Raising Financially-Aware Kids in the Internet Age

Today’s kids have more information at their fingertips than past generations could ever have dreamed—but not all this information is always accurate. And when it comes to financial literacy, the ability to weed out misinformation is crucial when it comes to developing healthy financial habits. What can parents do to encourage their kids to become financially aware adults? Young Children: Learning What Money Is and What It Can Do It’s never too early for children to learn the basic principles behind money: as a means to exchange something you have for something you want. By bartering with your toddler—exchanging a toy for a treat, or setting up a play store at home where they can “purchase” items they want—you’ll be able to get them started on the concept of exchanging money. Once your children are a bit older, you can build on this initial knowledge by involving them in household purchases. For example, you can help them boost their math and financial skills by adding up the price of items you’re purchasing at the grocery store or choosing between products to ensure that the total stays below a certain amount. And with access to the internet, it’s easier than ever to see how much a specific item costs. Adolescents and Early Teens: Saving and Living Within Your Means Tweens and teenagers are better able to conceptualize cost and value, which makes this the perfect time to create habits that will help them live within their means. If your child receives an allowance, this can provide an opportunity to begin shifting the cost of certain treats and extras to them. For example, you may be able to show your child that one week’s allowance is enough to go to

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6 Essential Tips for Retirement Planning

Retirement planning is all about the future, your future. Whether you are classified as a millennial, Gen Xer, woman, or you are in your 40s-50s, retirement planning is a must. The key to successful retirement planning is starting young because it gives you more time to work towards your retirement goals. There are some keys to successful planning for those who have an employer and for business owners who wish to maintain their lifestyle after retirement. 1. Take Full Advantage of Matching Funds While most of us do not have a pension plan we can depend on when we retire, one new benefit many have is matching funds offered by employers. These funds are dependent on your company retirement plan’s policy regarding matching funds. The sooner you start taking full advantage of matching funds, the better a cushion you will have after retirement. 2. Use the Retirement Savings Credit For those who are eligible for the retirement savings credit[1] on their taxes, take this credit annually. This credit is available for many lower income earners and helps encourage you to save for retirement by offering a credit of up to $1,000 for single taxpayers and up to $2,000 for joint filers. These credits reduce the amount of income tax owed which allows you to invest in your retirement. 3. Maximize Your Health Savings Account Your health savings account (HSA)[2] can help you pay medical bills while you are working. However, thanks to the ability to maximize your donations while working, these funds can also be used during retirement to help you maintain your lifestyle. If you contribute the maximum amount annually, you can use these funds tax-free to pay out-of-pocket medical expenses after retirement. 4.

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A Quick Look At Life Insurance Needs

Have you ever wondered how much life insurance is “enough”? One general rule of thumb says that you should buy an amount equal to five to seven times your annual income. Sure, it may be a reasonable guideline, but this method does not relate life insurance needs to your personal financial goals. A better method may be to implement a “needs analysis.” This process helps you determine the future short-term and long-term financial needs of you and your family. Once your needs have been identified, you can design a plan to help assure that money will be available to meet those objectives. Needs analysis is not the highly technical financial planning associated with business ownership or planning for the conservation, distribution, and coordination of wealthy individuals’ assets. Rather, it is appropriate for everyone. By assigning a specific dollar value to each item or “need” you want to provide for, needs analysis zeroes in on what may still be required, in terms of additional capital, to get the job done. Through specific questions designed to identify areas of concern, you will be able to establish your financial priorities. Here are some examples: What is most important to you? How would your objectives be affected in the event of the premature death or disability of you or your spouse? Is your current savings program adequate to accomplish your financial objectives? Personal and Financial Perspectives For most people, needs typically revolve around attaining and maintaining a comfortable lifestyle. This often translates into a good home, the advantages of a college education for your children, enough income left over for leisure activities, and last but not least, a retirement income sufficient to maintain your

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Assessing Your Retirement Resources

