Goldstone Financial Group's Blog

Understanding the True Cost of Hidden Fees With Goldstone Financial Group

Anthony Pellegrino | Goldstone Financial Group

A 1% fee doesn’t seem like much at first glance. After all, basic math tells us that it would only claim a single dollar out of a hundred or ten out of a thousand. To a new investor or aspiring retiree, signing over one or even two percent of a portfolio’s earnings might seem like a reasonable — or even small! — price to pay for enjoying the remaining 99% later in life.

A 1% cost might not look like much — but appearances can be deceiving. When it comes to investments, administrative expenses that may have seemed almost negligible at first can burgeon into costly financial demands. Mutual funds are particularly notorious for their plethora of so-called “hidden fees,” which often carve a significant portion of a portfolio’s future value away in a series of small cuts. Worse, these costs are often applied internally and may not be visible on your monthly statement; if you don’t go out of your way to investigate your accounts, you may never know precisely how much of your profits minor fees claim each year.

To continue our example — one dollar out of a hundred isn’t much of a loss. However, the primary financial drain to your account isn’t the initial deduction, but the opportunity cost posed by losing that dollar. By giving it up, you sacrifice its potential to compound and grow as an investment asset. For robust retirement accounts, these 1–2% fees could end up costing a retiree hundreds of thousands in lost profits. In 2018, analysts from Nerdwallet applied these average fees to a hypothetical millennial and found that over 40 years of saving, the investor would lose more than $500,000 to average charges.

Let’s break this down further.

To read the full article, click here! 

Investment Advisory Services offered through Goldstone Financial Group, LLC a Registered Investment Advisor (GFG). GFG is located at One Lincoln Centre, 18W140 Butterfield Rd., 14th Floor, Oakbrook Terrace, IL 60181, Telephone number — 630–620–9300.

Social Security Updates

Good news for retirees: Social Security benefits are scheduled to increase 2.8 percent in 2019, the biggest bump since the 3.6 percent increase in 2012.The average beneficiary – who received about $1,405 a month in 2018 – can expect to see just over $39 more each month, or about $468 more over the course of the year.1

Such cost of living increases are meant to cover household expenses that rise due to inflation. However, if you can absorb those additional costs, you could think about redirecting that additional payout toward helping to meet your long-term financial goals. For example, an emergency savings account or a life insurance policy designed to pay for funeral expenses. If you would like help with this, please give us a call.

There are a few more updates to Social Security for 2019. For one, the supplemental benefit paid to those who are blind or disabled will increase to $771 from $750 per individual; to $1,157 from $1,125 for couples. Second, if you’re currently working while receiving benefits, you can earn a bit more before those benefits are reduced. Moving forward, you may now earn up to $17,640 before $1 is deducted for every $2 you earn. In the year before you turn your full retirement age, you may earn up to $46,920 before $1 is deducted for every $3 you earn until the month you reach your full retirement age. And third, for those who are still working and have not yet started receiving benefits, the maximum amount of earnings subject to the Social Security tax will increase to $132,900 from $128,400.2

Some advocate eliminating the earnings cap to keep Social Security solvent in the future. That’s because the brunt of taxes dedicated to Social Security comes from lower-income earners, while high earners avoid this tax on earnings above $132,900. In fact, due to the increase in income disparity in the United States, a much higher level of earned income is now exempted from this payroll tax compared to the 1980s – $300 billion in 1983 versus $1.2 trillion in 2016.3

Other changes in addition to eliminating the taxable income cap have also been proposed. One option, which could benefit both the Social Security fund as a whole and individual retirees, is encouraging retirees to delay claiming Social Security benefits. For every year delayed, one’s benefits increase 8 percent. Those who wait to take the benefit until age 67 receive about 43 percent more a month; those who wait until age 70 receive about 75 percent more in lifetime monthly benefits.4

Social Security benefits – both funding and payouts – can be complex. It is worthwhile to stay abreast of the policies, changes and strategies that can help maximize benefits. For additional information, try out this quiz – which also gives a detailed explanation of the correct answers to help you become better educated about Social Security.5

Content prepared by Kara Stefan Communications.

John Wasik. Forbes. Nov. 2, 2018. “5 Things You Should Know About Social Security Changes.”https://www.forbes.com/sites/johnwasik/2018/11/02/5-things-you-should-know-about-social-security-changes/. Accessed Nov. 9, 2018.

2 Ibid.

Sean Williams. USA Today. Nov. 9, 2018. “Why the Social Security program will never run out of cash.”https://www.usatoday.com/story/money/2018/11/09/when-does-social-security-run-out/38452267/. Accessed Nov. 9, 2018.

Knowledge@Wharton. Oct. 3, 2018. “Delaying Social Security: How Lump Sum Payments Can Help.”http://knowledge.wharton.upenn.edu/article/delay-social-security/. Accessed Nov. 8, 2018.

Matthew Frankel. USA Today. June 2, 2018. “47% of American pre-retirees failed this basic Social Security quiz. Can you pass it?”https://www.usatoday.com/story/money/personalfinance/retirement/2018/06/02/pre-retirees-failed-basic-social-security-quiz/35343701/. Accessed Nov. 9, 2018.

Our firm is not affiliated with the U.S. government or any governmental agency.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

660667B

What Should You Look for in a Financial Advisor?

All financial advisors are not equally helpful. In this episode, Michael and Anthony Pellegrino illustrate why your choice of financial advisor could guide — or derail — your journey into retirement. The advice you receive will set the foundation for your financial future; you need to make sure that the person you turn to for help has your best interests at heart.

