EarthMover Financial Partners
Frank Vandy
Financial Consultant
1008 N. Bridge Street
Yorkville, IL 60560
630-906-3516 Office
630-319-0393 Cell
630-553-9635 Fax
Frank.Vandy@lpl.com
www.earthmovercu.com/services
Summer 2015
Pre-retirees Blindsided
by Impact of Taxes
on Retirement Income
IN THIS ISSUE
Research has found that more than half of pre-retirees underestimate the effect
that taxes may have on their income flow in retirement.
Pre-retirees Blindsided
by Impact of Taxes on
Retirement Income
Travel Journal: Getting to
Know Foreign Investments
Consumers Are Getting
Smarter About Credit
Scores, but Remain in the
Dark About Key Points
Recent research, focused on examining
how individuals plan for and manage
living expenses before and during
retirement, found that more than half of
pre-retirees underestimate or don’t even
consider the effect that taxes may have on
their retirement income flow.
Specifically, when pre-retirees were asked
what they thought their top expenses
would be in retirement most said “home/
mortgage, ” “healthcare,” and “travel/
leisure,” in that order. Yet when the same
question was asked of retired respondents,
the top three responses were “home/
mortgage,” “taxes, ” and “travel/leisure.”
More than a third (36% ) reported that
taxes had taken a bigger bite out of their
budgets than anticipated—and 23% were
completely blindsided by the impact of
taxes. On average, when reviewing all
household expenses paid on an annual
basis, retirees reported spending the most
on federal income tax.
Not Uninformed, Just Unprepared
The lack of tax planning didn’t appear
to be rooted in ignorance. In fact, a solid
majority (62%) of those surveyed said they
were aware of recent tax law changes,
although tax law awareness levels differed
by gender, with 66% of males indicating
knowledge of recent tax law changes
versus 53% of females.
When asked what actions they’ve taken
to minimize taxes, 35% said they had
itemized dedu on some types of tax-deferred
investments. Further, more than half (57%)
said they had regular discussions with their
advisors about tax laws and the implications
those laws could have on retirement income,
whil =e a significant minority (43%) said their
advisors didn’t discuss taxes with them.
Financial Concerns
The study “2013 – Expense Challenges of Age
62-75 Retirees” categorized respondents by
age segments—62 to 65, 66 to 70, and 7 1 to
75—as a way to obtain a greater insigh t into
the thoughts of the various groups. The data
cleared illustrated that those aged 62 to 65 had
more anxiety than other age segments about
major retirement issues and concerns, such as
outliving assets, health of self and/or spouse,
generating enough income to maintain their
desired lifestyle in retirement, and leaving a
legacy.
There are many strategies to help manage your
tax exposure in retirement. Talk to your tax
and financial advisor today about putting a tax
plan in place for your future.
This information is not intended to be a substitute for
specific individualized tax advice.
Source: Lincoln Financial Group news release, “Lincoln
Financial Survey Finds Retirees Underestimate the
Impact of Taxes on Retirement,” June 5, 2014.
All articles written by Standard & Poor’s. Securities offered through LPL
Financial, Member FINRA/SIPC. Insurance products offered through LPL
Financial or its licensed affiliates.
Travel Journal:
Getting to Know Foreign Investments
This article explains that before investing in overseas markets, it’s important to understand the differences between
developed and emerging markets and the risks inherent to each.
Foreign investments can play an important role in helping to
diversify a domestic equity portfolio. But before plunging into
international waters, it’s important to understand the differences
between developed and emerging markets and the risks inherent
to each.
Emerging Trends
Once upon a time, the United States was considered an emerging
market. In the late 1800s, British financiers took note of America’s
growth potential and invested in the companies that were building
the nation’s infrastructure, particularly the early railroad companies.
In doing so, they were accepting more risk than they would have with
making investments in their own market. After all, the United States
was still maturing, and political and social change, as well as many
other factors, could have made it a volatile investment market.
Companies are generally categorized as small cap, mid cap, or large
cap. There are also micro-cap stocks, which are the smallest of
the small. The definition of each category can vary, but small caps
typically have market values of $3 billion or less, mid caps $3 billion to
$10 billion, and large caps more than $10 billion.*
The same risk/reward characteristics apply to today’s emerging
markets, which are found in every corner of the globe. Because
they’re still maturing, they may have more room for growth than
long-established markets, such as the United States. But because the
road to maturity is not always a smooth one, there may be bumps
along the way.
