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Inside The Economy: Tariff Implications & California

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On this week’s Inside the Economy with SH&J, we discuss the ongoing tariff negotiations that have been dominating the news cycle. How much of an impact would tariffs have on Chinese-imported goods and is it likely to cause inflation? The state of California is single-handedly one of the largest economies in the world. Has job growth there been increasing or declining, and does the expensive real estate market in the state have anything to do with it? Tune in to find out!

Retiring Early and Moving Abroad

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Returning home from an international vacation can leave us feeling saddened and missing the sunny skies, white beaches, or cultural city centers. It’s easy for our minds to start wondering “what if”…? What if I were to retire abroad? Would I be able to retire earlier? Would I be able to afford the healthcare? Will my Social Security benefit be enough to cover all my monthly expenses?

As the retirement savings crisis continues to increase, the number of Americans choosing to retire abroad also increases. According to the Social Security Administration, the number of Americans collecting their benefit while living outside of the U.S. is now almost at 700,000 people. This figure has continued to grow since the Great Recession. If all of the stars align, this could be an attractive and viable option for retiring Baby Boomers.

International Living has assembled a list of the “Best Countries to Retire”, which includes Mexico, Panama, Ecuador, Costa Rica, Colombia, Malaysia, Spain, Nicaragua, Portugal, and Malta. The list dives into the pros and cons of living (rather than simply vacationing) in each country. However, in reality, Americans who are retiring abroad are more likely to live in Canada, Japan, Germany, Mexico, and the U.K. The reasons for choosing a country vary widely amongst retiree.

The Travel Department of the U.S. Government gives you an itemized bullet point list of important planning steps before you choose or move to a different country during retirement. Some of these items include visa/residency requirements, exchange rates, and emergencies. Two items that top the list are taxes and healthcare. How will your various sources of income be taxed and what are your options for healthcare?

Are you considering retiring abroad? Contact Sharkey, Howes & Javer to speak with a CERTIFIED FINANCIAL PLANNER™ to determine how this may fit in to your retirement plan and what you may need to consider before making the move.

Inside The Economy: Fed Holds & Social Security

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On this week’s Inside the Economy with SH&J, we discuss the Federal Reserve’s decision to leave interest rates unchanged at last week’s meeting. What are some of the reasons for the Fed’s decision? There’s been a lot of media coverage about Social Security being depleted in the next few decades. How much of a surplus is there currently in the Social Security trust fund and how soon will social security have to make changes? Tune in to find out!

Meet Derek Van Calligan

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Name: Derek Van Calligan

Title: Certified Financial Planner™

SH&J team member since: August, 2017

 

How did you decide to become a financial planner?

I think I just kind of lucked into it, really, when I was in college. I didn’t know what I wanted to do, being 19 years old and not knowing what all is out there. I took a personal finance class because I thought it would be able to help me and my own personal finances, and then I realized that you can make a pretty great career out of helping others with their finances and that’s what lead me on this path.

What’s your favorite part of your job?

My favorite part of the job is the different kinds of people you get to meet. Between our current clients and new prospects coming in the door, you never really know who you’re going to meet and what their story is going to be. I would say the majority of the people I meet are very good people with very different backgrounds and unique perspectives on life. So, just being able to meet different people on a daily basis and help them with their unique challenges is one of the things I enjoy the most.

You’re originally from Wisconsin, so what brought you to Colorado and SH&J?

Like the majority of people who move out here from the Midwest, I was getting sick of the weather up there and I always enjoyed coming out here skiing. There’s a pretty big presence of people out here from Wisconsin and the Midwest, so I knew fitting in out here wasn’t going to be an issue. I knew I wanted to work at a Fee-Only RIA firm, and SH&J was at the top of the list when I performed a Google Search. I emailed them my resume, ended up getting an interview the next week and an offer that same day. It was a pretty fast process.

What do you like to do in your free time?

In my spare time, like most Coloradans, I like to get up in the mountains and ski. I also just picked up fly fishing so I’ve enjoyed that as well, and pretty much just doing anything that involves being outdoors and exploring Denver. I mean, there’s always a festival or different event going on every weekend, so there’s never really a lack of things to do. It’s a tough place to be bored.

Do you have a favorite place you like to ski?

Nothing beats the Back Bowls at Vail on a powder day.

What’s something about you that would surprise us?

I recently went bungee jumping over Victoria Falls in Africa.

How did you end up doing that?

I went over there with a buddy of mine and did a mission trip, and we spent an extra week and did more touristy stuff, such as a safari, bungee jumping over the falls, whitewater rafting, and fishing. It was quite the adventure and one of the best trips I’ve ever taken.

What is the most interesting place you’ve ever been to?

