What to do with your 401(k) when you switch jobs

Changing jobs is exciting, but there are some practical things you’ll have to deal with … like what to do with your old 401(k) plan.

1. You can leave the money in your old 401(k) plan

There may be a minimum balance required to leave your money with your old company, but most companies will let you do it.

That said, there are a few downsides of keeping your 401(k) where it is: One, you can no longer contribute to it, and two, you’ll have multiple 401(k) plans floating around.

Plus, if your old company gets bought or switches 401(k) providers, now you don’t know your login information or your account number and it can be a pain to figure out.

Leaving your funds with your previous employer is definitely an option, but typically, the downsides mean it’s not the best option.

2. You can roll over your 401(k) to your new employer’s plan

If your new employer accepts rollovers, this is a good option if you like the investment choices and the fees aren’t too high. This way, your money will all be in one account and it’ll be easier to manage.

If you aren’t happy with the investment options offered by the new plan, or the fees are too high, you have a third option.

3. You can roll over your 401(k) to an individual retirement account (IRA)

Your third option is to move your 401(k) into an IRA or Roth IRA, which is a great option because IRAs typically have lower fees and more investment choices.

They’re both retirement accounts — you just get to pick when you pay the taxes. With a traditional IRA, you contribute pre-tax dollars and let that money grow tax-deferred over time. You’ll pay taxes on your contributions (and investment gains) only when […]

Freelancers and independent contractors must plan ahead

There are more than 53 million freelancers in the United States, according to a 2014 study commissioned by the Freelancers Union. That accounts for about a third of the economy.

Whether you freelance full time or have a side gig in your off hours, it takes some financial know-how to make it work. Here are four important financial matters to plan for:

Cash flow

Freelancers sometimes struggle with uneven cash flow. Checks may not arrive when you expect. For people accustomed to having a full-time job where cash is seamlessly deposited into their bank account like clockwork, it can take some getting used to—and some savings to tide you over.

Be sure to pay yourself a salarys. You may also want to consider keeping your business and personal checking separate. That’s because you will need to keep records to help substantiate business expense deductions such as office supplies. Even if your business is something with extremely low overhead—you may find yourself paying a little extra for mundane things.

As a self-employed person, you may be able to deduct the cost, or part of the cost, of some of your business expenses—so it may make sense to track them apart from personal expenses. For more information, visit IRS.gov.

Because freelancers don’t have the luxury of knowing that another paycheck is automatically coming in two weeks, it’s vital to establish an emergency fund and keep paying into it regularly. Retirement savings have to be a high priority as well. It’s easy to let savings slip, but you should treat retirement savings like money you save to cover taxes—it’s something you can’t afford to ignore.

Consider saving at least 15% of your pretax income for retirement. That amount would include any retirement savings contribution […]

When markets get choppy…

No investor likes to hear that the market has experienced a big drop. But volatility is part and parcel of investing.

Dramatic moves in the market may cause you to question your strategy and worry about your money. A natural reaction to that fear might be to reduce or eliminate any exposure to stocks, thinking it will stem further losses and calm your fears, but that may not make sense in the long run.

So instead of being worried by volatility, be prepared. A well-defined investment plan tailored to your goals and financial situation can help you be ready for the normal ups and downs of the market, and take advantage of opportunities as they arise.

Market volatility should be a reminder for you to review your investments regularly and make sure you consider an investment strategy with exposure to different areas of the markets—U.S. small and large caps, international stocks, investment-grade bonds—to help match the overall risk in your portfolio to your personality and goals.

Keep perspective–downturns are normal and normally short lived.

Market downturns may be upsetting, but history shows that the U.S. stock market has been able to recover from declines and can still provide investors with positive long-term returns. In fact, over the past 35 years, the market has experienced an average drop of 14% from high to low during each year but still had a positive annual return more than 80% of the time.

Be comfortable with your investments.

If you are nervous when the market goes down, you may not be in the right investments. Your time horizon, goals, and tolerance for risk are key factors in helping to ensure that you have an investment strategy that works for you.

