Many people frequently go online to check the status of their
investments. Still others review their portfolios on a monthly basis
with their traditional paper statements. But no matter how you keep
track of your numbers, it was indeed a rough third quarter for most
investors.
Several pundits believe this is the beginning of a long overdue bear
market. Other experts feel we’re still in the late stages of a bull
market and this past quarter was simply a breather before the climb
continues.
The reality, of course, is that nobody can be certain what tomorrow
will bring. This is true not just with investments, but with life in
general. No matter who you are, your life can change in a heartbeat.
While risk can’t be eliminated, it can be managed. That’s why we
strap in our kids and buckle ourselves up when we get into a car. That’s
why virtually every piece of machinery, all our medicine bottles and
everything else we own that has an instruction manual, clearly explains
that improper usage may cause harm, injury or even death.
In other words, we all face a multitude of risks every day. At some
point in our lives, most of us have fallen off a bicycle. I have never
met anyone who stopped riding a bike because of it. Nor do I know anyone
who quit driving because of a fender bender.
But, with money it’s different. Investment risk is a horse of a
different color. And the biggest reason, in my opinion, is emotion.
Money makes it easy for our emotions to take control of our brains. And
when that happens, my experience has been that long-term results are
rarely positive.
For example, during the 2008-09 recession, some may have moved their
entire investment portfolio into cash. The initial move may have looked
good and relieved some stress for a while.
But, long term, what if those monies remained in cash all these
years, with interest rates barely above zero? My guess is that people
who left their money safely in the bank would lag well behind those who
rode out the recession and remained invested.
The bottom line is that most long-term investors should neither get
too excited about a good quarter, nor overly distraught over a poor
quarter. Most long-term investors are best served with a diversified
portfolio that incorporates various asset classes.
Depending on the size of your portfolio, diversity might mean
traditional domestic and foreign stocks and bonds as well as real estate
and commodities.
Naturally, everyone should periodically review their investments and
tweak them as necessary. It’s just common sense. But rarely do
circumstances dictate abandoning your long-term strategy altogether.
Whenever investments trend downward, the Internet is flooded by the
gloom and doom crowd selling their advice. They can’t predict the
future. They’re playing on your emotions. Could the economic world as we
know it could totally collapse? Sure. Anything is possible.
That being said, I believe that somehow, someway, our nation will get
its financial house in order and the traditional investment methods
that have historically rewarded investors will continue to do so.
Of course, the world will continue to change and I believe these
changes will open the door and reward investors who stay with their
long-term plans.
Monday, October 19, 2015
Monday, October 12, 2015
A good financial adviser does more than advise
When the investment world is on a downward spiral, fear begins to take a
firm grip on many investors. And when people are fearful, they’re
vulnerable to investment scams. This is especially true of elderly
investors.
It’s been my experience that, in the spectrum of human emotions, there are two extremes that get people into financial difficulty. Fear and greed.
Fear overrides the brain of people who strive to preserve what they already have. Greed is the emotion exemplified by people who either ignore risk or turn a blind eye to common sense in an attempt to garner unrealistic, off-the-charts investment returns.
The victims of the Ponzi scheme that put Bernie Madoff behind bars were good examples of greed. Some scam artists like Madoff were properly registered, but his antics were not immediately discovered by financial regulators. Many scam artists are nothing more than hustlers, simply out to get their hands on other people’s money.
I firmly believe the vast majority of financial advisers go to great lengths to educate, explain, and communicate with their clients. Consequently, most advisers really get to know them over time.
They know which ones need their hands held during market downturns and, conversely, those who don’t even want to be bothered when the market stumbles. Most advisers meet with their clients year in and year out, regardless of what’s going on in the financial world.
Their discussions aren’t just about the numbers, either. They also include dreams, family issues, health concerns, estate planning and much more. So financial advisers not only help clients meet their financial goals, they also get to know them beyond the numbers.
