The Diversified Blog

A wealth management blog dedicated to creating a long lasting sustainable retirement.

Retirement Spending in Scary Markets

When the markets are down or particularly volatile, how do I safely withdraw retirement money out of my portfolio?


This is a common question and a very good one. It is very scary when the market is volatile and the TV is telling you the world is coming to an end. It can be even scarier when you are in or near retirement. While one blog post won’t replace a fee-only wealth planner who is committed to serving your highest financial interests in an ongoing relationship, the following are three ideas to get you started.


1.  Take a Reality Check


The first step to knowing how you’re doing is to determine where you stand. For this, we suggest taking a very analytical approach to withdrawing money from your portfolio.


At our firm, the first thing we look at for clients who are taking money out of their portfolio is their withdrawal rate. In other words, what percentage of the portfolio’s total worth are they taking out? If the withdrawal rate is reasonable according to their financial plan, then everything should be fine. If the withdrawal rate seems too high (again, according to their particulars), we let them know.

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Advisors Who Think Like Demographers Can Identify The Right Niche

We wanted to share with our readers an article posted in Investor’s Business Daily, a website designed to provide exclusive stock lists, investing data, stock market research, education and the latest financial and business news to help investors make more money in the stock market.

 

The article, Advisors Who Think Like Demographers Can Identify The Right Niche, highlights our very own Robert Pyle and his passion for advising.

 

Here is a preview of what you will find:

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Your Second Wind — Starting Up a New Business in Retirement

Not that long ago, retirement meant being put out to pasture, with long days punctuated by occasional games of golf and bridge. But today, with lengthening life expectancies and dwindling pensions, many Americans are looking to retirement as an opportunity to start a new business. "We've never before seen so many seniors who are this active and doing so many things,'' says Lisa Gundry, a professor of management at DePaul University's Kellstadt Graduate School, who has worked with seniors in DePaul's business incubator program. "They've accumulated enough financial security so that they are better able to take a risk on a business than someone who is younger and has a mortgage and small children.''

 

Senior Start-ups: Common Characteristics

 

Older entrepreneurs differ from their younger brethren in several critical ways. For one, seniors are usually in a much better financial position than younger entrepreneurs. Their bigger financial cushion -- retirement packages, nest eggs, or home ownership -- affords them flexibility in the initial stages of a start-up, where funding is often critical. Because they can often rely on other sources for current income, they are in a better position to take greater entrepreneurial risks. Start-up funding may also be easier to come by for seniors, who can draw from personal savings and a lifetime of business and professional contacts. Senior start-ups may also be looked on more favorably by lenders, who often associate older entrepreneurs with a lower risk of default.

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Understanding Medicare: Parts A, B, C, and D

Medicare contains many rules that beneficiaries and their caregivers are required to learn. Perhaps the best way to grasp the program's details is to review the major components of the Medicare program: Parts A, B, C, and D.

 

Medicare Part A: Hospital Insurance

 

This insurance is designed to help cover the following:

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Put Savings (and Yourself) First With a Budget

Americans, it seems, are spenders. Although personal savings rates have increased recently, they remain low by historical standards, as many people continue to spend beyond their means.

 

If you're among those Americans who can't seem to save, it might be time to create a budget. A budget allows you to understand where the money goes and may help you free up cash for important savings goals, such as college and retirement.

 

Getting Started

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Planning 2016: New Realities, New Expectations

Financial resolutions often fall prey to the same procrastination that hinders personal aspirations. Yet current volatility in the financial markets along with other unsettling factors such as the impending presidential election and widespread geopolitical unrest may have led investors to pause, rethink their financial situations, and set new expectations for the future.

 

Resolutions typically fall into one of three financial "life stages" -- accumulation, preservation, or transfer of wealth. In order to establish action plans for these phases, you need to examine opportunities, identify challenges, and add a dose of reality to your planning efforts.

 

Accumulating Assets

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Ten Reasons to Consider Tapping Home Equity Now

The Federal Reserve has set the wheels in motion and for the first time in nearly a decade, interest rates are on an upward trajectory. The initial hike was a modest one quarter of one percentage point -- not a game changer for most investors or consumers. And from what Fed Chairwoman Janet Yellen telegraphed in her remarks following the mid-December, 2015, announcement, the Fed plans to move with caution and lift rates very slowly over the next few years.

That said, for homeowners contemplating refinancing their mortgages or tapping the value of their home via home equity borrowing, carpe diem may be the message to be heeded.

Positive Sales Trends

Data gathered during the first three quarters of 2015 found that single-family home and condominium sales reached their highest level in nine years. Further, those who sold their homes in the third quarter of 2015 also garnered the biggest price gains in eight years -- an average of 17% over their purchase price.1 Rising home values and historically low interest rates have also stimulated refinancing activity.  According to data reported by The New York Times, refinanced loans represented 42% of lenders' loan volume in September of 2015 -- a 5% increase over August and the highest level reached since May.1

The same trend is in evidence as homeowners are tapping into the equity they have built up in their homes and using the cash for a range of purposes. Here are 10 good reasons to borrow, cited by banks and other types of consumer lenders.

