Richard London CFP

April 2016 Newsletter

Reasons to Avoid 401(k) Loans

april 1Many 401(k) plans offer the option to take a loan against a portion of your 401(k) balance. This might seem like an easy source of funds to tap for various reasons, but with exception of a dire emergency you should think twice about borrowing from your 401(k) plan.

Leaving your job can trigger the requirement for an immediate repayment of the loan. If you can’t make this repayment you will trigger taxable distribution for that portion of your balance that also comes with a penalty if you are under 59 ½.

  •  If the stock market increases, you lose out on potential gains
  • There are costs involved with these loans
  • The interest on the loan is not tax deductible.
  • There is no flexibility in the repayment terms if you run into financial difficulties.
  • You will likely have less saved at retirement.

These loans are even more dangerous for those of you who:

  • Are near retirement. You may find yourself unable to pay the money back prior to retirement resulting in both an extra tax liability and a lower retirement nest egg.
  • Are planning to change jobs in the near future.
  • Feel that your job security is in question.

If you have questions about the financial impact of taking a 401(k) loan, contact our office to schedule a meeting so we can help you take a look at your options.

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Richard London CFP

March 2016 Newsletter

How to Succeed in a Failing Stock Market

march 1The start of 2016 has not been a good one for investors to say the least. Through the middle of January, the swift, sharp decline was the worst start to a new year ever. Even experienced investors and financial advisors find these market declines unsettling. As an investor what should you do during a falling stock market?

Relax.  Take a deep breath, go for a walk and turn off the cable financial news network. The world is not coming to an end. Market declines or corrections are common, we’ve seen them before and we will certainly see more of them in the future.

Review your overall financial picture.  Market declines are a good time to take stock of where you are in terms of your overall financial situation. This can help you see that things are likely not as bad you might have feared and it can help you determine where adjustments might be needed.

Go bargain hunting.  Investors should always have an investment shopping list. This is a great time to look for stocks or mutual funds that have seen their price beaten down. If you can pick up that investment at a bargain price, that’s great. One caution, be sure the price decline is due to the general decline in the markets and not some underlying problem with the stock or the fund.

If you’d like another viewpoint on your portfolio or your overall financial situation, please contact me to schedule a meeting.

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Richard London CFP

February 2016 Newsletter

The Fiduciary Standard

In the investment world, there are two different standards that Investment Advisors and Broker Dealers must follow. Many people consider the advice that they receive from both parties as similar, but there are differences that most may not know. This article focuses on the company that you’re doing business with and how it is regulated. Employees of each will follow the same standards as their company.

Investment Advisors provide many services regarding financial decisions from planning for a child’s education, to retirement, and developing strategies to manage portfolios to reach a targeted outcome. They charge fees for their services which could be a percentage of the assets they manage for a client or an hourly fee; or they may charge commissions based on trades they make for their clients.

Investment Advisors are bound by a fiduciary standard that was established as part of the Investment Advisors Act of 1940. Investment Advisors can be regulated by the SEC(Securities and Exchange Commission), or by state regulators, both which require investment advisors to put their client’s interests above their own. Their duty is to provide both loyalty and care to their client, and always place trades under “best execution”, which means at the best combination of low cost and efficiency of execution. They must also ensure the purchase, trade, or execution is suitable for the client. Read more

Richard London CFP

January 2016 Newsletter

The Savvy Female Saver

female-saverWomen face a different challenge than their male counterparts; they are living longer and spending more time in retirement, but with less savings. Americans in general as a group face a shortfall in retirement savings, but women appear to be saving less than men (Employee Benefit Research Institute 2015 study). Why the shortfall? There is still a pay gap and women may face career interruptions due to raising children or taking care of family. Women also tend to save less during their earning years compared to men, regardless of pay. Here are some ‘savvy savings’ ideas to help ensure you have enough in retirement:

Take Responsibility for your financial security. Regardless if you’re in a relationship or not, your longevity statistics prove you should be in control of your savings. Don’t rely on someone else’s savings to coast you through retirement.

Coordinate Retirement contributions with your spouse or partner. If you have times you are unemployed and not saving, have your spouse contribute to a spousal IRA on your behalf.

Plan for long term care. Because women statistically live longer, you are likely to need care and without insurance to cover that cost, your assets will quickly become depleted.

Save more than the norm. Saving 5%, even 10% of you pay may not be enough. Have a financial plan done on you alone, aside from you as a couple to see what your amount saved would need to be to last you through age 98.

