Women Empowered Toward Investment Success

Women now comprise nearly half of the U.S. workforce, and they now earn a higher percentage of the bachelor’s and master’s degrees compared to men. So how come women’s average retirement plan balances are just 60 percent of men’s average balances?  No, it’s not because there was just a great shoe sale!

Take Control of Your Finances

CONTRIBUTING FACTORS

Several factors may play into women having lower average retirement plan balances:

• Lower average salaries In 2010, the Bureau of Labor Statistics reported that the earnings ratio of women to men was 81 percent. Lower wages may translate to lower contribution and match rates.
• Tendency to select more conservative investments Generally speaking, conservative investments may result in lower long-term returns.
• Employment breaks Not only do women take time off for maternity leave, they may take additional time away for child rearing, as well as the care of elderly parents. Most who take time off for care-giving duties do not continue to contribute to any kind of retirement plan.

Combine the above factors with the fact that women usually live longer than men and, as a result, need an even bigger nest egg, and it’s not surprising that only 24 percent of women are very confident they will have enough money to take care of basic expenses in retirement.

HELP YOURSELF

There are several steps women may take to help themselves live comfortably through retirement:

• Get an idea of how much you may need in retirement If you don’t know, don’t feel bad. Only 40 percent of women (and 45 percent of men) have ever tried to calculate how much they will need to have saved by the time they retire. Try the Retirement Calculator at Fidelity.com  to gain some perspective.
• Pay yourself first Stash cash into your retirement plan — even before saving for your children’s college education (Loans may be available for college, but not retirement). You may feel that’s selfish, but one of the best gifts you can give your children is to secure your own retirement to avoid being a financial burden upon them in the future.
• Learn about saving and investing Usually the more you know, the less scary it is. A good place to start is right here. Go to the Blogs tab on our website at CompassAMG.com  for information on many financial topics, from budgeting  and investing to estate planning
• Explore when to claim Social Security Nearly 60 percent of the people receiving Social Security benefits are women. Although Social Security was never intended to cover all your retirement needs, it may be an important aspect of your retirement. If you are married, there are several scenarios to explore to coordinate you and your spouse’s benefits. For most people, delaying claiming Social Security beyond your full retirement age equals approximately 8% more per year in benefits. (This increased benefit for delaying stops at age 70.) On the Social Security Web site is a Retirement Estimator, which will help you get immediate and personalized retirement benefit estimates. Sign up for My Social Security and view your personal information.

YOU GO, GIRL

Empower your future! Explore, learn and put to work these ideas to close the retirement gap. Begin now to make your future financially secure.  A good strategy and plan will leave a lot more dough around for the magic of martinis & Manolos!! Start today!

This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Written by Steven M. DiGregorio, President, Compass Asset Management Group, LLC.   Compass Asset Management Group, LLC is an affiliate of Spire Wealth Management, LLC.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm.
Securities offered through an affiliate Spire Securities, LLC.
Member FINRA/SIPC.

What Can Affect YOUR Credit Score? SURPRISE!!

We all know enough to pay our bills on time and carry as little debt as possible, and most of the time, that is all that matters in your credit score. Yet other, smaller factors that many people aren’t aware of can cause your score to suffer.

