It should be no surprise to hear that exercise is the cornerstone of a healthy lifestyle. With the help of a balanced diet, exercise can help you achieve personal fitness goals, whether you want to lose those extra pounds before swimsuit season or get the six-pack abs you’ve always wanted. But, the list of positive benefits doesn’t stop with physical fitness. Regular exercise can also provide psychological benefits such as:

·       Improved mood

·       Higher self-esteem

·       Enhanced brain function

·       Reduced mental fatigue

·       Diminished anxiety

These are all very good reasons to stop reading this article and head to the gym. If they are not motivation enough, then consider this: regular exercise has been linked to higher salaries. According to a study published in the Journal of Labor Research, employees who exercise regularly (at least three hours each week) earn nine percent more, on average, than employees who don’t.[1]

Previous studies tried to confirm the relationship between exercise and income, but proved merely that regular exercise was correlated to a higher salary. Vasilios Kosteas of Cleveland State University used ‘propensity-score matching’ to compare employees with similar work ethics and backgrounds (health history, education, experience, etc.). When exercise was the only independent variable, Kosteas found that people who exercise regularly earned nine percent more, on average, than those who didn’t exercise. The study also found that employees who didn’t have a history of healthy behavior saw an increase in productivity after starting a regular exercise routine, and they often got a raise.

Of course, as with many things, individual results will vary. Regardless, one thing is for certain. Exercise has been linked to many positive effects on the human body and mind, so do yourself a favor and start working out regularly. If it doesn’t show in your paycheck, it may provide benefits in the form of lower healthcare bills and increased longevity.

So get out there and exercise!

[1] Journal of Labor Research, The Effect of Exercise on Earnings, 2012, vol. 33, issue 2, pages 225-250

Before making any investment decision, one of the key elements you face is working out the real rate of return on your investment.

Compound interest is critical to investment growth. Whether your financial portfolio consists solely of a deposit account at your local bank or a series of highly leveraged investments, your rate of return is dramatically improved by the compounding factor.

With simple interest, interest is paid just on the principal. With compound interest, the return that you receive on your initial investment is automatically reinvested. In other words, you receive interest on the interest.

But just how quickly does your money grow? The easiest way to work that out is by using what’s known as the “Rule of 72.”¹ Quite simply, the “Rule of 72” enables you to determine how long it will take for the money you’ve invested on a compound interest basis to double. You divide 72 by the interest rate to get the answer.

For example, if you invest $10,000 at 10 percent compound interest, then the “Rule of 72” states that in 7.2 years you will have $20,000. You divide 72 by 10 percent to get the time it takes for your money to double. The “Rule of 72” is a rule of thumb that gives approximate results. It is most accurate for hypothetical rates between 5 and 20 percent.

While compound interest is a great ally to an investor, inflation is one of the greatest enemies. The “Rule of 72” can also highlight the damage that inflation can do to your money.

Let’s say you decide not to invest your $10,000 but hide it under your mattress instead. Assuming an inflation rate of 4.5 percent, in 16 years your $10,000 will have lost half of its value.

The real rate of return is the key to how quickly the value of your investment will grow. If you are receiving 10 percent interest on an investment but inflation is running at 4 percent, then your real rate of return is 6 percent. In such a scenario, it will take your money 12 years to double in value.

The Rule of 72 is a mathematical concept, and the hypothetical return illustrated is not representative of a specific investment. Also note that the principal and yield of securities will fluctuate with changes in market conditions so that the shares, when sold, may be worth more or less than their original cost. The Rule of 72 does not include adjustments for income or taxation. It assumes that interest is compounded annually. Actual results will vary.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2016 Emerald Connect, LLC

Considering the high interest rates that apply to many credit cards and other types of consumer loans, is it a good idea to borrow from your 401(k) instead? It often depends on your job security and how you intend to use the money. About 87% of 401(k) participants are in plans that offer loans. But just because you can get a loan doesn’t mean you should. Know the rules. Under IRS rules, loans are limited to the lesser of $50,000 or 50% of the vested account balance. Loans must be repaid within five years (longer terms may be allowed for a home purchase). However, each plan is allowed to set its own interest rates and repayment policies. The good news is that even though the plan is required to charge interest, the interest is paid back to your own account. Understand the risks. Borrowed money isn’t pursuing investment returns, which could result in a retirement income shortfall. Also, if you leave your employer, the loan generally must be repaid within 60 to 90 days. Failing to repay on time means the outstanding balance may be treated as a distribution. Distributions from employer-sponsored retirement plans are subject to ordinary income tax. Early withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty. Taking out a 401(k) loan could be a better option than carrying high-interest debt. But as always, you should be careful to avoid borrowing to maintain a lifestyle you cannot afford.

This information is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2017 Broadridge Investor Communication Solutions, Inc.

