Investment inaction is played out in many ways, often silently, invisibly, and with potential consequence to an individual’s future financial security.
Let’s review some of the forms this takes.
Your workplace retirement plan.
The worst non-decision is the failure to enroll. Not only do non-participants sacrifice one of the best ways to save for their eventual retirement, but they also forfeit the money from any matching contributions their employer may offer. Not participating may be one of the most costly non-decisions one can make.
The other way individuals let indecision get the best of them is by not selecting the investments for the contributions they make to the workplace retirement plan. When a participant fails to make an investment selection, the plan may have provisions for automatically investing that money. And that investment selection may not be consistent with the individual’s time horizon, risk tolerance, and goals.
Distributions from workplace retirement plans and most other employer-sponsored retirement plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions. The 10% early withdrawal penalty may be avoided in the event of death or disability.
Non-retirement plan investments.
For homeowners, “stuff” just seems to accumulate over time. The same may be true for investors. Some buy investments based on articles they have read or on a recommendation from a family member. Others may have investments held in a previous employer’s workplace retirement plan.
Over time, they can end up with a collection of investments that may have no connection to their investment objectives. Because the markets are dynamic, an investment that may have made good sense yesterday might no longer make sense today.
By periodically reviewing what they own, investors can determine whether their portfolio reflects their current investment objectives. If they find discrepancies, they are able to make changes that could positively affect their financial future.
Marriage changes everything, including insurance needs. Newly married couples should consider a comprehensive review of their current, individual insurance coverage to determine if any changes are in order as well as consider new insurance coverage appropriate to their new life stage. The good news is that married drivers may be eligible for lower rates than … Continue reading “Insurance When You’re Newly Married”
With the children now out of the house, financial priorities become more focused on preparing for retirement. At this stage, you may very likely be at the height of your earning power and fast approaching peak savings as you lay the groundwork for retirement. During this final leg to retirement – and throughout your retirement … Continue reading “Insurance Needs for Empty Nesters and Retirees”
“What is your greatest retirement fear?” If you ask any group of retirees and pre-retireesthis question, “outliving my money” will likely be one of the top answers. In fact, 51% of investors surveyed for a 2019 AIG retirement study ranked outliving their money as their top anxiety. Retirees face greater “longevity risk” today. The Census Bureau … Continue reading “Reducing the Risk of Outliving Your Money”
For many investors, it can be tempting to think of one’s portfolio in terms of “gains” or “losses.” True, this is a central concept to understanding market behavior, but to truly maximize your investing knowledge, you also need to know about “unrealized gains,” “unrealized losses,” and how they can work to your advantage. As always, … Continue reading “Unrealized Loss and Gain”
As a consumer, when you purchase an expensive item, like a car or refrigerator, you expect to receive a warranty that the manufacturer will repair or replace that product if it breaks down. A warranty makes sense for big-ticket purchases, but what about for a home?
Epic Capital provides the following comprehensive financial planning and investment management services: Learn More >