Investing in Stocks Vs Real Estate

The comparison is often made between investing in Real Estate vs investing in the Stock Market.   There are many strong points to both arguments, but as an Investment Advisor, I am going to argue the side of why the stock market is a better long term investment.  Note, I am not inferring you should not buy a home, nor am I inferring that you should exclusively put all of your money in the stock market.  This argument is just in terms of where you should put extra money that you would like to grow for retirement or other purposes.

Here are 5 advantages of investing in stocks over investing in real estate.

1.Effort/Work

Whether you are flipping homes, renting properties, or developing land, there is a whole lot more hands on work and extra time as compared to ownership of stocks.  If you have an investment advisor, you could realistically spend absolutely no time “working” on your stock ownership and still get the growth of the market.   Lucky for you, stocks don’t have furnaces that break, or water pipes that leak.

2. Diversification

Diversification is a very important concept.  The old saying is don’t put all your eggs in one basket.  Diversification in Real Estate would involve buying homes, apartments, commercial property, and farm land etc., all in different areas of the country.   You would have to have quite a bit of money to be fully diversified.  With the stock market, if you are invested in a Matson Money Fund, you can start with one dollar and be invested in about 12,000 stocks throughout the world.

3. Liquidity

Liquidity is how easy it is for you to sell.   Stocks are extremely liquid, with most stocks being sold within seconds of offering them for sale.   With Real Estate, it can take weeks, months, or sometimes years to sell or rent out a property.

4. Costs

The cost of owning property could include all or most of the following; real estate agent fee, property taxes, maintenance, utilities, mortgage interest, and insurance.   The cost of owning stocks usually only includes an investment advisor fee, and mutual fund management fee.

5. Annual Return

From 1975 through 2015, a 40 year period, the S&P 500 (US Large Stocks) returned growth of 8.1% annually.  During the same exact period, the US Residential Real Estate prices returned growth of 4.8% annually.   You can see the difference that makes long term by looking at this basic chart. 1.

If you are looking for a way to get the biggest financial return for retirement, my opinion is that your best option is to put your money in stocks, via a diversified Roth IRA or 401k.

Feel free to comment with your thoughts.

By Jimmy Hancock

 



References

  1. Iskyan, Kim. “What Is the Historical Return of Real Estate vs Stock Investing?” TrueWealth Publishing, 31 Aug. 2016. Web. 12 May 2017.
  2. Kennon, Joshua. “Should You Invest in Real Estate or Stocks?” The Balance. N.p., 17 Oct. 2016. Web. 12 May 2017.

 

How to Become a Millionaire on a $30k Salary

Becoming a Millionaire used to seem like this totally unrealistic goal that would never happen unless I won the lottery or inherited a bunch of money from some distant relative.   As it turns out becoming a millionaire is not all that unrealistic of a goal.  It is achievable on almost any salary if you do it the right way.  There are over 8 million Millionaire households in America.  That’s more than 1 in every 20 households.  1. 

Is it Possible?

This is my 3 step guide to reach the status of millionaire: 1. Saving/investing at least 10% of your income, 2. investing prudently while taking proper risks, and 3. starting young.

1. Saving 10% of Your Income

I will show you an example of how a person making $30,000 a year can be a millionaire by the time they retire.   A 25 year old, let’s say his name is Bayden, just graduated from college and got a job making $30k year.  He decides to put 10% of that into a Roth IRA, which is $250 a month.   As it turns out he stayed at that same job for his entire life and never got a raise, but continued to invest the 10%.   When he retires at age 67, with growth rate of 8%, he will have $1,058,593 in his Roth IRA.  And the best part of that is the money is all tax free!  Obviously with a higher salary and/or frequent raises you could end up with much more than a million if you follow the 10% rule.

2. Investing Prudently While Taking Proper Risk

Time, and growth rate are the two most important factors in that equation.  An 8% growth rate is not anything too crazy, but you have to be invested long term, and have a vast majority of your money in stocks.  You cannot panic and take your money out if there is a crash.  You must trust in the market, and understand that stocks are the greatest wealth creation tool in the world. 

