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Joe Lucey

Digital Tools for Tax Season

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Tax season is upon us. According to the IRS, about 90 percent of taxpayers now file their taxes electronically. The agency touts the service as more accurate, convenient and secure than paper claims, and people usually receive their tax refunds faster.

The IRS offers free tax filing assistance to filers who earn $54,000 a year or less, and people age 60 or older.1 For those who prefer to complete their own returns, there are several helpful resources at IRS.gov.

At the website, you can find an electronic copy of Publication 17, which provides the general rules for filing a federal income tax return. There also is an “Interactive Tax Assistant” that provides answers to frequently asked questions on a variety of topics, such as whether you need to file a return, who you can claim as a dependent and whether you’re eligible to claim an education credit.2

Once you’ve filed a return, you can monitor the status of a refund within 24 hours of IRS receipt using the “Where’s My Refund?” tool. It is located at the IRS.gov website, or you can download the IRS2Go mobile app.3 For a general idea of when you’ll receive a refund based on when you submitted your return, check out the table here.4

If you have questions or would like help completing your taxes, we can refer you to one of the experienced tax professionals within our network. It’s a good idea to work collaboratively with your tax professional and your financial professional in order to help maximize opportunities for tax savings.

For a comparison and ratings of some of the most popular online tax services, check out PC magazine’s review of the “Best Tax Software of 2018.” The rundown includes H&R Block, TaxAct, TaxSlayer and Intuit TurboTax Deluxe, among others.5

While working to complete your tax return by the April 17 deadline, it’s a good time to start considering rules that will be changing for 2018. For example, deductibility of interest on home equity loans and lines of credit (HELOCs) will apply only on loans used to buy, build or substantially improve a home.6

Content prepared by Kara Stefan Communications.

1 IRS.gov. Feb. 6, 2018. “Six Reasons to E-file.” https://www.irs.gov/newsroom/six-reasons-to-e-file. Accessed Feb. 6, 2018.

2 IRS.gov. Jan. 29, 2018. “IRS Tax Tips 2018-14: Check Out These Three Tools on IRS.gov.” https://content.govdelivery.com/accounts/USIRS/bulletins/1d6b25e. Accessed Feb. 5, 2018.

3 Ibid.

4 Isaac M. O’Bannon. CPA Practice Advisor. Dec. 28, 2017. “2018 IRS Income Tax Refund Chart – When Will I Get My Tax Refund?” http://www.cpapracticeadvisor.com/news/12370552/2018-irs-income-tax-refund-chart-when-will-i-get-my-tax-refund. Accessed Feb. 5, 2018.

5 Kathy Yakal. PC. Feb. 9, 2018. “The Best Tax Software of 2018.” https://www.pcmag.com/article2/0,2817,1904319,00.asp. Accessed Feb. 5, 2018.

6 Suzanne Woolley. Bloomberg. Jan. 29, 2018. “How to Game Next Year’s Taxes Now.” https://www.bloomberg.com/news/articles/2018-01-29/eight-ways-to-prepare-for-the-new-tax-law. Accessed Feb. 5, 2018.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Exploring the Behavioral Biases of Investing

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Despite the research and due diligence necessary in developing an investment portfolio, investors are frequently influenced more by their own emotional and behavioral biases than by data.1 These biases may include overconfidence, regret, impatience and the desire to “keep up with the Joneses.”

In fact, personnel from at least one asset management firm believe that the company has a better chance of outperforming the market by anticipating investor behavior. At a macro level, the behavioral biases of a large number of investors may be able to influence the expectations of company performance and even its stock price. By tracking patterns among such biases, it may be possible to capture a higher return on investment relative to other market fundamentals.2

Although there may be truth to that, we believe that investment selection should be based more on individual goals than on mass market speculation. As financial advisors, we help clients get to the crux of their objectives and design a financial strategy around their long-term goals, timeline and tolerance for risk. Markets will always fluctuate, regardless of the impetus, but our job is help reduce the impact of behavioral biases and help keep your financial strategy on track. Please contact us if you’d like to learn more.

