Objective information about financial planning, investments, and retirement plans

Investing: The Bull Market Turns 5 What Now?


The S&P 500 Index hit a low of 677 on March 9, 2009 at the bottom of the market drop connected to the financial crisis.  Since then the market has been on a tear, closing at 1,878 on March 7, 2014 for a gain of 178%.  Many market averages are at or near record highs.  As the rally celebrates its 5th anniversary what should investors expect going forward?

Birthday Party BashAccording to CNBC:

  • This Bull Market is the 2nd strongest since World War II
  • This is the 6th longest Bull Market of all-time
  • This is 4th strongest Bull Market of all-time 

How long do Bull Markets typically last? 

According to Zacks Investment Research the average length of a Bull Market since 1921 is 62 months and the average gain is 180%.  The median gain is 115% and the median length is 50  months.

At 60 months and counting with a gain of about 178% the current Bull Market is about average.

What’s next?

Over this past week I’ve heard varying opinions on CNBC.  Perpetual stock market Bear Harry Dent is predicting the Dow Jones Industrial Average will drop to 6,000 by 2016 from its current level of 16,453.

Another guest thought we were in the middle of a 15 year secular Bull Market.  Basically anyone’s guess is as valid as anyone else’s.

What should you do now? 

Perhaps more than ever a financial plan will put you on the right path.  If you stayed in the markets through the financial crisis and through these past five years your portfolio has likely done pretty well.  Perhaps you are even ahead of your retirement goals.  Your financial plan will help you determine where you stand relative to your goals.  This process will also help you determine if your asset allocation is still appropriate or if perhaps you should dial down your level of risk.

Investing when it feels good can be dangerous.  I wrote Investing: John Hancock’s TV Ad – Brilliant and Disturbing last year criticizing the company’s ads suggesting now was a good time to get back into the market.  Clearly anyone who did invest at the time of these ads did pretty well in 2013, but time will tell on longer term basis.  Moreover investors who feel the need to jump back into the markets because they feel like they missed out may live to regret that decision.

I have no idea what the future holds and I’m not saying that investing in equities is a bad idea.  What I am saying is that investors should not get caught up in the current market euphoria, but rather they should invest based upon their goals, risk tolerance, and the time horizon in which the money will be needed.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss  all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

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Meaningful Family Conversations for the Holidays


This post was written by fellow NAPFA-Registered fee-only financial advisor Megan Rindskopf.

With Christmas less than a week away and the streets abuzz with holiday spirit, it is easy to get consumed by the busyness of the holidays. We encourage you this season, amidst the shopping shuffle and the corporate holiday parties, to pause. Take time this year to reflect on the people and the relationships that are most important to you.

Diabetes365 Day 48 November 24 - The family

Every family is different and there is no one-size-fits-all solution to a family’s situation – whether family members are estranged or everyone is “thick as thieves,” take the opportunity this year to have meaningful conversations with your loved ones. Reflect on memories – appreciate the tough moments that have made your relationships stronger and be grateful for the memories that make you laugh. Most importantly though, share your thoughts and feelings with the ones you love, because we never know how short life might be.

As you enjoy the company of family and friends during the holidays, pause for a moment to consider the following: 

If something happens to me, will my loved ones be taken care of?

While this thought may seem a bit morbid around the holidays, in reality, what better time than when we are surrounded by family and friends to remind us to have the appropriate insurance coverage in place to protect the ones we care about most.

If you or your spouse become disabled, do you have the right coverage(s) in place to make sure you can still support your family? Retirement, college and other savings goals become much more difficult to accomplish when your income stream is greatly reduced or eliminated entirely.  Proper disability insurance can help supplement the loss of income associated with a long term disability. My colleague Cheryl Sherrard was recently quoted in Financial Planning Magazine regarding group disability insurance. Click here to read the article (free registration may be required).

If you or your spouse become ill and needs skilled nursing care, do you have Long Term Care insurance or adequate additional resources in place to cover in-home care or a skilled nursing facility?  Equally as important – have you had those conversations with your family members so they know what type of care you desire in the event a long term care need arises? It is important to have these discussions before an issue arises.

If you or your spouse passes away unexpectedly, do you have the right life insurance in place to support your family? Depending on your family and financial situation, you may or may not need life insurance coverage. It is important to understand both the amount and type of life insurance you need, in order to assess whether any adjustment is necessary. Work with a financial professional who knows you and thoroughly understands your needs and your goals when assessing your family’s needs.

Do I have current estate planning documents and have I communicated my wishes to my family?

It is imperative to have the essential legal documents in place to protect against the unexpected. In order to avoid family turmoil once you are no longer living, it is also helpful if you have discussed your wishes with the friends and family members involved. While these conversations can be difficult to initiate, they can bring clarity to a situation and help reduce family conflict once you are gone. If the conversations are too difficult to have, a hand-written letter or video can accompany the Last Will and Testament explaining your decisions.

