We frequently get asked about Roth Conversions. 95% of the time it’s not the right strategy, because the reasons for wanting to do it are often based on unknown future events. We want to set the record straight with some points about what it is and who it might be suitable for.

A Roth Conversion involves transferring IRA money into a Roth IRA. You pay taxes on the conversion now. In exchange, you get tax free growth on the Roth IRA.

Why it might not work for you:

1. Taxes: You must pay ordinary income tax today on the entire conversion amount. This is in addition to your employment income. I.e. For a $250,000 conversion, the additional tax burden could be at least 32%, or $80,000.
2. Math: Your $250,000 conversion just got reduced by 32% to $170,000. Just to get the Roth back to the original $250,000, you’ll need an investment return of 47% (not 32%). BTW, a 47% investment return on your original $250,000 IRA would equal $367,500! Assuming the same investments, your IRA will greatly outperform your converted Roth over time due to compound interest on a higher starting number.
3. Taxes (again): A popular opinion is that we’ll have higher tax rates in the future. While that may be true during your working years, this likely won’t be the case during your retirement. What that means is that your tax burden for taking IRA distributions (vs Roth) will be a) spread out over 20 to 30+ years when b) your tax rate will be lower.

Why it might work for you:

1. Income: You decide to take a sabbatical, start a business, or you’re unemployed this year. Your tax rate may be the lowest it’ll be for a while, so a conversion could be worth it.
2. Beneficiaries: If you want to shoulder the tax burden for your beneficiaries, then a conversion might make sense.
3. Relocating: If you live in a low tax state during your working years but plan on moving to a high tax state in retirement, then paying the taxes to convert now might also make sense.

If you’re unsure about whether a Roth Conversion makes sense for you, please contact us!Please consult with your tax professional if you’re considering a Roth Conversion.

It should come as no surprise that January is the peak month for gym visits. After stuffing ourselves for the previous 2 months, we all want to get back into shape. Unfortunately, by Mid-March, gym visits start to drop as people remember how hard it is to stay in shape. It’s physically demanding, takes time, and is not for the faint of heart. But we’re not here to motivate you back into the gym. We’re here to tell you about some Financial New Years Resolutions that don’t require memberships or getting on a treadmill. The best part is that this once-a-year housecleaning will lead to a lifetime of less financial stress.

1. Increase your 401k contributions. The IRS increases the limit annually, so you should take full advantage.
2. Reevaluate your monthly budget. Look for inefficiencies and trim the excess. Each year you should strive to eliminate unnecessary expenses from your budget.
3. Reducing your debts. Recalculate how long it will take you to pay off your debts and hold yourself accountable. Take any eliminated expenses and apply them to your debts!
4. Wills and Trusts.
   If you’ve had any major life events over the past 12 months, then odds are you’ll need to update your wills and trusts.
5. Check your emergency savings. It’s a good habit to keep enough cash around to cover 3-6 months of essential living expenses. Loss of job, major car or house maintenance, or unplanned medical procedures can drain your resources quickly if you’re not prepared.
6. Do something fun! Financial planning shouldn’t be all business. Take a trip to visit a college friend. Have a spa day. Get those Nike Air Jordans you’ve wanted for years. Your mental well-being is top priority.

If you need a push to help you with your Financial New Years Resolutions, contact us for a free consultation.

Who are we kidding? This could probably be part 2 of 7 with the sheer number of missteps investors are making. Maybe someday this list will get shortened!

To recap, here are the investing mistakes we discussed last month in Part 1:

1. Worrying that every stock market drop is the start of a crash
2. Avoiding the stock market when things are good
3. Focusing on a small group of stocks
4. Holding too much cash
   While we wish this was the end of the list because you listened to our sage advice, there are more to add:
5. The Taxman Cometh. Investors that own after-tax accounts might get stuck with a large tax bill if they’re not careful. Only selling the winning investments and not tax-loss harvesting are reason enough to give Uncle Sam more than what he deserves.
6. Paralysis by Analysis. Investors often get caught up in the what ifs: “Should I pick stock A over stock B?”, “What price should I pay?”, What if I buy stock B and it drops tomorrow?”, “What price should I sell at?”. If you’re asking these questions, you’re asking the wrong questions! Investing can be uncertain, and no 1 investment is going to be the solution. Having a long-term plan with a diversified portfolio is your best bet.
7. Block out the noise! Political turmoil, wars, and natural disasters are all just part of life. Worrying about what may never come is losing strategy. Rather than using headline news or conspiracy theories to dictate decisions, investors need to look at the economic data that drives the stock and bond markets (corporate earnings, GDP, unemployment data, etc.)

