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Comprehensive Financial Planning: What It Is, Why It Matters

January 10, 2018
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Your approach to building wealth should be built around your goals & values.

Just what is comprehensive financial planning? As you invest and save for retirement, you may hear or read about it – but what does that phrase really mean? Just what does comprehensive financial planning entail, and why do knowledgeable investors request this kind of approach?

While the phrase may seem ambiguous to some, it can be simply defined.

Comprehensive financial planning is about building wealth through a process, not a product. Financial products are everywhere, and simply putting money into an investment is not a gateway to getting rich, nor a solution to your financial issues.

Comprehensive financial planning is holistic. It is about more than “money.” A comprehensive financial plan is not only built around your goals, but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?

Comprehensive financial planning considers the entirety of your financial life. Your assets, your liabilities, your taxes, your income, your business – these aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation.

Comprehensive financial planning is long range. It presents a strategy for the accumulation, maintenance, and eventual distribution of your wealth, in a written plan to be implemented and fine-tuned over time.

What makes this kind of planning so necessary? If you aim to build and preserve wealth, you must play “defense” as well as “offense.” Too many people see building wealth only in terms of investing – you invest, you “make money,” and that is how you become rich.

That is only a small part of the story. The rich carefully plan to minimize their taxes and debts as well as adjust their wealth accumulation and wealth preservation tactics in accordance with their personal risk tolerance and changing market climates.

A comprehensive financial plan is a collaboration & results in an ongoing relationship. Since the plan is goal-based and values-rooted, both the investor and the financial professional involved have spent considerable time on its articulation. There are shared responsibilities between them. Trust strengthens as they live up to and follow through on those responsibilities. That continuing engagement promotes commitment and a view of success.

Think of a comprehensive financial plan as your compass. Accordingly, your financial professional will work with you to craft and refine the plan can serve as your navigator on the journey toward your goals. The plan provides not only direction, but also an integrated strategy to try and better your overall financial life over time. As the years go by, this approach may do more than “make money” for you – it may help you to build and retain lifelong wealth.

At HFG Wealth Management, we embrace a 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.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

Establishing a Budget for 2018


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Do you ever wonder where your money goes each month? If so, you may want to establish a budget to help you keep track of how you spend your money and help you reach your financial budgeting goals.

Examine your goals
Before you establish a budget, you should examine your financial goals. Start by making a list of your short-term goals (e.g., new car, vacation) and your long-term goals (e.g., your child’s college education, retirement). Next, ask yourself: How important is it for me to achieve this goal? How much will I need to save? Armed with a clear picture of your goals, you can work toward establishing a budget that can help you reach them.

Identify your current monthly income and expenses
To develop a budget that is appropriate for your lifestyle, you’ll need to identify your current monthly income and expenses. You can jot the information down with a pen and paper, or you can use one of the many software programs available that are designed specifically for this purpose.

Start by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support. Next, add up all of your expenses. To see where you have a choice in your spending, it helps to divide them into two categories: fixed expenses (e.g., housing, food, clothing, transportation) and discretionary expenses (e.g., entertainment, vacations, hobbies). You’ll also want to make sure that you have identified any out-of-pattern expenses, such as holiday gifts, car maintenance, home repair, and so on. To make sure that you’re not forgetting anything, it may help to look through canceled checks, credit card bills, and other receipts from the past year. Finally, as you list your expenses, it is important to remember your financial goals. Whenever possible, treat your goals as expenses and contribute toward them regularly.

Evaluate your budget
Once you’ve added up all of your income and expenses, compare the two totals. To get ahead, you should be spending less than you earn. If this is the case, you’re on the right track, and you need to look at how well you use your extra income. If you find yourself spending more than you earn, you’ll need to make some adjustments. Look at your expenses closely and cut down on your discretionary spending. And remember, if you do find yourself coming up short, don’t worry! All it will take is some determination and a little self-discipline, and you’ll eventually get it right.

Monitor your budget
You’ll need to monitor your budget periodically and make changes when necessary. But keep in mind that you don’t have to keep track of every penny that you spend. In fact, the less record keeping you have to do, the easier it will be to stick to your budget. Above all, be flexible. Any budget that is too rigid is likely to fail. So be prepared for the unexpected (e.g., leaky roof, failed car transmission).

Tips to help you stay on track

  • Involve the entire family: Agree on a budget up front and meet regularly to check your progress
  • Stay disciplined: Try to make budgeting a part of your daily routine
  • Start your new budget at a time when it will be easy to follow and stick with the plan (e.g., the beginning of the year, as opposed to right before the holidays)
  • Find a budgeting system that fits your needs (e.g., budgeting software)
  • Distinguish between expenses that are “wants” (e.g., designer shoes) and expenses that are “needs” (e.g., groceries)
  • Build rewards into your budget (e.g., eat out every other week)
  • Avoid using credit cards to pay for everyday expenses: It may seem like you’re spending less, but your credit card debt will continue to increase

At HFG Wealth Management, we embrace a 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.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

A New Year can bring a new outlook!


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A New Year can bring a new outlook, new opportunities and new chances to improve your financial standing. As we welcome a new year, it is worth considering how you want to make the most of the next 12 months. A New Year is an opportunity and you may even say New Year’s Day represents page one. All the pages are blank to begin with and you now have the chance to write all the chapters and make this year a classic. You also have a chance to write a new chapter in your financial life by making the most of opportunities that may make the years ahead even better for you.

