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Joe Lucey

How to Take Off Without Breaking the Bank

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Value Flight Offerings on the Rise

For travelers jet-setting all over the world, finding airfare at the right price may be the most stressful part of the vacation.

The rise of cheap, no-frills nationwide airline options have provided more than affordable flights — they’ve offered stiff competition to the major airlines. This may partially explain why industry giants like American, Delta and United have begun offering lower rates — with restrictions.

It’s common for companies to offer very few seats at the lowest fares, so they go quick. Those seats also may come with no frills, mirroring the limited luxuries that are available through small regional competitors such as Allegiant, Spirit and Frontier. For example, additional charges for luggage and fees for in-flight snacks and beverages.

A recent airfare analysis revealed basic economy rates from these major airlines run between $30 and $62 below the standard economy ticket on the same airline. However, they are still higher than fares offered by some ultra-low-cost carriers, by as much as $65 to $122 per ticket. Note, too, that larger airlines tend to offer low fares only on select routes and airports, although they are starting to expand to more flights nationwide. They also come with more restrictions than we’re used to from the larger carriers, such as the inability to change or cancel tickets, choose your seats or even store your luggage in the overhead bins. Basic economy fares tend to be the last to board and the last to deplane.

However, if you’re on a budget, it may be worth pursuing these lower fares since larger airlines do offer more flight times, locations, larger aircrafts and tend to be more reliable.

When researching airfares for your next trip, keep these tips in mind:

  • If you’re a longtime traveler of a specific airline and a member of its loyalty program, such as an American Airlines AAdvantage member, you may be exempt from certain restrictions imposed by your booking. You may be able to board earlier, for example.
  • Also consider you may have overriding perks offered by a travel credit card, such as the option to check a bag for free and receive priority boarding.
  • When shopping for basic economy rates, check out the specific airline’s website for booking, as it will provide more accurate information about rates and their limitations. Third-party travel sites may be long on promotional information and short on pertinent details. Be sure to read all the information in the ticket description before making a purchase.
  • Airfares change all the time. If you find an affordable rate, it might be better to book it rather than continue shopping. The next time you go back to that site, the fare may have increased.
  • Delta’s basic economy tickets were priced lowest eight weeks in advance of departure, and United’s best fares were two weeks in advance. American fares have been known to drop both eight weeks and two weeks out, but fares increased during the intervening weeks.

How to Take Off Without Boarding a Plane

Travel can be good for the soul, especially when daily life causes stress and sadness.

The Centers for Disease Control and Prevention reports that use of antidepressants has increased by almost 400 percent over the past 20 years, with anxiety at an all-time high. For those who feel overwhelmed and in need of a break, packing up and going somewhere can help lift us out of present circumstances.

However, not everyone has the money, time and good health for a vacation. Those who can’t afford a getaway trip still need a way to find an occasional escape. It turns out walks in nature can provide a similarly soothing effect.

According to scientists, the impact nature has on our psyche is biological. A walk through the forest can decrease cortisol levels, blood pressure, heart rate and neural activity in the part of the brain associated with anxiety and depression. Fresh air also helps us improve thinking tasks.

Despite studies showing people feel significantly happier when they are outdoors, we spend less than 5 percent of our waking hours in nature on average. But even those cooped up inside can experience some positive effects of the great outdoors. A study by the University of Michigan discovered that simply looking at pictures of nature can help overstimulated brains chill out.

The following are a few tips to help enhance your travels through nature:

  • Change your computer screensaver to images of nature.
  • Make a nature walk part of your daily or weekly routine.
  • Plan vacations to incorporate beautiful landscape vistas.
  • Put your cellphone on mute and keep it buried in your pocket when enjoying the outdoors.
  • If you’re considering a relocation or second home, look for areas with convenient proximity to nature where you can spend time benefitting from its biological advantages.

IRS News to Know

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As we head into the final quarter of 2017, it’s a good idea to stay cognizant of any tax issues that may affect your finances come April 2018. Now is the time to review your investments and income distribution plans to help ensure you don’t trigger additional taxes or penalties later on.

We can help retirees create income distribution strategies that provide a reliable stream of income. As some income-generating strategies could increase your tax liability in a single year, we recommend clients also consult with an experienced tax professional to understand issues regarding their specific situation. We are happy to make a recommendation from our network of professional colleagues.

One common income distribution strategy is to transfer assets from an employer-sponsored 401(k) plan to a self-directed IRA. This move can give some individuals more investment choices. The IRS encourages eligible taxpayers to consider requesting a direct trustee-to-trustee transfer, rather than doing a rollover. However, if you do not conduct a direct trustee-to-trustee transfer, it’s important to understand the rules related to personally withdrawing money from one account and depositing it to another. The IRS allows a 60-day window to do this without penalty. If an individual misses that deadline, he may qualify for a waiver to extend the deposit window. The IRS will generally allow an extension for one or more of 11 circumstances, including the death of a family member or because the taxpayer becomes seriously ill. Furthermore, a taxpayer can use a new self-certification procedure to apply for the waiver of the 60-day period to avoid possible early distribution taxes.

