National Financial Planning Month – 3 Things Smart Savers Do

Fall is a dramatic change of seasons. It feels like time slows as we transition from the hustle of summer activities, put away the toys, harvest the garden and prepare for the coming winter. With transitions and the traditional back to school season, it’s no surprise that October is also National Financial Planning month – time to refresh our personal finances. I’ll share key areas of financial planning to review and three things smart savers do.

A good financial plan is holistic. Your goals often are being independent and having choices (financial freedom), not being a burden on anyone (the long-term), planning for life’s surprises both good and bad (uncertainty), and taking care of your loved ones (family).

Components of financially planning include:

  • Cash flow
  • Saving and investing
  • Tax reduction
  • Retirement planning
  • Insurance and risk management
  • Estate planning
  • Employee benefits
  • Business considerations

They’re inter-related. One area that becomes healthy (or stagnant) tends to cure (or infect) other areas. For example, focusing on your budget to eliminate debt generates surplus to build cash reserves (rainy day funds), to save and invest, and to build retirement. You may be very competent in some areas and DIY, and for others it may be better to hire an expert.

A key consideration when you delegate – in addition to expertise, experience and reasonable cost factors – is the personal relationship. You’re going to be sharing your most personal hopes and fears. You want someone who will ask the right questions, help you manage life’s transitions – and more importantly, anticipate them, and share relevant and valued resources.

Here are three things smart savers do.

Have a written plan

Denis Waitley said “Expect the best, plan for the worst and prepare to be surprised.” Writing down your goals increases the probability of success. And having a written financial plan provides a basis for accountability, milestones to be celebrated, and serves as a road map to keep you on track.

Develop great habits

Discipline, commitment and consistency go a long way whether it be relationships, work or personal finance. One of the biggest keys is managing cash flow and save. A favorite client says “We know how to save… not a penny, but a hundred.” History shows us that the fanciest investment strategy does not compensate for a lack of savings. And the best habits are often the ones we develop the earliest.

Have faith in the future

Life’s full of surprises both good and bad. Sometimes when times are toughest is when it’s best to put your head down and grind it out. Control what you can and forget about the rest. Thomas Malthus was an 18th century economist best known for his theory on overpopulation. He believed that mankind would perish because population growth would outpace food production. He and his followers, known as Malthusians or pessimists, exponentially grow the problems and straight line the solution. They fail to consider mankind’s ingenuity and creativity – in this case advancements in food productivity. Often, we’re at our best when times are darkest.

Your financial success depends on you taking action. Seek sage advice at any age and secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Finance Tips for Late-Blooming Retirement Savers

Is it too late to start saving for retirement if you’re in your 50s? There are generally five phases of retirement planning – accumulation, pre-retirement, then early, mid and late retirement. Absolutely, it’s easier when you start early. In the accumulation phase you adopt good savings habits that have a direct impact on your financial future. However, the answer to the proverbial question, “When’s the best time to plant an acorn?” is anytime. The point is to get started.

Life’s all about going through transitions. It’s not always smooth sailing, yet hopefully you keep moving ahead. There are many reasons why individuals in the pre-retirement phase (the 15-year period before retirement) are saving late-bloomers, including:

  • You have competing needs for retirement savings including raising a family, rising home prices, debt reduction, building cash reserves and college funding.
  • Difficult financial and personal times such as the COVID-19 pandemic, being injured with job loss or having reduced hours, etc.
  • Procrastination – You want to save but you put it off and suddenly, you’re in your 50s.
  • You invest in a career or business

