7 Retirement Savings Tips for Women

Mary Randel—Retirement Benefits Officer, Wealth Management 

As a women, saving for retirement is a challenge. On average, a woman’s life expectancy is longer than a man’s, which requires her to accumulate a higher lifetime savings balance. But, what makes saving enough even more difficult, is that many women experience career interruptions to care for children and, later, elderly parents, which reduces their lifetime earnings. Complicating matters even further is a lingering perception that retirement savings supplement Social Security benefits, rather than the other way around.

Whatever the reasons, today, more than ever, saving for retirement is truly hard work.

What Women Can Do to Meet the Challenge

Many employers, regardless of their size, offer 401k plans to help their employees save for retirement. Even if you are just starting out—or have started your own company—participating in one of these tax-deferred plans is your first line of defense for achieving the type of retirement you deserve.

Other actions women can take to feel more confident they are doing enough for their “future self” include:

  • Make no excuses! When your employer offers to match the amount you’re saving, save at least the amount needed to earn the maximum amount being matched. An offer of matched savings is better than a free lunch, unlimited personal time or a snack drawer—it’s literally free money for you to spend in retirement.
  • Regardless of your current position, save. Don’t wait until you’re earning more or have fewer financial obligations. In the long run, how much you save isn’t as important as how early you start and how consistent you are.
  • Have something in reserve. The emergency cash reserve everyone is supposed to build in their 20s becomes even more important in retirement. Be sure to save not just for day-to-day expenses but also for the unexpected things, like replacing cars and furnaces or paying for homecare providers and rehabilitative services.
  • Redefine “old.” Approach retirement planning with the mindset that you will work at least until your age of full employment under Social Security. That’s not 62. For today’s workers, it’s actually between ages 66 and 67. Taking benefits at age 62 when they first become available will severely reduce your monthly benefit for the rest of your life.
  • Invest in yourself. The healthier you are, the more options you’re likely to have regarding your retirement. Preventable health issues can lead to retiring earlier than planned, reduce your quality of life in retirement and significantly erode savings. There is also another reason to invest in yourself: Many retirees find leisure isn’t as compelling as it once seemed. Maintaining your marketable skills, along with your health, makes doing work you find meaningful, as long as you choose to, an option.
  • Plan for both of you…and each of you. Many widowed spouses are surprised when they no longer have a second Social Security check coming in each month after the death of their spouse. Retirement planning should include savings arrangements that cover the needs of the couple but also incorporate the ongoing needs of the remaining spouse.
  • Invest to achieve your goals, not to appease your fears. Being overly cautious when investing can be detrimental to successfully saving for retirement. This is why many people opt to hire a professional. Whether this means having a wealth manager step in or investing in a diversified handful of mutual funds, outsourcing the decision-making can help get you closer to your goals.

Whether you want to supplement your employer’s retirement plan by saving on your own or are an employer who wants to make it easier for your staff to plan for their retirements as well, we can help. Contact me at 630-906-5500 or at mrandel@oldsecond.com. You can also learn more about our options here. However you choose to contact us, we look forward to talking to you about how we can help you plan for the future you deserve.

4 Things You Need to Know About Cryptocurrencies and Block Chain

Brad Johnson, CFA, CFP®, Vice President/Senior Investment Officer

Thanks to the surge in the stock prices of cryptocurrencies like Bitcoin—and the technology companies that allow for its use—conversations around this topic often get emotional. Some are gripped by the fear of missing out on an opportunity to “get in on the ground floor,” while others quickly dismiss the volatile stock prices as evidence of a growing bubble, much like the dotcom era of the early 2000s.

The reality, however, can be found somewhere in between, and the conversation is far from over. To help inform the discussion, here’s what you need to know about cryptocurrencies and the technology—block chain—that makes them possible.

#1: The Technology Is Legit.

Block chain, is both legitimate and of real significance. It has the potential to change how business is transacted and information exchanged, resulting in an instantaneous and verified transfer.

