Articles for June 2019

Diversification, Patience, and Consistency

Three important factors when it comes to your financial life. 

Regardless of how the markets may perform, consider making the following part of your investment philosophy:

Diversification. The saying “don’t put all your eggs in one basket” has real value when it comes to investing. In a bear or bull market, certain asset classes may perform better than others. If your assets are mostly held in one kind of investment (say, mostly in mutual funds or mostly in CDs or money market accounts), you could be hit hard by stock market losses, or alternately, lose out on potential gains that other kinds of investments may be experiencing. There is an opportunity cost as well as risk.1

Asset allocation strategies are used in portfolio management. A financial professional can ask you about your goals, tolerance for risk, and assign percentages of your assets to different classes of investments. This diversification is designed to suit your preferred investment style and your objectives.

Patience. Impatient investors obsess on the day-to-day doings of the stock market. Have you ever heard of “stock picking” or “market timing”? How about “day trading”? These are all attempts to exploit short-term fluctuations in value. These investing methods might seem fun and exciting if you like to micromanage, but they could add stress and anxiety to your life, and they may be a poor alternative to a long-range investment strategy built around your life goals.

Consistency. Most people invest a little at a time, within their budget, and with regularity. They invest $50 or $100 or more per month in their 401(k) and similar investments through payroll deduction or automatic withdrawal. They are investing on “autopilot” to help themselves build wealth for retirement and for long-range goals. Investing regularly (and earlier in life) helps you to take advantage of the power of compounding as well.

If you don’t have a long-range investment strategy, talk to a qualified financial professional today.


Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website:  www.cgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and Registered Investment Advisory Services offered through Silver Oak Securities, Inc., Member FINRA/SIPC. Silver Oak Securities, Inc. and Cornerstone Financial Group are separate entities.

Citations.

1 – forbes.com/sites/brettsteenbarger/2019/05/27/why-diversification-works-in-life-and-markets [5/27/19]

 

 

Retirement Now vs. Retirement Then

Today’s retirees must be more self-reliant than their predecessors.

Decades ago, retirement was fairly predictable: Social Security and a pension provided much of your income, you moved to the Sun Belt, played tennis or golf, and you lived to age 70 or 75.

To varying degrees, this was the American retirement experience during the last few decades of the previous century. Those days are gone, and retirees must now assume greater degrees of financial self-reliance.

Social Security benefits will probably not keep us afloat in retirement. Generations ago, a retiree could potentially enjoy a middle-class lifestyle by pairing Social Security income with a pension from a lifelong employer. Today, pensions are scarce, and the maximum monthly Social Security benefit is less than $3,000.1

Seniors who think they can retire on Social Security alone are in for a rude awakening. The lesson: you must supplement Social Security benefits with other income streams or sources in retirement.

Many of us carry more debt than our parents and grandparents once did. It is much easier to borrow money (and live on margin) today than it was decades ago. The prospect of retiring with outstanding home, student, business, and auto loans is real.

Some of us are retiring alone. Once retired, we may share a residence with a sibling, child, or friends, which could offer us something of an economic cushion.

We will probably live longer than our parents did. Today, the average 65-year-old man is projected to live to 84; the average 65-year-old woman, to 87. Yesterday’s retirees could depend on a combination of Social Security, pension income, and fixed-income vehicles during a 10-year or 15-year retirement. In contrast, we may need to sustain a diverse investing approach during our probable 20-year or 30-year retirements.2

We will likely have to insure ourselves if we retire before age 65. Those of us who retire too young to be eligible for Medicare will have to try and find some kind of private health coverage in the interim, and it could be expensive. Out-of-pocket medical expenses will add further financial pressure.

Our retirement will differ from that of our parents. It will likely be longer; it will also offer us the potential for a great quality of life. We must plan ahead to try and meet its financial challenges.

Mike Moffitt may be reached at ph# 641-782-5577 or email:  mikem@cfgiowa.com

Website:  www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and Registered Investment Advisory Services offered through Silver Oak Securities, Inc., Member FINRA/SIPC. Silver Oak Securities, Inc. and Cornerstone Financial Group are separate entities.

Citations.

1 – investopedia.com/ask/answers/102814/what-maximum-i-can-receive-my-social-security-retirement-benefit.asp [3/11/19]

2 – ssa.gov/planners/lifeexpectancy.html [3/29/19]

 

Retiring Single

You will want to replace your income; you will also want to stay socially engaged.

