Review Category : Retirement

Is It Time To Make A Roth IRA Conversion?

Over this past year, more clients have asked me about whether or not it makes sense to do a conversion from their Traditional IRA to a Roth IRA.   I’ve written before on the merits of a back door Roth IRA (http://bit.ly/2jNBfFA) before on Your Smart Money Moves, but the larger question about converting an existing account can be a tricky one to approach in your personal finances.   More importantly, if you are not proactive in your tax planning, you could miss a tremendous opportunity to take advantage of a bad year with your business or if you have a substantially down year of income.  Given the volume of planning cases I see every month, especially those in their late 40’s to late 50’s should be looking at this strategy very closely if you are in a transition phase. With the potential upcoming changes in the tax code suggested to move from seven tax brackets down to three, each family needs ...

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How Life Insurance Made Jim Harbaugh, Not Nick Saban, the Highest Paid Coach in the NCAA

Most that follow collegiate athletics are familiar with Nick Saban, arguably the most successful head coach in NCAA history. Heck, even if you don’t follow college sports, Saban has become a figure that is well known throughout the country for his Alabama teams and their ferocious defenses. But did you know that despite his track record on the field, he is not the highest paid coach in the NCAA? That distinction belongs to Jim Harbaugh, head coach of the Michigan Wolverines. Despite not having reached the pinnacle of the sport yet in terms of national championships, Michigan made Harbaugh the highest paid head man in the country in August of 2016. The avenue in which Harbaugh and the University accomplished this is not commonly seen in professional or amateur sports. After his first season with the Wolverines, Harbaugh and the leaders at Michigan entered into a Split-Dollar Loan Agreement under which the University agreed to make seven loan advances, of ...

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Why Are You Such A “Poor” Millionaire

As I continue to help more and more people approach the end zone of making work optional (a.k.a. – retirement) it continues to shed light on just how little one million dollars seems these days.    It was once believed that the ultimate pinnacle for wealth building was to have one million liquid dollars, but with the uncertainty in the bond markets, stock markets, and real estate markets, it has baby boomers about to retire shaking in their boots about being sacked before they score a touchdown. Many people hear this notion being thrown about called the 4% percent rule.   This rule was initially laid out by a financial planner William Bengen.   He had back tested a variety of withdrawal rates using various historical rates of return and found that 4% withdrawal with the absolute highest rate that held up over a period of 30 years. So, if you are a “millionaire” with $1,000,000 of starting capital at ‘work optional’, you ...

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5 Key Points To Know When You Decide To Refinance

With the Fed recently raising interest rates, people have already started to write and call me about whether or not it is still a good time to refinance.  You will likely see more offers from your current mortgage company, broker, or bank looking to get you locked in before the Fed raises rates again in 2017.  Here are my smart money moves to five key points to know when you make a final decision about whether a refinance is good for your property. There Is NO Rule Of Thumb — I love these random articles out there that say your mortgage rates needs to be down by a certain percentage for a refinance to make sense. In fact, Investopedia recently wrote, “The typical rule of thumb is that if you can reduce your current interest rate by 0.75-1%” This makes very little sense to me as this is going to be a math equation because all refinancing costs money.   What you are ...

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The Rules For Retirement Are Changing And You Better Be Listening

I am sure you have heard that phrase from many financial professionals over the years.  This time I want you to really hear it THE RULES FOR RETIREMENT ARE CHANGING!!  Hopefully I have your attention now because what I am about to tell you will scare the hell out of you.  Whether you are in your 40s or 50s you have been hearing that you need to save for retirement in traditional vehicles such as 401ks, IRAs, and sometimes someone mentions Roth IRA.  The reason you are told this is because of the tax deferral and the amount of money you can grow your nest egg for retirement. If you are a business owner or an employee of a company what I am about to say is a very bold statement and I will take heat for it.  Your investment guy, your Certified Financial Planner™, your insurance representative, your CPA, your estate planning attorney and anyone in between I believe ...

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VIDEO: How Millennials Can Retire With A Million Dollars

Nearly two-thirds (64%) of working millennials say they will never accumulate $1 million in savings over their lifetime, according to the Wells Fargo Millennial Study. Six in ten (59%) of millennials have started saving for retirement, whereas 41% have not. Of the millennials who are not saving for retirement, 64% say they are “not making enough money to save for retirement.” The Wells Fargo Millennial study was conducted by GfK and surveyed over 1,000 U.S. adults between the ages of 22 and 35, with an additional oversample of 500 Hispanic millennials for comparison purposes. (source:wellsfargo.com)…. Read Full Article at: http://bit.ly/2eXvvpM ...

