Let’s say you have a $1,000,000 investment portfolio, and you’re withdrawing $40,000 of annual income to meet your retirement spending needs. Adjusting your withdrawals up to $50,000 a year doesn’t seem like a big move, and in percentage terms it’s not – you’re only increasing them from 4% to 5%. But the impact it could have on your portfolio is significant, and it can really have an adverse effect on your long-term retirement goals: [+] Read More

One of the distinguishing features of the Great Depression was marked deflation from 1930 – 1932, with prices falling precipitously (-30%) over that time.1 Deflation spiraled, and the stock market and investor portfolios tumbled with it. With recent headlines citing deflation as a concern, we’re taking a moment to remind investors about the negative effects of deflation, its present-day risk in the global economy, and what steps investors concerned about deflation can take in their portfolios. What is Deflation and How Does it Affect the Economy? Deflation occurs when prices of goods fall on a broad scale, usually due to sharp declines of money in circulation or because of a big spike in the supply of goods with little supporting demand.2 The key phrase here is “broad scale.” The prices of flat screen TVs might fall year-over-year, for instance, but that’s more likely because of productivity gains and innovation within that sliver of consumer goods than it is a broad-scale economic issue. [+] Read More

The 2008 financial crisis left many investors cautious about investing in stocks, and rightfully so. The thought of experiencing steep market declines is a recipe for losing sleep at night, and no investor wants that type of feeling about their portfolio. Investing with caution is understandable, but it’s to the point that many investors could be inadvertently hurting their retirement by choosing to remain in cash and other short term investments instead of putting their money to work. The Opportunity Cost of Waiting in Cash A recent survey by BlackRock found that nearly half of investor’s portfolios are in cash, with a relatively small proportion dedicated to longer-term investments like stocks. What’s more, half of those investors said they intend to keep that cash in their portfolios for the next 12 months, and 36% of investors said they plan on increasing their cash holdings over the course of the year.1 [+] Read More

The market was down 4% in January,1 and that’s left some investors wondering if they should be concerned about the “January Barometer.” This indicator is tied to that old stock market saying: “so goes January, so goes the year.” If the barometer is a reliable indicator, this could be a negative. So is it really reliable? Going back to 1979, in the 12 years the market fell in January, the market only followed along in 4 of those years – meaning the January barometer only predicted negative returns a meager 33% of the time.2 In our view, a 33% success rate just isn’t powerful enough that it should influence investment decisions. [+] Read More

Here are three approaches to generating the desired amount of retirement income. When deciding which option – or combination of options – is right for you, we’d encourage you to seek the help of a financial advisor. 1) Get the Most Out of Your Social Security Retirement Benefits There are several strategies to consider when trying to optimize how you activate your social security retirement benefits. We’ve written about two methods in particular that may help you increase the size of your Social Security check, if executed correctly. The first is the Restricted Application for Spousal Benefits, and the other is the File and Suspend Strategy. [+] Read More

According to a study conducted by benefit consultant Aon Hewitt and advice firm Financial Engines, investors who did not use the help of a financial advisor tended to underperform with their investments. The study looked at the 401(k) returns of more than 425,000 savers from 2006 through 2010, and found that the median annual return of those who got professional help was almost 3% higher than the return for those who invested on their own, even after taking fees into account.1 Why Did Investors Without a Financial Advisor Underperform? According to the study, one of the reasons for the performance gap was that the investors who self-managed were far more likely to be too aggressive or too conservative, instead of a diversified balance of the two. [+] Read More

One of an investor’s main goals in retirement is to have his or her income needs met for as long as they live. But sometimes folks forget to plan for how their spouses and families will have their income needs met as well. The central question to ask yourself, and it’s a difficult one, is: “If I pass away tomorrow, will my nest egg be able to support my family’s financial needs?” Here are four steps investor’s should take to find out how prepared they are, and whether or not their nest egg is big enough to support their family’s needs. 1) Take an Inventory of All Valuable Assets This can be a rather exhausting exercise, but it’s crucial to the planning process. You should have a full list of all of your assets (property, stocks, jewelry, anything with material value) as well as your debt (if any). You can use this list when creating an investment plan, to keep track of how much everything is worth over time. Make the list once, and then have your financial advisor ask you about it regularly to make sure it’s all there and accurately valued. [+] Read More

Thanks to advances in medical technology, folks are generally living longer. This is great news. But it also doubles as an action item for investors, because the longer you live, the more you’ll need saved to provide for your spending needs in retirement. The question then becomes, what is the best way to calculate your life expectancy so you can plan retirement accordingly? When Planning for Retirement, Use a Conservative Estimate for Life Expectancy Everyone can likely agree that when it comes to retirement planning, it’s better to have saved too much than too little. By making a conservative estimate of you and your spouse’s life expectancies, you encourage yourself to save more and invest for longer, so that you can secure your income and spending needs throughout a long retirement. It’s a smart approach. [+] Read More

April 15 is fast approaching and the W-2s, 1099s, and other tax documents are starting to appear in your mailbox - it’s almost time to file. What’s more, with Congress having passed some tax law changes in 2013 - higher top marginal income tax rate (39.6%), higher capital gains rate (20%) for top earners, etc1… - there’s a possibility that your tax bill has increased from 2012. With that in mind, it could make sense to start preparing your taxes early in the event you might owe a bit more than you think. This way you’ll have additional time to decide how you want to pay. We hope the information below will help make the tax preparation experience a little better by reminding investors of a few ways they may be able to reduce their taxable income for 2013, while also offering a few pointers for thoughtful tax planning in 2014. Ways to Potentially Reduce Taxable Income for 2013 It’s too late to make tax deductible contributions to 401(k) plans or other employer-sponsored plans for the 2013 tax year. But, you might still have some alternatives—if you meet some eligibility requirements, you could potentially make a tax deductible contribution to a Traditional IRA, a SEP IRA, or a Health Savings Account, which would reduce the taxable income that you would report for the year. [+] Read More