One of the most difficult aspects of being a financial adviser is seeing clients begin to lose some of their mental capabilities or become seriously ill. These are times when clients are most vulnerable to quick talking scam artists. And when responsible financial advisers intervene to protect their clients from those fast-talkers trying to get into their pocketbooks.
Several years ago I was meeting with a widower client. I sensed his mental sharpness had diminished so I tracked down one of his adult children. She thanked me and said that she had also noticed a change. By getting involved, a problem was averted with minimal financial damage.
In another instance, a client’s spending suddenly increased and a “friend” took inquiring telephone calls instead of the client. Protective Services for the Elderly was contacted and, once again, intervention prevented someone from taking financial advantage of a vulnerable senior.
Of course, not all investors work with a financial adviser. So they lack an extra set of eyes watching out for them; something especially important as they enter the point in life where they have two things that scam artists find most desirable: Money and old age.
That’s why I recommend that people establish a life-long relationship with an adviser during their working years. Advisors can not only help protect you from people trying to pry your money away, they can also help when your health begins to fade or you otherwise struggle with the aging process.
In other words, financial advisers who know their clients are the first line of defense to help protect you and your nest egg from anyone trying to steal your assets.
It’s been my experience that, in the spectrum of human emotions, there are two extremes that get people into financial difficulty. Fear and greed.
Fear overrides the brain of people who strive to preserve what they already have. Greed is the emotion exemplified by people who either ignore risk or turn a blind eye to common sense in an attempt to garner unrealistic, off-the-charts investment returns.
The victims of the Ponzi scheme that put Bernie Madoff behind bars were good examples of greed. Some scam artists like Madoff were properly registered, but his antics were not immediately discovered by financial regulators. Many scam artists are nothing more than hustlers, simply out to get their hands on other people’s money.
I firmly believe the vast majority of financial advisers go to great lengths to educate, explain, and communicate with their clients. Consequently, most advisers really get to know them over time.
They know which ones need their hands held during market downturns and, conversely, those who don’t even want to be bothered when the market stumbles. Most advisers meet with their clients year in and year out, regardless of what’s going on in the financial world.
Their discussions aren’t just about the numbers, either. They also include dreams, family issues, health concerns, estate planning and much more. So financial advisers not only help clients meet their financial goals, they also get to know them beyond the numbers.
One of the most difficult aspects of being a financial adviser is seeing clients begin to lose some of their mental capabilities or become seriously ill. These are times when clients are most vulnerable to quick talking scam artists. And when responsible financial advisers intervene to protect their clients from those fast-talkers trying to get into their pocketbooks.
Several years ago I was meeting with a widower client. I sensed his mental sharpness had diminished so I tracked down one of his adult children. She thanked me and said that she had also noticed a change. By getting involved, a problem was averted with minimal financial damage.
In another instance, a client’s spending suddenly increased and a “friend” took inquiring telephone calls instead of the client. Protective Services for the Elderly was contacted and, once again, intervention prevented someone from taking financial advantage of a vulnerable senior.
Of course, not all investors work with a financial adviser. So they lack an extra set of eyes watching out for them; something especially important as they enter the point in life where they have two things that scam artists find most desirable: Money and old age.
That’s why I recommend that people establish a life-long relationship with an adviser during their working years. Advisors can not only help protect you from people trying to pry your money away, they can also help when your health begins to fade or you otherwise struggle with the aging process.
In other words, financial advisers who know their clients are the first line of defense to help protect you and your nest egg from anyone trying to steal your assets.
Monday, October 5, 2015
The health of your nest egg is at risk
The Affordable Health Care Act notwithstanding, a considerable amount of
money is being siphoned out of many retirees’ nest eggs. According to
government projection, health care spending will account for nearly one
out of every five dollars spent by the year 2024.
Not long ago, I wrote that retirees should earmark at least $250,000 for health care related costs and expenses. To my amazement, I recently opened up one of my financial journals and a headline read, ”Michigan is the most expensive state for retirement health care.”
