Women’s Finances: How Do You Prepare For The Future?

Three Women on Couch

Prepare for the future by understanding the differences in women’s finances.

It’s a fact: in the U.S., women live longer than men, on average. According to this NPR report, females can expect to outlast their male counterparts by nearly five years. If you’re a woman, that means your finances may need to be planned for and executed differently. Generally speaking, women may need more money than men, in order to support themselves for those remaining years.

So, how can you try to ensure you’re prepared for the future? Here are a few key strategies that can help boost women’s finances, depending on the age and financial situation.

Employer Retirement Plans

One of the best ways to beef up your savings may be to earmark a portion of your salary for an employer-provided retirement plan, such as a 401(k). Some women’s finances are impacted if they leave the workforce to care for their children or parents, which can create a gap in retirement savings. The earlier you can start contributing to a 401(k) or similar plan, the better you may be able to cope with the absences and greater savings needs.

If your employer offers a contribution match, you may want to take advantage of the full amount, so you have the opportunity to save even more money. This can help you build a solid foundation to tap into when you have health or living expenses.

Individual Retirement Accounts

Whether or not you have an employer-provided retirement plan, it can be a good idea to open an individual retirement account, or IRA. Not only do these accounts offer important tax benefits, but they also don’t have to be transferred if you change jobs. Depending on your choice between a traditional IRA and Roth IRA, you may be able to withdraw your funds once you’re retired or keep them there until needed.

In terms of women’s financial needs, IRAs can be especially helpful when it comes to supplementing social security and investment income. They are superior savings vehicles that may help you build a savings nest egg over time.

Long-term Care Insurance

Since women have longer life expectancies, they can sometimes have higher living expenses and medical bills as well. Long-term care insurance can help offset these costs, as long as you enroll before you reach a certain age or have certain health complications. Here’s an idea of how much health care may cost by the time you retire.

If you are near the end of your career or have already entered retirement, then there may be other strategies available to help you prepare or the future. Guidant Wealth Advisors specializes in women’s finances and helping women navigate their financial plan before and during retirement.

Reach out to us – we are happy to discuss your specific concerns.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

2017 Financial Checklist: The To-Dos You’ve Been Meaning to Finish (But Haven’t)

Couple Working on Financial Paperwork

Tackle your financial checklist for 2017 while the new year is fresh.

Your 2017 financial checklist may be like the one you have for home maintenance and repairs: a long list of to-dos and what feels like a short amount of time to actually do them. Thankfully, a new year is here, and it’s time to refresh your memory on the important tasks that can help as you work towards securing your financial future. Put each one in your calendar, so you can schedule time in your week for what needs to be done.

Power of Attorney for Healthcare

When you assign a medical power of attorney, you choose someone who will make decisions regarding your healthcare, in the case you cannot do it yourself. For example, if you are involved in a car accident, you may need a power of attorney for healthcare. This can affect not only your medical health but also your financial situation, so be sure to make this a priority on your financial checklist for 2017. Here’s more information about assigning a POA.

Wills and Trusts

If you want to leave any of your assets to your family or friends after you die, then you need to take care of these legal documents now. Depending on the type of assets, you may need to put together a will or a living trust. You can learn more about the differences between wills and trusts on our blog.

Life Insurance/Disability Insurance

Another important to-do for your 2017 financial checklist! Most of us recognize we need life insurance in order to cover expenses if we pass away. Fewer people realize that disability insurance, outside of what’s offered by an employer, may also be essential to paying the everyday bills if you’re unable to work. Learn more about the role of life insurance within your financial plan, and get more insight on why you may need to have disability insurance.

Long-term Care Insurance

It’s well documented that most people are going to need some form of long-term care (LTC) insurance as they become older. Whether it’s to cover in-home assistance or overwhelming medical expenses, LTC is likely going to help pay the bills that may not be covered under traditional insurance plans. And even though men and women may have different needs when it comes to LTC, both may want to consider enrolling some time this year.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Tips for Recovering from Holiday Spending

Couple Looking at Holiday Bills

You can recover from holiday spending with focus and attention.

