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New Rules Affect Retirement Savings Advice

On April 6, 2016, the Department of Labor (DOL) issued new "conflict of interest" rules regarding financial advice as it relates to retirement plans and IRAs. The new DOL rules generally hold financial professionals to a fiduciary standard if they receive compensation for providing investment advice to retirement plan participants or IRA owners, which means they must act impartially and in their clients' best interests. Here are answers to some basic questions about the new rules.

What is a "fiduciary" and why does it matter?

"Fiduciary" is a term for an individual who has a legal or ethical duty to act for another's benefit. When a financial professional provides investment advice or recommendations to an IRA owner or an employer-sponsored retirement plan participant, and in doing so receives compensation, the new rules generally hold the financial professional to a fiduciary standard. In other words, the financial professional must put the client's best interest ahead of his or her own. To that end, the rules are designed to eliminate potential conflicts of interest. One example is a situation in which a financial professional would get paid more for one investment product than another, creating a possible conflict when he or she makes a recommendation.

Does that mean sales commissions on investments will be eliminated?

Financial professionals can continue to receive compensation via commission on investment products. Under the new rules, however, certain requirements must be followed if advice provided relates to retirement plans or IRAs, including rollovers to IRAs. For example, if a financial professional provides advice relating to an IRA, there's a general requirement for a contract stating that the financial institution and professional will act as fiduciaries and will provide investment advice that is in the best interest of the client. There are also required disclosures on fees and charges, and on commissions and other transaction-based payments.

Will anything change if a financial professional is being paid a flat fee?

The impact of the rules may be much less obvious if a financial professional is compensated based on a fixed percentage of the value of assets, or on a set fee that does not change based on the particular investments recommended. However, there will be some additional documentation requirements, particularly when any discussion involves a potential rollover of funds to an IRA.

What about general educational materials?

The new rules do not change or limit the ability of financial professionals to provide general investment, financial, or retirement education materials. That includes newsletters; general marketing materials; research reports or news reports prepared for general distribution; and educational pieces on concepts such as risk and return, effects of inflation, and estimating future retirement income needs.

Do the new rules apply to advice that relates to accounts that aren't retirement plans or IRAs?

No. The rules only apply to advice as it relates to IRAs and employer-sponsored retirement plans, such as 401(k) plans. Existing rules will continue to govern the advice provided by a financial professional relating to taxable accounts.

When do the new rules take effect?

Most of the major provisions in the final rules do not take effect until April 2017. Some of the provisions relating to detailed disclosures, policies and procedures, and contract requirements do not go into full effect until January 1, 2018.

Where can I get more information?

The actual rules, as well as explanatory materials, can be found on the DOL website at www.dol.gov/ebsa/regs/conflictsofinterest.html.

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2016 Year-End Tax Planning Basics

The window of opportunity for many tax-saving moves closes on December 31, so it's important to evaluate your tax situation now, while there's still time to affect your bottom line for the 2016 tax year.

Timing is everything

Consider any opportunities you have to defer income to 2017. For example, you may be able to defer a year-end bonus, or delay the collection of business debts, rents, and payments for services. Doing so may allow you to postpone paying tax on the income until next year. If there's a chance that you'll be in a lower income tax bracket next year, deferring income could mean paying less tax on the income as well. Similarly, consider ways to accelerate deductions into 2016. If you itemize deductions, you might accelerate some deductible expenses like medical expenses, qualifying interest, or state and local taxes by making payments before year-end. Or you might consider making next year's charitable contribution this year instead. Sometimes, however, it may make sense to take the opposite approach — accelerating income into 2016 and postponing deductible expenses to 2017. That might be the case, for example, if you can project that you'll be in a higher tax bracket in 2017; paying taxes this year instead of next might be outweighed by the fact that the income would be taxed at a higher rate next year. 

Factor in the AMT

Make sure that you factor in the alternative minimum tax (AMT). If you're subject to the AMT, traditional year-end maneuvers, like deferring income and accelerating deductions, can have a negative effect. That's because the AMT — essentially a separate, parallel income tax with its own rates and rules — effectively disallows a number of itemized deductions. For example, if you're subject to the AMT in 2016, prepaying 2017 state and local taxes won't help your 2016 tax situation, but could hurt your 2017 bottom line.

Special concerns for higher-income individuals

The top marginal tax rate (39.6%) applies if your taxable income exceeds $415,050 in 2016 ($466,950 if married filing jointly, $233,475 if married filing separately, $441,000 if head of household). And if your taxable income places you in the top 39.6% tax bracket, a maximum 20% tax rate on long-term capital gains and qualifying dividends also generally applies (individuals with lower taxable incomes are generally subject to a top rate of 15%). If your adjusted gross income (AGI) is more than $259,400 ($311,300 if married filing jointly, $155,650 if married filing separately, $285,350 if head of household), your personal and dependency exemptions may be phased out for 2016 and your itemized deductions may be limited. If your AGI is above this threshold, be sure you understand the impact before accelerating or deferring deductible expenses. Additionally, a 3.8% net investment income tax (unearned income Medicare contribution tax) may apply to some or all of your net investment income if your modified AGI exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately). Note: High-income individuals are subject to an additional 0.9% Medicare (hospital insurance) payroll tax on wages exceeding $200,000 ($250,000 if married filing jointly or $125,000 if married filing separately).

IRAs and retirement plans

Take full advantage of tax-advantaged retirement savings vehicles. Traditional IRAs and employer-sponsored retirement plans such as 401(k) plans allow you to contribute funds on a deductible (if you qualify) or pre-tax basis, reducing your 2016 taxable income. Contributions to a Roth IRA (assuming you meet the income requirements) or a Roth 401(k) aren't deductible or made with pre-tax AMT triggers You're more likely to be subject to the AMT if you claim a large number of personal exemptions, deductible medical expenses, state and local taxes, and miscellaneous itemized deductions. Other common triggers include home equity loan interest when proceeds aren't used to buy, build, or improve your home, and the exercise of incentive stock options. Page 1 of 2, see disclaimer on final page Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016 Vantage Advisors, LLC, is an independent Registered Investment Advisory firm. Gregory A. Kemp CPA, PFS, is an Investment Advisor Representative with Vantage Advisors, LLC, a separate and distinct legal entity from Vantage Financial Solutions, Inc., Vantage Strategies, LLC, and Kemp Commercial, LC, dba Vantage Real Estate. Please contact Gregory A. Kemp or Neal Marchant if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part 2B of Form ADV and is available for your review upon request. dollars, so there's no tax benefit for 2016, but qualified Roth distributions are completely free from federal income tax, which can make these retirement savings vehicles appealing. For 2016, you can contribute up to $18,000 to a 401(k) plan ($24,000 if you're age 50 or older) and up to $5,500 to a traditional IRA or Roth IRA ($6,500 if you're age 50 or older). The window to make 2016 contributions to an employer plan typically closes at the end of the year, while you generally have until the April tax return filing deadline to make 2016 IRA contributions.

Roth conversions

Year-end is a good time to evaluate whether it makes sense to convert a tax-deferred savings vehicle like a traditional IRA or a 401(k) account to a Roth account. When you convert a traditional IRA to a Roth IRA, or a traditional 401(k) account to a Roth 401(k) account, the converted funds are generally subject to federal income tax in the year that you make the conversion (except to the extent that the funds represent nondeductible after-tax contributions). If a Roth conversion does make sense, you'll want to give some thought to the timing of the conversion. For example, if you believe that you'll be in a better tax situation this year than next (e.g., you would pay tax on the converted funds at a lower rate this year), you might think about acting now rather than waiting. (Whether a Roth conversion is appropriate for you depends on many factors, including your current and projected future income tax rates.) If you convert a traditional IRA to a Roth IRA and it turns out to be the wrong decision (things don't go the way you planned and you realize that you would have been better off waiting to convert), you can recharacterize (i.e., "undo") the conversion. You'll generally have until October 16, 2017, to recharacterize a 2016 Roth IRA conversion — effectively treating the conversion as if it never happened for federal income tax purposes. You can't undo an in-plan Roth 401(k) conversion, however. 

