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Your Advisor’s Role in Helping You Navigate the Path to Financial Success

We’ve talked about how your financial advisor is an essential guide on your journey toward your financial future. But what exactly should your financial advisor do as you navigate the highs and lows, twists and turns of your financial journey?

Your Advisor can Help You Look Beyond the Plan

Even though your financial advisor will offer you a plan to help you set your strategy in motion, at the end of the day, the plan isn’t the final destination in your planning journey. In a dynamic market and ever-changing financial environment, a financial plan can only offer so much.

This isn’t to say there is no value in a plan. After all, a plan gives you an idea of where you’re going and some steps you’ll take to get there. A plan helps you to organize your activities around an end goal, but it’s not the only thing you should focus on.

Your Advisor is Prepared to Guide You Through

Your advisor doesn’t have a crystal ball to see into the future and give you clear numbers to expect one year, five years, 25 years down the line. But your advisor does have tools to help you get through whatever obstacles you’ll encounter on your financial journey.

If you were to take a backpacking trek through a mountain range you’ve never traveled before, you’d hire a guide to help you get through safely and help you find views and scenery you might not have reasonably found on your own. However, you’d never expect your guide to give you a detailed weather forecast for each hour of your trek. Nor would you expect details about when you’d encounter wild animals, a downed tree across a portion of the path or an unforgettable sunset scene.

You would want your guide to have some essentials, like a knowledge of the trails you’ll travel and a sense of the natural features and climate in the area. You’d also expect them to carry equipment like a first aid kit and radio communication device in their backpack.

Similarly, your financial advisor is equipped to help you with the ups and downs you’ll encounter as you navigate your financial journey. They have the tools to help you work through unexpected portions of the path and the insight to help you prioritize your path depending on the outcomes you’re looking to achieve.

They can guide you through these events with pointed advice or recommendations that you wouldn’t have otherwise considered. Even though your advisor can’t predict every twist and turn, they can help you select products, actions and services to help you navigate terrain with which you’re unfamiliar.

Gear Up for Your Financial Journey

Whether you’re ready to start your financial journey or want to correct your course, look to a financial advisor who has the tools to help you navigate your pursuit of financial success. After all, the journey is a lot easier and more enjoyable when you use the help of a guide who knows the ins and out better than you do.

Your financial advisor can give you the guidance you need to monitor your progress along the path and help you update your plans along the way. Remember, just because you’ve chosen a route doesn’t mean you can’t benefit from regular updates and assistance with making implementation decisions as you go.

Your next step is as easy as contacting Certified Financial Planner, Jacob Sturgill

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Spring Clean Your Finances

Spring is an ideal time to roll up your sleeves and get to work on the clutter and dusty piles you might have accumulated over the winter. And while you might automatically turn to spring cleaning your home or office, consider that this season is also an ideal time to take a look at your finances to make sure you’re on track for the rest of the year. Here are some ways you can spruce up your finances this season:

Double Check Your Withholdings

We’re deep into tax season, and whether you’re the type to finish your taxes early, file on Tax Day, April 15th, or file for an extension, it’s never too late to think about how to save money next year. After all, it’s the money that you earn and taxes that you pay during this calendar year that’ll affect your numbers when you go to file in 2020. This year, with taxpayers feeling the impacts of the new tax law for the first time, it’s especially important to take a look at your withholdings. You may find it necessary to make adjustments in order to set aside the right amount for the rest of the year so that you can avoid unpleasant surprises next tax season.

Tidy Up Your Budget

Around the beginning of the year, it’s not uncommon for people to resolve to make this the year that they make a budget and stick to it. How about you? If you started off the year with intentions to get your finances on track with a new budget, are you making progress toward that goal? If not, consider adjustments that you can make. Maybe there are some places you can save a little more. Or maybe you’re not spending as much in one area as you thought you would and you can allocate that money to another line item. Remember, you don’t have to set aside your good intentions just because you might have gotten off track. A step toward budget correction is always a step in the right direction.

Review Your Accounts

While you’re sifting through papers in your home office, take some time to look through information related to your family’s accounts. From savings accounts to retirement accounts, take stock of the assets you have and make note of any accounts that need attention. Depending on life changes you may have had during the past year, you may want to pay special attention to account changes that have the potential to benefit you in the coming year.

Put Your Financial Plan Together

If you haven’t done so already, spring is the perfect time to get your financial plan together. This time of year, you’re probably already aware of your financial status, thanks to the mandatory review you go through at tax time. It’s only natural to take advantage of that awareness - and the fact that your financial info is likely sitting somewhere convenient for you to access - and make time to meet with a financial advisor to make a plan for the future. An advisor will help you to determine your values and take steps to work toward your desired financial future. Or maybe you already have a financial plan in place and simply need a yearly tune-up. If you haven’t already, put a meeting on the calendar and sit down with your advisor to review your plan and make any necessary adjustments.

If you’re ready to tidy up your finances and shine up your portfolio call or email us to set an appointment.

[contact-form-7 id="3520" title="Schedule a Free Consultation w Jacob Sturgill"] Important Disclosures: This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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Navigating the Path to Financial Success

Plotting a path toward your financial future can seem fairly straightforward: you set your goals, build a portfolio, and wait for your investments to grow. However, making progress with your plan, as with making progress in most parts of life, is hardly a linear process. You should start your financial planning journey with an end goal (or goals) in mind and an idea of how you’re going to achieve it. Then you’ll work backward to fill in the gaps and create a guidepath for that journey.

Expect the Unexpected

On paper, the path from where you are to where you want to be will look and feel like a straight line. But in reality, over time and with life changes like a new job or a cross-country move, the path is going to lose its crisp clarity. Some portions of the path will experience high highs, like when the market is booming or you get an amazing promotion and raise at work. And some of the portions will take a seeming nosedive as you experience losses like unemployment or the death of a spouse. At these times, it will look like your portfolio has moved away from where you think it needs to be to achieve your financial goals. It can be hard to avoid the euphoria that comes with experiencing the high points or the fear that comes with the low ones. But it’s during these times that you need to remember that your overall financial journey shouldn’t be measured by where you are during a single portion of that journey.

Trust Your Navigation

Think of how you travel when you take a road trip. Sometimes, your GPS updates in transit and takes you around bodies of water, road construction, or traffic accidents as driving conditions change. While this new route or detour may not have been planned, trusting the guidance still gets you where you want to go. In reality, a straight line between where you are today and where you hope to be in the future likely doesn’t even exist. Change will be constant. Some of it, like how much you save, how much you spend, and how you react to different situations, will be in your control. Many things will happen that will be beyond your control and you’re going to possibly need to make adjustments to get to where you’re going. Even if the path doesn’t stray far from what you expect, you’re inevitably going to have to stop for gas (or a charge!) at some point - you just don’t know where or when.

Find a Trustworthy Guide

When navigating your financial journey, your financial advisor can act as your personal GPS, steering you around unavoidable hurdles, like laws and regulations that impact your investments the same way that natural bodies of water dictate where roadways travel. Your advisor should be able to read the road ahead well enough to know when to steer you clear of the traffic accidents or road construction that unexpectedly pop up to block your way. Instead of insisting on the mythical straight path, embrace the ups and downs as you travel your financial journey. Focus more on the destination and less on your current position on the path. Before you know it, you might be closer to your goals than you ever thought possible.

To learn more about plotting your financial journey contact Jacob Sturgill.

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Financial notebook, plan, and coffee

What Is Sustainable Investing?

Whether you’re looking to build, protect, or grow your investment portfolio, you need to base your investment decisions around a variety of factors in order to find investments which have the potential to meet your financial goals. You might consider factors like a company’s past performance, a colleague’s advice, market trends, or portfolio diversification.

Each investor makes unique judgement calls every time they make a decision to build or update their portfolio. And while it’s important to not make these judgements for emotional reasons, is it possible that there are other considerations you should take into account?

For example, how important is it to you that companies you invest in uphold certain ethical standards? Does it make a difference whether Company A has greater carbon offsets than Company B? Or whether Company C is committed to sourcing only organic inputs?

Sustainable investing is a component of investing that is related to investors finding companies that align with their moral and ethical standards. After all, if you’re going to invest your money with an organization, you may enjoy the confidence that comes with knowing your dollars are doing work you agree with.

