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Eight Mistakes That Can Upend Your Retirement

Avoid these situations, if you can.  Provided by Stan Evans, CFP    Pursuing your retirement dreams is challenging enough without making some common, and very avoidable, mistakes. Here are eight big mistakes to steer clear of, if possible. No Strategy.Yes, the biggest mistake is having no strategy at all. Without a strategy, you may have no goals, leaving you no way of knowing how you’ll get there – and if you’ve even arrived. Creating a strategy may increase your potential for success, both before and after retirement.  Frequent Trading.Chasing “hot” investments often leads to despair. Create an asset allocation strategy that is properly diversified to reflect your objectives, risk tolerance, and time horizon; then, make adjustments based on changes in your personal situation, not due to market ups and downs. (The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification are approaches to help manage investment risk. Asset allocation and diversification do not guarantee against investment loss. Past performance does not guarantee future results.)  Not Maximizing Tax-Deferred Savings.Workers have tax-advantaged ways to save for retirement. Not participating in your workplace retirement plan may be a mistake, especially when you’re passing up free money in the form of employer-matching contributions. (Distributions from most employer-sponsored retirement plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.)  Prioritizing College Funding over Retirement.Your kids’ college education is important, but you may not want to sacrifice your retirement for it. Remember, you can get loans and grants for college, but you can’t for your retirement.  Overlooking Health Care Costs.Extended […]

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Will You Avoid These Estate Planning Mistakes?

Too many wealthy households commit these common blunders.  Provided by Stan Evans, CFP   Many people plan their estates diligently, with input from legal, tax, and financial professionals. Others plan earnestly but make mistakes that can potentially affect both the transfer and destiny of family wealth. Here are some common and not-so-common errors to avoid.  Doing it all yourself.While you could write your own will or create a will, it can be risky to do so. Sometimes simplicity has a price. Look at the example of Aretha Franklin. The “Queen of Soul’s” estate, valued at $80 million, may be divided under a handwritten or “holographic” will. Her wills were discovered among her personal effects. Provided that the will can be authenticated, it will be probated under Michigan law, but such unwitnessed documents are not necessarily legally binding.1  Failing to update your will or trust after a life event.Relatively few estate plans are reviewed over time. Any major life event should prompt you to review your will, trust, or other estate planning documents. So should a major life event that affects one of your beneficiaries. Appointing a co-trustee. Trust administration is not for everyone. Some people lack the interest, the time, or the understanding it requires, and others balk at the responsibility and potential liability involved. A co-trustee also introduces the potential for conflict.  Being too vague with your heirs about your estate plan. While you may not want to explicitly reveal who will get what prior to your passing, your heirs should understand the purpose and intentions at the heart of your estate planning. If you want to distribute more of your wealth to one child than another, write a letter to be presented after your death that explains your reasoning. Make a list of which heirs will receive collectibles or […]

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Making Investment Decisions

Are your choices based on evidence or emotion? Provided by Stan Evans, CFP Information vs. instinct.When it comes to investing, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on? The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we may not even be aware of. Deal du jour.You’ve heard the whispers, the “next greatest thing” is out there, and you can get on board, but only if you hurry. Sound familiar? The prospect of being on the ground floor of the next big thing can be thrilling. But while there really are great new opportunities out there once in a while, those “hot new investments” can often go south quickly. Jumping on board without all the information can be a bit like gambling in Vegas: the payoff could be huge, but so could the loss. A shrewd investor will turn away from spur-of-the-moment trends and seek out solid, proven investments with consistent returns. Risky business.Many people claim not to be risk-takers, but that isn’t always the case. Most proficient investors aren’t reluctant to take a risk, they’re reluctant to accept a loss. Yes, there’s a difference. The first step is to establish what constitutes an acceptable risk by determining what you’re willing to lose. The second step is to always bear in mind the final outcome. If taking a risk could help you retire five years sooner, would you take it? What if the loss involved working an extra ten years before retiring; is it still a good risk? By weighing both the potential gain and the potential loss, while keeping your final goals in mind, you can more wisely assess what constitutes an acceptable risk. You can’t […]