Speaking of IRAs, one income distribution strategy that early retirees may be able to take advantage of is IRS Rule 72(t). Normally, someone who retires before age 59 ½ would be subject to a 10 percent penalty on early withdrawals from a retirement plan. However, Rule 72(t) waives this penalty for individuals who make a series of “substantially equal periodic payments” for five years or until the retirement account owner reaches age 59 ½ – whichever is longer. The allowable amount is based on life expectancy and must be calculated using one of the IRS approved methods. Since every situation is different, individuals are encouraged to consult with a qualified tax professional before making any decisions.

A 2011 rule from the IRS relates to the “portability deadline.” This is the rule that allows a surviving spouse to absorb any unused portion of a deceased spouse’s estate tax exemption amount. The surviving spouse must file an estate tax return on behalf of the decedent in order to qualify for the portability rule, even if the estate is under the filing threshold and typically would not be required to file an estate tax return. A new IRS guideline grants a permanent automatic extension of the time to file an estate tax return just to claim portability, extending it from nine months to up to two years after the decedent’s death.

Also, as a reminder, 2017 is the first tax year in which taxpayers age 65 and over are subject to the same 10 percent threshold of adjusted gross income (AGI) for deducting unreimbursed medical expenses as all other taxpayers (in previous years the threshold was 7.5 percent for those 65 and over). Eligible medical and dental expenses must be over 10 percent of the taxpayer’s 2017 AGI in order to claim the deduction.

 

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.

Annuity Options

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For retirees concerned about outliving their retirement income, one option to consider is to use a portion of assets to purchase an annuity. Annuities offer many different options, from starting income payouts right away with an immediate annuity to delaying them until a later date with a deferred annuity.

An annuity is a long-term contract with an insurance company that can be purchased for a lump sum or over a period of time. That premium guarantees a stream of payouts for a specific period of time, or even life, for one or both spouses.1Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company, so it’s important to research the company before making a purchase. A financial professional can help you determine which type of annuity suits your needs and objectives. We will be happy to give you more information about annuities and discuss options with you; give us a call to set up a meeting.

Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs.

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.

“Spendaphobia”: The Reluctance to Spend

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It is widely recognized that America’s economic growth since the 2008 recession has been slower than that of past recoveries. Some economists believe this is due in part to Americans putting more money into savings and spending less. The desire by a large percentage of the population – including baby boomers – to contribute to their savings has trimmed consumer spending, thus impeding higher economic growth.

There is even some concern among research analysts that as more baby boomers retire, money withdrawn from their 401(k) plans could put a drain on returns of remaining investment assets. Historically, balanced portfolios have yielded an average of 8 percent a year. However, more recent estimates project that returns between 2005 and 2050 will average 0.9 percentage points lower.

The reasons behind this potential decline are unclear. In fact, recent research reveals that retirement income withdrawals are probably less of a factor than previously thought. That’s because many retirees, in anticipation of living longer and concerned they might outlive their income, are spending less than the amount of retirement income they regularly receive. According to a Vanguard survey, retirees who hold at least $100,000 in savings actually reinvest about 40 percent of the money they withdraw from 401(k)s, IRAs and other retirement accounts. This means that while they may not be spending it, which influences economic growth, they’re likely not crippling the securities markets, either.

One notable observation is that many retirees find it difficult to make the transition from saving their hard-earned dollars to spending it in their retirement years. Some refer to this phenomenon as “spendaphobia.” Rather than traveling, buying a second home or indulging in other traditional retirement spending patterns, these retirees tend to be frugal.

It’s important to find a balance between wanting to preserve your nest egg and allowing yourself to enjoy some indulgences. One key is to develop a prudent but reasonable spending strategy, with separate contingency accounts and/or insurance products to help pay for large or unexpected expenses like a medical condition, assisted or long-term care, or even buying a new car or replacing the roof on your house. When retirees create a distribution strategy that helps prepare their nest egg for longevity, inflation and market volatility, spendaphobia may be reduced or eliminated. After all, it’s your retirement; you’ve worked hard to get there, so you should enjoy it. We can work with you to help you develop distribution strategies for your retirement income; just give us a call at (952) 460­-3260.

 

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.

The Power of Meditation

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The Science of Worrying

Worrying; it’s part of being human. Retirees might be concerned about running out of income, poor health or how the world has changed and what that means for their grandchildren. Parents might worry about everything from money and work to family, health and nutrition. The problem is, the more we worry, the less we are able to focus on other things.

According to psychologist Sian Beilock, worrying is a task in itself. For instance, if we worry while driving the car, we are technically multi-tasking. A potential problem with multi-tasking is that we may become a jack of all trades and a master of none. If we don’t learn to improve our focus, it can impact the goals we wish to achieve.

According to Beilock, we can’t write, or speak in public or even fully concentrate on what other people are saying if we’re worried about something else. To help alleviate this negative impact of worrying, she suggests writing down your worries before you take on another task. One study Beilock performed showed students who wrote down their worries for 10 minutes before taking a test scored higher than those who didn’t — even if their worries were simply about the taking the test.

Writing can lead to a sense of catharsis, liberating the canvas of our mind so we can concentrate on other things. And frankly, any activity that can help alleviate our worries may be worth giving a try.