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VIDEO: What To Do If You Receive A Severance Package?

When the consulting companies are done offering advice to your corporation on how to make it more effective, the one word you don’t want to hear from upper management is “reorg”. Reorg, short for reorganization, if often a labor intensive process where a large organization systematically eliminates a section of the workforce to streamline their overall processes, people, and systems. When these reductions in workforce happen, one of the possibilities that may occur is to offer you a severance package. The problem for most families is that decisions have to be made so quickly that people often make poor choices on how to best maximize this package. Here are five smart money moves to make when you are offered a severance package. Read Full Article at: https://shar.es/1xFXsV ...

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Quit Buying Stuff You Can’t Afford

Generation X is classically defined as people born between the years 1965 and 1979.    Pretty much those of you in your late 30’s and now, *GULP* into the early 50’s.  Having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude.   Since I am 47 and have had a good deal of financial success on my own, I’ve noticed some big mistakes that I see my generation making with their money and how they think about money.    One of the main problem with our generation is that it seems we can defy gravity when it comes to buying anything but savings for our own future. Where do you think we should take the kids away for spring break this year?      Should we go away for Thanksgiving or would it be better during the holiday season?    I know ...

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Is It Time To Fed Proof Your Portfolio

We are all witnessing the antics of the Presidential election that we see and hear in the media every day.   The Fed recently chose not to raise rates again recently and we don’t know if they will do it in September, December, or not at all this year.   However, when rates rise you will want to be prepared on what to do with your portfolio, so here are my tips on money moves to consider. Consider Locking In Rates While They Are Low If you have benefited from having a low adjustable rate mortgage over the past five or six years, you might want to consider locking into a 15 year or 30 year fixed rate mortgage while rates are low. This would prevent you potentially getting hurt if you plan to live in your property for a long period of time and you expect the Fed to raise rates. Also, you might want to make a long term real ...

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How Millennials Can Retire With A Million Dollars

Nearly two-thirds (64%) of working millennials say they will never accumulate $1 million in savings over their lifetime, according to the Wells Fargo Millennial Study. Six in ten (59%) of millennials have started saving for retirement, whereas 41% have not. Of the millennials who are not saving for retirement, 64% say they are “not making enough money to save for retirement.” The Wells Fargo Millennial study was conducted by GfK and surveyed over 1,000 U.S. adults between the ages of 22 and 35, with an additional oversample of 500 Hispanic millennials for comparison purposes. (source:wellsfargo.com). We originally started oXYGen as an XY company, so it is only fitting that we help this 64% with five key money tips on how to retire with a million dollars. Be An Avid Bill Shopper First and foremost, make sure you shop your student debt which will likely be the number one initial inhibitor to long term wealth building. Make sure first, that if ...

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Is It Time For A “Back Door” Roth IRA?

There are many individuals and families who make a high income and believe they cannot do a Roth IRA.   However, there is a part of your financial house you may not have realized that existed called the “Back Door” Roth IRA.   So, why do so many people miss this great opportunity?  According to the Investment Company Institute, only 18.6 million U.S. households (about 15.7%) owned Roth IRAs in 2011.  Do that few Americans want tax-free income in retirement? Who can generally contribute to a Roth IRA? There are three ways to fund a Roth IRA–you can contribute directly, you can convert all or part of a traditional IRA to a Roth IRA, or you can roll funds over from an eligible employer retirement plan. In general, you can contribute up to $5,500 to an IRA (traditional, Roth, or a combination of both) in 2016 ($6,500 if you’ll be age 50 or older by December 31).  However, your ability to make ...

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You Should Get To Know The Self Directed Brokerage 401(k)

You would think that because I’ve been doing financial planning for 25 years that I would be a flat out 100% advocate for 401(k) plans.    With the ability today to put away money on a pre-tax basis in your 401(k) or now the use of a Roth 401(k) there are many different ways to save for your future.    Many employers even offer a ‘match’ of some of the funds that you put away into your plan as an incentive and some companies even give a year end profit sharing contribution if the company has done well.    The 401(k) has now become the Gibraltar Rock for most people in their 30’s and 40’s as the main driving force for their future retirement.    In most 401(k) plans, the problem is that you are generally limited to choices of five or six target date/retirement date funds and with limited index fund choices you could be left in an absolute mess in retirement if ...

