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Market Timing: More Risk than Reward

If you turn on the news, you are bound to see discussion about the uncertainty of the current financial market. When you log into social media, it’s easy to find hundreds of “experts” discussing “buy now” and “sell now” strategies. The idea of properly timing investments for a quick return is not a strategy we believe in and is not something we ever recommend for clients. In this article, we will discuss why we don’t believe in investing based on market timing. 

What is Market Timing? 

A practice typically used by day traders, market timing refers to the process of using predictive methods to determine when to move investment money in or out of a financial market. Certain investors believe if they can predict the movements of the market, they can buy and sell to create a significant return.

According to Investopedia, “many investors, academics, and financial professionals believe it is impossible to time the market.For the majority of investors, engaging in market timing produces lower returns than long-term strategies.

Though some traders claim to have success with this method, there are no guarantees when it comes to the stock market.  As professional financial planners, the Blakely Financial team will always stress the importance of the time your funds stay invested rather than encouraging investments based on an opportune time. 

The Buy and Hold Strategy

The buy-and-hold strategy is essentially the opposite of market timing. Basically, with buy-and-hold, you purchase securities and hold on to them regardless of how the market is performing. Historically, this method yields significantly higher returns than market timing.

It is difficult to predict the ebbs and flows of the stock market. In the current bear market, it’s important to remember that historically, after every bear market, a bull market follows. Overall, the U.S stock market is positive most of the time, and bull markets last more than twice as long as bear markets. Though it can be difficult to navigate a bear market, rational thinking and patience are the best ways to ensure the success of your investments over time. 

Avoid Emotional Strategies

When experiencing a rough patch, successful investors will look toward the future instead of taking drastic steps to correct a loss. If the market is trending downward, you may feel compelled to sell off stocks for fear of more substantial losses. On the other end of the spectrum, some may feel pressure to “buy the dip” with hope that prices will soon rise again rather than continue to fall. These reactions operate under contradictory assumptions, and can be incredibly risky maneuvers. Additionally, the financial and emotional stress of monitoring price changes so closely is rarely, if ever, worth it.

Choosing your investments intentionally based on your overall financial goals can give you peace of mind regardless of the state of the market. When you are experiencing stress or fear in regards to your portfolio, review your investments with your Financial Advisor, they will be able to provide the insight you need.

In closing:

Historically, the buy-and-hold method yields significantly higher returns than market timing. Attempting to time the market is not a strategy Blakely Financial supports, regardless of how attractive certain opportunities or indicators may be. The road to financial freedom looks different for everybody, but it is important to prioritize the time your funds stay invested over the timing of your investments. The team at Blakely Financial can guide you toward well-informed, diversified, and long-term investments to grow your wealth over time. 

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Financial Horror Stories

Financial Horror Stories

After celebrating Halloween, we wanted to share some financial horror stories we encounter all too frequently. Making mistakes when it comes to your finances is perfectly normal, however, when it comes to these horror stories, the impact can be significant, and frankly, quite scary.

Not Saving Enough for Retirement

Even if retirement is 10, 20 or even 30+ years away, it’s essential to know how much you need to save in order to live comfortably. Years can fly by and leave you in a precarious position when it comes to your retirement. Don’t leave your future self in a bad position: take action now and make sure you’re doing what you can to set yourself up for a comfortable retirement that meets your lifestyle goals. 

Saving for retirement does not have to be complicated. Start early, identify your goals, stay on budget, and maximize any matching money available to you, and you will be on the road to a secure and comfortable retirement. 

Living Beyond Your Means

Living a financially comfortable life is on almost everyone’s list of priorities. But, many want more than they can afford–which can lead to lifestyle inflation and living beyond your means. Be sure to practice smart shopping habits, and always maintain a strong understanding of your financial wellness to be sure you are fully informed before making any large purchases. 

It’s vital to be realistic with your financial goals, and your spending, to avoid ending up with more debt than income. The saying is true: you can’t out-earn bad financial habits.

Uneducated Investments

With a quick Google search you can find millions of articles and videos telling you how to invest your money, but making uneducated investments can be more than scary, it can be detrimental to your portfolio and your financial wellness! Before you click the ‘submit’ button on any of the dozen investment apps, contact a professional. 

When meeting with a financial planner, the full picture of your financial health will be reviewed, taking into account your income, expenses, goals, and more. By planning appropriately with the help of a professional, and diversifying your portfolio with asset allocation based on your investment objectives, you can pursue your financial goals with greater confidence and less risk. 

