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Investors can learn much from Super Bowl teams

Scott-Johnson---Head  If you’re a football fan (and probably even if you aren’t), you are aware that we’re closing in on the Super Bowl. This year’s event is unique in that it is the first Super Bowl held in an outdoor, cold-weather site — New Jersey, to be specific.
  However, the 2014 game shares many similarities to past Super Bowls in terms of what it took for the two teams to arrive at this point. And some of these same characteristics apply to successful investors.
  Here are a few of these shared traits:
  • A good offense — Most Super Bowl teams are adept at moving up and down the field and crossing the goal line. And good investors know how to choose those investments that can provide them with the gains they need to keep moving toward their own goals, such as a comfortable retirement. That’s why, at every stage of your life, you will need to own a reasonable percentage of growth-oriented investments, such as stocks and stock-based vehicles.
  • A strong defense — Even a good offense usually isn’t enough to vault a team into the Super Bowl, which is why most participants in the Big Game also have strong defenses. Similarly, the best investors don’t just put all their money in a single type of aggressive instrument and then forget about it — they know that a downturn affecting this particular asset class could prove extremely costly. Instead, they “defend” their portfolios by diversifying their holdings among a range of investments: stocks, bonds, government securities, certificates of deposit, and so on. And you can do the same. Keep in mind, however, that although diversification can help reduce the impact of volatility on your portfolio, it can’t guarantee a profit or always protect against loss.
  • Perseverance — Every team that makes it to the Super Bowl has had to overcome some type of adversity — injuries to key players, a difficult schedule, bad weather, playoff games against good opponents, etc. Successful investors have also had to overcome hurdles, such as bear markets, bad economies, political battles and changing tax laws. Through it all, these investors stay invested, follow a long-term strategy and continue to look for new opportunities — and their perseverance is often rewarded. You can follow their example by not jumping out of the market when the going looks tough and not overreacting to scary-sounding headlines.
  • Good coaching — Super Bowl teams contain many fine players, but they still need coaches who can analyze situations and make the right decisions at the right times. Smart, experienced investors also benefit from “coaching — in the form of guidance from financial professionals. It’s not always easy for busy people to study the financial markets, stay current on changing investment-related laws, monitor their own portfolios and make changes as needed. By working with a financial professional who knows your situation, needs, goals and risk tolerance, you will find it much easier to navigate the increasingly complex investment world.
  As we’ve seen, some of the same factors that go into producing a team capable of reaching the Super Bowl are also relevant to investors who want to reach their own goals. By incorporating these behaviors and attitudes into your own investment strategy, you’ll be following a pretty good “game plan.”

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Use tax diversification to help manage retirement income

Scott-Johnson---Head  You need to save and invest as much as possible to pay for the retirement lifestyle you’ve envisioned. But your retirement income also depends, to a certain degree, on how your retirement funds are taxed. And that’s why you may be interested in tax diversification.
  To understand the concept of tax diversification, you’ll need to be familiar with how two of the most important retirement-savings vehicles — an IRA and a 401(k) — are taxed. Essentially, these accounts can be classified as either “traditional” or “Roth.”
  When you invest in a traditional IRA or 401(k), your contributions may be tax-deductible and your earnings can grow tax deferred. With a Roth IRA or 401(k), your contributions are not deductible, but your distributions can potentially be tax-free, provided you meet certain conditions. (Keep in mind, though, that to contribute to a Roth IRA, you can’t exceed designated income limits. Also, not all employers offer the Roth option for 401(k) plans.)
  Of course, “tax free” sounds better than “tax deferred,” so you might think that a Roth option is always going to be preferable. But that’s not necessarily the case. If you think your tax bracket will be lower in retirement than when you were working, a traditional IRA or 401(k) might be a better choice, due to the cumulative tax deductions you took at a higher tax rate. But if your tax bracket will be the same, or higher, during retirement, then the value of tax-free distributions from a Roth IRA or 401(k) may outweigh the benefits of the tax deductions you’d get from a traditional IRA or 401(k).
  So making the choice between “traditional” and “Roth” could be tricky. But here’s the good news: You don’t necessarily have to choose, at least not with your IRA. That’s because you may be able to contribute to both a traditional IRA and a Roth IRA, assuming you meet the Roth’s income guidelines. This allows you to benefit from both the tax deductions of the traditional IRA and the potential tax-free distributions of the Roth IRA.
  And once you retire, this tax diversification can be especially valuable. Why? Because when you have money in different types of accounts, you gain flexibility in how you structure your withdrawals — and this flexibility can help you potentially increase the amount of your after-tax disposable income. If you have a variety of accounts, with different tax treatments, you could decide to first make your required withdrawals (from a traditional IRA and 401(k) or other employer-sponsored plan), followed, in order, by withdrawals from your taxable investment accounts, your tax-deferred accounts and, finally, your tax-free accounts. Keep in mind, though, that you may need to vary your actual sequence of withdrawals from year to year, depending on your tax situation. For example, it might make sense to change the order of withdrawals, or take withdrawals from multiple accounts, to help reduce taxes and avoid moving into a different tax bracket.
  Clearly, tax diversification can be beneficial. So after consulting with your tax and financial advisors, consider ways of allocating your retirement plan contributions to provide the flexibility you need to maximize your income during your retirement years.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Prepared for the unexpected?

