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Financial Guide RICE COUNTY

February 2020 | Faribault Daily News | Northfield News

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RICE COUNTY FINANCIAL GUIDE

February 2020

Investing is about more than money. At Edward Jones, we stop to ask you the question: “ What’s important to you?” Without that insight and a real understanding of your goals, investing holds little meaning. Contact your Edward Jones financial advisor for a one-on-one appointment to discuss what’s really important: your goals. Faribault Greg Lee

Cate Grinney, CFP®

Jacob L Womeldorf

1645 Lyndale Ave N Faribault, MN 55021 507-334-9936

404 Heritage Place Faribault, MN 55021 507-334-1666

318 NW 4th Street Faribault, MN 55021 507-332-2957

Jim Harding

Tom Klemer

404 Heritage Place Faribault, MN 55021 507-334-1666

200 8th Ave NW Faribault, MN 55021 507-334-3149

Brian T Panettiere

Christian Lockner, ChFC®

Greg Pierce, CRPC®

Financial Advisor

1250 S Highway 3 Northfield, MN 55057 507-645-0270

509 Division St Northfield, MN 55057 507-663-8809

Financial Advisor

Northfield Financial Advisor

205 W 3rd St Suite B Northfield, MN 55057 507-664-1191

Jon M Snodgrass, CFP®

Financial Advisor

158 N Water St Northfield, MN 55057 507-663-0325

www.edwardjones.com Member SIPC

February 2020

RICE COUNTY FINANCIAL GUIDE

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6 Ways Retirement Has Changed In The Past 8 Years Courtesy of Daniel Hummel Retirement funding can seem like something to deal with later in life, but setting a strategy in place in your early working years is the key to a comfortable life in retirement. Find out how we can help you determine the strategy that’s best for you! Eight years ago the United States plunged into a financial situation later dubbed the Great Recession. Stocks plummeted, home prices dropped, and unemployment skyrocketed. The comparisons to the Great Depression of the pre-World War II era came about quickly, but the generations that lived and worked through that recession had a positive attitude about the outcome.

of the recession, this generation has an interesting set of beliefs that steer the idea of retirement in a new direction. See below for a list of considerations Millennials take into account regarding retirement and how the Great Recession of 2008 is affecting their retirement funding.

1. People aren’t retiring as early as they used to.

Baby Boomers have had to deal with job losses, falling home prices, and investment portfolio losses, so retirement has been delayed for many Boomers. Of those over 50, 44 percent plan to work part-time in retirement

and 33 percent plan to delay retirement. Implementing a retirement strategy early can ensure you’re prepared to retire at an age you choose.

2. You can’t rely on Social Security.

The Social Security Administration’s Trustees Report of 2015 states that total expenditures have exceeded non-interest income of its trust funds since 2010, and they anticipate that the cash-flow deficit will continue. Depending on Social Security as retirement income is no longer a wise plan. It’s going to be up to individuals to ensure they have planned for their future financial needs.

Flash forward to today. The country is bracing itself for a shift in the workforce as the Baby Boomer generation makes its move into retirement. This shift makes way for the highly-anticipated, even larger generation of the Millennials.

5. Realize that you will have to withdraw money from retirement accounts and savings accounts longer than you anticipated.

Many areas of the U.S. continue to reflect home prices that have not recovered from the recent depression. The continually rising home values that retirees counted on in the past are no longer guaranteed. Retirement Life expectancy has increased funding should consider this re- from 75.4 years in 1990 to 78.8 ality. in 2013, so an increase in retirement savings will be necessary. 4. Living a healthy Cutting back on non-necessities is one way to deal with needing lifestyle can offset additional savings, but healthcare expenses and other necesfuture healthcare sary costs aren’t easily reduced. costs. With Social Security payouts in In a recent survey, respondents doubt for Millennials, it’s critisaid they consider healthy life- cal to start saving for retirement style habits such as a proper diet, now. regular exercise, and preventive care as a means to reduce healthcare costs. Healthcare expenses 6. It’s vital to take can be a major factor in retire- an active role in ment funding.

vice agents know the ins and outs of which strategies will work for you. If you want to plan for your future, but you aren’t sure where to start, call Daniel Hummel at 507-412-0658.