Top 10 Reasons to Consider Tapping Home Equity

1.  Refinance higher-cost debt.

2.  Pay off higher interest credit card debt, then redirect freed-up cash to retirement savings.

3.  Take advantage of potential tax breaks.

4.  Avoid liquidating a solid investment, or better time a capital gain.

5.  Refinance retirement plan loans that would be difficult to repay immediately if employment ends.

6.  Refinance life insurance policy loans that are approaching the cash value.

7.  Enhance liquidity with an emergency fund.

8.  Help a family member with college tuition, a home down payment, or a business start-up.

9.  Stop deferring a significant purchase or project that could be more expensive in the future.

10.  Take advantage of what may be a limited opportunity to lock in an exceptional deal.

If you are thinking of tapping the equity in your home and need a refresher on what type of borrowing vehicle is right for you, consider the following at-a-glance comparison:

Home Equity Loans and Lines of Credit -- What's the Difference?



Keep in mind that historically, home values have gone down as well as up, and a sustained decline could limit the financial options for those with significant loan balances. For more information or to obtain current rate data, contact your banking institution, credit union, or other consumer lender.

Source:

1.  The New York Times, "Cashing in on Home Equity," November 13, 2015.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 Wealth Management Systems Inc. All rights reserved.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail i This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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A Vanishing Value Premium?

Here is a nice article provided by Weston Wellington of Dimensional Fund Advisors:

Value stocks under-performed growth stocks by a material margin in the US last year. This column reviews a previous period when challenging performance caused many to question the benefits of value investing.

 

A Vanishing Value Premium.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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2016: 10 Predictions to Count On

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

The New Year is a customary time to speculate. In a digital age, when past forecasts are available online, market and media professionals find it harder to hide their blushes when their financial predictions go awry. But there are ways around that.  READ MORE:  2016: 10 Predictions to Count On.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Treasury Market Absorbs Fed's Increase

Here is a nice article written by Dimensional Fund Advisors:

On December 16, 2015, the market was unsurprised and able to digest, without a catastrophic loss, the first increase in the federal funds target rate since 2006.  READ MORE:  Treasury Market Absorbs Fed's Increase.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Second-Hand News

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

Why don’t the media run more good news? One view is bad news sells. If people preferred good news, the media would supply it. But markets don’t see news as necessarily good or bad, rather in terms of what is already built into prices.  CLICK HERE:  Second Hand News.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail i This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Hedge Funds: What Are They Good For?

Here is a nice article written by Peter Lazaroff and posted on the CFA Institute blog Enterprising Investor:

 

What are hedge funds good for?  Absolutely nothing.

That is the answer to the title’s question. It is also what hedge fund investors receive in return for shelling out exorbitant fees.  CLICK HERE TO READ THE FULL ARTICLE:

Hedge Funds: What Are They Good For?

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Volatility, China, and Oil

Here are some nice articles written by Dimensional Fund Advisors:

January 2016 saw the worst start to the year for the S&P 500 in history, while the Chinese equity market experienced a decline in prices as well as continued volatility and a decline in oil prices coincided with a decline in stock prices. These events provide an opportunity to examine several questions important to investors and revisit some fundamental principles of investing in capital markets.


Recent Market Volatility.pdf


An Update on China.pdf


Crude Oil and Financial Markets.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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When To Take Social Security

What is the best way to take Social Security?

Figuring out how to make the most of your and your spouse’s Social Security is one of the most challenging retirement-planning decisions you may make in your lifetime. You may not only find yourself between a rock and a hard spot, but you can expect some blind curves and steep hurdles thrown in for good measure!

Collect Some Now or Collect More Later
First, there’s the rock: You may be tempted to begin taking Social Security as soon as you’re able. But the hard spot means that the earlier you begin taking it, the less monthly income you’ll receive over your lifetime, and the smaller your cost of living adjustments (COLA) will be over time. Longevity risk – the risk that you end up living a long time in retirement – could throw you additional blind curve. 

I know: You’re probably not used to thinking of “living a long time” as a risk. But when you’re pushing the pencil around on your retirement planning, that’s exactly what it is. If you live to 95 or 100 years old, you could potentially spend 30–40 years in retirement, during which you’ll want to be able to depend on your retirement income to see you through. 

Let’s examine what those numbers might look like. Here are typical monthly payments you could expect under current circumstances:

 

If you begin taking Social Security at …

Expect to receive about …

Age 62

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Focus on the Forest, Not the Trees, of Investing

It's a message worth repeating. Investing is a matter of focus. Despite recent disappointments in stock market performance, investors who are willing to assess the whole universe of investment choices may find that the market continues to offer new possibilities. And those who keep their sights set on long-term investment goals may find that a "forest, not trees" approach to investing offers the greatest potential for success.

