Are You Getting What You Want?

I think we have all been there at one point or another and maybe even now. We wonder why we keep having bad luck or why things happen the way they happen to us. We even compare ourselves to the “luck” that others have and wonder how we can get that “luck”.

I remember I used to wonder those same things and blame it on luck. I had an external locus of control, meaning I blamed my outcomes on external things that were out of my control. I started to understand that I was in control of my own outcomes when I first started college. Something clicked in my head for some reason and I decided to push myself and realized that if I kept doing what I was doing that I would keep getting what I was getting.

I realized that even though I believed that I could control my outcomes, that people would ALWAYS be there to try and knock me down. That’s when I decided to focus on doing what needed to be done in order to get what I wanted to get. It required hard work and a lot of discipline, but I started seeing that you can accomplish anything you put my mind to if you step out of your comfort zone.

I still practice that to this day and challenge people to step out of their comfort zone so that they too can get what they want by changing what they are doing.

Beat Quota Last Month? Who Cares!

I’ve held various sales positions over my career and when I saw this meme, I couldn’t help but laugh. Sales positions can be very lucrative, depending on where the position falls in terms of the sales funnel. What I mean is that those positions that are considered “hunter” roles, pay the most because you are tasked with finding new customers.

What I find hilarious about the meme is that it is so true. Sales people push and push each month to exceed quota just to be in the same spot again the following month. Your sales manager would be the one saying last month’s sales mean nothing. What sucks is that those of us in sales understand the stressful things we deal with when closing those deals, especially when you solve the customer’s problem and the customer agrees, but takes their time to sign the deal.

In the end, we choose sales because of the thrill of closing deals and if you’re in sales, you know exactly what I’m talking about. Perfecting your pitch, trying different sales tactics, closing those impossible customers, and the loooooong hours, all those things lead to HUGE commission checks.

I’ve learned many different sales techniques and continue to learn everyday. It’s important to keep practicing your craft and learning from others and read lots of books. I’ve learned so much from sales books and more so from psychology books. The point is that even if you beat quota, never stop learning because in the end, “Last Month’s Sales Don’t Matter This Month!”

Now go out there and sell something!

Why Your Work Provided Life Insurance May Not Be Enough

Getting things for free is always a good thing for the most part. This includes one of the free benefits that most employers offer, which is life insurance.

The downside is when we go through a client’s financial situation, the question comes up about life insurance. The usual answer is “Yes, I have it with my job,” but they aren’t sure how much or what it covers, so when we review the policy, the coverage is usually one time their annual salary.

The concerning part is that most companies only offer life insurance while employed which means that coverage ends once you depart the company.

Another concerning thing is that a majority of people who sign up for life insurance through their job, never look at it again or add additional coverage.

Why is it concerning? Well think about it this way, let us say you take advantage of the perk and have $50,000 of coverage. You have a family and a mortgage that depend on you and you unexpectedly pass away, leaving your spouse the debt that you have incurred and now they have to find a way to pay the mortgage, funeral expenses, taking care of the kids, and many other things that come into play. Now ask yourself if you think $50,000 will take care of those immediate and future expenses? Absolutely not in most cases!

Now I get it, most people don’t anticipate passing away early or want to pay for something they can’t physically see, but life insurance can actually be very affordable and can be the difference between one unfortunate situation becoming multiple unfortunate situations. So don’t put your family in a situation that you wouldn’t want them in to begin with. Just check rates and be informed.

If you have any questions about the content discussed or any other topic, feel free to reach out.

Check out our website www.medinaadvising.com

Alternative Approaches to Retirement Planning

Alternative Approaches to Retirement Planning

Is the conventional wisdom for everyone? 

Provided by Jose Medina    

Questioning traditional assumptions about retirement planning can be illuminating. Some retirement planners and economists argue that they need to be reexamined.

