5 Reasons to Hire an Experienced Financial Advisor to Help You Plan for Retirement Posted on June 25, 2020June 25, 2020 by ladams Planning for your retirement can be challenging. How can compound interest work in your favor? What role do time and principal play in your savings? What investment vehicle and strategy is right for you? You’d advise any student struggling with a complex subject to engage a tutor, so why not take your OWN advice?! Getting the help of an experienced financial advisor can be vital to reaching your retirement goals. The following are just a few of the ways an experienced professional can help. 1. Guidance on how to begin It can be confusing to know how to take the first step when it comes to retirement planning. Do you know what types of programs, investments, and strategies might help you reach your goals? If not, don’t worry, an advisor can get you started with the basics and guide you through the process. 2. Constructing a plan that’s right for you Just as every student you teach is unique, your needs for retirement planning are as well. Preparing for retirement is best approached by articulating your specific goals and a plan to achieve them with the help of a knowledgeable advisor. They can help you choose the right investments to meet your objectives. The investment programs available to teachers are unique and differ from most other employees, so guidance from a financial professional experienced in working with educators can be vital. 3. Helping you avoid costly mistakes When going it alone, the potential for making mistakes is significant and could be expensive. An experienced financial professional can help you avoid these pitfalls, and help ensure you’re making choices that are right for you, and will get you on track toward your retirement goals. 4. Saving you money It’s simple. Financial professionals have more experience and less emotion when it comes to making tough financial decisions. A study by the financial research firm Financial Engines, showed that those who worked with a financial professional when planning for their retirement had a better experience and felt less stress than those who didn’t. 1 Source: Financial Engines & Aon Hewitt Find 401(k) Participants Who Use Professional Help Are Better Off Than Those Who Do Not 5. Saving you time Taking the do-it-yourself approach often involves things like monitoring investments and making adjustments in response to market conditions. This requires time and expertise few people have. An experienced financial professional can answer questions and help you navigate unexpected life changes, provide steady guidance in a volatile market and make adjustments as your goals and circumstances change. Yours is a noble profession benefitting the future of our society. It can also be sacrificial and thankless. We get it. It reminds us of a teacher’s story: A police car with flashing lights pulled me over near the high school where I teach. As the officer asked for my license and registration, my students began to drive past. Some honked their horns, others hooted, and still others stopped to admonish me for speeding. Finally the officer asked me if I was a teacher at the school, and I told him I was. I think you’ve paid your debt to society, he concluded with a smile, and left without giving me a ticket. You’re working hard to improve the future of the next generation, so let an experienced financial professional help you improve yours.
Retirement Plan Contribution Limits for 2020 Posted on June 10, 2020June 18, 2020 by ksimas One of the most basic principles of successful long-term investing is to invest as much as you can as soon as you can. For 2020, many of the annual retirement plan contribution limits have increased from their 2019 levels. Limits for 2020 include: For individuals under age 50, the maximum contribution to 401(k), 403(b) and 457(b) plans increased to $19,500. For individuals age 50 and older, catch-up contribution to 401(k), 403(b) and governmental 457(b) plans has increased to $6,500. The maximum combined employee and employer contribution to 401(k) and 403(b) plans increased to $57,000. For individuals under age 50, the maximum contribution to Traditional and Roth IRAs remains at $6,000. For individuals age 50 and older, the additional catch-up to Traditional and Roth IRAs remains at $1,000. The 403(b) plan service-based catch-up contributions, available to 403(b) account holders with at least 15 years of service with their current employer, remains at $3,000.1 If your employer offers both a 403(b) and a governmental 457(b) plan, then you can contribute up to the combined maximum annual contributions to each plan. This means if you are under age 50, you can contribute up to $19,500 to each plan for a total maximum 2020 contribution of $39,000. If you’re age 50 or older, you can contribute up to $26,000 to both the 403(b) plan and a governmental 457(b) plan for a maximum 2020 contribution of $52,000. 2020 Retirement Plan Contribution Limits Plan 2020 Limit 401(k), 403(b), 457(b) and SAR-SEP Plans $19,500 Age 50 & Over Catch-Up for 401(k), 403(b) and Governmental 457(b) Plans 403(b) Service-Based Catch-Up for 15+ years with Employer1 $6,500 $3,000 Roth/Traditional IRA Age 50 & Over Catch-Up $6,000 $1,000 SIMPLE Plan Elective Deferral Limit Age 50 & Over Catch-Up $13,500 $3,000 Defined Contribution Maximum Combined Employer and Employee Contribution $57,000 Contribute as Much as You Can, as Soon as You Can By investing as much as you can as soon as you can, you can take advantage of the power of long-term compound growth. The hypothetical table below illustrates how by contributing just $1,000 more per year you can increase the size of your nest egg over the long term.2 After 10 Yrs After 20 Yrs After 30 Yrs $10,000 per Year $139,716 $389,927 $838,017 $11,000 per Year $153,688 $428,920 $921,818 Savings Increase $13,972 $38,993 $83,802 1. Up to a $ 15,000-lifetime limit. Other conditions apply. 2. Assumes a 6% average annual growth rate and a single lump sum contribution at the beginning of each year. Actual returns may be higher or lower. Table is for illustration purposes only and is not intended to indicate the past or future performance of any investment options available through the PlanMember Program. This hypothetical illustration does not include sales charges or other expenses. This communication is not intended to be tax, legal or accounting advice. Issues could exist that can affect the tax treatment of a transaction. Therefore, taxpayers should seek advice from an independent tax, legal or accounting advisor before acting on any information presented. This information cannot be used to avoid tax penalties.
