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How Millennials Can Get Off to a Good Financial Start

Split Road

Doing the right things at the right time may leave you wealthier later.

Provided by TechGirl Financial

What can you do to start building wealth before age 35?

You know time is your friend and that the earlier you begin saving and investing for the future, the better your financial prospects may become. So what steps should you take?


Reduce your debt

You probably have some student loan debt to pay off. According to the Institute for College Access and Success, which tracks college costs, the average education debt owed by a college graduate is now $28,950. Hopefully, yours is not that high and you are paying off whatever education debt remains via an automatic monthly deduction from your checking account. If you are struggling to pay your student loan off, take a look at some of the income-driven repayment plans offered to federal student loan borrowers, and options for refinancing your loan into a lower-rate one (which could potentially save you thousands).1

You cannot build wealth simply by wiping out debt, but freeing yourself of major consumer debts frees you to build wealth like nothing else. The good news is that saving, investing, and reducing your debt are not mutually exclusive. As financially arduous as it may sound, you should strive to do all three at once. If you do, you may be surprised five or ten years from now at the transformation of your personal finances.


Save for retirement

If you are working full-time for a decently-sized employer, chances are a retirement plan is available to you. If you are not automatically enrolled in the plan, go ahead and sign up for it. You can contribute a little of each paycheck. Even if you start by contributing only $50 or $100 per pay period, you will start far ahead of many of your peers.1

Away from the workplace, traditional IRAs offer you the same perks. Roth IRAs and Roth workplace retirement plans are the exceptions – when you “go Roth,” your contributions are not tax-deductible, but you can eventually withdraw the earnings tax-free after age 59½ as long as you abide by IRS rules.1,2

Workplace retirement plans are not panaceas – they can charge administrative fees exceeding 1% and their investment choices can sometimes seem limited. Consumer pressure is driving these administrative fees down, however; in 2015, they were lower than they had been in a decade and they are expected to lessen further.3


Keep an eye on your credit score

Paying off your student loans and getting started saving for retirement are a great start, but what about your immediate future? You’re entitled to three free credit reports per year from TransUnion, Experian, and Equifax. Take advantage of them and watch for unfamiliar charges and other suspicious entries. Be sure to get in touch with the company that issued your credit report if you find anything that shouldn’t be there. Maintaining good credit can mean a great deal to your long-term financial goals, so monitoring your credit reports is a good habit to get into.1


Do not fear Wall Street

 We all remember the Great Recession and the wild ride investments took. The stock market plunged, but then it recovered – in fact, the S&P 500 index, the benchmark that is synonymous in investing shorthand for “the market,” gained back all the loss from that plunge in a little over four years. Two years later, it reached new record peaks, and it is only a short distance from those peaks today.4

Equity investments – the kind Wall Street is built on – offer you the potential for double-digit returns in a good year. As interest rates are still near historic lows, many fixed-income investments are yielding very little right now, and cash just sits there. If you want to make your money grow faster than inflation – and you certainly do – then equity investing is the way to go. To avoid it is to risk falling behind and coming up short of retirement money, unless you accumulate it through other means. Some workplace retirement plans even feature investments that will direct a sizable portion of your periodic contribution into equities, then adjust it so that you are investing more conservatively as you age.


Invest regularly; stay invested

When you keep putting money toward your retirement effort and that money is invested, there can often be a snowball effect. In fact, if you invest $5,000 at age 25 and just watch it sit there for 35 years as it grows 6% a year, the math says you will have $38,430 with annual compounding at age 60. In contrast, if you invest $5,000 each year under the same conditions, with annual compounding you are looking at $596,050 at age 60. That is a great argument for saving and investing consistently through the years.5

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – gobankingrates.com/personal-finance/money-steps-need-after-graduating/ [5/20/16]
2 – usatoday.com/story/money/personalfinance/2015/07/03/money-tips-gen-y-adviceiq/29624039/ [7/3/15]
3 – tinyurl.com/hgzgsw4 [12/2/15]
4 – marketwatch.com/story/bear-markets-can-be-shorter-than-you-think-2016-03-21 [3/21/16]
5 – investor.gov/tools/calculators/compound-interest-calculator [5/26/16]

Advancing Toward Your Career Goals

advancing towards your career goals

Should you change jobs in pursuit of them? Or position yourself in a new way at work?

Provided by TechGirl Financial

Is your career unfolding as it should?

If not, maybe it is time for a change; either a change of jobs, or a change in your role at your workplace.


Pay attention to the signals of a stalled career

If the status quo at your office bothers you, or if you feel apathetic or nonchalant about your work, you have company. A recent Aon Hewitt poll found that only 63% of employees felt sufficiently engaged on the job. According to a Gallup poll, even fewer Americans truly like what they do for a living: just 32% of employees are “involved in, enthusiastic about and committed to their work and workplace.”1

If you find yourself dreaming of an escape and doing just enough to avoid getting fired, you have three basic avenues. One, go into business for yourself (a move that is impractical and terribly risky for most people). Two, change jobs. Three, see if you can make yourself more valuable and more engaged where you are.

