Well worth the read. Explains our thoughts here at JRSCM about bonds and the potential risks therein better than I ever could. -jeff
Bill Gross, Portfolio Manager of the Janus Global Unconstrained Bond Fund, shares his outlook on the global financial markets.
Entire Article: Bill Gross Investment Outlook August 2015
Bill Gross Investment Outlook August 2015 Read Post »
Roth IRAs are very popular because distributions from them are tax-free, but many wonder if they will remain so.
Entire Article: Why Roth IRAs will stay tax-free for years to come – MarketWatch
Why Roth IRAs will stay tax-free for years to come – MarketWatch Read Post »
It’s reasonable to ask whether you should continue to be bullish on the U.S. economy and equities when the media continue to emphasize a plethora of troubling issues including a flat lining manufacturing sector, an energy sector that is still contracting, and a new host of government taxes and regulations […]
Entire Article: Reasons To Believe That Stocks And The Economy Have Better Days Ahead
Reasons To Believe That Stocks And The Economy Have Better Days Ahead Read Post »
Finally, it’s time. The long-anticipated day has arrived. You loosen your tie (or kick off your heels), sink into your leatherette desk chair one last time, and spin around for a final 360-degree view of the cubicle farm horizon before waltzing down to the parking garage and saying “sayonara” to your 9-to-5 working days (after turning in your security badge and boxing up your terrarium of mixed succulents, of course).
Ahhhh, retirement. Aaaaargh! Retirement! It may be time, and you may be financially ready. But there’s a key part of the retirement readiness equation that isn’t captured by asset allocation models and withdrawal-rate simulations: Are you emotionally prepared for retirement? “You mean, no more being woken by a shrieking alarm clock?
Entire Article: Are You Emotionally Ready for Retirement?
Are You Emotionally Ready for Retirement? Read Post »
Retirement is approaching. Do you have a comprehensive overview of your retirement funds and how you will manage them when you actually do retire? A surprising number of people do not know much about their retirement funds other than that they exist. Some don’t even realize how many sources of retirement funds they have.This is one of the main reasons why consolidating your retirement funds makes sense as you get closer to retirement age. They will be easier to manage and may save you money in the end thr
Entire Article: How and why to consolidate your retirement accounts — Next — Bangor Daily News — BDN Maine
I used to make market comments quite frequently, but I don’t so much these days. It’s not that I no longer have an interest; I do still find the markets quite fascinating. It’s more that I’ve come to the conclusion that it makes no difference what I think: The markets will do what they do despite my opinion.
But when we’re faced with the rare situation when it looks like small minds are beginning to rule the day, I can’t resist stepping in to try to come to the rescue of those of us who wish to think bigger… globally… and long-term.
So first, let’s talk about the market facts: Yep, we’ve had a couple of lousy weeks in the market. So lousy in fact that the stock market (S&P 500 Index) is now basically unchanged from Thanksgiving of 2014. It’s so boring that the 3 month, 6 month and year-to-date returns are almost not measurable, leaving us with a less than a 1% total return overall since last fall.
What does this mean? Nothing. It’s a flat spot, which is a typical thing in the market from time to time. Sometimes we can get into these ruts for an extended period of time. Most likely, we’re just working off past excesses: The stock market gets a little ahead of itself from time to time and now it is taking a necessary breather. (Yawn here.)
The silver lining here is that a wicked sell off is also a great way to work off excess market valuations. Believe me, flat spots (consolidations) are a much easier way to digest past gains, unless you’re afraid of being bored to death.
The bottom line is that even with the past few weeks selloff, the current long-term uptrend is still intact. We’re still invested in equities in a meaningful way. If it changes in the future, we’ll step away from the stock market before bad turns to worse… and probably write about that too.
Second, let’s talk about Greece: Oh my. What a great story for the news channels. Although the story makes for great press, everyone has known for about 5 years that Greece is in trouble. If the market’s don’t like surprises and this is no surprise, then it’s no wonder that we haven’t seen much, if any market movement due to the newest leg of this crisis.
As I write this, it’s projected that Greek voters have voted “no” on furthering the bailout terms. It’s hard to say how the market will react, if at all. Greece is about 2% of the Eurozone and their GDP is about the same as Connecticut’s.
