Most of you have already made it over this education hurdle and have turned to planning for funding sources for retirement instead. That’s one of the reason we’re constantly working with clients to determine reasonable distribution rates during retirement. And ways to provide monthly income utilizing investment portfolios or pensions, along with the timing of
ISR - What is it and is it for you?
March 17, 2015 By
Recently, I have been working with a USPFA member discussing and evaluating one of these transition times for many of us in regard to our retirement planning. The top of mind topic for these members was the In-Service Rollover (or ISR). Many people are not aware that once you reach the age of 59 ½, you have the ability to transfer a portion of your retirement plan assets (401k, 403b or similar retirement plan vehicle) into a self-directed IRA. This transfer can be completed while you are still working for your employer and while you continue to participate in your employer provided retirement plan. Each retirement plan has specific rules and processes but typically, this transfer can be up to 80% of your 401k balance.
Behavioral Finance - Part III
January 23, 2015 By
From the Outside Looking In (part 3)
“If I had a million dollars…” is a refrain often spoken and contemplated. From song lyrics to day dreams, we spend time fantasizing about what we would do with such a large sum of money. For many, accumulating a million dollars seems unattainable, but in reality, it can be achieved. The keys are: utilizing a predetermined and dedicated savings/investment program, sticking with good financial management, and making smart choices.
Of the three items listed above, the piece that is often ignored is “making smart choices.” In fact, what we think are smart choices may be the exact opposite, they could be emotional reactions to something going on in our world at the time. This paper, part three of a series, uses the tenets of behavioral finance* to examine how and why our actions often impede smart financial decision making.
Who is the beneficiary of your 401k or IRA?
January 2, 2015 By
This oversight could cost your loved ones dearly.
Something seemingly so easy as to declare the beneficiary of your 401k has caused heartache for many unsuspecting heirs, who are unintentionally left with nothing.
Take the case of Ben Langford, who worked at a privately owned company for 25 years. He named his wife of 38 years the beneficiary of his 401k account in the event he died before her. As it turned out, however, she died first.
Consequently, Ben smartly updated his account, naming his three grown children as the co-beneficiaries of his account.
WHY IS YEAR-END TAX PLANNING AND PREPARATION IMPORTANT?
December 4, 2014 By
Many of the items we are going to discuss require action before year-end, and definitely before you or your tax preparer begin to compile your tax return for 2014. While taxes are inevitable, assuming you have taxable income, with proper tax planning you can maximize your potential for tax savings.
Behavorial Finance - Part II
November 13, 2014 By
From the Outside Looking In (part 2)
“The investor’s chief problem—and even his worst enemy—is likely to be himself.” Why is this so? This paper, part two of a series, uses the tenets of behavioral finance* to examine how and why our actions often impede good financial decision making.
In part one, (Behavioral Finance Part I) we introduced the topic of behavioral finance and how our biases can prevent us from making the best financial decisions. We discussed three common and powerful biases: loss aversion, conservatism, and hindsight. In part two, we will discuss three more biases and show how they can interfere with an important financial objective— investing retirement funds for growth in the face of risk and uncertainty. In addition, we will provide suggestions for overcoming these tendencies. The goal: to help you become a better informed and successful investor.
The S&P 500 and Emotional Pitfalls
October 5, 2014 By
This month, I wanted to highlight one specific misconception and then a couple of emotional pitfalls that investors fall victim to. This is not as much about pointing out common mistakes, but rather to have you consider how emotion can affect our actions.
Behavioral Finance - Part I
September 11, 2014 By
From the Outside Looking In
Have you ever noticed how easy it is to know when someone else is making a bad decision—a friend is impulsively quitting her job; a family member is buying a house that seems too expensive; your brother has no retirement account? We find it easier to assess someone else’s choices because we all have two views of the world: an outside view and an inside view. When you think about someone else’s situation you are able to consider it from the outside, using the rational side of your mind. But when it’s a decision affecting your own life, the emotional side often takes over. So why is it seemingly impossible to take emotions out of making a decision about our finances?
Part one in this series examines how and why we act as we do. We'll use the tenets of behavioral finance* to examine our natural vulnerabilities and tendencies that so often impede good financial decision making. We'll explain some of the common and most powerful biases, help you to assess which biases you're the most prone to, and provide tips for overcoming those portfolio-wrecking tendencies. The goal: help you become a better informed and successful investor. But first, some background information.
How the Brain Works
Our brains enable us to process information and make decisions. The brain is divided into sections that control specific functions. The amygdala is action-oriented; it controls our “fight or flight” instinct and emotions such as anger and fear. In his book, The Little Book of Behavioral Investing, James Montier likens this part of the brain to the Dr. McCoy character from the Star Trek series.1 It operates automatically and quickly. You don’t control it. It just happens. It’s an automatic system that generates impressions, intuitions, and feelings.
The Dos and Don’ts of Choosing a Financial Advisor
July 22, 2014 By
You’re thinking about hiring a financial advisor to help you manage your assets. I can assume this is the case since you’re taking the time to read this paper. This is most likely because you’re planning for the future— your retirement funding or college, or you’re unhappy with your current money manager, be it a
What Will The Fed Do?
Since we are constantly being bombarded with what the Fed may do this month or next, I thought it might be a good idea to look at some history on how we got to this place with a specific eye on the Fed’s 2% target inflation rate. Arguing in favor of a hike is the