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The Cost of Procrastination

clock

Don’t let procrastination keep you from pursuing your financial goals. Provided by Stan Evans, CFP  Some of us share a common experience. You’re driving along when a police cruiser pulls up behind you with its lights flashing. You pull over, the officer gets out, and your heart drops. “Are you aware the registration on your car has expired?” You’d been meaning to take care of it for some time. For weeks, you had told yourself that you’d go to renew your registration tomorrow, and then, when the morning comes, you repeat it again. Procrastination is avoiding a task that needs to be done – postponing until tomorrow what could be done, today. Procrastinators can sabotage themselves. They often put obstacles in their own path. They may choose paths that hurt their performance. Though Mark Twain famously quipped, “Never put off until tomorrow what you can do the day after tomorrow.” We know that procrastination can be detrimental, both in our personal and professional lives. From the college paper that gets put off to the end of the semester to that important sales presentation that waits until the end of the week for the attention it deserves, we’ve all procrastinated on something. Problems with procrastination in the business world have led to a sizable industry in books, articles, workshops, videos, and other products created to deal with the issue. There are a number of theories about why people procrastinate, but whatever the psychology behind it, procrastination may, potentially, cost money – particularly, when investments and financial decisions are put off. As the example below shows, putting off investing may put off potential returns. Early Bird. Let’s look at the case of Cindy and Charlie, who each invest a hypothetical $10,000 to start. One of them begins immediately, but the other puts […]

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Pension Plans & De-risking

Pension and De-Risking

Corporations are transferring pension liabilities to third parties. Where does this leave retirees? Provided by Stan Evans, CFP A new term has made its way into today’s financial jargon: de-risking. Anyone with assets in an old-school pension plan should know what it signifies. De-risking is when a large employer hands over its established pension liabilities to a third party (typically, a major insurer). By doing this, the employer takes a sizable financial obligation off its hands. Companies that opt for de-risking usually ask pension plan participants if they want their pension money all at once rather than incrementally in an ongoing income stream. The de-risking trend began in 2012. In that year, Ford Motor Co. and General Motors gave their retirees and ex-employees a new option: they could take their pensions as lump sums rather than periodic payments. Other corporations took notice of this and began offering their pension plan participants the same choice.1 Three years later, the Department of the Treasury released guidance effectively prohibiting lump-sum offers to retirees already getting their pensions; lump-sum offers were still allowed for employees about to retire. In March 2019, though, the Department of the Treasury reversed course and issued a notice that permitted these offers to retirees again.1 So, whether you formerly worked or currently work for a company offering a pension plan, a lump-sum-versus-periodic-payments choice might be ahead for you. This will not be an easy decision. You will need to look at many variables first. Whatever choice you make will likely be irrevocable.2    What is the case for rejecting a lump-sum offer? It can be expressed in three words: lifetime income stream. Do you really want to turn down scheduled pension payments that could go on for decades? You could certainly plan to create an income stream from the […]

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Three Key Questions to Answer Before Taking Social Security

Taking Social Security

When to start? Should I continue to work? How can I maximize my benefit? Provided by Stan Evans, CFP Social Security will be a critical component of your financial strategy in retirement, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source. When to Start? The Social Security Administration gives citizens a choice on when they decide to start to receive their Social Security benefit. You can: * Start benefits at age 62. * Claim them at your full retirement age. * Delay payments until age 70. If you claim early, you can expect to receive a monthly benefit that will be lower than what you would have earned at full retirement. If you wait until age 70, you can expect to receive an even higher monthly benefit than you would have received if you had begun taking payments at your full retirement age. When researching what timing is best for you, it’s important to remember that many of the calculations the Social Security Administration uses are based on average life expectancy. If you live to the average life expectancy, you’ll eventually receive your full lifetime benefits. In actual practice, it’s not quite that straightforward. If you happen to live beyond the average life expectancy, and you delay taking benefits, you could end up receiving more money. The decision of when to begin taking benefits may hinge on whether you need the income now or if you can wait, and additionally, whether you think your lifespan will be shorter or longer than the average American.1,2 Should I Continue to Work? Besides providing you with income and personal satisfaction, spending a few more years in the workforce may help you to increase your retirement benefits. […]

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Stan Evans Recognized as Top Financial Adviser in the U.S. by HTK

Capital Financial Benefit Solutions a Hunt Valley, Maryland based financial services firm, is pleased to announce that Stan Evans has been recognized by broker-dealer and registered investment adviser, Hornor, Townsend & Kent, LLC (HTK), as one of the top financial advisers in the U.S. for 2018.1 Each year, HTK releases a ranking of its 900 financial advisers2 who have qualified for the firm’s Summit and Peak Top Financial Adviser Program. Stan is recognized as a Peak adviser, joining the firm’s prestigious group of leading financial advisers in the U.S. “Our Summit and Peak advisers represent those leading the pack at HTK. They have a demonstrated history of excellence and a strong commitment to delivering robust financial solutions to their clients,” says Timothy Donahue, president and CEO, HTK. “We’re proud to have these advisers represent our firm, both to their clients and within the financial services industry at large.” For more than 50 years, HTK has been the trusted partner supporting financial advisers on their path to success. HTK is committed to offering advisers the independence to build their practice their way through the delivery of a flexible platform, leading solutions and personalized service. Learn more at www.htk.com.