 Six Tips to Get on Track

  • Set your goal – Define what you want your life to look like and know the “whys” – Why they are important to you? When the “whys” get big enough, then the rest tends to magically fall into place. These are the building blocks of your plan.
  • Reverse engineer the capital required – Your goal may be more achievable than you thought. What is it going to take to maintain your lifestyle? Subtract your cash flow sources such as pensions, Social Security and rental income, and the balance is what you need to fund from capital. Say you need an additional $2,000 or $15,000 a month. Using a 4% withdrawal rate, you’ll need $600,000 or $4.5 million of investment capital. Subtract expected business sales proceeds, inheritance, etc., and the balance is what you need to accumulate in your retirement savings. Finally, calculate the amount of additional savings to fill the gap between what you need in the future and what you’ve saved so far.
  • Make catch-up contributions to your 401(k) and Individual Retirement Account (IRA) plans – Employee contribution limits for 2021 are $19,500 and $6,000 for 401(k) and IRA, respectively. Those individuals who are 50 years or older can contribute an additional $6,500 and $1,000 in catch-up contributions. Make sure to confirm your eligibility and limits with your plan administrator and Certified Public Accountant (CPA).
  • Consider working longer – More cash can mean greater security. There are many people who continue to work for reasons other than a paycheck e.g. benefits, sense of purpose and staying engaged.
  • Pay off debt – People may find it advantageous to reduce their expenses.
  • Be nice to your elders – Baby boomers are expected to pass up to $68 trillion to their heirs. However, their financial advisors may be planning alternatives for your future inheritance including the costs of aging and your parents not being a burden on anyone as well as philanthropy.

Often, Americans get serious about retirement planning in their 50s. The kids are off the payroll, they can focus on their future, and they want to minimize making mistakes because they don’t have the time to earn it again. And remember what Albert Einstein said, “Nothing happens until something moves.” Seek sage advice at any age and secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Retool and Retrain: New Education Planning Considerations

The fall tradition of “Back to school” has a new look as we adapt for Covid. However, there are more adults going back to school at 30, 40, 50 and beyond. The reasons are numerous and completing their degree or certificate programs come with unique challenges. Some of the issues have been long-term and others are newer with the disruptions of Covid. Following are some considerations for late stage college planning.

The Numbers

About half of undergraduates are 25 years or older per the National Center of Education Statistics. EAB, another education research firm, estimates the number of twenty-five to thirty-four-year-olds will increase by twenty-one percentage points by 2022. These figures are before the impacts of Covid.

Why Go Back to School

  • Career change: Workers facing automation or obsolete industries
  • Increase earning potential
  • Expand career options
  • Stay competitive or marketable
  • Degree completers: Interruptions from family and military service
  • Keep learning

The Challenges Can Be Burdensome

  • Focus: Get the best bang for your buck – What courses, certificates or degrees and where to get them?
  • Time is not our friend: You don’t have the benefit of funding a 529 Plan for 15 years for the child.
  • Finances: Some feel they can’t afford more education expenses – e.g. existing unpaid student debt, or in a couple, one works while the other goes to school, and then switch.
  • Childcare: Parents seek affordable on-campus childcare.

Funding Opportunities

  • Loans, grants and scholarships: Free Application for Federal Student Aid (FAFSA) is required for Federal programs. Reduced income (furloughs and layoffs from Covid) may help and request aid offices for a “professional judgement” review to consider your award year (reduced) income. Research programs, check and and use caution with debt, especially with the potential for rising interest rates.
  • Employer tuition assistance: Many employers provide an education benefit. It may be a reimbursement program so budget accordingly, and may require minimum service and GPA standards.
  • Online learning: The rise in distance and hybrid learning provides more flexibility and choices especially for those maintain part-time and full-time jobs.
  • Coronavirus relief: Federal student loan borrowers may get some relief including suspension of loan payments to December 31, 2020, temporary zero percent interest and multiple payment options.

Using Your Retirement Plans

There’s a rising trend of parents sacrificing their retirement for their children’s education. Borrowing from 401k plans can be tempting for later stage students because “I’m paying myself back.” Consider the following before you borrow or withdraw from your 401k:

  • Will I need this money for my retirement? (A most important question).
  • What potential growth of retirement savings is sacrificed?
  • Can I afford to repay the loan over five years?
  • What are the consequences – including income taxes, borrowing restrictions, and more?

People are heading “back to school” for numerous reasons. Yes, there are challenges. Make it worthwhile. Secure your future wisely.

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When to Break Investment Rules – Not Investing Like Your Age

Consider breaking rules when it comes to how you invest your money. Imagine being sixty years old. Conventional thinking is you should be a more conservative investor and take less risk – you’re not forty anymore. Should you? And the opposite applies if you’re younger. This article emphasizes the need for tailored financial planning and investment strategies, and the need to bend some general rules to maintain good financial and mental health.