The holiday shopping has ended, you’ve cleaned up the wrapping paper, and now it’s time to face the music – or, rather, the bills – and try to recover from the holiday spending.

Rest assured, if you used credit cards in the past couple months, you’re not alone. According to a survey from CreditDonkey, 37 percent of people said they use credit cards to finance their holiday spending. Whether you charged a small or large amount, now is the time to get out from under that debt and move on with your financial plans.

Here are tips to help you in recovering from holiday spending.

Start with the Highest Interest Rate

If you used more than one credit card this season, then you’ll want to focus on paying off the one with the highest interest rate first. This way, you can avoid as much interest as possible while you pay down the debt. As you put most of your payments toward the higher interest card, pay the minimum on the other cards. Once you are done with the first card, move on to the next until you are paid off in full.

Consider Transferring Your Balance

If you went a bit overboard and you won’t be able to pay off your debt anytime soon, then consider transferring your credit card balances to a card with a 0% APR period. This way, you can pay off your balance over a longer period, without accruing interest along the way. You’ll want to check on the terms of different credit card offers, as each makes different allowances, such as transfer fees, APR periods, and the ongoing APR.

Limit Unnecessary Spending

Aside from the costs of housing, transportation, utilities and food, be sure you’re not building additional expenses into the mix. You’ll need that extra cash to recover from your holiday spending. Instead of fancy dinners and weekend shopping trips, consider staying in and renting a movie, cooking with friends, or playing board games with a group.

Recovering from holiday spending may take a little work on your part, but with discipline and a big picture view of what you want to accomplish, you can set realistic goals for the New Year.

 
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Do Women Approach Financial Planning Differently than Men?

Man and Woman with Financial Planner

Men and women approach financial planning in their own ways.

Over the years, we’ve assisted all types of clients with their financial planning goals, but when it comes to men and women – some of them certainly have their differences in talking about, learning about, and handling money.

In this post, we want to highlight the major distinctions we have personally experienced in the ways women approach financial planning differently than men.

Of course, this doesn’t apply to every female client or every male client, but it might be fun to see if you notice these habits in your own interactions with personal finance.

Education

Some women approach financial planning differently than men, particularly when it comes to education about money and making decisions. Some women may need a lot of information before making a decision; they want to consider opportunities and are less likely than some men to make a quick decision.

This difference in approach sometimes means women are more conservative when it comes to investments, too. Because they may need more time to learn about options and their impacts, women may choose investments or make financial decisions that seem more modest than some men. Taking the time to be informed and making educated decisions can give women the confidence they need and deserve when it comes to financial matters.

Language

Thousands of interactions with clients have taught us that some women prefer to learn and talk about financial planning differently than men. For example, some of our male clients relate better to technical terms or respond more to competitive language.

In contrast, some female clients prefer the straight talk. Talking about finances in plain English seems to resonate more with female clients who are less interested in competition and, again, more motivated by discussion around financial education.

Long View

Financial planning is naturally about the long view, but that seems even more applicable when it comes to some female clients. For example, some male clients may trade stocks more often than female clients, and it sometimes can be a matter of women looking at the bigger picture. Women approach financial planning differently than men, especially in how they view financial progress: over the long-term and many years, rather than the day-to-day management of money.

What other differences do you see in the ways women and men approach financial planning? Tell us about your experiences in the comments.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Is Home Refinancing Your Best Financial Option?

Man and Woman in Front of Home

When considering home refinancing, weigh the pros and cons first.

You may be considering a refinance of your home mortgage, especially with the probability of an interest rate hike later this week. The opportunity to lower your monthly payments at a better interest rate is tempting. But the real question here is, will home refinancing be the right fit for your overall financial plan?

Home refinancing can be helpful for homeowners who want to save money in the long run. Instead of paying the same interest rate as they secured at the start of the loan term, they may be able to secure a lower rate for the balance of the loan. Over the course of 10, 20 or 30 years, this can save you a great deal, and you can put the money saved toward retirement or other goals.

But just because the option to refinance exists, doesn’t mean it’s necessarily the right decision for you.