It also creates a decentralized payment system that cuts out the middleman, the Federal Reserve system, in particular. This is the inverse of the current financial system in which the central bank makes decisions regarding monetary policy. This efficiency will have many applications, including reducing opportunities for fraud and lowering cash management costs. However, the technology and its use are years away from being able to support widespread adoption of block chain transmissions. That said, it’s well worth keeping an eye on the companies that are at the forefront of making block chain an eventual reality in day-to-day payment systems.

#2: Bitcoin Is Not the Only Cryptocurrency in Town.

There are thousands of cryptocurrencies, but Bitcoin is the most well known in its rapidly expanding universe. Cryptocurrencies are not on equal footing with currencies like the dollar, however. They are issued in fixed amounts—like trading cards. Their value rises and falls with demand for their limited supply. That undermines their use as a store of value. Currently, there are no regulatory bodies in charge of cryptocurrencies and no exchanges on which they trade. This creates a “wild west” of sorts—similar to the U.S. banking system prior to the 1900s, when individual banks, as well as the U.S. Treasury, issued currency. It will be a while before standards are in place enabling cryptocurrencies to function on equal footing with country currencies and “winners” emerge among the thousands of options.

Also important to note is that because of the outsized attention that speculation in the coins has caused, the public has a misperception about the influence this payment option has on the economy and world markets as a whole. It is still in its infancy and much too small to move global markets at this point.

#3: Cryptocurrencies and Block Chain Are Not Able to Replace the Current Financial System.

While the technology is exciting and has a role to play in the future, we think it’s more likely that cryptocurrencies and block chain will be a payment tool that resides within the current monetary system. Consider that because the coins are finite, the payment and its receipt are immediate—and it occurs on a one-to-one basis—there is no opportunity for lending.

The current global financial system operates with an infinite amount of currency. Central banks, like the U.S. Federal Reserve, have mechanisms for expanding and contracting the money supply to support the economy through borrowing and lending activities. Loans—whether between banks, countries, or banks and their individual and corporate borrowers—are a key part of the system. Without lending, there are no mortgages or car loans—credit that creates the liquidity necessary to increasing economic wealth. That, in turn, would not be good for economic growth.

#4: Participation in Cryptocurrencies Is Limited.

Regulated wealth management firms like ours are prohibited from acquiring and holding cryptocurrency positions for clients. There just is no mechanism for us to do to so as a fiduciary. Also, the cryptocurrency world is currently plagued by fraud and confusion since anyone can issue coins. Pyramid schemes have also been increasing. What we can do for our clients is monitor and suggest investment—where prudent—in the companies involved in developing block chain technology and the applications that will eventually emerge.

It’s Too Soon

There is little doubt that, at some future point, cryptocurrencies and block chain will become part of the mainstream financial world. However, adoption of block chain and cryptocurrencies is not imminent. The technology and its use are years away from being able to support widespread use. How the system will work, who will use it, which currency or currencies will be adopted, and the opportunities they will give rise to, however, are something we continue to monitor closely.

To stay current on the latest developments impacting the investment world, consider subscribing to our weekly newsletter. Our Wealth Management representatives are also eager to answer your questions about opportunities to grow your invested assets. To reach us, call 630-906-2000 or visit us online.

T+2: What a Change in Settlement Dates Means to You

Brad Johnson, CFA CFP® Vice President—Investment Officer 

A seismic change hit the securities markets on Sept. 5, 2017, without causing so much as a ripple. That is the day financial companies, Old Second included, will figuratively flip a switch and begin settling stock, ETF, corporate and municipal bond, and some limited partnership transactions two business days after their trade dates. Previously, trades settled on a T+3 basis, or in three business days.

What This Means to You

With the change to T+2, when you sell exchange-traded securities you will receive your money one day sooner than in the past. As a buyer, you can expect to pay and take ownership of these securities one day earlier. Treasuries and most mutual funds are unaffected. They will continue to offer a faster settlement.

While shortening the settlement cycle seems like a big deal, it mainly will affect mindsets. It also may require a bit more planning, at least initially, to ensure cash is available to accommodate the earlier payment date.

