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What Expenses Could Change When You Retire?

November 28, 2016
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Some costs could rise, fall or even disappear.

Your retirement may seem near at hand or far away, but one thing is certain: your future will differ from your present. Financially, that fact is worth remembering. Some of the costs you have paid regularly all these years may suddenly decrease or fade away. Others may increase.

Will your insurance costs rise with age? Maybe not. You may find that your overall insurance expenses decline. Yes, health insurance becomes more expensive the older you get – but those premiums are merely part of the bigger insurance coverage picture. If you stop working in retirement, you have no need for disability insurance. You might have little need for life insurance, for that matter. You may have paid off your home and other major debts, and rather than drawing income from work, you will be drawing it from investments and Social Security.

You can expect your medical expenses to increase. By how much, exactly? That will vary per household, but perhaps you have read some of the latest estimates.

How about your income taxes? If you live on 70-80% of your end salary in retirement – which is not unusual – then you may find yourself in a lower income tax bracket. Yes, your Social Security income may be taxed – but, even in the worst-case scenario, no more than 85% of it will be.   If you have invested using a Roth IRA, you will be looking at some tax-free retirement income – provided, of course, you have owned the IRA for at least five years and are older than 59½ when you start making withdrawals. While a Roth account held in a workplace retirement plan requires withdrawals beginning at age 70½, the withdrawals will still be tax-free if you follow IRS rules.

Will your housing costs fall? Over the long term, they may. Some retirees own their homes free and clear and others nearly do. Homeowner association fees and property taxes must still be paid, so, while that mortgage balance may be gone or nearly gone, other recurring costs will remain. Homes inevitably need repairs, so, in some random year, you may find your housing costs jumping. Downsizing and moving into a smaller home can also mean a short-term rise in your housing expenses. If you do downsize and move, you will hopefully relocate to an area where housing costs are lower.

Will you face education costs? You may have retired your own college debt, but if you have children forty or fifty years younger than you are, you could risk retiring with some of their student loan debt on your hands. That expense could linger into your retirement – a valid reason to reject assuming it in the first place.

One “cost” may disappear, leaving you with a little more money each month. Once retired, your constant per-paycheck need to save for retirement vanishes. So if you are assigning 10% or 20% of your paychecks to your retirement accounts, you may be pleasantly surprised to find that money back in your wallet (so to speak) after you transition into your “second act.”

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

Retirement Plan Considerations For Different Stages of Life

November 10, 2016
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Throughout your career, retirement planning will likely be one of the most important components of overall financial plan. Whether you have just graduated and taken your first job, are starting a family, are enjoying your peak earning years, or are preparing to retire, your employer-sponsored retirement plan can play a key role in your financial strategies. How should you view and manage your retirement savings plan through various life stages? Following are some points to consider.

retirementplanwordsJust starting out:
If you are a young adult just starting your first job, chances are you face a number of different challenges. College loans, rent and car payments all may be competing for your hard-earned paycheck. How can you even consider setting aside money in your employer-sponsored retirement plan now? After all, retirement is decades away—you have plenty of time, right? Before you answer, consider this: The decades ahead of you can be your greatest advantage. Through the power of compounding, you can put time to work for you. Compounding happens when your plan contribution dollars earn returns that are then reinvested back into your account, potentially earning returns themselves. Over time, the process can snowball.

Example(s): Say at age 20, you begin investing $3,000 each year for retirement. At age 65, you would have invested $135,000. If you assume a 6% average annual return, you would have accumulated a total of $638,231 by age 65. However, if you wait until age 45 to begin investing that $3,000 annually and earn the same 6% return, by age 65 you would have invested $60,000 and accumulated a total $110,357. Even though you would have invested $75,000 more by starting earlier, you would have accumulated more than half a million dollars more overall. That’s the power you have as a young investor—the power of time and compounding. Even if you can’t afford to contribute $3,000 a year ($250/month) to your plan, remember that even small amounts can add up through compounding. So enroll in your plan and contribute whatever you can, and then try to increase your contribution amount by a percentage point or two every year until you hit your plan’s maximum contribution limit. As debts are paid off and your salary increases, redirect a portion of those extra dollars into your plan. Finally, time offers an additional benefit to young adults—the potential to withstand stronger short-term losses in order to pursue higher long-term gains. That means you may be able to invest more aggressively than your older colleagues, placing a larger portion of your portfolio in stocks to strive for higher long-term returns.

