independent investor
INDEPENDENT INVESTOR Timely Insights for Your Financial Future November 2017
In This Issue
Financial Wellness Programs: A Win-Win for Employee, Employer Financial wellness programs at work can help reduce workplace stress and make people more productive. They can also help boost job satisfaction.
No Place Like Home? The Buy-vs.-Rent Decision We hope this educational resource proves helpful. We believe an educated investor is a better investor. Please call us if you have questions. Jeffrey & Sherri Kitzberger Olympus Wealth Partners, Inc. Olympus Wealth Partners, Inc. Founding Partners 3750 Park East Drive Suite 200 Beachwood, OH 44122 440-505-5744 Fax: 440-505-5619 [email protected] om http://www.olympuswealth partners.com
Home prices have recovered from the days of the housing bust. And mortgage rates are lower. It may be time to rethink buying versus renting.
Income Inequality and Its Impact on Women's Retirement Gender issues affect more than just a woman's paychecks. Longevity, family caregiving, and the gender wage gap influence women's long-term financial well-being and retirement security.
Retirement: How Long Will a Million Dollar Nest Egg Last? How much money you'll need for a comfortable retirement depends on where you live. Here are some useful benchmarks for planning your financial goals.
A Year of Spending (and Saving) Wisely A step-by-step approach can make a long list of tasks more manageable. This checklist can help you address your financial tasks bit by bit.
2
Timely Insights for Your Financial Future
Financial Wellness Programs: A Win-Win for Employee, Employer It has been said that when you have your health, you have everything. But when it comes to financial health, employees who are worried about their financial well-being can bring those feelings to the workplace, potentially having a significant, adverse effect on their employers' bottom line, according to a newly published report from Mercer. Following are some of the key takeaways from "Inside Employees' Minds™," the second installment of a comprehensive study on financial wellness and its role in employee behavior on the job and decision making around financial issues. Employees report spending on average about 150 hours annually worrying about their finances while at work. 1 Mercer estimates that, based on a total wage outlay of $5 trillion among employers in the United States, this unproductive time could be costing companies up to $250 billion in lost wages each year. 2 Needless to say, those with the lowest apparent levels of financial wellness spent the most time worrying about money and other personal financial needs during work time, an average of more than 400 hours per year.By contrast, those with a high level of financial wellness spent far less time worrying, typically about one-third as much, on average.2 Employer-sponsored financial wellness programs appear to play a significant role in feelings of well-being, and beyond that, in employees' satisfaction with their employers. For example, among employees who were not offered any kind of financial wellness program, less than 30% reported being very satisfied with their employer. Among those who said they were offered a program, nearly 60% reported being very satisfied. Even employees who did not participate in wellness programs indicated greater levels of employer satisfaction than those who had none available.2 While it may be clear that financial wellness programs are generally considered important, there is less consensus around what programs should entail. For example, only about one employee in five would want their employer to give direct advice using the employee's personal financial information. More than one-third would find it helpful to be given a referral to an advisor endorsed by the employer, and nearly half would like to have a financial expert provide training and education.2
1Mercer, "Financial Stress Could Cost US Employers Up to $250 Billion in Lost Wages Annually, Finds New
Mercer Survey," August 16, 2017. 2Mercer, "Inside Employees' Minds™," Financial Wellness, Volume 2,
© 2017 DST Systems Inc. All rights reserved. 1-662723
August 16, 2017.
3
Timely Insights for Your Financial Future
No Place Like Home? The Buy-vs.-Rent Decision Ten years after the housing market bubble burst, consumers face a mixed picture on the cost of owning a home. Nationwide, the benchmark price for a single family home has recovered from the steep drop it took during the financial crisis and its aftermath (see chart). And mortgage rates are generally lower now than they were then. On the other hand, housing supply remains a concern. Fewer homes are being built now than in the last decade. And those that are being built tend to be larger and more expensive than in the past. As a result, younger families may face greater challenges getting started with their first homes.
Home Prices: 1975-2017
Source: S&P CoreLogic Case-Shiller U.S. National Home Price Index, January 1975 to May 2017. The index tracks changes in the value of real estate nationally. Data were not seasonally adjusted and assume the size, condition, and other quality factors remained constant. Index values do not represent the price changes for any specific property or location and do not reflect the costs of buying, selling, and maintaining real estate. Individual results will vary. Past performance does not predict future results. But buying a home is not necessarily right for everyone in every circumstance. In fact, the Pew Research Center reported recently that the number of U.S. households who rent their home has reached more than 43 million, or nearly 37% of all U.S. households, the highest percentage in more than 50 years.1 Of course, the decision to rent or buy may be complex. An optimal solution will depend on a number of factors including your finances, your time horizon, and your location.