Lead with Your Values

You know it’s important to bring your values to the table when you build your financial portfolio. After all, it’s your values, rather than your emotions, that should shape your priorities and investing behavior.

When it comes to sustainable investing, your values will take an even more obvious lead in guiding your investment behavior. If, for example, you’re concerned with environmental issues, you might want to learn more about green investment options.

The concept of sustainable investing makes it possible to make sound investment decisions that fit your personal values and long-term financial goals. In fact, many investors find that companies that are committed to doing societal and environmental good may well have a similar commitment to financial responsibility, meaning that they might perform better over time.

Find Companies Committed to Doing Good

Sustainable business practices are becoming more and more popular, which means that it’s even easier to learn whether companies you want to invest in operate in a way that you agree with. In fact, many companies have started to include sustainability reports along with their annual financial reports.

If you want to find companies that are making the kind of difference that you want to see, you can talk to your financial advisor about finding information on companies’ sustainability and corporate social responsibility reporting.

Balance Your Portfolio

If you choose to go the sustainable investing route, you can balance your portfolio with sustainable investment options in a number of ways. Maybe you want to dip your toes into sustainable investing by choosing one or two companies to add to your portfolio. Or perhaps you’d like your portfolio to boast a larger percentage of sustainable companies.

Whatever your feelings on sustainable investing, your financial advisor can provide direction to finding brands that align with your personal values. If you’d like to learn more about how sustainable investing can help pursue your investment goals contact Jacob Sturgill today.

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Should You Convert to a Roth IRA

Should You Convert to a Roth IRA

Individual retirement accounts (IRAs) come in two flavors: traditional and Roth. With a traditional, contributions are potentially tax deductible and taxes on contributions and earnings are paid when funds are withdrawn in retirement. With a Roth, contributions are made after tax, but withdrawals in retirement are generally tax free.

But even if you have been contributing to a traditional IRA, you are allowed to convert it to a Roth IRA, which may or may not work to your benefit. Before considering a Roth IRA conversion, however, it is important to understand that each type of IRA has its own rules summarized in the table below.

Traditional Versus Roth: Understand the Differences

Maximum Annual Contribution

Traditional IRA

$6,000 for single taxpayers and $12,000 for couples filing jointly for 2019. An additional $1,000 “catch up” contribution is permitted for each investor aged 50 and older who has already made the maximum annual contribution.

Roth IRA

Same as traditional IRA.

Income Thresholds for Annual Contributions

Traditional IRA

None, as long as the account holder has taxable compensation and is younger than age 70½ by the end of the year.

Roth IRA

Single taxpayers with modified adjusted gross income (MAGI) of $137,000 or more and married couples filing jointly with MAGI of $203,000 or more are not eligible to contribute in 2019. Income thresholds are indexed annually.

Deductibility of Contribution

Traditional IRA

Yes, if account holder meets IRS requirements (income restrictions apply if account holder or spouse is covered by a retirement plan at work).

Roth IRA

Contributions are not deductible.

Contributions After Age 70½

Traditional IRA

Not allowed.

Roth IRA

Permitted if owner has earned income.

Required Minimum Distributions (RMDs) After Age 70½

Traditional IRA

RMDs are required.

Roth IRA

Not required during original account holder’s lifetime.

Taxes on Distributions

Traditional IRA

Distributions are taxed as ordinary income. Withdrawals before age 59½ may also be subject to a 10% penalty.1

Roth IRA

Qualified distributions are tax free. Withdrawals from accounts held less than five years or before age 59½ may be subject to taxes and a 10% penalty.

Tax Implications

The good news is that converting a traditional IRA to a Roth IRA will not trigger the 10% penalty that early withdrawals from an IRA usually do. But converting will trigger income taxes on investment earnings and contributions that qualified for a tax deduction. If your traditional IRA contributions did not qualify for a tax deduction because your income was not within the parameters established by the IRS, investment earnings will be taxed but the amount of your contributions will not.

When a Conversion May Be Beneficial

Conversion may be advantageous if you are in one of the following situations:

  • You do not plan to access your IRA assets for a long time, and your account will have time to potentially grow and compound before you begin withdrawals.
  • You are not likely to need the Roth IRA assets for living expenses during retirement. Because you wouldn’t have to take RMDs from your Roth IRA, you could leave these assets intact and potentially bequeath a larger sum to heirs.