That was the conclusion reached by HealthView Services, the nation’s leading producer of health care cost-projection software. Their research indicated that a 65-year-old Michigan retiree would spend $3,707 in premiums for Medicare parts B and D supplemental insurance this year.
HVS also said that over a 20-year period, a Michigan retiree would spend $40,000 more than his or her Hawaiian counterpart. It should be noted, however, that Hawaii is among the states with the lowest health care costs.
The bottom line is that, even after all of the health care debates and the passage of the Affordable Health Care Act, the costs associated with health care continue to increase at an alarming rate.
Meanwhile, because the government’s data indicates there’s no inflation, it appears that retirees collecting Social Security benefits will not see an increase in their payment in 2016.
Nonetheless, those same retirees are likely to be hit with jaw-dropping increases on their Medicare premiums. Clearly there’s a disconnect between Uncle Sam’s perception of inflation and the reality of increasing health care related costs and expenses.
Roughly 10,000 people per day turn 65 in America. As this group moves through their retirement years, it’s going to put a great strain on our health care system. The question that I believe will continue to be debated is, “Who should pay for these increasing costs?”
There are already new taxes in effect dedicated to paying some of the increased costs. For example, the .09% increase in Medicare taxes for married couples filing jointly who make more than $250,000 a year. And in 2018, a new excise tax for those whose employers offer so-called Cadillac health care plans will be phased in.
It’s important that people understand before they retire that all of their retirement dollars aren’t going to be spent on vacations. It’s very likely that a significant amount will go instead toward mundane expenses related to their health.
Anyone who is currently working and has a large deductible should see if you’re eligible for a Health Savings Account. If not, before the next enrollment period you should check to see if you can switch your coverage to a plan that is HSA eligible.
Simply stated, an HSA is similar to an IRA in that both are tax deductible and they accumulate tax deferred. Ultimately, the funds can be used for a wide array of health care services.
If you’re not HSA eligible, you just have to be more aware that a significant portion of your retirement nest egg will likely be used for health care related expenses.
After the Affordable Health Care Act was passed, many thought that, as a nation, we would stop debating health care costs. I have a feeling the discussion is just getting started.
Ken will be speaking at a workshop regarding healthcare spending on Oct. 21. For information and reservations please contact Lifetime at 248-952-1744.
Not long ago, I wrote that retirees should earmark at least $250,000 for health care related costs and expenses. To my amazement, I recently opened up one of my financial journals and a headline read, ”Michigan is the most expensive state for retirement health care.”
That was the conclusion reached by HealthView Services, the nation’s leading producer of health care cost-projection software. Their research indicated that a 65-year-old Michigan retiree would spend $3,707 in premiums for Medicare parts B and D supplemental insurance this year.
HVS also said that over a 20-year period, a Michigan retiree would spend $40,000 more than his or her Hawaiian counterpart. It should be noted, however, that Hawaii is among the states with the lowest health care costs.
The bottom line is that, even after all of the health care debates and the passage of the Affordable Health Care Act, the costs associated with health care continue to increase at an alarming rate.
Meanwhile, because the government’s data indicates there’s no inflation, it appears that retirees collecting Social Security benefits will not see an increase in their payment in 2016.
Nonetheless, those same retirees are likely to be hit with jaw-dropping increases on their Medicare premiums. Clearly there’s a disconnect between Uncle Sam’s perception of inflation and the reality of increasing health care related costs and expenses.
Roughly 10,000 people per day turn 65 in America. As this group moves through their retirement years, it’s going to put a great strain on our health care system. The question that I believe will continue to be debated is, “Who should pay for these increasing costs?”
There are already new taxes in effect dedicated to paying some of the increased costs. For example, the .09% increase in Medicare taxes for married couples filing jointly who make more than $250,000 a year. And in 2018, a new excise tax for those whose employers offer so-called Cadillac health care plans will be phased in.
It’s important that people understand before they retire that all of their retirement dollars aren’t going to be spent on vacations. It’s very likely that a significant amount will go instead toward mundane expenses related to their health.