If you are unsure if your documents are still adequate, consult your estate planning attorney to see if you need to establish new estate documents or update your existing documents.

The holidays present opportunities for family members to spend quality time together and create lasting memories. Show your gratitude this season by making sure your loved ones are properly protected financially and by having open, honest conversations with your family members before issues arise. Being proactive for the benefit of those you love is the best gift you can give this season.

Megan Rindskopf is a Financial Advisor for Clearview Wealth Management in Charlotte, NC. As a NAPFA-Registered Financial Advisor and CERTIFIED FINANCIAL PLANNER™ professional, Megan helps individuals and families reach their goals through a holistic and customized approach to financial planning. Much of her time is spent helping young, high earning professionals prioritize competing demands so that they may successfully achieve financial clarity and independence, along with a healthy work-life balance for the long term. Clearview Wealth Management is an independent, fee-only Registered Investment Advisor firm that cares deeply about each relationship and is committed to lifelong partnerships with clients and their successive generations. Megan can be reached at mrindskopf@cvwmgmt.com, or connect with her on LinkedIn. If you would like to learn more about Clearview Wealth Management and the people they work with, check out their website at www.clearviewwealthmgmt.com 

Thanks to Megan and her firm for these excellent thoughts and tips for addressing these difficult issues.

As always please feel free to contact me  at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

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The end of the year is a time to celebrate the holidays with family and friends.  Sadly it is often the time of year when many employers look to reduce employee headcount.  My thanks to Chicago attorney Daniel N. Janich for contributing this guest post with his thoughts and suggestions on what you should do if you find yourself being let go by your employer now or at some point in the future. 

Okay. So you have just been notified that your employment has been terminated. Perhaps you just came back from a meeting with the boss, or you received an email or other written notice from the HR department simply informing you to clean out your desk.

Lady Justice


Overcoming the initial shock

After overcoming the initial shock of this news, you soon realize that you were handed some papers from your employer to sign. Among them is a proposed separation agreement with the terms of your severance package.  Upon your brief initial review of the agreement you learn that you will receive your severance only if you agree to sign a release.

What are the issues that you should watch out for before putting pen to paper? Should you sign the severance agreement “as is” or do you believe you have any leverage to negotiate for a better deal and perhaps modify some of its terms?  What should you do before signing a separation agreement?

First, before doing anything else, thoroughly read through the entire separation agreement.  Make notes if necessary of provisions which may be of concern or which you do not understand or you think you might want to modify or even delete. You should also review any other employment or compensation related agreements that you may have signed with your former employer in the past as well as your Employee Handbook. The purpose of this review is to ensure that all the terms in your separation agreement are consistent with those in other documents. If they are not, your separation agreement will most likely expressly provide that its terms supersede those of any earlier agreement or understanding, thus effectively nullifying these earlier agreements if and when you sign the separation agreement.  In such case you need to be keenly aware of exactly just what it is that you are giving up by signing the separation agreement.

If you are at all uncomfortable with any of the provisions in the separation agreement, and there is a big enough severance amount involved in your deal, you will likely benefit by hiring an experienced attorney to review the agreement for you and provide you with an analysis and recommendations. You may also want the attorney to negotiate with your former employer on your behalf. The fees involved may be money well spent because you will be made aware of potential problems with the agreement that you did not spot on your own, and you will be provided with practical solutions that will not only preserve your severance benefits but might also provide you with more favorable terms for your agreement. Additionally, the attorney may also uncover claims against your former employer you may not even been aware you had.

Review the agreement

Second, regardless of whether you hire an attorney, determine if the agreement presents issues that either need to be resolved or clarified before you are ready to sign it. Here is a list in no particular order of importance—and by no means exhaustive—of the typical provisions in a separation agreement which might cause problems for employees, and therefore, which you should review very carefully:

  • Termination date.  Your termination will end your participation in the company’s benefit plans.  When will you be required to transition your health coverage under COBRA?   Under COBRA the entire cost of your health insurance premiums under the company’s group coverage will generally be paid out of your own pocket. (See COBRA discussion below).
  •  Severance amount.  Is your severance consistent with the company’s severance policy and practice? Are you being downsized and perhaps entitled to participate in a company sponsored severance plan?  Is the severance amount that is being offered sufficient to justify you signing a release?
  • Method and manner severance is to be paid.  For how long will you be receiving severance payments?  Does the structure of your severance payouts comply with Internal Revenue Code Section 409A’s deferred compensation rules? (Ask the company’s HR department or your lawyer about this issue as the penalties for non-compliance could be great.) When will severance payments begin and under what circumstances might they end before you receive the entire amount?
  • Scope and duration of the noncompete. A noncompete provision in your separation agreement means that you might be prevented from seeking other viable job opportunities in your field within your former employer’s industry for a certain period of time and within a designated geographic area after signing the separation agreement. What is the duration of your noncompete? How big is the geographic area?  You should ascertain whether you could obtain a waiver of these restrictions if necessary.
  • Nondisparagement.  Will you be prevented from saying anything negative, even if it is truthful, to anyone either orally, in writing or through social media regarding your former employer or the products and services provided by your former employer?  Is this provision mutual, which would prevent your former employer from saying negative things to others about your character or job performance? Should you negotiate receiving a letter of recommendation from your former employer or a positive recommendation if a prospective employer should contact your former one?
  • COBRA coverage.  When will your COBRA coverage begin? Have you received your COBRA notice and election form? When is your election form due?  When is your first premium payment due? You might be able to negotiate that a portion of your COBRA premiums be subsidized by your former employer.  Are there any circumstances that might extend your COBRA coverage, if necessary, beyond the initial 18 months following your employment termination?
  • Continuing Cooperation.  Are you required under the separation agreement to be available to your former employer if needed as a witness or to participate in a legal investigation on behalf of the company?  If so, how will you be compensated for your time and your out-of-pocket expenses?  Is there flexibility in the amount of time you are required to provide and when you must make yourself available to your former employer?
  • Scope of general release.  Is the general release that you are required to sign prepared broadly to cover any possible claim of any kind and at any time in the past, present or future, in connection with your former employer?  Or does it address only claims relating to your employment relationship and its termination?  When must you sign and return the release? Is this at the same time as the date your separation agreement must be signed and returned?

Some additional pointers

If the provisions of your separation agreement require negotiation of its terms, then you should seek at the outset a written extension of time to sign and return the separation agreement and release.  In fact, it is a good idea to obtain a written  extension as soon as the need for it is apparent to give you sufficient time to resolve issues of concern in the agreement or release without undue pressure to accept terms you might not otherwise agree upon simply to avoid forfeiting the severance amount that was offered to you.

Prior to signing any release you should consider and discuss with your attorney whether you have any potential claims—which would most likely be employment or benefit related—that you would be giving up by signing the release.  Your attorney should confirm with you after reviewing your employment related documents, including your written employment agreement if any, and copies of any retirement or welfare plan documents, as to whether the severance payout under the separation agreement is a sum that justifies your signing the waiver of claims under the release.  To this end, any compensation and benefits that you already earned prior to the termination of your employment should not be counted as part of your severance amount.

If you are participating in various stock-based compensation plans and programs, you should assess prior to signing your separation agreement whether you are “leaving money on the table” in the form of appreciated but unvested shares, options or units as of your effective termination date.  If so, you may consider whether some or all of your unvested interests can be vested as of your termination date, or whether you can receive an extra amount of cash to compensate you for this forfeited benefit.

Your qualified and non-qualified retirement benefits are generally governed by plan documents other than your separation agreement. Again you will need to assess whether and how your employment termination will affect your vested interest in these retirement plans. Although not of immediate concern, you should also eventually determine whether it might be best to rollover any retirement benefits from your 401(k) plan into an IRA or another 401(k) of your next employer.

Before signing the release you should understand exactly what it is you are signing.  Once the release has been signed, you will have permanently given up your rights in exchange for the severance payment agreed upon in the separation agreement.  There cannot be any lingering doubts or other second thoughts about whether you should have signed the separation package and release.  Once it is done there is no looking back.

This blog post is certainly not intended to be a complete discussion of all potential concerns and issues that may arise in connection with your decision whether to sign the proposed separation agreement.  In fact, your circumstance may call for your separation agreement to be dealt with differently from the way your co-worker deals with an identical separation agreement.  That is why when your livelihood and rights are at stake, consulting with an experienced attorney may, in the long run, be the right decision for your career.

Daniel N. Janich is a Partner in the Employee Benefits and Executive Compensation Practice Group at Greensfelder, Hemker & Gale, P.C. in Chicago.  He has extensive experience representing clients in a broad range of benefits and compensation matters, including the drafting, negotiation and litigation of employment agreements and separation packages.  He can be reached at dnj@greensfelder.com or 312-558-1070.  Check out Dan’s profile on LinkedIn as well. Dan is an excellent resource should you find yourself in this position.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

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7 Year-End 2013 Financial Planning Tips


Thanksgiving is behind us and we are in the home stretch of 2013.  While your thoughts might be on shopping and getting ready for the holidays, there are a number of financial planning tasks that still need your attention.  Here are 7 financial planning tips for the end of the year.

Use appreciated investments for charitable donations

 If you would normally contribute to charity why not donate appreciated stocks, mutual funds, ETFs, closed-end funds, etc.?  The value of doing this is that you receive credit for the market value of the donated securities and avoid paying the capital gains on the appreciation.  A few things to keep in mind:

  • This only works with investments held in a taxable account.
  • This is not a good strategy for investments in which you have an unrealized loss.  Here it is better to sell the investment, realize the loss and donate the cash.


