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Consider investment strategy at each season of your life

Scott-Johnson---Head  Fall is almost officially here — and if you’re like most people, you’re probably wondering how summer went by so fast. Those trips to the lake or the beach are fading in memory now, giving way to helping kids with homework, raking leaves and the other rites of autumn. And just as your day-to-day tasks change with the seasons, so, too, will your money management and investment activities at different phases of your life.
  Here’s how these scenarios might look:
  Phase one: Planning for possibilities — When you’re young and you’re starting out in the working world, your most immediate financial concerns may be to pay off student loans and then, possibly, save for a down payment on a house. To address both these goals, you’ll need to budget carefully. And yet, even at this stage of your life, you should start thinking about saving for retirement — because time is your biggest ally. Consequently, if you work for an employer who offers a retirement plan, such as a 401(k), contribute what you can afford. At the very least, put in enough to earn your company’s matching contribution, if one is offered.You may also want to open an Individual Retirement Account (IRA).

  Phase two: Gearing up for other goals — As you move through life, and possibly begin a family, you’ll likely develop other financial goals, such as helping your children pay for college. You may want to consider investing in a tax-advantaged college savings vehicle, such as a 529 plan. Also, it’s important to have enough life insurance to protect your young family.

  Phase three: Ramping up for retirement — When you reach the mid-to-later stages of your working life, you may find you have more financial resources available, as your earnings may have increased significantly, your children have grown and your mortgage may even be paid off. If you are not already doing so, “max out,” if possible, on your 401(k) and IRA. And if you still have money available to invest, you may want to look for other tax-advantaged retirement vehicles.
  Phase four: Reaping the rewards — Now it’s time to enjoy the results of your lifetime of hard work and your many years of saving and investing. You may have to tap into your retirement accounts, so you’ll need to choose a sustainable annual withdrawal rate. The amount you withdraw each year from your IRA and 401(k) depends on a variety of factors: how much you’ve saved, the lifestyle you’ve chosen, your estimated longevity, how much you have available from other sources, and so on.
  Phase five: Examining your estate plans — During your retirement years, if not sooner, you’ll want to review your estate plans so that you can leave the legacy you desire. If you have a need to create or update your legal documents, such as a living trust and durable power of attorney, you should consider consulting a qualified estate-planning attorney.

  You’ll need to make the appropriate financial and investment decisions at many different times over the years. This may sound daunting, but with diligence and discipline, you can discover the paths to take as you move through the seasons of your life.

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.

What’s your retirement ‘contingency plan’?

Scott-Johnson---Head  You probably have thought about what you’d like to do during your retirement years. But all your plans probably depend, to at least some extent, on your financial situation. What happens if you reach the age at which you wish to retire and you just don’t have the money you thought you’d have?

  If this occurs, it’s time for “Plan B.” What does that look like? Here are a couple of possibilities:
  • Continue working. If you like your job, you may not mind working an extra year or so. You’ll be bringing in more income and contributing more to your 401(k) or other retirement account — and, perhaps almost as importantly, you may be able to avoid tapping into these retirement accounts, thus giving them more time to potentially grow. (However, once you turn 70½, you’ll need to begin taking withdrawals from your 401(k) and a traditional IRA.) But if you are really not enamored with the idea of working any longer, you might find that even the ability to “beef up” your retirement plans for another couple of years isn’t much consolation.
  • Adjust your retirement lifestyle. It’s pretty simple: If you don’t save as much as you had planned for retirement, you probably can’t do all the things you wanted to do as a retiree. For example, you may not be able to travel as much, or pursue your hobbies to the extent you’d like.
  Clearly, you’d like to avoid these “retirement contingency plans.” To do so, though, you’ll need to take steps well before you retire. And the most important move you can make may be to contribute as much as you can possibly afford to your IRA and your 401(k) or other employer-sponsored retirement plan.
  During the last several years before you wish to retire, you may be in a strong position to “max out” on these plans because, at this stage of your life, your income may be at its highest point, your children may be grown and you may even have “retired” your mortgage. If you still have money left with which to invest, you may want to look at other tax-advantaged vehicles that can be used for retirement.