When a Conversion May Not Be Beneficial

A Roth IRA conversion may not be in your best interest if the following circumstances apply:

  • You anticipate being in a lower tax bracket during retirement. Sticking with a traditional IRA could be the best option because your RMDs would be taxed at a correspondingly lower rate.
  • You plan to retire in the near future. Should you convert, your Roth IRA may not achieve adequate short-term growth prior to withdrawals to compensate for the tax payment.
  • You plan to access the IRA for living expenses, and a bequest to heirs is not an issue.

Converting assets within a traditional IRA to a Roth IRA presents potential benefits, but only if the time horizon, tax issues and estate planning parameters work to your advantage. Review all angles to make sure you make the right choice.


Footnotes and Disclaimers

1IRA account holders (both traditional and Roth) may make penalty-free withdrawals before age 59½ only if they meet specific criteria established by the IRS such as disability, first-time home purchase and others. Consult www.irs.gov for additional information.

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2019 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. This article was prepared by DST Systems Inc. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Please consult me if you have any questions. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

For Public Use: Tracking # 1-835916 (Exp:4/2020)

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Common Misconceptions About Sustainable Investing

As investors continue to grow more aware of sustainable investing, there are a greater number of discussions happening around the topic. Understandably, investors want to know as much as they can before making any investment decisions, but that can be challenging when truths are hard to discern from common assumptions. As with any topic in the realm of investing, it’s important to dig beneath the surface to separate fact from fiction. If you’re curious about sustainable investing, read on to learn the truths behind some prevailing misconceptions.

Misconception #1: Sustainable Investing Isn’t Real Investing; It’s Just for People who Like to Feel Good About Themselves

Some investors are concerned that sustainable investing isn’t quite the same as traditional investing. After all, what could be wrong with the traditional system? How could viewing investments sustainably really make a difference? Even though the idea of sustainable investing might bring images of popular green brands or alternative lifestyles to mind, sustainably-minded investing doesn’t have to be in opposition to other investment methods. Instead, what sustainable investing offers is a values-based way for investors to evaluate their portfolios and make shifts that align with their financial aspirations, as well as their personal code of ethics. Depending on the investor’s goals and resources, sustainable investments might fit well into portfolios where other companies would not. And just because an investor chooses to consider sustainable investments for a portion of their portfolio, doesn’t mean that they have to rework everything. Every investor has different needs and should work to find a unique balance of that works for them.

Misconception #2: I Need to Choose Between Sustainability and Returns

Another common misconception about sustainable investing is that investors need to sacrifice returns in order to invest in brands that are truly sustainable. As it turns out, it’s possible for a company to be both sustainable and deliver potential similar returns over time. A financial advisor can help you analyze your investment options for sustainability and other metrics important to portfolio design. This is why a close relationship with your advisor and transparency about your values and aspirations is so important in your investment conversations.

Misconception #3: Sustainable Investing is Just a Fad

There is a certain assumption that the conversation surrounding sustainable investing is just a fad. After all, sustainability in everyday life, from communities banning plastic straws to discussions over global conservation, is a trendy topic. When it comes to sustainability in business, there is reason to believe that the practice of sustainable investing is here to stay. A big part of this is that sustainable investing isn’t actually a new concept; it’s just receiving a little more attention as sustainable practices are gaining more popularity in the public eye and businesses are dedicating more resources to sustainability.

Misconception #4: Sustainable Investing Holds Businesses to Certain Moral Standards

It used to be that ethically-minded investing naturally excluded certain “sin” industries, like tobacco and alcohol. But today’s sustainable investing is less about making a moral statement by withholding investments from “bad” companies and more about what a company is doing to make the world a better place. Companies don’t have to adhere to a certain set of morals to be considered sustainable. And investors can choose brands that align with their values, even if the companies themselves might get an eye roll from an older family member.

If you’d like to learn more about how sustainability investing might work for your portfolio please call or email us today.

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Ask Aaron: Are Annuities Bad?