Finance doesn’t have to be scary- working with an experienced advisor can help you avoid financial horror stories and free you from any money-related fears you may have! 

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Life Insurance What is it and why you need it

Why Do I Need Life Insurance?

If you’re like most people, it’s not that you don’t appreciate the value of life insurance. In fact, many people believe they need more coverage. You probably wouldn’t mind owning additional life insurance. It’s just that you don’t want to buy it.

Thinking about buying life insurance, talking about buying life insurance, discussing the reasons for buying life insurance–all of this makes many people feel uncomfortable. Here are just some of the reasons why you may be putting off buying the life insurance you know you need.

1. I don’t have enough time

You’ll get around to buying life insurance, but not today. With all the things you’ve got to do, buying life insurance can come off as a low priority–just one more thing you ought to do. Plus, the whole idea of discussing life insurance isn’t a whole lot of fun. Who wouldn’t rather take the dogs for a walk on the beach, attend a child’s softball game, or spend those precious few hours of free time in the evening visiting with friends?

Nonetheless, buying life insurance is really an important task that should be addressed. Life insurance can help ensure that your family will have enough money to meet their financial obligations in the event of your death.

2. The subject is boring and morbid

If you really don’t like to think about death, you’re not alone. Death is an unpleasant subject, and life insurance raises issues of our own mortality. Some people say that the very thought of starting the life insurance buying process makes them feel stressed out. There’s no great appeal to contemplating our own mortality. It’s a subject we’d rather ignore than address. The result can be inertia or denial.

It doesn’t have to be that way. People who do act on their life insurance needs tend to focus on the positive aspects: the idea of meeting their responsibilities to provide for, and care for, their loved ones. They think of it as contingency planning, protecting their families against the uncertainties of life. They also recognize that life insurance is really about life and love, about helping to ensure a positive quality of life for their spouse and children if they die prematurely.

3. I don’t know where to start

If you don’t have a clue about which type of policy is right for you, or how much life insurance you need, join the club. Few of us truly understand life insurance: why we need it, what type of policy is best, how much we need, when and how benefits are paid, how benefits may be taxed, and more. That’s okay. It’s not your job to know everything about life insurance. That’s the job of an insurance professional.

Thinking you need to have all of the answers about which type of life insurance is best for you is sort of like needing surgery and thinking you need to know which type of scalpel to use. That’s the surgeon’s job. In the same respect, the right insurance professional can guide you through the process of selecting the policy that best suits your needs, budget, and objectives, and can answer your questions.

4. Life insurance isn’t a high priority compared with the other expenses I have

For many underinsured people, it’s not so much that they don’t want the life insurance they need; it’s just difficult to find the extra dollars to pay for it.

Buying life insurance you can’t afford doesn’t benefit anyone. If it causes your family hardship or requires you to make choices that seem incongruous (“Gee kids, I’d love to take you on vacation, but our life insurance premium is due”), you’ll eventually discontinue the policy. Then you lose, and your family loses.

That’s why it’s important to purchase a policy that meets your needs and your budget. Fortunately, there are many types of life insurance available. These include term life insurance policies and various types of permanent (cash value) life insurance policies. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period.

Permanent insurance policies offer protection for your entire life, regardless of future health changes, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment goes toward building up the policy’s cash value, which may be accessed through loans or withdrawals. (Keep in mind, though, that loans and withdrawals will reduce the cash value and the death benefit, and could cause the policy to lapse, which may result in a tax liability if the policy terminates before the death of the insured). The cash value continues to grow–tax deferred–as long as the policy is in force.

Several different types of permanent life insurance are available, including:

  • Whole life insurance
  • Universal life insurance
  • Variable life
  • Variable universal life

Variable life and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy. There are contract limitations, fees, and charges associated with variable life and variable universal life insurance, which can include mortality and expense risk charges, sales and surrender charges, investment management fees, administrative fees, and charges for optional benefits. Variable life and variable universal life insurance is not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association. The investment return and principal value of the investment options will fluctuate. Your cash value, and perhaps the death benefit, will be determined by the performance of the chosen investment options and is not guaranteed. Withdrawals may be subject to surrender charges and are taxable if you withdraw more than your basis in the policy.

The bottom line

It’s easy to understand why people tend to put off purchasing the life insurance they know they need. But look at it this way: buying life insurance is one way you can help secure your family’s financial future. And what could be better than knowing your loved ones will be protected, even if you’re no longer around to take care of them?

