Figuring Out a 401(k) Strategy That Works for You

Matching your tolerance for risk with your investment objectives   Everyone wants a comfortable retirement, but the road you take there will depend on your specific situation. When you invest, you assume a certain level of risk (but like everyone you’re hoping that your holdings will increase in value). One of the most challenging aspects of investing involves matching your tolerance for risk with your investment objectives. Beyond Your 401(k) Have you taken the time to really project the amount of money you may need in retirement? While setting aside a percentage of your income in a 401(k) is an important step, chances are you will need more than current limitations may allow you to save. Most people supplement their employer-sponsored retirement benefits and Social Security income with personal investments. In order to develop a fitting plan, you need to have your goals in sight. In 2022, your elective deferral (contribution) limit for your 401(k) is $20,500. If you’re age 50 or older, you may save an additional $6,500. While the contribution often rises in upcoming years and your employer may match contributions above this limit, will your employer-sponsored plan allow you to save enough? Cast your net as far as possible—can you contribute to your 401(k) and afford to invest in other opportunities? Increasing your savings rate now may help you later. Asset Allocation and Diversification Are you an aggressive, moderate, or conservative investor? Your answer probably depends in large part on your stage in life and your financial resources, and will most likely change over time. Aggressive investors tend to have a longer time frame—as many as 35 years or more to save and invest until they reach

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5 Tips for Navigating Medicare in Retirement

One of the main concerns about retirement is health care. As healthcare costs continue to rise, medical bills may quickly derail your retirement plan. The good news is when you turn 65, you will be able to apply for Medicare, which provides you with coverage for some of the larger bills you may face during your retirement. Though navigating Medicare is a little tricky, the following tips can make the process less daunting. 1. Watch Your Dates There are deadlines for Medicare. The first is the Initial Enrollment Period. If you sign up during this time, you can avoid a significant amount of hassle. This enrollment period starts three months before you turn 65 and extends until three months after. Failing to sign up on time may result in up to $6,500 more in premiums over 20 years. This occurs because you may be assessed a 10 percent penalty for each year that passes without enrollment.1 2. Find the Correct Doctor A change in insurance may mean you need to change physicians. Providers have the option of accepting the Medicare program in different ways or not accepting it at all. If your doctor is a participating provider, they agree to the Medicare fee and will take that as the entire covered portion, which means you will likely only be responsible for 20%. If your doctor is a non-participating provider, they will accept Medicare as a form of payment but may charge you up to 15% more, which you will have to pay out of pocket.1 You may also want to consider switching to a doctor that specializes in geriatrics so that they have more experience in issues that you may encounter as

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Tax Planning Tips: Life Insurance

Understanding the importance of life insurance is one thing. Understanding the tax rules is quite another. As insurance products have evolved and become more sophisticated, the line separating insurance vehicles from investment vehicles has grown blurry. To differentiate between the two, a mix of complex rules and exceptions now governs the taxation of insurance products. If you have neither the time nor the inclination to decipher the IRS regulations, here are some life insurance tax tips and background information to help you make sense of it all. Life insurance contracts must meet IRS requirements For federal income tax purposes, an insurance contract cannot be considered a life insurance contract–and qualify for favorable tax treatment–unless it meets state law requirements and satisfies the IRS’s statutory definitions of what is or is not a life insurance policy. The IRS considers the type of policy, date of issue, amount of the death benefit, and premiums paid. The IRS definitions are essentially tests to ensure that an insurance policy isn’t really an investment vehicle. The insurance company must comply with these rules and enforce the provisions. Keep in mind that you can’t deduct your premiums on your federal income tax return Because life insurance is considered a personal expense, you can’t deduct the premiums you pay for life insurance coverage. Employer-paid life insurance may have a tax cost The premium cost for the first $50,000 of life insurance coverage provided under an employer-provided group term life insurance plan does not have to be reported as income and is not taxed to you. However, amounts in excess of $50,000 paid for by your employer will trigger a taxable income for the “economic value” of the

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Saving for Retirement and a Child’s Education at the Same Time