Changes to note

If you didn't have qualifying health insurance coverage in 2016, you are generally responsible for the "individual shared responsibility payment" (unless you qualified for an exemption). The maximum individual shared responsibility payment for 2016 increased to 2.5% of household income with a family maximum of $2,085 for 2016, up from 2% of household income for 2015. After 2016, the individual shared responsibility payment will be based on the 2016 dollar amounts, adjusted for inflation. Since 2013, individuals who itemize deductions on Schedule A of IRS Form 1040 have been able to deduct unreimbursed medical expenses to the extent that the total expenses exceed 10% of AGI. However, a lower 7.5% AGI threshold has applied to those age 65 or older (the lower threshold applied if either you or your spouse turned age 65 before the end of the taxable year). Starting in 2017, the 10% threshold will apply to all individuals, regardless of age. This is something that you may want to factor in if you're considering accelerating (or delaying) deductible medical expenses.

Expiring provisions

Legislation signed into law in December 2015 retroactively extended a host of popular tax provisions — frequently referred to as "tax extenders" — that had already expired. Many of the tax extender provisions were made permanent, but others were only temporarily extended. The following provisions are among those scheduled to expire at the end of 2016. • Above-the-line deduction for qualified higher-education expenses • Ability to deduct qualified mortgage insurance premiums as deductible interest on Schedule A of IRS Form 1040 • Ability to exclude from income amounts resulting from the forgiveness of debt on a qualified principal residence • Nonbusiness energy property credit, which allowed individuals to offset some of the cost of energy-efficient qualified home improvements (subject to a $500 lifetime cap) 

Talk to a professional

When it comes to year-end tax planning, there's always a lot to think about. A tax professional can help you evaluate your situation, keep you apprised of any legislative changes, and determine whether any year-end moves make sense for you. 
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Four Things Women Need to Know about Social Security

Ever since a legal secretary named Ida May Fuller received the first retirement benefit check in 1940, women have been counting on Social Security to provide much-needed retirement income. Social Security provides other important benefits too, including disability and survivor's benefits, that can help women of all ages and their family members.

1. How does Social Security protect you and your family?

When you work and pay Social Security taxes, you're paying for three types of benefits: retirement, disability, and survivor's benefits.

Retirement benefits

Retirement benefits are the cornerstone of the Social Security program. According to the Social Security Administration (SSA), because women are less often covered by retirement plans and live longer on average than men, they are typically more dependent on Social Security retirement benefits. Even if other sources of retirement income are exhausted, Social Security retirement benefits can't be outlived. Many women qualify for benefits based on their own work record, but if you're married, you may also qualify based on your husband's work record.

Disability benefits

During your working years, you may suffer a serious illness or injury that prevents you from earning a living, potentially putting you and your family at financial risk. But if you qualify for Social Security on your earnings record, you may be able to get monthly disability benefits. You must have worked long enough in recent years, have a disability that is expected to last at least a year or result in death, and meet other requirements. If you're receiving disability benefits, certain family members (such as your dependent children) may also be able to collect benefits based on your work record. Because eligibility requirements are strict, Social Security is not a substitute for other types of disability insurance, but it can provide basic income protection.

Survivor's benefits

You probably know the value of having life insurance to financially protect your family, but did you know that Social Security offers valuable income protection as well? If you're qualified for Social Security at your death, your surviving spouse (or ex-spouse), your unmarried dependent children, or your dependent parents may be eligible for benefits based on your earnings record. You also have survivor protection if you're married and your covered spouse dies and you're at least age 60 (or at least age 50 if you're disabled), or at any age if you're caring for your covered child who is younger than age 16 or disabled.

2. How do you qualify for benefits?

When you work in a job where you pay Social Security taxes or self-employment taxes, you earn credits (up to four per year, depending on your earnings) that enable you to qualify for Social Security benefits. In 2016, you earn one credit for each $1,260 of wages or self-employment income. The number of credits you need to qualify depends on your age and the benefit type.

·        For retirement benefits, you generally need to have earned at least 40 credits (10 years of work). However, you may also qualify for spousal benefits based on your husband's work history if you haven't worked long enough to qualify on your own, or if the spousal benefit is greater than the benefit you've earned on your own work record.

·        For disability benefits (if you're disabled at age 31 or older), you must have earned at least 20 credits in the 10 years just before you became disabled (different rules apply if you're younger).

·        For survivor's benefits for your family members, you need up to 40 credits (10 years of work), but under a special rule, if you've worked for only one and one-half years in the three years just before your death, benefits can be paid to your children and your spouse who is caring for them.

Whether you work full-time, part-time, or are a stay-at-home spouse, parent, or caregiver, it's important to be aware of these rules and to understand how time spent in and out of the workforce might affect your entitlement to Social Security.

3. What will your retirement benefit be?

Your Social Security retirement benefit is based on the number of years you've worked and the amount you've earned. Your benefit is calculated using a formula that takes into account your 35 highest earnings years. If you earned little or nothing in several of those years, it may be to your advantage to work as long as possible, because you may have the opportunity to replace a year of lower earnings with a year of higher earnings, potentially resulting in a higher retirement benefit.

Your benefit will also be affected by your age at the time you begin receiving benefits. If you were born in 1943 or later, full retirement age ranges from 66 to 67, depending on the year you were born. Your full retirement age is the age at which you can apply for an unreduced retirement benefit.

However, you can choose to receive benefits as early as age 62, if you're willing to receive a reduced benefit. At age 62, your benefit will be 25% to 30% less than at full retirement age (this reduction is permanent). On the other hand, you can get a higher payout by delaying retirement past your full retirement age, up to age 70. If you were born in 1943 or later, your benefit will increase by 8% for each year you delay retirement.

For example, the following chart shows how much an estimated monthly benefit at a full retirement age (FRA) of 66 would be worth if you started benefits 4 years early at age 62 (your monthly benefit is reduced by 25%), and how much it would be worth if you waited until age 70--4 years past full retirement age (your monthly benefit is increased by 32%).

Benefit at FRA

Benefit at age 62

Benefit at age 70
















What if you're married and qualify for spousal retirement benefits based on your husband's earnings record? In this case, your benefit at full retirement age will generally be equal to 50% of his benefit at full retirement age (subject to adjustments for early and late retirement). If you're eligible for benefits on both your record and your spouse's, you'll generally receive the higher benefit amount.

One easy way to estimate your benefit based on your earnings record is to use the Retirement Estimator available on the SSA website. You can also visit the SSA website to sign up for a my Social Security account so that you can view your personalized Social Security Statement. This statement gives you access to detailed information about your earnings history and estimates for disability, survivor's, and retirement benefits.

4. When should you begin receiving retirement benefits?

Should you begin receiving benefits early and receive smaller payments over a longer period of time, or wait until your full retirement age or later and receive larger benefits over a shorter period of time? There's no "right" answer. It's an individual decision that must be based on many factors, including other sources of retirement income, your marital status, whether you plan to continue working, your life expectancy, and your tax picture.

As a woman, you should pay close attention to how much retirement income Social Security will provide, because you may need to make your retirement dollars stretch over a long period of time. If there's a large gap between your projected expenses and your anticipated income, waiting a few years to retire and start collecting a larger Social Security benefit may improve your financial outlook. What's more, the longer you stay in the workforce, the greater the amount of money you will earn and have available to put into your overall retirement savings. Another plus is that Social Security's annual cost-of-living increases are calculated using your initial year's benefits as a base--the higher the base, the greater your annual increase, something that can help you maintain your standard of living throughout many years of retirement.

This is just an overview of Social Security. There's a lot to learn about this program, and each person's situation is unique. Contact a Social Security representative if you have questions.

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Handling Market Volatility

Conventional wisdom says that what goes up must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when your money is at stake. Though there's no foolproof way to handle the ups and downs of the stock market, the following common-sense tips can help.

Don't put your eggs all in one basket

Diversifying your investment portfolio is one of the key tools for trying to manage market volatility. Because asset classes often perform differently under different market conditions, spreading your assets across a variety of investments such as stocks, bonds, and cash alternatives has the potential to help reduce your overall risk. Ideally, a decline in one type of asset will be balanced out by a gain in another, though diversification can't eliminate the possibility of market loss.

One way to diversify your portfolio is through asset allocation. Asset allocation involves identifying the asset classes that are appropriate for you and allocating a certain percentage of your investment dollars to each class (e.g., 70% to stocks, 20% to bonds, 10% to cash alternatives). A worksheet or an interactive tool may suggest a model or sample allocation based on your investment objectives, risk tolerance level, and investment time horizon, but that shouldn't be a substitute for expert advice.

