When it comes to fees on your account, there is no such thing as a ‘fee-free' investment.  All you need to do is ask so that you know what you’re paying for.

Do You Know What You're Paying For?

Much being is said regarding the changes happening in the financial services industry right now.  You may have heard some news stories through the media regarding disclosure, compensation, and fiduciary responsibility.  Those that are already disclosing fees, advisor compensation, and are a fiduciary are already operating on these parameters; those that are not conducting their business in this way are opposing changes to the industry.  Unfortunately, it has left some financial clients confused.

As a client, you have the right to choose the model works best for you when you choose a financial professional to work with.  However, you need to be informed of the differences and should feel comfortable asking questions pertaining to fees on your accounts, how much your financial professional makes from you, and if they operate as a fiduciary.  Here are some key differences that impact what you pay for in working with your financial professional:

A Financial Advisor- Is a fiduciary that has a legal and moral responsibility to take care of your assets and act in your best interest; this is a financial advisor (person) who works for a Registered Investment Advisor firm and holds a Series 65 or 66 license in addition to other licenses.  They are compensated for the advice they give and the management of your assets, based on a percentage of assets under management.

A Registered Representative (Financial Representative) - Is a professional who is compensated based on the products they recommend when you purchase those products or buy or sell shares in your accounts.  They typically work for a broker-dealer or an insurance company and represent the products those two entities sell.  They may or may not offer financial advice and can't charge for it.  The license they hold that designates them as a representative is a Series 63 in addition to others.

Many financial professionals have numerous securities licenses that allow them to work with specific investment vehicles and may choose to have advanced designations obtained through additional specialized education.  All licensed individuals need to complete continuing education on-going to remain licensed.

When it comes to fees on your account, there is no such thing as a ‘fee-free' investment.  You will either pay fees upfront when you buy a product or shares or pay fees that are included in the assets under management through your agreement with your financial advisor.  Regardless, there is a way to compare fees of both financial professionals which should be disclosed to you when you decide to do business with that person.  All you need to do is ask so that you know what you're paying for.  We welcome your questions regarding how we are compensated for working with you.

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Women and Retirement: Overcoming Savings Obstacles

Women in the US today are better educated and have more opportunities than their mothers and grandmothers.  But even though women have more opportunities than in the past, they face obstacles that can impact their potential for retirement savings.  Lower pay than male counterparts, time off from their career to care for children or another family member, and longevity are all factors affecting a women's ability to save and have enough to live off of in retirement.

Women are great savers when they are participating in a retirement savings plan such as a 401(k) or similar offering, but the participation rate is less for women than men, and they save 4% less than their male counterparts.  Women (56% of the current working) are more likely to ‘guess' at their retirement income savings needs and believe that $500,000 is enough in retirement.  Men are less likely to guess as reported in the 2017 Transamerica Center for Retirement Study and reportedly used a financial calculator to arrive at their retirement savings number.

Women participating in the study identified things that they felt would help them to save more, regardless of obstacles; having access to accurate information regarding saving and investing for retirement, greater tax incentives for participating, a financial advisor, and a greater sense of urgency to save.

Interestingly all women, and especially Baby Boomer women, expressed not knowing enough about social security benefits.  Many cited concerns about Social Security not being available to them when they retire and worries over the retirement priorities of the President and Congress.

What can women do to overcome savings obstacles?  Start by taking charge of YOUR financial future: 

1.  Start saving and get into the ‘habit' of saving each month

2.  Participate in a retirement plan at your employer, or another plan type if there isn't one.

3.  Find an advisor you trust and work with them to develop a financial plan.

4.  Become involved in your family finances, not just trusting someone else to ‘take care of it.'

5.  Get educated about investing for retirement

6.  Have a backup plan; death, divorce, and being unable to work before retirement is a reality check

If you have concerns about the obstacles you may be facing regarding saving for retirement, contact our office to have a conversation and develop a plan that meets your personal needs.

