Divorce is a process that can be exhaustive emotionally, physically and mentally for those who go through it. As amicable as one would hope and like for things to go there many times may be a lot of emotion, consideration and disagreement that can take place during the process. I say this not only from what I have witnessed in the clients that I’ve helped over the years but as someone who has gone through the trials and tribulations of the divorce process first hand myself.
“It is important that we look deeper in these efforts (or consider working with someone in regards to the financial aspect) to ensure that we aren’t on face value seeing 50/50 ‘split’ as completely fair or equitable. Remember: its not what you get from your settlement, its what you keep & where what you keep will position you for the many years to come.”
Today the U.S. House of representatives is set to vote on the Health Economic Recovery Omnibus Emergency Solutions (HEROS) Act. This would mark the fifth piece of legislation directly addressing the COVID-19 pandemic and the wake of economic peril its left many in. The bill spans 1800 pages and has an estimated sticker price of roughly $3 trillion.
The Stock Market increasingly seems like the happy fisherman who’s posed alongside the river with his catch, grinning ear to ear for a picture completely unaware of the bear right behind him. As the country stays mostly under strict stay at home orders due to COVID-19 and states begin to evaluate a return to “normalcy” there are staggering numbers in the wake. The COVID-19 pandemic has caused an incredible shift in the daily lives of households, their income, sense of security and as a result how and where they spend. As we await the retail sales numbers for April and look at the -17.22% YTD return on the Dow we have to wonder if the markets are fairly pricing in all that’s been going on?
For retirement withdrawal needs the CARES act may seem to present a unique opportunity, but its important to watch out for potential mistakes.
The CARES Act allows: up to $100,000 in total withdrawals from retirement accounts (IRA, 401k or other tax-deferred account types) with the 10% penalty waived. In addition, there can be the ability to pay back the funds within 3 years of the distribution to eliminate the tax liability. This all may sound very tempting, but there are pitfalls to consider before moving forward.
CARES provisions allow for 3 years of “paying back” your retirement accounts, as well as 3 years of spreading the tax cost . Both of these options allow for flexibility on spreading the tax bill and potentially making some (or all) of the distribution tax-free. However, you need to plan ahead on how you are planning to report, pay or potentially offset these taxes. This can become complex and involve retroactive amendments to your previous filing as well as other considerations.
What you can do: Work with your accountant as well as your advisor to set a plan around your needs.
The CARES laws were rushed to the presses therefore leaving some areas of uncertainty. Roth conversions are one area for you to be weary. To understand more, we have to look at the intent of the law rather than the actual “word”. The intent of the law is to allow you additional cash-flow from retirement accounts while softening the tax impact. More simply, this law is designed to allow someone in need to access money during these uncertain times.
As previously mentioned, this would allow for the withdrawal and use of the funds for any expenses with an extended “payback” or multi-year tax payment. The law is not designed or intended as a loophole for your Roth conversions. In addition to this, your tax filing necessary to denote the conversion (due to contribution limits) will inform the IRS of the action taken with those funds.
What you can do: Currently, until more explicit guidelines are provided from the IRS you should expect to pay the full tax bill for 2020. However, for conversion of shares there is a unique opportunity for you to convert more shares for a target cost during the market pullback.
The temptation to take money because it is “available” at this time may be on your mind. However, remember that you’d be selling while the markets are down and creating tax costs by doing so at this time. If you move the funds now (if they’re not needed) you are taking away from your compounding future growth. What this means is that you will have less shares held at the point of a market recovery. This may not seem like much now but it can have more major impacts over time. You also need to consider the extra tax costs that you will need to pay as well. Think not only about what you’ll pay on the funds you take but what it may do to your tax bracket as well.
What you can do: Evaluate your needs and plan for the tax as well as future value impacts. Your financial planner can depict these for your consideration and review. Also, consider strategies that allow for liquidity in the future.
We understand that your financial needs are unique and require careful consideration. For a free consultation to discuss our services as well as your needs Schedule an Appointment Now. Visit our COVID-19 Resources Page for more articles & tools.
Right now the precipitous drop of the markets along with fears over the spread of COVID-19 may make it feel like the sky is falling. However, two major opportunities are there if you act.