Social Security and Medicare Update: 2016 Trustees Reports

The fiscal challenges facing Social Security and Medicare have been well publicized, but many Americans may not be aware of the facts behind the headlines. Each year, the Trustees of the Social Security and Medicare trust funds release detailed reports to Congress on the current financial condition and projected financial outlook of these programs. Here is some background on the trust funds and key projections from the most recent reports, which were released on June 22, 2016. What Are the Trust Funds? The Social Security program consists of two parts: the Old-Age and Survivors Insurance (OASI) program, which provides benefits for retired workers, their families, and survivors of workers; and the Disability Insurance (DI) program, which provides benefits for disabled workers and their families. Each program has a trust fund that holds the payroll taxes that are collected to pay benefits, as well as reimbursements from the U.S. Treasury’s General Fund and revenue from income taxes on benefits. Medicare also has two trust funds. The Hospital Insurance (HI) Trust Fund pays for inpatient and hospital care under Medicare Part A. The Supplementary Medical Insurance (SMI) Trust Fund comprises two accounts: one for Medicare Part B physician and outpatient costs, and the other for Medicare Part D prescription drug costs. By law, money that is not needed to pay current benefits and administrative costs is invested in special-issue Treasury securities that earn interest. As a result, the Social Security and Medicare HI trust funds have built up reserves that can be used to cover benefit obligations if payroll tax income is insufficient to pay full benefits. (SMI Trust Fund accounts are automatically balanced through premiums and revenues from the General Fund, which provides about 74% of costs, effectively subsidizing coverage.) Social Security Projections To help assess the Social Security program (OASDI) as a whole, the Trustees provide theoretical projections based on the combined trust funds. In fact, under current law, the trusts are separate, and one program’s taxes and reserves generally cannot be used to fund the other. However, a partial reallocation of payroll taxes from 2016 to 2018 has helped extend the life of the DI Trust Fund. Combined OASDI costs have exceeded non-interest revenue since 2010, but the trust fund reserves will increase through 2019 due to the interest payments. Beginning in 2020, annual costs are projected to exceed total income, and the Treasury will start withdrawing reserves to help pay benefits. If there is no congressional action, the Trustees project that the combined reserves will be depleted in 2034, the same year as projected in the 2015 report. Starting in 2034, payroll tax revenue alone should be sufficient to pay about 79% of scheduled benefits, with the percentage declining gradually to 74% by 2090. The OASI Trust Fund, considered separately, is projected to be depleted in 2035. Payroll tax revenue alone would then be sufficient to pay 77% of scheduled OASI benefits. The DI Trust Fund is expected to be depleted in 2023, seven years later than projected in last year’s report. Once the trust fund is depleted, payroll tax revenue alone would be sufficient to pay 89% of scheduled benefits. Medicare Projections Annual costs for the Medicare program have exceeded tax income since 2008, although the Trustees project slight surpluses in 2016 through 2020 before a return to deficits thereafter. The HI Trust Fund is projected to be depleted in 2028, two years earlier than estimated last year. Once the HI Trust Fund is depleted, tax and premium income would cover 87% of estimated program costs, then decline slowly to 79% in 2040 and gradually increase to 86% by 2090. COLA and Premiums The Social Security cost-of-living adjustment (COLA) and Medicare premiums for 2017 will not be calculated until October. The Trustees reports project a small 0.2% COLA, which would result in a similar Part B premium increase for about 70% of beneficiaries — primarily current beneficiaries who have Medicare premiums deducted from their Social Security benefits. For these beneficiaries, a “holdharmless” provision limits the dollar increase in the Medicare Part B premium to the dollar increase in their Social Security benefit. The remaining 30% — new enrollees, wealthier beneficiaries, and those who choose not to have premiums deducted from their Social Security payments — may see a higher Part B premium increase. The monthly base premium for these beneficiaries could rise from $121.80 in 2016 to $149.00 in 2017. Beneficiaries subject to income-related premiums would also see increases. Call to Action The fiscal challenges facing Social Security and Medicare are a result of the aging U.S. population and increasing health-care costs. Both reports urge Congress to address these challenges in the near future so that any solutions will be less drastic and may be implemented gradually, lessening the impact on the public. Although a variety of potential solutions have been on the table for some time, there has been no political consensus and little effort to take action. As the reports make clear, Social Security and Medicare are not in danger of collapsing entirely, but the clock is ticking on their ability to pay full benefits. It remains to be seen whether the next Congress will address the future of “America’s safety net.”

U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The information in this newsletter is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independentprofessional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Prepared by Broadridge Advisor Solutions. © 2016 Broadridge Investor Communication Solutions, Inc.

Most people have good intentions about saving for retirement. But few know when they should start and how much they should save.

The rewards of starting to save early for retirement far outweigh the cost of waiting. By contributing even small amounts each month, you may be able to amass a great deal over the long term. One helpful method is to allocate a specific dollar amount or percentage of your salary every month and to pay yourself as though saving for retirement were a required expense.

Here’s a hypothetical example of the cost of waiting. Two friends, Chris and Leslie, want to start saving for retirement. Chris starts saving $275 a month right away and continues to do so for 10 years, after which he stops but lets his funds continue to accumulate. Leslie waits 10 years before starting to save, then starts saving the same amount on a monthly basis. Both their accounts earn a consistent 8% rate of return. After 20 years, each would have contributed a total of $33,000 for retirement. However, Leslie, the procrastinator, would have accumulated a total of $50,646, less than half of what Chris, the early starter, would have accumulated ($112,415).*

Regardless of the method you choose, it’s extremely important to start saving now, rather than later. Even small amounts can help you greatly in the future.

*This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return involve a higher degree of investment risk. Taxes, inflation, and fees were not considered. Actual results will vary.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2016 Emerald Connect, LLC