Your Golden Years - In Gold or Brass

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How and Why Interest Rates vary
When you borrow money, one of the most important things to consider is the interest rate you will be paying. This is the money you pay to the bank in return for them lending you money. It is like a fee. You never see it again.

But it is much more. It is determined by three major factors.

1. The Federal Reserve Discount Interest Rate.

The first factor, the Federal R... Read personal finance article



How to Easily Managed Budgets
When creating a budget it is very important to remember that simplicity is the key to a successful budget. You don't want to make it too difficult otherwise you will lose the motivation to stay on your budget.

We have come up with 6 easy ways to create a budget that you can be successful with and will want to stick too.

1. Define your goals

Firstly you want to crea... Read personal finance article



Your Golden Years - In Gold or Brass
We spend most of our lives saving money and finding the best venues to invest. Unfortunately when we start taking money out, we need to carefully monitor how the assets are being used. One key to making our money last is avoiding a catastrophic invasion of principal, meaning healthcare issues.

One of the main reasons for a potentially accelerated decline of assets is the payments for a nursing home or in-home care. Retirees who don't have insurance or the luxury of a cushy savings find themselves dependent on family members. These situations are embarrassing or stressful because nobody wants to be a physical, mental or financial burden to their children and extended families.

So what can an aging person do to protect the assets they currently have? Most people have heard of Long-Term Care Insurance but haven't spent the time finding out how/why it can be instrumental.

We all know that one day we will pass away. The difference is the when and how long will it take. If in-home care or a nursing home costs approximately $5,000 per month how long will your assets last before reaching a zero balance? There's your answer. You can only be sick for that many months/years. But the one fact we do know is that a study done by the U.S. Department of Health and Human Services state that people who reach the age of 65 will have a 40% chance of entering a nursing home.

Take out some time to review what is important to you and how Long-Term Insurance fits within the rest of your life. It can ultimately preserve your investments for you, your spouse, charitable gifting, or leaving a legacy to your family.

Talk about spending...

When you retire, or since you have, will you decrease your spending by 30%? Did you adjust your lifestyle because of the fixed income? No, I didn't think so. This is the time you want to enjoy life: fix up the home, go on a trip or buy some needed items for the grandchildren.

If you want to enjoy life without worry take the time to plan. Get a good understanding of your monthly expenses such as rent/mortgage, utilities, taxes, prescriptions and doctor visits. Is there anything left? The point is to be careful about drawing out of your assets. Most people tend to overestimate the amount they can withdraw from their retirement funds. It's critical to determine a strategic liquidation order and a sustainable withdraw rate so that your assets have a higher probability of lasting as long as you do.

Managing Your Investments

Having control of our money is a great responsibility. However, it's important to be cautious of our actions. We want our money to work hard especially our retirement nest egg.

Monitoring the market is a critical aspect to investing however, reacting to the news of the market by moving the money around frequently may not prove to be beneficial. Investing in different assets such as growth and income mutual funds, bonds, real estate, commodities or precious metals could reduce your risk and potentially enhance your returns.

Take some time to decide your risk level, timeframe, and the goal of your investments.

It's Time Consuming

Weather you are retired or not, take time to think about these topics. Long Term Care Insurance, tracking your expenses and managing your investments are important issues that need to be addressed. It can either cost you or save you money in the near future.

John Michalak is a well-known local authority and financial educator in the matters of retirement finances. He assists retirees & pre-retirees in preserving their capital, protecting their estates and more profitably structuring their investments. People who consult with John find that they reduce or eliminate tax on social security income, increase their fixed monthly income and obtain better protection for their financial future.

Educational Background:

1) MBA in Finance 2) Have completed the CFP - Certified Financial Planner Certificate program at Loyola Chicago. 3) Certified Senior Advisor, (CSA)

Professional licenses and other qualifications:

Series 63, Registered Investment Advisor (RIA) (State or SEC) or RIA representative, Masters of Business Administration, Series 65, Series 6, Certified Financial Planner Certificate Program

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Capital Gain Taxes - Keeping More Money

As we may know, keeping a diversified portfolio can be beneficial to the overall health of our financial stability and growth. Taking a closer look at each investment, they fall into two categories of taxes: capital gains tax and ordinary tax. Many people have both types of taxes within their portfolio but are not sure which tax applies to the investments.

Which Tax is Which: Capital Gains and Ordinary

Capital gains tax is applied on profits realized from the sale of capital assets such as a home, certain investments and dividends and business interests. The best way to determine how an investment is taxes is to simply ask, "What occurred with the investment this year?" If the investment generated income such as interest, the income will probably be considered ordinary. But if you sold the investment for a profit then it will be determined a capital gain.

Capital gain is generated when the sale price for a capital asset exceeds your adjusted tax basis in that asset. Generally, your adjusted tax basis in an asset equals the price you paid for the asset with some adjustments. However, different basis rules may apply to assets acquired through gift or inheritance.

Retaining Income Through Capital Gain

Capital gain income is generally preferable to ordinary income. Currently, the highest marginal income tax rate is 35 percent, while long-term capital gains tax rates vary from 5 percent to 28 percent, depending on the asset and your marginal tax rate.

Here's how capital gain is taxed. Taxation of capital gains depends on how long you owned or held your investments before selling. Assets that are held for less than one year generate short-term gains and are taxed at the ordinary income tax rates. If you hold the asset for more than one year, it is considered a long-term capital gain. The applicable long-term capital gains tax rate is determined by the type of asset and your marginal tax bracket. For taxpayers in tax brackets higher than 15 percent, the rate is generally 15 percent. For taxpayers in the 15 percent and 10 percent brackets, the rate is 5 percent. This applies to sales and exchanges made after May 5, 2003 and before January 1, 2009.

Too Much Income

If selling an asset that you've held on to for more than a year puts you into the higher tax bracket, you may not be taxed at 5 percent. You can use a preferred capital gains tax rate of 5 percent on a portion of the capital gain only. The remainder of your capital gain will be taxed at the higher 15 percent rate.

Net it Out with the Netting Rules

In order to properly compute your capital gains tax, you should be aware of the manner in which capital gains and losses may offset one another. These rules are known as the "netting rules." Generally speaking, the tax code prescribes that short-term capital gains and losses must be netted against each other first. Next, long-term capital gains and losses are netted against one another according to a set of ordering rules. Finally, net short-term gains or losses must be netted against net long-term gains or losses in a prescribed manner.

Capital losses are netted against capital gains. Up to $3,000 of excess capital losses is deductible against ordinary income each year. Unused net capital losses are carried forward indefinitely and may offset capital gains, plus up to $3,000 of ordinary income during each subsequent year.

Knowing is the Key

The key to making the most of your money is deciding when to keep or sell your investments. But when you do, you now know how it can be taxed. Be sure to consult your financial planner or accountant to verify the tax rate so your decision is the best one.

John Michalak is a well-known local authority and financial educator in the matters of retirement finances. He assists retirees & pre-retirees in preserving their capital, protecting their estates and more profitably structuring their investments. People who consult with John find that they reduce or eliminate tax on social security income, increase their fixed monthly income and obtain better protection for their financial future.

Educational Background:

1) MBA in Finance 2) Have completed the CFP - Certified Financial Planner Certificate program at Loyola Chicago. 3) Certified Senior Advisor, (CSA)

Professional licenses and other qualifications:

Series 63, Registered Investment Advisor (RIA) (State or SEC) or RIA representative, Masters of Business Administration, Series 65, Series 6, Certified Financial Planner Certificate Program




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