Does most retirement planning focus on the future at the expense of the present? One noted economist makes that case. Laurence Kotlikoff, the former White House economic advisor who writes for PBS NewsHour, contends that your retirement savings effort should be structured in a way that allows you to protect your standard of living today and tomorrow.1

A key question in retirement planning is “How much will you need to spend in the future?” Kotlikoff thinks the appropriate question should be “How should you gradually adjust your household spending as you grow older?” He argues that basing your retirement planning on a projected retirement income target is faulty.1

As an illustration, he references the example of what you do when you have errands to run before you catch a flight. The wisest thing to do is to start with your departure time and think backward. (How early do you have to be at the airport? How much time will you need to complete errand A and errand B? How much time should you allow for travel between A & B and after B?) This is what we usually do, and how we figure out when to leave home with enough time to accomplish everything. You plan by looking backward from the future.1

Kotlikoff thinks that typical retirement planning only looks forward. It projects an income target and implies that you have to save $X per year or per paycheck for X years to build a sufficient nest egg to generate that income. This amounts to mere guesswork, he believes, and invites two potential problems. One, if the retirement income target is set too high, you can end up saving more for retirement than you really need and injure your standard of living before retiring. Two, if the retirement income target is set too low, you can end up spending more than you should before you retire and saving less than you need. (And there’s another question. Will your household spending in retirement match what it was years before? Maybe, maybe not.) Kotlikoff thinks that lifetime spending and saving plans have more merit – again, planning by looking backward from the future.1

Is saving overrated? It is pounded home that Americans aren’t saving enough for retirement, but some people don’t think saving is the only step to retiring well. In 2013, retirement planner Joe Hearn (one of MarketWatch’s RetireMentors) posted a column noting several other tips to entering retirement in better financial shape. One, retire without debt. Two, retire with a paycheck (start a small business or work part-time). Three, don’t claim Social Security at 62. There were other pointers, such as retiring to a cheaper part of the country (or world) and going overseas for major surgeries. (As an example, the largest cardiac hospital in the world is India’s Narayana Hrudayalaya Health Center, which is highly regarded and charges about $2,000 for open heart surgery.) If you haven’t saved much for retirement, alternative financial moves like these (and others) could conceivably leave you with lower expenses and more money to live on or invest.2

Should you borrow money & invest it for retirement? This idea definitely isn’t for everyone; it was championed in 2010 by Yale University economists Ian Ayres and Barry Nalebuff. As twenty-somethings have time on their side but not usually a lot of money, Ayres and Nalebuff contended that young people would do well to borrow money and invest it in equities. You don’t need to see a loan officer to make this happen, as there are ways to do it through brokerages; a family loan could also be made pursuant to the same goal. As the risks are potentially major for borrower and lender, you don’t see many such arrangements.3

How about asking your employer for a second retirement plan? Some people have the leverage to pull this off. In particular, doctors and executives without much in the way of savings can make a valid argument that they need (and should have) a deferred compensation plan in addition to the usual qualified retirement plan, as Social Security payments won’t seem large enough when retirement comes. It helps, of course, if they have worked for the employer for quite some time. A reasonable benefit from such a plan would = number of years that the executive or doctor has worked for the employer x 2.0%.

With many people finding it a challenge to save for their futures, it isn’t surprising that these unconventional moves are getting a look.

Jose Medina may be reached at 469-777-8082 or info@medinaadvising.com

www.medinaadvising.com

This material was prepared for J I Medina Investments, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – pbs.org/newshour/making-sense/make-your-standard-of-living-the-basis-for-all-financial-planning/ [3/31/14]

2 – marketwatch.com/story/7-alternatives-to-saving-for-retirement-2013-09-27 [9/27/13]

3 – money.usnews.com/money/retirement/articles/2010/07/06/3-unconventional-retirement-investing-strategies [7/6/10]

Bad Spending Habits That Can Be Corrected

Bad Spending Habits That Can Be Corrected

A little frugality may lead to a lot of financial progress.

Provided by Jose Medina    

Americans have a great deal of disposable income relative to many other nations, yet our free spending can take us further and further away from the potential for financial freedom. Some people fall into crippling spending habits and injure their finances as a consequence.

Bad habit: failing to save. Saving – saving even $50 or $100 a month – isn’t that hard under most financial conditions. Even so, some households don’t put much of a priority on building a cash reserve of some kind, a portion of which could be used for equity investment.

