Articles

Women and Financial Strategies

Forty-four percent of American women are the primary breadwinner in their house.1 Yet only 10% of women feel very confident in their ability to fully retire with a comfortable lifestyle.2

Although more women are providing for their families, when it comes to preparing for retirement, they may be leaving their future to chance.

Women and College

The reason behind this disparity doesn’t seem to be a lack of education or independence. Today, women are more likely to go to college and graduate than men.3 So what keeps them from taking charge of their long-term financial picture?

One reason may be a lack of confidence. In one recent study, less than half of the more than 2,000 women surveyed said they felt satisfied with their knowledge of finances.4 Women may shy away from discussing money because they don’t want to appear uneducated or naive and hesitate to ask questions as a result.

Insider language

Since Wall Street traditionally has been a male-dominated field, women whose expertise lies in other areas may feel uneasy amidst complex calculations and long-term financial projections. Just the jargon of personal finance can be intimidating: 401(k), 403(b), fixed, variable.5 To someone inexperienced in the field of personal finance, it may seem like an entirely different language.

But women need to keep one eye looking toward retirement since they may live longer and could potentially face higher health-care expenses than men.

If you have left your long-term financial strategy to chance, now is the time to pick up the reins and retake control. Consider talking with a financial professional about your goals and ambitions for retirement. Don’t be afraid to ask for clarification if the conversation turns to something unfamiliar. No one was born knowing the ins-and-outs of compound interest, but it’s important to understand in order to make informed decisions.

Compound Interest: What’s the Hype?

Compound interest may be one of the greatest secrets of smart investing. And time is the key to making the most of it. If you invested $250,000 in an account earning 6%, at the end of 20 years your account would be worth $801,784. However, if you waited 10 years, then started your investment program, you would end up with only $447,712.

Compound Interest Chart With Alarm Clock

This is a hypothetical example used for illustrative purposes only. It does not represent any specific investment or combination of investments.
  1. CNBC.com, January 19, 2017
  2. TransAmericaCenter.org, 2017
  3. The Atlantic, August 8, 2017
  4. Time.com, February 12, 2018
  5. Distributions from 401(k), 403(b), and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite

How Will Working Affect Social Security Benefits?

Tip: Rules, Rules, Rules. Different rules apply for those receiving Social Security disability benefits vs. Supplemental Security income payments. Different rules also apply for those working outside the U.S.
Source: Social Security Administration, 2017

In a recent survey, 79% of current workers stated they plan to work for pay after retiring.¹

And that possibility raises an interesting question: How will working affect Social Security benefits?

To answer that question requires an understanding of three key concepts: full-retirement age, the earnings test, and taxable benefits.

Full Retirement Age

Most workers don’t face an “official” retirement date, according to the Social Security Administration. The Social Security program allows workers to start receiving benefits as soon as they reach age 62—or to put off receiving benefits until age 70.

“Full retirement age” is the age at which individuals become eligible to receive 100% of their Social Security benefits. For example, individuals born in 1955 can receive 100% of their benefits at age 66 years and 2 months.²

Earnings Test

Starting Social Security benefits before reaching full retirement age brings into play the earnings test.

If a working individual starts receiving Social Security payments before full retirement age, the Social Security Administration will deduct $1 in benefits for each $2 that person earns above an annual limit. In 2018, the income limit is $17,040.³

During the year in which a worker reaches full retirement age, Social Security benefit reduction falls to $1 in benefits for every $3 in earnings. For 2018, the limit is $45,360 before the month the worker reaches full retirement age.⁴

For example, let’s assume a worker begins receiving Social Security benefits during the year he or she reaches full retirement age. In that year, before the month the worker reaches full retirement age, the worker earns $65,000. The Social Security benefit would be reduced as follows:

Earnings above annual limit $65,000 – $45,360 = $19,640
One-third excess $19,640 ÷ 3 = $6,547

In this case, the worker’s annual Social Security benefit would have been reduced by $6,547 because he or she is continuing to work.

Taxable Benefits

Fast Fact: Earnings Test. The Senior Citizens’ Freedom to Work Act of 2000 eliminated the annual earnings test after the month a person attains his or her full retirement age.

Once you reach full retirement age, Social Security benefits will not be reduced no matter how much you earn. However, Social Security benefits are taxable.

For example, say you file a joint return and you and your spouse are past the full retirement age. In the joint return, you report a combined income of between $32,000 and $44,000. You may have to pay income tax on as much as 50% of your benefits. If your combined income is more than $44,000, as much as 85% of your benefits may be subject to income taxes.

There are many factors to consider when evaluating Social Security benefits. Understanding how working may affect total benefits can help you put together a program that allows you to make the most of all your retirement income sources—including Social Security.

