Social Security was never intended to be an income source that could support you in retirement. Rather, its sole purpose was to provide a safety net for people who were unable to accumulate sufficient retirement savings. For more than seven decades, the majority of Americans never gave much thought to their Social Security benefits – it was nothing more than a box they checked when it was time to collect. Today, an increasing number of...
While you may not think of it in this way, your investment in a mutual fund is actually a contract to hire a professional to manage your funds, just as if you had hired an individual portfolio manager. With investment management fees approaching 1.5%, there’s no need to be concerned if they are being paid enough. The question is whether their pay matches their performance and, at what point should you hand them the pink...
After costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar for any time period. —William F. Sharpe, 1990 Nobel Laureate The efficient markets hypothesis implies that no active investor can consistently beat the market over long periods of time, except by chance. Yet active managers continue to test the hypothesis every day through their efforts to pick stocks and time markets. The evidence...
Some, stockbrokers, stock analysts, investment gurus and individual investors will have you believe that investing is an art, requiring nuanced skill and timing based on information that only they possess. So, it’s not surprising they are very quick to attribute any successes they have to their individual abilities. However, when things don’t go their way, they are just as quick to defend their abilities by attributing their failures to bad luck or, generally, events beyond...
With rising retirement costs, longer life spans, and the need to rely almost exclusively on one’s own assets for income, there is little margin for error in investing for retirement. When we’re talking about securing a comfortable income that needs to last as many as 25 or 30 years, mistakes made early on can be magnified to tragic proportions. It’s becoming increasing important to forge a serious, sound retirement investment strategy as early as possible...
It should not take the filing of a tax return or a death in the family to finally create order out of paper chaos so you are not forced to scramble in those critical circumstances. The chances of making costly errors are too great not to take some very simple, albeit essential, measures to get and stay organized all year long. Today you can begin a system of document disposition which will simplify your financial...
When you change jobs, everything you need to take with you can usually be packed neatly into a couple boxes for your move - everything except your employer-sponsored retirement plan. Of course, you will likely enroll in your new employer’s retirement plan, but the decision as to what to do with your existing 401k plan may not be all that clear. As with anyone who leaves an employer-sponsored retirement plan, you have four options to...
With home values finally recovering from their steep declines of the last half decade, and interest rates still hovering around their historic lows, homeowners are, once again, looking to their home equity for financing. Among all of the factors that go into home equity financing, the first consideration should be the type of financing – a home equity loan (HEL) or a home equity line of credit (HELO). Both serve the purpose of tapping your...
Although whole life insurance, in its present form, has been around for over a century, it remains somewhat of an enigma for people who want to buy permanent protection, especially as new forms of life insurance have sprung up around it over the last several decades. Yet, it remains the securest way to provide for long-term protection and, when it is fully understood, it can also be the most cost-effective way to own permanent, lifelong...
For many people, life insurance forms the security foundation of their financial plan. While most financial planners recommend that life insurance be purchased for its protection, and not as a primary savings vehicle, few would argue that cash value life insurance doesn’t have some fairly unique and attractive savings features. When these are considered in the context of a person’s overall savings and investment strategy, they may offer some advantages especially for providing additional tax...
In my opinion, it is impossible to predict future stock market returns. Investment models can produce hypothetical returns but they can’t account for future events. So, in my opinion, investors who manage their investments based on market performance or what they perceive as opportunities for better returns have very little control over the outcome. On the other hand, there may be market risk, interest rate risk, inflation risk and taxation risk. If your investment portfolio...
Today’s retirees are finding that retirement requires at least as much psychological and emotional preparation as it does financial preparation. So, retirement planning needs to include a thorough assessment of human assets and liabilities along with an assessment of financial assets and liabilities. It is no longer enough for retirees to know how much money they will need to live; they need to know how they will be able to make the most of this...
