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home : ask an expert : ask an expert
September 18, 2019

Brian Bedford
Edward Jones
Expertise: Fincancial Advisor
680 Main St., Baldwin, WI 54002
(715) 688-6735
Brian Bedford - Edward Jones Online
Click here to ask Brian Bedford a question!
Brian Bedford is a financial advisor with Edward Jones. His offices are located in Baldwin, WI.
Q: Financial Resolutions For the New Year
A: About 45% of Americans usually make New Year’s resolutions, according to a survey from the University of Scranton. But the same survey shows that only 8% of us actually keep our resolutions. Perhaps this low success rate isn’t such a tragedy when our resolutions involve things like losing a little weight or learning a foreign language. But when we make financial resolutions — resolutions that, if achieved, could significantly help us in our pursuit of our important long-term goals — it’s clearly worthwhile to make every effort to follow through.

So, what sorts of financial resolutions might you consider? Here are a few possibilities:

• Boost your contributions to your retirement plans. Each year, try to put in a little more to your IRA and your 401(k) or other employer-sponsored retirement plans. These tax-advantaged accounts are good options for your retirement savings strategy.

• Reduce your debts. It’s not always easy to reduce your debts, but make it a goal to finish 2014 with a smaller debt load than you had going into the new year. The lower your monthly debt payments, the more money you’ll have to invest for retirement, college for your children (or grandchildren) and other important objectives.

• Build your emergency fund. Work on building an “emergency fund” containing six to 12 months’ worth of living expenses, with the money held in a liquid account that offers a high degree of preservation of principal. Without such a fund, you might be forced to dip into your long-term investments to pay for emergencies, such as a new furnace, a major car repair, and so on. You might not be able to finish creating your emergency fund in one year, but contribute as much as you can afford.

• Plan for your protection needs. If you don’t already have the proper amounts of life and disability insurance in place, put it on your “To Do” list for 2014. Also, if you haven’t taken steps to protect yourself from the considerable costs of long-term care, such as an extended nursing home stay, consult with your financial professional, who can suggest the appropriate protection or investment vehicles. You may never need such care, but that’s a chance you may not want to take — and the longer you wait, the more expensive your protection options may become.

• Don’t overreact to market volatility. Too many people head to the investment “sidelines” during market downturns. But if you’re not invested, then you miss any potential market gains— and the biggest gains are often realized at the early stages of the rally.

• Focus on the long term. You can probably check your investment balance online, which means you can do it every day, or even several times a day — but should you? If you’re following a strategy that’s appropriate for your needs, goals, risk tolerance and time horizon, you’re already doing what you should be doing in the long run. So there’s no need to stress yourself over the short-term movements that show up in your investment statements.

Do whatever you can to turn these New Year’s resolutions into realities. Your efforts could pay off well beyond 2014.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
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Q: Sharing Your “Bounty” Can Be Rewarding
A: Thanksgiving is almost here. If you have the financial resources to provide a comfortable life for your family, you have reason to be thankful. And if you can afford to share some of your “bounty” with charitable organizations, you may want to be as generous as possible — because your gifts may allow you to both give and receive.

By donating cash or other financial assets, such as stocks, to a qualified charity (either a religious group or a group that has received 501(c)(3) status from the IRS), you help benefit an organization whose work you believe in — and, at the same time, you can receive valuable tax benefits.

To illustrate: If you give $100 to a qualified charity, and you’re in the 25% tax bracket, you can deduct $100, with a tax benefit of $25, when you file your 2013 taxes. Therefore, the real “cost” of your donation is just $75 ($100 minus the $25 tax savings).

Furthermore, if you donate certain types of non-cash assets, you may be able to receive additional tax benefits. Suppose you give $1,000 worth of stock to a charitable group. If you’re in the 25% bracket, you’ll be able to deduct $250 when you file your taxes. And by donating the stock, you can avoid paying the capital gains taxes that would be due if you had eventually sold the stock yourself.

To claim a charitable deduction, you have to be able to itemize deductions on your taxes. Charitable gifting can get more complex if you choose to integrate your charitable giving with your estate plans to help you reduce your taxable estate. The estate tax is consistently debated in Congress, and the exemption level has fluctuated in recent years, so it’s not easy to predict if you could eventually subject your heirs to these taxes. Nonetheless, you can still work with your tax and legal advisors now to take steps to reduce any possible estate tax burden in the years ahead.

