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Are Women Better Investors?

In “Why women are better investors: study,Reuters discusses a Fidelity investments survey and an academic study which found that women save more than men and that their investments also earn more. The survey found the savings and the investment advantage women have over men is 0.4 percent, adding “…the disparity at retirement age is anything but minor. For a 22-year-old starting out with a salary of $50,000 a year, a woman investor will outpace her male counterpart by more than $250,000.”

The article revisits the idea that people presume that men are better investors than women since less than 10 percent of the survey respondents agreed with this idea.

It also points to possible explanations for women may have the edge when it comes to investing:

  • Women save more in 401(k)s at work and in IRAs and other accounts
  • Women tend to invest in less risky investments
  • Women diversify their investments more than men do

Overall, the article states that women take a long-term approach to investments by saving more earlier and being less interested in making noteworthy trades. The article concludes with an expert opinion that men pick their stocks for bragging rights.

In “The Secrets of Women Investors,” Kiplinger examines this same topic and is more analytical about what may seem like stereotypes:

“Of course, men can be marvelous investors, too, and in some areas women would be wise to take their counsel. But women have a different and valuable approach that can help almost anyone become a better investor.”

Along with their strengths such as investing in what they know, tempering risk, thinking long term, trading sparingly, and selling with discipline, Kiplinger found that in contrast to the Fidelity survey, women save less. Kiplinger also cited a study which found women tend to be less knowledgeable about investments then men, perhaps because women may be reluctant to discuss money.

No matter who you are, if you’ve been hesitant to examine your finances, you can work with a Fee-Only financial planner.

Retirement Planning Can Ease Anxiety

 

Louise Nayer, author of Poised for Retirement: Moving From Anxiety to Zen, kept a diary right before she officially retiring and during the first few years of retirement and she used this, along with interviews and research, to write a book to help retirees.

Nayer told Forbes in an interview that she found whether people were well prepared or ill prepared for retirement, they were all worried about money.

In hindsight, Nayer considers some financial decisions her family made and says she might have done some things differently. She muses that her children may have been just as happy without going to private schools and seems to regret taking out a home equity line. And while she knows it would not have been easy to do, told Forbes that it would have been better to have her mortgage paid off before retirement.

While Nayer is direct about the financial challenges she has because she retired before she was really financially ready, she also notes that she and her husband experienced better health once they were no longer at their previous jobs. She also says that people should think about what makes them happy and do “more emotional planning as well as financial planning.”

Overall, a better financial outlook may make it possible for you to meet your social and emotional goals for retirement and a Fee-Only financial planner can help you with retirement planning to meet those goals.

For example, Nayer would like to see friends more often but she and her husband rent out space in their home with a website that facilitates short-term rentals and this cuts in to their ability to have friends visit. Since they rely on that income, they cannot stop the rentals altogether.

Nayer recommends that people who have anxiety about retirement try relaxation techniques such as taking a deep breath and setting limits on the time you spend thinking about certain troubles. In addition to trying to alleviate anxiety, she also suggests finding ways to fill your life with positive practices like exercise, activities you like, and healthy eating.

Children, Taxes, and Unearned Income

There have been recent news stories about officials in different places shutting down lemonade stands and other business enterprises set up by children for various reasons, including permits, health code concerns, and taxation issues. We may assume that children are free from the same taxes that apply to adults but that is not so. Some children have income they earn and income that they get from investments and tax law treats these categories of income differently.

In “Generational Financial Planning Within the Kiddie Tax Limits,” writing for Forbes, David John Marrotta examines tax law as it applies to children’s unearned income:

“The kiddie tax (or “Tax for Certain Children Who Have Unearned Income” as the IRS calls it) is a set of tax laws which force unearned income over a small amount to be taxed at the higher tax rate of the parents. For 2017, the kiddie tax limits allows $1,050 to be received without being taxed and the next $1,050 to be taxed at the child’s rate, while any unearned income in excess of $2,100 is taxed at the parent’s top marginal rate.

