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Peachtree Planning July 2022

July 20, 2022

July 2022

Summer’s here, and the time is right for vacations, outdoor activities, and fun. It’s also a good time to consider a few financial matters. Here are some questions to ask yourself mid-year.

  • Goals still the same for 2022? Has market volatility affected your goals? Note any changes since the first of the year that may warrant reviewing your goals.
  • Credit score looking good? Double-check your credit score for any red flags. This can be a good way to catch issues like identity theft early.
  • Contributions on track? Consider increasing your contributions to any personal or workplace-sponsored savings plans if it suits your goals.
  • Scheduled spending still make sense? Look at any impacts you've felt due to market volatility. Do your plans for the rest of the year align with reality?

If these tips have you thinking, please feel free to reach out. We're happy to discuss your financial picture at summertime or any time.

John and Mary are nearing retirement and they have a lot of items on their bucket list. Longer life expectancies mean John and Mary may need to prepare for two or even three decades of retirement. How should they position their money?1

One approach is to segment your expenses into three buckets:

  • Basic Living Expenses — Food, Rent, Utilities, etc.

  • Discretionary Spending — Vacations, Dining Out, etc.

  • Legacy Assets — for Heirs and Charities

Next, pair appropriate investments to each bucket. For instance, Social Security might be assigned to the Basic Living Expenses bucket.2

For the Discretionary Spending Bucket, you might consider investments that pay a steady dividend and that also offer the potential for growth.3

Finally, list the Legacy Assets that you expect to pass on to your heirs and charities.

A bucket plan can help you be better prepared for a comfortable retirement.

Call today and we can develop a strategy that may help you put enough money in your buckets to complete all the items on your bucket list.

  1. John and Mary are a hypothetical couple used for illustrative purposes only. Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline.

  2. Social Security benefits may play a more limited role in the future and some financial professional recommend creating a retirement income strategy that excludes Social Security payments.

  3. A company’s board of directors can stop, decrease or increase the dividend payout at any time. Investments offering a higher dividend may involve a higher degree of risk. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.

According to the Social Security Administration, a 20-year-old has more than a 25% chance of becoming disabled before reaching retirement age.1

Loss of income for such a duration has the potential to cause significant financial hardship. And while Social Security Disability Insurance may help, it's critical to understand that about two-thirds of initial applications are denied and the average SSDI payment is only $1,358 a month.2,3

Disability coverage may be available through your employer, who may pay all or a portion of the cost for your coverage.

Employer plans typically pay up to 50% of your income. This limited coverage might not be enough to meet your bills, which is why you may want to supplement employer-based coverage with a personal policy. Supplemental policies may be purchased to cover up to about 70% of your income.4

Taxation of Disability Benefits

When you purchase a personal disability policy, the benefit payments are structured to be income tax-free. Consequently, you may not be eligible for coverage that equals your current salary since your take home pay is always less.

If your employer paid for your coverage, then the income you receive generally will be taxable. If you paid for a portion of the employer-provided coverage, then the pro rata amount of the benefits you receive are structured to be tax-free.

Choices, Choices, Choices

Consider the waiting period before disability payments begin. A longer waiting period saves you money, but it also means that you may have to live off your savings for a longer period. You are the best judge of how much of this risk you are comfortable assuming.

You also may want to coordinate the waiting period with any short-term disability benefits you could have. For example, if your short-term disability covers you for 90 days, look to have at least a 90-day waiting period so that you can potentially lower the cost on the long-term policy.

Ask how a policy defines an inability to work. Some policies will say the "inability to do any job or task;" others will say "own occupation." You may prefer the latter definition so you're not forced to perform some less-skilled, lower-paid work. That type of work may not help you meet your bills. 2020-107098 Exp. 08/22

1. Social Security Administration, 2022

2., 2021

3., 2022

4., 2021

Money is a central part of everyday life as an adult. We spend time most days earning it, we need it for survival, and we want it for fun and entertainment. Oddly, it’s often a topic that isn’t talked about or shared with children. Schools don’t teach much about how to manage money and parents often keep money matters private. However, it’s worth considering the benefits of teaching children about money from a young age so they are well prepared to manage it responsibly and effectively as adults.

Here are several ideas for teaching kids about money, whether they’re toddlers or teenagers.

Start Young: Teaching Toddlers About Money

When you have young children, you can begin to introduce them to the ideas of money through play. Pretend one of you has a store and the other is going shopping. Be sure to include the parts of those experiences that involve money. You can also begin to introduce them to actual money. Show them all the types of coins and have them organize them by like-kind or by size.

Next Steps: Talking Money with a Preschooler

As your child gets a little older, they will be more curious about money and how it works. Be open with them. Discuss it when you pay bills, go to the grocery store, and balance your budget. Plus, continue to teach money concepts through play.

Giving a Financial Foundation to Young Kids

Between the ages of six and eight, children can begin to take on household responsibilities and earn an allowance. This will bring the concept of earning money into their world. Teach them about long and short-term goals and the importance of saving. Creating jars for different long and short-term goals like saving up for a new bike and having money for the ice-cream man will help make these concepts tangible for them.

Creating Interest in Finances in Older Kids

Children between the ages of nine and 12 can understand and grasp complex concepts. You can talk to them in more detail about setting a budget. Walk them through your family’s starting balance and how each expense deducts from the available amount and show them where the money goes. Taking for granted things like Wi-Fi and streaming TV are a great way to start a conversation about how paying for intangibles is important part of budgeting. You can also instill a sense of generosity by showing that a portion of your income goes to a charity that you support.

Discussing Finances with Young Teens

Once you officially have a teenager, you’re getting into the final lap. In today’s world, it’s helpful to start thinking about what they want to do after high school and the costs and impacts of those options. Younger generations tend to prioritize experiences over things and helping them understand the full bottom line of a Senior Prom or a class trip to Spain are a great teaching opportunity.1 Also, as their lives expand and require more funding, include them in the budgeting process and encourage them to look for ways to earn money (mowing lawns, babysitting, etc.). Additionally, this is also a good age to talk about credit — how credit works, how important it is, and how to build a good score.

Ready for Send-Off: Money and Older Teens

The last stretch has arrived. Many major credit card issuers allow you to add a minor as an authorized user on your credit card. This can let them practice managing a credit card and can help to establish a positive credit line on their report. Additionally, keep talks about money open and work with them on managing their own budget. Help them understand the tradeoff between what they spend on today and how that affects what they can purchase in the future by playing the Cash Stash Dash.

Begin the conversation about Money with Your Kids

Money doesn’t have to be a taboo topic within the household. No matter what age your kids are, it’s the right time to start money talks. It will help prepare them for the real world. Then when they do go out on their own, they will know exactly what to do. Your kids will have a stronger foundation to help them resist common financial missteps like racking up huge credit card bills or damaging their credit score. If you’d like more tips or advice, feel free to contact one of our financial professionals today. They can help you with more ideas for a child of a particular age.

2020-98052 Exp 12/2022
1 Guardian Millennials and Money Study 2018