How will Social Security fit into your retirement income strategy?

Scott-Johnson---HeadHave you given much thought to collecting Social Security? The answer probably depends on how old you are — but whatever your age, you’ll want to consider the best way of incorporating Social Security benefits into your retirement income strategy.
Of course, if you have several decades to go until you retire, you might be wondering if Social Security will even be there for you at all. The basic issue is that the Social Security system is experiencing a sharply declining worker-to-beneficiary ratio. In plain English, this means that fewer workers are contributing to Social Security while the huge baby boom generation is retiring and taking money out. Still, Social Security has enough money to pay full retirement benefits to every eligible American until 2038, according to the Congressional Budget Office. After that point, benefits would have to be reduced unless changes are made to the Social Security system.
And several changes have indeed been proposed. Given that we do have nearly 25 years until benefit cuts may need to be made, it seems reasonable that some type of solution could be reached to put Social Security back on solid ground.
In any case, when thinking about your retirement income, you need to focus on those things that you can control — such as when to start taking Social Security and how you can supplement your Social Security benefits.
Depending on when you were born, your “full” retirement age, as far as collecting Social Security benefits, is likely either 66 or 67. You can start getting your checks as early as 62, but if you do, your monthly payments could be reduced by as much as 30% — and this reduction is permanent. Consequently, if you can support your lifestyle from other sources of income — such as earnings from employment and withdrawals from your IRA and 401(k) — you may want to postpone taking Social Security until you reach your full retirement age. In fact, you can get even bigger monthly checks if you delay taking your benefits beyond your full retirement age, although your payments will “max out” once you reach 70. Keep in mind, though, that other factors, such as your anticipated longevity, should also enter into your calculations in considering when to take Social Security.
As mentioned above, your retirement income may also include withdrawals from retirement accounts, such as an IRA and a 401(k), along with other investments, such as a fixed annuity. And these other accounts are quite important, because Social Security provides, on average, only about 40% of retirement income for the average 65-year-old today. Consequently, in the years and decades before you retire, contribute as much as you can possibly afford to these other accounts. Given the advances in medical care and the greater awareness of healthy lifestyles, people are living longer than ever — which means you could spend two, or even three, decades in retirement. To enjoy those years fully, you’ll need adequate income.
By planning ahead, you can determine how best to fit Social Security into your retirement income strategy. Every move you make to help “secure” your retirement can pay off for you in the long run.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.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.

Saving is good … but it’s not investing

Scott-Johnson---HeadIt’s a good thing to have some savings. When you put the money in a low-risk account, you can be pretty sure it will be readily available when you need it. Nonetheless, “saving” is not “investing” — and knowing the difference could pay off for you far into the future.
Think about it this way: Saving is for today, while investing is for tomorrow.
You need your savings to pay for your daily expenses, such as groceries, and your monthly bills — mortgage, utilities, and so on. In fact, you might even want your savings to include an emergency fund containing six to 12 months’ worth of living expenses to pay for unexpected costs, such as a new furnace or a major car repair.
These are all “here and now” expenses — and you could use your savings to pay for them. But in thinking of your long-term goals, such as college for your children and a comfortable retirement for yourself, most individuals typically can’t simply rely on their savings — they’ll need to invest. Why? Because, quite simply, investments can grow — and you will need this growth potential to help achieve your objectives.
To illustrate the difference between saving and investing, let’s do a quick comparison. Suppose you put $200 per month into a savings account that paid hypothetical 3% interest (which is actually higher than the rates typically being paid today). After 30 years, you would have accumulated about $106,000, assuming you were in the 25% federal tax bracket. Now, suppose you put that same $200 per month in a tax-deferred investment that hypothetically earned 7% a year. At the end of 30 years, you would end up with about $243,000. (Keep in mind that you would have to pay taxes on withdrawals. Hypotheticals do not include any transaction costs or fees.)
This enormous disparity between the amounts accumulated in the two accounts clearly shows the difference between “saving” and “investing.” Still, you might be thinking that investing is risky, while savings accounts carry much less risk. And it is certainly true that investing does involve risks — investments can lose value, and there’s no guarantee that losses will be recovered.
Nonetheless, if you put all your money in savings, you’re actually incurring an even bigger risk — the risk of not achieving your financial goals. In fact, a low-rate savings account might not even keep up with inflation, which means that, over time, you will lose purchasing power.
Ultimately, the question isn’t whether you should save or invest — you need to do both. But you do need to decide how much of your financial resources to devote toward savings and how much toward investments. By paying close attention to your cash flow, you should be able to get a good idea of the best savings and investment mix for your particular situation. For example, if you find yourself constantly dipping into your long-term investments to pay for short-term needs, you probably don’t have enough money in savings. On the other hand, if you consistently find yourself with large sums in your savings account even after you’ve paid all your bills, you might be “sitting” on too much cash — which means you should consider moving some of this money into investments with growth potential.
Saving and investing — that’s a winning combination.