People who do act on their life insurance needs tend to focus on the positive aspects: the idea of meeting their responsibilities to provide for, and care for, their loved ones.

Five reasons to buy life insurance

  • To provide continuing income for your family members
  • To pay off debts you leave behind
  • To pay final expenses and taxes
  • To provide an estate for your loved ones
  • To leave money to charity

There may be surrender charges at the time of surrender or withdrawal and are taxable if you withdraw more than your basis in the policy.

Any guarantees are contingent on the claims-paying ability and financial strength of the issuing company.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.

Life insurance policies have exclusions, limitations, and terms for keeping them in force.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Pre Marital Planning Financial

3 Financial Items to Consider Before Marriage

Divorce is hard enough without the many financial issues it brings. In fact, disagreements about money are one of the leading causes of divorce. This is why it is important to save yourself from future distress by considering certain pre-marriage steps. Having smart family discussions about money and forming legal agreements can not only prevent marital problems but save you from stressful legal arguments in the unfortunate event of a divorce. 

1. Prenuptial Agreement

Regardless of how you divide financial responsibilities within a marriage, divorce can raise difficult questions about each spouse’s legal rights and responsibilities. A prenuptial agreement can be a wise choice; by settling all of those issues before they arise. A prenup can limit your debt liability by ensuring that creditors cannot go after you to collect on your spouse’s debts. It can also protect the inheritance rights of your children from a previous relationship, as well as the ownership rights to your business. 

It is important to enter a marriage with a solid sense of assets and liabilities- a prenup is not just for the event of divorce, but for full disclosure of financials within a partnership. 

Prenups may also set provisions for financial responsibility during the marriage. They can even contain a sunset provision, meaning that conditions in the prenup will expire after a certain length of time.

 

2. Property

If you and your spouse eventually part ways, you may not agree on who owns certain property acquired during the marriage. Depending on the state you live in, property acquired during a marriage may be divided up 50-50 during a divorce, or be divided as a judge deems fair, which may not be strictly equal. Establishing which property will be marital or separate should be considered before entering into a marriage, and separate property acquired as a gift or inheritance during a marriage should be carefully documented as such: 

 

Determining whether property is separate or marital can become a very fact-specific inquiry. Especially in community property states, a judge may presume that all the property in a couple’s possession during their marriage is marital property unless they present evidence to suggest that an asset is separate property.” 

 

3. Children and Estate Planning

You may have already made some estate planning considerations, but they should be reevaluated before marriage. Whether this is your first marriage or your third, it is important to consider how it may legally impact your spouse, as well as your obligations and children from previous relationships. Estate planning will provide you the flexibility to name someone else to oversee the money you leave to your children. If you have remarried, an estate plan can provide support for your surviving spouse, as well as protect your children’s potential inheritance should your surviving spouse remarry.

Before getting married, your will should reflect your desires as they impact your children and those of your new spouse. Don’t make the mistake of assuming a change in your circumstances will make a prior beneficiary designation null and void. Always make beneficiary changes on the correct paperwork specific to the financial institution.

 

In Conclusion

Avoiding financial stress in a marital partnership is vital to protecting your assets and those of your spouse. Taking these measures before entering into a marriage not only simplifies the process of a divorce, but ensures that you and your spouse are on the same page in terms of the division of assets within a marriage. Consulting with a professional before you tie the knot will answer any hypothetical questions you both may have about a possible divorce. Though it may sound like a disheartening way to begin a marriage, it is a practical and mutually beneficial choice for you and your spouse!

As a Certified Divorce Financial Analyst (CDFA®) Emily Promise is able to guide women through all of the financial implications of a divorce. Join her on Wednesday, August 31st at 12pm for a Live Webinar: Financial Independence: A Divorced Woman’s Guide. Register Today!

 

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

10 Ways to Help Yourself Stay Calm During a Volatile Market

10 Ways to Help Yourself Stay Calm During a Volatile Market

Staying calm can be difficult when the market goes on one of its periodic roller-coaster rides. It’s useful to have strategies in place that prepare you both financially and psychologically to handle market volatility. Here are 10 ways to help keep yourself from making hasty decisions that could have a long-term impact on your ability to achieve your financial goals.