When you don’t make saving a goal, you don’t have any money to withdraw in a pinch – so if you need to get ahold of some money, where do you find it? Basically, you have three options. One, turn to friends or Mom or Dad. Two, divert money that would go toward a core need (food, rent, the heating bill) toward the sudden crisis. Three, charge your credit card. (There are other options, but they are best not explored.)

Good habit: save just a little, then a lot. You can start a savings campaign by saving “invisibly” – that is, just spending $10 or $15 or $20 less on a regular expense each month. Maybe two or three, even. That’s less than a dollar a day per expense. When your earnings climb further above your financial baseline, you can increase the amount you save/invest.

Bad habit: buying things on a whim. The correlation between impulsive spending and credit card use isn’t too hard to spot. Spending money you don’t have on material items that will soon depreciate doesn’t put you ahead financially.

Good habit: set a budget when you shop. As you arrive at the market, the mall or the local power center, arrive with a limit on what you will spend on that shopping trip and stick to it. Take an hour (or a day) to mull over any big buying decisions – are you buying something you really need? Lastly, use cash whenever you can.

Bad habit: living on margin. Living above your means, charging this and that credit card – this is a path toward runaway debt. You may look rich, but you’ll carry a big financial burden that risks being “out of sight, out of mind” in between credit card statements.

Good habit: strive for lasting affluence, not temporary bling. Possessions symbolize wealth to too many Americans. Real wealth is measured in accumulated assets. They aren’t usually visible, but you can count on them in the future, in contrast to ever-depreciating luxury goods.

Bad habit: buying unnecessary services. Cable subscriptions, extended warranties, service contracts for highly reliable items, health club memberships that translate into little more than an alternate place to shower – they all add up, they all siphon some of our dollars away each month. In many cases, we pay for options rather than necessities.

Good habit: evaluate who benefits most from those services. Are they benefiting the provider more than the consumer? Are they entrees to a “main course” – a steady, long-range financial exploitation?

Go against the norm – it might leave you a little wealthier. In April, Gallup found that 62% of Americans liked saving money more than spending it. Just 34% liked spending more than saving. This appreciation of frugality is relatively new. As recently as 2006, 50% of Americans told Gallup that they enjoyed saving more than spending with 45% preferring spending.1

If we love saving money, a key statistic doesn’t reflect it. According to the Commerce Department, the typical U.S. household was saving 4.8% of its disposable personal income in May. The personal savings rate for 2013 was 4.5%, the least in any year since 2007. Compare that to 6.7% across the 1990s, 9.3% across the 1980s and 11.8% during the 1970s.1,2

Perhaps many of us want to save but can’t due to financial pressures. Perhaps the economic rebound is encouraging personal consumption over saving. Whatever the reason, Americans on the whole don’t seem to be saving very much. That’s the status quo; going against it might help you build wealth a little more easily.

Jose Medina may be reached at 469-777-8082 or info@medinaadvising.com

www.medinaadvising.com

This material was prepared for J I Medina Investments, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – gallup.com/poll/168587/americans-continue-enjoy-saving-spending.aspx [4/21/14]

2 – bea.gov/newsreleases/national/pi/pinewsrelease.htm [6/26/14]

Watch for These Insurance Blind Spots

Watch for These Insurance Blind Spots

There are incidents that standard policies may not cover.  

Provided by Jose Medina  

No insurance policy will protect you from everything. Even the most comprehensive umbrella liability policy has its shortcomings. A good auto, homeowner, or renter policy will insure you against what the carrier believes to be common threats. There are other risks, however, that you might need to address.