Getting married and starting a family:
You will likely face even more obligations when you marry and start a family. Mortgage payments, higher grocery and gas bills, child-care and youth sports expenses, family vacations, college savings contributions, home repairs and maintenance, dry cleaning and health-care costs all compete for your money. At this stage of life, the list of monthly expenses seems endless. Although it can be tempting to cut your retirement savings plan contributions to make ends meet, do your best to resist temptation and stay diligent. Your retirement needs to be a high priority. Are you thinking about taking time off to raise children? That is an important and often beneficial decision for many families. But it’s a decision that can have a financial impact lasting long into the future. Leaving the workforce for prolonged periods not only hinders your ability to set aside money for retirement but also may affect the size of any pension or Social Security benefits you receive down the road. If you think you might take a break from work to raise a family, consider temporarily increasing your plan

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage.

Planning for Future Health Care Costs

November 7, 2016
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The usual method for estimating spending needs in retirement is to take your post-retirement household budget and tack on an inflation rate, such as 3%. Some expenses may increase at a faster rate than the inflation rate you use, others at a slower rate, but overall, expenses such as housing, utilities, food, and so on, should rise with the general rate of inflation.   Not so for health care expenses. Projecting future health care costs in retirement can be tricky because there are several factors influencing the amount you will pay for health care in the future.

Your individual health care experience
General health care expenditures notwithstanding, you and your spouse will have your own individual health care experience during retirement. As the years go by, the odds of contracting a serious illness or chronic condition increase. Even with supplemental insurance, you could be forced to allocate a higher portion of your budget to out-of-pocket expenses such as copayments on drugs and doctor visits. You may not know exactly how much you’ll have to pay for health care when you’re 75 or 80 or 85, but you can be pretty sure it will be more than you are paying now.

Longevity
The mere possibility of a long life results in higher-than-average health care expenditures. Even if you are lucky enough to stay healthy all your life and pass away peacefully of natural causes at age 100 or 105, you still will have paid 35 or 40 years’ worth of premiums. Adding these up for Medicare, Part D and Medigap premiums and rising by 5% per year, a 65-year-old who lives another 35 years would end up paying quite a bit in premiums alone — even if he or she never enters a doctor’s office. With longer life expectancy comes a greater likelihood of the need for long-term care. Even in the absence of illness, the frailties of aging inhibit elders’ ability to care for themselves.

Potential loss of retiree health benefits
As health care costs continue to rise, employers are responding by reducing or eliminating retiree health coverage for new hires and requiring current retirees to pay more for the coverage they have. If you are counting on generous retiree coverage from your former employer, you may want to consider the possibility that such coverage may be reduced or eliminated in the future, requiring you to go into the open market to purchase supplemental insurance.

How much will you need?
The amount will depend on, among other factors:

  • The age at which he or she retires
  • Length of life after retirement
  • The availability of health insurance coverage after retirement to supplement Medicare and the   source of that coverage
  • Health status and out-of-pocket expenses
  • The rate at which health care costs will increase
  • Interest rates and other rates of return on investments

The healthiest of us may need to save the most for health care. This may seem paradoxical, but think about what many people in their eighties or nineties experience: years of declining health and mobility, and accompanying high health care expenses.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

Factors to Consider When Updating Insurance Coverage

November 6, 2016
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With health care reform implementation getting closer and the memory of super storms still fresh, now is a good time to review insurance policies coverage, insurance needs, and emergency plans. Insurance coverage tends to be the stepchild of family financial planning. All too often, insurance is obtained and then put on autopilot, only to be found inadequate when a disaster or problem strikes. That’s why it makes sense to take time every year to review insurance coverage, consider situations when new coverage may be required, and look at the implication of disaster planning on insurance coverage.