The New Year is a wonderful time for recommitting ourselves to things that are important to us. What could be more impactful than a fresh start and starting anew? With 2018 here, this can be an optimum time to set your goals and refine your investment philosophy and goals. The New Year tends to signify a fresh start and leaves us open to new possibilities, strategies and aspirations. If you set aside time to plan, it can set the tone for the entire year. This small practice can allow you to make decisions and goals that are in line with your vision, and that ultimately will impact your year to allow some meaningful change. You may want to reflect on the following as you begin the year:

What are your goals for the Year? Not only do you want to reflect on financial goals, but any goal you’d like to work toward or achieve in the New Year that may have financial consequences. For example, during the past year did you get married or divorced, have a child, decide to work less, change jobs or change short-term or long-term goals?

What’s truly important to you and your family? Setting specific goals and scheduling dedicated time to achieve them is a powerful tool for realizing those goals. It not only clarifies what you have to do financially to achieve the goals, it prompts you to achieve them within a specific time. Review the goals you had last year, refresh what you are focusing on, restructure your investments and schedule dedicated time with your advisor to prepare.

At HFG Wealth Management, we embrace a 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.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

 

 

Getting (Mentally) Ready to Retire


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Even those who have saved millions must prepare for a lifestyle adjustment.

A successful retirement is not merely measured in financial terms. Even those who retire with small fortunes can face boredom or depression and the fear of drawing down their savings too fast. How can new retirees try to calm these worries?

Two factors may help: a gradual retirement transition and some guidance from a financial professional.

An abrupt break from the workplace may be unsettling. As a hypothetical example, imagine a well-paid finance manager at an auto dealership whose personal identity is closely tied to his job. His best friends are all at the dealership. He retires, and suddenly his friends and sense of purpose are absent. He finds that he has no compelling reason to leave the house, nothing to look forward to when he gets up in the morning. Guess what? He hates being retired.

On the other hand, if he prepares for retirement years in advance of his farewell party by exploring an encore career, engaging in varieties of self-employment, or volunteering, he can retire with something promising ahead of him. If he broadens the scope of his social life, so that he can see friends and family regularly and interact with both older and younger people in different settings, his retirement may also become more enjoyable.

The interests and needs of a retiree can change with age or as he or she disengages from the working world. Retired households may need to adjust their lifestyles in response to this evolution.

Practically all retirees have some financial anxiety. It relates to the fact of no longer earning a conventional paycheck. You see it in couples who have $60,000 saved for retirement; you see it in couples who have $6 million saved for retirement. Their retirement strategies are about to be tested, in real time. All that careful planning is ready to come to fruition, but there are always unknowns.

Some retirees are afraid to spend. While no retiree wants to squander money, all retirees should realize that their retirement savings were accumulated to be spent. Being miserly with retirement money contradicts its purpose. The average 65-year-old who retires in 2018 will have a retirement lasting approximately 20 years, by the estimation of the Social Security Administration.

Retirement challenges people in two ways. The obvious challenge is financial; the less obvious challenge is mental. Both tests may be met with sufficient foresight and dedication.

At HFG Wealth Management, we embrace a 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.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

Tax Cut and Jobs Act – Things to know!


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Tax reform was swept through at the end of 2017, with changes that will affect virtually all tax-paying adults in the country. Here is what you need to know about various tax brackets, thresholds, limitations, and exemptions for 2018.

After years of tax-reform talk and little action, the Republican-led Congress managed to overhaul the tax code in late 2017, enacting sweeping changes to tax rates and provisions likely to affect just about every tax-paying adult in the U.S. in 2018.

It would be a stretch, however, to say that the goal of simplification was achieved. While individual taxpayers might welcome the doubling of the standard deduction—a move likely to encourage more people to forgo the hassle of itemizing—they’ll still have to wrestle with seven tax brackets, the same number as in 2017.

And while some deductions were eliminated—most notably, perhaps, the eradication of personal exemptions and deductions for miscellaneous expenses and alimony payments, plus new limitations on deducting property taxes and state and local income taxes—others were maintained and even expanded. Consider that the rules for the medical expense deduction were eased: For 2017 and 2018, taxpayers’ medical costs need exceed only 7.5% of adjusted gross income, rather than the 10% threshold that had been the law.

One of the biggest changes likely won’t be noticed by most taxpayers: the law changes the way that inflation adjustments are calculated, relying on the chained consumer price index, which tends to rise more slowly than the previous measure used, the consumer price index. Over time, that will increase individuals’ tax bills as their income grows and the tax brackets are adjusted at a slower pace.

Taxpayers will need to be mindful, too, of the fact that numerous provisions were enacted temporarily, often sun setting at the end of 2025, while others were made permanent.

