Participants Need Help with Retirement Planning

PLANADVISER.com published a survey of employees who participated in a 401(k) plan and the numbers were eye-opening.

Nearly three in four (76%) said they need professional assistance with elements of retirement planning such as how much to save and how to allocate their investments.

For example, when it comes determining a comfortable retirement income, 53% estimated they would need less than 75% of their pre-retirement salary. However, most financial experts cite this figure as too low. In any case, only 13% of employees believe they are on track to replace 75% or more of their pre-retirement income. Four in 10 do not have a specific target of how much to save for retirement, and less than 30% believe their savings will last throughout their retirement.

The problem for most 401(k) participants is that (1) they don’t know who to ask, and (2) most investment advisors won’t provide them advice.  There are a number of reasons for this.  Many people are reluctant to approach stock brokers, thinking either that they have too little money to interest them or afraid they will be “sold” something.  From advisor’s perspective, the assets in a 401(k) are not a source of fees or commissions and therefore, he is not interested in spending time giving free advice.

Employees can get help with their 401(k) plans if they go to a Registered Investment Advisor (RIA) who provides advice on an hourly basis.  We would be happy to discuss this with employees seeking help with their 401(k).

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Financial Planning in the Shadow of Dementia

Alzheimer’s, the most common form of dementia, is an epidemic. More than 5 million Americans are living with Alzheimer’s. It’s irreversible and fatal although some may linger for up to 20 years. And the number is expected to soar.

The Alzheimer’s Association has created a list of the 10 warning signs. These range from memory loss, through confusion to severe mood changes.

Because of the widespread nature of this disease, for people with Alzheimer’s and their families there are a number of things that should be done. Plans should be in place well before the onset of the symptoms.

• Review your insurance policies, especially your Long Term Care policies.
• Talk with your family and your financial advisor to make your wishes known.
• Review your wills and trusts.
• Appoint an advocate who has the legal authority to act on your behalf.
• Make sure you have provided for an appropriate Power of Attorney.

Research shows that declining financial skills is one of the first symptoms of the early stages of Alzheimer’s. This includes anything from difficulty in balancing a checkbook to being victimized by criminals who prey on the elderly. This usually leaves family members to take responsibility for the individual’s finances.

In some cases, people assume these responsibilities without having experience handling money or dealing with financial issues. This is the time to bring in a trusted financial advisor. We can provide practical guidance on both day-to-day and long-term financial decisions.

For a report on this subject, contact Korving & Company – the Financial Planning and Investment Management experts.

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Four reasons why the rich are less prone to financial panic

It appears that “the rich” are less prone to financial panic. There are several reasons why this is true.

1. They don’t live hand-to-mouth so a decline in the value of their portfolio probably does not affect their lifestyle.

2. Research from the University of Michigan shows that there’s a correlation between selling stocks “at the wrong time” and having statistically lower income.

3. The rich are usually older and have experienced previous market declines and realize that after every decline there’s a rebound.

4. The rich have professional advice.

From the Wall Street Journal

But for some of the top 10%, success must come down to having professional financial advisors who help them resist their instincts to cut and run when securities markets hit the skids….

Imagine two well-off households, each with $100,000 in the stock market in 2007. A family that sold in 2009 after losing half its portfolio’s value may now have $50,000 in a savings account. A family that held on would now have about $130,000 in stocks. The inequality has yawned merely because of the investing decisions. In the long run, those savings accounts have a vanishingly small chance of outperforming stocks.

One of our jobs it to help our clients avoid making bad decisions during periods of market volatility. Join the top 10%.  Check us out at Korving & Company.

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6 things the middle class can’t afford anymore

A recent article in USA Today discussed the “middle class” and the ways it has been pinched financially. The middle class was defined as

…those [with a] reasonable amount of discretionary income. Middle-class people do not live from hand to mouth, job to job, season to season, as the poor do…. Perhaps, anyone who earns between the 25th percentile and 75th percentile is a member of the middle class …. Today’s bourgeoisie is composed of laborers and skilled workers, white collar and blue collar workers, many of whom face financial challenges.