Rent vs. Buy Here are a few points you should consider if you're weighing the options of buying versus renting. Life circumstances. If you've recently graduated from college, ended a marriage, or retired, you're probably in a transitional period of your life. In other words, if you are not sure of your long-term plans you may be better off renting. If you buy a home and go to sell it soon afterward, the costs you'd incur -- real estate commissions, closing costs, etc. -- won't be averaged out over a long period of time. If, however, you know you're going to be living in a certain area and plan on staying in the same home for a number of years, then buying may make financial sense. Cost. Another obvious factor is cost. To find out if it makes financial sense to rent rather than own, compare the cost of renting versus buying a home in your area. Also try out one of the many Buy vs. Rent calculators you can find online to determine how long it would take you to reach the "breakeven horizon" -- that's when the cost of buying equals the cost of renting. Maintenance and repair. Do you have the time and inclination to manage the upkeep of a home -- mowing lawns, clearing snow, raking leaves, etc.? When you own a home, there is no landlord to call when you blow a fuse or the water heater springs a leak. You need to have at least some basic handyman skills or be willing to
4
Timely Insights for Your Financial Future pay someone else to handle the job. If you are considering buying, your first order of business is to determine how much house you can afford. Most people, especially first-time buyers, must take out a mortgage to buy a home. To qualify for a mortgage, the borrower generally needs to meet certain industry-standard requirements: The housing-expense-to-income ratio compares basic monthly housing costs, e.g., mortgage, homeowners insurance, and property taxes to the buyer's gross monthly income (before taxes and other deductions). For a conventional loan, your monthly housing cost should not exceed 28% of your gross monthly income. The debt-to-income ratio is the percentage of income required to service all your monthly debt payments, including any student, car, or other installment loans and/or credit card debt. Your total monthly debt payments, including basic housing costs, should not exceed 36% of your gross monthly income. In addition to qualifying for a mortgage, you may need a down payment. Down payments can vary from 20% or more of the home's purchase price to 0% for some loan programs, such as Veterans Administration (VA) loans. There are many factors involved in determining the appropriate down payment for a given transaction. For help making this important decision, you may want to speak with a mortgage representative at your local bank. Other costs associated with purchasing a home include closing costs -- such items as homeowners insurance, loan origination fees, "points" (prepaid interest), an appraisal fee, and a title report/insurance. The decision to buy versus rent a home is one of the biggest financial decision you may make. The more research you do today, the better your decision will look in the years to come.
1The Pew Research Center,
"More U.S. households are renting than at any point in 50 years," July 19, 2017.
© 2017 DST Systems Inc. All rights reserved. 1-662727
5
Timely Insights for Your Financial Future
Income Inequality and Its Impact on Women's Retirement Here are the facts. Generally speaking, women earn less than men, live longer than men, and often take time out of the workforce to have children and/or to care for an aging parent or sick loved one. The potential consequence of these realities? While most U.S. workers are facing a retirement savings deficit, for women, the effect is compounded: Lower pay translates into reduced Social Security benefits, smaller pensions, and less retirement savings. While most U.S. workers are facing a retirement savings deficit, for women, the effect is compounded: Lower pay translates into reduced Social Security benefits, smaller pensions, and less retirement savings.
Just the Facts You needn't look far to find evidence of the gender retirement gap. Consider the following facts: Many women will need to make their retirement nest eggs last longer than men's. According to the latest data from the Society of Actuaries, among females age 65, overall longevity has risen 2.4 years from 86.4 in 2000 to 88.8 in 2014. Similarly, among 65-year-old men, longevity has risen two years during the same timeframe, from 84.6 to 86.6 in 2014.1 The gender wage gap has a ripple effect over a woman's entire career. The National Women's Law Center has found that a woman starting her career now will lose more than $430,480 over a 40-year career; for Latinas, this wage gap could total $1,007,080 over a career, and for an African American woman, the total wage deficit could reach $877,480.2 Put another way, a woman would have to work 51 years to earn what a man earns in 40 years.2 Family caregiving causes career interruptions that can have significant monetary consequences over time. Research conducted by the AARP revealed that family caregivers who are at least 50 years old and leave the workforce to care for a parent forgo, on average, $304,000 in salary and benefits over their lifetime. These estimates range from $283,716 for men to $324,044 for women.3 The retirement income gap is very real. The average Social Security benefit for women older than 65 was $14,234 annually in 2014, compared with $18,113 for men, according to Social Security Administration data.4 Research shows that women also receive about a third less income in retirement from defined benefit pension plans and have accumulated about a third fewer assets in defined contribution retirement accounts than their male counterparts.5
Progress: Slow but Steady While the evidence is compelling and points out the continuing challenge women face in attaining a secure financial future, there are also signs of improvement for women and their outlook for retirement. For instance, according to the National Institute on Retirement Security's recent study, women are working for more years now than ever before, which helps to enhance their Social Security benefits, pension income, and retirement savings. Specifically, the study found that the workforce participation of women age 55 to 64 has climbed from 53.2% in 2000 to 59.2% in 2015.5 And today as many women as men participate in workplace retirement plans. More broad-based measures, such as legislative action to eliminate the gender pay gap would go far toward leveling the playing field for women when it comes to retirement readiness, yet such policy matters are complicated and outcomes are impossible to predict.
