Once the need for life insurance is determined, the discussion almost invariably turns to the choice of term life insurance versus whole life or permanent insurance. Any comparison of the two, however, is like considering apples and oranges with each satisfying very specific needs, preferences and priorities.
Many investors, especially those still reeling from the 2008 – 2011 stock market roller coaster ride, have developed a low tolerance for volatility. As a result they have moved a significant portion of their investments into bonds or other fixed yield vehicles. What many investors may not realize is that wholesale switches from one asset class to another in order to avoid volatility can actually increase it.
In many respects, people can be their own worst enemies in their quest for financial security. When you consider that our lives are nothing more than a culmination of the decisions we make each day, if we tend to make more bad decisions than good decisions, or worse, if we can’t make decisions at all, it’s should be no surprise when financial security remains elusive.
Watching the roller coaster ride of the stock market can make many investors queasy. Even though the stock market has, historically, always trended up, investors can’t help but feel uneasy as they watch the values of their portfolios rise and fall with the market. That is, unless they also have a portion of their money in the bond market and the precious metals market, and in short term savings. When portfolios are limited to one type of asset, its value will reflect the volatility of that asset class. But, when portfolios are allocated among several different asset classes, the variable rates of volatility and the uncorrelated movements of each can have the effect of stabilizing the overall portfolio.
Most people are familiar with the basic concepts of life insurance and understand that some level of protection is a necessary part of modern financial life. The question of what life insurance can actually accomplish, when considered as part of an overall financial plan, is more involved and worth a closer look.
If you’ve ever seen it, it’s one of those things you’ll never forget – the mass migration of hundreds of thousands of wildebeest moving across the plains of Africa in search of a fresh feeding area. It’s magnificent to watch. Of course, we know why mammals herd together – it’s because there’s safety in numbers.
Most people are aware that they can begin collecting their Social Security retirement payout at age 62, and, in doing so, they are informed that they will be collecting a reduced benefit. And most people also know that, the longer they wait to collect benefits, they will receive a higher monthly benefit. When they do the math, some people figure they are better off by collecting a smaller benefit for a longer period of time. Of course, some people may not have a choice but to collect early if they are forced out of work or they simply don’t have sufficient resources. But, to the extent anyone can, they should delay retirement in order to collect as high a Social Security retirement payout as they can. The difference can be substantial.
Getting the Most from Your 410(k) Plan
401(k) plans were established by Congress to encourage individual savings towards retirement. Offered through employers, the plans are generally available to eligible employees who are allowed to contribute a percent of their salary to the plan. In most plans, employees are given a menu of investment options that enable them to create a portfolio that is most suited for their investment preferences and risk tolerance.
Contributions are based on a percent of your salary up to a current maximum of $17,500 ($23,000 under the catch-up provision for people over age 50). If your income exceeds $110,000, there may be some additional limitations depending on how many lower paid employees participate in the plan.
Year-End Tax Planning Begins Now
With the holiday season looming, it’s not too soon to do your year-end tax planning. One of the consequences of achieving financial success is that, what was once a relatively straightforward tax return increasingly becomes more involved as more tax issues come into the picture. You may have more things to track, forms to file, and you also may also experience bracket creep which can suddenly change the way you manage your taxes and finances.
Waiting until tax filing time to deal with these issues could be hazardous to your wealth. As your finances improve, it would be important to become more knowledgeable about your taxes to avoid any surprises.
The tax code is loaded with many tiny provisions that can impact the financial lives of most Americans. And, having some understanding of some of the intricacies of the taxation process can save a lot of time and money. Tax filing time should be used as an opportunity to assess where you are financially and prepare for the year to come.