Focus on the forest, not on the trees

As the market goes up and down, it's easy to become too focused on day-to-day returns. Instead, keep your eyes on your long-term investing goals and your overall portfolio. Although only you can decide how much investment risk you can handle, if you still have years to invest, don't overestimate the effect of short-term price fluctuations on your portfolio.

Look before you leap

When the market goes down and investment losses pile up, you may be tempted to pull out of the stock market altogether and look for less volatile investments. The modest returns that typically accompany low-risk investments may seem attractive when more risky investments are posting negative returns.

But before you leap into a different investment strategy, make sure you're doing it for the right reasons. How you choose to invest your money should be consistent with your goals and time horizon.

For instance, putting a larger percentage of your investment dollars into vehicles that offer asset preservation and liquidity (the opportunity to easily access your funds) may be the right strategy for you if your investment goals are short term and you'll need the money soon, or if you're growing close to reaching a long-term goal such as retirement. But if you still have years to invest, keep in mind that stocks have historically outperformed stable-value investments over time, although past performance is no guarantee of future results. If you move most or all of your investment dollars into conservative investments, you've not only locked in any losses you might have, but you've also sacrificed the potential for higher returns. Investments seeking to achieve higher rates of return also involve a higher degree of risk.

Look for the silver lining

A down market, like every cloud, has a silver lining. The silver lining of a down market is the opportunity to buy shares of stock at lower prices.

One of the ways you can do this is by using dollar-cost averaging. With dollar-cost averaging, you don't try to "time the market" by buying shares at the moment when the price is lowest. In fact, you don't worry about price at all. Instead, you invest a specific amount of money at regular intervals over time. When the price is higher, your investment dollars buy fewer shares of an investment, but when the price is lower, the same dollar amount will buy you more shares. A workplace savings plan, such as a 401(k) plan in which the same amount is deducted from each paycheck and invested through the plan, is one of the most well-known examples of dollar cost averaging in action.

For example, let's say that you decided to invest $300 each month. As the illustration shows, your regular monthly investment of $300 bought more shares when the price was low and fewer shares when the price was high:

Although dollar-cost averaging can't guarantee you a profit or avoid a loss, a regular fixed dollar investment may result in a lower average price per share over time, assuming you continue to invest through all types of market conditions.

(This hypothetical example is for illustrative purposes only and does not represent the performance of any particular investment. Actual results will vary.)

Making dollar-cost averaging work for you

  • Get started as soon as possible. The longer you have to ride out the ups and downs of the market, the more opportunity you have to build a sizable investment account over time.
  • Stick with it. Dollar-cost averaging is a long-term investment strategy. Make sure you have the financial resources and the discipline to invest continuously through all types of market conditions, regardless of price fluctuations.
  • Take advantage of automatic deductions. Having your investment contributions deducted and invested automatically makes the process easy and convenient.

Don't stick your head in the sand

While focusing too much on short-term gains or losses is unwise, so is ignoring your investments. You should check your portfolio at least once a year--more frequently if the market is particularly volatile or when there have been significant changes in your life. You may need to rebalance your portfolio to bring it back in line with your investment goals and risk tolerance. Rebalancing involves selling some investments in order to buy others. Investors should keep in mind that selling investments could result in a tax liability. Don't hesitate to get expert help if you need it to decide which investment options are right for you.

Don't count your chickens before they hatch

As the market recovers from a down cycle, elation quickly sets in. If the upswing lasts long enough, it's easy to believe that investing in the stock market is a sure thing. But, of course, it never is. As many investors have learned the hard way, becoming overly optimistic about investing during the good times can be as detrimental as worrying too much during the bad times. The right approach during all kinds of markets is to be realistic. Have a plan, stick with it, and strike a comfortable balance between risk and return.

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Deciding When to Retire: When Timing Becomes Critical

Deciding when to retire may not be one decision but a series of decisions and calculations. For example, you'll need to estimate not only your anticipated expenses, but also what sources of retirement income you'll have and how long you'll need your retirement savings to last. You'll need to take into account your life expectancy and health as well as when you want to start receiving Social Security or pension benefits, and when you'll start to tap your retirement savings. Each of these factors may affect the others as part of an overall retirement income plan.

Thinking about early retirement?

Retiring early means fewer earning years and less accumulated savings. Also, the earlier you retire, the more years you'll need your retirement savings to produce income. And your retirement could last quite a while. According to a National Vital Statistics Report, people today can expect to live more than 30 years longer than they did a century ago.

Not only will you need your retirement savings to last longer, but inflation will have more time to eat away at your purchasing power. If inflation is 3% a year--its historical average since 1914--it will cut the purchasing power of a fixed annual income in half in roughly 23 years. Factoring inflation into the retirement equation, you'll probably need your retirement income to increase each year just to cover the same expenses. Be sure to take this into account when considering how long you expect (or can afford) to be in retirement.

Current Life Expectancy Estimates




At birth



At age 65



Source: NCHS Data Brief, Number 168, October 2014

There are other considerations as well. For example, if you expect to receive pension payments, early retirement may adversely affect them. Why? Because the greatest accrual of benefits generally occurs during your final years of employment, when your earning power is presumably highest. Early retirement could reduce your monthly benefits. It will affect your Social Security benefits too.

Also, don't forget that if you hope to retire before you turn 59½ and plan to start using your 401(k) or IRA savings right away, you'll generally pay a 10% early withdrawal penalty plus any regular income tax due (with some exceptions, including disability payments and distributions from employer plans such as 401(k)s after you reach age 55 and terminate employment).

Finally, you're not eligible for Medicare until you turn 65. Unless you'll be eligible for retiree health benefits through your employer or take a job that offers health insurance, you'll need to calculate the cost of paying for insurance or health care out-of-pocket, at least until you can receive Medicare coverage.

Delaying retirement

Postponing retirement lets you continue to add to your retirement savings. That's especially advantageous if you're saving in tax-deferred accounts, and if you're receiving employer contributions. For example, if you retire at age 65 instead of age 55, and manage to save an additional $20,000 per year at an 8% rate of return during that time, you can add an extra $312,909 to your retirement fund. (This is a hypothetical example and is not intended to reflect the actual performance of any specific investment.)

Even if you're no longer adding to your retirement savings, delaying retirement postpones the date that you'll need to start withdrawing from them. That could enhance your nest egg's ability to last throughout your lifetime.

Postponing full retirement also gives you more transition time. If you hope to trade a full-time job for running your own small business or launching a new career after you "retire," you might be able to lay the groundwork for a new life by taking classes at night or trying out your new role part-time. Testing your plans while you're still employed can help you anticipate the challenges of your post-retirement role. Doing a reality check before relying on a new endeavor for retirement income can help you see how much income you can realistically expect from it. Also, you'll learn whether it's something you really want to do before you spend what might be a significant portion of your retirement savings on it.

Phased retirement: the best of both worlds

Some employers have begun to offer phased retirement programs, which allow you to receive all or part of your pension benefit once you've reached retirement age, while you continue to work part-time for the same employer.

Phased retirement programs are getting more attention as the baby boomer generation ages. In the past, pension law for private sector employers encouraged workers to retire early. Traditional pension plans generally weren't allowed to pay benefits until an employee either stopped working completely or reached the plan's normal retirement age (typically age 65). This frequently encouraged employees who wanted a reduced workload but hadn't yet reached normal retirement age to take early retirement and go to work elsewhere (often for a competitor), allowing them to collect both a pension from the prior employer and a salary from the new employer.

However, pension plans now are allowed to pay benefits when an employee reaches age 62, even if the employee is still working and hasn't yet reached the plan's normal retirement age. Phased retirement can benefit both prospective retirees, who can enjoy a more flexible work schedule and a smoother transition into full retirement; and employers, who are able to retain an experienced worker. Employers aren't required to offer a phased retirement program, but if yours does, it's worth at least a review to see how it might affect your plans.

Key Decision Points



Don't forget ...