Although there won’t be a significant actual financial fallout, there could be some emotional, ‘what-if’ reaction. It could inject some volatility into financial markets in the coming weeks. If it’s enough to change the long-term trend of the US stock markets, we’ll adjust. Otherwise, we’ll take the media’s squawking with our usual grain of salt.
If you want to take action on the Greek crisis, I suggest that you take a European vacation. Everything that is Euro-based is cheaper. Stay in a nicer hotel in Munich or dine at a nicer restaurant in Paris. (Maybe stay away from Greece itself right now unless you have plenty of cash on hand, since the ATMs are only giving up about 60 Euros a day.)
And lastly, here are a couple of paragraphs from a recent interview with Aby Rosen (New York real estate tycoon):
More than 5 Billion was spent by rich Chinese investors on New York property between early 2013 and December 2014 – up from less than 300 million in 2012 – according to the Wall Street Journal. There are so many billionaires created in China on a monthly basis who are smart enough to know that taking money out of China is already profit in itself.
There are hundreds and hundreds, thousands and thousands of foreign investors wanting to spend their money in the U.S. There’s been a flight from South America, from Russians who want to take their money out of the country -the rouble’s collapse didn’t help lately but there is still enough money. There are Indians, Malaysians and Old Europeans, including Jews leaving France. Qatar is coming, Abu Dhabi is coming, Egyptians, people who made money in Africa. Lots of wealthy independent people are looking at America for second or third homes – and the US is far more welcoming now to foreigners than it ever has been.
Commerce is in. If real estate is booming, art is booming. If you have a great apartment, you need great art. The worlds of architecture, art and fashion are all melting together into one happy family. There’s so much money out there and people want to have a good time. What else are they going to do with their cash?
And of course, it’s not just real estate and art. The kinds of demographic moves Mr. Rosen is seeing will affect everything and everyone. Even you.
Jeff
The Market, Greece and Big Picture Thinking Read Post »
The word “retirement” and number “65” are as linked in the American psyche as “bacon and eggs.” Then again, that all depends on how fast you want your eggs, right?
Retiring early — or leaving the work force for the golf course, if you like — might sound like an unattainable goal. That’s especially true if you look at the challenge from a pure cash paradigm. But there are many ways to make it, so long as you take numerous approaches into account.
15 Ways to Retire Early | GOBankingRates Read Post »
Social Security has a way of making your life decisions difficult. When divorce and remarriage enter the picture, things get very complicated.
The earliest age you can start claiming Social Security benefits is 62. You can also delay taking benefits to any age. If you wait until your full retirement age, which is 66 for the current crop of baby boomers, you receive a larger benefit. If you can get by without the monthly benefits for a few years longer, delaying further to 70 results in a maximized benefit for you.
Source: How Remarriage Can Mess Up Your Social Security – Forbes
How Remarriage Can Mess Up Your Social Security – Forbes Read Post »
Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.
Today’s Social Security question is about the relationship between different Social Security benefits as well as Medicare.
Question: I currently receive benefits under the civil service program with the federal government and don’t have enough paid into Social Security. My husband retired on disability and started on regular Social Security when he turned 66. I will be 65 in a few months, and the Social Security Administration told me I could get Medicare under my husband. Will I have to sign up for Social Security to get
Source: Social Security Q&A: Will My Spousal Benefit Reduce My Husband’s Retirement Benefit? – Forbes
These four mistakes could cause big problems when you get closer to retirement age. – Matthew Frankel, Selena Maranjian, Dan Caplinger, and Jason Hall – Investment planning
Source: 4 Ways You’re Sabotaging Your Retirement in Your 30s
4 Ways You’re Sabotaging Your Retirement in Your 30s Read Post »
Interesting read about how many of us have to learn to “shed our skins” to really, truly enjoy retirement. -jrs
SARA LAWRENCE-LIGHTFOOT: Many of us in our third chapters, who leave the well-worn, highly ritualized paths of our careers—where we have enjoyed status and standing, authority and expertise—to pursue new adventures, often find that part of making a successful transition requires that we explore new ways of learning.We discover, in fact, that the processes and products of our learning that assured our academic success and that advanced our careers can inhibit our development and adventurousness as older adults.In my interviews with dozens of women and men between the ages of 50 and 75 who were embarking on new vocations and avocations after retiring, I was struck by the contrasts and contradictions that they drew bet
Source: The Old Strategies Retirees Need to Unlearn – The Experts – WSJ
The Old Strategies Retirees Need to Unlearn – The Experts – WSJ Read Post »
Should we have an opinion about the stock market, or even about the direction of the economy? Is it important to set a firm course of action based upon our expectations of what we think will occur in the coming months?