In the midst of sell-offs that may be giving you a combination of motion sickness and flashbacks to 2008, your first reaction may be to “let it be and ride it out”. Now we are major proponents of a long-term approach but some small moves could make a major difference. So where is the opportunity we speak of? Lets take a look: (more…)
Recently retired individuals and those nearing their time to retire are suddenly flooded with unexpected market losses care of COVID-19. This leaves many who recently retired wondering if they’ll have to return to work, and those planning to retire soon considering if they need to push plans back. If you are in either of these two groups it’s time to evaluate your positioning.
Now, you may be asking “do I need to change plans?” and you wouldn’t be alone in asking that question. However, the honest answer is: it depends. Because everyone’s situations, wants and needs are different the question is impossible to answer without additional information. Think of it this way: you bump into your neighborhood physician, mention in passing that you’ve had a few symptoms and ask what is wrong with you. You’ll be told to either make an appointment or seek immediate medical attention. The reason for this (and why our article can’t fully answer the question) is because it would not be in your best interest to have someone diagnose you physically or financially “off the cuff” without proper testing. But let’s take a look at some scenarios and discuss if they need immediate attention or an appointment:
Seek immediate attention.
There are two skill sets that it takes to have a successful retirement. The first is accumulation, aka retirement saving. The second is distribution aka: income/withdrawal planning. Both present challenges however, withdrawals have significantly more variables to plan for. It would be worth the time to sit with a professional to see where you stand.
Set an appointment for a check-up
The “bucket” strategy approach constructs 3 separate accounts: cash (right now), bonds (a little later), and stocks (growth/long-term) to purposefully prepare & visualize each accounts purpose. Similarly, a larger cash reserve will also allow you to have the flexibility while riding out volatility. It’s important you review either of these to ensure you have proper positioning across your net worth. Recently retired individuals may enjoy the spoils of having cash on hand now, but considering current interest rates and long-term inflation against cash. Make sure to rebalance the buckets.
Seek immediate attention
First, we don’t ever want anyone loosing sleep because things feel “unknown”. The recently retired investor may have some panic looking at the years ahead while starting in a downturn. Piece of mind goes an extremely long way. Much like someone who waits to see if their symptoms will pass, its better to get ahold of things before they progress. There are many different things an experienced professional can consider and use to help. But if left without attention, it can compromise the amount of options that you have if any.
Set an appointment for a check-up
(If you haven’t professionally set a plan seek more immediate attention)
So this one has two different attention levels because if you have planned this is still an important time to team with your planner to regroup. If you haven’t planned, it’s worth your time to ensure that you aren’t causing any future problems. A professional will be able to account for the sequence of returns risk, taxes, inflation and additional setbacks that you may have missed.
Seek immediate attention
If half of your monthly expenses or more rely on checks from your investment accounts running out of money is not an option. Because of the larger reliance on these accounts there is limited flexibility to make lifestyle changes to lower expenses. It also means that as prices increase over time (inflation) your reliance on the savings will grow. Pensions don’t traditionally offer cost of life (COLA) adjustments, and the COLA for social security does not make significant strides to cover this gap.
We understand that these are extremely trying times both financially and emotionally for most people. Although it may be intimidating, it makes the most sense to know where you stand and if any action is necessary. A little planning can go a long way in these times, and together we are here to help. Schedule a Call With Us to review your situation.
April is earnings season and the next big test among the COVID-19 volatility that has punished the markets and investors. As of the time of this article the Dow has posted a 30.27% loss YTD effectively wiping out gains back to October 2016 levels. (more…)
The Ocean County Health Department announced late Friday that a Manchester man is the first Ocean County resident to have a presumptive positive test for COVID-19, state and county officials said Friday. He is among 21 new cases in the state of NJ bringing the total to 50 cases of COVID-19 in NJ, Health Commisioner Judith Persichelli said Friday Afternoon. (more…)
Portfolio rebalancing is a practice that aims to manage investment risk by maintaining target allocations over time. To clarify, target allocations refer to the percentage of Stocks, Bonds, cash or alternatives selected to balance your risk & needs when investing. Using the three major asset classes for the purposes of simplicity we will look at stocks, bonds and cash. Due to the risks involved on each of these parts of your portfolio they will not grow or drop at the same rates. Therefore, while the markets rise and fall your balances in each of these will take up more or less real estate than they were initially intended to causing ‘portfolio drift’.
