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Articles

TEACHERS – THEIR IMPACT ON OUR COMMUNITY

March 2015
-By Kirk Hoffman-

My life experience allows me a unique perspective in regard to top teachers.  I come from a long line of educators.  My great-great grandfather helped found two universities and was the president of a third.  My great grandfather was a teacher, professor, and university president.  My grandmother was a public school teacher.  Both of my parents were public school teachers.  My wife works for Jackson Public Schools and my daughter is a public school teacher.

I also have worked in financial planning since 1986 and obtained my Certified Financial Planner™ certification in 2003.  This background has let me see the effect that top teachers have on individuals, businesses, and communities.

Over the years, I have witnessed individuals sharing the positive impact that my family of educators has had on their lives.  They’ve been thankful for the encouragement that they received as students.  They’ve appreciated having an adult in their life that cared about them.  They were happy to have someone help them identify their gifts and strengths and get them passionate about it.  They were thankful that someone was successful in inspiring them to go after their dreams.  They were grateful for the preparation that they received that made them successful in their careers.  Some of these appreciative students even became top teachers themselves.

I have also seen the impact of top teachers in working with individuals on their financial plans over the last 28 years.  I’ve had the opportunity to work with executives, business owners, and high net worth individuals.  A common theme among these accomplished individuals is how they equate their success to the educational opportunities that they had, and the teachers and professors that influenced them.  The individuals I’ve worked with who are supervisors within their companies report that the educational experience of their employees has a positive impact on the life of the entire company. The cumulative effect of top teachers positively impacts business success and entire communities.

From my perspective, we all benefit from having top teachers in our community.  Therefore, it is important to encourage those teachers and be supportive of educators in our community.  Financial and moral support is critical.  I know from my own family experience how difficult and frustrating the teaching profession can be at times.  Entering the teaching profession has been much more challenging for my daughter than it was for my parents.  My wife and I have been long time supporters of Jackson Public Schools.  Both of our daughters graduated from Jackson High.  They had a good experience, received a great education, and had some wonderful teachers.  They were well prepared to move on to university and have been successful there.  We’ve also been pleased and impressed over the years with how the Jackson community values education and supports the schools in the district. 

The Jackson business community, especially local manufacturers, have done an impressive job in collaboration with the schools.  My family of educators appreciates the community and business support, and encourages our community to continue that support.  Top teachers do make a difference.

Silicon Apps Overtake Silver Screens

February 2015
No one would debate that the mobile app market is huge. But just how big of a deal is it? Take a look at these stats:
•    The iOS apps catalog contains 1.4 million apps.
•    People spent $500 million on iOS apps in the first week of 2015 alone.
•    In 2014, Apple paid app developers a total of $10 billion.

Those numbers don’t even include Android apps. Android numbers are more difficult to compile, since multiple companies offer app stores. But, to give some perspective, Google paid out about $3 billion to its developers in 2014 for sales made through its official store. 
Compare all that with Hollywood, where U.S. movie revenue came in at about $10.35 billion, and you can see just how important app revenue has become. 

Although the numbers aren’t the complete story (iOS data doesn’t include Android apps or service businesses, and the Hollywood number doesn’t include international box office revenues), app revenues have been growing exponentially for years while Hollywood revenues have remained relatively stagnant. If the app economy hasn’t completely overtaken the U.S. movie industry yet, it soon will.
This surge in technology revenue isn’t limited to mobile apps. The tech sector is seeing sweeping growth in many areas. Everything from online software to IT services is growing at an incredible rate. Though there are exceptions, of course, the trend has significantly raised the value of many tech companies over the past several years. 

The question for many economists is whether the current trend is a normal growth spurt or whether the market is experiencing a new tech bubble. You don’t have to be ancient to remember the last tech bubble—it burst only 15 years ago. The so-called “dot-com” crash saw dozens of unbelievably fast-growing companies disappear overnight. 

So, are we in the same position? There certainly are major differences between now and then. In the late 1990s and early 2000s, tech companies were able to draw investor capital bases with little more than a hint of potential success. The running joke at the time was that all a company had to do to increase its share price was add “.com” to its name. Companies were going into debt renting office space and buying computers to rush into a very uncertain industry.  

Today, investors are more digitally savvy and know how to analyze “internet” companies more rigorously. Still, the risk of overvaluation is always possible. Some point out that several tech startups have unnaturally high stock prices and speculative sustainability. The rapid advance of technology coupled with quickly shifting cultural preferences for mobile technologies prevents investors from making anything more than educated guesses. 

