Here is an interesting question: What does it actually mean to invest? When we were thinking of topics to bring to you, we kept coming back to foundational questions, to help you understand what we are really doing.
A little bit of planning can go a long way in avoiding taxes and having real world results when paying for medical expenses. Recently I experienced this after needing a significant amount of dental work that insurance wouldn’t cover. After diving deeper into Health Savings Accounts and utilizing some of these tax-saving strategies myself, I wanted to share this information.
Retirement
Think of Social Security as an asset to be managed. It may be a bit of an abstract thought since it is impossible to call up Social Security and ask for a withdrawal. Still, the lifetime value of your Social Security benefit is likely to be substantial, and can be dramatically larger or smaller depending on your claiming strategy, timing, and longevity.
Would you rather have a dollar today or a dollar tomorrow? What about one dollar every month or twelve dollars at the end of the year? The majority of us would take the money as soon as possible. This is based on two old economic principles; opportunity cost and the time value of money. We know that having a dollar today rather than some time in the future is more valuable because it means we can use that dollar immediately. This could mean saving, paying off debt, or even investing it for the future. Therefore, as we evaluate something of equal value received in the future, we discount its worth and prefer that same value now. This is relevant to us as taxpayers as every month we are given the option to receive more now or more when we file our taxes (assuming we are withholding too much).
Financial Planning
Almost all our engagements and recommendations with clients are Fiduciary. Why does that matter to you? Under current regulations, all advisors are now required to act as Fiduciaries for new recommendations in retirement accounts (for example IRA accounts). However, they were not required to do that until very recently, and your account might be grandfathered under the old, weaker, “suitability” rules.
College Planning
In our prior videos (College Planning), we have talked about ways to reduce the cost of education through AP course, college selection, and scholarships. Assuming you have done that and still have a shortfall, you are probably moving on to methods of obtaining financial aid. Today we are going to talk about the $150 billion in federal aid that the US Department of Education offers to 15 million students each year. The aid is provided in the form of grants, work-study, and loans.