3. Start Young

millionaire

Total contributions     $12,000                $36,000

* assumes an 8% growth rate    2. 

This visual further proves how important time and compounding is to your retirement account.  Starting young is a principle that everyone knows, they just don’t follow it.  The power of compounding interest is amazing, and the younger you start the more powerful it is.  Even if you can’t reach the 10% goal, if you have an income source, you should be contributing to a retirement account.  For those of you who don’t have 40 years till retirement, you will need to save more than 10% to reach a million. 

Do you  really need $1 Million Dollars?

Going back to the example of Bayden, when he retires at age 67, he will literally need every cent (and more) that he saved and earned while investing.   Just to live on the equivalent of today’s $30,000 a year ($103k assuming 3% inflation) for 20 years in retirement, he would need $1.1 million.   And that is assuming a 6% growth rate on the money for those 20 years.   If you don’t have a pension at work, and you want to live on more than $30k a year in retirement, then you better get to saving!

If you can apply discipline in your finances and in your investments, you can become a millionaire by the time you retire.    That is my plan.

By Jimmy Hancock

References

1. Boston Consulting Group. “Millionaire.” Wikipedia. Wikimedia Foundation, 17 June 2015. Web. 9 Feb 2017. <https://en.wikipedia.org/wiki/Millionaire>.

Matson Money. Who Wants to be a Millionaire Powerpoint. Mason, OH: Matson Money, 16 Jul. 2015. PPT.



Bonds 101

Bonds can be extremely difficult to understand at a deep level, but today we are going to discuss the basics of bonds and how they can help you achieve success in your retirement portfolio. 

Bond- “A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.” 1

Short term quality Bonds (matures in 10 years or less) should make up a percentage of your total retirement portfolio.  What percentage of bonds you have compared to stocks is up to you and should be planned according to your age and risk preference.

The Benefit of Bonds

Bonds are much less risky than stocks generally speaking, especially short term Triple A quality bonds.  A bond will give you a set rate of return each year.   Putting bonds in your portfolio helps to lower the overall standard deviation, thus helping to smooth out the performance.

Another advantage of having bonds in your portfolio is that they are not correlated with the price of stocks.  Often times bond prices and stock prices move in opposite directions although not always.  This means that bonds can give you big downside protection in case there is a big down turn in stocks.

Because bonds are not highly correlated with stocks, this makes it a huge rebalancing advantage to have both stocks and bonds in your portfolio.  If stocks crash, you can pull some money out of your fixed income portion of your portfolio, and buy stocks at 20 to 50% off.  Thus you are able to buy stocks at a discount without even putting new money into your portfolio, and your portfolio goes back to your original risk preference of stock to bond ratio.

The Risk of Bonds

Default risk is the main risk that comes along with bonds.  If you own a bond that defaults, you lose all of your money including the principle.  To reduce this risk you can diversify by not buying individual bonds, but investing in a bond mutual fund.  Some bonds, like long term (10 to 30 years) junk bonds can be extremely risky and lose their value quickly.  Long term junk bonds can give you a slightly higher rate, but have a much bigger chance of being defaulted and you losing your money.   Investing in long term bonds can also be dangerous especially in a time like now.  The current rate for a 30 year bond is about 2.63%. 2   That is extremely low and most people expect that to increase dramatically in the future.  If you get stuck in a 30 year bond at that rate, and the rate jumps to 5%, then the price value of your bond has dropped by an extreme amount.  You can either sell the bond at a big loss, or suffer the consequence of receiving 2% per year while everyone else is getting 5%.  

Bonds Vs. Stocks

To finish off, I will explain why bonds should not be used as your main source of portfolio growth.  The historical return for Bonds are minimal compared to a diversified group of stocks.  Check out the chart below. 3

  • Hypothetical US Stock Mix
  • S&P 500
  • Long Term Bonds

bond trap
This chart shows 30 year rolling returns of these 3 asset categories from 1927 though 2014.  You can see that long term bonds have never had a better 30 year return than a diversified stock mix.  Bonds have lost to stocks over the long term no matter what period of time you look at.  This is important to know as you decide the percentage of bonds you want in your retirement mix.

