How and Where to Save

Monday, November 02 at 08:45 AM
Category: Personal Finance

Everyone knows they should save money to help pay for their future needs or wants, but not everyone knows the best or easiest ways to save. Here are a few ideas.

Review how and where you are saving for retirement. Options include workplace retirement plans, Individual Retirement Accounts (IRAs) offered by many banks and investment companies, and the U.S. Treasury Department's new "myRA" (myRetirement Account), which is a simple, safe, and affordable savings program to help individuals start saving for retirement. The myRA program offers a new type of Roth IRA, guaranteed by a new U.S. Savings Bond that costs nothing to open and carries no risk of losing value.
 
Because myRA accounts do not have minimum contribution requirements, savers can contribute the amount that best fits their budget. During the first phase of the program, myRA accounts can be funded through automatic payroll deduction. To open an account or learn more about the myRA program, including eligibility requirements, go to www.myra.treasury.gov* or call (855) 406-6972.
 
Set savings goals for specific reasons. "Designating accounts that you will regularly contribute to for a particular purpose, such as for a vacation or the next holiday season, will help motivate you to meet your goals by a certain deadline," said Luke W. Reynolds, chief of the FDIC's Outreach and Program Development Section. "Some banks offer 'club' accounts that promote regular, small savings for a certain reason, but you can use regular deposits into any savings account to reach your target."
 
Certificates of deposit (CDs), which provide a predetermined fixed- or variable-rate interest payment for a set time period (usually three months to five years), also may be an option.
 
Find more money to save by cutting expenses. A great resource for ideas on how to use your money wisely is MyMoney.gov,* the U.S. government's main website about personal finances with information from more than 20 federal agencies, including the FDIC. Start at the "Spend"* page.
 
If you get a large, one-time "windfall," consider using some or all of it to help build your emergency savings. Start by checking whether you have enough in a federally insured deposit account to cover three to six months of essential living expenses. If you don't have that much in your "rainy day fund," consider adding funds from a tax refund, an inheritance, or other new-found money. This account may help pay for major unexpected expenses or tide you over during a disruption in your income.
 
For more ways to save, including ideas for keeping banking costs down, search for articles in FDIC Consumer News* and check out the FDIC's Money Smart* financial education program.
 
Information courtesy of FDIC Consumer News.

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank.

Tags: Financial Education, Investing, Retirement
 

Managing Lifetime (Retirement) Income

Monday, July 13 at 10:35 AM
Category: Personal Finance

Some people retire on income from an employer-sponsored defined benefit pension plan. Employers that sponsor defined benefit pension plans are responsible for contributing enough to fund promised benefits.

U.S. Department of Labor data shows a trend away from defined benefit plans and toward defined contribution plans, though. A key difference is that the employer bears the investment risks of a defined benefit plan. In defined contribution plans, employees bear the investment risks, and there is no guarantee that your defined contribution account balance will be adequate for your retirement.

Another difference is that defined benefit plans generally are required to make annuities available to participants at retirement. If you have a pension plan that provides a lifetime annuity, it protects you against longevity risk - the risk of outliving your assets. Defined contribution plans, such as 401(k) plans, typically do not provide an annuity option. The trend toward defined contribution plans means employees are responsible for saving enough for retirement and for ensuring that their savings last through their retirement years. Here is some information to help you manage this.

Retirement Asset Allocation
The most common reason to change your asset allocation is a change in your investment time horizon. As you get closer to your investment goal, you'll likely need to change your asset allocation. For example, as they get closer to retirement age, most people hold less stock and more bonds and cash equivalents. You may also need to change your asset allocation if there is a change in your risk tolerance, financial situation, or the financial goal itself.

Lump Sum Payments
Some people cash out retirement accounts and receive a lump sum payment. Receiving a lump sum payout can be very exciting because most people rarely have the opportunity to spend or invest a large amount of money at one time. However, figuring out what to do with a lump sum payout also can be very stressful, especially if you aren't comfortable making financial decisions.

Once you fully understand all of your options, you'll be in a better position to make a financial decision. So resist the urge to make a quick decision about how you'll use your lump sum payout. Many experts recommend that you take several months or even a year to decide how you'll use the money.