Probably Africa. Livingstone, Zambia to be exact. It’s right on the Zambezi River, it’s kind of a more touristy town, but the time that I spent there was more with the locals and helping out in a 1st grade classroom teaching the kids English and Mathematics. Africa is unlike any other place in the world, and I can’t wait to get back.

If money was not a factor, what would you do?

I think that I would try to use my time to get to every country in the world and see something unique in every country.

Inside The Economy: U.S. Economic Expansion & Water

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On this week’s Inside the Economy with SH&J, we take a look at the current economic expansion in the U.S. since the Great Recession. How does this compare to historical expansions and is there an end in sight? The lack of water supply in the western U.S. is causing farmers to leave in large numbers. Where are these farmers moving their operations? Tune in to find out!

Will Social Security be Going Away?

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As financial planners, one of the most common questions we receive is regarding the future of Social Security. A lot of this uncertainty is driven by headlines in the media. Oftentimes, the media calls to question whether Americans can rely on the Social Security program to still be viable when current workers reach retirement. Much of the doubt is derived from changing demographics in the United States.

The baby boomer generation is reaching retirement and healthcare advances are allowing us to live longer lives. Combine this with reduced birth rates resulting in less future workers, and some of the skepticism surrounding the Social Security program becomes valid. With that being said, many Americans are afraid that the Social Security program will become obsolete, which most likely will not be the case. What we do know is that over the next 75 years or so, Social Security will have to evolve in order to support future generations of retiring workers.

The Social Security program was signed into existence by Franklin D. Roosevelt in 1935 and has been through a few major changes over the last 84 years. As it currently stands, Social Security is a “pay-as-you-go” program, which means that the current working generations are paying for the current retirees. The system is subsidized by the Social Security Trust Fund, a reserve of funds to cover any deficit between income from taxes and output of benefits. While the demographics continue to change, the program will take on more costs with less workers to fund it. But there are several solutions to this issue, many of which we have seen before throughout the history of Social Security.

The first option, which you can imagine does not resonate well with the American constituents, is to reduce future benefits. According to Barron’s, if the program remains unchanged and the Social Security Trust Fund is depleted, the Social Security program will be able to continue paying retirees 75% of currently legislated benefits. Although Social Security was created to cover 40% of your income needs during retirement, many American’s rely on it as their only financial resource when they retire. Because of this, it is unlikely that politicians would make an argument to reduce Social Security if they are looking to gain approval from the largest demographic of voting constituents, retirees. A way that politicians have reduced benefits in a roundabout way in the past is by gradually pushing back “full retirement age” from 65 to 67. It would be more likely that we would see another push back beyond the age of 67, than an out-right cut in benefits.

The other option is to increase the revenues from payroll taxes that are funding Social Security. No one is a fan of increased taxes, but if it means providing a more reliable stream of income for you during retirement, it may be worth the extra tax dollars. We have seen changes in payroll taxes in the last 10 years with Congress temporarily cutting payroll taxes by 2% in 2011 and 2012, then raising them back up in 2013 by 2%. Many workers never acknowledged the later increase in payroll taxes. On top of that, payroll taxes are typically split between the employer and employee, so workers most likely won’t take full responsibility of any possible tax increases.

So will Social Security be going away? The brief answer is no. What we do know is that the program will continue to evolve with time and with the American population. That is why it is so important that we save for retirement during our working years, so that no matter what is to come, you are prepared. If you’d like to review your own retirement outlook, whether you are close to retirement or many years away, get in touch with us today for a complimentary consultation with a CERTIFIED FINANCIAL PLANNER™.

Inside The Economy: Global Debt & U.S. Trading Partners

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On this week’s Inside the Economy with SH&J, we discuss the rising debt balance in the global economy. How does the total debt in the U.S. economy compare to debt in other parts of the world? The U.S. has imported less from China over the past year and a half due to the change in tariffs. Which country has picked up the slack and increased its exports to the U.S.? Tune in to find out!

Our Financial Checklist for Newly Married Couples

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So you’ve planned night and day, hired incredible vendors, tied the knot, and danced the evening away with friends and family. Or maybe your wedding was a simple, quiet romantic elopement with just a few loved ones present. Either way, as you forge ahead into your new life together, you might be wondering what is next, especially in the realm of finances.

Many couples already live together before they get married, so they probably share finances to some extent. They are already used to setting financial goals together, making budgets, and deciding who pays for what. If you are a newlywed and haven’t done these things, this is a great place to start. But besides these tasks, there are other things to consider to make sure your finances are in order.

Now that you are married, you have to prepare for the unexpected and make sure that everyone is taken care of in the case of the unthinkable, not to mention you’ll need to think about your future together and plan for retirement. Below is our financial checklist for newly married couples, and we hope it helps you out!