 

Focus is especially important for retirement savers -- those who are still in the accumulation stage -- as well as for retirees who need to keep the potential for growth alive in their portfolios.

 

Are You a Micromanager?

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When Should You Sell an Investment?

Effective portfolio management is about more than buying securities, it's also about selling them when the time is right. Unfortunately, there's no crystal ball that tells investors when to sell their investments. Many investors hold securities for too long and reproach themselves for not having sold sooner. Others sell too soon and second-guess their chances of having done better. Psychology -- and human nature -- aside, there are some practical selling strategies you may want to consider when managing your portfolio.

 

Exit Strategies: When to Sell

 

Sell -- if your investment's value shifts by a predetermined percentage. When a security is purchased, define the maximum price movement up or down before you'll sell. If the value rises, your maximum upside number becomes an automatic signal to take profits. If the value drops, your "stop-loss point" on the low side is a fail-safe for limiting losses and protecting some part of any gains. For example, the stop-loss point could initially be set between 80% and 90% of the purchase price. If the investment's price later rises, the stop-loss point might be raised to maintain the same margin below the current price.

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Wealth Transfer in a Low-rate Environment

For those fortunate few individuals whose personal wealth exceeds the current estate-tax exemption threshold -- $5.43 million for 2015 rising to $5.45 million for 2016 -- today's historically low interest rate environment offers potentially powerful wealth transfer opportunities.

Recent low rates of interest have affected two important factors used to value wealth transfers involving trusts -- the applicable federal rate (AFR) and the Section 7520 rate -- both of which are published and calculated each month by the Internal Revenue Service (IRS). These rates reflect what the IRS assumes the assets in a trust will earn over the life of the portfolio. They are sometimes referred to as "hurdle" rates because if investment returns outperform the interest rate, the difference may be passed tax free to trust beneficiaries.

Given current conditions, the following strategies may prove especially attractive.

Grantor Retained Annuity Trusts (GRATs). A GRAT is an irrevocable trust that is used to shift the growth and appreciation of assets from one generation to the next, often with little or no gift-tax consequence. In a typical GRAT, a donor or "grantor" places stock or other assets in the trust for a specified term during which he or she takes back principal in the form of annuity payments that are calculated using the low IRS-prescribed interest rate.

Any appreciation in trust assets above that interest rate passes to the GRAT's remainder beneficiaries outside of the transfer-tax system. Thus, the lower the interest rate, the greater the potential gift that can pass out of the donor's taxable estate to heirs.

How might a GRAT play out today? Given current conditions, an individual could transfer more shares of depressed stock into a GRAT. Then, if the market rebounds and outperforms the hurdle rate for an extended period, that difference could represent considerable wealth that would transfer to heirs.

Charitable Lead Annuity Trusts (CLATs). For those who wish to combine charitable giving with the transfer of wealth to family members, a CLAT offers an alternative solution to a GRAT. In this case, periodic annuity payments are made to a charity of choice, not the grantor. At the end of the trust's term, any remaining assets are then paid out to the non-charitable beneficiaries, typically family members, tax free.

Sale of Assets to a Family Trust. Another potentially attractive technique is to sell (rather than give) assets that are likely to appreciate in value to a family trust for the benefit of children. The grantor receives a promissory note with AFR interest. Because the grantor is essentially making a loan to himself or herself, the interest received on the note is not considered taxable income. As the property increases in value, the note remains static, while appreciated assets pass to heirs.

The current environment may present an attractive opportunity for those gifting assets as well as those receiving them. Be sure to explore these and other wealth transfer options with your tax and legal advisors as part of your overall planning strategy.

This communication is not intended as tax and/or legal advice and should not be treated as such. Each individual's situation is different. You should contact your tax professional to discuss your personal situation.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 Wealth Management Systems Inc. All rights reserved.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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New Business Retirement Plan

I am starting my own business and I want to set up a retirement plan. What should I do?

As a firm that specializes in helping small business owners, we know how overwhelming it can be when you’re starting a business, and trying to take care of all of the related details. Presumably you are embarking on your new venture because you have a great idea you expect to profit from. To make the most of your efforts, it’s best to establish a retirement plan early on, so you can save and invest a portion of your proceeds in tax-favored accounts. 

These days, there is a wide and growing range of retirement plan solutions for the small business owner – as well as a wide and growing range of related requirements. Because selecting and implementing the best plan for you and your business depends on a number of specifics, we suggest speaking with a professional advisor to help you weigh the options and manage the operations. Following is an overview to get you started.

The Solo- or Owner-401(k) Plan
If you don’t have employees, a solo- or owner-401(k) may be the best way for you and your spouse to save money from your business profits, with two contribution opportunities from your dual role as employee and employer:

•    Your employee contribution allows you to save $18,000/year if you are under 50, and $24,000/year if you are 50 or older.

•    Your employer contribution allows you to save an additional 25% of your salary.

