An End-of-Year Financial Checklist

Written by Rob Copeland | 14 December 2015

The end of the year is just a couple of weeks away, but there is still time to handle some important financial tasks. Taking care of the items below will help you to have a more confident and financially successful 2016.

• Rebalance your portfolio. Your investment strategy should start with an asset allocation that's based on your goals, risk tolerance and time horizon. At the end of the year, you'll probably find that market fluctuations have upset the weighting of each asset class in your portfolio. Rebalancing, like tuning up your car, re-sets your investments to their intended state. If your goals or tolerance for risk have changed, end-of-year rebalancing is a good time to work with your advisor on adjusting your asset allocation.
• Tax-Loss Harvesting. Rebalancing is a good time to identify securities you can sell at a loss in order to offset a capital gains tax liability. A simple example: Selling a stock position that has lost $1,000 allows you to erase the capital-gains tax liability on an investment that you sell for a $1,000 profit. You can use up to $3,000 a year in losses to cancel out gains on investment or ordinary income and roll over unused losses to future years.

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How Much Should You Save For Retirement?

Written by Rob Copeland | 12 November 2015

One of the most common questions I hear from my clients is: "How much do I need to retire?"

The earlier a person asks that question, the better—because if retirement is relatively far away, you have more runway to save for it. But distribution planning is just as important for older clients too, because they'll want to make sure they don't outlive the savings they've got.

I always explain to clients that setting yourself up for a secure retirement isn't really complicated. It boils down to math. I use a straightforward process to determine what size nest egg a person or couple need, and what they have to do to get there. Here's my process:

1. Determine retirement income needs. To figure out how much monthly income a person or couple will need in retirement, I start with their current living expenses, then deduct any expenses that they'll no longer be paying once they retire. Often, couples plan to pay off their mortgage before retirement, which will ease the financial pressure during that period.
2. Determine a retirement date. Knowing when a person will retire tells me how much time a client has to save the amount they need.
3. Calculate inflation. At its historical rate of 3.5%, inflation doubles roughly every 20 years. So if you'll need $60,000 a year in retirement income, but you don't plan to retire for 20 years, you will actually need $120,000 a year in those future dollars.
4. Deduct Social Security. The Social Security system may look wobbly, but especially if you're 50 or older right now, it's more likely than not going to be there for you in some form. Let's suppose that your Social Security benefit, along with a small pension, will provide you and your spouse with $40,000 a year. That brings us to $80,000 of income you still need to find.

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Interest Rates and Your Mortgage

Written by Rob Copeland | 14 October 2015

The Federal Reserve is poised to start raising interest rates, and many people are considering buying a home or refinancing their current mortgage before rates get much higher.

Should you make a move based on the potential of rising rates? The answer will vary based on your individual situation. The one rule of thumb that does apply: Before taking any action, crunch the numbers to confirm that you'll come out ahead.

Let's look at some background. The Fed has held short-term interest rates near zero for years to help the country recover from the 2008 recession. With the economy on stronger footing now, it's looking for an opportunity to begin raising them closer to their normal range.

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To Navigate Volatile Markets, Focus On the Long Term

Written by Rob Copeland | 10 September 2015

If you're boating in rough seas, focusing on the horizon can help to calm that queasy feeling in your stomach.

Investing is similar. As markets rise and fall sharply—as they've done recently—it's best to ignore the day-to-day drama and take a long-term perspective.

As Warren Buffet put it in a recent interview: "Sometimes [markets] get very volatile like this and other times they put you to sleep, but the important thing is where they're going to be in 5 to 10 years, and I'm confident they'll be significantly higher in 10 years."

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