6 Tips for smart holiday spending Posted on May 26, 2020June 18, 2020 by ksimas Everyone wants to celebrate generously during the holidays, but it’s important to remember your financial plan and savings goals. Right around Thanksgiving, your calendar fills up with events that can trigger more spending than you realize. From decorations to gifts, and meal planning to party clothes, the costs creep up. These six tips will help keep your season debt-free and bright. 1. Create a budget and stick with it Prepare your holiday budget as early in the year as possible. Remember to include unexpected expenses such as travel, wrapping supplies, shipping and postage. Even additional groceries for out-of-town guests can add up, and don’t forget those new party clothes. Next, consider your monthly income and expenses, then save enough to cover holiday costs. If you prefer not to incur credit card debt, then save into an account and pay cash only. Next, make a list of gift recipients and set a reasonable amount per person. And finally, consider adding 10% to your overall shopping budget to cover gifts for teachers, neighbors, co-workers, and party hosts and hostesses. 2. Start early and compare prices Whether you prefer shopping in local stores or online, start early and compare prices. Don’t wait for last-minute holiday “deals,” as year-round budget shoppers drive many retailers to offer good deals throughout the year. As a bonus, shopping early is more enjoyable and relaxing, and eliminates the stress of stores crowded with shoppers who waited until the last minute and show it on their frowning faces. 3. Avoid self-gifting Don’t give in to the “three for them, one for me” temptation. Let your loved ones give you gifts. If there’s something you really want or need but don’t get from someone else, carefully evaluate the need and then buy it for yourself when after-holiday sales are in high gear. As always, though, you should stick to your budget. 4. Resist impulse buying When you’ve completed shopping, and the gifts are wrapped and ready to give, resist the urge to buy just one more thing, even if you think it would be “perfect.” Retailers are experts at encouraging impulse buying. Remember your spending plan and just say no. 5. Pick names instead of giving a gift to everyone Instead of buying for every friend, aunt, uncle and cousin, pick names a month before your holiday get-together, then take time to find the perfect present for your secret recipient. Giving gifts among your gathered group of family and friends is fun, and seeing all the joy can be priceless. It’s important, though, to set a dollar limit so everyone spends the same amount. 6. Plan celebrations that are gift-free and joyful Showing your friends and the people you love that you care about them can be more meaningful than any gift. Find ways to show your loved ones they are your greatest gifts in life. Have a cocktail party and invite everyone to share the year’s greatest accomplishments, milestones, and hopes for the future. Have people write on paper, roll and ribbon each message, and drop in a basket for everyone to share. Connect to people in ways that will resonate like wrapped gifts simply can’t.
The CARES Act Posted on May 11, 2020June 18, 2020 by ksimas Coronavirus financial relief for individuals On March 27, 2020, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. Following is a summary of the Act’s provisions designed to provide relief to individual Americans. Direct cash payments Federal government cash payments of $1,200 will be made to each individual adult and $500 for each child age 16 or younger. Single adults with Social Security numbers who have an adjusted gross income of $75,000 or less will get the full amount. Married couples with no children earning $150,000 or less will receive a total of $2,400, and head of household filers will get the full payment if they earned $112,500 or less.1 Above these amounts, payment decreases until it stops for single people earning $99,000 or married people who have no children and earn $198,000. No payment will be made to an adult who someone has claimed as a dependent. Payments are expected to begin in mid to late April and will start with direct deposits to taxpayers who have provided their bank information to the IRS. Expanded unemployment insurance for uncovered workers Temporary Federal unemployment insurance is available to individuals who would not otherwise be eligible for state unemployment insurance such as the self-employed, independent contractors, gig workers, part-time employment seekers, those who lack sufficient work history, or those who have exhausted their unemployment benefits under existing programs. Federal student loan relief Through September 30, 2020, there is a suspension of federal student loan payments, federal student loan interest, and loan debt collection from those in default. This provision applies only to non-defaulted Direct Loans and FFEL loans currently owned by the Department of Education. Retirement plans and income tax deadline The income tax filing deadline, and the deadline for 2019 IRA and HSA contributions, are extended from April 15, 2020 to July 15, 2020. There are no required minimum distributions (RMDs) from 401(k), 403(b), 457(b) and other employer-sponsored plans in 2020.2 Pre-59 1⁄2 penalty-free withdrawals of up to $100,000 from for 401(k), 403(b, 457(b) and other employer plans are now available, with the ability to repay the account (if the plan allows repayment) and pay any applicable Federal income taxes over the next three years. The limit on retirement plan loans has been increased from $50,000 to $100,000 for loans taken from March 27, 2020 through December 31, 2020. Loan repayments can be delayed by up to one year. 1. Based on the latter of 2018 or 2019 Federal income tax filing. 2. RMDs for 2020 will still be required for 457(b) top hat plans. Sources: studentloanborrowerassistance.org/what-the-cares-act-means-for-repayment-of-federal-student-loans/ natlawreview.com/article/cares-act-expansion-unemployment-insurance-and-benefits nytimes.com/article/coronavirus-stimulus-package-questions-answers.html forbes.com/sites/zackfriedman/2020/03/29/should-you-really-stop-paying-your-student-loans-due-to-coronavirus/#60b01d0f4d46 Bill opens up access to 401(k) money, Los Angeles Times, March 29, 2020 Lenders appear to be flexible, Los Angeles Times, March 27, 2020