You want to retire comfortably when the time comes. You also want to help your child go to college. So how do you juggle the two? The truth is, saving for your retirement and your child’s education at the same time can be a challenge. But take heart — you may be able to reach both goals if you make some smart choices now. Know what your financial needs are The first step is to determine your financial needs for each goal. Answering the following questions can help you get started: For retirement: How many years until you retire? Does your company offer an employer-sponsored retirement plan or a pension plan? Do you participate? If so, what’s your balance? Can you estimate what your balance will be when you retire? How much do you expect to receive in Social Security benefits? (One way to get an estimate of your future Social Security benefits is to use the benefit calculators available on the Social Security Administration’s website, ssa.gov. You can also sign up for a my Social Security account so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor’s, and disability benefits.) What standard of living do you hope to have in retirement? For example, do you want to travel extensively, or will you be happy to stay in one place and live more simply? Do you or your spouse expect to work part-time in retirement? For college: How many years until your child starts college? Will your child attend a public or private college? What’s the expected cost? Do you have more than one

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Five Keys to Investing for Retirement

Because inflation could reduce your purchasing power over time, you’ll probably need to contribute more to your retirement plan than you think. What seems like a healthy amount now is likely to feel smaller and smaller over time. All investing involves risk, including the possible loss of principal, and there can be no guarantee that any investment strategy will be successful. Asset allocation and diversification do not guarantee a profit or protect against investment loss.   Making decisions about your retirement account can seem overwhelming, especially if you feel unsure about your knowledge of investments. However, the following basic rules can help you make smarter choices regardless of whether you have some investing experience or are just getting started. 1.  Don’t lose ground to inflation It’s easy to see how inflation affects gas prices, electric bills, and the cost of food; over time, your money buys less and less. But what inflation does to your investments isn’t always as obvious. Let’s say your money is earning 4% and inflation is running between 3% and 4% (its historical average). That means your investments are earning only 1% at best. And that’s not counting any other costs; even in a tax-deferred retirement account such as a 401(k), you’ll eventually owe taxes on that money. Unless your retirement portfolio keeps pace with inflation, you could actually be losing money without even realizing it. What does that mean for your retirement strategy? First, you might need to contribute more to your retirement plan than you think. What seems like a healthy sum now will seem smaller and smaller over time; at a 3% annual inflation rate, something that costs $100 today would cost $181

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Common Cents: Financial Tips Everyone Should Know

Few U.S. high schools have comprehensive personal finance programs, which means that some teens enter adulthood without a deep base of knowledge on topics like investing, budgeting, and consumer debt. Even those who feel they’re fairly well-versed in personal finance may find themselves nearing retirement without a solid grasp on certain topics like required minimum distributions or Social Security taxation. But no matter your circumstances, there are some relatively simple steps that may go a long way toward improving your finances. Know That Little Changes Can Add Up The thought of saving $1 million for retirement may seem insurmountable, especially if you’re just starting out. You don’t necessarily need to commit to saving tens of thousands of dollars each year to fund a comfortable retirement. Even setting aside just $100 per month in an investment account may add up over time. Not only does the value of stocks and bonds grow as the years go by, in most cases, but they may also pay dividends, which you may then use to invest in even more shares. Don’t Pay Unnecessary Interest It may be all but impossible to avoid paying any interest over your life—at least if you spend any time paying a mortgage, auto loan, student loan, or another type of debt. But the interest rate on secured loans (like mortgages and car loans) is sometimes on the lower side, at least when compared to credit cards or paycheck advance loans. It’s important to carefully evaluate the interest rate and terms of any loan you take out to ensure you’re not overpaying. You may be able to save up cash for a larger down payment to reduce the amount subject to interest. You

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A Survival Guide for a Bear Market

A bear market is a prolonged period of price declines in securities, an index such as the S&P 500, or the overall stock market of usually 20% or more from a recent high. Bear markets can also signal economic downturns such as a pandemic, recession, or geopolitical crisis and may be cyclical or longer-term. Pessimism and overall negative investor sentiment may occur during a bear market, often leading to heard behavior, hasty decisions, and fear selling. These can be a risk to a portfolio’s overall long-term performance. As uncomfortable as a bear market may be, understanding how your emotions impact your portfolio’s performance is critical. Here are eight tips for helping you survive a bear market: Turn off the noise. Thanks to the media, we live in an interconnected world and always know what is happening in the world’s markets. While some information sources provide accurate market information, others may not reflect the current market conditions. Limit your exposure to stock market media reporting and rely on your advisor to inform you of what you need to know. Or, ask questions as to how your portfolio and goals may impact by a bear market. Live your life. It may be unhealthy for you to follow the market’s performance 24/7 or let it consume you. Also, it is essential to understand that your portfolio does not define who you are or how successful you are. Understand basis point performance reporting. The relationship between percentage changes and basis points determines a difference in a financial instrument, such as the stock market. The Basis Point (BPS) is used to calculate changes in interest rates, equity indexes (stock market), and fixed-income securities yield. A

