Set Goals as You Save & Invest

Set Goals as You Save & Invest

Turn your intent into a commitment. 

Provided by Jose Medina 

Goals give you focus. To find and establish your investing and saving goals, first ask yourself what you want to accomplish. Do you want to build an emergency fund? Build college savings for your child? Have a large retirement fund by age 60? Once you have a defined motivation, a monetary goal can arise.

It can be easier to dedicate yourself to a goal rather than a hope or a wish. That level of dedication is important, as saving and investing usually comes with a degree of personal sacrifice. When you dedicate yourself to a saving/investing goal, some positive financial “side effects” may occur.   

A goal encourages you to save consistently. If you are saving and investing to reach a specific dollar figure, you likely also have a date for reaching it in mind. Pair a date with a saving or investing goal, and you have a time horizon, a self-imposed deadline, and you can start to see how you need to save or invest to try and achieve your goal, and what kind of savings or investments to put to work on your behalf.

You see the goal within a larger financial context. This big-picture perspective may help you from making frivolous purchases you might later regret or taking on a big debt that might impede your progress toward reaching your target.

You see clear steps toward your goal. Saving $1 million over a lifetime might seem daunting to the average person who has never looked at how it might be done incrementally. Once the math is in place, it might not seem so inconceivable. The intimidation of trying to reach that large number gives way to confidence – the feeling that you could realize that objective by contributing a set amount per month over a period of years.

Those discrete steps can make the goal seem less abstract. As you save and invest, you may make good progress toward the goal and attain milestones along the way. These milestones are affirmations, reinforcing that you are on a positive path and that you are paying yourself first.

Additionally, the earlier you define a goal, the more time you have to try and attain it. Time is certainly your friend here. Say you want to invest and build up a retirement fund of $500,000 in 30 years. If you save $500 a month for three decades through a retirement account returning 7% annually, you will have $591,839 when that 30-year period ends. If you give yourself just 20 years to try and save $500,000 with the same time frame and rate of return, you may need to make monthly contributions of about $975. (To be precise, the math says that over two decades, monthly contributions of about $975 will leave you with $501,419.)1

When you save and invest with goals in mind, you make a commitment. From that commitment, a plan or strategy emerges. In contrast, others will save a little here, invest a little there, and hope for the best – but as the saying goes, hope is not a strategy.

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 – bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx [4/26/18]

Comprehensive Financial Planning: What It Is, Why It Matters

Comprehensive Financial Planning: What It Is, Why It Matters

Your approach to building wealth should be built around your goals & values. 

Provided by Jose Medina

Just what is comprehensive financial planning? As you invest and save for retirement, you may hear or read about it – but what does that phrase really mean? Just what does comprehensive financial planning entail, and why do knowledgeable investors request this kind of approach?

While the phrase may seem ambiguous to some, it can be simply defined.

Comprehensive financial planning is about building wealth through a process, not a product.

Financial products are everywhere, and simply putting money into an investment is not a gateway to getting rich, nor a solution to your financial issues.

Comprehensive financial planning is holistic. It is about more than “money.” A comprehensive financial plan is not only built around your goals, but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?

Comprehensive financial planning considers the entirety of your financial life. Your assets, your liabilities, your taxes, your income, your business – these aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation.

Comprehensive financial planning is long range. It presents a strategy for the accumulation, maintenance, and eventual distribution of your wealth, in a written plan to be implemented and fine-tuned over time.

What makes this kind of planning so necessary? If you aim to build and preserve wealth, you must play “defense” as well as “offense.” Too many people see building wealth only in terms of investing – you invest, you “make money,” and that is how you become rich.

That is only a small part of the story. The rich carefully plan to minimize their taxes and debts as well as adjust their wealth accumulation and wealth preservation tactics in accordance with their personal risk tolerance and changing market climates.  

Basing decisions on a plan prevents destructive behaviors when markets turn unstable. Quick decision-making may lead investors to buy high and sell low – and overall, investors lose ground by buying and selling too actively. Openfolio, a website which lets tens of thousands of investors compare the performance of their portfolios against portfolios of other investors, found that its average investor earned 5% in 2016. In contrast, the total return of the S&P 500 was nearly 12%. Why the difference? As CNBC noted, most of it could be chalked up to poor market timing and faulty stock picking. A comprehensive financial plan – and its long-range vision – helps to discourage this sort of behavior. At the same time, the plan – and the financial professional(s) who helped create it – can encourage the investor to stay the course.1  

A comprehensive financial plan is a collaboration & results in an ongoing relationship. Since the plan is goal-based and values-rooted, both the investor and the financial professional involved have spent considerable time on its articulation. There are shared responsibilities between them. Trust strengthens as they live up to and follow through on those responsibilities. That continuing engagement promotes commitment and a view of success.