Anyone who is currently working and has a large deductible should see if you’re eligible for a Health Savings Account. If not, before the next enrollment period you should check to see if you can switch your coverage to a plan that is HSA eligible.
Simply stated, an HSA is similar to an IRA in that both are tax deductible and they accumulate tax deferred. Ultimately, the funds can be used for a wide array of health care services.
If you’re not HSA eligible, you just have to be more aware that a significant portion of your retirement nest egg will likely be used for health care related expenses.
After the Affordable Health Care Act was passed, many thought that, as a nation, we would stop debating health care costs. I have a feeling the discussion is just getting started.
Ken will be speaking at a workshop regarding healthcare spending on Oct. 21. For information and reservations please contact Lifetime at 248-952-1744.
Monday, September 28, 2015
Are you sure you can’t afford insurance?
Almost everyone knows someone who’s paying back a student loan.
According to FinAid.gov, the national student debt total recently
surpassed $1.3 trillion. That sounds like a powder keg that could rattle
the economy the way the housing market collapse and mortgage crisis did
seven years ago.
The presidents of Oakland University and Eastern Michigan University were recently summoned to Lansing to explain large tuition increases. 8.48 percent and 7.8 percent respectively. I believe one of the hot topics of the upcoming election will be the exorbitant cost of higher education and the enormous student debt load that young adults are forced to carry.
I don’t pretend to have a quick-fix solution for the student loan crisis. But I am seriously concerned that it will create an unfortunate domino effect.
When young adults finally complete school, they have to start repaying their student loans. Unless they’re living in their parents’ basement, they also have housing costs. And regardless of where they live, there are car payments and all the other monthly bills that go along with becoming an adult.
Many are also getting married and starting families, so they have significant financial obligations in addition to school loans. And even though it’s another expense, as an adviser, I think it’s very important for a young family to have life insurance.
Sadly, it’s one of the most overlooked aspects of financial planning. Many young people feel invincible and give no thought to life insurance. Nothing bad is ever going to happen to them.
True, some do have insurance through their employer, but in today’s world people frequently change jobs and there can be gaps without coverage.
That’s why I believe it’s vital to actually own your life insurance rather than rely on your employer. Young people, especially those starting a family, need to make certain their loved ones are protected and loans are repaid in the event of a life ending tragedy, especially if there are children involved.
September is Life Insurance Awareness Month and I want to make certain that young adults take note. Life is all about choices. For example, do you really need the newest version of your favorite cell phone the very day it’s released? Is the fastest Internet speed worth paying a higher price? Do you really need a $3 dollar cup of coffee every day?
People need to make financial choices all the time. Unfortunately, too many of them make poor financial decisions or simply fail to look at reality. The difference with young adults is that they often have staggering student loan obligations in addition to everything else.
On the local news, you often see or hear about a fundraiser to help a family after a tragic loss. It’s nice to see so many big-hearted people willing to help them pay bills or perhaps fund a young child’s future education.
But responsibility comes with financial obligations, and if you signed for a loan or have children to house and educate in the years ahead, you owe it to your family to review your life insurance and find a way to include the cost in your budget.
Unaffordable? Consider a little budget juggling to free up enough money to cover insurance premiums. You’ll not only be buying life insurance, but also the comfort of knowing you have additional protection for the future.
The presidents of Oakland University and Eastern Michigan University were recently summoned to Lansing to explain large tuition increases. 8.48 percent and 7.8 percent respectively. I believe one of the hot topics of the upcoming election will be the exorbitant cost of higher education and the enormous student debt load that young adults are forced to carry.
I don’t pretend to have a quick-fix solution for the student loan crisis. But I am seriously concerned that it will create an unfortunate domino effect.
When young adults finally complete school, they have to start repaying their student loans. Unless they’re living in their parents’ basement, they also have housing costs. And regardless of where they live, there are car payments and all the other monthly bills that go along with becoming an adult.
Many are also getting married and starting families, so they have significant financial obligations in addition to school loans. And even though it’s another expense, as an adviser, I think it’s very important for a young family to have life insurance.
