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Secrets of Investing for Beginners Part III

Secret Three: Investing is not for daycare candidates

The children from Mizzou college in Missouri are trying to start a trend of so-called “safe zones,” where feelings are protected from hateful speech. If you are that prickly, you might want to get rich by striking oil, since the market can be a brutal place for the emotionally delicate. Emotions, namely fear and greed, will be your two worst enemies that stand between you and profits. Countless investors have failed to reach their financial goals because of these twin sisters of failure. The ability to remain invested in volatile markets takes both a long-term investment philosophy (Secret Two), and an understanding of the cyclical nature of the markets. Case in point: from 1987 to 2006, the S&P 500 averaged annual returns of 11.8%. Over that same period the average investor gained only 4.3%. Why? Fear and greed. Neither will help you make a dime.

What you need is a coach-minded advisor, not a salesman. I have seen two terrible recessions in my years as an investment consultant. I have seen people destroy their nest egg with emotions, and I have seen people stay the course, and reap the financial benefits. While I can’t say 100%, I can say that many of those who failed, tried to invest on their own, while the majority of those who succeeded, had an experienced advisor keeping them calm.

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Secrets of Investing for Beginners Part II

In stock market the most important element in Investing for Beginners is time. If anyone wants to start investing money in the stock market he or she must have to take time.

Secret Two: It’s time in the market, not timing the market

If I were to build a house for you, the first thing I would do is pour a solid, durable foundation. Everything, and I mean everything that I build for you from that point relies on that foundation. If you try to cut costs here you will pay handsomely for it. The 2011 Joplin tornado was a catastrophic EF5 multiple-vortex tornado that struck Joplin, Missouri, late in the afternoon of Sunday, May 22. It caused $2.8 billion in damages. It left a swath of destruction almost a mile wide. The massive EF5 twister destroyed many homes, yet in spite of its massive power, it was unable to demolish even one foundation.

A necessary ingredient to making money in the stock market is time. It is the foundation on which your portfolio grows. Before you put any money into a company via their stock or bond, you should have a long-term plan for staying there. There is only one way I know to get rich quick-TAKE YOUR TIME, because the swift outcome is usually the evaporation of your money.


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Secrets of Investing for Beginners Part I

Three Secrets of Investing for Beginners

So you want to start investing in the stock market, but, as a beginner, you are afraid of losing your money.Undoubtedly you’ve heard of people winning big, and others losing it all, in the same stock market, like the DOW Jones or the S&P 500. How do such polar opposite outcomes occur within the same market?  Do the successful have some spectacular insight that helps them choose winners over losers? Hardly. Could it be they have discovered the secrets that Wall Street doesn’t want you to know? Possibly. Would you like to know what they are? Here we go.

Secret One: Wall Street needs you, not the other way around

Make no mistake; you are the absolute life-blood of every brokerage firm and maker of every investment security which is both flattering and dangerous. As yet you do not fully appreciate the enormity of your worth in the eyes of the Hungry, nor do you yet comprehend the pitfalls of being so. Without you…there is no Wall Street; without Wall Street…you remain. When you understand this epiphany, things start to change. Most of what you consume regarding successful investing is pure noise. Larry Swedroe, author of, “What Wall Street Doesn’t Want You to Know” calls much of what you hear about making money in stocks, “investment pornography.” That is the hard blue-steel kind of language that you need to hear, and investment consultants need to speak. When you choose someone to help you with this, make sure they speak this kind of dialect.


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Social Security is Down and Medicare is Up

Help! My Social Security Benefit is Going Down!

“Why is my Social Security Benefit going down next year?” It always comes as an unpleasant surprise, when a Retiree receives a notice, that his or her social security benefit will be less in the coming year. This is usually when they turn to their advisor for help.

The cause? In a word, Income. If you have an increase in reportable income for just one year, it can lower your Social Security check. For example, if you sell a piece of property in 2012, and file the gain in 2013, you could see a decrease in your social security check in 2014. Higher income can also mean higher Medicare Part B premiums. Since these premiums are deducted from your Social Security check each month, an increase would lower your benefit. Unfortunately, the bad news doesn’t stop there. Medicare Part D premiums will also increase as income increases. If you choose to have these premiums deducted from your Social Security check, the benefit will be smaller. (The cost increase is the same, even if you elect to pay the drug company directly).

An advisor in Huntington, N.Y., was contacted by his client, who experienced this very thing. She had been enjoying her Social Security benefit for several years when, in 2013, she sold a piece of property. The sale bumped her income up for that year. She filed her return in 2014. Then, in 2015, she received a notice that her Social Security benefits would be going down for 2016. She asked her advisor if it was possible for her to return to the previous level, prior to the land sale.

Most retirees pay $104.90 per month for Medicare Part B, which covers doctors’ visits and outpatient services. Higher-income retirees pay higher premiums. When modified adjusted gross income (MAGI), which includes all income on your tax return plus any tax-free interest, exceeds $85,000 per year for single individuals, (or $170,000 for married couples filing jointly), monthly Medicare premiums increase.

Your Medicare premium expense is based on your last tax return. Therefore, if you report a higher income this year, from selling a home or business, (or a stock at a profit), the gain could result in a lower Social Security benefit in 2017, due to an increase in Medicare premiums.

There are five Medicare premium brackets with surcharges ranging from $42 to $230.80 per month, in addition to the standard $104.90 per month premium. These are cliff brackets, meaning if you go over the income limit by just $1, you are going to pay the higher monthly premium all year long.

The anxious client asked her advisor if there was any way she could undo her premium increase. Form SSA-44 is used to request a reduction in a Medicare premiums. The only problem is, she doesn’t qualify for a premium adjustment.

The key to qualifying for an income-related monthly adjustment amount, or IRMAA, is why your income dropped.  If it was because of a “life changing event,” such as retirement, marriage, divorce or death of a spouse, then it is possible. Loss of an income-producing property due to a natural disaster, or other event beyond the property owner’s control, is another qualifying life-changing event. Simply selling stocks or a piece of property does not quality.

In the absence of a life changing event, SSA will not use her 2014 MAGI to determine her 2015 charges. The 2014 income will be used for 2016 premium.

The advisor relayed the bad news. She would not qualify for a Medicare premium adjustment in 2015. Her premiums would be based on her higher income realized in 2013, which resulted from the sale of her home. (Although single homeowners can exclude up to $250,000 in gains from the sale of their primary residence, and married couples can exclude up to $500,000 in gains from federal income taxes, profits above those levels are taxable).

The income brackets that determine Medicare premium adjustments are not adjusted for inflation, meaning more retirees could drift into the higher premium brackets each year. And those additional premiums are per person, so a high-income married couple could pay more than $670 per month just for Medicare Part B premiums, plus monthly supplemental Medigap insurance premiums, that cover Medicare deductibles and co-payments. Medicare Part D prescription drug plan premiums are also subject to high-income surcharges, ranging from an additional $12.30 to $70.80 per month.

Together those costs can add up to a huge out-of-pocket health care expense. Therefore, it is very important that you know what your total income level is, for each year. It would be a shame to lose precious income dollars, just because you went over the “cliff” by $1. We can help.