2022 has been a challenging year for investors so far. The S&P 500 Index just had one of its worst Aprils in decades, and May is off to a rocky start. Bond investors have not fared much better as rising interest rates have pushed down bond prices. Bond losses have made the stock market volatility feel even worse than usual. Markets don’t like uncertainty but it’s getting a healthy dose of it this year, dealing with high inflation, tighter Federal Reserve monetary policy, COVID-19 shutdowns in China, and snarling global supply chains, all while the war in Ukraine continues. Investing mistakes often take place during periods of elevated volatility. One of the most frequent is trying to time the market by jumping in and out. Market timers must be right twice, and timing the return to the market can be extremely difficult to pull off. Markets can turn quickly, and missing even just one big up day can significantly reduce returns over time. The biggest daily gains tend to come in down markets, making them especially difficult to predict. Time in the market, not timing the market, may be more beneficial to long term investors. When markets are shaky, it can be helpful to look to long-term fundamentals that have provided the foundation of positive returns for stocks and bonds over the long run. For stocks, gains depend on the ability of corporations to grow earnings, which they have continued to do during first quarter earnings season—S&P 500 Index earnings per share are on track to increase 10% year over year. For bonds, the key fundamental has simply been the ability of borrowers to make required payments. Corporations and consumers

Market Volatility and the Importance of Staying the Course at Different Ages When you invest in the stock market, you want to see growth, but unfortunately, in most cases, investments do not grow all the time. Inevitably, the market goes up and down, and to safeguard your potential for long-term growth, you need to understand the importance of staying the course through market volatility. However, you also need to adjust your approach to investing at different ages. Staying the course through market volatility has different implications at ages 20, 30, 40, 50, and into retirement. Check out these tips. 20s to 30s At these ages, you should be actively saving for retirement. By investing early, you have the opportunity to amass more wealth than you do if you wait until you are older. When choosing your investments, keep your personal risk tolerance in mind, but don’t necessarily sell funds that drop in value. At these ages, you don’t need the funds for another 30 to 40 years, and as a result, you have the ability to ride through market volatility. Typically, at these ages, the best course of action when investments drop is to just do nothing. 40s to 50s At these ages, retirement is looming on the horizon, and ideally, you should be investing as much as you can. Even at these ages if your investments drop in value, you shouldn’t necessarily sell. But you should consult with a financial professional and make slight changes as needed. Keep in mind that while the market grows at an average of 7.2% per year, research indicates that the average investor only sees 5.3% growth per year — analysts speculate that this

Whether your child was just born or is heading toward high school graduation, a 529 savings plan may help you put aside funds to pay for college expenses without paying taxes (federal and some states) on any dividends and gains.1 However, 529 plans have some specific rules, regulations, and restrictions that parents must know before college begins. Here are the answers to some of the most commonly-asked questions about 529 college savings plans. What Are Qualified Expenses? Generally, 529 funds are tax-free when spent on qualified expenses, such as tuition, books, fees, and room and board. However, understanding what constitutes an eligible expense is sometimes challenging. Here are some things to know about qualified expenses: Books, supplies, and equipment are qualified; however, laptops and other tech devices are qualified expenses only if required for enrollment or attendance at a school. Airfare or driving expenses to and from college are not qualified expenses. Health insurance is not a qualified expense. Room and board, including off-campus housing, is a qualified expense. However, it is capped at the room and board amount your college estimates in its total cost of attendance. This rule means that if your college publishes its cost of attendance as including $10,000 in room and board, but you have an off-campus apartment that costs $2,000 per month, you may only be able to use your 529 withdrawal to pay for $10,000 of your rent. What Happens if Your Child Gets a Scholarship? Getting a full-tuition scholarship may create a challenge. You may need to change what to do with the 529 funds earmarked to pay for college tuition. Fortunately, several options allow a 529 custodian to avoid paying penalty

