By: Michelle Smalenberger - Director of Client Services and Financial Advisor
Are you looking to relocate to a warmer weather, tax friendly climate? Or do you just want to live closer to your children or grandchildren? Kiplinger's map can help answer your questions about which states provide the best tax friendly environments for retirees. You may find the bonus of perfect weather too!
Having multiple residences can provide the best of both worlds for tax purposes and living in the weather conditions you prefer. Give us a call if we can help you with this decision. Your specific situation may warrant choosing one state over another.
Enjoy the chart and tax facts Kiplinger has put together HERE.
We are happy to be helping our clients all across the country. If you or someone you know needs the guidance of a financial advisor we would appreciate your referral of our services.
By: Lisa Thuer - Senior Trading and Research Specialist
Growing up I was always told that no question is a dumb question. We learn by asking questions. It is easy to feel we should know what something means or that we are afraid what someone will think if we do not know the answer or the meaning. For example, we are in the financial industry and deal with terminology every day that others may not know. We take it for granted others know what we are talking about since it is a daily occurrence for us. Below is a list of vocabulary we use daily, which you may not know, but want to ask. We would like to offer some simple definitions to help you better understand.
Stock - A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares.
Mutual Fund - An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. One of the main advantages of mutual funds is that they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult (if not impossible) to create with a small amount of capital.
ETF (Exchange Trade Fund) – A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.
Dividends - A portion of a company's profit paid to shareholders. Public companies that pay dividends usually do so on a fixed schedule although they can issue them at any time. Unscheduled dividend payments are known as special dividends or extra dividends.
Capital Gains - The profit that comes when an investment is sold for more than the price the investor paid for it.
Unrealized Gain/Loss - An unrealized loss occurs when a stock decreases after an investor buys it, but he or she has yet to sell it. If a large loss remains unrealized, the investor is probably hoping the stock's fortunes will turn around and the stock's worth will increase past the price at which it was purchased. If the stock rose back above the original price, then the investor would have an unrealized gain for the time he or she still holds onto the stock. Unrealized gains and losses are also commonly known as "paper" profits or losses, which implies that the gain/loss is only real "on paper."
Realized Gain/Loss - A gain resulting from selling an asset at a price higher than the original purchase price. A realized gain may lead to an increased tax burden if the asset was held in a taxable account. This also is turning an unrealized “paper” gain into a realized gain.
IRA (Individual Retirement Account) - Traditional IRAs are established by individual taxpayers, who are allowed to contribute 100% of compensation (self-employment income for sole proprietors and partners) up to a set maximum dollar amount. Contributions to the Traditional IRA may be tax deductible depending on the taxpayer's income, tax filing status and coverage by an employer-sponsored retirement plan. eventual withdrawal from an IRA is taxed as income; including the capital gains. Because income is likely to be lower after retirement, the tax rate may be lower. Combined with potential tax savings at the time of contribution, IRAs can prove to be very valuable tax management tools for individuals. Also, depending on income, an individual may be able to fit into a lower tax bracket with tax-deductible contributions during his or her working years while still enjoying a low tax bracket during retirement. eventual withdrawal from an IRA is taxed as income; including the capital gains. Because income is likely to be lower after retirement, the tax rate may be lower. Combined with potential tax savings at the time of contribution, IRAs can prove to be very valuable tax management tools for individuals. Also, depending on income, an individual may be able to fit into a lower tax bracket with tax-deductible contributions during his or her working years while still enjoying a low tax bracket during retirement.
Roth IRA - An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible and qualified distributions are tax free. Similar to other retirement plan accounts, non-qualified distributions from a Roth IRA may be subject to a penalty upon withdrawal. A qualified distribution is one that is taken at least five years after the taxpayer establishes his or her first Roth IRA and when he or she is age 59.5, disabled, using the withdrawal to purchase a first home (limit $10,000), or deceased (in which case the beneficiary collects). Since qualified distributions from a Roth IRA are always tax free, some argue that a Roth IRA may be more advantageous than a Traditional IRA.
