Financial Guidance

10 Money Tips for Newly Married Couples

In a recent study, 35% of married couples described money issues as their primary source of stress. While there are many potential causes of such financial stress, in some cases the root may begin with habits formed early in the marriage.

Fortunately, couples may be able to head off many of the problems money can cause in a marriage.

Top 10 Tips For Newly Married Couples

Communication. Couples should consider talking about their financial goals, memories, and habits because each person may come into the marriage with fundamental differences in experiences and outlook that may drive their behaviors.

Set Goals. Setting goals establishes a common objective that both become committed to pursuing.

Create a Budget. A budget is an exercise for developing a spending and savings plan that is designed to reflect mutually agreed upon priorities.

Set the Foundation for Your Financial House. Identify assets and debts. Look to begin reducing debts while building your emergency fund.

Work Together. By sharing the financial decision-making, both spouses are vested in all choices, reducing the friction that can come from a single decision-maker.

Set a Minimum Threshold for Big Expenses. While possessing a level of individual spending latitude is reasonable, large expenditures should only be made with both spouses’ consent. Agree to what purchase amount should require a mutual decision.

Set Up Regular Meetings. Set aside a predetermined time every two weeks or once a month to discuss finances. Talk about your budgeting, upcoming expenses, and any changes in circumstances.

Update and Revise. As a newly married couple, you may need to update the beneficiaries on your accounts, reevaluate your insurance coverage, and revise (or create) your will.

Love, Trust, and Honesty. Approach contentious subjects with care and understanding, be honest about money decisions you know your spouse might be upset with, and trust your spouse to be responsible about handling finances.

Consider Speaking with a Financial Advisor. A financial advisor may offer insights to help you work through the critical financial decisions that all married couples face.


Click Here For a free copy of our Newlywed Checklist

Five Tips To Manage Your Credit Score

Your credit score, often called your FICO score, represents to a lender how likely you are to pay your bills on time. It may determine whether you can get a loan, a job, an apartment, or insurance. A low score may prevent you from obtaining the lowest borrowing rates or the best loan terms.

Your credit score is based on information provided by your creditors to the three credit reporting agencies: Equifax, Experian, and TransUnion. Because each agency may have different information about you, your score may differ slightly among the three.

What affects your credit score? Although judgments, liens, and bankruptcies can have a damaging effect on your score, it is the little things that count. Fully 65 percent of your FICO score is based on two key factors: your payment history and the amount of debt you carry versus the amount available to you (i.e., your credit card limits). Also important is your length of credit history, how much new credit you have applied for, and your mix among credit types. For more detailed information, visit www.myfico.com/crediteducation.

Tip #1: Get your score.

Although you can get a free credit report once every 12 months through www.annualcreditreport.com, the report does not include your score. You only get a free score if you have been denied credit or insurance. Many lenders will provide your score upon request, after your application has been approved. If you want to know your score before applying, you can pay a small fee to one of the credit reporting agencies or go to www.myfico.com. Offers for free scores are usually tied to monthly credit monitoring services.

Tip #2: Correct your information.

It is a good idea to check your credit reports annually to ensure that they are accurate. Correct mistakes immediately, with both the institution and the credit reporting agencies; they have a responsibility to correct errors under the Fair Credit Reporting Act. Be sure to send copies of supporting documentation and keep a record of your request.

Tip #3: Understand your rating.

FICO scores range from 300 to 850, with 850 the best possible score. In 2015, the median credit score in the U.S. was 723. As a general rule, a FICO score above 700 is very good; scores below 600 indicate a high credit risk.

Tip #4: Know how to improve your score.

You can take the following actions to help improve your score:

 

· Pay bills on time.

· Pay down credit card balances. Reduce the credit card balances you carry to below 35 percent of your available credit limit; 10 percent is ideal.

· Cut up unnecessary cards but don’t close the accounts. Because your utilization rate counts as 30 percent of your FICO score, don’t reduce your available credit by closing old accounts. Instead, train yourself not to carry unnecessary cards or cut them up.

· Remember that the trend is your friend. As your credit “blips” recede into the past, your new habits have more weight.

 

Tip #5: Avoid debt negotiation companies.

Don’t be taken in by ads for companies that offer to get you out of debt by negotiating with creditors. You may get a reduction in your credit balance, but not without paying a high price. Moreover, if the company encourages you to walk away from your debt, you will also likely damage your credit score and wind up paying additional taxes.

