Financial Planning Archives - Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ

Laddered Bond and CD Portfolios

Kurt Rohrs — Thu, 27 Sep 2018 19:19:27 +0000

What is a Laddered Portfolio?

Laddered Portfolios can be made out of any group individual securities that have a fixed maturity. The intent is to remove interest rate risk by holding the securities to maturity thus eliminating price fluctuations that can be caused by changing interest rates. Other investment risks such default of the issuer or currency risk still remain. The risk of reinvesting the funds received at maturity at a lower rate also remains.

Typical Securities Often Used in Laddered Portfolios

Corporate Bonds – Generally have higher yields because of the perceived higher risk of the corporate issuer. Interest income is fully taxable at the Federal and State levels.

Municipal Bonds – Issued by State and Local issuing authorities. Yields are determined by the relative risk of the issuing authority. These bonds are exempt from Federal Tax and can be exempt from State tax if the taxpayer is a resident of that state.

U.S. Treasuries — Generally considered as the lowest risk security by the investment community. Interest income is taxable at the Federal level but tax exempt at the State level.

Certificates of Deposit (Fixed Rate) – Usually issued by Banks and Federal Deposit Institutions. These are principal protected by FDIC insurance up to certain amounts. Interest income is fully taxable.

Certificates of Deposit (Market-Linked) – These CDs are issued by Financial Institutions with access to the Stock Market. The yield is tied to stock market performance over a certain period instead of a fixed rate. Interest income can be more or less than a fixed rate CD depending on market performance. They are principal-protected, the minimum return is zero, and FDIC insured.

Mix and Match – It is also possible to put together several of these different types of securities in complimentary Ladders to take advantage of each of their unique characteristics. An example would be a mix of Fixed Rate CDs and Market-Linked CDs for an investor that wants to maintain some exposure to a rising market environment.

Other Considerations

Risk Avoidance – Investors often use Laddered Portfolios to “park” cash if they do not choose to participate in the Stock or Bond Market but still would like to generate some interest income above Money Market rates.

Maturity Matching – Laddered Portfolios can be tailored to accrue interest and then generate free cash at very specific intervals. The securities that make up the Laddered Portfolio are bought on the large secondary market where precise maturity dates can be chosen.

Liquidity Risk – The securities in a Laddered Portfolio usually can be sold or redeemed before maturity but this may expose the Investor to market price risk or redemption penalties. The key to this strategy working successfully is to hold the securities to maturity to avoid these risks.

Tax Equivalent Yield – It may be helpful to calculate a Tax Equivalent Yield in order to compare the tax liability of your interest payments of different types of securities which to build your Laddered Portfolio. This will help you make an “apples-to-apples” comparison of the actual income you would receive in comparing your different options. Your Financial Advisor or Tax Professional should be able to help you do this.

Conclusion

Developing Laddered Portfolios may take sophisticated trading software to do properly. Investors may want to consider consolidating larger positions in order to avoid excess trading costs. You can learn more about Investment Strategies at our website www.SWRetire.com as well as learn more about our full service Financial Advisory practice.

Views, opinions and analyses expressed in this presentation are those of Southwestern Retirement and not those of Independent Financial Group, LLC.

Registered Representative offering Securities and Advisory Services through Independent Financial Group LLC,

a Registered Broker-Dealer and Investment Adviser. Member FINRA/SIPC.

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC.

OSJ Address: 4041 MacArthur Blvd., Suite 240, Newport Beach, CA 92660

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Tax Avoidance Strategies for Investors

Kurt Rohrs — Wed, 12 Sep 2018 01:22:50 +0000

Which Tax Do you want to Avoid?

There are many taxes levied by Federal, State, and Local Governments. Some of the more significant ones are listed below. In general, they fall into four major categories, Income Taxes, Payroll Taxes, Property Taxes and Consumption Taxes.

Some Significant Taxes Levied by U.S. Taxing Authorities

Income Tax Estate Tax Social Security Tax Property Tax

Capital Gains Tax Gift Tax MedicareTax Sales Tax

Dividend Tax Generation Skipping Transfer Tax

In this article we will concentrate on avoidance of the primary taxes involved with Investing: Income Tax, Capital Gains Tax, and Dividend Tax. We can deal with the other taxes in future discussions.