Should you leave or stay?

If your job amounts to a dead end, then leaving is probably your only option. If your workday simply bores you or you have issues with your pay or your role, leaving is also an option; you also may want to talk with your supervisor or boss to see how things can change where you are.


If you consider another job, look beyond the offer

A company may woo you with a terrific compensation package, a better title, and a nicer place to work; you should see these as short-term pluses. Does this new job really represent a long-term career move, or just a change of scenery? What kind of vision do they have for you? Do you get the sense that your vision matters to them? What kind of culture does this company have? Think ahead. Three to six months from now, do you think you will be happy at the new job? Two or three years from now, do you think your career will be progressing as it should thanks to this job change?

If you stay, make the right moves to assert your goals and your value

What position do you want at work, as opposed to the one you have now? What is a reasonable next step? If you work for a larger employer, you might find several opportunities in multiple locations (think about if you want to relocate as a consequence of a promotion).

Schedule a meeting with your boss. Prior to having that conversation, think about the perception you want to create in your boss’s mind. During the conversation, promote it.

Tell your boss that you want to discuss your personal development, how your career can progress and evolve with the company. Share your reasons for bringing all this up; your aspirations, not your complaints. Mention the specific career move you would like to make, and the kind of contribution you could make in that new role. Tell your boss that, as much as you appreciate your current role, your heart tells you that it is time for a new role or a new challenge. (You might mention that you will be happy to train another employee to take over your old duties.)

This conversation should last at least 15 minutes. In the process, you may learn what kind of expectations your boss has for you, and see how they correspond with yours. (If you do not get a glimpse into that, it is worth bringing up.)

Keep in mind that being really good at your job may not warrant a promotion by itself. Even if you are fully engaged at work, you may be passed over if you fail to fully engage with the people with whom you work. Likeability is a big factor in promotion and career advancement, and networking is not just something you do to land another job, it is also a great idea at your current job.


Financially, a move to another employer might be the best move

Rightly or wrongly, changing jobs is perceived as a path to continually higher pay. In fact, one of the big criticisms of staying put is that your employer may only compensate you more if you insist.

Last year, the core Consumer Price Index advanced 2.1%. Meanwhile, real average hourly wages rose 1.8% according to the Bureau of Labor Statistics. Moving on to a new employer may help you cope with this kind of economic weakness. Payroll processor ADP, whose research arm tracks such data, notes that the average full-time employee changing jobs in 2015 received 4.5% greater compensation as a result of the move.2,3

1 – washingtonpost.com/news/wonk/wp/2016/01/11/feeling-stuck-in-your-job-blame-management-consulting/ [1/11/16]
2 – tinyurl.com/zv64ge4 [5/2/16]
3 – theatlantic.com/business/archive/2016/02/job-switchers-raise/460044/ [2/8/16]

Breaking the Surface

breaking the surface tips to recover

Four tips for recovering from unemployment.

Provided by TechGirl Financial

Any period of unemployment is fraught with stress – both personal and financial

While landing that formerly-elusive new job can be a relief, it is only the first step on the road to recovery from unemployment. This transition time is akin to breaking the surface after being underwater for several minutes. It’s a relief to be breathing again and feel the sun on your face, but it’s no time to relax. You must start swimming right away to get back to a healthy financial shore.

Here are four steps you can take to help make sure your recent unemployment doesn’t cast a long shadow across your future financial health.

Continue to live lean

More likely than not, you weren’t buying $4 coffees while unemployed. Five star restaurants were out too. Hamburger may have replaced steak. You may want to continue to follow that pattern. We tend to grow into our incomes, our budgets bloating along with our salaries. Fighting that urge will help with the rest of the steps to unemployment recovery.

Protect yourself ASAP

The longer your unemployment lasts the more important basic survival becomes. Someone who is unemployed may let life insurance, disability insurance or health insurance policies lapse as they try to keep current on the mortgage, pay utilities and put groceries in the pantry. Sometime during the first few days of your employment you should enroll in whatever benefits you need that your company offers. If the new firm does not offer the coverage you need, make an appointment with an insurance professional and use part of your first paycheck to protect you and your family. Remember, the income from your new job won’t benefit anyone if a catastrophic illness, disability or death suddenly takes it away.


Develop a plan to pay down your debts

When you have a job, debts are a nuisance. When you don’t have a job, they may become a threat to your future financial well-being. While it’s normal to hope that you never have to go through unemployment again, you must start preparing for the possibility.