Here are the types of coverage and issues to consider in any review of personal insurance policies:

Health Insurance
Health care reform is changing the landscape of health insurance, removing previous barriers to gaining coverage, extending coverage to children up to the age of 26, and closing the doughnut hole for senior citizen prescription drug spending. With that in mind, here are some points for individual and family health insurance coverage that should be reviewed:

  • Medical deductibles and limits. For employees and senior citizens, open enrollment season provides an opportunity to review current policies and potentially change providers. When reviewing coverage or deciding whether to change to a new plan, take a look at deductibles, co-pays, and overall out-of-pocket expenses.
  • More employers are switching to high-deductible health insurance plans, once the deductible is met, there are usually co-pays for doctor’s appointments, prescriptions, and other medical treatment. The overall out-of-pocket expense limit reveals the most you’ll have to spend in overall out-of-pocket costs. Also consider out-of-network costs in case you or a family member are traveling and require care out of town or a specialist needs to be consulted who is out of network. What type of policy to choose depends on many factors, such as the overall health of family members, how often doctor’s visits and medications are needed, and the family budget.
  • Prescription coverage. Most plans provide for cheaper options that can save money, such as generic drugs, discounts, or prescription-by-mail availability.

Homeowners’ Insurance
Hurricanes and super storms are important reminders that home insurance coverage should be regularly reviewed and coverage increased in certain situations.

Homeowners’ inventory. It’s all too easy to buy jewelry, home office equipment, collectibles, and even upgrade a home through a renovation project without considering upgrading a homeowners’ insurance policy. Make a list of any significant renovations, new jewelry, home office equipment, collectibles, or other assets and review them with your insurance agent. Take up-to-date photographs or videos of all major belongings in the home and keep those pictures or videos in a safe place. Archive those photos or videos remotely via online storage.

Home replacement coverage. With home values down versus mortgages in many parts of the country, obtaining competitively priced “guaranteed replacement” or “replacement” coverage is critical. Call several insurers or insurance agents to obtain estimates on this type of coverage, and incorporate whatever change makes sense into your current or new coverage as soon as possible.

Flood and earthquake insurance options. Review the need for this coverage, because it’s not a part of standard homeowners’ policies. Hurricane and windstorm coverage. This coverage varies by state and sometimes by county. Some states offer windstorm coverage pools for people who can’t get private insurance. Most states have high-risk pools or participate in federal programs that offer this type of coverage in coastal areas, so check with an insurance agent or state insurance department to make sure you have the latest coverage options and information.

Disaster planning. This isn’t a specific insurance issue, but it’s vital just the same. Create a document in a binder, folder, or online that includes all the information that loved ones would need in case of your death–keep a physical form of this information close to the items to grab in a crisis. It is vital that in case of a catastrophic event like a sudden death that loved ones have a single go-to guide with insurance, home, and estate information. It also makes sense to make a second copy for relatives.

Umbrella Liability
Because it can be impossible to predict how much risk or liability certain situations may create – a bad car crash that a member of your family was responsible for or a fall on your property – many insurance agents recommend buying an umbrella liability policy.

Supplement to home and auto coverage. This type of policy provides coverage over and above a homeowners’ or car insurance policy in the event of a lawsuit. That way, if an unexpected event does occur that results in a lawsuit, legal and any settlement costs will be mostly covered by insurance.

Disability Insurance
Many employers provide disability insurance, but that coverage may not be sufficient to truly cover earnings lost if a disability strikes. Check any employer policy for specific coverage items like when it goes into effect, what kind of disabilities are covered, how much income replacement is offered, and how long it lasts. Many policies only replace up to 50% to 60% of income; a supplemental individual policy may be the way to increase that. Consider long-term and short-term coverage.