1. Small Unpaid Private Debts
   Many people pay their mortgage, credit card and utility bills with consistency, yet may neglect or forget smaller debts. They may feel that these debts are illegitimate or that they will just go away if ignored. For example, municipalities have been known to report unpaid parking tickets and even library fines to credit bureaus. Unfortunately, any unpaid debt can weigh down your credit score.
2. Tax Liens
   You might not think of the IRS as an agency that reports to credit bureaus, but Uncle Sam figured out long ago how to use your credit history as leverage. In fact, these records remain in your credit history for 15 years; even longer than a bankruptcy. If you have an unpaid tax lien, paying it off will certainly help your credit score, but it can’t undo all the damage done by having there in the first place.
3. Utility Bills
   Your electricity bill or gas bill is not a loan, but failing to pay it will hurt your credit score. While these companies won’t normally report their customer’s payment history, they will report delinquent accounts much more quickly than other institutions, so be careful.
4. Too Many Recent Credit Applications
   It can be tempting to sign up for various credit cards that offer some bonus for your business. Banks can offer tens of thousands of points or miles, while retailers grant in-store discounts when you apply for their credit card. By themselves, these applications have an insignificant effect, but too many credit checks in too short of a time period can lower your credit score. To avoid this problem, limit the number of applications for credit, especially when you are shopping for a home, car or student loan.
5. Long-Term Loan Shopping
   Consumers may know that too many credit inquiries will lower their credit score. Nevertheless, to allow consumers to shop around for the best rates on automobile, student and home loans, the FICO will not penalize borrowers who have multiple credit checks in a short period of time. Various FICO formulas negate multiple inquiries with either 14 or 45 days. Therefore, continuing to shop around for a loan over several months will fall outside of this safe harbor and will lower your score.
6. Business Credit Cards
   Do you have a credit card in the name of your business? Nevertheless, almost all banks will still hold you personally responsible for your debts. Furthermore, your payment history is reported to the credit bureaus. Therefore, any late payments or unpaid debts in the name of your business will affect your personal credit, so long as you are the primary account holder on a business card.
7. Mistakes
   Any incorrect information in your credit history can hurt your score. For example, people with common names frequently find other people’s information in their file. In other cases, typos and clerical errors result in adverse information affecting your score. This is one of the reasons why consumers are encouraged to complete soft inquires at least once a year and dispute any mistakes they find. You can check your credit score annually for free by going to www.annualcreditreport.com

Your personal credit is a serious matter. But following these tips, you can avoid credit pitfalls.

The information herein contained does not constitute legal advice. Decisions or actions should not be made without first consulting an attorney or tax advisor.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm. Securities offered through an affilliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.

Should you have any debt in retirement?

Debt isn’t a bad thing, just as long as you understand the differences between good debt and bad debt.

Many financial advisers have claimed when it came to debt and retirement: The only good debt is debt that’s retired!

No doubt, going into retirement without much debt has plenty of benefits.  Cash flow is better; it helps you sleep a little easier and often means that you can have a respectable net return on your investments.

Generally speaking though, debt is a negative asset.  Pay it off and it’s like earning the return of what the debt used to cost! Money back in YOUR pocket!

But with interest rates still near historic lows and the “cash is king” mentality approaching debt from a strategic perspective is a smarter play.  Choosing to carry certain debt in retirement, if it makes good financial sense, may not be bad.

You see, not all debt is necessarily bad debt.   The key is how to manage debt in retirement so it works to your advantage. So let’s look at some kinds of debt and see if it makes sense for you.

1.  Mortgage debt – Good, as long as you lock in a low rate and earn a better return on your money elsewhere!

The old advice was to plan your mortgage-burning party before your retirement party. That was when retirees tended not to move and interest rates were much higher, in the 9% to 12% range.  Now that people often move when they retire and 30-year fixed-rate mortgage loans are hovering at about 5%, owning the house outright is less of a priority. In fact, depending on your circumstances, you may be better off keeping your mortgage than paying it off.

Among other things, you’ll want to look at the after-tax effect of forgoing the mortgage-interest deduction. If doing so bumps you into a higher bracket, it could have broader implications, such as raising the taxes you owe on IRA withdrawals.

Also take into account how you will fund the payoff. It’s one thing if you have cash to spare earning less than 1%, but quite another if you dip into a high-yielding portfolio or worse by giving up saving in your 401(k) account to just to pay off the mortgage.

Keep in mind too that paying off your mortgage means giving up liquidity, and that can leave you in a more precarious situation, especially after retirement.  It’s always easier to dip into your savings than to go back and get money out of your mortgage, especially after you’ve retired.  In fact, for that very reason you may want to consider applying for a home equity line of credit before retiring.  Any credit is easier to obtain when you still have a steady stream of earned income.