English: A bauble on a Christmas tree.


Harvest losses from your portfolio

The thought here is to review investments held in taxable accounts and sell all or some of them with unrealized losses.  These may be a bit harder to come by this year given the appreciation in the stock market.  Bond funds and other fixed income investments might be your best bet here.

The benefit of this strategy is that realized losses can be offset against capital gains to mitigate the tax due.  There are a number of nuances to be aware of here, including the Wash Sale Rules, so be sure you’ve done your research and/or consulted with your tax or financial advisor before proceeding.

Establish a Solo 401(k) 

If you are self-employed and haven’t done so already consider opening a Solo 401(k) account.  The Solo 401(k) can be an excellent retirement planning vehicle for the self-employed.  If you want to contribute for 2013 the account must be opened by December 31.  You then have until the date that you file your tax return, including extensions, to make your 2013 contributions. 

Rebalance your portfolio

With the tremendous gains in the stock market so far this year, your portfolio might be overly allocated to equities if you haven’t rebalanced lately.  The problem with letting your equity allocation just run with the market is that you may be taking more risk than you had intended or more than is appropriate for your situation.

Rebalance with a total portfolio view.  Use tax-deferred accounts such as IRAs and 401(k)s to your best advantage.  Donating appreciated investments to charity can help.  You can also use new money to shore up under allocated portions of your portfolio to reduce the need to sell winners.

Review your 401(k) options 

This is the time of the year when many companies update their 401(k) investment menus both by adding new investment options and replacing some funds with new choices.  This often coincides with the open enrollment process for employee benefits and is a good time for you to review any changes and update your investment choices if appropriate.

Be careful when buying into mutual funds 

Many mutual fund companies issue distributions from the funds for dividends and capital gains around the end of the year.  These distributions are based upon owning the fund on the date the distribution is declared.  If you are not careful you could be the recipient of a distribution even though you’ve only owned the fund for a short time.  You would be fully liable for any taxes due on this distribution.  This of course only pertains to mutual fund investments made in taxable accounts.

Required Minimum Distributions 

If you are 70 ½ or older you are required to take a minimum distribution from your IRAs and other retirement accounts.  The amount required is based upon your account balance as of the end of the prior year and is based on IRS tables.  Account custodians are required to calculate your RMD and report this amount to the IRS.

Note beneficiaries of inherited IRAs may also be required to take an RMD if the deceased individual was taking RMDs at the time of his/her death.

If you have multiple accounts with multiple custodians you need to take a total distribution based upon all of these accounts, though you can pick and choose from which accounts you’d like to take the distribution.  Make sure to take your distribution by the end of the year otherwise you will be faced with a stiff penalty of 50% of the amount you did not take on top of the income taxes normally due.

If you turned 70 ½ this year you can delay your first distribution to April 1 of next year, but that means that you will need to take two distributions next year with the corresponding tax liability.  Also if you are still working and are not a 5% or greater owner of your company you do not need to take a distribution from your 401(k) with that employer.  You do, however, need to take the distribution on all remaining retirement accounts.

For those who take required minimum distributions and who are otherwise charitably inclined, you have the option of diverting some or all of your distribution via a provision called the qualified charitable distribution (QCD).  The advantage is that this portion of your RMD is not treated as a taxable income and may have a favorable impact on the amount of Social Security that is subject to income taxes for 2014 and other potential benefits.  Note that you can’t double dip and also take this as a deductible charitable contribution.  Consult with the custodian of your IRA or retirement plan for the logistics of executing this transaction.

With all of the strategies mentioned above I recommend that you consult with a qualified tax or financial advisor to ensure  that the strategy is right for your unique situation and if so that you execute it properly. 

Certainly year-end is about the holidays, family, friends, food, and football.  It is also a great time to take execute some final year-end financial planning moves that can have a big payoff and in the case of RMDs save you from some hefty penalties.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of  your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

Photo credit:  Wikipedia

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A Feast of Thanksgiving Financial Links


In our house Thanksgiving is all about having the five of us together and eating way too much, passing out in a food coma and then eating some more.  In between the food, family, football, shopping, or whatever it is that you do over this holiday weekend here are some links to some great financial blogs if you have the time to do a little reading.


Must-read financial blogs

I recently attended the FINCON conference for financial bloggers in St. Louis and had a chance to connect and reconnect with some of these great bloggers.  This is a list of finance blogs that in my opinion offer great financial information and insights.

Getting Your Financial Ducks in a Row

Consumerism Commentary

Barbara Friedberg Personal Finance

Mom and Dad Money

The Dollar Stretcher

Frugal Rules

Free From Broke

AAAMP Finance Blog

Len Penzo dot Com

Modest Money

PT Money

Cash Money Life


Money Crashers

Good Financial Cents

The College Investor

The Reformed Broker


Wealthcare For Women

This is not in any way, shape, or form an exhaustive list and I’ve certainly omitted some outstanding blogs.  None the less, the list above provides a great start in terms of finance blogs you should consider adding to your reading list.