Remember … “Tax Avoidance is Legal, Tax Evasion is a Crime”

Income Tax regulations, formally known as the Internal Revenue Code (IRC), are set forth in Title 26 of the Code of Federal Regulations (CFR) also referred to as the U.S. Code. They have the force of law.

You are encouraged to take advantage of every method allowed in the IRC to reduce your tax liability but you are discouraged from using questionable methods to avoid responsibility for paying your fair share of taxes. This may put you in a difficult position with the Department of Justice which may prosecute you for breaking the law.

If you are in doubt please consult with a qualified Tax Professional, either a Certified Professional Accountant (CPA) or an IRS Enrolled Agent (EA), who should be able to give you sound guidance.

Account Registrations and Structures

Qualified Plans

They are “Qualified” by the Internal Revenue Code (IRC) which specifically defines their attributes that give them their special tax protected status. Plan numbers such as “401k” refer to the specific section in the IRC which defines that type of plan (i.e. Section 401, paragraph k).

The general purpose of these plans is to allow individuals to put away funds, including investment gains, that are Tax Deferred until they are distributed. Individual plans are non-employee plans where the contribution is a tax deduction on the individual Income Tax Return in the year it is contributed. Defined Contribution Plans are for earned income that can consist of Employee contributions, in the form of salary for wage deferrals and Employer contributions in the form of matching contributions or profit sharing contributions. Defined Benefit Plans are funded solely by Employers and consist mostly of the traditional Pension Plans that we know of.

Roth IRAs are a special type of plan in which contributions are made after tax are paid but can be withdrawn as Tax Free, including investment gains, after the required minimum age is attained.

Some Common Qualified Account Types

Individual Plans Defined Contribution Plans Defined Benefit Plans

Traditional IRAs 401k, 403b, 457 Plans Company Pension Plans

Rollover IRAs SEP, SIMPLE, SARSEP Plans Government Pension Plans

Beneficiary IRAs Profit Sharing Plans Union Pension Plans

Spousal IRAs

Roth IRAs

529 College Savings Plans – Contributions are made with after-tax funds but can be distributed Tax Free, including investment gains, if they are made for IRC qualified expenses (tuition and fees).

Health Savings Accounts (HSAs) – Contributions are made with before-tax funds for individuals with high deductible Health Care Plans but can be distributed Tax Free, including investment gains, if they are made for IRC qualified health care expenses.

Charitable Remainder Trusts – Highly appreciated assets can be donated to Charity with a deduction for their full value in exchange for a lifetime income. This technique can convert a large, current capital gains tax liability to an income tax liability and stretch it over a long period That is Tax Deferred.

Irrevocable Life Insurance Trusts (ILITs) – are used to for Estate Tax avoidance for large estates. It essentially gifts current tax premiums and multiplies those into a future insurance Death Benefit which will pass Tax Free to the beneficiaries.

Transactional Techniques

Tax Loss Harvesting. Not all investments make money. However The IRC allows individuals to take a Tax Deduction for investment losses against investment gains in the year they are sold as well as some income. A professional Investment Manager should be able to identify and maximize these opportunities through sophisticated portfolio management software.

Donation of Appreciated Stock. Investors can attain concentrated positions in highly appreciated stock, which they are discouraged from selling because of a significant tax liability associated with the sale. The IRS allows the individual to donate the stock to a qualified charitable institution and take a large charitable Tax Deduction of the entire market value of the stock including the capital gain. This may calculate out to a better financial outcome than paying the capital gains tax on the appreciated value. It is also certainly better than donating cash to charity because of the capital gains tax avoidance feature.

Product Type Characteristics

Certain investment types have their own unique tax avoidance features:

Municipal Bonds – Interest payments are Tax Free at the Federal level and but also at the State level if the investor files tax returns in that state.

Qualified Dividend Income – Dividends from IRC qualified investments are taxed at a Flat Rate of 15% which may be far less than the tax rate paid by Investors with higher incomes.

Real Estate – has the advantage of depreciation deductions that can be taken against income which can decrease the tax liability. This tax protection also extends to Real Estate Investment Trusts (REITs), Limited partnerships, and other fractional ownership programs. This makes the investment income Tax Deferred. This depreciation deduction may have to be recaptured when the property is sold however this can be avoided for some properties by using a 1031 property exchange to a new investment property which can further defer the tax liability.

Annuities – have special tax advantages in the IRC which allows investment gains to be Tax Deferred until distributions are made from the Annuity. Annuities also come with features that can guarantee either future Income Benefits or future Death Benefits. Income Tax free transfers to better Annuities are also allowed.

