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Having the Money Talk with Your Children

Posted on June 13, 2017 at 10:19 AM Comments comments (328)
Having the Money Talk with Your Children
 
How much financial knowledge do they have?
 
 
Some young adults manage to acquire a fair amount of financial literacy. In the classroom or the workplace, they learn a great deal about financial principles. Others lack such knowledge and learn money lessons by paying, to reference William Blake, "the price of experience."
 
Broadly speaking, how much financial literacy do young people have today? At this writing, some of the most recent data appears in U.S. Bank's 2016 Student and Personal Finance Study. After surveying more than 1,600 American high school and undergraduate students, the bank found that just 15% of students felt knowledgeable about investing. For that matter, just 42% felt knowledgeable about deposit and checking accounts. 1
 
Relatively few students understood the principles of credit. Fifty-four percent thought that having "too many" credit cards would negatively impact their credit score. Forty-four percent believed that they could build or improve their credit rating by using credit or debit cards. Neither perception is accurate. 1
 
Are parents teaching their children well about money? Maybe not. An interesting difference of opinion stood out in the survey results. Forty percent of the parents of the survey respondents said that they had taught their kids specific money management skills, but merely 18% of the teens and young adults reported receiving such instruction. 1,2  
 
A young adult should go out into the world with a grasp of certain money truths. For example,   high-interest debt should be avoided whenever possible, and when it is unavoidable, it should be the first debt attacked. Most credit cards (and private student loans) carry double-digit interest rates. 3      
 
Living independently means abiding by some kind of budget. Budgeting is a great skill for a young adult to master, one that may keep them out of some stressful financial predicaments.
 
At or before age 26, health insurance must be addressed. Under the Affordable Care Act, most young adults can remain on a parent's health plan until they are 26. This applies even if they marry, become parents, or live away from mom and dad. But what happens when they turn 26? If they sign up for an HMO, they need to understand how out-of-network costs can creep up on them. They should understand the potentially lower premiums that they could pay if enrolled in a high-deductible health plan (HDHP), but also the tradeoff - they might get hit hard in the wallet if a hospital stay or an involved emergency room visit occurs. 3,4      
 
Lastly, this is an ideal time to start saving & investing. Any parent would do well to direct their son or daughter to a financial professional of good standing and significant experience for guidance about building and keeping wealth. If a young adult aspires to retire confidently later in life, this could be the first step. A prospective young investor should know the types of investments available to them as well as the difference between investments and investment vehicles (which many Americans, young and old, confuse).
 
A money talk does not need to cover all the above subjects at once. You may prefer to dispense financial education in a way that is gradual and more anecdotal than implicitly instructive. Whichever way the knowledge is shared, sooner is better than later - because financially, kids have to grow up fast these days.
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - stories.usbank.com/dam/september-2016/USBankStudentPersonalFinance.pdf [9/16]
2 - tinyurl.com/yc6ejxjp [10/27/16]
3 - cnbc.com/2017/03/02/parents-need-to-have-real-world-money-talk-with-kids.html [3/2/17]
4 - healthcare.gov/young-adults/children-under-26/ [6/8/17]
 

Investing in Agreement with Your Beliefs

Posted on June 1, 2017 at 4:06 PM Comments comments (174)
Investing in Agreement With Your Beliefs

The case for aligning your portfolio with your outlook & worldview.
   
Do your investment choices reflect your outlook? Are they in agreement with your values? These questions may seem rather deep when it comes to deciding what to buy or sell, but some great investors have built fortunes by investing according to the ethical, moral and spiritual tenets that guide their lives.     
 