As Michael explains, there are two primary categories of advisors. The first is a fiduciary. All of Goldstone Financial Group’s advisors are certified fiduciaries and are thus legally obligated to put their clients’ needs above their own financial interests. The second category of advisors holds to a suitability standard. Unlike fiduciaries, suitability-grade professionals do not consider the client’s long-term financial health. So long as the advisor deems a product suitable for the situation at hand, they can sell it — regardless of whether it will still be useful in five or ten years. The only way that a client can be certain that their advisor has their best interests at heart is to sign on with a fiduciary.

However, a fiduciary certification alone doesn’t guarantee that an advisor is right for you. As Michael and Anthony Pellegrino point out in this episode, a genuinely effective advisor has other positive qualities.

Good Listening Skills

Even the best-qualified advisors will fall short if they don’t bother to engage with their clients. They need to listen to their clients’ goals, acknowledge their concerns, and ask the questions that will give them enough context to establish a solid financial plan.

Accessibility

Advisors should be accessible — and yet, many retirees find it difficult to schedule an appointment that lasts long enough for their advisor to address their questions and concerns fully. This issue is particularly pressing at larger firms that have higher turnover rates for advisors. With these organizations, clients might cycle through advisors every six months, and never get a chance to build a long-term, trusting relationship with any one person.

Proactivity

We exist in an ever-changing market environment. Retirees need advisors who can be proactive and adaptive in good and bad times alike. If an advisor is reactive and only makes a move after circumstances have changed for the worse, they won’t be as effective as someone who acted preemptively.

To sum up — when you look for an advisor, search for a fiduciary that you like and trust!

 

News Around the Internet

By Anthony Pellegrino | Goldstone Financial Group 

Where there is internet, is there more prosperity? Generally speaking, yes.

It costs much more to lay fiber to outlying communities than it does in larger metropolitan areas, which may contribute to the growing geographical discrepancy between income, education and even health care. Some places, like Indiana, hope to bring rural areas up to speed by expanding broadband access. Indiana, for example, is planning a $1 billion infrastructure update.1

Internet access opens the door for opportunities in a variety of areas, including education. Enrollment for online higher education classes is increasing each year, according to the report “Grade Increase: Tracking Distance Education in the United States.” Most of this enrollment (67.8 percent) is by students attending public institutions, with about half of students also attending on-campus classes. While online educational enrollment is rising swiftly, the number of students studying on a campus dropped by more than 1 million between 2012 and 2016.2

Keeping in touch with friends and the world’s current events is also simplified by internet access. Use of social media websites and apps is widespread among all demographics. According to a Pew Research Center study, while the share of teens using Facebook fell 20 percentage points over three years, a larger share of lower-income teens continue to use Facebook. Sociologists interviewed noted that higher-income teens often seek the prestige of the next “hot” social media platform, whereas lower-income teens continue to rely on Facebook to connect with a diverse network of friends and family.3

Unfortunately, the internet also has become a tool for negativity, particularly when it comes to bullying and misinformation. While social media has done much to establish and strengthen connections among people, it also enables the propagation of cyberbullying, a growing threat for teens and preteens. In 2018, 26 percent of parents reported their child had been a victim of cyberbullying. However, this share has dropped from 34 percent in 2016.4 First Lady Melania Trump has made cyberbullying her primary focus, encouraging adults to provide children with information and tools to develop safe online habits.5

Perhaps one of the most detrimental uses of the internet in recent years has been the spread of misinformation, particularly “fake news” stories that look like legitimate articles but which report inaccurate or fabricated facts and statistics. The problem is exacerbated by social media users who read and believe the stories, then share them with friends and followers.

Worse yet, these fake articles are circulated by bots on Twitter and other websites. A “bot” is an automated account made to look like a human user that is programmed to spread false information. More than 13.6 million Twitter posts shared misinformation linked to bots between May 2016 and March 2017.6

Sadly, people tend to be more interested in dramatized falsehoods than the truth. One researcher found that while true news stories tend to spread to no more than about 1,600 people, shared false stories on the internet tend to reach tens of thousands of readers, even though they originated from far fewer sources.7

Content prepared by Kara Stefan Communications.

1 Lindsey Erdody. Indiana Business Journal. Sept. 14, 2018. “Broadband blitz to lift economy, study says.” https://www.ibj.com/articles/70471-broadband-blitz-to-lift-economy-study-says. Accessed Oct. 4, 2018.

2 Online Learning Consortium. Jan. 11, 2018. “New Study: Distance Education Up, Overall Enrollments Down.”https://onlinelearningconsortium.org/news_item/new-study-distance-education-overall-enrollments/. Accessed Nov. 30, 2018.

Hanna Kozlowska. Quartz.com. Aug. 15, 2018. “Do teens use Facebook? It depends on their family’s income.” https://qz.com/1355827/do-teens-use-facebook-it-depends-on-their-familys-income/. Accessed Nov. 30, 2018.

Sam Cook. Comparitech. Nov. 12, 2018. “Cyberbullying facts and statistics for 2016-2018.” https://www.comparitech.com/internet-providers/cyberbullying-statistics/. Accessed Nov. 30, 2018.

Jordyn Phelps. ABC News. Aug. 20, 2018. “First lady Melania Trump speaks out against cyberbullying.” https://abcnews.go.com/Politics/lady-melania-trump-speaks-cyberbullying/story?id=57284988. Accessed Nov. 30, 2018.

Maria Temming. Science News. Nov. 20, 2018. “How Twitter bots get people to spread fake news.” https://www.sciencenews.org/article/twitter-bots-fake-news-2016-election. Accessed Nov. 30, 2018.

Maria Temming. Science News. March 8, 2018. “On Twitter, the lure of fake news is stronger than the truth.”https://www.sciencenews.org/article/twitter-fake-news-truth. Accessed Nov. 30, 2018.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

690042B

Goldstone Financial Group TV: Should You Roll Over Your 401k?