Life Insurance – also have special tax benefits which allow gains in the contract to accumulate tax-free. Death benefits from Life Insurance policies are Tax Free but may be subject to Estate tax.

Conclusion

Tax Avoidance strategies take careful planning and construction to work effectively. You should seek out a qualified Financial Professional (CFP) and consult your Tax Professional (CPA) to help ensure the most desirable outcome.

Alternative Investments

Kurt Rohrs — Tue, 04 Sep 2018 01:15:07 +0000

“Alternative Investment” is a common term used in the investment world. For the purposes of this discussion we will consider it to mean any investment that is not traded in the Stock Market or the Bond Market.

Real Estate is probably the most commonly held Alternative Investment. It can be held as Direct Ownership where title is held directly by an individual such as a rental home, or Fractional Ownership as a share in a Real Estate Investment Trust (REIT), or Partnership along with other investors. Although some REITs are actually traded in the Stock Market (“Traded REITs”) most actually started their lives as private offerings to investors outside of the market (“Non-traded REITs”). Common Real Estate categories include Residential, Office, Retail and Warehouse/Industrial.
Life Insurance and Annuities. These are actually contracts that are made between an individual or special entity and a Life Insurance or Annuity company. Annuity contracts are set up with fixed or variable return rates based on various market returns. The contract benefits usually fall into two broad categories, Living Benefits, associated with Income payouts, or Death Benefits, associated with lump sum payouts. These benefits are guaranteed by the company issuing the contract. This guarantee can relieve and Investor of some of the market risk in stock or bond investing. A way to understand this investment market it is to realize that Annuity contracts often consist of a large current payment (the “Premium”) to the issuing company in exchange for a stream future payouts (the “Benefit”) to the Investor. Conversely, Life Insurance contracts consist of a current stream of Premium payments in exchange for a large lump-sum Benefit payout in the future. The issuing companies simply make their profit on the spread between these current premium payments and the payout of future benefits.
Hedge Funds and Futures Contracts. These are more sophisticated investment vehicles that involve contracts written against market performance, arbitrage on mergers and acquisitions in the market as well as foreign currencies. Arbitrage is the practice of taking advantage of valuations that are perceived as mispriced in the market. They often involve smaller high-risk investments that are targeted for outsize returns.
Commodities and Currencies. Typical commodities are of Oil and Gas, Precious Metals (i.e. Gold or Silver), Base Metals (i.e. Copper or Aluminum), Agricultural Products (i.e. Wheat or Soybeans). They can be held directly (i.e. Gold Coins) or they often take the form of futures contracts that are traded in the own unique markets that may or may not be correlated to the Stock and Bond Markets. One of the newer investment vehicles that may fit into this category are cryptocurrencies such as Bitcoin. This is could be considered as an undeveloped market that is highly speculative and volatile.
Private Debt and Private Equity. One of the newer investment vehicles is the private placement of debt for mid-sized companies that too large to borrow from banks and too small for a debt offering in the Bond Market. Business Development Companies (BDCs) organize these offerings and sell them privately to sophisticated investors through the Broker/Dealer network. There are also offerings organized to pool investor funds and invest in start-up or later-stage financing of growing companies looking to raise equity privately.
Conclusion. Alternative Investments are a good way to diversify and round out an Investment Portfolio without further exposure to Stock and Bond Markets. They are often used to dampen volatility (market price swings) and stabilize of a portfolio to smooth out investment returns. Many Alternative Investments also produce regular cash payments that may greater than the Bond Market but can be obtained with less risk. They should be considered as part of a sophisticated Investment Portfolio. Some of these Alternative Investments can only be obtained through a full service Financial Advisor.

Wise Money Moves Young Women Can Make

Kurt Rohrs — Wed, 01 Aug 2018 02:38:10 +0000

As a young woman, you have an opportunity to make some major financial strides. You truly have time on your side when it comes to investing, saving, and harnessing the power of compounding. Now is the time to pay yourself first and do those things that could make you wealthy in the future.

Your first move should be debt reduction. This frees up money for the other moves you can make and lessens the amount of money you pay to others, instead of yourself, each month.