Sir John Templeton stands out as an example. Born and raised in a small Tennessee town, he became one of the world's richest men and most respected philanthropists. Templeton maintained a lifelong curiosity about science, religion, economics and world cultures - and it led him to notice opportunities in emerging industries and emerging markets (like Japan) that other investors missed. Believing that "every successful entrepreneur is a servant," he invested in companies that did no harm and which reflected his conviction that "success is a process of continually seeking answers to new questions." 1
 
Among Templeton's more famous maxims was the comment, "Invest, don't trade or speculate." Having endured the Great Depression as a youth, he had a knack for spotting irrational exuberance. 2,4  
 
As the 1990s drew to a close, he correctly forecast that 90% of Internet companies would go belly-up within five years. In 2003, he warned investors of a housing bubble that would soon burst; in 2005, he predicted "financial chaos" and a huge stock market downturn. To Templeton, a rally or an investment opportunity had to have sound fundamentals; if it lacked them, it was dangerous. 3,4  
 
Warren Buffett leaps to mind as another example. The "Oracle of Omaha" is worth $70 billion, and Berkshire Hathaway's market value has risen 1,826,163% under his guidance - yet he still lives in the same house he bought for $31,500 in 1958, and prefers cheeseburgers and Cherry Coke to champagne or caviar. He was born to an influential family (his father served in Congress), but he has maintained humility through the decades. 5
 
Money manager Guy Spier dined with Buffett in 2008 at one of the billionaire's annual charity lunches, and in his book The Education of a Value Investor (co-written with TIME correspondent William Green), he shares a key piece of advice Buffett gave him that day: "It's very important always to live your life by an inner scorecard, not an outer scorecard." In other words, act and invest in such a way that you can hold your head high, so that you are staying true to your values and not engaging in behavior that conflicts with your morals and beliefs. 5  
 
Buffett has also cited the need to be truthful with yourself about your strengths, weaknesses and capabilities - as you invest, you should not be swayed from your core beliefs to embrace something that you find mysterious. "You have to stick within what I call your circle of competence. You have to know what you understand and what you don't understand. It's not  terribly  important how  big  the circle is. But it's  terribly  important that you know where the  perimeter  is." 5  
 
Speaking to a college class some years ago in Georgia, he cited the real reward for a life well lived: "When you get to my age, you'll really measure your success in life by how many of the people you want to have love you actually do love you. I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them. But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don't care how big your bank account is, your life is a disaster." 5
 
Values and beliefs helped guide Templeton and Buffett to success in the markets, in business and in life. For all the opportunities they seized, their legacy will be that of humble and value-centered individuals who knew what mattered most.
 
Today, socially responsible investing looks better than ever. Investors who want to their portfolios to better reflect their beliefs and values often turn to "socially responsible" investments - or alternately, "impact" investments that respond to environmental issues, women's rights issues and other pressing societal concerns. When they emerged in the late 1980s, people were skeptical about how well such investments would perform; that skepticism is still around, but it appears to be unwarranted. Since 1990, the average annual total return for the S&P 500 has been 9.93%; the Domini 400, considered the prime index tracking socially responsible companies, has an annual total return of 10.46% by comparison. So aligning your portfolio with your outlook and worldview looks like even more like a win-win these days. 6
   
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
   
Citations.
1 - forbes.com/sites/alejandrochafuen/2013/05/07/how-to-invest-think-and-live-like-sir-john-templeton/ [5/7/13]
2 - record-eagle.com/news/local_news/jason-tank-finding-the-right-mindset-is-good-start/article_42c81b99-c7c9-5fa1-83b3-4fa2f9c1c641.html [5/5/15]
3 - csmonitor.com/Commentary/Opinion/2008/0711/p09s01-coop.html [7/11/08]
4 - crossingwallstreet.com/archives/2014/02/sir-john-templeton-the-last-yankee.html [2/10/14]
5 - observer.com/2015/05/ive-followed-warren-buffett-for-decades-and-keep-coming-back-to-these-10-quotes/ [5/4/15]
6 - marketwatch.com/story/socially-responsible-investing-has-beaten-the-sp-500-for-decades-2015-05-21 [5/21/15]
 

The Real Cost of College

Posted on May 31, 2017 at 1:37 PM Comments comments (217)
The Real Cost of College
 
It may not be what you think. 
 