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Even though women today have more opportunities than in the past, they face obstacles that can impact their potential for retirement savings. 

Regardless of political drama that may or may not lead to IRS changes affecting savings vehicles, one thing is clear- you need to save for retirement regardless of how it may affect your taxes.

What’s New for 2018 for Retirement Plan Savers?

The answer to that is not much, but the allowable pre-tax contributions in most traditional retirement plans will see a small increase for 2018.  Here's what you need to know if you plan to contribute the most you can in 2018 into your pre-tax retirement accounts: 

401(k)s, 403(b)s, and most 457 plans will see a $500 allowable increase for those under age 50 to $18,500.  The ‘catch-up' provision for those older than age 50 will stay the same at $6000 for 2018.  However, if you don't turn 50 until December 31st, 2018, the IRS will still allow you to make your $6000 extra contribution in 2018 (of course).

Defined Contribution Plan contributions will increase to $55,000.

SEP IRAs and Solo 401(k)s (for the self-employed and business owners) goes up to $1000 to a limit of $55,000 that they can contribute as an employer in 2018.  The contribution amount is a percentage of salary, so make sure you consult your tax professional on the allowable limit for 2018 before you contribute.

SIMPLE IRAs will not have an increase.  The max contribution remains at $12,500 with the catch up provision for those age 50 and older still the same at $3000 per year.

Defined Benefit Plans are for those high-earning corporate self-employed and will have an increase of $5000 to a maximum contribution limit of $220,000 in 2018.

There is a lot of adverse reporting and fear-mongering in the media about what the current administration and Congress may or may not do to pre-tax retirement savings.  Regardless of political drama that may or may not lead to IRS changes affecting savings vehicles, one thing is clear- you need to save for retirement regardless of how it may affect your taxes.  If you would like to discuss your pre-tax retirement accounts, or how drawing down your retirement savings may impact you, please contact our office for a meeting.

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A Holistic Approach to Your Retirement

Retirement and financial planning should take on a holistic approach.  There are two parts involved, the preparing for retirement, and the being in retirement stages.  Both stages are equally important in your approach to how you view your mind, body, and your money as it will set the stage for achieving goals and enjoying retirement.  Living a good life now will enable you to live a good life later.  People are living longer and need their mind to be clear, their body to hold up, and their money to last.  Let's take a look at each area and why you need a holistic approach toward retirement planning.

Your Mind.  According to the American Psychological Association, the Stress in America Report released last month (November 2017) connects the links between stress, the body's ability to stay healthy, and the financial implications related to both.  Mental health determines how you treat your body and how you manage your finances.  Poor mental health commonly leads to physical health problems, and a byproduct is the inability to control one's finances or maintain employment.  Those with better mental health practice individual planning and saving for retirement, managing their finances and maintaining regular jobs.  They practice a healthy lifestyle because they view themselves retiring someday.  Maintaining good mental health in retirement is just as important as when you're younger, and medical intervention should happen if you experience a change in mental capacity or depression.

Your Body.  How you take care of your body before retirement is a determination of what you may pay in healthcare costs for care.  An example of this would be a lack of exercise during most of pre-retirement or obesity, where either or both cause hip issues leading to surgery, life-long mobility problems, and expenses in retirement not planned for.  Nutrition, exercise, and lifestyle choices are tied directly to a longer, healthier life.  Keeping active when you're retired increases your chances of your body lasting as long as your life with minimal physical ailments.

Your Money.  Saving money monthly while in your working years helps you develop a habit that will help you stretch your money when you're retired.  Saving and spending habits are developed early in life and people tend to treat their financial health the same all through their life.  It's either poor or healthy!  Treating your money as a precious commodity that can be lost if you don't manage it properly, or developing a financial plan is a way to help you stay on track.  Having money saved will help if you have mind or body problems later in life. 

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Living a good life now will enable you to live a good life later.  People are living longer and need their mind to be clear, their body to hold up, and their money to last.

SAI December 2017 Newsletter Approval 1949027.1

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