Retirement planning in America is no simple task. Whether it’s navigating the ever-shifting tax code, factoring-in the rising cost of healthcare, or devising income strategies from various sources like Social Security and retirement investment accounts, investors have many decisions to make and potential strategies to pursue. So, amidst the many complexities involved with retirement planning, it’s useful to take a step back and think about retirement planning in simpler terms. In other words, start with a basic framework first, and then grind down into the details from there. Here are 3 practical tips for setting a solid course for your retirement. [+] Read More

If it feels like the United States has been delivering good (but not gangbusters) economic growth and solid stock market returns since 2009, it’s because it has been – at least relative to some other parts of the world. Europe has continued to struggle with GDP growth and cannot seem to fully shake its sovereign debt issues; Japan has experienced weak growth and lackluster inflation for years; Britain is taking the significant and potentially risky step of leaving the European Union; and Emerging Markets growth has slowed. In a world of political and economic uncertainty, the United States often feels like the best house on the investing block. For those reasons – and because the US is arguably the largest and most diverse economy in the world – many investors prefer to keep their money close to home. In many ways it makes sense, and for the last few years it has likely been a beneficial strategy. But as Russ Koesterich of Blackrock (the largest money manager in the world1) smartly points out, “the tendency to invest close to home is understandable, [but] it may not be optimal,” adding that “US outperformance isn’t pre-ordained.” [+] Read More

If you were asked to give only one answer to the question, “What do you think is the most important quality in a healthy relationship?” what would you say? Our answer: communication. There are, no doubt, other important and necessary qualities in a healthy relationship, like trust, honesty, and commitment to a common goal or end. But it all boils down to the ability to communicate freely and openly. Good communication means being on the same page and working as a team, which in turn makes problem-solving less difficult – and maybe even fun. Think about instances in your workplace or with your spouse/partner where strong communication made everyone happier, more confident, and more productive. There are probably a lot of breakthrough moments that come to mind! Why wouldn’t the same strengths of communication apply to financial planning? Well, they do. [+] Read More

In a recent post on 529 plans titled, “Helping You Understand the Basics of 529 Plans,” we discussed some features of 529 plans work and whether they might make sense as part of your comprehensive financial plan. [+] Read More

529 plans are college savings plans sponsored by state or educational institutions. Congress created them in 1996 to provide a tax-advantaged way for people to save for college or other post-secondary education. There are numerous features of 529 plans and a wide variety of options when it comes to choosing one, so it’s prudent to consult a financial planner before making a decision. Below are some questions to help you understand the basics of 529 plans to help you get started. Who qualifies for a 529 Plan? Any U.S. citizen over the age of 18 and of any income level can open a 529 plan, and the beneficiary of the plan can be anyone with a Social Security number or tax I.D. The beneficiary can be a future college student of any age—the plan isn’t necessarily limited to people under the age of 18 who haven’t attended college yet. The owner of the 529 plan may also change the beneficiary (for example, to a different family member) if they wish. How do 529 plans work? Contributions to 529 plans are after tax, but the earnings grow tax-free on the federal level and may also qualify for state tax deductions. Once the beneficiary goes to college or a qualified post-secondary institution, distributions from the 529 plan that are used for qualified education expenses are not subject to federal tax. [+] Read More

The Achieving a Better Life Experience (ABLE) Act is still fairly new; it was signed into law in December of 2014, so many people are still unaware of what it is and how it can be used.1 In fact, only a few states will have their programs up and running in 2016. The bill’s intent is to ease the financial burdens faced by individuals with disabilities by making tax-free savings accounts available that can cover expenses such as housing, transportation, and education. Let’s take a closer look at the ABLE Act and how it might be helpful to you with your financial planning. [+] Read More

Passive investing – which is also categorized as index investing or simply ‘investing in Exchange Traded Funds (ETFs)’ – has gained popularity in recent years within the investment community. In 2015 alone, roughly $150 billion moved out of mutual funds while $150 billion moved into ETFs (according the Thomson Reuters). It is probably a coincidence that the money moving in and out was nearly the same, but that’s not the point anyway. What is clear is that ETFs are gaining popularity while enthusiasm for mutual funds is fading, and this is a trend that has been going on for years.1 Performance and fees are probably two key drivers of the sea change. Over the last 20+ years, the percentage of active managers (mutual funds and otherwise) that outperform passive indexes can range anywhere from 10% to 80%, but from year to year the actual number fluctuates widely.2 If an investor has a manager or managers that have a couple of years underperforming their benchmark (usually an index), the investor might grow tired of paying management fees and decide to take a passive approach instead. The theory behind taking a passive approach is fairly simple – it offers the investor less in management fees with index-like returns. But does it? There are two little-discussed flaws with the passive approach that can be influential (and detrimental) to performance. [+] Read More

Quizmaster, Doug Hutchinson, has come up with another great quiz for us regarding how tax aversion can sometimes lead investors to make sub-optimal investment decisions. Good luck! Consider this scenario: Your friend Jeff owns a mutual fund worth $100,000 in his taxable account. Jeff has been considering selling the mutual fund and replacing it with a similar investment with lower fees (and, therefore better projected net of fees returns). However, Jeff is leaning toward not selling his mutual fund because his cost basis on the mutual fund is $75,000, so selling it would create a taxable gain of $25,000. [+] Read More

Here’s a fact about financial advisors (NOT Investment Advisors) that may surprise you: they do not necessarily have to act with your best interests in mind. Please, take a moment to shake your head in disbelief. It’s ok. Actually, it’s not ok! The way the law exists today, advisors and brokers can be classified in one of two ways. Either they give you investment advice according to the fiduciary standard, or they adhere to what's known as the suitability standard. It’s the latter one that can be problematic, and it’s also the growing subject of legal debate as the White House and Department of Labor consider new rules. Below, we broke down what you need to know now and what to look for ahead. [+] Read More