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Archives for April 2017

Earned Income Tax Credit for Working Grandparents

The Earned Income Tax Credit, or EITC, is a federal income tax credit for workers whose annual income is $53,505 or less (2016), depending on marital status and number of eligible dependents. There are other eligibility limits, such as the requirement that investment income be $3,400 or less for the year. This refundable credit can reduce taxes up to $6,269 and is available to all workers who meet eligibility requirements.

This credit is frequently overlooked by working grandparents and other relatives who care for qualifying children who live with them. Be aware, however, that there are certain restrictions if the child’s parents also qualify for the EITC.2 For more information, speak with your tax professional. You can also check out this IRS document: Publication 596, Earned Income Credit.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

What Is “Reflation”?

In recent years, inflation in the United States has remained below the Federal Reserve Bank’s target rate of 2 percent, despite the agency’s efforts to jumpstart economic growth with low interest rates. However, the election of Donald Trump infused the markets with the spark they needed. After an initial drop attributed to uncertainty, the stock market responded with outperformance in the weeks following the election results. Part of this response was in anticipation of the Trump administration’s promises for changes in fiscal policy, such as tax cuts and larger investment in the country’s infrastructure — which could involve issuing new debt.

The first phase in a period of economic growth is called “reflation,” which many economists believe we have now entered. Some of the tools the government deploys to activate reflation include lowering taxes and changing the money supply, both of which appear to be on the horizon.

Signs of reflation include higher prices for consumer goods and higher wages to pay for them. With the low unemployment rate, businesses likely will need to increase compensation to compete for qualified candidates. At the same time, the Fed has already raised interest rates and indicated it will continue to do so, which will increase borrowing costs. In turn, those increases could be passed on in the form of higher prices.

Further, higher wages promote consumer spending, which in turn means higher prices, leading to higher corporate profits. This is a crucial circle for the reflationary phase, which eventually leads to inflation. How much inflation the economy can sustain generally is dependent on whether companies can continue to support higher wages via price increases or a slight reduction in profit margins.

Reflation also can impact investors: Rising interest rates cause existing bond prices to drop. New bond issues will feature the new, higher-interest yields, thereby de-valuing older bonds. In this environment, some investors choose to sell their bonds in favor of either higher-yielding bonds or dividend-paying cyclical stocks. These are called “reflation trades”, because they are made with the expectation that inflation will rise.

Remember, it’s important for individuals to focus on their specific financial goals rather than react to the changing economic environment. If you are considering making changes, please consult with your financial advisor to help assess how any changes might impact your long-term goals.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

What Happens When “Your Life Flashes Before Your Eyes”

You often hear about near death experiences. Someone crossing the street nearly gets hit by a car and later recalls that his life “flashed before his eyes.” What does that mean and how does it happen?

Scientists set out to answer these questions, terming the phenomenon a “life review experience” (LRE). In a recent study of people who said they had undergone an LRE, researchers discovered these commonalities:

  • The LRE timeline typically is not chronological; most people see their life events flash either in random order or seemingly all at once.
  • People may experience an LRE from the point of view of someone close to them. In other words, a person doesn’t just see his own life flash before his eyes, he may see others’.
  • People who have LREs experience a changed perspective in the way they regard other significant people in their life or important events that occurred in the past.

To figure out why this phenomenon occurs, neuroscientists studied the prefrontal, medial temporal and parietal cortices of the brain, which all are associated with housing autobiographical memories. These parts of the brain also are vulnerable to hypoxia and blood loss that can occur in the event of a traumatic, near-death experience.

In their study, the researchers compared LRE occurrences to those of people who had non-trauma-related but similar experiences such as “déjà vu” or who feel regret about past events. They found that all of these experiences trigger common neurocognitive mechanisms that happen every day – but in a more highly concentrated way.

The study suggests that an LRE is not a mystical event that happens to special people. It’s a common neurological process that can pretty much happen to anyone who experiences a near-death event.

How to Manage Taxes in Retirement

Here are some tips on how to manage taxes in retirement;

  • To stay within the 15% income tax bracket: maximum annual income = single, $37,950; married filing jointly, $75,900.
  • Investors can harvest capital gains with a zero tax rate as long as their income stays in or below the 15% tax bracket.
  • To help reduce retirement tax liability, traditional IRA owners can conduct partial conversions to a Roth each year in amounts low enough to remain in the lower tax bracket.
  • Drawing down income from taxable accounts first allows tax-deferred accounts to compound growth as long as possible.

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Emotional Intelligence: Pros and Cons

You wouldn’t want a symphony comprised exclusively of flutists. A football team with nothing but offensive linemen is not likely to win many games. By the same token, it takes all types of people to run a company. When a business seeks to employ only workers who “fit” its corporate culture, it could end up missing out on some key characteristics for success.

Researchers have delved into the impact of different kinds of temperaments. They often refer to a person’s disposition as his or her emotional intelligence or emotional quotient (EQ), which sums up interpersonal skills such as sociability, sensitivity, adjustability and prudence.