When it comes to researching your investment options, you’ll find a plethora of choices and lots of chatter about what the “best” investment options are. Among this chatter, you’ll no doubt hear the amazing benefits of annuities as investments. You may be thinking: “are annuities a good investment for me?” On the other side of the spectrum, you might have friends or family members who have had poor experiences with investments in annuities and are quick to tell anyone who will listen. Their stories aren’t unique, as sadly there are many investors who have been hurt by overzealous salespeople, disadvantageous contract terms or a lack of understanding of what is one of the most complex investment products available. So which is it? Are annuities bad? Or are they all they’re cracked up to be? Let’s take a deeper look…

What is an Annuity?

First things first, let’s look at what an annuity is. An annuity is an agreement between an insurance company and an investor that includes a stream of regular payments. However, all annuities are not created equal, and it’s imperative to make investment decisions with your eyes wide open before you ever sign on the dotted line.

Who Offers Annuities?

Annuities are investment contracts offered by insurance companies. Insurance companies are able to offer certain guarantees that other financial institutions might not be able to offer such as death benefits, income benefits, or crediting benefits, also called riders. On the outside, this seems like an appealing proposition. But if you come across an agent who seems to pressure clients toward one type of product or company, you might want to steer clear. Someone with a certain product to sell may not have much more in mind than selling as many of those products as possible in order to earn a commission, even though those products may not truly be best for their clients.

Perks of Annuities as an Investment

There are certainly perks to annuities as investments. After all, they're still a popular investment vehicle for long-term investing. The biggest perks to investing in annuities are the accompanying tax deferral and other possible guarantees. Many annuities are paid out in consistent, recurring amounts, which is very appealing to individuals looking to set up a consistent stream of income or obtain some type of certainty.

Downsides of Annuities as an Investment

On the flip side, annuities are often not the best investment choice. While they may come with a guaranteed return and other appealing incentives, there are almost always strings attached. Unseen internal costs or penalties and long surrender schedules can impact your bottom line significantly. Depending upon the specifics of an annuity contract, the payout might not end up as all it’s cracked up to be. And if you’re already committed to an annuity, removing your funds could prove challenging and expensive.

Some Important Things to Remember about Annuities

The most important thing to remember when it comes to annuities is that there is no single financial product that’s best for every investor. For some investors, certain annuities might be an ideal choice. For other investors, those same annuities might be a costly mistake. And some annuities might be terrible investments, period - even for the most likely candidate. If it sounds too good to be true, it probably is. Your individual financial situation is an essential driver behind which investments are the best for your portfolio. Instead of a sales pitch, you deserve a personalized recommendation based on an objective review of your specific situation.

At Puckett & Sturgill Financial Group, we take the time to get to know you personally before ever making recommendations for specific financial products. Are you curious about whether annuities are right for you? Reach out and schedule a consultation today!

[contact-form-7 id="386" title="Schedule a Free Consultation"] Disclaimer: Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 1⁄2 are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value. Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company.
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What Issues are Important to Consider if My Spouse Passes Away

Dealing with death is never easy and always comes too soon for those we love. Putting your estate in order can allow your loved ones to transfer your assets in an orderly, timely, and tax-efficient manner in order to minimize their burden after you pass and allow you disburse your assets as you intend. Here are some other factors to consider if your spouse passes away.

Are Your Cash Flow Needs the Same?

After a loss, your lifestyle needs, including income and spending, will probably change. It’s possible that your sources of income may change and important to consider how these factors might impact your budget and other aspects of your financial situation. You may need to look into ways to provide a continued cash flow to sustain your lifestyle, as well as issues pertaining to handling your spouse’s IRA, pension, and other benefits. Your income, personal budget, investments, and other financial decisions may all be impacted in the aftermath of a loss.

Was Your Spouse Receiving Social Security Benefits or a Pension?

If your spouse was receiving Social Security benefits or a pension from a previous employer, you may be eligible to collect survivor benefits, have payments that will stop, or payments that could be reduced. Depending on your spouse’s employer and career history, you may be eligible for certain benefits on their behalf. And if your spouse was a veteran, you may be eligible to receive death and burial benefits, as well as other survivor benefits.

Are You Aware of All of Your Spouse’s Property and Assets?