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LPL Financial Research Midyear Outlook 2022: Navigating Turbulence

Markets rarely give us clear skies, and there are always threats to watch for on the horizon, but the right preparation, context, and support can help us navigate anything that may lie ahead. So far, this year hasn’t seen a full-blown crisis like 2008–2009 or 2020, but the ride has been very bumpy. We may not be flying into a storm, but there’s been plenty of turbulence the first part of 2022. How businesses, households, and central banks steer through the rough air will set the tone for markets over the second half of 2022. Turbulence cannot be avoided, but it also need not deter us from making progress toward our financial goals. LPL Research’s Midyear Outlook 2022: Navigating Turbulence is designed to help you assess conditions over the second half of the year, alert you to the challenges that may still lie ahead, and help you find the smoothest path for making continued progress toward your destination. When times are turbulent, the surest path toward progress remains sound financial advice from dedicated professionals who have logged many hours in similar conditions.   View the digital version: https://view.ceros.com/lpl/midyearoutlook2022       This material is for general information only and is not intended to provide specific advice or recommendations for any individual. The economic forecasts may not develop as predicted. Please read the full Midyear Outlook 2022: Navigating Turbulence publication for additional description and disclosure. This research material has been prepared by LPL Financial LLC. Tracking # 1-05292601 (Exp. 07/23)

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5 Ways a Financial Professional Could Be a Small-Business Owner’s Best Friend

As a business owner, you may assume you do not need professional financial advice until you hit certain milestones such as $1 million in sales, having ten employees, or some other tangible measure. However, financial professionals may benefit small-business owners no matter what the stage of their business. The earlier you seek financial advice, the more this advice might help your business as it grows. Here are five ways a financial professional could be your ally as a small-business owner. Saving You Time and Energy Having a financial professional to help you plan the economic future of your business might allow you to concentrate on more immediate needs. It may be tough to make long-term projections when just trying to get through each day. Delegating these tasks to a financial professional might help you lower stress. You are able to spend your time managing your operations while your financial professional works on items such as tax-saving strategies, expansion, cash flow projections, and anything else your business may need to manage finances. Saving You Money It might be tough to get a comprehensive overview of your business as an owner. Your financial professional might find ways to save you money by taking such a view, tracking your budget expenditures, and seeing where you might be overspending. Cutting out this extra spending might free up capital that you may use to hire more employees, do more marketing, stock more products, or provide your workers with raises. Evaluating Market Trends Many small businesses operate in competitive markets, so having a finger on the pulse of relevant trends may be the difference between a booming business and a struggling one. Some financial professionals offer

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6 Ways to Minimize Your Tax Liability Throughout the Year

You don’t need to wait until the end of the year to look for ways to minimize your tax liability. Tax planning should take place throughout the year to have you prepared well ahead of tax season. Here are six ways to minimize your tax liability that you can implement any time before the end of this year: Update your payroll deductions– double check that you are claiming the correct deductions and taking advantage of pre-tax benefits that can help lower your taxable income, such as: Flexible spending accounts (FSAs)- a health savings account (HSA), healthcare insurance, a flexible spending account (FSA), commuter benefits, and childcare expenses. Maximize pre-tax retirement savings contributions– In 2022, you can contribute $20,500 to your employer’s retirement savings plan. If you are aged 50 or older, you can contribute an additional $6,500 to help lower your taxable income. Other Tax-liability Reduction Strategies Whether you’re an individual or a married couple, you can lower your taxable income while doing good for others by donating to an IRS-qualified charity. To take advantage of charitable tax deductions this year, you must make your donation before December 31st. Here are some common charitable donation strategies to consider: Qualified Charitable Distributions (QCDs) – If you’re age 72 or older, you can use a QCD to donate to an IRS-qualified charity of your choice directly from your IRA. The gift won’t qualify for a charitable deduction but will allow you to deduct the amount transferred to the charity from your taxable income. A QCD may be helpful if you won’t reach a level of itemized deductions to exceed the standard deduction amount on your taxes.   The maximum amount you may

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