RMD (Required Minimum Distribution) - The amount that Traditional, SEP and SIMPLE IRA owners and qualified plan participants must begin distributing from their retirement accounts by April 1 following the year they reach age 70.5. RMD amounts must then be distributed each subsequent year. The amount that Traditional, SEP and SIMPLE IRA owners and qualified plan participants must begin distributing from their retirement accounts by April 1 following the year they reach age 70.5. RMD amounts must then be distributed each subsequent year.
Roth Conversion - A reportable movement of assets from a Traditional, SEP or SIMPLE IRA to a Roth IRA, which can be subject to taxes. A Roth IRA conversion can be advantageous for individuals with large traditional IRA accounts who expect their future tax bills to stay at the same level or grow at the time they plan to start withdrawing from their tax-advantaged account, as a Roth IRA allows for tax-free withdrawals of qualified distributions. It is recommended that any such conversions be done following a meeting with a financial planner or personal tax professional, as there may be major tax implications if not done appropriately.
The end of the year will be here before we know it. If you would like to discuss any of these terms or perhaps take advantage of gains or losses or maybe even do a Roth Conversion this year, please give us a call at 847-934-7777.
The market keeps going higher... Buy! Buy! Buy! The market is tanking... Sell! Sell! Sell! Fear and greed are two emotions which play a big part in investing. Everyone wants to be in the market and not miss out on making money when it is going up. As soon as the market goes down and starts to suffer losses, people want to sell. Your emotions take over and you may make a big mistake instead of sticking to your long-term plan.
How is an Advisor to manage money when we want it all? Through prudent investing, a portfolio can be created to achieve your goals and objectives, but also let you sleep at night knowing a portion of your investments are preserving the capital accumulated and a portion is also taking advantage of growth opportunities. Investing in the appropriate number and structure of holdings to achieve your optimal portfolio should yield returns to support your future.
There are systematic risks inherent in the market such as purchasing power, reinvestment rate, interest rate, market, and exchange rate risks. However there are also unsystematic risks that can be eliminated through diversification such as accounting, business, country, default, executive, financial, and government or regulation risk. Measuring these across an entire portfolio helps to minimize unnecessary risk where possible.
How does the performance of your portfolio relate to the lifestyle you are living today and desire to in the future? Are you chasing investment returns or striving to achieve your goals and objectives? Defining the purpose of your portfolio should provide insight to the answer of these questions.
Are you in a tug-of-war between living for today and saving for tomorrow? Some questions needing answers may be: How much should I save?, How much do I need for living expenses?, and How much income do I need to earn? These are just a few that you can ask yourself. Finding the balance in your financial future can be a juggling act. There is no identical balance for anyone. Everyone has different circumstances.
There are several tools available with the increase of technological innovation that help us provide you with answers and guidance to help solidify your wishes. Let us create a customized financial plan and help you put some numbers to your goals and analyze those projected numbers to see if there are changes to make today. Then we can create a customized investment portfolio to help meet your needs. The sooner you know what changes need to be made, the sooner you can put your dreams into motion based on today's reality.
Give us a call today to schedule your free consultation 847-934-7777.
By: Lisa Thuer - Senior Trading and Research Specialist
It’s that time of year again where all the kids are heading back to school. For some of us it is that first experience of taking your child to pre-school for a couple of hours a day - a few days a week. This is the start of their school education and letting go of your little one. They may have tears as they leave you for those few hours and venture into the unknown. You may also have tears that are held back as you say, “It’s going to be okay. Mommy/Daddy will be back to pick you up.”. As you turn away, the tears coming rolling down as you realize how quickly time goes. It seems like they were just born and you couldn’t wait for them to walk and talk and now they are off to school.
For some others, their children are already in full swing of elementary school and they go reluctantly because they know what lies ahead of them - a structure of nine to ten months with teachers, homework, projects, and learning. But on the other hand, they welcome the structure of learning and the socialization of being with their peers on a daily basis.
And yet for others the first experience of High School is taking place. My second and last child are now in High School. Both she and her brother are at the same school. She relies on her brother by asking him questions like: How is this teacher?, Do I need to do this?, or How do I do that?.