Consider attacking your highest-interest debts first rather than your largest debts. If you have big credit card balances, high-interest car loans, or similar financial obligations, that borrowed money may be extremely expensive. Credit bureau Experian says that monthly household credit card balances in this country hover around $6,375. According to personal finance website NerdWallet, the average interest rate on a credit card right now is 14.87%, and the average U.S. household pays out $904 a year just in credit card interest. A constant debt of $6,000 is bad enough, but having to pay roughly another $1,000 a year just for the opportunity to borrow? That really hurts.1

Whether your major debts are larger or smaller, think of the progress you could possibly make by devoting thousands of dollars you pay to others to yourself. Say you direct $3,000 you would otherwise pay to creditors during a year into an investment account returning 6%. Say you do this for 10 consecutive years. At the end of that 10-year period, you are looking at $47,287, not simply $30,000. That is what compound interest – the best kind of interest – can do for you financially.2

Across longer time periods, compound interest has a proportionately greater positive effect. Stretch the above example out to 35 years and those annual $3,000 investments at a 6% return grow to $377,421. (Keep in mind, you may be able to save and invest considerably more than $3,000 annually as you earn more money per year.)2

Save or invest whatever you can. Setting aside a little cash for yourself is good, too. You want to build some kind of emergency fund with money you can touch; money you can get at right away if you need it quickly.

Many retirement savings vehicles offer you tax breaks. The common workplace retirement plan or IRA is tax favored: money within the account grows tax free, and it is subtracted from your paycheck before taxes. You only pay taxes on the money when it is withdrawn. In addition, many employers will partially match your contributions if you meet a certain minimum. Roth IRAs and workplace plans allow both tax-free growth and tax-free withdrawals, provided Internal Revenue Service rules are followed. While you get no up-front tax break for contributing to a Roth account, you also have the potential to withdraw the money tax free for retirement, which is a great thing.3

Not using these saving and investing accounts could be a big mistake. Some people are skittish about Wall Street investments, but largely speaking, those are the kinds of investments that have the potential to return better than 5% a year (think about the scenario from a few paragraphs earlier). In fact, the S&P 500, the broad benchmark of the stock market, gained an impressive 19.42% last year.4

Parking too much money in cash and avoiding all risk can come with an opportunity cost you may not be able to afford. Sallie Krawcheck, the former president of the investment management division of Bank of America and CEO of Ellevest, estimates that a woman making $85,000 annually who puts 20% of her yearly pay into a bank account rather than an investment account could effectively forfeit more than $1 million after four decades of doing so.5

Now is the ideal time to plan to get ahead financially. Think about your future, and make the wise money moves that give you the potential to make it bright.

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

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.

Citations.

1 – tinyurl.com/ybxskou6 [2/19/18]

2 – bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx [2/22/18]

3 – fool.com/retirement/2017/05/20/taxable-vs-tax-advantaged-savings.aspx [5/20/17]

4 – ycharts.com/indicators/sandp_500_return_annual [2/22/18]

5 – money.cnn.com/2017/03/08/pf/financial-moves-sallie-krawcheck/ [3/8/17]

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What Do You Have in Reserve for 2018?

Kurt Rohrs — Fri, 20 Jul 2018 02:21:07 +0000

How much does the average American household have in the bank? Estimates vary, but the short answer to this question is “not enough.”

Last year, a GoBankingRates poll discovered that 57% of U.S. households had less than $1,000 in deposit accounts (although, 25% reported having at least $10,000). A 2017 analysis from Moebs Services, a research firm consulting banks and credit unions, noted that the average U.S. checking account contained around $3,600.1,2

Eyeing these numbers, you get the sense that – in an emergency – most households have less than a month before their liquid savings run out. Is this true for your household? Hopefully, your cash reserve is much larger; if that is not the case, now is as good a time as any to bolster your emergency fund.

Building up an emergency fund may be easier than you think. As financial upsets are thankfully infrequent, you have long periods of normalcy in which you can amass cash. Can you save $50 a month toward that goal? You will have $600 after 12 months if you do or $1,200 in 12 months if your spouse saves along with you. That may not seem like much, but even that little pool of cash could suffice.

Keep in mind, the whole goal of an emergency fund is to deal with sudden – and presumably acute – expenses. In the grand scheme of things, these emergency costs will likely be trivial compared to the total expense of your retirement. If you end up directing more of your money to your retirement fund than your emergency fund per month, who can blame you? Your retirement fund is presumably invested in equities and has the chance to grow and compound over time. It addresses what is arguably your top financial need – the need to provide yourself with financial stability after you end your career.

