What Is Your Behavioral Finance?

April 18th, 2018

One thing I have learned during the course of my eighteen years in the financial industry is that a person’s view on money is like a fingerprint; no two views are exactly the same. They may have similar values, they may invest using similar methods but everyone treats money slightly differently from the next person. The question to ask is “What is your Behavioral Finance?”

Here are some of the typical behavioral traits people exhibit when it comes to finances:

a] Mental Accounting

The majority of people prepare a monthly budget and allocate certain parts of their pay cheque to certain bills. This “preparation” is slightly different with mental accounting. Mental accounting is the tendency for people to designate particular money for a specific purpose, without consideration for the big picture in terms of practicality. For example, a person can split their money and treat each portion differently, depending on which “account” it’s in. So, money in a savings account is treated differently than money meant for debt repayment. That is, even if a savings account is paying 1% pa in interest and their car loan is costing 7.5% pa in interest, the money they allocate to each “pot” they deem as equal because each “pot” of money has been designated for a purpose.

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Have a 401K Plan at a Former Employer?

April 10th, 2018

You may have had multiple jobs over your career, and left behind retirement account balances — critical building blocks for your retirement. Here’s a short guide to your options of what to do with a retirement account left with a former employer:

Roll it over to an IRA
• A rollover IRA allows you to continue any tax-deferred growth.
• A direct rollover IRA helps you avoid current taxes and early withdrawal penalties.
• You retain flexibility to select investments that fit your specific needs.
• A rollover IRA allows you to consolidate your retirement assets in one convenient place when you change jobs or
decide to retire. Read the rest of this entry »

Is Your Retirement Account Protected From Identity Theft?

April 5th, 2018

Most retirement plans have advanced identity theft and fraud protection safeguards, and a recent Identity Force survey indicated that 68% of HR executives are actively looking at identity theft protection as an employee perk.

To determine how safe your account is, review the online fraud policies and recommendations of your retirement plan provider. Check your account balances and activity at least once a month to be sure there has been no unauthorized trading. To be extra vigilant, be sure to change your username, password and security questions every six to nine months.

Overcoming the Lag In Womens’ Retirement

April 2nd, 2018

In general, women need more and save less money for retirement than do men. Overall, women accumulate less money for retirement than men, yet because they have a longer lifespan, the need for savings is greater. And because men die earlier, women may live out the end of life in a single income household.

The reasons women save less may be that they go in and out of the workforce to care for a family, work part time, and work in jobs that are more flexible and often, therefore, pay less. A study (Planning and Financial Literacy: How Do Women Fare?, Annamaria Lusardi and Olivia S. Mitchell, National Bureau Of Economic Research, January 2008) found there is also a difference in financial knowledge between the sexes, which can result in a too-conservative approach to investing. Read the rest of this entry »

Considering a Target-Date Fund for Your Retirement Plan?

April 2nd, 2018

Here’s what you need to know about this popular investment option

If you are like many investors, researching, selecting, monitoring, and adjusting your investments and asset allocation within your retirement plan can be a time-consuming burden. One possible strategy to consider may be a target-date fund.2 A target-date fund takes much of the decision making out of which asset classes to own, at which percentage weights, given your estimated retirement date. As that “target” date approaches, the manager of a target-date fund automatically adjusts your allocations to reduce your market risk. Here are some basic facts about target date funds that you should know before you buy:

It is a popular option for retirement plans. Target-date funds are growing in popularity as investment options in qualified plans. In fact, as of December 31, 2016, 88% of target-date mutual fund assets were held through defined contribution plans and IRAs, according to the data from the Investment Company Institute.3 Read the rest of this entry »

Deciphering Investment Risk & Reward

March 26th, 2018

Over the course of my 18-year career in the financial services industry I have met many investors and based on our conversations, I can confidently state that only about half of them actually know what they have invested in. However, what is even more alarming is, their incomplete understanding of the risks associated with their investments. Risk and reward are two key components in understanding the type of investment you should be considering. Read the rest of this entry »

Saving for health care with your 401K

March 21st, 2018

There is a lot of misunderstanding about what Medicare will and won’t pay for retirees’ health care. Your 401(k) plan is a great tool for employees to use to save for these expenses, and the 401(k) meetings are a good time to discuss this topic.

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Dreaming of a Royal Retirement?

March 13th, 2018

Cash flow is king when thinking about your financial future

 

Cash flow is like the water in the moat surrounding a successful retirement. It’s an essential element of financial planning that can help you defend your castle against unexpected expenses, coffer-raiding or overspending. Cash flow planning combines five interdependent activities: setting goals, establishing an emergency fund, calculating your net worth, recording expenses & communicating your wishes to your loved ones — the five elements of cash flow planning.

Look from the Tower: Set Goals
It’s impossible to plan without having a goal in mind. When it comes to your future finances, start with the basics, whether it’s to pay down school loans or to establish a three-month emergency fund. Read the rest of this entry »

Traditional vs Roth 401K

March 8th, 2018

Did you know that both a traditional and Roth 401(k) allow you to contribute regularly for retirement?

With a traditional 401(k), you don’t pay taxes in the year you put it into the account. You will have to pay income tax on your contributions and earnings when you take the money out. With the Roth option, you pay taxes on the money before it goes into your account, but you generally won’t be taxed on your contributions or gains if you take a withdrawal after five years.

Think Before You Give

February 12th, 2018

Think before you give: Four situations where you may not want to split everything evenly among children.

During my childhood, the holiday season was the main time my relatives gathered together, both immediate and extended family. Most times it was at my nanna’s house with all my cousins – sixteen of us squeezed around two tables [the adults’ table and the kids’ table], enjoying a meal, having a laugh and perpetuating a great family tradition. Read the rest of this entry »