As time goes on, they all find their way and get comfortable once again in their educational environment. It seems as if it comes full circle when I hear people taking their kids to college for the first time. It is almost like pre-school all over again, except this time they are adults; but in your eyes, they are still your little baby. It is now time to let go again and both of you have the fear of the unknown.
They are not just being dropped off for a couple of hours, a few days a week. It may not be until Thanksgiving that you see your little darling again. Tears of joy, fear or happiness may all be shed as your little one is now grown up and you have been successful in getting them this far. Now it is up to them to take their life to the next level and figure out what they want to do.
No matter what stage of schooling you may be at with your child, it is never too early to start educating them about money. Through the course of their childhood, they may receive money for special occasions such as a birthday, holiday, or graduation. This can be a first step of taking responsibility and showing them how to put money aside and watch it grow. Someday they will need it to go to college, possibly support themselves, and buy things such as a car, house, or even go on vacation.
Even if you are able to provide all of this for your children, teaching them to be responsible with their money is one of the best life lessons you can provide. My son had his first part-time job this summer and when he wanted to buy the more expensive pair of gym shoes, I told him that I would pay a certain amount and if he wanted to buy the more expensive pair, he would have to pay the difference. Since it was his money, he decided he didn’t need the more expensive pair and went home and found a pair online which fell in the budget of what I would pay for.
Children tend to value the price of money when they have to buy something themselves. He also wanted something this summer and I said he could buy it with his own money since he’s working. He replied, “Do you know how many hours I have to work to pay for it?” Lesson learned.
There are many ways to start your child learning about the value of money and putting it aside for the future. Feel free to give us a call if we can help – it is never too early or too late to begin your financial future 847-934-7777.
By: Lisa Thuer - Senior Trading and Research Specialist
How much money do you need to make you happy?
- A cup of coffee at home OR a Starbucks latte?
- Vacation abroad OR road trip?
- Luxury car OR a means of transportation?
- A local beach OR the Caribbean?
This answer is different for everyone. Not everyone desires glitz and glamour. When people ask,
“How much do I need to
retire?”. “It all depends.”, really is the correct answer. The word happy is defined as delighted, pleased, or glad over a particular thing. It is characterized by pleasure, contentment, or joy.
People are accustomed to different lifestyles. Some people stop at Starbucks every morning to pick up their latte, but to someone else that may be their luxury item they treat themselves to once in a while. There is no right or wrong answer in how you live, as long as you live within your means.
Happiness is not always determined by how much money you have. Your emotional well-being helps measure your happiness too. Spending time – laughing, crying, having a cup of coffee with a friend, going to dinner with your spouse – may bring happiness and cost very little, if anything.
Do these quotes guide your mind to what makes you happy:
“Most folks are about as happy as they make up their minds to be.” ~Abraham Lincoln
“He is rich or poor according to what he is, not according to what he has.” ~Henry Ward Beecher
“Give a man health and a course to steer, and he'll never stop to trouble about whether he's happy or not.” ~George Bernard Shaw
“We act as though comfort and luxury were the chief requirements in life, when all we need to make us really happy is something to be enthusiastic about.” ~Charles Kingsley
“Happiness is not a state to arrive at, but a manner of traveling.” ~Margaret Lee Runbeck
For example, retirees tend to be happy if they have their mortgage paid off. There are more funds available to spend on what they want to do. People who have a rainy day savings tend to feel more in control and have a better sense of well-being.
Everyone would like to have a life-time experience that will add to their fulfillment. Would you rather enjoy a baseball game or go to the opera? Each of these is not something we do on a regular basis but if you have the funds to check things off of your “Bucket List”, it adds to your life fulfillment. These life-time experiences show our personality and what we enjoy in life.
Perhaps seeing a financial advisor is on your Bucket List, but you do not know how to go about it and not sure what questions you actually want to ask? Give us a call and we can help you determine how much you need to satisfy the lifestyle you enjoy.
“A truly happy person is one who can enjoy the scenery on a detour.” – Author Unknown