Anthony Pellegrino | Goldstone Financial Group | Goldstone Financial Group TV: Should You Roll Over Your 401k?

 

In this ongoing series, Goldstone Financial Group principals Michael and Anthony Pellegrino answer personal finance questions from the residents of Chicago. This episode centers on employer-sponsored retirement accounts — and, more specifically, the strategies a retiree can use to grow the money they save further.

 

How limited am I to my company’s 401K options?

MICHAEL PELLEGRINO: Unfortunately, you probably are relatively limited. Most people only have a few options available when they sign on to a company 401(k) plan. If you do enroll, it’s crucial that you contribute — and if your employer offers a match, take them up on it! That’s free money in your account. Aside from that, I’d suggest working with an advisor to see if you’re eligible to make an IRA or Roth contribution.

ANTHONY PELLEGRINO: Another factor to consider is age. Most people assume that they can’t touch their 401(k) while they’re working, but you have more options once you reach 59.5 years of age. If you’re still working and contributing at that point, a fiduciary could help you put together an in-service rollover. You can go in and access some part or all of your 401(k) and then roll over those funds to an IRA. At that point, you have more options for your investment — and you don’t have to stop contributing to your 401(k), either! You’ll have two buckets to grow your investment, instead of one.

 

Should I leave my old 401k with my past employer?

MICHAEL PELLEGRINO: That’s one option, but you may have others. It’s important to look at the specifics of your 401(k) before you make any decisions. Again, though, an employer-sponsored plan is going to limit your options. It might be worth looking into rolling the money over into other investment vehicles — an IRA account, for example.

 

Should I take out money from my pension fund from a previous employer, or should I leave it there to grow over time?

ANTHONY PELLEGRINO: Those of us at Goldstone Financial Group specialize in these “lump-sum pension option rollovers.” People come to us all the time to ask about lump-sum buyouts, wondering whether they should take their pension money out all at once or access it in installments as “income” in retirement. In our view, a pension is just a large annuity. Once you start drawing income, you give up all access to its liquidity. You’re locked into that model, and you have no way to move the money you’ve saved into other investment vehicles. Worse, a pension does not come with death benefits — if a retiree were to pass on after spending decades with a company, their family would get nothing.

MICHAEL PELLEGRINO: As fiduciaries, we can create a comparison of your options and help you determine whether you should keep your 401(k) as is or roll those funds over into another investment vehicle.

Anthony Pellegrino on OnMogul

Anthony Pellegrino | Goldstone Financial Group | Planning For Long-Term Care? Goldstone Financial Group Can Help

Anthony Pellegrino, Goldstone Financial Group founder and firm principal, has dedicated his practice not only to helping individuals plan for their financial future but also remaining by their side as a partner in achieving their desired results. When Goldstone Financial Group helps a client prepare for retirement, they aren’t afraid to talk about the worst-case scenarios.

“Everyone likes to hope for the best – heck, we like to hope for the best,” Anthony Pellegrino says, “But we have to think about the practical issues, too. The last outcome we want is for a client to put away money every day for two, even three decades and then find themselves struggling to pay their bills after an unexpected and financially catastrophic life event.”

Read the full article here!

Is Your Portfolio Too Risky? Goldstone Financial Group Weighs In

Laptop on desk with finances

When it comes to money, most people prefer a predictable approach; they feel secure with the regular schedule of a paycheck or the guarantee of a reliable income. There are some who may find a thrill in the possibility of a riskier and potentially more profitable investment, but their worry exceeds their optimism. Understanding the actual level of risk can make a huge difference.

The calculated risks investments demand isn’t for everyone. However, for Goldstone Financial Group founder and principal Anthony Pellegrino, assessing risk is a way of life. Anthony Pellegrino has built his career on determining good investments from bad investments while guiding his clients towards a secure financial future. Assessing and determining the level of risk in investments, he explains is one of the most important aspects of his job – mainly because many of the people he connects with do not realize how risky their portfolio really is.

Read the full article on Patch! 

Goldstone Financial Group TV: Are Annuities Right for You?

When most people save for retirement, they do so with the expectation that after they cash their last paycheck, they will have enough money in savings and investment assets to carry them through the entirety of their lives. They feel secure in knowing that they have money tucked away, so they rarely consider the worst-case scenarios.

What if they face a massive investment loss shortly before or after their retirement? What do they do if they spend most of their savings in the first decade of retirement, only to live another ten years?

Without a steady paycheck, retirees don’t have a fixed source of monthly income or a way to guarantee that they will be able to pay their bills during their sunset years. They need a plan – and Goldstone Financial Group is prepared to offer a few suggestions.

In this episode, firm principal Anthony Pellegrino provides a few insights into how those planning for retirement can establish a predictable income stream before they lose the security of their monthly paycheck.

According to Pellegrino, one of the best options available to retirees today are annuities. These investment vehicles come in all varieties, each with their pros and cons. An annuity that works for one person may be financially damaging for another – and as such, it is essential to consult a certified fiduciary before signing up for one. In this video, however, Anthony Pellegrino provides two examples of annuities that may be helpful for some retirees.

 

Example #1:

At age 60, you place $250,000 in an annuity account. This account will give you a bonus of six, seven, or even eight percent for signing up if you agree to a ten-year term. Throughout the decade, that percentage bonus will generate an additional $28,000 for your retirement fund.

Some annuity packages also come with a Home Healthcare Doubler, which would effectively double your income during the years that you might need assistance with two or more of the six active daily living (ADL) needs such as bathing, eating, or walking. It is worth noting that the doubler benefits only apply up until a set age ceiling; after that, the income provided would revert to the original amount.