Your spouse’s employer may offer a life insurance policy that you can collect after your spouse’s passing. You may also be eligible to collect credit card points, airline miles, unclaimed property, safe boxes and other assets your spouse had accumulated throughout their life.

How is Your Tax Situation Impacted?

Taxation on your assets may look a little different after your spouse passes away. You home is one area where you need to research your tax benefit through selling (you can qualify for the $500,000 housing exclusion if you sell within two years of your spouse’s death). For property owned jointly with your spouse, expect to receive a step-up in basis adjustment for each joint property. Additionally, if you filed “married filing jointly”, you may continue to do so for the year your spouse passed away.

Are Your Risk Tolerance and/or Investment Objectives Different?

As a newly single investor, your investment needs may be different than they were when you and your spouse invested jointly. Perhaps your retirement figures require adjustment or your risk tolerance has changed. Regardless of your specific situation, it’s important to look for ways in which your future financial plans may be impacted by the loss and to strategize a plan for moving forward.

Do Other Special Situations Apply?

Sometimes, there are unique situations that further impact your estate planning needs. If your spouse was a business owner, you will need to make accommodation for their business assets and close or transfer accounts to the proper parties. You will also want to take a second look at assets and make proper accommodations for out-of-state properties and other accounts with unique needs. Lastly, you may wish to reduce the risk of identity theft by closing your spouse’s online accounts, canceling their driver’s license, and notifying official parties of their passing.

We’re Here for You

There is never a convenient time to deal with loss, but you don’t need to navigate these unknown waters alone. Contact Puckett & Sturgill Financial Group today to learn more about our estate planning services and how we can lend a helping hand during challenging times. [contact-form-7 id="3520" title="Schedule a Free Consultation w Jacob Sturgill"] Important Disclosures This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
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Should I Rollover a Dormant 401(k)

When you’re looking through your investments, you may come across accounts that you don’t quite know what to do with anymore. Sometimes, these are older investments from past employer plans or ones that simply got lost in the shuffle as you reprioritized your savings plan at one point or another. If you have a dormant account from a previous employer, you may be wondering what you should do with it.

First, Understand Your Options

A plan participant leaving an employer typically has four options (and may engage in a combination of these options), each choice offering advantages and disadvantages.
  1. Leave the money in his/her former employer’s plan, if permitted;
  2. Roll over the assets to his/her new employer’s plan, if one is available and rollovers are permitted;
  3. Roll over to an IRA;
  4. Cash out the account value.
Here are some things to consider as you work through your decision process.

Are You Getting What You Need from Your Plan?

The first thing you should determine is whether you’re getting what you need out of your 401(k). If the plan is well managed and meets your needs, then keep it. If the plan isn’t well-managed or meeting your needs, you may want to consider rolling your assets over into an active 401(k) or IRA.

Do You Want the Option to Contribute to the Plan?

If you want to make future contributions, you’ll want to roll over the assets to a new 401(k) or IRA, since you can’t contribute to a dormant account. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

Do You Have a Loan Against Your 401(k)?

You may want to leave your assets alone if you have a loan against your 401(k). Should you withdraw your assets, your loan will be paid off immediately but you may be stuck with taxes and an added 10% penalty.

Does Your 401(k) Hold Company Stock?

If your 401(k) is has a company stock component, you may be better off to take advantage of the Net Unrealized Benefit and roll the stock into a taxable brokerage account to avoid tax penalties.

Now, Consider Your Age:

Your age may impact your withdrawal options, due to certain penalties involved with removing 401(k) funds prematurely. However, even if you fall along the younger end of the spectrum, you still have options for releasing your funds from a dormant 401(k), should you choose this route.

Are You Under 59.5 and Want to Take Advantage of Your 401(k) Funds?

If you choose this option, you’ll incur a 10% penalty on withdrawal. Instead of paying this fee, consider whether one of the following situations might suit you better:
  • Take a Loan - While you can’t take a loan from a dormant 401(k), you can convert your funds to an active 401(k) and take a loan from that account.
  • Hardship Withdrawal - This is another option that’s available through an active 401(k), rather than a dormant one. Depending on your circumstances and what you require the funds for, you may qualify for a hardship withdrawal from your funds if you roll them over to an active 401(k).
  • Rollover to an IRA - And of course, you can roll your 401(k) funds into an IRA and take withdrawals from that account when you need them. Your income will be taxable as regular income, but you may still incur a 10% penalty.

