THE COLLEGE E-ZINE THE COLLEGE OF DIPLOMATES OF THE AMERICAN BOARD OF ORTHODONTICS
“Keeping Our Members Connected”
39 ANNUAL th
SUPPLEMENTAL LECTURE Saturday, July 8 2017
Where: Resort at Squaw Creek, Lake Tahoe, California When: July 7-11, 2017
Tips to Avoid Financial Pitfalls #1
Avoid These Financial Traps — They May Be Hazardous to Your Wealth
Tips to Protect Against Loss #10
Rethinking Risk -- Common Barometers for Measuring Portfolio Performance
Tips to Protect Against Loss #14
We Are Considering Adopting a Child. What Do We Need to Know?
Tips for Retirement Planning #19 What Today’s Workers Can Expect From Social Security Tomorrow
Tips to Avoid Financial Pitfalls #1 Avoid These Financial Traps â&#x20AC;&#x201D; They May Be Hazardous to Your Wealth Planning and a dose of common sense can guide you through some of the key financial traps of life.
Moneyâ&#x20AC;Ś.It's hard to get and easy to lose. It doesn't
take long for the wealth you've accumulated to disappear if you don't manage your money well or have a plan to protect your assets from sudden calamity. Snares like the ones mentioned below could easily threaten your financial security. Planning ahead can protect you and your loved ones from getting caught.
Undisciplined Spending The more you have, the more you spend -- or so the saying goes. But not paying close attention to your cash flow may prevent you from saving enough money for your future. Manage your income by creating a spending plan that includes saving and investing a portion of your pay. Your financial professional can help identify planning strategies that will maximize your savings and minimize your taxes.
High Debt With the easy availability of credit, it isn't hard to understand how many people rack up high credit card balances and other debt. Short-term debt will become long-term debt if you're paying only the minimum amount toward your balances. If you can't pay off your credit card debt all at once, consider transferring the balances to a card with a lower interest rate.
Unprotected Assets Your life, your property, and your ability to work should all be protected. Life insurance can provide income for your family if you die. Homeowners and automobile insurance can help protect you if your home or car is damaged or destroyed and provide
liability coverage if someone is injured. Disability insurance can protect your income if you're unable to work.
Unmanaged Inheritance A financial windfall is great, but it also can be dangerous. Without solid advice on managing and investing the money, you could find that your inheritance is gone in a much shorter time than you would have thought possible. Your financial professional can help you come up with a plan for managing your wealth. Setting aside a portion of the money to spend on a trip or other luxury while investing the rest may be one way to reward yourself and still preserve the bulk of your assets.
Neglected Investments Reviewing your investments to make sure they're performing as you expected -- and making changes in your portfolio if they're not -- is essential. But it's also essential to periodically review your investment strategy. You may find that your tolerance for risk has changed over time. You'll also want to assess the tax implications of any changes you plan to make to help minimize their impact.
Retirement Shortfall If you're not contributing the maximum amount to your employer's retirement savings plan, you're giving up the benefits of pretax contributions and potential tax-deferred growth. Maximizing your plan contributions can start you on your way to a comfortable retirement -- hopefully with no traps along the route.
Tips to Protect Against Loss #10 Rethinking Risk -- Common Barometers for Measuring Portfolio Performance If you are researching new investment avenues, chances are “evaluating risk” tops your checklist. Financial experts have developed many methods for measuring risk, but beta and standard deviation are two of the most popular and useful options. Beta calculates how much (or how little) an investment’s price varies relative to a specific benchmark. For stocks, the S&P 500 is often used.1 For bonds, it might be the Barclays U.S. Aggregate Bond Index.2 The mechanics of beta are fairly simple: The benchmark is always assigned a risk rating of 1.0. So, if a stock has a beta of 1.1, for example, it has been 10% more volatile than the general market. If the market has a return of 10%, an investment with a beta of 1.1 would be expected to return 11%. Similarly, if the market declines 10%, the investment would be expected to drop by 11%. Since it is calculated in relation to a benchmark, beta may provide a more accurate risk reading for specific asset classes and certain types of mutual funds than for individual securities.3 Standard deviation measures how much an investment’s return fluctuates from its own longer-term average. Higher standard deviation typically indicates greater volatility -- but does not necessarily indicate a greater risk of loss. How so? While standard deviation quantifies the variance of returns, it does not differentiate between gains and losses. Consistency of returns is what matters most. For example, if an investment declined 2% every month for a specified period of time, it would earn a seemingly positive standard deviation of zero. Alternatively, an investment that earned 8% one month and 12% the next would have a much higher standard deviation, but by most accounts it would be the preferable investment. The lesson to
be learned? Greater volatility in and of itself is not necessarily a bad thing. One of the key strengths of standard deviation and the reason it is the most commonly used risk barometer, is its universal applicability across asset classes and types of securities. While understanding the role that risk plays in your portfolio is important, no amount of knowledge can eliminate risk entirely. That’s why it is important to manage risk through diversification and other strategies.4 Contact your financial professional to learn more about managing risk in your portfolio. Investing in stocks involves risks, including loss of principal. Standard & Poor’s Composite Index of 500 Stocks (the S&P 500) is an unmanaged index that is generally considered representative of the U.S. stock market. It is not possible to invest directly in an index. Past performance is not a guarantee of future results. 1
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price. The Barclays U.S. Aggregate Bond Index is considered representative of most U.S. traded investment grade bonds. 2
Investing in mutual funds involves risk, including loss of principal. Mutual funds are offered and sold by prospectus only. You should carefully consider the investment objectives, risks, expenses and charges of the investment company before you invest. For more complete information about any mutual fund, including risks, charges and expenses, please contact your financial professional to obtain a prospectus. The prospectus contains this and other information. Read it carefully before you invest. 3