 

Example #2

Let’s assume that you place that same $250,000 in a different variety of account. In this scenario, you have the security of a floor beneath your initial contribution. Even better, the annuity is designed with a built-in inflationary hedge. Every time the market trends upward, you will see your annual income increase by the same percentage – and when the market trends downward, your income remains fixed at its previous yearly amount. As a bonus, these accounts can also be structured to include a clause for spousal continuation, which would allow the account holder’s spouse to take ownership of the annuity if they pass away.

Most retirees hope to build and build – but they don’t have a plan in place for establishing a stable income stream. Goldstone Financial Group can help! Reach out today to consult with a certified fiduciary.

 

Has Warren Buffett’s Buy and Hold Strategy Gone Out of Style?

By Anthony Pellegrino | Goldstone Financial Group | Kiplinger

Many investment professionals, including Warren Buffett, advise investors to buy and hold a diversified portfolio of stocks … and hold and hold. But with today’s record-long bull market, maybe it’s time to try tactical asset management instead.

When is the last time you took a look at how your investment portfolio is performing — and then did something about it?

If your answer is “Hmmm … not lately,” you’re not alone.

Too many people still have the old-school mentality that if they buy a diverse bunch of mutual funds and stocks — spreading out their money into several different buckets — they’ve done what they can to protect themselves against a big drop in the market. They buy and hope — and hope and hope — that by the time they retire, there will be more money in those buckets than when they started.

The Old Buy and Hold Approach Strategy

Who can blame them, when that’s been the prevailing investment theory for more than 60 years? Whenever the market starts to wobble, they’re told: “Don’t worry about it; stick with it. You’re in for the long haul.” Even billionaire Warren Buffett, the “Oracle of Omaha,” tells nervous investors not to watch the market too closely and says that buy-and-hold is still the best strategy.

It may not be. It may be an antiquated approach.

The markets have changed; we’re in a global economy. When something happens overseas — Brexit, for example, or debt or stock shifts in Greece or China — we feel it here. It may not make sense to buy and hold certain investments long term, possibly riding them as they go down. If you have stocks that appear to have run their course, why not take some of the chips off the table and pull some of the profits while you can? Sure, there are exceptions, but sometimes if you hold onto a winner too long, it can become a loser.

Many investors learned this lesson the hard way in 2008 and 2009.

People have come to our firm who used the buy-and-hold strategy then and thought they were safe. They experienced 30%, 40%, or even 50% losses during those years.

A Different Way of Approaching Investing

We talk to them about potentially taking a more active approach with tactical asset management.

Tactical asset management strategy is 100% math-based. It uses short-term and long-term averages to monitor the market, and when the two averages cross over, it’s a signal to become either defensive or bullish. Money managers use technical analysis to move to the sidelines into cash when the market statistical indicators look bleak and to buy back in when their market indicators improve.

Timing the market is never a sure thing, and investors who try to do it blindly can get burned if they let their emotions rule their decisions. However tactical asset management takes the emotional side out the market and focuses on the technical and fundamental aspects instead. That analytical approach can potentially eliminate riding a bull market too long.

Get the Help You Need to Actively Monitor Your Portfolio

So many people get caught up in life and forget about their investment accounts. The years fly by, and they remain passive about their investments until retirement closes in. (Although many don’t lessen the risk even then – you see Baby Boomers who still have almost everything in a bunch of stocks and mutual funds that carry risk.)

Find someone who will help watch your money with you. Look for a financial adviser who is held to a fiduciary standard, who is legally and ethically bound to put your interests first.

Don’t put it off any longer. This bull market may be running on wobbly legs, and hope isn’t going to prop it up.

Goldstone Financial Group: Taking Control of Your Retirement

With current advances in medical technology, Americans today are living longer than ever before. A retiree now has more time than they ever have expected to enjoy their post-career life — and more concerns that the nest egg they saved to fund it won’t last. In this episode, Goldstone Financial Group’s principal advisors, Anthony and Michael Pellegrino, sit down to discuss these fears and offer a few insights into how savvy professionals can leverage their assets to prepare for retirement.

The Pellegrinos begin the segment by outlining a few realities of personal finance today. Pensions, Anthony notes, have more or less fallen by the wayside. As employers step back, individuals need to take over the responsibility of ensuring that they have a steady income for the next twenty, thirty, or even forty years of their lives. Their spending, too, needs to be carefully considered — if retirees blow through too much of their savings too soon, they risk running out of the funds they need to pay their bills. If they spend too little, on the other hand, they may deprive themselves of a lifestyle they could have afforded.

As the pair explains, each individual has a different set of financial circumstances and goals. Some might be more risk-tolerant; others might be more risk-averse — and these preferences will play into the tailored financial plans that wealth managers create for their clients. However, Anthony Pellegrino stresses that regardless of a person’s financial nuances, every portfolio must be diversified beyond the typical set of stocks, bonds, and mutual funds. The careful diversification, he explains, will help mitigate some of the investment risks that some clients might otherwise face.

When the conversation turns to risk minimization, Michael Pellegrino takes the time to explain Goldstone Financial Group’s approach to what the principals refer to as Tactical Asset Management. Most people, Michael explains, are familiar with the “buy and hold” approach — that is, buying assets to hold through good and bad times alike. A TAM strategy is somewhat different: trained money managers use algorithms and their own experience to assess downturn risks, then adjust their investment strategy accordingly. If the risk is high, they can shift into a more defensive position – or change a client’s assets into cash to protect against severe fluctuations in the market.

Tactical asset management, Michael stresses, is not something that clients should attempt on their own. The best course of action would be to enlist the aid of high-level institutional money managers like the one Goldstone Financial Group employs to care for client accounts. These trained professionals work behind the scenes to track market movements and implement carefully-considered investment strategies on a client’s behalf.