Table 1: 2018 Tax Rate Schedule

Taxable income ($) Base amount of tax ($) Plus Marginal tax rate Of the amount over ($)
Single
0 to 9,525 0 + 10 0
9,526 to 38,700 952.50 + 12 9,525.00
38,701 to 82,500 4,453.50 + 22 38,700.00
82,501 to 157,500 14,089.50 + 24 82,500.00
157,501 to 200,000 32,089.50 + 32 157,500.00
200,001 to 500,000 45,689.50 + 35 200,000.00
Over 500,000 150,689.50 + 37 500,000.00
Married filing jointly and surviving spouses
0 to 19,050 0 + 10 0
19,051 to 77,400 1,905.00 + 12 19,050.00
77,401 to 165,000 8,907.00 + 22 77,400.00
165,001 to 315,000 28,179.00 + 24 165,000.00
315,001 to 400,000 64,179.00 + 32 315,000.00
400,001 to 600,000 91,379.00 + 35 400,000.00
Over 600,000 161,379.00 + 37 600,000.00
Head of household
0 to 13,600 0 + 10 0
13,351 to 50,800 1,360.00 + 12 13,600.00
51,801 to 82,500 5,944.00 + 22 51,800.00
82,501 to 157,500 12,698.00 + 24 82,500.00
157,501 to 200,000 30,698.00 + 32 157,500.00
200,001 to 500,000 44,298.00 + 35 200,000.00
Over 500,000 149,298.00 + 37 500,000.00
Married filing separately
0 to 9,525 0 + 10 0
9,526 to 38,700 952.50 + 12 9,525.00
38,701 to 82,500 4,453.50 + 22 38,700.0
82,501 to 157,500 14,089.50 + 24 82,500.00
157,501 to 200,000 32,089.50 + 32 157,500.00
200,001 to 300,000 45,689.50 + 35 200,000.00
Over 300,000 80,689.50 + 37 300,000.00
Estates and trusts
0 to 2,550 0 + 10 0
2,551 to 9,150 255.00 + 24 2,550.00
9,151 to 12,500 1,839.00 + 35 9,150.00
Over 12,500 3,011.50 + 37 12,500.00

Source: House and Senate Conference Report (PDF p. 535)

Standard deduction. The tax-reform law almost doubles the amount of the standard deduction in 2018, to $24,000, from $12,700 in 2017, for married-filing-jointly filers; to $12,000, from $6,350, for single and married-filing-separately filers; and to $18,000, from $9,350, for head-of-household filers. This is a temporary change, effective only until December 31, 2025.

The tax reform law keeps the additional standard deduction amounts as they were for 2017. Thus, people who are blind or over age 65 receive an extra deduction of $1,300. The additional deduction for those who are blind or over 65 and unmarried (not a surviving spouse) is $1,600.

Table 2: Standard Deductions

Filing status 2018 2017
Single or married filing separately $12,000 $6,350
Married filing jointly and qualifying widow(er)s $24,000 $12,700
Head of household $18,000 $9,350
Dependent filing own tax return $1,050* $1,050

*Cannot exceed greater of $1,050 or $350 plus the individual’s earned income
Source: 
House and Senate Conference Report (PDF p. 538)

Personal exemption. The ability to take personal exemptions has been eliminated under the new law, a change which to some degree tempers the benefit of the higher standard deduction. In 2017, the personal exemption amount was $4,050. The provision to eliminate personal exemptions is scheduled to sunset after December 31, 2025.

Limitations on deductions. Before the Tax Cuts and Jobs Act, the Pease and PEP provisions reduced the value of deductions for wealthy taxpayers. The new law ends the limitation on deductions, but only until the end of 2025.

Capital gains and dividends. Tax rates on long-term capital gains and qualified dividends generally are unchanged, at 0%, 15% and 20%. For 2018, the 15% rate applies to capital gains or dividends that push taxable income above $77,200 for joint returns and surviving spouses, $51,700 for heads of household, $38,600 for single and married-filing-separately taxpayers, and $2,600 for estates and trusts.

The 20% rate applies to long-term capital gains or qualified dividends that propel taxable income past $479,000 for joint filers and surviving spouses, $452,400 for heads of household, $425,800 for single filers, $239,500 for married-filing-separately filers, and $12,700 for estates and trusts.

Tax on net investment income. Some high-income taxpayers owe the Net Investment Income Tax (NIIT) of 3.8%, which is levied on the lesser of net investment income or modified adjusted gross income over specific thresholds (see thresholds below). Net investment income includes taxable interest, ordinary dividends, capital gains and other income categories, and some expenses can be subtracted.

Table 3: 3.8% Tax on Lesser of Net Investment Income or Excess of MAGI Over

Filing status 2018
Married filing jointly $250,000
Single $200,000
Married, filing separately $125,000

Source: IRS Net Investment Income Tax FAQs

Deduction for medical expenses. The House of Representatives proposed entirely repealing the medical expense deduction, but the Senate’s proposal to expand the tax break won the day. Under the Tax Cuts and Jobs Act, for tax years 2017 and 2018, taxpayers who itemize can claim a deduction for medical expenses if those expenses exceed 7.5% of adjusted gross income, a decrease from the higher 10% threshold that had been required for 2017.

Sales tax deduction. Taxpayers who itemize can choose whether to deduct state and local sales taxes or state and local income taxes, but the Tax Cuts and Jobs Act limits the total deduction for property taxes, state and local income taxes, and state and local sales taxes (paid as an individual taxpayer, unrelated to a business) to $10,000 a year.

Alternative minimum tax. The Tax Cuts and Jobs Act temporarily increases the AMT exemption amounts. In 2018, the exemption amounts rise to $109,400 for married-filing-jointly taxpayers, up from $84,500 in 2017; $70,300 for single filers, up from $54,300 in 2017; and $54,700 for filers who are married filing separately, up from $42,250 in 2017.

The new amounts are indexed for inflation, and scheduled to sunset at the end of 2025. The new law doesn’t address estates and trusts, the exemption amount for which is scheduled to rise to $24,600 in 2018, up from $24,100 in 2017.

The 28% tax rate applies to income over $95,750 for people who are married filing separately and $191,500 for all other taxpayers. The exemption amounts phase out at income of $1 million for married-filing-jointly taxpayers and $500,000 for all others (except estates and trusts which, under existing law, phase out at $82,050 in 2018).

Kiddie tax. The Tax Cuts and Jobs Act subject’s children’s unearned income to the tax brackets for estates and trusts. For qualified unearned income up to $2,600, they pay 0% tax; on qualified unearned income from $2,600 to $12,700, they pay a 15% rate, and on qualified unearned income above $12,700, they pay a 20% rate.