For corporate cash managers, the shortened cycle may also mean adjustments in their liquidity strategies. However, increased efficiency should be the end-result.

Why the Change?

The change reflects the electronic nature of securities transactions. Today, there is no need to accommodate paper-based delivery of securities, which is where the processing delay originated. It’s also a move that will align the United States and Canada (which will be making the switch to T+2 at the same time) with settlement procedures already in practice on other global market exchanges.

Also, T+2 will help reduce some market, counterparty and credit risk, specifically for firms that clear transactions. With less time to settle, there is less time for things to go wrong. When they do the response and resolution should similarly occur that much faster.

Once the markets and investors have had an opportunity to adjust to T+2, a move toward T+1 is expected to follow, which would improve efficiencies further. In addition, some experts suspect that the switch could eventually lead to lower collateral requirements when securities are pledged against loans. However, we are not there just yet.

Should you have any questions about how the change to T+2 affects your trading or cash management strategies, call me at 1-630-906-5545.

Guardianships: Someone to Watch Over Them

Michele Morgan, Vice President/Trust Officer MorganM_BUS003xqc

The one thing you should know about guardianships—also known as conservatorships—is that they protect individuals who are unable to make sound decisions for themselves. As court-ordered arrangements, they result in the appointment of an individual or corporation to handle that person’s care and/or financial matters.

The arrangement lasts as long as necessary. In the case of a minor, that may be until they reach the age of 18. For an adult, it could be a lifelong appointment or just until they sufficiently recover from a health issue.

Circumstances That Lead to the Need

Guardianships are subject to state laws, and established by a court proceeding in the individual’s home county. Where children are involved, there is typically a large sum of money—either an unexpected inheritance or a personal injury settlement. Adult guardianships generally arise due to a temporary or permanent disability or an injury.

When the need arises, there are two different roles created in a guardianship: one involving the “Guardian of the Person” where the named individual or corporation is appointed to oversee the needs and care of the individual. The second role is the “Guardian of the Estate” to oversee the individual’s financial matters.

Guardians can be family members, unrelated individuals or, as mentioned above, corporations. Where large sums are involved, judges often prefer to see a bank serve as the guardian of the estate or, at the very least, as a co-guardian to ensure the assets will remain in place to support the individual throughout their life. Regardless of who is appointed the court requires an annual report to ensure the current arrangements continue to serve the needs and best interests of the individual.

Guardianships for children end at the age of 18 with a proceeding that determines the individual is now capable of making rational and prompt decisions about their own care and finances. For adults, a physician typically supplies a statement verifying they’ve regained the capacity to assume responsibility for their own care and finances.

Guardianships versus Powers of Attorney or Estate Plans

The need for a guardianship arises from the lack of other legal documents, such as powers of attorney or an estate plan. Sometimes, family members are overwhelmed by the medical side of caring for a loved one or have trouble agreeing on a course of action. In such cases, they may petition the court to appoint an impartial corporate guardian, especially to oversee financial matters. This saves family members from having to account to the court for how money is spent and from having to reimburse the estate if any charges are deemed inappropriate later.

Compassion Is Part of the Arrangement

While having the court involved in the care and financial matters of a loved one may seem invasive, judges involved with cases like these typically act as extended family members, especially where juveniles are involved. They take a genuine interest in ensuring each person gets what they need to be the best they can be. Compassion carries the day.

To learn more about guardianships and how Old Second can be of assistance in this area, please call me at 630-844-3222. I’m here to help get you the answers you need as you consider your family’s options.

Land Trusts: An Estate Planning Tool

Carolyn Swafford, CTFA, Vice President/Trust OfficerSwaffordC_BUS014qc

Land trusts are a versatile legal tool for holding title to real estate. Individuals, investors, businesses and families all use land trusts to accomplish specific goals regarding the acquisition, ownership and transfer of property.