1. Have a game plan

Having predetermined guidelines that recognize the potential for turbulent times can help prevent emotion from dictating your decisions. For example, you might take a core-and-satellite approach, combining the use of buy-and-hold principles for the bulk of your portfolio with tactical investing based on a shorter-term market outlook. You also can use diversification to try to offset the risks of certain holdings with those of others. Diversification may not ensure a profit or protect against a loss, but it can help you understand and balance your risk in advance. And if you’re an active investor, a trading discipline can help you stick to a long-term strategy. For example, you might determine in advance that you will take profits when a security or index rises by a certain percentage, and buy when it has fallen by a set percentage.

2. Know what you own and why you own it

When the market goes off the track, knowing why you originally made a specific investment can help you evaluate whether your reasons still hold, regardless of what the overall market is doing. Understanding how a specific holding fits in your portfolio also can help you consider whether a lower price might actually represent a buying opportunity.

And if you don’t understand why a security is in your portfolio, find out. That knowledge can be particularly important when the market goes south, especially if you’re considering replacing your current holding with another investment.

3. Remember that everything is relative

Most of the variance in the returns of different portfolios can generally be attributed to their asset allocations. If you’ve got a well-diversified portfolio that includes multiple asset classes, it could be useful to compare its overall performance to relevant benchmarks. If you find that your investments are performing in line with those benchmarks, that realization might help you feel better about your overall strategy.

Even a diversified portfolio is no guarantee that you won’t suffer losses, of course. But diversification means that just because the S&P 500 might have dropped 10% or 20% doesn’t necessarily mean your overall portfolio is down by the same amount.

4. Tell yourself that this too shall pass

The financial markets are historically cyclical. Even if you wish you had sold at what turned out to be a market peak, or regret having sat out a buying opportunity, you may well get another chance at some point. Even if you’re considering changes, a volatile market can be an inopportune time to turn your portfolio inside out. A well-thought-out asset allocation is still the basis of good investment planning.

5. Be willing to learn from your mistakes

Anyone can look good during bull markets; smart investors are produced by the inevitable rough patches. Even the best investors aren’t right all the time. If an earlier choice now seems rash, sometimes the best strategy is to take a tax loss, learn from the experience, and apply the lesson to future decisions. Expert help can prepare you and your portfolio to both weather and take advantage of the market’s ups and downs. There is no assurance that working with a financial professional will improve investment results.

6. Consider playing defense

During volatile periods in the stock market, many investors re-examine their allocation to such defensive sectors as consumer staples or utilities (though like all stocks, those sectors involve their own risks and are not necessarily immune from overall market movements). Dividends also can help cushion the impact of price swings.

7. Stay on course by continuing to save

Even if the value of your holdings fluctuates, regularly adding to an account designed for a long-term goal may cushion the emotional impact of market swings. If losses are offset even in part by new savings, your bottom-line number might not be quite so discouraging.

If you’re using dollar-cost averaging — investing a specific amount regularly regardless of fluctuating price levels — you may be getting a bargain by buying when prices are down. However, dollar-cost averaging can’t guarantee a profit or protect against a loss. Also consider your ability to continue purchases through market slumps; systematic investing doesn’t work if you stop when prices are down. Finally, remember that the return and principal value of your investments will fluctuate with changes in market conditions, and shares may be worth more or less than their original cost when you sell them.

8. Remember your road map

Solid asset allocation is the basis of sound investing. One of the reasons a diversified portfolio is so important is that strong performance of some investments may help offset poor performance by others. Even with an appropriate asset allocation, some parts of a portfolio may struggle at any given time. Timing the market can be challenging under the best of circumstances; wildly volatile markets can magnify the impact of making a wrong decision just as the market is about to move in an unexpected direction, either up or down. Make sure your asset allocation is appropriate before making drastic changes.

9. Look in the rear-view mirror

If you’re investing long-term, sometimes it helps to take a look back and see how far you’ve come. If your portfolio is down this year, it can be easy to forget any progress you may already have made over the years. Though past performance is no guarantee of future returns, of course, the stock market’s long-term direction has historically been up. With stocks, it’s important to remember that having an investing strategy is only half the battle; the other half is being able to stick to it. Even if you’re able to avoid losses by being out of the market, will you know when to get back in? If patience has helped you build a nest egg, it just might be useful now, too.