As a small-business owner, you may be looking for the next big thing—an investment that might double your profits within the next year or allow you to maintain your income while working just a few hours a week. However, business success may depend on many incremental investments you make along the way. By including investments that fall outside the financial realm, you may better position your business and yourself to take advantage of future opportunities. Here are four key investments that may help your business thrive. Invest in Your Health Starting a company is all-consuming. You may find yourself relying on too many fast-food meals and getting too little exercise as you put in the long hours needed to get your business going. Nevertheless, business success may be anticlimactic if you are not healthy enough to enjoy it. Invest in yourself by taking time for self-care, exercise, time with family, and healthy meals. Realize that your business may only be as healthy as you are. Invest in Your Education Education is more accessible than ever, including pay-per-credit-hour classes at local community colleges and online courses from some of the country’s most reputable universities. Small-business owners may take advantage of these educational opportunities to expand their knowledge on any number of subjects. Perhaps you want a greater understanding of grants or loan opportunities that may be available. You might desire to learn about a new marketing strategy. Investing in your education may give you a knowledge base to support you throughout your entrepreneurial efforts. Invest in Financial Professionals If you try to run your business while also doing your taxes and keeping your books, you may find that there are not

Without a doubt, it is important to have enough life insurance coverage to handle any financial contingencies that may affect your family if you die prematurely. However, determining the amount of life insurance you need is not that simple. One past rule of thumb was that you should have enough life insurance to equal five times your annual salary. But more frequently, having the appropriate amount of life insurance coverage requires careful “Needs Analysis” rather than using an arbitrary formula.   The Needs Analysis approach incorporates an evaluation of your family’s most important financial obligations and goals. This could include insurance coverage for mortgage debt, college expenses, future family income, and creating liquidity for future estate tax liabilities.   Continuing income for your family. The amount of income you will need to help provide for your surviving spouse and dependents will vary greatly according to your other assets, retirement plan benefits, Social Security benefits, age, health, and your spouse’s earning power. Many surviving spouses may already be employed or will find employment, but their income is based on education, training, and experience. Your spouse’s income alone, may be insufficient to cover the monthly expenses of your family’s current lifestyle. Providing a supplemental income fund will help your family maintain its standard of living.   Mortgage debt. You need to consider whether your life insurance proceeds are sufficient to help pay the remaining mortgage on your home. If you are carrying a large mortgage, you may need a sizable amount. If you own a second home, the mortgage on that home also needs to be factored into the formula.   College expenses. Many people want life insurance proceeds large enough to

April brings more than possible rain showers. It also marks Financial Literacy Month in the U.S. Whether you’re interested in a quick refresher or seeking to learn something new, it may be worth the effort to brush up on some financial concepts that give you a broader knowledge base from which to make financial decisions. Here are several ways to invest in your financial education for this Financial Literacy Month. Check Out the Library With financial topics and discussions available in online articles, blogs, podcasts, radio, television shows and just about every other type of media, the library may be an overlooked resource for those seeking to improve their financial literacy. However, it may be cost-effective to check out a book from the library since it is free. Your librarian may be an invaluable resource for identifying areas of knowledge that you would like to boost and helping you select the appropriate books to read. Think About Your Budget and Taxes Whether you are good at budgeting or tend to take whatever comes financially, spring presents an opportune time to take a hard look at your income and spending and decide what changes may be worth making. While gathering the information you need to file your income tax return, you may be able to identify patterns and get an early start on any changes you would like to make this year. For example, if you did not contribute to a 401(k) or traditional individual retirement account (IRA) last year, running a few calculations might help give you a good idea of how much you may save in taxes by starting contributions now. Suppose your overall tax rate is quite low

Social Security Retirement benefits are one thing that people know of, but often what they know isn’t always accurate. First, the Social Security Trust Fund was created in 1939 as part of Old Age and Survivors Insurance by the Social Security Administration (OASI). The goal of this legislation was to help American workers have financial resources in retirement. But since its inception, there have been myths surrounding Social Security. Here we will answer questions people have about Social Security to help dispel common myths of the program: Q: Can the U.S. Government borrow money from the Social Security reserve fund? The government does not borrow money from the Social Security Reserve fund, and by law, is unable to tap the fund, regardless of the U.S. deficit. There has never been any change in how the Social Security program is financed or how the federal government uses payroll taxes to fund the program. Q: Since a tax funds Social Security, can I deduct it when I file my taxes? There was never any provision of law making the Social Security taxes paid by employees’ deductible for income tax purposes. The 1935 law expressly forbid this idea in Section 803 of Title VIII. – SSA.GOV Q: Are Social Security retirement benefits taxed? President Reagan signed the taxation of Social Security benefits into law in April 1983. In 1993, additional legislation was enacted, increasing the benefits subject to taxation from 50% to 85%. Q: Can immigrants and non-U.S. citizens collect Social Security retirement benefits? Legal immigrants and non-U.S. citizens can qualify for Social Security retirement benefits if they earn enough work credits over their careers. They must also have a social security number