Land of Lincoln…and Trusts

Illinois is among only a handful of states that allows the creation of land trusts. Although the legal precedent originated in England, land trusts also began popping up in the United States. They first appeared in Illinois in the late 19th century and were used by real estate developers to acquire multiple parcels of land needed to build large-scale developments.

Using Land Trusts

Privacy is a popular reason to establish a land trust. Property can be deeded into a land trust either at the time of purchase or anytime afterwards. The trust becomes the owner of the property. The individual then becomes the beneficiary with all the rights, avails and proceeds to the property. Since the trust is the owner of the property, the beneficiary is able to keep their name off all public records.

As a legal tool, therefore, a land trust can be used to accomplish very specific goals. Here are three of the most common uses.

Protecting Business Interests

Land trusts are a great way to add a layer of protection between the beneficiary and the property that is contained in the trust. This protection ensures judgment claims against a beneficiary do not automatically become a lien on the real estate or otherwise cloud the title.

Bypassing Probate

If an individual or individuals are named to inherit the beneficiary’s interest after their death, the land trust is not subject to the probate process. This allows the remainder beneficiaries to manage or sell the real estate much faster.

Transferring Interests

When there are multiple beneficiaries in a land trust, there may be a time when one beneficiary buys another out. Individuals may also want to gift their share to another person. Transferring interests within a land trust is accomplished easily and quickly without the need to record public documents.

Flexible and Easy to Establish

Since a land trust is a legal entity, you will want your attorney to prepare the Land Trust Agreement and Deed in Trust. In cases where Old Second is named as the trustee, the necessary forms are downloadable from our website.

For more information on land trusts, click here or contact me directly at 630-906-5470 to discuss how this legal tool might benefit you.

 

 

The One Thing You Need to Know About Investing

Steve Meves, Senior Vice President/Chief Investment Officer, Wealth Managementmevess_bus009xqc

Investing is about using the money you’ve saved to purchase an asset that will hopefully appreciate over time. The key word in that last sentence is “time.” Giving your investments sufficient time to grow, regardless of what you are investing in, is the hard part. It’s also a key ingredient to building wealth.

Market Movements Are Noise

The financial markets go up and down, sometimes within the same day. But throughout history, they’ve kept climbing. The indexes we use to measure investment results—the Dow Jones Industrial Index and the S&P 500 Index—reflect this jagged climb. It’s this historical proof of resilience through wars, political mayhem and underperformance that allows professional wealth managers to remain calm in the face of sell-offs. They’ve seen the charts and looked at the data on market closes. And, they know that sell-offs end with recoveries. These recoveries may take time, but eventually they occur and have led to a resumption in the historical upward trend.

Go Long

The mistake many investors make is in assuming they need to do something when markets sell off. That’s only natural. It hurts to see your account balances decline, even if it’s a short-term occurrence. Our brains are hard wired to feel the pain of a loss—in this case money—more intensely than we feel the joy of a gain. It’s why we are intuitively risk averse. No one likes the way they feel when they lose.

When markets do sell off—whether during a day, over several weeks or even months—we all impulsively want to avoid further pain by selling. Some even want to anticipate the loss by selling before markets ever start selling off.

Taking evasive action may feel good in the short run, but it can destroy investment results in the long run, because you need to be right about the market continuing to go down when you are out of the market. More importantly, you also need to be in the market during its recoveries in order to benefit. It’s hard to know on any given day the kind of day it will be.

When Is the Right Time to Invest?

When you are an investor and take a long-term view, any time can be the right time depending on what you are investing in. Therefore, it’s advisable to have access to wealth managers who actively monitor markets daily to determine when it makes sense to pull back on investing in securities, or types of securities, and when to add more. It’s also our job to keep emotions like loss avoidance from endangering your overall goals so that your portfolio is diversified over different types of assets. That way, it’s better positioned to withstand volatility in any one type of asset.

In the end, the secret to successful investing is to remain focused on why you invest: to build wealth over time.

For more information on how our goal-driven wealth management services keep you on task over the long term, visit us here or call 630-801-2217. We can’t wait to talk to you about what we can do for you today.

 

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.