Earthquakes. A typical homeowners policy offers no earthquake protection, and that presents a serious coverage gap in certain states. Just 10% of California households have earthquake insurance, for example. (On the bright side, a record number of Californians bought these policies in 2017.)1

Floods. In some regions, houses may be more at risk for flood damage than their owners believe. Last year, tens of thousands of Southeast Texas homeowners discovered just how vulnerable they were in the wake of Hurricane Harvey – neighborhoods well inland were inundated. Just 12% of U.S. homeowners have flood insurance coverage, which the average homeowners policy does not provide.2 

Sewage backups. The main sewer system in your city is the city’s responsibility – but the pipes that reach from the main sewer system in the street onto your property are your responsibility. If something goes wrong with those pipes, your homeowners policy probably will not cover any property damage. The good news is, you can get sewer backup insurance. It costs about $75-150 per year for $5,000-$10,000 worth of coverage.3 

Home business damage or mishaps. Are you a solopreneur with a home-based business venture? Are you a lawyer or therapist who hosts clients in a home office? You should realize that regular homeowners insurance usually won’t cover business-related liability and neither will the normal umbrella liability policy. At the very least, you need commercial liability insurance, which addresses risks your business venture may face inside and outside of your residence. It can cover property damage (to your home or another home you or your employees visit on business) and bodily injury claims. Commercial property insurance can cover business equipment you have at your house. A standard business owner’s policy includes both commercial property and commercial liability coverage. The yearly premium for a business owner’s policy is usually less than $500.4

An accident or theft involving a vehicle you lease. If a car you are leasing is stolen or totaled, there is a good chance that your auto insurance provider will not reimburse you for the full amount of your lease agreement. (This could also be the case for a vehicle you have bought with financing.) How can you mitigate this risk? You can purchase gap insurance from the auto insurance company you have a relationship with, the dealership, or a lender. This coverage fills in the gap in value between the full lease or loan amount and how much the vehicle was worth at the time of the incident.5

Disabilities. If you ever become disabled to the point where you cannot work, your income will disappear. You may end up spending your whole emergency fund and selling assets to make ends meet. Disability insurance focuses on this risk – and a significant one it is, as more than 25% of us will suffer either a long-term or short-term disability before retirement age, according to the Social Security Administration. Yes, some employers offer workers in high-risk occupations disability insurance coverage – but when paid out, those benefits may prove less than adequate.6

Has this article made you think about certain things? Perhaps it has. Fundamental insurance coverage is often far ranging, but the above risks to your business, your home, your cars, and your income may need to be addressed with supplemental coverage. Ask an insurance professional about it, today.

Jose Medina may be reached at 469-777-8082 or info@medinaadvising.com

www.medinaadvising.com

This material was prepared for J I Medina Investments, and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – nytimes.com/2018/02/09/us/california-today-earthquake-insurance-sales.html [2/9/18]

2 – washingtonpost.com/news/wonk/wp/2017/08/29/where-harvey-is-hitting-hardest-four-out-of-five-homeowners-lack-flood-insurance/ [8/29/17]

3 – finance.zacks.com/sewer-backup-insurance-9503.html [6/7/18]

4 – seattletimes.com/explore/careers/if-you-work-at-home-and-dont-have-this-insurance-you-could-be-at-risk/ [3/2/18]

5 – cnbc.com/2017/08/17/how-to-decide-if-you-need-gap-insurance.html [8/17/18]

6 – ssa.gov/disabilityfacts/facts.html [6/7/18]

Gauging Your Financial Well-Being

Gauging Your Financial Well-Being

Six signs that you are in good shape. 

Provided by Jose Medina 

How well off do you think you are financially? If your career or life takes an unexpected turn, would your finances hold up? What do you think will become of the money you’ve made and saved when you are gone?

These are major questions, and most people can’t answer them as quickly as they would like. It might help to think about six factors in your financial life. Here is a six-point test you can take to gauge your financial well-being.

Are you saving about 15% of your salary for retirement? That’s a nice target. If you’re earning good money, that will probably amount to $10-20,000 per year. You are probably already saving that much annually without any strain to your lifestyle. Annual IRA contributions and incremental salary deferrals into a workplace retirement plan will likely put you in that ballpark. As those dollars are being invested as well as saved, they have the potential to grow with tax deferral – and if your employer is making matching contributions to your retirement account along the way, you have another reason to smile.