Some households need larger emergency funds than others. A high-earning, child-free couple living without much debt in a relatively inexpensive metro area might need one to absorb only 3-4 months of expenses. A family reliant on one paycheck might need one that is much larger, as severe financial trouble could surface if the breadwinner loses a job or falls ill.

Emergency funds can also help in other kinds of money crises. While an emergency is an unexpected event calling for an immediate response, you may be able to sense other financial disruptions and inconveniences coming. Maybe that garage door keeps malfunctioning or your eight-year-old computer has trouble booting up. These are signals that you will need to write a check or pull out that debit card soon.

Living without an emergency fund can invite worry. It is an anxiety too many households have had to accept. Plan to save a little each month (or more than a little, if you can manage), so that you may create a bit more financial “breathing room” in your life.

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

Citations.

1 – cnbc.com/2017/09/13/how-much-americans-at-have-in-their-savings-accounts.html [9/13/17]

2 – tinyurl.com/yacqwq4p [7/13/17]

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Smart Financial Steps After College

Kurt Rohrs — Mon, 16 Jul 2018 20:16:10 +0000

Did you recently graduate from college? The years after graduation are crucial not only for getting a career underway, but also for planning financial progress. Consider making these money moves before you reach thirty.

Direct a bit of your pay into an emergency fund. Just a little cash per paycheck. Gradually build a cash savings account that can come in handy in a pinch.

Speaking of emergencies, remember health insurance. Without health coverage, an accident, injury, or illness represents a financial problem as well as a physical one. Insurance is your way of managing that financial risk. A grace period does come into play here. If your employer does not sponsor a health plan, remember that you can stay on the health insurance policy of your parents until age 26. (In some states, insurers will let you do that until age 29 or 31.) If you are in good health, a bronze or silver plan may be a good option.1,2

Set a schedule for paying off your college debt. Work toward a deadline: tell yourself you want to be rid of that debt in ten years, seven years, or whatever seems reasonable. Devote some money to paying down that debt every month, and when you get a raise or promotion, devote a bit more. Alternately, if you have a federal college loan balance that seems too much to handle, see if you qualify for an income-driven or graduated repayment plan. Either option may make your monthly payment more manageable.3

Watch credit card balances. Use credit when you must, not on impulse. A credit card purchase can make you feel as if you are buying something for free, but you are actually paying through the teeth for the convenience of buying what you want with plastic. As Bankrate.com notes, the average credit card now carries a 16.8% interest rate.4

Invest. Even a small retirement plan or IRA contribution has the potential to snowball into something larger thanks to compound interest. At an 8% annual return, even a one-time, $200 investment will grow to $2,013 in 30 years. Direct $250 per month into an account yielding 8% annually for 30 years, and you have $342,365 three decades from now. That alone will not be enough to retire on, but the point is that you must start early and seek to build wealth through one or more tax-advantaged retirement savings accounts.5

Ask for what you are worth. Negotiation may not feel like a smart move when you have just started your first job, but two years in or so, the time may be right. It can literally pay off. Jobvite, a maker of recruiting software, commissioned a survey on this topic last year and learned that only 29% of employees had engaged in salary negotiations at their current or most recent job. Of those who did, 84% were successful and walked away with greater pay.6

Of course, you also have the power to negotiate your pay when you change jobs. That ability is not always acknowledged. Robert Half, the staffing firm, recently hired independent researchers to poll 2,700 U.S. workers employed in professional environments. The pollsters found that just 39% of these workers attempted to negotiate a better salary upon their most recent job offer. The percentage was higher for men (46%) than for women (34%).7

Financially speaking, your twenties represent a very important time. Too many people look back over their lives at fifty or sixty and wish they had been able to save and invest earlier. These are the same people who may face an uncertain retirement. Rather than be one of them years from now, do things today that may position you for a better financial future.

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 9266

Citations.