You don’t need a third party to work out a modified repayment plan. Call the number on the back of your credit card, explain your situation, and ask to restructure your payments.

Financial Planning: Helping You See The Big Picture

As a financial planner, it always shocks me to hear some of the reasons people have for not having a financial plan in place.

“I don’t have enough money yet”

“I’m too young”

“It’s too expensive”

The question I usually respond with is: “Do you picture yourself owning a new home, launching a business, starting a family or retiring comfortably?”  These are just a few of the financial goals that may be important to you, and each comes with a price tag.

This is where financial planning comes in. Financial planning helps you target your goals by evaluating your whole financial picture and outlining strategies that are tailored to your individual needs and available resources.

Why is financial planning important?

A financial plan serves as a framework for organizing all of the pieces of your financial life. With a financial plan in place, you'll be able to focus on your goals and understand what it will take to reach them.

One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related--for example, how saving for your children's college education might impact your ability to save for retirement. Then you can use that information to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you'll know that your financial life is headed in the right direction.

The financial planning process

Creating and implementing a comprehensive financial plan generally involves working with financial professionals to:

 
  • Develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities, and evaluating your insurance coverage, your investment portfolio, your tax exposure, and your estate plan

  • Establish and prioritize financial goals and time frames for achieving these goals

  • Implement strategies that address your current financial weaknesses and build on your financial strengths

  • Choose specific products and services that are tailored to help meet your financial objectives

  • Monitor your plan, making adjustments as your goals, time frames, or circumstances change

 

Why can't I do it myself?

If you have enough time and knowledge - you absolutely can. Keep in mind that developing a comprehensive financial plan typically require expertise in several areas. It is also difficult to give yourself objective advice. A financial professional can give you, fact-based information and help you weigh your alternatives, saving you time and ensuring that all angles of your financial picture are covered.

Staying on track

The financial planning process doesn't end once your initial plan has been created. Your plan should be reviewed at least once a year to make sure that it's up-to-date. It's also possible that you'll need to modify your plan due to changes in your personal circumstances or the economy.

Common questions about financial planning

 

What if I'm too busy?

Don't wait until you're in the midst of a financial crisis or 10 years out from retirement before beginning the planning process. The sooner you start, the more options you may have.

Is it expensive?

This a typical assumption based on some stereotypes that are quickly becoming outdated. If you envision an older man in a fancy office who profits off the financial products you buy — well, it’s probably time to take another look. We’ve redesigned the cost to be more affordable for the younger generations. 

Is the financial planning process complicated?

Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, the goal is to make the process as easy as possible.

What if my spouse and I disagree?

This is more common than you would think, but I’ve been trained to listen to your concerns, identify any underlying issues, and help you find common ground.

 

Conclusion

Your financial health — just like the physical or mental kind — takes time and effort. We all have financial goals and, in many cases, there are several that require our attention at any given time. Having a well-designed financial plan in place will help you navigate those important decisions and keep you on track. By starting earlier in life, you have the advantage of time. Don’t let your “fears” stand in the way of making real progress.

As a financial planner, my goal is to make every effort to help you make smart financial decisions and hopefully avoid making crucial mistakes. I’m invested in your success. If you’re on the fence, please reach out and ask me questions.

Are You Maximizing Your Employee Benefits?

For many of you, your salary and bonus are likely just a part of the total compensation you receive from your employer. Why not give yourself a raise by learning about and taking advantage of all your company benefits? This article will help you ensure that you’re making the most of the benefits your employer offers.

Retirement Plans

Your company’s 401(k) plan can play an important role in your future financial security. If your employer matches contributions, you should be contributing at least enough to get the maximum match. If you plan to max out your contributions, make sure you don’t do so too early in the year and potentially miss out on the matching.

For those of you that are considered highly compensated, your employer may also provide a nonqualified deferred compensation plan with matching to cover wages above the qualified limit. It is important to find out how the plans interact and how you can maximize your benefit.

Stock Options and RSUs

Some companies still grant employee stock options as a form of compensation. These can add significant value to your long-term financial success, but they can be complicated and have additional risk that needs to be considered.

 
  • Risk of termination before vesting

  • Risk of market volatility in the stock price

  • Risk of asset concentration

 

There are also several tax considerations that need to be evaluated when working with stock options and RSUs. I recommend working with a financial advisor to determine what works best for you.