Remember to be aggressive in your savings and planning. Once retired, remember your investments still need to outperform inflation and make money. Read more

Richard London CFP

December 2015 Newsletter

Sandwiched

Have you heard of the ‘sandwich generation’? The definition of Sandwich Generation is ‘a generation of people who care for their aging parents while supporting their own children’ (Wikipedia). According to the Pew Research Center just over 1 out of every 8 Americans aged 40 to 60 is caring for a parent and raising their own child. With longer life spans, this will become a growing trend as the ‘Boomer Generation’ continues to age. US Census Bureau Statistics indicate that the number of Americans 65 and older will double by 2030, to over 70 million.

If you are ‘sandwiched’ between the generations as a care giver, looking for resources to assist you and asking for help will become more important. You are possibly still working and taking care of a parent full time is not possible without leaving your job.

Your parents may or may not have long term care insurance to cover care as they age. The time prior to a long term care insurance claim being started can be difficult if you’re unable to find resources to assist you. Here are a few ideas that may help you:

  1. Consider friends and neighbors of your parent(s). You may be unable to be present every day for your parent. Communicating with others that are close to your parent can help you determine if there is a change in their health, behavior, or other situations.
  2. Hire a Care Manager. Hiring someone to help with cleaning, grocery shopping, and taking your parent to appointments can relieve you of some of the time constraints on your own schedule that may take you away from work, or other commitments. The care manager is a resource that will notify you of changes in your parent.
  3. Monitor paying bills and spending accounts through the internet. If your parent has asked you for assistance, make sure that there is documentation in place for you to legally monitor accounts and represent your parent. Consulting an attorney prior to assist with this is recommended
  4. Familiarize yourself with The Family and Medical Leave Act. Under this act, you are allowed to take leave from your employer in order to care for a parent. This applies in the same way it would for yourself, your child, or spouse needing care.

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Richard London CFP

November 2015 Newsletter

Welcome Chip Cards

welcome-chip-cardsLast month (October 1, 2015) marked the date that retailers will now be held responsible for fraudulent charges that occur at their point of sale terminals if ‘chip technology’ was used during the purchase. You may have already received a new card from your credit card companies or banks with the new smart chip (metallic square) on the front of the card. What makes them safer?

They are harder to counterfeit because they send a code to authorize each purchase, instead of sending ALL of your financial information, as the magnetic strip cards do. Each time you use the card, a new code is generated for that sale; no codes are ever the same. This only works when you use a ‘chip reader’ terminal. Retailers that had security breaches in the past were liable because magnetic strip information was recorded through their point of sale system. The new technology helps to reduce the risk to the retailer and the consumer.

Additionally, the new chip reader terminals require the card to be placed into the machine and remain in the machine while you make a purchase. This process requires you to enter a pin number or sign your name for validation. If the card is removed during the purchase, the purchase is not authorized.

Once you receive your new card, you will have received one of two types. If you’re required to enter your pin number at the point of sale, you have received a ‘chip and pin’ card. If a signature is required with no pin, you have received a ‘chip and signature’ card.

Note: All of the new cards will still have the magnetic strip. If you choose to ‘swipe the strip’, the merchant will not be liable for fraud on the card. The only way the merchant is held responsible with the new chip cards is if the chip technology was used in the chip reader for that fraudulent purchase. If your card has been lost or stolen, report it immediately. Read more

Richard London CFP

October 2015 Newsletter

End Of Year $ Moves

end-of-year-money-movesIt’s that time of year again; close to the end! As we enter the last quarter of the year, remember these money moves that you still have time to make:

  1. Add to Your 401K. Now is the time to make additional contributions if you are not already maximizing. Some companies include bonuses in the last paycheck of the year. Consider giving yourself the ‘gift’ of the bonus down the road with a larger retirement account.
  2. Rebalance Your Accounts. Meet with me to rebalance your accounts and reassess your financial plan with updated information.
  3. Check Your Budget. Analyze saving and spending, and readjust if necessary. Finish this year with an updated budget and start next year strong.
  4. Make Purchases With Cash. If you spend on holiday gifts, plan to spend cash and keep credit balances low. Cash purchases are often less than credit purchases per item.
  5. Meet With Your Tax Professional. Discussing options to off-set taxes you will need to pay for 2015 may save you money. It’s better to be prepared and have time to make some changes thenbe ‘shocked’ at filing time.
  6. Complete a New Risk Assessment and Financial Plan. If we haven’t done this in a few years, now is the time.