Having that cushion can prevent you from cashing out of investments prematurely or having to rely on high-interest credit cards as a backstop.  Uniquely, you only pay interest on the equity you actually use, and any interest you do pay is, in most cases, tax-deductible. Just don’t treat your equity line as a bottomless piggy bank.

2. Car loan – Bad, unless you’re paying next to nothing in interest

From an asset perspective, there is no sense paying interest on something that loses value over time. After several years of weak car sales dealers have gotten aggressive about incentives, with many offering rates at or near 0%, so keep that in mind during your search.

That said, before you sign on the dotted line, compare the total cost of financing a car with paying for one outright.  You may getter a bigger discount if you pay cash.

3.  Student Loans – Let your kids bear the responsibility, you can always help.

There are more parents today nearing retirement age just as junior is graduating from college.  Those loans a scary thought?  Of course, it’s natural to want to help your child pay for a college education, but planners recommend avoiding parental loans whenever possible.

Here’s a better idea: Help your child apply for student loans in his or her name and then, if you must, help them out later when it’s time for them to make payments. Start by looking at federal student loans, which typically carry low fixed rates, offer income-based repayment plans, and can be deferred or even forgiven.

Even if you don’t think you’ll qualify for financial aid, you’ll still need to complete the Free Application for Federal Student Aid (FAFSA) to receive subsidized loans, which are based on financial need, as well as unsubsidized loans, which are not need-based.

Once you’ve secured loans in your child’s name, you can always help them make payments later. But this way you’re not on the hook for the loan and you’ve given you child a vested interest in his education.  Let’s hope my kids don’t hate me for that!

4.  Credit cards – Bad and bad.  No matter what, pay them off as quickly as possible.

When it comes to credit cards the question isn’t whether to pay them off before retirement but how. The wrong way is tapping into your retirement savings. This is not only short-sighted, it’s too easy. Likewise, don’t let big credit card debts stop you from contributing to your 401(k) or other retirement savings plan, especially if you’re eligible for a company match.

A better strategy: First, get a handle on how much credit card debt you have, the interest rate(s) you pay and your total monthly finance charges. Next, take a good hard look at what expenses account for the bulk of your debt.  Unless you can stop the bleeding there’s no point in paying off the debt.  Study your year-end statement for insight into where the money went.

Finally, devise a plan to pay off your credit card or other unsecured debt by the time you retire. If you expect a lump sum from a tax refund, a bonus or the sale of a non-retirement asset, put that money toward your cards. Otherwise, you’ll need to trim expenses and commit to paying a set amount every month. Treat that payment like any other bill.

If you have debt on multiple cards, consider paying off the lowest balances first. Then allocate that payment as an addition to the next lowest balance card, thereby paying that one off faster.  The snowball continues and before you know it….you’re debt free!  Seeing a zero balance on a card is often good motivation to ramp up your efforts on the next.

When it comes to the double-digit rates you may be paying on your cards, transfer your debt to cards with low or zero-rate offers.  Just make sure you cancel your old card too. If your debt is more extensive, call the credit card companies to negotiate a lower rate or work out a payment plan.

Ideally, you should want to delay retirement until you’ve closed the chapter on credit card debt once and for all.  Accomplish that small goal and you will surely rest easier in retirement.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affilliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.

Investment Moves that Increase Financial Aid

Financial aid season for college students doesn’t kick off for another five months, but parents should take a close look at their investments and assets now to help maximize their child’s aid eligibility.

The Free Application for Federal Student Aid (FAFSA), which students must fill out in order to apply for federal, state and some school aid, determines the expected family contribution (EFC) – the amount that your family could be responsible to pay out of pocket toward college education. The lower the EFC, the more financial aid a student is likely to receive.

