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value of money

Time Value Of Money And Planning

Understanding the general concept of the time value of money can help consumers plan appropriately for future needs and today’s wants. This concept applies to how a consumer may save, invest and make decisions on lending needs.

Many of us are familiar with the idea that the earlier one starts saving the more he or she will have in the future. This may be the case, but it’s also important to be familiar with present value of money and debt, future value of money and debt, and the beginning period and ending period of saving.

When a consumer considers how these concepts work together, it can provide the consumer with the valuable information needed to effectively plan for the future. A good example is credit card debt. If one were to calculate the length of time and amount of finance interest paid to credit card companies by only paying the minimum payment, it would shock most of us.

Saving for future needs is important. We must understand that the dollars we save today (present value of money) will most likely be worth less in the future. So how can we make decisions to save and take advantage of time value? Let’s consider a scenario of saving for retirement in an IRA (Individual Retirement Account) annually. Investors have a choice to save at the beginning (beginning period) of each year rather than saving at the end of the year (ending period of investing). Using this strategy, an investor can earn more on his or her money by contributing the same dollar amount annually at the beginning of the year rather than at the end of the year.

Investing consistently and taking advantage of different types of accounts sponsored by employers, deferred-tax saving retirement accounts and after-tax saving accounts can help consumers plan for retirement. Many employers offer match savings, as well as company contribution, just for signing up for the employer retirement plan. It’s important to take full advantage of the match. Also, some plans offer both a Traditional (pre-tax) deferred saving as well as (after-tax) Roth saving plan. Each of them has specific benefits, and if used properly, they can be a valuable piece of a consumer’s planning strategy. Keep in mind that withdraws prior to age 59-1/2 may result in a 10 percent IRS tax penalty, in addition to any ordinary income tax. IRA and Roth IRA accounts can also be used in addition to employer sponsored plans.

The traditional employer plan and individual retirement plans allows consumers to save on a tax deferred basis; however, he or she will need to account for ordinary income taxes during distributions. Where as, Roth contributions allow for after-tax contributions and tax-free growth and withdraws. By combining these options, and starting sooner rather than later, consumers can take advantage of the time value of money as well as using all options available.

As consumers, it’s not only important to take advantage of the time value of money by investing early, but it’s also important to manage debt in a similar way. Present debt and future debt are key ingredients to manage and can make or break consumer’s future plans. By applying the same concepts to debt management, one can see the value of using time as a way to structure debt for the consumer rather than the financing institution. For example, be wary of committing to long-term debt. When committing to long-term debt, consider a plan to payoff the debt early by making additional payments. Applying the time value of money in this case will save consumers a lot of money in the long run and reduce debt sooner. Also, keep in mind that lower interest rates will help save consumers finance cost. A little extra planning can greatly benefit consumers.

These concepts can be very valuable with practice, practice and more practice. Consumers can become experts in controlling their way of using time value of money and planning for future needs. For more information, visit jacobgold.com.

Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc. This information was prepared by Michael Cochell of Jacob Gold & Associates, Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.
Estate Planning: Planning Your Future

Estate Planning: Planning For The Future

Estate Planning: Planning for the Future

When planning your financial future, it is important to consider an investment strategy, risk tolerance and time horizon. These are critical aspects of building wealth.

Although many of us focus on the now, we forget about organizing our finances and personal interests upon our passing. This aspect of planning is neglected many times and can put everything at risk. As investors, we will spend many years saving and planning; we should take the steps to protect all that we have built. This can be done by arranging an estate plan that will allow you to pass on your assets to who you want, how you want, and when you want.

This type of planning may seem overwhelming, but an effective estate plan doesn’t need to be complicated. It can be broken down in two key elements. The first is having a durable power of attorney and the second is a will.

Having a durable power of attorney will allow you to manage your assets while you are still living by appointing someone to act in the event you are unable to do so. A will focuses on managing and distributing your assets after death.

In addition to these key elements, an estate plan can help avoid the problems and expenses of probate, avoid family conflicts, provide flexibility in estate management, and minimize taxes at the time of death. These are some of the benefits and why estate planning is so important. However, how does one get started on setting up an estate plan?

Most estate planning objectives can be accomplished by hiring an attorney or by using an online “do-it-yourself” approach. The cost of hiring an estate planning attorney to assist with the development and implementation of an estate plan is typically far outweighed by the benefits of recruiting experienced council. The person who decides to save money by using an online service is likely to make costly mistakes, says estate attorney Kari Meyrose of Gorman and Jones Law Firm.

“Estate planning attorneys spend many years learning the contours of estate planning rules and methodologies, and they have the ability to forecast the potential outcomes that may result from an individual estate plan,” Meyrose says.

Estate plans range from simple to very complicated, and in some cases the cost of not using an attorney may actually end up being a very costly lesson for loved ones. Either way you decide— do it yourself or use an attorney — don’t procrastinate in making a choice and take action in planning your future.

For more information about estate planning or Jacob Gold & Associates Inc., visit www.jacobgold.com.