Regardless of how busy you may be at the end of the year, I highly recommend doing these simple steps to help your financial success. Read more

Richard London CFP

September 2015 Newsletter

Fueling Financial Errors

Resolve Financial Errors In Las Vegas, NVFinance in general has been based on rational and logical theories, and for the most part tends to be somewhat ‘predictable’. Financial theories assume that people behave rationally and predictably, and that outside factors and emotions do not influence people when it comes to making financial decisions.

The fact is, people do behave irrationally and differently in the real world. Starting in the 1990s, research by psychologists and other scientists found that the human brain has difficulty assessing risk and possibilities. Because we have emotions that affect our decision making process, we make irrational decisions when it comes to our investments. We also react stronger (it’s painful) to financial loss, than to gain. These new findings have led to a new science called ‘behavioral finance’, which seeks to explain our actions.

In thinking about yourself, how do you react to market commentary on TV, or to ‘Herd Instinct’ of wanting to invest in something because everyone else is investing in it? When the market declines do you become fearful of the loss (it’s painful) and want to sell everything, or hold onto something that seems ‘safe’ because you don’t need to think about it even if you aren’t making anything on the investment?
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Richard London CFP

August 2015 Newsletter

Investor Identity Crisis

Screen Shot 2015-08-07 at 12.54.14 PMHearing the term ‘identity crisis’ can lead to thoughts of confusion, questioning decisions, or changes in behavior that can be good or bad. As an investor, you can have an ‘identity crisis’ by not fully thinking about what you want and how you will react to changes. You need to know yourself before you can determine your goals and start to invest.

How much market fluctuation can you tolerate? Are you comfortable with separating money into different investment options to help fund each goal you have? Do you feel comfortable with investment advice and monitoring of your portfolio? The best way to avoid ‘investor identity crisis’ is understanding your investor profile. Your Investor Profile, or style is determined by:

  • Objective Traits- Personal or social traits such as gender, age, income, family, even tax situation
  • Subjective Attitudes- Part of the emotions and beliefs of the investor.
  • Balancing Risk vs Reward- Tolerating greater risk to have greater reward or less risk and contentment with a reasonable return.
  • Area of Focus- Types of investments (ex. Stocks, bonds) and sectors of investments (ex. Technology).
  • Investment Strategies- Helps to shape the investor profile by the type of investing the investor uses (ex. ethical, growth, index)
  • Valuation Methods- Helps to shape the investor profile trough the valuation method (ex. Fundamental analysis, technical analysis, quantitative analysis).

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Richard London CFP

July 2015 Newsletter

Adult to Adult: Talking to Your Parents About Their Money

adult-to-adultHaving the ‘money talk’ either happens at the ‘wrong time’, or can easily be put off because the generations feel differently about the ‘right time’. Regardless of opinion, having a talk with your parents (or children) is something that is necessary and should occur occasionally. Too often these talks happen when there is a sudden health issue.

Understanding what your parents what you to know or not know and their fears will help both parties come to a plan for discussion. The timing of the talk often leads to feelings of ‘control’ or the fear of ‘lack of control’. The older generation often mistakes their child’s inquiry as disrespectful of their privacy.

The reality is that this is not the case. If a parent becomes unable to make financial decisions because of health issues or death, and the other parent is not capable of following through or understanding financial decisions, this becomes the responsibility of the adult child. It is much better to know your parent’s financial information prior to a disruptive event and how your parents live off of their assets. Even being aware of their monthly obligations allows you to help take over or monitor bill paying.

Suggesting a financial review together with an impartial financial professional is highly recommended.
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Richard London CFP

June 2015 Newsletter

The Empty Nest Syndrome

Empty Nest SyndromeEmpty Nest Syndrome: is a feeling of grief and loneliness parents or guardians may feel when their children leave home for the first time, such as to live on their own or to attend a college or university. It is not a clinical condition. -Wikipedia.

This is the time of year when some ‘nests’ become empty. Children grow up and graduate, and you realize you are now in a position of having less people in your home and fewer mouths to feed. This could be a time when you start to feel like you have more money available.

During this new period of your life, you may make some bad choices. Having additional revenue may cause additional spending. You may be financing a student going on to secondary education, or your windfall may cause you to spend more than you did previously on yourself.
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