This tax can cause the children of wealthy parents to lose any preferential treatment of qualified dividend income and be taxed at a rate higher than that of a multimillionaire.”

A Fee-Only financial planner can help you decide just what assets to give to your children or grandchildren, how to pass these assets on, and the timing of when you pass on these assets.

The article notes that income your child earns through work is not going to be taxed the way investments like stocks can be. It also suggests that it would be ideal if you were able to have your child work in a family business because they could earn money (that wouldn’t be taxed the way unearned income is taxed) and you could put money into the company Roth 401(k) for them.

Overall consider this final piece of advice Marrotta: “Families that consider generational financial planning techniques can reduce the burden of taxes on the family as a whole.”

Why Not Save for Christmas in July?

Today, July 25, is known as Christmas in July. The retail calendar does not always match our own and people tend to remark when they see Halloween decorations in the summer or swimsuits on sail in the winter. And some retailers try to entice shoppers to spend more for Christmas in July. But rather than being enticed to spend, you could use Christmas in July as an opportunity to think ahead and save for the winter holidays.

While it is important to save for a general emergency fund, some people find it is easier to save with a specific goal in mind rather than just save in general. Smartasset.com offers some tips to start saving for the winter holidays in July. If you have thought about doing this is in the past and haven’t managed it before, it is not too late to start this year. By the end of the year, you may feel at ease to spend on gifts or experiences like vacations.

Separate your savings. One thing the site suggests is that you keep your holiday savings separate from your general savings. You will not want to dip into your overall emergency savings as you spend for the holidays.

Some people need to set up an automatic transfer to save while others can do it themselves. You can do this on your own through a Christmas Club account at some financial institutions. Or you can do the transfers on your own into an account that you designate specially for the holidays.

For those who don’t mind keeping track on their own, Smartasset.com recommends rounding up each debit card purchase and saving the difference, as well as saving loose change.

Find ways to reward yourself. Instead of using credit card rewards to justify overspending at Christmas, try spending earlier in the year with a rewards credit card with an aim to trading in points for gifts during the holidays:

“Just keep in mind that if you’re going to try your hand at the rewards game you should only charge what you can afford to pay off in full each month. It’s not worth it to pay interest just for the sake of scoring a few extra points.”

Investment 101: Choosing and Selling Profitable Investments

While it is important to save, a comfortable retirement is often not made of savings alone.

In “How to Fund Your Retirement Without Selling Off Your Investments,” The Motley Fool explains the two ways people usually make money after investing in stocks and bonds: selling once the investment is worth more (capital gains) or getting a monetary reward from the organization you invested with (dividend or interest).

This explanation points the way towards how one can retain investments and still profit from them:

“Choosing investments that will produce lots of income for you is an important part of retirement planning.”

When you have an investment that offers dividends or interest, you profit without selling. And a profitable investment that offers dividends or interest once may very well do so again since “getting dividends and interest is an ongoing income stream, which makes it a perfect option for retirees.”

You may find that you want to sell an investment that has already produced profit for you at some point in the future but you need to plan carefully. You need to make sure that selling is the best move since you will no longer profit once you make the sale.

If you didn’t know already, dividends are not exempt from taxation. Stocks that are part of a retirement account are not taxed as long as they remain in that account. Stocks that are part of a Roth IRA will not be taxed at all.

If this sounds at all daunting, work with a Fee-Only financial planner to chart your course towards or during retirement. On the other hand, you may do very well picking profitable investments on your own but you could do even better with expert help. A financial advisor can you choose a variety of investments that can offer an income stream in retirement if that is your goal.

It’s Okay to Start Social Security Earlier Than Planned

There are a number of sayings about how you can make plans for your life and not be able to see them through. Financial planning is not something you do to guarantee that things will go your way but a way to ensure that you are prepared for whatever life may throw at you. It’s okay to start social security earlier than you had planned.

After hearing from a senior who felt like a failure because of the need to start Social Security earlier that anticipated in an online chat, Washington Post finance columnist Michelle Singletary responded:

“If you need to tap your retirement funds early or apply for Social Security at 62, or before your full retirement age, or even at 70, that’s okay. Yes, ideally, waiting will net you more money every month, but if your circumstances are such that you can’t wait, do what’s needed to provide for yourself. And please don’t feel like a failure. Life happens.”

So, yes, while you may have heard that in many circumstances it is advisable to wait as long as possible to start Social Security that does not mean you should become destitute trying to stick you the plan.

One of the most basic principles of financial planning is that you need to save as much as you can. Sufficient savings can give you flexibility when your other resources are in jeopardy: if you lose your job and your investments don’t do as well as expected, you can rely on savings to see you through a difficult time.

Financial planners are there to help—whether you consult with one in advance to lay out your financial goals or find yourself visiting one in a bit of a panic.

Fee-Only financial advisors take an ethical, all-inclusive approach to your financial future. They are without commission-related conflicts of interest and dedicated to providing you with options and opportunities that are the right fit for your needs.

Should Adult Children Pay Rent?

What does financial independence look like? This can be a tricky question when adult children are employed but still not earning enough to finance their own lives. If you can sit down and discuss the matter before the child has moved back in, you are ahead of the curve. Some parents find themselves having this discussion after their adult child has been home for a while—that can be awkward but better late than never.

In an article that argues for parents not to charge adult children rent, one writer acknowledges that both she and her mother had tight budgets but not paying her mother’s nominal rent could have help her to pay down student loans avoid further grad school debt.

A U.S. News & World Report articulated reasons why adult children who move back home should pay rent, including that it will motivate them to find work and help them learn how to budget as they pay back their student loans.

Whatever you decide, it should be something that you feel comfortable doing. If you do not want to cover all of the costs to have another adult in your home, this needs to be communicated. If, instead, you prefer that your adult child use that money to build their financial future, as one responder to this forum indicated was her mother’s position, you can communicate that (although you might relent and take something if your children want to help).

Young adults living at home can achieve financial independence. It is important to remember that there are many choices between having an adult child pay rent and not having that child pay rent. Options include:

  • Charging a rent that is below the market rate
  • Giving your child a certain amount of time that is rent-free and charging after that time ends
  • Charging rent and putting it into a savings account for the child to use once they move out
  • Asking your child to pay for one or more of the utilities
  • Splitting the cost of utilities with your child
  • Asking your child to commit helping with household chores

 

 

Thoughts on Estate Planning from the Ultra-Rich

Thomas Heath’s Washington Post column on how the ultra-rich talk to their kids about money may not give you a detailed plan for discussing finance with your children but it does give you some food for thought on estate planning. If you assumed that all wealthy people like talking about money because they have plenty of it, think again.

“Wealthy people on both sides of the equation — the wealth creators and the heirs — often consider it gauche to even discuss money. Some are embarrassed by it.”

One owner of a family business has each of this children talk with the family estate attorney when they reach the age of eighteen. And this talk is between the attorney and the eighteen-year-old while Dad sits out in the lobby. The talk at eighteen is preparation for turning 21, which the business owner considers the beginning of adulthood. He thinks a responsible adult will have a will and an estate plan.

Other business owners interviewed talked about establishing trusts and their philosophies on how a trust should be administered. Setting up a trust that allows access to money at different ages is one way to see to it that a child does not go through a huge amount of money with youthful exuberance.

There is also the stance taken by some very well known millionaires and billionaires: leave your children no money or a very small inheritance so can appreciate the value of hard work. One of the most famous wealthy Americans to do this was Andrew Carnegie; he said it would be ‘a disgrace to die a rich man.’

Whether you want to give your wealth away or pass it all down to your heirs, you will need a plan to distribute your resources because you cannot leave it up to chance and the courts. And this is where a Fee-Only financial planner can help. It is up to you to decide to do some estate planning before talking to your heirs or to do it in consultation with them. Either way, a Fee-Only financial planner can help you get started so you can design an estate plan that will meet your financial goals.

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