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Tag: Financial Planning

Social Security: By the Numbers

Social Security has been a pillar of retirement life for several decades, but how much do you really know about it? Here are a handful of facts that might surprise you:

 

The Social Security trust fund exceeds the gross domestic product of every country in the world except: China, the United States, India, Japan, Germany, Russia, Indonesia, and Brazil.[i]

 

For 61% of retirees, Social Security is a major source of income.1

 

Benefits are subject to federal income taxes, but it wasn’t always so. Amendments to the Social Security Act made benefits potentially taxable beginning in 1984.1

 

Benefits are determined by your average earnings during a lifetime of work, based on your 35 highest-earning years.1

 

If you receive Social Security, you no doubt welcome cost-of-living-adjustments (COLAs) to your benefits. Did you know that Social Security COLAs once required an act of Congress? That was the case before 1975, when they were finally pegged to advances in the Consumer Price Index.1

 

In the middle of 2018, more than 1 in 6 Americans were collecting Social Security benefits. Older Americans constitute about 80% of Social Security recipients, and their average monthly benefit in June 2018 was $1,413.[ii]

 

When should you begin taking Social Security? That may depend on several factors, but many people choose to claim benefits as soon as they are eligible. You can receive benefits beginning at age 62, but if you take them before reaching Social Security’s Full Retirement Age (67 for those born in 1960 or later), your monthly benefit will be fractionally reduced. You can wait until age 70 to claim your maximum potential benefit.

There are many factors to consider when determining the age at which you should begin taking benefits. We believe this decision should be made in conjunction with your overall financial planning process.

 

We would welcome the opportunity to discuss this further or to begin a conversation regarding your financial plan and how Social Security benefits fit into the plan.  Contact CapSouth at 800.929.1001.

 

To read more about financial and retirement planning visit http://capsouthwm.com/services/financial-estate-planning/

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.waddell.com/explore-insights/market-news-and-guidance/planning/9-facts-about-social-security

 

[ii] https://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security

 

The Great Debate Continues: Active vs. Passive

In sports, music, and politics, there are “great debates” that never seem to conclude. In the investment world, one great debate asks a thought-provoking question: which investment approach is better – Active or passive?

 

Equally intelligent, educated people can take distinctly opposite sides in this discussion, which may mean no definitive answer exists.

 

Passive pointers. The case for passive investment management is anchored in the evidence that the preponderance of money managers has failed consistently to beat their comparative index. Why is this? Adherents of passive investing cite two primary reasons:

 

One, markets are efficient, and all known information is already reflected in the price of the stock, making it difficult for managers to find companies that are expected to outperform. Over the 15 years ending in 2017, more than 90% of small-cap, mid-cap, and large-cap asset managers of active equity funds failed to beat their benchmarks. Some did for a particular year, but across successive market years, their ranks quickly thinned.[i],[ii]

 

Two, actively managed equity funds often have an elevated expense ratio. That presents a hurdle, which can make it hard to match or exceed the return of a low-expense index fund. In 2017, actively managed funds had an expense ratio averaging 0.79%, according to the Investment Company Institute (ICI), compared to 0.09% for the average equity index fund.2,[iii]

 

Even so, a studious investor has to decide if the potential cost savings of a passive investing approach outweigh the possible opportunity cost.

 

Active arguments. Active investment managers counter that while the markets may be generally efficient, there are windows of inefficiency created by the time it takes for information to be properly reflected in a stock’s price.

 

Active managers further argue that performance is not just about relative return, but also, about managing risk. Since the performance of an actively managed account or fund is not tracked to an index, that freedom allows the manager more leeway and options to hedge or reduce exposure to disappointing sectors of the market.

 

Unlock the combination. Ultimately, the active vs. passive decision comes down to preference. Do you prefer the approach taken by index funds or the strategy behind active management? For some, the combination of both methods represents a strategy that takes no sides but seeks to tap into the distinctive potential benefits of each method. Some investors choose to have a portion of their invested assets actively managed and another passively managed. Perhaps this is not indecision so much as experimentation.