Sadly, it’s one of the most overlooked aspects of financial planning. Many young people feel invincible and give no thought to life insurance. Nothing bad is ever going to happen to them.
True, some do have insurance through their employer, but in today’s world people frequently change jobs and there can be gaps without coverage.
That’s why I believe it’s vital to actually own your life insurance rather than rely on your employer. Young people, especially those starting a family, need to make certain their loved ones are protected and loans are repaid in the event of a life ending tragedy, especially if there are children involved.
September is Life Insurance Awareness Month and I want to make certain that young adults take note. Life is all about choices. For example, do you really need the newest version of your favorite cell phone the very day it’s released? Is the fastest Internet speed worth paying a higher price? Do you really need a $3 dollar cup of coffee every day?
People need to make financial choices all the time. Unfortunately, too many of them make poor financial decisions or simply fail to look at reality. The difference with young adults is that they often have staggering student loan obligations in addition to everything else.
On the local news, you often see or hear about a fundraiser to help a family after a tragic loss. It’s nice to see so many big-hearted people willing to help them pay bills or perhaps fund a young child’s future education.
But responsibility comes with financial obligations, and if you signed for a loan or have children to house and educate in the years ahead, you owe it to your family to review your life insurance and find a way to include the cost in your budget.
Unaffordable? Consider a little budget juggling to free up enough money to cover insurance premiums. You’ll not only be buying life insurance, but also the comfort of knowing you have additional protection for the future.
Tuesday, September 22, 2015
If you enjoy your work, it’s not a job
Over the Labor Day weekend, a frequent comment I heard from friends and
family was, “Where did the summer go?” During the long winter months
everyone looks ahead with anticipation to the unofficial start of
summer, Memorial Day.
Then the July 4th holiday sneaks up on us and in the blink of an eye it’s Labor Day. It seems like summer comes and goes in about the time it takes to walk the five miles across the Mackinac Bridge.
The purpose of Labor Day, of course, is to salute the American workforce. And my, how the workforce has changed since President Cleveland signed the law enacting Labor Day in 1894.
According to the Department of Labor, there were nearly 18 million American workers in unions in 1983. In 2014 the number of union members had fallen to just over 14.5 million.
As with so many things in our society, people tend to have very strong opinions one way or another about unions. As the auto unions are about to begin contract negotiations we’ll be hearing plenty of passionate opinions, both pro- and anti-union.
I believe that, regardless of union status, American workers are essentially dedicated and hardworking. That being said, I wonder just how many Americans like or enjoy their work.
Without question, the makeup of the workforce and the nature of many jobs in our nation have changed dramatically over the years. Rosie the Riveter during World War II began the influx women into the workforce.
More recently, service sector jobs and technology have dramatically changed the atmosphere and character of a typical workday. In other words, there are no typical workers or typical jobs.
Since Labor Day is the unofficial end of summer and the beginning of the school year, I encourage students to study with the objective of graduating with more than just a job. Work toward finding a field that is rewarding both financially and emotionally.
Find something you’re passionate about and that you’ll love doing day after day. I have encountered many people who are counting the days until they can retire and do something they’ll truly enjoy.
I was recently talking to a retired auto executive client who is passionate about his Corvettes and Corvette Club activities. He was surprised to learn I grew up in an automotive family and my high school and college job was buffing out automobiles.
It was great experience. I liked it, the money was decent and I learned a thing or two. But it was just a job, not a career. Not something I would want to do for 30 or 40 years.
I’ve been extremely fortunate for many years. As a financial adviser, I’m just as enthusiastic about my career as my client is with his Corvette Club. In other words, my work is my passion.
Life, like summer, is over much too soon. If you can find an enjoyable career to make a living, great! A workday does not have to be dull or boring.
Labor Day is an American tradition and a well-earned day off. People get up and go to work every day. As you study and prepare for the workforce, try to do everything you can to put yourself in a position where your work is your passion.