Positioning for Financial Aid

Parents who are considering selling investments, like stocks or mutual funds, or real estate should consider the impact their capital gains or losses will have on their child’s financial aid eligibility. In general, capital gains increase a family’s adjusted gross income (AGI), which tends to decrease their financial aid. In addition, this year presents a new opportunity for high income-earning investors to roll over their Individual Retirement Account (IRA) into a Roth IRA, which can provide plenty of tax perks but can hurt their request for financial aid.

Here are four investment moves that can impact the amount of financial aid a student gets.

Rolling an IRA into a Roth IRA

This year, a new opportunity became available to retirement savers, which permits those with more than $100,000 in annual modified gross income to roll over savings from a traditional IRA into a Roth IRA. With a Roth IRA, you’ll pay taxes upfront and you can withdraw tax free, assuming you’re at least age 59 1/2 and have one Roth IRA account open for at least five years. The upshot here is if you think your personal tax rate will be higher when you retire, it might be better to bite the bullet now and pay the taxes while you’re in a lower bracket. The drawback is that you’ll have to pay full income taxes on the conversion. And for individuals with children about to enter or in college, this rollover could lead to a smaller financial aid package. That’s because the entire amount that gets converted to the Roth IRA will show up on their tax return as income.  This could be extremely damaging for a family that would [otherwise] qualify for financial aid.

There is a way for parents to accomplish a rollover without sacrificing their child’s aid eligibility. The Department of Education is permitting colleges to ignore this conversion when they’re reviewing a family’s income for financial aid purposes. The ultimate decision will be made by each individual college, and parents will need to contact the school to request that they ignore this rollover as part of their income. Otherwise, there’s a greater chance that the school will take the rollover into account.

Managing capital gains and losses

Given the recent volatility in the U.S. markets, it’s likely that many investment portfolios have taken a hit. Although selling a stock at a loss is never ideal, such a move can help increase the amount of aid your child will receive.

Selling at a loss may only make sense if the individual isn’t planning to hold on to the investment for the long run. However, if you were investing for the short term or if you were hoping to use this money to help pay for college tuition, it might be time to sell. You may be better off to sell sooner rather than waiting for the future when you may have gains that would count against them in the financial aid formula. It might be better to take the loss that would be deducted from your earned income on their tax return and will lower the adjusted gross income.

Selling an investment at a profit will increase your AGI, which would likely lower the amount of financial aid  you can get. However, taxpayers in the 10% or 15% tax brackets who have long-term capital gains (requires a holding period of more than a year) pay zero taxes through the end of 2010.

Consider impact of selling real estate

Homeowners thinking about selling their home may or may not impact their child’s financial aid eligibility depending on how much their property fetches.

Currently, there is a capital gains exclusion of gains up to $250,000 in profit per person or $500,000 in profit per couple who files jointly; the sale doesn’t show up in your AGI unless the home sells and you’re left with a gain higher than these amounts. Homeowners must have owned and lived in the home for at least two years. (Sales of investment properties show up on your AGI regardless of how much they sell for.)

To determine capital gains, the cost basis, which is the price at which you bought your home and the cost of the improvements that you made, is subtracted from the selling price (including commission).

Shifting assets from child to parents

Parents often move assets into their children’s names for tax purposes – but this tactic will almost certainly hurt them come financial aid time. The federal needs analysis formula assesses child assets at a rate of 20%, while parent’s assets are assessed at up to 5.64%. The EFC will probably be higher when the assets remain in the child’s name and they could lose out on need-based aid, assuming they qualify.

One option is to move the assets from the student to the parent’s name before filing the FAFSA. Or parents can move some of their cash into their child’s 529 plan, which is treated as a parental asset. This money, however, will have to be used for educational purposes; otherwise, when you withdraw, the earnings will be taxed as ordinary income and hit with a 10% tax penalty. Also, such a move will probably make the most sense for someone moving cash from a bank account into a 529 plan.

* Consider the investment objectives, risks, charges and expenses of the 529 Plan carefully before investing.  Consultation with a tax adviser is recommended as Compass Asset Management Group. LLC does not provide tax advice.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affilliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.