Sources: ht t p : / / m o n e y. u s n e w s . c o m / money/blogs/planning-toretire/2011/05/27/10-ways-therecession-has-changed-retirement http://www.forbes.com/sites/ samanthashar f/2014/07/30/ the-recession-generation-howmillennials-are-changing-moneymanagement-forever/ http://www.pewsocialtrends. org/2010/06/30/v-retirementworries/ http://www.pewresearch.org/facttank/2015/05/11/millennialssurpass-gen-xers-as-the-largestgeneration-in-u-s-labor-force/

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Financial Guide RICE COUNTY

3. Selling your home isn’t a good way to get money for retirement.

A special project of the Faribault Daily News 514 Central Avenue, Faribault, MN 55021 Publisher CHAD HJELLMING

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RICE COUNTY FINANCIAL GUIDE

February 2020

How financial planners can help you every day (Metro) Financial planning and retirement go hand in hand. Without effective planning, many people would never be able to retire, while others might have to work much longer than they hope to. While financial planning is essential to achieve longterm goals, planning also can make it easier for people to meet their everyday financial needs. Managing money is a big responsibility, and it’s one that many people may need help with. A recent survey from Pew Charitable Trusts found that 55 percent of Americans spend as much or more than they earn. That’s not only compromising their financial futures, but also making daily life more stressful, as the American Psychological Association’s annual “Stress in America” survey routinely finds that money is a top cause of stress among millions of Americans. Adults who are finding it difficult to manage their money on a dayto-day basis may benefit from the services of a financial planner. Financial planners can help people create effective long-term financial plans, and they also can be vital resources for people who need help managing their money every day. • Planners can look at things from an unbiased perspective. An honest assessment of monthly expenses is essential

when creating a monthly budget. However, many people tend to be biased when it comes to their monthly expenses. For example, some may feel that three streaming service subscriptions are something they cannot live without. That can make it difficult to trim some of the fat from their monthly expenditures. A financial planner will begin by examining your monthly expenses and may or may not make unbiased suggestions regarding where you can save.

they haven’t gotten to it. Financial planners have the time to help clients save, and over time a planner can be an expense that pays for itself if families are saving more as a result of enlisting the services of a planner.

• Planners have the expertise many people lack. One of the reasons people struggle financially is that it can be hard to navigate the world of investments, insurance and taxes. Planners have the financial literacy necessary to navigate those waters success• Planners have the time. The fully and can help people realize average household is a hectic both their short- and long-term place. Adults with commit- financial goals. ments at work and home often cite a lack of time as one of the Financial planners don’t just help reasons they aren’t more on top people plan for retirement. Many of their finances. A 2018 survey planners are equally effective at from Bankrate.com found that helping clients achieve their daily 16 percent of respondents aren’t financial goals as well. saving more money because

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(Metro) Financial changes are a fact of life. Changes occur at every turn, including when students leave home for the first time, people get married and when families purchase their first home. One of the biggest financial changes occurs when starting a family.

Starting a family can come with a measure of sticker shock, particularly for young couples without much financial history. Since the 1960s, the costs associated with raising a family have risen exponentially, says the financial resource MarketWatch. Between 2000 and 2010, costs rose by 40 percent. Data from Money.com indicates that, as of 2015, American parents spent, on average, more than $230,000 on child costs from birth until the age of 17. The U.S. Department of Agriculture says that today that number is closer to $245,000 per child, which does not include the cost of college. BabyCenter. com offers a cost comparison tool to help prospective parents