Beating the Odds Despite these challenges, many women retire with enough money to relax and enjoy their later years. Here's how they do it: Saving as much as they can: This year you can save up to $18,000 in an employer-sponsored retirement plan, plus a $6,000 "catch-up" contribution if you are age 50 or older. Your contributions are made on pretax income, which means you're paying taxes on a lower amount.6 Becoming educated about other sources of retirement income. No matter how committed you are to saving, chances are your employer-sponsored plan won't provide all of the money you'll need once you retire. Find out as much as you can about Social Security -- and strategies for optimizing your benefits -- as well as IRAs and other investments that can help fill in the gaps. 7 Make the connection between life expectancy and income needs. Even if you already have a healthy nest egg, it's important to continue saving because you could end up spending 20 or 30 years in retirement, which means you'll have to save that much more. Regardless of your personal challenges, you can take charge of your financial future -- starting today.
6
Timely Insights for Your Financial Future
1Society of Actuaries, "Society of Actuaries Releases New Mortality Tables and an Updated Mortality
Improvement Scale to Improve Accuracy of Private Pension Plan Estimates," October 27, 2014. 2The National Women's Law Center, "Wage Gap Costs Women More Than $430,000 Over a Career, NWLC
Analysis Shows," April 4, 2016. 3AARP: Understanding the Impact of Family Caregiving on Work, Fact Sheet 271, October, 2012 and MetLife
Mature Market Institute, "The MetLife Study of Caregiving: Costs to Work Caregivers: Double Jeopardy for Baby Boomers Caring For Their Parents," 2011. 4Morningstar, "Retirement: The Other Economic Gender Gap,"
June 7, 2016.
5National Institute on Retirement Security, "Shortchanged in Retirement: Continuing Challenges to Women's
Financial Future," March 2016. 6To make the catch-up contribution, you are first required to save the annual maximum of $18,000. 7Distributions from a traditional IRA will be subject to taxation upon withdrawal at then-current rates.
Distributions taken prior to age 59½ may be subject to an additional 10% federal tax. © 2017 DST Systems Inc. All rights reserved. 1-523926
7
Timely Insights for Your Financial Future
Retirement: How Long Will a Million Dollar Nest Egg Last? Although it may not buy you a yacht or a jet, a million dollars is still a lot of money. It certainly should prove adequate to fund a long retirement for most people. Right? A new study by GOBankingRates suggests otherwise.1 The study looked at the average total expenditures, by state, for people 65 and older, including groceries, housing, utilities, transportation, and healthcare costs, then calculated how many years that $1 million would last. The results were sobering for some, promising for others -- depending upon where you live. While a million dollar nest egg would run out in under 12 years in Hawaii, it would last more than twice as long -- 26.4 years -- in Mississippi. In general, the study showed that the retirement dollar went the furthest in southern states, while California and the Northeast fared poorly. Behind the disparity is a wide variation in living costs from state to state. In California, the average retiree spends over $60,000 per year to get by, while a retired Arkansan spends under $40,000. Much of the difference can be attributable to housing costs. Whereas California retirees pay an average of over $30,000 a year in housing costs, those in Arkansas average only about $12,000. But the other costs also vary widely.
Location, Location, Location Here's how long your million would last in selected states.1 50. Hawaii
11 years, 11 months
49. California
16 years, 5 months
47. New York
17 years, 1 month
35. Pennsylvania
21 years, 11 months
33. Colorado
22 years
30. Florida
22 years, 4 months
24. Arizona
23 years, 2 months
18. North Carolina
23 years, 8 months
10. Alabama
24 years, 9 months
1. Mississippi
26 years, 4 months
Beyond being simply interesting reading, the study helps point to the gaping differences in retiree living costs and how choosing a retirement location should be about more than being in a fun place to live. Of course, the lion's share of retirement investors will never see near this amount in their retirement nest eggs. In fact, about half of households age 55 and older have no retirement savings at all, and those that have put aside something have saved a median of only about $104,000 for households age 55-64 and $148,000 for households age 65-74.2 So if you anticipate hitting the $1-million mark, congratulations, you are way ahead of the pack. But don't feel too confident if you're hoping to retire to an expensive state. 1GOBankingRates, How Long $1 Million Will Last in Retirement in Every State, August 21, 2017. 2Government Accountability Office, Retirement Security, May 2015.