Health Insurance

Many companies subsidize health insurance coverage for their employees, and some offer a choice of different plans.

 
  • HMOs generally have lower premiums and lower costs to access health care but limit which providers you can see.

  • PPOs allow you to choose any physician, but they charge higher fees if you decide to see an out-of-network provider.

 

Before selecting a plan, I recommend confirming that your doctor is a preferred provider.

If one of your health insurance choices is a high-deductible health plan, you may have the option to set aside money in a health savings account (HSA) to pay for qualified health care expenses on a pretax basis. HSA contributions remain in your account until you use them, distributions for qualified medical expenses are tax-free, and the account is portable. Some companies even contribute to employees’ HSA accounts.

Flexible Spending Account

Your company may offer flexible spending accounts (FSAs) for a variety of expenses, including health care, dependent care, transportation, and parking. If you have any of these qualified expenses, you may benefit by having pretax money taken out of your paycheck to fund them. For example, if it costs you $100 per month to park at work, you can set aside that amount in an FSA to cover the expense. By contrast, you’d have to earn $157.36 to pay for this expense after taxes, assuming a total tax rate of 36.45 percent.

Life and Disability Insurance

Some employers provide life insurance coverage equal to a multiple of your salary. In many cases you may be able to purchase group supplemental life insurance coverage through payroll deductions. While this can be convenient, the coverage amounts and features may be limited, so I recommend shopping the market to ensure that you’re getting coverage at the best price.

Your employer may also pay for long-term disability insurance. LTD payments from an employer-paid policy are taxable to you; if you pay the premiums, you will receive LTD payments tax-free. If your company gives you the option of paying for your own LTD coverage, you should weigh the cost of covering the premiums yourself versus the benefit of receiving tax-free payments.

Additional Benefits

Some companies offer employee discounts on everything from wireless plans and vision care to movie tickets, hotels, and car rentals. Your employer may also offer reimbursement for certain education expenses.

I see far too often employees missing out on key employer benefits. Working with an adviser and doing a little research could be well worth your while! Contact Us today so we can help you maximize your benefits.

Take Charge of Your Student Debt Repayment Plan

Student loans are a lot like a ball and chain, slowing down what could be a perfectly good financial plan. Outstanding student loan debt in the United States has tripled over the last decade, surpassing both auto and credit card debt to take second place behind housing debt as the most common type of household debt. Today, more than 44 million Americans collectively owe more than $1.4 trillion in student debt. Here are some strategies to pay it off.

Look to your employer for help

The first place to look for help is your employer. While only about 4% of employers offer student debt assistance as an employee benefit, it's predicted that more employers will offer this benefit in the future to attract and retain talent.

Many employers are targeting a student debt assistance benefit of $100 per month.3 That doesn't sound like much, but it adds up. For example, an employee with $31,000 in student loans who is paying them off over 10 years at a 6% interest rate would save about $3,000 in interest and get out of debt two and a half years faster.

Understand all your repayment options

Unfortunately, your student loans aren't going away. But you might be able to choose a repayment option that works best for you. The repayment options available to you will depend on whether you have federal or private student loans. Generally, the federal government offers a broader array of repayment options than private lenders. The following payment options are for federal student loans. (If you have private loans, check with your lender to see which options are available.)

 

Standard plan: You pay a certain amount each month over a 10-year term. If your interest rate is fixed, you'll pay a fixed amount each month; if your interest rate is variable, your monthly payment will change from year to year (but it will be the same each month for the 12 months that a certain interest rate is in effect).

Extended plan: You extend the time you have to pay the loan, typically anywhere from 15 to 30 years. Your monthly payment is lower than it would be under a standard plan, but you'll pay more interest over the life of the loan because the repayment period is longer.

You have $31,000 in student loans with a 6% fixed interest rate. Under a standard plan, your monthly payment would be $344, and your total payment over the term of the loan would be $41,300, of which $10,300 (25%) is interest. Under an extended plan, if the term were increased to 20 years, your monthly payment would be $222, but your total payment over the term of the loan would be $53,302, of which $22,302 (42%) is interest.

Graduated plan: Payments start out low in the early years of the loan, then increase in the later years of the loan. With some graduated repayment plans, the initial lower payment includes both principal and interest, while under other plans the initial lower payment includes interest only.