Short term quality bonds should be a part of your portfolio, but make sure you work with an investment coach to decide exactly how much.

By Jimmy Hancock

 

References

1. Investopedia. “Bond Definition | Investopedia.” Investopedia. Investopedia, LLC, 23 Nov. 2003. Web. 31 May 2016.

2. Yahoo! “Bonds Center.” – Bond Quotes, News, Screeners and Education Information. Yahoo!, 31 May 2015. Web. 31 May 2015.

3. Matson Money. The Long Bond Trap Presentation. N.p.: n.p., n.d. PPT.



Investment Accounts 101

investing choicesPlanning your investments to build a retirement fund can be a dizzying prospect. The various questions, options, details, accounts, and amounts are enough to make anyone’s head spin. Wouldn’t it be nice if there was a generic recipe for success? A nice neat list of step by step instructions on how to make the best decisions on where, when, and how much when it comes to investing for your retirement? Unfortunately, this list of steps is incredibly dependent upon each individual and their current situation and future plans, so a sure fire success route does not exist.  This is why it is important to work with an investment coach that can understand your specific needs.

But before you stop reading, there are a few things that we feel you should know about that will lead you down the right path.  Here’s the order that is suggested for the majority of people in terms of what retirement accounts to invest in.

1. Fulfill Your Company’s Match Program: Most companies, even small companies, offer some sort of retirement account.  Smaller companies usually have simple IRA’s or SEP IRA’s, while larger companies usually have 401k’s.  There is a high likelihood that your company has a match program as part of their plan.  This means that for each contribution you make into your account, the company will match it up to a certain amount.  So match programs offer an instant 100% return on the money invested.   Before you invest anywhere else, make sure you are investing enough in your work retirement plan to get your full match.

Before we move on, here is word of warning on the company retirement plan.  If you don’t plan on working for the company long term, make sure you check out the vesting schedule.  A lot of company retirement plans don’t give you full access to your money unless you work there for a few years.

2. IRA to the Max: An IRA is an individual retirement account that can be opened by anyone seeking to invest.  Investing in an IRA usually gives you more investment choices and flexibility than is offered in many 401k plans.   Also, you have the Roth option.  There has been a long standing battle between the Traditional IRA’s and the Roth IRA’s. When it comes to your retirement planning, your Roth IRA should win this battle in most cases. There are a few different reasons why you should make this move. Investing in a Roth allows you to pay taxes on your income now, and avoid the higher tax rate as it grows in your retirement.  The total taxes paid with a Roth IRA from opening of account to death and beyond are almost always less than with a Traditional IRA.

Another thing to consider if you are married is opening an IRA for your spouse.  Even if they are not working you can contribute to their IRA and max it out as well.

3. Company Retirement Plan to the Max: After you have reached your company’s matching level and have maxed out your IRA or Roth IRA, turn your funds back to the company retirement plan until they are maxed out as well. Having both your Roth IRA and your  company retirement plan maxed out gives you some variety in your portfolio in terms of how the investments are taxed. This variety gives you something of a safety net in terms of how taxes and other investments change over time and the affect they will have on your funds.

4. Open Taxable (Non-Qualified) Accounts: If you have maxed out your company plan and an IRA for your and your spouse, congratulations, you are doing very well in the retirement planning side of things.  But what if you still want to put more money away?  There are still options.   You can still invest more money in a non-qualified account.  If you are married this would be a joint account, and for the singles it is a personal account. There are a few advantages and disadvantages of this type of account.  This is not a tax sheltered account, so there is no taxable advantage.  But one big advantage is there is no tax penalty or fee for taking the money out at any age for any reason.  For that reason a lot of people use this account as an emergency fund.
This plan is not something to jump into without doing your homework. There is a lot of things to know, and I haven’t even gotten into life insurance and that side of the retirement planning.   Like I mentioned before, there is a reason that no one has created a perfect plan that fits everyone. Depending on your personal income, you might not be eligible for certain accounts, like a Roth IRA.  But, for most people, looking for a general order of priority for their retirement investments, these four steps are a great place to start.