© 2017 DST Systems Inc. All rights reserved. 1-662733
8
Timely Insights for Your Financial Future
A Year of Spending (and Saving) Wisely Do you wait until the last minute to pack for your vacation or shop for back-to-school clothes for the kids? Do you find it difficult to start projects -- and then to finish them? Are you chronically late for appointments? If so, then chances are you are a procrastinator. When it comes to managing your finances, procrastination can keep you from reaching your goals. But by breaking your spending and saving priorities down into monthly increments, you may find it easier to stay on track.
Try some of these tips all year long. January -- Start an emergency savings fund with the goal of accumulating three to six months of living expenses. By setting aside just $25 a week, you could save $1,300 after just one year. It's important to have a backup plan -- and financial cushion -- when the unexpected happens. February -- Make sure you are making the most of your tax-deferred retirement savings opportunities. If you have access to an employer-sponsored retirement plan, such as a 401(k), are you contributing the maximum allowed? Generally,you may contribute up to $18,000 to qualified retirement plans in 2017, and those 50 and older may contribute an additional $6,000. (Additional plan limits may apply.) What about an IRA? The good news is you have until April 17, 2018, to contribute up to $5,500 (or $6,500 for those 50 and older) to an IRA for tax year 2017. March -- Start organizing your tax documents -- Form W-2s from your employer(s), property tax receipts, mortgage interest, charitable donation receipts, etc. -- so you're ready to meet with your tax advisor and get the biggest refund you are entitled to. April -- If you are one of the roughly 75% of Americans who do get a refund, consider directing it toward your emergency fund or credit card debt, or put the extra money toward your retirement. Every little bit can add up. May -- Spring is in the air -- and for many Americans -- the weather is warming up. Lowering the temperature on your hot water heater during summer months may help to cut costs. The U.S. Department of Energy (DOE) estimates that water heating accounts for about 18% of energy consumed in the average home. The agency recommends turning the heater setting on your water heater to warm (120F degrees) to save on energy costs. Visit the DOE website for more energy saving tips. June -- Have a green thumb? Vegetables fresh from the garden are less expensive than canned or frozen foods -- and they taste better, too! If you are not an experienced gardener, start small -- try a few tomato plants. And don't forget to water and fertilize regularly. July -- Are you signing the kids up for sports teams? If so, consider buying the needed equipment at used sporting goods stores. From catcher's mitts to hockey skates, these stores sell their wares at a fraction of the original cost. August -- Look for everyday learning experiences to teach your children about money. Have young children write down the price of similar items at the grocery store. Assist older kids in learning about managing money by allowing them to buy school supplies with a planned budget. Help children of all ages to set up a savings account at the local bank and decide how much they will plan to save each month for wish-list purchases. September -- In August and September many auto dealers try to clear their lots to make room for next year's new models. If you don't mind haggling, you may be able to shave money off a car's sticker price. October -- Plan for year-end tax saving moves. For instance, holding on to investments in taxable accounts for more than one year will generally qualify you for a lower tax rate on any capital gains -- 15% for most taxpayers and 20% for taxpayers in the top income tax bracket (39.6%). Also, keep in mind that realized capital losses can be used to offset realized capital gains for federal tax purposes. Any excess losses up to $3,000 ($1,500 for married individuals filing separate returns) can be deducted against ordinary income. A loss greater than that amount can be carried over to future tax years, subject to the same limits. November -- Many charities begin active fundraising at this time of year. Generally, charitable contributions to qualified charitable organizations are deductible. Also, before sending a donation to your favorite charity, you may want to obtain more information about the organization by checking various online resources, such as BBB Wise Giving Alliance or Charity Navigator, to find out if the charity meets your giving criteria. December -- Consider giving yourself an early holiday gift -- the gift of travel. Did you know that the first two weeks of December (after the Thanksgiving rush) is one of the slowest travel periods -- offering some of the best travel deals to destinations in the United States and other locales? If you want to take advantage of the December travel "dead zone," start shopping for flights a month or more in advance.
9
Timely Insights for Your Financial Future © 2017 DST Systems Inc. All rights reserved. 1-662716
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Jeffrey & Sherri Kitzberger is a Registered Representative with and Securities are offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Olympus Wealth Partners, Inc., a registered investment advisor and a separate entity from LPL Financial.