Eligible to tap tax-deferred savings without penalty for early withdrawal

59 ½*

Federal income taxes will be due on pretax contributions and earnings

Eligible for early Social Security benefits


Taking benefits before full retirement age reduces each monthly payment

Eligible for Medicare


Contact Medicare 3 months before your 65th birthday

Full retirement age for Social Security

65 to 67, depending on when you were born

After full retirement age, earned income no longer affects Social Security benefits


*Age 55 for distributions from employer plans upon termination of employment

Check your assumptions

The sooner you start to plan the timing of your retirement, the more time you'll have to make adjustments that can help ensure those years are everything you hope for. If you've already made some tentative assumptions or choices, you may need to revisit them, especially if you're considering taking retirement in stages. And as you move into retirement, you'll want to monitor your retirement income plan to ensure that your initial assumptions are still valid, that new laws and regulations haven't affected your situation, and that your savings and investments are performing as you need them to.

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The Game-Changing Fiduciary Rule: What it means to you.

On April 6th the US Department of Labor (DOL) expanded its 1975 definition of “fiduciary” for the first time in more than 40 years to include those who are not fiduciaries under the existing rule.

Previously, brokers or agents could hide behind the Suitability Standard which allowed them to sell financial products to their customers which were classified as “suitable”.  Some of these products had very high commissions and hidden fees. The Fiduciary Standard calls for advisors to be held to a higher standard, and to be legally obligated to act in the clients’ best interest.

Accounts affected by this new rule include: 401(k), 403(b), IRAs (Traditional, Roth, SEP, Simple), Archer medical savings accounts, Health savings accounts,  Coverdell education savings accounts.

What this means is that every financial advisor who deals with retirement accounts must now become a fiduciary and may receive compensation only from retirement clients. Previously, they were permitted to receive commissions and compensation from mutual fund companies and others through the “back door”.

Under the new law, charging commissions on transactions in retirement accounts will now be a Prohibited Transaction, and there can be no hidden fees. Companies may continue to engage in these prohibited transactions by relying on a “Best Interest Contract Exemption.” What this means is that advisors who wish to charge commissions on retirement accounts may only do so after having the client agree in writing that it is in their best interest. If you have any of these type accounts with advisors, other than Vantage, you may be asked to sign one of these contracts.

Terms like “fees” and “fiduciary standard” will dominate the financial discussion in the coming months, and consumers will be surprised to learn that their interests have not been protected in this manner before now. We don’t doubt that many commissioned advisors have dealt honorably with their clients, but now they will all be legally required to do so.

At Vantage Advisors our response is:  It’s about time!  We have always operated as fiduciaries, and this new law will have little to no effect on how we do business. We have always acted in our client’s best interest, and will continue to do so.

Rollovers from a 401(k) to an IRA will now need to be facilitated by a fiduciary advisor or by the investor directly.

We will be forwarding you additional information on this subject in the near future.  However, if you have any questions we always welcome your call.

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by Stephanie S. Beecher


At Vantage Advisors, LLC in St. George, Utah, the company generally caters to clients who have a high level of complexity in their financial lives. Fiscally a person may have several streams of wealth, multiple business entities and partnerships, or capital obligations related to a spouse or children. One factor remains. Regardless of financial situation, Vantage Advisors cares about its clients.


50 East 100 South #101
St. George, UT 84770
Phone: 435-628-6336

In an industry swarming with com­panies who could all boast about their wealth management expertise, Vantage prides itself not only on its fine tuning of the portfolios, but rather on its profusion of empathy. Vantage has a strong team of professional CPAs on staff that helps diversify the firm’s holistic approach to financial advising. Howev­er, the single biggest thing making this company stand out from its competitors, is an approach that Greg Kemp, CEO of Vantage Advisors wanted to try long before he founded the firm.

“We’ve learned over time that there is a price to pay when you focus on some­thing, and that price is the loss of your peripheral vision,” says Kemp, adding that companies often zero in on the ebbs and flows of the financial market, rather than client feelings. “In the profession that we are working in, there are people who are very, very focused – almost to the point of excluding everything else. And it really compromises their ability to give holistic advice.”

“We can’t offer the best advice if we don’t own the problem, and we can’t own the problem without empathy,” he adds. “We need to see it through our client’s prism.”

Kemp acknowledges that the Vantage team assesses everything from an indi­vidual’s asset portfolio, to financial goals and fears, family background – even personality. In turn, Vantage is able to take its knowledge to create customized solutions.

“Everybody says they do that,” Kemp argues. “But, we really work hard to stay wide, and to have some depth also. And these aren’t just talking points – it’s got to be real.”

Being “real” is more important than ever. Though the digital age has given advisors a bigger set of tools, it is also beginning to take the “human” out of the equation. In addition to the rise of robo-advising services, Kemp believes the 24/7 news environment often unnecessarily escalates clients’ concerns.

At other companies, calls to advisors who could quiet market murmurs too often go unanswered.

In fact, Kemp says that the lack of advisor availability happens to be new clients’ No. 1 complaint about their previous wealth management company. Vantage has made it their mission to be available and present – and to help clients keep things in perspective.

“We really admire some of the soft­ware we’ve seen, but at the end of the day it’s still an algorithm,” he said, emphasizing, “It can’t pick up on the nu­ances that a face-to-face [meeting] with a human being does. That’s how we talk about customizing solutions unique to an individual.”

As Kemp succinctly puts it, “Robots don’t care.”


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A Tale of Four Decades 1975-2015

Dear Friends,

With another year closed, and a New Year at our doorstep, we would like to share with you some of our thought, and our feelings about the future.

As we have met with you from time to time, we have shared our optimism and faith in the future.  We understand that it is natural to have anxiety about the financial markets, so we wanted to give you this letter as a reminder to all of us just where we have been, and what we have achieved in the short span of 40 years.

For starters, I thought we might take a look at some Population numbers, Gross Domestic Product (GDP), and the S&P 500 at specific points during this period, namely the years ending in 5. Granted, we don't have all of the 2015 data yet, but I think we can get close enough without doing intellectual violence to this exercise.  Along the way for additional perspective, we'll look at some events that alternately troubled or uplifted us in each of these landmark years.


Saigon falls; President Ford escapes two assassination attempts within seventeen days.  Margaret Thatcher becomes the first woman leader of Britain's Conservative Party. Andrei Sakharov, the great hero of Soviet resistance, wins the Nobel Peace Prize.  An American and a Soviet spacecraft link up in space.  U.S. postage stamp costs ten cents.

  • Global Population:     4.1 billion, (1/2 live in extreme poverty)
  • U.S. Population:        216 million
  • GDP:                         $5.49 trillion
  • S&P 500 close:         $90.19

1985 -

Gorbachev comes to power in the Soviet Union, and meets with President Reagan.  The internet domain name system is created. Windows 1.0 is published, and the first successful human heart transplant takes place.  U.S. postage stamp costs twenty two cents.

  • Global Population:     4.85 billion
  • U.S. Population:        238 million
  • GDP:                         $7.71 trillion
  • S&P 500 close:         $211.28


Oklahoma City bombing occurs.  OJ Simpson's murder trail begins and ends. Israeli Prime Minster is assassinated.  The Rock and Roll Hall of Fame and Museum opens in Cleveland.  U.S. postage stamp costs thirty two cents. 

  • Global Population:     5.7 billion
  • U.S. Population:        266 million
  • GDP:                         $10.28 trillion
  • S&P 500 Close:         $615.93


Hurricane Katrina devastates an American land mass larger than Great Britain. Saddam Hussein goes on trial for his life.  July 7 becomes London's 9/11, as coordinated attacks on the bus and subway system claim 52 lives.  Pope John Paul ll dies. U.S. postage stamp costs thirty seven cents.

  • Global Population:     6.5 billion
  • U.S. Population          296 million
  • GDP:                          $14.37 trillion
  • S&P 500 Close:          $1,248.29

2015 -

ISIS casts the Middle East into chaos, and caries out terrorist atrocities in Paris and elsewhere.  Refugees pour into Europe.  The world's leading nations reach and accord with Iran on its nuclear development program.  U.S. postage stamp costs forty nine cents.

  • Global Population:     7.29 billion, (less than 1 in 10 of whom live in extreme poverty)
  • U.S. Population:        322 million
  • GDP                           $16.39 trillion (9/30/15)
  • S&P 500 Close:         $2,078.36 (12/29/15)

So, this is the tale of four decades:

  • Global population is up nearly 80%, with extreme poverty slashed from one human in two to one in ten, creating wave upon wave of new middle class consumers.
  • U.S. population is up by half, and gaining a new person every fourteen seconds.  And still with plenty of room to grow. Population density per square mile in this country is 85, compared with almost 300 in France, 680 in UK, and 870 in Japan.  Abundant natural resources, with mineral rights vested in the landowner. A hundred year's worth of hydrocarbon energy reserves.
  • Real GDP more than tripled, on only a 50% population increase, meaning real GDP per capita has soared.
  • The S&P 500 rose more than twenty times.  Including an earnings increase in excess of fifteen times, and a dividend boost approaching twelve times.