Are You Over 59.5 and Want to Take Advantage of Your 401(k) Funds?

If you are over 59.5, you can withdraw funds from your dormant 401(k) and they’ll be taxed as normal income. You won’t need to worry about incurring the 10% penalty.

Did You Leave Your Employer at Age 55?

If you left the employer through whom you acquired the now-dormant 401(k) at age 55, you may want to consider leaving the account alone for the time being, as you may qualify for a “separation from service distribution” payout penalty-free.

Some Final Thoughts

As you can see, there are plenty of variables that come into play when considering what to do with a dormant 401(k). If you have questions about your retirement accounts or are curious about your retirement investment options email or call Jacob Sturgill. [contact-form-7 id="3520" title="Schedule a Free Consultation w Jacob Sturgill"]
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Risky Business: Understanding Your Risk Tolerance and Why it Matters

An important aspect of planning your investment portfolio is balancing your risk and payout potential to help you work toward your ideal financial future. After all, you aren’t going to grow your wealth if you keep it hidden beneath your mattress in case of a rainy day, right? However, you don’t have to swing to the other extreme and rely exclusively on high-risk investments either. Finding a happy medium will make you more comfortable with your portfolio and should help you feel in control of your future financial prospects. The first step to achieving this balance is finding your personal risk tolerance level. So, what is risk? According to the Financial Industry Regulatory Authority (FINRA) “Risk is any uncertainty with respect to your investments that has the potential to negatively affect your financial welfare”. The uncertainty associated with future returns and the volatility of securities prices can cause investors to make emotionally-charged decisions and either sell too early or invest too conservatively (or too aggressively). Managing risk helps you stick to your investment plan and is key to good long-term investment results.

What is Risk Tolerance?

Investopedia defines risk tolerance as “the degree of variability in investment returns that an investor is willing to withstand”. Human beings are all risk tolerant to a certain degree, but everyone’s own level of risk tolerance varies. There are multiple factors that contribute to your personal level of risk tolerance, including:
  • What is time frame for achieving your investment goals?
  • How much have you already saved? Are you currently saving?
  • How much will you need to spend? How long do you need your funds to last?
  • Think about past experiences. (Here’s an easy test: If you find yourself constantly afraid of the next market crash, it may be the case that your balance of risky and less risky assets is not appropriate for you.)
In general, we tend to shy away from risk. In fact, we’re likely to be more than twice as concerned about avoiding loss than we are about achieving potential gains. This is known as loss aversion in behavioral finance. Investing in the equity and bond markets is inherently risky. As an investor, you shouldn’t take more risk than you need to, are able to, or are comfortable with. Successful investing often means sticking with an investment plan that experiences both good times and bad times.

Balance Your Portfolio

Once you’re aware of your personal comfort zone and ideal level of risk tolerance, you are better prepared to build your portfolio. Sometimes, investors find that their portfolios are full of investments that are skewed toward more or less risk than they’re personally comfortable carrying. If you suspect that your portfolio is imbalanced, talk to your advisor about how you can make adjustments to align your portfolio with your risk tolerance level. Here are some of the ways you can stay on top of the level of risk your portfolio contains:
  • Analyze investment risk and return relationships
  • Diversify your investments
  • Stay on top of economic trends and developments that can impact investments

Be Realistic

As you consider your risk tolerance, you do need to continue to approach your financial plan with a measure of realism. There is some unavoidable amount of risk that’s necessary to growing your investments to achieve your future financial goals. If you have a particularly hard time coping with the requisite risk associated with building and managing your portfolio, talk to your financial advisor about how to find confidence and ways that you can minimize risks along the way. A trustworthy advisor should be able to guide you to the right investments for your lifestyle and can give you pointers on avoiding emotional investment decisions that could sidetrack your progress.

To learn more about how personalized financial advice can help you find the right balance in your investment portfolio email or call Jacob Sturgill today.

[contact-form-7 id="3520" title="Schedule a Free Consultation w Jacob Sturgill"] Important Disclosures: There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. References: Investopedia on risk tolerance Finra.org on reality investment risk
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