This newsletter was created using Newsletter OnDemand, powered by Wealth Management Systems Inc.
In This Issue
Financial Wellness Programs: A Win-Win for Employee, Employer Financial wellness programs at work can help reduce workplace stress and make people more productive. They can also help boost job satisfaction.
No Place Like Home? The Buy-vs.-Rent Decision We hope this educational resource proves helpful. We believe an educated investor is a better investor. Please call us if you have questions. Jeffrey & Sherri Kitzberger Olympus Wealth Partners, Inc. Olympus Wealth Partners, Inc. Founding Partners 3750 Park East Drive Suite 200 Beachwood, OH 44122 440-505-5744 Fax: 440-505-5619 [email protected] om http://www.olympuswealth partners.com
Home prices have recovered from the days of the housing bust. And mortgage rates are lower. It may be time to rethink buying versus renting.
Income Inequality and Its Impact on Women's Retirement Gender issues affect more than just a woman's paychecks. Longevity, family caregiving, and the gender wage gap influence women's long-term financial well-being and retirement security.
Retirement: How Long Will a Million Dollar Nest Egg Last? How much money you'll need for a comfortable retirement depends on where you live. Here are some useful benchmarks for planning your financial goals.
A Year of Spending (and Saving) Wisely A step-by-step approach can make a long list of tasks more manageable. This checklist can help you address your financial tasks bit by bit.
2
Timely Insights for Your Financial Future
Financial Wellness Programs: A Win-Win for Employee, Employer It has been said that when you have your health, you have everything. But when it comes to financial health, employees who are worried about their financial well-being can bring those feelings to the workplace, potentially having a significant, adverse effect on their employers' bottom line, according to a newly published report from Mercer. Following are some of the key takeaways from "Inside Employees' Minds™," the second installment of a comprehensive study on financial wellness and its role in employee behavior on the job and decision making around financial issues. Employees report spending on average about 150 hours annually worrying about their finances while at work. 1 Mercer estimates that, based on a total wage outlay of $5 trillion among employers in the United States, this unproductive time could be costing companies up to $250 billion in lost wages each year. 2 Needless to say, those with the lowest apparent levels of financial wellness spent the most time worrying about money and other personal financial needs during work time, an average of more than 400 hours per year.By contrast, those with a high level of financial wellness spent far less time worrying, typically about one-third as much, on average.2 Employer-sponsored financial wellness programs appear to play a significant role in feelings of well-being, and beyond that, in employees' satisfaction with their employers. For example, among employees who were not offered any kind of financial wellness program, less than 30% reported being very satisfied with their employer. Among those who said they were offered a program, nearly 60% reported being very satisfied. Even employees who did not participate in wellness programs indicated greater levels of employer satisfaction than those who had none available.2 While it may be clear that financial wellness programs are generally considered important, there is less consensus around what programs should entail. For example, only about one employee in five would want their employer to give direct advice using the employee's personal financial information. More than one-third would find it helpful to be given a referral to an advisor endorsed by the employer, and nearly half would like to have a financial expert provide training and education.2
1Mercer, "Financial Stress Could Cost US Employers Up to $250 Billion in Lost Wages Annually, Finds New
Mercer Survey," August 16, 2017. 2Mercer, "Inside Employees' Minds™," Financial Wellness, Volume 2,
© 2017 DST Systems Inc. All rights reserved. 1-662723
August 16, 2017.
3
Timely Insights for Your Financial Future
No Place Like Home? The Buy-vs.-Rent Decision Ten years after the housing market bubble burst, consumers face a mixed picture on the cost of owning a home. Nationwide, the benchmark price for a single family home has recovered from the steep drop it took during the financial crisis and its aftermath (see chart). And mortgage rates are generally lower now than they were then. On the other hand, housing supply remains a concern. Fewer homes are being built now than in the last decade. And those that are being built tend to be larger and more expensive than in the past. As a result, younger families may face greater challenges getting started with their first homes.
Home Prices: 1975-2017
Source: S&P CoreLogic Case-Shiller U.S. National Home Price Index, January 1975 to May 2017. The index tracks changes in the value of real estate nationally. Data were not seasonally adjusted and assume the size, condition, and other quality factors remained constant. Index values do not represent the price changes for any specific property or location and do not reflect the costs of buying, selling, and maintaining real estate. Individual results will vary. Past performance does not predict future results. But buying a home is not necessarily right for everyone in every circumstance. In fact, the Pew Research Center reported recently that the number of U.S. households who rent their home has reached more than 43 million, or nearly 37% of all U.S. households, the highest percentage in more than 50 years.1 Of course, the decision to rent or buy may be complex. An optimal solution will depend on a number of factors including your finances, your time horizon, and your location.
