Paying taxes on my Social Security income

Nearly 90% of individuals over age 65 rely on Social Security income to pay for a large portion of living expenses throughout their retirement years. The federal government makes this benefit available to those who have worked and contributed to the system for a certain number of years, but the total monthly benefit varies from person to person. Although Social Security is an inevitable part of most individuals’ retirement planning, retirees may not be fully aware of how and when those benefits are taxed.
When Social Security Is Not Taxable
For retirees who receive Social Security income with little to no supplemental influx of cash, either from retirement plan distributions or other earnings, most likely those benefits are not taxable. The average benefit received is just under $1,300 each month, totaling $15,600 annually, and benefits are only taxable when combined income exceeds $25,000 for single retirees or $32,000 for couples filing joint tax returns. Individuals who are able to sustain the type of lifestyle they need or want on that level of income do not pay taxes on their Social Security benefits.
Taxable Social Security Income
For Social Security benefits to be taxable, individuals must have income above the threshold. This is based on total combined income, calculated as an individual’s adjusted gross income plus nontaxable interest earnings and half of his or her Social Security benefit. If combined income for a single individual is above $25,000 but below $34,000, or above $32,000 but below $44,000 for married couples, 50% of Social Security benefits are taxed. Combined income above these maximum amounts results in benefits taxed up to 85%. At this time, there is no income level that creates a situation where Social Security benefits are 100% taxable for retirees.
Avoiding Tax on Benefits
The simplest way to keep […]

Increase Your Online Financial Security

In an increasingly digital world, security of personal information remains in the forefront of our concern. Great emphasis should be placed on keeping your information safe and secure when navigating the internet. There are many benefits to conducting business online, but it is important to be aware of the risks involved and how to protect yourself from identity theft, phishing and fraud. The weakest link is often the individual user, so here are 6 tips to help you protect your information online and reduce the risk of financial fraud.

Keep your network secure
When setting up your wireless internet connection at home, make sure you secure it. By setting up security features such as password encryption you can deter would be hackers. When accessing the internet in a public space, such as the library or your local coffee shop, know that the connection is often not secure. It is generally best to refrain from accessing sites that contain sensitive personal information on such a connection as it can lead to others being able to access your information as well.

Set up banking alerts
In addition to the benefit of just keeping track of expenses to make sure they are in line with your budget, setting up bank alerts can be a way to detect fraudulent charges. Go through your bank and credit card transactions at least monthly to verify all transactions were authorized by you. You can also set up email and text message alerts that are sent to you every time a card is swiped.

Strengthen your passwords
These can be difficult to remember. Most of us have passwords on multiple accounts at various websites and it is often just easier to set them all to be the same. […]

Compulsive buying habits?

About 6% of Americans are compulsive buyers, according to research published in the American Journal of Psychiatry a decade ago. And many believe the advent of online shopping has exacerbated the problem further.

“Excessive spending is the number one barrier to saving for retirement,” said Tia Lee, director of wealth planning at Spectrum Management Group.

She has a novel approach to helping clients after years of trying to get them to simply stay within a traditional budget usually failed.

Now she has compulsive spenders “budget their lives, not their money,” she said.

Ms. Lee used such an approach with one woman who was racking up $12,000 a month shopping for clothes and other things online.

After examining a year’s worth of her spending habits revealed lots of small purchases, Ms. Lee directed her client to put as many items as she wanted in her electronic cart during the week. But the client was only allowed to purchase them on Fridays.

The woman saved $5,000 a month because her own internal spending limits kicks in before she hits send on Fridays and so she removes some items from the cart before purchasing.

In another case, Ms. Lee had clients who spent too much on dinners in expensive restaurants so she told them to limit their nights out to four a month.

“The number of times you’ve been out is easier to keep track of than budgeting the amount you spend,” she said.