6 Ways to stay afloat without a paycheck Posted on May 11, 2020June 18, 2020 by ksimas If you are one of the millions of Americans out of work due to the coronavirus pandemic, the harsh reality of losing paychecks can be overwhelming. If your family is struggling with the loss of all or part of its monthly income, here are some steps you can take that might help you stay afloat during this unprecedented crisis. 1. Apply for unemployment benefits Most states have revised and expanded unemployment-benefits coverage for employees affected by coronavirus-related layoffs, furloughs, shutdowns and work-hour reductions. Visit your state’s unemployment insurance website for any online, expedited claims-filing process available. 2. Establish a budget List all of your monthly expenses in order of necessity. Next, calculate your household’s monthly income. If your family’s income is not enough to cover essential expenses such as food, housing and utilities, you may need to take measures to reduce expenses. 3. Look for ways to save Cancel your home phone, cable, online or printed subscriptions and membership services. Reduce your cellphone plan to only basic phone, text and data needs. 4. Talk with your creditors Don’t hesitate to contact your credit card issuers, mortgage holders and landlords and ask if you can work out a payment plan. Many mortgage providers are offering forbearance options, and lenders are telling customers they will not report late or missed payments to credit agencies during the pandemic. 5. Pay the minimum or stop If possible, continue to make minimum credit card payments. But if it comes down to making a payment or keeping food in the fridge, simply forgo payments until you are back on your feet. Be sure to contact your credit card company or lender and ask them to waive any fees during the crisis. 6. Use your savings accounts As a very last resort, you may need to temporarily reduce or stop your ongoing contributions to your retirement and/or college savings plan accounts and/or take advantage of currently relaxed loan and withdrawal restrictions for employer-sponsored retirement plans. If you feel you must disrupt your savings strategies, please contact us first and we’ll make a plan to help replenish your accounts when things return to normal. We will get through this. Making extreme changes during this extraordinary crisis won’t be easy, but remember that this will not last forever and we’ll get through it together. Making temporary sacrifices today could help you stay above water until this terrible storm passes.
Dollar Cost Averaging Posted on May 11, 2020June 25, 2020 by ksimas A potential upside of down markets During this unprecedented time of crisis, the volatile stock market is on everyone’s mind. While it is hard to feel good about any market decline, using a long-term dollar cost averaging strategy could provide bright side to this down market. How does dollar cost averaging work? The concept of dollar cost averaging is simple. You just invest a fixed dollar amount every month, quarter or other regular interval. This type of systematic investing is a built-in benefit to 403(b), 457(b), 401(k) and other workplace retirement plans where contributions are taken automatically from each paycheck. You can also integrate a dollar cost averaging strategy into your IRA and other savings plans by making equal contributions that are automatically deducted from your bank, as long as your total contributions do not exceed the annual IRA contribution limits. What are the benefits? The benefits of dollar cost averaging are best realized with longer-term investments in fluctuating markets. When the stock market is down and prices are lower, your fixed contribution amount buys more shares. When the market is up, your systematic contributions purchase fewer shares at higher prices. In markets that fluctuate in the short term but rise in the long term, the results can be more shares purchased, a lower average price per share and a higher ending value. To see how this works, take a look at the above table that compares an investment that fluctuates in price to an investment with a steadily increasing price. Notice that when share prices are lower, each $100 contribution buys more shares. Also, notice that when share prices fluctuate up and down, the end result is more shares purchased and a higher ending value. By making a fixed investment on a regular basis, you can take advantage of down markets and purchase the same investment at a lower price, which may translate into higher returns when the market recovers. Dollar cost averaging also encourages discipline and helps take the emotion and guesswork out of investing. However, dollar cost averaging does not ensure a profit nor protect against loss in declining markets. And because dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels, you should consider your financial ability to continue your purchases throughout periods of market fluctuations.