Estate tax. The Tax Cuts and Jobs Act essentially doubled the amount excluded from tax, to $10 million for the estate of a person who dies in 2018 (indexed to inflation after 2011), up from $5.6 million in 2017. The top federal estate-tax rate remains 40%.

Gift tax. The value of gifts one person can give another without reporting it on a gift tax return is $15,000 in 2018, up from $14,000 in 2017.

Tax-free IRA distributions to charity. People aged 70½ or older can make tax-free distributions of up to $100,000 from an IRA directly to a charity. The distribution will count as a required minimum distribution.

Education credits & deductions. As lawmakers worked on proposals during the tax-reform process, it looked as though some education credits and deductions might be reduced or eradicated. For example, the initial bill approved by the U.S. House of Representatives would have repealed the Lifetime Learning Credit, ended new contributions to Coverdell accounts, and eliminated the rule that makes savings bond interest tax-free when used for higher education. However, the final law retained those provisions as well as much of the same education benefits as existed in 2017.

There are some changes that are of note: The new law allows up to $10,000 a year in 529-plan distributions to pay for qualified private-school K-12 education costs (excluding home-schooling), a provision which might encourage taxpayers to focus on 529 plans rather than Coverdell’s. (Previously, for a 529 distribution to be qualified, it had to be used for higher-education costs, whereas K-12 expenses have been a qualified expense for Coverdell plans.) The new law also allows rollovers from 529 plans to ABLE accounts for disabled beneficiaries until December 31, 2025.

American Opportunity Tax Credit. Taxpayers with qualified education expenses can reduce their tax bill by up to $2,500 (and the credit is partially refundable) thanks to the AOTC, if their modified adjusted gross income doesn’t exceed $80,000 ($160,000 for married-filing-jointly filers). At that income level, the credit starts to phase out. A partial credit is available to people with income up to $90,000 ($180,000 for married-filing-jointly). The credit is not available to taxpayers at incomes above $90,000 ($180,000).

Lifetime Learning Credit. This nonrefundable credit is worth up to $2,000. In 2018, the credit starts to phase out for taxpayers with modified adjusted gross income of $57,000 ($114,000 for married-filing-jointly filers). The Lifetime Learning Credit offers two main advantages over the American Opportunity Tax Credit: The LLC can be claimed for an unlimited number of tax years (the AOTC is limited to four tax years per eligible student) and the student doesn’t need to be pursuing a degree (the AOTC requires the student is pursuing a degree or other credential).

Student loan interest deduction. The House of Representatives proposed repealing this tax benefit, but the final law didn’t include that repeal. The student loan interest deduction allows taxpayers to reduce their income, via an above-the-line deduction that doesn’t require itemizing, by up to $2,500. The deduction starts to phase out once modified adjusted gross income reaches $65,000 ($135,000 for married-filing-jointly filers) and is unavailable to taxpayers with modified adjusted gross income higher than $80,000 ($165,000 for joint filers).

Tax-free savings bond interest. In 2018, the ability to enjoy tax-free interest from savings bonds that are redeemed to pay for higher-education costs starts to phase out for taxpayers with modified adjusted gross income of $79,700 ($119,550 for joint filers) and completely disappears for those with income above $94,700 ($149,550 for joint returns).

Coverdell Education Savings Accounts. Parents and others who want to save for a student’s education costs can contribute a maximum of $2,000 to these accounts (contributions are after-tax, like a Roth IRA), and then withdraw the contributions and investment earnings tax-free if the funds are used to pay qualified education expenses. The maximum contribution starts to phase out for taxpayers with modified adjusted gross income of $95,000 ($190,000 for married-filing-jointly filers), while taxpayers with income above $110,000 ($220,000 for joint filers) are prohibited from contributing to such accounts.

Retirement plan contribution limits

There were rumors that the tax reform law would lead to significant changes in retirement plan contribution limits, but those changes never came to pass. The total amount that employers and employees combined can contribute to a 401(k) or similar defined-contribution plan rises to $55,000 in 2018, up from $54,000 in 2017. The maximum annual employee contribution increases to $18,500, from $18,000 a year ago, while the catch-up contribution for people aged 50 and older remains $6,000. The limit on how much compensation can be counted under a qualified plan rose to $275,000, from $270,000. Meanwhile, the basic annual benefit limit for defined-benefit plans rose to $220,000, from $215,000.

Table 4: Retirement Plan Contribution Limits

  2018 2017
Annual compensation used to determine contribution for most plans $275,000 $270,000
Defined-contribution plans, basic limit $55,000 $54,000
Defined-benefit plans, basic limit $220,000 $215,000
401(k), 403(b), 457(b), Roth 401(k) plans, elective deferral limit $18,500 $18,000
Catch-up provision for individuals 50 and over, 401(k), 403(b), 457(b), Roth 401(k) plans $6,000 $6,000
SIMPLE plans, elective deferral limit $12,500 $12,500 $12,500
SIMPLE plans, catch-up contribution for individuals 50 and over $3,000 $3,000

Source: IRS

Individual retirement accounts

In 2018, taxpayers who save for retirement in a traditional IRA or Roth IRA are limited by the same contribution maximums as applied in 2016 and 2017: $5,500, plus a $1,000 catch-up for those 50 and older.

