In about 6 weeks, there will be a newly minted RN among us – my daughter. As she prepares to enter the workforce, I have been counseling her and her fellow graduates on what to do with their first ever adult pay. My first piece of advice to them is: put 10% directly into their 403(b) accounts. If they start now, they will become regular savers throughout their working lives. Because most of them are in their late 20’s or early 30’s, 10% is enough for them to be contributing to their retirement. For others, this may not be enough.
My daughter has some classmates that are changing careers or starting out in nursing after taking care of their families. These graduates are in their late 30’s and early 40’s. For these classmates, 10% savings into their retirement accounts may not be enough. Time may not be on their side due to the late start.
Financial planning is especially necessary for those who are finding their work passion late in life.

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First, some good news. The tax cap will not change for 2016. What does this mean? It means that there will be no change in the maximum amount of earnings subject to Social Security tax –it remains at $118,500.
But that means…. There is no increase in the earnings limit. If you are under age 65 for and make more than $15,720 but are collecting Social Security benefits, you will have $1 withheld for every $3 in excess of the earnings limit.
There will be no raises in 2016. Social Security payments are adjusted upward to keep pace with inflation. For the third time since 2010, there will be no cost-of-living increase. In fact, it is possible that some payments to those who first sign up for Social Security in 2016 may receive slightly less than they expected due to no cost-of-living adjustment.
Please log on to www.ssa.gov and check your benefits.

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Orlando Sentinel Ask the Expert Hotline.

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Q: I am getting ready to retire and may need some of the money from my company plan right away. Is there any way I can avoid the 20% automatic withholding if the proceeds are paid out to me?
A: You state that you “may” need some of the money right away. In that case I would open up a Rollover IRA, have the proceeds from your company plan sent directly to that account, but have all of the funds deposited into a cash account. If you need to withdraw some money, you will only pay your ordinary income tax on what you withdraw vs. 20% on the whole account balance. If you determine you do not need to take a withdrawal, or can allow the bulk of your account to grow, you can them invest the balance of your account.

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Actually, there are two silver linings.
The first is for those considering converting a Traditional IRA to a Roth IRA. As you know, any amount that you convert will be taxed. If your Traditional IRA balance is down, you can convert to a Roth without selling those assets, pay the tax on the lower balance, then wait as the markets recover with the assets in an account with tax-free withdrawals.
Second, if you are currently adding to your accounts regularly, history indicates you will have been able to buy on sale. When accumulating assets for the future, the name of the game is to get as many shares as possible. By investing a regular amount of money at regular intervals, you are able to do so. More shares should equal more income during retirement.

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Financial Planning:  The Personal Approach

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Recently, I was talking with a client about her expenses. She was distraught because of her health insurance. My client has been retired for many years, receives a small pension and Social Security. Her distress has been caused by the drug portion of Medicare. She just received notice that the premium for the drug portion of her Medicare is going up $16/month and the deductible on her current plan is increasing to $250. She started shopping the plan available to find a premium that is close to what she currently has, but with each low premium she found, the out of pocket was so high she could never afford it. She asked me why.
The Affordable Care Act has brought thousands of uninsured citizens on to the rolls of being insured. Everyone has to pay part of this burden. Everyone. My client never thought her insurance would increase; I don’t think she is the only one to be surprised.

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Over the years, I have met with more than a few people that were not planning on saving for their retirement because they knew they were going to inherit money from their parents.
I have cautioned these people not to count on this; my caution has been proven to be valid as the years have passed.
Our parents are living longer, but not necessarily healthier. My father-in-law went through about $75,000/year for home health and in hospital care; this lasted for 3 years before he passed. His wife has been in an assisted living facility for the past 2 years – her care is now being paid by Medicaid because there is nothing left. These situations are becoming more and more common.
Prepare for your own retirement – if you inherit, consider it gravy.

disclosures:http://www.hechteffect.net/?page_id=31

Max out your pre-tax retirement savings:
The more you contribute pre-tax, the more you keep. It is that simple.

Do a mock tax return:
By doing so you can determine if you can deduct more, convert a Traditional IRA to a Roth IRA, or make an extra charitable donation.

Check your health savings account:
Do you have money in your HSA that you have not used yet? Now is the time to complete your preventative care medical appointments.

Check your cash:
Do you need to rein in your expenses? Beef up your emergency fund? Can you add more to your kid’s college savings plan?

Check your beneficiaries:
Have there been marriages, deaths, or births that would change where you would want your estate to go? Make those changes now.

You still have three months left, but times seem to fly. Don’t waste the time you have.

disclosures:http://www.hechteffect.net/?page_id=31

Comments like this, which I heard on a business channel, are what start panics. 30% of the Dow Component is equal to 9 stocks. That’s it, 9 stocks. In the universe of stocks that you can buy, 9 companies amount to almost nothing.
If you have a well diversified portfolio that matches your risk tolerance, please do not panic. Investments are for the long term. Over the long term, stocks historically have prevailed.

disclosures:http://www.hechteffect.net/?page_id=31