Within the study of behavioral finance are subfields. For example, biases can be cognitive, meaning an investor may think and act in specific ways or by following a rule of thumb. A behavioral bias also can be emotional, relying on feelings rather than information. An example of this is “self-attribution bias,” wherein investors tend to believe their investment success comes from their own actions but blame poor performance on external factors.3

Cognitive biases often are characterized by the inability to fully process statistical information or by memory errors.4 In some cases, cognitive bias manifests in simply not acknowledging when there is too much information for a person to process. In this scenario, it is common for an investor to cling to the original reason he or she made the investment — even when presented with new and potentially damaging evidence.5

Another common investing behavioral bias is an aversion to loss. In fact, investors are generally more afraid of losing money than they are of embracing the thrill of stock market success. This inherent fear of loss can, in fact, make an investor unwittingly more conservative than he needs to be or, depending on financial circumstances, should be.6

Content prepared by Kara Stefan Communications.

1 Tim Parker. Investopedia. “4 Behavioral Biases and How to Avoid Them.” https://www.investopedia.com/articles/investing/050813/4-behavioral-biases-and-how-avoid-them.asp. Accessed Jan. 5, 2018.

2 John R. Riddle. 361Capital. “Bounded Rationality: Tapping Investor Behavior to Source Alpha.” http://361capital.com/financial-advisor/viewpoints/bounded-rationality-tapping-investor-behavior-to-source-alpha/. Accessed Jan. 5, 2018.

3 Brad Sherman. Investopedia. April 12, 2017. “8 Common Biases That Impact Investment Decisions.” https://www.investopedia.com/advisor-network/articles/051916/8-common-biases-impact-investment-decisions/. Accessed Jan. 5, 2018.

4 Peter Lazaroff. Forbes. April 1, 2016. “5 Biases That Hurt Investor Returns.” https://www.forbes.com/sites/peterlazaroff/2016/04/01/5-biases-that-hurt-investor-returns/#74592db8d4ac. Accessed Jan. 5, 2018.

5 361Capital. “Behavioral Finance Basics.” http://361capital.com/wp-content/uploads/361Capital-Behavioral-Finance-Basics-Infographic.pdf. Accessed Jan. 5, 2018.

6 Peter Lazaroff. Forbes. April 1, 2016. “5 Biases That Hurt Investor Returns.” https://www.forbes.com/sites/peterlazaroff/2016/04/01/5-biases-that-hurt-investor-returns/#74592db8d4ac. Accessed Jan. 5, 2018.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Preparing for Retirement — Do You Have a Plan?

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For much of the 20th century, many employees who spent decades working for one company typically received a pension plan. According to the Center for Retirement Research at Boston College, 88 percent of all private-sector employees in 1975 had a pension.1 With the confidence of knowing their retirement would be covered by pension and Social Security benefits, perhaps they even saved little — but it would not have been all that necessary to learn how to invest.

Today, the number of private-sector employees with pensions has plummeted to 33 percent.2 This means that baby boomers (those born between 1946 and 19643) are the first generation of retirees to rely on defined contribution plans, such as 401(k) and 403(b) plans. In fact, many boomers don’t have the luxury of perhaps just saving a little; they have to save a lot.

In addition, many boomers have to learn about different types of investments, which can be daunting. In fact, the Financial Industry Regulatory Authority (FINRA) lists 12 broad types, each of which has its own subsets.4 That’s a pretty big responsibility to take on.

Here’s an idea of where we stand:5

  • 44% of baby boomers have no work-sponsored retirement plans
  • 43% have defined contribution plans
  • 13% have defined benefit (pension) plans

Bear in mind that back in the days when many employees could count on a pension plan, those assets were managed by professional money managers. These days, some company 401(k) plans include a “self-directed” option, which lets you decide how to invest your contributions yourself.6 We hasten to remind you that investing can be complex, and creating a financial strategy for retirement has been complicated by the fact that people are living more years in retirement than ever before. If you could use some advice to help manage your investment portfolio — including self-directed accounts — or to create a financial strategy, please give us a call.