Create or Update Documents

    1. Create or update your will. If you don’t have a will already, now is the time to create one. Especially now that you have a spouse, you want to make sure your assets are going where you want them to upon your death.
    2. Create or update your living trust. A living trust is a legal contract with a third party that makes sure your assets go where you want them to go upon your death. Many people choose between a will and a trust. We know thinking about you or your spouse passing away is not enjoyable, but don’t put off creating one of these critical documents just because it isn’t fun. You have the ability to make sure everyone is taken care of while you are well, so make sure you do!
    3. Update your beneficiaries. Any life insurance plan or retirement fund will have beneficiaries listed as to who will receive your assets upon your death. Make sure these are updated to include your spouse because legally, your beneficiaries supersede your will.
    4. Update any titles. If you plan on sharing property, home and vehicles titles should be updated to include your spouse as well.

Combine or Update Insurance Policies

  1. Life insurance: Not everyone thinks about life insurance before they are married, but now that you are, it is time to make sure you both have a life insurance policy to make sure your loved ones will be taken care of if one of you passes.
  2. Auto: Often there is no reason to carry two different policies once you are married when you can save by bundling. If your spouse is going to be driving your car, you also want to make sure both names are attached to the insurance so there are no issues in case of an accident.
  3. Home: You may find that your partner can get a cheaper home insurance rate by bundling with another policy like their auto insurance. Be sure to shop around and ask about discounts for bundling.
  4. Health insurance: If you want to combine health insurance, marriage is one of the few qualifying life events that allows you to change your plan. However, you generally only have 60 days to add a spouse after the wedding, so make sure you get on this right away.

Taxes

  1. Review and adjust your tax filing status. You may need to update your W-4 so you don’t owe money at tax time. This is a great time to run your numbers through the IRS withholding calculator to make sure you’re on track for the year. If both you and your spouse will be working, make sure to check the box for “Married, but withhold at higher Single rate” when you refile your W-4.
  2. Consider your tax-advantaged accounts. Depending on your combined income, you may move in or out of eligibility brackets for various tax-advantaged accounts. Make sure you take advantage of the accounts that will be the most beneficial in the future and consider whether backdoor contributions make sense for you. If one spouse won’t be working, consider opening a spousal IRA which gives you more space for tax-advantaged savings. If you plan to have children, you could also set up a 529 plan to save money for schooling.

If this list seems like a lot, don’t be overwhelmed. At Sharkey, Howes & Javer, we are here to help. Contact us to meet with a CERTIFIED FINANCIAL PLANNER™ for help setting up your finances and getting the most from your money as a newly married couple.

Inside The Economy: Stock Market Rebound, US Dollar Strength, and the Yield Curve

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On this week’s Inside the Economy with SH&J, we discuss the recent bounce back in the U.S. stock market. The market is close to the all-time high it reached last Summer, but is it starting to get overvalued? An inverted yield curve has historically been a reliable recession indicator. Is the current flattening of the yield curve a cause of concern for our economic outlook? The U.S. dollar strengthened in 2018 due to many factors, including higher interest rates and tariffs. Are these dynamics still affecting the direction of the dollar? Tune in to find out!

Does it Make Sense to Pay Off Your Mortgage?

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A home mortgage is something that the majority of Americans need to obtain in order to purchase a primary residence. A mortgage is considered “good debt” because it is tied to an asset that has the opportunity to appreciate in value over time. It is usually issued at a lower interest rate compared to consumer loans and the interest can be tax deductible.

A common question people have is whether or not they should pay down their mortgage early. The first thing to look at when trying to answer this question is the interest rate on the loan. Since the Financial Crisis in 2008, we have seen historically low interest rates. According to FreddieMac, the average 30-Year Fixed-rate mortgage has been between 3.5% and 5.5% since 2010. It is important to take into consideration the opportunity cost of paying down your mortgage. If you have a low rate (in the 3.5%-4.5% range), it may make sense to invest that money rather than using it to aggressively pay down the mortgage. Going back to 1926, the average annual return on a 60% stock and 40% bond portfolio is about 8%. If you’re a long-term investor, it would make more financial sense to invest that money in a diversified portfolio instead.

Another aspect of this decision is the emotional side. A housing payment (whether it be rent or mortgage) is often the largest expense item in a person’s budget. For some people, you cannot put a price on the feeling of owning your own home free and clear and never having to worry about a mortgage payment again.

Are you wondering if you should pursue paying off your mortgage early? Contact Sharkey, Howes & Javer today to speak with a CERTIFIED FINANCIAL PLANNER™. We’ll help you answer this question and provide you with the advice you need to help meet your financial goals.