By Jimmy Hancock

Who Wants to be a Millionaire?

The word Millionaire used to seem like this totally unrealistic goal that would never happen unless I won the lottery or inherited a bunch of money from some distant relative.   As it turns out becoming a millionaire is not all that unrealistic of a goal.  It is achievable on almost any salary if you do it the right way.  There are over 6.9 million Millionaire households in America.  That’s more than 1 in every 20 households.  1. 

Is it Possible?

This is my 3 step guide to reach the status of millionaire: 1. Saving/investing at least 10% of your income, 2. investing prudently while taking proper risks, and 3. starting young.

 

1. Saving 10% of Your Income

I will show you an example of a person making $30,000 a year can be a millionaire by the time they retire.   A 25 year old, let’s say her name is Elicia, just graduated from college and got a job making $30k year.  She decides to put 10% of that into a Roth IRA, which is $250 a month.   As it turns out she stayed at that same job her entire life and never got a raise, but continued to invest the 10%.   When she retires at age 67, with growth rate of 8%, she will have $1,058,593 in her Roth IRA.  And the best part of that is the money is all tax free!  Obviously with a higher salary and/or frequent raises you could end up with much more than a million if you follow the 10% rule.

2. Investing Prudently While Taking Proper Risk

Time, and growth rate are the 2 most important factors in that equation.  An 8% growth rate is not anything too crazy, but you have to be invested long term, and have a vast majority of your money in stocks.  You cannot panic and take your money out if there is a crash.  You must trust in the market, and understand that stocks are the greatest wealth creation tool in the world.

 

3. Start Young

millionaire

Total contributions     $12,000                $36,000

* assumes an 8% growth rate    2. 

This visual further proves how important time and compounding is to your retirement account.  Starting young is a principle that everyone knows, they just dont follow it.  The power of compounding interest is amazing, and the younger you start the more powerful it is.  Even if you can’t reach the 10% goal, if you have an income source, you should be contributing to a retirement account.  For those of you who don’t have 40 years till retirement, you will need to save more than 10% to reach a million.

If you can apply discipline in your finances and in your investments, you can become a millionaire by the time you retire.    That is my plan.

 

By Jimmy Hancock

References

1. Boston Consulting Group. “Millionaire.” Wikipedia. Wikimedia Foundation, 17 June 2015. Web. 16 July 2015. <https://en.wikipedia.org/wiki/Millionaire>.

Matson Money. Who Wants to be a Millionaire Powerpoint. Mason, OH: Matson Money, 16 Jul. 2015. PPT.

Why Your Retirement Dollars Might Fall Short



inflation-2Predicting the future is a rough sort of business to find yourself in, especially with a world that’s been changing more and more rapidly with every passing day.  Unfortunately a lot of people planning for retirement find themselves having to do this  very thing, having to try and figure out what directions the world will be taking them in once they’re ready to stop working. Here are just a few of the ways in which retirement is changing in the next decades, to help you stay ahead of the curve:

1. Retirees are living longer than ever before.
Advancements in medical technology have increased the average life expectancy of individuals. Retirement planning is becoming more and more troublesome for both actuaries and future retirees (Smart Money, 2012). This increased longevity comes with a need to set up a matching retirement plan, particularly when some
retirements are expected to last longer than the amount of time the retirees spent working.  Rather than trying to predict how long your retirement is slated to last, be prepared for the longer estimate in response to these treatments and technologies.

2. Children are staying with their families longer, even after college.
According to a new study released by Oregon State University, young adults in the 18-30 age bracket are having a harder time than ever becoming financially independent from their parents (Journal of Aging Studies, 2012). This greatly affects those looking to retire while their children are still young adults, and can cause a domino effect that starts to influence generations to come. There’s no guarantee of the job market recovering or this trend changing in the next few years, so when looking at your retirement make sure to factor in all of your current familial expenses.