One such step might involve establishing a charitable remainder trust. Under this arrangement, you’d place some assets, such as appreciated stocks or real estate, in a trust, which could then use these assets to pay you a lifetime income stream. When you establish the trust, you may be able to receive a tax deduction based on the charitable group’s “remainder interest” — the amount the charity is likely to ultimately receive. (This figure is determined by an IRS formula.) Upon your death, the trust would relinquish the remaining assets to the charitable organization you’ve named. Keep in mind, though, that this type of trust can be complex. To establish one, you’ll need to work with your tax and legal advisors.

Of course, you can also choose to provide your loved ones with monetary gifts while you’re still alive. You can give up to $14,000 per year, per individual, to as many people as you choose without incurring the gift tax. For example, if you have three children, you could give them a cumulative $42,000 in a single year — and so could your spouse.

Thanksgiving is a fine time to show your generosity. And, as we’ve seen, being generous can be rewarding — for your recipients and yourself.

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
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Q: Avoid 'Cramming' For College Savings
A: If you have children, you’re keenly aware that it’s getting close to back-to-school time. Today, that might mean you need to go shopping for notebooks and pencils. But in the future, when “back to school” means “off to college,” your expenditures are likely to be significantly greater. Will you be financially prepared for that day?

It could be expensive. The average cost for one year at an in-state public school is $22,261, while the comparable expense for a private school is $43,289, according to the College Board’s figures for the 2012–2013 academic year. And these costs will probably continue to rise.

Still, there’s no need to panic. Your child could receive grants or scholarships to college, which would lower the “sticker price.” But it’s still a good idea for you to save early and often.

To illustrate the importance of getting an early jump on college funding, let’s look at two examples of how you might fund a college education. A 529 plan is one way — but not the only way — to save for college. (The following examples are hypothetical in nature and don’t reflect the performance of an actual investment or investment strategy.)

Example 1: Suppose you started saving for your child’s college education when she was 3 years old. If you contributed $200 a month, for 15 years, to a 529 plan that earned 7% a year, you’d accumulate about $64,000 by the time your daughter turned 18. With a 529 plan, your earnings grow tax free, provided all withdrawals are used for qualified higher education purposes. (Keep in mind, though, that 529 plan distributions not used for qualified expenses may be subject to federal and state income tax and a 10% IRS penalty.)

Example 2: Instead of starting to save when your child was 3, you wait 10 years, until she turns 13. You put in the same $200 per month to a 529 plan that earns the same 7% a year. After five years, when your daughter has turned 18, you will have accumulated slightly less than $15,000.

Clearly, there’s a big disparity between $64,000 and $15,000. So, if you don’t want to be in a position where you have to start putting away huge sums of money each month to “catch up” on your college savings, you’ll be well advised to start saving as early as possible — specifically, during the first few years of your child’s life.

Of course, given all your other expenses, you may find it challenging to begin putting away money for college. And with so many years to go until you actually need the money, it’s tempting to put off your savings for another day. But those “other days” can add up — and before you know it, college may be looming.

Consequently, you may want to put your savings on “autopilot” by setting up a bank authorization to move money each month into a college savings account. And, as your income rises, you may be able to increase your monthly contributions.

Save early, save often: It’s a good strategy for just about any investment goal — and it can make an especially big difference when it comes to paying for the high costs of higher education.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

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Q: Plan Ahead For Your Own Financial Independence Day
A: This month, we celebrate Independence Day with fireworks, sparklers, picnics and parades. Amidst the hoopla, though, it’s always important to reflect on the many freedoms we enjoy in this country. And as an individual, you may want to use the occasion to think of another type of independence you’d like to enjoy — financial independence.

In some ways, we are living in a time when attaining financial freedom is more difficult than it has been for quite a while. We’re still recovering from the bursting of the housing bubble and the lingering effects of the Great Recession. Furthermore, wage stagnation is a real problem. In fact, median income for working-age households — those headed by someone under age 65 — actually slid 12.4 percent from 2000 to 2011. Taken together, these factors certainly impose challenges on anyone seeking to become financially independent and eventually enjoy a comfortable retirement.