Source:  Liz Skinner, Investment News

National Tax Freedom Day® 2017

National Tax Freedom Day® 2017 – the date when the nation as a whole has earned enough money to pay its total tax bill for the year – was April 23.  Americans will pay $3.5 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of more than $5.1 trillion.  Americans will collectively spend more on taxes in 2017 than they will on food, clothing, and housing combined.

This year, Americans will work the longest—46 days—to pay federal, state, and local individual income taxes. Payroll taxes will take 26 days to pay, followed by sales and excise taxes (15 days), corporate income taxes (10 days), and property taxes (10 days). The remaining six days are spent paying estate and inheritance taxes, customs duties, and other taxes.

Source:  Tax Foundation

Don’t be distracted

Don’t make the mistake of reacting to each news story as it hits the wires. Markets always anticipate what will happen in the near future and move before the event. That’s why it pays for investors to read the market’s mood and ignore their Twitter feeds.

The news changes all the time—but the market’s own signals are much better at forecasting stock market movements. Investors should keep with their individual asset allocation strategies based on their life situations  and not let the news of the day be the reason you make investment decisions.

Derived from:  Michael Kahn, Barron’s

Run out of money in retirement? Don’t make these mistakes

Being newly retired is definitely a reason to celebrate — and spend — some of the hard-earned money you’ve saved over the years.

Yet with Americans living longer, experts say you need to plan for a retirement that could last 30 years or more. Add in ever-rising medical costs, mostly stagnant Social Security checks and all of a sudden that pile of cash doesn’t look so big.

The issue of outliving your money is a real threat. To avoid having that happen don’t make these classic new-retiree mistakes.
Spending too much too soon

Making the transition from earning money to spending money when you first stop working is tricky. Especially if you’re healthy and eager to enjoy all that new free time.

“We get this all the time, where recently retired clients will do a trip to Europe or Asia, then spend four weeks in Caribbean, saying, ‘When we get older we’ll slow down,’” said Chris Schaefer, who leads MV Financial’s Retirement Plan Practice Group, Bethesda, Maryland. “They’re eating so much of principal in early retirement that they don’t have enough to last.”

Schaefer suggests that working with a financial planner to create a withdrawal strategy for your retirement accounts is key. He says a good starting point is taking out no more than 4 percent of your total nest egg a year.

Overspending on the house

Wanting to be debt free is an admirable goal and one that works for many retirees. However if you haven’t paid off the mortgage yet, rushing to do so may not be your best move.

As long as you have the cash flow to comfortably make the payments, Schaefer says don’t sacrifice your retirement savings by using a big chunk to pay it down. Instead keep […]

Some Stock Market Perspective

Not a day passes without someone warning of an impending correction, overvalued equities, and rumblings in bond markets, not to mention a seemingly endless series of geopolitical crises and potential domestic imbroglios over government spending, government shutdowns, health care, and tax reform. And yet, markets have so far failed to do much but shrug and meander in place.
It should be taken as a given that a 5%-10% correction is always possible, at least for equities, for one reason or another. It’s best, in fact, to assume that such corrections will occur from time to time, and that for higher beta stocks, the number will be greater than 10%.
In a time when the Federal Reserve has begun to raise short-term rates modestly, after years at the zero bound, bond investors also could expect a resetting of yields and prices, and accept that years of price gains on bonds might not be in the offing.
It also should be taken as a given that equities can surge 5%-10% quickly, perhaps because of a few good earnings reports, a global crisis that subsides, or any number of other reasons. And, of course, interest rates can go up or down 50 basis points or more in a matter of days, after long weeks or months of moving hardly at all.
Such moves can happen in a blink of an eye—far too quickly, in fact, for most investors to react either meaningfully or constructively. Read too much into the downward moves, and the result will be premature, precipitous selling that may be regretted in retrospect. Rush in when assets are jumping, and the result could be a brief momentum trade that ends as quickly as it started.
That is why being well […]

Why You Need to Own Bonds

When one thinks about portfolio diversification, bonds, in addition to US and International equities should be evaluated.