Do you have an emergency fund? Sadly, most Americans don’t. In June, Bankrate polled U.S. households and found that 26% of them were living paycheck-to-paycheck, with no emergency fund at all.1

A strong emergency fund contains enough money to cover six months of expenses for the individual who maintains it. (Just 23% of respondents in the Bankrate survey reported having a fund that sizable.) If you head up a family, the fund should ideally be larger – large enough to address a year of expenses. At first thought, building a cash reserve that big may seem daunting, or even impossible – but households have done it, especially households that have jettisoned or whittled down debt. If you have done it, give yourself a hand with the knowledge that you have prepared well for uncertainty.1

Are you insured? As U.S. News & World Report mentioned this summer, about 30% of U.S. households don’t have life insurance. Why? They can’t afford it. That’s the perception.2

In reality, life insurance is much less expensive now than it was decades ago. As the CEO of insurance industry group LIMRA commented to USN&WR, most people think it is about three times as expensive as it really is. How much do you need? A quick rule of thumb is ten times your income. Hopefully, you have decent or better insurance coverage in place.2

Do you have a will or an estate plan? Dying intestate (without a will) can leave your heirs with financial headaches at an already depressing time. Having a will is basic, yet many Americans don’t create one. In its annual survey this spring, the budget legal service website RocketLawyer found that only 51% of Americans aged 55-64 have drawn up a will. Just 38% of Americans aged 45-54 have drafted one.3

Why don’t more of us have wills? A lack of will, apparently. RocketLawyer asked respondents without wills to check off why they hadn’t created one, and the top reason (57%) was “just haven’t gotten around to making one.” A living will, a healthcare power of attorney and a double-check on the beneficiary designations on your investment accounts is also wise.3

Not everyone needs an estate plan, but if you’re reading this article, chances are you might. If you have significant wealth, a complex financial life, or some long-range financial directives you would like your heirs to carry out or abide by, it is a good idea. Congratulate yourself if you have a will, as many people don’t; if you have taken further estate planning steps, bravo.

Is your credit score 700 or better? Today, 685 is considered an average FICO score. If you go below 650, life can get more expensive for you. Hopefully you pay your bills consistently and unfailingly and your score is in the 700s. You can request your FICO score while signing up for a trial period with a service such as TransUnion or GoFreeCredit.4

Are you worth much more than you owe? This is the #1 objective. You want your major debts gone, and you want enough money for a lifetime. You will probably always carry some debt, and you can’t rule out risks to your net worth tomorrow – but if you are getting further and further ahead financially and your bottom line shows it, you are making progress in your pursuit of financial independence.

Jose Medina may be reached at 469-777-8082 or info@medinaadvising.com

www.medinaadvising.com

This material was prepared for J I Medina Investments and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.    

Citations.

1 – dailyfinance.com/2014/09/03/why-american-wages-arent-rising/ [9/3/14]

2 – money.usnews.com/money/personal-finance/articles/2014/07/16/do-you-have-enough-life-insurance [7/16/14]

3 – forbes.com/sites/nextavenue/2014/04/09/americans-ostrich-approach-to-estate-planning/ [4/9/14]

4 – nerdwallet.com/blog/credit-score/credit-score-range-bad-to-excellent/ [9/4/14]

Tax Scams & Schemes

Tax Scams & Schemes

The “dirty dozen” that criminals & cheats try to get away with year-round.  

Provided by Jose Medina

Year after year, criminals try to scam certain taxpayers. Year after year, certain taxpayers resort to schemes in an effort to put one over on the IRS. These cons occur year-round, not just during tax season. In response to their frequency, the IRS has listed the 12 biggest offenses – scams that you should recognize, schemes that warrant penalties and/or punishment.

