Financial foolishness

Are you foolish? I know that’s a provocative question. Nobody likes to appear foolish to themselves or to others. However, to paraphrase Forrest Gump’s mama, “Foolish is as foolish does.” We all play the fool sometimes, so it’s a good idea to engage in a little self-reflection occasionally to make sure we aren’t fooling ourselves. Self-reflection followed by self-correction enables us to grow wise despite our foolishness. As a financial planner I am especially interested in helping people escape financial foolishness. In my experience, there are three common ways in which people fool themselves financially.
Read More

Escaping the tax on your RMD

Retirees of a certain age face the harsh reality that the IRS is lurking in the shadows. As soon as they turn 70 ½ years old, the IRS comes knocking. “Hello, Mr. Retiree,” says the nice IRS man. “You’ve had the tax-free use of this money for years and you have built up a nice little nest egg. Now we want our share.” They get their share by requiring you to take minimum distributions every year from your retirement savings. The distributions are taxed as ordinary income which makes the IRS man very happy. Now what if I told you there was an easy and perfectly legal way to beat the IRS man at his own game?
Read More

Is your financial thinking distorted?

The human brain is a wonderful thing, but sometimes we suffer from what psychologists call “cognitive distortions.” Cognitive distortions cause us to perceive the world inaccurately. When we act on these distorted perceptions, we make poor decisions and undermine our own happiness.
Read More

Roth IRAs for the Older Investor

Q: I retired last year. I receive a pretty good pension and I would like to contribute some of that money into a Roth IRA. Is that possible? A: You can only contribute what the IRS deems to be “earned income” to a Roth IRA. Unfortunately a lot of the income many retirees receive does not fall into that category. For example, the IRS specifically excludes
Read More

It’s a bond world

Fixed income markets play a vital role in the global capital markets. They also play an important role in a well-structured investment plan. Unfortunately, fixed income securities, also known as bonds, are a mystery to many individual investors. This week we are going make a foray into the world of bonds. However, the bond market is so huge and includes such a mind-boggling array of securities, there is no way we will be able to do more than scratch the surface.
Read More

What makes a good financial plan good

We often talk about the importance of having a good financial plan, but we rarely discuss what makes a financial plan good. As with most things in life, financial plans come in a variety of qualities and flavors. Knowing what to look for as you shop for a financial plan will help you get the best plan for your particular situation. Financial plans can be either tactical or strategic in nature.
Read More

So, You Want to be a Day-trader

Q: My wife and I have had some success trading stocks and we want to start doing it full-time. I believe we have sufficient capital and we’ve been taking an online course through a reputable discount brokerage firm. What advice can you give me (other than telling me not to do it)?
Read More

Take a look at index annuities

Q: I went to a dinner recently hosted by someone who was trying to drum up interest in fixed index annuities. She said these kinds of annuities would allow me to benefit from the stock market’s upside while guaranteeing that I wouldn’t lose money if the market went down. It sounds too good to be true, but the products are offered by some very reputable insurance companies. What can you tell me about them?
Read More

Prepare now, avoid bankruptcy later

If you are retired, preparing to retire, or one day hope to retire, I encourage you to read an article in Monday’s edition of the New York Times. The article is titled “Too Little, Too Late: Bankruptcy Booms Among Older Americans.” The article is based on a new report by a group called the Consumer Bankruptcy Project. I found the newspaper article so interesting, I tracked down a copy of the report itself.
Read More
Subscribe to Monterey Herald