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An Effective Stock Option Strategy for Startup Employees

Tuesday, 03 May 2016

An Effective Stock Option Strategy for Startup Employees
It’s true that timing is everything.

It’s true that timing is everything. For individuals that receive stock options during a company’s startup or pre-IPO phase, there can be an acceleration of wealth that is unlike any other form of employee compensation.  Working at a startup can provide the right mix of entrepreneurial upside with the stable salary and benefits of a competitive full-time job.

Although many people realize benefits of stock options and sometimes layer the proceeds from options into a long-term wealth building strategy, most do not understand the substantial planning opportunities available to minimize taxes around the exercise of options.

A well-timed stock option exercise and hold strategy with a sale at capital gains rates can provide significant tax savings.   From a wealth planning standpoint, it can be lightning in a bottle.

Stock Option Basics

A stock option grant is simply the right (or option) to purchase one share of company stock at a set price.

For example, Startup, Inc. could grant Eddy Employee 1,000 stock options at $5/share (known as the strike price). Eddy can now choose, within some set time frame, to purchase (or exercise) the options at the strike price of $5.

Three Essential Financial Planning Questions for Thirty-Somethings

Friday, 15 April 2016

Three Essential Financial Planning Questions for Thirty-Somethings
By age thirty, personal financial planning becomes, in many cases, necessary for long-term success.

During their twenties, people are finding their way personally and professionally.  Long nights at the office as “low man on the totem pole” can turn into a mid or senior level position and a well-established career track by the age of thirty.  

Likewise, the twenties lifestyle of living with friends and going out on weekends gives way to marriages, families, and moving to the suburbs.  By age thirty or thirty-five, especially when children enter the picture, there is less discretionary time and money, so every dollar needs to count.

For individuals approaching thirty and beyond, here is a quick litmus test to see whether you have a handle on your financial situation.  If you can’t affirmatively answer these questions, your financial plan may need attention.

  1.  How Much Do You Save Each Month?

Everyone knows what hits their bank account each pay period.  Some people know their monthly spending number.  Very few people know their monthly savings, or deficit, number.  This number could include retirement account contributions from payroll, but in general, people should have a good idea of the portion of their monthly income that goes towards achieving their long-term financial goals.

Don't Let Poor Planning Keep You From Crossing Retirement Home Plate

Friday, 01 April 2016

Don't Let Poor Planning Keep You From Crossing Retirement Home Plate
Why Early Retirees Should Reconsider the 4% Rule

Getting on base and ultimately crossing home plate are two very different things. Even after a fantastic at-bat, a subsequent mental lapse on the base path could end a scoring chance and possibly lose a game.

For individuals that have "reached first base" in saving enough to stop working, retirement success could require a whole different mindset than successfully saving for retirement.  Actually, the first five years of retirement can mean the difference between winning and losing. Although retirement rules of thumb can be helpful with long-term goals, when it comes time to tap into retirement assets, retirees need flexibility and proactive risk awareness.

Financial Planning Checklist for New Parents

Friday, 11 March 2016

Financial Planning Checklist for New Parents

Having a baby is an extraordinary, life-changing event. Although positive emotions can overwhelm new mothers and fathers, parenthood also creates significant responsibility—and sometimes anxiety.  Without proper planning, a little bundle of joy can lead to a very large financial burden.  There is no way to fully anticipate the emotional, financial and lifestyle shifts of becoming a parent, but here are some key areas that all parents should address with their financial planner: 

  1. Review Additional Living Expenses and Plan Accordingly

If your financial house is in order, you may already have a strong handle on your monthly cash flows and budget.  But everything changes when you have a baby. Evaluating the major additional expenses and understanding how to optimize after-tax savings is imperative for long-term financial success.

2. Health Insurance Family Coverage

Health insurance costs are rising. According to Zane Benefits, the cost of family healthcare has tripled since 2001 and continues to grow at an increasing rate, climbing 6.3% in 2015.  At the very least, new parents should expect family coverage to cost...

Over 59 1/2? Consider the Benefits of an In-Service Withdrawal from Your Company Retirement Plan

Tuesday, 08 March 2016

Over 59 1/2? Consider the Benefits of an In-Service Withdrawal from Your Company Retirement Plan

Many employees love the convenience of investing in 401(k)s, 403(b)s or other qualified employer retirement plans.

With automatic contributions, prepackaged investment choices, and employer matching—the system enables an easy retirement savings process.

But many feel stuck with the inflexibility of 401(k)s. The investment choices can be limited and may only include expensive actively managed mutual funds or target date funds. Depending on the individual, these options might not be the best.

When It Comes to Finances, Get A Routine and Stick to It

Tuesday, 09 February 2016

When It Comes to Finances, Get A Routine and Stick to It

“Everyone has a plan until they get hit in the mouth.” – Mike Tyson

As January gym crowds shrink and many Americans slip into their old routines, we’re reminded of the difficulties in developing disciplined and consistent habits towards achieving a long term goal. As busy professionals, our schedules change rapidly, and too often, our best laid plans go awry. After a few weeks of work, there are no immediate results and it becomes easier to ditch the gym for drinks after work, or have a few too

Enhancing Retirement Cash Flow with the New and Improved Reverse Mortgage

Enhancing Retirement Cash Flow with the New and Improved Reverse Mortgage
Part I: The Basic Retirement Planning Equation

Retirees must fund an enjoyable lifestyle without working, which is no small feat. With fewer pensions, lackluster social security benefits, low-interest rates, and significant market volatility—hard-earned retirement savings may not last until age 90 or later.

Retirement is generally considered sustainable if total portfolio withdrawals during the first year of retirement are no higher than 4% of portfolio value (the so-called 4% rule). But it turns out even 4% could be too much if retirees suffer a market downturn in early retirement. Or any number of other things can go wrong.

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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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