Move With Confidence Towards Your Goals

Erickson Financial Solutions Blog

This is some blog description about this site

What is the Best Strategy for Investing Today

Why is Asset Allocation Important?

Your Best Investment Strategy Today

Investing correctly is deceptively difficult when you try to buy at the right time. An important concept is that the price of a stock is only as high as enough people want to pay for it relative to those that want to sell it. If no one will pay for a certain price, then price drops until enough people buy it to balance those that want to sell. Think of it as a two-arm scale with price on one side and pushing down on the other side is the weight of money people are putting into the price. When the weight is heavy, the other side (price) goes up. When weight is removed, the price drops.

One element of timing is to get in at the bottom of the market, then buy and hold. Are we near the bottom. Hardly, we have NEVER been higher. So we will write that down as a negative for stock market purchasing right now.

Somewhat analogous to entering at the bottom is entering early in the market up swing. Are we near the start of an upswing of a bull market. Hardly, we have recently eclipsed the longest bull market in USA history. So, we will write that down as a negative for stock market buying right now.

Another time to switch into equities is when few others are invested in equities. After all, the “early bird gets the worm” and we could get in front of the wave. Well, since 1980, the proportion of investor’s allocation has NEVER been higher. Many are “all-in” now so they will not likely contribute much more.  So, we will write that down as a negative for stock market investing right now.

Another time to switch into equities is when others have plenty of cash to move into equities. After all, someone has to have money to buy the equities and if they lack disposable income or a stash of cash to invest, then how are the prices going to be bid up? Well, since 1980, the proportion of investor’s allocation I cash has NEVER been low. So, we will write that down as a negative for stock market buying right now.

As you all have done in the past, when we want to buy something, but do not have the money, we buy on credit. So, if investors have low credit balances, they can borrow money from their brokerage firm to buy stocks. Instant, but temporary, cash to invest. If the amount of credit held by investors was low, that could indicate investors could borrow to take advantage of the stock market’s rising prices. Well, in the last hundred years, investors have rarely borrowed as much as they are borrowing now. A few comparable years like 1929, 2000, and 2007 were years when Americans were comparably in debt to buy stocks. So, from where is the money coming to buy more stocks when Americans are invested heavily and have borrowed heavily? 

What would happened if prices did not go up? Well the investor would need to pay the borrowed money back. Where would the investor get the money? They would sell their stocks. Hmm, do we want to be heavily in the stock market when so much money is borrowed to hold the prices up? I do not think so.

So, what is the best investment strategy today. We do not know the future and the market can go up further. One good strategy is to keep fully diversified, rebalance occasionally, and skew your holdings to preserve what you have rather than trying for a big win. In or near the retirement years, it is more about the return of your money and than the return on your money. Risk and return are both important when investing at any time.

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products, Steve Bloomberg articles, and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

 

 

 

Continue reading
0 Comments

A problem when withdrawing money from a 529 Plan when a scholarship is involved

Withdrawals from 529 plan.

Your first child goes to college. You have judiciously saved money since your child was a toddler in a 529 Plan gaining a State income tax deduction as you put money into the account and get untaxed growth along the way. Good job.

Now it is time to take the money “tax-free” for tuition, room and board, books, computer and a few other ancillary expenses. Let’s say your child picked a State school that meets their needs and your budget. Further, your child earned scholarships. Great! You raised a talented child.

Now what is the fine print say when you have scholarship money for an expense for which you saved in the 529 plan? Unfortunately, to the amount of the scholarship, the money drawn is free of the 10% for using money for a purpose other than qualified expense, but you will need to pay income tax on that withdrawal. Not 100% of the amount drawn is subject to tax as a portion is considered a return on you initial investment. The tax liability can be calculated by your accountant.

Great care must be taken when drawing money from a 529 Plan when you child has earned a scholarship for the same time period to avoid income taxes or penalties.

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

Continue reading
0 Comments

Should I pay down my debt or invest?

Should I pay down my debt or invest?

See 1-minute video: Should I pay down my debt or invest?