  But while it’s important to put in as much as possible to your retirement accounts, you need to do more than that — you also must put the money in the right investments within these accounts. Your exact investment mix should be based on your individual risk tolerance and time horizon, but, as a general rule, these investments must provide you with the growth potential you’ll need to accumulate sufficient resources for retirement.
  Of course, as you know, investments move up and down. You can’t prevent this, but you’ll certainly want to reduce the effects of volatility as much as possible when you enter retirement. Consequently, during your final working years, you may need to adjust your retirement accounts by shifting some of your assets (though certainly not all) from growth-oriented vehicles to income-producing ones.
  It’s a good idea to have contingency plans in place for virtually every endeavor in life — and paying for your retirement years is no different. But if you can make the right moves to avoid the contingency plans in the first place, then so much the better.

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.

Five years later, officials to revive Chicago Ridge/Worth Chamber

 

  Bill Ritter remembers the final days of the former Chicago Ridge/Worth Chamber of Commerce.

  “It just kind of fell apart. You couldn’t Page-3-2-COL---CHAMBERChicago Ridge Village Clerk George Schleyer (left), Bill Ritter, owner of Metal Masters Auto Body, and Worth Village Clerk Bonnie Price believe local businesses would thrive as a result of a new chamber of commerce. Ritter was a leader of the previous chamber, which folded in 2008. Photo by Bob Rakowget people to come out (to meetings),” said Ritter, owner of Metal Masters Auto Body in Chicago Ridge.
  That was 2008 when businesses were battling a down economy and keeping the chamber thriving was no simple task.
  Five years later, Ritter is one of several business owners in the adjoining communities eager to resurrect the chamber.
  And they’re not alone. Chicago Ridge Village Clerk George Schleyer and Bonnie Price, the clerk in Worth, are throwing their full support behind the plan.
  “It is a valuable resource,” said Price, who sent a letter to all Worth business owners notifying them of plans for a new chamber. Ritter made Chicago Ridge business owners aware of the plan, and both he and Price have received positive feedback.
  But Price said it’s important to do more than discuss the possibilities of forming a new chamber.
  “You have to move forward,” she said. “It’s a valuable resource.”
  The first meeting for the new group will be held at 6:30 p.m. Sept. 19 at the Chicago Ridge Senior Center, which is inside Chicago Ridge Village Hall, 10455 S. Ridgeland Ave.
  Selecting officers and board members is on the agenda for the initial meeting, Schleyer said.
  Ritter said he expects to face the same challenges that confronted him when he was involved in the previous chamber of commerce.
  The amount of time officers and directors must commit to the chamber is the “biggest challenge,” he said. Additionally, encouraging people to attend meetings and get involved can be a struggle.
  Schleyer said 50 members would be a good start, although not all members have to be active, he said.
  Schleyer said a chamber of commerce offers several benefits including networking and a platform for sharing common problems and solutions.
  “People feel there’s a need for this,” he said. “It’s (about) way more than luncheons and speakers. I know how important it is. I believe a strong business community strengthens the whole community.”
  Price said Worth is home to numerous small businesses whose owners work “12 to 15 hours a day.” An active chamber would help those busy proprietors network and market their companies.
  “We want to help the businesses help promote themselves,” Schleyer said.
  The chamber plans to host a monthly meeting as well as annual events such as a golf outing and business expo, but Schleyer envisions more.
  For example, he wants the chamber to work with landlords to fill vacant storefronts, which are noticeable in both Worth and Chicago Ridge.

 

Can excess retirement dollars help your grandchildren?