They say your risk tolerance should decrease over time – be a more aggressive investor when you’re younger and “throttle back” as you age. The Rule of 100 is a guideline on how you allocate between stocks (growth) and bonds (fixed income) over your lifetime. Subtract your age from 100 and the result is the recommended allocation to stocks, and the difference goes to bonds. Hence, a 40 year old would have sixty percent in stocks and forty percent in bonds, and a 60 year old would have the opposite allocation. Generally, it makes sense to take the foot off the gas investment-wise as you age. However, here are four reasons an investor might break the Rule of 100.

Higher returns needed to achieve your goals

Reducing the stock allocation generally lowers the volatility (risk) – and reduces the long-term return.  The expected annual returns for US stocks and investment grade bonds are about seven percent and three percent, respectively, per long-term capital market assumptions from Goldman Sachs and JP Morgan. The difference in expected returns for a 60/40 versus a 40/60 portfolio is a little under one percent. Some investors need the additional return.

Don’t outlive your retirement savings

Length of retirement and the aging process are important variables in financial planning. Investors tend to live longer than they expect and should have a cushion. A recent study by Morningstar called Estimating “The End” of Retirement recommends using life expectancies of age 90 or 95 for an average couple aged 65. Your money may need to last a long time.

Investments don’t neatly fit in the categories

Some stocks act more like income investments (high dividend paying stocks) and some bonds pattern more like stocks (high yield bonds). Real estate can act like both providing rental income and appreciation. Consider an investment’s characteristics and how it behaves, rather than its name, in your allocation strategy.

Are you the average investor?

Follow your financial plan. What if pension and Social Security will significantly cover your retirement lifestyle? You have the luxury to be more growth-oriented. What if you’re younger and inheriting significant wealth? You can be a more conservative investor – like starting a marathon at mile marker 15 or 20 – or take the opportunity to do amazing things. And what’s important about money to you? Some focus on security and not worry about running out of money in retirement. Others want the freedom to do what they want in retirement without having to ask. And others find it important to leave a legacy or pass on what was left to them.

Granted we face uncertainties such as COVID and US elections. Remember to stay focused on your main challenges – to worry less about your finances, not being a burden to anyone, making smart financial decisions, and even making this world a better place. Investing will be a lot easier. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Planning Finances for Retirement and Dementia

Will I be cooperative and turn in my car keys if I’m unable to drive safely when I’m old? Or will I put up a big stink? Retirement planning is often about saving and investing, tax reduction, insurance, and passing wealth at death. But it’s wise to plan for life events including death, divorce, and dementia. Dementia is a deterioration in memory, thinking, behavior, and ability to carry out daily activities. It affects mainly older people. However, it is not a normal part of aging. According to the World Health Organization (WHO), only 5 to 8 percent of the worldwide population aged 60 and over is afflicted. Alzheimer’s disease is the most common form of dementia, representing about two-thirds of the cases.

While there is no cure for dementia, there are numerous treatments being investigated, including early diagnosis and optimizing health and well-being. Brain health has also become a bigger conversation among women. Women tend to live longer than men, comprise about two-thirds of Alzheimer’s cases, and represent more than 60 percent of caregivers.

There are three ways dementia is relevant to personal planning:

Personal: Giving Up My Car Keys (or Checkbook)

Misplacing my car keys or struggling to recall a name – that’s forgetfulness. However, losing longer-term memories, language and knowledge are more serious signs of dementia that should be checked out. And being behind a 3,000-pound vehicle can be dangerous. Similar concerns happen if you have access to the checkbook or family savings with the lure of online shopping, electronic banking, and scammers.

Do you dread the conversation, “Dad, can I have your car keys?” It’s tough – you’re taking away something valuable from someone you love. However, there are ways to more effectively have this conversation. Remember to be patient but firm, demonstrate understanding and empathy, appeal to their desire to act responsibly, get an authority figure (e.g. family physician or driving test), and empower them with alternatives for how they can do things like shop for groceries.

