Our Biggest Financial Challenges Are Often Self-Inflicted

Presented by Mark Phillips on April 13, 2016

In many respects, people can be their own worst enemies in their quest for financial security. When you consider that our lives are nothing more than a culmination of the decisions we make each day, if we tend to make more bad decisions than good decisions, or worse, if we can’t make decisions at all, it’s should be no surprise when financial security  remains elusive.

When it comes to finances and investment decisions, many people are not wired to be able to make decisions dispassionately, without emotions clouding their reasoning; and that’s when people tend to make the most behavioral mistakes with their financial decisions. Understanding these behavioral mistakes and how to avoid them is crucial to achieving financial security.

How many of these behavioral mistakes have you made?

Impulse purchases – We’re all prone to an impulse purchase now and then, but for some people, it’s more of pattern than a one-off indulgence; and when these purchases add to debt, the damage is compounded.

Using bonuses or salary increases to add to lifestyle and not savings – When people lack a goal, or a vision or a purpose, they are more likely to want more lifestyle than savings.

Trying to pick the winners – When investing, do you spend your time looking for the top performing mutual funds in hopes of jumping on the train to riches? Very rarely does a top performing mutual fund repeat its winning performance.

Following the herd – In investing, many people have a fear of being left behind, which is why the human tendency is to follow the herd in times of stock market exuberance or panic. Almost invariably, this leads to buying near the top of the market or selling near the bottom.

Procrastinating – Procrastination, typically brought on by the inability to make a decision, is one of the primary causes of financial distress.

Trying to avoid risk – Many of the behavioral mistakes people make is a result of their lack of understanding of the role risk plays in investing. Without risk, there are no returns; and, without returns, achieving financial security is almost impossible. If you think you are avoiding risk by avoiding the stock market, you are actually inviting other, more corrosive forms of risk, such as inflation risk, longevity risk, and interest rate risk.

These common, costly behavioral mistakes typically result from a lack of planning, with no clear vision or purpose to guide decisions.  Instead, decisions become reflexive responses to emotions that are allowed to dominate our thought process in the absence of the discipline, logic and reasoning that a well-conceived plan can engender.

Studies indicate that people who have well-defined goals, a clear purpose in life, and a thoughtfully prepared plan in place, are better able to check their emotions and muster the necessary discipline to follow their plan. In doing so, they are more likely to avoid many of the behavioral mistakes that can cost them their financial security.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2016 Advisor Websites.

Five New Ways We Could Use Credit Cards In The Future

Presented by Mark Phillips

Tired of pulling your credit card out of your wallet every time you want to make a purchase?  What if you only had to use your hand?  Or maybe instead of going to the grocery store, you could order groceries right from your refrigerator!  This article shares some possibilities for the future – that may or may not make life easier.

http://qz.com/609642/refrigerators-bots-and-cars-nine-ways-you-can-use-your-visa-card-in-10-years/

5 Moves Every Couple Should Make

By Melanie Vu

 

An exclusive survey on love and money shows that how you handle your finances affects how happy you are in your marriage.  Following these 5 moves may improve your financial compatibility.

1.       Get Financially Naked with each other – lay it all out on the table. Financial transparency will set a solid foundation for your relationship, whether you are dating, about to get married, or already married. Knowing your significant other’s savings, debt and goals will give you a good idea about how they handle their finances. If you and your significant other aren’t already open about finances, don’t rush them into it.  To avoid coming off as confrontational, wait until the mood is happy and plan to make lists together. Make a list of assets and liabilities and monthly expenses together, as well as setting individual and mutual goals.

2.       If you haven’t already discussed retirement yet, start by creating a vision plan. Write down what age you want to retire, where you want to retire, what activities you would like to do together in retirement. See how much you have each saved for retirement and how much you will need in order to achieve retirement success.

3.       Tackle the biggest source of tension – If you and your partner are on opposite ends of the spectrum when it comes to spending and saving, meet halfway. Many couples hide purchases from their partner to avoid conflict. Make lists of what each of you have spent for the month and decide together what is necessary and what is excessive. Make compromises that both partners can agree with.

4.        Handling Debt – debt can be one of the biggest silent killers of a relationship. Credit card debt and student loans impact a person’s self-confidence, also making it harder to save for specific goals.  If you create a plan together to pay off debt and review your progress periodically, you will both feel accomplished and be more motivated to continue paying it down.

5.       Keep Tiny Tiffs from Escalating – Practicing all of these steps doesn’t guarantee that you and your partner will always agree and find a solution. The important thing is how you handle your disagreements. When you do argue about money, don’t wait too long after you cool down to have another discussion. Relationships are give and take; don’t let money rule your relationship.

 

This content was adapted from Time Money’s article “Five Money Moves Every Couple Should Make.”

Written by Dan Kadlec with Kerri Anne Renzulli.

To read the full article, click here.