Income-driven repayment plan: Your monthly payment is based on your income and family size. The federal government offers four income-driven repayment plans for federal student loans only:

 
 
  • Pay As You Earn (PAYE)

  • Revised Pay As You Earn (REPAYE)

  • Income-Based Repayment (IBR)

  • Income-Contingent Repayment (ICR)

 
 

You aren't automatically eligible for these plans; you need to fill out an application (and reapply each year). Depending on the plan, your monthly payment is set between 10% and 20% of your discretionary income, and any remaining loan balance is forgiven at the end of the repayment period (generally 20 or 25 years depending on the plan, but 10 years for borrowers in the Public Service Loan Forgiveness Program). For more information on the nuances of these plans or to apply for an income-driven plan, visit the federal student aid website at studentaid.ed.gov.

 

Can you refinance?

Yes, but only with a new private loan. (There is a federal consolidation loan, but that is different.) The main reason for trying to refinance your federal and/or private student loans into a new private loan is to obtain a lower interest rate. You'll need to shop around to see what's available.

If you refinance, your old loans will go away and you will be bound by the terms and conditions of your new private loan. If you had federal student loans, this means you will lose any income-driven repayment options.

Watch out for repayment scams

Beware of scammers contacting you to say that a special federal loan assistance program can permanently reduce your monthly payments and is available for an initial fee or ongoing monthly payments. There is no fee to apply for any federal repayment plan.

Still Need Help?

Student loans can be complicated and can have a significant impact on your long-term financial success. It’s important to develop the right plan for your unique situation. Don’t let your student loan debt derail your financial progress Contact Us for a free consultation.

How Will Tariffs Impact Your Investments?

I know this may come as a shock, but fundamentally, the topic of tariffs is actually good. Government leaders implement tariffs on foreign products and services to restrict imports by tacking on additional taxes or fees. The goal is to make foreign products less attractive to domestic consumers.

Tariff supporters argue that they helps correct trade inequities and boost domestic production and growth. They believe that well-targeted tariffs foster fair trade and create a more open and robust international marketplace, despite the tension in the short run.

Those against the idea argue that establishing tariffs is a highly arbitrary fix to flaws in a very complex international market that will lead to unnecessary and unproductive trade wars that historically have ended tragically.

What's Going On Now?

 
  • President Trump has threatened to implement tariffs on nations to correct trade imbalances, unfair exporting practices and marketplace offenses.
  • Trump imposed tariffs on Chinese goods as punishment for the country’s intellectual property theft.
  • The U.S. trade deficit with China has reached a record high of more than $375 billion.
  • Trump has also instituted tariffs on steel and aluminum shipments from Canada, Mexico, and the European Union.
 

Who Will It Help? Who Will It Hurt?

First, who is expected to gain from the U.S. policy on tariffs?

 
  • U.S. steel producers stand to gain significantly. The 25% steel tariff makes a strong argument to go for domestic steel.
  • The U.S. aluminum market has been growing with the implementation of tariffs.
  • Foreign firms serving the markets affected by U.S. tariffs may benefit.
 

Second, who is expected to get the short end of the tariff stick?

 
  • American whiskey exports may suffer. U.S. whiskey producers shipped $737 million in bourbon to Europe in the 12 months prior to March 31.
  • Harley-Davidson and other U.S. motorcycle manufacturers say tariffs will put the brakes on production.
  • Prices for beer and soda, in aluminum cans, may rise.
 

Tariff Impact on Stock Market

Tariffs—and the potential for a trade war—will loom heavy on the stock market, most analysts believe. But by how much, to what extent, and in what direction remains unanswered.

Investors, at this point, are breathing a little easier, as the U.S. stock market seems to be adjusting to the news of the tariffs. Traditional wisdom suggests trade wars don’t produce positive, short-term results. However, Trump’s reasoning rests on the premise that vast trade imbalances favoring foreign countries has unfairly put the brunt of global economic development on U.S. shoulders.

While U.S. stocks have largely climbed to unprecedented heights following Trump’s “Tax Cuts and Jobs Act” and other economic incentives in late 2017 and early 2018, the market has undergone some remarkable shifts, including the sudden 12% drop in February 2018.

We help our clients wade through the challenges and opportunities of the market, on both the personal and professional levels. When you invest in developing a relationship with an independent financial professional, you invest in your future.

Contact us today to learn more!

 

Certain sections of this commentary contain forward-looking statements based on reasonable expectations, estimates, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict.

Credit Card Dos and Don'ts

The Basics: A credit card is issued by a financial company that gives the holder an option to borrow funds, usually at the point of purchase. Credit cards charge interest and are used primarily for short-term financing. Interest typically begins to be charged one month after a purchase is made, and borrowing limits are pre-set according to an individual’s credit rating.

If you're like me, you probably receive multiple offers weekly from credit card companies seeking new customers with easy to complete applications. In fact, I'd be willing to bet you have one or two sitting in your mailbox right now! These of course are almost always unsolicited. Before you sign on the dotted line and mail in one of those application, you need to know more. Here are some dos and don’ts regarding credit cards.

 
"Do not save what is left after spending, but spend what is left after saving."
                                    - Warren Buffett
 
 

Dos

Shop around. The credit card industry is very competitive, so compare interest rates, credit limits, grace periods, annual fees, terms, and conditions.

Read the fine print. The application is a contract, so read it thoroughly before you sign it. Watch for terms such as “introductory rate,” and be sure you know when that introductory rate of interest expires.

Pay your bill in full each month. Pay off your statement each month in full and on time; otherwise, you will begin paying interest charges and may be charged late fees. Paying off your bill each month can also help ensure that you stay out of debt.

Track your spending. Look closely at your credit card statements each month to be sure that you actually approved the charges that appear. Mistakes can happen, and you don’t want to pay more than you agreed to.

Pay attention to changes in your credit agreement. Occasionally, the credit card company will send you updates on the contract you have with it. If you don’t pay attention, you could miss something important.

 
 

Don’ts

Don’t spend money you don’t have. Buying things without the money in your savings account can lead you down a dangerous path. Before you know it, you could be in a lot of debt with no way to pay it off.

Stay below your maximum credit limit. Creditors want to see that you know how to use your card wisely. Keeping your balance low and making payments in full are good ways to do that. Just because the option to spend more is there doesn’t mean that you should take advantage of it.

Don’t sign up for store credit cards just to receive a discount. Opening a credit line at a store to obtain a discount on a purchase then and there may not be a good idea. Remember that credit cards affect your credit score and that opening too many can actually hurt it. Plus, store credit cards tend to have much higher interest rates than those offered by financial institutions.

Don’t apply for additional credit cards if you have balances on others. Pay your balances on existing cards before you open new accounts. Getting in this habit will make you less likely to open too many accounts.

Don’t give your credit card to someone else. Whether you authorize it or not, giving your credit card to someone else to use is against the law.

 

Although having a credit card is important in helping you to establish a credit history, they are often misused. A credit card can be a powerful tool in the hands of a responsible individual, but it can be even more powerful in a destructive way in the hands of someone who is unaware of its pitfalls. Keep these tips in mind before obtaining and using a credit card.

Building Your Budget: Start With The Basics

A budget is an estimate of income and expenses for a set period of time. Creating a budget can help you get control of your finances and achieve important financial goals, including buying a car, saving for college, purchasing a home, and providing for a family. It can also be beneficial in meeting unexpected financial challenges, such as losing a job. Honestly I know this doesn't sound fun or exciting, but budgeting will help you improve every aspect of your financial life, and the earlier you begin, the better off you’ll be.

Write down your financial goals.

Before you start evaluating how much you can actually save each month to achieve your important goals, you should consider setting some near-term financial goals. This is essential to tracking your progress. So you need to:

 

· Determine what percentage of your paycheck you would like to save.

· Decide how much money you would like to save each month or how much money you need to save in order to achieve one of your longer-term financial goals.

· Consider how much money you want to allocate to future purchases, as well as how much you want to contribute to an emergency fund and a retirement plan.

 

Whether your goal is to put away a couple of hundred—or a few thousand—dollars every year, you need to know what that amount is. Once you have a realistic idea regarding how much you’d like to save, review the steps below, which can help you determine precisely how much you actually can save.

Next Steps

 

1. Track your income for a month. Figure out how much you make per month. Think in terms of your net income, that is, the amount of money you actually take home (i.e., your net pay) after federal, state and local taxes; contributions to employer-sponsored health insurance; and so forth have been subtracted from your gross pay.

2. Track your expenses for a month. This is the most important step to budget creation. You should record every purchase you make—without exception. No dollar should escape accountability. If you bank online, it is extremely easy to track noncash expenses and debit card charges by simply exporting the information from your user login to a spreadsheet.  