Car Insurance
In a similar fashion to homeowners’ insurance, it is easy to set and forget car insurance deductibles and coverage. Reviewing and updating coverage can insure coverage when an accident or disaster occurs or save money if coverage previously required is no longer needed. Higher deductibles can save money on the premium, but require higher out-of-pocket costs in the event of an accident or disaster, so weigh those variables out. If a disaster strikes, most comprehensive auto coverage will cover wind, flood, or earthquake damage. In the case of an older car that is paid for, skipping on collision insurance can be a real saver in terms of monthly premiums, but will mean no insurance payment if the car is in a collision.

Small Business Insurance
Small businesses face many risks, so if you’re a small-business owner, it makes sense to review and update your coverage frequently. Coverage your business may need could include general and professional liability insurance, commercial property insurance and home-based business insurance. Business interruption insurance is another type of coverage that could help pay the bills if a disaster, disability, or other crisis intrudes on the ability of a business to continue operating for a period of time.

Life Insurance
There are two aspects to life insurance — the first is coverage of a family member’s life and the second is insurance on a third party’s life. There are a variety of reasons to have coverage in both of these situations.

Family coverage
Life insurance coverage should pay enough to ensure the preservation of the lifestyle of a surviving spouse and children, as well as the children’s educational goals. That includes money for ongoing expenses, debt payments, and tuition. Working spouses should also consider similar coverage. As painful as it might seem, it is also necessary to consider burial coverage for children.

Insurance on another person’s life.
There are some cases when it makes sense to buy insurance on another person’s life due to the potential financial loss that could occur if that person died. In order to buy such coverage, the insured and the beneficiary must know one another and have an emotional or financial connection such that the insured wants the beneficiary to receive a benefit in the event of death. Circumstances in which you may want to consider purchasing such a policy include divorce, to protect an inheritance, for a business partner to keep a business going, or to collect on a loan. In a divorce, the spouse who is making alimony or child support payments should be covered so the spouse receiving those payments still has a source of income support if the former spouse dies. It can also be a good idea for the former spouse who is taking care of the children to be covered by a policy so that if he or she dies, the working spouse can cover childcare expenses.

In the case of protecting an inheritance, insurance coverage can help ensure adequate cash to cover taxes and other post-death costs outside of probate. For the owner of a small business, the death of a partner can throw the whole future of the business into question, so an insurance policy and agreement can provide for the surviving partner to have the cash and agreement in place to buy the deceased partner’s share of the business. In the case of a personal loan to a family member or friend, an insurance policy can ensure that the loan is repaid if the borrower dies unexpectedly.

A final word
It’s a good idea to regularly set a date to review insurance coverage and check with an insurance agent to make sure you have all the types of coverage you need at the appropriate levels. Because insurance is such an important component of overall risk management and financial planning, be sure to discuss your needs with your advisor during your annual review or at least once during each year.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

 

Critical Illness Insurance

November 5, 2016
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What it is, why people opt for it.

What is critical illness insurance? This isn’t standard-issue disability insurance, but a cousin of sorts. With people living longer, it is a risk management option entering more people’s lives. The notable wrinkle about this type of insurance is that the insurer issues you a lump sum while you are alive.

Insurance for a prolonged health crisis.
You buy critical illness insurance to help you out in case you are diagnosed with, suffer from, or experience a serious, potentially life-threatening health concern. Now, what does an insurer define as “serious” or “life-threatening”? That varies. Events or illnesses that often qualify include organ transplants, open-heart surgeries, deafness or blindness, Alzheimer’s disease, heart attacks, paralysis or the loss of limbs, serious cancers and other maladies. Many non-fatal, but trying conditions also fall within the category. The idea is that you will use the payout to get through the crisis financially – the treatment, the surgery, the costs incurred. The cash premium is either paid directly to you, or to someone that you designate.

A lump sum to use as you see fit.
While critical illness insurance pays out a lump sum to the ill, insured party, there are usually no strings attached to the money. It usually does not have to be used for medical payments. The money is tax-free, and you can use it to pay hospital bills, living expenses, business expenses … whatever costs you need or want to pay in a time of crisis.