10. Take it easy

If you feel you need to make changes in your portfolio, there are ways to do so short of a total makeover. You could test the waters by redirecting a small percentage of one asset class to another. You could put any new money into investments you feel are well-positioned for the future, but leave the rest as is. You could set a stop-loss order to prevent an investment from falling below a certain level, or have an informal threshold below which you will not allow an investment to fall before selling. Even if you need or want to adjust your portfolio during a period of turmoil, those changes can — and probably should — happen in gradual steps. Taking gradual steps is one way to spread your risk over time, as well as over a variety of asset classes.

Remember that while they’re sound strategies, diversification, asset allocation, and dollar-cost averaging can’t guarantee a profit or eliminate the possibility of loss. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. If you need further assistance in remaining calm during a volatile market, contact Blakely Financial and we will talk you through it.

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

5 Common Factors Affecting Retirement Income

5 Common Factors Affecting Retirement Income

When it comes to planning for your retirement income, it’s easy to overlook some of the common factors that can affect how much you’ll have available to spend. If you don’t consider how your retirement income can be impacted by investment risk, inflation risk, catastrophic illness or long-term care, and taxes, you may not be able to enjoy the retirement you envision.

1. Investment Risk

Different types of investments carry with them different risks. Sound retirement income planning involves understanding these risks and how they can influence your available income in retirement. Investment or market risk is the risk that fluctuations in the securities market may result in the reduction and/or depletion of the value of your retirement savings. If you need to withdraw from your investments to supplement your retirement income, two important factors in determining how long your investments will last are the amount of the withdrawals you take and the growth and/or earnings your investments experience. You might base the anticipated rate of return of your investments on the presumption that market fluctuations will average out over time, and estimate how long your savings will last based on an anticipated, average rate of return.

Unfortunately, the market doesn’t always generate positive returns. Sometimes there are periods lasting for a few years or longer when the market provides negative returns. During these periods, constant withdrawals from your savings combined with prolonged negative market returns can result in the depletion of your savings far sooner than planned. Reinvestment risk is the risk that proceeds available for reinvestment must be reinvested at an interest rate that’s lower than the rate of the instrument that generated the proceeds. This could mean that you have to reinvest at a lower rate of return, or take on additional risk to achieve the same level of return.

This type of risk is often associated with fixed interest savings instruments such as bonds or bank certificates of deposit. When the instrument matures, comparable instruments may not be paying the same return or a better return as the matured investment. Interest rate risk occurs when interest rates rise and the prices of some existing investments drop. For example, during periods of rising interest rates, newer bond issues will likely yield higher coupon rates than older bonds issued during periods of lower interest rates, thus decreasing the market value of the older bonds. You also might see the market value of some stocks and mutual funds drop due to interest rate hikes because some investors will shift their money from these stocks and mutual funds to lower-risk fixed investments paying higher interest rates compared to prior years.

*All investments are subject to risk and loss of principal. When sold, investments may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

2. Inflation Risk

Inflation is the risk that the purchasing power of a dollar will decline over time, due to the rising cost of goods and services. If inflation runs at its historical long term average of about 3%, the purchasing power of a given sum of money will be cut in half in 23 years. If it jumps to 4%, the purchasing power is cut in half in 18 years. A simple example illustrates the impact of inflation on retirement income. Assuming a consistent annual inflation rate of 3%, and excluding taxes and investment returns in general, if $50,000 satisfies your retirement income needs this year, you’ll need $51,500 of income next year to meet the same income needs. In 10 years, you’ll need about $67,195 to equal the purchasing power of $50,000 this year. Therefore, to outpace inflation, you should try to have some strategy in place that allows your income stream to grow throughout retirement. (The following hypothetical example is for illustrative purposes only and assumes a 3% annual rate of inflation without considering fees, expenses, and taxes. It does not reflect the performance of any particular investment.)

Inflation Bar Graph

3. Long-Term Care Expenses

Long-term care may be needed when physical or mental disabilities impair your capacity to perform everyday basic tasks. As life expectancies increase, so does the potential need for long-term care. Paying for long-term care can have a significant impact on retirement income and savings, especially for the healthy spouse. While not everyone needs long-term care during their lives, ignoring the possibility of such care and failing to plan for it can leave you or your spouse with little or no income or savings if such care is needed. Even if you decide to buy long-term care insurance, don’t forget to factor the premium cost into your retirement income needs. A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the long-term care policy. It should be noted that carriers have the discretion to raise their rates and remove their products from the marketplace.