Financial: Health Care Expenses

Most people want to stay at home and not be a burden to anyone. That’s why upfront planning is helpful. Aging is one of the biggest costs that retirees face. Some people age less gracefully than others, and they don’t always have family available to assist. Fidelity Investments estimates the costs of health care for a 65-year-old couple is about $280,000 in retirement. This includes insurance premiums, co-pays, and out-of-pocket costs for Medicare. It excludes the cost of long-term care, dental care, and over-the-counter medicines. Full-time assisted living at a facility costs around $5,000 to $8,000 a month and $250 might cover 10 hours a week of in-home caregiver assistance for the impaired spouse and relief for the other spouse. The key is to plan for these expenses while we are well.

Management/Care giving: Your Loved One’s Protector

You may be the caregiver and think it’s as simple as a periodic check-in. About 60 percent of our population is caring for someone age 50 or older, and about half are assisting a parent or in-law. 6 in 10 caregivers are between ages 35 and 64, and the average age of a 50 plus caregiver is 75. Care giving involves physical and emotional demands that should be balanced with support and “downtime” for your life. They frequently involve healthcare, legal and property management issues. If professionals are doing the washing, dressing and exercising, you still need to be the advocate at the doctor’s office, and to see the medications are taken on time, review and balance the checkbook and stock the fridge. Don’t throw in the towel yet, there are organizations that offer assistance and other resources including and the MIT AgeLab.

Life’s full of blessings and curses. It’s not always easy, yet we find shoulders to lean or stand on. Secure your (and your loved ones’) future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Four Financial Risks During COVID-19 You Can Cover

Life’s often about adapting and adjusting. Living with COVID-19 has and will likely continue to bring its challenges. We just emerged from the deepest and shortest recession in modern history. It appears a second wave is likely, but not another shutdown says Goldman Sachs Group, Inc., a leading multinational investment bank. Mainly because we’re better prepared, the virus is better understood, and shutdowns are harsh and nonlinear. Nevertheless, diversifying your retirement funds is an important way to protect yourself from market volatility. However, there are other risks besides volatility that can knock and keep you off course. Here are four risks to review and cover with your family and trusted advisors:

Household or Business Disruption

The pandemic has impacted us all one way or another. How has the pandemic impacted you? Some common challenges in addition to income interruption include a change in household. Your kids might have moved in to live with you again or you’re faced with distanced learning. If you’ve been working from home, you know that it comes with its own set of challenges. On the business front, it’s meant shutdowns, supply interruption, and social distancing – to name a few. While some household budgets have been helped by lower spending (travel, dining, shows), others are hindered by layoffs, furloughs or additional childcare. It may impact retirement savings and debt reduction plans. Some may be considering accessing funds through retirement plans, Paycheck Protection Program (PPP) loans and other COVID-19 liquidity sources. Other planning opportunities include replenishing cash reserves, updating contingency plans (including personal estate agreements) and fine-tuning insurances needs.


This is called the “Hidden Menace” because it quietly robs you of purchasing power. You’ll need period pay raises in retirement to keep pace with cost of living. A “sure thing” such as a certificate of deposit has risks. Sure, the future payments (interest and principal) are fixed, however, they’re worth less and less over time. A $100 bill today will be worth half its value in 24 years if inflation averages 3 percent annually (Rule of 72). It may make sense to have some money invested for growth, so you beat inflation and income taxes for a different kind of safety – the ability to maintain your lifestyle.


Funding retirement was a lot easier when you got your gold watch at 65 and punched the clock in your mid-70’s. Continued advances in longevity have two impacts. First, we need to accumulate more retirement savings – longer period of living expenses and potentially higher costs of aging. And second, this “Age Wave” generates new products and services and impact health, social, and lifestyle priorities for the future says Ken Dychtwald and Robert Morison in their latest book “What Retirees Want – A Holistic View of Life’s Third Age”.

Finding Yourself Alone

How do you make important financial decisions, and how would that process change if an important person to you were no longer in the picture? Take a couple considering the purchase of a home – maybe they divide the duties and one decides what the home will look like and the other is focused on the finances. What if you find yourself suddenly alone through one of the “Three D’s” – death, divorce or dementia? Would it be wise to have a plan to help you navigate – to keep things from falling through the immediate, flexibility during the intermediate for the haze to clear and time for the next chapter to unfold, and a sounding board for the longer term?

