Archive for Goal Setting

HOW TO MAKE YOUR TEEN A MILLIONAIRE Recommended by Paul Ferraresi

Washington – How To Make Your Teen A Millionaire This Summer

Published on July 31, 2017 04:29 PM;

Washington – Gary Sidder set up Roth IRAs for his sons when they turned 13. Each year, the Littleton, Colorado, certified financial planner and his wife, Francie Steinzeig, a school psychologist, contributed an amount equal to whatever the two boys earned cutting lawns, shoveling snow and doing odd jobs. As the sons’ earnings increased, so did the parental contributions.

“Initially we started with $400, and now we do $5,500 for each,” the annual maximum allowable contribution, says Sidder, whose sons are 32 and 27. “Now that their accounts are worth more than $100,000 and $65,000, respectively, they do see the value of saving and starting early.”

Even if no further contributions are made, both sons could see their accounts top $1 million by retirement age, assuming conservative 7 percent average annual returns.

Financial planners know that Roth IRAs can set kids up for sound financial futures. Since children have decades ahead for money to compound, even relatively small contributions can grow large. The catches:

The kids must have earned income from real work. That includes reasonable wages or income from self-employment. The Roth contribution can’t be more than their total earnings for the year, up to $5,500.

Kids under 18 need a custodial Roth. Not all brokerages have attractive options for small accounts. Fidelity and Schwab, however, offer custodial retirement accounts with no opening or maintenance fees. Fidelity has no minimum, while Schwab requires at least $100 to open the account, and both offer commission-free trades on certain mutual funds and exchange-traded funds.

Why a Roth rather than a traditional IRA? Low-wage workers pay little if any income tax, so they don’t get much value from tax deductions, including deductible contributions to a traditional IRA. When a big upfront tax break isn’t available, it makes sense to contribute instead to a Roth. Contributions aren’t deductible, but withdrawals in retirement are tax-free.

Another important note: Retirement accounts aren’t included in federal financial aid formulas, so a child’s Roth won’t affect financial aid offers from most schools. Some private schools, however, do consider custodial Roths when calculating their offers, says college financing expert Lynn O’Shaughnessy, author of “The College Solution.” Also, withdrawals from Roths during college years would be considered income to the child and count heavily against her, O’Shaughnessy says.

The ability to contribute to a Roth starts to phase out above certain modified adjusted gross income levels. For 2017, the phase-out begins at $118,000 for singles and $186,000 for married couples filing jointly.

That’s not an issue most kids have to worry about. Let’s say your daughter works 30 hours a week for the federal minimum wage of $7.25 per hour this summer and earns about $2,600 over 12 weeks.

Obviously, she won’t net $2,600 from her job. She’ll lose 7.65% to payroll taxes and want to spend some of the money she earns. But you can contribute $2,600 for her, or offer matching funds for whatever she contributes. If she continues those $2,600 contributions for the next 50 years, her Roth can grow to $1 million, assuming 7 percent average annual returns.

That far in the future, $1 million will be worth the equivalent of about $230,000 today, assuming 2.9 percent inflation. Once she’s in the working world full time, encourage her to contribute at least 15 percent of her income toward her retirement and keep doing so throughout her career.

You can talk about that with her as you’re setting up her Roth. Together you should also:

—Review her investment options. Fees can devastate small accounts and dramatically lower the amount she can accumulate over decades, so low-cost index funds or exchange-traded funds might be a good choice.

—Discuss the temptations for tapping the money. Technically, she can withdraw an amount equal to the contributions at any time without paying taxes or penalties. She also can withdraw up to $10,000 for a first-time home purchase, or money to pay college expenses, without taxes and penalties after the account has been open five years.

—Underline the payoff for leaving the money alone to grow. The best use of retirement money is for retirement, and it can grow to seven figures only if she keeps her mitts off it.

“Parents could use this to teach a valuable lesson in delaying gratification and building investments over time,” says John Gugle, a certified financial planner in Charlotte, North Carolina. “This is a marathon, not a sprint.”