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Can Bourbon Save Social Security

So I know what you are about to say, what does Bourbon have to do with Social Security.  Well nothing in regards to the distilled spirit itself.  But a possible excised tax could save the day.  Our Founding Fathers have used an excised tax on Spirits three times in American history to pay for wars.  Washington did it to pay for Revolutionary war debts.  The Great Whiskey Rebellion eventually forced a repeal.  But then Thomas Jefferson and Abraham Lincoln both used a Spirits Tax to pay for their respective wars; War of 1812 and the Civil War.  Today the Federal Government does not have tax on spirits, they leave that up to the state governments. Fast forward to today.  Social Security has been called the Third Rail of politics.  A subject that politicians do not want to tackle for fear of being ousted from their jobs.  So what are the three biggest problems with Social Security and possible solutions. The ...

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My Roth IRA turned Five

Why is age 5 so important for your Roth IRA.  Well, there is a little discussed rule around Roth IRAs.  We know that they grow tax free.  We know that we can take contributions out at any time without penalty.  We also, know that at age 59 ½ we can start taking from either our IRA or our Roth accounts. But what most people miss is the 5 year clock on Roths.  The Roth rules say that to take distributions tax-free and penalty-free, your Roth account has to have been open for at least 5 years.  That means when you turn 59 ½ your account also has to be at least 5 years old.  I’ve been asked by clients if the clock resets each time they make a contribution; or does each contribution have its own 5 year clock.  The answer is no.  The clock starts when the account is first opened. In 99% of cases, the clock is a ...

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How To Survive Planning For Retirement and College At The Same Time

For Baby Boomers and Gen X’ers the quandary that faces them smack in the face is the juggling act of planning to pay for their kids’ college education while also socking money away for retirement.   Was it that 25 years ago this was an easy task or has the never ending spike in college education costs officially pressured parents in the corner of their financial house?  While these waters are tricky to navigate, here are my four smart money moves to stay on the balancing beam of this difficult financial routine. Set Realistic Goals- This is probably the single most important step in the routine.  You must sit your children down and be absolutely transparent around what is and what is not possible for your financial situation.  Don’t get their hopes up to attend an out of state private college institution if you know that you cannot afford it or it will cost them an arm and leg for debt.   ...

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Important 2016 Rules For IRA’s and 401(k)’s

As 2016 rapidly approaches us, it’s important that you know the rules about changes upcoming for 401(k)’s and IRA’s so you get off to a great start in 2016.    People often overlook funding an IRA because they don’t how the qualifications work within their family.  Whether you are a few years from retirement or you are just beginning your savings plan, keep this handy article by your side so you make the most of your retirement contributions for 2016. How Much Can I Contribute? The good news is that 2016 brings a calendar year where nothing really changes in terms of your overall maximum contributions for 401(k)’s and IRA’s.   For 401(k)/403(b) investors, if you are under 50 years old you can put away up to $18,000, and those that turn the age of 50 in 2016 or are older than 50 can make a ‘catch up’ contribution of $6,000 (the maximum being $24,000 overall).  For IRA/Roth IRA investors, if you ...

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Why People Still Don’t Know Their 401(k) Costs

On February 3, 2012, the Department of Labor published final regulations on fee disclosure for retirement plans. The final regulations were supposedly going to finalize the process where the DOL began to expand disclosure of compensation paid to service providers of ERISA-subject plans. In short, the idea of this regulation was to offer the consumer better transparency of their 401(k) by having much easier fee disclosure to read and understand. The regulations raised important questions for plan sponsors and service providers to implement new compliance systems within the regulation. As fiduciaries, plan sponsors are responsible for making the decisions related to selecting an appropriate fee structure.  These fees can include asset fees charged by the financial institution, fund expenses within the mutual funds themselves, and broker/financial advisor compensation that may exist within the plan.   This doesn’t involve the actual cost to the company of running the plan for recordkeeping, plan participant fees, etc.  It’s up to each and every company ...

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Can You Buy A Rental Property In Your IRA?

The U.S. homeownership rate, which was over 69 percent at the height of the housing bubble, had fallen by the beginning of 2015 all the way to 63.7 percent. That means over the last 10 years that the U.S. has lost all of the homeownership gains of the previous 20 years. It means that the 2010 decade is on pace to be the strongest decade for renter growth in history (source: www.chicagotribune.com). That steep drop has put the national homeownership rate back where it last was in 1993. Effectively, 1.7 million fewer households owned their homes by 2015 than they did at the bubble’s peak.   Many people are now thinking about buying a rental property, but may be short the cash to do it.  One of the questions that we are often asked is “Can I use my IRA to buy a rental property?” The short answer is yes, but let me first give a little ‘buyer beware’ that Real ...

