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Why A Well Diversified Portfolio is the Hallmark of the Savvy Investor

We all seem to know a day trader or two: someone constantly hunting for the next hot stock. That’s not what I’d consider smart investing. Here’s why it’s wise to diversify your portfolio:

Diversification Helps You Manage Risk

We all want a terrific ROI, but risk management matters just as much in investing, perhaps more. That is why diversification is so important. There are two great reasons to invest across a range of asset classes, even when some are clearly outperforming others.

REASON #1:

Potentially Capture Gains in Different Market Climates

If you allocate your invested assets across the breadth of asset classes, you will at least have some percentage of your portfolio assigned to the market’s best-performing sectors on any given trading day. If your portfolio is too heavily weighted in one asset class, or in one stock, its return is riding too heavily on its performance.

Your portfolio is like a garden. A good gardener will plant a variety of flowers to ensure something is always blooming. The gardener knows that some flowers eventually die off or may not grow well but if there is enough diversity the overall picture will still look good.

REASON #2:

Potentially Less Financial Pain if Stocks Tank

If you have a lot of money in growth stocks and aggressive growth funds (and some people do), what happens to your portfolio in a correction or a bear market? You’ve got a bunch of losers on your hands. Tax loss harvesting can ease the pain only so much.

Diversification gives your portfolio a kind of “buffer” against market volatility and drawdowns. Without it, your exposure to risk is magnified.

ADVICE:

Don’t put all your eggs in one basket!

Believe the cliché: don’t put all your eggs in one basket. Wall Street is hardly uneventful and the behavior of the market sometimes leaves even seasoned analysts scratching their heads. We can’t predict how the market will perform; we can diversify to address the challenges presented by its ups and downs.


Sources

  1. usatoday30.usatoday.com/money/perfi/retirement/story/2011-12-08/investment-diversification/51749298/1
  2. This material was prepared, in part, by MarketingPro, Inc.

6 Tips To Help You Begin (or Improve) Your Retirement Savings Plan

Feeling like you need to start saving and planning for retirement? Here are 6 smart tips to get you going:

TIP #1

Make Savings A Top Priority

Pay Yourself First

Resolve to pay yourself first. That is, direct money toward your retirement before you do anything else, like pay the bills or spend it on needs or wants. Always remember, your future should come first.

TIP #2

Invest Some or Most of What You Save

Potential to Grow and Outpace Inflation

Investing in equities is vital, because it gives you the potential to grow and compound your money to outpace inflation. With interest rates so low right now, ultra-conservative fixed-income investments are generating very low returns, and most savings accounts are offering minimal interest rates. Thirty or forty years from now, you will probably not be able to retire solely on your savings. If you invest your retirement money in equities, you have the opportunity to retire on the earnings and compound interest accumulated through both saving and investing.

TIP #3

The Effect of Compounding Can Be Profoud

The Earlier You Start The Better

The effect of compounding can be profound. Suppose you want to retire with $1 million in savings. Let’s project that your investments will yield 6.5% a year between now and the year you turn 65 and, for the sake of simplicity, we will put any potential capital gains taxes and investment fees aside. Given all that, how early would you have to begin saving and investing to reach that $1 million goal, and how much would you have to save per month to reach it?

How early would you have to begin saving and investing to reach that $1M goal?

START AT 45 = $2,039
START AT 35 = $904
START AT 25 = $438

If you start saving at 45, the answer is $2,039. If you start saving at 35, the monthly number drops to $904. How about if you start saving at 25? Only $438 a month would be needed. So, as you see the earlier you start saving and investing, the more compounding power you can harness.

TIP #4

Strive to Get The Match

Some Companies Contribute 50 cents for Every Dollar

Some companies reward employees with matching retirement plan contributions; they will contribute 50 cents for every dollar the worker does or, perhaps, even match the contribution dollar-for-dollar. An employer match is too good to pass up.

TIP #5

Invest in A Way You Are Comfortable With

Avoid Investments That are Convoluted or Mysterious

In the mid-2000s, some Wall Street money managers directed assets into investments they did not fully understand, a gamble that contributed to the last bear market. Take a lesson from that example and avoid investing in what seems utterly convoluted or mysterious.

TIP #6

Realize That Friends And Family May Not Know It All

Your Main Concern Should Be Staying Invested

The people closest to you may or may not be familiar with investing. If they are not, take what they tell you with a few grains of salt.

Getting a double-digit annual return is great, but the main concern is staying invested. The market goes up and down, sometimes violently, but there has never been a 20-year period in which the market has lost value. As you save for the long run, that is worth remembering.