Improve your Life

As An avid reader of Success Magazine I found these 10 action steps that may help enhance your life. Try it!
Drink Up
This week, commit to drinking more water and nixing the sugary drinks. Note the changes in your skin tone, happiness and energy levels.
Light the Fire
Schedule a brainstorm session to solve a nagging problem. Encourage all new ideas, even the off-the-wall ones.
Let the Games Begin
Plan a family game tournament and prepare special treats for the event. Soak up the bonding time and save the to-do list for tomorrow.
Add It Up
Tonight evaluate your spending habits. Choose one small weekly expense (one less cappuccino or one less restaurant meal) to cut from your budget. Tuck away those savings for a vacation next year.
Get Inspired
Pick a movie or book that inspires you this weekend. Watch it alone and jot down whatever crazy ideas pop into your head. Revisit your notes and act on the best ones.
Face Up
Sign up to do one thing that scares you – a singles happy hour, a skydiving course, a cooking class. Commit to pushing yourself out of your comfort zone.
Buddy System
Call a friend you haven’t seen in a while. Schedule a coffee or lunch date to catch up and remember the importance of making your friends and family feel special.
Take Stock
Tonight, write down your top three passions. Assess whether your current lifestyle matches or is headed toward achieving that list.
Speak Up
Whenever your creative genius strikes – a more efficient process, a new place for the company lunch, a crazy idea you’ve been scared to mention – act on it quickly. Relish your newfound confidence.
Give Back
Find a local charity organization and schedule time to volunteer. Enlist family, friends and co-workers to join you.

Market Swoon

The volatile stock market’s action from July 2015 to present has given most people anxiety.

Over those many weeks none of our clients franticly called in because we had positioned their money into safe vehicles that never lose when the market drops. No I am not talking about parking their money in a cash account. For multiple years this Blog has extolled the virtues of Tax Free Investment vehicles that rise when the market advances but never participates in a loss.

It amazes me that since the year 2000 the average investor has not become whole (on an inflation adjusted basis). Wow! Fifteen years of a zero rate of return. As one approaches, say, age 45 you have to think seriously about locking into something that produces a safe rate of return. Volatility is not your friend. If you are 45 or 50, can you handle another 15 year period of zero return so you enter retirement with the same nest egg as today?

Even if you are 60 you need to protect your assets from a 15 year period of zero returns so they do not wither away as you approach 70-75.
Why do people keep doing the same thing over and over? Why do they keep losing 40-50% in 2000, 2008 and now again?

Ah, the definition of insanity! Doing the same thing over and over and expecting different results.

New Year Resolution- Health

The secrets to success in anything is simply doing a few correct things every day. I am fascinated at how people start the New Year with resolutions (I hate resolutions as they depict the negative side of a success. Rather, I work on my “goals”). Funny, most people have as a “resolution or goal”… to get healthy. Tell me I am wrong here, but, have you noticed on January 2nd of each year the workout centers are full; it takes 45 minutes to get on a machine; or, you see people are lining the streets to jog. Amazingly, on February 15th (the day after “sweetie’s” day) there is no one in the workout center or jogging except those that know the secret in this area… consistent effort. As Reverend Schuller so graciously put it… “Spectacular performance is always preceeded by unspectacular preparation.”

I have listed this link before but it is worth repeating. If health is one of your goals for this year by all means write down 10 reasons why you want to improve your health. As we all know, if the “why” is strong enough, then, the “how” is easy.

Go to this site… … As you take the test be honest with yourself. Pay attention to the questions as you can vividly see what will not allow you to live beyond 100. My test results showed I will live to 108! So it is true… the good die young. :)

Here is my New Year wish for you… that you reach every goal and dream you have for this year and every year of your life.

How long must my money last?

During our working years, most people have a financial goal of accumulating enough money to retire. Usually our time horizon is known; that is, we know how long we want to or have to work to accumulate enough money to retire. Another goal during our working years is often to obtain as high a rate of return as possible without taking more risk than necessary.

During our retirement years, the financial goal is typically to try to make sure that our money will last for the remainder of our lives. Since none of us know how long we will live, our time horizon is unknown. This uncertainty oftentimes makes retirement income planning very challenging. The investment objective in retirement often becomes obtaining as much income as possible without outliving our money – that is, having too much life left at the end of the money. This raises some interesting financial planning and tax questions, such as how to invest retirement funds and how to systematically withdraw funds from tax-exempt, tax-deductible and taxable accounts.

When I work with clients, I prefer to assume that they will live longer than the average because I want to try to protect them from running out of money. I’d rather they have some money going to heirs than for them to find themselves broke during their lifetimes. I encourage my clients to plan on living at least into their mid-90’s, or longer.

As a result, some people may choose to work longer than they initially planned. Moreover, retirement-income planning options need to be carefully planned and monitored.