Identity theft. Theft of federal tax refunds climbed 400% from 2011 to 2013. Cyberspace isn’t always the scene of the crime: thieves can steal your mail or rifle through your trash. If you are a victim, the IRS isn’t even obligated to tell you if the crook has been caught.1 

Phishing. If you get an unsolicited email claiming to be from the IRS or the Electronic Federal Tax Payment System (EFTPS), it is a scam. Neither agency emails taxpayers out of the blue seeking information. If such an email lands in your inbox, forward it to phishing@irs.gov.2

Phone shakedowns. Each year, criminals call up taxpayers and allege that they owe the IRS money, which must be paid quickly via wire transfer or a pre-loaded debit card. Visual and aural tricks can lend authenticity to the ruse: the caller ID may show a toll-free number and background noise may suggest a call center. The caller may know the last four digits of your Social Security Number, or mention a phony IRS employee badge number. After the initial call, there may be a follow-up call or email from “the DMV” or “the police”. Such behavior can be reported to the Treasury Inspector General for Tax Administration at (800) 366-4484.2

Sham tax preparation services. While there are many good, legitimate small businesses providing tax preparation, there are also some con artists out there who aim to rip off SSNs and personal information and grab phantom refunds. Worth noting, as always: you are legally responsible for what’s on your 1040 form, even if a third party prepares it.2

Tax preparers exaggerating/swiping refunds. In this scenario, the scammers do prepare and file 1040s, but they charge big fees up front, claim refunds that are way out of line, and deposit some or all of the undeserved refund in a bank account. They also avoid giving the taxpayer a copy of the filed return.2

Bogus charities. An old wisecrack says that you can make a lot of money running a non-profit organization. Some taxpayers try to, claiming that they are gathering funds for hurricane victims, an overseas relief effort, an outreach ministry, and so on. You can always ask them for visual proof of their charity’s tax-exempt status, and if you are near a computer or smartphone, you can visit irs.gov and use their Exempt Organizations Select Check search box. A specious charity may ask you for cash donations and/or your SSN and banking information.2 

Phony income, expenses & exemptions. Some taxpayers exaggerate or falsify incomes in pursuit of the Earned Income Tax Credit, the fuel tax credit and other big federal tax perks. A fraudulent claim for the fuel tax credit can backfire into a penalty of as much of $5,000. Once caught, taxpayers may be on the hook for repaying the credit and refund amounts with interest and penalties, and may face criminal prosecution.2

Lying on Forms 4852 or 1099. Some individuals send the IRS “corrected” 1099s or 4852s that are lies, claiming they earned nothing last year despite what their employers reported.2 

Concealed offshore income. Not all taxpayers adequately report offshore income, and if you don’t, you are a lawbreaker to the IRS. You could be prosecuted, or at least contend with fines and penalties. The IRS restarted its Offshore Voluntary Disclosure Program (OVDP) in 2012 to give taxpayers who were negligent or guilty a chance to come clean.2

Deceits using LLCs, LLPs & offshore credit/debit cards. While the entities and credit/debit cards may be legitimate, some taxpayers use them in multi-layered, flow-through schemes to hide taxable income or true ownership of assets.2

Incredible trusts. Properly structured trusts can help taxpayers defer or reduce taxes, and in some cases legally avoid them. Specious trusts – created with or without the “help” of unprincipled tax and estate consultants – can result in an IRS crackdown.2

Frivolous arguments. There are seminar speakers and books claiming that federal taxes are illegal and unconstitutional, and that Americans only have an implied obligation to pay them. These and other arguments crop up occasionally when people owe back taxes, and at present they carry little weight in the courts and before the IRS. Section 1 of the Internal Revenue Code imposes income tax on all Americans, specifically 26 U.S.C. § 1 and 26 U.S.C. § 1(a). IRC Section 6072 establishes April 15 as the annual federal tax deadline.2,3

Watch out for these ploys – and watch so you don’t run afoul of tax law.          

Jose Medina may be reached at 469-777-8082 or info@medinaadvising.com

www.medinaadvising.com

This material was prepared for J I Medina Investments and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – money.cnn.com/2014/04/16/pf/taxes/refund-identity-theft/ [4/16/14]

2 – irs.gov/uac/Newsroom/IRS-Releases-the-%E2%80%9CDirty-Dozen%E2%80%9D-Tax-Scams-for-2014;-Identity-Theft,-Phone-Scams-Lead-List [2/21/14]

3 – docs.law.gwu.edu/facweb/jsiegel/Personal/taxes/JustNoLaw.htm [4/17/14]

The Retirement We Imagine, the Retirement We Live

The Retirement We Imagine, the Retirement We Live

Examining the potential differences between assumption & reality. 