3. Create spending categories. Split your expenses into luxury items and necessities. Necessities would include rent, groceries, car payments, insurance, utilities, and so on. Luxuries would include dining out, entertainment, and other unnecessary items (e.g., extra trips to Starbucks).

To be safe, you should include your saving goal as a necessary item, so you would be less likely to sacrifice saving for other luxuries. Excel is a wonderful tool for this because you can color code your expenses, making it more obvious to tell which type of expense is which.

4. Evaluate your budget. This is the final step in budget preparation. Take a good look at your expenses. Do you see numerous luxury items that you can live without? One benefit to having expenses displayed on an electronic spreadsheet is the ability to make quick and easy calculations. You can set limits on your spending based on the results of your calculations. 

 

Besides preparing yourself for big purchases later in life, your budget can help save you from going into debt in the event of an emergency that requires you to unexpectedly spend a large amount of money.

Check your budget frequently

Keep in mind that it’s important to check your budget frequently to be aware of any changes that may have occurred in your financial situation. Every three months is a good rule of thumb for tracking your spending habits. Not doing so could result in overspending, under saving, and therefore delaying your big financial goals.

What are you waiting for? Get started now!

Now that you know how valuable a budget can be to your financial future and achieving your dreams, what are you waiting for? No doubt you’ll want to begin a savings program as soon as possible. Begin by considering the steps outlined here. Our Wealth Wise Plan program would provide you with personalized financial portal to help you track, monitor and improve your budget and cash flow situation. Contact Us today!

Should You Consolidate Your Retirement Accounts?

If you’re like many of the young professionals I work with every day, myself included, you’ve probably had a few different jobs at this point in your career. In many cases you may have started saving for retirement using the available employer plan or even an individual retirement account (IRA). As you change jobs, it may make sense to consolidate all of your savings into one account to achieve a coordinated investment plan.

Why consolidate?

Consolidating your retirement accounts offers several potential benefits:

 

Less administrative hassle. You’ll receive just one account statement, making it easier to keep track of your funds. Consolidating your accounts also simplifies required minimum distribution calculations and tracking. You’d be surprised how often we discover clients have additional accounts they forgot they even had.

No overlap. If you have multiple accounts, that doesn’t necessarily mean that your investments are properly diversified. In fact, your money may be invested in similar asset classes with significant overlap. Consolidating your retirement accounts gives you a clearer view of your asset allocation picture, as well as any adjustments you may need to make.

Easier rebalancing. Any retirement savings account requires periodic rebalancing to keep it in line with your objectives. By consolidating your accounts, you’re more likely to achieve a cohesive investment strategy.

Proper Beneficiary Management. I can’t tell you how often we see clients with multiple IRAs and 401k plans, all with different beneficiary designations. Even more shocking is how often that information is incorrect or outdated. Consolidation makes it much easier to keep these up to date and accurate.

 

How to consolidate

Moving a retirement account to a new employer plan or to an IRA can be done via direct rollover or trustee-to-trustee transfer.

With a trustee-to-trustee transfer, the funds are sent directly from one plan to another. The plan administrator will make the check payable to your new IRA custodian (never to you directly). That is why this type of transfer is often referred to as a direct rollover. Unlike regular rollovers, there is no tax withholding requirement for this type of transaction. When requesting a transfer from your employer’s plan or another retirement account, be sure to use the right terms to avoid unwanted tax consequences. If you’re unsure, contact your financial planner for assistance.

Should you move your employer plan to an IRA?

A former employer will generally let you keep your money in its retirement plan for as long as you want. You may also choose to move those savings to an IRA. Before making the switch to an IRA, however, it’s wise to consider the following factors:

 

Investment choices. An employer’s 401(k) plan may be lower cost, but your choice of investments will be limited, as 401(k) plan sponsors tend to simplify the investment decision for employees by reducing the number of options. With an IRA, you have a potentially unlimited choice of investments, including individual stocks, mutual funds, and alternative investments rarely offered by employer plans.

Control over distributions. Another benefit of IRAs is that you have more control over when your retirement savings are paid to you. Distribution requirements vary among IRA providers, so be sure to understand the choices available to you and your beneficiaries.

Creditor protection. If creditor protection is a concern, both employer plans and IRAs safeguard your retirement savings from creditors to a certain extent. Employer plans generally offer better protection than IRAs do, however. The level of protection an IRA offers depends on your state laws.