 
How much will your family end up paying for college? Your household's income may have less influence than you think - and some private colleges may be cheaper than you assume.
 
Private schools sometimes extend the best aid offers. Yes - it is true that the more money you earn and the more assets you have in a tax-advantaged college savings plan, the harder it becomes to qualify for financial aid. Merit aid is another matter, however; most private colleges and universities that boast major endowment funds that support healthy merit-based aid packages.
 
These scholarships and institutional grants - awarded irrespective of a family's financial need - can reduce the "sticker shock" of a college education. A study from the National Association of College and University Business Officers found that grant-based aid effectively cut tuition and fees by an average of 48.6% in the 2015-16 academic year. If your child can fit into the top quarter of a college's student population in terms of grades or achievement, merit aid may be a possibility. A college that might be your student's second or third choice might offer him or her more merit aid than the first choice. 1
 
Relatively speaking, some universities demand more from poorer families. An analysis published in 2016 by New America noted 102 U.S. colleges with endowments of greater than $250 million that charged the poorest students more than $10,000 in tuition for the 2013-14 academic year. Out of more than 1,400 colleges and universities New America studied, hundreds expected households earning $30,000 or less per year to pay the equivalent of half or more of their earnings on higher ed. 2  
     
The state legislature of New York made a striking move this spring. It decided to waive tuition for many full-time undergraduate students at both 2-year and 4-year public colleges and universities within its borders. To qualify for this tuition break, households had to earn less than $100,000 annually - and students had to pledge to work and reside in New York state after they earned their degrees. (The annual earnings threshold will presently rise to $125,000.) Families and their students will still have to pay fees (and if needed, room and board). 3
 
New York is not the only state making such an offer. Programs like the Tennessee Promise and the Oregon Promise have made community college tuition free in those states. Delaware and Minnesota have adopted similar plans, and Rhode Island and Arkansas also have like policies in the works. Any little tuition break helps, especially in these times. According to the Institute for College Access and Success, about 70% of college graduates in 2015 owed a great deal of money; their average education debt was $30,100. 4
     
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - usnews.com/education/best-colleges/paying-for-college/articles/2016-07-07/strategies-for-students-too-rich-for-financial-aid-too-poor-for-college [7/7/16]
2 - washingtonpost.com/news/grade-point/wp/2016/03/16/these-colleges-expect-poor-families-to-pay-more-than-half-their-earnings-to-cover-costs/ [3/16/16]
3 - nytimes.com/2017/04/28/your-money/paying-for-college/as-college-deadlines-near-families-wonder-what-they-can-pay.html [4/28/17]
4 - newsweek.com/free-college-tuition-new-york-bernie-sanders-582345 [4/11/17]

Keep Calm, Stay Invested

Posted on May 19, 2017 at 4:47 PM Comments comments (7)
Keep Calm, Stay Invested

Expect more volatility, but avoid letting the headlines alter your plans.
 
Recent headlines have disturbed what was an unusually calm stock market. The political uproar in Washington may continue for weeks or months, and it could mean significant, ongoing turbulence for Wall Street.
 
As an investor, a retirement saver, how much will this turmoil matter to you in the long run? Perhaps, very little. There are many good reasons to remain in the market.
   
The earnings recession has ended, and the economy has strengthened. This past earnings season was a superb one. The first quarter of 2017 saw the biggest annualized leap in corporate profits in five years - nearly 15%, according to S&P Capital IQ. The good news hardly ends there. We may be at or near full employment - both the headline jobless rate and the U-6 rate measuring underemployment are back to where they were before the Great Recession began. Inflation has, at last, picked up, and the manufacturing and service sectors have been growing. 1,2
      
The market is still having a good year. At this writing, the S&P 500 is up more than 5% year-to-date; the Nasdaq Composite, about 12% year-to-date. Given the economic trends mentioned in the above paragraph - and the possibility of more dovishness from the Fed - these indices could certainly see further 2017 gains. 3
      
