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Exciting Changes at Ohanesian / Lecours

Our staff at Ohanesian / Lecours is growing. Leia Caponegro recently joined the firm as a Client Service Support specialist. She has a lot of responsibilities and clients will likely hear from her soon (if they haven’t already). Currently, she is assisting clients who are now required to take a Required Minimum Distribution from their IRA. She brings a wealth of experience and we’re happy that she joined our team!

Why the American Dream For Younger Generations Isn’t Dead

Investor’s Business Daily recently wrote an article entitled “Is The American Dream Dead for Millennials And GenX?”

The article paints a bleak picture for younger generations and backs it up with some supporting research in an effort to make a convincing argument. The premise is this: the recession forced younger generations into lower paying jobs that will affect them for decades and they are forced to take on more debt which will be an added burden for decades to come.

This is a great example of the media trying to scare us. Yes, every generation has its issues and some of today’s younger generations have to deal with the effects of starting their career during the recession. The article doesn’t go into the lessons these generations have learned, such as being more cost conscious. Or how that could benefit them down the road.

A line in the article reads “The Silent Generation, those born from 1925 to 1942, “did the best of all because they lived in the golden era of economic growth”. But in many cases their careers got started shortly after the Great Depression. What’s preventing the struggles of today’s younger generations from fueling them and propelling them to a new level of wealth?

We’re seeing increased innovation and scientific breakthroughs on a daily basis. The world economy is more accessible than ever before, allowing billions of people to connect. The internet is igniting our imagination to think and operate on levels that older generations couldn’t even dream of. Despite what we hear in the news, the world is safer, healthier, and wealthier than ever before.

To me, the American Dream is far from dead. I believe that younger generations will continue to push the boundaries and make the world and their own lives better.

The Myth of Putting All Your Eggs in One Basket

We’ve all heard not to put all our eggs in one basket when it comes to investing. Most of us would agree that sure, it’s good to have diversification but it seems like this concept of diversification has become misunderstood.

When someone says to me “I don’t want all my eggs in one basket,” they are saying they want to spread their risks out. An investor that invests only in the US stock market is putting all of his eggs in one basket. An investor who invests only in bonds is putting all of her eggs in one basket. They aren’t diversifying their portfolio and as a result are taking on risk.

Some investors make a mistake and think they are diversifying their investments, but in reality the opposite is more likely. Here are a few examples to consider:

Common Problems of Improper “Diversification”

  1. Multitude of Accounts: If an investor has a lot of different assets in different accounts it may be hard to track them all. They receive multiple statements in the mail and have to navigate different custodians when they need to make changes. It could cause confusion particularly around tax time. It becomes an administrative issue.
  2. Tax Impact: Having multiple accounts may cloud one’s view of tax consequences. They could be dealing with gains and losses in different accounts. If not coordinated, an investor could be paying more in taxes than needed. We refer to this as a tax loss harvesting strategy, where we sell investments at a loss to offset ones we’ve sold for a gain.
  3. Similar Underlying Investments: A common situation occurs when an investor has multiple mutual funds from different fund companies, thinking they are diversified. But in reality, those funds may own the same or similar underlying investments. The investor may be putting all their eggs in one basket and not even realize it. Similarly, we see investors who own utility stocks and income oriented mutual funds. When we dig into the holdings of the mutual fund, we aren’t surprised to see it comprised of utility stocks, as well. Again, the investor is putting a lot of their eggs in one basket.
  4. IRA RMD: Required Minimum Distribution (RMD) can be a massive headache if you haven’t consolidated your IRAs or 401(k)s. Missing an RMD (or not taking it out) can result in a 50% penalty.

Get Rid of Unintended Risks

As we’ve seen, the myth of diversifying assets can be misleading. It’s important to understand the true implication of diversification. Knowing how to invest properly by getting rid of unintended risks and allocating your retirement portfolio can give investors peace of mind and confidence in this present economy.

Steps to Take After Leaving a Job to Get Your Financial Life in Order

Leaving a job can be a frightening proposal, even if you’re moving up in the world—navigating retirement plan rollovers, lost and gained benefits, pay and cost-of-living changes, and the other variables can feel quite daunting. Fortunately, if you take a moment and relax, you’ll find that a methodical, thoughtful approach makes it all much easier. Today, we’ll help you navigate your way through the financials of leaving a job without getting stressed about the endeavor.

Figure out what you’re losing and what you’re gaining.

Take a close, hard look at the benefits you’re losing as you leave your job, noting the value of stock options, leave time, child-care, insurance, etc. If you’re moving immediately into a new job, you’ll want to evaluate what you’re gaining the same way, for ease of comparison. A firm understanding of the actual value of what you’re losing or gaining is important.

Look into what you can take with you.

Not every valuable benefit vanishes when you leave a job. You might have several decisions to make about more flexible benefits, such as stock options, which you’ll want to go over with a tax or finance professional—the details around these decisions can get quite complex quite quickly, so don’t let yourself drown alone in the specifics of rolling over your 401k to a new plan or an IRA, keeping or selling stock options, etc.

Negotiate to reimburse losses.

If you’ve noted a loss of value in moving to a new job, that information can be useful for negotiating additional pay, benefits, and one-time expense coverage (for relocation, etc.). Otherwise, look to a financial planning adviser for assistance in finding moves you can make to shrink the gap—you may be able to defray relocation expenses with tax deductions, qualify for new credits, etc.

Undertake a thorough self-audit.

When the dust settles, it’s time to conduct a thorough self-audit and see where your income, benefits, investments, retirement savings, and other financial considerations all stand. Make sure to review plans which, while not directly associated with the job you’re leaving, may interact strangely with your new situation—insurance, investments, estate plans, and the like all need a second look over after a major change such as leaving a job. Take your time, get professional financial planning assistance, and do it right, so you can rest assured that your big change is a move in the right direction.

When Clients Spend Through Their Savings

A reporter from Financial Planning Magazine, recently posed a question to several financial advisors asking:

“What happens when an elderly retired client runs out of money?”

Below is my response, which was included in the article:

 

WATCH WITHDRAWAL RATES

Michael Lecours, an advisor at Ohanesian/Lecours in West Hartford, Conn., says the time to address the issue of running out of money with retirees is when they start increasing withdrawal rates from their savings.

“We can see the writing on the wall five to 10 years away,” Lecours says. “After a conversation, most clients recognize the issue and find ways to reduce their expenses. They make plans to downsize, move in with a family member, or scale back on their lifestyle.”