Similar to taking care of your personal health by proactively incorporating healthy habits and annual checkups, you can also take control of your financial health when you are proactive and engaged in managing your finances. And also like your physical and mental health, your financial health requires an ongoing commitment and focus in order to get results. Regardless of your stage in life, it’s important to establish certain habits that can put you in the position to be able to reach your financial goals, whether that’s a vacation, a college fund, savings for a rainy day or a successful retirement. There are a few universal tips to consider as you establish and maintain your financial health. Determine your financial goals: You have to know where you want to end up to know the way to get there. The goal can be as short-term or ambitious as you need it to be, at this moment in your life. Maybe it’s creating a budget to be able to have more money to save. Or maybe you’re looking ahead at what you’ll need for a happy retirement. Either way, you need to look ahead and establish the goal and create the timeline to reach it.   Create a financial plan: You wouldn’t expect to lose 10 pounds without evaluating your diet and exercise and then tweaking either of those to create results. Similarly with financial health, you need to evaluate your current financial situation, and then develop a financial plan that can help you work toward your goal. That includes the need to consider your current budget, projected income, investments and other factors so that you can create your personal roadmap to a

As retirement becomes more than just a vague future concept, you may begin to feel pressure to develop a more concrete plan for your income, your spending, your asset allocation, and your withdrawal rate. And when you’re in the banking industry, which can often be a feast or famine one, planning for retirement can involve even more variables. Below, we’ll discuss three ways banking professionals can plan for a secure and prosperous retirement. Don’t Just Have One Plan In the banking world, things can turn on a dime. One year, you may find yourself facing unexpected layoffs; the next, you could be wondering what to do with a sizeable bonus. It’s important to develop several retirement plans that can account for these unpredictable fluctuations. For example, you may want to create a retirement plan under the assumption that you’ll earn a fairly conservative baseline level of income over the next decade. Once you have this plan in place, if you receive bonuses that allow you to exceed this income, you may be able to shorten your retirement horizon by a specific number of months for each additional $10,000 earned. By having multiple plans available, you can help maintain your ability to adapt to whatever changes may come your way. Begin Expanding Your Tax Options Not all retirement funds provide the same return once taxes are taken into account. When deciding which funds to withdraw from, and when, it’s important to perform an apples-to-apples comparison by calculating the after-tax proceeds of each fund. You may find that withdrawing a smaller amount from several types of funds each year reduces your tax bill more than withdrawing one year’s expenses from an IRA, the next year’s expenses

College marks a great milestone in a child’s life. It may be the first time he or she will live away from home. Dropping off your child at college may be an experience loaded with emotions, so here are a few tips for a smoother transition. Accept that the parent-child dynamic has changed Your child is always your child, and will need you as much as ever. However, parents need to understand that their role has transitioned from “supervisor” to “mentor.” Make the move simple Do not bring the moving van. Not only will it embarrass your child, but dorm rooms just aren’t that large. Bring only what’s appropriate. Consider pre-ordering essentials (soap, bedding, shower caddy, etc.) for pick-up at a location by the school. This will save space whether your trip is by car or plane. Don’t leave “The Talk” to the drop-off While college represents a gateway to many wonderful experiences, parents will want to have a serious conversation about safety, responsible behavior, finances, and expectations about staying in touch. Do not leave it for the drop-off. It is sure to sour the moment and may rush a conversation that deserves more time and mutual dialogue. Time to learn financial responsibility Your child will need spending money. You may want to provide a debit card attached to an account that has a set sum for the full semester, or one that’s refreshed with monthly deposits. College is a perfect time to learn budgeting. Take the lead from your child Let your child have the discretion to make decisions about what to bring. However important you think a dust skirt for the bed is, try to avoid fights. Let