529A Accounts for Special Needs Individuals

Presented by Mark Phillips

As part of its 2014 year-end tax legislation activity, Congress passed the Achieving a Better Life Experience (ABLE) Act, which creates tax-favored accounts for individuals with disabilities.
Beginning in 2015, states will be allowed to adopt an ABLE program that mirrors many of the qualities of a traditional 529 plan. These “529A” accounts are intended to be a low-cost alternative to the establishment of special needs trusts.

About the new 529A account
Individuals with disabilities (or more likely, their parents or guardians) will be able to open one 529A account. To qualify, the beneficiary (the disabled individual)  must have a significant disability that he or she was diagnosed with prior to reaching age 26, and that disability must be expected to last for at least 12 consecutive months.

 

Contributions:

• Contributions are limited to $14,000 per individual, per year.
• Contributions are ineligible for the five-year-averaging rules available to standard 529 college savings plans.
• Unlike contributions to traditional 529 plans, contributions to 529A accounts are irrevocable.

 

Distributions:

• Qualified distributions may be taken over the beneficiary’s lifetime to cover the costs of medical expenses, education, transportation, employment training and support, and housing.
• Nonqualified distributions will be subject to income tax on earnings, as well as a 10-percent penalty.

Additional features:

• These accounts typically will not disqualify the disabled individual from most state or federal aid, such as Medicaid or social security.
• Only the first $100,000 in the account is exempt from the Supplemental Social Security Income limit of $2,000, however.
• Funds remaining in the account when the disabled individual passes away will be used to repay the state for any benefits received under a state Medicaid plan.
• Also to be determined is what will happen to any remainderment assets in the account not claimed by the state.

Other changes from the ABLE Act
In addition to the establishment of 529A accounts, the ABLE Act will allow traditional 529 plan owners to make twice-annual investment changes, rather than just one as has been the case historically. This change will apply to both 529 and 529A accounts beginning in 2015.

Although the legislation has been officially signed into law, the Department of the Treasury and the IRS have been given six months to develop regulations for these accounts. Additionally, states will need to implement their individual plans. As such, 529A accounts will likely be unavailable until the latter half of 2015, but they may certainly become an integral part of financial planning for some families with special needs children in the future.
 
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

For Registered Representatives: Mark Phillips is a financial consultant located at Mark Phillips & Associates, 19171 MacArthur Boulevard, Suite 225, Irvine, CA 92612.  He offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. He can be reached at (949) 333-6394 or at mark@phillipswealthmanagement.com.
 
© 2015 Commonwealth Financial Network®

Student Loans: How much can the student borrow?

Presented by Mark Phillips

From the Federal Government Student Aid web site

(click here to access the website)

Your school determines the loan type(s), if any, and the actual loan amount you are eligible to receive each academic year. However, there are limits on the amount in subsidized and unsubsidized loans that you may be eligible to receive each academic year (annual loan limits) and the total amounts that you may borrow for undergraduate and graduate study (aggregate loan limits). The actual loan amount you are eligible to receive each academic year may be less than the annual loan limit. These limits vary depending on

     ·  what year you are in school and

·  whether you are a dependent or independent student.

If you are a dependent student whose parents are ineligible for a Direct PLUS Loan, you may be able to receive additional Direct Unsubsidized Loan funds.

If the total loan amount you receive over the course of your education reaches the aggregate loan limit, you are not eligible to receive additional loans. However, if you repay some of your loans to bring your outstanding loan debt below the aggregate loan limit, you could then borrow again, up to the amount of your remaining eligibility under the aggregate loan limit.

The following chart shows the annual and aggregate limits for subsidized and unsubsidized loans.

Year	Dependent Students (except students whose parents are unable to obtain PLUS Loans)	Independent Students (and dependent undergraduate students whose parents are unable to obtain PLUS Loans)
First-Year Undergraduate Annual Loan Limit	$5,500—No more than $3,500 of this amount may be in subsidized loans.	$9,500—No more than $3,500 of this amount may be in subsidized loans.
Second-Year Undergraduate Annual Loan Limit	$6,500—No more than $4,500 of this amount may be in subsidized loans.	$10,500—No more than $4,500 of this amount may be in subsidized loans.
Third-Year and Beyond Undergraduate Annual Loan Limit	$7,500—No more than $5,500 of this amount may be in subsidized loans.	$12,500—No more than $5,500 of this amount may be in subsidized loans.
Graduate or Professional Students Annual Loan Limit	Not Applicable (all graduate and professional students are considered independent)	$20,500 (unsubsidized only)
Subsidized and Unsubsidized Aggregate Loan Limit	$31,000—No more than $23,000 of this amount may be in subsidized loans.	$57,500 for undergraduates—No more than $23,000 of this amount may be in subsidized loans. $138,500 for graduate or professional students—No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study.

Notes:

·       The aggregate loan limits include any Subsidized Federal Stafford Loans or Unsubsidized Federal Stafford Loans you may have previously received under the Federal Family Education Loan (FFEL) Program. As a result of legislation that took effect July 1, 2010, no further loans are being made under the FFEL Program.