Still, you need to do everything you can to put yourself on the path to financial independence. For starters, make full use of whatever resources are available to you. If you have a 401(k) or similar retirement plan at work, try to contribute as much as you can possibly afford — and every time you get a raise in salary, increase your contributions. At the very least, put in enough to earn your employer’s matching contribution, if one is offered. Also, within your 401(k) or similar plan, choose an investment mix that offers you the chance to achieve the growth you will need to make progress toward the type of retirement lifestyle you’ve envisioned.

In addition to contributing to your 401(k), you can also take advantage of another retirement account: a traditional or Roth IRA. Like a 401(k), a traditional IRA grows tax deferred, while a Roth IRA can grow tax free, provided you meet certain conditions. Plus, you can fund your IRA with virtually any type of investment, including stocks, bonds, certificates of deposit and Treasury securities.

What else can you do to help yourself move toward financial independence? For one thing, don’t become dependent on “hot tips” or other questionable financial advice about The Next Big Thing in the investment world from so-called experts who often have poor prognostication records. Even more importantly, though, their advice may simply be inappropriate for your needs and risk tolerance.

Finally, consider these two suggestions: Maintain adequate liquidity and keep your debt levels as low as possible. By having enough cash reserves to cover unexpected costs, such as a major car repair or a new air-conditioning unit, you won’t have to dip into your long-term investments. And by keeping your debt payments down, you’ll have a stronger cash flow, which means you’ll have more money available to save and invest for your future.

Each one of these suggestions will require a commitment on your part, along with a clear focus on your goal of financial independence — there just aren’t any “short cuts.” But with a consistent effort, you can keep moving along on your journey toward your own Financial Independence Day.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
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Q: What Can All-Stars Teach Investors?
A: you’re a baseball fan, you’ll enjoy the annual gathering of the sport’s best players. And if you’re an investor, you may be able to take away some valuable lessons from the All-Stars — lessons that can prove valuable to you long after the game’s final out is recorded.

So, what can you learn from the All-Stars? Here are a few of their traits:

• Consistency — All-Star teams rarely include ballplayers who are having one great year amidst a mediocre career; typically, All-Star players perform well every season. As an investor, you also want to seek consistent performers — those investments that, year in and year out, are likely to meet their objectives, whether those are growth, income or a combination of both. Of course, in the financial world, there are no sure things, so just like the best ballplayers, any investment can have an “off year.” Still, by sticking with quality investment vehicles, you should be able to improve the overall performance consistency of your portfolio.

• Ability to avoid “errors” — All-Star players (apart from pitchers) are typically superior hitters, but many of them also have superior defensive skills — which means they make few errors in the field. And as an investor, you will definitely want to avoid as many errors as possible, because these mistakes can be costly. Some of the most common “errors” are chasing after “hot” stocks (they may have already cooled off by the time you hear about them), investing too aggressively and investing too conservatively.

• Durability — The Major League Baseball season is 162 games long, which means that, over the course of six months, ballplayers play almost every day. And since baseball is a physically demanding game, injuries are common — yet, many All-Stars seem to make it through the entire season without missing more than a few games. When you invest, you will need plenty of durability as well. Over the course of decades, you will see some bumps in the road — periods in which the financial markets are struggling. During these times, you may be tempted to take a “time out” from investing. But if you do, you could miss out on the beginning of a market rally. The best investors stay invested, through “up” and “down” markets, following a long-term strategy and keeping their focus on their goals.

• Flexibility – Not surprisingly, most Major League Baseball players are big, strong men. However, in recent years, many ballplayers — like other professional athletes — have discovered that various types of training, including yoga, can greatly increase their flexibility, allowing them to reduce injuries and play more effectively. As an investor, you, too, need flexibility in the sense of being able to adjust your portfolio, as needed, in response to changes in your life or in your goals. As part of this flexibility, you need, among other things, enough liquidity in your accounts to take advantage of new investment opportunities as they arise.

In all likelihood, you won’t be swinging a bat or throwing a ball in front of a national audience — but by following the above suggestions, you may be able to become an “all-star investor.”

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

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