For example, if you pay yourself $100,000/year and you are 50 or older, you can contribute $24,000/year as an employee and $25,000/year as an employer (in addition to your salary), for a total of $49,000 annually. The maximum 401(k) contribution is $53,000 if you are less than 50 and $59,000 if you are 50 or older.

The SEP IRA
What if you and/or your spouse is employed at another company and maximizing the employee contribution there, but one or both of you are also running a small business of your own? You can set up a “self-employed” or SEP IRA for your separate business. The contribution limit for a SEP cannot exceed the lesser of 25% of your self-employed compensation or $53,000 per year. These are the guidelines for 2015 and 2016, and are subject to annual cost-of-living adjustments for future years.

Defined Benefit or Cash Balance Plan
If you want to save even more than described above, you can consider a defined benefit plan or a cash balance plan. The limits for these plans are around $200,000/year but it depends upon age and income. Typically, you set an annual contribution amount and there is a range around it. You are required to contribute each year.

Defined benefit and cash balance plans are more complex to set up and administer, but if your situation calls for it (for example, you are older with high income), they can be a great way to save even more than you can in a 401(k) plan. They also can be paired with a 401(k) plan, but this limits the employer contribution part of the 401(k) plan.

Company 401(k) Plan
Once you have employees, you can consider a company 401(k) plan to help you save for your own retirement while providing an important benefit to your valued employees.

A company 401(k) plan is more complex, and the current regulatory environment may soon call for even higher levels of vigilance with respect to your fiduciary duties as the plan sponsor. If you are considering establishing one, we suggest aligning with a Registered Investment Advisor relationship that includes accepting the fiduciary role of acting as your plan’s 3(38) investment manager. This doesn’t relieve you of all fiduciary duty to your plan participants, but it helps you sensibly shift the investment management portion to a professional investment manager.

Getting Started
Regardless of which plan or combination of plans makes the most sense for you, there are a number of custodians who are set up to house the assets for you. For the relatively straightforward solo-401(k) or SEP IRA, there should be no additional set-up fees. If you are planning to establish a company 401(k), defined benefit or cash balance plan, expect additional administrative and management fees to apply.

Circling back to where we began, if you are considering launching or have recently launched a new business, we are ready to help with your retirement plan set-up. Please feel free to reach out to us if you have any questions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Budget Deal Curbs Social Security Claiming Options

On Monday, November 2, President Obama signed into law H.R. 1314, the "Bipartisan Budget Act of 2015." One significant byproduct of the legislation is the elimination and/or curbing of two Social Security filing strategies that two-income married couples may have been using -- or counting on -- to increase their lifetime Social Security payouts. The two programs, referred to in the bill as "unintended loopholes," generally involve one of the following strategies: file and suspend and restricted application for spousal benefits. As with most things related to federal programs, there's complexity in the details.

Here are a few key points of explanation about the strategies and how the new law will change and/or eliminate them, along with some takeaways you may want to discuss with your advisor.

What's at Stake?

Very generally, the strategies in question allowed both spouses who had reached full retirement age (currently 66 for most claimants) to delay claiming benefits on their own earnings records -- and, thus, increase their individual annual payouts -- while, depending on the tactic used, also allowing one spouse to claim a so-called spousal benefit based on the other's earnings.

Under file and suspend, for instance, typically the higher earning spouse would start receiving Social Security payments and then suspend them, allowing the lower earning spouse to claim spousal benefits. Under restricted application for spousal benefits, typically the higher earning spouse would delay filing for his or her own benefit but claim the spousal benefit on the lower earning spouse's benefit.

In both scenarios, the end game for couples was to delay receiving benefits, perhaps until as late as age 70, and thereby increase Social Security payments by 6% to 8% per year -- potentially adding thousands of dollars more in income over their lifetimes.

What's Changing?

While dual-earner couples will still be able to suspend their payments and start up again at a higher rate no later than age 70, under the new rules they generally can no longer "double dip" -- that is, first collect one type of payment (i.e., spousal benefits) and then switch to payments based on their own earnings record, which would have grown due to delayed retirement credits. Similarly, in most cases, if you suspend payments, the new law will prohibit spouses or other dependents from claiming Social Security benefits on your work record until you resume payments again.1

Windows of Opportunity

Note that there is a four-month window in which these strategies will still be in effect in their current iterations. So if you are 66 now, or will turn 66 within the next four months, you may want to speak with your advisor about taking advantage of these claiming options before you lose the option to do so.

Also keep in mind that your age plays a key role in how the new rules may impact you. For instance, individuals who will be 62 or older as of December 31, 2015, may still be able to take advantage of some of these strategies once they reach full retirement age.2

In addition, those who are already employing these strategies are generally "grandfathered," and their benefits will not be eliminated or changed by the new laws. Similarly, widows and widowers generally won't be affected, while divorced persons and same-sex married couples may be among the groups most adversely affected by the changes.