Life isn’t meant to be easy. But there are some tips for success. One is to know what you want out of life and your what your future will look like. Devise a plan to get you there recognizing the actions you take today will shape the future. Surprises in life will happen, some good and others not. And hopefully with a roadmap and a guide, you’ll make adjustments to stay on track or reset the course and get where you want to go. The other is to be awfully lucky. I’d put more money on the first. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Restoring Financial Wellness during COVID-19

It can be difficult to make decisions when the future is uncertain. Shelter-in-place orders and business shutdowns halted economic activity here and overseas. Some Americans are unsure about investing their 401(k)s or have considered tapping their reserves. However, we’re in the process of re-emerging, learning to live with COVID-19 and adapting to a new normal. It’s time to get back on track with your financial plan and I’ll share four areas to consider and discuss with your family and advisors.

Increase Cash Reserves

Hold cash for two reasons: planned expenses and emergencies. The rest is invested for its purpose such as a house down payment, education funding or retirement. Have at least three months’ living expenses parked in an interest-bearing Federal Deposit Insurance Corporation (FDIC) insured account. Consider holding more if you’ve got a seasonal or sales job or retired. Life’s less stressful when you have cash available for the unexpected medical bill or car repair versus charging it.

When Should I Start Investing?

We recently had two historical events – the fastest stock market decline followed by one of the quickest rebounds. Both of these make some investors hesitant to invest. Some investors question an apparent disconnect of a rising stock market compared to a struggling economy and high unemployment. However, they’re comparing a lagging indicator (economy) to a leading indicator (stock market). And others identify other uncertainties including the 2020 U.S. elections, trade wars and more. These are reasons given why some investors are sitting on a bunch of cash. If fear has paralyzed you, consider two things. First, if you wait for all uncertainty to go away, then often so goes the opportunity. Second, use a page from many retirees’ playbook. Retirees gradually sell investments to fund their retirement paychecks – they don’t typically need all their money at once. Consider investing your cash over time such as a third over each of the next three months or a quarter over the next four – and if the market sells off then accelerate the investing. This strategy is called dollar cost averaging.

Reduce the Number of Accounts

Would your life be simpler if you had less accounts to track or debts to repay? Debt reduction is a high priority for most households. But instead of focusing on the total amount of debt, concentrate on eliminating one at a time (smallest balance first). This is called the “debt snowball” strategy. Some couples have an excess number of bank accounts. There may be my, your and our accounts with multiple checking and savings accounts. What can be consolidated? Look at your budget – can line items for electricity, water and phone be consolidated to “utilities” or groceries and dining out be labeled as “food?” Sometimes, less is more.

Roll with the Punches

Who could have predicted this pandemic? Household earnings may have declined, the budget shifted and the kids moved back home. Perhaps the debt reduction and retirement funding goals are temporarily delayed. You make adjustments and move on.

What differentiates the financially successful and those that aren’t? Did some plan to fail or fail to plan? Warren Buffett once said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” Don’t put things off too long. Secure your future wisely.

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Sudden Wealth Syndrome – Can It Be Cured?

If having more money solved financial woes, then younger generations should be secure, right? In the next 30 years, $36 trillion is expected to pass from one generation to the next. However, squandered money has become so common that a term has been coined – sudden wealth syndrome (SWS) by psychologist Stephen Goldbart. The symptoms include persistent thoughts about money, anxiety and depression resulting from stock market volatility, feelings of extreme guilt and poor decision making when you feel undeserving of wealth and identity confusion.

The challenges are three-fold. One is that money can be emotional, and emotions can drive decision making. Second is financial literacy and complexity, and third is communication. Parents wrestle with telling their children about family wealth – the desire to prepare them versus concern of ruining them. Warren Buffett addresses balance when he says his children will inherit enough so they can do anything, but not so much they can do nothing. Yet a Charles Schwab survey says 69 percent of parents feel more prepared to talk to teens about sex than investing.

Will you break the money silence? Consider using your financial advisor to help you initiate and nurture the conversation. We’ll share some strategies to help save you money when inheriting retirement accounts.

Covid-19 and Retirement and Finances Survey

A TD Ameritrade, a financial services company, survey shows some positive trends as Americans adjust their finances and spending habits amid the pandemic.