Most readers when asked, would think these questions a bit silly. Everyone “knows” that you must have an opinion to be a successful investor.
Or do you? Given the nature of how a publicly traded market truly functions, it’s quite possible that having a preconceived notion about it’s future direction could be more hindrance than help.
I consistently see evidence that the investors who 
have a firm opinion about what they believe will occur in the future are taking a risk with their flexibility. They’re messing with an essential investing skill that is the ability to change and adapt to a very fluid and dynamic situation.
Once a money manager or other professional makes a public declaration about an expected market direction, it becomes increasingly difficult for them to abandon their position should the market begin to prove them wrong. Ultimately, this can lead to their own pride or hubris costing them and those they advise significant sums of money.
Even the “experts” are wrong most of the time. In a classic case of “couldn’t be MORE wrong”, late in the year in 2007, in an annual Barron’s survey, 12 prominent strategists were questioned about what they thought would be the course of the economy and the market for 2008.
First, not a single one of them predicted a recession even though we were already in a recession at the time of the survey (December 2007). Second, their ending estimates for the S&P 500 were between 1525 and 1750. The S&P 500 closed 2008 at 903.25. That’s an embarrassingly huge miss!
Of course, it would be a bigger shame if they managed or advised others based upon an unflinching adherence to their predictions. That’s a portfolio-wrecking miscalculation and strategy. And this isn’t just one “strategist”… it’s all of them.
It’s foolish, dangerous and most likely quite expensive to try to predict the stock market in any economic scenario. Of course, this doesn’t stop the pundits or the headline-seekers from attempting it. They must be doing it for the pure publicity… good or bad, it doesn’t seem to matter.
But for me, this is why it doesn’t matter what I think about the future. The good news is that when I’m stacked up against some of the greatest economists in the world, I figure I’ve got about the same odds as them as being right. The bad news is that those odds are somewhere between slim and none.
What to do?
I think that it is more important to imagine a number of potential scenarios and their corresponding courses of action. From this brainstorming session, you can develop a written plan for the future of your investments in a sequence of decision statements.
I’ve tried to do this with our investment portfolios. We have “rules” that we follow that indicate to us when to be in a market and when to be out of a market. We don’t guarantee results or performance, but we place an emphasis on putting in place the decision trees to try to avoid the large long-term losses that come along a few times during an investor’s life cycle that can wreck or alter a financial plan entirely.
Once these rules are in place, then truly does not matter what I, you or anyone else thinks about the market. If it’s good, we’re in. If not, we’re not. Very low stress.
Why It Doesn’t Matter What I Think About The Market Read Post »
For some, this question is as tantalizing as it can be vexing. After many years of saving and planning for a secure, fulfilling, and comfortable retirement, it’s natural to wonder, “How much is enough?” From my experience helping people answer this question over 25 years as an adviser, researcher, and writer, the answer is quite often, “Less than you may think.” Obviously, it depends on many factors. But a key takeaway is that what you believe and how you think about the financial resources already available to you is likely what matters most of all.
Source: Why Retiring Early May Be More Affordable Than You Think | Money.com
Why Retiring Early May Be More Affordable Than You Think | Money.com Read Post »
When I work with people about their finances, it usually ends up not being about JUST finances. There’s so much emotion wrapped up in how we view money that we end up working on an assortment of financial, emotional and behavioral issues.
Together with our clients, we are on a quest to find a combination of working / saving / spending attitudes that allow folks to not only work toward being able to retire before they need to, but also (and this is a biggie) to be able to live a happy, healthy and fulfilling life along the way.
We encourage everyone to consider building a strategy that will allow them to retire early. Although many clients are perfectly happy in their professions, (some even wishing to work well into their 70s) we still encourage building an early retirement strategy for two main reasons:
One, having built a plan to reduce or eliminate your financial dependence on your paycheck can actually increase enjoyment. I like to call it the “Johnny Paycheck Effect”. For many, being able to tell the world (or your boss), “You Can Take This Job and Shove It” can actually make it easier to enjoy your career. It can cleanse your emotional palate, lessen the chance for burnout and allow you to view your daily routine as more pure. Helping others, volunteering, achieving objectives, building something of lasting value etc. are all pursuits typically more fulfilling than the purely selfish pursuit of a paycheck. Thank you Johnny Paycheck.