Rent vs. Buy Here are a few points you should consider if you're weighing the options of buying versus renting. Life circumstances. If you've recently graduated from college, ended a marriage, or retired, you're probably in a transitional period of your life. In other words, if you are not sure of your long-term plans you may be better off renting. If you buy a home and go to sell it soon afterward, the costs you'd incur -- real estate commissions, closing costs, etc. -- won't be averaged out over a long period of time. If, however, you know you're going to be living in a certain area and plan on staying in the same home for a number of years, then buying may make financial sense. Cost. Another obvious factor is cost. To find out if it makes financial sense to rent rather than own, compare the cost of renting versus buying a home in your area. Also try out one of the many Buy vs. Rent calculators you can find online to determine how long it would take you to reach the "breakeven horizon" -- that's when the cost of buying equals the cost of renting. Maintenance and repair. Do you have the time and inclination to manage the upkeep of a home -- mowing lawns, clearing snow, raking leaves, etc.? When you own a home, there is no landlord to call when you blow a fuse or the water heater springs a leak. You need to have at least some basic handyman skills or be willing to
4
Timely Insights for Your Financial Future pay someone else to handle the job. If you are considering buying, your first order of business is to determine how much house you can afford. Most people, especially first-time buyers, must take out a mortgage to buy a home. To qualify for a mortgage, the borrower generally needs to meet certain industry-standard requirements: The housing-expense-to-income ratio compares basic monthly housing costs, e.g., mortgage, homeowners insurance, and property taxes to the buyer's gross monthly income (before taxes and other deductions). For a conventional loan, your monthly housing cost should not exceed 28% of your gross monthly income. The debt-to-income ratio is the percentage of income required to service all your monthly debt payments, including any student, car, or other installment loans and/or credit card debt. Your total monthly debt payments, including basic housing costs, should not exceed 36% of your gross monthly income. In addition to qualifying for a mortgage, you may need a down payment. Down payments can vary from 20% or more of the home's purchase price to 0% for some loan programs, such as Veterans Administration (VA) loans. There are many factors involved in determining the appropriate down payment for a given transaction. For help making this important decision, you may want to speak with a mortgage representative at your local bank. Other costs associated with purchasing a home include closing costs -- such items as homeowners insurance, loan origination fees, "points" (prepaid interest), an appraisal fee, and a title report/insurance. The decision to buy versus rent a home is one of the biggest financial decision you may make. The more research you do today, the better your decision will look in the years to come.
1The Pew Research Center,
"More U.S. households are renting than at any point in 50 years," July 19, 2017.
© 2017 DST Systems Inc. All rights reserved. 1-662727
5
Timely Insights for Your Financial Future
Income Inequality and Its Impact on Women's Retirement Here are the facts. Generally speaking, women earn less than men, live longer than men, and often take time out of the workforce to have children and/or to care for an aging parent or sick loved one. The potential consequence of these realities? While most U.S. workers are facing a retirement savings deficit, for women, the effect is compounded: Lower pay translates into reduced Social Security benefits, smaller pensions, and less retirement savings. While most U.S. workers are facing a retirement savings deficit, for women, the effect is compounded: Lower pay translates into reduced Social Security benefits, smaller pensions, and less retirement savings.
Just the Facts You needn't look far to find evidence of the gender retirement gap. Consider the following facts: Many women will need to make their retirement nest eggs last longer than men's. According to the latest data from the Society of Actuaries, among females age 65, overall longevity has risen 2.4 years from 86.4 in 2000 to 88.8 in 2014. Similarly, among 65-year-old men, longevity has risen two years during the same timeframe, from 84.6 to 86.6 in 2014.1 The gender wage gap has a ripple effect over a woman's entire career. The National Women's Law Center has found that a woman starting her career now will lose more than $430,480 over a 40-year career; for Latinas, this wage gap could total $1,007,080 over a career, and for an African American woman, the total wage deficit could reach $877,480.2 Put another way, a woman would have to work 51 years to earn what a man earns in 40 years.2 Family caregiving causes career interruptions that can have significant monetary consequences over time. Research conducted by the AARP revealed that family caregivers who are at least 50 years old and leave the workforce to care for a parent forgo, on average, $304,000 in salary and benefits over their lifetime. These estimates range from $283,716 for men to $324,044 for women.3 The retirement income gap is very real. The average Social Security benefit for women older than 65 was $14,234 annually in 2014, compared with $18,113 for men, according to Social Security Administration data.4 Research shows that women also receive about a third less income in retirement from defined benefit pension plans and have accumulated about a third fewer assets in defined contribution retirement accounts than their male counterparts.5
Progress: Slow but Steady While the evidence is compelling and points out the continuing challenge women face in attaining a secure financial future, there are also signs of improvement for women and their outlook for retirement. For instance, according to the National Institute on Retirement Security's recent study, women are working for more years now than ever before, which helps to enhance their Social Security benefits, pension income, and retirement savings. Specifically, the study found that the workforce participation of women age 55 to 64 has climbed from 53.2% in 2000 to 59.2% in 2015.5 And today as many women as men participate in workplace retirement plans. More broad-based measures, such as legislative action to eliminate the gender pay gap would go far toward leveling the playing field for women when it comes to retirement readiness, yet such policy matters are complicated and outcomes are impossible to predict.