Think of a comprehensive financial plan as your compass. Accordingly, the financial professional who works with you to craft and refine the plan can serve as your navigator on the journey toward your goals.

The plan provides not only direction, but also an integrated strategy to try and better your overall financial life over time. As the years go by, this approach may do more than “make money” for you – it may help you to build and retain lifelong wealth.    

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

Click Subscribe to receive our newsletter that includes financial tips and tools from top financial gurus. Subscribe.

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 – cnbc.com/2017/01/04/most-investors-didnt-come-close-to-beating-the-sp-500.html [1/4/17]

Smart Financial Steps After College

Smart Financial Steps After College

A to-do list for the twentysomething. 

Provided by Jose Medina 

Did you recently graduate from college? The years after graduation are crucial not only for getting a career underway, but also for planning financial progress. Consider making these money moves before you reach thirty.

Direct a bit of your pay into an emergency fund. Just a little cash per paycheck. Gradually build a cash savings account that can come in handy in a pinch.

Speaking of emergencies, remember health insurance. Without health coverage, an accident, injury, or illness represents a financial problem as well as a physical one. Insurance is your way of managing that financial risk. A grace period does come into play here. If your employer does not sponsor a health plan, remember that you can stay on the health insurance policy of your parents until age 26. (In some states, insurers will let you do that until age 29 or 31.) If you are in good health, a bronze or silver plan may be a good option.1,2Set a schedule for paying off your college debt. Work toward a deadline: tell yourself you want to be rid of that debt in ten years, seven years, or whatever seems reasonable. Devote some money to paying down that debt every month, and when you get a raise or promotion, devote a bit more. Alternately, if you have a federal college loan balance that seems too much to handle, see if you qualify for an income-driven or graduated repayment plan. Either option may make your monthly payment more manageable.3Watch credit card balances. Use credit when you must, not on impulse. A credit card purchase can make you feel as if you are buying something for free, but you are actually paying through the teeth for the convenience of buying what you want with plastic. As Bankrate.com notes, the average credit card now carries a 16.8% interest rate.4Invest. Even a small retirement plan or IRA contribution has the potential to snowball into something larger thanks to compound interest. At an 8% annual return, even a one-time, $200 investment will grow to $2,013 in 30 years. Direct $250 per month into an account yielding 8% annually for 30 years, and you have $342,365 three decades from now. That alone will not be enough to retire on, but the point is that you must start early and seek to build wealth through one or more tax-advantaged retirement savings accounts.5Ask for what you are worth. Negotiation may not feel like a smart move when you have just started your first job, but two years in or so, the time may be right. It can literally pay off. Jobvite, a maker of recruiting software, commissioned a survey on this topic last year and learned that only 29% of employees had engaged in salary negotiations at their current or most recent job. Of those who did, 84% were successful and walked away with greater pay.6Of course, you also have the power to negotiate your pay when you change jobs. That ability is not always acknowledged. Robert Half, the staffing firm, recently hired independent researchers to poll 2,700 U.S. workers employed in professional environments. The pollsters found that just 39% of these workers attempted to negotiate a better salary upon their most recent job offer. The percentage was higher for men (46%) than for women (34%).7Financially speaking, your twenties represent a very important time. Too many people look back over their lives at fifty or sixty and wish they had been able to save and invest earlier. These are the same people who may face an uncertain retirement. Rather than be one of them years from now, do things today that may position you for a better financial future.

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

Click Subscribe to receive our newsletter that includes financial tips and tools from top financial gurus. Subscribe.

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 – tinyurl.com/y7nne8bd [11/7/17]

2 – money.cnn.com/2017/10/20/pf/health-insurance-first-time/index.html [10/21/17]

3 – fool.com/investing/2018/03/22/your-2018-guide-to-federal-student-loan-repayment.aspx [3/22/18]

4 – bankrate.com/finance/credit-cards/current-interest-rates.aspx [4/5/18]

5 – investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator [4/5/18]

6 – cnbc.com/2017/05/25/most-employees-dont-negotiate-their-salary.html [5/25/17]

7 – smallbiztrends.com/2018/02/salary-negotiation-statistics.html [2/8/18]

Retirement Plans for Individuals & Businesses

Retirement Plans for Individuals & Businesses

A look at some of the choices.