Even if your time horizon is […]

A good spring cleaning

Warmer temperatures make it a good time to thaw out and soak up some much- needed vitamin D. Why not use the subsequent energy boost to tidy up your personal finances?

Performing some financial spring cleaning can help you avoid making a mess of your fiscal affairs down the road. Here’s where to get started.

Revamp your budget

Living within your means is an integral part of a healthy financial lifestyle. But we’re all human, and those new kicks you spotted at the mall or that popular restaurant down the street can make it difficult to stay faithful to your budget.

“Everything in your financial life flows from your ability to effectively manage and allocate your income,” says Carrie Houchins-Witt, a financial adviser in Coralville, Iowa.

She recommends that you review your 2016 spending transgressions. Then recalibrate your budget for this year. That may mean zeroing in on and consequently reducing purchases in a given spending category, such as going out to eat.

Tweak your investments

As important as it is to track current spending habits, make sure also to review the investment allocations in your retirement account and other long-term savings. This spring, adjust the mix if what you hold no longer gels with your overarching financial goals.

“We are all so busy and — especially for the index-fund investor who relies on the simplicity of this kind of strategy — it’s easy to forget that we need to perform periodic maintenance to ensure our investment allocations have not grown out of whack over the last year,” Houchins-Witt says.

Financial adviser Mathew Dahlberg recommends rebalancing your portfolio.

“Regularly rebalancing a portfolio can add a few percentage points to long-term returns,” says Dahlberg, of Kansas City, Mo. He recommends using rebalancing tools offered by […]

4 Money Lessons you can Learn from Anthony Bourdain

Anthony Bourdain is now reportedly worth millions of dollars and is one of the richest chefs in the world — but the chef-turned-TV-personality had a number of financial roadblocks on his way to success. From blowing his money on drugs to racking up thousands in debt, as he told WealthSimple, an online investment management service, n a recent interview, has learned the hard way how to be more financially savvy. Here are some of the lessons we can take away from the top chef’s experiences.

1. Start saving when you’re young

Until he was 44 years old, Bourdain, 60, didn’t have a savings account. He called his delay in saving “a sad fact” and said, “I’d always owed money. I’d always been selfish and completely irresponsible.”

He’s not alone, however: nearly 70% of Americans have less than $1,000 in savings and 28% have no money saved at all. Erin Lowry, author of “Broke Millennial: Stop Scraping By and Get Your Financial Life Together,” said even people on a tight budget can make room for savings from each paycheck. “It’s important to start the habit as early as possible,” she said. “Even if the amount you’re saving feels minuscule, it’s really about building that foundational habit so when you do start to make more, you do not have to make a lifestyle shift.”

No matter where you are in your career, start putting away at least $5 a month to get in the healthy habit of saving.

2. Don’t owe anybody money

Bourdain learned the hard way that owing money can take a toll on personal finances — and mental well-being. The chef talked about the stress of constantly owing money when he struggled with substance abuse. “I didn’t put anything aside, ever. Money came in, money went out. I was […]

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Again, courtesy of State Street Global Advisors.

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Many thanks to our colleagues at State Street Global Advisors.


Retirement Planning for the Self-Employed

Planning for retirement is rarely easy. But for people who are their own bosses, the complexities are multiplied.

After all, self-employed workers—a fast-growing segment of the workforce that includes everyone from gig workers who book their work online to freelancers to small-business owners—often have volatile incomes. That makes it hard for them to save consistently and even harder to predict how much they will have by retirement.

The self-employed aren’t doing particularly well at retirement planning. According to a recent survey of 1,600 self-employed people in 15 countries by the Transamerica Center for Retirement Studies and the Aegon Center for Longevity and Retirement, only 36% in the U.S. say they make sure to save regularly for retirement—compared with 54% who work for others.

But they have many options to get their savings on track. The right approach will depend on factors including the amount self-employed people want to save and how much complexity they can tolerate when establishing and maintaining a retirement plan.