On June 10, 2020, the Department of Labor released CPI numbers for May and there was a chorus singing deflationary tunes for the rest of the week. Will the chorus get louder over the coming months or lose its voice in the heat of the summer? The U.S. Bureau of Labor Statistics reported that: The Consumer Price Index for All Urban Consumers declined 0.1% in May on a seasonally adjusted basis after falling 0.8% in April Over the last 12 months, the all items index increased 0.1% before seasonal adjustment Further, it was reported that: “Declines in the indexes for motor vehicle insurance, energy, and apparel more than offset increases in food and shelter indexes to result in the monthly decrease in the seasonally adjusted all items index. The gasoline index declined 3.5 percent in May, leading to a 1.8-percent decline in the energy index. The food index, in contrast, increased 0.7 percent in May as the index for food at home rose 1.0 percent. The index for all items less food and energy fell 0.1 percent in May, its third consecutive monthly decline. This is the first time this index has ever declined in three consecutive months. Along with motor vehicle insurance and apparel, the indexes for airline fares and used cars and trucks declined in May. The indexes for shelter, recreation, medical care, household furnishings and operations, and new vehicles all increased.” This data adds another worry to any economic recovery – whether it’s U-shaped, V-shaped or doesn’t take any shape at all – as deflation is now a real possibility. In fact, this is the first time in over 60 years that core CPI has dropped for

On June 19, 2020, the Internal Revenue Service announced new guidelines to help those affected by COVID-19 gain more access to retirement plan distributions and loans. The IRS expanded the categories of those eligible, called qualified individuals, and increased the dollar limit on loans to $100,000. The CARES Act In late March of 2020, the $2 trillion Coronavirus Aid, Relief, and Economic Security Act – the CARES Act – was passed by Congress and signed by the President.  In addition to providing direct assistance to individuals, families and small businesses, the CARES Act allows for COVID-19-related distributions of up to $100,000 from eligible retirement plans, including IRAs, between January 1st and December 30th of 2020. These distributions will not be subjected to the 10% early withdrawal penalty. In addition, a COVID-19-related distribution can be included in income in equal installments over a three-year period and one has three years to repay and undo the tax consequence. There are also provisions of the CARES Act that allow for retirement plans to relax rules for loan amounts and repayment terms, including the suspension of loan repayments that are due from March 27th through December 30th. Further, dollar amount on loans made between March 27th and September 22nd is increased to $100,000, up from $50,000. Expanding the Qualification Criteria The definition of those who qualify under the CARES Act was also expanded by the IRS. As copied directly from Notice 2020-50, a qualified individual is anyone who: Is diagnosed, or whose spouse or dependent is diagnosed, with the virus SARS-CoV-2 or the coronavirus disease 2019 (collectively, “COVID-19”) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug,

There’s no denying the benefits of a college education: the ability to compete in today’s job market, increased earning power, and expanded horizons. But these advantages come at a price. And yet, year after year, thousands of students graduate from college. So, how do they do it? Many families finance a college education with help from student loans and other types of financial aid such as grants and work-study, private loans, current income, gifts from grandparents, and other creative cost-cutting measures. But savings are the cornerstone of any successful college financing plan. College costs keep climbing It’s important to start a college fund as soon as possible, because next to buying a home, a college education might be the biggest purchase you ever make. According to the College Board, for the 2019-2020 school year, the average cost of one year at a four-year public college for in-state students is $26,590, while the average cost for one year at a four-year private college is $53,980. Many private colleges cost substantially more.   Though no one can predict exactly what college might cost in 5, 10, or 15 years, annual price increases in the range of 3% to 5% would certainly be in keeping with historical trends.   This chart can give you an idea of what future costs might be, based on the most recent cost data and an average annual college inflation rate of 5%. (Source: College Board, Trends in College Pricing 2019)     Tip: Even though college costs are high, don’t worry about saving 100% of the total. Many families save only a portion of the projected costs — a good rule of thumb is 50% — and then

To most people, “risk” evokes negative images — driving faster than the speed limit, placing bets on “a long shot,” or traveling alone to unfamiliar places. Mention risk in terms of investing and people might think about losing their life’s savings. But in reality, investment risk comes in many forms, and each can affect how you pursue your financial goals. The key to dealing with investment risk is learning how to manage it. Step One: Understand Risk Barron’s Finance and Investment Handbook defines risk as the “measurable possibility of losing or not gaining value.” Fear of losing some money is probably one reason why people may choose conservative investments, even for long-term savings. While investment risk does refer to the general risk of loss, it can be broken down into more specific classifications. Familiarizing yourself with the different kinds of risk is the first step in learning how to manage it within your portfolio. Varieties of Risk Risk comes in many forms, including: Market risk: Also known as systematic risk, market risk is the likelihood that the value of a security will move in tandem with its overall market. For example, if the stock market is experiencing a decline, the stock mutual funds in your portfolio may decline as well. Or if bond prices are rising, the value of your bonds may also go up. Interest rate risk: Most often associated with fixed-income investments, this is the risk that the price of a bond or the price of a bond fund will fall with rising interest rates. Inflation risk: This is the risk that the value of your portfolio will be eroded by a decline in the purchasing power of your savings as a result

