diversification

Better Off BONUS call 026 - Student Loans

This week on the BONUS call it's yet again the all too familiar question about heavy, heavy student loan debt. This time it was Alida in Florida looking for some advice as to how she and her husband can attack roughly 200k in loans.

This week on the BONUS call it’s yet again the all too familiar question about heavy, heavy student loan debt. This time it was Alida in Florida looking for some advice as to how she and her husband can attack roughly 200k in loans. Even though that is a serious amount of debt, I have a pretty good feeling about these guys.

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Better Off BONUS call 025 - Asset Allocation

Last week on the BONUS call the question was about when to start diversifying. This week Ashley from Florida is asking if there's such a thing as being too diversified? With a few different retirement accounts in the works, does she need all of them? Or does less really equal more in this scenario?

Last week on the BONUS call the question was about when to start diversifying. This week Ashley from Florida is asking if there’s such a thing as being too diversified? With a few different retirement accounts in the works, does she need all of them? Or does less really equal more in this scenario?

“Better Off” is sponsored by Betterment.

Have a finance related question? Email us here or call 855-411-JILL.

We love feedback so please subscribe and leave us a rating or review in iTunes!

Connect with me at these places for all my content:

https://twitter.com/jillonmoney

https://www.facebook.com/JillonMoney

https://www.instagram.com/jillonmoney/

https://www.linkedin.com/in/jillonmoney/ 

http://www.stitcher.com/podcast/jill-... 

http://betteroffpodcast.com/

https://itunes.apple.com/us/podcast/b...

"Better Off" theme music is by Joel Goodman, www.joelgoodman.com.

5 Retirement Mistakes to Avoid

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Some retirement mistakes are out of our control. For example, you may decide to call it quits amid a terrible recession, which can upend all of the best calculations in the world. But there are plenty of missteps that we can easily avoid, with just a bit of attention and planning. Here are my top 5 Retirement Plan Mistakes to Avoid. 1. Withdrawing instead of Rolling Over: During the recession, many were forced to take withdrawals from their retirement accounts to survive. Unfortunately, there are still too many workers who leave their jobs, cash out plan assets and pay a tax penalty, instead of rolling over the funds into another retirement account. Cash-outs are most prevalent among younger workers, the ones who would most benefit from keeping the money in a tax-deferred retirement account.

Plan administrators usually automatically withhold 20 percent of the balance and sends that amount to the IRS. In addition to federal and state income tax, investors younger than 59½ who cash out have to pay a 10 percent early withdrawal penalty. The potential result: Cashing out $50,000 in 401(k) savings may leave just $35,000 in cash. And regardless of the age, the retirement saver who withdraws plan assets no longer gets the compounded growth the savings would have occurred in the account.

2. Not Rebalancing: The old “set it and forget it” mentality can be problematic, because it can ensnare you in one of the classic retirement plan mistakes: Not rebalancing on a periodic basis (quarterly, biannually or annually). It has gotten easier to complete this task, because a lot of plans now have an auto-rebalance option. A side benefit of using this feature is that it can help take emotions out of the investment process, essentially forcing you to buy low and sell high.

3. Not Diversifying/Owning too Much Company Stock: You know that you shouldn’t put too many eggs in one basket. But some participants don’t realize how much overlap they may have among their retirement funds. It’s far more important to diversify among asset classes (stocks, bonds, commodities and cash) than in the total number of funds. Additionally, if your company stock is an option in your plan, limit your exposure to five percent of your total investment holdings. Sure, the stock may be awesome now, but do you really need to risk your retirement on the company’s performance? Since many companies match in their stock, it is incumbent on you to keep an eye on your allocation…or use that auto-rebalance!

4. Choosing High-Fee Mutual Funds: One way to increase your return without risk is to reduce the cost of investing. If your plan offers index funds, you may be able to save for retirement at a fraction of the cost of managed funds. If your plan is filled with expensive funds, gather your co-workers and lobby your boss to add low-cost index funds to your plan.