If you find yourself falling for one of these mistakes, contact us for a free consultation. Trust us, you’ll be doing you and your loved ones a favor.

A college course could be taught on this subject, but we’ll keep things simple since we only have your attention for the next 60 seconds. We’ll follow up with Part 2 next month.

1. Worrying that every stock market drop is the start of a crash. Since 1980, on average, the stock market has had 4.5 intra-year drops of at least 5%, and a 10% drop every 1.2 years. It happens more frequently than you think, so worrying about these smaller drops or timing the stock market are losing ventures. These smaller drops could actually be perfect buying opportunities.

2. Avoiding the stock market when things are good. The stock market hits all-time highs on a regular basis. Fearful investors who interpret all-time highs as a sell signal can miss out on substantial gains. Fun Fact: since 1933, every president except 2 (GWB and Nixon) left office with a higher stock market than when they entered office.

3. Focusing on a small group of stocks. The recent bull market has been unusually concentrated around a select handful of stocks. Investors may experience FOMO and make risky bets by doubling down on these stocks. Since past performance doesn’t guarantee future results, investors may find themselves much worse off. It’s always better to stay the course with a diversified portfolio based on risk tolerance, time horizon, and financial planning goals.

4. Holding too much cash. Cash became king again as interest rates spiked. Unfortunately, investors sitting on too much cash have been (and continue to get) significantly outpaced by the markets. Since 1/1/2023, the S&P is up 42%, the NASDAQ 61%, and the Bloomberg bond index is up 9%. To quote the great Warren Buffet, “Be fearful when others are greedy. Be greedy when others are fearful”

If you find yourself falling for one of these mistakes, contact us for a free consultation.

The term “fake news” was first used in the 1890s when newspapers realized they could sell more papers by sensationalizing stories. The only thing that’s changed in 135 years is the format! Instead of receiving a newspaper once a day, we’re now bombarded 24/7 with questionable content on our phones, TVs, and computers. Determining what’s real or fake has become exhausting.

Financial news has also become sucked into this problem, as politics has further muddied the waters. Individuals or conglomerates with political agendas now own financial news stations. By preying on people’s biggest source of stress (money), it’s very easy to sway their political choices. Depending on what channel you’re watching, the economy could either be doing “very well” or “in a recession”.

While it’s nearly impossible to avoid the news altogether, it’s much more feasible to gather your information from a variety of sources. If you hear a wild conspiracy theory on late-night TV about using your life savings to buy gold coins, take it with a grain of salt.

Lastly, by comparing what was predicted against what came true, you can easily determine the quality of the source. If one of your sources is never correct, consider moving on!

If you have any questions about the legitimacy of your financial news, contact us.

So, check this out…59% of Gen Zers and 56% of Millennials get their investment information from social media. However, a majority (56%) of those that give the advice (the finfluencers) have “negative skill”, underperforming average investment returns by -2.3% per month, or -27.6% per YEAR!* You wouldn’t trust Dr. Google to give you medical advice. So, why would you trust Instagram Advisor to help you make investment decisions?

Social media is here to stay, and unfortunately a large group of unlicensed financial hobbyists have grabbed your attention, with millions of followers in tow. It’s no surprise that finfluencers are now on the radar of the SEC and FINRA (the 2 largest U.S. financial regulatory bodies). But because the SEC and FINRA are primarily focused on licensed professionals, these unlicensed hobbyists have largely flown under the radar. So, it’s very easy for them to give “hot stock tips” with little consequence.

How we as licensed financial professionals can use social media is highly regulated. The laundry list of what we can’t say on social media is long, primarily because we don’t know who our audience is going to be. i.e. How can we recommend a stock to someone whose entire financial picture we don’t intimately know? So, if you follow someone who gives “hot stock tips”, rest assured the advice you’re getting is likely garbage!