3. Social Security may not be around in the future.
Social Security has always been a problem politically since it has a foreseeable end; between longer life expectancies and the large baby boomer population, social security is anticipated to “face funding shortfalls in about two decades if nothing changes” (CNBC 2012). While it’s quite possible that the government will come to a viable solution to salvage social security benefits, it’s a good idea to plan for the ‘what ifs’ regardless. Plan for social security as less of a guarantee and more as a pleasant possibility so there are no unpleasant surprises down the road. Don’t have your retirement plan hinge on social security as it may crumble within the next few decades.

4. Inflation never stops

Inflation is a very big risk to your retirement dollars.  To the couple in their 20’s, inflation will nearly double the amount that they need to save in order to live comfortably by the time they reach retirement.  Inflation decreases the value of your savings each year, so it is important to invest your retirement dollars in a portfolio that will outpace inflation.  Savings accounts, CD’s, fixed annuities, and most bonds do not outpace inflation.  You have to put a portion of your money in stocks or you will be losing the long term battle to inflation.

Retirement is changing, but that doesn’t mean you can’t still build a healthy, strong retirement plan even with a moderately uncertain future. Your retirement is something that needs to be made to last a long time and you’re allowed to take your time putting the right amount of money into it. As long as you avoid the unnecessary risks in relying on social security, and avoiding inflation, and you prudently plan for a slightly longer nesting period for your children, and plan for your own longevity, you can avoid a few of the major pitfalls that your retirement plans may otherwise succumb to.

By Financial Social Media and Jimmy Hancock

 

References

1. http://www.smartmoney.com/retirement/planning/the-cost-of-living-longer–much-longer-1328897162395/

2. http://oregonstate.edu/ua/ncs/archives/2013/jan/no-more-%E2%80%9Cempty-nest%E2%80%9D-middle-aged-adults-face-family-pressure-both-sides
3. http://www.cnbc.com/id/100338122/Yes_We_Can_Fix_Social_Security_but_It_Won039t_Be_Pretty

How to Maximize Your Social Security Benefit



social security moneyYou have worked hard and are finally ready to enjoy your golden years aka retirement. And yes, you have also planned and saved for these future retirement years. Maybe you planned many years ago or maybe you planned just recently; but either way, you probably factored in the boost offered from your future Social Security benefits. Whatever the boost might be, wouldn’t you want to maximize those benefits if possible? If the answer is a resounding “YES”, then you need  to learn about the various claiming strategies, and fully discuss them with your financial coach. The proper strategy can amplify your lifetime Social Security benefits significantly.

Wait As Long As You Can

An example of one strategy is waiting as long as possible to start claiming your Social Security benefits. The earliest age that a retiree can start claiming these benefits is 62 years old. However, did you know that once you reach your full retirement age (between 66 -67), your social security benefits increase by about 8% each year plus inflation adjustments? A guaranteed 8% growth rate year over year is unheard of these days in the investing world.  Your benefits are maxed out at the age of 70.

Other Strategies

Are there claiming strategies that can optimize your Social Security benefits even if you need to start collecting at an earlier age? The answer is “Yes”. Advantageous strategies can be applied to this situation as well when you know how to maneuver through the claiming process… you just need the proper expertise to guide you through the rules.  There are many different situations and needs but here are just a few strategies that might fit your situation.

Spousal Benefit

Spousal benefit is getting half of the Social Security benefit of your spouse.  If your individual benefit is less than half of your spouses benefit then it is wise to take the spousal benefit in most cases.  This is especially true if you are older than your spouse, since you can claim half of what their full benefit would be, as long as you are at the full benefit age.  This is true even if they are not at the full benefit age yet.