Provided by Jose Medina

Financially, how might retirement differ from your expectations? To some degree, it will. Just as few weathercasters can accurately predict a month’s worth of temperatures and storms, few retirees find their financial futures playing out as precisely as they assumed.

As you approach or enter retirement, you may find that your spending and your exit from your career don’t quite match your expectations. You may be surprised by these developments, even pleasantly surprised by some of them.

Few retirees actually outlive their money. If this was truly a crisis, we would see federal and state governments and social services agencies addressing it relentlessly. The vast majority of retirees are wise about their savings and income: they don’t spend recklessly, and if they need to live on less at a certain point, they live on less. It isn’t an ideal choice, but it is a prudent one. Health crises can and do impoverish retirees and leave them dependent on Medicaid, but that tends to occur toward the very end of retirement rather than the start.

You may not need to retire on 70-80% of your end salary. This is a common guideline for new retirees, but according to some analysts, you may not need to withdraw that much for long.

In the initial phase of retirement, you will probably want to travel, explore new pursuits and hobbies and get around to some things you may have put on the back burner. So in the first few years away from work, you might spend roughly as much as you did before you retired. After that, you could spend less.

Bureau of Labor Statistics data is very revealing about this. JP Morgan Asset Management recently studied U.S. household spending and found that it peaks at age 48. The average U.S. household headed by people aged 65-74 spends only 63% as much as a household headed by people aged 55-64. Additionally, the average household headed by people 75 and older spends only 72% as much as the average household headed by people aged 65-74.1

In the big picture, households run by those 75 and older typically spend about half as much per year as households headed by people in their late forties.1 

Further interesting analysis of BLS statistics and retirement spending patterns comes from David Blanchett, the head of retirement research at Morningstar Investment Management. He sees a correlation between career earnings and retirement spending, one contrary to many presumptions. Comparatively speaking, he notes that higher-earning retirees commonly have to replace less of their income once their careers conclude. As he commented to Money Magazine, “the household that makes $40,000 a year might have an 85% replacement rate, and the household making $100,000 a year might need 60%.”2

Why, exactly? The upper-income household is watching its costs fall away in retirement. The home loan, the private school tuition, dining out due to convenience, the professional wardrobe, the car payment, the workplace retirement plan contribution – this is where the money goes. When these costs are reduced or absent, you spend less to live. Blanchett believes that the whole 70-80% guideline may “overestimate the true cost of retirement for many people by as much as 20%.”2

Your annual withdrawal rate could vary notably. Anything from healthcare expenses to a dream vacation to a new entrepreneurial venture could affect it. So could the performance of the stock or bond market.

You could retire before you anticipate. You may want to work well into your sixties or beyond – and the longer you wait to claim Social Security benefits after age 62, the greater your monthly payout. Reality, on the other hand, shows that most people don’t retire at age 66, 67 or 70: according to Gallup, the average retirement age in this country is 61. The aforementioned JP Morgan Asset Management study determined that less than 2% of Americans wait until age 70 to claim Social Security benefits. So if your assumption is that you will work to full retirement age (or later), you should keep in mind that you may find yourself electing to claim Social Security earlier, if only to avert drawing down your retirement savings too quickly.1 

You don’t have to be a millionaire to have a happy retirement. In a 2011 Consumer Reports poll of U.S. retirees, 68% of respondents were “highly satisfied” with their lives irrespective of their financial standing. Backing that up, JP Morgan Asset Management found that retiree satisfaction increased only incrementally the more retirement spending surpassed $40,000 a year.1 

The retirement you live may be slightly different than the retirement you have imagined. Fortunately, retirement planning and retirement income strategies may be revised in response.

Jose Medina may be reached at 469-777-8082 or info@medinaadvising.com

www.medinaadvising.com

This material was prepared for J I Medina Investments  and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – reuters.com/article/2014/03/12/us-column-stern-advice-idUSBREA2B1R020140312 [3/12/14]

2 – money.cnn.com/2014/02/26/retirement/retirement-spending.moneymag/index.html [2/26/14]

Retirement Seen Through Your Eyes

Retirement Seen Through Your Eyes

After you leave work, what will your life look like?

