Blog 2022-12-01T02:08:51+00:00

Articles of Interest

On Guard for the Fragile Decade

Some call it the “fragile decade,” that first 10 years of retirement when market movements can have a profound effect on a portfolio’s ability to sustain income and financial security for the years ahead.  It has a lot to do with the sequencing of returns. In the years leading up to retirement, many investors have discretionary income to make meaningful contributions to retirement savings, and they’re not yet drawing from those nest eggs.  If markets are down, they’re buying in at lower prices with better upside prospects ahead.  But once that employment income must be replaced, at least in part, by withdrawals from retirement savings, the impact of a significant market downturn can be magnified. Suppose one starts retirement with a [...]

Roth IRAs Are Increasingly Popular, Especially With Younger Investors

Analysis released last year by the Internal Revenue Service shows younger investors are choosing Roth IRAs over the traditional variety in large numbers.  Fund manager T. Rowe Price confirms that as of year-end 2013, investors under 34 have eight times more money in Roth IRAs than in traditional IRAs. There’s logic to that, assuming young investors are looking at currently low marginal tax rates, lots of years to enjoy tax-deferred growth, and easier access to a portion of their Roth assets if a need arises a few years down the road.  But as those same workers edge into higher marginal tax brackets the argument gets a little more nuanced. The main lure of the Roth IRA is the promise of tax-free [...]

A SIMPLE Plan

I recently set up a SIMPLE IRA plan for a business in Corvallis. Their goal was to help their employees save for retirement while not spending a small fortune on administrative costs.  If this is the case for your business, you may want to take a look at a SIMPLE IRA plan. Who is eligible: Businesses with less than 100 employees, tax-exempt organizations, and government entities. Who must be covered:  Any employee earning $5,000 during any two preceding years. Required Employer Contribution: Dollar-for-dollar match up to 3% of pay OR 2% of gross pay up to $245,000 for all eligible participants who earn at least $5,000. Maximum Contribution:  $12,000 deferral plus a $12,000 maximum match.  Those over the age of 50 may make an [...]

Will Stock Selling by Boomers Tank the Market?

For the better part of two decades some market sages have warned that stocks could face a stiff, steady headwind as retiring baby boomers trim their equity holdings in favor of more conservative allocations and start spending their nest eggs. It’s the flipside of the view that the great bull market of the 1980s and ‘90s was partly fueled by the boomers surging into the prime earning and saving phase of their lives. Demographics certainly can influence markets, but it’s probably more of an indirect effect tied to the relative dynamism of the national economy. Recent studies question the idea that retiring boomers will tank stocks.  Several years ago the U.S. Government Accountability Office determined that demographic variables account for less [...]

Bonds Can Be Risky

If you own individual bonds or bonds within mutual funds, you may want to start taking a more cautious approach to your bond investing.  Although bonds are typically considered a relatively safe investment, we may be entering a period where bond prices could be volatile. We are seeing signs that interest rates could be moving up in the near future.  Rising interest rates are not a good thing for bond investors as bonds generally lose value when rates rise.  For example, if you own a bond that matures in 10 years, or own a bond fund with an average maturity of ten years, a 1% rise in interest rates could cause your bond investment to decrease in value by as much [...]

Traditional IRA Vs. Roth IRA

Let’s explore some of the differences between a traditional IRA and a Roth IRA. With a traditional IRA, your contributions may be tax-deductible and can grow tax-deferred. In retirement, traditional IRA distributions are taxable as ordinary income. With a Roth IRA, your contributions are non-deductible, but have the opportunity to grow tax free. At retirement age, distributions from a Roth IRA are tax free. Here is a list of some of the primary differences: Traditional IRA Roth IRA Tax Treatment of Contributions: Tax-deductible Non-deductible Tax Treatment of Distributions: Taxable as ordinary income Tax free Mandatory Distributions: Mandatory at age 70.5 No mandatory distributions Early Withdrawal Penalty: 10% on entire amount 10% only on earnings Although the above table highlights some of [...]

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