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When Is The Right Time To Sell Your Business?

There are different reasons why business owners decide to build a business.  Some do it for their family legacy.  Some do it for the potential of a big cash out down the road.   Some just build a business so they don’t have to work for the man, and get the business to generate enough income to support their lifestyle.   Whatever may be the reason you start a business, the question will come up at some point on when the right time (if at all) will come to eventually sell your business.  Here are some smart money moves thoughts on when may be a good time to sell your business. Historically low capital gain rates–  Currently, we have long term capital gain rate of 15% on most items, especially if you are considering doing an asset sale of your business.    It has been very uncertain where this rate will head in 2016 or 2017 with a new President,  but 20% is ...

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It’s SIMPLE the deadline is October 1st

After an owner makes heads or tails at the end of the year, they will usually determine whether or not money is left behind for setting up some sort of long term retirement plan within their business.   Since there are so many people setting up individual LLC’s or home based side businesses, you need to keep a close eye out this time of year for setting up one kind of retirement plan, a SIMPLE IRA.   The deadlines are just around the corner in the next few weeks, so could this be the right type of retirement plan for you? A SIMPLE IRA (Savings Incentive Match Plan For Employees) was first available to small business owners in 2001. A SIMPLE IRA plan is an IRA-based plan that gives small employers a simplified method to make contributions toward their employees’ retirement and their own retirement. Under a SIMPLE IRA plan, employees may choose to make salary reduction contributions and the employer makes ...

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5 Reasons Gen X Needs To Build Their Own Wealth

At 46 years old, the statistics would classify me as Generation X.  The media defines this generation by people who were born between 1965 and 1979, although I would say practically it is more in the line of people born from 1960 to 1980.  For those that fall within these age brackets, I think you better start planning on not receiving much of an inheritance and focusing on building your own wealth.   I don’t say this because your parent’s bumper sticker says “I’m spending my children’s inheritance”, but really because of five trends I see happening over the next twenty years that may spend it for you. Your parents have reached the age of 65– According to the Center for National Health Statistics (www.cdc.gov/nchs), men who reach the age of 65 have a normal life expectancy of 82 years old.  For women it is even better with the average female who turns the age of 65 having a normal life ...

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Tony Bennett Proves You May Never Want To Retire

A few weeks ago, I had the wonderful privilege to see Anthony Dominick “Tony” Benedetto a.k.a. Tony Bennett perform in concert at the ripe young age of 88.   On August 3rd, he turned 89.   In fact, what made the performance even more amazing is that he sang duets with Lady Gaga who strutted the stage with at least six outfit changes.   As I stood in amazement watching this legend belt away his famous tunes, it made me think about how people should be approaching this word we call retirement. A friend of mine and fellow Wall Street Journal author Professor Olivia Mitchell from the Wharton School of Business recently pointed out in an article about how people are aging more vibrantly than they did in the past.   On the left is the famous artist Albrecht Durer’s portrait of his 63-year-old mother in 1514.  On the right is the lovely actress Helen Mirren at the same age more recently. Portrait of the ...

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When Should You Take Your Deferred Compensation Plan?

Over the past several months I have seen an increased amount of nonqualified deferred compensation plans being offered at the workplace. These types of plans are often misunderstood by the employees that participate in them, and most of their decisions are made from discussions with their colleagues at work. When families build out their overall financial plan, they generally have the two phases of accumulation and decumulation. The challenge with deferred compensation plans is that most families can easily see the tax advantages in the short term, but don’t consider how the income will be received in the long term when they check off their elections for receiving money down the road. First things first, when it comes to signing up for deferred compensation plans at work. You should be sitting down as a family and carefully calculating the best strategy to minimize your taxes while not destroying your family cash flow. Sometimes it will be best to rob Peter ...

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4 Money Moves To Make When You Turn 40

Generation X is classically defined as people born between the years 1965 and 1979.    This means for the next five years, the last batch of Gen X’ers are going to turn 40.   If life begins at 40, then it must be certain that making smart money moves should fold into that master plan.   Whether you are woefully behind on student debt, just getting married, or you are now starting to make some serious money, here are four smart money moves to consider when you turn the age of 40. Admit Your Mistakes . . . They Are Natural Financial Mistakes- If you are spending like a drunken sailor making sure you are seeing all the best concerts and trying the fanciest restaurants, don’t beat yourself up.  If you have piled up debt or lost money on a private investment deal, there is still time.  Just be true to yourself on those mistakes so you don’t continue to make them. Personal ...

