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Wealth Design Group

November 2017: The Coming of Winter and Its Impact on Your Money


The Coming of Winter and Its Impact on Your Money


By Gary Pevey

The winter is here and its time to think of how this season may impact on finances. You may need lots of heating this season – cut down on the overall power bills by ensuring that your system is efficient ahead of the real cold that will be here soon. Winter unfortunately often comes with some medical issues too. This is when people suffer from endless flus and other contagious illnesses. Hand washing, keeping yourself warm, resting, and avoiding crowded places will help you stay healthy. This means you won’t miss work and will lower any possible medical bills. And remember, apart from taking precautions, you also should consider more exercise. These and many other tips can make your winter season wonderful and keep your finances more secure.

Here are my 10 thoughts on finance for November.

1. Is all your essential information located in one place?  If not, you should take the time to gather the information and store it in a safe place and let someone know where it is. Here is a list of essential information you should have on-hand.

•  In case of emergency - primary contacts

•  Full name, addresses, social security numbers, phone contacts of spouses and children

•  Relatives to notify with addresses and phone numbers

•  Others to notify with addresses and phone numbers

•  Advisors and Healthcare Professionals to notify with phone numbers

•  Locations and notes of Legal & Financial Documents

•  Location of safety deposit box and keys

•  Logins for Social Media

2. Permanent Whole Life Insurance is not an investment, it's a Foundation! You will receive reasonable rates of return if the contract is constructed correctly, but it will not match the upside potential nor the downside risk, of investment vehicles. It is an excellent place to store cash for opportunities as they arise. It provides an emergency fund for unexpected events. And, it helps fulfill family obligations in the event the main breadwinner cannot fulfill his or her obligation of providing for the family. Investments should be a part of everyone's portfolio, but only after the permanent life insurance is in place.

3. Is always a good thing when it comes to your money?

•  Always have enough predictable income at retirement so you can insure your monies last as long as you do.

•  Always start with avoiding threats and fulfilling obligations before you seek opportunities.

•  Always look for ways to reduce your taxes because taxes are the biggest drain on your cash flow.

•  Always remember, our lives are governed by cash flow not accumulation of assets.

•  Always develop a retirement plan that works in all market conditions.

4. When is the best time to take Social Security?  It is impossible to know if claiming early or claiming late will maximize how much you receive from Social Security.  The decision for a single person is simple.  You tell me how long you are going to live and we can tell you the best time to start taking your benefits. However, for married couples it can be more difficult.  You have two life expectancies to consider, and possible spousal benefits.  It is important to work with an advisor that has the financial tools that will help you make an informed decision.

5. Social Security announced the changes for 2018:

•  Next year's Cost of Living Adjustment (COLA) for people receiving benefits is 2%.

•  Also released at the same time is the new amount of maximum taxable earnings. For 2018, that figure is $128,700, up from $127,200. The new maximum taxable earnings means the maximum a high wage earner can pay in the Social Security portion of FICA is $7,979.40, and double that for self-employed people.

•  The earnings test exempt amounts have also increased to $17,040 per year for those under full retirement age and to $45,360 for the calendar year a beneficiary attains full retirement age.

6. Do you have a mortgage if you are facing retirement and your house is free and clear?  If you said no you might want to take a look at all of your assets.  For many Americans their biggest asset, in addition to their house, is their IRA or 401K. Uncle Sam holds a mortgage on all those funds.  You won't know how much you owe on that debt until you withdraw the funds because that is when the tax is calculated.  Also, as your asset continues to grow so does the mortgage.  It is important to plan early developing solutions to minimize this liability. There is a real possibility you could be in a higher income tax bracket in retirement than your present tax bracket.

7. Having a mortgage on your house might not be right for you, but listed are a couple of counter intuitive thoughts about this topic.

•  If you won the lottery today would you put your money into an account that earns zero interest? When you pay off your mortgage, even though you reduce the interest you pay on your house loan, you no longer earn interest on the cash nor have the cash available for emergency use.

•  Remember, you have to qualify to get cash out of your house. The time to get the cash is when you don't need or want it. They probably will not give it to you when you need it.

•  If you have a $250,000 mortgage and $250,000 in a side fund that is easily accessible - is your house paid for?

•  If you have enough money in a side fund to satisfy the mortgage then is it a debt or financial obligation?

8. What is the role of a trusted advisor? Trusted Advisors learn their client's or prospect's answers to these questions before making any recommendations:

•  Can a problem be identified?

•  Is the client aware of the problem?

•  Does the client want to fix the problem?

•  Is the problem fixable?

9. A few thoughts from Warren Buffet on money:

•  Rule Number 1 - Never Lose Money.  Rule Number 2 - Never forget rule Number 1.

•  It is impossible to un-sign a contract, so do all of your thinking before you sign.

•  It is easier to stay out of trouble than it is to get out of trouble.

•  Wall Street is the only place that people ride in a Rolls-Royce to get advice from those who take the subway.

•  It is not necessary to do extraordinary things to get extraordinary results.

•  My idea of a group decision is to look in the mirror.

•  You should invest in a business that even a fool can run, because someday a fool will.

•  Anything that can't go on forever will end.

(Source:  "The Tao of Warren  Buffet"  Mary Buffett)

10. It is important to discuss with your Advisor how they get paid. You should consider doing it early in the conversation.  All Advisors have biases. Some work on a fee arrangement while others receive compensation directly from the financial institution. Advisors must get paid or they will not continue in business. The most important thing to determine is: will their recommendation enhance your position, and do you have a high level of trust that they are working in your best interest regardless of their compensation method.



Gary  Pevey, CLU ChFC

Wealth Design Group

3445 American River Drive, Suite B Sacramento, CA 95864

(916) 480-0669


Investment advisory services offered through  Wealth Design Group,  a Registered Investment Adviser registered with the State of California. Securities offered through  Mutual Securities, Inc., Member  FINRA/SIPC. Wealth Design Group is not affiliated with Mutual Securities, Inc.