Stock Market


July 4th, our nation’s Independence Day, provide a good opportunity for reflection. Check-in with your self and answer the following questions.  Then ask them to your spouse or significant other. You may find that between the two of you, your definition and goals for when you reach financial independence  (aka retirement) are very similar or the economic crisis has your goals miles apart. The time to refocus is now.

When do you want your Independence Day (Retirement to begin)?

When do you think it will actually happen?

What changes and sacrifices are you willing to make to meet your ideal Independence Day goal?

What is the first step you are going to take to figure out the new plan? (Hint: Who are you going to talk to?)

If you are already retired – Can you afford to stay retired?

These questions will guide the process of figuring out your next steps. Just remember to write them down, so they become tangible items you can deal with vs. thoughts rambling around your head.

Yes, it is ok to look. As the end of the second financial quarter hits Wall Street it is time to see where things are at in your portfolio.  I am frequently asked “Should I even look at my investments, 401k, IRA, 529 savings plan or brokerage account?” In general, my advice has been if you don’t need it tomorrow, don’t obsess and look all the time. Instead take action where you can. This may be cutting back spending, changing investments to adjust for your new risk tolerance or saving more to makeup the gap in your account balances.  Here are my Top 10 Reasons to Sneak a Peak.

10. Admit it, you look everyday so why would today be any different?

9. Your mom told you not to look.

8. Finally you’ve made the appointment with a financial advisor and need to know where your 401(k) and IRAs are to prepare.

7. You can’t move forward with your financial plan unless you know where you are today.

6. How else will you know what to complain or brag about at the next BBQ? (Up or down, everyone is talking about the stock market.)

5. It may be time to rebalance your investment portfolio.

4. Good excuse to open that bottle of tequila or wine that you’ve been eyeing to get through the pain.

3. If your risk tolerance has changed because of the market turmoil your retirement investments need to be adjusted accordingly.

2. Relieve stress by printing out your 401(k) or IRA statements and tying them to a bottlerocket on the 4th.

1. You want to retire, it’s time for a new gameplan. Sneak a peak and start today!

Always wanted a Roth IRA, but your income exceeds the limits? New way available soon. Income limits for converting IRAs to Roth IRAs are being removed in 2010. You have to pay the taxes now, but then it grows tax free. Why convert  in 2010?

  • Portfolio is down, means taxes you owe will be down when the rules are lifted Jan. 1.
  • Those that convert in the first year can spread the taxes out over two years. This is a one-time only offer for the first year of this rule change.
  • If you believe taxes will go up, this is how you hedge your nest egg. Growth and withdrawals are tax-free in Roth IRAs (for both you and your heirs).
  • No Required Minimum Distribution (RMD) once you hit 70 1/2, makes this an excellent weatlh transfer tool.

I look at this as a rare gift from the government. You have to pay the taxes now, but you would pay taxes upon withdrawal. This provides you with more tax strategy options in retirement.

Great article in Wall Street Journal’s weekend edition about these changes. Will definitely be topic of future posts as we approach 2010. Start talking to your accountant now!

http://online.wsj.com/article/SB10001424052970204612504574193480955034164.html

Maybe it will and maybe it won’t. Let’s consider why organizations eliminated or reduced 401(k) matching contributions.

A poor economic climate reduced revenues, which led to a reduction in expenses. To your company the 401(k) match is an expense. As companies learn to run leaner it will be difficult to bring back an expense. Until employers are competing for employees again, I do not believe this will be an area of focus for most organizations.

I truly believe that companies will have all intended to bring back the 401(k) match. In reality, my prediction is many will bring it back when the economy has full recovered, but it will be smaller than before. While the match may seem small, how your company deals with employee retirement plans has a huge impact on your overall financial plan.

Here is how one Fortune 50 company has evolved it’s employee retirement options over the last decade. Imagine that 10 years ago your employer had a defined benefit pension plan when you joined. You knew then it was a great retirement benefit. Then they switched to a cash balance plan with a full 6% match on the 401(k). You are disappointed, but the full 6% match is one of the best out there, so you are still feeling pretty good. Tough times this year and the company has gone to a variable match up to 4%, dependent on company performance. Bad year, you get 0%. The challenge a number of people within 15 years of retirement face is that the pension they thought they would have is gone and if you knew that 10 years ago you might have saved differently.

You could be in a place where retirement savings need to be ramped up to hit your goals. Action Item: Sit and figure out how the changes in your employer sponsored retirement plans impact your financial plan and retirement goals. Make savings adjustments now so you get there faster.

New rule moving forward – Save more and expect less from your company.

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated

If only our financial lives had glaring guiding stars in our daily journey. My grocery store is advertising that they are helping us eat better with the guiding stars. Between one and three stars appear below items to tell shoppers the nutritional value of a product (www.hannaford.com). Why shouldn’t my financial life have guiding stars? For the record, Hostess cupcakes and Ben and Jerry’s receive no stars. I thought dairy was good for me!

So here are my guiding stars on scale of 1-3 for your financial evolution, with 3 stars being things that will be the best for your financial evolution. It’s just a taste of stars, I’m sure I’ll add more at some point.

Aim for the stars.

3 stars

  • Understand your sustainable lifestyle expense. What do you need to live each month?
  • Laid off – rollover your 401k into an IRA with more investment options.
  • Determine how much you will need to retire and how the market turmoil impacts your retirement date.
  • Hold a state of your finances meeting with your spouse and write down your goals for the remainder of 2009.

2 stars

  • Determine if you need long-term care insurance.
  • Max out your 401k or retirement plan.
  • Go to work for a college so your kids tuition is free.

1 star

  • Refinance your mortgage to a lower rate.
  • Make an extra mortgage payment.
  • Consolidate credit card debt and work towards paying it off (read Dave Ramsey’s Total Money Makeover for another star.)
  • Work together as a family to reduce two ongoing monthly expenses .
  • Make one better financial choice each week. (Keep morning coffee and bring lunch!)

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated.

Here is a great article comparing two investment strategies. Often this is viewed as two camps your either a buy and hold or a market timer. Just remember an investment strategy for you needs to be specific to your investing timeframe, risk tolerance and need.

My view is that you need to have assets with great money managers and track records. Being open to both strategies will provide you with more opportunity. Some market cycles favor the buy and hold strategy and others the market timers. Not being open to both could have you missing out when one of the strategies falls out of favor.

http://www.investopedia.com/articles/stocks/08/passive-active-investing.asp

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated. 

No one calls the IT guy to say, “My email worked great today!” Only when are you having troubles do you squawk. As an investor it is hard to acknowledge the main fact of the markets. They go up and they go down. It is human nature to focus on the down. This is very difficult for those that had retirement on the horizon and see it slipping away.

We also know that when markets go down in a recession that we do not want to miss the market upswing. Here is a great article to provide perspective on the market recovery in the six-months and five-years after a recession. If retirement is on your horizon you need to develop a new plan of action to recovery from the market. That is where I can help.

 https://www.americanfunds.com/resources/perspectives/recessions-perspective.htm

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated.