The 7 Most Common Retirement Planning Mistakes

The 7 Most Common Retirement Planning Mistakes

Free Online Workshop

Hey Everyone! I'd like to invite you to our next live online event: The 7 Most Common Retirement Planning Mistakes.

Thanks to your feedback, we've put together a workshop that will cover the top mistakes I see in my practice and how you can avoid them.  We'll be hosting the workshop this coming Thursday, 4/26, from 10-11am PST / 1-2pm EST.

This workshop will be live, and if I manage the time correctly we'll have room for an open Q&A at the end.  So come prepared with retirement planning & investment related questions. 

This event will be free, but space is limited so grab your spot now while there's availability.

Here's the link to register.  

 

Topics We'll Cover:

  • The most common retirement planning mistakes & how to avoid them
  • A proven method for maximizing your Social Security benefits
  • Powerful tips for reducing your tax burden both now AND in retirement
  • How to maintain a comfortable lifestyle and ensure you'll never run out of money

As I mentioned, this will be a free online event but seating is strictly limited to the first 100 attendees.  Feel free to spread the word to your friends/family members/colleagues who might be interested, but make sure you reserve your spot before space runs out.

Here's the link to register again.

I look forward to seeing you there!

 

 

Market Volatility Survival Guide

Free Online Training: Market Volatility Survival Guide

If you’ve been paying any kind of attention to the markets over the last two months, you’ve probably noticed a new trend: volatility.  Consistent market volatility isn’t something we’ve seen in quite some time.  Other than the market’s brief reaction to the Brexit, we really haven’t seen much upheaval since the depths of the financial crisis.

With tighter monetary policy from the Federal Reserve and both feet on the gas of our fiscal policy here in the U.S., there’s a good chance the choppy waters are here to stay.

Since I’ve been getting a ton of questions recently about how to handle market volatility, I figured it’d be a good subject for an online training.  So, this Tuesday, March 6th, from 10-11am PST / 1-2pm EST, I’ll be hosting a free online training on how to protect your retirement accounts during market corrections.  Here’s the link to register.

Topics We’ll Cover:

  • The single BEST strategy to protect your retirement portfolio when markets crash
  • The secret to surviving the next bear market
  • The top 5  mistakes you should avoid when saving in workplace retirement accounts
  • How to tune out the noise and identify what news you should actually pay attention to

This will be a free online event, but seating is strictly limited to 100 attendees.  Feel free to spread the word to your friends/family members/colleagues who might be interested, but make sure you reserve your spot before the spaces are filled.

Click Here to Register

I look forward to seeing you there!

Backdoor Roth Conversion: How to Contribute to a Roth IRA When You Make Too Much Money

Backdoor Roth IRA Conversion: How to Contribute to a Roth IRA When You Make Too Much Money

If you asked me to choose my FAVORITE type of account to invest in, it would definitely be the Roth IRA.  Roth IRAs allow you to save money tax free for the rest of your life.  They’re not subject to mandatory withdrawals in your 70’s, and your kids won’t even owe taxes on their withdrawals if they inherit the account from you down the road.  In my opinion the Roth IRA is just about the best deal out there.

Problem is, they’re not accessible to everyone.  The IRS considers Roth IRAs such a good deal that they won’t let you contribute to one if you make too much money.  Fortunately, there’s a work around: the backdoor Roth IRA conversion.  The backdoor Roth conversion allows you to get money into the Roth IRA by making non-deductible contributions to a traditional IRA.  Don’t worry if this sounds complicated.  We’ll go over the strategy step by step in this post.  Read on to learn more.

 

The Backdoor Roth IRA Conversion Strategy

So here’s how it works.  I’ll break it down into two-distinct steps.  But to start, let’s review the income limitations for direct contributions to a Roth IRA.  If your modified adjusted gross income on the year (MAGI) falls below the “Full Contribution” threshold, you can contribute to a Roth IRA directly.  If your MAGI falls into the phaseout region your contribution limit for the year begins to fall.  When it reaches the “Ineligible” threshold, you’ll be prevented from contributing to a Roth IRA altogether (at least in 2018).  If this is you, the backdoor Roth conversion might be a good fit.  (Here’s a review of how to calculate modified adjusted gross income).

Backdoor Roth Conversion: How to Contribute to a Roth IRA When You Make Too Much Money

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Bloodletting and Evidence Based Investing

Bloodletting and Evidence Based Investing

Have you ever heard the term “bloodletting”?  Bloodletting was a tactic used by the medical community to prevent or cure illness.  In the old days, the collective wisdom was that our blood was one of many systems in our body that must remain in balance at all times.  If you walked into a doctor’s office with a common affliction like the flu or a cold, the doctor might determine that you simply had too much much blood in your body.  A common prescription was to apply leeches to your skin to bring relief.

Why did they believe this craziness worked?  Their anecdotal experience, speculation, and conjecture.

So how did we figure out that bloodletting was probably doing more harm than good?  Researchers began applying science to the practice of medicine in the late 1800s.  The scientific method of hypothesizing, gathering data, testing, and using analysis to come to a reasonable conclusion helped us figure out that our problems were not because we had too much blood.  They came from other things like viruses, bacteria, and our genetics.

 

Evolution of Investing

This revolution in western medicine is similar to what we’re seeing in investing today.  For years and years the investment process has been driven by anecdotal observation and conjecture.

For example, how many times have you read an article in Forbes or The Wall Street Journal that profiles the “next big stock to pop”?  In the 90’s it was tech stocks, in the 2000’s it was banking and pharmaceuticals, and since then it’s been social media and tech stocks.  Buying a stock that you think is about to pop, or is undervalued, has been one of the preeminent investment strategies since the early 1900s.