File and Suspend

The file and suspend strategy is a unique way to use the spousal benefit to your advantage.  The strategy involves the higher wage earner filing for and then suspending their benefits at full retirement age.  This allows the spouse to receive their spousal benefit, while the higher wage earner can wait for a future time when they can take their benefits at a much higher amount.  This is a great way to increase your overall benefit in the long term, while still giving a small amount of income while waiting to max out the benefit.

Seek Help

There are many other aspects and complications that can be thrown into the mix, but those are just a few options to think about.  Overall, these claiming strategies can cushion your retirement years with thousands of dollars. If you are thinking about navigating through your Social Security claiming process alone, it might be very unrealistic because the rules behind these strategies can be complex and confusing.  It’s best to seek the help of a financial coach who has an in-depth knowledge of the best Social Security strategies for retirees.  Make certain that you fully learn and understand the rules of each strategy before you choose. You can add thousands of dollars to your retirement funds just by applying the right Social Security claiming strategy for you.

By Jimmy Hancock

Seven Questions to Ask Before Investing



investingWe have all heard of the seven deadly sins, things that you should never do or you risk the harshest of punishments. But many people don’t know about the seven deadly questions, involving your investments. There are seven questions that one must answer before beginning to have peace of mind with your investments. Making investment decisions isn’t easy, especially if you are just entering the game. There are a lot of details that many people don’t think about until it’s too late. So, if you want to avoid the life long pain of poor investment plans, ask yourself these seven questions.

1. “Why?” It’s a simple question, but it’s often the hardest one to answer. Why are you investing, and what do you hope to gain from it? In other words, you must set specific goals. Maybe you want to save for retirement, maybe you want to send your kids to college, or maybe you just want some breathing room from everyday expenses. Whatever the reason, it’s important that you define why you investing your money and what goals you wish to accomplish in doing so.  This will help you to decide how much money to put away.

2. “What is my time frame?”  This is like asking, how long will it be until I need the money?  This can depend on your age, and of course your answer to question number one.  If you are putting money away for retirement, your time frame should not end at the day you plan to retire, it should end at the day you plan to die.  You will need that money at the beginning of retirement, but you will keep it invested throughout retirement if you do it right.

3. “What am I going to get out of it?” What can you realistically expect to earn on your investments? Having an unrealistic idea of playing the stock market and striking it rich could leave you simply striking out.  Investing in stocks is not the problem, it is the expectation of beating the market, rather than expecting to get market returns.  Other investments, such as bonds, have fixed returns that are not as susceptible to market changes but have a lower expected return.

4. “What kind of earnings will you make?” Very few times when investing does a wad of cash appear in your mailbox if you’re successful. Your earnings will be very inconsistent in the short term, so there is no point in fretting over 1, 3, or 5 year returns.  The annual return that you will get is dependent on the type of investment you are in.  Which leads me to my next point.

5. “What’s my risk?” And here comes the basic balance in investing, risk versus reward. The higher the risk, usually the higher the potential reward, but that is not always the case.   Overall there is no guarantee that you will get your money back or receive the earnings promised to you, unless you have your money in a savings account or a U.S. Treasury security, both of which are backed by the federal government and give you extremely small returns. Make sure that the risk you take is worth the reward that you expect to achieve.  If you have a longer time frame, you can invest in riskier investments.

6. “Is my money diversified?” We can all remember our mothers at some point or another saying, “Now, don’t put all your eggs in one basket.” Well your mother’s wise words ring true in terms of investments as well. Certain types of investments do better in certain situations, so by diversifying your investments, you are spreading your eggs across many baskets. That way if a certain industry tanks or sector is struggling, you will have plenty of other baskets holding your money safe and sound.  This doesn’t mean having different accounts or different advisors, but having different holdings in thousands of stocks and bonds.

7. “What is the effect of taxes on my investments?”  Every person who receives any earned income can invest in a tax advantaged plan.  Whether that be a 401k or 403B at work, or an IRA/Roth IRA, or all of the above.  Make sure you understand the implications of how your money is taxed with each type of account.  In many cases, a Roth IRA is the best for your tax situation, especially in retirement.  Also, make sure you plan to have enough money saved to pay for taxes in retirement.

