Hi, This is Angela Thomson with Coastal Financial Planning, Inc.
Hi, I'm Tim Parker, CFA with Regency Wealth Management in Northern New Jersey!
Good morning. This is Ara Oghoorian with ACap Asset Management, Inc in Los Angeles.
Welcome to today’s Jump-Start Your Retirement Plan Live Chats! And thanks for joining us, Tim, Ara and Angela.
Now, just a quick word about the format of today’s chat, and then we’ll get started.
We received several questions in advance, and for the most part, questions will be answered in the order they were received. Each question will be held for moderation until an advisor is available to give you a detailed, personalized response. So, please do not be concerned if you do not see your question appear right away.
If you have a follow-up question, please submit it, and we will bring it to the advisors’ attention right away.
Angela, you can take this one from Richard
There is nothing wrong with having cash in your portfoilio. Use these funds for other investment opportunities or strenghten positions within your portfolo to take advantage of market shifts
Angela, when you're ready, we have a follow-up from Mr. Dalton.
Hi Richard, I do not use the ETF funds in any of my portfolios. I think you need to look beyond these types of funds and review some of the sector mutual funds. Especially with the market trending on the positive side.
Ara and Tim, please feel free to weigh in, as well. Mr. Dalton's original question was:
"What should be done with dividends and other distributions as they accumulate in a brokerage account between rebalancing sessions?"
I recommend dividends be paid in cash and not reinvested. Reinvested dividends artificially distort your initial asset allocation. In addition, each reinvested dividend creates its own cost basis which means you have to keep very accurate cost basis records.
Mr. Dalton - You might consider doing at least a minor rebalance half way through the year or quarterly to put to work the built up cash.
Tim, here is one for you from Hbbery
Hbberry - The risk of sticking with cash is you might miss out on further rising stocks and you will not even beat inflation given the low rates you can earn on cash. You might consider dollar cost averaging into the markets.
And Ara, here's one from Luisa
Thank you for your question Luisa. You should also look for the fund’s objectives (i.e. large cap, small cap, international, etc.) so that you are sufficiently diversified, its holdings to ensure there is no overlap in your portfolio, and whether the fund is actively managed or passively managed depending on your personal preference.
Tim, here's another one for you from Sneaky Pete
Hi Sneaky Pete - Projecting inflation is very challenging. Even the FED has difficulty with it. The 2.3% is probably close to historical inflation which might be just fine. To be more conservative, you can use higher rates, especially if you think you might have more medical bills in the future as medical costs seem to rise faster than overall inflation.
Angela, you can take this next one from Amy
Hi Amy, There is a big distinction between saving in a 401(k) and an emergency fund. The general rule of thumb is 2-3 months salary in an emergency account. If you don't have sufficient funds for an emergency situation, a possible alternative is borrowing from your 410(k). The regs allow you to take out up to 50% on the account balance, to a limitation of dollars.
Alright, ready for our next round of questions
Ara, here's one from Dire in Alabama
Thank you for your question Dire. The best way to reduce your taxable income is doing what you are already doing which is contributing to your husband’s retirement plan. Have you considered also funding your own retirement plan through your self-employment income to further reduce your taxable income?
Tim, you can take this one from Sue
Hi Sue - lots of moving parts here. If you both have your own businesses you might be able to save taxes and put more money than the average person away for retirement in a vehicle like a self-employed IRA or solo 401k, so look into those if you haven't already. You should also have an emergency fund to cover several months of spending but I don't know if you have one. After an emergency fund you should think about attacking the debt that charges 15% interest and work your way down. Debt on a rental property may be fine to keep as long as your rental income is covering all your costs including the mortgage.
And Angela, here's one from Elle
Hi Ellie, First you are not alone in your situation. I think you need to put yourself on "economic probation'. The student loan company will let your defer payments if you are having challenges. I would start there and contact the loan lender, and at the very least have them freeae your loan for a year. Once that is taken care of, pay down the credit card first. Also, there are credit card companies that will allow you to transfer you debt to there company. They often offer a lower interst rate and deffering interest charges to your account.
Ara, you can take this next one from Mark
Mark, I am not familiar with the VA prepaid tuition plan, but some states restrict you to only attend a school within their state. The prepaid option allows you to lock in the cost, but it may be less flexible if your child decides to go out of state. With your current 529 plans, you can use the funds in any state and can easily change the beneficiary to your other child without tax consequences.
Angela, here's one from Larry