Things to remember.
Critical illness insurance policies only pay out if you come down with one of the stipulated illnesses. This is why many people do not purchase them. However, with lifespans extending, many people recognize that more years may give them more chances to encounter a serious but survivable illness.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

Getting Your Financial Paperwork in Good Order

October 23, 2016
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Who wants to leave this world with their financial affairs in good order? We all do, right? None of us wants to leave a collection of financial mysteries for our spouse or our children to solve.

What we want and what we do can differ, however. Many heirs spend days, weeks, or months searching for a decedent’s financial and legal documents. They may even discover a savings bond, a certificate of deposit, or a life insurance policy years after their loved one passes.

Certainly, you want to spare your heirs from this predicament. One helpful step is to create a “final file.” Maybe it is an actual accordion or manila folder; maybe it is a file on a computer desktop; or maybe it is secured within an online vault. The form matters less than the function. The function this file will serve is to provide your heirs with the documentation and direction they need to help them settle your estate.

What should be in your “final file?” Definitely a copy of your will and copies of any trust documents. Place a durable power of attorney and a health care proxy in there too, as this folder’s contents may need to be accessed before you die.

Copies of insurance policies should go into the “final file” – not only your life insurance policy, but home and auto coverage. A list of all the financial accounts in your name should be kept in the file – and, to be complete, why not include sample account statements with account numbers, or, at least, usernames and passwords, so that these accounts can be easily accessed online.

Social Security benefit information should also be compiled. That information will be essential for your spouse (and, perhaps, for a former spouse). If you happen to receive a pension from a former employer, your heirs need to know the particulars about that.

They should also be able to access documentation pertaining to real estate you own. If you have a safe deposit box, at least one of your heirs should know where the key is – otherwise, your heirs will have to pay a locksmith, directly or indirectly, to open it. Along those lines, the combination to a home safe should be disclosed. If you have trust issues with some of your heirs, you can only disclose such information to the trusted ones or to an attorney.

Contact information should be inside the “final file” as well. Your heirs will need to look up the email address or phone number of the financial professionals you have consulted, any attorneys you have turned to for estate planning or business advice, and any insurance professionals with whom you have maintained relationships.

Other documentation to include: credit card information, vehicle titles, and cemetery/burial information. Be sure to include your social media and e-commerce passwords for sites like Facebook, Twitter, LinkedIn, Pinterest, Amazon and eBay. Some social media sites may require a copy of your death certificate or obituary notice before allowing any other party to access your profile. Furthermore, you may also wish to leave a letter or note instructing your heirs on how the world should be notified of your death.

Your heirs will want to supplement your “final file” with contributions of their own. Perhaps the most important supplement will be your death certificate. A funeral home may tell your heirs that they will need only a few copies. In reality, they may need several – or more – if your business or financial situation is particularly involved.

One other important step may save your heirs money & time. If you add the name of an heir to a key bank account, that heir can pay a hospital bill or make a mortgage payment on your behalf without undue delay.

Be sure to tell your heirs about your “final file.” They need to know that you have created it; they need to know where it is. It will do no good if you are the only one who knows those things when you die.

You can compile your “final file” gradually. The next account statement, income payment, or real estate or insurance newsletter than comes into your inbox or mailbox can be your cue to tackle and scratch off that particular item from the “final file” to-do list. Yes, it takes work to create a “final file” – but you could argue that it is necessary work, and your heirs will thank you for your effort.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

 

How Can Women Take Charge Of Their Money?


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Why do so many of us delegate financial responsibilities to others? 

Many women are in charge of their financial lives, and proudly so. Some have become their own financial captains as a result of life events; others have always steered their own ships. Even so, there are too many women who are left out of financial decision making – some by their own choice.

That may be a mistake. Allowing a spouse or partner to handle financial affairs may predispose a woman to a lack of money knowledge – an education deficit that may allow a couple to slip toward indebtedness one day, or prove economically crippling in the event of a divorce or death. Are you one of these women? If so, why do you think you find yourself among them?