For example, let’s say you are 10 years into a 30-year mortgage, and you are thinking about refinancing the remainder of what you owe. If you start your new loan with another 30-year term, home refinancing can cost you more money in the long run.

It’s important to compare your monthly payments in a 15- or 20-year refinance plan versus a 30-year refinance, so you don’t end up paying more than you would if you stayed in your current program.

Of course, if you decide to refinance, doing so before the interest rate hike can help you secure a lower payment. BankRate says that on a $200,000 mortgage, half of 1 percentage point of interest means a difference of $20,000 or more over 30 years.  

The key here is to make certain you are doing what is best for your financial situation. Don’t rush into a decision; instead, talk to your mortgage representative about different scenarios you might be able to take advantage of first.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth may not develop as predicted.

How Might Charitable Giving Help Reduce My Income Tax?

Gifts to Charity Section on Income Tax Form

Understand how to reduce your income taxes through your gifts to charity.

Charitable giving tends to reside in our hearts and minds around this time of year. Whether it’s a few coins in the bucket at the grocery store or donating children’s toys to a local initiative, we all have our own ways of doing something for the greater good. Consequently, these acts of giving may also give back to you, in the form of income tax deductions. Let’s take a look at some of the ways your charitable gifts may be able to reduce your income taxes.

Standard and Itemized Deductions

According to the Internal Revenue Service (IRS), there are two main types of income tax deductions: the standard deduction and itemized deductions. Deductions reduce the amount of income to be taxed, so a smaller income means less tax. You can choose standard or itemized deductions, but you cannot choose both.

In general, you may only want to choose itemized deductions if the total amount of your charitable giving (plus other allowances like real estate taxes, personal property taxes, mortgage interest, etc.) is greater than the standard deduction for your filing status.

For tax year 2016, the IRS states the standard deductions as follows:

Single: $6,300

Married Filing Jointly: $12,600

Married Filing Separately: $6,300

Head of Household: $9,300

Qualifying Widow(er): $12,600

If you are a single taxpayer, and you have more than $6,300 in charitable gifts and other qualified deductions, then you may want to take itemized deductions. This may require you to do more paperwork and use additional tax forms, so be sure to speak with a qualified tax professional.

Limits to Charitable Giving

In most cases, there is no limit to how much you can deduct when it comes to donations. If you donate to a public charity known as a 50 percent organization, then you can only claim gifts that add up to no more than 50 percent of your adjusted gross income. If you happen to donate more, then you will have to wait until the next tax year to deduct the remaining amount over the 50 percent.

There are also limits for high-income earners. For tax year 2016, the IRS tells us the limitation for itemized deductions to be claimed begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).

Giving to your favorite charities is a wonderful notion that makes you feel good and may help you out at tax time. Before you make end-of-year donations, be sure to check with your financial advisor and tax professional for any other requirements or limitations that may reduce your income taxes.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Always consult with your tax professional before making any decisions.

What is Financial Planning?

Personal Financial Planning Text on a Napkin

For some people, the idea of financial planning can be quite mystical. Will there be discussions about bad spending habits? How is the financial planner going to know what’s really good for my future? Will they send me away for not balancing my checkbook?

We’ve been in business long enough to hear plenty of myths about our field – as well as some great truths – so we thought now would be a good time to explain what financial planning is, once and for all.

What is Financial Planning?

At its most basic, financial planning is the process of evaluating current finances, establishing financial goals, and creating a strategy to help you get there.

Depending on where you’re at in life (beginning of career, near retirement, etc.), your financial plan may be more or less involved. For example, those who are in the early years of their careers may focus more on paying down student debt and saving for a down payment for a first home. Those who are further along may be discussing an estate plan, social security, and how to fund retirement.

There are several pieces that make up a financial plan, but let’s take a look at the three cornerstones that exist no matter who you are.

Evaluate Current Finances

One of the first steps in understanding what is financial planning, is recognizing the importance of your current financial status.

That means evaluating your current work environment: how long have you been at your job, how is the company doing, do you plan to stay there, and of course – how much do you make and how does the future look?