If the tech market finds itself with another bursting bubble, beneficial technologies may still survive. For example, despite the dot-com crash in 2000, no one thought that online services were going to disappear or that they would never be lucrative. Individual companies were in danger, but it was obvious the tech sector as a whole would bounce back. 

What should you take away from all this as an individual investor? Even if you can’t predict the future, it is still valuable to be aware of how technology can shift the value of markets. Knowing the broad changes can keep you from acting on speculation, fear or greed. You should know what drives your investments’ success and how they fit into your personal portfolio. The best decisions are always made within the context of your personal financial plan, so speak with your financial advisor before making any changes. 
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Chinese Economy Now Largest in the World

February 2015
For decades, the U.S. has had the largest economy in the world, and by a wide margin. Though other countries, such as China and India, have had much more rapid growth in recent years, the U.S. GDP still dwarfs that of any other country. In fact, it’s almost double China’s, at least in terms of nominal GDP. However, the International Monetary Fund (IMF) recently reported that China is the world’s largest economy in one regard: purchasing power parity (PPP). 

First, some background: When comparing the size of economies, normally each country’s GDP is converted to U.S. dollars using current market exchanges rates to create an easy means of comparison. A country’s GDP expressed in U.S. dollars using this method is called its nominal GDP. It is in this regard that the U.S. still towers over every other country. The U.S. nominal GDP is roughly twice the size of China’s economy using this method and multiple times the size of every 
other country. 

But economists have pointed out that nominal GDP doesn’t give us the whole picture. The same goods or services in one country don’t cost the same in another, even taking into account market exchange rates. This is especially true in underdeveloped countries, where goods and services are often much cheaper. Tourists often recognize this concept intuitively when going to a restaurant or market in a less developed country than their own and noticing their money goes much further. Purchasing power parity applies this concept on a much larger scale.  One country may have less money (nominal GDP) than another, but the amount of goods and services that money could buy within that country (PPP) is effectively the same. 

In terms of PPP, the IMF reports that China currently outputs $17.6 trillion in goods and services annually, while the U.S. outputs $17.4 trillion. This may come as a surprise for many who had heard that China’s economy won’t become the world’s largest until 2020 or later. That’s still true, as those estimates are based off nominal GDP estimates, not PPP estimates. Most tend to regard nominal GDP as the more important measurement, because it better states the position of the country in a global economy. However, the reason the PPP estimate is so significant is that the time that China will become the largest economy by any measure is not so far off. 

This isn’t to say that China’s economy is similar to the U.S. economy—far from it. The U.S. still has much more purchasing power globally, even if it has less inside its own borders. While China may be able to purchase more domestic goods, like cars, missiles or soldiers, than the U.S., the U.S. has greater access to foreign goods due to the strength of the dollar. China also has a much larger population than the U.S. This means that while the country’s economy is large, its per capita GDP is drastically lower than the U.S. Additionally, China is still mostly a communist state, and many of the companies are state-run with limited access to foreign investment. However, that is changing as China has been becoming more public. Just last November, China’s Shanghai stock exchange linked up with the Hong Kong exchange to become open to foreign investors. It’s too soon to tell how well the exchange will do, but the long-term implications are significant. 

Does this mean Americans need to start converting their dollars to Yuan and learning Mandarin? No. But it does mean that the global economy, as always, is changing in big ways. If things continue in the direction they are heading, America will soon lose its tenure as the world’s economic leader—in size, at least—and China will step in to take its place.
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

For Today’s Children, Retirement Planning Starts Young

February 2015
We all hope for a long, healthy life, but—from a financial standpoint—the length of our lives may be starting to get out of hand. One projection from the U.K.’s Office of National Statistics estimates that more than 30 percent of the nation’s children born after 2011 will reach age 100. That means that for every couple that reaches age 65, more than half will have least one partner live another 35 years.

If today’s children continue to retire at what we currently consider a “normal” age, many could spend almost as much of their life in retirement as they spend working. Since a majority of U.S. citizens already face insecure retirements with current financial planning norms, extended longevity may become an overwhelming monetary challenge.

One solution to the problem may lie in changing when people begin to plan for retirement. A few extra years of growth can have a massive impact on the value of a retirement account. If we can train today’s children to make good financial decisions earlier in life than most adults do now, they’ll be better able to handle the cost of an extremely long retirement. 

But it’s today’s adults who will need to teach them.

In general, adults usually impart their financial habits to children—whether they mean to or not. Kids are observant, and adults’ financial decisions can imprint upon them easily. However, retirement planning, though essential, is an obscure subject. Children get to see how adults spend their money, but they don’t often see how they save it.

Obviously, trying to lecture a young child about 401(k)s and investment strategies won’t be helpful to anyone, so adults will need to take a more basic approach. By teaching children the underlying principles of saving, planning and money growth, you can turn their future financial decisions into a matter of obvious choices.  

Getting Kids to Learn
Though teaching financial habits takes more than a piggybank, it’s still a great place to start. Providing a younger child with both an allowance and savings goals is a great way for them to practice budgeting. Help the child set goals that are simple and attainable; if they set an ambitious goal, offer to help them by covering the difference if they reach a significant percentage of the total value.

But saving alone isn’t enough: children need to understand that value can grow over time. This can be taught by providing them with interest: offer a small amount of money for each dollar they saved from their last allowance. They’ll quickly learn that by forgoing some immediate gratification, they can reach their savings goals even faster.

Later on, you can reverse this process to teach a child about debt. Allow them to borrow money from you for a small purchase, but plainly explain that they’ll have to pay the money back with interest. When they hand their money over to you later, it becomes a golden opportunity to explain how debt means paying extra.

If you prefer a more direct route of education, there are numerous online resources to help teach kids about money and smart planning—one of the most interesting examples being Warren Buffett’s own online cartoon series “Secret Millionaires Club” (www.smckids.org).
As a child grows, help them get the ball rolling on retirement planning. Our team at GuideStream Financial would be glad to help them take some first steps. We can help you explain the importance of planning ahead for retirement and avoiding heavy credit debt (especially during college). Financial maturity doesn’t happen overnight, so stay patient and don’t try to cover everything all at once. 
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Cell Phones: The New Way to (Safely?) Pay

November 2014
One would be forgiven for mistrusting credit cards these days. It seems like every month for the past year, some company announces that it’s had customer credit information stolen. For some companies, the thefts were isolated to a few thousand individuals; others, like Target and Home Depot, exposed the data of millions of customers.

In September, the world of digital transactions took a sudden turn when Apple announced its new “Apple Pay” service. Having already popularized digital revolutions in cell phone and tablet technology, Apple wants to facilitate a safer and more convenient way to pay at stores and online. Using near-field communication (NFC)—a short-range wireless signal—Apple Pay allows you to touch your phone to a special credit card reader and make a transaction.

Like any new type of transaction, the technology has been met with varying degrees of skepticism. Some believe the wireless broadcast of a payment leaves them exposed. Others point out that adding banking information to an already data-loaded phone only increases the risk of full identity theft if the device is lost or stolen. In fact, resistance to NFC payments has been so strong that Google Wallet, which offers NFC payments on Android devices, still has few users despite launching three years ago.

Of course, broadcasting your credit card number through radio waves (even very short-range ones) would be extremely dangerous. That is why NFC payments don’t store or transmit credit data in the traditional sense. In fact, Apple Pay holds no raw card data on the phone or in cloud storage. It creates one-time, digital “tokens” to verify transactions. During a transaction, a token is sent to a creditor, where it is decrypted and authorizes the release of funds. Once an exchange is complete, the token created for it is useless.

In addition to making any “skimmed” banking data useless, transactions using disposable tokens also hide you from retailers. Apple Pay tokens only facilitate monetary transactions, preventing a retailer from collecting any personal information. Apple has also said that their devices will not keep any information about your purchases, just a basic record of transactions.

Apple Pay’s final layer of security comes through human authorization. For each purchase, a device requires verification from the user by PIN or fingerprint scan on the device. This not only means that a user must acknowledge every transaction, but that a phone thief will have great difficulty making a purchase even if the phone were stolen.

Given its ability to secure and obscure data, Apple Pay is being praised as one of the most secure ways a person could make a retail purchase.

Or so we think.

The reality is that Apple Pay and other NFC credit systems are still too new for us to be certain of total security. As they grow more popular, hackers and data thieves will become increasingly interested in finding ways to break in and steal data. Just because the creators can’t think of a way to beat the system doesn’t mean someone else won’t.