Debt itself is not bad. We often use debt to buy a car, buy a home, or pay for college. Debt is a problem when you have too much debt especially high interest rate debt found with credit cards. So, when looking at your debt, do you have a lot of debt relative to your income? Is the interest rate on the debt relatively high? If you answer yes to either of these, then reducing your debt may be the better path.

If your debt is under control, and you have no credit card or high interest rate debt, then the answer may be to invest the money. But before you invest for the long-term, make sure you have an emergency fund to cover likely unexpected costs. It can be expensive to pay down debt or invest and then have to change course because you lacked enough in an emergency fund.

There may tax benefits depending upon your situation. You might be giving up a tax deduction if you pay down a debt. Similarly, you might not get a deduction if you pay the debt and do not invest in a retirement plan that provides a tax deduction.

Paying down debt and investing both have risks and rewards and it is best to look at the big picture before acting.

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

 

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

 

Continue reading
0 Comments

What you might lose in a lawsuit.

What you might lose in a lawsuit.

See also 1-minute video: What you might lose in a lawsuit.

For good or bad, our society has become more litigious. One day you may be on the receiving end of a lawsuit. What is at stake? Nearly every financial asset if the damages sought are high enough.

You can not prevent a lawsuit, but you can take legal measures to reduce the potential loss. The time to set these measures is before the incident causing the lawsuit ever occurs.

One measure is insurance. Insurance transfers the risk to another up to the limit or the coverage and the extent of the coverage. Often a liability  policy can further insulate you than just the ordinary home owner’s or automobile coverage might provide.

Another measure available to married couples is to title asset as tenancy by the entireties. This is ordinarily limited to one’s home, but in some states it may be recognized for other assets.

Another measure is to place the assets in a trust for which you are not the beneficiary. You might have an extra amount of assets you would like passed to an offspring or sibling, but do not want it exposed to lawsuit award. Transferring the asset to a properly written trust may serve that purpose. It is a technical area and you should seek legal counsel to use this tool.

These are but a few strategies available. Which is best for you takes a review of you risks and assets and deciding whether it is cost effective to use any of these.

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

 

 

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

Continue reading
0 Comments

Social Security Retirement Benefit Strategies

Social Security Retirement Benefit Strategies

(Watch 1-minute video: How To Strategize for Your Social Security Benefits?)

Planning on when to start drawing social security retirement benefits is a complicated issue. There are too many possibilities to cover them all in a short article, but we can touch some major issues.

One issue is when to start taking benefits. You can take them as early as age 62 based upon your earnings during your work career. But taking them can have several drawbacks. First, your benefits will be permanently reduced by as much as 25% relative to waiting to your normal retirement age. If you live a long time, this could mean a loss of thousands of dollars. Also, if you draw the benefit and still keep your job, your benefits are often reduced until you stop working.

One benefit of waiting until your full retirement age, which is now about age 66 for those about to retire, is that benefits are not reduced if still working. Also, if you delay further, the benefit amount rises each month you wait until age 70. This means if you are long-lived, you will get thousands more that if you start to draw money at your normal retirement age.

Underlying the above discussion is your anticipated life expectancy. You can go on line and gather information for Americans, but your case is individual. You may have a family history of those living into their nineties or only into their mid 70s. Whatever your estimate can color your decision on whether to delay or take the retirement benefit early.

Another issue is whether you can afford to quit working. Social Security retirement benefits were never intended to, and rarely do, provide for the retirement you seek.

The issues are compound when you are married as each spouse, depending on their work history, may be entitled to benefits. Without doing considerable analysis, which to take first and when is impossible to determine. No rule fits everyone. But commonly, if you can afford it, waiting is better. But again individual cases can be different.  

Another factor is taxation of the benefits. Depending upon your family income level, a portion of the benefits can be taxed. Obviously if the benefit is taxed, you will have less spendable money for your family.

For a married couple, the decision as to when to draw retirement benefits may affect the spouses benefit in event of death of the recipient of the benefits. While we can not control the timing of a spouse’s death, we do need to consider the possibility and ramifications.

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

 

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

 

Continue reading
0 Comments