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Why Is It So Hard to Make a Tax Deductible Contribution to a Traditional IRA?

By Posted on In Retirement, Rule of Thumb, Uncategorized

During tax season, we had dozens of conversation with clients that begin with the client asking, “can I make a tax deductible contribution to my IRA, so I can lower my tax bill?”

Unfortunately, the answer isn’t a straightforward “yes” or “no”. Rather, we have to drill into each client’s specific situation to make sure we follow the in’s and out’s associated with IRA contributions on a case by case basis. The below infographic does a pretty good job at capturing the complexity of answering the question. Bottom line, before making a contribution to your IRA, consult with a financial advisor or tax professional because it’s complicated.

IRA Contribution Flow Chart

Are You Addicted to News?

By Posted on In Finding Confidence, Investment Behavior, Uncategorized

A recent article by the Guardian discusses 10 reasons why news can harm you. It’s an interesting read, one that reinforces a message that we regularly communicate to our clients: news is sensationalized to draw viewers but it should be taken with a grain of salt and not relied on to make investment decisions without doing your own research.

The article references the sensational and shocking stories we see. These stories are designed to scare us into doing something (or not doing something). The article fails to recognize, that there is a lot of insightful, objective, and thoroughly-researched journalism produced every single day that readers should be reading. Length does not necessarily indicate quality. Long articles can be sensationalized just as much as a tweet. And a tweet can be more insightful than a long article.

The problem becomes: How to determine quality news from an eye catching headline with regurgitated content. Second, where do we find quality news and who can we trust?

We will cover those questions in a later post.

 

A New Strategy. A New Approach.

By Posted on In Investment Strategies, Uncategorized

This is the final part of a series (Part 1, Part 2, Part 3)

If your portfolio is still sitting on the sidelines in cash as you wait for the right time to enter the market, you may want to consider a new strategy. There is always a headline out there to suggest that the market is about to go down. Here are a few strategies we suggest you consider:

1) Turn off the TV. 95% of what you hear and read about the economy is noise. A recent article on the front page of Yahoo.com reports that actress “Mila Kunis Rotates From Cash to Stocks”. We’re not putting the link there, because that’s the noise we’re talking about.

2) Put a multi-year plan together. Step 1 – Decide what the funds will be used for and when you expect to need them. Step 2 – Determine the amount of risk you need to take in order to reach your goals. If not, there are many strategies that can be used to help you. Maybe you need to save more, or maybe you need a new investment portfolio and investment strategies.

3) Stick to it. It’s important to remain committed to the plan, with periodic tweaks and changes. All to often, we see plans used for only a short period of time before old habits come back.

4) Get a second opinion. It’s important to remember to tap the expertise of a financial advisor when developing your plan. When prospective clients ask us for help, we dig deep to make sure all their investments and assets (including their 401(k), IRA, ROTH IRA, bank accounts) are working well together. We look at a few key areas for each portfolio: proper diversification, fees & expenses, performance, and volatility within the portfolio. Each of these is important and is driven by a client’s personal situation and risk tolerance. Most importantly, we look to see if this portfolio could achieve the client’s financial goal.

Growing complexity of retirement

By Posted on In Retirement, Uncategorized

This piece was written about a year ago, but the two statistics from Sloan should be read again. During the past year, we have plenty of anecdotal evidence to support their findings:

There are a lot of options and factors to consider when preparing for retirement. It’s no longer just about the size of your nest egg. It’s about adequate insurance coverage, strategies to maximize your social security benefits (interesting story here), strategies to minimize taxes, and weighing your needs for Long Term Care insurance. And that’s just to name a few.

Of course, another option to consider is when to retire. Given the state of the economy and the fact that people are healthier and living longer than ever before, more and more people are pushing retirement back. Here are a few interesting statistics coming from the Sloan Center on Aging & Work at Boston College:

“Fewer Older Workers Expect to Retire at 62 or 65. According to a 2012 analysis of data from the Health and Retirement Survey, ‘a declining percentage of Americans are expecting to retire at 62 and 65. In 2006, 7.4 percent of people [over the age of 50] said they plan to stop working at 62, but by 2010 it had dropped to 4.9 percent. In 2006, 16.1 percent people expected to retire at 65, but in 2010, 14.6 percent planned to do so. Conversely, expected retirement at 66 has increased from 2.9 percent in 2006 to 4 percent in 2010.'”

And coming from the same outfit:

“One-fifth of U.S. Workers Say They Don’t Plan to Stop Working According to the 2011 Sun-Life Unretirement Index, when asked at what age they plan to stop working, 20% of American workers stated ‘Never. I think I’ll always work in some capacity.'”

Bad News Begets Bad Behavior

By Posted on In Finding Confidence, Uncategorized

This is the third part of a series (Part 1, Part 2, Part 3, Part 4)

For many investors, the bad news was cause for them to pull their money out, sit on the sidelines and wait for conditions to improve. They waited for the situation to turn around and to feel confident again in the markets.

We all remember the infamous day of September 29, 2008 when the markets dropped so much. But the very next day, the markets had one of the best days ever.

And for the past three years, the economy has been growing and growing. Many investors who stayed invested are back to where they were before the 2008 recession.

Unfortunately, many are still sitting on the sidelines watching the news and seeing one headline