The important thing to remember as the digital age progresses is that convenience through consolidation always adds a certain kind of risk. Apple has made a strong effort to make Apple Pay a safe service; now the responsibility is on us as consumers to protect our information. If we want to turn our phones into wallets, we need to be prepared to guard them as if they were both. We cannot continue to give identity thieves easy jobs by being lazy with passwords, linking accounts or leaving our phones unattended. It’s not wrong to put all of our eggs in one basket—we just need to be sure we watch that basket closely.
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Oil Goes On A Slide

November 2014
All over the country, Americans are getting relief at the pump. Gas prices dropped an average of about $0.50 per gallon from June through October, and market trends are expected to keep the price down for a few months more.

So, what’s going on? Did we suddenly find a lot more oil? Are fossil fuels reversing their decades-long march upward? In this case, the shift in oil has to do more with business strategy than availability or politics. Here are the major factors responsible for the relaxed prices:

Competition

The boom in shale oil fracking has turned the United States into a major producer in the world oil markets. Since the United States uses more oil than anyone (almost double that of the next highest consumer, China, in 2012), a change in its importing and production is likely going to have a big impact on market value.

However, while the United States is moving toward energy independence, its fracking boom has been sustained only by high oil prices. Fracking costs around 10 times more than the traditional oil pumping done in some OPEC countries. Fracking needs expensive oil to be profitable and practical.

To smother the success of fracking, Saudi Arabia and Kuwait have increased their production to drive down oil prices. At the moment, they are more interested in discouraging fracking operations than they are in getting the highest price. With their strong cash reserves, they have few qualms about a temporary drop in profitability to prevent countries from developing their own oil reserves.

Demand

The other major factor is OPEC’s desire to protect and grow the global demand for oil. When oil prices are high or the economy is bad, most countries cut back on consumption and look for alternate fuel sources.

Economic news from the past few months has been far from stellar. Many Eurozone countries are facing renewed recession, and growth in developing economies like China and Brazil has been slowing. Lowering oil prices can help support economic growth in these countries and, in time, create greater demand for oil when things improve.

As for the United States, demand for gasoline has been somewhat slowing despite the growing economy. The total number of miles driven in the country has been flat or down since the Great Recession, while vehicle fuel efficiency is greater than ever. This trend is expected to continue to increase as older cars continue to drop out of the market and more people move to metro areas. A drop in gas prices reduces the pressure for these improvements and encourages driving, helping to keep demand for oil high.

Collateral Damage

The goal of the major OPEC players is clearly to drive out smaller competition and secure a larger future market. However, the damage of cheap oil goes beyond the falling margins of shale oil companies.

In particular, countries that have limited, but essential, oil exports are taking a beating from the low prices (e.g. Russia, Iran and Venezuela). These countries, some of which are OPEC members, have limited markets to service—they need reasonable profits from what they manage to sell and have little chance of getting a larger market share from this whole ordeal.

To a lesser extent, green technology may also be hurt by this recent shift. Any time fossil fuels get cheap, interest in renewable energy dips. However, it will likely require several quarters of low fuel prices to really damage long-term interest in the green energy sector.

Right now, American drivers are the ones getting the most from the oil price war. However, if we lose our domestic oil production and increase our gas dependency, this current relief will have a negative long-term effect on the country.

It’s difficult to estimate how long OPEC will allow prices to decline or when crude prices will climb again. Despite all the known factors, oil prices are a notoriously difficult commodity to anticipate. Even the best theories cannot account for surprise factors like international conflict, terrorism or technological developments. The safest way to profit from the current oil market is to just enjoy the extra savings the next time you fill up.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Financial Planning – 30 & Under

December 2014
-By Caitlin Koppelman-
While I was in college, people told me I had fewer obligations and more financial flexibility than I’d have in my entire life. I could not comprehend that at the time. In retrospect, I can see it now:  No mortgage, no kids, and those blessed student loans were still in deferment!  Life was so simple: almost no liabilities and a high percentage of discretionary income. Now, I have to remind myself that I’m in the “accumulation phase” of life. I’m accumulating valuable assets for the future: an education, our first home and starting a retirement savings plan. Those assets aren’t cheap, but I’m making an investment for the future. Every mortgage payment and every retirement contribution is like money in a future bank account.

Even though it’s natural to want to pay more attention to your present bank account, now is the time to make deposits for that far off phase of life. Do it now, while it’s easier than ever. Notice I said, “easier” not “easy”. It is never easy to delay gratification, but if we want to reap the benefits at harvest time, we have to sow and tend the garden along the way. With 35+ years on your side, a little bit now can multiply if handled wisely.