Sources:

  1. This material was prepared, in part, by MarketingPro, Inc.

3 Steps To Get Your Financial Documents In Good Order for Your Loved Ones

Wondering what paperwork you need have at the ready for your spouse or children so that when you pass you don’t leave behind a collection of mysteries for them to solve? Here’s what you’ll need:

 STEP #1
Create a Financial File

Function is More Important Than Form

Many heirs spend days, weeks, or months searching for a decedent’s financial and legal documents. They may even discover a savings bond, a certificate of deposit, or a life insurance policy years after their loved one passes. So, your first step is to create a financial file. Maybe it is an actual accordion or manila folder; maybe it is a file on a computer desktop; or maybe it is secured within an online vault. Clients of Weiss Financial Group can use their Secure Client Portal. The form matters less than the function. The function this file will serve is to provide your heirs with the documentation and direction they need to help them settle your estate.

STEP #2
Put The Right Stuff in The File

Your Heirs Will Need to Supplement the File

Now that you’ve chosen your filing system, it’s time to start putting the right stuff in it. Here’s what should go it in it…

Your Financial File Contents:

  • Your Will
  • Durable Power of Attorney
  • Healthcare Proxy
  • Trust Instruments
  • Insurance Policies
  • List of Financial Accounts
  • Usernames & Passwords
  • Contact info for your financial professionals

Your heirs will want to supplement your “final file” with contributions of their own. Perhaps the most important supplement will be your death certificate. A funeral home may tell your heirs that they will need only a few copies. In reality, they may need several – or more – if your business or financial situation is particularly involved.

STEP #3
Tell Your Heirs About the File

It Will Do No Good if Nobody Knows About It!

Be sure to tell your heirs about your “final file.” They need to know that you have created it and they need to know where it is. It will do no good if you are the only one who knows those things when you die.


Sources:

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. marketwatch.com/story/13-steps-to-organizing-your-accounts-and-assets-2016-03-03 
  3. reuters.com/article/us-retirement-death-folder-idUSKBN0FK1RW20140715

How Much Can You Contribute to Your Retirement Plan in 2017?

A new year brings new opportunities to try and max out your retirement savings. Here’s a rundown of the 2017 contribution limits:

IRAs

For 2017 they remain the same as 2016: $5,500 for IRA owners who will be 49 and younger this year, $6,500 for IRA owners who will be 50 or older this year. These limits apply to both Roth and traditional IRAs. What if you own multiple IRAs? The total combined contributions cannot exceed the maximum allowed

401(k)s, 403(b)s, & 457s

Each of these workplace retirement plans have 2017 contribution limits of $18,000, $24,000 if you will be 50 or older this year. Now, If you are a participant in a 457 plan and within three years of what your employer deems “normal” retirement age, you can contribute up to $36,000 annually to your plan during the last three years preceding that “normal” retirement date.

2017.Contribution.Limits

High Earners

High earners may find their ability to make a full Roth IRA contribution restricted. This applies to a single filer or head of household whose modified adjusted gross income (MAGI) falls within the $118,000-133,000 range, and to married couples with a MAGI of $186,000-196,000. If your MAGI exceeds the high ends of those phase-out ranges, you may not make a 2017 Roth IRA contribution. (For tax year 2016, the respective phase-out ranges are $117,000-132,000 for single and $184,000-194,000 for married)

SIMPLE IRAs & SEP-IRAs

In 2017, the contribution limit for a SIMPLE IRA is $12,500; those who will be 50 or older this year may contribute up to $15,500. Federal law requires business owners to match these annual contributions to at least some degree; self-employed individuals can make both employee and employer contributions to a SIMPLE IRA. Both Business owners and the self-employed can contribute to SEP-IRAs. The annual contribution limit on a SEP-IRA is very high – in 2017, it is either $54,000 or 25% of your income, whichever is lower.


Sources

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. fool.com/retirement/2017/01/17/roth-vs-traditional-ira-which-is-better.aspx
  3. money.usnews.com/money/retirement/iras/articles/2016-12-19/how-saving-in-an-ira-can-reduce-your-2016-tax-bill
  4. forbes.com/sites/ashleaebeling/2016/10/27/irs-announces-2017-retirement-plans-contributions-limits-for-401ks-and-more/ 
  5. fool.com/retirement/2016/12/19/457-plan-contribution-limits-in-2017.aspx 
  6. money.cnn.com/2017/01/13/retirement/ira-myths/

Smart Strategies for Sticking With Your Financial Resolutions This Year

Have you already forgotten about your New Year’s resolutions? Like many of us, we start the new year with good intentions. The question is, how do we keep our New Year’s resolutions from faltering? Often, our New Year’s resolutions fail because there is only an end in mind – a clear goal, but no concrete steps toward realizing it. Mapping out the incremental steps can make the goal seem more achievable.