It seems, sometimes, as though financial professionals come in only two flavors. There are those who promise everything is going to be fine; you don’t have to fret about retirement, they say, because they’ll help you make more than enough money to get you through. And then there are the hand-wringers who just can’t stop with the worrying and their warnings that you’ll never have enough. Somewhere in the middle is the reality, of course. Retirement should be a reward for years of hard work, and you don’t want to have to pinch every penny. You should be able to do the things you couldn’t when you were punching a clock every day. You should be able to look forward to retirement as one of the best times of your life. But, that said, if you want your money to last, if you want to live comfortably in your 60s, 70s, 80s and beyond, you should consider some common concerns, including: 1. How much will you have available to support yourself? Maybe not as much as you think. Financial professionals used to commonly say you’d likely be OK in retirement if you started with a 4% annual withdrawal rate. But some 2013 research by Morningstar’s head of retirement research, David Blanchett, may have changed that theory. Co-authored by two college professors who are experts in retirement planning, Michael Finke and Wade D. Pfau, the analysis found that a 2.8% withdrawal rate over a 30-year retirement had a much higher chance of success (90% vs. 48.2%) if interest rates remain low. If you have $1 million saved, that would take you from $40,000 a year down to $28,000. That’s quite a

When you work for an employer, saving for retirement can be as simple as signing up for a 401(k) plan and making regular contributions, but when you own your own business, preparing for retirement can be more challenging. While pouring decades of your life into your business, you need to make sure you’re also thinking about what will happen when you retire. To leverage your business to help during your retirement, keep the following strategies in mind.   Choose the Most Effective Retirement Plan You should start preparing for retirement long before you ever plan to stop working. In that vein, consider consulting with a financial professional about the best retirement plans for small business owners. Ideally, you want a plan that has minimal administration costs and that allows you to make generous pre-tax contributions. Although there are many options, you may want to look into SIMPLE IRAs which allow small business owners to make tax-free contributions that are more than double the limit of a traditional IRA. Alternatively, cash balance plans are great for entrepreneurs who are trying to catch up on investment goals, and with these plans, you can contribute well over $100,000 per year.   Always Think About the Resale Value of Your Business When you’re trying to build a business, selling is often the last thing on your mind, but if possible, you should always think of the resale value of your company. As you run your business, keep very organized records and track expenses carefully. Potential buyers need to be able to fully understand your profit and loss statements, and ultimately, these records can make or break a deal. The ability to sell your business

At the midpoint of 2020, we’re mindful that it’s been an extremely challenging year so far in the United States and around the globe. We’re in the midst of a pandemic that continues to impact all of us, our communities, and our economies. Together we’re looking ahead for new ways to face these challenges and how we can prepare now for better times. We’ve been impressed by what we’ve seen so far: The resiliency and accelerated innovation among large and small US businesses; efforts by our national, state, and local governments to support our communities; and most of all, the dedication and unprecedented cooperation among our front-line health professionals, medical researchers, and everyday people to guide us through this health crisis. CLICK TO DOWNLOAD THE MIDYEAR OUTLOOK 2020 Stocks already are pricing in a steady economic recovery beyond 2020 that may be supported if we receive breakthrough treatments to end the COVID-19 pandemic. However, the optimism reflected in stocks also may limit their upside potential over the rest of the year. It’s still going to be a challenging environment with significant uncertainty that may lead to more volatility for the next few months. Still, we continue to encourage investors to focus on the fundamental drivers of investment returns and their longterm financial goals. LPL Research’s Midyear Outlook 2020 provides our updated views of the pillars for investing — the economy, bonds, and stocks. As the headlines change daily, look to these pillars, or trail markers, and the Midyear Outlook 2020 to help provide perspective on facing these challenges now and preparing to move forward together. Also, read our special “Election 2020” section to find out how the economy has predicted