 

As a reminder, equity funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this information and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

 

To read more about investment and wealth management, visit capsouthwm.com/services/investment-wealth-management/

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.investopedia.com/ask/answers/032615/what-are-differences-between-weak-strong-and-semistrong-versions-efficient-market-hypothesis.asp

[ii] http://www.aei.org/publication/more-evidence-that-its-very-hard-to-beat-the-market-over-time-95-of-financial-professionals-cant-do-it/

[iii] https://www.thestreet.com/investing/etfs/expense-ratio-14686652

Countdown to College

 

Most parents want to give their children the best opportunity for success, and getting into the right college may help open doors. According to the latest income-per-education-level data available from the Bureau of Labor Statistics, American adults who have a bachelor’s degree had median weekly earnings of $1,173 and a jobless rate of 2.5% in 2017, compared with median earnings of $712 and unemployment of 4.6% for those with just a high school diploma.[i]

 

Unfortunately, being accepted to the college of one’s choice may not be as easy as it once was. These days, preparing for college means setting goals, staying focused, and tackling a few key milestones along the way.

 

Before High School

The road to college begins even before high school. As early as elementary and middle school foster your child’s love for learning. Encourage good study habits and get them dreaming about college. A trip to a nearby university or your alma mater may help plant the seed in their minds. When your child reaches middle school, take the time to find out which prerequisite courses may set the right track for math and science in high school.

 

The earlier you consider how you expect to pay for college costs, the better. The average student loan borrower owes $32,731 in education debt, which amounts to between 65-111% of first-year salary.[ii]

 

Freshman Year

Before the school year begins, consider meeting with your child’s guidance counselor. Discuss college goals and make sure your child is enrolled in classes that are structured to help them pursue those goals. Also, encourage your child to choose challenging classes. Many universities look for students who push themselves when it comes to learning. At the same time, keep a close eye on grades. Every year on the transcript counts. If your child is struggling in a subject, don’t wait to get a tutor. One-on-one instruction can be a huge benefit when mastering difficult material.

 

In addition to academic performance, many colleges want prospective students to be well rounded, so encourage your child to engage in extracurricular activities, such as sports, music, art, community service, and social clubs.

 

Sophomore Year

During their sophomore year, some students may have the opportunity to take a practice SAT. A practice exam is a good way to give your child a feel for what the test entails as well as any possible areas improvement they may have. If your child is enrolled in advanced placement (AP) courses, encourage good performance on AP exams. High exam scores show universities your child can succeed at a higher level of learning.

 

Sophomore year is also a good time to get some depth in extracurricular activities. Help your child identify passions and stick to them. Encourage your child to read as much as possible. Whether they read Crime and Punishment or Sports Illustrated, they will expand their vocabulary and critical thinking skills. Summer may be a good time for sophomores to get a job, do an internship, or travel to help fill their quiver of experiences.

 

Junior Year

Near the beginning of junior year, your child can take the Preliminary SAT (PSAT), also known as the National Merit Scholarship Qualifying Test (NMSQT). Even if they won’t need to take the SAT for college, taking the PSAT could open doors for scholarship money. Junior year may be the most challenging in terms of course load. It is also a critical year for showing good grades in difficult classes.

 

Top colleges look for applicants who are future leaders. Encourage your child to take a leadership role in an extracurricular activity. This doesn’t mean they have to be drum major or captain of the football team. Leading may involve helping an organization with fundraising, marketing, or community outreach.

 

In the spring of junior year, your child will want to take the SAT or ACT. An early test date may allow time for taking the test again in senior year, if necessary. No matter how many times your child takes the test, colleges will only look at the best score.

 

Senior Year

For many students, senior year is the most exciting time of high school. They will finally begin to reap the benefits of all their efforts during the previous years. Once your child has decided to which schools they wish to apply, make sure you keep on top of deadlines. Applying early can increase your student’s chance of acceptance.

 

Now is also the time to apply for scholarships. Your child’s guidance counselor can help you identify scholarships within reach. Also, find out about financial aid and be thorough. According to research by NerdWallet.com, well over $2 billion in free federal grant money is going unclaimed each year simply because students are failing to fill out the free application.[iii]

 

Finally, talk to your child about living away from home. Help make sure they know how to manage money wisely and pay bills on time. You may also want to talk about social pressures some college freshmen face for the first time when they move away from home.

 

For many people, college sets the stage for life. Making sure your children have options when it comes to choosing a university can help shape their future. Work with them today to make goals and develop habits that will help ensure their success.

 

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.bls.gov/careeroutlook/2018/data-on-display/education-pays.htm

[ii] https://www.valuepenguin.com/average-student-loan-debt

[iii] https://www.azcentral.com/story/money/personalfinance/2018/10/17/free-college-money-unclaimed-fafsa/38172299/

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