The best way for most people to start is with an IRA, says Ed Slott, a Rockville Centre, N.Y., consultant who provides training to advisers on the retirement-savings vehicle.

IRAs come in two forms. With a traditional IRA, investors generally receive upfront tax deductions for their contributions and pay income tax on their withdrawals. With a Roth IRA, they receive no deductions for their contributions, but can avoid tax on their withdrawals.

Roth IRA contributions are off-limits to individuals with modified adjusted gross incomes above $133,000 in 2017 and married couples with annual adjusted gross incomes above $196,000.

But for new business owners who qualify, the Roth is often the better option, says Mr. Slott. The reason: Business owners in startup mode “are often in a lower bracket […]

The aging bull market is being sustained by optimism

Eight years ago, investors were more pessimistic than they had been in many decades. Stocks had crashed back to where they stood almost 13 years earlier, banks were failing and comparisons to the Great Depression of the 1930s were routine. It was a great time to buy.

Fast forward to 2017 and the S&P 500 has stormed up 255% from the March 2009 low, money is pouring into shares, confidence is high and stocks expensive. On the model used by legendary British investor Sir John Templeton, the aging bull market is definitely sustained by optimism, and perhaps already becoming euphoric.
For investors this creates a dilemma: chase the returns a final blowout would bring, or switch to cash now to survive the bear market that might follow?

The decision depends on the assessment of the risks and rewards of chasing a shift to euphoria. Bank of America Merrill Lynch recently upgraded its forecast for the S&P 500 at the end of this year to 2450, after the index powered through its previous prediction of 2300. Strategist Dan Suzuki said that valuations look high, but noted the upgrade was driven by increasing investor optimism.

Put another way: The market’s not really worth more, but exuberant buyers will chase shares higher anyway. As veteran strategist Ed Yardeni of Yardeni Research puts it, to make money from here “you’re not making it as an investor, you’re making it as a speculator.”

But today’s market is very different.   Today pretty much everything is expensive, and the valuation of the median stock is much closer to where it was at the turn of the century. Indeed, Doug Ramsey, chief investment officer of the Leuthold Group in Minneapolis, calculates that even with what he calls an “outlandish and probably irresponsible” assumption […]

It’s a remarkable and historic run for the two equity benchmarks

Buoyancy. That is what this indefatigable equity market has come to be known for over a four month stretch that has failed to yield a decline of at least 1% for either the S&P 500 or the Dow Jones Industrial Average. That is 102 trading sessions dating back to Oct. 11.

Put another way, Wall Street investors have gone through Halloween, a stunning election victory, weeks of shock, Veterans Day, Thanksgiving, Christmas, Hanukkah, New Years, Martin Luther King Jr. Day, Valentine’s Day, Presidents Day, four ballistic-missile firings by North Korea a tumble in oil prices, with nary a 1% blip neither from the S&P 500 nor the Dow industrials.

Such a preternatural period of supernatant trade is bordering on insane, but it is also historic, marking the longest stretch of trading days without a 1% decline since Dec. 18, 1995 for the S&P 500 and the longest since Sept. 20, 1993, for the Dow, according to Dow Jones data.

Stock-equity benchmarks tend to decline at least once every six trading sessions, according to Salil Mehta, a graduate school finance professor, who has worked at Georgetown University and New York University.

So far, the market looks amazingly resilient. Shaking off geopolitical tensions with aplomb and offering only a muted nod to worries around oil futures which have recently resulted in a nearly 8% decline in West Texas Intermediate crude-oil prices since Monday.

What’s kept the market in check and the CBOE Volatility Index known as the “fear gauge”, below its historic average of 20? It’s hard to say. Is it President Donald Trump’s promises to unleash animal spirits by way of tax cuts, deregulation and infrastructure spending? Maybe.

Lance Roberts, chief investment strategist at Clarity Financial, LLC has a theory. He says part of the market’s […]