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IRA Withdrawals That Escape the 10% Penalty

IRA

The list of these options has grown. Provided by Stan Evans, CFP An IRA, or Individual Retirement Account, is a tax-advantaged savings account that is subject to special rules regarding contributions and withdrawals. One of the central rules of IRAs is that withdrawals prior to age 59½ are generally subject to a tax penalty because policymakers sought to create a disincentive to use these savings for anything other than retirement.1 Yet, policymakers acknowledged that extenuating circumstances might require access to these savings prior to one’s second act. In appreciation of this, the list of exceptions for waiving this penalty has grown over the years. Penalty-Free Withdrawals. Outlined below are the circumstances under which individuals may withdraw from an IRA prior to age 59½, without a tax penalty. Ordinary income tax, however, is generally due on such distributions.1 Death – If you die prior to age 59½, the beneficiary(ies) of your IRA may withdraw the assets without penalty. However, if your beneficiary decides to roll it over into their IRA, they will forfeit this exception. Disability – Disability is defined as being unable to engage in any gainful employment because of a mental or physical disability, as determined by a physician. Substantially Equal Periodic Payments – You are permitted to take a series of substantially equal periodic payments and avoid the tax penalty, provided they continue until you turn 59½ or for five years, whichever is later. The calculation of such payments is complicated, and individuals should consider speaking with a qualified tax professional. Home Purchase – You may withdraw up to $10,000 toward the purchase of your first home ($20,000 for a married couple). You cannot have owned a home within the last two years. Unreimbursed Medical Expenses – This exception covers medical expenses in excess of 10% of your […]

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Earnings for All Seasons

all seasons

What is it and why is it important? Provided by Stan Evans, CFP While nature offers four seasons, Wall Street offers only one – four times a year. It’s called “earnings season,” and it can move the markets. So, what is earnings season, and why is it important? Earnings season is the month of the year that follows each calendar quarter-end month (January, April, July, and October). It is the time during which many public companies release quarterly earnings reports. Some public companies report earnings at other times during the year, but many are on the calendar year that ends December 31.1 Reported Earnings. To understand the importance of earnings, we need to remember that the value of a company can be tied to the amount of money it earns. Some companies don’t have earnings, and they are valued based on their potential rather than their current earnings. Wall Street analysts maintain a close pulse on a company’s quarterly report to help estimate future earnings. For example, these estimates may guide investors in determining an appropriate price for a company’s stock. Remember, a company is not permitted to discuss interim earnings with select individuals; earnings reports must be disseminated publicly to level the playing field for all investors.1,2 An Inside Look. When an earnings report is released, it tells the market two things. First, it offers an insight into how the company is performing and what its prospects may look like over the near term.1 And second, the report can serve as a bellwether for similar companies that still have not reported. For instance, if the earnings of a leading retailer are strong, it may offer an insight into the earnings of other retailers, as well as other companies that similarly benefit from higher consumer spending. What Time? Earnings reports […]

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Your Emergency Fund: How Much is Enough?

emergency fund

An emergency fund may help alleviate the stress associated with a financial crisis. Provided by Stan Evans, CFP Have you ever had one of those months? The water heater stops heating, the dishwasher stops washing, and your family ends up on a first-name basis with the nurse at urgent care. Then, as you’re driving to work, giving yourself your best, “You can make it!” pep talk, you see smoke seeping out from under your hood. Bad things happen to the best of us, and instead of conveniently spacing themselves out, they almost always come in waves. The important thing is to have a financial life preserver, in the form of an emergency cash fund, at the ready. Although many people agree that an emergency fund is an important resource, they’re not sure how much to save or where to keep the money. Others wonder how they can find any extra cash to sock away. One recent survey found that 29% of Americans lack any emergency savings whatsoever.1 How Much Money? When starting an emergency fund, you’ll want to set a target amount. But how much is enough? Unfortunately, there is no “one-size-fits-all” answer. The ideal amount for your emergency fund may depend on your financial situation and lifestyle. For example, if you own your home or provide for a number of dependents, you may be more likely to face financial emergencies. And if the crisis you face is a job loss or injury that affects your income, you may need to depend on your emergency fund for an extended period of time. Coming Up with Cash. If saving several months of income seems an unreasonable goal, don’t despair. Start with a more modest target, such as saving $1,000. Build your savings at regular intervals, a bit at a time. It […]

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