The second major reason is the unpredictability of life itself. It’s possible that despite your best-laid plans, life just won’t allow you to execute them as you’d desired. A health crisis or injury to either you or a spouse can wreak havoc on even the most thoroughly planned strategy. By having an “early retirement” plan in place, you can use it as an escape hatch to a life that you could not have imagined years earlier. Maybe you won’t ever need it, but having the plan in place can make your life between now and then significantly happier and less stressful.
Everyone will need to design an early retirement plan that suits their particular situation. Both now and in an anticipated future. It’s not always about building a specific nest egg amount to insure a happy early retirement. Many early retirement plans we’ve constructed with clients involve some low-impact consulting income for a couple of years after full retirement, or a part time job in a completely unrelated field to help with the transition, or even a complete lifestyle transition to make it possible. Most importantly, it helps to think out of the box by reminding yourself that it’s not always about the money.
According to newly released data from Allianz Life’s 2014 LoveFamilyMoney study, there are six major traits that people who’ve fully developed and implemented early retirement plans have in common… and some of these traits may surprise you. Happily for most clients, coming from a life of privilege is not among them.
Have a happy marriage. Early retirees tended to describe themselves as in sync with their spouse. Some 76 percent of these people were married, compared to 68 percent of the people who never planned to retire, and they were also more likely to be in their first marriage. And 90 percent of early retirees found it at least somewhat easy to talk about money with a spouse or significant other, well above the 77 percent of people planning to never retire.
Appreciate what you have. People planning to retire early were significantly more likely to describe themselves as wealthy or financially comfortable, but that can depend on your perspective too. I’ve worked with a number of clients who struggle with drawing the distinction between being appreciative for what they have and complacency. They can be under the assumption that being appreciative of their present situation is akin to giving up or ceasing to strive for further success. Nothing could be further from the truth.
Follow your parents’ example. The would-be early retirers in the Allianz Life survey were more likely to compare their financial situation to their parents’, with 21 percent of them doing so, compared to 14 percent of those not planning to retire. They also tended to emulate their parents’ money behaviors. Of course, for this one to have a positive effect, you need parents who were or are fiscally responsible.
Teach your kids about money. Only 14 percent of people planning to retire early taught their children about money and finances, but that was well above the 6 percent of people not planning to retire who did so. Boomerang kids and supporting adult children can decimate your retirement nest egg. Better to prepare the kiddos from an early age to be self sufficient.
Save the drama for your mama. Having a fairly calm financial life also seems to encourage people to plan early retirement. Some 46 percent of those people said they had not experienced financial hardship as an adult, versus just 31 percent of those planning to stay in the workforce.
Plan for the worst, hope for the best. On the downside, early retirees were more likely than other workers to worry about dying young. Only 47 percent of them worried about running out of money in retirement, but 53 percent worried that they would not live long after they retired. But don’t sweat it, the good news is that leaving the workforce won’t hasten the process.
With some out of the box thinking to help build an agile financial plan, while adopting as many of the above traits as possible, you should be well on your way to an early retirement.
How to Retire Early Read Post »
I got my start in financial services as a broker in the age of Gordon Gecko and the “Greed is Good” mentality. Although I did have a monogrammed shirt and suspenders back in the day, I did not find a lot of the advice that was passed on to us as brokers especially helpful for clients. It certainly wasn’t selfless, that’s for sure.
A lot has changed since those days, but one piece of advice that I got at the very beginning of my career has stuck with me to this day. The advice was that my life and my level of success in life would reflect my clients’.
I’ve noticed that over the years, this has become pretty true, although ultimately it’s a bit of a “Chicken or the Egg” question.
But, it does make me realize that many of the same financial decisions my wife and I are facing are probably the same financial issues that many of you are facing. One of the nagging questions that we’re faced with all of the time is the need to balance a bit of on-hand emergency cash with the need to continue to put money away into various longer term investment strategies and tax free or tax deferred options (IRAs etc.), or preferably both.