It also means looking at what types of retirement plans you have in place, whether through your own doing or through an employer plan. You’ll want to talk about life insurance and disability insurance, as well as a power of attorney for your healthcare.

Finally, to be fruitful in financial planning, you’ll need to evaluate your debts. Whether it is student loan debt, credit card debt, mortgage or other types of debt, you’ll want to put it all on the table.

Establish Financial Goals

Once you really understand your financial situation, you can set goals.

Maybe you want to buy your first home in five years, or you want to start your own business. Perhaps you plan on supporting a spouse and children, as well as your parents as they grow older. Is there a dream of owning a vacation home or moving to another country later in life? You’ll want to talk about all of it.

Next, you’ll want to figure out how you can support your family if something should happen to you. If you die or become unable to work, how will you continue to pay your bills and save for retirement?

And on that note, what does retirement look like for you? Your financial plan can be drastically different if you plan on working later in life. If you plan for long-term care insurance and other medical necessities ahead of time, you can also impact how comfortable your retirement can be.

Create a Financial Planning Strategy

The last step in understanding what is financial planning, is to create a financial strategy. This involves putting together the facts about your current finances and your financial goals, to discover how you can work towards them.

If you work with a financial planner, you can have them devise a long-term strategy that can help you get where you need to go. He or she can make recommendations on where to spend and where to save, ultimately helping you make important decisions to improve your financial wellbeing.

If you need assistance with your financial plan, it’s never too late to get started. Contact Guidant Wealth Advisors to set up a consultation.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Low-cost Retirement Investments for Military Servicemembers

Military Retirement Text on Paper

The low cost of retirement investments for military personnel offers distinct advantages.

Military servicemembers are privy to incredible financial benefits, not the least of which are federal retirement savings plans. Equipped with unique tax advantages and some of the smallest fees around, these low-cost retirement investments give members of the military some compelling reasons to start saving for the future.

Let’s take a look at these less expensive investments available to all military servicemembers.

Thrift Savings Plan (TSP)

The TSP is like a 401(k) for members of the U.S. military. One of the biggest differences between a TSP and a private employer 401(k) is the fees; the TSP has one of the lowest, just 29 cents for every $1,000 invested.

According to the Federal Retirement Thrift Investment Board, military service members can contribute up to $18,000 to a TSP in 2017 (combining traditional TSP and Roth TSP accounts), plus an additional $6,000 if they are age 50 or older. If the person is receiving tax-free income while deployed, then he or she can contribute up to $54,000 in 2017 – as long as it goes to a traditional TSP. Roth TSP accounts have some restrictions.

Roth TSP

The Roth TSP, introduced in 2012, is a newer program and not as familiar to servicemembers. While it is also a low-cost retirement investment plan (it carries the same fees), the Roth TSP differs from a traditional TSP in its tax rules.

In a traditional TSP, contributions are not taxed when they go in, but the money is taxed when withdrawn in retirement. In a Roth TSP, contributions are taxed before they go in, so there are no taxes when the money is withdrawn in retirement. In both plans, the money grows tax-deferred until retirement.

Because the Roth TSP is tax-free in retirement, it’s an attractive investment option for military servicemembers who expect to have a higher tax bracket in retirement.

The contribution limits for the Roth TSP are the same as the traditional TSP (see above), except when it comes to tax-free income during deployment – you can only contribute up to $18,000 in 2017 in a Roth TSP under these circumstances. However, if you are in a combat zone and receiving tax-free income, you can put money into the Roth without being taxed and you get to take the money out, without being taxed. It’s a double benefit that can help you build wealth faster.

Keep Your Low-cost Investments after Service

Military personnel who leave the service can still take advantage of these valuable, low-cost retirement investments. By rolling over private sector 401(k) plans or Individual Retirement Accounts (IRAs) into the TSP, members of the military can retain the low fees on investment accounts.

Questions on retirement savings? Reach out to us at (847) 330-9911, and we can connect you to one of our financial planners or wealth advisors.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

What Is Disability Insurance, and Why Should I Have It?