Who has time to tend that financial garden? There are only so many hours in the week and who wants to spend their down time planning a future retirement that they can barely imagine?  As a 28-year-old, I can’t blame you for being skeptical. You’re probably a little jaded by the whole idea of savings, debt, and retirement. It comes down to risk and reward. If a Traverse City cherry farmer is hopeful for a good crop, he faces the risk of frost, pests and drought, head on. It’s worth the risk for him because of the potential reward. His potential reward is higher because he took the risk and planted the trees. For me, I’m not willing to live a life of limited influence in the future because of financial constraints. So, I plant now and plan for a harvest.

Here are a few simple steps to get you started:

  1. Many employers offer 401(k) matching programs. Take full advantage of that by deferring at least the percentage at which the company will match your contribution. That’s free money! If your employer doesn’t offer a match, at least do your own contributing.
  2. Connect with a financial adviser you trust. Be brave and share your goals. Take advantage of their expertise. You’re a professional with your own expertise in a specific area. Let them use their wisdom and experience to set you free to focus on the things you care about.
  3. After you’ve made a trustworthy connection, make a plan and stick to it! Come flood or draught; keep your eye on the prize!

Remember, delayed gratification is not natural. When something threatens your cherry trees, you’ll be tempted to give up. Stay the course! The harvest is coming! 

Financial Planning

-By Scott Blakemore-
What comes to mind when you think of “Financial Planning”? 

When asked what I do for a living, my response, “I’m a financial planner” is usually met with blank stares and the sound of crickets.  Now and then I get a response, “Oh, I’ve done that”, “I have an annuity,” or “I have an IRA”.  If only that was all it takes.

In the next few paragraphs, we’ll address three common perspectives regarding “Financial Planning” that many people share and how it affects their planning decisions.

I don’t understand enough to know where to begin.  We hear this one often (both from clients and potential clients).  They apologize for not knowing enough about their investments, pension plans, social security, health or insurance benefits. 

Here is the good news: planners realize you have likely never been taught, nor do you probably want to learn about all the components of your financial situation.  I don’t want to be a nurse or doctor, and when I go to the doctor, I don’t apologize for not knowing how to take my blood pressure.  I am not trained in this, and they don’t expect me to know.  I just want to know if my blood pressure is good or bad, and what to do to correct the problem.  The same is true for a financial planner – you don’t have to know it all, but you do need to know who can help.

Financial planning is inflexible and limiting.  Rarely does someone verbalize this concern, but when asked if they perceive this to be true, their eyes get wide and they nod their head in agreement.

How many Fortune 500 companies have business or marketing plans, sales forecasts, or budgets?  Probably all of them.  How many change their plans the following year?  Probably all of them.  Maybe they aren’t big wholesale changes, but as information comes in and circumstances change, they change.  The same is true for your financial plan – a good plan is flexible and changes over time as you do.

I have a 401k, IRA or Roth IRA.  I own an annuity, stock or bond.  I’m all set.  While various products and retirement plans are definitely components to be used appropriately when constructing a plan, they are not a financial plan in and of themselves.  Does owning a bat make you a baseball player or owning golf clubs make you a golfer?  Having the right equipment is important, but if you want to be successful, you need a coach – someone to teach you and help develop your skills.  The same is true for a financial planner, we will help you learn the game, coach you and use the appropriate tools.

At its root, financial planning is mostly about trust in the person helping you.  Remember, you aren’t required to understand everything, your plan can flex with you, and there’s much more to a financial plan than the components you use.  Find someone who will listen to you and help you ask the right questions … that is the best, first step toward a more solid financial future.

How much money should I save for retirement?

The obvious answer is, as much as you can. You'll probably need to build a fund that you can draw on for much of your retirement income. This may be possible to do if you start early and make smart choices.

Contribute as much as you can to tax-advantaged savings vehicles (e.g., 401(k)s, IRAs, annuities). Make sure to contribute as much as necessary to get any employer matching contribution--it's essentially free money. Then round out your retirement portfolio with other taxable investments (e.g., stocks, bonds, mutual funds*). As you're planning and saving, keep in mind that you may have 30 or more years of retirement to fund. So, you may need an even bigger nest egg than you think.

*Note:   All investing involves risk, including the possible loss of principal. Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.

Your particular circumstances will determine how much money you should save for retirement. Maybe you have a pension plan, or your Social Security benefits will be large enough to tide you over. If so, you may not need to save as much as other people. But other personal factors will enter the picture, too. If you plan to retire early (e.g., age 50 or 55), you'll have even more retirement years to fund and may need more retirement assets than someone who plans to work until age 65 or 70. Conversely, you may need fewer assets if you plan on working part-time during retirement.