  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.

Holding investments for the long term can be less taxing

Scott-Johnson---HeadAs we get closer to April 15, the tax-filing deadline, you may be wondering about the effects of some of your actions on the amount of taxes you pay. Of course, you don’t have total command of some key tax-related components, such as your earned income. But one area in which you do have a degree of control is your investment-related taxes. And since 2013 has been a pretty good year for the financial markets, you may have some sizable gains. If you decide to sell some of your investments to “lock in” those gains, what would be the tax consequences?
Essentially, the answer depends on two variables: your tax bracket and how long you’ve held the investments.

Our tax code rewards those investors who hold their investments for longer time periods. Consequently, short-term capital gains, earned on investments held for less than one year before being sold for a profit, are taxed at an individual’s ordinary income tax rate, which, in 2013, can be as high as 39.6%. However, long-term capital gains, earned on investments held one year or longer, are taxed at just 15% for most taxpayers and 20% for those in the 39.6% bracket. (At this tax bracket, a 3.8% Medicare contribution tax may also apply to long-term gains, so the top capital gains rate would be 23.8%.) You’ll need to check with your tax advisor for more details.
From a tax standpoint, you are likely to be better off by keeping your profitable investments at least one year before selling them. But are there also other reasons to hold investments for the long term?
In a word, yes. For one thing, if you are constantly buying and selling investments, you won’t just incur taxes — you’ll also rack up commissions and fees. And these costs can eat into your investments’ real rate of return.

Also, if you are always buying and selling, you may be doing so for the wrong reasons. You might be chasing after “hot” investments, even though by the time you buy them, they may already be cooling off — and, in any case, they may not even be right for your needs. Or, you might decide you need to “shake things up” in your portfolio because you haven’t liked what you’ve seen on your investment statements for a longer period of time. But if the overall market is down, it tends to drag everything down with it — even quality vehicles that still have good prospects.

But most importantly, if you are always buying and selling, you will find it difficult to follow a unified, long-term investment strategy — one that’s based on your goals, risk tolerance and time horizon. When you follow such a strategy, you may indeed buy and sell investments, but only at those times when it’s really necessary, such as when you need to further diversify your holdings, a fundamental change in the company has occurred or when the suitability rating of the investment has changed. While diversification can’t guarantee profits or protect against loss, it can help reduce the impact of volatility on your portfolio.
If you want to cut down on your capital gains taxes, holding quality investments for the long term makes sense. And for an investment strategy, a “buy and hold” approach can better position you long after tax season has ended.

  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.