While determining when and how to claim Social Security benefits has always been a challenging task, these new rules create even more complexity for those nearing retirement. If you need help navigating the changing Social Security landscape, speak with your financial advisor.

Source(s):

1.  U.S. News & World Report, "How the Budget Deal Changes Social Security," November 13, 2015.

2.  MarketWatch, "Millions of Americans just lost a key Social Security strategy," November 7, 2015.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 Wealth Management Systems Inc. All rights reserved.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Mutual Funds and Taxes: A Primer to Help Lighten the Load

Filling out your tax return is like compiling the index of a book -- the book is complete, but you have to rummage (sometimes painfully) through your work again, assuring accuracy and factual content, in order to make the book easier for someone else to read. If you're a mutual fund investor trying to determine your taxable gain or loss for the past year, your tax return will entail additional work.

 

But if you've kept good records and understand some basic guidelines, the process can be relatively painless.

 

Tax Treatment of Mutual Funds

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Managing a Disability or Chronic Illness

Create a financial plan that can help you make the best of any circumstance. Here's a checklist for financial preparedness.

 

Lay a secure foundation

 

Consider disability insurance to replace income that you may no longer receive if you become disabled by illness or injury. Some employers offer free or discounted disability insurance policies to their employees. Many insurance companies sell individual policies.

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Make the Most of Your 401(k)

As more Americans shoulder the responsibility of funding their own retirement, many rely increasingly on their 401(k) retirement plans to provide the means to pursue their investment goals. That's because 401(k) plans offer a variety of attractive features that make investing for the future easy and potentially profitable.

 

What is a 401(k) plan?

 

A 401(k) plan is an employee-funded savings plan for retirement. For 2015, a 401(k) plan allows you to contribute up to $18,000 of your salary to a special account set up by your company, although individual plans may have lower limits on the amount you can contribute. Individuals aged 50 and older can contribute an additional $6,000 in 2015, so-called "catch up" contributions.

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Maintain a Good Credit Rating

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Unhealthy Attachments

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

 

Have you ever made yourself suffer through a bad movie because, having paid for the ticket, you felt you had to get your money's worth? Some people treat investment the same way.  CLICK HERE TO READ MORE: Unhealthy Attachments.pdf

 

 

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Under the Surface

Here is a nice article written by Dimensional Fund Advisors:

 

Sophisticated systems and highly skilled people working with great efficiency and precision underpin every Dimensional fund.  This Issue Brief provides an overview of our operations.  CLICK HERE TO READ MORE:  Under the Surface.pdf

 

 

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Which Hat Are You Wearing?

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

 

Most of us have multiple roles—as business owners, professionals, workers, consumers, citizens, students, parents and investors. So our views of the world can differ according to whatever hat we're wearing at any one time.  CLICK HERE TO READ:  Which Hat Are You Wearing.pdf

 

 

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Introduction to Dimensional’s Advisor Byline 2015 Review

Here is a nice article provided by Bryan Harris of Dimensional Fund Advisors:

To counteract some of the stress that the markets have been putting us through lately, we’d like to share a short, upbeat tale with you about risks and expected rewards.

Once upon a time in 1981, there were two young men in Brooklyn who created a fund management company based on a set of ideas that were “bigger than the firm itself.” Its funds would be new and groundbreaking, but they would be guided by evidence-based insights that had been decades in the making. It would be the first fund manager (and still one of the few) with scientific discipline and academic oversight built into its strategies.

The firm has since flourished, with a global family of funds structured to efficiently capture worldwide dimensions of market returns. But during its early years, success was far from guaranteed. Its first fund was designed to isolate U.S. small-cap returns, which frequently defied expectations by under-performing U.S. large-caps for multiple, multiyear periods. During these trials by fire, its founders didn’t know when – or even if – their confidence in the science of investing would be rewarded.

But there was one thing they did know. If they abandoned their well-reasoned plan without giving it the test of time it deserved, failure would be certain. So they stuck to their evidence-based guns; the rest, as they say, is history.

As you might have guessed, this is the tale of Dimensional Fund Advisors. It’s a tale to take to heart for your own resolve. In that context, we are pleased to share Dimensional’s freshly released 2015 Market Review.pdf.

With an evidence-based rigor, the data is the data. We don’t attempt to whitewash it. At a quick take, 2015 was marred by nearly universal negative-to-low returns, especially from small-cap and value stocks; continued declines in the world oil market; and weak economic growth in China and elsewhere. Investors who held globally diversified portfolios tilted toward riskier sources of market returns were not rewarded. Not last year, anyway. 

The stage-setting in 2015 may or may not also explain the rough ride we’re experiencing so far in 2016. But if you add Dimensional’s current annual review to the ones it has been publishing since 2011, the sensible take-home becomes clear: Markets have been on an overall uphill trajectory for as long as anyone has been tracking them. But they’ve also exhibited wild unpredictably nearly every step of the way. In that respect, the current climate is no exception to our evidence-based expectations. It’s the “risk” part of the risk/reward equation.

