Personal finance doesn't need to be complicated. For that reason, I launched The Astute Advisor personal finance site. I was excited to reach a much broader audience. Lastly, I’ve always believed that the blog shouldn’t be my voice alone. I’m convinced my readers will benefit by hearing from other financial professionals too. Here are some articles that are worth a read.
The Danger Zone in Social Security Taxation
Devin Carroll is an independent investment advisor specializing in all things Social Security at the Social Security Intelligence blog. The gradual phase-in of taxes on Social Security benefits can deliver some unexpected and unpleasant results if you fail to recognize the “danger zone” to avoid. Here’s what you need to know about the taxes on Social Security benefits and how you can avoid the pitfall of paying way too much in taxes on that income. Be sure to visit his YouTube channel!
Social Security is almost synonymous with retirement. Most everyone will receive Social Security benefits at some point in their lives. Despite this, it remains a scary endeavor for those who apply for benefits. There is no doubt the laws and rules are complex. On the surface, it seems pretty basic. You retire at a designated age and you receive a defined benefit. But, like an onion, each question and situation involves pealing another layer. Under each layer is a new set of rules and pitfalls to avoid. If you are approaching retirement, you need to do your research and don't be shy about asking for help.
Why Annuities Are (Almost) Always a Bad Idea
Russ Thornton is a Certified Divorce Financial Analyst and author of Wealthcare For Women. In this article, Russ provides and excellent review of annuities and why they should be avoided.
Annuities are often misunderstood. Sadly, even financial professionals who sell annuities, don't have a deep understanding of them. The term “annuity” refers to a recurring payment, often monthly, received as retirement income. For example, in the old days, you would retire from an employer and receive an annuity payment as a source of income to live on in retirement. Insurance companies create annuity products and rely on financial professionals to sell them to the public.
Now, annuities are more of an investment vehicle and the actual “annuity” part where you receive income is almost an afterthought. All kinds of annuity products have been developed with ever increasing complexity that make it difficult for even the financial professional selling it to thoroughly understand the pros and cons.
Above all, the sad truth is that high commissions paid to brokers who sell these products are a big part of the problem. Some insurance companies will pay a broker 8% as a commission for selling the product to a customer. The brokers aren't even required to disclose the commission they would receive to the customer. For example, if you were about to invest $50,000 in an annuity, wouldn't you want to know that the person recommending it will be paid $4,000! With high payouts like these, it's reasonable to think a broker would steer someone toward an annuity.
The Extraordinary Upside Potential Of Sequence Of Return Risk In Retirement
Michael Kitces is a Certified Financial Planner™ and publisher of Kitces.com where he writes about personal finance and matters specific to the advisor industry. There's much more to portfolio success than rate of return. Michael takes a deep dive on “sequence of return risk.”
To many of my clients dismay, I often tell them to focus less on returns. It's human nature to want more. However, focusing too much on investment returns can cause you to miss the forest for the trees. Don't get me wrong, returns are important and we always need to weigh them against risk. However, financial success relies much more on our behavior than return on investment. You could have the best returns possible, but if you mess up some smaller non-investment related financial decisions, those returns won't mean a thing.
Certainly, develop a good understanding of risk, return, asset allocation, diversification, and withdrawal rates. You don't need to become a financial expert, but even a basic understanding will help you have the right expectations. However, none of that matters if you make decisions based on emotion or give in to some bad financial behavior.
Doing All The Right Things
Jim Blankenship is a Certified Financial Planner™ and founder of Blankenship Financial Planning, Ltd. Jim writes a personal finance blog called Getting Your Financial Ducks In A Row. Saving and investing while just keeping debt in check isn’t the whole answer. Jim's explains how it's not enough to only do “some” of the right things in personal finance.
I've always felt that financial success is the result of a series of small decisions consistently made well over long periods of time. I remember when my student loan came due six months after I graduated. Fortunately, I understood that every on-time payment I made helped build my credit. I also understood that if I paid a little extra each month, the loan would be paid off sooner. Certainly, those aren't Earth shattering financial concepts. However, what made them powerful was consistency and time. After a few years, I saved interest and freed up cash flow for other things. Lastly, I built up my credit which helped me buy my first car.
Multiply those few things by all of the other small financial decisions we're faced with everyday and you have the makings of a powerful force. A friend and fellow financial advisor said “big doors swing on small hinges.” Don't neglect the seemingly small actions you can take. Taken together, they can add up to a lot!
Social Security and Working – What You Need to Know
Roger Wohlner, a fee-only financial planner, freelance financial and business writer, and ghostwriter for financial advisors. and author of The Chicago Financial Planner personal finance blog.
Enjoy your retirement and collecting your Social Security check. However, proceed with caution if you plan to work part time or pursue other income producing endeavors. The IRS doesn't like missing a chance to get their hands in your pockets. Therefore, if you're not careful, the extra income could result in additional taxes on your Social Security income.
Above all, this is more critical than ever since “retirement” doesn't look like it used to. For example, we're living longer and staying more active. Many folks “retire” but keep pursuing other income producing activities. Not necessarily because the have to but because they want to. Be sure to review this area of Social Security planning to make sure you don't give the IRS any more than you need to.
Robo Investment Advice: The Pros and Cons
Barbara A. Friedberg, MBA, MS is a former portfolio manager committed to investment and money education across multiple platforms. Friedberg owns Robo-Advisor Pros, a non-biased, comprehensive and trusted resource for all of the latest robo and technology enhanced investing platforms. She owns Barbara Friedberg Personal Finance which is dedicated to improving investment knowledge and wealth. In addition, Friedberg consults for a select group of fintech companies and writes for many popular online media outlets. Lastly, her books can be found on Amazon.
Robo Advice can seem like a strange way to describe automated investing. I often picture clients coming into an office and sitting in front of a robot. Despite images of robots pushing paper around and managing portfolios, it's simply an automated process. For example, it involves investing and re-balancing portfolios. The idea is that investment management can be done at a much lower cost by removing the human advisor. To clarify, that's not the whole picture but a good part of it. Most importantly, for some investors who are just starting out, using a robo advisor could be a great way to go. For example, many financial professionals have account minimums which limits access for those who don't have enough assets or are just staring out.
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