  • 70 percent of Americans regularly contributed to their savings and had an emergency fund.
  • Boomers lead the emergency fund accumulation with 49 percent having more than six months socked away, Millennials and Gen X tied for four to six months’ worth at 16 percent, but 45 percent of all Americans had three months or less.
  • 40 percent said their household budget was negatively impacted, while 20 percent of Millennials report positive impact (found a new side-hustle and spent less money – major purchases and trips, childcare, meals at home, shopping, hair and nails, and commuting).
  • New obstacles for parents – Homeschooling children and working are too much to manage (57 percent), some saved money for childcare ($366 average) and others spent more on educational resources ($147) and entertainment ($104).
  • Life got simpler with low or no budget activities – walks, games and puzzles, working out, learning new skills, and virtual events (happy hour and yoga).
  • More financial levers being pulled – Track spending (66 percent), increase retirement savings (47 percent), open new accounts (29 percent), delay retirement (39 percent), and 23 percent of Boomers are considering early retirement.

Strategies for Inherited Retirement Accounts

Are you inheriting an individual retirement account (IRA) or 401(k) from your family? Certain non-spouse beneficiaries are now subject to a “10-year rule.” The main impact is potentially less after-tax proceeds from a shorter period (not “stretching” withdrawals over your lifetime). This applies to adult children, nieces and nephews, grandkids, etc. Old stretch rules continue to apply to spouses, minor children, disabled, and others. Refer to your tax expert for the specifics.

Here are some strategies to consider if you’re the beneficiary:

  • Defer the withdraw as long as possible and take a single distribution. Disadvantage – could be more expensive and push you into higher tax brackets. Advantage – possibly for smaller pre-tax balances, Roths or you’re the highest tax brackets.
  • Spread the distributions (and tax bill) over 10 or 11 years. How 11 years? You’re required to take full distribution by the tenth year following the account holder’s death. If you hustle and establish the inherited IRA, then the year of death might be Year 0 for distribution.
  • “Chunk” the distributions. Strategically time and amount of distributions to lower tax years – job change, new business start-up, retirement, major tax deduction, etc. – student aid, or other planning opportunities.

Life can be complicated. However, communication, knowing your options and planning are key. Talk to your advisors as good decisions make for a good life. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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How You Can Adjust Your Thrift Savings Plan During COVID-19

COVID-19’s disruptions offer both challenges and opportunities – business shifts, where we work, how we spend our time and money, among others. Some of these are temporary but others are longer term. This article’s focus is on the planning opportunities for federal employees and military members who participate in the Thrift Savings Plan (TSP). It also includes key information on other retirement plans such as an individual retirement account (IRA) and a 401(k).

According to, TSP is the largest defined contribution plan in the world with around $621 billion for 5.8 million participants. Retirement benefits from defined contribution plans (including IRAs, 401(k) plans, deferred compensation, etc.) are based on how much you saved, investment returns and your longevity.

TSP Saving and Investing Opportunities 

The contribution limits are similar to 401(k) plans. The 2020 limit is $19,500 plus $6,500 catch-up for individuals 50-years-old and older. Elective deferral limit might not apply to military members on active duty in combat zones. Your savings goal is driven by your retirement goals. The greater the need, then generally the greater the wealth required – the earlier you start saving the better. Also, you may need to save outside of retirement accounts because of plan limits, diversify retirement taxation and flexibility.

Choice in tax treatments are traditional (tax-deferred) or Roth (after-tax contributions). If you expect to be in a lower tax bracket in retirement, then consider traditional tax-deductible contributions. If vice versa, then consider Roth. Remember you’re making bets over long periods of time with the uncertainty of future tax laws and consult with your tax advisor.

There are six funds on the menu: Government securities (G Fund), fixed income (I Fund), common stock (C Fund), small-cap stock (S Fund), international stock (I Fund) and Life Cycle Funds (broadly diversified). Life Cycle Funds are gaining in popularity due to convenience and diversification. Investment allocation should be driven by your financial plan and not the market or your work buddy.