If you are behind on your mortgage, call your lender to let them know of your new job and to work with them on a plan to catch up on your payments. If they are unwilling to work with you, consider using a Federal resource such as those offered by the U.S. Housing and Urban Development Administration.

While there are fewer similar programs for car loans, calling your lender and trying to develop a plan for a loan you’re behind on should be your first step.

All too often during unemployment, credit cards may be used to get by when cash is low. While your interest rates may have been low when you initially signed up for the card, new legislation has caused a spike in credit card rates.1 Rates of 20% – 30% are not uncommon as banks react to new rules. Paying down these balances should also be a primary goal.

Remember to start paying yourself

Whether you call it a rainy day fund, a nest egg or emergency cash, slowly, paycheck by paycheck, begin paying yourself a fraction of your salary. Some experts will argue that a family should keep six months to one year’s worth of expenses in the bank for unexpected events such as a blown car engine, the roof caving in, or another round of unemployment.1 For many families, that may feel like an insurmountable sum. But as the old joke goes “How do you eat an elephant?” The answer: “One bite at a time”. Paying yourself has to be done paycheck-to-paycheck, little by little.


1 –http://www.marketwatch.com/story/credit-cards-gouge-consumers-ahead-of-new-law-2009-11-06 [11/10/09]

Money Concerns for Those Remarrying

money concerns for remarrying

What financial factors deserve attention?

Provided by TechGirl Financial

Some of us will marry again in retirement

How many of us will thoroughly understand the financial implications that may come with tying the knot later in life?

Many baby boomers and seniors will consider financial factors as they enter into marriage, but that consideration may be all too brief. There are significant money issues to keep in mind when marrying after 50, and they may be important enough to warrant a chat with a financial professional.

You might consider a prenuptial agreement

A prenup may not be the most romantic gesture, but it could be a very wise move from both a financial and estate planning standpoint. The greater your net worth is, the more financial sense it may make.

If you remarry in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), all the money that you and your spouse will earn during your marriage will be considered community property. The same goes for any real property that you happen to purchase with those earnings. Additionally, these states often regard extensively comingled separate property as community property, unless property documentation or evidence exists to clarify separate origin or status.1

A prenuptial agreement makes part or all of this community property the separate property of one spouse or the other. In case of a divorce, a prenup could help you protect your income, your IRA or workplace retirement plan savings, even the appreciation of your business during the length of your marriage (provided you started your business before the marriage began).1,2

A prenup and its attached documents lay everything bare. Besides a core financial statement, the support documentation includes bank statements, deeds, tax returns, and (optionally) much more. The goal is to make financial matters transparent and easy to handle should the marriage sour.1,2

If one spouse discovers that the other failed to provide full financial disclosure when a prenup was signed, it can be found invalid. (A prenup signed under duress can also be ruled invalid.) If a divorce occurs and the prenup is judged worthless, then the divorce will proceed as if the prenup never existed.2

You should know about each other’s debts

How much debt does your future spouse carry? How much do you owe? Learning about this may seem like prying, but in some states, married couples may be held jointly liable for debts. If you have a poor credit history (or have overcome one), your future spouse should know. Better to speak up now than to find out when you apply for a home loan or business loan later. In most instances, laws in the nine community property states define debts incurred during a marriage as debts shared by the married couple.1


You should review your estate planning

Affluent individuals who remarry have often done some degree of estate planning, or at least have made some beneficiary decisions. Remarriage is as much of a life event as a first marriage, and it calls for a review of those decisions and choices.

In 2009, the Supreme Court ruled that the beneficiary designation on an employer-sponsored retirement plan account overrides any wishes stated in a will. Many people do not know this. Think about what this might mean for an individual remarrying. A woman might want to leave her workplace retirement plan assets to her daughter, her will even states her wish, but the beneficiary form she signed 25 years ago names her ex-husband as the primary beneficiary. At her death, those assets will be inherited by the man she divorced. (That will hold true even if her ex-husband waived his rights to those assets in the divorce settlement.)3

In the event of one spouse’s passing, what assets should the other spouse receive? What assets should be left to children from a previous marriage? Grandchildren? Siblings? Former spouses? Charities and causes? Some or all of these questions may need new answers. Also, your adult children may assume that your new marriage will hurt their inheritance.

Are you a homeowner planning to remarry?

Your home is probably titled in the name of your family. If you add your new spouse to the title, you may be opening the door to a major estate planning issue. Joint ownership could mean that the surviving spouse will inherit the property, with the ability to pass it on to his or her children, not yours.4

One legal option is to keep the title to your home in your name while giving your new spouse occupancy rights that terminate if he or she dies, moves into an eldercare facility or divorces you. Should any of those three circumstances occur, your children remain in line to inherit the property at your death.4


1 –nolo.com/legal-encyclopedia/marriage-property-ownership-who-owns-what-29841.html [3/17/16]
2 – blog.credit.com/2015/06/prenup-vs-postnup-which-is-better-117548/ [6/1/15]
3 – tinyurl.com/j8ncltt [9/7/11]
4 – usatoday.com/story/money/columnist/brooks/2014/05/20/retire-baby-boomer-divorce-remarry-pension/9171469/ [5/20/14]

College Funding Options

college funding options

You can plan to meet the costs through a variety of methods.

