Investing is for Everyone

By
March 12, 2019
Share on:

A generation or so ago, the path to financial freedom was pretty direct for most. You found a job and saved for a home and a rainy day. When it was time to retire, you collected from a pension and enjoyed your remaining twilight years. Over time, things have drifted away from womb-to-tomb employment and gotten a lot more complicated. Today’s Americans have to be much more proactive with their finances. In this day and age, saving isn’t enough. Make sure your money is working as hard as you work for it.

There are a lot of concerns for the future. Buying a home. Sending kids to college. Making sure that your current career will be around to see you to retirement. People are living longer, so their retirement money has to go farther. Many high costs associated with medical care aren’t covered by Medicare, such as many prescriptions and long-term care. Pensions are no longer viable option for most Americans, and Social Security, a program that was never intended to replace income, no longer provides the level of security people need for their future. There’s a lot to prepare for.

Due to these concerns on the path to financial independence, people need to be mindful of their money. Even the most conservative Americans need to do more than contribute to a standard savings account, which can’t keep up with the rate of inflation. Investing your money will grow it exponentially faster than simply saving due to the power of compound interest. Yet, preparing for the future can be very emotional work. Today’s retirement planning relies far more on the decisions made by an individual rather than a company or organization, which can be a lot of pressure. Fears of not having enough money, a very common concern, can cloud decisions and can prompt people to react rather than plan. This is why an objective third party is necessary. Financial advisors can see past the emotions and help you plan your path to your financial freedom.

In this day and age, there are real and unique concerns that can derail you from the path to your financial independence. Trilogy Financial is here to help you establish your goals and invest your money to help get you where you want to go. It is our mission to ensure that every American, from Main Street to Wall Street, has access to great planning and the tools to establish their financial independence.

You may also like:

By
Jeff Motske, CFP®
June 7, 2018

Your retirement savings, which is the means to your financial freedom, should be set up in the same way. There is no way to accurately predict what life will be like during the course of your retirement. Based on the climbing US debt, it is safe to assume that tax rates may increase. Unanticipated expenses may arise. Life is never predictable. Therefore, you need your money to be ready to work for you. In my experience, one of the best ways to ensure this is by utilizing three types, or buckets, of savings.

The first bucket is comprised of your traditional retirement investments like a 401(k), 403(b), or 457 plan. These plans are very popular and easily accessible as most employers offer them. Contributions grow tax-deferred and can be automatically deducted from one’s paycheck. However, what was a tax benefit while saving becomes a tax-trap once you retire as those funds will be taxed once they are pulled out. Another thing to consider is what the tax rate will be like at that time. I always ask my clients, “Do you think taxes will have gone up or down by the time you retire?” No one ever says down. Therefore, if all your retirement funds are in this first bucket, you are suddenly at the mercy of the government on how you utilize your retirement money. This is not financial freedom.

However, more buckets mean more options. Let’s consider that you also have retirement savings invested in a second bucket containing tax-free funds. This is typically comprised of Roth IRA’s or Roth 401(k)’s. Although Roth 401(k)’s are not highly promoted or even included in a lot of employer-offered plans, they are a very powerful saving tool. Your contributions grow tax-deferred and are distributed tax-free. With the addition of this second bucket or savings, you suddenly have a little more flexibility on how you access your money.

The final bucket is one that isn’t on most people’s radar. This bucket should be comprised of the investments in your portfolio of stock equities. The gains on these investments are taxed as capital gains. Historically, capital gains tax rates are significantly lower than typical income tax rates. If these investments are sold properly, they can provide another option when trying to manage how your money works for you.

As you can see, multiple buckets of retirement savings seek to provide you with freedom and tax control. If taxes are high, utilize your second bucket. If taxes are lower, feel free to dip into your first bucket. You can work with your financial advisor on what investments belong in which bucket, as well as to dial more or less into these buckets depending on tax rates and what your needs are. This flexibility is key to securing your financial freedom in 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. Investing involves risk, including the risk of loss.

By
Rebecca DeSoto, CDFA®
May 23, 2018

Technology provides ample flexibility when it comes to making purchasing decisions these days. You are no longer required to go somewhere, talk to anyone, or spend a great deal of time comparing options. The internet is a convenient place that is accessible wherever you are, doesn’t require you to talk through your purchase with a sales representative, and allows you to spend as much or as little time researching your decision as you’d like. This can make life more efficient and simpler, but when it comes to important decisions like purchasing life insurance, you run the risk of simplifying the decision too much, not fully understanding what you’re purchasing, and purchasing a policy that may not provide the most flexibility and options later in life when you need it most.

There is no shortage of information available about life insurance on the internet. A lot of it has negative connotations. From policies that historically haven’t provided what was promised, to salespeople coaxing consumers into products, and one size fits all advice. Most people come in with the base knowledge that they need term insurance if they have a spouse and children they want to protect financially if they pass away. Combine these two factors and people generally use the internet to find an inexpensive policy. However, when making a decision about life insurance there are a few important factors to consider besides simply the cost and the amount of insurance, namely living benefits or accelerated benefit riders, and whether the policy has a cash-value component.

While all policies are required to have a terminal illness rider, meaning the insured has the option of utilizing the death benefit prior to passing away if diagnosed with a terminal illness, not all policies come with a chronic or critical rider. A chronic illness rider can accelerate your death benefit if the insured is diagnosed with an illness and unable to perform two of the six daily activities of living (bathing, continence, dressing, eating, toileting, and transferring). Considering how expensive long-term care insurance can be these days, having a chronic illness rider on a life insurance policy can provide some level of affordable protection (depending on your age when you get the policy). The critical rider can apply to injuries or illness and can include things like heart attack, stroke, paralysis, severe brain trauma, and diagnosis of invasive cancer. Having these riders in addition to one that protects against terminal illness adds a much more encompassing level of protection to the insured that can provide flexibility and options in an unplanned emergency.

Life insurance can also have a cash-value component or investment vehicle in addition to providing protection. Cash-value in a permanent life insurance vehicle is one of the only ways to build non-taxable income in retirement besides a Roth IRA. Other than the tax benefits, it can also enhance your plan with diversification and stability. It generally has some level of protection, called a “floor” that assets invested in the stock market wouldn’t have, meaning there is protection against the downside while allowing the investor to take advantage of positive markets.

Whether or not you choose a policy that has all of these components, it is important to consider which benefits are meaningful to you and are worth paying for. It can be hard to determine the pros and cons without talking to a licensed professional that has your best interest in mind and it can be difficult to really understand what you’re purchasing just by browsing the internet for the least expensive policy. Just like any insurance, the ideal situation is not needing it. But if you do, you’ll be happy you did your research and understand the vehicle you chose.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. This article is intended to assist in educating you about insurance generally and not to provide personal service. Guarantees are based on the claims-paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges, and restrictions, and the policyholder should review their contract carefully before purchasing.

If you decide to downsize after retirement and have lived in your home for at least two years out of the last five from the date of sale, you can exclude up to $250,000 in capital gains from the proceeds and almost double that if you are married.

Get Started on Your Financial Life Plan Today