Are you worried about the current state of the Social Security system and how its future may affect your retirement income? It’s important to take a long, hard look at your current savings strategy to ensure you’ll be able to compensate for this, or any other, retirement income shortfall. Here are some important savings strategies that can help you work towards your retirement income goals.   Participate in your employer’s retirement plan. Regular contributions to an employer-sponsored retirement plan, such as a 401(k), can be an essential part of solidifying your retirement savings program. Contributions to such plans offer three key benefits: they are made with pre-tax dollars; they reduce your current taxable income; and they enjoy tax-deferred accumulation.   Start an IRA. An IRA (Individual Retirement Account) is a retirement savings vehicle that gives individual taxpayers the opportunity to accumulate tax-deferred earnings on contributions. You can contribute up to $6,000 (or $7,000 if you are age 50 or older) per year to an IRA, and contributions are tax deductible under certain circumstances. It is the combination of these two key benefits—tax-deferred accumulation and deductibility of contributions—that makes an IRA an important retirement savings vehicle for many individuals. Earnings on all contributions enjoy tax-deferred accumulation and incur federal (and, in some cases, state) income taxes only upon withdrawal. Deductible contributions also incur income taxes upon withdrawal. Bear in mind, any withdrawal from an IRA prior to age 59½ may result in a 10 percent federal penalty tax (in addition to federal and state income taxes). In addition, withdrawals must commence when you reach age 70½, at which time you must also stop making contributions.   Consider a Roth IRA. This

What to look for and what’s not important   If you are shopping for a financial professional, you need a good checklist of questions to ask. What you are looking for is someone who handles clients like you – and who is financially wise. As you assess a professional who manages your assets, for instance, do yourself a favor: Don’t rely on his or her investment record. Clients have differing needs. A money manager whose investment performance touched the stars last year may falter this year. More important nowadays may be how skillful a financial professional is at preserving your assets. That may range beyond market forecasts into such realms as insurance. Losing the ability to work and generate income, because of a sudden disability, can be more ruinous to your financial well-being than a slide in the stock market. This list of questions to a prospective professional will help you decide whether the person is a suitable fit for you: What Don’t You Do? Some financial professionals are strictly asset managers. They run your portfolio and do no planning. Others are wealth managers and their mandate is broader: They help plan the risk in your life. Within these categories are specialists in such areas as insurance and estate planning. You may hire a professional to help you draw up an investment plan aimed at pursuing enough assets to see you through retirement. But the financial professional may know zilch about creating a trust to pass along wealth to your grandkids. So, you will need another expert for that. Who Is Your Typical Client? Let’s say you are starting out and have a net worth of $50,000. It may not

Even though tax filing season is well under way, there’s still time to make a regular IRA contribution for 2021. You have until your tax return due date (not including extensions) to contribute up to $6,000 for 2021 ($7,000 if you were age 50 or older on or before December 31, 2021). For most taxpayers, the contribution deadline for 2021 is Monday, April 18, 2022. You can contribute to a traditional IRA, a Roth IRA, or both, as long as your total contributions don’t exceed the annual limit (or, if less, 100% of your earned income). You may also be able to contribute to an IRA for your spouse for 2021, even if your spouse didn’t have any 2021 income. Traditional IRA You can contribute to a traditional IRA for 2021 if you had taxable compensation. However, if you or your spouse were covered by an employer-sponsored retirement plan in 2021, then your ability to deduct your contributions may be limited or eliminated, depending on your filing status and modified adjusted gross income (MAGI). (See table below.) Even if you can’t make a deductible contribution to a traditional IRA, you can always make a nondeductible (after-tax) contribution, regardless of your income level. However, if you’re eligible to contribute to a Roth IRA, in most cases you’ll be better off making nondeductible contributions to a Roth, rather than making them to a traditional IRA. Roth IRA You can contribute to a Roth IRA if your MAGI is within certain limits. For 2021, if you file your federal tax return as single or head of household, you can make a full Roth contribution if your income is $125,000 or less. Your maximum