In fact, outside investment advice in the defined contribution space is becoming more prevalent. A recent report by the Spectrem Group found that 73 percent of employer-plan participants use an outside advisor, such as a mutual fund company representative or an independent financial planner, to assist them with investing assets that are outside their plan. However, they do not necessarily consult with an outside advisor for their entire investment portfolio.7

Keep in mind that preparing for retirement involves much more than just accumulating assets. This preparation includes deciding on a Social Security claiming strategy; navigating defined contribution plan rollovers; considering tax consequences; and mulling possible part-time work during retirement. And we must do this while pursuing social and intellectual engagement opportunities so we can stay healthy and cognitively fit during our long retirement.8

It’s a lot to think about. The earlier we get started on our full-scale retirement plans, the better.

Content prepared by Kara Stefan Communications.

1 John Waggoner. InvestmentNews. Dec. 2, 2017. “Younger baby boomers face hurdles as they approach retirement.” http://www.investmentnews.com/article/20171202/FREE/171209994/younger-baby-boomers-face-hurdles-as-they-approach-retirement. Accessed Jan. 16, 2018.

2 Ibid.

3 The Pew Charitable Trusts. Feb. 15, 2017. “Retirement Plan Access and Participation Across Generations.” http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2017/02/retirement-plan-access-and-participation-across-generations. Accessed Jan. 24, 2018.

4 FINRA. “Types of Investments.” http://www.finra.org/investors/types-investments. Accessed Jan. 16, 2018.

5 The Pew Charitable Trusts. Feb. 15, 2017. “Retirement Plan Access and Participation Across Generations.” http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2017/02/retirement-plan-access-and-participation-across-generations. Accessed Jan. 24, 2018.

6 Amelia Josephson. SmartAsset. March 22, 2017. “What Is a Self-Directed 401(k)?” https://smartasset.com/retirement/what-is-a-self-directed-401k. Accessed Jan. 24, 2018.

7 Spectrem Group. 2017. “How Plan Participants Use Advisors.” https://spectrem.com/Content/how-dc-plan-participants-use-advisors.aspx. Accessed Jan. 16, 2018.

8 Emily Brandon. U.S. News & World Report. Jan. 16, 2018. “How to Retire in 2018.” https://money.usnews.com/money/retirement/baby-boomers/articles/how-to-retire. Accessed Jan. 16, 2018.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Keep an Eye on Interest Rates

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Optimism often predates good news. Such was the case last year when, just before the end of the year, Congress passed legislation that significantly reduced the corporate tax rate. The anticipation of this fulfillment of one of President Trump’s pro-business campaign promises helped drive up stock prices in the latter half of the year — to the tune of a 24 percent uptick. In other words, the expectation for lower tax rates was already baked into market assumptions for 2017.1

Now the question is, what will happen in 2018? According to one market analyst, a challenge for this year’s equity markets will be the likelihood of the Federal Reserve raising interest rates further. If the economy grows by 3 to 3.5 percent this year, as the analyst predicts, this could trigger higher interest rates. Ultimately, higher rates can put a damper on stock prices and make bonds and CDs more attractive.2

We like to remind our clients of a couple of rules of thumb when it comes to managing an investment portfolio. First of all, remaining diversified is generally an effective way to help capture gains, reduce risk and work toward long-term goals. Second, bear in mind that what matters is overall portfolio performance, not individual sectors or investments.3 If you’d like help reviewing your current asset allocation strategy to make sure it’s aligned with your objectives, tolerance for risk and investment timeline, please contact us to schedule a consultation.

Remember that as interest rates rise, bond prices generally drop. However, as long as rates rise modestly and gradually — which is what the Fed projects — bond investors can still make money via their total return.4

The general forecast is for the Fed to increase the federal funds rate within a range of 2.75 to 3 percent by the end of 2018. With that said, note that there are some positives associated with higher interest rates, especially for retirees who rely on low-risk, fixed-income investments for income. Higher rates also could improve the pricing of annuities and credited interest rates.5

Content prepared by Kara Stefan Communications.