Deductible IRA. Taxpayers who aren’t participating in a retirement plan at work generally can fully deduct their contributions to a traditional IRA. However, income thresholds limit the deductibility of such contributions for taxpayers who are participating in a workplace plan (or if their spouse participates). The following table details the income thresholds, which are slightly higher in 2018, due to IRS inflation adjustments.

Table 5: MAGI Limits for IRA Deductibility in 2018 if Covered by a Qualified Plan at Work

Filing status Full deduction Partial deduction No deduction
Single, head of household Less than $63,000 $63,000–$73,000 More than $73,000
Married filing jointly Less than $101,000 $101,000–$121,000 More than $121,000
Married filing jointly—deduction if taxpayer not covered by qualified plan, but spouse is Less than $189,000 $189,000–$199,000 More than $199,000
Married filing separately N/A 0–$10,000 More than $10,000

Source: IRS

Roth IRA contributions. Income thresholds limit who can contribute to a Roth IRA (there are no such income limits on Roth conversions), and those limits increase slightly in 2018 for most taxpayers, except for couples who are married, filing separately.

Table 6: AGI Limits for Roth IRA Contributions in 2018

Filing status Full deduction Partial deduction No deduction
Single, head of household Less than $120,000 $120,000–$135,000 More than $135,000
Married filing jointly Less than $189,000 $189,000–$199,000 More than $199,000
Married filing separately N/A 0–$10,000 More than $10,000

Source: IRS

Health savings accounts

Health savings accounts offer the rare tax trifecta: Contributions are made pretax, enjoy tax-free investment returns, and money comes out tax-free if used for qualified medical expenses. The downside is that such accounts currently are available only to those who are enrolled in a high-deductible health plan, which can pose steep up-front costs for consumers. For 2018, the minimum annual deductible for a qualifying health plan is $1,350 for an individual plan and $2,700 for family coverage. The maximum deductible contribution to an HSA in 2018 is $3,450 for individuals. For family coverage, the maximum deductible contribution is $6,900.

Table 7: Health Savings Accounts 2018

  Contribution limit Minimum annual deductible Maximum out of pocket (deductibles and copays) 55+ catch-up contribution
Single $3,450 $1,350 $6,650 $1,000
Family $6,900 $2,700 $13,300 $1,000

Source: IRS Revenue Procedure 2017-37

Long-term-care premiums

Taxpayers who are paying for long-term care generally can deduct a portion of their premiums as a qualified medical expense. The deductible varies based on the taxpayer’s age. See the table below for the specific amounts, which increase slightly in 2018.

Table 8: Amount of LTC Premiums That Qualify as Medical Expenses

Age before close of tax year 2018 2017
40 or younger $420 $410
41 to 50 $780 $770
51 to 60 $1,560 $1,530
61 to 70 $4,160 $4,090
Over 70 $5,200 $5,110

Source: IRS Revenue Procedure 2017-58

Social Security

Social Security beneficiaries may be glad to learn they’re set to receive a 2% cost of living adjustment to their benefits—a bit better than the zero adjustment in 2016 and 0.3% in 2017. The estimated maximum monthly benefit is $2,788 in 2018, up from $2,687 in 2017. The maximum taxable wage base in 2018 is $128,400, up from $127,200 in 2017. The tax rate remains the same: 6.2% each for employer and employee (12.4% for self-employed people).

Tax on Social Security benefits. Sometimes retirees are surprised to find their Social Security benefits are taxed. Table 9 below shows the income thresholds at which benefits start to be taxed. To figure their bill, beneficiaries must compute their “provisional” income, which is also known as “combined” income. Combined income = income + nontaxable interest + one-half of Social Security benefits.

Table 9: Income Brackets for Tax on Social Security Benefits

Filing status Provisional income Amount of Social Security subject to tax
Married filing jointly Under $32,000
$32,000–$44,000
Over $44,000
0
Up to 50%
Up to 85%
Single, head of household, qualifying widow(er), married filing separately and living apart from spouse Under $25,000
$25,000–$34,000
Over $34,000
0
Up to 50%
Up to 85%
Married filing separately and living with spouse Over 0 Up to 85%

Source: Social Security Administration

Full retirement age. The so-called “full” or “normal” retirement age for claiming unreduced Social Security benefits is 66 for people who were born from 1943 through 1954. For those born after 1954 but before 1960, full retirement age is 66 plus some number of months, depending on the birth year. For those born in 1960 or later, full retirement age is 67.

The earliest anyone can claim benefits is age 62, though claiming before one’s full retirement age leads to a permanently reduced monthly benefit amount. On the other hand, delaying benefits past one’s full retirement age can lead to higher benefits—as much as 8% a year higher up to age 70. The decision of when to claim benefits is a complex one; the best answer will vary depending on an individual’s circumstances. Note that even if someone delays Social Security benefits, he or she should sign up for Medicare at age 65 to avoid a late-enrollment penalty.

Retirement earnings test. When Social Security beneficiaries earn money from working, they risk a temporary reduction in benefits if their earnings exceed a certain amount—this only applies to people who are younger than their full retirement age. For every $2 in earnings above an income threshold, $1 is withheld from their benefits. That earnings threshold is $17,040 in 2018, up from $16,920 in 2017. In the year that the beneficiary reaches full retirement age, $1 of benefits is withheld for every $3 of earnings above $45,360, up from $44,880. There is no reduction in benefits after full retirement age. Once the beneficiary reaches full retirement age the benefit is adjusted to remove the actuarial reduction for those months in which a benefit was withheld.