Here are my 6 tips for making and keeping your financial resolutions this year:

TIP# 1
MAXIMIZE YOUR PLAN CONTRIBUTIONS

Contribution limits are set by the federal government each year so be sure to find out what the limits are for your retirement plan. If you will be 50 or older you’ll be able to make an additional catch-up contribution. Here’s a link to our key financial data report for 2017 which includes the dollar amounts for contribution limits: 2017 Key Financial Data.

TIP #2
SET UP AUTOMATIC CONTRIBUTIONS

There are two excellent reasons for doing this. One, time is on your side – in fact, time may be the greatest ally you have when it comes to succeeding as a retirement saver and an investor. An early start means more years of compounding for your invested assets. It also gives you more time to recover from a market downturn. Two, scheduling regular account contributions makes saving for retirement a given in your life.

TIP #3
REVIEW & REDUCE YOUR DEBT

Look at your debts, one by one. You may be able to renegotiate the terms of loans and interest rates with lenders and credit card firms. See if you can cut down the number of debts you have – either attack the one with the highest interest rate first or the smallest balance first, then repeat with the remaining debts.

TIP #4
REBALANCE YOUR PORTFOLIO

Many investors go years without rebalancing, which can be problematic. Rebalancing is crucial for the smart investor.

TIP #5
SOLIDIFY SOME RETIREMENT VARIABLES

Accumulating assets for retirement is great;  doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year – that may make the “how” and “how much” clearer as well.

TIP #6
SOLIDIFY YOUR COLLEGE PLANNING

If your child has now reached his or her teens, see if you can get a ballpark figure on the cost of attending local and out-of-state colleges. Even better, inquire about their financial aid packages and any relevant scholarships and grants. If you have college savings built up, you can work with those numbers and determine how those savings need to grow in the next few years.

Good luck with your financial resolutions. If you need help feel free to reach out, or download a copy of my free eBook, The Pre-Retirement Toolkit.


Sources:

  1. This material was prepared in part by MarketingPro, Inc.

5 Smart Money Moves to Make When You Are in Your 50’s

So you are in your 50’s? Here are the smart financial moves you should be making right now:

RETIREMENT RED ZONE

At this point in your financial life you’re in what I would call the Retirement Red Zone. You are getting close, but you’re not quite there yet and you still have some important work to do.

SMART MOVE #1

PICK A DATE

TIP: Start Thinking About an Approximate Retirement Date

Will you work 5 more years? 10 years? 20? You need to have a rough idea of when you may stop working so you can plan accordingly. The longer you work the less you’ll need in retirement savings and vice versa.

SMART MOVE #2

RAMP UP SAVINGS

TIP: Take Advantage of Catch-Up Contributions

Ramp up your savings if you can and take advantage of catch-up contributions. For the current catch-up contribution allowances click here.

A Catch-Up Contribution is a type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k) and/or individual retirement accounts.

SMART MOVE #3

REDUCE DEBT

TIP: Retiring With Major Debt Isn’t Good for Your Financial Health

Aim to reduce your debt as much as possible by the time you retire. Retiring with major debts won’t be good for your retirement and can prove to be extremely stressful for both you and your spouse.

SMART MOVE #4

CONSIDER LONG TERM CARE INSURANCE

LTC = Long Term Care Insurance

Long Term Care Insurance is coverage that provides nursing-home care, home-health care, personal or adult day care for individuals above the age of 65 or with a chronic or disabling condition that needs constant supervision.

LTC is a smart move for most of us, but can be too costly for many to purchase. If you have the means to purchase it, now is the time to do it.

If you buy a policy in your 40’s you risk paying too much over the life of the policy. On the flip side if you wait until 60’s or later the premiums skyrocket and you may not even get the coverage. So, your 50’s is the sweet spot to make that purchase.

SMART MOVE #5

UPDATE YOUR WILL

Nearly ½ of All Americans Over 50 Don’t Have a Will!

According to AARP nearly half of all americans over age 50 don’t have a basic will, so make sure you have one.

For more info on the importance of having a will watch this video:


Sources

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. http://www.investopedia.com/

3 Smart Financial Tasks to Start Off The New Year Right

Here are 3 things to do in January to help keep your financial life on track this year:

TASK #1

Set Up Your Budget

Set up your budget for the new year. Review your spending habits from the previous year and create a saving and spending plan for the current year. You can use online tools to help with this. I use http://bit.ly/FirstStepCashManagement when working with clients but you also check out http://www.YouNeedABudget.com or http://www.Mint.com

TASK #2

Get A Credit Report

Get a copy of your credit report. You should be checking this three times throughout the year. You are entitled to one free report every year from all three agencies Experian, Transunion, Equifax. So, spread out your requests over the year. Pick one agency to obtain report from now. You want to look for anything that doesn’t seem right on the report and take action if you need to. Go to http://www.annualcreditreport.com

TASK #3

Review Retirement Plan Contributions

If you aren’t already maxing out your retirement plan contributions consider increasing the amount you contribute by 1% this month. Since you’ll be looking at your budget this month make sure you work savings into your plan. Keep increasing your contribution by 1% every 6 months until you’ve at least reached the 10% mark.