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Mandate Guaranteed Annuities In 401(k) Plans

Annuities often get a bad rep in the public market place. You’ll read they have high fees. You’ll read they have high commission. You’ll read that financial advisor salespeople love to sell them. However, if you talk to some of the happiest people in retirement like my own mother, one of the main financial reasons she is happy is that a fixed pension paycheck comes to her each and every month for the rest of her life. She doesn’t worry about the stock market, the bond market, or the real estate market. The reason is because she gets an annuity for the rest of her life. Consider for a moment that pensions have all but disappeared from major Fortune 500 corporations and most people today are suspect about how much they will get from Social Security. The burden of saving for retirement is squarely on the shoulders of you, the individual. While most 401(k)’s offer 10 to 20 choices on ...

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Are I Bonds A Better Idea Than A 1 Year CD?

Most investors are fully aware that the rates earned on cash today are less than a dismal amount.  By the time you factor in yearly inflation, you are basically safely going backwards with your savings and money market accounts.  If you are considering looking for a better rate of return on your cash, one interest Government program that is far too often overlooks is the use if I-Bonds as a cash reserve strategy. Essentially, an I-Bond has two separate forms of interest rate within the bond.  One part is a fixed interest rate of return which remains constant throughout the bond, and a variable rate based upon changes in the Consumer Price Index (CPI) that are announced each May and November.  Currently, the overall interest rate on I-Bonds are 1.48% and they are exempt from state or local tax which can be a benefit depending on what state you live in at this time. The good news about I-Bonds is ...

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The One Secret Your Benefits Department Never Told You About Your 401(k)

What if we were to tell you that you could get access to part of your 401(k) today and NOT pay a single penalty to move your funds into an IRA account?  You would think that we were kidding, right?  Unfortunately, most Time Warner employees (CNN, Cartoon Network, Turner, TBS, TNT, etc.) are unaware of a little known rule in your summary plan description of your 401(k) called an “in-service distribution”. Time Warner permits an in-service distribution which would allow you to withdrawal some of your money from the 401k and roll it over to an IRA while you are still employed with the company!  YES, this is 100% TRUE.  Call Fidelity yourself and find out!  By rolling over the assets to an IRA, you can maintain control of how you manage your money. Let’s face it- – some 401k’s are deficient with high fees, limited investment fund choices, and your ability to customize an investment process within your 401k ...

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How Do You Practice For Retirement?

Almost every week in my line of business, I hear someone talking about ‘retirement’.    They have hopes, dreams, and ideas about the day that they just don’t have to work anymore.   I firmly believe that anything you do well in life is going to take practice.   That’s right Allen Iverson, I said practice.   But how in the world will you practice for retirement?  Here are three smart money moves ideas to help you think about getting ready for the day you say ‘no mas’ to letting the alarm clock get you up for work. Practice Your Money Habits- Having built well over a 1,000 budgets for families over the years, there may be no tougher budget than planning the one for retirement.   You’ll never really know how much you need in terms of withdrawals from your portfolio until you actually spend three to six months trying to live on that budget.  As one would imagine, this is difficult if the ...

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Who Will Take Care of Mom and Dad?

For Boomers and Generation X’ers, you are probably beginning to see the early stages of your parents slowing down or perhaps one of them had a mild health scare over the last five years that got you thinking who is going to take of mom and dad?    Before each one of your brothers and sisters rush to put their finger on their nose and scream “NOT IT!”, it may be time to have a serious discussion about who will bear the responsibility should your mom and dad need someone by their side for financial or medical decisions.   There are several key mistakes that I see families make when it comes to discussing their aging parents’ finances. Who will be the main caretaker for Mom and Dad? – Since many siblings are strewn across the country, you should have a discussion with Mom and Dad so they know who will be taking the lead for potential items such as power of ...

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Four Financial Ideas On Your Work Anniversary

It’s another anniversary and a good time to reflect on where you are in your career both professionally and financially.   It couldn’t be a better time to also take stock of where your overall financial plan is currently, and whether or not you are on track to make work optional.  Here are four smart financial ideas to consider on this work anniversary. Rule of 1/3rds– Your work anniversary often signals a time where you could earn an additional pay raise.   Most individuals often don’t deploy the important rule of 1/3rds.   What this means is that at least 1/3rd of the raises (and bonuses) you get every year at work should be captured immediately with some form of forced savings.  This should be priority number one.   So, if you got a $10,000 pay raise, a 1/3rd is likely to go to taxes, a 1/3rd should go to some type of savings, and a 1/3rd should be spent on something you enjoy.   ...