Thanks for the recognition 

I want to thank Crain’s Chicago Business for featuring this blog in their recent article 8 must-read (and locally written) finance blogs.  My blog was profiled in The Chicago Financial Planner: A self-starter’s money guideNote this link might require you to log-in to their free limited subscription option. 

Jean Chatzky, the financial editor for NBC’s Today Show, was kind enough to mention this blog as her top pick for investing blogs in a piece for AARP Personal Finance Blogs You Should Read.

I hope that you and your families and loved ones have a great Thanksgiving holiday and enjoy the time spent together.

Please feel free to add any finance blogs or websites that you feel provide great information in the comment section below.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

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Open Enrollment 2014 – Don’t Just Check the Boxes


This is an update of Employee Benefits Open Enrollment – Make Good Choices which originally appeared on the blog on September 12, 2012.

Health Care Costs

Fall is traditionally open enrollment season for many companies.  In our house I’m self-employed and my wife works for a major corporation with a full array of employee benefits.  As you might suspect she hands me any information about her benefits with the implicit instructions “… deal with this…”

While it has never been a good practice to just “check the box” and to automatically go with the same benefit choices year-to-year, this is an especially risky practice as you enroll in your 2014 benefits this open enrollment season.  All of the hoopla over ObamaCare and its impact on health insurance for those without coverage and for those with employer provided plans is front and center in the news media.  The general trend across all employee benefit options is for companies to seek ways to reduce costs which often translates to reduced benefits.

Health Insurance 

Clearly the trend here is less coverage for more money.  Beyond this some companies are making some major changes in their coverage.  As an example one major Chicago area company is setting up a private exchange for their employees.  Another major corporation eliminated the option of spousal coverage for employees whose spouses have access to coverage elsewhere.  Even in our case, if I had access to outside coverage and still wanted to be covered under my wife’s plan there would have been a monthly surcharge.  The bottom line with health coverage is that you need to take a fresh look at the options offered for 2014 and align those with your family’s needs and usage to determine the best option for you at the best price.  For example you might consider a high deductible plan with an HSA to save on premium costs. 


You may have the option to fund a Flexible Spending Account or a Health Savings Account. Both allow for the payment of medical expenses with pre-tax dollars. The FSA is a “use it or lose it” proposition, the HSA is not. Take a look at your spending patterns for health care and also look at your out-of-pocket expenditures from past years. Both accounts have their pros and cons so read up, ask your benefits people and decide if either of these options (if offered) are right for your situation.  The HSA is typically only an option in conjunction with a high deductible health insurance plan.

Company Life Insurance 

Company life insurance often can be competitive in terms of price and the death benefits offered, but this is not always the case.  If you have a health condition that might preclude you from buying life insurance outside the company this coverage can be crucial.  I often suggest to clients to look outside the company for coverage while they are in good health so that they will have the death benefit they need should they leave their current employer, regardless of any change in their future health status.  Many plans offer some amount of life insurance (such as 1 times your salary) for free; additional coverage may carry a charge.  If you have health issues that might make it difficult or impossible to obtain an outside policy you will want to check out the conversion rules on this coverage should you leave the company at some point in the future. 

Disability coverage 

I generally suggest that you take advantage of any disability coverage offered and that you buy any extra benefit that is available to you. Disability coverage is “lifestyle” insurance. There is usually a short-term component and a long-term component. The long-term portion generally covers 60 percent of your base salary, though coverage can vary. If you receive a substantial bonus or compensation or other sorts of compensation beyond your base salary you might want to consider looking into a supplemental disability policy from an outside insurance carrier as this compensation might not be covered under the disability insurance offered via your employer.

Your 401(k) plan 

Enrollment in your company’s 401(k) plan is generally not limited to the annual open enrollment period, but this is often the time that companies will announce changes to their plan.  These changes might include new investment options, a change in the matching formula, and others.  This is a good time for you to look at increasing your salary deferral if you are not already contributing the maximum and to take a look at your investment allocation. 

Other coverage and benefits

We generally take dental and vision insurance.  Beyond that you really need to look carefully at benefits offered such as accidental death and dismemberment insurance (AD&D), cancer insurance, and other supplemental coverages.  A heath insurance agent put it quite well in saying to me that coverages with low premiums generally indicate a low probability of loss.  For example AD&D requires injury or death under specific parameters that many people will not incur, hence the low cost.  You choices should be based upon your situation and the type of job you perform.

Depending upon your organization, you might also have access to benefits for transportation, parking, child care, deferred compensation (if you are at a high enough level in the organization), and many others.  These are all potentially valuable options depending upon your needs.

