2015 Insights

December 2015

Our best wishes to you and yours for happy holiday season.  As you enjoy all the tasty treats, see our 2015 year-end newsletter to get some food for thought!  Topics include:

  • How to compare local hospital charges for common in-patient procedures.
  • Considering taking a 401(k) loan?  Be aware of the downside of “paying interest to yourself”.
  • Will you live to 100?  One estimate is that 1 out of 26 boomers will…will your money last as long as you do?

November 2015

The Social Security strategy known as “file-and-suspend” was introduced in 2000 in the Senior Citizens Freedom to Work act and allowed suspension of benefit payments in order to accumulate more credits up to the maximum amount at age 70 while at the same allowing a spouse to claim “spousal-only benefits” and leave their own benefit to grow until age 70.

Update 12/27/15: “This strategy is only available for those who will have turned at least 62 by the end of 2015.  Under the new budget this so-called loophole has been closed for those age 61 and younger.”

The decision of when to start taking Social Security benefits is highly personal –and critical. Depending on your benefit, longevity, and age when you claim your benefit there may be tens or even hundreds of thousands of dollars of benefits over your lifetime at stake. Investigate your options by working with a professional – fiduciary – financial advisor or do your own research so you understand what your lifetime benefit will be if you live into your 90’s.

October 2015

Unsolicited mail, all those offers for credit cards and insurance can be a nuisance if you’re not in the market for these services.  If you would like to opt-out for 5 years or even permanently, go to http://www.optoutprescreen.com. The Opt-Out website is operated by the major consumer credit reporting agencies. You’ll need to enter your birthday and Social Security number, along with address and phone numbers. If you choose to permanently opt-out, you’ll have to print and sign the election form, then mail it in.  Note that you might miss an offer or something that you would actually like to have seen.

September 2015

The dramatic swings on Wall Street over the past few weeks, including a 500+ point drop on August 24th, show markets flirting with a correction and even bear territory for some stocks. A correction is when the market drops between 10 and 20%; a “bear” market is called when the market drops more than 20%.

Corrections are fairly common and often considered a sign that the market had gotten bloated with some stocks having moved up with the momentum of the market, never mind the fundamentals. A correction allows the market to revalue stock prices more realistically and can create buying opportunities. So what triggered this sell-off? Two primary causes are China and the talk about the Fed raising interest rates with the China factor weighing the most. It wasn’t too long ago that China became the world’s second largest economy and there was even talk about China’s yuan overtaking the dollar as the world’s reserve currency. China’s growth has slowed considerably from 10.6% in 2010 to 7.4% in 2014 (http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG) and estimates of 6-7% growth for 2015. That compares to our weak annual growth rates of 1-2.5% since 2008. And when the Fed finally does raise rates it will actually signal that they have more confidence in the economy.

The bottom line is that a correction was bound to happen and many expected it much sooner than this. Trying to time the market is a gamble with the most likely outcome of selling low and buying high, the exact opposite of what investors intend. US-based corporations are generally in strong financial positions after having learned a valuable lesson from the financial crisis. Most investors also learned a valuable lesson – patience through the volatility.

August 2015

Are “reverse mortgages” a good fit for you?  Maybe you have seen commercials touting the benefits of reverse mortgages and wonder if it makes sense for you or loved ones.  There were a lot of issues in the past with costs and unsuitable uses.  Costs have come down and you may find that there are certain circumstances that reverse mortgages can be a strategic part of your retirement plan.  There are criteria that must be met, including being at least 62 years old and owning your home outright or at least having significant equity in your home.  Call us if you’d like to learn if this can – or should – be a part of your long-term plan.

July 2015

Restricted Stock Units (RSU) are often a cornerstone in an employee incentive plan.  Many Fortune 500 companies have been replacing other stock options such as Non-Qualified Stock Options (NQSO) and Incentive Stock Options (ISO) with RSUs.  The tax characteristics varies among each of these plans.  Contact us to work with a professional that has experience in the different plans to make the most of your benefit.

June 2015

Are you making the most of your 401(k), 403(b) or 457 employer-based retirement plan?  Employees under age 50 can generally contribute up to $18,000 and those age 50 and better can use the “catch-up” provision of up to $6,000 to boost their tax-deferred (or Roth) savings up to $24,000.  Some plans also allow additional after-tax savings.  In any case, make sure you are getting the full benefit of your employer’s matching funds.  Beyond getting the full match, review your 401(k) plan expenses and fund options: in some cases you may be better off doing the rest of your saving on your own in IRAs, Roth IRAs or even taxable accounts.

May 2015

NAPFA (National Association of Personal Financial Advisors) has stringent requirements including peer review of a financial plan prior acceptance as a registered NAPFA advisor. Mary has been co-leader for the Midwest-Area group for several years and facilitates local meetings. Recently Kirsten Izatt, attorney for The Estate Planning Law Group in Wheaton spoke to us about wills and trusts and helped us understand how to better prepare our clients for their meeting with an attorney. Following Kirsten was Deborah Shoemaker, Director of Fiduciary Services at the Trust Company of Illinois who spoke about navigating the final family obligation and how a professional trustee might fit into end-of-life planning.

April 2015

Recently we attended a presentation on cyber-security and learned that there is growing threat to homeowners regarding property and mortgage fraud. The Lake County Illinois Recorder of Deeds now has an online registration. After you have registered your email or phone number they will notify you when there is an activity associated with your property. Note: register with variations of your name (i.e. with middle name; middle initial only; no middle name, etc.) Go to Property Check at: http://www.lakecountyil.gov/Recorder/Pages/Property_Check.aspx

March 2015

The Sunday paper recently had an article by Kiplinger called How to Pick a Financial Planner.  Kiplinger suggests taking into consideration the experience, credentials, access to other experts (attorneys, accountants, insurance consultants) and whether the planner works on a fee-only basis, fees and commissions, or commissions only.  See the article and then call us to schedule a complimentary introductory meeting  http://www.kiplinger.com/article/credit/T064-C000-S001-how-to-pick-a-financial-planner.html 

February 2015

Your home is likely one of your biggest assets and as such you want to be smart about home improvements, especially if you plan to move within 5 years.  Do not expect to recoup all of your costs when updating your home.  Major renovations are unlikely to yield enough of a return to justify for sales purposes.  Remodeling magazine says that replacing the front door can be the best, providing nearly a 97% return on your new front door costs.  Minor kitchen updates might return 83% of the remodeling costs.  However, if you plan to stay put and can afford it after you’ve put aside retirement/college savings, a renovation can make your home more livable and enjoyable for years to come.

January 2015

As you start the new year, consider whether you are spending your time and money in ways that will enhance your goals and priorities.  A good way to start is by tracking how you currently spend both time and money.   Various apps and software programs are available to make it easier.