Remember that many investors come to regret emotional decisions. Emotions drove many people away from equities in the 2007-09 bear market, and they paid a price; after sinking to a bottom on March 9, 2009, the S&P 500 appreciated 100% in just four years.   Some of those who sat on the sidelines as the bull market started ended up buying high after selling low. 4
 
Here is another dramatic example: the S&P rose 15.2% in a month (in terms of total return) after hitting a low on October 9, 2002. So, just as the market can drop quickly, it can also recover quickly. 4
            
Breaking news should not dissuade you from pursuing your long-term objectives. Your retirement savings effort is not momentary, but lifelong. The Dow, Nasdaq, and S&P 500 have climbed higher through all kinds of disruptions in their long history. The S&P has advanced in 72% of the years it has been in existence. Look at the big picture of market performance over time. Understand that pronounced, daily volatility is a disruption of the market norm, not the norm itself. 4
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - cnbc.com/2017/05/12/corporate-profits-just-posted-their-biggest-jump-in-five-years.html [5/12/17]
2 - nytimes.com/2017/05/05/upshot/were-getting-awfully-close-to-full-employment.html [5/5/17]
3 - markets.wsj.com/us [5/18/17]
4 - thebalance.com/u-s-stock-bear-markets-and-their-subsequent-recoveries-2388520 [9/23/16]
 

Why Retirees Need Good Credit Scores

Posted on May 16, 2017 at 4:09 PM Comments comments (98)
Why Retirees Need Good Credit Scores

Careers & businesses end, but the need to borrow remains.
 
We spend much of our adult lives working, borrowing, and buying. A good credit score is our ally along the way. It retains its importance when we retire.
 
Retirees should do everything they can to maintain their credit rating. A FICO score of 700 or higher is useful whether an individual works or not. 
 
For example, some retirees will decide to refinance their home loans. A recently published study from the Center for Retirement Research at Boston College noted that in 2013, 50% of homeowners older than 55 carried some form of housing debt. In 2017, it is probable that picture is unchanged. Arranging a lower interest rate on any remaining mortgage payments could bring income-challenged retirees more money each month. A strong FICO score will help them do that; a substandard one will not. 1  
 
Most retirees will want to buy a car at some point. Perhaps buying a recreational vehicle is on their to-do list. Very few car, truck, or RV purchases are all cash. A good credit score can help a retiree line up an auto loan with lower interest payments.
 
Insurance companies also study retiree credit habits. Since the early 1990s, credit-based insurance scores have been fundamental to underwriting. Used in all but a few states, they play a major role in determining car insurance and homeowner insurance premiums. 2  
 
The Fair Isaac Co. (FICO) generates credit-based insurance scores, which are variants of standard credit scores. Job and income data do not matter in a credit-based insurance score. Instead, insurers add up factors from a person's credit history to project the likelihood of that person having an insurance loss. When a retiree consistently makes bill and loan payments on time, that helps her or his credit-based insurance score. The score is hurt when bill or loan payments are missed or delinquent or when debt levels become excessive. 2,3
 
A strong credit rating can come in handy in other financial situations. It can help a retiree qualify for another credit card, should the need arise. If a senior wants to buy a smaller home (or move into an assisted living facility), a credit score may be a make-or-break factor. If a senior co-signs a loan for children or grandchildren, a credit rating will matter.
 
How can retirees boost their credit scores? Some obvious methods come to mind as well as less obvious ones. Besides paying bills on time and keeping credit card balances low, wiping out small debts can help lower a retiree's credit utilization ratio. Asking a card issuer to raise a debt limit on a card can have the same effect, provided the monthly balance stays low and is paid off routinely. 4  
 
Too few retirees review their credit reports, and about 20% of individual credit reports have errors. More retirees ought to ask the three big credit bureaus - Equifax, TransUnion, and Experian - for a free copy of their credit report. Every 12 months, they are entitled to one. 4
 
Credit cards held for decades should be kept active, especially if they have good payment histories. The same goes for high-limit cards. Closing these accounts out can do more harm than good to a credit rating.
 