We invite you to use Dimensional’s 2015 Market Review to better understand some of the global forces that are shaping the markets today. For shaping your own financial course, two sources remain your best guides: (1) the tenets of evidence-based investing, which give you your best odds for investment success over time; and (2) your personal relationship with Diversified Asset Management, Inc., to keep you from playing too many of your own emotional wild cards during the heat of the pursuit.

If we can help strengthen your resolve or answer any questions during these challenging times, please be in touch.

Robert J. Pyle, CFP, CFA
Diversified Asset Management, Inc


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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A Global Movement

Here is a nice article provided by Dave Butler of Dimensional Fund Advisors:

 

Dave Butler discusses his summer 2015 visits to Dimensional’s regional offices and explains why he thinks the independent financial advice model is advancing worldwide.  CLICK HERE TO READ MORE:  A Global Movement.pdf

 

 

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The Rise of Short-Term Rates

Here is a nice article written by Dimensional Fund Advisors:

 

While many market participants wait for the “inevitable” rise in short-term interest rates expected when the Federal Reserve tightens its monetary policy, some investors may have missed the increase in short-term rates already underway as a result of market forces.  CLICK HERE TO READ MORE:  The Rise of Short Term Rates.pdf

 

 

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What Happens to My Retirement Assets in the Event of a Divorce?

Federal law requires that participants in employer-sponsored retirement plans designate their spouse as their beneficiary unless the spouse waives this right in writing. Assuming that you and your spouse adhered to this practice, a document known as a Qualified Domestic Relations Order (QDRO), which is part of a divorce settlement, specifies how retirement assets are divided.

 

A QDRO specifies the amount or portion of a plan participant's benefits that are paid to a spouse, former spouse, child, or other party. A QDRO typically governs assets within a retirement plan such as a pension, profit-sharing plan, or a tax-sheltered annuity. Benefits paid to a former spouse typically are considered income for tax purposes. If you contributed to your retirement plan, a prorated share of your investment is used to determine the taxable amount.

 

Former spouses on the receiving end of a lump-sum distribution mandated by a QDRO may be able to roll over the money tax free to a traditional individual retirement account or to another qualified retirement plan. Following such a transfer, assets within the plan are subject to rules that would normally apply to the retirement plan. If you transfer assets within a traditional IRA to your spouse as part of a divorce decree, the transfer is not considered taxable and the assets are treated as your former spouse's IRA.

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FAQs About Investing In 529 Plans

In a recent post, we addressed a frequently asked question about determining where you stand with your overall investing. Today, let’s focus in on a subject near and dear to many investors’ heartfelt goals: funding their children’s higher education. 

 

To help families save and invest for college, Congress created the tax-advantaged 529 plan in 1996, named after Section 529 of the Internal Revenue Code. Today, you’ll find that most states and some educational institutions offer 529 plans. 

 

While there are often good reasons to establish a 529 plan for college savings, there also are many factors to be weighed and choices to be made along the way. Savingforcollege.com is a great resource to learn more, but here are two of the biggest questions we regularly encounter. 

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What Are the Tax Issues Associated With a Gain or Loss on a Primary Residence?

For U.S. federal income tax purposes, you may be able to exclude from income any gain up to $250,000 for a single taxpayer and $500,000 for a married couple filing a joint return. Generally, to exclude the gain, you must have owned and lived in the property as your main home for two of the five years prior to the date of the sale. If you lose money on a sale, the loss is not tax deductible.

 

Your Adjusted Basis

 

A dollar amount known as your adjusted basis determines whether you experience a gain or a loss. If you purchased or built your home, your initial cost basis typically is the cost to you at the time of purchase. If you inherit a home, the cost basis is the fair market value on the date of the decedent's death or on a later valuation date selected by a representative of the estate.

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Choosing the Right Benchmarks for Your Mutual Fund

Community school boards use standardized tests to gauge how their students perform in relation to national averages. On an even more basic level, your local weather forecasters can check the accuracy of their predictions by measuring temperatures and rainfall. As a mutual fund investor, you also have tools available to gauge the performance of your investments. Such tools are known as market benchmarks. The challenge, however, is choosing the tool that most accurately serves your purpose.

 

What Are Investment Benchmarks?

 

The dictionary defines a benchmark as "a point of reference for measurement." Market benchmarks are used by individual investors, portfolio managers, and market researchers to determine how a particular market or market sector performs. Often cited in news reports, market indexes can be especially helpful to mutual fund investors by offering market "standards" to help them evaluate the risk and the return history of their own investments. However, investors should remember to compare their mutual fund to the index that best tracks securities comparable to the fund's holdings, and to use an appropriate time frame.

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Coping With Market Volatility

Global market volatility ramped up last summer as worries about the tenuous state of the Chinese economy shook virtually all major financial benchmarks, indicating once again how interrelated the world's economies and investment markets have become.

