In this time of disappearing pensions, corporate downsizing, and high unemployment it becomes a great concern that many folks are still not saving enough for retirement. This may be due to a failure to realistically assess future costs or because we’re spending too much without saving – which is a hallmark of the baby-boom generation. Granted, there are plenty of good reasons why spending is out of control – with healthcare costs increasing all the time, for example. But I suspect that much more of the blame for our low savings balances is due to poor savings habits in the first place.
financial planning
How to Save More Without Making More
Here’s a pretty neat strategy that you can try if you’re looking to save a bit more for retirement, college or even paying down debt. It works like this: Whenever we’re out shopping or online shopping there’s always the temptation to purchase things we really don’t need. For example, I was at the store the other day and tried on a few pairs of jeans. Did I really need them? No. Did I want them? Of course. You may have seen yourself in a similar situation – wanting something but knowing you most likely didn’t really need it.
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Debt Consolidation Loans Don’t Work (But You Might Get it to Work For You!)
You’ve likely heard or seen the commercials that urge you to consolidate your debt into “one low payment”. The concept makes logical sense and promises to free up some cash so it is easier to live paycheck to paycheck. The reason this usually doesn’t work is that it doesn’t address the real problem. The reason we get into this mess is because we have not learned how to spend within our income. What we need is a method to manage and organize our money so we make conscious decisions about how we spend it. A good book that I’ve used is “Your Money or Your Life” by Joe Dominguez. How to Get Started To get started you might try the following:
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Asset Allocation Vs Diversification
Asset allocation and diversification are not the same. Perhaps some readers may benefit from a brief explanation of the two and how it may impact your investments. An investor may have excellent diversification but poor asset allocation and vice versa. Let’s start with asset allocation. When we speak of asset allocation we’re talking about how we’re going to invest in a particular category of investments called asset classes. That is, we are choosing which assets are going to be in our portfolio. Generally, assets classes that investors may choose from are stocks (equities), bonds (fixed income), cash, commodities, and real estate.
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Stay Away From This Asset Class in 2015
Admittedly, this is a pretty deceiving headline. We see headlines like these every day in the newspapers, TV and from colleagues at work. The truth of the matter is that there are certainly going to be assets classes that will behave horribly while other asset classes do extremely well. The point is, neither you nor I (or anyone else) will accurately be able to predict which ones will do better than others. For every person that says stocks will have a meteoric rise in 2015 there will be just as many that will say to avoid them. You’ll have others saying that bonds are doomed while others will sing their praises. Buy gold, sell gold; buy real estate, sell real estate. The point is no one knows which asset classes will do well and which ones will fall.
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Make SMART Goals as You Plan
Goal planning is the real “meat” of financial planning. That is to say, once you’ve covered the issues of organizing your information, developing and improving your net worth, and providing for the safety issues, it is now time to consider exactly what you would like to do with your money and your life. This is a very personal set of decisions – no one person makes the same choices. Perhaps you’d like to open your own business, and become your own boss. Maybe all you’d like to do is to finish working after 30 years and spend your time playing with your grandchildren. Or maybe you’ve finished up college and now you’re beginning to earn some money, and so you’re planning on starting a family and buying a home. Setting your goals is very important as you begin a savings and investing plan, because without a goal in mind, it […]
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What is a QLAC?
In July of 2014 the IRS issued final regulations regarding the allowance of qualified longevity annuity contracts in employer sponsored plans such as 401ks, 403bs and 457b plans as well as IRAs. What it Means and What it Means to You QLAC stands for qualified longevity annuity contract. This means that a person is allowed to take up to 25% of their overall account balance but not more than $125,000 in their retirement plan and use that money as premium to fund a longevity annuity contract. Additionally, the annuitant must start the annuity by no later than the first day of the month following the attainment of age 85. They can however, start earlier. In a 401k, 403b or 457b plan a QLAC can be purchased up to the maximum of $125,000 across all accounts (IRAs included), but not more than 25% of the account balance per plan.
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Your Year-End Bonus
As the end of the year approaches many employers will pay and many employees will receive year-end bonuses. While often the icing on the cake for a productive year employee should be aware of the tax consequences of their bonus. Percent vs. Aggregate Method When it comes to taxing the bonus an employer may choose the percentage method versus the aggregate method. Under the aggregate or wage holding bracket method the employer will use the withholding tables generally used for the employee normal paycheck. Then, the supplemental wages are aggregated with the employee’s normal pay and taxes are withheld accordingly.
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5 Tips To Avoid Overspending for the Holidays
The Holiday season is the time of year when we get into the spirit of giving and start our lists of who’s been naughty and nice. With Black Friday and Cyber Monday over, there are still plenty of days left to shop for friends and loved ones. It can be tempting to get caught up in the spirit of giving so much that after the Holidays are over we’ve put ourselves in a financial bind. The following are five tips to consider this Holiday season to avoid overspending.