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Don’t Attempt To Time The Market

As 2014 enters into its final month for all major indices, this should be a good time of the year to reflect on the most important major lesson about investing. The lesson is to be certain that you have the appropriate time frame to take the risk associated with investing in a particular asset class. Time and time again, most average investors get caught up in trying to figure out the best time to exit the markets or enter the markets. This is challenging enough for the experts who are engulfed in this data every hour of every working day let alone going at it as an individual investor. Check out these predictions from January 2014 from over 30 of the major chief investment strategists from various leading firms http://cnnmon.ie/1CvoVBd. On average, the peer group had the S&P 500 growing 6% and the year to date return of the S & P is almost double that number. They also had ...

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Do You Understand The Term Diversification?

Diversification is a term that is often discussed, but is still widely misunderstood amongst investors today. When the financial markets collapsed in 2008, many investors were left wondering if the opportunities to truly diversify were fewer than they once believed. Diversification: Is NOT having your money at four different banks. Many investors still do not understand how FDIC insurance works. Diversification: Is NOT having your money at four separate financial institutions. Many wealthy investors often believe they spread their diversifications risk by hiring money managers at different brokerage houses. This is hardly ever the case. Diversification: Is NOT leaving your 401(k)’s at three old employers. It’s extremely scary to see how many people buy the same mutual funds through their 401(k) at different employers and never really look at their investment strategy as a whole. Diversification: Is NOT necessarily done by buying different mutual funds or exchange traded funds from the same fund family. Diversification: Is NOT subtracting your age ...

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Did You Just Get A Raise In November

It’s pretty amazing to me how many people truly still don’t understand our payroll tax system.  When you work as a W-2 for an employer, both you and your employer are going to pay certain payroll taxes.  The two main types of taxes are the Federal Insurance Contributions Act (FICA) tax and the Medicare tax.   Both you and your employer pay 6.2% into FICA up to $117,000 this year and Medicare is a perpetuity tax at 1.45%.  In 2014, when wages, compensation, etc. get above $200,000 for an individual and $250,000 for a married couple, you will incur an additional .9% Medicare tax this year.   When your w-2 gets above $200,000, your payroll provider should be deducting that amount from your paycheck now, but it is important you double check at work. Since there are many individuals who pay their full amount into social security and their income exceeds $117,000 in a particular calendar year, unfortunately your HR department won’t ...

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I Can’t Take Money Until 59 1/2

There is an ever-changing landscape of families and individuals who are working on making work-optional by the age of 50 or 55. This doesn’t mean that they won’t continue running some small business or choosing projects to work on that they really enjoy, but at this financial juncture in their lives they are wondering how they may be able to tap into their retirement savings accounts. The biggest misconception people have about retirement savings accounts is that they simply cannot touch the money before the age of 59 ½ or they will pay significant penalties to the IRS. You’ll want to check this IRS link out. (http://1.usa.gov/1rB1ufw) Essentially, IRA owners have an option called Substantial Equal Period Payments which would allow them to withdraw money from their IRA or qualified plan before the age of 59.5 without incurring the IRS 10% early withdrawal penalty. The IRS will require individuals to continue the SEPP program for a minimum of five years ...

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Don’t Forget To Protect The Golden Goose

I have delivered insurance checks in my career and nobody has ever told me they have too much life insurance after a loved one dies. It’s really ironic because there are many media pundits who beat up on having unnecessary life insurance, but those writers don’t have to pick up the pieces after a major breadwinner dies in a family. Recent studies still say that the odds of dying are 1 out of 1. LOL. Even though I think that most families are woefully underinsured when it comes to life insurance, the greatest gap I see amongst Generation X and Generation Y is an apathetic amount of disability insurance. Most people who work for companies believe that the amount of disability insurance they get through work will be adequate to cover their situation should they sustain a long term disability. The stark reality is that most Gen X’ers an Gen Y’ers don’t even read the benefits manual to understand the ...

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Can The Government Garnish Your Social Security Check?

