace cash, credit, and electronic wire transactions with a digital medium of exchange that isn’t issued by any bank or backed by any federal government.

Small Transactions

Bitcoin was originally viewed as an ideal system for small online transactions, like credit card fees. However, because those online fees are too expensive for retailers—plus with a limited supply and varying demand—Bitcoin’s real-world application has been hampered. To date, only a few established retailers will accept Bitcoin as a form of payment. Among them, you'll find names such as Overstock, Expedia, Newegg, and Dish Network.

Scarcity

Bitcoin’s high level of scarcity has partly influenced its reported high market value. Although you can purchase Bitcoin using online cryptocurrency exchanges, Bitcoin was originally earned via a process known as mining, which is basically a lottery system using a specialized computer program. This lottery system favors those with the biggest and fastest machines, which means people will always need better programs and higher Bitcoin prices to make mining worthwhile—leading to its scarce supply.

The Influence of Cryptocurrency

At this time, it’s hard to tell how much cryptocurrencies are influencing the markets. There are currently at least six other forms of cryptocurrency worthy of attention in the marketplace—and in recent months and years, upwards of 3,000 other cryptocurrencies have been developed and released since Bitcoin was created. However, many of them died out due to a lack of interest and use.

The Future of Cryptocurrency

Governments around the globe are looking at the potential for regulating cryptocurrencies. At the moment, Bitcoin is controlled by a global network of computers that track all purchases and transactions through a system known as Blockchain.

Blockchain keeps Bitcoin decentralized, making it hard for governments and regulatory bodies to control it and other cryptocurrencies. The decentralized nature of Bitcoin, plus its surging value, is diminishing its chances of becoming a more widespread currency. At the moment, most people are turning to Bitcoin as a means of investing with hopes of a big payoff, rather than using it in commercial transactions.

Reports of investors who bought Bitcoin early and generated wealth has led to droves of people precariously investing in the cryptocurrency based on emotion and fear of missing out. As with any investment, there is risk involved with investing in cryptocurrency, and no one can predict its future value.

It’s important to keep an eye on your long-term goals, and before investing in cryptocurrencies, talk to a financial planner to make sure your investment aligns with your financial plan. 

 

This article is intended strictly for educational purposes only and is not a recommendation for or against cryptocurrency.

The Powerful Effects of Compound Interest

Getting an early start on your retirement savings may end up being one of the best financial moves you can make for yourself and your family. Thanks to the power of compound interest, you have the opportunity to make your money work for you and grow exponentially in many cases on a tax-deferred basis.

Think of interest as a fee paid for using borrowed money. The original amount of money in your  account (without added interest) is known as the principal. Compound interest is beneficial because it’s calculated based on the principal plus the interest, resulting in greater interest accrual over the life of the investment.

The benefits of saving early and often

Let’s look at the investing choices of two hypothetical investors, Amy and John.

 

Amy

Amy started investing at age 25. She invests $3,600 per year for 15 years at an 8-percent interest rate and then stops. At age 40 her account has grown to $104,500. By age 70 her investment has grown to $1,050,000.

John

John didn’t start investing until he was 40. He invests $3,600 per year for 30 years at an 8-percent interest rate. At age 40 he has $0 in his account. At age 70 his account has grown to $450,000

 

Clearly this is for illustrative purposes only.  The figures above do not represent the performance of any specific investment and assumes no withdrawals, expenses and tax consequences.

By now you're probably saying, “Okay, I get it. Saving earlier is better than later.” While this is a key point (and one you’ve probably heard before), many people don’t realize just how important it is until they fall into financial trouble. After all, many things can get in the way of retirement saving besides procrastination, such as paying off a mortgage, car loans, sending kids to college, and unexpected injuries or illnesses. The best way to be prepared is to kick off a pattern of saving and take advantage of compound interest as early as you can.

Retirement Readiness

Although retirement may be the furthest thing from your mind at this point, recognizing how costly it can be may help you stick to a savings plan. Here’s an overview of some of the expenses that may come into play:

 

Income taxes. When you begin withdrawing funds from retirement accounts, you may lose more of your financial “nest egg” than you thought possible to income taxes.

Everyday expenses. Groceries, home maintenance and insurance, utilities, and other basic living expenses can eventually start to chip away at your savings.

Travel and hobbies. Many retirees want to travel and take up new hobbies (after all, this is what retirement should be about). Unfortunately, such dreams may not happen if you haven’t saved enough to cover the more crucial expenses highlighted above.

 

Ready to start saving big?

Clearly, getting an early start on your retirement savings (and sustaining that habit over time) can greatly improve your future financial stability. To see how much your money could grow, schedule a free consultation with us here.