How resourceful can you be during your retirement? Determining where your retirement money will come from is an integral part of planning for retirement. Most people draw on three main sources of income: Social Security, employer-sponsored plans, and personal retirement savings. Each offers important resources that can help you fund the lifestyle you seek in retirement. Social Security Social Security offers a retirement benefit to workers and their spouses. You can start receiving benefits as early as age 62 (considered early retirement) or wait until you reach the full retirement age of 65 to 67 (depending upon your year of birth). The benefits you receive are based on the income you have earned over the course of your life, subject to a maximum amount. You can calculate how much you can expect to receive by visiting the Social Security Administration (SSA) website at www.ssa.gov. Social Security benefits will most likely fall short of meeting all of your retirement needs. The maximum benefit for a person who retires in 2019 at full retirement age is $3,770 per month; the benefit for a nonworking spouse is considerably less. For most people, Social Security provides only a base level of income. Therefore, you may require a retirement plan that includes additional sources of income. Employer-Sponsored Plans Employer-sponsored plans are a staple of retirement income for many individuals. Many employers offer benefit packages that include retirement savings options, such as defined benefit plans, 401(k) plans, 403(b) plans (for nonprofit organizations), and Savings Incentive Match Plans for Employees (SIMPLEs). Here’s how the plans work: With a defined benefit plan (also called a traditional pension), retirement benefits are generally based on a variety of factors, including

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Using Trusts to Manage Wealth – What Investors Should Know

Whether you manage a trust for someone else, are the beneficiary of a trust, or are thinking of creating a trust, you probably have some questions about the “best practices” of trust management. A well-managed trust can help preserve wealth for generations, while a poorly-managed trust may provide only a quick path to insolvency. How can you ensure that your trust falls into the first category? Common Goals of a Trust Though trusts can be designed to fulfill any number of goals, there are a few that are quite common. These include: Wealth Preservation If someone leaves their assets to heirs outside a trust, these assets are often liquidated and then distributed in a single lump sum. While most estates divided in this manner aren’t subject to estate taxes, providing heirs with a single lump sum isn’t always the best way to permanently improve their economic situation. In fact, the National Endowment for Financial Education estimates that about 7 in every 10 people who receive a sudden windfall will spend all the money within only 3 years.1 On the other hand, a trust requires each disbursement to be run by the trustee, who has discretion (in accordance with the trust documents) to grant, deny, or modify the request. This can prevent heirs from squandering money or falling victim to a financial scam. Tax Efficiency In addition to providing a limit on withdrawals, a trust can preserve wealth through tax efficiency and prudent investments. By keeping withdrawals to a sustainable amount, trustees can ensure that the principal continues to grow throughout the life of the trust. And by parceling out trust funds in smaller amounts or dividing a distribution among several tax years,

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4 Retirement Planning Tips for Millennials and Gen X

In 2014, almost one-third of baby boomers had nothing saved for retirement. For those who did save, the median was around $200,000. This is a far cry less than the $1 million experts recommend for a 30-year retirement plan. Luckily, for millennials and Gen X, there is still plenty of time to craft an effective retirement planning strategy. Here are four tips to get you started.   Give Up the Love for Cash After witnessing the stock and real estate markets crash in the Great Recession, America’s millennials now mostly hedge their bets on cash investments. According to Forbes, cash investments yield returns of just 1.5% on average. While the stock market and other forms of investments are variable, the returns can be much higher. On average, the stock market yields 8% in annual returns. And, even in a decline, the people who can afford to wait out the market may benefit from its recovery.   Watch Out for Student Loans With the rising cost of obtaining a college education, no matter how well parents plan, most students need grants, scholarships and/or student loans. While paying off student loans is important, beware of spending all your money on paying off debt rather than saving up and investing some disposable income for retirement. You should definitely prioritize student loans, but not to the detriment of other financial goals.   Consider Home Ownership CNBC claims that it is better to rent than buy a home in today’s market. But, what does “better” really mean? For almost all calculations, what makes it better is that it is cheaper in the short run. However, for millennials and Gen Xers who can afford to purchase

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Buying Life Insurance: What Kind and How Much?

