Thursday, October 29, 2015

To Give and Not Accumulate

I resolved to stop accumulating and begin the infinitely more serious
and difficult task of wise distribution.
Andrew Carnegie

As we move closer to year’s end, my thoughts as a financial advisor tend to drift toward taxes and how I can save clients money on their tax bills come next April. There are two significant ways to save on taxes. The first is to sell the securities that are negative in your portfolio and realize the loss. The second is to make charitable contributions for a tax deduction. There are several factors that dictate how much you can deduct in a given year, but I am not going to get into those specifics here.
What I would like to discuss is giving and charitable consciousness. Chances are if you are reading this blog, you are in a better place than many others. You have a warm place to sleep, food in your refrigerator, and clean clothes to wear. Hopefully, there are not gunshots being fired nearby, and you are free to practice your faith, politics, or sexual preference as you wish.
This presidential election will probably be the ugliest and meanest one in U.S. history. Buckle in, or tune out now! Our country is divided between those who want to protect the wealth and privilege of a few and those who believe in a fair and decent country in which everyone has the chance to be happy and successful. Let’s all take the high road here and agree that if we all succeed, we are stronger as a nation.
Money can be great. It’s fun to buy new clothes, eat a great meal, or take a fantastic vacation. Money can buy freedom, but it doesn’t buy happiness.
So, as we head into the holiday season and begin assembling lists of gifts for Christmas or Chanukah, let’s check that list twice. While giving is great and watching a smile erupt on a child’s face is priceless, why not consider checking your privilege this year and pledge to stop accumulating more stuff.

Personally, doing this won’t be easy, but I am going to try. Whatever the net savings, what we would have bought versus what we did buy, I will give to charity. Are you with me? 

Monday, October 26, 2015

401(k) for the Youth

This week I had the pleasure of doing a 401(k) educational meeting for a client. Once a year I like to meet with the company’s employees, go through the plan, discuss the funds, and answer questions about savings and retirement.

If you read my blog with any regularity, you know the idea or the concept of retirement is a pet peeve of mine.  The media markets retirement as if it were Fantasy Island. Retirement is just another word for not working and how am I going to fund my life at that point. But it’s not a game.

The company that I visited has a lot of young and enthusiastic employees. Most of them are enrolled in the 401(k) plan. Unfortunately, not everyone is deferring a portion of income into the plan; most are not deferring enough.

Here is my list of to-dos for your 401(k) plan. Parents, feel free to share it with your working children.

·         Participate, participate, and participate.

·         Try to defer at least 10% of your salary, with a goal of reaching 15%.

·         Defer enough to max out on a company match if it is available. It’s FREE money!

·         Sign up for auto-escalate so you are automatically increasing the amount you are contributing to your savings. If you get a raise, give yourself a raise in how much more you will save.

·         If your plan doesn’t offer target date funds, demand that it does.

·         If your plan doesn’t offer low-cost index funds, demand that it does.

·         Diversify between stocks and bonds. If you are young, you can defer more to stocks than bonds. If you are risk adverse, talk to the advisor for your plan about an appropriate asset allocation.

·         The world is a big place, and half of the world’s companies are outside of the United States. Have some international exposure to your portfolio.

·         If you are concerned about how your money is invested and what kind of companies you are invested in, ask your employer about socially responsible funds.

·         Your 401(k) is portable: if you leave your company, you can roll your account into your new employer’s 401(k) or into an IRA account. You can also leave it in your employers 401(k). I would discuss with an advisor the benefit or drawback of doing so.

·         If you are older than 50, you can put up to $24,000 annually into your 401(k) account.

·         It’s important to check your account balance at least twice a year. Make sure you have your log-in credentials.

·         Don’t look at your account every day; focus on the long term, not the day to day.

·         Pick a day to rebalance your account once a year; your birthday is a good reminder.