Provided by Jose Medina 

How do you picture your future? If you are like many baby boomers, your view of retirement is likely pragmatic compared to that of your parents. That doesn’t mean you have to have a “plain vanilla” tomorrow. Even if your retirement savings are not as great as you would prefer, you still have great potential to design the life you want.

With that in mind, here are some things to think about.  

What do you absolutely need to accomplish? If you could only get four or five things done in retirement, what would they be? Answering this question might lead you to compile a “short list” of life goals, and while they may have nothing to do with money, the financial decisions you make may be integral to achieving them. (This may be the most exciting aspect of retirement planning.)

What would revitalize you? Some people retire with no particular goals at all, and others retire burnt out. After weeks or months of respite, ambition inevitably returns. They start to think about what pursuits or adventures they could embark on to make these years special. Others have known for decades what dreams they will follow … and yet, when the time to follow them arrives, those dreams may unfold differently than anticipated and may even be supplanted by new ones.

In retirement, time is really your most valuable asset. With more free time and opportunity for reflection, you might find your old dreams giving way to new ones. You may find yourself called to volunteer as never before, or motivated to work again but in a new context.

Who should you share your time with? Here is another profound choice you get to make in retirement. The quick answer to this question for many retirees would be “family”. Today, we have nuclear families, blended families, extended families; some people think of their friends or their employees as family. You may define it as you wish and allocate more or less of your time to your family as you wish (some people do want less family time when they retire).

Regardless of how you define “family” or whether or not you want more “family time” in retirement, you probably don’t want to spend your time around “dream stealers”. They do exist. If you have a grand dream in mind for retirement, you may meet people who try to thwart it and urge you not to pursue it. (Hopefully, they are not in close proximity to you.) Reducing their psychological impact on your retirement may increase your happiness.

How much will you spend? We can’t control all retirement expenses, but we can control some of them. The thought of downsizing may have crossed your mind. While only about 10% of people older than 60 sell homes and move following retirement, it can potentially bring you a substantial lump sum or lead to smaller mortgage payments. You could also lose one or more cars (and the insurance that goes with them) and live in a neighborhood with extensive, efficient public transit. Ditching land lines and premium cable TV (or maybe all cable TV) can bring more savings. Garage sales and donations can have financial benefits as well as helping you get rid of clutter, with either cash or a federal tax deduction that may be as great as 30-50% of your adjusted gross income provided you carefully itemize and donate the goods to a 501(c)(3) non-profit.1

Could you leave a legacy? Many of us would like to give our kids or grandkids a good start in life, or help charities or schools – but given the economic realities of retiring today, there is no shame in putting your priorities first.

Consider a baby boomer couple with, for example, $285,000 in retirement savings. If that couple follows the 4% rule, the old maxim that you should withdraw about 4% of your retirement savings per year, subsequently adjusted for inflation – then you are talking about $11,400 withdrawn to start. When you combine that $11,400 with Social Security and assorted investment income, that couple isn’t exactly rich. Sustaining and enhancing income becomes the priority, and legacy planning may have to take a backseat. In Merrill Lynch’s 2012 Affluent Insights Survey, just 26% of households polled (all with investable assets of $250,000 or more) felt assured that they could leave their children an inheritance; not too surprising given what the economy and the stock market have been through these past several years.2

How are you planning for retirement? This is the most important question of all. If you feel you need to prepare more for the future or reexamine your existing plan in light of changes in your life, then confer with a financial professional experienced in retirement planning.

Jose Medina may be reached at 469-777-8082 or info@medinaadvising.com

www.medinaadvising.com

This material was prepared for J I Medina Investments and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – http://www.bankrate.com/finance/financial-literacy/ways-to-downsize-during-retirement.aspx [2/28/13]

2 – wealthmanagement.ml.com/Publish/Content/application/pdf/GWMOL/Report_ML-Affluent-Insights-Survey_0912.pdf [9/12]