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This information was prepared by Michael Cochell of Jacob Gold & Associates Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.[/stextbox]

Low Rate Environment

Dealing With A Low Rate Environment

Dealing with a low rate environment

Many investors watch day-to-day market performance to evaluate their investment holdings. Do I buy, do I sell, hold on, or consider other options such as sitting in cash or CDs to earn a return? There are many factors to think about. Having a low rate environment is one of them. This is a critical piece of the pie and can affect all of us for a long time, especially retirees.

How does this work? The Federal Reserve, led by Ben Bernanke, along with the Federal Open Market Committee, meets eight times a year to determine the federal funds rate. The federal funds rate is influenced by the Fed in three different ways.

First, the Fed can buy Treasury securities from the market to reduce government debt. This will lower the rate.

Second, the Fed can adjust the reserve requirement that capital banks must have on their books. This may reduce the amount of loans banks offer their customers which may affect what consumers pay to borrow.
Third, the Fed sets the discount rate. The discount rate is the rate at which banks can borrow from the Federal Reserve Banks. If this is increased, it creates higher rates for consumers, which usually reduces the amount investors save. The Fed’s influence on rates affects all of us and must be considered in retirement planning.

Having a low rate environment has its pros and cons. For borrowers, it is very positive. It allows individuals and businesses to get cheap money on mortgages, credit cards, auto loans, business loans, and other related borrowing needs. As a consumer, you are able to save by paying lower interest rates and use that savings to spend more on necessities. On the institution side, companies are able to borrow from other banks and the Federal Reserve at low costs. This provides opportunities for acquisitions, mergers, and investing in their companies for future growth.

On the negative side, financial institutions that are required to meet certain deposit minimums may only yield a low return, making it more difficult to generate a profit. Banks and financial institutions earn less on their reserves. Many times, companies will increase their fees to compensate for low-interest rates, which cost consumers more.

Also, having low interest rates provides for low returns on fixed income type of investments such as CDs, money market accounts, and treasury securities. Retirees who have low debt and rely on fixed incomes are feeling the pinch more than ever. In some cases, retirees who depend on low risk returns are having to turn to equity or bond positions to offset the low rates of C’s and cash equivalents. This becomes very challenging and presents a constant balancing act for retired investors.

In today’s market, it is much more difficult to figure out the most appropriate investment for an individual, especially one that is already retired. Most retirees rely on low risk investments to generate returns that will keep up with inflation of about 3 percent. This is much more challenging to do when rates are as low as they are today. According to the Fed’s last meeting, interest rates will continue to be low (near zero) until 2013.

When rates do start to rise, investors will need to be proactive and make change to their portfolios. Learning to manage our investments according to risk tolerance and needs is a constant battle. Working with a financial professional can help guide investors through volatility and rate changes.

For more information about having a low rate environment, visit www.jacobgold.com or call (480) 998-4653.

[stextbox id="grey"]Michael Cochell is associate vice president at Jacob Gold & Associates Inc. This information was prepared by Michael Cochell of Jacob Gold & Associates Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions. [/stextbox]

choosing retirement plans, arizona business owners

Choosing Retirement Plans for Business

Choosing retirement plans for business owners: Today, business owners are a critical piece for the growth of our economy. They will continue to provide new innovations and venture out to other countries improving competitiveness in our global markets.

New businesses have become the backbone of our U.S growth. For this reason it is important to have support from our government, consumers and the business owners themselves.

One of the ways our business owners help support our economy is by providing jobs and retirement plans to help us plan for our future. However, choosing retirement plans, and the right one at that, for a business owner can be overwhelming and confusing. It takes hours of research and a check list of highly relevant questions to figure out the best plan for the type of business. Most of the facts include demographics of the employees such as their ages and income, along with the overall financial objective for the plan.

There are numerous plans to choose from such as: SEP’s, SIMPLEs, 401(k)’s, 403(b)’s, Solo 401(k)’s, Safe Harbor 401(k), Profit Sharing, Defined Benefit Plans, Money Purchase, and so on. In addition, add an array of non-qualified plans, and it becomes even more daunting.

For example, the SEP-IRA allows a contribution of up to 25% compensation with a limit of $49,000. It also is very easy to set up and has low administration cost. Whereas a traditional 401(k) is appropriate when a business seeks to make large contributions for the owner(s) and other partners, as well as provide an employer contribution for employees as a benefit.

The traditional 401(k) options have many benefits and allow the employer to control eligibility, match options and vest schedule. It also provides asset protection under ERISA and allows plan participants to contribute $16,500 for 2011 — plus an additional $5,500 if the participant is age 50 or older.

On the other hand, 401(k) plans may create high fiduciary responsibility for the business owner and have higher administration cost due to complex discrimination testing.

Choosing retirement plans for business is challenging, and I found that the process of elimination helps sift through the many choices; and clearly identifying what you want to achieve for you and your employee’s financial goals will narrow the choices.

As our economy continues to work though the recent recession, business owners will still provide new innovations in servicing and production of goods. We hope that as our economy stabilizes, we will see more opportunities for businesses to choose retirement plans and offer the right one to employees to help our future retirees.

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For more information about choosing retirement plans, visit www.jacobgold.com.

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Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.

This information was prepared by Michael Cochell of Jacob Gold & Associates Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.

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