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Wednesday, July 30, 2014

For More Than a Rainy Day

Over the years, I think I have seen almost every type of financial emergency, either personally or professionally. Some are relatively small, like the time you took your car in for an oil change and ended up with $1,200 in repairs. Some are big, like the loss of a job or an unexpected medical issue. Regardless of the situation, they cause family stress and can pressure you into making poor financial decisions. This is why one of the basic recommendations that we make with all clients is to maintain an adequate emergency or rainy day fund.

Calculating the right amount to maintain in an emergency fund is an important exercise. Why? Because you don’t want to be caught without enough to cover your emergencies, leading you to use expensive credit cards or pay taxes and penalties to withdraw from your retirement accounts. Also, having too much in a rainy day fund hurts your long term planning. These are funds that could be invested instead of sitting in a savings or checking account.

A general rule of thumb is three to six months of monthly living expenses. While this is a nice starting point, there could be other important factors:
  • Health: Do you or your family members have health concerns that could result in lost time at work? Could you be needed to take time off to care for a relative?
  • Job Security: Some jobs are more secure than others. Is your family dependent on one income earner? Does your income fluctuate?
  • Budget Flexibility: Are you able to “cut back” if necessary? Do you have a lot of monthly payments?
  • Investment Liquidity: Do you have assets that can be converted to cash? Are all of your assets in real estate or retirement plans?
Some people feel more comfortable with a little more in the bank that they can get at easily. Your emergency fund acts as an important buffer for your other investments and retirement accounts. Even though you earn little on the emergency savings, they play an important role in your overall planning allowing for increased financial confidence and maintaining a focus on long term goals.

Wednesday, July 16, 2014

Changes Coming to Your 401K

In early July the US Treasury released a ruling allowing annuity purchases in your 401k. As you review your 401ks please contact us to help you navigate these changes and how they affect you. Below is the article explaining the changes:

Tuesday, July 8, 2014

You Think You Know What to Expect during Retirement?

I am going to travel.  I am going to go back to work.  I am going to retire at 65.  We are going to spoil our grandchildren. We are going to purchase another home down south.

All of these responses are common themes when it comes to helping people prepare for retirement. The biggest advice we give, however, is to expect the unexpected. The Wall Street Journal published a fantastic article on May 24, 2014 describing some of the common unforeseen retirement circumstances. One of the most common occurrences I come across is people retiring earlier than they had planned. There could be an early buyout option, company downsizing, or a health concern, but the bottom line is that retiring before a planned date happens quite often. I like to attribute it to seeing the finish line and knowing that the end is near, that’s when the justification process begins. When it comes down to it, will the extra year of work really make a difference in the retirement spending? What if the stress of the extra year of work takes years off the retiree’s life? Each retirement situation is different and a financial advisor can be very useful throughout the process. Wouldn’t you rather consult with someone who has helped others navigate similar scenarios? Experience and expertise can be a great asset during a time that most people have been planning for all of their life, but have yet to conquer.

Tuesday, July 1, 2014

Lost and Found

Remember in elementary school when you came home from school with only one mitten. You were immediately sent to the office to look through the school’s lost and found. A giant box with a hodgepodge of orphaned mittens, shoes, jackets, and hats. If you were lucky, you found your mitten. At best, a 50/50 shot.

It is a little more complicated with lost savings and investments. Believe it or not, this does happen. Most commonly, it is a small retirement plan from an old employer long forgotten. Often, the original owner has passed away along with clues as to the whereabouts of the account.

After a while, the investment company passes on the information to the state’s Unclaimed Property Department. In Michigan, this is part of the Department of Treasury. In addition to the state programs, there are private firms that help people find lost property, for a fee. The fee is often up to 20% of the value of the account.

When you were in school, your parents may have safety pinned your mittens to your coat or maybe you had those mittens that were connected by a cord that ran through your coat sleeves. Either way, you were protected against loss. With investments, there are some ways to prevent the loss of your accounts also:

1. Minimize the number of different accounts that you have. Consolidate types of accounts such as IRA’s and savings accounts so that it is easier to keep track.

2. If your leave an employer, make sure you rollover your retirement account.

3. Make sure your accounts are up to date with your address and other contact information.

4. Keep a list of all savings and investment accounts in a safe place or with your financial advisor. Keep it up to date.

5. Check the online database of unclaimed property. The Michigan Department of Treasury maintains a searchable database called Michigan Money Quest at

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.