Provided by TechGirl Financial

How can you cover your child’s future college costs?

Saving early (and often) may be the key for most families. Here are some college savings vehicles to consider.

529 plans

Offered by states and some educational institutions, these plans let you save up to $14,000 per year for your child’s college costs without having to file an IRS gift tax return. A married couple can contribute up to $28,000 per year. (An individual or couple’s annual contribution to the plan cannot exceed the IRS yearly gift tax exclusion.) These plans commonly offer you options to try and grow your college savings through equity investments. You can even participate in 529 plans offered by other states, which may be advantageous if your student wants to go to college in another part of the country.1,2

While contributions to a 529 plan are not tax-deductible, 529 plan earnings are exempt from federal tax and generally exempt from state tax when withdrawn, as long as they are used to pay for qualified education expenses of the plan beneficiary. If your child doesn’t want to go to college, you can change the beneficiary to another child in your family. You can even roll over distributions from a 529 plan into another 529 plan established for the same beneficiary (or for another family member) without tax consequences.1

Grandparents can start a 529 plan, or other college savings vehicle, just as parents can; the earlier, the better. In fact, anyone can set up a 529 plan on behalf of anyone. You can even establish one for yourself.1

529 plans have been improved for 2016 with two additional features. One, you can now use 529 plan dollars to pay for computer hardware, software, and computer-related technology, as long as such purchases are qualified higher education expenses. Two, you can now reinvest any 529 plan distribution refunded to you by an eligible educational institution, as long as it goes back into the same 529 plan account. You have a 60-day period to do this from when you receive the refund.3

If you have a 529 plan and received such a refund at any time during January 1-December 18, 2015, you have until Tuesday, February 16, 2016 to put that money back into your 529 plan. If you meet that deadline, the distribution will not be seen as a non-qualified one by the IRS (i.e., fully taxable plus a 10% penalty).3

“Investors should consider the investment objective, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer’s official statement, which should be read carefully before investing. A copy of the official statement can be obtained from a financial professional. Before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.”

Coverdell ESAs

Single filers with adjusted gross income (AGI) of $95,000 or less and joint filers with AGI of $190,000 or less can pour up to $2,000 annually into these tax-advantaged accounts. While the annual contribution ceiling is much lower than that of a 529 plan, Coverdell ESAs have perks that 529 plans lack. Money saved and invested in a Coverdell ESA can be used for college or K-12 education expenses. Coverdell ESAs offer a broader variety of investment options compared to many 529 plans, and plan fees are also commonly lower.4

Contributions to Coverdell ESAs aren’t tax-deductible, but the account enjoys tax-deferred growth and withdrawals are tax-free so long as they are used for qualified education expenses. Contributions may be made until the account beneficiary turns 18. The money must be withdrawn when the beneficiary turns 30 (there is a 30-day grace period), or taxes and penalties will be incurred. Money from a Coverdell ESA may even be rolled over tax-free into a 529 plan (but 529 plan money may not be rolled over into a Coverdell ESA).2,4


UGMA & UTMA accounts

These all-purpose savings and investment accounts are often used to save for college. When you put money in the account, you are making an irrevocable gift to your child. You manage the account assets. When your child reaches the “age of majority” (usually 18 or 21, as defined by state UGMA or UTMA law), he or she can use the money to pay for college. However, once that age is reached, that child can also use the money to pay for anything else.5

Imagine your child graduating from college debt-free

With the right kind of college planning, that may happen. Talk to a financial advisor today about these savings methods and others.


1 – irs.gov/uac/529-Plans:-Questions-and-Answers [8/24/15]
2 – time.com/money/3149426/college-savings-esa-529-differences-financial-aid/ [8/21/14]
3 – figuide.com/new-benefits-for-529-plans.html [1/13/16]
4 – time.com/money/4102891/coverdell-529-education-college-savings-account/ [11/9/15]
5 – franklintempleton.com/investor/products/goals/education/ugma-utma-accounts?role=investor [2/3/16]
6 – investopedia.com/articles/personal-finance/102915/life-insurance-vs-529.asp [10/29/15]

White House Proposes Changes to Retirement Plans

white house proposes changes to retirement plans

A look at some of the ideas contained in the 2017 federal budget.

Provided by TechGirl Financial

Will workplace retirement plans be altered in the near future?

The White House will propose some changes to these plans in the 2017 federal budget, with the goal of making such programs more accessible. Here are some of the envisioned changes.