 

Widespread uncertainty has not only heightened anxiety among investors, it was also a likely contributor to the Federal Reserve's decision to leave interest rates near zero when the Central Bank's decision-makers met in September. Indeed, despite the continued strengthening of the U.S. economy, there are many signs that indicate that this turbulent period for stocks may linger indefinitely.

 

Five Investing Strategies for a Volatile Market

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When Changing Jobs, It Pays to Keep Track of Your 401(k)

Americans are on the move, not only in their leisure pursuits, but in their jobs as well. According to the Bureau of Labor Statistics, about 38% of U.S. workers change jobs every year. If your employment situation changes, do you know what your choices are for managing the money in your 401(k) account?

 

Generally, workers have four options available to them: leave the money in their former employer's plan, transfer the money into their new employer's 401(k) (if allowed), roll the money into an IRA, or take a cash distribution. What many individuals don't realize is that if they fail to choose one of those options -- and their account balance is small enough -- the decision can be made for them. Specifically, current law allows employers to force participants with vested balances of $5,000 or less out of their 401(k) plans into an IRA without their consent. Further, if the account balance is less than $1,000 when the participant separates from the employer, the plan is allowed to cash out the account, triggering taxes and penalties if the participant does not take action in a timely manner to redeposit the money in another retirement account.

 

How prevalent are these practices? According to the Plan Sponsor Council of America, more than half (57%) of 401(k) plans transfer account balances of between $1,000 and $5,000 to an IRA when a participant leaves the company and/or cash out those accounts with balances of less than $1,000.1

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Common Estate Planning Mistakes -- and How to Avoid Them

Estate planning can be a minefield of potential missteps, some of which could have far-reaching consequences. Many of the poor choices individuals make when planning for their own future or passing assets to their families are caused by "one-size-fits-all" planning strategies or well-intended advice from family or friends. Following are some common and potentially costly mistakes along with suggestions for avoiding them.

 

Failing to plan. Whether drafting a basic will or crafting an elaborate strategy involving trusts and tax planning, an estate plan can help reduce estate taxes, save on estate administrative costs and specify how your assets are to be distributed. Today, the majority of Americans have no will. If you die without one, your estate will be divided according to the intestacy laws of your state -- not according to your wishes. This could create problems if your intended beneficiary is a minor child, a child with special needs, a favorite charity, or a combination of the above. In these cases, you need a will that details each contingency and a trust or multiple trusts to accomplish your goals.

 

Not maximizing your marital estate exemptions. Perhaps one of the most important pieces of tax legislation passed recently is referred to as the "portability" provision. This means that if one spouse dies without using up his or her federal estate tax exemption -- $5.43 million in 2015 -- the unused portion may be transferred to the surviving spouse without incurring any federal estate tax.

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Large-Cap Stocks: Why They Could Be a Building Block for Your Portfolio

Stocks and stock mutual funds are often grouped according to size, or "market cap," a term that represents the total dollar value of a company's shares.1 Market cap is calculated by multiplying a stock's price by the number of shares outstanding. For instance, if XYZ Corp. had a price of $25 per share and had 10 million shares outstanding, it would have a market cap of $250 million.

 

Large-Cap Defined

 

Most stocks can be categorized as small-cap, mid-cap, or large-cap. Large-cap stocks tend to be the stocks of well-established companies. They may have long track records and hold dominant positions in their industry. These companies often employee thousands of people and may provide some of the world's best-known products and services.

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DFA’s Disciplined Approach Earns It a Top Mark

Here is a nice article provided by Morningstar:

 

Morningstar recently issued a new Stewardship Grade for Dimensional. The firm’s overall grade is an A. The report is available as a PDF that can be downloaded and distributed by email, and hard copy reprints are available through your regional director.  CLICK HERE TO READ MORE:  DFAs Disciplined Approach Earns Its a Top Mark.pdf

 

 

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Why Is One of My Investment Accounts Underperforming?

Welcome to 2016. In this new year, let’s explore some of the questions we hear most often when speaking with clients. We’ll lead with one that may be top of mind as you’re reviewing your year-end reports and considering where you stand in the roller coaster markets we’re enduring at the moment: 

 

Why is one of my investment accounts underperforming?

 

We hear this question a lot, especially when the market is particularly moody (which, let’s face it, is quite often). For example, clients will come to us after noticing that their Roth IRA seems to be steaming ahead of their Traditional IRA; they wonder if something needs to be adjusted. We sometimes hear a similar question about why one account’s returns are more volatile (swinging up and down more wildly) than another. 

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The Patience Principle

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

 

Global markets are providing investors a rough ride at the moment, as the focus turns to China's economic outlook. But while falling markets can be worrisome, maintaining a longer-term perspective makes the volatility easier to handle.  CLICK HERE TO READ MORE:  The Patience Principle.pdf

 

 

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Taking Stock

Here is a nice article provided by David Butler of Dimensional Fund Advisors:

 

Dave Butler shares an essay by David Goetsch, who explains how his long-term view of investing helped him avoid the emotional rollercoaster during the market’s recent volatility.  CLICK HERE TO READ MORE: Taking Stock.pdf

 

 

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Should Investors Sell After a "Correction"?