5. Tapping Retirement Funds to Pay Down a Debt: Workers sometimes dip into retirement funds to whittle away their outstanding credit card balances and other bills. While the IRS does allow for hardship withdrawals in certain instances, pulling money from retirement accounts should be a last resort, due to the aforementioned fees and taxes. Additionally, many workers who are over 59 ½ are tempted to use retirement assets to pay down a mortgage as they approach retirement. The biggest risk in doing this is that you may deplete your liquid assets to eliminate a debt on a non-liquid one.

#223 Exploring Robo Advisors with Betterment's Eli Broverman

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For years, small investors have complained that the big firms don’t want their business and when they do, it’s often expensive. Not anymore…There’s been a revolution in the financial advice business, which could help. It’s not a WHO, but a WHAT… automated systems are replacing humans! They’re called ROBO-ADVISORS and we have one of the industry's stars--Betterment co-founder and COO Eli Broverman to explore this amazing trend.

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Eli explains how Betterment works and why he has embraced the pejorative ROBO ADVISOR. If you are wondering if robo is for you, check out my post here.

As stocks stage another run at records, Mike is concerned about a downturn, which would give back a lot of the fantastic returns he has seen over the past six years. What should he do?

Nancy is a widow in her late fifties and still working. Should she re-fi her 30 yr mortgage? We also answered Mary's estate question about rolling over a spouse's retirement account and Mike's titling issue around his deceased in-law's.

Mary's husband will retire by the end of the year and has to make a pension election-what is the best choice for them?

Thanks to everyone who participated this week, especially Mark, the Best Producer in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

#222 The Triple Crown of Financial Shows

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This weekend marks the 71st anniversary of the Allied invasion of Normandy (D-Day). In the sports world, the weekend could mean the  end of thoroughbred racing's 37-year Triple Crown drought. As American Pharoah tries to reign at the Belmont Stakes, we’re tackling your financial questions. The "Jill on Money" Triple Crown means that the show aims to be fun, informative and free!

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We started with Mitch from MN, a 26-year-old engineer, who just got engaged. He and his soon-to-be wife are juggling savings, paying down student loans and retirement planning. What’s the best game plan to attack the debt? Should they refinance their mortgage to pay it off early? So many questions and we have the answers!

Jan from Alaska is 62.5 years old and wants to know if she should avoid filing for Social Security retirement benefits before her Full Retirement Age -- YES! Steve wants to minimize losses before a stock market correction occurs and Stanley from CT is wondering about rolling over his 401 (k) into an IRA.

It was a delight to have guest Eleanor Blayney, the CFP Board of Standards’ Consumer Advocate join the show to discuss inheritance disputes. As Eleanor says, fights over estates “are not just a problem for the rich and famous, or for blended families.” Find out who has a right to contest a will and the ways that families can take proactive steps to avoid these messy post-mortem dustups. You can read Eleanor’s great post about the topic here.

Thanks to everyone who participated this week, especially Mark, the Best Producer in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

#221 The Best Financial Advice? It Depends

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When you call and write, asking about various financial issues, you'll hear me ask a bunch of nosey questions. I am the first to admit that I am a financial voyeur, but the real reason that I need that information is to determine the best financial advice for you! So often, it really does depend on your specific situation, which is why we avoid dispensing cookie-cutter advice.

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We started the show with a follow up response to last week's question: would you quit your job to take off a year from the grind? Allison did just that, but says, "Looking back I should never of done it."

Greg and Laura are considering the purchase of  a vacation rental home and wanted to know the pitfalls of doing so.

We helped Steve and an anonymous e-mailer with allocation/share type questions; Chrissy with a query about her variable annuity;  helped Maurie guide her 19 year old daughter, who needs financial guidance; and provided Anil with the upside and downside of  carrying a "big, long mortgage."