Provided by Jose Medina

Households are saving too little for the future. According to one new analysis, 41% of Gen Xers and 42% of baby boomers have yet to begin saving for retirement. In a recent financial industry survey, 35% of small business owners said they were planning to use the sale proceeds from their company for a retirement fund, an idea which comes with a flashing question mark.1,2

Do you need to build retirement savings? Take a look at these retirement plans:

SEP-IRA: low fees, easy to implement and maintain. These plans cover sole proprietors and their workers with no setup fees or yearly administration charges. Your business makes all the contributions with tax-deductible dollars. The amount of the contribution your company can deduct is the lesser of your contributions or 25% of an employee’s compensation. You can even skip contributions in a lean year.3,4

SIMPLE IRAs and 401(k)s: low maintenance, high contribution limits. In contrast to SEP-IRAs, Savings Incentive Match Plan (SIMPLE) IRAs are largely employee-funded. A worker can direct as much as $12,500 or 100% of compensation (whichever is less) into a SIMPLE IRA per year. That current $12,500 annual contribution limit rises to $15,500 for plan participants 50 and older. Matching employer contributions are required: you can either put in 2% of an employee’s annual compensation, or match employee contributions dollar-for-dollar up to 3% of the employee’s annual compensation.2,4

Does your company have less than 100 workers? Do you want a 401(k) plan that is relatively easy to administer? The SIMPLE 401(k) might do. This is a regular 401(k) with a key difference: the employer must match employee contributions in the manner described in the previous paragraph. As with the SIMPLE IRA, employee contributions are elective. Contributions to a SIMPLE 401(k) vest immediately. While you must file a Form 5500 annually with the I.R.S., no non-discrimination testing is necessary for these 401(k)s.2,4  

Solo 401(k)s: a great way to “play catch-up.” Both pass-through firms and C corps can install these plans, which allow a solopreneur to contribute to a retirement plan as both an employee and an employer. In 2018, a business owner can direct up to $55,000 into a solo 401(k). As with a standard 401(k), participants age 50 and older can make a $6,000 catch-up contribution each year. If you are 50 or older, your maximum annual contribution could be as large as $61,000.2,5,6

If you are behind on retirement saving, a solo 401(k) presents an outstanding opportunity to help you grow your retirement fund. The catch is that your business must be very small and stay that way. You can only have one employee besides yourself, and that employee must be your spouse. Solo 401(k)s do need plan administrators, but no Form 5500 is needed until the plan assets top $250,000. If you have a corporation, your solo 401(k) contributions are characterized by the I.R.S. as business expenses. If your business is unincorporated, you may deduct your solo 401(k) contributions from your personal income.2

The solo 401(k) offers even more savings potential for a married couple. Your employed spouse can make an employee contribution to the plan (limit of $18,500/$24,500 annually), and you can then make a profit-sharing contribution of up to 25% of his or her compensation as the employer. You can even have a Roth solo 401(k).4,6

Roth and traditional IRAs: the individual retirement planning mainstays. These accounts currently let you save and invest up to $5,500 a year ($6,500 a year if you are 50 or older). Both permit tax-advantaged growth of the invested assets. With a Roth IRA, contributions are not tax-deductible, but distributions are tax-free provided I.R.S. rules are followed. Roth IRAs never require mandatory withdrawals when you reach your seventies. Withdrawals from traditional IRAs are taxed as regular income, but contributions are often fully tax-deductible; withdrawals must begin when the account owner is in his or her seventies.2,7  

Roth and traditional 401(k)s: the small business standard. These plans now have annual contribution limits of $18,500 ($24,500 for those 50 and older). Your 401(k) contributions reduce your taxable income. Assets within all 401(k)s grow with tax deferral. Some 401(k) plans now feature a Roth option. The rules for Roth 401(k)s mirror those for Roth IRAs, with a notable exception: Roth 401(k) plan participants usually must begin taking mandatory withdrawals from their accounts once they reach age 70½.8,9 

Contact the financial professional you know and trust today about these plans. You must build adequate retirement savings for the future, and your prospects for retirement should not depend on the future of your business.

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

www.medinaadvising.com

Click Subscribe to receive our newsletter that includes financial tips and tools from top financial gurus. Subscribe.

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 – fool.com/retirement/2018/01/29/guess-how-many-gen-xers-and-baby-boomers-have-no-r.aspx [1/29/18]

2 – inc.com/hr-outsourcing/best-retirement-plans-for-small-businesses.html [2/2/18]

3 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions [10/25/17]

4 – trustetc.com/resources/investor-awareness/contribution-limits [2/6/18]

5 – irs.gov/retirement-plans/one-participant-401k-plans [10/25/17]

6 – nerdwallet.com/blog/investing/what-is-a-solo-401k/ [7/24/17]

7 – cbsnews.com/news/new-tax-law-roth-vs-traditional-ira-or-401k/ [2/6/18]

8 – investopedia.com/ask/answers/112515/are-401k-contributions-tax-deductible.asp [1/30/18]

9 – forbes.com/sites/greatspeculations/2017/03/17/__trashed-55/ [3/17/17]