Your retirement savings will fund your retirement, so don’t shortchange yourself. Consult a financial professional today to learn what you could be doing to achieve your long-term financial goals!

Goldstone Financial Group: Why You Shouldn’t Forget About Your Old 401(k)s

When it comes to retirement planning, the 401(k) is near-universal. The vast majority of company-employed workers funnel a small portion of their paycheck directly into their tax-deferred 401(k) each pay period. As Anthony and Michael Pellegrino explain in this installment, having this type of investment vehicle is a crucial part of an effective retirement savings strategy. The pair suggests that employees should take full advantage of their accounts by contributing as much as they can, as early as they can; after all, Michael points out, employees essentially accumulate free money if their work-sponsored plan includes an employer contribution.

What most people don’t have, however, is a strategy to handle their old 401(k) accounts. In his experience, Anthony Pellegrino says, late-career employees will often two, three, or even four old retirement accounts scattered across past employers. Most people tend to have an unfortunate “buy-and-hold” mentality when it comes to old 401(k)s and only notice them when the market dives. To make matters worse, the funds in these accounts are often subject to lots of internal fees, poor expense ratios, and sub-account fees. The better savings solution, Anthony explains, would be to roll the funds from those languishing 401(k)s into a single, more strategically-considered account.

Employees nearing retirement have even more options, Anthony points out. If a person is fifty-nine and a half or older, they have the opportunity to apply an in-service rollover or in-service distribution to old 401(k) accounts. While many people believe that they can’t access their current 401(k) during their employment term, those over the age mentioned above can roll the savings from that account into other investment vehicles and think beyond the limits of their company plan. No taxable event takes place when funds shift from a 401(k) into an IRA – so savers should take advantage!

That said, Michael Pellegrino interjects, people who haven’t reached the fifty-nine-year mark have their own set of imperatives. They need to start planning for retirement early on, contribute as much as they can, and ensure that their investment portfolio is diversified in a way that suits who they are.

To summarize: don’t neglect your old 401(k) plans, start contributing early, take advantage of employer contributions, and implement an in-service rollover when you can! If you need further advice and direction, advisors at Goldstone Financial Group can help you tailor these strategies to suit your unique needs.

Goldstone Financial Group: Which Investment Vehicles Are the Best?

In this episode, Goldstone Financial Group representatives took to Chicago’s streets to ask residents about their most pressing financial questions.

Anthony and Michael Pellegrino provide answers.

Are mutual funds the best place to invest my money?

Michael Pellegrino:

Mutual funds can be a great vehicle for investment, but they certainly aren’t the only one available. Every person’s financial needs, situation, and goals are different; one person might be better suited by investing in bonds or stocks – or maybe mutual funds are preferable. Muddling through the possibilities can be difficult for anyone who hasn’t worked in the financial sector for years, so I would highly recommend making an appointment with an experienced financial advisor to understand your options.

My husband’s retiring, how will an annuity help us?

Anthony Pellegrino:

First things first – there is no single annuity. They come in a variety; fixed annuities are high-interest and tax-deferred, while variable annuities have high fees and fixed hybrids limit downside risks. Another option might be an immediate annuity, which would offer money right away, but prevent investors from having cash access. Like any other investment, its suitability varies depending on the financial needs and situations of the investor.

That said, annuities tend to get a bad rap. Michael and I generally tend not to like them, but there are a few great options out there. You need to enlist an advisor to help you make the best choice for your particular set of circumstances.

Am I better investing in ETFs?

Michael Pellegrino:

Exchange Traded Funds (ETFs) do offer another option for investors. They came onto the investment scene in the last few years as an alternative to mutual funds. Like the latter investment type, ETFs allow investors to maintain multiple ownerships within one vehicle and thereby diversify their portfolio. ETFs also tend to have lower internal costs than mutual funds – but again, it’s best to consult a financial advisor before you settle on an investment plan.

Goldstone Financial Group: Are Hidden Fees Cutting Into Your Retirement Fund?

 

When most people begin to plan for retirement, their goals are usually simple. They want to put aside enough money to live the lifestyle they want and have a little left to pass onto their beneficiaries. They imagine that by saving and investing, they are already well on the path to a successful retirement – but in some cases, covering the basics won’t be enough to secure financial stability later in life.

Too often, people overlook small but crucial details. They might have a substantial savings account and a few investments, but they haven’t realized just how much of their retirement fund they lose to fees each year.

As Anthony and Michael Pellegrino point out in this episode, seemingly small costs can add up quickly. Mutual funds, for example, are positively riddled with small financial demands that run the gamut form 12B-1 costs to sub-account fees and trading expenses. All told, these administrative expenses can claim two percent or more of a person’s investment earnings for the year. To make matters worse, these costs are applied internally, so the client might never realize how much those fees carve out of their profits!

As an institutional fiduciary, Goldstone Financial Group can lessen the impact of administrative costs by bundling them into a single wrap cost – a fee which takes care of advisory costs, covers third-party money manager expenses, and allows for unlimited trading. By packing the fees into one institutionally-managed bundle, Michael explains, Goldstone advisors can lower administrative costs overall by shifting clients out of retail investment and into a more cost-effective institutional setting.

However, avoiding hidden fees is only half of the battle when it comes to savvy investment. Knowing who is managing your money and what their qualifications are, Anthony stresses, is just as crucial to your financial health. While the vast majority of client-facing financial professionals call themselves “advisors,” only registered fiduciaries are legally obligated to put their client’s best investment interests above their own.

Brokers, Anthony goes on to explain, are trying to sell a product. When they convince their clients to invest, they earn a commission. The nature of their occupation incentivizes them to sell more, even when the investment might not be in the client’s best interests.