·       Effective for periods of enrollment beginning on or after July 1, 2012, graduate and professional students are no longer eligible to receive Direct Subsidized Loans. The $65,500 subsidized aggregate loan limit for graduate or professional students includes subsidized loans that a graduate or professional student may have received for periods of enrollment that began before July 1, 2012, or for prior undergraduate study.

Graduate and professional students enrolled in certain health profession programs may receive additional Direct Unsubsidized Loan amounts each academic year beyond those shown above. For these students, there is also a higher aggregate limit on Direct Unsubsidized Loans. If you are enrolled in a health profession program, talk to the financial aid office at your school for information about annual and aggregate limits.

 

Understanding Your Credit Report and Score

Presented by Mark Phillips

How much do you know about your credit?

If you haven't checked your credit report or score lately, say in the past 12 months or less, it may be time to give them a look, especially if you have a major purchase or life change on the horizon. A bad credit report or score could mean you face higher interest rates—or cost you a loan, a job, or an apartment—so it's important to understand what's in your credit report and how to improve your score. Reviewing your credit information is also a good way to identify signs of identity theft.

Order a copy of your report. At your request, each of the three nationwide credit reporting agencies—Equifax, Experian, and TransUnion—is required by law to provide you with a free copy of your credit report once every 12 months. The credit reporting companies have set up a central website, www.annualcreditreport.com, where you can access your credit report immediately.

Read More and take action…

1 in 4 Seniors Have Meager Savings

Presented by Mark Phillips

We found this article that we thought was interesting about the savings situation of seniors. Particularly disturbing is that one-quarter of the Medicare beneficiaries have less than $11,300 in their retirement and financial accounts.

“Most people on Medicare are of modest means with relatively low incomes, low savings and low home equity,” said Gretchen Jacobson Associates Director of the Medicare policy program at Kaiser Family Foundation.

While our practice is focused on designing and implementing retirement income for clients of moderate to high means we understand that there are some people in your life, that matter a lot to you, that are in this group with very limited means. For you as our clients we urge you to have them meet once off with us such that we might help them focus on those behaviors that may help them not slip into a financial black hole.

Of course we welcome an introduction to your friends of moderately to high means as they too want to maximize their “lifestyle” with the resources, and to manage the risk in their life going forward.

We are here to help create financial stability and security for you and your friends.

Access the full Article  - Enjoy!

IRS Benefit Plan Limits for 2015

Presented by Mark Phillips

he Internal Revenue Service (IRS) has announced contribution limits for retirement plan participants for 2015. Many of the limits will change because the Consumer Price Index met the statutory thresholds that trigger their adjustment.

The maximum annual contribution employees can make through salary reduction to a 401(k), 457(b), or 403(b) has increased to $18,000. Catch-up contributions for employees 50 years of age and older has also increased, to a maximum of $6,000 per year. SIMPLE IRA limits have increased from $12,000 to $12,500, while the compensation limit for SEPs has also increased from $550 to $600.

 

The dollar limit used in the definition of a key employee for top-heavy purposes remains unchanged at $170,000, but the definition of a highly compensated employee has increased to $120,000.

401(k) Plan Limits for Plan Year	2015 Limit	2014 Limit	IRC Reference
401(k) Elective Deferral Limit1	$18,000	$17,500	402(g)(1)
Catch-Up Contribution2	$6,000	$5,500	414(v)(2)(B)(i)
Defined Contribution Dollar Limit	$53,000	$52,000	415(c)(1)(A)
Compensation Limit3	$265,000	$260,000	401(a)(17); 404(i)
Highly Compensated Employee Income Limit	$120,000	$115,000	414(q)(1)(B)
Key Employee Officer Limit	$170,000	$170,000	416(i)(1)(A)(i)
Non-401(k) Limits
403(b) Elective Deferral Limit1	$18,000	$17,500	402(g)(1)
Defined Benefit Dollar Limit	$210,000	$210,000	415(b)(1)(A)
457 Employee Deferral Limit	$18,000	$17,500	457(e)(15)
SEP and SIMPLE IRA Limits
SEP Minimum Compensation	$600	$550	408(k)(2)(C)
SEP Maximum Compensation	$265,000	$260,000	401(a)(17); 404(i)
SIMPLE Contribution Limit	$12,500	$12,000	408(p)(2)(E)
SIMPLE Catch-Up Contribution2	$3,000	$2,500	414(v)(2)(B)(i)

¹ Employee deferrals to all 401(k) and 403(b) plans must be aggregated for purposes of this limit.

² Available to employees age 50 and older during the calendar year.

³ All compensation from a single employer (including all members of a controlled group) must be aggregated for purposes of this limit.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or a lawyer.

IRS CIRCULAR 230 DISCLOSURE:
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax information contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed here.

 

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