These characteristics can play an important role in the work environment. For example, a person with a high EQ is generally perceived as proficient at following rules and procedures and getting along with others. These employees tend to score high in leadership roles, job performance, job satisfaction, and physical and emotional well-being. On the surface, it may be easy to understand why a company might look to hire only people with a high EQ.

However, there are some downsides to having a work environment filled with people with high EQs. For example, people with a higher EQ tend to exhibit lower levels of creativity and innovation. Creative types frequently are stereotyped as moody, nonconformist, excitable and even hostile. But the fact is, their impulse to challenge the status quo is one of the features of out-of-the-box thinking that many companies need to stay competitive.

High EQ people may also have issues giving or receiving negative feedback, which can impede their ability to lead and manage others. Researchers say they are so steady and well-adjusted that they may not give much credence to negative feedback they receive.

People who tend to get along well with others also may be so focused on maintaining good relationships that they do not excel at being change agents, driving results or making unpopular decisions for the good of the company. In other words, a high EQ person is more likely to “play it safe” and miss out on higher-risk but higher-reward opportunities.

This is why it often takes a wide variety of personalities to drive a successful company. One solution is to match the disposition of workers to the role they will fulfill. A person with a high EQ may excel in positions such as salesperson, customer support and account liaison. An employee with a lower EQ may be better suited for responsibilities related to creativity, innovation, leading change or taking risks.

The Power of Mindfulness

It seems everywhere you turn these days, from news shows to news articles to local advertisements, there’s this idea of promoting “mindfulness” in our day-to-day lives. Mindfulness is generally accepted as focusing one’s mental state on the present moment, being completely aware of all elements around us.

Some financial professionals have expanded this idea of mindfulness to financial management. In an effort to help achieve this, some people practice a no-spending day, no-spending week or no-spending month. By avoiding expenses at all costs, we are forced to assess if and why we need to make certain purchases. For example, if you go into a store for one item, you shouldn’t leave with six more. Likewise, you might find you end up consuming all of the canned foods in your pantry before you feel the need to buy more.

Recognizing the difference between wants and needs is probably the biggest benefit to conducting a no-spend day. It’s also a good way to allocate your retirement income streams to help ensure your money doesn’t run out. In other words, you could designate steady and reliable income streams (such as Social Security, a pension or an annuity) for necessities such as food and utilities in retirement, while any other variable income can be used to pay for occasional indulgences.

There’s a growing body of research that supports this idea that mindfulness-focused activities, such as meditation and yoga, can help decrease anxiety, depression, stress and pain, as well as help improve general health, mental health and quality of life. In fact, one study concluded that the impact of ongoing mindfulness activities was both significant and long term compared to taking a short-term vacation which, at the outset, was very successful at relieving stress.

Neuroscience studies also have correlated the impact of aerobic exercise on cognitive clarity. In fact, vigorous exercise has been identified as the only known trigger to create new neurons in the brain. These newly produced neurons appear in parts of the brain associated with learning, memory, concentration and time management.

When comparing brain scans of young-adult cross-country runners to young adults who don’t engage in regular physical activity, scientists found that overall, the runners demonstrated greater functional connectivity for activities such as planning and decision-making.

On the surface, it may seem that the older we get, the less sharp our minds become. But alas, there also are studies that demonstrate more mature minds benefit from “crystallized intelligence.” This represents the knowledge and data that we have accumulated over decades of work and life experience. Older workers in particular can counteract age-related cognitive lag by relying on this foundation of experience to troubleshoot problems and innovate new solutions on the job.

Some educators believe that the medical profession should take this new focus on mindfulness into consideration, not just as a means to help patients cope with health conditions but also to help physicians become better at their jobs.

Doctors are sometimes guilty of taking a set of symptoms at face value and settling on an incorrect diagnosis because they are not tuned in to other symptoms or patient data that may have bearing. Medicine is an inexact science that takes years of experience to become adept at recognizing a wide array of conditions, yet it is equally important not to let that experience and confidence close the mind to other possibilities.

This is where the practice of mindfulness can help physicians become more attuned to each patient’s full array of symptoms and their own biases. To date, some experts believe a missing ingredient in medical education and medical practice are courses or workshops that teach physicians the practice and impact of mindfulness. This has become even more critical now that health care delivery has become more of a volume and administrative business with less time spent with patients.

Are you practicing mindfulness in the various areas of your life? Please give us a call  at (952) 460­-3260 if we can help you be more mindful of your current financial situation and long-term retirement income goals.

Danielle Christensen

Paraplanner

Danielle is dedicated to serving clients to achieve their retirement goals. As a Paraplanner, Danielle helps the advisors with the administrative side of preparing and documenting meetings. She is a graduate of the College of St. Benedict, with a degree in Business Administration and began working with Secured Retirement in May of 2023.

Danielle is a lifelong Minnesotan and currently resides in Farmington with her boyfriend and their senior rescue pittie/American Bulldog mix, Tukka.  In her free time, Danielle enjoys attending concerts and traveling. She is also an avid fan of the Minnesota Wild and loves to be at as many games as possible during the season!