Beating the Odds Despite these challenges, many women retire with enough money to relax and enjoy their later years. Here's how they do it: Saving as much as they can: This year you can save up to $18,000 in an employer-sponsored retirement plan, plus a $6,000 "catch-up" contribution if you are age 50 or older. Your contributions are made on pretax income, which means you're paying taxes on a lower amount.6 Becoming educated about other sources of retirement income. No matter how committed you are to saving, chances are your employer-sponsored plan won't provide all of the money you'll need once you retire. Find out as much as you can about Social Security -- and strategies for optimizing your benefits -- as well as IRAs and other investments that can help fill in the gaps. 7 Make the connection between life expectancy and income needs. Even if you already have a healthy nest egg, it's important to continue saving because you could end up spending 20 or 30 years in retirement, which means you'll have to save that much more. Regardless of your personal challenges, you can take charge of your financial future -- starting today.
6
Timely Insights for Your Financial Future
1Society of Actuaries, "Society of Actuaries Releases New Mortality Tables and an Updated Mortality
Improvement Scale to Improve Accuracy of Private Pension Plan Estimates," October 27, 2014. 2The National Women's Law Center, "Wage Gap Costs Women More Than $430,000 Over a Career, NWLC
Analysis Shows," April 4, 2016. 3AARP: Understanding the Impact of Family Caregiving on Work, Fact Sheet 271, October, 2012 and MetLife
Mature Market Institute, "The MetLife Study of Caregiving: Costs to Work Caregivers: Double Jeopardy for Baby Boomers Caring For Their Parents," 2011. 4Morningstar, "Retirement: The Other Economic Gender Gap,"
June 7, 2016.
5National Institute on Retirement Security, "Shortchanged in Retirement: Continuing Challenges to Women's
Financial Future," March 2016. 6To make the catch-up contribution, you are first required to save the annual maximum of $18,000. 7Distributions from a traditional IRA will be subject to taxation upon withdrawal at then-current rates.
Distributions taken prior to age 59½ may be subject to an additional 10% federal tax. © 2017 DST Systems Inc. All rights reserved. 1-523926
7
Timely Insights for Your Financial Future
Retirement: How Long Will a Million Dollar Nest Egg Last? Although it may not buy you a yacht or a jet, a million dollars is still a lot of money. It certainly should prove adequate to fund a long retirement for most people. Right? A new study by GOBankingRates suggests otherwise.1 The study looked at the average total expenditures, by state, for people 65 and older, including groceries, housing, utilities, transportation, and healthcare costs, then calculated how many years that $1 million would last. The results were sobering for some, promising for others -- depending upon where you live. While a million dollar nest egg would run out in under 12 years in Hawaii, it would last more than twice as long -- 26.4 years -- in Mississippi. In general, the study showed that the retirement dollar went the furthest in southern states, while California and the Northeast fared poorly. Behind the disparity is a wide variation in living costs from state to state. In California, the average retiree spends over $60,000 per year to get by, while a retired Arkansan spends under $40,000. Much of the difference can be attributable to housing costs. Whereas California retirees pay an average of over $30,000 a year in housing costs, those in Arkansas average only about $12,000. But the other costs also vary widely.
Location, Location, Location Here's how long your million would last in selected states.1 50. Hawaii
11 years, 11 months
49. California
16 years, 5 months
47. New York
17 years, 1 month
35. Pennsylvania
21 years, 11 months
33. Colorado
22 years
30. Florida
22 years, 4 months
24. Arizona
23 years, 2 months
18. North Carolina
23 years, 8 months
10. Alabama
24 years, 9 months
1. Mississippi
26 years, 4 months
Beyond being simply interesting reading, the study helps point to the gaping differences in retiree living costs and how choosing a retirement location should be about more than being in a fun place to live. Of course, the lion's share of retirement investors will never see near this amount in their retirement nest eggs. In fact, about half of households age 55 and older have no retirement savings at all, and those that have put aside something have saved a median of only about $104,000 for households age 55-64 and $148,000 for households age 65-74.2 So if you anticipate hitting the $1-million mark, congratulations, you are way ahead of the pack. But don't feel too confident if you're hoping to retire to an expensive state. 1GOBankingRates, How Long $1 Million Will Last in Retirement in Every State, August 21, 2017. 2Government Accountability Office, Retirement Security, May 2015.