get started on creating family range from $3,000 to upward budgets. of $37,000 per child for a normal vaginal delivery, and from When mulling the cost of start- $8,000 to $70,000 if a C-section ing a family, prospective parents or special care is needed. Concan ask themselves the follow- sider how much your health ing questions to get a handle on insurance will cover and how their finances. much adding a child to a policy will increase your rates. • Can I afford big-ticket baby items related to safety and • Will I need daycare? In order comfort? Items may include a to afford added expenses, both new vehicle with high crash- parents may have to work. Babytest ratings, or renovations to a Center.com states that a famhome to provide a safe nursery. ily’s average childcare costs are If renovations are unlikely, then roughly $755 per month. would-be parents may need to consider the costs of moving. • Can I afford life insurance? Once you begin a family it is im• Have I considered daily child portant for both parents to have expenses? Diapers, formula, a life insurance policy in place laundry detergent, clothing for to provide for surviving family each stage of growth, and vari- members in the event of an unous other items are necessary timely death. when raising a child. Make a list of such items and their potential Couples who want to start a costs. family can make the transition go smoothly by figuring out • Do I have adequate health their finances before welcoming insurance? Pew Research states a baby into the family. that expenses for a delivery can

February 2020

RICE COUNTY FINANCIAL GUIDE

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Potential passive income streams

(Metro) Jobs may be how many people earn their money, but there are other ways to generate income that may not require the level of effort of a nine-to-five gig.

Passive income streams can be a great way to earn substantial amounts of money. Passive income can be earned through investing in stocks, money market funds, real estate, livestock, or savings bonds. Lending money also can provide passive income. Though such income streams are described as “passive,” they require an investment of time and/ or money to get started. Passive income streams enable the average person to make some extra money without taking on a full-time job. Unlike active income, where the more you work the more you earn, passive income often generates a flat level of return over time without the same level of commitment.

more times to generate an ongoPassive revenue streams are con- ing revenue stream. tinually evolving. Modern passive investments are varied, and can include the following ideas. Peer-to-peer

Home-rental service

Popular sites like Vacation Rental By Owner (Vrbo¨) and Airbnb put interested parties in touch with potential landlords. Vacation property owners or people who do not spend a lot of time at a primary residence may find this is a lucrative way to earn some extra money. Properties located in popular tourist areas may garner considerable income.

Digital products

lending

According to the financial wellness site MyMoneyWizard.com, peer-to-peer lending (P2P) is the practice of lending money to borrowers who may not qualify for traditional loans. P2P is a growing market that removes large financial institutions from the lending process. Lenders serve as the “bank,” and the consumer pays interest on the principal. The loans can be handled through an intermediary like The Lending Club, which is regulated by the Securities and Exchange Commission. Passive income streams require upfront time and financial investments, but tend to produce steady streams of revenue over time.

Digital items, such as expert advice guides, books, informa- Real estate tional articles, digital photography, digital artwork, and more investment trusts can be sold online. The product Real estate investment trusts, or only needs to be created once, REITs, offer the benefits of being and then it can be sold infinite a landlord without the hassle of

dealing with fixing broken pipes or handling rowdy tenants. REITs are like stocks in real estate market. You purchase a share in a company that owns, manages

or invests in various real estate properties. The higher the dividend rates the higher the risk, so investors must weigh REIT considerations carefully.

Passive income streams are another way to earn extra money and can be lucrative for those who take time to invest.

When buying a leased vehicle makes sense

(Metro) Consumers in the market for new vehicles must make a number of decisions before getting behind the wheel of a new car. Some may debate whether or not to buy a new or preowned vehicle, while others may wonder if buying or leasing is best for them. People who decide to lease will likely have another decision to make when their leases reach maturity: should I return my car

• The o t g re is less than the market value of the vehicle: Lessees who don’t drive much might find that their vehicles are worth more at the end of the lease than the buyout figure indicated on the agreement. That means lessees can buy the vehicle for less than its market value. They can then flip the vehicle and reap a profit or simply keep driving the vehicle. or buy it? Drivers who have never leased a vehicle may not even know that lessees have the option to buy their cars at the end of their lease agreements. The idea of leasing suggests drivers would always be better off turning their vehicles in, but there are situations in which keeping the car can benefit buyers.

