When Whole Life Insurance Makes Sense
Whole life insurance has received a bad rap in recent years. Some insurance agents may try to sell it to younger couples with children who are better served with low-cost term life insurance. And some people plan to withdraw the funds while living and face negative tax consequences or high loan interest rates. But in certain situations a whole life policy can make sense, particularly as a tax efficient way to accumulate a fund to pass onto heirs with the added benefit of protecting against the loss of a second social security benefit stream....
read moreRiding the Rollercoaster: Why I Don’t Worry About Short Term Swings in the Stock Market
The performance of the market over the last few days has heightened many people’s anxiety about whether the stock market is due for a major correction. For many, the memory of 2008/2009 lingers. No one can really predict if and when a major correction will occur, but anyone invested for the long term, who has a well-diversified portfolio with low fees, should be fine. In this blog I will walk through how I think about stock market risk and returns. It is important to understand the difference between volatility and risk as applies to the...
read moreHow Understanding Industry Changes Can Help You Lower Your Cell Phone Bill
I recently upgraded my cell phone and discovered a lot has changed in the cell phone marketplace over the last couple of years. In this month’s blog I’m sharing some strategies to help keep your overall cost down. I will start with the traditional two year contract. The way these contracts work is that the wireless carriers provide an upfront subsidy on the phone and in return require a two year contract. For example, a new phone might cost $600 but you will only be charged $200. That $400 subsidy provided by the carrier is an expense for...
read moreThe Danger of Lifestyle Creep
If you won’t be collecting a traditional pension and must rely on a combination of social security and a 401K/IRA portfolio to fund your retirement, you’ll want to be very conscious of both your pre-retirement spending and the size of your portfolio so you can support that level of spending after retirement. I am focusing this blog on the danger of lifestyle creep because the current level of spending has a significant impact on both the ability to save pre-retirement and the level of spending needed during retirement to maintain a lifestyle...
read moreStrategies to Supplement a 529 for College Savings
For the most part, 529 plans are a great vehicle for saving for college but there is one potential pitfall: if the funds are not ultimately used for college expenses, significant tax consequences could result. Thus I often advise my clients who are establishing a college savings plan to consider other sources of funds to supplement a 529 plan. For those not familiar, 529 plans were authorized by the Economic Growth and Tax Relief Reconciliation Act of 2001 to provide a tax advantaged savings vehicle for higher education. With a 529 plan you...
read morePros and Cons of Rolling a 401K/403B to an IRA
One question many folks have when leaving a job is what to do with their 401K/403B. It most instances rolling over your 401K to an IRA makes the most sense, but in some situations the better option is to keep the money in your current 401K or roll the money into a 401K at your new company. Taxes work for a 401K/403B plan the same as for a traditional or rollover IRA. You put money in pre-tax, the earnings grow tax deferred, and you pay taxes on any amount withdrawn. While the taxation rules are the same, some of the features of the various...
read moreWhy Most People Should Delay Collecting Social Security Until Age 70
In the financial advisory world, too much emphasis is often placed on the investment side of the conversation and not enough on issues like when to start collecting Social Security, which can have a significant impact on the potential success of a client’s retirement. The decision on when to begin collecting Social Security is one where I find a great divide between what is in the best financial interest for most people and what they are inclined to do. The government provides a great incentive to delay collecting on Social...
read morePaying for Your Health Insurance through COBRA? Visit healthcare.gov before February 15
In my financial planning practice I spend a fair amount of time with people in a job transition. Recently I have spoken with a few people who pay for their health insurance through COBRA, not realizing that they could potentially save hundreds of dollars a month in premiums by obtaining subsidized policies from the government’s health care exchange. You are allowed to purchase a plan on the affordable care act exchange and qualify for a subsidy even if COBRA is available to you. In addition, if you live in a state that expanded...
read moreWhy I Believe in Investing in Treasury Bonds and Not Corporate Bonds
I am going to start out by explaining exactly what a bond is for those who are not familiar with bonds and how they work. Bonds reflect money that a company or governmental entity borrows to finance some activity. The lender (investor) provides a lump sum of cash to the borrower and in return receives semi-annual interest payments for the term of the bond. The lump sum is returned to the investor when the bond expires. The rate of return is fixed assuming the investor holds the bond through maturity and is able to reinvest the interest...
read moreDo Annuities Ever Make Sense in a Retirement Portfolio?
In my opinion, the answer to the question “Do Annuities Ever Make Sense in a Retirement Portfolio?” is “Yes – In Certain Situations.” In its simplest form an annuity is a contract between an individual and an insurance company. The individual gives the insurance company a lump sum of cash and the insurance company agrees to provide a fixed stream of payments to the individual for the rest of their life. Whether that contract ends up being a good “investment” for the individual depends on how long they live. Those who die sooner than...
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