If you and your spouse both work look at both benefits packages and coordinate the best options between the two plans.

Your employee benefits can add up to a significant percentage of your overall compensation.  These benefits are potentially quite valuable to you and your family, take the time to review your available options in order to make the best choices for you and family.  Especially in this year of drastic upheaval in health insurance and across the employee benefits landscape, don’t just let your selections default to your existing choices.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss your open enrollment options and to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

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4 Steps to Make Your 401(k) Work as Hard as You Do


WI: Eau Claire Labor Day celebration, Septembe...

Labor Day is here once again.  A time for picnics and the start of the college football season.  It’s also a good time to step back and make sure that you are on track for retirement.  Whether you work as an employee or you are self-employed you work hard for your money.  In spite of what was said on PBS Frontline The Retirement Gamble and elsewhere in the press, in my opinion 401(k) plans are one of the best retirement savings vehicles available.  Here are 4 steps to make sure that your 401(k) plan is working hard for your retirement.

Get started 

This might seem basic, but you can’t benefit from your employer’s 401(k) plan unless you are participating.  If you haven’t started deferring a portion of your salary into the plan this is great time to start.  Look at your budget, determine how much you can afford to defer each pay period and get started.  You may be able to do everything online, otherwise contact the plan administrator at your company.

Are you self-employed?  There are a number of retirement plan options to consider including a Solo 401(k).  If you don’t have a retirement plan in place for yourself, do this today.  You work way too hard not to be putting something away for retirement.

Increase your contributions 

This is a great time to review the amount of your salary deferral and look to increase it if you are not already maxing out your contributions.  For 2013 the maximum contribution is $17,500 if you are under 50 and $23,000 if are 50 or over (and if you turn 50 before the end of the year).  For those 50 and over you can still make the full $5,500 catch-up contribution even if your contributions are otherwise limited to an amount below the maximum due to your plan failing its testing.  This situation can occur for highly compensated employees and usually occurs at smaller plans.

If you were enrolled into your employer’s plan under an automatic enrollment scenario the amount you are deferring is likely inadequate to meet your retirement needs, you need to revisit this and take affirmative action both in terms of the amount deferred and the investment options to which those salary deferrals are directed.

It’s often popular to urge 401(k) participants to contribute at least enough to receive the full amount of any company match.  I agree that it makes sense to go for the full match, but the key words here are at least.  The quality of each plan is different, but if your plan offers a solid investment menu and reasonable expenses I suggest that you consider increasing your contributions beyond the minimum required to receive the full company match.  Automatic salary deferrals are an easy, painless way to invest and simplicity in saving for your retirement should not be pooh-poohed.

Take charge of your investments, don’t just default 

Target Date Funds are offered by many 401(k) plans and are often the default option for those participants who do not make an investment election.  While TDFs may be fine for younger participants, I’m not a huge fan for those of you within say 15-20 years of retirement.  If you are in this situation I urge you to look at an allocation that is more tailored to your overall situation.  At the very least if you are going to use the Target Date Fund option offered by your plan take a hard look at how the fund will invest your money, how this fits with investments you may have outside of the plan, and the fund’s expenses.

Plan for your retirement 

While contributing to your 401(k) plan is a great step, it is just that, a step.  The retirement savings crisis facing many workers here in the U.S. has been well-documented.  Your 401(k) is an important tool in planning for retirement, but the keyword is planning.  Many 401(k) plan providers offer retirement planning tools on their websites.  They may also offer advice in some format.  Consider taking advantage.

If you work with a financial advisor make sure that they consider your 401(k) and all investments when helping you plan for your retirement.  I find it amazing every time that I hear of some brokerage firm that forbids its registered reps from providing clients advice on investing their 401(k) account because the plan is not offered by their firm.

As a starting point, check out the retirement planning calculator tool at the end of this post.  You may have seen this in several other blog posts on this site, but I feel this is a critical step for many of you and I hope that you will take a moment to utilize this tool.  Nobody but you will see your information or the outcomes.

While this is an excellent tool, please remember the results only provide a first step in the retirement planning process.  This is not a substitute for an in-depth financial plan done by a qualified professional.

Please contact me at 847-506-9827 for a free 30-minute consultation to discuss all of your 401(k) and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

Retirement plan sponsors, do you need an independent review of your company’s plan?  Do you need help selecting a new plan provider?  Are you looking for ongoing financial advice to help you meet your fiduciary obligations and to provide a superior retirement savings vehicle for your employees?  Would you like to offer your plan participants access to fee-only, unconflicted advice on how to manage their 401(k) accounts and plan for their retirement?  Please feel free to contact me to learn about our investment consulting services for retirement plan sponsors

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Led Zeppelin and Your 401(k)

Led Zeppelin -- Led Zeppelin

Andrea Coombes recently wrote an excellent piece for Market Watch entitled “401(k) savers are confused and stressed.”   The title of Andrea’s article reminded me of the classic Led Zeppelin song Dazed and Confused.  Led Zeppelin is perhaps the greatest rock band of all-time.  Lead singer Robert Plant and guitarist Jimmy Page are true rock legends.  Dating myself a bit, I still have the original vinyl versions of Led Zeppelin II and Led Zeppelin III that I bought in my early teens.