• The excess mileage penalties are steep: Drivers also may be better off buying if they significantly exceeded their mileage restrictions. Lease agreements typically include per-mile penalty fees for every mile drivers go past the mileage limits indicated in their agreements. These fees can quickly add up, but drivers won’t have to pay them if they choose to buy their vehicles at the end of

their leases rather than returning ing a leased vehicle that’s been them. well-maintained can save drivers money over the cost of buying • The con ition o the vehicle new vehicles, as the buyout value Drivers who took care of their on their lease is likely a lot less leased vehicles and even those expensive than the cost of a new who did not may benefit from car or truck. But keeping vehicles keeping their cars when their that have enduring considerable leases reach maturity. Keep- wear and tear also may be wise,

as leasing companies may charge hefty wear-and-tear penalties.

Buying a vehicle at the end of a lease may seem unusual. But there are various instances when buying makes more sense than turning the vehicle in.

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RICE COUNTY FINANCIAL GUIDE

February 2020

BUSINESS PLANS

What’s the future like in your dreams? I know it’s different for all of us. So, let’s sit down. You talk and I’ll listen – face-to-face. We’ll plan for the future you’ve always dreamed of. Daniel Hummel Agent Name 301 Division St

Agent Photo

Northfield Agent Info (507) 645-4212 Agent Info Cell: (507) Agent Info412-0658 http://www.agenthummel.com/ Agent Info Agent Info Agent Info

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While there are no rules governing business plans, the U.S. Small Business Administration notes that most fall into one of two categories: traditional or lean startup. Traditional business plans follow a standard structure and can span dozens of pages as entrepreneurs share detailed information in regard to every aspect of their business and their goals for it. A lean startup business plan is a brief, typically one-page summary of the essential points of your plan. The SBA notes that lenders and investors commonly request traditional business plans as opposed to lean startup plans. However, the SBA notes that lean startup business plans may be more useful than traditional business plans in certain situations. For example, entrepreneurs whose businesses figure to be relatively simple or subject to routine changes may be better off drafting lean startup plans, which are not as detailed and do not take nearly as long to design as traditional business plans.

How to begin building a credit history (Metro) Credit scores play a significant role in the lives of millions of adults across the globe. A strong credit history can help people secure more borrowerfriendly terms on home and auto loans, potentially saving them thousands of dollars. Credit scores are not typically on the minds of young adults who are years away from purchasing their first homes. However, young adulthood is a great time to begin building a strong credit history. By laying a strong foundation now, young adults can reap significant rewards when they try to finance major purchases, such as cars and homes, down the road. • Open a credit account. It’s important to begin building credit histories once you’re eligible, as young people with no credit histories may find it hard to get loans or even apartments of their own. Cosigners can help, but loans secured with cosigners won’t do much to improve young people’s credit scores. Borrowers want loan applicants who have shown they can pay their own bills, and length of credit history is one of many variables

that are used to determine borrowers’ credit scores. A long history that documents a young person’s track record of paying bills on time is to his or her advantage. Many credit card companies issue credit to applicants as young as 18, so young people should not hesitate to begin exploring their options. The online financial resource NerdWallet notes that young people with no credit history may need to apply for secured credit cards. Unlike more traditional cards, secured cards are backed by upfront cash deposits. However, secured cardholders must still make payments on time and will still incur interest charges if they donÕt. These cards can be a great way for young people to begin showing lenders their creditworthiness. • Apply for an installment loan. Installment loans are another great way for young people to build their credit histories. According to the credit reporting agency Experian, auto loans are among the easiest types of loans to obtain. Young borrowers may need cosigners, though some lenders may not require that. Young people who want to

buy new vehicles can avoid leaning on their parents to facilitate their purchases and instead take out an auto loan that requires monthly payments. A track record of making installment loan payments on time and in full is a great way for young people to prove their creditworthiness and improve their credit scores.