What’s Your Full Retirement Age?

Those born in 1942 or before were already eligible for full Social Security benefits at age 65. For those born between 1943 and 1960, full retirement age increases incrementally until it reaches 67.

Retirement Age

Source: Social Security Administration, 2017
1. Employee Benefit Research Institute, 2017
2,3,4. Social Security Administration, 2018
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite.

4 Reasons for the Return of Market Volatility

Until early 2018, stocks were enjoying their longest period without a five percent pullback in nearly 90 years.1,2 But in early February, that calm came to a sudden and decisive end, as the Standard & Poor’s 500 Index fell more than six percent during the first three trading days of the month.

By February 8, stocks had fallen more than 10 percent from their January highs, leaving many investors to wonder how things could change so fast. Days later, sentiment had shifted yet again and stocks trended higher.3

The sudden return of volatility has been attributed to a range of factors. Here are four to consider.

1. Inflation Fears

The January employment report (released on February 2nd) showed an increase in long-stagnant wage growth, creating fears of accelerating inflation and higher interest rates.4Inflation is a rise in overall prices, which reduces the purchasing value of money.

Amplifying the economic issues was concern over American fiscal policy. The recent tax cuts have sparked worries that the “fiscal stimulus“ may prove inflationary, which also may put upward pressure on interest rates.

Yield on the 10-year Treasury bond spiked to 2.88 percent on February 8, hitting its highest level in four years.5,6 While higher yields are not necessarily bad for stock prices, they do represent competition for investors’ dollars. In other words, some investors may be tempted to pull money out of stocks to invest in bonds.

2. Algorithmic Trading

Algorithmic trading is a type of investment involving certain triggers to buy or sell stocks, using computers to make large trades very quickly. It has been estimated that algorithmic trading is responsible for about half of all the daily activity in the S&P 500 Index.7

The triggers for “pushing the button“ on buy or sell programs can be many, but market watchers say some sell programs were activated when 10-year Treasury yield approached 3 percent.8 This may have triggered other automated strategies, which accelerated the downward move and contributed to the market’s subsequent rally.

3. The End of Easy Money

The drop in prices also may be tied to the end of monetary easing. The U.S. Federal Reserve (along with other major global central banks) pursued a policy of low interest rates through quantitative easing in recent years. Quantitative easing occurs when central banks work to lower interest rates in an attempt to spur economic growth. While the Federal Reserve announced the end of quantitative easing last fall, the markets may just be feeling the ramifications of the end of the stimulus program.9

4. Natural Market Cycles

Market corrections are a natural part of the investing cycle. Since the end of World War II, there have been 76 corrections of 5 to 10 percent, 26 pullbacks of 10 to 20 percent, eight retreats of 20 to 40 percent and three drawdowns greater than 40 percent.10 A long-range view can be comforting, as you remember that fluctuations have happened many times before.

Market movements in coming weeks are impossible to predict, though continued volatility is likely. Your investment portfolio should reflect your goals, time horizon and risk tolerance. Now is a great time to remember why you invested, stay the course, and avoid overreactions.

 

1. CNBC.com, January 29, 2018
2. Stocks are represented by the S&P 500 Composite index, which is an unmanaged index that is considered representative of the overall U.S. stock market. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
3. Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Any companies or stock indexes mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities.
4. The Wall Street Journal, February 2, 2018
5. The market value of a bond will fluctuate with changes in interest rates. As rates rise, the value of existing bonds typically falls. If an investor sells a bond before maturity, it may be worth more or less that the initial purchase price. By holding a bond to maturity an investor will receive the interest payments due plus your original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk.
6. The Wall Street Journal, February 8, 2018
7. BBC.com, February 6, 2018
8. BBC.com, February 6, 2018
9. Reuters, September 19, 2017
10. U.S. News & World Report, February 5, 2018
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite.

Self Employment Retirement Calculator

Self-Employment Retirement Plan Maximum Contribution

Compensation for a self-employed individual (sole proprietor or partner) is that person’s “earned income.”* The starting point to determine the individual’s earned income is the net profit amount from the Schedule C (or Schedule K-1 for a partnership). Use this calculator as a starting point to assess your potential maximum contribution amount for a Self-Employed 401(k), a SIMPLE IRA, or an SEP. *Earned Income = Net Profit – 1/2 of Self-Employment Tax – Contribution

Plan Information

This is a hypothetical example used for illustrative purposes only. This worksheet provides an estimate based on certain assumptions. It is not intended to provide specific investment advice. Distribution rules are similar for most retirement plans, including 401(k) plans, SIMPLE plans, and SEP IRAs. Distributions are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. With 401(k), SIMPLE plans, SEP IRAs, account owners generally must begin taking minimum distributions after reaching age 70½.