Surely this is the greatest accretion of real wealth by the greatest number of people in the history of the world.  What are the mega trends underpinning this spectacular economic and financial progress? There are two, and of course they form a virtuous cycle.

They are

  • The spread of the free market

Liberty had vanquished communism and the most extreme iterations of socialism during this time period.  This cultivated the way for our modern day global economy.

  • Exponential progress in information technology

Today a middle school child carries in her backpack a smartphone with more computing power than the state of the art mainframe had in 1975. This growth in technology continues at a rampant rate.  We are excited to see what technologies and innovations come forth in the next 40 years.


We may never be able to tell what stocks or sectors of the market will win each year (even though we may wish we could), but we are confident and have a positive attitude for the future and we hope this letter helps your "vantage" point as well.


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Avoiding Investment Fraud

I know a highly educated doctor of philosophy who got caught in one of the most common frauds in Utah. When I heard that he was investing in the “Iraqi dinar”; I did some research and found warnings on numerous web sites including the State of Utah’s. I called the gentlemen and gave him a summary of the fraud alerts and sent him the links to the various sites via email. Sadly, not only did he disregard the warning he continued to invest and went so far as to borrow against the equity in his home to invest even more. His family came to me upset and appalled. There was nothing any of us could do but watch him systematically wipe out his personal net worth and continue to store worthless currency in his basement.

Fraud is one of the most significant losses in the net worth of families in Utah. Some of the smartest people I know get “caught” in one scheme, scam or bad investment. Remember fraud captures our imagination because they first appeal to our greed and belief we are getting “fantastic” returns on our investment. I can only repeat what my own mother taught me over and over again; if it sounds too good to be true; it is! If there were really a way to earn15% or 30% on an investment “overnight”; Warren Buffet would be buying up the investment and there wouldn’t be anything left for us “little guys”.

Here are some other cautions you should heed when looking at an investment from someone you know or someone who knows someone you know.

  1. Do your homework. The worldwide web is a great place to start looking. Research the investment strategy and research the person who brought it to you.
  2. Talk to your Financial Advisor; if they review and like it; okay; but if they tell you its fraud and NOT to invest; be smart and listen to them.
  3. If it involves property; go online to the County website where the property is located and check out the details on the county recorder’s site. Who really owns the property? Are there existing liens on the property that would take priority over your lien? And, by the way, never, ever, ever agree to lend on a property where you know you will be in second or third position unless you can buy out the first and second debt. Why? Because if you can’t and either of those loans default; you are wiped out.
  4. Avoid someone selling you into a limited partnership where you don’t know any of the other members. If it really intrigues you then be sure to review the financials: cash flow statements; income statement; balance sheet and at least two years of tax returns. If that doesn’t even make sense to you; don’t invest.
  5. If someone is trying to talk you into investing in a “start-up” company; do yourself a favor and just say “no” unless, of course, you are an expert in that field. If you are, then be sure to review the financials: cash flow statements; income statement; balance sheet and at least two years of tax returns. If that doesn’t even make sense to you; don’t invest. More importantly if the entrepreneur trying to get you to invest doesn’t understand any of those terms; don’t invest.
  6. Never invest in the “heat of the moment”; give yourself two to three weeks to “think it over”. If the person “selling” the investment tells you there isn’t enough time and you have to decide "now"; then walk away.

I knew a very sophisticated and successful excavator who was talked into loaning $300,000 on some property in a county to the south of him. It was a friend that needed the money. The investment was to be secured by a “note and first trust deed”. He didn’t do his due diligence. Too late he learned that his loan was in third position on the property; not first. He also learned that the property was not worth the amount he lent. Worse he learned that if he bought out the first and second trust deed he would be indebted to the tune of $1,500,000 on a property worth $300,000. His money was lost forever.

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Reverse Aging: 70 is the New 62

Not so long ago my mother and I went to grab a quick lunch at a fast food chain. We stood in line laughing and chatting and ordering food that really wasn’t good for us. As my mother, who by the way absolutely refuses to allow me to pay for her meal, was paying. She asked about their “senior citizen discount.” The young girl behind the counter innocently looked at my mother and said “well, you don’t get it because you have to be 65 years old.” Mom and I smiled at each other. She was 70. I think that made her day, well, and getting the discount sort of a “two for one” kind of a day. The reality is that for most Americans 71 is the new 60 when it comes to when old age starts.

Life expectancy for the average American has moved from 47 to 67 in a century. Science and medicine continues to work toward increasing our longevity. This is good news. It does mean, however, that we need to reevaluate the timelines of our lives. Can we stay in school longer and get more education? Perhaps it makes sense to get married closer to thirty than twenty and start a family in our mid to late thirties instead of our twenties. We’ve got time.

Most seniors today feel younger than their age and they love it. There are concerns. What is the point of living longer if we can’t live well? Seniors want to continue to do the things they’ve always done. They want to remain productive and contributing members of society and they want the health, mobility and financial resources that would ensure it. Bottom line: planning for the “new” retirement means a change of the planning paradigm. It may mean delaying retirement until they are 70 years old. Or it may mean working part-time after their planned retirement at 65. Americans need to plan for diminished physical and mental capacity as many will live into their 90’s. They also need to take a hard look at whether there is any chance that they will outlive their wealth and the added stress of the related increasingly expensive medical costs. If there is; the time to make the adjustments is right now.

Feeling 60 at 71 is wonderful. What a great time to be alive in America. Make it even better by taking the time to make a plan to have the resources and capacity to also enjoy feeling 70 at 81.

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Medicare and Healthcare Decisions to Make Before You Retire

The good news for retirees is that your retirement will last considerably longer than that of your parents or grandparents. Conversely; this is also bad news with the reality of the current cost of medical care for seniors. Currently, inflation for medical care out paces the Consumer Price Index. Another way of looking at this, your medical expenses are increasing at a faster rate than the growing cost of filling up your car’s gasoline tank. In addition, retiring consumers are budgeting on average about $5,620 per year for health care when the real cost is actually closer to $10,750 per year. The average household income for seniors is $40,000 per year! This means that healthcare for the average senior is nearly 25% of their annual income and makes it the second largest expense for retirees. Want another scary statistic? Thirty to forty percent of seniors who reach the age of 65 will end up in Nursing Home care.

Those statistics are important because planning for your medical retirement is extremely important and should be a big part of your discussion with your spouse, your family and your financial planner. Below is a list of things to ponder when you are making these decisions.

  • Medicare does not start until age 65. If you are going to retire early you need a retirement plan that includes medical insurance to bridge the gap between retirement and age 65. Consider the following:
     Critical tools available to you include HIPPA provision allowing you to retain your employer’s coverage for up to 63 days.
     COBRA allows you to continue with your employer’s insurance for up to 18 months (in the case of death or divorce this can be extended up to 36 months) at a rate not to exceed 102% of the employer’s cost.
     You may also be able to use your savings from your HSA (health savings plan); your 401K or perhaps even an annuity to cover your health insurance costs until you are eligible for Medicare.
  • Medicare options include the following:
     Part A: this is the “original” Medicare for hospital insurance. You have three months prior to turning 65, the month you turn 65 and three months after you turn 65 to enroll (a seven month period). If you miss this enrollment period, you will have to wait until the next “open enrollment” for Medicare which is January to March of each year.
     Part B: this includes coverage for medically necessary services such as medical equipment, flu shots etc., by the way, it does not include hearing aids.
     Part C: in an HMO equivalent and covers elements of Part A, B and D. A lot of seniors “like” this program and it is good coverage unless you plan on traveling during retirement. Part C will not provide adequate coverage if you need medical care outside the area covered by your Part C/HMO.
     Part D: This is your prescription drug coverage
     Medicare Supplement: supplemental programs are designed to provide you with reimbursements for deductibles and co-payments. You must enroll in this within 6 months of turning 65. Enrollment cost and coverage for the supplements is relatively universal. What you are paying for, in addition to the basic coverage, is the strength of your carrier (will they be in business and be able to maintain the level of coverage they committed to covering during your lifetime) and the level of “real” service. The information in this blog is not meant to be comprehensive and arm you with all the information you need to plan for Medicare. The intent is to create awareness that a significant portion of your retirement planning MUST include plans for medical care. (Check out the Medicare website for more comprehensive information about enrollment and the provisions of Plans A, B, C and D at http://medicare.gov/ )
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My mother was a child of the depression in the 1930’s. She raised us during the more abundant years of the sixties and seventies. Fruits and vegetables during her day were available only during the seasons they were grown. Dairy products were available only if they had a healthy cow. Sometimes their meals were simply made up of what they could forage from the land. She wanted more for us. She wanted us to be healthy and as fresh fruits became available in the grocery stores year-round; she had them on the table for us to eat. Mother strictly adhered to the basic five food groups mantra and ensured that each of our meals had appropriate allocations to the basic fruits, vegetables, grains, proteins and dairy. Our meals were balanced and well thought out and we grew up healthy, trim and fit.