Pooled employer-sponsored retirement programs

This concept could save small businesses money. Current laws permit multi-employer retirement plans, but the companies involved must be similar in nature. The White House wants to lift that restriction.1,2

In theory, allowing businesses across disparate industries to join pooled retirement plans could result in significant savings. Administrative expenses could be reduced, as well as the costs of compliance.

Would governmental and non-profit workplaces also be allowed to pool their retirement plans under the proposal? There is no word about that at this point.

This pooled retirement plan concept would offer employees new degrees of portability for their savings. A worker leaving a job at a participating firm in the pool would be able to retain his or her retirement account after taking a job with another of the participating firms. Along these lines, the White House will also propose new ways to make it easier for workers to monitor and reconcile multiple workplace retirement accounts.2,3

Scant details have emerged about how these pooled plans would be created or governed, or how much implementing them would cost taxpayers. Congress will be asked for $100 million in the new budget draft to test new and more portable forms of retirement savings accounts. Presumably, many more details will surface when the proposed federal budget becomes public in February.2,3

Automatic enrollment in IRAs

In the new federal budget draft, the Obama administration will require businesses with more than 10 employees and no retirement savings program to enroll their workers in IRAs. This idea has been included in past federal budget drafts, but it has yet to survive bipartisan negotiations – and it may not this time. Recently, the myRA retirement account was created through executive action to try and promote this objective.1,3


A lower bar to retirement plan participation for part-time employees

Another proposal within the new budget would allow anyone who has worked for an employer for more than 500 hours a year for the past three years to participate in an employer-sponsored retirement plan.2

A bigger tax break for businesses starting retirement plans

Eligible employers can receive a federal tax credit for inaugurating a retirement plan – a credit for 50% of what the IRS deems the employer’s “ordinary and necessary eligible startup costs,” up to a maximum of $500. That credit (which is part of the general business credit) may be claimed for each of the first three years that the plan is in place, and a business may even elect to begin claiming it in the tax year preceding the tax year that the plan goes into effect. The White House wants the IRS to boost this annual credit from $500 to $1,500.2,4

Also, businesses could receive an annual federal tax credit of up to $500 merely for automatically enrolling workers in their retirement plans. As per the above credit, they could claim this for three straight years.2


What are the odds of these proposals making it into the final 2017 federal budget?

 The odds may be long. Through the decades, federal budget drafts have often contained “blue sky” visions characteristic of this or that presidency, ideas that are eventually compromised or jettisoned. That may be the case here. If the above concepts do become law, they may change the face of retirement plan participation and administration.


1 – nytimes.com/2016/01/26/us/obama-to-urge-easing-401-k-rules-for-small-businesses.html [1/26/16]
2 – tinyurl.com/je5uj3r [1/26/16]
3 – bloomberg.com/politics/articles/2016-01-26/obama-seeks-to-expand-401-k-use-by-letting-employers-pool-plans [1/26/16]
4 – irs.gov/Retirement-Plans/Retirement-Plans-Startup-Costs-Tax-Credit [8/18/15]

Why You Should Stay in Stocks in 2016

why you should stay in stocks in 2016 2

One bad trading day is not the year.

Provided by TechGirl Financial

The stock market has wavered recently

A lackluster year just ended, and this year has started inauspiciously. You may be wondering … should you really be invested in stocks right now?

Yes, you should be.

In moments like these, investors should not panic and overreact to the headlines. Instead, they should take the long view of stock market investing. Impulsive selling now can lead an investor to try and time the market later, and market timing usually leads investors to make mistakes.

Stock market investing is a long-run proposition

On a bad day, it may seem like the whole market is falling apart – but stock market performance is not measured only in days.

Consider the following statistics, which highlight some underpublicized truths:

**Even with their poor showing in 2015, stocks have advanced notably in the last three years. Across 2013-15, the Dow Jones Industrial Average gained 9.97%, the Nasdaq Composite 18.37%, the S&P 500 12.74%, and the small-cap Russell 2000 index 10.18%. The Dow Jones Internet index advanced 28.85% in those three years, the Nasdaq Biotech index 35.26%.1

**Just recently, the Dow gained 7.00% in a quarter. The Nasdaq rose 8.38% and the S&P 6.45% in the same interval. When did this happen? The fourth quarter of 2015. Yes, the same quarter that just ended with everyone talking about how sluggish the market was.2

**The S&P 500 did lose 0.73% in 2015 in terms of price return, but its 2015 total return (including dividends) was positive – a yearly gain of 1.38%.3

And now, some long-term historical perspective:

**Through the decades, the S&P 500 has recovered very well from many of its major one-day descents. Its January 4 plunge was comparable to its August 24 drop, when it was down more than 4% during the trading session and lost 3.2% on the day to close at 1,893.21. It took the S&P just three days to recover the entirety of that big loss. Before that, there had been 54 market days in the past 32 years in which the S&P had lost 3.5% or more. There were 45 year-over-year advances after such days, in contrast to 9 year-over-year retreats.4,5

**In the 88 market years from 1928-2015, the S&P had 63 profitable years with its average yearly gain being 21.5%. So across the rough equivalent of a human lifetime, the S&P 500 has advanced on an annual basis 72% of the time.6

**Looking at the 74 possible 15-year intervals of S&P performance occurring during 1928-2015, roughly 60% of these periods have seen the S&P post a compound return of 10% or better. During 1985-99, the index’s compound return was a striking 18.3%.6

Yes, there have been down years for stocks, severe ones among them – think of 2008. There have also been great years, and far more positive years than negative ones. You have to take the good years with the bad. It is simply part of stock market investing.

Those who sell when the market is down often buy back in well after the market recovers. Selling low and buying high is a formula for disappointment. Staying invested through market downturns positions you to buy quality shares when they are cheaper, and when stocks rally, you are in the market and ready to benefit.

A particular headline or economic indicator may jolt the market on a particular day, but you are not invested for one day – you are investing for a lifetime. We have many positive signs in our economy – solid hiring, appreciable wage growth, steady consumer spending, a strong housing market – and they may lead to better corporate earnings in 2016. So be patient; better days may be ahead for the market.

1 – wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [12/31/15]
2 – wsj.com/mdc/public/page/2_3022-quarterly_gblstkidx.html [12/31/15]
3 – stockcharts.com/articles/chartwatchers/2016/01/do-dividends-matter.html [1/2/16]
4 – tinyurl.com/oksgh26 [8/25/15]
5 – tinyurl.com/jmams7p [1/4/16]
6 – marketwatch.com/story/understanding-performance-the-sp-500-in-2015-02-18 [2/18/15]

Are Gen Xers Planning for Retirement the Right Way?

are gen xers planning for retirement the right way

Some are planning wisely, but others are beset by mistakes.

Provided by TechGirl Financial

Generation X has become the new “sandwich” generation

Many Americans born during the years 1965-80 are finding themselves caring for aging parents and growing kids at once, with little time to devote to their personal finances or their retirement planning.

Broadly speaking, that time shortage has hindered their retirement saving and planning efforts. Some members of Gen X are on track to reach their retirement money goals; others are making mistakes that may greatly undermine their progress. What kind of mistakes, specifically?




In a recent survey of 36- to 49-year-olds commissioned by the Transamerica Center for Retirement Studies, 39% of respondents said they would prefer to tackle retirement investing when they were nearer to retirement age.1

If you are in your thirties or forties, this is a mistake you cannot afford to make. When it comes to retirement saving, time is your friend – perhaps the best friend you have – and the earlier you start, the more years of compounding your invested assets can receive. That is not to say all hope is lost if you start saving and investing at forty, however. You just have to save considerably more per month or year to catch up.

A very simple compounding example bears this out. Let us take a 25-year-old, a 35-year-old, and a 45-year-old. From this day forward, each will contribute $1,000 a month for a 10-year period to a retirement account yielding 7% annually. At the end of those ten years, they will stop contributing to those accounts and merely watch that money grow until they turn 65 (not recommended, but again this is a simple example). Under these conditions, the person who saved for just ten years starting at age 25 has $1,444,969 at 65. The person who saved for ten years starting at 35 has but $734,549, the person who saved for ten years starting at 45 only $373,407.2


Raiding the retirement fund

Think of your retirement fund as your financial future, or at least a large part of it. Many instances may tempt you to draw it down: your children’s education expenses, student loan debt, eldercare costs. Refrain if at all possible. Work on creating an emergency fund so you can avoid this (if you already have one, great).

Every loan you take from a workplace retirement account leaves you with fewer invested dollars, fewer dollars that may grow and compound faster than inflation via the equities markets. Your forties, in particular, represent a prime time to ramp up your saving effort as your salary and/or compensation presumably increase.

Undervaluing catch-up contributions

Beginning in the calendar year you turn 50, you are permitted to contribute an extra $1,000 to your IRA per year, and an extra $6,000 per year to a typical 401(k), 403(b) or 457 plan. An extra $1,000-$6,000 per year may not sound like much, but if you have both an IRA and a workplace retirement plan, this gives you a chance to save an additional $50,000-$100,000 (or more) for retirement between now and when you presumably wrap up your career. Those dollars can benefit from compounding as well. Even the opportunity to direct an additional $1,000 into an IRA each year should not be dismissed. Sadly, some savers will enter their fifties not knowing about catch-up contributions or not valuing them enough – but you will consistently make them, right?3

Not planning with the “end” in mind

Many Gen Xers are saving for retirement without defined financial objectives. They do not yet know how large their nest egg needs to be in order to generate worthwhile retirement income. They have not really thought about what they want their money to accomplish. Even using a free online retirement calculator (there are some really good ones) might yield some food for thought.