Your projected expenses during retirement will also help determine how much money you'll need and how much you need to save to get there. Certain costs (e.g., food, utilities, insurance) will be shared by almost all retirees. But you may still be saddled with retirement expenses that many retirees no longer have (e.g., mortgage payments or a child's tuition).

Expenses will also depend on the type of retirement lifestyle you want. How many nights a week will you dine out? How much traveling will you do? These kinds of questions will give you a better idea of how much money you'll be spending once you retire. In general, the greater your anticipated retirement expenses, the more you need to save each year to meet those expenses.

Content prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

Business Owners: Don’t Neglect Your Own Retirement Plan

If you're like many small business owners, you pour your heart, soul, and nearly all your money into your business. When it comes to retirement planning, your strategy might be crossing your fingers and hoping your business will provide the nest egg you'll need to live comfortably. But relying on a business to fund retirement can be a very risky proposition. What if you become ill and have to sell it early? Or what if your business experiences setbacks just before your planned retirement date?

Rather than counting on your business to define your retirement lifestyle, consider managing your risk now by investing in a tax-advantaged retirement account. Employer-sponsored retirement plans offer a number of potential benefits, including current tax deductions for the business and tax-deferred growth and/or tax-free retirement income for its employees. Following are several options to consider.

IRA-type plans
Unlike "qualified" plans that must comply with specific regulations governed by the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA), SEP and SIMPLE IRAs are less complicated and typically less costly.

SEP-IRA: A SEP allows you to set up an IRA for yourself and each of your eligible employees. Although you contribute the same percentage of pay for every employee, you're not required to make contributions every year. Therefore, you can time your contributions according to what makes sense for the business. For 2014, total contributions (both employer and employee) are limited to 25% of pay up to a maximum of $52,000 for each employee (including yourself).

SIMPLE IRA: The SIMPLE IRA allows employees to contribute up to $12,000 in 2014 on a pretax basis. Employees age 50 and older may contribute an additional $2,500. As the employer, you must either match your employees' contributions dollar for dollar up to 3% of compensation, or make a fixed contribution of 2% of compensation for every eligible employee. (The 3% contribution can be reduced to 1% in any two of five years.)
Qualified plans

Although these types of plans have more stringent regulatory requirements, they offer more control and flexibility. (Note that special rules may apply to self-employed individuals.)

Profit-sharing plan: Typically only the business contributes to a profit-sharing plan. Contributions are discretionary (although they must be "substantial and recurring") and are placed into separate accounts for each employee according to an established allocation formula. There's no fixed amount requirement, and in years when profitability is particularly tight, you generally need not contribute at all.

401(k) plan: Perhaps the most popular type of retirement plan offered by employers, a 401(k) plan allows employees to make both pre- and after-tax (Roth) contributions. Pretax contributions grow on a tax-deferred basis, while qualified withdrawals from a Roth account are tax free. Employee contributions cannot exceed $17,500 in 2014 ($23,000 for those 50 and older) or 100% of compensation, and employers can choose to match a portion of employee contributions. These plans must pass tests to ensure they are nondiscriminatory; however, employers can avoid the testing requirements by adopting a "safe harbor" provision that requires a set matching contribution based on one of two formulas. Another way to avoid testing is by adopting a SIMPLE 401(k) plan. However, because they are more complicated than SIMPLE IRAs and are still subject to certain regulations, SIMPLE 401(k)s are not widely utilized.

Defined benefit (DB) plan: Commonly known as a traditional pension plan, DB plans are becoming increasingly scarce and are uncommon among small businesses due to costs and complexities. They promise to pay employees a set level of benefits during retirement, based on a formula typically expressed as a percentage of income. DB plans generally require an actuary's expertise.

Total contributions to profit-sharing and 401(k) plans cannot exceed $52,000 or 100% of compensation in 2014. With both profit-sharing and 401(k) plans (except safe harbor 401(k) plans), you can impose a vesting schedule that permits your employees to become entitled to employer contributions over a period of time.

For the self-employed
In addition to the options noted above, sole entrepreneurs may consider an individual or "solo" 401(k) plan. These types of plans are very similar to a standard 401(k) plan, but because they apply only to the business owner and his or her spouse, the regulatory requirements are not as stringent. They can also have a profit-sharing feature, which can help you maximize your tax-advantaged savings potential.

Content prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

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