Your financial portfolio should be thoughtfully designed so that your money is allocated in a balanced manner that reflects both your long-term and short-term goals and also your own level of risk tolerance. Like a balanced meal; a balanced portfolio should be carefully allocated to the various investment groups so that your financial health is maintained. Part of determining whether or not your financial assets are appropriately allocated is asking yourself the following questions:

  • Have I identified the time frame within which I will need the money from my investments?
  • Have I determined how much financial risk I can tolerate?
  • Have I determined how much money I will need during retirement and to meet my other financial goals?
  • Have I determined the appropriate percentage of my assets to invest in stocks, bonds, real estate, personal bank savings accounts, etc.?
  • Do I have an overall investment strategy or am I “winging” it and investing based on current events, whims, or the advice from “friends”?
  • Am I satisfied with the performance of my investments?
  • Do I have an over concentration of investments that is placing me at unnecessary risk?

Once you have an investment strategy that is balanced and based on your ability to emotionally deal with risk you are closer to having a secure financial future. Now, you ought to make sure you understand benefit plans from your employer and Social Security. If you have a 401K, are you maximizing the employer matching? If you have employee stock options, have you determined the appropriate strategy, based on your financial plan, for exercising and selling stock options? Do you have a Defined Benefit Plan/Retirement Plan from your work? If you do, have you carefully reviewed your options? Can you take a lump sum? If so, should you? Next, take a look at your social security benefits. Have you sat down and carefully reviewed all options available in order to maximize the benefits you should receive? Ask yourself these questions and be tough on yourself. If you don’t know the answer, you need to get it.

Tax planning is also an important part of reviewing your investments. Generally, your retirement accounts like a 401K and a traditional or simple IRA are tax exempt when you contribute to them so you pay income taxes on it when you withdraw it. ROTH IRA’s are one of the exceptions. On a ROTH you are putting your money in ‘after taxes’ and, therefore, when you take the money out you do not owe income tax on either the contribution amounts or the earnings. Most regular investments not tied to a retirement account, are also made in after tax dollars so when you withdraw the money; you don’t owe income tax money on it but you will have to pay long term capital gains on the earnings. Knowing the type of accounts you have and how they will be taxed is important when developing the tax planning on your investment portfolio.

You, as a prudent investor, should also carefully analyze the cost of your various accounts and make sure you do your part to minimize them. You should ask yourself whether or not you are minimizing unnecessary turnover in your investments. Buying and selling investments costs you money. Is it more cost effective for you to own individual stocks or mutual funds? Are the funds you are invested in with your taxable investments being managed to minimize the amount of taxes you are paying? Just as fresh fruits, vegetables, dairy products and whole grains became readily available in the fifties and sixties and continue to be available to all of us today allowing for the planning of healthy and well balanced meals; so too, there is information available to allow for the healthy planning of your investment portfolio. Not allocating and planning for the proper foods for good nutrition results in bad health just as surely as failing to allocate properly and plan properly for your investments means there is a good chance your portfolio will expire long before you no longer need it.

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Planning for Your Legacy

Recently an acquaintance of mine came into my office and shared with me a sad tale. The story revolved around a 74 year old college professor who died unexpectedly of a massive heart attack. That is tragedy enough for a family. However, what followed his death were a set of even greater unintended consequences of his sporadic estate planning efforts. The professor had, alas, been married four times. Each of his first three wives presented him with children. He had no children with his last wife but she had two adult children from a previous marriage. The professor had eleven children. He thought he had planned for all of them; herein laid the tragedy. His intentions were a family trust to educate his children and grandchildren should they desire to go to college. The trust was to hold various properties and assets but he had never “gotten around to” moving the assets from his name to that of the trust. His intention was to have plenty of insurance to cover his estate and the welfare of his fourth wife for the duration of her life. She knew of the value of the policies and had planned for using the benefits. Unfortunately, the dear professor had never changed the beneficiaries on these policies so his third wife and her children ended up receiving the funds. Sadly, the story went on and on with stories of the family confrontations, court battles, tears and pain experienced by his various heirs. (There was one unusually happy consequence of the event and that had to do with his first wife who out-lived him and who had been married to him for more than 10 years. Seems like social security has an estate planning provision for divorced women whose former husbands precede them in death but that is a story for a later date.)

This story should have had a happy ending as the professor had adequate assets to provide for his heirs in a way he would have liked. For example; the professor should have updated his will and provided copies to his Executor which in his case was his oldest son. As soon as the family trust was set up, all properties and assets he wanted to place in the trust should have been immediately transferred and a list given to the Trustees which were four of his oldest children. The Professor taught in the school of business. He talked the talk but absent mindedly forgot to walk the walk. He should have had all beneficiaries on all of his insurance policies evaluated prior to his fourth marriage. His intentions for the assets of his estate should have been clearly spelled out to his new wife. The State he lived in was a community property state. The fourth wife drained every asset she could and sold all of his valuable personal possessions and what she didn’t sell; she gave to her two children and his eleven surviving children had only memories.

Good estate planning is the fourth step in your process of a good Personal Financial Plan which I have been discussing over the last four blog articles. The elements of an estate plan may include:

  • Wills and living trusts;
  • Accurately titling assets including designating beneficiaries on all retirement accounts and life insurance policies. (The beneficiaries should have copies of the documents.)
  • You should understand the estate and death laws in your state and understand what would happen in the event you died without a will.
  • Good estate planning may include irrevocable trusts such as a special needs trust for a descendant with developmental or physical disabilities. A plan would include providing directives to your family and heirs if you have a living will and or a durable power of attorney in case of your physical or mental incapacitation.
  • Finally, if you want to leave gifts to your collegiate alma mater; your church; your community or some other charitable organization make sure you have an attorney draft the documents and then sign them.

The good professor had good intentions. He did not, however, create the appropriate estate planning and documentation that his heirs needed in order to execute his planning legally and accurately. His inheritance to his family turned out to be short term discord and estrangement. Prevent a similar legacy in your life through intelligent and thorough estate planning.

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Saving for Success in Your Financial Plan

This past week I had a granddaughter turn six and like a good grandparent I sent her a birthday card inside of which was tucked a check for twenty-five dollars. When I asked her about her card and check during her birthday phone call; she said "Mom, took it to the bank and the bank gave me twenty five dollars!" It got me smiling. "What did you do with your twenty-five dollars?" I had to ask. "Well," and there is a long pause and then an idea; "first I saved some!" I smiled. Two generations down and the simple wisdom of saving was thriving.

The last blog I wrote talked about a Personal Financial Plan and how important it is to everyone either in full or part-time retirement or facing retirement in the next decade to make and keep such a plan. I spoke about the importance of setting and maintaining financial goals. The next step in the process of evaluating where you are at with your Plan is to review your spending and make a plan for it. I was listening to a sports radio program last week and one of the radio personalities was former Jazz player Karl Malone. He was talking about some of the successes of his business ventures and the mentoring he received from the Jazz owner Larry Miller. Part of his comments led him to a discussion about how 80% of professional basketball players are broke three years after they have left the profession. Karl was disturbed with this statistics and kept coming back to it. He spoke about the value of older players mentoring younger players in the league specifically in regards to money management and investing. The key point was not about profitable investments; it was that players had to learn to control their spending. This sage wisdom is true for all of us. We must spend less than we make and save enough so that we can reach our financial goals.