Then the July 4th holiday sneaks up on us and in the blink of an eye it’s Labor Day. It seems like summer comes and goes in about the time it takes to walk the five miles across the Mackinac Bridge.
The purpose of Labor Day, of course, is to salute the American workforce. And my, how the workforce has changed since President Cleveland signed the law enacting Labor Day in 1894.
According to the Department of Labor, there were nearly 18 million American workers in unions in 1983. In 2014 the number of union members had fallen to just over 14.5 million.
As with so many things in our society, people tend to have very strong opinions one way or another about unions. As the auto unions are about to begin contract negotiations we’ll be hearing plenty of passionate opinions, both pro- and anti-union.
I believe that, regardless of union status, American workers are essentially dedicated and hardworking. That being said, I wonder just how many Americans like or enjoy their work.
Without question, the makeup of the workforce and the nature of many jobs in our nation have changed dramatically over the years. Rosie the Riveter during World War II began the influx women into the workforce.
More recently, service sector jobs and technology have dramatically changed the atmosphere and character of a typical workday. In other words, there are no typical workers or typical jobs.
Since Labor Day is the unofficial end of summer and the beginning of the school year, I encourage students to study with the objective of graduating with more than just a job. Work toward finding a field that is rewarding both financially and emotionally.
Find something you’re passionate about and that you’ll love doing day after day. I have encountered many people who are counting the days until they can retire and do something they’ll truly enjoy.
I was recently talking to a retired auto executive client who is passionate about his Corvettes and Corvette Club activities. He was surprised to learn I grew up in an automotive family and my high school and college job was buffing out automobiles.
It was great experience. I liked it, the money was decent and I learned a thing or two. But it was just a job, not a career. Not something I would want to do for 30 or 40 years.
I’ve been extremely fortunate for many years. As a financial adviser, I’m just as enthusiastic about my career as my client is with his Corvette Club. In other words, my work is my passion.
Life, like summer, is over much too soon. If you can find an enjoyable career to make a living, great! A workday does not have to be dull or boring.
Labor Day is an American tradition and a well-earned day off. People get up and go to work every day. As you study and prepare for the workforce, try to do everything you can to put yourself in a position where your work is your passion.
Tuesday, September 15, 2015
Even the military needs help maneuvering through retirement
Over the past few years, I’ve had the good fortune of attending a couple
of educational seminars, each of which featured a former Navy Seal as a
guest speaker.
One was Marcus Luttrell, the lone survivor of Operation Red Wings and co-author of the book “Lone Survivor.” The other was Robert O’Neill, who was not only part of the operation that rescued Captain Phillips, but also the final assault on the compound where Osama Bin Laden was killed.
Both men shared some truly fascinating stories about their rigorous training and military experiences. At the end of the day, it strengthened my opinion that our nation’s military has some incredible men and women serving our country.
Recently, within a short span of time, I heard from a cousin who is a retired Army officer and I also drove past a military convoy near the National Guard base near Grayling.
It made me realize that, although I work with many people who served in the military, only a small handful actually made the military their career. And just as with so many other occupations, the financial dynamics of a military career appear to be changing.
I’ve previously written that traditional pensions known as defined benefit programs are becoming extinct. The auto industry, state government, educators and most municipalities have eliminated traditional pensions for new hires.
It appears that the military is also going to significantly alter their retirement program, in an attempt to save $1 billion annually.
If approved by Congress, the new program will be a “blended” plan.
It will shrink the traditional pension amounts by roughly 20 percent and implement a mandatory contribution. However, for the first time, those that do not make the military a lifelong career — in other words serve for less than 20 years — will receive some retirement benefits.
If the Pentagon’s recommendations are enacted, the 20 percent reduction in military pensions will be offset by government contributions into a program similar to a 401(k) or IRA. The program is called the Thrift Savings Plan (TSP.)
Within the TSP, Uncle Sam will automatically contribute one percent of basic pay. Military personnel will also have three percent of their pay automatically withheld and deposited into the TSP. The similarity I referred to is that there will be a ten percent penalty if the money is withdrawn prior to age 59.5.