With our nation at 17.5 Trillion dollars in debt (source: debtclock.org) and growing, is it any wonder where the Government will strike next to begin collecting more and more revenue.   With tons of people behind on payments on their student loans, there is a new phenomenon that people collecting social security need to be on guard for . . . that your Social Security check can be garnished.  Yes, that’s right; you can actually have some of your fixed income in retirement taken away from you. With more people going back to get a mid life college degree and more parents and grandparents co-signing loans, once your name gets on the dotted line for a federal loan you will be responsible to pay it back one way or another.   Back in 2000, only six people were being garnished for delinquent loans and now that number has risen to over 156,000 people.   The total garnishments exceeded more than $150 million dollars ...

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Uber For Seniors?

Uber for seniors?   I have no idea if this will ever be a business model, but I did have a laugh and an awakening moment the other day at one of my client’s homes over a cup of coffee.     In Fulton County (Atlanta), I was completely unaware of the amazing car services that are available to seniors to get around town.  With all of the new restaurants, shopping, and entertainment venues, even those that can’t drive or don’t have family to help them can get access to these cool services. The first of these services is the DART S Service.  It was started back in 2010 and to be eligible for the program you must: Be a Fulton County resident 55 years or older Have limited access to transportation Doesn’t own a car Permanently or temporarily cannot safely operate a vehicle Has no consistent means of transportation Has no access to services within reasonable walking distance To apply for the ...

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Why Is It So Hard To Spend Money In Retirement?

The number one concern for most people approaching retirement age is that they will run out of money. It is such a great fear amongst individuals and families that many people actually deprive themselves of the number one objectives they had for retirement. Having fun! When you are working 40, 50, or 60 hours a week and raising a family, you often dream about what you will do when work is optional. You daydream about taking the vacations to destinations you have never seen like Australia. You ponder the idea of spending three months sitting beachside and purchasing that cool convertible you always wanted your whole life. So, what’s stopping you? It isn’t the kids. It isn’t the work. It isn’t the weather. Why is it so hard for retirees to enjoy the money they saved for that very purpose of enjoying when work becomes optional? Without proper planning (and even sometimes with proper planning), the fact is that most ...

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Nothing But Net Is All That Matters

Analyzing fund returns can be one of the more treacherous tasks for the average investor. There is so much information on the internet, but it doesn’t necessarily make the regular Joe more knowledgeable when it comes to picking a fund. In addition, the prospectuses have such technical legal and financial jargon that you practically need an engineering degree to get through it cover to cover. In my mind, the most important thing you do not want to overlook is making sure you are comparing funds net vs. net when making a decision about where to put your money. The first piece of the ‘nothing but net’ conversation is to line up all the costs of the fund. Beware that some costs will take you more time and research to find out versus others. Review shareholders fees such as sales loads, exchange fees, and purchase fees. Closely examine fund operating expenses including management fees, 12b-1 fees, and a line item called ...

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Was Your Mutual Fund A One Hit Wonder?

We love lists.  In fact, we have become addicted to them.   Every year, magazines and newspapers publish lists of the best and worst performing mutual funds.   As investors, we often have an impulsive nature to chase the latest and greatest mutual funds often without doing the proper due diligence before we invest new money or transfer our IRA accounts.   What should you ask before investing in a top performing mutual fund from last year? Was this a sector play?   In any given calendar year, one specific sector of the market may dominate versus other sectors of the market.  Just because gold or technology or emerging markets were the top performing sector from the year prior doesn’t necessarily mean they will repeat in the following years to come.   You should be certain that particular sector matches your long term investment objectives before you invest your money. Is it the same manager?  Sometimes mutual funds perform very well and then a given ...

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Are You An Irresponsible Investor?

If you aren’t a socially responsible investor, does this explicitly imply that you have become an irresponsible investor? LOL. When I first saw socially responsible funds hit the market, most of the initial strategies were fairly straightforward. Avoid the “sin” stocks such as alcohol, tobacco, and gambling. What you need to know today is that socially responsible investing has taken on an entirely different meaning in today’s investing world. You’ve got mutual funds today that invest in undervalued equity securities of large-cap companies with outstanding workplaces. You have funds that invest in common stocks and foreign stocks where investment decisions are made in accordance with Islamic principles. There are others that will address the ecological risks and opportunities of the investment process for the 21st century. My point behind this is that like any other investment you would make with your money, it is incumbent upon you to do the due diligence to determine whether the fund matches both your ...