4. The Costs of Catastrophic Care

As the number of employers providing retirement healthcare benefits dwindles and the cost of medical care continues to spiral upward, planning for catastrophic health-care costs in retirement is becoming more important. If you recently retired from a job that provided health insurance, you may not fully appreciate how much health care really costs. Despite the availability of Medicare coverage, you’ll likely have to pay for additional health-related expenses out-of-pocket. You may have to pay the rising premium costs of Medicare optional Part B coverage (which helps pay for outpatient services) and/or Part D prescription drug coverage. You may also want to buy supplemental Medigap insurance, which is used to pay Medicare deductibles and co-payments and to provide protection against catastrophic expenses that either exceed Medicare benefits or are not covered by Medicare at all. Otherwise, you may need to cover Medicare deductibles, co-payments, and other costs out-of-pocket.

5. Taxes

The effect of taxes on your retirement savings and income is an often overlooked but significant aspect of retirement income planning. Taxes can eat into your income, significantly reducing the amount you have available to spend in retirement. It’s important to understand how your investments are taxed. Some income, like interest, is taxed at ordinary income tax rates. Other income, like long-term capital gains and qualifying dividends, currently benefit from special–generally lower–maximum tax rates. Some specific investments, like certain municipal bonds,* generate income that is exempt from federal income tax altogether. You should understand how the income generated by your investments is taxed, so that you can factor the tax into your overall projection. Taxes can impact your available retirement income, especially if a significant portion of your savings and/or income comes from tax-qualified accounts such as pensions, 401(k)s, and traditional IRAs, since most, if not all, of the income from these accounts is subject to income taxes. Understanding the tax consequences of these investments is important when making retirement income projections.

*Interest earned on tax-free municipal bonds is generally exempt from state tax if the bond was issued in the state in which you reside, as well as from federal income tax (though earnings on certain private activity bonds may be subject to regular federal income tax or to the alternative minimum tax). But if purchased as part of a tax-exempt municipal money market or bond mutual fund, any capital gains earned by the fund are subject to tax, just as any capital gains from selling an individual bond are. Note also that tax-exempt interest is included in determining if a portion of any Social Security benefit you receive is taxable.

Have you planned for these factors?

When planning for your retirement, consider these common factors that can affect your income and savings. While many of these same issues can affect your income during your working years, you may not notice their influence because you’re not depending on your savings as a major source of income. However, investment risk, inflation, taxes, and health-related expenses can greatly affect your retirement income.

 

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This blog has been developed by an independent third party. Commonwealth Financial Network is not responsible for their content and does not guarantee their accuracy or completeness, and they should not be relied upon as such. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Commonwealth does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.
Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.
Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

What is Your Retirement ‘Elevator Pitch’?

We are entering the halfway point in the year. Now is a great time to do a mid-year check of your goals. And a great way to do this is to start with an ‘elevator pitch’.  Imagine stepping into an elevator and realizing that you are about to spend the 30-second ride with someone who could make your retirement dreams come true — if only you could explain them before the doors open again. How would you summarize your financial situation, outlook, aspirations, and plans if you had 30 seconds to make an “elevator pitch” about achieving one of your most important goals?

Answering that question — and formulating your own unique retirement dream elevator pitch — could help bring your vision of the future into sharper focus and make sure you are on the path to reaching those goals.

What Are Your Goals?

Start with an overview of what you hope to accomplish. That typically includes describing what you want, when you want it, and why. For example, you might say, “My goal involves retiring in 10 years and moving to a different state so I can be closer to family.” Or, “In the next 15 years, I need to accumulate enough money to retire from my regular job and open a part-time business that will help sustain my current lifestyle.”

If your plans include sharing life with a loved one, make sure you’re both on the same page. Rather than assume you have similar ideas about retirement, discuss what you want a future together to look like.

How Much Will It Cost?

To put a price tag on your retirement dream, consider working with a financial professional to calculate how much money you’ll need. Making multiple calculations using different variables — such as changing your anticipated retirement date and potential investment growth rate — will help you develop a better understanding of the challenges and opportunities you may encounter.

It’s important to remember that plans don’t always work out the way we intend. For example, 72% of workers surveyed in 2021 said they expect to continue working for pay during retirement, but only 30% of retirees said they actually did so. And nearly half (46%) of current retirees left the workforce earlier than expected.1 Understanding the financial implications of an unanticipated change in plans before it happens could make it easier to adjust accordingly.

How Will You Do It?