Thanks to everyone who participated this week, especially Mark, the Best Producer in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

#220 Memorial Day, How to Buy Bonds

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The roots of Memorial Day go back to the aftermath of the Civil War. It has since been expanded to honor those who have made the ultimate sacrifice for their country. It’s also an opportunity to consider those veterans who are trying to transition into a civilian life. While working on a story, I stumbled upon a great resource for military personnel who are entering the broader job market: GIJobs.com, so pass it on to someone who might need a break!

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The theme of this week's show is "How to Buy Bonds", because both Chris and Jay have big portfolios, allocated almost exclusively to stocks. Each voiced the same concern: Although they want to buy bonds, they find it hard to do so, just as interest rates are poised to rise. We provide both of them with some ideas to accomplish a more balanced portfolio.

Paul has a fixed annuity that will mature in November, but if he cashes it in, he will be on the hook for a big tax liability. He wonders what options are available to mitigate the tax hit.

Should Gary use the proceeds of his primary home sale to pay off the mortgage on his second home? While it might be great to feel unburdened without a mortgage, he might regret not having access to the money.

The existential question of the week comes from Jessica, who asks, "Is it financial suicide to consider taking 6 to 12 months off of work for both working parents mid-career?" Feel free to weigh on this conversation!

Mark and Caroline are busy juggling priorities. What should they do with an extra $1,000 per month? Pay down debt, save for a house or open a 529 college savings plan?

John asks whether all of the staff at the registered advisory firm with which he works, must be registered individually...the answer: Maybe, but maybe not!

Thanks to everyone who participated this week, especially Mark, the Best Producer in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

Bear Market Anniversary: Are you Still a Lousy Investor?

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March 9 2014 marks the five-year anniversary of the stock market’s recent bear market closing low. That trading day, the Dow Jones Industrial Average was at 6547, its lowest level since April 15, 1997; the S&P 500 was at 676, its lowest level since Sept 12, 1996; and the NASDAQ was at 1268, its lowest level since Oct 9, 2002. Since then, U.S. markets have charged higher. Through the end of February, the S&P 500 has shot up 175 percent and including dividends, returns have more than tripled since the bear market low. For the first few years of the recovery, ordinary investors were largely on the sidelines. The experience of watching a retirement account plunge by half prompted many to say that they would never again put themselves through the pain. But over the past few years, many risk-averse investors have reentered the market, though this time, hopefully a little bit wiser.

Not so fast. According to Morningstar, which regularly reviews investors' performance results versus the funds that they own, people are lousy investors. In fact, in the ten years through the end of 2013, the typical investor lagged the mutual funds in which she was invested by 2.5 percent EACH year. What explains the underperformance? We are mere mortals, who are prompted to make emotional decisions -- at precisely the wrong times -- in our portfolios!

There are two main emotions that infect most investors: fear and greed. In 2007, when stocks were flying high and financial crisis had not yet entered the vernacular, many  allowed greed to rule, piling into risky asset classes, like stocks. Then at some point, maybe near the bottom in 2009, or even earlier in 2008, fear prompted many to sell.

Conversely, those who adhered to a more balanced approach were better able to keep those emotions in check. Yes, you may have been handsomely rewarded if you kept all of your money in stocks from the bottom until today, but the fact that so much of your nest egg was vanishing before your eyes in 2008-2009, made it more likely that you would not be able to withstand the pain. That's why the unsexy advice of maintaining a thoughtful, balanced approach to investing, which incorporates periodic rebalancing, can help you avoid the emotional decisions that greed and fear often prompt.

Here are the three ways to keep fear and greed in check:

1. Keep cool: If you had sold all of your stocks during the first week of the crisis in September 2008, you would have been shielded from the additional losses that occurred until March 2009. But how would you have known when to get back in? It is highly doubtful that most investors would have had the guts to buy when it seemed like stock indexes were hurtling towards zero.

