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Take advantage of open enrollment season

Scott-Johnson---Head  At many places of work, it’s open enrollment season — the time where you get to make changes to the various benefits you receive from your employer. As you review your overall benefits package, what areas should you focus on?
  Here are three possibilities:
  • Life insurance — If your employer offers life insurance as a benefit, and you haven’t already signed up for it, consider adding it during your open enrollment period — because life insurance can be important to your family’s financial security. If you already have life insurance with your employer, you may want to take the time, during open enrollment, to review your beneficiary designations. If you’ve experienced a change in your family situation, such as divorce or remarriage, you’ll want to update your beneficiaries, as needed.
  However, the amount of life insurance offered by your employer in a group policy may not be sufficient for your needs, so you may want to consult with a financial professional to determine if you should add private, or individual, coverage. You may find that individual coverage is comparable, in terms of cost, to your employer’s coverage. Also, individual coverage is “portable” — that is, you can take it with you if you change jobs.
  • Disability insurance — Your employer may also offer disability insurance as a low-cost benefit. The coverage can be invaluable. In fact, nearly one in three women, and about one in four men, can expect to suffer a disability that keeps them out of work for 90 days or longer at some point during their working years, according to the Life and Health Insurance Foundation for Education (LIFE). Again, as was the case with life insurance, your employer’s disability policy may not be enough for your needs, so you may need to consider additional coverage.
  • Retirement plan — Your employer may offer a 401(k) or similar retirement plan, such as a 403(b) plan, if you work for an educational institution or a nonprofit organization, or a 457(b) plan, if you work for a governmental unit. All these plans offer the chance to contribute pretax dollars; so the more you put in, the lower your taxable income. Equally important, your earnings can grow tax deferred, which means your money can accumulate faster than if it were placed in an account on which you paid taxes every year.

  Consequently, try to contribute as much as you can possibly afford to your 401(k) or other employer-sponsored plan. If you’ve gotten a raise recently, consider boosting your contributions during open enrollment. Also, take this opportunity to review the array of investments you’ve chosen for your 401(k) or other plan. If you feel that they’re underperforming and not providing you with the growth opportunities you need, you may want to consider making some changes. You might also think about making adjustments if your portfolio has shown more volatility than the level with which you are comfortable. Your financial professional can help you determine if your investment mix is still suitable for your goals, risk tolerance and time horizon.

  Open enrollment season gives you the perfect opportunity to maximize those benefits offered to you by your employer. So, think carefully about what you’ve got and what improvements you can make — it will be time well spent.

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.

Lessons from save for retirement week

   Scott-Johnson---HeadCongress has designated the third week in October as National Save for Retirement Week — which means it’s a good time to think about your own retirement savings strategies.
  Ensuring that you have enough money to support your chosen retirement lifestyle is certainly important. Unfortunately, many of your fellow Americans have apparently not done enough in the way of building retirement savings to ease their minds. Consider these figures, taken from the Employee Benefit Research Institute’s 2013 Retirement Confidence Survey:
  • 49% of those surveyed said they are not confident about being able to afford a comfortable retirement.
  • Just 46% of survey respondents say they and/or their spouse have even tried to calculate how much money they will need to live comfortably in retirement.
  What steps can you take to gain confidence in your ability to retire in the manner you have envisioned? Here are a few suggestions:

  • Envision your retirement lifestyle. At what age do you want to retire? When you retire, do you plan to travel or stay close to home and pursue your hobbies? Will you do some part-time work or consulting? It’s important to identify your retirement goals and then, as best as possible, estimate how much they will cost. Once you know what your retirement goals look like, you’ll be able to shape a strategy for achieving them.

  • Contribute as much as you can afford to your retirement accounts. No matter what your retirement goals may be, you’ll help yourself by contributing as much as you can possibly afford to your IRA and your 401(k) or other employer-sponsored retirement plan. (At a minimum, put enough into your 401(k) to earn your employer’s matching contribution, if one is offered.) And if you reach the point where you can “max out” on these plans, look for other tax-advantaged investments to which you can contribute.
  • Invest for growth. To help you reach your goals, you’ll want to include a reasonable percentage of growth-oriented vehicles in your retirement accounts. The exact percentage will depend on your risk tolerance and your specific objectives, but it’s important to have that growth potential. Keep in mind, though, that investing in growth-oriented vehicles involves market risk and possible loss of principal.
  • Review your progress. At least once a year, review your portfolio to determine if its performance is still on track to help you make the progress you need to reach your goals.

  • Make changes as needed. If your investments are simply underperforming, you may need to make some changes. And in the years immediately preceding your retirement, you may also need to adjust your holdings, possibly by moving some dollars from growth-oriented investments to income-producing ones. However, even at this stage of your life, you may still need your portfolio to provide you with some growth potential — you could be retired for two or three decades, so you’ll want your money to last and to stay ahead of inflation.
  National Save for Retirement Week comes just once a year. Take its message to heart.

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.

It’s harvest time for your investments

Scott-Johnson---Head  It’s harvest time again. Of course, harvest season may not mean that much to you if you don’t work in agriculture. Nonetheless, you can learn a lot from those who do — especially in your role as an investor.
  Here are a few of these lessons to consider:

  • “Feed” your portfolio. Through the proper combination of fertilizers and irrigation, farmers seek to maximize the growth of their crops. And if you want to give your portfolio the opportunity to grow, you need to “feed” it with the right mix of investments. This generally means you’ll need to own a reasonable percentage of growth-oriented vehicles, such as stocks and stock-based securities. Keep in mind, though, that the value of these types of investments will fluctuate, sometimes sharply — and there’s no guarantee you won’t lose some or all of your principal.
  • Be patient. Crops don’t grow overnight. Farmers know that they will put in countless hours of work before they see the fruits of their labors. And they know that, along the way, they will likely experience setbacks caused by a variety of issues: too much rain, too little rain, insect infestations — the list goes on and on. When you invest, you shouldn’t expect to “get rich quick” — and you can expect to experience obstacles in the form of bear markets, economic downturns, changes in legislation and so forth. Continuing to invest for the long term and focusing more on long-term results than short-term success can help you as you work toward your objectives.
  • Respond to your investment “climate.” Farmers can’t control the weather, but they can respond to it. So, for example, when it’s been dry for a long time, they can boost their irrigation. As an investor, you can’t control the economic “climate,” but you can make adjustments. To illustrate: If all signs point to rising long-term interest rates, which typically have a negative effect on long-term bond prices, you may need to consider reducing your exposure, at least for a while, to these bonds.
  • Diversify. Farmers face a variety of risks, including bad weather and fluctuating prices. They can help combat both threats through diversification. For instance, they can plant some crops that are more drought-resistant than others, so they won’t face complete ruin when the rains don’t fall. As an investor, you should also diversify; if you only owned one type of financial asset, and that asset class took a big hit, you could sustain large losses. But spreading your dollars among an array of investments — such as stocks, bonds, cash and other vehicles — may help reduce the effects of volatility on your portfolio. (Be aware, though, that diversification by itself can’t guarantee a profit or protect against loss.)
  Relatively few of us toil in the fields to make our living. But by understanding the challenges of those who farm the land, we can learn some techniques that may help us to nurture our investments.

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.

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.