So what are the things that the middle class has a problem paying for?

Vacations
At least not without saving on other things like dining out, movies or purchasing big ticket items like TV sets.

New cars
Middle class people buy new cars but it’s usually not a wise decision. “Just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up all such a huge share of your paycheck.”

To pay off debt
According to one source the average family has at least three credit cards and owes them over $15,000. In addition there are student loans, mortgages, car loans and medical debt.

“In 2013, consumer debt was $9,800 per person, which was 13.4% of the average household income of $72,600.”

Emergency savings
Do you have an emergency fund in case something breaks or you lose your job? Having six months of earnings in an emergency fund is considered a minimal requirement. A Bankrate survey found that only one in four households had this amount set aside.

Retirement savings
Saving for retirement is one of those things that people find easy to put off. If you do, unless you are fortunate enough to have a pension, your income will be what Social Security provides or what you can earn as you pass the traditional retirement age. It’s estimated the one in five people near 65 have not saved anything for retirement, and many more worry that they have not saved enough.

Medical and Dental care
Medical care is becoming increasingly expensive, insurance premiums are going up and so are the deductibles. Given the cost, the government is seeking to reduce the amount it allows the doctor and hospital to charge. There are also changes in the kinds of procedures that are going to be covered by programs such as Medicare. An increasing number of people are simply forgoing medical and dental procedures to save on costs.

Many people have financial issues. We can’t help with all of them, but if you have a financial issue that is troubling you, give us a call to see if we can help.

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Viewing “Generation Now”

Chapter 12

Schwab funded a research study to find out what the next generation – “Generation Now” – believes and how it views the world. They wanted to understand how they view their future, determine their fears, attitudes and behaviors.

“Generation Now” is 30 – 45 years old. They have graduated from college, have a career and are making good money. But as they reached adulthood, the events they grew up with shaped them and their attitudes.

Difficult Navigation

Despite some negative in – going perceptions and attitudes towards financial advisors (at large), most “Generation Now” Investors know that great, unique advisors exist. But it’s just not that easy to find them.

Most rely on word of mouth networks and referrals, and are reluctant to cold call a new advisor based simply on a website, listing or ad.

If I could find one that really was just there to inform me and be a partner in the process rather than trying to steer me into one thing or another that they believe is good for me. I’d rather be educated and allow to make my own decision. I don’t care if they make money off the decisions. But I want to be the one who makes the decision and understands why I’m making it. So if I could find a financial advisor like that who could assist but not to pressure or guide too strongly, then it would be an ideal situation.

This is the twelfth of 12 posts examining Generation Now.

Contact us for a complete copy of the report.

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NEW! IRS Retirement Plan Contributions Limits For 2015

The IRS just this week released the retirement plan contribution limits for 2015.  Here’s a chart we put together that shows what the limits are for most people:

2015 Contribution Limits

For those of you who prefer to read it, from Financial Advisor magazine:

Taxpayers can now put aside a little more toward their retirement in 2015, according to the Internal Revenue Service.
The agency has adjusted the maximum contribution allowed for pension plans and other retirement funds for tax year 2015, it announced today, a change reflecting cost-of-living increases.
Taxpayers 50 years old and over can contribute up to $24,000 in retirement funds for 2015, an increase of $1,000 from 2014.
Though some limits remain unchanged from last year, several ceilings have increased. Some of the changes include:
• The elective deferral (contribution) limit for employees who participate in 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan has been increased from $17,500 to $18,000.
• The catch-up contribution limit for employees aged 50 and over who participate in those same plans has been increased from $5,500 to $6,000.
• The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
• The deduction for taxpayers making contributions to a traditional IRA has been phased out for singles and heads of households who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

For even more written information, go to the IRS website.

For clarification, and to figure out what all of the above means for you, contact us.

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Viewing “Generation Now”

Chapter 11

Schwab funded a research study to find out what the next generation – “Generation Now” – believes and how it views the world. They wanted to understand how they view their future, determine their fears, attitudes and behaviors.