Early withdrawal. One reason to keep funds in an employer account, at least temporarily, is that you may need to tap into your retirement savings before you reach age 59½. There is no tax penalty for taking a distribution from your former employer’s plan after you reach age 55. Although you’ll still pay income taxes, you will avoid the 10-percent penalty for early withdrawal, which would be assessed if you withdrew funds from an IRA before age 59½. Exceptions to the penalty on early IRA distributions include:

 
 
  • Unreimbursed medical expenses that amount to more than 10 percent of your adjusted gross income
  • Disability
  • Distributions from a beneficiary IRA upon the death of the original IRA owner
  • Qualified higher-education expenses
  • Qualified first-time home purchase
  • Distributions under a “substantially equal payment” plan, per Section 72(t) of the Internal Revenue Code
 

A Retirement Strategy That Works For You

As you can see there are some great benefits to consolidating your retirement accounts, however, there are many factors that should be considered. I recommend working with a financial planner to determine what is right for you. Please feel free to reach out to me if you have questions. I'd rather develop the best strategy for you and help you implement it properly, than you potentially creating issues trying to do it yourself.

8 Life Events that Require Financial Guidance

Almost everyone stresses over the daily obligations of financial planning, but many also neglect the significant life stages that require special attention and strategies. Here are 8 key life events that could benefit from professional financial guidance.

1. Graduating from College

College graduation marks the first major transition into adulthood. The progression from school to career is a significant milestone and the perfect time to get financial advice. Whether you or a loved one has graduated, this is also a great time to assess needs such as college debt repayment, savings strategies, or insurance.

Luckily, most recent graduates have time on their side. With the decades ahead and the power of compound interest, it’s the perfect time to have a discussion about the benefits of saving right now. The financial foundation built now will have a major impact on the rest of your financial life.

2. Marriage or Divorce

Professional finance advice is extremely beneficial at the time of marriage. Goals such as combining finances, handling credit issues or debt problems, and building a successful financial life with your spouse will be hard to establish without objective financial advice. Click here to download our helpful checklist for newlyweds.

On the other end of the spectrum, divorcees should ensure that they protect their finances. If you’re entering divorce proceedings, important tasks like updating your will, changing your insurance policies, and protecting your investment accounts need to be handled with care and are best managed by a professional.

3. Adding a Member to Your Household

The birth of a child is a miraculous event, but that new addition will bring huge financial and lifestyle changes. College funds will need to be created, wills and insurance policies need to be updated, and a whole host of new expenses will need to be managed. Make sure that your new bundle of joy is off to the best start possible by bringing in a professional.

4. Job and Income Changes

Whether you are starting a new job, changing careers, or accepting a well-deserved promotion, there are important financial considerations to address. During a job change, you’re better off with a financial planning professional who can help you minimize taxes by rolling over retirement accounts and making the most of your stock options. A professional can also help you adjust your financial plan so you start putting more money aside and preparing for a future of continued financial growth.

5. Buying and Selling Property

If you’re buying a home, a professional can help you review your situation in an effort to maximize your tax benefits, deal with capital gains exclusions and taxes, and find write-offs and deductions you might otherwise have missed. Buying and selling property is complicated, and it’s not worth tackling on your own.

6. Illness or Hospitalization

An unexpected illness or hospitalization can strike at any time, and when it does, your finances are soon to be impacted. If you find yourself hospitalized or stricken by a sudden illness, reaching out to a professional could minimize the financial impact and help you recover more quickly. A financial advisor will also help with long-term care options and disability insurance, estate planning, life insurance, and a host of other planning topics that will have an impact on your overall portfolio.

7. Inheriting Property

Dealing with an inheritance can also be complicated, hence why it made our list. If your inheritance comes in the form of a lump sum, it is important that you minimize the tax bite and address outstanding debts. If you are inheriting a retirement account like a 401(k) or IRA, you’ll definitely benefit from assistance with rollover options and investment advice.

8. Retirement

Retirement may be the most important transition in your life. From maximizing and managing benefits to developing a distribution strategy, the right professional can be an invaluable resource.

Everyone wants to feel comfortable by establishing long-term financial security, so it’s worth taking an honest look at your current financial situation and goals. Every day we take the complexity out of financial planning for our clients. We can make it simple for you too, so don't hesitate to contact us directly if you need someone to look over things with you.