Foregoing consultations with financial professionals

One of the demerits of DIY investing is the learning curve. Investing for retirement without any help is akin to trying to find a street address without help from a map: you might get close, you might get there, but most of the time you may not know how close or far away you are from your goal. A meeting with a financial professional can lead to an overview of where you stand, and give you a firm idea of what you need to do as you pursue your retirement goals further.

The good news? Gen Xers are making a solid effort to save

In the aforementioned Transamerica survey, 83% of Gen X respondents said they were building up a retirement fund, and 20% of them had amassed more than $250,000 in retirement savings prior to age 50.1

1– forbes.com/sites/nextavenue/2014/08/28/7-retirement-mistakes-gen-x-is-making/print/ [8/28/14]
2 – moneyunder30.com/power-of-compound-interest [2/27/15]
3 – shrm.org/hrdisciplines/benefits/articles/pages/2016-irs-401k-contribution-limits.aspx [10/22/15]

The Fed Makes Its Move

Wall Street rallies as interest rates rise for the first time since 2006.

Provided by TechGirl Financial

U.S. monetary policy officially changed course Wednesday

Federal Reserve officials voted to raise the federal funds rate by a quarter of a percentage point, ending an unprecedented 7-year period in which it was held near zero. Nearly ten years had passed since the central bank had adjusted interest rates upward.1

The Federal Open Market Committee voted 10-0 in favor of the rate hike. It also raised the discount rate by a quarter-point to 1.0%.1

Addressing the media after the FOMC announcement, Federal Reserve chair Janet Yellen shared the central bank’s viewpoint: “With the economy performing well, and expected to continue to do so, the committee judged that a modest increase in the federal funds rate target is now appropriate, recognizing that even after this increase, monetary policy remains accommodative.”2

Equities started the day with minor gains, then advanced further

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite respectively advanced 1.28%, 1.45%, and 1.52% Wednesday. The yield on the 2-year Treasury hit a 5-year high of 1.021%. Gold rose $15.20 to close at $1,076.80 on the COMEX.3,4

As a December rate increase was widely expected, the real curiosity concerned the following press conference. Would Janet Yellen offer any hints about monetary policy in 2016?
She offered one: she said she doubted that any interest rate hikes in 2016 would be “equally spaced.” Aside from that remark, no new insights emerged; Yellen reemphasized that the Fed does not plan to raise rates aggressively.2

Investors gained more insight from the Fed’s latest dot-plot chart, which expresses the Federal Open Market Committee’s opinion on where the benchmark interest rate will be at near-term intervals. The new dot-plot forecasts four rate hikes during 2016, with the federal funds rate climbing toward 1.5% by the end of next year (the median projection is 1.4%).5

The dot-plot revealed benchmark interest rate targets of 2.4% for the end of 2017 and 3.3% for the end of 2018, slightly lower than the previously stated targets of 2.6% and 3.4%.5

That corresponds with the consensus of analysts surveyed by CNBC. Their expectation was for three quarter-point rate hikes across 2016, taking the federal funds rate toward 1%.6

Some analysts wonder if the next rate hike might occur at the FOMC’s March meeting. Nothing could be gleaned about that from Yellen’s press conference or the new FOMC announcement.6


With more tightening seemingly ahead, what is in store for the bull market?

Bears may want to wait before making any gloomy pronouncements. While rising interest rates are commonly assumed to impede a bull market, this is not always the case. In fact, the S&P 500 advanced 15% during the last round of tightening (2004-06).7

Could higher interest rates decrease inflation pressure?

That is a distinct possibility, and that would hurt wage growth and business growth. The Fed would like to see inflation in the vicinity of 2%, yet the Consumer Price Index is up only 0.5% in the past 12 months, held in check by a 14.7% annualized retreat in energy prices and a 24.1% annualized fall in gas prices. On the other hand, the Core CPI (minus food and energy prices) is up 2.0% in the past year.6

The Fed may have made just the right move at the right time

If it had waited until 2016 to tighten, a collective “uh-oh” might have been heard from pundits and analysts, with comments along the lines of “Does the Fed know something about the economy that we do not?”