If your calculations indicate you may be facing a retirement savings shortfall, take a fresh look at your spending habits to help find ways to save more money. Make a list of your fixed expenses and then keep track of your discretionary purchases every day for a month. It might be startling to realize how much you routinely spend on non-essential items, but you’ll quickly discover exactly where to start applying more financial discipline.

Source: Employee Benefit Research Institute, 2021

Finally, you’ll need to manage the funds you earmark for retirement by choosing the types of accounts to use and allocating your money within each account. If you have access to an employer-sponsored retirement account with matching contributions from your employer, you might want to start there and then invest in additional tax-deferred and taxable investments.

Regardless of the types of accounts you choose, your specific investment decisions should reflect your personal tolerance for risk and time frame, while addressing the priorities outlined in your retirement dream elevator pitch. If your retirement outlook changes at any point, take a fresh look at your investment strategy to make sure you’re still potentially on course.

Taking time to perform this exercise of crafting your ‘elevator pitch’ and talking to your trusted financial advisor to review your goals and current situation is imperative in helping to achieve your goals and dreams.

All investing involves risk, including the possible loss of principal. There is no guarantee that any investment strategy will be successful. Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. There is no assurance that working with a financial professional will improve investment results.

1) Employee Benefit Research Institute, 2021

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at www.blakelyfinancial.com to see what other financial tips we can provide for your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

 

Baseball Lessons To Change Up Your Finances

Presented by STEPHEN LAFRANCE, CFP®, MBA

Baseball stadiums are filled with optimists. Fans start each new season hoping that this year could finally be the year, even if last year ended severely. After all, teams rally mid-season, curses are broken, and even underdogs sometimes make it to the World Series. As Yogi Berra famously put it, “It ain’t over till it’s over.”1 Here are a few lessons from America’s pastime that might inspire you to take a fresh look at your finances.

Proceed One Base at a Time

There’s nothing like seeing a home run light up the scoreboard, but games are often won by singles and doubles that put runners in scoring position through a series of hits. The one-base-at-a-time approach takes discipline, something you can apply to your finances. What are your financial goals? Do you know how much money comes in and how much goes out? Are you saving regularly for retirement or a child’s college education? Answering some fundamental questions will help you understand where you are now and help you decide where you want to go.

Cover Your Bases

Baseball players must be positioned and prepared to make a play at the base. So what can you do to help protect your financial future if life throws you a curveball? First, try to prepare for those “what ifs.” For example, you could buy the insurance coverage you need to help make sure your family is protected. And you could set up an emergency account that you can tap instead of dipping into your retirement funds or using a credit card when an unexpected expense arises.

Take Me Out to the Ball Game

The average cost of taking a family of four to a Major League Baseball game during the 2021 season was $253. Prices varied across the league, with Red Sox fans paying the most and Diamondbacks fans paying the least.*

Source: The Athletic, 2021

Expect to Strike Out

Fans may have trouble seeing strikeouts in a positive light, but every baseball player knows that striking out is a big part of the game. Striking out is much more common than getting hits. The record for the highest career batting average record is .366, held by Ty Cobb.2 As Ted Williams once said, “Baseball is the only field of endeavor where a man can succeed three times out of ten and be considered a good performer.”3

So how does this apply to your finances? As Hank Aaron put it, “Failure is a part of success.” 4 If you’re prepared for the misses and the hits, you can avoid reacting emotionally rather than rationally when things don’t work out according to plan. For example, when investing, you have no control over how the market will perform, but you can decide what to invest in and when to buy and sell, according to your investment goals and risk tolerance. In the words of longtime baseball fan Warren Buffett, “What’s nice about investing is you don’t have to swing at every pitch.”5

See Every Day as a New Ball Game

When the trailing team ties the score (often unexpectedly), the announcer shouts, “It’s a whole new ball game!” 6

Whether your investments haven’t performed as expected, you’ve spent too much money, or you haven’t saved enough, there’s always hope if you’re willing to learn from what you’ve done right and what you’ve done wrong. Hall of Famer Bob Feller may have said it best. “Every day is a new opportunity. You can build on yesterday’s success or put its failures behind you and start again. That’s the way life is, with a new game every day, and that’s the way baseball is.”7

 

All investing involves risk, including the possible loss of principal. In addition, there is no guarantee that any investment strategy will be successful.

1, 3-4, 6-7) BrainyQuote.com

2) ESPN.com

5) quotefancy.com

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

STEPHEN LAFRANCE, CFP®, MBA is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. 336-885-2530.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.