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Why the 4% Rule Doesn't Work For Retirees

Friday, 12 July 2019

Why the 4% Rule Doesn't Work For Retirees
Don't Run Out of Money

Per following the 4% rule, you've dutifully saved over your working years and are now ready to retire. You plan to withdraw 4% annually in retirement.

But the 4% rule alone will not guide you to retirement success. In this article I outline a few shortfalls with this famous rule-of-thumb, and why you need to be weary of them well before your actual retirement. 

 

How High Earners Can Fund Roth Accounts - A Few Strategies

Monday, 17 June 2019

How High Earners Can Fund Roth Accounts - A Few Strategies
High Earners, You Can Fund Roths Too

Roth accounts are the holy grail of retirement savings. While taxed in the year of contribution, once in a Roth, funds are tax free forever. No tax on investment, or withdrawals, or even distributions to your kids when you’re gone and they’re fighting over your estate.

But high earners face an uphill battle in funding Roth accounts. Direct contributions to a Roth IRA aren’t allowed for households earning more than $203,000. Here are few workarounds.....

 

 

 

Roth Conversions and Tax Rate Arbitrage: Not As Confusing As It Sounds

Thursday, 30 May 2019

Roth Conversions and Tax Rate Arbitrage: Not As Confusing As It Sounds
When Your Income Dips, Convert to Roth

Arbitrage is a fancy word used in finance conversations by people that really want to seem smart. 

Today, I’m excited to be one of those people.  

Roth conversions during low-income years can be a great way to set money free forever at a reduced tax rate. This strategy works well for those that have accumulated a high balance in traditional IRA or 401(k) through pre-tax contributions, and will have a low-income year because of a decision to retire, start a business, or become an instagram life coach. 

 

Tax Loss Harvesting Part I - Take the Easy Money

Thursday, 25 April 2019

Tax Loss Harvesting Part I - Take the Easy Money
Everyone should do it, but few do.

At the end of every year, take a look at your portfolio and sell whatever is "down" to capture a tax loss. If you still like the investment, buy it back after thirty days. If not, buy something else. 

This annual exercise can create huge value over several years of investing. 

Tax Deferral on Capital Gains: The Qualified Opportunity Zone Investment

Monday, 11 February 2019

Tax Deferral on Capital Gains: The Qualified Opportunity Zone Investment
Invest Money Now, Pay Taxes Later

A little discussed provision of the Tax Cuts and Jobs Act of 2017 allows for investors to invest taxable capital gains directly into an “Opportunity Fund” and defer paying taxes. There is a 10% and 15% basis increase after holding the Opportunity Fund for five and seven years, respectively. Any gains on Opportunity Fund investments are tax free if there is a holding period of ten years or longer.  

How to Avoid Bad Financial Decisions

Monday, 28 January 2019

How to Avoid Bad Financial Decisions
Less Bias, Better Judgment

Using good judgment to make smart decisions is paramount to successful results, and financial decisions are no exception. It is well documented that investor behavior, defined as the mental processes and emotions that cause investors to buy or sell, is the decisive factor in long term results, rather than knowledge, skill or luck. We might classify these behavioral missteps as the lack of good judgment in financial decision making. 

My Company Was Acquired - Now What?

Monday, 14 January 2019

My Company Was Acquired - Now What?
Navigating a Potential Windfall

While folks may not have a full grasp on their employment picture over the short term, as consolidation means many things to many different people, one area of worthwhile focus is the effect of ownership change on personal finance and retirement planning. 

How does this acquisition affect your current retirement plan? Major transitions are a great time to take another look at everything and see how you can solidify your finances, despite short-term uncertainty. 

Obligatory Investment Outlook (2019)

Monday, 07 January 2019

Obligatory Investment Outlook (2019)
Just a Quick Note on Annual Investment Outlooks…

Each year, seemingly thousands of financial institutions, professional investors and everyday financial advisors provide a forward-looking outlook for the coming year. These outlook papers serve as forward-looking predictions for the market and economy. Ostensibly, investors leverage these insights to position their portfolios for success.

There is no shortage of intellectual geniuses in the investment community. For decades, the brightest, most ambitious go-getters from all over the globe have flooded into asset management firms in search of their investment fortune. I won’t pretend to be half as smart as these folks. I’m not a CFA, nor do I play one on TV.

Effective Financial Planning for Young Professionals

Tuesday, 18 December 2018

 Effective Financial Planning for Young Professionals
There are two stages of retirement planning - accumulation and distribution.

There are two stages of retirement planning - accumulation and distribution. Accumulators are those still working (and who we’ll discuss here). Distributors are those that are no longer working and live off their assets and passive income streams (to be discussed later).

Here’s a graphic showing the lifecycle of a good financial plan from working years (accumulation phase) to retirement years (distribution phase). 

 

HSAs Part II: Funding Hacks, Resources and Smart Healthcare Decisions

Tuesday, 20 November 2018

HSAs Part II: Funding Hacks, Resources and Smart Healthcare Decisions

I’ve already explained the economic and tax advantages of HSAs.

Now, let’s talk about how to optimize HSA funding with an IRA rollover to provide a “cushion”, some resources for where to spend your HSA funds on everyday “health expenses”, and how to be a smarter healthcare consumer.

Funding – IRA to HSA Rollover

Married couples can contribute up to $6,900 annually to HSAs. Generally, open enrollment season is in October or November, but benefit changes technically don’t go into place until January first of the following calendar year. You have to wait until your HDHP plan goes into effect to contribute to your HSA.  

Human Advisors Are Irreplaceable (For Now)

Tuesday, 30 October 2018

Human Advisors Are Irreplaceable (For Now)

Competent investment management is a commodity service—and this is no secret.

For the past decade, institutional and retail investors alike have chosen low-cost passive index funds over higher cost actively managed strategies because active managers can’t consistently beat the index, but still, charge high fees for trying. Here are the numbers for active managers vs. the index from a Wall Street Journal article:

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Disclosure: Claro Advisors LLC ("Claro") is a Registered Investment Advisor with the U.S. Securities and Exchange Commission ("SEC") based in the Commonwealth of Massachusetts. Registration of an Investment Advisor does not imply any specific level of skill or training. Information contained herein is for educational purposes only and is not to be considered investment advice. Claro provides individualized advice only after obtaining all necessary background information from a client. Disclosures and Terms of Use. 

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