1 – tinyurl.com/y7nne8bd [11/7/17]

2 – money.cnn.com/2017/10/20/pf/health-insurance-first-time/index.html [10/21/17]

3 – fool.com/investing/2018/03/22/your-2018-guide-to-federal-student-loan-repayment.aspx [3/22/18]

4 – bankrate.com/finance/credit-cards/current-interest-rates.aspx [4/5/18]

5 – investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator [4/5/18]

6 – cnbc.com/2017/05/25/most-employees-dont-negotiate-their-salary.html [5/25/17]

7 – smallbiztrends.com/2018/02/salary-negotiation-statistics.html [2/8/18]

The post Smart Financial Steps After College appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

Why You Want a Retirement Plan in Writing

Kurt Rohrs — Mon, 02 Jul 2018 18:38:58 +0000

Many people save and invest vaguely for the future. They know they need to accumulate money for retirement, but when it comes to how much they will need or how they will do it, they are not quite sure. They will “wing it,” hope for the best, and see how it goes. How do they know they are really contributing enough to their retirement accounts? Would they feel less anxious about the future if they had a written plan?

Make no mistake, a written retirement plan sharpens your focus. It can refine dreams into goals and express a strategy to pursue them. According to a Charles Schwab study, just 24% of Americans plan their financial futures according to a written strategy. Here is why you should join their ranks, if you are not yet among them.1,2

You can figure out the “when” of retirement planning. When do you think you will retire and start drawing income from your taxable and tax-advantaged accounts? At what age do you anticipate you will start to collect Social Security? How long do you think you will live? No, you cannot precisely know the answers to these questions at this point – but you can make reasonable assumptions. Your assumptions may be altered, it is true – but a good retirement plan is an evolving document, one that can be revised with changing times.

You can set a target monthly or annual savings rate. Once you have considered some of the “whens,” you can move on to “how.” Assuming a conservative rate of return on your invested assets, you can specify how much to defer into retirement accounts.

You can decide on a risk tolerance and an investment mix that agrees with it. Ultimately, you will invest in a way that a) makes sense for your objectives and b) makes you comfortable. The 06-TB-1256 investment mix that you decide on today may not be the one you will favor ten years from now or even three years from now. Regular portfolio reviews should complement the stated investment approach.

You can think about ways to get more retirement income instead of less. Tax reduction should be part of your retirement strategy. Think about the possibility of part of your Social Security income being taxed. Think about tax on your Required Minimum Distributions (RMDs) from your IRAs and employee retirement plan. What could you do to manage, or even minimize, the income and capital gains taxes ahead of you?

You can tackle the medical expense question. That is, how will you fund the medical care that you will inevitably need to greater or lesser degree someday? Should you assign part of your savings to a special account or form of insurance for that purpose? Retiring before 65 may mean paying for some private health insurance in the years before Medicare eligibility.

You can think about your legacy. While a retirement plan should not be equated with an estate plan, the very fact of planning for your later years does make you think about some things: where you want your money to go when you are gone; your endgame for your company or professional practice; whether part of your accumulated wealth should go to causes or charities.

A written plan promotes confidence and a degree of control. A 2017 Wells Fargo/Gallup survey determined that those with written retirement plans were nearly twice as confident of having sufficient retirement income in the future, compared to those with no written plan.3

If you lack a written retirement plan, talk to the financial professional you know and trust about one. Writing it all down may make a difference in planning for your second act.

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

Citations.

1 – kiplinger.com/article/retirement/T023-C032-S014-do-you-have-a-written-financial-plan.html [10/25/17]

2 – aboutschwab.com/images/uploads/inline/Charles_Schwab-Modern_Wealth_Index-findings_deck.pdf [6/17]

3 – time.com/money/4860595/how-to-retire-wealthy/ [7/18/17]

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Wealth Management with Memory Disorders

Kurt Rohrs — Thu, 28 Jun 2018 18:54:20 +0000

Besides impacting lives and relationships, dementia can also impact family finances. It may call for another family member to assume money management responsibilities for a parent, grandparent, or sibling. It may increase the risk of financial exploitation, even as we do our best to guard against it.

Just how many older adults have memory disorders? Well, here are two recent estimates. The Chicago Health and Aging Project figures that nearly a third of Americans 85 and older have Alzheimer’s disease. The National Institute on Aging sponsored a study, which concluded that 14% of Americans age 71 and older have dementia to some degree.1

Older women may be the most vulnerable to all this. A new Merrill Lynch and Age Wave study notes that after age 65, women have twice the projected risk of Alzheimer’s that men do.2

In the best-case scenario, parents or grandparents acknowledge the risk. They lay out financial maps and instructions, telling adult children or grandchildren who love them dearly about the details of their finances. They involve the financial professional they have long known and trusted and introduce them to the next generation. All this communication occurs while the elder still has a sound mind.