The idea that I want to stash cash into a tax deferred growth environment is appealing, but if I put too much in and need to pull cash for an emergency, I’ve shot myself in the foot. If I leave it in savings or our checking account for very long, I shoot myself in the other foot: Keeping balances in cash that you don’t ever use is very expensive over the long term, both in the erosion of it’s purchasing power and the opportunity cost versus investing it.
I’ve come across a couple of ideas that seem to offer the best of both worlds: The ability to stash possible excess cash in tax advantaged accounts AND the ability to access it should an emergency arise.
Roth IRAs
It’s easy to turn your nose up at a Roth IRA because the contributions are not tax deductible. Many CPAs don’t think to routinely recommend them to their clients because they are typically having conversations during tax time and clients are seeking ways to lower their tax bills now, not later.
The basics of Roth IRAs are that you can put money into them and the money will grow TAX FREE if you wait to access it until you’re 59 1/2. Roths differ from regular IRAs because in a regular IRA you have to pay taxes on the money you pull from it (after 59 1/2) as if it were ordinary income and you must start withdrawals from your IRA at 70 1/2 and you NEVER have to withdraw money from your Roth IRA if you don’t want to.
But, here’s the “cash-stash” secret… Most people don’t know that you can withdraw up to the amount you contributed to your Roth without a penalty and without paying income taxes on it. This brings the anxiety level about having adequate emergency reserves way down if you use a Roth IRA as a cash stash. Why not grow the money long term, tax free, think positively and anticipate that you won’t need it?
Here’s another “cash-stash” secret about Roth IRAs: These things are GREAT for retired folks who are still generating income or whose investments or mandatory IRA withdrawals provide in excess of what they need for living expenses: You can continue to contribute to a Roth IRA forever and you never have to pull it out. Pull the money you’re required to pull out of your IRA and stash it in your Roth. Bam.
There are income limits and annual contribution limits. I’ve summarized and simplified the details, but you can find the details at http://www.irs.gov/Retirement-Plans/Roth-IRAs or you can call me and we’ll make an appointment to go through the details together and investigate how it relates to your situation.
Health Savings Accounts (HSAs)
Chances are that you’re not hearing about HSAs from your other advisors or your accountant. I think that’s because there’s no real vested interest for anyone to help you set up one of these accounts. In most cases, these accounts are set up at your local bank. Some have some investment options available, some do not.
But, if you make the assumption that medical bills (either now, or most likely later) will eat up at least some of your savings, you might as well save it in the right “bucket” and for many this can be an HSA. Contributions (up to $6,550 for couples this year and $3,300 for singles) are pre-tax. Money grows tax-sheltered, and withdrawals for medical expenses are tax-free.
Your health plan has to be a high-deductible plan and in most situations, this is at least $2,500 for families and $1,250 for singles, to be eligible. The average deductible on a typical employer-sponsored plan is now at $1,850 for families, so more and more of you are qualifying.
Here’s the “cash-stash” secret: You don’t have to use your HSA for medical bills if you don’t want to or don’t need to. You can use it as an additional retirement funding tool because once you are eligible for Medicare at 65, the purpose behind your HSA goes away and the government disallows further contributions. Although you can still use it for the rest of your life to cover medical expenses, you can also use it to fund your retirement lifestyle. You have to pay taxes on distributions just like a regular IRA, but there is no penalty and no required minimum distribution at 70 1/2. Neat.
Here’s another secret: You can fund your HSA from your traditional or Roth IRA if you want to. Let’s say you have some medical expenses and you don’t have an HSA yet and you don’t have the cash on hand because you stashed a bunch in your Roth. What to do?
You are allowed a tax-free funding withdrawal from your IRA to an HSA. You can only do this once in your life and you can only do it up to the amount that you could contribute to your HSA annually. But, this can significantly reduce “cash-stash” anxiety by knowing you have another option if you get caught short-handed on emergency cash.
There are all kinds of rules that need further clarification if you’re to consider this… but on balance it’s definitely worth your time. I’ve summarized and simplified the details and you can find the link to the IRS details about all of the rules at http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204020 or you can call me and we’ll make an appointment to go through the details together and investigate how it relates to your situation.
I hope you’ve found these tips helpful. Here’s the link to get a peek at my availability and schedule a quick phone call: https://www.timetrade.com/book/VNTL6
Have a great holiday weekend,
Jeff
Secrets of Stashing Cash Read Post »