As JPMorgan Private Bank chief U.S. investment strategist Kate Moore told CNNMoney this week, “Keeping interest rates at zero is enforcing the idea that the U.S. economy is fragile.” Years of easing certainly helped the bull market, though: Wednesday morning, the S&P 500 was 202% above its March 9, 2009 bear market low.2,7

Ultimately, the central bank felt the time had come for tightening

At Wednesday’s press conference, Yellen commented that data had led the Fed to raise rates – it had not made its move in response to any shifts in public opinion. “Consumers are in much healthier financial condition” than they once were, she remarked. The rate hike certainly expresses confidence in the economy, which could strengthen further in 2016.2

1– marketwatch.com/story/federal-reserve-lifts-interest-rates-for-first-time-since-2006-2015-12-16 [12/16/15]
2 – blogs.marketwatch.com/capitolreport/2015/12/16/live-blog-and-video-of-the-fed-interest-rate-decision-and-janet-yellen-press-conference/ [12/16/15]
3 – cnbc.com/2015/12/16/us-markets-fed.html [12/16/15]
4 – reuters.com/article/usa-bonds-idUSL1N1452HC20151216 [12/16/15]
5 – marketwatch.com/story/federal-reserve-dot-plot-still-signals-4-interest-rate-hikes-in-2016-2015-12-16 [12/16/15]
6 – latimes.com/business/la-fi-federal-reserve-rate-hike-20151216-story.html [12/16/15]
7 – money.cnn.com/2015/12/15/investing/stocks-markets-fed-rate-hike/ [12/15/15]

Bad Spending Habits That Can Be Corrected

bad spending habits that can be corrected

A little frugality may lead to a lot of financial progress.

Provided by TechGirl Financial

Americans have a great deal of disposable income relative to many other nations, yet our free spending can take us further and further away from the potential for financial freedom. Some people fall into crippling spending habits and injure their finances as a consequence.

Bad habit: failing to save

Saving – saving even $50 or $100 a month – isn’t that hard under most financial conditions. Even so, some households don’t put much of a priority on building a cash reserve of some kind, a portion of which could be used for equity investment.

When you don’t make saving a goal, you don’t have any money to withdraw in a pinch – so if you need to get ahold of some money, where do you find it? Basically, you have three options. One, turn to friends or Mom or Dad. Two, divert money that would go toward a core need (food, rent, the heating bill) toward the sudden crisis. Three, charge your credit card. (There are other options, but they are best not explored.)


Good habit: save just a little, then a lot

You can start a savings campaign by saving “invisibly” – that is, just spending $10 or $15 or $20 less on a regular expense each month. Maybe two or three, even. That’s less than a dollar a day per expense. When your earnings climb further above your financial baseline, you can increase the amount you save/invest.


Bad habit: buying things on a whim

The correlation between impulsive spending and credit card use isn’t too hard to spot. Spending money you don’t have on material items that will soon depreciate doesn’t put you ahead financially.


Good habit: set a budget when you shop

As you arrive at the market, the mall or the local power center, arrive with a limit on what you will spend on that shopping trip and stick to it. Take an hour (or a day) to mull over any big buying decisions – are you buying something you really need? Lastly, use cash whenever you can.


Bad habit: living on margin

Living above your means, charging this and that credit card – this is a path toward runaway debt. You may look rich, but you’ll carry a big financial burden that risks being “out of sight, out of mind” in between credit card statements.


Good habit: strive for lasting affluence, not temporary bling

Possessions symbolize wealth to too many Americans. Real wealth is measured in accumulated assets. They aren’t usually visible, but you can count on them in the future, in contrast to ever-depreciating luxury goods.


Bad habit: buying unnecessary services

Cable subscriptions, extended warranties, service contracts for highly reliable items, health club memberships that translate into little more than an alternate place to shower – they all add up, they all siphon some of our dollars away each month. In many cases, we pay for options rather than necessities.


Good habit: evaluate who benefits most from those services

Are they benefiting the provider more than the consumer? Are they entrees to a “main course” – a steady, long-range financial exploitation?


Go against the norm – it might leave you a little wealthier

In April, Gallup found that 62% of Americans liked saving money more than spending it. Just 34% liked spending more than saving. This appreciation of frugality is relatively new. As recently as 2006, 50% of Americans told Gallup that they enjoyed saving more than spending with 45% preferring spending.1

If we love saving money, a key statistic doesn’t reflect it. According to the Commerce Department, the typical U.S. household was saving 4.8% of its disposable personal income in May. The personal savings rate for 2013 was 4.5%, the least in any year since 2007. Compare that to 6.7% across the 1990s, 9.3% across the 1980s and 11.8% during the 1970s.1,2

Perhaps many of us want to save but can’t due to financial pressures. Perhaps the economic rebound is encouraging personal consumption over saving. Whatever the reason, Americans on the whole don’t seem to be saving very much. That’s the status quo; going against it might help you build wealth a little more easily.


1– gallup.com/poll/168587/americans-continue-enjoy-saving-spending.aspx [4/21/14]
2 – bea.gov/newsreleases/national/pi/pinewsrelease.htm [6/26/14]

Lean In To Retirement

Check out TechGirl Financial's Article Series on how to "Lean In To Retirement".

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