Portfolio drift is a naturally occurring part of anyone’s portfolio that is not actively rebalanced. The graphic above shows an instance of portfolio drift in a growing market, where stocks are out-performing bonds. During this time the “target allocation” of 50% stocks, 45% Bonds and 5% cash has drifted to have 65% stocks, 30% bonds and 5% cash. As a result, your portfolio would be riskier than you had intended (and possibly could withstand) due to this drift.
Portfolio re-balancing is a practice where at a regular interval (weekly, monthly, quarterly) chosen by the investor or investment manager these balances are checked. If the allocation is outside a pre-determined threshold there will be a balancing out of the portfolio back to the target allocation. In our illustration above, 15% of the stock allocation would be sold off and re-invested into the bonds of the portfolio, bringing the allocation and risk level of the portfolio back to proper proportions.
A common misconception is that your 401k stays balanced because you have chosen the allocation when you enrolled. This enrollment simply instructs how much of your savings goes into each of the investments. However, the market performance of each of those investments determines how much drift you have in one direction or another. Take a moment to check on your portfolios to discover where your allocation currently stands. Should you not have a ‘target allocation’ it is worthwhile to sit with one of our planners to discuss what would be most efficient for you.
Looking to discuss further? Contact us for a free consultation today!
Markets have been picking up in their volatility as oil prices have plummeted and the Coronavirus has taken center stage. One of the more classic ways investors seek protection in portfolios is through the use of bonds. However, there are many ways to invest into bonds for your portfolio from ETFs, Mutual Funds, Individual Bonds, Closed Ended Funds and managed accounts just to name a few. (more…)
Providing some relief from the steep selloff yesterday, President Donald Trump hinted at a Payroll tax cut. The market responded opening strongly, subsiding mid-day and pushing to a strong close up 1,167 points for the DJIA. (more…)
Oil is adding onto the coronavirus volatility with prices selling off in excess of 20% (largest since January 1991). Oil’s fall comes as a result to OPEC failing to strike a deal with its allies regarding production cuts. In reaction to the lack of a deal Saudi Arabia slashed prices, indicating that they would be looking to ramp up production and creating fear of an all-out price war that could ensue. (more…)
Long gone are the days of the old-school broker. The one who cold-called and introduced them-self in a phone call you didn’t see coming. However, there are still some of these old practices that still stick around and create inefficient approaches to your wealth. (more…)
Wondering how to balance out retirement planning along with college savings goals? We will cover that as well as account types for college savings here!
First, lets talk about the balancing act that we all have to consider when it comes to these two lofty goals. The average retirement is now averaging 30+ years due to advances in medicine and longevity. At the same time, the average 4 year degree has a tuition of $129,000! So how do we make sense of funding both of these goals and what should be considered? (more…)
In today’s post (and corresponding podcast episode) we talk to Joshua Zirilli, CPA about some of the retirement options available to small business owners and how they can be used to save on taxes. We want to make sure you read to the end because Joshua is going to explain a strategy to turbocharge your retirement savings that is unfamiliar to most people. (more…)
Wealth may be a long term goal of many, but its the small habits that make or break your ability to achieve it.
Wealth: it can mean something different to each person that you speak with but in the context of financial wealth there are make-or-break habits that can often be overlooked. Today we will cover five bad habits that are killing your ability to become wealthy. (more…)
Thinking of hiring a Financial Advisor or looking to evaluate your current relationship? Here are 4 Questions you should ask NOW:
Asking an advisor if they are a Fiduciary will give you insight on if they allow any conflicts of interest to interfere with the advice you are getting. The Fiduciary standard will have your interests first as compared to the “know your client/best interest model” of a non-Fiduciary. In a “best interest” model you simply have to receive advice and investment recommendations that are appropriate for you but not necessarily best pricing, liquidity, etc. (more…)
Markets have been roaring in a historic bull run. The returns are welcomed by investors but fund managers may have begun re-positioning creating a jump in your taxes..
Free Webinar: The SECURE Act and Your Retirement
Estate planning considerations also covered, register by clicking the “register now” button.