The other day I was speaking to my eighty year old mother. She told me, matter of factly, that she saved $500 a month out of her social security check a staggering 25% of all her income. She has a good saving target. We all need one. The goal is to set aside enough savings so that you can build up first an emergency reserve of three to six months of cash that would cover all your living expenses during that time frame. Once that savings is in a secure money market or other conservative account that is liquid and easily accessible by both spouses if you are married; you can start saving for vacations; educations; retirements; and other financial goals.

The target savings is step one is creating a budget. Once that amount is allocated you build the rest of your budget. How much do you need for housing or food or transportaion or healthcare? Your budget starts with the necessities of life and if there is money left over you can start adding the extras like golf, eating out, or art classes. A budget will only work when both spouses or all family members are on board with it. One spouse creating a budget for the other rarely works because there usually isn't a full buy-in by the spouse that is not incorporated into the process.

Finally, take a look at your debt and do it in context of your tax. If debt is not a  deductible expense on your taxes pay it off as soon as you can and don't borrow from others. Borrow from yourself. This is the beauty of having your own savings account in which you accumulate emergency cash and cash to meet your goals. Will you need a new car in four years? Start saving for it now and pay cash. Is your dream vacation a cruise around Italy? Saving for it and not going into debt will make that trip one of the best in your life. And, while we are talking about debt management, do an annual check on your credit, balance your checking accounts on a monthly basis and be diligent in checking for fraudulent use of your credit by others.

Your good habits will be an example to those you love and it is the one gift you can give family that will bless a lifetime. My six year old granddaughter knows what she should be doing with her money as we all do. The trick is really to just do it.

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Setting Family Goals

I recently sat down with a family member who wanted to discuss her options regarding an inherited investment. The specific question was whether to sell out her share of an inherited income property to family members and then take the money and create her own investments. The relatively specific question led us to a larger discussion about her family’s current financial situation. It was clear as we broadened the subject away from her current question that we should first step back and have her and her husband do a comprehensive assessment of their entire financial plan.  The components of a good financial plan include:

  • setting your financial goals;
  • reviewing your spending and creating a good budget;
  • making a risk assessment which is generally an audit of your insurance;
  •  reviewing and establishing what your investing goals are
  •  making sure that you have a good and comprehensive estate plan

Over the next five blogs; I want to help you consider each of these five financial areas separately and hopefully inspire you to sit down with your spouse, family or just yourself and do an evaluation of where you are when it comes to understanding your personal goals and needs.

Alice’s Cheshire cat pointed out that it doesn’t matter which way you go if you don’t know where you want to go. Goals that you need to understand and get written down in order to plot your family’s financial future include elements of the following:

  1. Retirement- Ask yourself when or if you want to retire. Then consider the state of your health and that of your spouse, if you are married, and determine how long you expect your retirement to last. In other words, if you want to retire at age 70 and you expect to live until you are 90 then your retirement and the funds for it need to last 20 years. You should look into your social security benefits and determine when is the best time for you to retire in order to maximize your benefits. Be an internet detective and learn all about annuities and reverse mortgages so they can be considered as possible retirement income resources. Finally, last week’s blog we talked about avoiding retirement disasters. The biggest disaster is bad health. Your plan should include a minimum $250,000 in medical expenses out of your pocket for you and your spouse during your 20 years of retirement.
  2. College- You better be clear to your children, heirs, spouses and anyone else you care about as to how much you can and will provide for a college education.  Eliminate the emotional pressure of feeling you need to contribute to someone else’s education by helping them review college costs; scholarship availability and other financial aid. The best real life help you could give them just may be helping them brush up a resume or getting them an introduction for a part-time job and summer job.
  3. Home- If you don’t own a home, is being a homeowner in your future? It is just as important to review the financial options you have in buying a home as it is to find the right home in the right neighborhood.
  4. Work-Many Americans over the last couple of decades have lost their jobs to technology, the economy, downsizing, and younger people who will take a lower salary and fewer benefits than you may be getting. You should take an unemotional and hard look at what you are doing and make plans if things are going to change before you are ready to retire.  A good friend recently was forced to retire or lose benefits he had thought were already his. He was basically told to take a severance package and keep his retirement benefits including a much coveted health plan or keep working and be put on a new contract that would strip him of those benefits. He wasn’t ready to retire at 57 but he carefully evaluated his options and took the severance and two days later was working at another company in his industry at a higher salary while keeping his previous employer’s benefits.
  5. Enjoying Now- Vacations, hobbies, down time and recreational activities are all critical to your emotional health and are important components of your financial goal planning. Plan that trip to Italy with your children or grandchildren and it really can happen.

Like a good jigsaw puzzle; each of the elements of your financial plan need to be evaluated and then locked into place in order for the picture inside the puzzle to be clear, beneficial and enjoyed. Once my relative and family had a good honest discussion about their financial goals we were one step closer to being able to answer her specific investment question.

In my next article you will get suggestions for taking the second step in understanding your financial plan by taking a good look at your current spending and budget.

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Hoping for the Best

“Hope for the best and prepare for the worst.” Do you remember when you first really understood what that meant? No doubt it was at a time in your childhood when you had plans for something really exciting like an outdoor birthday party, swimming at the lake or a bake sale with your scout troop. Then the storm comes that prevents the event from happening and some kind adult put their arms around you and said “Well, sweetheart, sometimes we hope for the best but prepare for the worst.” Then that same adult pulls a canopy out of the trunk of their car; or they move the party in-doors. In any case, you became aware of the value of risk management on a very personal scale.

In the last few articles we have been talking about creating a financial plan. The first part of the plan is setting our financial goals. Second, is developing thrifty spending and savings habits. The third step is developing a personal risk management plan. We manage risk by accepting worst case scenarios in our lives and getting the proper insurances to cover it.

Start with life insurance. Have you determined the amount of life insurance coverage required for your family and loved ones in the event that you passed away? How much is needed to maintain your current lifestyle and pay-off mortgages or other debts? Is the life insurance policy owned by the correct person or entity? Life insurance planning isn’t always just about adding more coverage. Sometimes it is about cancelling unnecessary or inappropriate policies. What about policy consolidation to get multi-policy discounts?

You have assets. You may have a home, a car, a boat, an RV or a beloved Harley motorcycle; do you have adequate replacement cost coverage for these items? Did you carefully study whether you need flood or earthquake insurance? Is your artwork, jewelry and other collectibles you value adequately covered? I had an Aunt and Uncle that had their home washed away when a dam broke. Their house was swept away and on to someone else’s lot. This event precipitated an early retirement so they loaded up what they could salvage from their ruined goods; paid to have their house removed from the other person’s property; loaded up a moving van and drove it west. Their son fell asleep at the wheel on the drive; flipped the van and what they had salvaged was destroyed. They had no flood insurance. They had no insurance on the balance of their personal items. They were retired and starting over with nothing but each other.

The number one reason for the filing of bankruptcy for families in their retirement years is unexpected medical expenses. Are you covered to the extent possible with your budget? Do you understand your eligibility and benefits with Medicare? Do you have savings for emergency medical bills? Are you getting preventive care and taking good care of your health? If you are, you are managing for risk. If you are not, life can happen and you can lose.

Finally, the worse scenario for many families is dealing not with death but with the financially and emotionally draining reality of disability from some catastrophic event or medical condition. If you or a family member ended up in a long term medical facility because of such an event or condition; what would happen to your financial plan? What would happen to your lifestyle? Disability and long-term care insurance are important risk management tools. You need to determine what you could end up needing by researching the cost of convalescent care. You need to then get the best possible Long Term Disability coverage from the most reliable provider. Pay with after-tax dollars to ensure the benefits are tax-free. If this type of insurance is cost prohibitive you need to do some homework regarding possible Medicaid benefits and if you’re a US Veteran, check out your VA benefits.

My Uncle and Aunt were sunny and happy people. I loved being around them. They believed in the overall goodness of life and had failed to plan for the worst. They ended up starting over and surviving retirement. There were many adventures they had planned to enjoy in their retirement years, however, they became those roads not taken. By adequately planning for the worst in our lives we can both hope for the best and, indeed, expect it to be just that.

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Gifts of a Lifetime for Your Grandchildren

Your grandchildren are playing at your feet on the floor in the living room and rays of the sun burst through the windows of your stylish designed and decorated retirement dream home. You are overcome by a feeling of wonder and love. Then your thoughts turn to wondering; “What will be the challenges that will face my grandchildren during their life?” Then you ask yourself, “What gift can I give them that will ensure then can enjoy a similar happy moment; and, just as importantly, gifts that will help them navigate the trials of their lives?”