Medicare

The standard premium amount in 2018 is $134, though some Part B beneficiaries pay less (an average of $130 in 2018) due to the “hold harmless” provision that protects them if Social Security benefits rise slower than Medicare premiums. The people who pay the higher figure include those signing up for Medicare Part B for the first time, those who don’t receive Social Security benefits, those who don’t have their Part B benefits automatically deducted from their Social Security benefits, and others. Meanwhile, some higher-income beneficiaries will pay more than the $134 standard premium (see Table 10 below).

Table 10: 2018 Medicare Premiums and Deductibles

  2018 2017
Part B (outpatient services) premium $134 (Average of $130 if held harmless) $134 (Average of $109 if held harmless)
Part B deductible $183 $183
Part A (inpatient services) deductible for first 60 days of hospitalization $1,340 $1,316
Part A deductible for days 61-90 of hospitalization $335/day $329/day
Part A deductible for more than 90 days of hospitalization $670/day $658/day

Source: Centers for Medicare and Medicaid Services

Medicare premiums for high-income taxpayers. There are higher Part B premiums for wealthier taxpayers that vary based on income. See the table below.

Table 11: Medicare Premiums for High-Income Taxpayers

2016 MAGI single 2016 MAGI joint Part B premium Part D income-related adjustment
$85,000 or less $170,000 or less $134.00 (Average of $130.00 if held harmless) $0.00
$85,001–$107,000 $170,001–$214,000 $187.50 $13.00
$107,001–$133,500 $214,001–$267,000 $267.90 $33.60
$133,501–$160,000 $267,001–$320,000 $348.30 $54.20
More than $160,000 More than $320,000 $428.60 $74.80

Source: Centers for Medicare and Medicaid Services

At HFG Wealth Management, we embrace a 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.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

A Caregiver’s Financial Responsibilities

October 4, 2017
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Key questions for you & your family to consider. 

A labor of love may come to involve money issues. Providing eldercare to a parent, grandparent or relative is one of the noblest things you can do. It is a great responsibility, and over time it may also lead you and your family to reflect on some financial responsibilities. We have come up with a list of questions to consider:

Q: How will caregiving affect your own financial picture? Try to estimate a budget, either before you begin or after a representative interval of caregiving. How much of the elder’s finances will be devoted to care costs compared with your finances? If you are thinking about quitting a job to focus on eldercare, think about the resulting loss of income, the probable loss of your own health care coverage, and your prospects for reentering the workforce in the future.

Q: How much will “aging in place” cost? Growing old at home (rather than in a nursing home) has many advantages. Unfortunately, over time, the cost of care provided in the home can greatly exceed nursing home services. So you must weigh how long you can manage with home health aide services versus adult day care or nursing home care.

Q: How much do you know about your loved one’s financial life? Caring for a parent, grandparent or sibling may eventually mean making financial decisions on their behalf. So you may have a learning curve ahead of you. Specifically, you may have to learn, if you don’t already know:

  • Where your loved one’s income comes from (SSI, pensions, investments, etc.)
  • Where wills, deeds and trust documents are located
  • Who the beneficiaries are on various policies and accounts
  • Who has advised your loved one about financial matters in the past (financial consultants, CPAs, etc.)
  • Assorted PIN numbers for accounts and of course Social Security numbers

Q: Is it time for a power of attorney? If a loved one has been diagnosed with Alzheimer’s or any form of disease which will eventually impair judgment, a power of attorney will likely be needed in the future. In fact, if you try to handle money matters for another person without a valid power of attorney, the financial institution involved could reject your efforts. When a power of attorney is in effect, it authorizes an “agent” or “attorney-in-fact” to handle financial transactions for another person. A durable power of attorney lets you handle the financial matters of another person immediately. A springing power of attorney only lets you do this after a medical diagnosis confirms a person’s mental incompetence. (As no doctor wants a lawsuit, such diagnoses are harder to obtain than you might think.)   You may want to obtain a power of attorney before your loved one is unable to make financial decisions. Many investment firms will only permit a second party access to an account owner’s invested assets if the original account owner signs a form allowing it. Copies of the durable power of attorney should be sent to any financial institution at which your parents have accounts or policies. Whoever becomes the agent should be given a certified copy of the power of attorney and be told where the original document is located.

Q: Is it time for a conservatorship? A conservatorship gives a guardian the control to manage the assets and financial affairs of a “protected” person. If a loved one becomes incapacitated, a conservator can assume control of some or all of the protected party’s income and assets if a probate court allows.

To create a conservatorship, you must either request or petition a probate court, preferably with assistance from a family law attorney. A probate court may only grant conservatorship after interviews and background check on the proposed conservator and only after documentation is provided to the court showing financial and mental incompetence on the part of the individual to be protected.

A conservatorship implies more vigilance than a power of attorney. With a power of attorney, there is no ongoing accountability to a court of law. (The same goes for a living trust.) There is little to prevent an attorney-in-fact from abusing or neglecting the protected person. On the other hand, a conservator must report an ongoing accounting to the probate court.

Q: If a trust is created, who will serve as trustee? As some care receivers acknowledge their physical and mental decline, they decide to transfer ownership of certain assets from themselves to a revocable or irrevocable trust. A settlor (or grantor) creates a trust, a trustee manages it and the assets go to one or more beneficiaries. (The trustee can be a relative; it can also be a bank or an attorney, for that matter.) At the settlor’s death, the trustee distributes the settlor’s assets according to the instructions written in the trust document. Probate of the trust assets is avoided – so long as the assets have been transferred into the trust during the settlor’s lifetime.

A trustee has a fiduciary responsibility to watch over the financial legacy of the settlor. Practically speaking, a trustee needs to have sufficient financial literacy to understand tax law, the managing of investments and the long-range goals noted in the trust document. Some families consider all this and opt to manage trusts themselves; others seek the services of financial professionals.