Absent that kind of communication and foresight, some catching up will be in order. The kids will have two learning curves in front of them: one to understand the finances of their elders and another one in which they discover the degree of care they can capably provide. The stress of these two learning curves can be overwhelming. Asking professionals for help is only reasonable.

The earlier the basic estate planning elements are in place, the better. This means a will, a durable power of attorney, a health care proxy, and possibly a revocable living trust. In cases of significant wealth or a complex personal history, more sophisticated estate planning vehicles may be needed. If a durable power of attorney is in place, another person has the ability to act financially in the best interest of the person with dementia.1

Children and grandchildren must also confer about major decisions. What kind of assisted living facility would be best for dad? How much of mom’s retirement savings should be used for her eldercare? How do we convince dad that he should not manage his investments day-to-day anymore? What do we do now that mom seems totally unaware she has to make an IRA withdrawal? These will be hard conversations, trying decisions. If they never occur, however, the household financial damage may grow worse.1,3

Financial inattention or incompetence may be one of the first signals of Alzheimer’s disease or another form of dementia. The National Institute on Aging explains that difficulty paying for an item in a store or figuring out a tip at a restaurant could amount to early warning signs; trouble counting change or reading a bank or investment statement may also reflect cognitive impairment. These instances may be harbingers of problems to come – unpaid bills, impulsive and questionable investment decisions, and unwise credit card purchases.4

Should a household sign up for Social Security’s representative payee program? This may be a good idea. Many retirees have never heard of this option, which lets a designated, approved second party receive and manage monthly Social Security benefits on their behalf. The monthly benefit is sent to that representative, who must document to Social Security that the money was spent in the senior’s best interest. According to the Center for Retirement Research at Boston College, just 9% of Social Security recipients older than 70 with dementia were enrolled in this program in 2017.2,3

Elders suffering from such disorders often resist relinquishing financial control. Allowing limited financial independence (credit cards with lower limits, access to some cash for discretionary spending) may make the transition easier. Loved ones can also emphasize that seniors are so often victims of fraud and other forms of financial elder abuse.

The time to think about these things is now. We have all read horror stories of elders owing years of back taxes, facing lawsuits from creditors, or falling prey to investment scams. Your parents, grandparents, or siblings should not be left to experience such crises.

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

Citations.

1 – forbes.com/sites/nextavenue/2017/10/31/managing-finances-for-a-loved-one-with-dementia [10/31/18]

2 – barrons.com/articles/the-stubborn-wealth-gap-between-men-and-women-1524099601 [4/18/18]

3 – usatoday.com/story/money/columnist/powell/2017/09/16/financial-help-retirees-cognitive-impairment-dementia/627326001/ [9/16/17]

4 – nia.nih.gov/health/managing-money-problems-alzheimers-disease [5/18/17]

The post Wealth Management with Memory Disorders appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

Should Couples Combine Their Finances?

Kurt Rohrs — Wed, 27 Jun 2018 02:14:11 +0000

Some couples elect to consolidate their personal finances, while others largely keep their financial lives separate. What choice might suit your household?

To consolidate or not: that is the question.

The first question is: how do you and your partner view money matters? If you feel it will be best to handle your bills and plan for your goals as a team, then combining your finances may naturally follow.

A team approach has its merits. A joint checking account is one potential first step: a decision representing a commitment to a unified financial life. When you go “all in” on this team approach, most of your incomes go into this joint account, and the money within the account pays all (or nearly all) of your shared or individual bills. This is a simple and clear approach to adopt, especially if your salaries are similar.

You need not merge your finances entirely. That individual checking or savings account you have had all these years? You can retain it – you will want to, for there are some things you will want to spend money on that your spouse or partner will not. Sustaining these accounts is relatively easy: month after month, a set amount can be transferred from the joint account to the older, individual accounts.

A financial plan may focus the two of you on the goal of building wealth. Investment and retirement plan accounts are individual by design, but a plan can serve as a framework to unite your individual efforts.

You may want separate financial accounts. Some couples want to pay household bills 50/50 per partner or spouse, and some partners and spouses agree to pay bills in proportion to their individual earnings. That can also work.

This may have to change over time. Eventually, one spouse or partner may begin to earn much more than the other. Or, maybe only one spouse or partner works for a while. In such circumstances, splitting expenses pro rata may feel unfair to one party. It may also impact decision making – one spouse or partner might think they have more “clout” in a financial decision than the other.