By Jimmy Hancock


5 Basic Tips for Creating a Solid Retirement Plan

retirement planWe all know what the retirement picture is supposed to look like.  We spend our whole life working toward that magical retirement age when your golden years begin–the hobbies, the travel, spending time with your grandchildren.  However, with a rocky economy and volatility in the markets your picture might not be so clear.

Consider these basic tips to see to it that your retirement is spent doing what you love.

  1. Set your retirement goals:  Think about what you want your retirement picture to look like.  Does it involve living in a paid-off home, buying a motor home, or relocating to a house on the beach?  Do you want to donate to charities, or provide for your children and grandchildren?  What will it take to make it all come together?
  2. Start Planning now:  Whether you are just beginning or looking to retire in five years, start taking the steps to prepare now.  Establish IRA’s or participate in your employer-sponsored 403b or 401k plan and fund them with as much as you can.  One goal would also be to increase your contribution each year to help insure that you have enough money to retire.
  3. Reevaluate your life expectancy:  It is no secret that with medical technology and living a good healthy life we are living longer than ever.  According to the Society of Actuaries, a 65-year-old man has a 41% chance of living to age 85, and a 20% chance of surviving to age 90.  A 65-year-old woman has even better odds.  She has a 53% chance of living to age 85, and an impressive 32% chance of reaching age 90.  With these statistics in mind, ramping up your savings is more crucial than ever.
  4. Determine your Social Security benefits:  Did you know the longer you delay retirement, the larger your Social Security checks grow?  While you can officially start drawing funds at age 62, if you hold off until age 70, you’ll double your benefit amount.  Even if you wait until age 66, your Social Security checks will grow by one-third.  While working past age 65 might not appeal to you, the higher payout amount certainly should.  There are many more strategies to get the most from Social Security, especially if you are married.  To explore your options and determine when you will begin to draw Social Security benefits, visit www.SSA.gov.  They even have an online retirement estimator to help guide your decision.
  5. Work with a trusted Financial Coach:  If you really want to get the best out of your retirement plan, it’s best to place it in the hands of a capable retirement specialist who will coach you through the process, recommend appropriate investment tools, offer practical advice on savings, and keep an eye on your retirement portfolio.  For more information on working with a coach versus an planner click on the tab at the top of this page called Why You Need a Financial Coach.

We hope this has been helpful to you.  If you would like more information click on the contact button and we will send you more information or set up a time to meet with you.

By Jim Hancock

Investing in a Roth as Part of College Education Planning

college planningA Roth IRA can be a smart way to save for a child’s education or fund continuing education classes. However, the key is to maintain the right amount of risk depending on when the money will be used for college expenses. Education Planning doesn’t have to be complicated, especially with the guidance of a respected financial coach.

According to a report by collegedata.com, a reasonable college budget can range from $22,826 a year for in-state to $44,750 a year for private college. When it comes to thinking of the Roth as part of college financial planning, consider the benefits of a Roth over other college investment and saving vehicles.

Eliminating tax consequences

As long as a person withdraws their contributions to a Roth IRA as opposed to the interest earned, they do not have to pay taxes. It doesn’t matter how the money is spent. Money contributed to a Roth IRA, however, has to be earned income.

Funding short and long-term goals

Parents can help their children get a head-start on retirement by encouraging them to open a Roth IRA as soon as they get their first jobs. The interest and dividends earned may stay in the account for retirement, while the contributions may be withdrawn for college. Another advantage is that you have much more growth potential with a Roth IRA compared to a CD at a bank or any other fixed option.  Any money that is not used for college will continue growing in the account for retirement.

Education Planning should start as soon as your child is born. Some experts believe the cost of tuition may go down in the future if the so-called “student loan bubble” bursts. The cost of college is rising faster than even health care costs.

Using a Roth IRA for Education Planning gives parents and children flexibility for the future. A financial adviser can help you decide how to make smart investments for your Roth IRA accounts.

by Financial Social Media and Jimmy Hancock