• Ask your landlord to help. Young people who rent and pay their rent on time might finally be able to benefit from that. In the past, the only way rent payments were included on credit reports was if tenants were delinquent with their rent payments and subject to lawsuits or were reported to collection agencies. However, Experian recently started to include positive rental payment information in their credit reports. Young people with histories of making rent payments on time can ask their landlords to report their positive payment histories to the credit bureaus.

Strong credit histories can benefit adults from all walks of life. It’s never too early for young adults to begin building their financial reputations.

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RICE COUNTY FINANCIAL GUIDE

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Early Preparation Can Help You Get The Most From Social Security Courtesy of Daniel Hummel If you’re like most, you see Social Security as retirement income you’re working hard to earn, and you would like to receive it as soon as possible. In many cases, as soon as you become eligible at age 62. But did you know that taking your Social Security benefits early results in a permanent reduction of your monthly income?

Consider this: Individuals retiring at age 65 today can expect to live, on average, another 13 or more years1 and be paid an average annual Social Security income of just $15,9362. Whether your retirement is a few months away or many years down the road, the following are tips you can use now to help ensure you can get the most from your retirement benefits and keep the lifestyle you desire in your later years.

Plan Now to Delay Your roadmap to retirement as early as possible to help you prepare • hat ill o r income nee n ﬁts You know that you can claim Social Security benefits beginning at age 62, but did you know that doing so can reduce your monthly income amount by as much as 30 percent? This reduction is permanent for retirement years.

Delaying your receipt of Social Security benefits, on the other hand, can dramatically increase your total lifetime benefit. For every year beyond your full retirement age (age 66 or 67 depending on when you were born) that you delay your benefit, your total Social Security benefit is increased by 8 percent. This increase continues up to age 70 for a total increase of 24 to 32 percent depending on your full retirement age.2

for your income needs. By viewing your Social Security benefits as a retirement asset similar to a 401(k) or pension plan, an IRA or even simply long-term savings, you can include it as just another piece of a larger income pie.

I don’t think I can wait that long.

There are a variety of reasons why waiting until age 70 to receive Social Security benefits might seem too long for you and your spouse. In some cases – a shorter life expectancy due to illness, lack of confidence in the system – waiting simply isn’t a reasonable solution and benefits should be taken as soon as you need.

Does this mean I’ll have Other reasons, such as financial challenges, etc. may be able to be to keep working? Not necessarily. With some advance retirement preparation, you may be able to stop working and use money from other investments as income while you wait to draw your Social Security. The key is to create your

addressed, and you may be able to find a way to delay benefits. You’ll need to begin by asking some important questions: • hen o m spo se an to stop working?

plan

on your team of financial profese sionals - your insurance agent, between ages 62 and 67? attorney, estate planner, etc. They can help you understand the op• hat ill o r income nee e tions available to you and can between ages 66 and 70? even assist you in purchasing products like an IRA, annuity, or • hat ill o r income nee e life insurance to complete your at age 70 and beyond? retirement strategy. Your retirement will be unique • hat other so rces o income to you, but getting the most from are already existing? your retirement benefits starts with early preparation. • hat is o r risk tolerance or investments we could make now 1 U.S. Department of Health and to help us reach our goals later? Human Services, www.cdc.gov, visited June 3, 2015

Tips brought to you by Farm Bureau Financial Services. For more information about products and services, call Daniel Hummel at 507-412-0658.

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RICE COUNTY FINANCIAL GUIDE

320 4th St NW, Faribault, MN 55021

February 2020

507-334-8888

15-1446

1300 Bollenbacher Dr, Northfield, MN 55057

507-645-6281