Even if you staunchly maintain separate finances throughout your relationship, you may still want to have some type of joint account to address basic monthly household costs.

What else might you consider doing financially? Well, one good move might be to consult and retain a qualified financial professional to provide insight and guidance as you invest and save toward your goals.

Think about how your tax situation might change if you marry. Some people marry and correspondingly change their withholding designation from single to married on their W-4 form. In return, they are shocked to find their income taxes are much more than they ever expected – or they discover they have an enormous refund coming their way. Adjusting your withholding earlier in a calendar year makes more of a difference than if you do so later.1

If marriage means a name change, be sure to update bank account, investment account, Social Security account, and insurance policy data with time to spare. Marrying couples will probably want to redo beneficiary forms on accounts and policies and make various accounts joint tenants with right of survivorship (JTWROS) accounts or Totten trusts (also known as payable-on-death accounts). A JTWROS or POD account allows the assets involved to pass to a surviving spouse without probate.2,3

Take a look at the auto and health insurance coverage each of you have. You might notice some overlap, and you may want to address that.

The Knot, the wedding planning website, says that the number one priority for 55% of marrying couples is uniting personal finances. Agreeing how to handle your household finances can be a goal whether you marry or not.4

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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.

Citations.

1 – turbotax.intuit.com/tax-tips/tax-refund/top-5-reasons-to-adjust-your-w-4-withholding/L8Gqrgm0V [5/31/18]

2 – legalzoom.com/knowledge/last-will/topic/totten-trust [5/31/18]

3 – legalzoom.com/knowledge/last-will/topic/joint-tenancy [5/31/18]

4 – forbes.com/sites/investor/2018/05/08/the-most-important-conversation-newlyweds-need-to-have/ [5/8/18]

The post Should Couples Combine Their Finances? appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

Beware of Lifestyle Creep

Kurt Rohrs — Wed, 20 Jun 2018 16:56:06 +0000

“Lifestyle creep” is an unusual phrase describing an all-too-common problem: the more money people earn, the more money they tend to spend.

Frequently, the newly affluent are the most susceptible. As people establish themselves as doctors and lawyers, executives, and successful entrepreneurs, they see living well as a reward. Outstanding education, home, and business loans may not alter this viewpoint. Lifestyle creep can happen to successful individuals of any age. How do you guard against it?

Keep one financial principle in mind: spend less than you make. If you get a promotion, if your business takes off, if you make partner, the additional income you receive can go toward your retirement savings, your investment accounts, or your debts.

See a promotion, a bonus, or a raise as an opportunity to save more. Do you have a household budget? Then the amount of saving that the extra income comfortably permits will be clear. Even if you do not closely track your expenses, you can probably still save (and invest) to a greater degree without imperiling your current lifestyle.

Avoid taking on new fixed expenses that may not lead to positive outcomes. Shouldering a fixed mortgage payment as a condition of home ownership? Good potential outcome. Assuming an auto loan so you can drive a luxury SUV? Maybe not such a good idea. While the home may appreciate, the SUV will almost certainly not.

Resist the temptation to rent a fancier apartment or home. Few things scream “lifestyle creep” like higher rent does. A pricier apartment may convey an impressive image to your friends and associates, but it will not make you wealthier.

Keep the big goals in mind and fight off distractions. When you earn more, it is easy to act on your wants and buy things impulsively. Your typical day starts costing you more money.

To prevent this subtle, daily lifestyle creep, live your days the same way you always have – with the same kind of financial mindfulness. Watch out for new daily costs inspired by wants rather than needs.

Live well, but not extravagantly. After years of law school or time toiling at start-ups, getting hired by the right firm and making that career leap can be exhilarating – but it should not be a gateway to runaway debt. According to the Federal Reserve’s latest Survey of Consumer Finances, the average American head of household aged 35-44 carries slightly more than $100,000 of non-housing debt. This is one area of life where you want to be below average.1

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com
Southwestern Retirement Planning Advisors, Inc.
3800 S. Alma School Road, Suite 123
Chandler, AZ 85248
www.SWRetire.com

Registered Representative offering securities and advisory services through Independent Financial Group LLC,
a registered broker-dealer and registered investment adviser. Member FINRA/SIPC
Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC
OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

Citations.
1 – time.com/money/5233033/average-debt-every-age/ [4/13/18]

The post Beware of Lifestyle Creep appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.