4 There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk.
Tips to Protect Against Loss #14 We Are Considering Adopting a Child. What Do We Need to Know?
When considering adoption, it is important to understand the legal process, the evaluation by a social worker; programs that may help you finance an adoption, and your ability to care for a child.
Legal Issues Anyone who is considered a "fit parent" may adopt a child, but many states and adoption agencies impose special requirements.1 State laws may impose a residency requirement for a period of time prior to the adoption or may insist that a parent be a certain number of years older than the child. Adoption agencies may impose stricter guidelines. Be aware that many private organizations may have strong preferences for placing children with heterosexual couples. Although it is possible for single parents and same-sex couples to adopt, they may have to go through more steps to prove that the placement would be in the best interest of the child. For an adoption to be legal, birth parents must consent unless their rights have been terminated. Most states will not permit consent until after a child is born, and there is likely to be a waiting period after birth. You may want to consult an experienced adoption lawyer to make sure you understand circumstances when birth parents can revoke consent. All adoptions must be approved by a judge at an adoption hearing. Prior to the hearing, biological parents, the adoption agency (if applicable), the child's legal representative (if applicable), and other parties must provide consent in order for the judge to issue a final decree of adoption.
Home study Prior to the adoption hearing, the judge typically reviews the recommendation of a home study in
which a social worker examines the home life of the adoptive parents. Social workers are likely to examine the adoptive parents' financial situation, marital stability (there may be exceptions for single parents or nonmarried couples), lifestyle, other children, career obligations, physical and mental health, and criminal history.
Finances Private agencies typically charge fees ranging from several hundred to several thousand dollars.2 One-time, non-recurring expenses may include fees associated with the home study, parent preparation classes, criminal checks, court costs, attorney fees, health and psychological exams, and travel. In many instances, public agencies may help adoptive parents pay expenses when a waiting child or a foster child is adopted. Many waiting children are entitled to state or federal adoption assistance each month until the child reaches age 18 or 21. Federal tax law provides an adoption tax credit of up to $13,460 in 2016. In addition, financial support may be
available from religious organizations and from the National Adoption Foundation.
Your Readiness for Adoption In addition to the legal and financial issues, consider whether you are able to care for a child personally and emotionally. The adoption process does not always proceed smoothly, and you may encounter frustration and delays before bringing a child into your home. If the child is young, you
are likely to spend the better part of two decades putting the child's needs ahead of your own. That said, being an adoptive parent also presents many rewards. Going into the experience with your eyes open may increase your chances of creating a positive outcome for all parties involved. 1
Source: National Adoption Center.
Tips for Retirement Planning #19 What Today’s Workers Can Expect From Social Security Tomorrow Did you know that the age at which many workers will qualify for full Social Security benefits has risen to 67 from 65? If that’s news to you, you’re not alone: The majority of workers are still in the dark about Social Security eligibility requirements and many expect to qualify for benefits payments sooner than they actually will. Combined with lingering questions about the longterm financial health of the overall Social Security program, these facts reinforce the importance of understanding exactly what you might expect from Social Security during your retirement.
Benefit Basics The exact amount of your Social Security benefit will depend upon your earnings history. According to the Social Security Administration (SSA), your benefits will be there for you when you retire. However, the SSA also acknowledges that some changes to the present system may be required.
in or approaching retirement, there will be almost twice as many older Americans in 30 years as there are today.1
What’s in Store? Ideally, Social Security takes in more in taxes each year than it pays out in benefits. However, based on SSA projections, by 2034, the Social Security trust fund will be insufficient to allow for full payment of scheduled benefits. Recognition of these issues is growing, and legislators are now looking at funding and investment options to resolve them.2 While your Social Security benefits are an important piece of the retirement income equation, you probably shouldn’t plan to rely on Social Security alone for your future income. Your employer-sponsored retirement savings plan, company pension, and personal savings may need to provide the major portion of your income in retirement. Source: U.S. Census Bureau, “Projections of the Population by Sex and Age for the United States: 2015 to 2060,” 2014.
For example, when Social Security was created, the average life span was less than 65 years. But today, many people are living longer, healthier lives. And because the nation’s 76 million baby boomers are
Source: Social Security Administration, “Fast Facts & Figures About Social Security,” 2015.
Contact: www.cdabo.org 10