All of Goldstone’s advisors are registered fiduciaries; as such, they have a legal and moral responsibility to put their clients’ financial interests above their own. Regardless of whether clients choose to sign on with Goldstone or another investment firm, however, Anthony and Michael believe it to be critical that they sift through hidden fees early and find a registered fiduciary to help them plan for retirement. Otherwise, clients run the risk of losing significant portions of their retirement savings to unnecessarily high fees and unscrupulous “advisors.”

Notes on U.S. Infrastructure

The American Society of Civil Engineers has given the U.S. an overall infrastructure grade of D+. Throughout the next decade, it will take more than $4.5 trillion to fix our aging infrastructure — including upgrades to roads, mass transit, wastewater treatment plants and the electrical grid.1

We’ve reached the mission-critical stage. One industry analyst observed, “We’re at the point where our infrastructure is becoming an impediment to productivity and long-term economic growth.”2

The idea of national infrastructure may remind us of personal retirement preparation. If you are still working and thinking about retirement options, consider your own “infrastructure” situation. First, are you considering relocating or downsizing, or are you committed to aging in your own home? If you prefer the latter, it’s a good idea to check out your home from top to bottom to see whether you need any major repairs or maintenance while you’re still earning a paycheck.

This inspection should include considering a new roof, checking for mold buildup in your crawl space and researching new windows or other energy-efficient features that can help lower your utility bills. Even replacing older appliances could impact your household budget once you’re living on a fixed income.

Given our dramatic weather pattern swings, we should also prepare for the possibility of a natural disaster that could affect our daily living. Consider how you might plan for a long-term disruption in power or clean water supplies, such as installing a generator, solar panels, tiles and/or a battery pack. While it may seem farfetched, remember that the citizens of Puerto Rico probably never thought they would have to adapt for long-term power outages, as seen after Hurricane Maria.3

One way the U.S. is trying to address some of these issues is by incorporating green stormwater infrastructure (GSI) in sewer overflow control and integrated wet-weather plans. The idea is to evaluate the performance of GSI systems for future development.4

With all the discussion about funding at the federal level, one little-known fact is how much infrastructure is controlled at the local level. In fact, 40 percent of the nation’s bridges and 46 percent of all public roads are owned and maintained by counties. Furthermore, counties help fund one-third of the nation’s airports and 78 percent of public transportation programs.5

The news isn’t all bad. According to the World Economic Forum, the U.S. international ranking for overall infrastructure quality improved from 25th to 12th place last year out of 138 countries. However, when it comes to specific categories, we show mixed results — the U.S. ranks second in road infrastructure spending but ranks 60th for road safety. The U.S. also lags behind other developed countries when it comes to infrastructure resilience and future sustainability.6

Content prepared by Kara Stefan Communications.

1 Merrill Lynch. 2018. “Getting a Bigger Bang for the Infrastructure Buck.” https://www.ml.com/articles/getting-a-bigger-bang-from-the-infrastructure-buck.html#financial-research-and-insights. Accessed April 20, 2018.

2 Ibid.

3 Camilla Domonoske. NPR. April 18, 2018. “Puerto Rico Loses Power — Again.” https://www.npr.org/sections/thetwo-way/2018/04/18/603569966/puerto-rico-loses-power-again. Accessed April 20, 2018.

4 Water Environment Federation. April 4, 2018. “Data analyses confirm GSI value in overflow control.” http://stormwater.wef.org/2018/04/data-analyses-confirm-gsi-value-overflow-control/. Accessed April 20, 2018.

5 Mary Scott Nabers. Infrastructure USA. April 9, 2018. “County government — a critical component of America’s greatness.” https://www.infrastructureusa.org/county-government-a-critical-component-of-americas-greatness/. Accessed April 20, 2018.

6 Hiba Baroud. PBS News Hour. Feb. 18, 2018. “Measuring up U.S. infrastructure against other countries.” https://www.pbs.org/newshour/nation/measuring-up-u-s-infrastructure-against-other-countries. Accessed April 20, 2018.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

 

AE05185051B

Lifetime income default options: a win for employees

Lifetime income default options: a win for employees

Choosing a retirement plan can be one of the most important decisions you make as you map out your financial future. Especially now, when Social Security again appears to be in jeopardy while defined benefit plans are already on their way out, a need for reliable options for working people is pertinent as ever. Unfortunately, too many employees put off thoughts of retirement as unfeasible or premature. Lack of planning often leads to hasty decision-making when the time comes to make vital choices about life after work.

That’s why default options are extremely useful for employers to introduce. Simply put, their implementation demonstrates a commitment to the well-being of the workforce that can pay off greatly in the long run. Lifetime Income Default Options offer their recipients a fixed rate of income during the years after retirement, with the option to opt out of the program rather than the need to opt in. Since many people underestimate how long they will live after they retire (and therefore don’t plan on having as much money), this option, helps provide a long-term safety net.

The major dilemma of retirement planning, income level vs. liquidity, is a choice not to be taken lightly. Some people may not be aware of it, but these lifetime income options offer a sort of compromise. To begin, their money is placed into a diversified fund that readjusts along with the market, so income level stays steady while their savings are accrued, then at a preset time (usually at age 48) allocations to a deferred annuity begin, with full conversion achieved about a decade later. This gradual approach helps to neutralize changes coming from interest rate adjustments, typically a driving force in annuity price changes.

The strategy assures employees that they will receive a baseline amount of income in retirement. If they choose, they can adjust their level of savings as they see fit. This saves them from getting locked into a strict amount and gives them the flexibility to spend the amount of money they feel most comfortable with.

These plans have already generated a great deal of interest that only looks to gain more momentum as the word spreads. It’s important not to let stagnation or complacency with existing, less than adequate plans get in the way of your employees’ needs. These plans offer a reliable way for your employees to retire with greater financial stability, and can encourage greater savings pre-retirement. In the end, what’s important is that people are able to use the tools at their disposal for a comfortable and prosperous retirement. A plan that offers employees flexibility while helping to provide for long-term financial safety is a win for them, and a win for you as a leader.