About 6% of Americans 65 and older have never married. That statistic comes from a 2018 Census Bureau report, which also found that 22% of Americans aged 65-74 live alone.1

If you think you will retire alone and unmarried, you will want to pay special attention to both your financial and social qualities of life. Whether you perceive a solo retirement as liberating or challenging, it helps to be aware of how your future might differ from your present.1

Be aware that your retirement income needs may change. They can be affected by unplanned events and changes in your outlook or goals. Perhaps, a new dream or ambition emerges; you decide you want to start a business, or maybe, see more of the world. You could also end up retiring sooner than you anticipated. Developments like these could alter the “big picture” of your retirement distributions.

You may need to reinvent your social circle. Once retired, you may lose touch with the people who were a big part of your day-to-day life – the people that your business or career connected you with, including your co-workers. If you happen to retire to another community, the connections between you and your best friends or relatives might also weaken, even with social media on your side.

Ask yourself what you can do to try and strengthen your existing relationships and friendships – not just through the Internet, but in real life. Also, keep yourself open to new experiences through which you can build new friendships. Returning to a past hobby or pursuing a new one could also connect you to a new community.

An estate strategy should be a priority. Even if you have no heirs, you still have an estate, and you should have a say in how you are treated as an elder. Consider having powers of attorney in place. These are the legal forms that let you appoint another individual to act on your behalf, in case you cannot make short- or long-term financial or health care decisions.

There are four kinds of power of attorney. A general power of attorney can be written to give another person legal authority to handle a range of financial affairs for you. A special power of attorney puts limits on that legal authority. A durable power of attorney is not revocable; it stays in effect if you become incapacitated or mentally incompetent. Lastly, a health care power of attorney (which is usually durable) authorizes another person to make medical treatment decisions for you.2

In addition to powers of attorney, a will, and possibly other legal forms, you will also want to think about extended care. Not everyone ends up needing extended care, but you should consider its potential cost.

All this being said, you may find a degree of freedom that your fellow retirees envy. If you remain reasonably healthy and active, you may marvel at how many opportunities you can pursue and how many adventures you can readily have. Retiring single can be a challenge, but it can also be an open door to a new intellectually and emotionally rewarding phase of life.

Mike Moffitt may be reached at ph# 641-782-5577 or email:  mikem@cfgiowa.com

Website:  www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and Registered Investment Advisory Services offered through Silver Oak Securities, Inc., Member FINRA/SIPC. Silver Oak Securities, Inc. and Cornerstone Financial Group are separate entities.

Citations.

1 – census.gov/content/dam/Census/library/publications/2018/acs/ACS-38.pdf [10/18]

2 – notarize.com/blog/types-of-power-of-attorney [9/12/18]

Retirement and Adult Children

Supporting family can put a crimp on your strategy.

Families are one of the great joys in life, and part of the love you show to your family is making sure that their basic needs are met. While that’s only to be expected from birth through the high school years, many households are helping their offspring well into their twenties and beyond.

However, you may have concerns that your adult children have come to depend on you too much. On the other hand, you may have given more than you planned, to the point where you are dipping into your retirement savings. If that’s the case, you might want to think about how involved you want to be in your children’s financial needs.

How common is this? An April 2019 Bankrate.com survey of 2,500 Americans indicated 51% of respondents saying that they helped adult children, aged 18 and up, either “somewhat” or “a lot” – specifically drawing from their retirement savings.1

While every household has their reasons to help their adult children, it’s important to keep your retirement strategy on track. It’s not only a matter of replacing the money that you are taking out of retirement accounts or investments, but you’re also losing time. The growth that may occur with investments or compound interest is a phenomenon that happens over decades. In that situation, you can replace the money you took out, but you can’t replace its potential.

Communication is a good first step.  Beyond your own interest, there’s also the young adult in your life to consider. Helping solve a short-term financial problem is one thing, but you also want to offer them an advantage that may help them face a future money squeeze on their own.

It’s also helpful to keep in mind that not all the expenses young adults are incurring are wasteful. CBS News reports that student loan payments may be $400 per month, describing the amount as “typical.” When you factor in rent, utilities, and basic personal expenses, that underlines why the habit of careful budgeting can be so crucial for someone just joining the workforce.1

For that reason, financial education can also be a great gift. There are numerous resources that can help with learning how to budget: books, classes, apps, and more. If you aren’t sure what would work best for the young adult in your life, you can ask your trusted financial advisor for some tips. The skills and knowledge needed to handle money is not instinctual; helping your adult children learn how to better control their financial lives may offer them the confidence to succeed and navigate rough money issues without you, in time.

Mike Moffitt may be reached at ph# 641-782-5577 or email:  mikem@cfgiowa.com

Website:  www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and Registered Investment Advisory Services offered through Silver Oak Securities, Inc., Member FINRA/SIPC. Silver Oak Securities, Inc. and Cornerstone Financial Group are separate entities.

 Citations.

1 – cbsnews.com/news/adult-children-are-costing-many-parents-their-retirements/ [4/25/19]