The same goes for “tactical” asset allocation.  Boosting your portfolio’s allocation to oil stocks because you think OPEC is about to cut their production quotas, or selling bonds because you think interest rates are about to rise are strategies based on speculation about the future.

Why do so many people invest this way?  Because of our life experience & anecdotal observations.  Everyone I’ve ever met has at least one person they know who invested early in Facebook or Microsoft and made a fortune.  We believe this type of investing can work because of our anecdotal experience.

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The Equifax Data Breach & Why We Should Care

The Equifax Data Breach & Why We Should Care

I’m sure by now you’ve seen the headlines: Equifax had a data breach and a bunch of Americans’ personal information was stolen by hackers.  It’s easy to ignore incidents like these because they’re becoming more commonplace.

The incident with Equifax is a bigger deal, though.  Past incidents like Target and Yahoo have included important pieces of sensitive information, but never the whole picture.

The Equifax breach included names, Social Security numbers, birth dates, addresses, and some credit card numbers.  That’s enough information to take out a loan in your name, rack up credit card charges, claim your tax refund, or even withdraw money from your bank account.  And it happened to 143 million Americans.  That’s 44% of the population.

I’ve gotten a few questions about the Equifax breach this week, so I thought a blog post might help answer a few of them.  This post will cover what happened, why it’s important, what you should do now, and why you shouldn’t trust that they’ll “make things right”.

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Paying for College With Your 401k: Can You? Should You?

Paying for College With Your 401k: Can You? Should You?

Believe it or not, we’re already in “back to school” season.  And to continue our recent series of posts on paying for college, today’s covers a question I’m sure will resonate with many readers:

Should you raid your 401k to pay for your kids’ college?

There are a lot of moving parts to this question.  First, can you even get money out of your 401k to pay for college costs?  Are there early withdrawal penalties for doing so?  And aside from the logistics, is it even a good idea to?  This post will cover whether it’s possible…and whether you should.

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Using a Roth IRA for College Savings: What You Need to Know

Using a Roth IRA for College Savings: What You Need to Know

If you’re in a position to put some money away for your childrens’ future college costs, a 529 plan is typically the most popular home for your savings.  There are some tax advantages, you could get a deduction on your state’s income taxes, and heck, the accounts were created for college savings.  But the knock on 529 plans is that they can be inflexible.  Take money out for anything other than qualified educational expenses and you’re probably looking at a 10% penalty on the account’s earnings.

As an alternative, some people prefer to use a Roth IRA for college savings instead.  You get great tax benefits, and many people don’t realize that you can withdraw funds before retirement age penalty free if they’re used for qualified educational expenses.  So given the limitations of 529 plans, are Roth IRAs really a superior vehicle for college savings?

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College Tuition Tax Credit: A Consolation Prize to Big Tuition Bills

College Tuition Tax Credit: A Consolation Prize to Big Tuition Bills

If you’re a parent, I’m guessing that at some point you’ve freaked out thought about the cost of your child’s future college tuition.  College costs are rising about 7% per year here in the U.S., and don’t look to be slowing down any time soon.  Most conventional advice we hear about ways to afford college costs has to do with starting to save early, or scouring the earth for potential scholarships.  What many of us forget is that we already have saving opportunities build into our tax code, in the form of a college tuition tax credit.

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How to Use Strategic Asset Allocation to Reduce Your Tax Bill

How to Use Strategic Asset Location to Reduce Your Tax Bill

I’m a believer that the biggest factor contributing to the returns in your portfolio is asset allocation.  The amount of your portfolio you choose to invest in stocks, bonds, real estate, or anything else will ultimately have the biggest effect on how your portfolio does over the long run.

In other words, the decision of whether to buy Lowe’s or Home Depot isn’t nearly as important than the decision to be in large cap stocks or international bonds.

If you’re being strategic about your saving, you’ll probably try to utilize tax advantaged accounts like IRAs, Roth IRAs, and 401(k)s as much as you can.  If you’re using them (like most people), after a while your total portfolio will probably be spread across several different types of these accounts.

Today’s post covers asset location.  Rather than replicate the exact same asset allocation in each of your individual accounts, placing your investments across them strategically can work to reduce your tax bill and enhance your after tax returns.

Since some asset classes are more likely to distribute taxable income & capital gains, parking them in the accounts you don’t pay tax on (like a Roth IRA), only seems logical.  When done thoughtfully, asset location can as much as 0.25%-0.75% per year to your portfolio’s returns.

Read on to learn how it works.

 

 
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Defined Benefits Pension Plan: Helping Business Owners Shelter Thousands from Income Tax

The Defined Benefits Pension Plan: Helping Business Owners Shelter Thousands from Income Tax

Taxes are frustrating to nearly every small business owner I speak with.  Most people agree that we should all pay our fair share.  But after working countless thousands of hours to build a viable business, it’s easy to feel like Uncle Sam’s reaching into our pockets too far.  That’s why I focus on helping my clients who own businesses make sure they’re not paying more in taxes than they need to.  One great tool we can use in this endeavor is a defined benefit retirement plan.  Whatever you want to call it, DB plan, defined benefits pension plan, etc., it can be a killer way to defer a huge portion of your income from taxation.

I realize you might cringe when you read the words “pension” or “defined benefit”.  The idea of promising employees a monthly check throughout their retirement may not foster warm and fuzzies.  But if you don’t have employees, or only have a few, a defined benefit plan can offer some pretty major tax advantages.

Read on to learn how you might take advantage of them.

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