“Generation Now” is 30 – 45 years old. They have graduated from college, have a career and are making good money. But as they reached adulthood, the events they grew up with shaped them and their attitudes.

Easy prey

Most “Generation Now” investors have, at some point, had a negative experience with some type of financial advisor.

In these times, investors have been misled by advisors, or sold products with hidden fees, only to find out later what had actually happened.

The perceived lack of transparency and honesty in the broader field (of investment services) causes “Generation Now” to approach advisor relationship with caution and a degree of skepticism.

I would say for me to work with a financial advisor, I would want somebody who’s honest. You know, explains to me the fees up front… I just want something that’s real, and not cheesy, and not trying to hide anything, or hold anything back

This is the eleventh of 12 posts examining Generation Now.

Contact us for a complete copy of the report.

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Viewing “Generation Now”

Chapter 10

Schwab funded a research study to find out what the next generation – “Generation Now” – believes and how it views the world. They wanted to understand how they view their future, determine their fears, attitudes and behaviors.

“Generation Now” is 30 – 45 years old. They have graduated from college, have a career and are making good money. But as they reached adulthood, the events they grew up with shaped them and their attitudes.

Misaligned Interests

Though exceptions exist, many “Generation Now” Investors don’t believe their best interests are taken to heart when dealing with the Financial Professionals and Advisors in their life.

For these investors, there’s the perception that advisors are simply salesmen in suits, who steer clients into products that they’re incentivized to sell – either from corporate directives, or due to high commissions – rather than based on a client’s best interests or unique needs

Sometimes I feel like they have an agenda, and they’re really interested in how much you have to invest, and how much you have. And I just kind of feel like it’s really self serving sometimes. So if they really try to get to know me as a person, and come to my level, respect me and treat me as I want to be treated, with my best interests in mind, then maybe I would trust them a little bit more.

This is the tenth of 12 posts examining Generation Now.

Contact us for a complete copy of the report.

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Merrill Lynch Jacking Up Fees

We read of a broker at Merrill Lynch who left the firm because, and we quote:

“Under Merrill Lynch One, fees were going to go up for my clients by 30% to 40% on average.”

Wow, that’s a lot!

Account fees have always been a sore spot for us at Korving & Company, which is why we use Charles Schwab as our custodian. They don’t charge account fees.
Merrill is getting some negative reaction from the financial press. Here’s one from Forbes (Merrill’s Fee Debacle:

You’re near the top of your industry and a cash cow for your parent (Bank of America). The future looks bright as the financial crisis of 2008 fades. So, what do you do? You announce a complicated new fee structure that on the surface looks like it may increase fees for many of your top clients in a fast growing (fee-based) business. Then you explain it in murky terms. Not, in my opinion, too smart!

These fee changes are part of a platform restructuring that merges five separate managed account platforms on to a new one called Merrill Lynch One (set to rollout in September).

The author criticizes Merrill Lynch for creating confusion and a lack of clarity on how this is going to affect the clients and the brokers at Merrill.
If you have an account at Merrill Lynch, you may want to check out our clear, easy to understand and fully transparent fee structure.

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Viewing “Generation Now”

Chapter 9

Schwab funded a research study to find out what the next generation – “Generation Now” – believes and how it views the world. They wanted to understand how they view their future, determine their fears, attitudes and behaviors.

“Generation Now” is 30 – 45 years old. They have graduated from college, have a career and are making good money. But as they reached adulthood, the events they grew up with shaped them and their attitudes.

Abundant Misconceptions

Most “Generation Now” Investors are unaware of the diversity that exists in the wider world of financial advisors. Advisor perceptions, often unfairly, are based on cumulative interactions with financial professionals, most of whom aren’t technically RIAs.

Like the retail guys that we see on TV, like Schwab and TD Ameritrade… I thought they were kind of like basic advisors. You know they have a desk in the office, in the big office with a bunch of other guys with desks… They just give basic investment advice. I guess I’m looking for more of a detail or a sit down with a professional. I think that’s what Chase Private Clients is like. I think it’s really more like upscale.

This is the ninth of 12 posts examining Generation Now.

Contact us for a complete copy of the report.

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