Conventional wisdom says that life insurance is sold, not purchased. In other words, some people are reluctant to discuss the importance of owning life insurance, and others are simply unaware of the need to have life insurance. Although many large companies provide life insurance as part of their benefits package, this coverage may be insufficient. Who needs life insurance? If there are individuals who depend on you for financial support, or if you work at home providing your family with such services as child care, cooking, and cleaning, you need life insurance. Older couples also may need life insurance to protect a surviving spouse against the possibility of the couple’s retirement savings being depleted by unexpected medical expenses. And individuals with substantial assets may need life insurance to help reduce the effects of estate taxes or to transfer wealth to future generations. Types of Insurance Term insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically 1 to 10 years, and may be renewable at the end of each term. Also, the premiums increase at the end of each term and can become prohibitively expensive for older individuals. A level term policy locks in the annual premium for periods of up to 30 years. Declining Balance Term insurance, a variation on this theme, is often used as mortgage insurance since it can be written to match the amortization of your mortgage principal. While the premium stays constant over the term, the face value steadily declines. Once the mortgage is paid off, the insurance is no longer needed and the policy

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How to Save for Retirement and Avoid Overspending During Your Career

You know you want to enjoy your retirement, but getting to that point can feel difficult. Worried that you’re not saving enough? Trying to get your spending under control? These problems are common for many people who are trying to build their nest egg while balancing their budget, but these tips can steer you in the right direction.   Start Early The younger you start, the less you have to save, and if you’re not scrabbling to save at the end of your career, starting early frees up money in your budget during your working years. That said, regardless of your age, it is never too late to start saving for retirement, and there are tax incentives and special retirement plans designed to help people who need to catch up with their retirement goals.   Set Goals Set clear goals about what you want your finances to look like during your retirement. If you have a specific goal in mind, saving becomes easier because it’s more purposeful. You may not be as motivated if you’re just saving blindly.   Put Your Efforts to Work for You Look for the most effective saving methods. For instance, if your employer matches the first 2% of wages contributed to a 401(k), you should take advantage of that plan. With this type of set-up, you receive a 100% return before the investment even has time to grow. In contrast, if you simply put the funds in a savings account, you would merit a negligible interest rate. By choosing the most lucrative investments, you reduce the total amount you need to save and at the same time free up extra money for spending during your

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Changing Jobs. What Should I Do With the Money?

Changing jobs is an important decision — one that many of us are making more often. Once you’ve decided to switch jobs, your next move is to determine what to do with the money in your former employer’s retirement plan. Four Common Options Generally, you have four options or a combination of options for handling the money in your account: Option #1: Keep the Money in Your Former Employer’s Plan If your former employer permits, leaving your money where it is may be an attractive option because it allows you to continue enjoying the potential benefits of tax-deferred compounding. If you are happy with the plan’s investment options, this maybe a good choice. On the downside, there may be special conditions or fees associated with your continued participation, and you may have withdrawal restrictions in the future. Option #2: Roll the Money Into Your New Employer’s Plan This option also has its advantages — continued tax-deferred growth of your investment and the convenience of having all of your retirement assets in one place. But because every employer has its own rules governing rollover money, review your new employer’s plan and possible eligibility restrictions carefully before choosing this option. Option #3: Take the Money in Cash While this option may seem appealing because it gives you immediate access to your money, Uncle Sam is the real winner here. Cash distributions are subject to a mandatory 20% federal withholding in addition to regular income tax. Furthermore, if you are under age 59½, your distribution would also be subject to a 10% additional federal tax. Finally, if state or local taxes apply, they could claim an even bigger portion of your account. Option

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How to Develop a Money Mindset That Aligns with Your Goals

Financial goals are essential. Setting them will help you to obtain the things you want out of life as well as live the lifestyle you desire, both during your working years and in your retirement. But obtaining these goals isn’t always easy unless you develop a money mindset that aligns and drives you to these goals. So how do you create this mindset to give you the ideal chance of obtaining your financial goals? Determine Your Values The easiest way to be confident with your financial goals is to align your spending habits with your values. This will allow you to better stick to your spending habits. So to start, you will need to determine the values that are important to you. Ask yourself, what do you value most, your family, your freedom, your security, or your health? In what order do you place these priorities? Once you have established these values, you need to spend your money in a way that correlates with these values. For example, if your family is most important, you may want to focus on saving for your children’s future education, instead of spending the money on expensive clothing or take out. Determine What You Need to Do to Work Toward Your Goals Once you have established your goals and determined what you value most in your life, you will want to make a plan to pursue those goals. Want to be able to travel during your retirement? Come up with ways to increase your retirement savings. Invest more in your employer-sponsored account. Cut back on spending that is not necessary. Learn how to develop and manage a financial portfolio that may help you to address your goals. Start Small

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