Our advice to you is to know who you’re following, and to know that investing isn’t one-size-fits-all. Everyone has different goals, time horizons, and risk tolerances. If you need customized, regulated advice from licensed financial professionals, please contact us for a free consultation. We’re here to help!

*”Finfluencers”. Swiss Financial Institute Research Paper, May 3, 2023. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4428232

You may either be an armchair golfer watching The Masters or an avid league player about to tee it up at your local course. Either way, there are lessons that can be taken from the golfing world which can be applied to your investment and retirement planning strategy.

1. Have a Strict Routine: Great golfers have a consistent and disciplined routine before taking every shot. Investors that create and follow a similar path are also poised for success. Contributing to your 401k and brokerage account each month is a perfect example!
2. Seek Good Advice: Serious golfers have coaches to help them achieve peak performance. Serious investors are no different. Finding someone that can look for your swing faults and correct them is crucial to accomplishing both your golf and financial goals.
3. Ignoring The Noise: “I didn’t hear the crowd noise” is a common line you’ll hear from professional golfers. Investors also need to tune out the noise, which includes market swings, advice from untrained family and friends, or panic-driven news reports.
4. Bad Shots Will Happen: All golfers know that bad shots will always happen during a round. Adjusting your swing mechanics after a bad shot is a recipe for failure. Elite golfers have developed the mental toughness required to focus solely on the next shot. Experiencing market volatility is like hitting a bad shot. You never want to make rash decisions when it comes, since you’re likely to buy and sell at the wrong times.
5. Everyone Has a Different Swing: No two golf swings (or retirement plans) are alike. Don’t let generic advice you see on TV or the internet alter your path. What works for one person, won’t necessarily work for the nex

If you need an experienced and disciplined financial coach in your corner, please contact us for a free consultation. Golf lessons are optional.

No, you’re not really a dummy. We just needed a catchy title! We actually discuss index benchmark performance with our clients all the time. Despite the problems of using indexes as a measure of investment portfolio success, the feedback from clients is often the same: “But how did we compare to the S&P 500, NASDAQ, Dow Jones, etc.?”.

So, while we cater to client demand to show index benchmarks, we also disclose the numerous problems with it:

Diversification: If your portfolio is properly diversified across all stock and bond sectors, it’s nearly impossible to benchmark. There are 11 sectors of the stock market and 4 sectors of the bond market, each with underlying asset classes. If you own 100% U.S. large cap stocks, then there’s a case for benchmarking vs. the S&P 500. Otherwise, you can forget about it.

Benchmark Weighting: The NASDAQ is a stock index made up of the largest 100 tech companies. The largest 7 companies now make up FIFTY PERCENT of the index!

The Dow Jones Industrial Average only contains 30 stocks: If you have a solid financial game plan and own a diversified risk-appropriate portfolio, then there shouldn’t be any need to compare to the indexes.

There’s no need to compare!: If you have a solid financial game plan and own a diversified risk-appropriate portfolio, then there shouldn’t be any need to compare to the indexes.

If you’re in need of a financial game plan, or want to know if you’re properly diversified, contact us for a free consultation.

Have you ever felt like you’re paying more taxes than you should? Well, you’re not alone! Uncle Sam has a way of making even the most profitable investments feel like a loss. But what if there was a way to ease your tax burden on these winners? That’s where tax-loss harvesting comes in, a strategy that allows you to offset your gains with losses.

Think of it like this: imagine you’re a farmer and you’ve had a bad year. Your crops have withered and you’ve lost a lot of money. But then you remember that you have a giant pile of manure sitting around. So, you decide to sell the manure to a fertilizer company. Now, you’ve turned your loss into a gain!

Tax-loss harvesting is similar. You sell your losing investments to offset your winners, lowering your taxable income. And just like the farmer, you’ll have more money in your pocket to do with as you please.

Here are a few tips to get you started:

• Identify your losing investments. Take a look at your portfolio and see which investments have lost money this year. These are the ones you’ll want to sell for tax-loss harvesting.
• Consider your tax bracket. The amount of money you save by tax-loss harvesting will depend on your tax bracket. The higher your tax bracket, the more you’ll save.
• Don’t sell your investments just for the tax break. Make sure you still believe in the long-term potential of your investments before you sell them.

If you’re not sure how to get started with tax-loss harvesting, contact us for a free consultation.

Happy Harvesting!