Before you make any decisions, consider these questions:
  • Am I carefully avoiding fraud?
  • What is my current financial situation?
  • Do I need the help of a financial professional?
  • Have I paid off my high interest credit card debt?
  • Have I asked enough questions?
An Arvest Asset Management Client Advisor can help you create a reliable retirement income and establish a solid financial plan for the future. Please contact us today at (877) 278-3781 or visit our website to find a Client Advisor in your community.

Article courtesy of Investor.gov* (U.S. Securities and Exchange Commission). 

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.
 
Tags: Financial Education, Investing, Retirement
 

11 Tips for the New Year

Thursday, January 01 at 09:00 AM
Category: Personal Finance

It's that time of year — the time to ring out the old and ring in the new, to ditch bad habits and replace them with good ones. We can't guarantee you'll lose weight, or become a better human being, but we can give you some suggestions to help you whip your finances into shape. Here are some tips for the new year. 

  1. Save and invest. Don't underestimate your ability to save and invest. With compound interest, even modest investments now can grow over time
  2. Lighten your credit load. Paying off high-interest debt may be your best investment strategy. Few investments pay off as well, or with less risk than, eliminating high-interest debt on credit cards or other loans. 
  3. Boost your "rainy-day" fund. Many experts recommend keeping about six months of expenses in a federally insured account to cover sudden unemployment or other emergencies.
  4. "Sure thing" is fine as an expression but not as an investment pitch. Promises of guaranteed high returns, with little or no risk, are a classic warning sign of fraud. The potential for greater returns typically come with greater risk. You know the saying — if it sounds too good to be true, it probably is.
  5. Take charge of your money. If you don't know where it goes, start keeping track. There are plenty of tools to help you set a monthly budget and stick to it.
  6. Pay yourself first. Put yourself at the top of your "payee" list. Regular automatic deductions from your paycheck or bank account into a savings or investment account will keep you on track toward your short-term and long-term financial goals.
  7. Know your investment self. You're the best judge of yourself. Use that knowledge to find investments that are a good match for you, based on your goals and your ability to tolerate risks.
  8. Make sure your older investments still fit you. Take time to review your holdings and see if they're still appropriate for you. If you've outgrown them, it's probably time to sell them and buy something better suited to you.
  9. Don't put all your eggs in one basket. One way to reduce the risks of investing is to diversify your investment holdings. Think twice before investing heavily in shares of your employer's stock or any single investment.
  10. Ignorance isn't always bliss, especially when it comes to your account statements. Sure, it can hurt to look at statements when investments are losing value. But, if you don't review your statements, you may miss problems in your accounts that are unrelated to performance.
  11. Do your homework. Asking questions about financial opportunities and checking out the answers with unbiased sources can help you make informed choices and avoid fraud. 
For more information, contact your financial advisor or the wealth management team at your financial institution.
 
Tags: Financial Education, Investing, Savings
 

Do IRA and 401(k) Contributions Still Make Sense?

Monday, December 15 at 09:40 AM
Category: Personal Finance

In almost every case, the answer is a resounding YES. 

Planning for a financially secure retirement is most often ranked as the number one reason why people save and invest. Social Security and company pension plans may provide some of the income you need during retirement, but contributions to your company retirement plan and your IRA may make the difference between enjoying the retirement lifestyle you want or relying on others for your basic needs.

Contributions to retirement plans and IRAs move you closer to a financially secure retirement in three ways.

You save and accumulate money.
Having a portion of your wages deferred into your 401(k) or other retirement plan can be the simplest and least “painful” way to save. Often the amounts are not missed as you automatically adjust your spending accordingly. Contributions to an IRA also add up, especially over longer periods of time. Contributing $5,500 a year over 20 years will add up to over $202,000 with a 6 percent earnings rate. 

Your earnings are tax deferred. Earnings on funds within your retirement plan and IRA are not subject to income tax each year the way your other savings are. This means you have more money working for you. You will have to pay tax on the earnings when you withdraw the funds (except for a Roth IRA), but most people are in lower tax brackets when they retire.