Remember that good credit counts at any age. TransUnion recently surveyed baby boomers and discovered that nearly half thought their credit scores would become less important after they turned 70. As you can see by the above examples, that is not true. A high credit score can help you buy and borrow long after your working days are done. 5
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - nytimes.com/2016/11/22/health/new-old-age-mortgage-debt.html [11/22/16]
2 - naic.org/cipr_topics/topic_credit_based_insurance_score.htm [12/30/16]
3 - kiplinger.com/article/credit/T017-C000-S015-why-your-credit-score-matters-in-retirement.html [2/9/17]
4 - fool.com/retirement/general/2016/05/13/5-ways-to-boost-your-credit-score-in-retirement.aspx [5/13/16]
5 - kiplinger.com/article/credit/T017-C000-S002-4-reasons-for-retirees-to-maintain-strong-credit.html [7/16]
 

The Importance of Financial Literacy

Posted on May 11, 2017 at 4:12 PM Comments comments (215)
The Importance of Financial Literacy

Too few Americans understand personal finance fundamentals.
 
If only money came with instructions. If it did, the route toward wealth would be clear and direct. Unfortunately, many people have inadequate financial knowledge, and for them, the path is more obscure. 
 
Are most people clueless about financial matters? That depends on what gauge you want to use to measure financial knowledge. The U.S. ranked fourteenth in Standard & Poor's 2015 Global Financial Literacy Study, with just 57% of the country's population estimated as financially literate. 1
 
Obviously, the other 43% of Americans have some degree of financial understanding - but it is mixed with a degree of incomprehension. Witness some examples:
 
*A recent LendU survey found that nearly half of college students carrying student loans thought those debts would eventually be forgiven if left unpaid.
*This year, Fidelity Investments asked Americans the following question in a multiple-choice quiz: "If you were able to set aside $50 each month for retirement, how much could that end up becoming 25 years from now, including interest, if it grew at the historical stock market average?" The correct answer was $40,000, but just 16% of respondents got it right. Another 27% guessed $15,000 (i.e., 50 x 12 x 25, as if interest was not a factor). 
*Only 42% of those quizzed by Fidelity knew that withdrawing 4-5% a year from retirement savings is commonly recommended. Fifteen percent of those older than 55 thought they would be "safe" withdrawing 10-12% per year.
*The S&P 500 has returned positively in 30 of the last 35 years. Just 8% of those answering Fidelity's quiz guessed this. 2,3
 
Apart from these examples, consider another one at the macro level. According to the latest National Financial Capability Study from FINRA (the Financial Industry Regulatory Authority), only about a third of Americans younger than 40 understand the basic financial concepts of compounding, inflation, and risk diversification. 1
 
Statistics aside, think about how a lack of financial acumen hurts people's chances to build or protect wealth. How about the employee who skips retirement plan enrollment at work, mistakenly thinking that a tax-advantaged retirement account is the same as a bank account? Or the small business owner puzzled by cash flow and profit-and-loss statements? Or the young borrower who fails to grasp the long-run consequences of only making interest payments on a credit card or loan?
      
Financial professionals continually educate themselves. They stay on top of economic, tax law, and market developments. Investors should as well. Ten or twenty years from now, you may find yourself in an entirely different place financially - who knows? The economy, the Wall Street climate, and even the investment opportunities before you could all differ from what you see today. If your financial knowledge is ten or twenty years out of date, you risk being at a disadvantage. 
 
Financial literacy is not about prevention, but instead about empowerment. The more you understand about personal finance, the more potential you give yourself to make smart money decisions.  
          
