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NU Fixed Account Rate Declines

NU Retirees: For over a year, the interest rate for the Fixed Account in the 401(k) plan at Fidelity has been declining.  The decline has continued into 2015 with the rate reducing from 2.25% to 2.0%.  As we have mentioned in the past, we now view the fixed account as a proxy for cash.

We’ve written a lot over the past year about how to view cash in your portfolio – posts can be viewed here.

A Wake Up Call: How Not to Deal With an Inheritance.

The following story offers a great example of what can go wrong when a young, financially inexperienced individual becomes wealthy overnight. This author’s advice at the end is exactly what we recommend to clients in this situation:

  1. Get advice from someone on how to use this new found wealth.
  2. Create a plan. Put it in writing. Understand what these funds will be used for it.
  3. Stick to the plan. Without controlling your budget, you can slowly lose track of the wealth.
  4. Don’t be tempted to rely too much on this wealth. It’s very, very easy and tempting to dip into the inheritance when things get tough. But it’s nearly impossible to rebuild a nest egg has been decimated.

How I Blew a $250,000 Inheritance

What’s the best investment?

In a recent Gallup poll, Americans were asked what they thoughts was the best investment to make over the long term. Their choices:

Real estate
Savings Accounts

The average American incorrectly believes that Real Estate is the best investment over the long term.

The following article presents a good argument for why Stocks may be the best investment over the long term. And I’m glad that they made note that investors should be shifting to lower risk assets the closer they get to retiring.

Less Than a Quarter of Americans Get the Most Important Investment Right

What Children Want to Talk to Their Grandparents About May Surprise You.

Children are looking to their grandparents for advice about saving money, according to a new study by TIAA-CREF and MIT’s AgeLab.

85% of the children interviewed were interested in talking more about money, saving and personal finance. Yet, only 8% of grandparents have such conversations.

The article in USA Today, outlined a few good ways to jumpstart the conversation:

  • Talk about how prices have changed in your lifetime.
  • Bring up savings at birthdays if the kids get a check or two.
  • Talk about the opportunities you’ve gotten (or maybe missed out on) through education.
  • Listen to their worries. Ninety-seven percent of young adults in the intergenerational study say they’re worried about saving.

Visit USA Today for the full story.

Now May Be The Best Time To Check Your Risk Tolerance

Is this the top of the market? If so, are you (and your investments) ready for the possible roller coaster that could follow?

That’s the gist of a recent WSJ article, and it’s not bad advice to consider.

Investor’s appetite for risk is constantly changing.  When the market is bullish (like it is right now) investors want to maximize their returns and are willing to take on more risk.  Yet, as soon as the market turns sour, investors want to limit their risk and move to something “safer”.

That knee-jerk reaction can often end up hurting the investor in the long run. They end up buy and selling at the wrong time.

It’s better to take time now for investors to imagine how they would feel if there was a 5% or 10% drop in the market.  Would they stay calm and stay the course or would they be looking to move to more conservative investments?

If you haven’t thought about that, take some time now to consider what you would do.

Of course, we can help guide you.