1 Knowledge@Wharton. Jan. 2, 2018. “Jeremy Siegel: What’s Ahead for the U.S. Economy in 2018.” http://knowledge.wharton.upenn.edu/article/jeremy-siegel-whats-ahead-u-s-economy-2018/. Accessed Jan. 8, 2018.

2 Ibid.

3 Mike Loewengart. Etrade. Jan. 2, 2018. “Putting a bow on 2017 with a turn to the new year.” https://us.etrade.com/knowledge/markets-news/commentary-and-insights/putting-bow-on-2017-with-turn-to-new-year. Accessed Jan. 8, 2018.

4 Jeff Benjamin. InvestmentNews. Jan. 6, 2018. “2018 outlook in bond investing calls for change.” http://www.investmentnews.com/article/20180106/FREE/180109957/2018-outlook-in-bond-investing-calls-for-change. Accessed Jan. 8, 2018.

5 Mark Miller. Morningstar. Jan. 9, 2018. “Retirees: What You Should Watch in 2018.” http://news.morningstar.com/articlenet/article.aspx?id=842831. Accessed Jan. 9, 2018.

 Bond obligations are subject to the financial strength of the bond issuer and its ability to pay. Before investing consult your financial adviser to understand the risks involved with purchasing bonds.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Women’s Issues and Retirement

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In 2017, women organized and made headway toward real change, making it a hallmark year for women’s issues. The year started with the Women’s March in January and ended with the #MeToo movement spreading across the globe.1 In addition, record numbers of women considered running for public office.2

The thing is, many of the factors that may disadvantage women could also cause a drag on America’s economy. For example, challenges such as pay disparity and responsibility for the majority of caregiving (meaning less time in the workforce) can lead to lower savings opportunities for women. As a result, women are 80 percent more likely than men to live in poverty at age 65 and older, according to a report by the National Institute on Retirement Security.3

The upshot is that all women — even those who are married or in a committed relationship — need to have their own financial plan, recommends a new study from the Center for Retirement Research (CRR) at Boston College. That doesn’t necessarily mean every woman needs her own career or earnings; it simply recognizes that both spouses should be aware of the need to plan for a woman’s income sources should she survive her spouse or should the couple divorce.4

Singles and couples concerned about protecting a portion of their retirement assets may want to consider insurance options, such as annuities and life insurance. We would be happy to help assess your insurance needs; just give us a call.

It is equally important to work with an attorney to get all documents signed and in place for an estate plan. In 2016, 34 percent of U.S. women age 65 and older were widows. In total, 55 percent of women over age 65 were single.5 It behooves all women, whether single or married, to make the effort to prepare for their financial future.

 Content prepared by Kara Stefan Communications.

1 Melinda Gates. Yahoo. Dec. 16, 2017. “Melinda Gates: 2017 is the year our daughters will tell theirs about.” https://www.yahoo.com/lifestyle/melinda-gates-2017-year-daughters-will-tell-130032809.html?linkId=46306505. Accessed Jan. 8, 2018.

2 John Bowden. The Hill. Nov. 4, 2017. “Women are running for office in record numbers.” http://thehill.com/homenews/campaign/358780-women-are-running-for-office-in-record-numbers. Accessed Jan. 8, 2018.

3 Kara Stiles. Forbes. Dec. 7, 2017. “The Unsettling Truth About Women and Retirement.” https://www.forbes.com/sites/karastiles/2017/12/07/the-unsettling-truth-about-women-and-retirement/#77df97bf1b63. Accessed Jan. 8, 2018.

4 Bernice Napach. ThinkAdvisor. Aug. 15, 2017. “Married Women Need Their Own Financial Plan: Study.” http://www.thinkadvisor.com/2017/08/15/married-women-need-their-own-financial-plan-study. Accessed Jan. 8, 2018.

5 U.S. Department of Health and Human Services. “A Profile of Older Americans: 2016.” https://www.giaging.org/documents/A_Profile_of_Older_Americans__2016.pdf. Accessed Jan. 23, 2018.