2. Maintain a diversified portfolio and don’t forget to rebalance. One of the best ways to prevent emotional swings is to create and adhere to a diversified portfolio that spreads out your risk across different asset classes, such as stocks, bonds, cash and commodities. In September 2008, a then-client shrieked to me that “everything is going down!” But that was not exactly the case: the 10 percent allocation in cash was just fine, as was the 30 percent holding in  bonds. That did not mean that the stock and commodities positions were doing well, but overall, the client was in far better shape because she was diversified.

3. Maintain a healthy emergency reserve fund. Bad luck can occur at any time. One great lesson of 2008-2009 is that those who had ample emergency reserve funds (6 to 12 months of expenses for those who were employed and 12 to 24 months for those who were retired) had many more choices than those who did not. While a large cash cushion seems like a waste to some (“it’s not earning anything!”), it allowed many to refrain from selling assets at the wrong time and/or from invading retirement accounts.

Financial Crisis Anniversary: 5 Investor Lessons

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Five years ago, when the financial crisis blew across the nation like a massive storm, it left a wake of destruction in its path. The Federal Reserve Bank of Dallas estimates that the total cost of the crisis (assuming economic output eventually returns to its pre-crisis trend), to be between $6 and $14 trillion. To put those big numbers into perspective, the loss amounts to $50,000 to $120,000 for every U.S. household. Ouch! The crisis tested every investor, from the neophytes to the most jaded traders on the street. With five years of distance from the eye of the financial storm, here is my list of the top 5 lessons every investors can take away:

1. Keep cool: There are two emotions that influence our financial lives: fear and greed. At market tops, greed kicks in and we tend to assume too much risk. Conversely, when the bottom falls out, fear takes over and makes us want to sell everything and hide under the bed. If you had sold all of your stocks during the first week of the crisis in September 2008, you would have been shielded from further losses (stocks bottomed out in March 2009). But how would you have known when to get back in? It is highly doubtful that most investors would have had the guts to buy when it seemed like stock indexes were hurtling towards zero.

2. Maintain a diversified portfolio…and don’t forget to rebalance. One of the best ways to prevent emotional swings is to create and adhere to a diversified portfolio that spreads out your risk across different asset classes, such as stocks, bonds, cash and commodities. In September 2008, a client shrieked to me that “everything is going down!” But that was not exactly the case: the 10 percent allocation in cash was just fine, as was the 30 percent holding in government bonds. That did not mean that the stock and commodities positions were doing well, but overall, the client was in far better shape because she owned more than risk assets.

3. Maintain a healthy emergency reserve fund. Bad luck can occur at any time. One great lesson of the crisis is that those who had ample emergency reserve funds (6 to 12 months of expenses for those who were employed and 12 to 24 months for those who were retired) had many more choices than those who did not. While a large cash cushion seems like a waste to some (“it’s not earning anything!”), it allowed many people to refrain from selling assets at the wrong time and/or from invading retirement accounts. Side note: the home equity lines of credit on which many relied for emergency reserves vanished during the crisis.

4. Put down 20 percent for a mortgage (and try to stick to plain vanilla home loans (15 or 30 year fixed rate mortgages), unless you really understand what you are doing!) Flashback to 2004 – 2007 and you will likely recall that you or someone you knew was buying a home or refinancing with some cockamamie loan that had “features” that allowed borrowers to put down about 3 cents worth of equity. There’s a good reason that old rules of thumb work. Yes Virginia, house prices can go down. And despite the recovery, please shun the advice from so-called experts like Suze Orman, who are once again saying that 10 percent down is just fine.

5. Understand what is in your target date fund: Pre-crisis, many investors had started to use target date funds, in which the fund manager “targets” your future date of retirement and adjusts the allocation as you near the time that you will need to access the money. Unfortunately, many of these funds were far riskier than investors understood. Whether it’s a target date fund or an age-based investment for your kid’s college fund, be sure to check out the risk level before you put a dollar to work.