The Power of Meditation

The good news is brain research reveals financial decision-making peaks at around age 53, which is a common age for people to start thinking strategically about how to turn invested assets into a source of income when they retire. The bad news is those tactical brain skills are past their peak around age 60, and they diminish further as we age.

Unless we actively exercise our brains to increase gray matter and keep healthy brain cells actively growing and dividing, as we grow older, we often begin to suffer from age-related cognitive decline. Through the use of MRIs, researchers have attempted to identify what parts of the brain may correlate to money management thought processes. While it is too soon to identify specific regions, what is clear is that as we age, we may lose some of that financial capability.

However, studies have shown brain exercises can be an effective deterrent to cognitive decline. And if you don’t like doing crossword puzzles, there are other options. Meditation and other mindfulness activities are linked to slowing down the cellular aging process in the brain. A small study revealed gray matter is thicker in the brain of people who meditate for 40 minutes a day. One study even determined the brain can rebuild gray matter after just eight weeks of meditation.

Meditation has also been shown to positively affect clinical symptoms of gastrointestinal disorders, irritable bowel syndrome (IBS) and inflammatory bowel disease (IBD). It is generally believed the practice evokes a relaxation response in the body that not only improves symptoms in these disorders but also generates a network of anti-aging genes and improved cellular health.

Another study found people who have consistently practiced meditation for many years (4 to 46 years of meditation experience; 20 years on average) have younger brains — defined by higher concentrations of tissue in regions of the brain that are commonly depleted by aging. On average, the brains of long-term meditators were 7.5 years younger at age 50 than the brains of non-meditators, and are an additional one month and 22 days younger for every year after 50.

Scientists have proposed numerous explanations for how meditation produces these results, including:

  • Stimulating growth in neural structures
  • Promoting increased connectivity and efficiency within neural networks
  • Buffering the brain and nervous system against the harmful effects of chronic stress
  • Reducing pro-inflammatory response
  • Stimulating telomerase activity (promotes cell growth and division)
  • Inhibiting age-related brain change

These new findings are some of the reasons why meditation is being introduced into both schools and the work environment. The practice requires very little in terms of time, money or effort, and can be practiced alone in the privacy of your own home.

Mastering Meditation

One method of mastering a subject is to “overlearn” it. This is characterized by studying a concept until you fully grasp it, and then studying it even longer so it is cemented into the mind. This practice could be an ideal way of learning meditation. The longer you do it, the better you’ll master it and the more positive its impact may be on cognitive skills. Here are a few tips:

  • Get into a comfortable position — you don’t have to sit cross-legged on the floor.
  • Let your thoughts and feelings flow freely — you don’t have to block them out.
  • Let these impressions drift without judgement until you feel relaxed — this gets easier with practice.
  • Set a timer – you can relax and better enjoy your experience if you don’t have to keep checking the clock.

Assessing Risk in Retirement Income

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When it comes to investing, there’s no such thing as a “safe bet.” Every type of financial vehicle has some level of risk, even checking and savings accounts. Back in the 1920s, people believed that the safest place to keep their money was a bank, and they were right. But as they witnessed during the Great Depression, even those assets were not 100 percent safe. Bank runs caused banks to deplete their cash holdings, and they had to call in loans and liquidate assets to try to keep up with withdrawal demands, which subsequently led to bank failures. In response, the government created the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000 per depositor, per FDIC-insured bank, per ownership category.

Throughout history, bank deposit accounts have generally been considered the safest place to keep assets. However, today’s longer lifespans illustrate that risk takes many forms, including the potential risk of outliving your money if you don’t save enough, have a well-diversified financial portfolio to help outpace inflation and seek out multiple sources for reliable income streams. We can recommend a variety of strategies to help retirees pursue each of these goals, based on individual circumstances. Give us a call, and let’s discuss your options

Consider even Social Security. The agency projects that by 2034, its Trust Fund will be reduced to the point where it can pay out only 74 percent of promised benefits to retirees. While it’s unlikely this safety net will collapse, Congress will need to take steps to keep the fund fully solvent.

However, individuals who invest in 401(k)s should be aware that even if their company closes or goes bankrupt, vested 401(k) assets belong to the account owner; the employer or the employer’s creditors can’t touch them.

Another factor that can potentially affect your retirement assets is the impact long-term inflation can have on cost of living expenses for people who spend 20 to 30 years or more in retirement. Inflation has remained low for many years, and some market experts believe that, as a result, many investors are not well-prepared for a resurgence of inflation.

With the knowledge that investing offers the possibility of growth but also the risk of loss, it’s a good idea to consider working with a financial advisor to help tailor a financial portfolio to your specific goals, timeline and tolerance for different types of risk. Your financial advisor may also suggest annuities, and although they are not investments, some annuity contracts credit interest earnings that are linked to the performance of an external market index. These types of annuities, often referred to as fixed index annuities, offer a combination of higher interest growth potential and guaranteed income. The guarantees are backed by the insurance company so it’s important to check out the credit rating and financial strength and experience of the issuing insurer.

 

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.