What is Disability Insurance Text on Image of Lady in Wheelchair

Disability insurance is one of the most important financial protections you may have never heard about before.

Many people have life insurance, health insurance, auto insurance, and assorted other policies, but some have never even heard of disability insurance. The truth is, it could be one of the most important coverages when it comes to your financial plans. Follow along as we define what is disability insurance and why you may want to consider it in the future.

What is Disability Insurance?

Disability insurance, also called disability income insurance, replaces a percentage of your income if you are unable to work. Per the National Association of Health Underwriters, it can sometimes pay anywhere from 45 to 65 percent of your gross income on a tax-free basis. To receive benefits, you must be unable to work due to injury or illness.

Why Should I Have It?

You never know when a major injury or a long-term illness can happen. If it affects your ability to work, then you may struggle to pay your mortgage, credit cards, loans, and other bills. Disability insurance can ensure you have enough cash to make ends meet while you recover, but it can only do that if you enroll before the injury or illness occurs.

By enrolling in a disability insurance plan before you may need it, you could also protect your savings and investments if you are unable to work. The insurance may help you cover your day-to-day living expenses, so you can avoid tapping into your retirement accounts. You can sometimes protect your immediate and long-term future with this plan.

Some employees have disability insurance through their employer. What they don’t realize is this coverage is sometimes significantly less than what is available under a separate disability income insurance policy. It can be helpful to have your own coverage as well as the one through the employer.

Finally, life insurance policies do not pay out benefits if you are unable to work. Life insurance only pays benefits when the insured passes away.

Conclusion

Your disability insurance policy is a valuable piece of the financial plan. It can protect your everyday finances when you are unable to work, and can keep your savings intact for retirement. Consider a disability policy to insure your financial plan can survive in an emergency.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

5 Frightening Myths about Social Security

Social Security Card Reads Broke

Is the system broke or is it a social security myth?

Most retirees depend on their social security benefits for at least some part of their income, so understanding how it works is important. To help you get the most from your benefits and steer clear of any hocus-pocus, we came up with five social security myths and the truths you need to know.

Myth #1: You can’t take social security until age 65.

The golden age of retirement used to be 65 years old; therefore, that is when many retirees starting claiming their benefits. The truth is you can collect your retirement benefits any time between the ages of 62 and 70. The longer you wait to apply, the more benefits you may receive. Go to the Social Security Administration’s (SSA) website for more information.

Myth #2: Social Security is running out of money.

Perhaps one of the biggest social security myths is that the program is running out of money. While it is true that the trust fund will not be able to keep up with payouts within a couple decades – mostly due to the large baby boomer population and longer life expectancies – we don’t believe the government is going to let the program expire. Instead, lawmakers will have to pass legislation for higher taxes on the working population in order to pay for the benefits promised.   

Myth #3: The program doesn’t pay very much.

The average Social Security retirement benefit is about $16,000 a year – or $1,350 a month. For some retirees, this may not seem like very much, but it depends on your expectations in retirement and how well you plan your investments for retirement. Keep in mind that the higher your earnings during working years, the higher your benefits may be. To get a better idea of what you can expect, we recommend you get an estimate of your benefits over at the SSA’s online estimator.

Myth #4: You only get benefits if you worked for an employer.

This is another one of those big social security myths. The truth is, if you are self-employed, you are also eligible for social security benefits. In fact, you are required to pay the combined employee and employer amount of Social Security taxes (if you have an employer, you pay half the tax and your employer pays the other half), and you can apply for benefits as long as you worked and paid Social Security taxes for at least 10 years.

Myth #5: There isn’t much you can change about how much you receive.

While you can’t change the amount you paid into Social Security during your working years, there are a few things you can do to maximize your benefit. For one, you can choose to collect your own benefits or your spouse’s, but you’ll want to choose the one with the greatest amount of benefits. The SSA also periodically revises benefits for cost-of-living adjustments, which is set to take place in 2017 with a 0.3 percent increase.

Now that you know the myths about Social Security – and the truths – you can look at the program as an opportunity for your future instead of a frightening part of your retirement.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.