© 2017 DST Systems Inc. All rights reserved. 1-662733
8
Timely Insights for Your Financial Future
A Year of Spending (and Saving) Wisely Do you wait until the last minute to pack for your vacation or shop for back-to-school clothes for the kids? Do you find it difficult to start projects -- and then to finish them? Are you chronically late for appointments? If so, then chances are you are a procrastinator. When it comes to managing your finances, procrastination can keep you from reaching your goals. But by breaking your spending and saving priorities down into monthly increments, you may find it easier to stay on track.
Try some of these tips all year long. January -- Start an emergency savings fund with the goal of accumulating three to six months of living expenses. By setting aside just $25 a week, you could save $1,300 after just one year. It's important to have a backup plan -- and financial cushion -- when the unexpected happens. February -- Make sure you are making the most of your tax-deferred retirement savings opportunities. If you have access to an employer-sponsored retirement plan, such as a 401(k), are you contributing the maximum allowed? Generally,you may contribute up to $18,000 to qualified retirement plans in 2017, and those 50 and older may contribute an additional $6,000. (Additional plan limits may apply.) What about an IRA? The good news is you have until April 17, 2018, to contribute up to $5,500 (or $6,500 for those 50 and older) to an IRA for tax year 2017. March -- Start organizing your tax documents -- Form W-2s from your employer(s), property tax receipts, mortgage interest, charitable donation receipts, etc. -- so you're ready to meet with your tax advisor and get the biggest refund you are entitled to. April -- If you are one of the roughly 75% of Americans who do get a refund, consider directing it toward your emergency fund or credit card debt, or put the extra money toward your retirement. Every little bit can add up. May -- Spring is in the air -- and for many Americans -- the weather is warming up. Lowering the temperature on your hot water heater during summer months may help to cut costs. The U.S. Department of Energy (DOE) estimates that water heating accounts for about 18% of energy consumed in the average home. The agency recommends turning the heater setting on your water heater to warm (120F degrees) to save on energy costs. Visit the DOE website for more energy saving tips. June -- Have a green thumb? Vegetables fresh from the garden are less expensive than canned or frozen foods -- and they taste better, too! If you are not an experienced gardener, start small -- try a few tomato plants. And don't forget to water and fertilize regularly. July -- Are you signing the kids up for sports teams? If so, consider buying the needed equipment at used sporting goods stores. From catcher's mitts to hockey skates, these stores sell their wares at a fraction of the original cost. August -- Look for everyday learning experiences to teach your children about money. Have young children write down the price of similar items at the grocery store. Assist older kids in learning about managing money by allowing them to buy school supplies with a planned budget. Help children of all ages to set up a savings account at the local bank and decide how much they will plan to save each month for wish-list purchases. September -- In August and September many auto dealers try to clear their lots to make room for next year's new models. If you don't mind haggling, you may be able to shave money off a car's sticker price. October -- Plan for year-end tax saving moves. For instance, holding on to investments in taxable accounts for more than one year will generally qualify you for a lower tax rate on any capital gains -- 15% for most taxpayers and 20% for taxpayers in the top income tax bracket (39.6%). Also, keep in mind that realized capital losses can be used to offset realized capital gains for federal tax purposes. Any excess losses up to $3,000 ($1,500 for married individuals filing separate returns) can be deducted against ordinary income. A loss greater than that amount can be carried over to future tax years, subject to the same limits. November -- Many charities begin active fundraising at this time of year. Generally, charitable contributions to qualified charitable organizations are deductible. Also, before sending a donation to your favorite charity, you may want to obtain more information about the organization by checking various online resources, such as BBB Wise Giving Alliance or Charity Navigator, to find out if the charity meets your giving criteria. December -- Consider giving yourself an early holiday gift -- the gift of travel. Did you know that the first two weeks of December (after the Thanksgiving rush) is one of the slowest travel periods -- offering some of the best travel deals to destinations in the United States and other locales? If you want to take advantage of the December travel "dead zone," start shopping for flights a month or more in advance.
9
Timely Insights for Your Financial Future © 2017 DST Systems Inc. All rights reserved. 1-662716
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Jeffrey & Sherri Kitzberger is a Registered Representative with and Securities are offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Olympus Wealth Partners, Inc., a registered investment advisor and a separate entity from LPL Financial.
This newsletter was created using Newsletter OnDemand, powered by Wealth Management Systems Inc.