In general, emerging markets have three characteristics:
• Low or moderate personal incomes
• Economies that are in the process of being industrialized
Ongoing Opportunity
Developed markets typically have higher average incomes than
emerging markets, well-established financial institutions and markets,
and modern infrastructures. Of course, they may still offer investors the
potential for continued growth.
Like emerging markets, developed foreign markets may be subject to
greater risks than domestic investm less efficient, less liquid, and more
volatile than those in the United States. They are also subject to the
effects of foreign currency fluctuations and differing regulations.
A developing infrastructure is what may give an emerging market its
growth potential. For example, in an emerging market, an industry
such as banking might be just beginning to establish itself and
therefore have above-average growth potential.
If you decide to build an international element into your investment
portfolio, consider seeking professional guidance. Professional portfolio
managers often have access to information that’s not widely available,
not to mention the time and experience required to track events in a
variety of markets. Before expanding your portfolio beyond U.S. borders,
contact a qualified financial professional who can help you prepare for this
investment journey.
Of course, you need to keep in mind that emerging market
investments are generally suitable for patient investors with longterm time horizons. Emerging market stock prices can take dramatic
swings, and it’s essential that you have the time to ride them out.
Stock investing involves risk including loss of principal. International and emerging
market investing involves special risks such as currency fluctuation and political
instability and may not be suitable for all investors. Source: Wealth Management
Systems Inc.
• Financial infrastructures (including stock markets) that are still being developed.
Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources
guarantees the accuracy, adequacy, completeness, or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of
such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special, or consequential damages in connection with subscriber’s or others’ use
of the content.
* Source: Wealth Management Systems Inc
Consumers Are Getting Smarter About Credit Scores, but
Remain in the Dark on Key Points
Consumers’ knowledge about credit scores and what they mean has improved significantly, but there’s still much
room for improvement.
Americans have become more informed about certain aspects
of their credit scores, but most still don’t know enough about
the risks associated with low scores and alleged “credit repair”
services, according to a recent report issued by the Consumer
Federation of America (CFA) and VantageScore Solutions.
For instance, consumers taking CFA’s Credit Score Quiz
this year had a better understanding of which types of
organizations use credit scores—an increase of 8% since the
quiz was last administered. In addition, more of those polled
knew who collects the information that influences credit scores
(up 7%); what is considered a good credit score (up 4%); and
the importance of checking the accuracy of credit reports (up
9%).
However, most still falsely believe that credit scores are
influenced by their age (56%) and marital status (54%), while
21% think ethnic origin plays a role in determining their
scores. And approximately half (51%) are under the false
impression that credit repair companies are typically helpful
in fixing errors and improving scores, even though such firms
often charge high prices to perform services that consumers
could do on their own.
What You Can Do
A typical credit score will range between 300 and 850 points.
Although all lenders base decisions on the particulars of the
lending situation, it’s generally accepted that the higher your
score, the lower your perceived risk to the lender, and the more
attractive your offered interest rate will be.
A few tips for raising or maintaining a higher credit score
include:
■
Paying your accounts on time and keeping your balances low:
Lenders are looking for a proven track record of making timely payments. Payment history determines about 35% of your credit score.
■
Being conservative inthe amount of available credit you use at any given time: About 30% of your score is determined by what the industry refers to as your “utilization ratio,” which is the amount you owe in relation to the amount of credit available to you. It that percentaage is more than 50%, your score will be lower.
■ Holding on to older, unused accounts: The longer an account has been open and managed successfully, the higher your score will be.
■
Maintaining a diversified credit mix: If you hold an auto loan, a home mortgage, and credit cards that are
well managed, you’ll generally have a higher credit
score than someone whose credit consists mainly of finance companies.
Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources
guarantees the accuracy, adequacy, completeness, or availability of any information and is not responsible for any errors or omissions or for the results obtained from the
use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special, or consequential damages in connection with subscriber’s
or others’ use of the content.
* Source: Wealth Management Systems Inc