An investor may be tempted to overlook bonds altogether given that investing in equities tends to lead to higher overall returns. So why include bonds in your investment portfolio? The answer lies in reducing the volatility of your portfolio, providing for short-term cash needs and helping you sleep better at night.

The purpose of allocating a portion on your portfolio to bonds is to reduce overall volatility. There is risk in allocating a large portion of your portfolio towards equities when markets are at high levels. By including bonds in your asset allocation, your overall portfolio risk is reduced given that bonds are not as highly correlated with equity returns and tend to act as a diversifier during market downturns. Additionally, by allocating a portion of your portfolio to bonds, this allow you to have funds in your portfolio available when stock prices are more attractive to increase your stock allocation.

Finally, high quality bonds offer investors something of an emotional hedge against poor behavior. Not every investor is willing or able to have their entire portfolio in the stock market. There’s no use in trying to implement a risky portfolio strategy if periods of poor performance are going to cause you to not stick with it. Bonds can help by providing stability in the event of a stock market sell-off.

Even if bonds were to fall in a down stock market, it wouldn’t be nearly as severe. In this respect, bonds can act as a source of funds for either rebalancing into stocks at lower prices or for selling for cash flow needs. Ultimately, they provide the stability investors crave […]

Fake news! Some investment research is a sham

When you read an article on an investment research website, be aware that the article may not be objective and independent.  For example, the writer may have been paid directly or indirectly by a company to promote that company’s stock.  In some cases, the writer may not disclose compensation received or may go so far as to claim falsely that compensation was not received.  Keep in mind that fraudsters may generate articles promoting a company’s stock to drive up the stock price and to profit at your expense.

Stock promotion schemes also may be conducted through social media, investment newsletters, online advertisements, email, Internet chat rooms, direct mail, newspapers, magazines, television, and radio.  Be wary if you receive communications (including new posts, tweets, text messages, or emails) promoting a stock from someone you do not know, even if the sender appears connected to someone you know.  If a company’s stock is promoted more heavily than its products or services, this may be a red flag of investment fraud.

Microcap stocks, some of which are penny stocks and/or nanocap stocks, may be particularly susceptible to stock promotion schemes and other forms of market manipulation.

Even if articles on an investment research website appear to be an unbiased source of information or provide commentary on multiple stocks, they may be part of an undisclosed paid stock promotion.  Never make an investment based solely on information published on an investment research website.  Before investing in a particular stock, research the company thoroughly and make sure you understand its business.  As with any investment decision, carefully review all of the materials available to you and if possible, verify what you are told about the investment.

Source:  Securities & Exchange Commission

7 money decisions you could regret forever

Some financial missteps — paying a bill late or splurging on an unnecessary new accessory — can be swept under the rug.

Others will haunt you.

You don’t want to get to your golden years and realize you never got to see the world. Or worse, that you don’t have enough cash in the bank to sustain your retirement.

While it’s important to tune your financial decisions to your individual goals, here are seven money mistakes that you could end up regretting for life.

Not saving for retirement

The No. 1 financial regret Americans share is not saving enough for retirement, according to a 2016 survey by Bankrate. Eighteen percent of all survey respondents said that they regret not putting money away for later, with a full 27 percent of respondents over 65 citing it as their biggest regret.

Not only will you begin to feel more pressured and unprepared the older you get, but by waiting to pad your retirement savings accounts, you’re missing out on the power of compound interest.If you aren’t already taking advantage of your employer’s 401(k) plan, sign up. Financial experts typically recommend contributing at least 10 percent of your salary, but start with however much you can.If you don’t have a retirement savings plan at work, you can contribute to other tax-advantaged accounts designed specifically for retirement, such as a traditional IRA, Roth IRA or myRA.

And if you’re already using a retirement savings plan, spend a few minutes setting it to auto-increase by a certain percentage every year. That way, you’ll eventually work your way up to 10 percent and barely notice.

Buying a house you don’t need

While buying a home can be a good investment, it’s not right for everyone. It’s a huge financial undertaking and should reflect your future plans as […]