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - marketwatch.com/story/should-colleges-require-a-financial-literacy-class-2017-04-03/ [4/3/17]
2 - investopedia.com/news/3-ways-improve-financial-literacy/ [4/21/17]
3 - marketwatch.com/story/most-americans-failed-this-eight-question-retirement-quiz-2017-03-23 [3/23/17]
 

The Rough Consequences of Not Saving for Retirement

Posted on May 8, 2017 at 1:31 PM Comments comments (2)
The Rough Consequences of Not Saving for Retirement

Do you really want to risk facing these potential outcomes?
 
 
Saving for retirement may seem a thankless task. But you may be thanking yourself later. Putting away a percentage of one's income, money that could be used for any number of bills or luxuries, is a sacrifice made in the present in order to avoid a larger trouble down the road.
 
More than a quarter of seniors have no retirement savings. To be more specific, the Government Accountability Office says 29% of households headed by people 55 or older have no savings in a retirement account and no possibility of receiving an employer pension. 1
 
Late last year, a PWC survey revealed that 37% of baby boomers had less than $50,000 in retirement assets. Just 24% of baby boomer households PWC polled had saved more than $300,000 for their "second acts." 2  
 
What kind of future awaits boomers who have saved less than $50,000 for retirement? It is hard to say exactly what may happen to them financially, but it is possible to make some educated guesses.
 
They will likely try to work into their seventies. If their health permits, they will attempt to stay employed at least part time. Their earnings will presumably drop as they age.
 
They will probably rely heavily on Social Security & home equity. Social Security income by itself will prove insufficient to retire on, so they will look at selling their homes or arranging reverse mortgages to help fund their retirement (if they own homes to begin with).
 
A fortunate few may have a third option: augmenting their inadequate retirement savings with proceeds from a business sale. Some small business owners save relatively little, believing that the money they get from selling their company will fund their future. That is not a given. It may take years for their business to sell, and it may sell for far less than they assume.
 
Within a few years, they will need to accept a significantly lower quality of life. They may be forced to scale back creature comforts, live in tiny quarters, or relocate to a cheaper, less desirable area (assuming they can handle relocation costs). They may end up doing all of this.
 
At some point, they may start spending down their assets. If they do enough of that, they will be eligible for Medicaid - a grim consolation in a sad process. Debts may impel them to whittle away their net worth even faster.
 
Then, they may need help their children. Having little or no income besides Social Security, they will struggle mightily to keep up with the bills. If they own their homes free and clear, at least they will be able to stay in them; if not, they may choose the apartment of last resort and move in with one of their adult children.
 
Will this be your future? If you want to plan to avoid this financial nightmare, then   you must save and invest for retirement. Save and invest as if your entire future depends on it, for it may. Saving and investing now could help you save your quality of life someday.
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - smartasset.com/retirement/average-retirement-savings-are-you-normal [3/29/17]
2 - fool.com/retirement/2016/12/17/baby-boomers-average-savings-for-retirement.aspx [12/17/16]
 

Insurance and Investments

Posted on April 25, 2017 at 12:05 PM Comments comments (1)
Insurance and Investments

A good financial strategy is not just about "making money;" it is also about protection.
 
 
Some people mistake investing for financial planning. Their "financial strategy" is an investing strategy, in which they chase the return and focus on the yield of their portfolio. As they do so, they miss the big picture.
 
Investing represents but one facet of long-term financial planning. Trying to build wealth is one thing; trying to protect it is another. An effort must be made to manage risk.
 
Insurance can play a central role in wealth protection. That role is underappreciated - partly because some of the greatest risks to wealth go unnoticed in daily life. Five days a week, investors notice what happens on Wall Street; the market is constantly "top of mind." What about those "back of mind" things investors may not readily acknowledge?  
 