Inherited perceptions about wealth can shape your outlook. If your parents saw wealth in terms of material items linked to prestige and present-day satisfaction, this could influence your definition of wealth. Seeing wealth in terms of creature comforts invariably associates wealth with spending, and spending can promote debt. If your parents were “millionaires next door” and lifelong savers who had a habit of living within their means, your attitude toward money may be wholly different. Their thrift may have resulted in them getting rich slowly – a good and realistic model for growing wealthy. They may not have had the biggest house or the hottest coupe in the driveway, but they may have lived well. Many of us grow up with little understanding of the way investment markets or retirement plans work. Yet the more financial literacy we possess, the more confidence we have about making financial moves, and the more confident and assertive we can become about money decisions.

If you aren’t in charge of your financial life, chances are you will be at some point. Women will eventually be solely responsible for their finances.

The more knowledge you have, the more confident you can become. When you acquire more financial knowledge, you can shatter money myths that may have crept into your life and replace them with truths. You can see your financial behavior in a new light and adjust that behavior to give yourself a better chance at amassing significant retirement savings and lifetime wealth. A good first step? Talk with a financial professional who recognizes some of the common money myths out there, and who can counter them with realistic approaches to saving and building wealth for retirement. Don’t be afraid to “pay yourself first” and embrace some risk in investing – over time, the rewards may far exceed the degree of risk you take.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

Long-Term Investment Truths

October 11, 2016
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Key lessons for retirement savers. 

You learn lessons as you invest in pursuit of long-run goals. Some of these lessons are conveyed and reinforced when you begin saving for retirement, and others you glean along the way.

First & foremost, you learn to shut out much of the “noise.” News outlets take the temperature of global markets five days a week (and even on the weekends), and fundamental indicators serve as barometers of the economy each month. The longer you invest, the more you learn to ride through the turbulence caused by all the breaking news alerts and short-term statistical variations. While the day trader sells or buys in reaction to immediate economic or market news, the buy-and-hold investor waits for selloffs, corrections and bear markets to pass.   

You learn why liquidity matters. The older you get, the more you appreciate being able to quickly access your money. A family emergency might require you to tap into your investment accounts. An early retirement might prompt you to withdraw from retirement funds sooner than you anticipate. If you have a fair amount of your savings in illiquid investments, you have a problem – those dollars are “locked up” and you cannot access those assets without paying penalties. In a similar vein, there are some investments that are harder to sell than others.  Should you misgauge your need for liquidity, you can end up selling at the wrong time as a consequence. It hurts to let go of an investment when the expected gain is high and the P/E ratio is low.    

You learn the merits of rebalancing your portfolio. To the neophyte investor, rebalancing when the market is hot may seem illogical. If your portfolio is disproportionately weighted in equities, is that a problem? It could be. Across a sustained bull market, it is common to see your level of risk rise parallel to your return. When equities return more than other asset classes, they end up representing an increasingly large percentage of your portfolio’s total assets. Correspondingly, your cash allocation shrinks as well.  The closer you get to retirement, the less risk you will likely want to assume. Even if you are strongly committed to growth investing, approaching retirement while taking on more risk than you feel comfortable with is problematic, as is approaching retirement with an inadequate cash position. Rebalancing a portfolio restores the original asset allocation, realigning it with your long-term risk tolerance and investment strategy. It may seem counterproductive to sell “winners” and buy “losers” as an effect of rebalancing, but as you do so, remember that you are also saying goodbye to some assets that may have peaked while saying hello to others that you may be buying at the right time. 

You learn not to get too attached to certain types of investments. Sometimes an investor will succumb to familiarity bias, which is the rejection of diversification for familiar investments. Why does he or she have 13% of the portfolio invested in just two Dow components? The investor just likes what those firms stand for, or has worked for them. The inherent problem is that the performance of those companies exerts a measurable influence on the overall portfolio performance. Sometimes you see people invest heavily in sectors that include their own industry or career field. An investor works for an oil company, so he or she gets heavily into the energy sector. 