This conundrum is one that many grandparents are faced with when pondering birthday presents, Christmas presents, or gifts for other special occasions. The Jewish philosopher in the biblical chapter of Proverbs said “A good man leaves an inheritance to his children’s children…” (Proverbs 13:22). An inheritance to your grandchildren should involve more than just gifting them money. It should be a gift of wisdom and experience in how to save money as well as how to wisely spend it. After all you’ve gained a lot of both which is why your hair is turning white.

Here are some suggestions about gifts that teach your children’s children to both learn about the value of saving and the wisdom of spending money well.

  1. When the grandchildren are four or five purchase them not one but two piggy banks. Mark one “savings” and mark the other “cash”. Then when you want to give them some money as part of a birthday present, give it to them in multiple bills or coins and teach them to allocate at least 10% (one dime of ten dimes or one dollar bill of ten dollar bills) into the piggy bank marked savings and the balance to their “cash” piggy bank.
  2. When the child reaches 9 or 10 you can take them down to the local bank and help them set up a savings account and your gift is the initial deposit. If you live nearby, you can then take them on a monthly outing for ice cream or a hamburger and deposit their monthly savings in their bank account. Teaching them to save on a regular basis is important because if they learn young, it will be a lifetime habit which will allow them to accumulate not only money for a rainy day but actually accumulate wealth.
  3. Provide them with real spending experiences. Instead of buying them a gift. Take them on a shopping trip. Let them determine what they would like for their gift. Give them a budget. Then teach them how to comparison shop for quality and value.
  4. Trips with your grandchildren can not only be fun but opportunities to teach them about planning, budgeting, and living within the budget established. Get the grandchild involved in the planning process. Start with a budget amount and then discover destinations that meet your budget criteria. Calculate what money you will need for meals, outings, hotels and motels, travel and gifts for loved ones that don’t get to go on the trip. Let them have their own pocket money and identify what they need to pay for with their money whether treats, gifts, excursions, or meals. A fishing trip with grandpa or an excursion to the beach with grandma can combine fun with learning and they won’t even know they are at school. They will only know that they have a really cool grandparent and one more person in their young lives that love them.
  5. Do you keep a little jar or can for your pocket change? Gift it to them when they give you a hug or kiss or a little help around your house. Then have them help you count it. Next, if they are very young, help them separate a savings amount (ten percent) and put it in their piggy bank marked savings and the rest in their cash piggy bank. If they are older and have a savings account, have them help you put it in rolls for the bank, and then take it down and deposit the money into their savings account. A penny saved is a penny earned is still true and this is a great way to illustrate Ben’s pithy wisdom.
  6. Teenagers need to be engaged in the learning process but they need more challenging experiences then piggy banks and savings accounts. There are many suggestions for the older grandchild but the most critical element is integrating the experience with things teenagers are already engaged in like their cell phones, the internet, and games. So, start with gifts of various board games like Monopoly. Then you may want to hold a family “game” night once a week where you break out the pizza, soda and the games of “Life” or “Monopoly” or “Risk”. Any game will do that requires them to plan how to allocate and build wealth in an imaginary world. While you are playing with them on their birthday and subsequent holidays, you have the opportunity to teach them what you have learned about wealth accumulation, financing and budgeting.
  7. Teenagers can also be excellent students and have the ability to learn about the stock market and “on-line” trading. Gift them a stock certificate in a company with which they are familiar. The critical part of this gift is using it as an opportunity to teach them how to research and learn about the market and the economy and how to manage their investment based on the knowledge they accumulate. Help them analyze the data they gather. Before you turn over the live trading they will need to learn about the process and system. Most online trading sites allow you to trade without real money. Part of their education is learning to “ride” a bear market as well as a bull market. The real winners in the stock market are those that learn to be consistent. Part of this engagement process is that they can use their cell phones, which most teenagers keep with them 24/7 to track their stocks and investments. And, you can learn to “text” them with updates on their stock portfolio you help them build. This will be a very real lifetime gift.
  8. There are some good online or electronic “games” that teach teenagers about the market and about money. They include Fraud Scene Investigator and Sid Meier’s Railroad, or games that allow them to play while they learn about money and wealth. Remember, the key is to buy the game as a gift but the real gift is playing it with them and teaching them what you know about wealth and wealth management.

Every grandparent struggles with what to give a grandchild. Every grandparent wants to be “a good man” and leave an inheritance to them. Combining gift giving with leaving an inheritance of some of the wisdom and knowledge you’ve gained over a lifetime can be as good as it gets for both of you.

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Going Solo In Retirement

My friend’s 73 year old mother got a surprise upon the death of her former husband from the Social Security Administration. She found she was entitled to his survivor’s benefits which, since he died at age 74 and was still working full-time, turned out to be more than double what she was entitled to based on her own work history.  They had been divorced for over thirty years but they had been married for fourteen. This surprising windfall turned what was a near poverty level retirement income into one that more than met her needs. Being single usually means substantially reduced household income at retirement. But, if good decisions are made, it can be better than expected. If you are the spouse that stayed home and earned less prior to a divorce; you need to make sure you tell those who work at social security. They can show you how to make claims against your former spouse’s social security.

There is a new book out written by sociologist Eric Klinenberg called “Going Solo: the Extraordinary Rise and Surprising Appeal of Living Alone.”.  (www.smithsonianmag.com/science-nature/Eric-Klinenberg-on-Going-Solo.html) Mr. Klinenberger discovered in researching the growing rate of single households in America that many people who live alone live well-balanced, socially active lives and they enjoy living alone. In the past, many seniors, especially women, found they needed to be married in order to not drop into poverty as a divorced or single person at retirement time. The natural and thought provoking response to the ‘good news’ that living alone can be preferred and even fun is; how do retirees fund retirement on a single income? The follow-up question for spouses who weren’t the proverbial bread-winner is; how do I tap into a better social security income?

According to the Social Security Administration (www.socialsecuirty.gov/retire2/divspouse.htm ); there are conditions to a divorced spouse receiving benefits of their ex-spouse based on the better earnings record. They are:

  1. The marriage lasted ten years or longer.
  2. You are currently unmarried.
  3. You are age 62 or older.
  4. The benefit you are entitled to receive based on your own work is less than the benefits you would receive on your ex-spouse’s work.
  5. Your ex-spouse is entitled to Social Security retirement benefits.

Even if your ex-spouse has never applied for benefits and qualifies for them; you can receive benefits from social security if you have been divorced for at least two years. Your ex-spouse must be 62 years or older. It gets better (well, for you but not them)! If you ex-spouse dies you can begin receiving benefits at age 60! (Of course, that would not be the case if your marriage lasted less than ten years or your accrued social security benefits to which you would be entitled would be higher than your deceased ex-spouse.) This was the benefit that came to my friend’s mother.

What if you don’t qualify under the conditions noted above or more importantly never married or don’t intend to marry and love living “solo”?  The bottom line is that social security is limiting and you should have a savings program over and above it. However, there are ways you can maximize what you will receive from social security. Key will be when you chose to retire. It is estimated that if you are eligible for $2,000 or full retirement benefit at 66 you can increase that amount by 8% for every year past 66 you delay retirement until you reach age 70. By delaying retirement and increasing your benefits you set yourself up for a bigger cost-of-living adjustment in future years which may be the only inflation adjusted income that you can count on throughout your life. If, on the other hand, you choose to retire early you can reduce your benefits by 25% and significantly hurt your inflation adjusted income over your retirement years.

The purpose of this article is not to answer the hard questions that will come in reviewing your unique situation. This article is to get you thinking about being single and how to best benefit from social security. Now, that you are on alert, go down to your social security office and review your options with them or consult with your Financial Advisor. If you are going to pursue the possibility of capturing an ex-spouses’ social security benefits; you will need his/her tax ID and or personal data so that social security personnel can look up their records. In the meantime, even if living alone doesn’t have the appeal for you that Mr. Klinenberg’s book suggests; you now have learned about some opportunities that could possibly improve your unique financial situation at retirement.

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Vantage Advisors, LLC
50 East 100 South #101
St. George, UT 84770

Phone: 435-628-6336
Email: info@vantageadvisorsllc.com