You reduce your current income taxes. The amount you defer into your 401(k) plan reduces your taxable wages and you pay less tax each year. For 2014, the limit on the amount you can tax-defer into your 401(k) is $17,500 unless you are age 50 or above and then it is even larger. Contributions to a regular IRA are deductible if you are not covered by an employer-sponsored plan or if your adjusted gross income is below $96,000 for 2014 (married filing jointly) or $60,000 (filing a single tax return). Contributions to a Roth IRA are not tax deductible, but distributions are tax-free.

Saving for retirement in 401(k) plans and IRAs continues to make good financial sense. 

Tags: Financial Education, Investing, Retirement
 

Required Minimum Distributions

Monday, December 08 at 09:45 AM
Category: Personal Finance

The best way to prepare for retirement is to save, early and often. Generally, one should set aside 10 percent to 15 percent of one’s income each year. If the habit takes hold early in one’s career, a very meaningful nest egg should be the result.  

Saving is easier when there is a tax deduction for it, which helps explain the popularity of the traditional IRA. However, the tax law includes a stipulation that those who have developed the savings habit will find disconcerting. Once one reaches age 70 ½, a program of required minimum IRA distributions must commence. Each year the IRA must disburse an amount geared to the life expectancy of its owner. The reason for the requirement is to make certain that the money saved for retirement gets used for retirement — or, at least, becomes subject to income taxes during retirement. 
 
How large are the payouts?
Required minimum distributions from an IRA won’t exhaust the account before the owner lives beyond age 100, even if the account has poor investment return. Accounts that enjoy even modest returns will keep getting larger in the early years of minimum distributions. This table shows the projected size of a required minimum distribution from a $1 million IRA at various ages, for various rates of return. It also shows total distributions and the balance remaining at age 100, if only required minimum distributions are taken each year. If a 6 percent annual rate of return can be achieved, the account balance won’t dip below $1 million until age 92.
 


If you have questions about when your required minimum distribution needs to be taken, or need assistance in getting your required minimum distribution taken by Dec. 31, then please call us.

Source: M.A. Co.
Rates of return are for illustration only and do not represent any particular investment.
(June 2014)
© 2014 M.A. Co. All rights reserved.
Tags: Financial Education, Investing, Retirement
 

Social Consciousness ... On Wall Street?

Monday, November 17 at 09:30 AM
Category: Personal Finance

You may want to be socially conscious and do the right thing, both in your own community and in the larger global community. Perhaps you are concerned about environmental issues or about opportunities for fair trade and human rights, or maybe you are passionate about protecting wildlife or promoting healthy diet and exercise for young people.

Whatever your area of interest and moral or ethical position, you may want to act in a way that is in accordance with your personal beliefs and convictions. But at the same time, you may be interested in making money in the stock market. Many see this as an irreconcilable conflict, but it doesn't have to be, thanks to many stock funds that have been created to specifically cater to the needs of people who want to play the market without compromising their own personal values.

Mutual funds are a great way to delve into the socially conscious side of Wall Street. These are not single stocks, but groups of stocks that are managed by trained professionals. When you buy a share in a mutual fund, you are essentially contributing funds to a mutual fund, and then the fund's manager will use that money to buy stocks that he or she thinks will do well and meet the goals of the mutual fund's investors. Because these funds value diversity of assets, they are somewhat protected from the risk of only owning shares of an isolated company. And these days there are many mutual fund companies that specialize in socially conscious investing.

When you buy into their funds, they promise to use your money only for investment in companies that promote the things you believe in, so you get two benefits. First, you get the peace of mind of knowing that your stock market investments are for good causes. Secondly, you get to promote your causes and support the companies that share your values, by putting your hard-earned money behind your commitment to those values. You get to own shares in companies that are trying to succeed by doing the kinds of things you want to see done in the world, so you have a chance to reap both financial rewards and personal satisfaction.

You can also buy stocks in individual companies, by doing some background research to find out which ones meet your standards. For example, if you want to help protect the environment from companies that pollute, you could buy stock in companies that make "green" products like alternative fuels that don't contaminate the atmosphere. Or you can buy stock in companies that clean up oil spills, plant trees, or manufacture biodegradable consumer products.

The idea is that you can have your cake and eat it too. It is possible to make money in the stock market and at the same time remain committed to socially conscious values, by putting your money into the right stocks. To learn more, you can talk to a client advisor with Arvest Asset Management.

Tags: Financial Education, Investing

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