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December 18th, 2019 by
  • Are you saving for retirement?
  • For your children’s education?
  • For any other long-term goal?

Know how inflation can impact your savings.

Inflation is the increase in the price of products over time. Inflation rates have fluctuated over the years. Sometimes inflation runs high, and other times it is hardly noticeable. The short-term changes aren’t the real issue. The real issue is the effect of long-term inflation.

Inflation erodes the purchasing power of your income and wealth.

This means that even as you save and invest, your accumulated wealth buys less and less, just with the mere passage of time. And those who put off saving and investing impacted even more.

how does inflation affect you

How to fight inflation?

You should own at least some investments whose potential return exceeds the inflation rate. A portfolio that earns 2% when inflation is 3% actually loses purchasing power each year. Though past performance is no guarantee of future results, stocks historically have provided higher long-term total returns than cash alternatives or bonds. However, that potential for higher returns comes with, greater risk of volatility and potential for loss. You can lose part or all of the money you invest in a stock. Because of that volatility, stock investments may not be appropriate for money you count on to be available in the short term. You’ll need to think about whether you have the financial and emotional ability to ride out those ups and downs as you pursue higher returns.

Bonds can also help, but since 1926 their inflation-adjusted return has been less than that of stocks. Treasury Inflation Protected Securities (TIPS), which are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, are indexed so that your return should pace with inflation. The principal is automatically adjusted every six months to reflect increases or decreases in the Consumer Price Index; as long as you hold a TIPS to maturity, you will receive the greater of the original or inflation-adjusted principal. Unless you own TIPs in a tax-deferred account, you must pay federal income tax on the income plus any increase in principal, even though you won’t receive any accrued principal until the bond matures. When interest rates rise, the value of existing bonds will typically fall on the secondary market. However, changing rates and secondary-market values should not affect the principal of bonds held to maturity.

Diversify Your Portfolio!

Spending your assets across a variety of investments that may respond differently to market conditions is one way to help manage inflation risk. However, diversification does not guarantee a profit or protect against a loss; it is a method used to help manage investment risk.

All investing involves risk, including the potential loss of principal, and there is no guarantee that any investment will be worth what you paid for it when you sell.

Don’t allow inflation to catch you off guard. You need a little foresight and knowledge to make the most of your retirement plan. So, contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me TEL: 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.
December 11th, 2019 by

There are a number of different gifting strategies available for planned giving. Each has its advantages and disadvantages.

Gifting Strategies - retirement planning with Freeman Owen, Jr.

Instead of making an outright gift, you could choose to use a charitable lead trust. With a charitable lead trust, your gift is placed in a trust. The recipient of the gift draws the income from this trust. Upon your death, your heirs will receive the principal with little or no estate tax.

If you prefer to retain an income interest in your gift, you could use a pooled income fund, a charitable remainder unitrust, or a charitable remainder annuity trust. With each of these strategies, you receive the income generated by your gift, and the recipient receives the principal upon your death.

Finally, you could purchase a life insurance policy and name the charitable organization as the owner and beneficiary of the policy. This would enable you to make a large future gift at a potentially low current cost.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.

As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have contract limitations, fees, and charges, which can include mortality and expense charges. Most have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the policy; plus, there could be income tax implications. Any guarantees are contingent on the financial strength and claims-paying ability of the issuing company. Life insurance is not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association.

 AdvantagesDisadvantages
Outright GiftDeductible for income taxes.No retained interest.
Charitable Lead TrustA current gift to charity.

Current income tax deduction.

Pass assets to heirs at a future discount.
The transfer of assets is irrevocable.

If the current income tax deduction is taken, future income is taxable to the donor.

Donor gives up the use of income for life of the trust.
Pooled Income FundCurrent income tax deduction.

Income paid to beneficiary for life.

Non-income-producing assets can be converted to income-producing assets
Income is unpredictable from year to year.

Income received is taxed as ordinary income.

Remainder interest will usually go to only one charity.
Charitable Remainder UnitrustCurrent income tax deduction.

Avoids capital gains tax on appreciated property.

Reduce future estate taxes.
The transfer of assets is irrevocable.

Qualified appraisal generally required.

Complex administration and setup.

Distributions to noncharitable beneficiaries are generally subject to income tax.
Charitable Remainder Annuity TrustCurrent income tax deduction.

Avoids capital gains tax on appreciated property.

Fixed income.
Fixed payment cannot be limited to the net amount of trust income.

Qualified appraisal generally required.

Complex administration and setup.

Distributions to noncharitable beneficiaries are generally subject to income tax.
Gifts of InsuranceCurrent income tax deduction is possible.

Enables donor to make a large future gift at a small cost in the future.
May require annual premiums.

In some cases, the death benefit could be part of the donor’s taxable estate.

While trusts offer numerous advantages, they incur upfront costs and ongoing administrative fees. The use of trusts involves a complex web of tax rules and regulations. You might consider enlisting the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.

Planning for retirement is like planning a birthday party. You need a little foresight and knowledge to make the most of your retirement plan. So, contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.
December 11th, 2019 by
Holiday Shopping Tips

In 2018, Internet retail sales rose by more than 14% over 2017, while brick-and-mortar sales increased by less than 4%. About $514 billion in goods and services were purchased in cyberspace throughout the year. Even so, traditional retailers still dominated the marketplace, with $4.8 trillion in sales.1

Shopping online is especially popular during the holiday season when many people prefer to avoid the crowds and purchase and ship gifts with a few clicks of the mouse. Before you click, you might consider these tips, which could help make your online shopping experience safer and more satisfying.

Connect carefully. Look for https:// in the URL and an icon of a locked padlock, typically to the left of the URL, which indicates a secure connection. Don’t provide personal or financial information when connected to a public Wi-Fi hotspot unless you are certain it is secure. If you must use public Wi-Fi, use a virtual private network (VPN).

Protect your identity. Create a strong password if you order through an account. Only provide information that is required for your order. Opt-out of future contacts unless you want further information.

Use a credit card, not a debit card. Credit card payments can be withheld if there is a dispute, but debit cards are typically debited quickly. Credit cards generally have better protection than debit cards against fraudulent charges.

Know the vendor. Ordering online from well-known retailers is generally safer (although even large vendors can be hacked). If you want to order from an unknown vendor, read online reviews from other consumers and check out the company with the Better Business Bureau. Regardless of the vendor, be sure you are comfortable with the return policy, check for additional fees (such as handling), and make sure you’re not signing up for a service or product with recurring charges.

Finally, remember to factor in time for shipping. Many retailers offer free or low-cost delivery with a guaranteed delivery date, but it might not be as fast as you would like — and overnight or expedited delivery can be costly. If you need a last-minute gift, you might have to face those crowds at the local mall.

1) U.S. Census Bureau, 2019

Planning for retirement is like planning a birthday party. You need a little foresight and knowledge to make the most of your retirement plan. So, contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.