Participants in the plan can opt out of having their three percent withheld if they complete financial literacy training. The greatest benefit of the TSP is for military personnel with more than four years of service. Uncle Sam will match their contribution into the TSP dollar for dollar, for up to five percent of pay.
If all goes as planned, the new military retirement program will go into effect in January 2018. More than likely, there will be a grandfather clause for long-term military personnel to continue with the traditional pension or opt into the new TSP.
Naturally, as these changes move through Congress, I’ll keep my readers posted. Like so many things in our nation’s culture, it is becoming more complex even for military personnel. From private to general, military personnel also need financial advisers to sort through their situation, goals and strategies.
One was Marcus Luttrell, the lone survivor of Operation Red Wings and co-author of the book “Lone Survivor.” The other was Robert O’Neill, who was not only part of the operation that rescued Captain Phillips, but also the final assault on the compound where Osama Bin Laden was killed.
Both men shared some truly fascinating stories about their rigorous training and military experiences. At the end of the day, it strengthened my opinion that our nation’s military has some incredible men and women serving our country.
Recently, within a short span of time, I heard from a cousin who is a retired Army officer and I also drove past a military convoy near the National Guard base near Grayling.
It made me realize that, although I work with many people who served in the military, only a small handful actually made the military their career. And just as with so many other occupations, the financial dynamics of a military career appear to be changing.
I’ve previously written that traditional pensions known as defined benefit programs are becoming extinct. The auto industry, state government, educators and most municipalities have eliminated traditional pensions for new hires.
It appears that the military is also going to significantly alter their retirement program, in an attempt to save $1 billion annually.
If approved by Congress, the new program will be a “blended” plan.
It will shrink the traditional pension amounts by roughly 20 percent and implement a mandatory contribution. However, for the first time, those that do not make the military a lifelong career — in other words serve for less than 20 years — will receive some retirement benefits.
If the Pentagon’s recommendations are enacted, the 20 percent reduction in military pensions will be offset by government contributions into a program similar to a 401(k) or IRA. The program is called the Thrift Savings Plan (TSP.)
Within the TSP, Uncle Sam will automatically contribute one percent of basic pay. Military personnel will also have three percent of their pay automatically withheld and deposited into the TSP. The similarity I referred to is that there will be a ten percent penalty if the money is withdrawn prior to age 59.5.
Participants in the plan can opt out of having their three percent withheld if they complete financial literacy training. The greatest benefit of the TSP is for military personnel with more than four years of service. Uncle Sam will match their contribution into the TSP dollar for dollar, for up to five percent of pay.
If all goes as planned, the new military retirement program will go into effect in January 2018. More than likely, there will be a grandfather clause for long-term military personnel to continue with the traditional pension or opt into the new TSP.
Naturally, as these changes move through Congress, I’ll keep my readers posted. Like so many things in our nation’s culture, it is becoming more complex even for military personnel. From private to general, military personnel also need financial advisers to sort through their situation, goals and strategies.
Tuesday, September 8, 2015
The splash heard ’round the world
Thanks to the Internet, we’re living in a world where information
travels around the globe at lightning speed. I recently wrote that when
a rock falls into a pond halfway around the globe, we tend to feel the
ripples here in the states.
Shortly thereafter, as most of us are aware, an economic boulder fell in China. It wasn’t just a ripple in the pond; it was an enormous tidal wave. And no one can say for certain when the onslaught of waves will stop hammering our shores.
Such financial turmoil makes it easy for your emotions to overtake your mind, allow panic to set in, and abandon your investment strategies.
My experience suggests that’s not such a good idea. Rarely do emotional, panic-driven moves result in a positive outcome. That’s not only true in the investment arena but also in many matters of life.
I have written on numerous occasions that investors need an iron stomach to get through difficult times. What we are now going through is a prime example. If there’s one word I’d use to describe what we are in the midst of, it’s “extreme.”