What if an individual suddenly cannot work? Without disability insurance, a seriously injured or ill person out of the workforce may have to dip into savings to replace income - i.e., reduce his or her net worth. As the Council for Disability Awareness notes, the average length of a long-term disability claim is nearly three years. Workers' compensation insurance will only pay out if a disability directly relates to an incident that occurs at work, and most long-term disabilities are not workplace related. Disability insurance can commonly replace 40-70% of an individual's income. Minus disability coverage, imagine the financial impact of going, for instance, three years without work and what that could do to a person's net worth and retirement savings. 1   
 
What if an individual suddenly dies? If a household relies on that person's income, how does it cope financially with that income abruptly disappearing? Does it spend down its savings or its invested assets? In such a crisis, life insurance can offer relief. The payout from a policy with a six-figure benefit can provide the equivalent of years of income. Optionally, that payout can be invested. Life insurance proceeds are usually exempt from income tax; although any interest received is taxable. 2
 
Most people want a say in what happens to their wealth after they die. Again, insurance can play a role. At a basic level, those with larger estates may use life insurance to address potentially large liabilities, such as business loans, mortgage payments, and estate taxes. An ILIT may also shield the cash value of a life insurance policy from "predators and creditors." Beyond that, a sizable life insurance policy can be creatively incorporated into an irrevocable life insurance trust (ILIT), through which an individual can plan to exclude life insurance proceeds from his or her taxable estate. 3  
 
Yes, the estate tax exemption is high right now: $5.49 million. Even so, if a person dies in 2017 while owning a $5 million life insurance policy and a $500,000 home, his or her estate would be taxed. An ILIT would be a useful estate-planning tool in such a circumstance. 3  
 
Why do people underinsure themselves as they strive to build wealth? Partly, it is because death and disability are uncomfortable conversation topics. Many people neglect estate planning due to this same discomfort and because they lack knowledge of just how insurance can be used to promote wealth preservation.
 
The bottom line? Insurance is a vital, necessary aspect of a long-term financial plan. Insurance may not be as exciting to the average person as investments, but it can certainly help a household maintain some financial equilibrium in a crisis, and it also can become a crucial part of estate planning.
     
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - nerdwallet.com/blog/insurance/disability-insurance-explained/ [6/27/16]
2 - tinyurl.com/knroq9u [3/27/17]
3 - thebalance.com/irrevocable-life-insurance-trust-ilit-estate-planning-3505379 [3/21/17]

How Will You Spend Your Retirement Savings?

Posted on April 18, 2017 at 11:36 AM Comments comments (98)
Keep an eye on where it goes, as some destinations may be better than others.
   
You can probably envision how most of your retirement money will be spent. Much of it will be used on living expenses, health care expenses, and, perhaps, debt reduction. Beyond the basics, you will unquestionably reserve some of those dollars for grand adventures and great experiences. If your financial situation permits, you may also contribute to charity.  
 
You just have to remember that your retirement fund is not a bottomless well. If outflows begin to exceed inflows (that is, you repeatedly withdraw more than you make back), you will face a serious financial problem.  
 
With that hazard in mind, be wary of these four spending sieves. Some retirees fall prey to them, and all four can potentially reduce a retirement fund at an alarming rate.
 
Spending some of your retirement money on your adult children. According to the Federal Reserve Bank of New York, the average indebted college graduate is shouldering $34,000 in student loans. No wonder some millennials live without a car, live with a couple of roommates, or live with their parents. It is easy to feel empathy for a son or daughter in this situation, but you need not bail them out. 1
 
You may be tempted to pay off some bills for an adult child, even some education debt - but should your retirement dollars be used for that? Frankly, no. (If you face the prospect of retiring with outstanding student loans, attack yours instead of ones linked to your kids.)
 
Spending some of your retirement money on your home. Should the mortgage be paid off? Does the landscaping need work? Should you put in solar panels? In asking such questions, question whether you want to assign your retirement dollars to such expenses.
 
Making a big lump-sum payment to erase your mortgage balance can also erase that money right out of your retirement savings. Some retirees find it better just to carry their home loans a little longer, enjoying the associated mortgage interest tax break. Certain home improvements might raise the value of your residence; others might not be cost effective.
 