Whether you prefer Andrea’s article title or the title of the Led Zeppelin song, the confusion felt by many 401(k) investors is real and is an impediment to retirement success.

Schwab Survey 

The Market Watch article cited several findings from a Charles Schwab survey of 1,004 people who invest in a 401(k):

But more than half of the 401(k) savers said their plan’s investment options are more confusing than their health-care benefits, and 57% said they wish it were easier to choose among their plan’s investing choices.

Forty-six percent of savers said they don’t know what their best investment options are, and 34% said deciding how to invest in their 401(k) is causing them a lot of stress. (The survey respondents ranged in age from 25 to 75, and worked at companies with 25 or more employees.)”

Too many choices 

A 401(k) plan sponsor for whom I serve as advisor had a menu of over 150 distinct choices when we first started working them.   We have worked with the sponsor and the plan provider to pare down  the menu to three tiers that include access to Target Date Funds; a menu of 16 core individual mutual funds; and access to a brokerage link for those participants who prefer a purely self-directed approach.

A 401(k) with too many choices always reminds me of my frustration with many of the excellent family restaurants here in the Chicago area.  The menus are complete to the point of being like a small encyclopedia and all the choices look great.  Add to that a desert display when you walk in and making a final selection is often difficult.

Target Date Funds 

I’ve long had a love-hate relationship with Target Date Funds.  On the one hand I love the idea of a professionally managed, instantly diversified portfolio.  For young 401(k) savers like my 25 year daughter I think this is a great option.  She gets instant diversification and a portfolio that is appropriately aggressive for her age.

For investors in their 30s and 40s and beyond I’m not as sold on Target Date Funds.   By this time I’d hope that you’ve accumulated some investment assets and are ready to take charge of your financial future.  To me this means that you have a financial plan in place that includes an investment strategy tailored to match your individual financial goals.

If you decide to go the Target Date Fund route make sure that you understand the underlying investments of the funds as well as the fund’s expense ratio.  Remember that you are not obligated to invest in the fund with the target date closest to your anticipated retirement date.  Lastly remember that Target Date Funds from different families with the same target date may be vastly different.  Do your homework before investing.

401(k) investing tips

In an earlier post on this blog, I listed 5 timeless tips for 401(k) investors:

  • Stick with it
  • Contribute as much as you can
  • View you 401(k) as part of your overall portfolio
  • Don’t ignore your 401(k)
  • Use Target Date Funds with caution

To these tips I’d add two others, keep it simple and get outside help if you need it.

Many plans offer low cost index fund choices.  For example a relatively simple, but diversified portfolio could be constructed from say a Total U.S Stock Index fund, a Total International Stock Index fund, and a Total Bond Market Index fund.

If you need outside help to allocate your 401(k) as well as your other investments, get it.  Many 401(k) plans offer advice or managed accounts that are more tailored to the individual participant’s situation than a Target Date Fund.  Beyond this consider hiring a qualified Fee-Only financial advisor to help you.

Not sure where you stand on your journey to a successful retirement?  Check out the retirement calculator at the end of this post.  While this is an excellent tool, please remember the results only provide a first step in the retirement planning process.  This is not a substitute for an in-depth financial plan done by a qualified professional.

A 401(k) plan can be a daunting and intimidating investment vehicle.  Being dazed and confused is great when listening to Led Zeppelin.  However this state of mind has no place in plotting your financial future.

Please contact me at 847-506-9827 for a free 30-minute consultation to discuss all of your 401(k) and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

Retirement plan sponsors, do you need an independent review of your company’s plan?  Do you need help selecting a new plan provider?  Are you looking for ongoing financial advice to help you meet your fiduciary obligations and to provide a superior retirement savings vehicle for your employees?  Would you like to offer your plan participants access to fee-only, unconflicted advice on how to manage their 401(k) accounts and plan for their retirement?  Please feel free to contact me to learn about our investment consulting services for retirement plan sponsors

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5 Essential Financial Planning Steps for Your 30s and 40s



Many of the calls that I receive are from folks in their 50s or 60s who are either within sight of retirement or already retired.  Many of these callers are pretty well-prepared for retirement and are seeking my help to fine-tune their situation and/or to help them through this next phase of life.  This type of financial readiness doesn’t just happen it takes planning and preparation.  Here are 5 essential financial planning steps for those of you in your 30s and 40s to help you reach your retirement goals and more importantly to help you achieve financial independence.