You learn to be patient. Even if you prefer a tactical asset allocation strategy over the standard buy-and-hold approach, time teaches you how quickly the markets rebound from downturns and why you should stay invested even through systemic shocks. The pursuit of your long-term financial objectives should not falter – your future and your quality of life may depend on realizing them.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

Do Women Face Greater Retirement Challenges Than Men?


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If so, how can they plan to meet those challenges?

Why are women so challenged to retire comfortably? You can cite a number of factors that can potentially impact a woman’s retirement prospects and retirement experience. A woman may spend less time in the workforce during her life than a man due to childrearing and caregiving needs, with a corresponding interruption in both wages and workplace retirement plan participation. A divorce can hugely alter a woman’s finances and financial outlook. As women live longer on average than men, they face slightly greater longevity risk – the risk of eventually outliving retirement savings. There is also the gender wage gap, narrowing, but still evident.

What can women do to respond to these financial challenges? Several steps are worth taking.

  • Invest early & consistently. Women should realize that, on average, they may need more years of retirement income than men. Social Security will not provide all the money they need, and, in the future, it may not even pay out as much as it does today. Accumulated retirement savings will need to be tapped as an income stream. So saving and investing regularly through IRAs and workplace retirement accounts is vital, the earlier the better. So is getting the employer match, if one is offered. Catch-up contributions after 50 should also be a goal.
  • Consider Roth IRAs & HSAs. Imagine having a source of tax-free retirement income. Imagine having a healthcare fund that allows tax-free withdrawals. A Roth IRA can potentially provide the former; a Health Savings Account, the latter. An HSA is even funded with pre-tax dollars, as opposed to a Roth IRA, which is funded with after-tax dollars – so an HSA owner can potentially get tax-deductible contributions as well as tax-free growth and tax-free withdrawals.  IRS rules must be followed to get these tax perks, but they are not hard to abide by. A Roth IRA need be owned for only five tax years before tax-free withdrawals may be taken (the owner does need to be older than age 59½ at that time). Those who make too much money to contribute to a Roth IRA can still convert a traditional IRA to a Roth. HAS’s have to be used in conjunction with high-deductible health plans, and HSA savings must be withdrawn to pay for qualified health expenses in order to be tax-exempt. One intriguing HSA detail worth remembering: after attaining age 65 or Medicare eligibility, an HSA owner can withdraw HSA funds for non-medical expenses (these types of withdrawals are characterized as taxable income). That fact has prompted some journalists to label HSAs “backdoor IRAs.”
  • Work longer in pursuit of greater monthly Social Security benefits. Staying in the workforce even one or two years longer means one or two years less of retirement to fund, and for each year a woman refrains from filing for Social Security after age 62, her monthly Social Security benefit rises by about 8%. Social Security also pays the same monthly benefit to men and women at the same age – unlike the typical privately funded income contract, which may pay a woman of a certain age less than her male counterpart as the payments are calculated using gender-based actuarial tables.
  • Find a method to fund eldercare. Many women are going to outlive their spouses, perhaps by a decade or longer. Their deaths (and the deaths of their spouses) may not be sudden. While many women may not eventually need months of rehabilitation, in-home care, or hospice care, many other women will.

Today, financially aware women are planning to meet retirement challenges. They are conferring strategizing to take greater control over their financial futures. At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

Get Ready for Seven Serious Life Transitions Ahead

September 27, 2016
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change-aheadIt can be dangerous to generalize about the baby-boom generation, but there are seven key events that nearly everyone will face as they move through the last third of their lives. Unlike earlier, happier events such as getting married, having children, and moving up the career ladder, some of these events may be anticipated with dread. For this reason many boomers may put off facing them. But lack of preparation can make a bad situation even worse. (more…)

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Copyright © 2017. HFG Wealth Management, LLC. Investment advisory services offered through HFG Wealth Management, LLC – An independent Registered Investment Advisory firm registered with the SEC. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Therefore, any information presented here should only be relied upon when coordinated with individual professional advice. [ more disclosures ]