Retro Pizza Café makes a pleasant place to dine

Spring will bring outdoor ambience

As the weather gets warmer in the weeks ahead and this winter’s snow melts away to a mere memory, the owners of Retro Pizza Cafe are looking forward to business in full bloom.
“We opened in October and are doing well now, but when people can come here and sit outside and enjoy themselves, that’s when things will really take off here,” said co-owner James Argyropoulos as he stood inside his cafe, 13000 S. La Grange Road, in Palos Park’s Mill Creek Shopping Center.
The outdoor eating area that wraps around the place can seat up to 70 patrons, on the top of the seating for 24 inside.
Despite the establishment’s name, there is little “retro” about Retro Pizza Cafe. “If people come in here looking for pictures of classic cars, they won’t find it,” he explained with a smile, gesturing at the eatery’s cool colors, sleek design, mural-size photos of European cities, and hipster music flowing from overhead speakers. “The only thing here that’s retro is this [classic-looking] bottle of Pepsi.”
The inspiration for the name came from abroad.
“We’re Greek. We’re in Greece a lot, go to Europe a lot,” Argyropoulos continued, as he talked about a Retro cafe in his family’s hometown in the old country, a popular gathering place. “We wanted to put something here that was like that, in a way--a little more of a European cafe-style place than what you normally see around here.”
As the name implies, pizza is the star of the show. Outsized slices made with fresh ingredients are what draw customers young and old. Full pizzas are also available via pickup and delivery.
“We use quality ingredients, pretty much from scratch,” Argyropoulos said. “Our pizza is just a little bit different than others. We have a slightly sweeter sauce and our crust is right in the middle—between the really thin crust you’ll find in New York and the thicker crust that Chicago is famous for.”
In addition to its signature item, Retro Pizza Cafe has expanded its offerings to include panini, wraps, soup, salad, gelato, cake, muffins, smoothies and more. Plans are in the works to bake additional dessert items onsite, as well as launch a dinner menu that may include such favorites as baked salmon, baked chicken breast and more.
The cafe also serves Intelligentsia coffee, one of just a few locations in the area that offers the high-end, nationally acclaimed coffee.
Proud as he is of the food and beverages, Argyropoulos boasts about the friendly service at the family-owned and operated eatery.
“Everybody who’s involved here is local, family, you know, this is definitely a mom and pop operation,” he said. “You’ve got me, my two brothers, my best friend, and a brother-in-law.
“I grew up here. I know this area. I went to Stagg High School,” he reminisced. “My best friend went to Sandburg. We used to come here when it was Baskin-Robbins, 20 years ago. I used to walk here every day, to eat at Subway and hang out at Jewel, because that’s what there was to do.”
That family feel and familiarity with the area are what helps set Retro Pizza Café apart from other local eateries. “We really do care about every customer that comes in,” Argyropoulos added. “I think you find that a lot in the mom and pop places. Franchise places can be very cold. I’ve worked for franchises. Not that they teach you to be cold, but they have a system that doesn’t leave you a lot of room for warmth. We’re different. We’re a face-to-face kind of place. We talk to our customers, we listen, we’ve changed things at their request, and we’ve added menu items at their request.”

On Valentine’s Day, financial gifts should be super sweet

Scott-Johnson---HeadValentine’s Day is almost here. This year, instead of sticking with flowers or chocolates for your valentine, why not give a gift with a future? Specifically, consider making a meaningful financial gift.
However, a “meaningful” gift doesn’t gain its meaning from its size, but rather its impact. What types of financial gifts can have the greatest effect on the life of your loved one? Here are a few possibilities:
• Charitable gifts — Your valentine may well support the work of a variety of charitable organizations. Why not give to one of them, in the name of your loved one? Not only will you be helping a group that does good work, but you may also be able to receive a tax deduction for your contribution, assuming the organization qualifies for tax-exempt status. And if you give financial assets, such as appreciated stocks, you may also be able to avoid paying capital gains taxes on the donated shares.
• IRA contributions — Many people don’t contribute the maximum annual amount to their IRA (which, in 2014, is $5,500, or $6,500 if you’re 50 or older). While you can’t directly contribute to your valentine’s IRA, you can certainly write him or her a check for that purpose.
• Gifts of stock — Like everyone else, your sweetheart uses a variety of products — and he or she might enjoy being an “owner” of the companies that produce these goods. You can help make that happen through gifts of stock in these businesses. A financial advisor can help you through the straightforward process of buying stock and transferring it to another person.
• Debt payment — Consider volunteering to pay your valentine’s car payment, or credit card payment, for a month, and then encouraging him or her to put the savings to work in an investment. The fewer debts we have, the more we have to invest for our future.
• Life and disability insurance — Quite frankly, life insurance and disability insurance do not sound like the most romantic of Valentine’s Day presents. And yet, if your valentine is also your spouse, your purchase of life and disability insurance may actually be one of the most thoughtful gifts you can give. Of course, your employer may offer some life and disability insurance as employee benefits, but this coverage may be insufficient for your needs. After all, if something were to happen to you, your insurance may need to provide enough income to pay off your mortgage, send your children to college and perhaps even help pay for your spouse’s retirement. As for disability insurance, many employers’ plans are quite limited in what they provide, so you may need to supplement this coverage with a separate policy. And the possibility of incurring a disability, even for a short time, may be greater than you think. In fact, a 20-year-old worker has a three-in-10 chance of becoming disabled before reaching retirement age, according to the Social Security Administration.
As you can see, you can choose from a range of financial gifts to brighten Valentine’s Day for your loved one. So, consider the ones that make the most sense for your valentine and start “wrapping them up,” so to speak.
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.