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An Exception to the RMD Rule
For many folks, attaining age 70 ½ means the beginning of required minimum distributions (RMDs) from their 401k, 403b as well as traditional IRAs. There are however, some individuals that will continue to work because they want to or (unfortunately) have to and still want to save some of their income. At age 70 ½ individuals can no longer make traditional IRA contributions. They are allowed to make contributions to a Roth IRA as long as they still have earned income. Earned income is generally W2 wages or self-employment income. It is not pension income, annuity income or RMD income.
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Safety with an Emergency Fund
Today’s message is about Safety – but not things like “don’t run with scissors” or “wait a half hour after eating to go swimming”. What we’re referring to is the old concept of having an emergency fund. The primary thing that you should take away from this Safety discussion is Peace Of Mind. An emergency fund is a vital component of your overall financial toolkit. You should have 3 to 6 months’ worth of expenses set aside in a liquid, stable account, such as a bank passbook savings account or a money market account. By “liquid” we mean that the funds are easily valued and withdrawn as necessary. By “stable”, we mean that the funds are not at risk due to market volatility, but also that there is some return in the form of interest to the account, however small.
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Wants and Needs
Sometimes when we need more money for a specific goal in the future such as retirement, college, a down payment on a home or an emergency fund we may feel that before these things can happen we need to make more money. We may feel that once our incomes are up to a certain level that we’ll be able to afford to save for those goals. It may not be necessary to earn more in order to achieve the above goals. For many folks the solution is simply to prioritize between wants and needs. In other words, learning to distinguish between the wants and the needs in your life and then reallocating your money to fund retirement or college goals without having to ask for a raise or get a second job.
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Financial Advice to Ignore, Even if it Comes From Your Mother!
Listed below are a few time-honored maxims that we’ve all heard. Perhaps we’ve even heard these from very trusted sources – like our Mothers. As you’ll see, it’s not always good advice… In the interest of full disclosure, my own Mother did not give me any of this advice. She tended to stay with the “wait an hour after eating to go swimming” variety of advice. One of my favorites was always given as I was leaving the house during my younger years: “Have fun. Behave!” I once pointed out to her the fallacy involved there but she didn’t see the humor. :-) At any rate, those rules have served me well through the years – thanks, Mom!
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Apples and Oranges
When considering investing with a particular financial planning firm or mutual fund consider looking at what benchmark they’re comparing their returns (disclosure: the funds we use are the benchmarks). It’s pretty easy for a mutual fund company or adviser to tout their funds when they have beaten the benchmark over a certain period of time. For example, I had the opportunity to look at a client’s investment performance report that they had with another company. Written across the top in the adviser’s handwriting was the phrase, “Looks like we beat the benchmark.”
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To Roll or Not to Roll?
At some point in almost everyone’s lifetime they have gone through the process of changing jobs. Many times those jobs offered retirement plans such as 401(k)s 403(b)s, etc. Conventional wisdom would say that for most employees it may make sense to roll their employer sponsored plan into an IRA. Based on a request from a reader (thanks David!), I thought I would go over some of the issues to consider before rolling your employer sponsored plan to an IRA.
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Why You Should Consider Long Term Care Insurance
Long term care insurance is insurance that will pay in the event that an individual needs caregiving due to a number of afflictions or diseases. For example, if an individual is suffering from Alzheimer’s disease or dementia they made needs round the clock care. Generally, that care is provided by family members, with the majority of caregivers being daughters and spouses of caregiver. The costs for needing long term care can be expensive. Depending on the area of the country, care can range from $50,000 to $80,000 per year to stay in a nursing home and may run in the range of $20 to $30 per hour for care outside of the home. Based on the numbers above, long term care expenses can quickly drain an individual’s retirement savings, or other assets that were planned for other uses.
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The Benefits of Financial Planning
If you’re wondering about whether or not you need to do some financial planning, either on your own, using resources on the internet, or by hiring a financial planner, you might want to know what the benefits of financial planning are. From my perspective of many years providing financial planning and advice to folks, there are three primary benefits of financial planning: Organization, Efficiency, and Discipline. We’ll talk about each of these in order. Organization One of the most important benefits of financial planning is ORGANIZATION. Statistics tell us that fewer than 25% of Americans know their financial net worth. In addition, (prepare to be astounded) the average individual’s credit card debt is over $8,000. Think about that for a moment…
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Should You Worry About the Dow?
The last few weeks have shown that the market is certainly volatile. Once at a peak of over 17,000 the market has pulled back to just over 16,000. While this certainly makes for news (notice how I didn’t say interesting news) I wanted to give our readers a little perspective on why I (nor they) shouldn’t care.
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.