If the care receiver has a living trust or another form of trust already, you may still need a power of attorney as percentages of his or her assets or income may not end up in the trust. (There is nothing from preventing a trustee from also being the agent in a power of attorney.) Additionally, while a living trust is essentially a will substitute, you will still need a pour-over will to supplement it. That is because in all probability, some of the settlor’s assets won’t be transferred into the trust during his or her lifetime. A pour-over will is the legal mechanism that “pours” those stray assets into the trust when the settlor passes away.

Q: Finally, do you understand the potential for liability? As a caregiver, you have a physical, psychological and legal duty to the care receiver. If you neglect that duty, you could be held liable as many states have laws demanding that caregiving meets certain standards.  These laws are basically similar: a caregiver must not abuse the care receiver in any conceivable way, and any incidents of such abuse must be reported (there are often state and local “hotlines” set up for this). The elder must have adequate nutrition, clothing and bedding, and the environment must be clean and not pose health hazards.

If you have obtained a power of attorney for finances, then appropriate amounts of the elder’s money must be spent on necessary health services and other services on behalf of his/her well-being. Failure to do so could be interpreted in court as a form of abuse or neglect.

When abuse and neglect occur, they may have roots in caregiver burnout – the caregiver is constantly cross and irritable with the care receiver, or stress defines the experience, or an overwhelming sense of duty or anxiety prevents the caregiver from having a life of his/her own. If you ever feel you are approaching this point, it is time to call for assistance or to assign caregiving to professionals.   

At HFG Wealth Management, we embrace a 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.

The Advantages of HSAs

September 18, 2017
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Health Savings Accounts offer you tax breaks & more.

As health care planning remains a topic, why do people open up Health Savings Accounts in conjunction with high-deductible health insurance plans? Well, here are some of the compelling reasons why some employees decide to have HSA’s.

#1: Tax-deductible contributions. These accounts are funded with pre-tax income – that is, you receive a current-year tax deduction for the amount of money you put into the plan. Your annual contribution limit to an HSA depends on your age and the type of high-deductible health plan (HDHP) you have in conjunction with the account.

#2: Tax-free growth. In addition to the perk of being able to deduct HSA contributions from gross income, the interest on an HSA grows untaxed. (It is often possible to invest HSA assets.)

#3: Tax-free withdrawals (as long as they pay for health care costs). Under federal tax law, distributions from HSAs are tax-free as long as they are used to pay qualified medical expenses.

Add it up: an HSA lets you avoid taxes as you pay for health care. Additionally, these accounts have other merits.

  • You own your HSA. If you leave the company you work for, your HSA goes with you – your dollars aren’t lost.
  • Do HAS’s have underpublicized societal benefits? Since HSA’s impel people to spend their own dollars on health care, the theory goes that they spur their owners toward staying healthy and getting the best medical care for their money.

The HSA is sometimes called the “stealth IRA.” If points 1-3 mentioned above aren’t wonderful enough, consider this: after age 65, you may use distributions out of your HSA for any purpose; although, you will pay regular income tax on distributions that aren’t used to fund medical expenses. (If you use funds from your HSA for non-medical expenses before age 65, the federal government will typically issue a 20% withdrawal penalty in addition to income tax on the withdrawn amount.)  In fact, you can even transfer money from an IRA into an HSA – but you can only do this once, and the amount rolled over applies to your annual IRA contribution limit. (You can’t roll over HSA funds into an IRA.)

How about the downside? In the worst-case scenario, you get sick while you’re enrolled in an HDHP and lack sufficient funds to pay medical expenses. It is worth remembering that HSA funds don’t always pay for some forms of health care, such as non-prescription drugs. You also can’t use HSA funds to pay for health insurance coverage before age 65, in case you are wondering about such a move. After that age limit, things change: you can use HSA money to pay Medicare Part B premiums and long-term care insurance premiums. If you are already enrolled in Medicare, you can’t open an HSA; Medicare is not a high-deductible health plan.

Even with those caveats, younger and healthier workers see many tax perks and pluses in the HSA. If you have a dependent child covered by an HSA-qualified HDHP, you can use HSA funds to pay his or her medical bills if that child is younger than 19. (This also applies if the dependent child is a full-time student younger than 24 or is permanently and totally disabled.)

Your employer may provide a match for your HSA. If an HSA is a component of an employee benefits program at your workplace, your employer is permitted to make contributions to your account.  With the future of the Affordable Care Act in question, and more and more employers offering HSA’s to their employees, perhaps people will become more knowledgeable about the intriguing features of these accounts and the way they work.

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 It All Together for Retirement

May 31, 2017
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Where is everything? Time to organize and centralize your documents.

Before retirement begins, gather what you need. Put as much documentation as you can in one place, for you and those you love. It could be a password-protected online vault; it could be a file cabinet; it could be a file folder. Regardless of what it is, by centralizing the location of important papers you are saving yourself from disorganization and headaches in the future.

