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Why You Can’t Hide From Inflation

Just because it isn’t making headlines, doesn’t mean inflation is not a serious issue.  We, as advisors, have to deal with on a daily basis.  The following article is filled with great nuggets about inflation.  Here are my favorites:

“According to the US Labor Department, the median weekly wage back in 1988 was $382… or roughly 18,336 ounces of Coca Cola. Today the median weekly wage is $831.40… or just 6,651.20 ounces.”

“$1 would have bought me 48 ounces of Coca Cola 26 years ago. Today that same dollar buys me just 8 ounces. This means that the dollar has lost 83.3% of its value against Coca Cola over the past three decades, averaging roughly 6.6% inflation per year.”

To read more visit ZeroHedge

IRA Pointers At Tax Time

Around this time of the year, when the tax reports are coming to your mailbox, you might be wishing you could do something about your upcoming tax bill. Well, maybe you can for your 2013 return, and for your 2014 return as well!

Did you or your spouse work in 2013? You may be eligible to make a deductible contribution to an IRA. Contribute $1000 and you can save $150 off your taxes, assuming you’re in the 15% tax bracket. The higher your bracket, the more you save. A married couple can contribute as much as $13,000, and save a couple of thousand on their 2013 return. These contributions for 2013 can be made through tax-filing day (without extensions) in 2014. But remember, your contributions can never be greater than your earnings. Also, you cannot make a regular IRA contribution, or a spousal contribution, in any year you are age 70-1/2 or older, even if you are working. Darn.

As a matter of fact, if you will be over 70-1/2 this year, you have to make a minimum withdrawal from your IRA and 401k. The withdrawal is about 4% of the account’s value as of the end of last year. But the calculation changes every year, and the penalty is huge if you forget or take out too little. If this has happened to you, call us for a work-around.

If you have a Roth-IRA, there is no requirement to take the money out, regardless of age. And if you’re earning income from work, you can still make a contribution. There’s no tax deduction, but the money can grow tax-free as long as you live!

If you have a question that you would like us to answer, please email us at ron@ol-advisors.com or call our office at 860.521.471.

 

Cash Plus: Our Cash Strategy

We’ve built a cash strategy for Tier II and Tier III for investors with lots of cash sitting on the sidelines earning next to nothing.

We are recommending a short-term bond portfolio as outlined earlier. It would consist of 5-6 conservative bond investments, reviewed frequently and rebalanced every year. Effort is placed to minimize risk, diversify bond maturities and bond types through a combination of active and passive investments.

Other  features:

Funds can be wired from this account to your bank account in as little as three days.

You can sign up for free check writing privileges from the account.

 

Contact us today if you’re interested in making your cash work harder.

 

Creating a Cash Strategy

Your cash strategy should consist of three tiers, with each one having a specific objective:

Tier I: Immediate

Objective: Meets your immediate needs to pay bills and serve as your emergency cash fund.

Products to use: Focus on bank deposits and money market funds

Tier II: Enhanced Cash

Objective: Enhance returns to cash while maintaining liquidity

Products to use: Low duration bonds

Tier III: Return Driver

Objective: Grow cash balance over time

Products to use: Core bonds or actively managed bond funds

The allocation between each of these tiers will depend on several factors – including risk tolerance, goals and spending patterns.

We can help to analyze how much you need for each tier based on your needs. Contact us today if you’re interested in making your cash work harder.

A Step Out On the Risk Curve From Cash

Cash and money market funds pay next to nothing but then again you aren’t taking on much risk. If you’re exploring what to do with cash but not ready to go in stocks just yet, the next logical step is to look into short term strategies.  A little extra risk for a little extra potential reward.

Money Market Cash

 

Chart from PIMCO

 

 

Contact us today if you’re interested in making your cash work harder.