Here is a nice article provided by Weston Wellington of Dimensional Fund Advisors:

 

Financial professionals generally describe any decline of 10% or more from a previous peak as a “correction.” Should investors seek to protect themselves from further declines by selling, or should they consider it an opportunity to purchase stocks at more favorable prices? CLICK HERE TO READ MORE: Should Investors Sell After a "Correction"?.pdf

 

 

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Considering Central Bank Influence on Yields

Here is a nice article written by Dimensional Fund Advisors:

 

Many market participants presume that long-term interest rates will rise when a Fed tightening policy begins. However, history shows that short-term rates and long-term rates do not move in lockstep.  CLICK HERE TO READ MORE:  Considering Central Bank Influence on Yields.pdf

 

 

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Investing in Stocks

Shares of common stock play a role in just about every investment portfolio. This article is for those who'd like to know more about where their savings might be invested. Here are the basics:

 

•  Stock (sometimes called equity) represents ownership of a company, divided among the company's shareholders.

 

•  While any company can issue stock, only companies that meet legal requirements can issue shares for trading on U.S. stock exchanges where they can be bought and sold by any member of the public.

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Consider Prepaid Tuition Plans for College Savings

For parents planning for their children's college education, there are several investment options to consider. One option that seems appealing is state-sponsored prepaid tuition plans available in several states. These plans allow parents to pay today's tuition rates with the assurance that the child will have the money to go to college when the time comes. They also allow participants to defer paying federal income tax on earnings until money is withdrawn for college.

 

These plans sound very attractive because of their guarantee as well as relative simplicity. Prepaid tuition plans differ from college savings plans that seek higher returns not tied to the increase in tuition. College savings plans do offer the potential for higher returns than the rate of tuition inflation, but there is a risk that your investment could lose value.

 

How Do the Plans Work?

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Money Management for a Single Parent

As a single parent, you're probably familiar with the dual challenges of managing a household and planning for the future on your own. But are you as familiar with the financial strategies that can stretch your income and help you get ahead? Consider the following lessons to help improve your family's bottom line.

 

Lesson #1: Identify Your Goals

 

You can't have a financial plan without first defining your financial goals. Start by recording all of your short-, medium-, and long-term goals.

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Millennials: The "Slow and Steady" Generation of Investors

With some $30 trillion poised to change hands over the next several decades from parents and grandparents to so-called Millennials -- those 90-million-plus Americans aged 18 to 33 -- the financial services industry will have its work cut out for it. Popular investing wisdom states that the younger you are, the more time you have to ride out market cycles and therefore the more aggressive and growth-oriented you may be in your investment choices. Yet Millennials are hearing none of it.

 

As Investors: Wary and Conservative

 

Indeed living through the Great Recession and watching their parents and other older family members suffer financial losses may have taken a toll on these young investors -- and made them wary of investing in general and conservative in their investment choices. For instance, according to Wealthfront, an online financial services start-up that caters to this demographic group, Millennials "have lived through two market crashes … " and … "value simple, transparent, low-cost services," typically favoring index-based fund options over more exotic investment fare.1

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Plan Ahead for Gift Giving

Special occasions often call for gift giving: a graduation in May, a wedding in June, an anniversary in July, and birthdays throughout the year. Each event seems to sneak up on us -- and our budgets. Retailers plan for holidays and seasonal sales, so why not do a little gift planning of your own?

 

Here are a few tips for your planning list:

 

•  Save now. Gift buying will seem more manageable if you've been saving for it a little at a time. Whether you set up a formal gift account and contribute to it regularly or just stash away a few extra dollars here and there, it's good to accumulate cash that is earmarked for gift giving.

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Calculating Taxes on Mutual Funds

For mutual fund investors, earnings come from two sources: fund distributions -- dividends or capital gains -- and the sale of fund shares.1 Income from these sources may be taxable. Fund companies typically send year-end statements to shareholders that summarize the information used to report investment gains or losses to the IRS. Here's a look at how taxes on your mutual funds are calculated.

 

Taxable Distributions: Dividends and Capital Gains

 

As a shareholder, you must pay taxes on dividends or capital gains passed on to you in the year they were received, even if they were automatically reinvested to buy additional fund shares. In general, dividends and capital gains attributable to a fund's underlying investments are taxed as follows:

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When More Risk Equals Less Risk

If I asked you to name the most risky asset class, which would you pick?

 

•  Emerging markets 1

 

•  Commodities 2

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Let us give you a second opinion

Contact us to schedule a no-cost no-obligation consultation and receive a free special report called Finding the Right Financial Advisor - Seven Questions to Help You Discover Whether a Financial Advisor Is the Right Match for You and Your Family.