Is $1 million enough to retire?

Is $1 million enough to retire?

For many, having $1 million saved for retirement sounds like plenty, but when you break down the numbers, what once seemed like a fortune might seem like just passable or maybe even too little to maintain the lifestyle you have or fund the one you want.

Obviously, there’s no single answer for whether $1 million is enough to keep someone afloat during retirement—ostensibly, a frequent first-class jetsetter is going to need much more than that while someone opting for only simple pleasures may be satisfied with less.

If you’re a baby boomer and come out shy of the million dollar mark, know that you’re very much not alone. According to a survey from GoBankingRates, only 22% of individuals ages 55-64 and older have $300,000 or more set aside for the future and about 29% of those over 65 have nothing saved at all.

In fact, most Americans (81%) don’t actually know how much they’ll need to retire. But thanks to some general guidelines and user-friendly retirement calculators, it’s easy enough to estimate your target savings and see whether $1 million will allow you to afford the post-work life of your dreams. But how?

One rule of thumb is to plan on replacing 70-90% of your current income with savings and social security once you leave the workforce. That means if you make the American median annual household income of $55,775, then you should anticipate needing $39,042.50-$50,197.50 per year during retirement. However in an article for AARP, Dan Yu of EisnerAmper Wealth Advisors said that for the first 10 years of retirement, you are more likely to be spending 100% of your current income.

Another way of looking at it is by first calculating the bare minimum of how much you’ll need per year and then working backwards to see how much you need to save. Investopedia recommends using the 4% sustainable withdrawal rate, what they describe as “the amount you can withdraw through thick and thin and still expect your portfolio to last at least 30 years,” as a means of calculation. That means if you have $1 million saved, then your yearly budget will be around $40,000. If your retirement aspirations lean more towards golf resorts than improving your home garden, even with the additional $16,000 or so per year that you’ll receive through social security, $1 million will clearly not sustain you for long.

There’s also the added variable of your expected lifespan. While it may seem bleak to confront your own mortality, you need to calculate your yearly saving and spending with a time frame in mind. According to the CDC, the average life expectancy in the United States back in 2014 was 78.8 years old. But given that more Americans are living past 90, and a 65 year old upper middle class couple has a 43% chance that one or both partners will live a full 30 years more, you may end up stretching your savings for longer than you could have ever imagined.

Where you plan on living also has a massive impact on how far $1 million will get you. While a retiree in Sherman, Texas could lead a nice cushy life for 30 work-free years with a retirement account of just $408,116, a retiree in New York City would need more than 5 times that. SmartAsset calculated that the average retiree in NYC needs $2,250,845 in savings, allocating $47,000 per year for housing alone. Even a nest egg in Brooklyn isn’t much better—that too requires more than $1 million. Perhaps for that reason, New York City isn’t on Forbes list of best places to retire in 2017.

Even with the most careful planning, there are always going to be a few financial surprises along the way that may set you back more than a few pennies worth. Whether they’re negative like medical emergencies and subsequent health expenses or positive, like travel fare to a destination wedding, they’re still taking a bite out of your bank account that may not have been in your original budget. For this reason, it’s important to use the above guidelines and calculation tools as a rough estimate, and be on the safe side by saving more than you think you’ll need.

3 Biggest Regrets of Baby Boomers Once They Retire

3 Biggest Regrets of Baby Boomers Once They Retire

As the adage goes, “a life without regrets is a life not lived,” but it is also “better to regret what you have done than what you haven’t.” The three biggest regrets of retired baby boomers center on the things they have not done and teach the next generation to make more informed choices.

  1. Not Saving for Retirement Earlier

A rare absolute rule of finance is that people should start saving for retirement as early as possible, with the best time to start being in one’s twenties. Life expectancies are growing and show no signs of slowing down, so more money is needed to be stretched out for a longer period of time. Starting to save and invest as soon as one enters the full-time workforce can make a dramatic difference in the amount of money that accumulates by the time a person is ready to retire.

Many baby boomers failed to start saving on time and properly because they did not understand just how much money would be needed for their retirement. Some also did not know that receiving social security benefits or taking money out of retirement accounts before it is needed can have tax consequences that can substantially lower savings. Finally, many people tend to forget to adjust for inflation when considering whether they are satisfied with the rate of return on their investments.

  1. Not Working Less and Traveling More

A study of 2,000 baby boomers commissioned by British Airways revealed that one out of five boomers regrets not doing more traveling around the world. The survey data also indicate that only 9% of American workers get more than nine vacations days per year and that only 37% of Americans took all of their vacation days in 2015, suggesting that working too much may be an issue whose scope extends far beyond just the baby boomer generation.

A 10-year research project conducted by Karl Pillemer, Professor of Human Development at Cornell University, into the lives of 1,200 people aged 65 and older also revealed that lack of travel during one’s youth is a common regret. He writes, “To sum up what I learned in a sentence: When your traveling days are over, you will wish you had taken one more trip.”

  1. Not Working More

It might sound surprising given the decades of work they’ve done, but more than two-thirds of middle-income baby boomer retirees wish they had worked longer, and not for expected reasons. One might assume that people would want to continue working to keep earning their salaries, but for many baby boomers, wanting to keep working is about the work. People who are passionate about their careers and enjoy their work want to keep doing it. For this reason, many baby boomers return to the workforce on a part-time basis or as consultants. A number of baby boomers also enjoy working during their later years because they find that it keeps them mentally sharp, physically fit, and gives them a sense of purpose.

Should you rollover your 401k?

Should you rollover your 401k?