Scott-Johnson---Head  National Grandparents Day is observed on Sept. 8. And although this “Day” is not as widely known as Mother’s Day or Father’s Day, it does remind us of the importance of grandparents. If you’re a grandparent yourself, you may be thinking of ways to help your grandchildren on their journey through life. One of the greatest gifts you can give them may be financial support for their college education — and one way you can help provide this support could be found in the distributions you receive from your retirement accounts.
  To understand how this technique might work, you’ll need to be familiar with the required minimum distribution (RMD) rules governing various retirement accounts. Actually, they’re pretty straightforward: Once you turn 70½, you’ll generally have to start taking withdrawals from your traditional IRA and your 401(k) or other employer-sponsored retirement plan — such as a 457(b) plan, if you work for a state or local government, or a 403(b) plan, if you work for an educational institutions or nonprofit group. (If you have a Roth IRA, you are not required to take withdrawals at any age.)
  Your required minimum distribution is calculated by dividing the prior Dec. 31 balance of your retirement account by a life expectancy factor published by the Internal Revenue Service. As the word “minimum” suggests, you can take out more than this amount, but not less.
  You can use the money you withdraw for any purpose you choose. It may be that you need all of it to help support your retirement lifestyle. But if you have enough money coming in from other sources — such as Social Security and any investments held outside your retirement accounts — you may find that you don’t really need to use every dollar from your RMDs. And if that’s the situation, you might want to devote some of this money to a college fund for your grandchildren.
  Or you could simply give the funds to your grandchildren’s parents and let them decide how best to employ it for college. But you do have other options. For example, you could establish a 529 plan and name your grandchildren as beneficiaries.
  With a 529 plan, any potential earnings accumulate tax free, provided they are used for qualified higher education expenses. (Keep in mind, though, that 529 plan distributions not used for qualified expenses may be subject to federal and state income tax and a 10% IRS penalty). Furthermore, your 529 plan contributions may be deductible from your state taxes if you participate in your home state’s plan. However, 529 plans vary, so check with your tax advisor regarding deductibility.
  In all likelihood, you’ll be able to contribute as much as you want to a 529 plan, because the lifetime contribution limits are generous — although these limits vary by state. Plus, a 529 plan is flexible: If your grandchild decides against an eligible college or vocational school, you can generally transfer the unused funds to an eligible family member.
  A 529 plan is not the only college savings vehicle available to help your grandchildren; for other possibilities, you may want to consult with your financial advisor.
  In any case, once you start taking your RMDs from your retirement accounts, think about putting any “excess” amounts to work for your grandchildren’s college education. Your generosity could provide benefits for a lifetime.

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.

Work to become a better investor

Scott-Johnson---Head  Next week, we observe Labor Day. A federal holiday since 1894, Labor Day celebrates the achievements of American workers — people, like yourself, who work hard for their money. But to make progress toward your long-term financial goals, you need to do more than just earn money — you have to invest it wisely. And that takes work, too.
  Fortunately, there’s no real mystery to the types of labor in which you’ll need to engage to become a good investor. Here are a few suggestions:
  • Work to make investing a priority. Many people delay investing until they “have a better handle” on their finances. But these good intentions frequently go unfulfilled because there will always be something else on which to spend one’s money. To work toward your important goals, such as a comfortable retirement or a child’s education, you need to put away some money regularly. If you’re just starting out in your career, you might not be able to afford much, but even a small amount can help. And when your salary increases, so can your investment contributions. To make it easier on yourself, consider arranging for your bank to automatically move money each month from your checking or savings account into an investment account.
  • Work to understand what’s in your portfolio. Some investors aren’t certain about what investments they own — and this uncertainty can lead to poor decision-making if it becomes necessary to make changes. So make sure you know what’s in your portfolio — and why.
  • Work to keep your portfolio current with your goals. Even if you know why you initially purchased certain investments and how they fit into your portfolio, you can’t put things on “autopilot.” Over time, your goals may evolve, which means you’ll need to be vigilant in working with your financial advisor to adjust your portfolio accordingly.
  • Work to diversify your holdings. No matter where you are in your life, you will still need to diversify your portfolio by owning a variety of investments — stocks, bonds, government securities and other vehicles. Consequently, you’ll need to review your portfolio regularly to ensure that it’s still properly diversified. Diversification is a strategy designed to help reduce the effects of volatility on your holdings, but keep in mind that even a diversified portfolio can’t guarantee profits or protect against loss.
  • Work to maintain a long-term perspective. No matter what you might hear from anyone else, there’s no “shortcut” to investment success. Many people hope they will “hit” on that one investment that will make them rich quickly — but that’s pretty much a fantasy. To help achieve your goals, you will need to invest for many years, through good markets and bad. And during those inevitable downturns, you’ll need to focus on your long-term objectives and follow a consistent investment strategy, making only those adjustments that make sense for your situation.
  As you can see, you’ll need to work on many aspects of investing to stay on the road toward success. But you don’t have to work alone: Investing can be complex, so you may want to get help from a financial professional — someone who knows both the investment world and your individual needs, goals and risk tolerance.

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.