If for whatever reason you haven’t done much of anything to ensure your financial future it’s time to get going.  Today is the best day to get started, tomorrow is the second best day, and so on.  If you are in your 30s or 40s and haven’t begun to save for your retirement, if you have a family and don’t have a basic will or any life insurance, if you have debt or spending issues it’s time to get started on a path to secure your financial future.

Protect your family and yourself

I can’t tell you how many phone calls I’ve received from a 30 or 40 something professional (always a male) with young kids and a stay at home spouse.  Typically the caller is all excited about investing or perhaps about buying income property.  Both are great ideas.  However when I ask whether he has any life insurance in place or even a basic will naming a guardian for his young children the answer is something like “… we’ve talked about that…”  My response is to implore him to stop talking about it and get it done.  I generally follow-up the phone call with a list of estate planning attorneys for them to consider.

My point is this, if you are in your 30s or 40s and have a family you need to ensure their financial security.  Term life insurance is very cheap in this age range assuming that you are in good health.  Until you’ve accumulated sufficient assets to provide for your family in the event of your death, life insurance is a great way to build an estate quickly.

It is vital that parents of minor children at least have a will in place that names a legal guardian for their children in the event of their death.

While we are on this subject make sure that all beneficiary designations on retirement accounts, annuities, and insurance policies are up to date and specify the correct beneficiary.  There is no better way to say “I love you” to a spouse than to have you life insurance go to an ex-spouse or somebody else because you forgot to update the policy’s beneficiary designation.

Even if you are single at the very least you will want to give some thought as to where your money and assets would go if you were to die and take the appropriate actions to ensure this would happen.

Perhaps more importantly make sure that you have some disability insurance.  This protects you in the event you are disabled and can’t work for a period of time or perhaps permanently.  Both short and long-term disability coverage is a staple in many employee benefit packages.  Take as much coverage as is offered, this type of coverage is relatively cheap. If you are self-employed or your plan doesn’t offer disability coverage look into a private policy or perhaps something offered via a professional association.  Disability coverage is probably more vital in your 30s and 40s than life insurance.

Save for retirement 

There is still time to accumulate assets for retirement.  Time in fact is one of your greatest assets here.  Contribute to your 401(k) or similar retirement plan.  Contribute to an IRA.

In many cases you may be starting a family or looking to fund college during these years.  While there may be conflicting demands for your money, save as much as you can for retirement.  As you get to your 50s, 60s, and beyond you’ll be glad you did.

If you are single this is all the more reason to ramp up your retirement savings, assuming you never marry it’s all on you to save for a comfortable retirement.

Financial planning is vital 

Many folks get serious about financial planning in their 50s and 60s as they approach retirement.  There’s nothing wrong with this.  However having a plan in place in your 30s or 40s gives you a head start.  Are you on track to beat the odds in the “retirement gamble?”  Better yet what will it take to help you achieve financial independence?

Make sure the basics are covered.  Get your spending in check and pay down your debts.  If you haven’t done so already, adopt the basic fiscal habits needed to live within your means.

If you work with a financial advisor become knowledgeable.  Take an interest in your situation.  This doesn’t mean that you need to be a financial expert, but a bit of knowledge combined with your own good common sense will help shield you from fraud or just plain bad advice.  If your financial advisor recommends what seems to be costly, proprietary (to his/her employer) financial products trust your gut and look for advice elsewhere.  My very biased view is that you should seek the help of a fee-only financial advisor.  Check out NAPFA’s guide to help you in finding the right advisor for your needs. 

Combine and consolidate 

By this time you’ve likely worked for several employers.  If you are like many people you haven’t paid as much attention to your old 401(k) accounts as you should have.

This is a good stage of your life to do something with these old retirement accounts.  Combine them into a consolidated IRA account.  Roll them into your current employer’s plan.  Do something with these accounts, don’t ignore this valuable retirement asset.

Invest like a grown-up 

There’s nothing wrong with allocating a portion of your investment assets to taking some”flyers” on a stock you like, or an ETF that invests in a hot sector of the market,  play money in other words.

The vast majority of you investments should be allocated in a fashion that dovetails with your financial plan.  Have an allocation plan, stick with it, rebalance your holdings periodically, and adjust your allocation as you age or if your situation warrants.

This investing plan should take into account all of your investments including IRAs, company retirement plans, taxable investments, and so on.  If you are married this should include both of your accounts.

For most people mutual funds and ETFs generally make the most sense.  There is nothing wrong with individual stocks, but they require a level of expertise and research that most investors don’t have.

The planning, saving, and investing that you do in your 30s and 40s will pay major dividends down the road, as you seek a comfortable retirement and financial independence.  Don’t waste time, get started today.  Don’t become part of the retirement savings crisis in the U.S.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

Please check out our Resources page for some additional links that might be beneficial to you.  

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