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The Roth 401(k) Conversion: Pros and Cons

Since the Pension Protection Act, Roth 401(k)’s are becoming more popular amongst investors through their employer sponsored retirement plan.   If you have been investing in a 401(k) for some period of time, it’s likely you’ve chosen the pre-tax option and maybe it is time to consider whether or not a Roth 401(k) conversion makes sense for your individual situation. PROS: If you believe you’ll be in a higher tax bracket in the future when you distribute these funds, then converting your existing 401(k) to a Roth 401(k) could make sense. Roth 401(k)’s are subject to Required Minimum Distributions, but you can easily roll your Roth 401(k) into a Roth IRA and this can continue to allow you to defer dollars within your retirement accounts if you don’t need to distribute the money. If the market has another depressed year like it has twice in the past fifteen years, that particular year could be a really good time to convert your ...

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Should You Ever Borrow On A 401(k)?

For some of you a dreaded financial question may stare you in the mirror at some point in your life. Should you borrow against your 401(k)? While all initial responders in your body say no, there could be a few instances where borrowing against a 401(k) may actually make sense. Here is my smart money moves take on when to make yourself a loan. In general, it is not a smart financial move to borrow against your 401(k) plan. There are many individuals who are quitting their job and considering starting up a new business. In order to start their new entrepreneurial venture, they will likely exit from their current employer. The additional problem is where will the new entrepreneur find the capital to open up their new business? Instead of cashing in your old 401(k), one tremendously creative option to potentially fund a new business is to set up your new corporation and create a Solo 401(k) plan. Solo ...

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How Does The My RA Work?

Trapped in my office by the Snowpocalypse that hit Atlanta on last Tuesday, I had the opportunity to watch the State of the Union (#sotu) Address delivered by President Obama.   There is a whole lot of financial topics we could talk about on Your Smart Money Moves, but I’d like to review the topic around the new proposed investment vehicle called the MyRA.  Since we already have the SEP-IRA, SIMPLE-IRA, Rollover IRA, Roth IRA, Traditional IRA, Beneficial IRA, etc., wouldn’t it have just been easier to call it the My IRA instead of the new urban dictionary word called MyRA? The concept behind the MyRA account would be a new type of bond within a Roth IRA-type umbrella.  Contributions would not be tax-deductible, but earnings would be tax-free when you withdraw it in the future.  It’s unclear about how closely the rules on this account shadow the rules of the current Roth IRA. The investment vehicle would be a new ...

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Retirement Assumptions: What’s Your Legacy Goal?

When you are building out your long term retirement plan, a financial advisor will often have to make many different types of assumptions. I have authored numerous articles around this topic. You need to consider market downside risk, interest rate risk, inflation risk, liquidity risk, tax risk, sequencing risk, and several others. Often, one major mistake made around the discussion regarding building a quality retirement plan is actually having the end in mind. What do you want your legacy to be when you pass on? This is a crucial conversation to have at the onset of your overall comprehensive financial plan. Consider this for a moment. If you tell your financial advisor nothing, he or she will likely build out your retirement plan analysis by using a ‘death age’. From the conversations you have with your planner or from some default number in the financial planning software, you will arrive a set age usually in the 85 to 90 range. ...

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I Need A Pension Plan

We know that for years that planning for retirement was a three legged stool.   Pension plans, social security, and then whatever personal savings and investment plans you could muster up over the course of your lifetime.   With a great deal of uncertainty looming over social security and pension plans dwindling away from large corporations, I continue to stress to people that retirement planning feels more like a pogo stick than it does a stool. Product companies understand that the greatest way to attract customer is figure out how to fill a void in the marketplace.   As investors struggle to figure out the best way to plan for retirement, a fairly new type of fixed product has been gaining traction called a Deferred Income Annuity (DIA).   A deferred income annuity is a newer type of annuity that is essentially a mixture of a single premium immediate annuity and a single premium deferred annuity. With a DIA, the idea behind the vehicle ...

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Take The Lump Sum Or The Pension?

You have spent 20 or 30 years working for the same company and now it is time to retire.    You have put money away in your 401(k) and some other savings, but your really large asset is the pension plan where money has been put away for you all of these years.     Your human resources or benefits department sends you this large packet of information telling you what options you have with your pension.   Unbeknownst to you, they tell you that you can either get one check in a lump sum or they offer you various options if you choose a lifetime pension.  So, what is the best direction to take with your pension plan? Part I- Taking The Pension The first option you have is to take the pension.   One of the things to consider up front is that taking the pension allows you to remove the stress of ever having to manage the money.  Essentially, you are turning ...

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