Sources:

  1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
  2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
  3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

3 Things To-Do in December to Keep Your Financial Life On Track

Here are 3 great year end tasks you should seriously considering doing this month:

TIP #1

Review Your Accounts

The end of the year is a great time to take a look at all your investment accounts to determine if you need to rebalance in the new year. Over time your portfolio can deviate from your intended allocation due to market fluctuations. If you are working with and advisor they will most likely be doing this for you.

TIP #2

Tax-Loss Harvest

Determine if you should do any tax-loss harvesting. What’s that? Tax-loss harvesting is the practice of selling a security that has experienced a loss. By realizing, or “harvesting” a loss, investors are able to offset taxes on both gains and income. In your taxable accounts, if you sold any capital assets for a gain this year, now may be a good time to sell off some of your investment dogs so that you can offset those gains with losses. If you are working with an advisor they can help with this. TIP: Your accountant can help you determine if you should take any capital gains or losses

TIP #3

Reflect on the Year

Take this month to reflect on your financial life this year. What went right and what went wrong? Make note of the good things and try to keep that going. For the things that didn’t work out see if there is any room for improvement next year.


Sources:

  1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
  2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
  3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

5 Smart End-of-the-Year Money Moves You Could Make Right Now

As the year comes to a close, here are 5 things you can do to help keep your financial life on track:

Ask yourself these 5 questions and then take action!

Question #1

What has changed for you in 2016?

Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and the new year begins. Even if this year has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little more wealth.

Question #2

Do You Practice Tax-Loss Harvesting?

Tax-loss harvesting is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. If you fall into one of the upper tax brackets, you might want to consider this move, which directly lowers your taxable income. Keep in mind this strategy should be made with the guidance of a financial professional you trust.(1)

Question #3

Do You Itemize Deductions?

If you do itemize deductions, great! Now would be a good time to get the receipts and assorted paperwork together. Besides a possible mortgage interest deduction, you might be able to take a state sales tax deduction, a student loan interest deduction, a military-related deduction, a deduction for the amount of estate tax paid on inherited IRA assets, an energy-saving deduction. There are so many deductions you can potentially claim, now is the time to meet with your tax professional to strategize to claim as many as you can.

Question #4

Are You Thinking of Gifting?

How about donating to a charity or some other kind of 501(c)(3) non-profit organization before 2016 ends? In most cases, these gifts are partly tax-deductible. Keep in mind, you must itemize deductions using Schedule A to claim a deduction for a charitable gift.(2)

Question #5

What Can You Do Before You Ring in The New Year?

Talk with a financial or tax professional now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.


Sources:

  1. fool.com/retirement/2016/11/09/1-smart-tax-move-to-make-before-the-end-of-2016.aspx
  2. irs.gov/taxtopics/tc506.html
  3. This material was prepared, in part, by MarketingPro, Inc.

How Trump’s Proposed Tax Changes Could Affect You

Trump has been pretty clear about wanting to simplify our tax code. I sat down with CPA Steven Stern to help explain these proposed changes. So, here are where things currently stand and how they might affect you:
Here’s list of the of the items discussed in the video, but be sure to watch the video for to learn how these changes specifically affect you:

CHANGE #1 

Shift From 7 Income Tax Brackets To 3

Current (Married Filing Jointly):

  1. 10% bracket: $0 to $18,550
  2. 15% bracket: $18,550 to $75,300
  3. 25% bracket: $75,300 to $151,900
  4. 28% bracket: $151,900 to $231,450
  5. 33% bracket: $231,450 to $413,350
  6. 35% bracket: $413,350 to $466,950
  7. 39.6% bracket: $466,950 or more

Proposed (Married Filing Jointly)

  1. 12% bracket: $0 to $75,000
  2. 25% bracket: $75,001 to $224,999
  3. 33% bracket: $225,000 or more

CHANGE #2

Increasing the Standard Deduction

Trump proposes increasing the standard deduction from $12,600 to $30,000 for joint filers (from $6,300 to $15,000 for singles), and capping itemized deductions at $200,000 (joint) or $100,000 (single) and scrapping AMT.

CHANGE #3

Eliminate 3.8% Affordable Care Act Tax

The 3.8% Affordable Care Act tax on the lesser of net investment income or the amount by which your AGI exceeds $200,000 would also be eliminated.


Source: Bob Veres