Should I Contribute To A Roth 401(k)?

Should I Contribute To A Roth 401(k)?

Employee Benefits

by | Oct 2, 2020 | Employee Benefits, General

Roth 401(k)s have become an increasingly popular alternative to traditional 401(k)s, allowing you to make after-tax salary deferrals to your employer plan. You may have the opportunity to contribute to a designated Roth account in your 401(k), but are uncertain about the best savings strategy for your personal circumstance.

This flowchart helps guide you through a series of considerations that will help in your decision on whether to contribute to a Roth 401(k), and covers:

  • Future tax rate expectations
  • Roth IRA eligibility
  • Employer matching considerations
  • RMDs and future rollover options
  • Additional savings opportunities through backdoor Roth contributions
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What Issues Should I Consider Before The End Of The Year (2020)

What Issues Should I Consider Before The End Of The Year (2020)

General

by | Aug 24, 2020 | General, Uncategorized

The end of the year provides a number of planning opportunities and issues. Year-end topics can include tax planning, investment and retirement accounts, charitable giving, cash flow and savings, insurance and estate planning.

In this checklist, we cover a number of planning issues that you need to consider prior to year-end to ensure you stay on track, including:

  • Various issues surrounding investment and retirement accounts including matching capital gains against any investment losses in taxable investment accounts and confirming that all RMDs are taken.
  • Tax planning issues including strategies dependent upon your prospects for higher or lower income in the future. You will also want to review where you sit relative to your tax bracket as this is a good time to make moves to fill out brackets for the current year that also might prove beneficial down the road.
  • For those who are charitably inclined, there are several strategies that will also help reduce your tax liability that can be considered based upon your situation.
  • For those who own a business, tax reform has created some opportunities surrounding pass-through income from your business to your personal return. Accelerating or deferring business expenses presents another solid planning opportunity.
  • It’s wise to review your cash flow situation as you near year-end to see if you can fund a 529 plan for children or grandchildren or to see if you can save more in an employer-sponsored retirement plan like a 401(k).

This is a comprehensive checklist of the types of year-end planning issues that should be considered to ensure you take advantage of opportunities in the current year and beyond.

Update on TD Ameritrade – Charles Schwab Merger

Update on TD Ameritrade – Charles Schwab Merger

Pivot Point Wealth

by | Dec 6, 2019 | Pivot Point Wealth

If you follow financial media at all, it is likely that you have seen news about Schwab buying TD Ameritrade in a $26 billion all-stock deal.

Because I custody assets for many of my clients at TD Ameritrade (see postscript for a brief explanation of what a custodian does), some have asked what this deal will mean for them. I am writing this brief post to help address that question. If this subject is of interest to you, please note the following points.

  1. The deal is not final. Although Charles Schwab announced plans to buy TD Ameritrade, the deal has yet to be approved by antitrust regulators. This means it is too early to speculate about what the terms will specifically mean.
  2. It will take time. Pending regulatory approval, the integration of the two firms is expected to take 18 to 36 months* after the deal is closed. This means it will likely be a significant amount of time before any clients will be affected by this merger.
  3. There may be advantages. Some analysts believe the combined firm may be able to cut costs, stream new revenue opportunities and improve the platform. Only time will tell.
  4. Let’s stay focused on what we can control. When it comes to serving the financial needs of clients, it’s important to stay focused on what can be controlled. We cannot control the markets, the economy, or this merger. We can control the goals we set, the plans we make, and the perspectives we maintain. To that end, please be assured that I will keep looking out for your best interests and will inform you the moment I perceive something that may directly affect you, or if any adjustments need to be made.

Thank you for the confidence you have placed in me. I consider it an honor and a privilege to serve you!

P.S. A custodian is a financial institution that holds securities for safekeeping in order to minimize risks associated with theft or loss.

The Debts We Knowingly Accept

The Debts We Knowingly Accept

General

by | Jul 29, 2019 | General

“0% APR for XX months!!!”

“Pay only $XXX for 72 months!!!”

“Open a store credit card and get XX% off every purchase!!!”

It’s so freaking tempting! We can have our cake today but pay for it tomorrow when we can really afford it.

Most of us are aware of the tradeoffs of taking on financial debt. Using tomorrow’s dollars to pay for today’s enjoyment requires a potentially dangerous assumption though…that tomorrow will play out exactly as we expect it to today. That our jobs are secure…that our incomes will remain stable or even increase…that other expenses will decrease as we expect them to…that we stay healthy in the future. But what if we don’t…

Tomorrow is by no means guaranteed and neither are the plans that we build for it in our minds. Debt requires a balance with the uncertainties of tomorrow.

Why? Debt has a negative compounding effect. For one, interest is being paid to someone else over time. So that $20,000 car purchase that we agreed upon actually becomes a $23,000 purchase after it’s all said and done. Secondly, few people want to or choose to carry a balance on their credit cards when they first start out, but one small debt stacks on top of another small debt which again stacks on top of another until the point that we can no longer afford to pay them off each month. Forcing us to carry a balance one month to the next, and slowly and unknowingly the balance begins to grow to unmanageable levels. Putting strains on our monthly cashflows and, even, our personal relationships. It’s a slippery slope…and the uncertainties of tomorrow only serve to accelerate that potential slide.

Clearly, you know my general feelings towards debt at this point…but it’s not all bad. It can and does occasionally serve a good purpose, but only when it’s used carefully and strategically, for instance, to buy a home for our families…or to pay for an education that will increase our future earnings potential…or to start or buy a business. All of these debts have a common theme though, they’re used to “buy” something that will hopefully hold or increase in value themselves or increase our ability to earn more in the future, which helps provide a balance to the potential dangers that the uncertainties of tomorrow could bring.

Debt can be a springboard to a better future if used cautiously…or it can be a roadblock to it if used unmindfully.

Patience and Perspective

Patience and Perspective

General

by | Jun 21, 2019 | General, Weekend Pivot Points

“Markets take the stairs up and the elevator down” is one of the first lessons learned in the self-study course that is Behavioral Finance 101.

Progress and the climb up tends to feel slow and hardly noticeable, while drops tend to happen more quickly inducing feelings of uncertainty, fear, panic, and a race to the emergency exit.

Patience and perspective are crucial to successful investing, though. Take the graphs above, for example.

Graph #1 (above, top) shows the return of the US stock market (S&P 500 Index) over the last 12 months. If you watched the markets or listened to the news at all over the last 12 months, there were plenty of reasons to feel uncertain or fearful or even panicked to the point of racing for the exit. Truth is these past 12 months have been a pretty typical representation of the “normal” market journey. Up, down, up, down some more, then a slow steady climb back up. It can feel like a roller coaster if you watch it every day.

However, if you change your perspective and zoom out a little, a much different picture is painted. Graph #2 (above, bottom) shows the return of the US stock market (S&P 500 Index) over the last 10 years. The roller coaster ride becomes much more steady and much more palatable.

Markets will go down. EVERY investor will feel the urge to want to head for the exit, but markets are resilient in the long run. The markets reward the patient investor who can look past the choppy waters beneath them and keep their eyes focused on the horizon.