Guarantees and protections provided by insurance products including annuities are backed by the financial strength and claims-paying ability of the issuing insurer.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

 

How Changes in Spending Impacts Retirement

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Online shopping has become the norm in the Western part of the world. Experts say mature economies adopted e-commerce quickly because of its strong infrastructure and a trusting financial landscape.1

In other words, consumers could count on receiving goods ordered, vendors knew they would get paid and any conflicts were protected by a reputable credit and court system. These things weren’t true in many developing countries, thus e-commerce was slower to gain traction there.

However, now that emerging markets have put a secure infrastructure in place, many expect online sales to soar — which could help bolster those waning economies. The global online market offers new prospects for struggling brick-and-mortar retailers in the U.S. Just about any retailer, large or small, that can adapt its sales model to a global e-commerce market could be poised for massive opportunity.2

That’s one of the interesting parallels between life and commerce — where some doors close, others open; we just need to see where opportunity awaits. The same can be true when planning for retirement. Please feel free to contact us to discuss creating retirement strategies through the use of insurance products that can help you work toward your long-term retirement income goals.

Interestingly, one of the biggest economic issues of the day comes from a social phenomenon: As older people are living longer, younger people are having less children. To be exact, the first of the baby boomer generation turned 70 last year while, at the same time, the fertility rate in the United States reached its lowest point since records began in 1909.3

The ramifications of this population shift will likely be widespread and long lasting. For example, retirees tend to contribute less to the consumer economy, with an average reduction of 37.5 percent in household spending. This, in turn, affects company revenues and, subsequently, returns in the investment market.4 At the same time, retirees may be drawing down invested assets for income, further reducing available capital.

The elderly population boom also is expected to cause economic drains in targeted areas of the country. For example, states that have long been popular retirement havens, such as Florida, Arizona, Oregon and South Carolina, are among at least 14 states where the cost of elderly care is rising.5

In Florida alone, 20 percent of the population is over the age of 65; more than 40 percent is over 50. While it’s easy to write this off as the result of Florida being a retirement haven, that is no longer the case. Within about 10 years, the entire country will have a similar demographic composition — we will become “a nation of Floridas.”6

Another problem with the sizable gap between retirees and babies is an anticipated drop in the number of workers. The workforce may not be large enough to support the government programs older people are entitled to after years of contributing into the system. This issue is hardly isolated to America. Between 2025 and 2050, the number of people age 65 and older is projected to nearly double worldwide.7

To help mitigate the drain on resources, many are raising the eligible age for government-sponsored pensions and encouraging people to work well past traditional retirement age. Whether due to lack of retirement savings or the desire to work longer, the share of people working longer has grown during the past decade: a 6 percent increase in Germany, 10 percent in the U.K. and 18 percent in the U.S.8

Content prepared by Kara Stefan Communications.

1 Knowledge@Wharton. Nov. 1, 2017. “Why Emerging Markets Are the Next E-commerce Frontier.” http://knowledge.wharton.upenn.edu/article/why-emerging-markets-are-the-next-e-commerce-frontier/. Accessed Nov. 22, 2017.

2 Ibid.

3 Stephen McBride. World Economic Forum. Sept. 14, 2017. “Retiring baby boomers are going to have a huge impact on the economy.” https://www.weforum.org/agenda/2017/09/retiring-baby-boomers-are-going-to-have-a-huge-impact-on-the-economy. Accessed Nov. 22, 2017.

4 Ibid.

5 Sue Chang. Marketwatch. Nov. 8, 2017. “These maps show just how crazy fast the world is aging.” https://www.marketwatch.com/story/these-maps-show-just-how-crazy-fast-the-world-is-aging-2017-11-08?link=sfmw_tw. Accessed Nov. 22, 2017.

6 Joseph F. Coughlin. Time. Nov. 8, 2017. “There’s No Such Thing As ‘Old Age’ Anymore.” https://www.msn.com/en-us/news/other/theres-no-such-thing-as-old-age-anymore/ar-BBEJG0u. Accessed Nov. 22, 2017.

7 Suzanne Woolley. Bloomberg. Sept. 17, 2017. “Retirement, Delayed.” https://www.bloomberg.com/quicktake/retirement-redesigned?cmpid%253D. Accessed Nov. 22, 2017.

8 Ibid.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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