Scott-Johnson---Head  When you’re working to achieve your financial objectives, you will encounter obstacles. Some of these can be anticipated — for example, you won’t be able to invest as much as you want for retirement because you have to pay for your mortgage. Other challenges can’t be easily anticipated, but you can still plan for them — and you should.
  Obviously, the word “unexpected,” by definition, implies an unlimited number of possibilities. However, at different stages of your life, you may want to watch for some “expected” unexpected developments.
  For example, during your working years, be prepared for the following:
  • Emergency expenses — If you needed a major car or home repair, could you handle it? What about a temporary job loss? These events are costly — especially if you are forced to dip into your long-term investments to pay for them. To help guard against these threats, try to build an emergency fund containing six to 12 months’ worth of living expenses, held in a liquid, low-risk account.
  • Investment risk and market volatility — Extreme price swings are unpredictable, and they can affect your investment success. To defend yourself against wild gyrations in the market, build a diversified portfolio containing quality investments. While diversification, by itself, can’t protect against loss or guarantee profits, it can help reduce the effect of volatility on your portfolio. And here’s one more thing you can do to cope with the ups and downs of investing: Maintain a long-term perspective. By doing so, you won’t be tempted to overreact to short-term downturns.
  • Long-term disability — One-third of all people between the ages of 30 and 64 will become disabled at some point, according to the Health Insurance Association of America. Disabilities can be economically devastating. As part of your benefits package, your employer may offer some disability insurance, but you may need to supplement it with private coverage.
  • Premature death — None of us can really predict our longevity. If something happens to you, would your family be able to stay in your home? Could your children still attend college? To protect these goals, you need adequate life insurance.
  As you approach retirement, and during your retirement years, you may want to focus on these challenges:
  • Living longer than expected — You probably don’t think that “living longer than expected” is necessarily a bad thing. However, a longer-than-anticipated life span also carries with it the risk of outliving your money. Consequently, you may want to consider investment solutions that can provide you with an income stream that you can’t outlive. Also, you’ll need to be careful about how much you withdraw each year from your various retirement and investment accounts.
  • Need for long-term care — If you had to stay a few years in a nursing home, the cost could mount to hundreds of thousands of dollars. These expenses could jeopardize your financial security, so you’ll need to protect yourself. You could “self-insure,” but as that would be extremely costly, you may want to “transfer the risk” to an insurance company. A financial professional can help explain your choices.
  None of us can foresee all the events in our lives. But in your role as an investor, you can at least take positive steps to prepare for the unexpected — and those steps should lead you in the right direction as you move toward your important goals.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Area businesses take on a new look in the snow

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Photos by Jeff Vorva

Snow was piled up high in Evergreen Park at the corner of 95th Street and Pulaski Road. And that was before a second storm hit the next day.

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Vehicles at the Enterprise Car Sales in Worth accumulated a lot of snow during the recent storm.

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A small army of snow blowers were camped in front of J-Tel Lawn and Snow Equipment in Worth on Thursday.

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The AutoZone in Oak Lawn received a little ice and snow during the storm.

What’s your vision of retirement?

When you start out in your career, you’re probably not thinking much about retirement. At this point, your picture of a “retirement lifestyle” may be, at best, hazy, hidden as it is behind a veil of experiences you’ve yet to encounter. But as you move through the years, your view of retirement comes into clearer and closer focus — and this vision will have a big impact on your savings and investment strategies.

Consequently, to create and implement those strategies effectively, you’ll need to define your retirement vision by identifying its various parts. Here are some to consider:

  • Travel — If you’re like many people, you may dream of traveling during your retirement. But what does “travel” mean to you? Do you envision taking a cruise or an international trip every year? Or is your idea of travel just a short jaunt to a popular destination, such as a lake or the mountains or the beach? The difference in costs between global and U.S.-based travel can be enormous, so you’ll need to define your goals and estimate your expenses.
  • Second home — Once you retire, you’ll have to make some housing-related decisions. Should you sell your home and “downsize”? Or do you want to keep your current residence and possibly purchase a second home, such as a condominium, in another part of the country? Obviously, you’ll need to factor in these choices when you think about how to invest before you retire and how to manage your withdrawals from your 401(k), IRA and other accounts during your retirement.
  • Volunteer activities — You might think that your volunteer activities during retirement won’t affect your finances much. But if you are particularly ambitious, and your volunteerism involves travel, renting space, purchasing equipment and so on, you might be looking at some large cash outlays. Furthermore, if you host people at your house, you may be incurring some types of liability risk, which you might need to address through appropriate insurance coverage.
  • Hobbies — During your working years, you may pursue your hobbies always with the thought that you can devote a lot more time to them after you retire. However, expanded hobby activities may involve expanded costs. For example, if you’re good with cars, you might decide to invest in that foreign sports car of which you’ve dreamed. Or, if you’re fascinated by genealogy, perhaps you’ll start traveling to places once inhabited by your ancestors. These types of activities can be expensive, so you’ll have to evaluate your saving, spending and investing habits to determine how to accommodate your increased expenditures on your hobbies.
  • Second career — Many people look forward to retiring from one career so they can start another — opening a small business, consulting or even taking a part-time job. Clearly, if you were to start your own business, some expenses would be involved, so you’ll have to plan for them. Even if you become a consultant or work part time, you could incur various costs, including travel. And, in relation to these types of work, you may also have insurance and health care issues to address.

By identifying the various components of your retirement vision, and estimating their respective costs, you can make those saving, spending and investment choices that can help you work toward your retirement dream.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.