According to the Investment Company Institute, 401K plan assets reached $4.8 trillion dollars at the end of the first quarter in 2016. That’s nearly 20% of total retirement assets in America (which was at $24.1 trillion).

For 401K plan holders heading into retirement, changing jobs, or leaving a company, a big question looms: what should be done with this type of retirement savings account? Essentially, investors have to choose whether or not to roll the money over into a new account.

Options for rolling the 401K over include putting the cash into a self-directed IRA or transferring it to a new employer’s 401K plan. If workers decide against a rollover, the other options are to leave the account alone or cash out. Before making a decision, investors should look at the pros and cons and choose based on their unique situation.

Rollover Options and Advantages

There are significant advantages to rolling the 401K over to a new employer’s plan or IRA. Most investment professionals advise choosing an IRA, but it’s important for workers to also examine the quality of the new company’s 401K plan (if going to another job).

Pros of the Rollover into a Traditional IRA

Dr. Don Taylor, a retirement advisor and contributor at Bankrate, says that the rollover to a traditional individual retirement account from a former company’s 401K plan can provide “wider investment choices and potentially reduced annual fees and other expenses.” This flexibility makes the IRA an attractive selection, as investors can choose among mutual funds, stocks, bonds, and exchange-traded funds.

Like with a traditional 401K employer plan, money can continue to grow tax-deferred in a traditional IRA. That way, investors won’t have to worry about capital gains and dividend taxes each year.

This also allows workers to shop for plans with lower fees, and, if desired, select an IRA with more access to investing tools and management guidance. The IRA can also be withdrawn without penalty for specific purposes, like college tuition or a first-time home purchase (up to $10,000).

Pros of the Rollover into a Roth IRA

Unlike traditional IRAs, Roth IRA contributions are made after income is taxed—with the benefit that earnings are not taxed when withdrawn later. Because contributions are made after income taxation, investors have the ability to withdraw those contributions (not earnings) from the account without fees.

The Roth IRA does not have minimum required distributions after reaching age 70½, unlike 401Ks and Traditional IRAs. This makes it a potentially lucrative investment vehicle into old age and a good option for those looking to set up future generations.

Since the Roth IRA rollover requires a tax payment before transfer, Dr. Don Taylor attests that a Roth IRA rollover makes sense only if investors can come up with the tax fees from a source other than the 401K funds and “expect to be in a lower tax bracket now than when (they) start tapping retirement funds.” This makes paying the taxes now financially beneficial in the long run.

Pros of the Rollover into the New Employer’s 401K Plan

Most employers offer new employees the chance to roll over their old company’s plan. Getting all retirement plans into one place can make saving much more convenient and cheaper.

Investors should compare fees between the two company’s plans, and only roll over their old 401K’s cash if the new employer’s plan has lower fees and/or better investment options. The new company’s plan may even have lower fees than IRA accounts do.

For those that do choose to transfer to the new company’s fund, understand those earnings will continue to grow tax-deferred, and while those funds can be withdrawn after 59½ years old without penalty, workers may have the option to delay required minimum distributions (RMDs) beyond 70½ years old (if still employed at that company).

Traditional benefits of the old 401K still apply at the new company too. Investors are given more protection under federal law, as 401K assets are better protected from claims from creditors than IRA assets are. Many 401K plans provide investors the benefit of being able to borrow against the plan as well.

Options for Those Choosing Against the Rollover

While rolling the account over is traditionally the best choice, everyone’s personal situation is different. In some circumstances, one of the following two options may be the most ideal—or necessary—choice.

Leave the 401K Alone

The first and most common choice is simply to leave the 401K account with the old employer and let earnings continue to rise tax-free. For investors that like their current plan, aren’t paying a lot in fees, and are happy with its performance, this may be the best—and easiest—choice. Prior to doing this, do compare fee charges with other fund options, like the new business’ 401K plan and traditional and Roth IRAs.

In addition to having the benefits mentioned above for 401K plans, there is also a specific benefit for not touching the 401K. For those that leave their employer between the ages of 55 and 59½, they can enjoy penalty-free withdrawals before reaching 59½ (the typical starting withdrawal age).

Before doing this, ex-employees should check to see if their employers allow the money to stay in their old account. Most companies require at least a balance of $5,000

Cashout

A final choice is the cashout. Most investors don’t suggest this route, as paying taxes on the withdrawal alone could easily cut into 35% of the total amount (depending on the tax bracket). A withdrawal penalty of 10% would also be assessed if younger than 59½.

Additionally, savings would no longer grow tax-deferred, which means investors robbing their future selves. For example, take the case of a worker making $75,000 per year who has a traditional 401K with $50,000 in assets. This worker decides to withdraw it all after quitting the company. In this case, 25% of that amount would be taxed and a 10% penalty would be implemented, leaving the worker with 35% less, or just $32,500. If this money was simply just left in the 401K and continued to grow at a decent rate for one or two decades, this easily turns into a six-figure mistake.

The cash-out option is mostly seen as a last resort for those experiencing a legit financial emergency and can’t access cash from other sources, such as lenders, savings accounts, and family. Only do it if absolutely necessary. Nearly every time, borrowing from other sources makes more financial sense than cashing out retirement savings.

Making the Best Decision with the 401K

While the traditional IRA is commonly seen as the best rollover option for 401K plans with an old employer, everyone’s personal situation is different. Ideally, workers should always research and choose retirement savings plans with low fees and high returns. They should make choices that set them up for long-term financial success.

Thus, it’s advised to also analyze the financial advantages and disadvantages of rolling over to the Roth IRA, transferring to another company’s 401K plan, and leaving the money with the old 401K. Once workers have a clear picture of what makes the most financial sense, they can go through with the decision—and watch their nest egg grow to its highest potential.