Spending some of your retirement money at casinos. It is amazing how many retirees flock to gaming establishments. As AARP noted last year, about half of visitors to U.S. casinos are aged 50 or older. Gambling addiction is, fortunately, rare, but even casual gamblers can have a hard time walking away due to the comfort and conditions of the casino experience. Would any retiree be able to defend such spending as purposeful? 2
 
Spending too much of your retirement money at the start of your "second act." Often, retiree households get a little too ambitious with their travel plans or live it up just a little too much in the first few years of retirement. Either on their own or through a talk with their retirement planner, they learn that they must reduce their spending - and fast.
     
Aim to spend your retirement money in a way that you will not regret. Recognize these potential traps, strive to steer clear of them, and consider options that may give your retirement fund the possibility of further growth.
     
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - tinyurl.com/ldkz9yt [4/4/17]
2 - aarp.org/money/scams-fraud/info-2016/casino-traps-older-patrons.html [2/16]
 

Combining Your Finances When You Marry

Posted on April 11, 2017 at 12:11 PM Comments comments (0)
How separate (or intertwined) should your financial lives be?
 
Some spouses share everything with each other - including the smallest details of their personal finances. Other spouses decide to keep some individual financial decisions and details to themselves, and their relationship is just fine.  
 
Just as a marriage requires understanding, respect, and compromise, so does the financial life of a married couple. If you are marrying soon or have just married, you may be surprised (and encouraged) by the way your individual finances may and may not need to change.
 
If you are like most single people, you have two or three bank accounts. Besides your savings account and your checking account, you may also have a "dream account" where you park your travel money or your future down payment on a home. You can retain all three after you marry, of course - but when it comes to your expenses, you have a fundamental decision to make.
 
After you marry, the two of you may also find it best to have three checking accounts. Yours, mine, and ours? Essentially. A joint account can be set up specifically for household expenses, with each spouse retaining an individual checking account. Of course, each spouse might also maintain an individual savings account.
 
Do you want to have a joint bank account? The optimal move is to create it as soon as you marry. Some newlyweds find they need a joint bank account only after some financial trial-and-error; they would have been better off starting out married life with one.  
 
If you only have individual checking accounts, that forces some decisions. Who pays what bill? Should one of you pay most of the bills? If you have a shared dream (like buying a home), how will you each save for it? How will you finance or pay for major purchases?
 
It is certainly possible to answer these money questions without going out and creating a joint account. Some marrying couples never create one - they already have a bunch of accounts, so why add another? There can be a downside, though, to not wedding your finances together in some fashion.
 
Privacy is good, but secrecy can be an issue. Over time, that is what plagues some married couples. Even when one spouse's savings or investments are individually held, effects from that individual's finances may spill into the whole of the household finances. A spouse who has poor borrowing or spending habits, an addiction, a sudden major debt issue, or an entirely secret bank account may be positioning himself or herself for a money argument. The financial impact of these matters may affect both spouses, not just one.
 
A recent Ameriprise Financial survey of 1,500 couples found that nearly a third of them argued about money matters at least once per month. About 70% of the respondents in that survey reported making purchases without informing their spouse or partner. Seventy-three percent said that they made money decisions differently than their better half did. In households like these, a little communication could help put both spouses or partners on the same page. 1  
 
So above all, talk. Talk to each other about how you want to handle the bills and other recurring expenses. Discuss how you want to save for a dream. Chat about the way you want to invest and the amount of risk and debt you think you can tolerate. Combine your finances to the degree you see fit, while keeping the lines of communication ever open.
 
Mark McGahee may be reached at 757 539 9465 or [email protected]
www.nansemondriverfinancialservices.com
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Trading instructions sent via e-mail may not be honored. Please contact my office at 757-539-9465 or Securities America, Inc. at 800-747-6111 for all buy/sell orders. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated."
   
Citations.
1 - bloomberg.com/news/features/2016-09-29/couples-can-spy-on-each-other-s-spending-with-this-new-bank-account [9/29/16]