  • What should go in the vault, cabinet or folder(s)? Crucial financial information and more. You will want to include…
  • Those quarterly/annual statements. Recent performance paperwork for IRAs, 401(k)s, funds, brokerage accounts and so forth. Include the statements from the latest quarter and the statements from the end of the previous calendar year (that is, the last Q4 statement you received). You no longer get paper statements? Print out the equivalent, or if you really want to minimize clutter, just print out the links to the online statements. (Someone is going to need your passwords, of course.) These documents can also become handy in figuring out a retirement income distribution strategy.
  • Healthcare benefit info. Are you enrolled in Medicare or a Medicare Advantage plan? Are you in a group health plan? Do you pay for your own health coverage? Own a long term care policy? Gather the policies together in your new retirement command center, and include related literature so you can study their benefit summaries, coverage options, and rules and regulations. Contact info for insurers, HMOs, your doctor(s) and the insurance agent who sold you a particular policy should also go in here.
  • Life insurance info. Do you have a straight term insurance policy, no potential for cash value whatsoever? Keep a record of when the level premiums end. If you have a whole life policy, you need paperwork communicating the death benefit, the present cash value in the policy and the required monthly premiums.
  • Beneficiary designation forms. Few pre-retirees realize that beneficiary designations often take priority over requests made in a will when it comes to 401(k)s, 403(b)s and IRAs. Hopefully, you have retained copies of these forms. If not, you can request them from the account custodians and review the choices you have made. Are they choices you would still make today? By reviewing them in the company of a retirement planner or an attorney, you can gauge the tax efficiency of the eventual transfer of assets.
  • Social Security basics. If you have not claimed benefits yet, put your Social Security card, your W-2 form from last year, certified copies of your birth certificate, marriage license or divorce papers in one place, and military discharge paperwork and a copy of your W-2 form for last year (or Schedule SE and Schedule C plus 1040 form, if you work for yourself), and military discharge papers or proof of citizenship, if applicable. Take a look at your Social Security statement that tracks your accrued benefits (online or hard copy) and make a screengrab of it or print it out.
  • Pension matters. Will you receive a bona fide pension in retirement? If so, you want to collect any special letters or bulletins from your employer. You want your Individual Benefit Statement telling you about the benefits you have earned and for which you may become eligible; you also want the Summary Plan Description and contact info for someone at the employee benefits department where you worked.
  • Real estate documents. Gather up your deed, mortgage docs, property tax statements and homeowner insurance policy. Also, make a list of the contents of your home and their estimated value – you may be away from your home more in retirement, so those items may be more vulnerable as a consequence.
  • Estate planning paperwork. Put copies of your estate plan and any trust paperwork within the collection, and of course a will. In case of a crisis of mind or body, your loved ones may need to find a durable power of attorney or health care directive, so include those documents if you have them and let them know where to find them.
  • Tax returns. Should you only keep your 1040 and state return from the previous year? How about those for the past 7 years? Have you kept every one since 1982 or 1974? At the very least, you should have a copy of returns from the prior year in this collection.
  • A list of your digital assets. We all have them now, and they are far from trivial – the contents of a cloud, a photo library, or a Facebook page may be vital to your image or your business. Passwords must be compiled too, of course.

  

This will take a little work, but you will be glad you did it someday. Consider this a Saturday morning or weekend project. It may lead to some discoveries and possibly prompt some alterations to your financial picture as you prepare for retirement.

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. HSAs 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).
  • 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 with financial advisors in recognition of those tests – and they are 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.

How Millennials Can Get Off to a Good Financial Start

June 28, 2016
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Doing the right things at the right time may leave you wealthier later.  

What can you do to start building wealth before age 35? You know time is your friend and that the earlier you begin saving and investing for the future, the better your financial prospects may become. So what steps should you take?

Reduce your debt. With recent graduations, students may have student loan debt to pay off. If struggling to pay student loans off, take a look at some of the income-driven repayment plans offered to federal student loan borrowers and options for refinancing the loan into a lower-rate one (which could potentially save thousands). You cannot build wealth simply by wiping out debt, but freeing yourself of major consumer debts frees you to build wealth like nothing else. The good news is that saving, investing and reducing your debt are not mutually exclusive. As financially arduous as it may sound, you should strive to do all three at once. If you do, you may be surprised five or ten years from now at the transformation of your personal finances.

Save for retirement. If you are working full-time for a decently-sized employer, chances are a retirement plan is available to you. If you are not automatically enrolled in the plan, go ahead and sign up for it. You can contribute a little of each paycheck. Even by contributing only $50 or $100 per pay period, you will start far ahead of many of your peers. Away from the workplace, traditional IRAs offer you the same perks. Roth IRAs and Roth workplace retirement plans are the exceptions – when you “go Roth,” your contributions are not tax-deductible, but you can eventually withdraw the earnings tax-free after age 59½ as long as you abide by IRS rules. Workplace retirement plans are not panaceas – they can charge administrative fees exceeding 1% and their investment choices can sometimes seem limited.

Keep an eye on your credit score. Paying off your student loans and getting started saving for retirement are a great start, but what about your immediate future? You’re entitled to three free credit reports per year from TransUnion, Experian, and Equifax. Take advantage of them and watch for unfamiliar charges and other suspicious entries. Be sure to get in touch with the company that issued your credit report if you find anything that shouldn’t be there. Maintaining good credit can mean a great deal to your long-term financial goals, so monitoring your credit reports is a good habit to get into.

Invest regularly; stay invested. When you keep putting money toward your retirement effort and that money is invested, there can often be a snowball effect. In fact, if you invest $5,000 at age 25 and just watch it sit there for 35 years as it grows 6% a year, the math says you will have $38,430 with annual compounding at age 60. In contrast, if you invest $5,000 each year under the same conditions, with annual compounding you are looking at $595, 040 at age 60. That is a great argument for saving and investing consistently through the years.

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.

INVESTMENT
ADVICE

Asset Allocation
Investment Review Selection
Portfolio Management
Risk Analysis Management
Tax Impact Analysis
Asset Transition Analysis

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 ]