How to Generate Cash in a Down Market

Down markets tend to give retirees grief – the fear of running out of money or selling at a loss. Accumulators should be leaping for joy to buy things on sale; however, they too may hesitate. Here are some strategies to generate cash:

Cash Reserves

Have enough saved equal to three to six months of living expenses, more if your income fluctuates, and a year or two if you’re retired. Some of those “reserves” might be in the form of short-term CDs or bonds.

Rebalance Your Portfolio

Say your portfolio was $500,000, it declined in value, you need $10,000 in cash, and your portfolio allocation was 60 percent stocks, 30 percent bonds and 10 percent cash. Furthermore, assume the stocks fell 20 percent and bonds and cash were unchanged – the portfolio fell 12 percent to $440,000. Reduce the account by the cash needed ($10,000) then apply the 60/30/10 allocation. It tells you to sell $21,000 of bonds, buy $18,000 of stocks and add $3,000 into cash. This is buying low and selling high.

The CARES Act created special rules to allow for a new classification of hardship withdrawals. The rules are specific, read them and consult with your tax expert. Nevertheless, you still need to generate cash and think twice about accessing retirement monies. You’ll have to save more in the future and once you’ve early accessed retirement funds, it’s easier to do the second time.

We can’t always control what happens to us in life. However, we control our response. COVID-19, like other life changing events, forces us to revisit and refresh our financial and life plans. Often, it’s prudent to seek expert and objective advice for a second opinion for the sake of your future and peace of mind. Secure both wisely.

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Planning Tips for Parents of the Class of 2020

We are taught to expect the best, plan for the worst and prepared to be surprised. And we learn that success and sanity often depend on how we react, respond and adjust to those surprises. Many are facing new challenges as they navigate through a pandemic, social distancing and loss in various ways.

Households may be experiencing some upheaval – two incomes shifting to less, single parents shuffling for time off or additional daycare, helping your child think through college or career choices and more. Here are some thoughts to stimulate discussion in your home and with your advisors for greater financial stability, less stress, and a brighter future for your children.

At-Home Learning – Remote learning has its ups and downs, and we’re uncertain of its future.

  • Educators are advising parents to lean into school resources for help with at-home learning as well as considering tutors and academies.
  • Routines and schedules help. These include scheduling time to connect with their friends and outdoor activities.
  • Appeal financial aid. Your financial situation may have changed. Financial aid may have been based on dated Federal tax returns filed with Free Application for Federal Student Aid (FAFSA) and doesn’t represent your current ability to pay for college.
  • Seek refunds. Some schools are offering tuition discounts due to the switch to online learning and others are competing for students. Some are rethinking college and career choices and choosing in-state colleges and trade schools. And maybe this will be a record “gap year.”

Protect and Build Your Retirement – People are facing difficult situations. Businesses have closed permanently, and individuals have been laid off or furloughed. Nevertheless, we’ve got to take care of ourselves.

  • 401(k) account values took a hit, but many have recovered with rebounding equity markets. Control what you can control – allocations and savings rates. Re-align your allocations with your goals as needed. If you couldn’t sleep well in March, then now’s the time to shift. Some may temporarily have lower savings (tighter household budgets) so save more in the future. It’s a marathon, not a sprint.
  • Build your emergency reserves. We’ve witnessed why we should have money in the bank to cover our household for at least three to six months.
  • Retirees should view and revise their withdrawal rates – amounts pulled from retirement accounts. Your savings must last your lifetime.

Improve Cash Flow – This may take creativity and redefining priorities.

  • What can you do to improve your marketability or shift your business for the new world? Can you take on a side gig?
  • What expenses can you cut or defer? Tax filing is deferred to July 15, however, what if you have a refund due? Work proactively on bill deferment. Lenders, credit cards, landlords and vendors may offer deferment or accommodation for COVID hardship. What aid is available through the government, health clinics and more?

Tapping Savings – Use caution.

  • Life’s rich with trade-offs. However, you’re a greater asset when you’re financially and physically fit. Use caution with unexpected expenses from college education to maintaining your lifestyle – can you survive this temporary downturn by making a few sacrifices?

Thankfully, more businesses are reopening, people are getting back to work, children will get back to school and proper medicine will be developed. Meanwhile, we have some adjustments to make – some temporary and others long-term. Secure your future wisely.

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