The SECURE act stands for Setting Every Community Up for Retirement Enhancement and was signed into law on December 20, 2019. The act focuses mainly on retirement legislation and has been argued to have been the largest piece of retirement legislation to have been passed in the last 13 years. However, within the act there are benefits for College Loan Payments in 529 educational savings accounts and an exemption for birth or adoption expenses from retirement accounts that previously hadn’t existed. Because of these changes it is important for you to be aware how they may impact you or your previous planning approaches to these financial goals. In this update we will explore what has changed and what action steps you should consider as an investor. (more…)
We have access to more information than any other generation at our fingertips, so why do we still see so many mistakes being made? (more…)
The holiday season can be especially stressful for some and although we can’t solve any family tensions or make your in-laws do an abrupt 180 we can lend some insight to help keep your wallet from stressing too. (more…)
There is a retirement risk that every pre and post retiree may not be seeing right in front of them. Its not always the same risk for each person, and in some cases its all three. I have had the pleasure of working with many different people of different backgrounds, needs and goals over the years that I have been a Financial Advisor. One of the most common reasons that people not only save but seek planning is for their retirement, and why not? No person wants to work for their whole life without the ability to retire and enjoy the fruits of their labor. As a result, we do our best to adhere to some of the basic principles: work hard, save early and watch our spending. However, there are constant forces that we need to account for when we transition into spending the savings, we worked so hard for: inflation, taxes and sequence (order) of returns. Let’s take a look at this through the eyes of a retiree who we will call Jane.
Jane worked until she was 65, saved and considered what she will need to spend every month. She put away $500,000 in her retirement savings and has budgeted for expenses of $20,000 per year. Jane understands that if she keeps her expenses at 4% or less of her savings there is a higher likelihood that she will have her money last, and she also feels comfortable with a portfolio allocation that has an average return of 5%. So, the math seems simple to Jane: if I only need 4% of the value of my account and on average, I have a portfolio that returns 5% I will be able to maintain my portfolio value with a slight potential for growth. Unfortunately, this is wrong and all to commonly assumed. The truth of it is that to get the $20,000 from her retirement account after taxes (approx. $5,900 in this case) her total withdrawal starts at $25,900 – this is a 5.18% withdrawal rate from the $500,000 portfolio. Surprised, she still feels confident that although her numbers were slightly off the difference of 0.18% vs her allocations average rate of return would take a long time to be a real threat to her savings…unfortunately this too was a risky assumption and we will explain that next:
Costs don’t stay level over time, just think back to what a movie ticket, loaf of bread or soda from a vending machine used to cost in the past as compared to today. The same holds with your expenses over the years in retirement, basic needs expenses have historically gone up just above 2% per year while medical expenses have shown to inflate at just over 5%. This means that within the first 11 years your healthcare costs can be two times the cost from where they had started, while your basic needs expenses can be 27% higher than when you started! This can be a very eye-opening realization for clients that hadn’t accounted for these considerations before coming in to formally plan.
The average return on a portfolio is often taken too literally when planning for a withdrawal strategy. We become hard wired to the average rate of return during our accumulation of investment savings because it can be a way to forecast the potential future value of investments that are not withdrawn from. What this means is that if the money is left to ride out the ups and downs of the markets along the way these peaks and dips will average out over time. However, when we are starting to take from the balance of these savings it can be very important to understand the difference in how these affect our ability to make them last. Having a portfolio downturn in the earlier years can prove to be a larger risk to the ability for your savings to last, in our example with Jane she decided to retire at 65 and will fund her retirement fully for one year until she takes Social Security at her FRA (Full Retirement Age) of 66. Due to all her previous assumptions (not counting for taxes, assuming level costs without inflation) she feels that the extra expense is worth starting on this journey she worked so hard for her whole life. Let’s look at how all these factors together lead to Jane’s retirement running out:
If you haven’t taken these considerations into account, you are not alone. Starting an open conversation with a professional who specializes in retirement planning can help to address these risks as well as provide guidance on what you can do to improve your situation. We are here to help at Coastal Wealth Planners and you can schedule a free consultation or call us at (732)554-1099 to discuss your concerns and needs.