I say extreme because we’re seeing investment values plummet one minute and then skyrocket just a few hours later. These are not insignificant daily changes. They’re extreme.
The collapsing Chinese economy ignited a worldwide financial crisis and the European and U.S. markets have been swinging wildly as a result.
Unlike an amusement park, these are rides that can lead to stress. A recent report estimated that the average 401(k) was down $3,000 in just one day. In other words, if someone decided to take their money out of the market now, they would be exiting with a substantial loss.
So, how do you not cut your losses and run? As I’ve written many times, you need to have an iron will and keep your emotions at bay. When the markets are on a downslope, it’s probably not the time to make major modifications and adjustments to your portfolio.
Over the years I have navigated a great number of clients through financial storms. That includes the traumatic one-day, twenty percent drop in 1987. Often, when people panic over pocketbook issues the end result is negative. I’ve seen it many times.
If you’re nervous or unsure about your portfolio, schedule a meeting with your financial advisor. Granted, financial advisors don’t have a crystal ball, but reviewing your strategies might remind you why you diversified and selected your investment strategy in the first place. It might also help push aside your inclination to panic.
Naturally, I can’t see into the future either. That being said, however, I’m still fairly optimistic that there are sunny skies on the horizon.
Our domestic economy may not be growing at lightning speed, but it is growing. Once again, you can hear the sounds of construction. Vehicles are moving out of showrooms. You need reservations to get into many restaurants. And businesses are tepidly optimistic.
I believe the focus is shifting from China, the world’s second largest economy, back to our economy. We have the opportunity to take the baton and lead the world’s economy out of the doldrums. When this happens, the value of investment portfolios will bounce back and continue to move upward.
Shortly thereafter, as most of us are aware, an economic boulder fell in China. It wasn’t just a ripple in the pond; it was an enormous tidal wave. And no one can say for certain when the onslaught of waves will stop hammering our shores.
Such financial turmoil makes it easy for your emotions to overtake your mind, allow panic to set in, and abandon your investment strategies.
My experience suggests that’s not such a good idea. Rarely do emotional, panic-driven moves result in a positive outcome. That’s not only true in the investment arena but also in many matters of life.
I have written on numerous occasions that investors need an iron stomach to get through difficult times. What we are now going through is a prime example. If there’s one word I’d use to describe what we are in the midst of, it’s “extreme.”
I say extreme because we’re seeing investment values plummet one minute and then skyrocket just a few hours later. These are not insignificant daily changes. They’re extreme.
The collapsing Chinese economy ignited a worldwide financial crisis and the European and U.S. markets have been swinging wildly as a result.
Unlike an amusement park, these are rides that can lead to stress. A recent report estimated that the average 401(k) was down $3,000 in just one day. In other words, if someone decided to take their money out of the market now, they would be exiting with a substantial loss.
So, how do you not cut your losses and run? As I’ve written many times, you need to have an iron will and keep your emotions at bay. When the markets are on a downslope, it’s probably not the time to make major modifications and adjustments to your portfolio.
Over the years I have navigated a great number of clients through financial storms. That includes the traumatic one-day, twenty percent drop in 1987. Often, when people panic over pocketbook issues the end result is negative. I’ve seen it many times.
If you’re nervous or unsure about your portfolio, schedule a meeting with your financial advisor. Granted, financial advisors don’t have a crystal ball, but reviewing your strategies might remind you why you diversified and selected your investment strategy in the first place. It might also help push aside your inclination to panic.
Naturally, I can’t see into the future either. That being said, however, I’m still fairly optimistic that there are sunny skies on the horizon.
Our domestic economy may not be growing at lightning speed, but it is growing. Once again, you can hear the sounds of construction. Vehicles are moving out of showrooms. You need reservations to get into many restaurants. And businesses are tepidly optimistic.
I believe the focus is shifting from China, the world’s second largest economy, back to our economy. We have the opportunity to take the baton and lead the world’s economy out of the doldrums. When this happens, the value of investment portfolios will bounce back and continue to move upward.
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