What is Financial Planning? When you hear the term what does it first make you think of? For some it’s maybe a budgeting coach,others it’s a broker who gives investment tips, talk to another person and the term signifies a personal Chief Financial Officer. One of the things that makes for the varied opinions is the open architecture of titles in the financial services industry. Firms use a myriad of titles for the representatives that they employ: Financial Advisor, Investment Consultant, Financial Solutions Advisor, Financial Consultant, Wealth Planner and Wealth Advisor are just a few.One of the most recent topics among the financial planning community is the framework to distinguish a financial planner from a financial services representative. (more…)
Take your vitamins, get plenty of exercise, eat well, brush your teeth. These are simple tenants of our basic care along with keeping up on an annual physical or any other milestone tests that are recommended for preventative care. As a result, there is a greater likelihood that medical issues can be found and addressed earlier on or prevented all together. So, the big elephant in the room is why aren’t we treating our money in the same way? The same simple concepts can easily be translated into healthy money habits however knowledge is only half the battle and action is needed to make a difference in your financial outcomes. Let’s talk a little about the similarities and what you can do: (more…)
Planning for retirement can feel like a daunting task. Not only does it involve thinking about many unknowns such as what you might be spending in 20-30 years or when to take social security but there are also things that you can forget to include as part of your retirement planning.Today we will cover six things that you may have forgotten to consider when planning for your retirement. (more…)
Believe it or not, the last will is not the end all be all of estate planning. Beneficiary designations on accounts such as PODs on bank accounts or beneficiary/TOD designations on investment accounts actually come before a will in the distribution of these accounts. Therefore, it is always important to be mindful of where and how updates are made overtime.
It almost feels like it was yesterday that you were ringing in the new year, thinking of 2019 and what would be to come and setting your resolutions. One of the things that was a hot topic as we rolled into the new year was the new tax plan and what might await us come the filing deadline. Now make no mistake, taxes are a part of investing, but they frequently are thought of as something that comes hand-in-hand with investing that we have no control over. Although we can’t control the markets, investor behavior, fear and many other parts of what can come along with investing we can have some control and influence over how taxes affect your investment portfolio. Today we will cover some tips on what you can still do before year end to help your tax situation. (more…)
Recently I’ve seen a number of financial articles around Millennialslack of retirement savings as well as Seniors working longer because both groups expressed feelings that they can’t afford to save for retirement (see linked articles from Business Insider as well as CNBC). As we previously covered the topic in our 5 Simple Things You Can Do To Save More even the smallest of events can lead to serious savings. (more…)
Studies show that investors who partner with a professional to plan have less stress, anxiety and overall, they can show to have higher success rates in achieving goals they have set. There are many reasons why this is and we outlined some of them in previous posts such as Why You Should Partner With a Financial Planner (Even if You’re a Pro) as well as Why Your Goals Are the Only Index to Measure Against. But one of the things that can be nagging investors in their relationship is that they feel like they are being sold when they work with their professional, and there can be many reasons for this such as the style of the professional’s delivery. However, one of the bigger topics over the last few years can also answer why things may feel this way: is the professional a fiduciary or not? (more…)
The partnership with a Financial Planner can go a long way in order to keep things on track, make you feel more at ease and give an opinion that is more objective on your progress to the goals that you’ve set.Our recent post Why You Should Partner With a Financial Planner (Even if You’re a Pro) covered some of these topics in more depth. During this partnership there should be periodic collaboration to spot check where things stand and make sure everything is on track while resolving any questions or concerns. However,sometimes there are instances that should have you pick up the phone and set up an appointment sooner than later that we will cover here. (more…)
Partnering with a financial planning professional offers much more than just the Financial Plan itself. Taking the time to invest in this relationship creates strength in many ways that you may not often times associate with engaging a financial planner, and in today’s article we are going to look at a few of those ways. (more…)
Savings is the foundation of what I work with my clients on. It may take many forms such as retirement savings, college savings, wealth transfer, executive compensation strategies, or emergency savings but all roads started with saving. I’ve said it many times as my father said to me: “When it comes to saving start early and often.” (more…)
The term “Index” is widely used in financial conversations, publications and news broadcasts. Often the conversation goes something like “Investment X is outpacing the S&P 500 Index year to date”, however what does this really mean to the average investor? Indexes are the reflection of a segment of the financial markets such as: S&P 500, Dow Jones Industrial Average, Nasdaq Composite and Barclay’s Capital Aggregate Bond Index. These are only a very small sampling of the indexes available both Domestically and Internationally, what they tell us is the relative performance of the companies or bonds that they track. (more…)