Job Hunting in the Digital Jungle

Gone are the days when job hunting meant simply opening a newspaper and browsing the classified ads. Today, the digital age has made job searching more complicated. Fortunately, the online jungle of job opportunities and professional advice is easier to navigate when you know a few key strategies.

jobsearchonlineHone your navigation skills
You won’t know what kinds of employment opportunities are available if you don’t understand where to look. Start with a simple search of the numerous online job sites in existence. You can pick and choose the sites that will be most helpful to you according to the employment opportunities that interest you.

If you’re interested in a government job, visit USAJobs.gov to find federal opportunities, as well as listings according to your state’s career service department. And if you’re struggling with creating your resume or sharpening your interview skills, there are sites providing guidance. Once you know where to look, the path to employment will be easier to navigate.

Use social media
The use of social media for employment is a hot topic these days for a reason. It helps employers find an exact fit for an open position by allowing them to browse through profiles to get a feel for a candidate’s personality and professionalism.

You can showcase your qualities by keeping your employment history up-to-date and thinking before posting or sharing questionable statuses on your personal page. Bear in mind that it’s easy for a potential employer to find you online, so you need to be careful about the information you choose to share about yourself.

Know your buzzwords
Employers sometimes receive hundreds of online applications for a single position. This can be overwhelming, and they don’t want to waste their time reading them individually. Instead, employers might create filters that are designed to eliminate resumes that don’t contain keywords.

file000370626123Often it’s useful to look at the description of the job you’re applying for while you create your resume. That way, you can figure out which buzzwords employers will look for when they read your resume. Nouns, verbs, and phrases that describe the kind of work you excel in can help you stand out from your competition. Make use of any resources available to you online if you have trouble figuring out what defines a buzzword.

Never underestimate the importance of a cover letter
A cover letter is your chance to make a personal connection with a potential employer. It might be tough to make a cover letter describing your employment history to sound both engaging and informative. Don’t waste precious space by including information that will be obvious from your resume. And as tempting as it might be, don’t rely on cover letter templates when drafting your own.

It may save time, but employers don’t want to read identical cover letters from prospective employees. Remember, a cover letter is your chance to express your writing skills and professional voice. Put the necessary time and effort into writing a good one, and you could reap the benefits.

Remember personal relationships in a digital job hunt
The traditional method of meeting face-to-face with a prospective boss is obsolete when applying for a job online. While it may seem impersonal to send your resume and cover letter via e-mail without ever seeing a face or hearing a voice, your application is being read by another human being.

Add touches of your personality to your social media profiles and whenever you reach out to potential employers so you can truly connect. If you bear this in mind, then personal connections won’t get lost in cyberspace.

Healthy Resolutions Can Pay Off (Literally)

If you made a New Year’s Resolution to get healthy, you may get more bang for your resolution buck than you bargained for. That’s because healthy habits can benefit your wallet as well as your body.

grandparentsbeachsq99763666The link between health and money
According to the Centers for Disease Control and Prevention (CDC), chronic conditions–including diabetes, heart disease, and cancer–account for more than 75% of all health-care costs nationwide.

Nearly half of all Americans have a chronic disease, which can lead to other problems that are devastating not just to health but also to a family’s finances. People with a chronic condition pay five times more for health care each year, on average, as those without a chronic disease.*

Many chronic diseases can be linked to four behaviors: tobacco use, excessive alcohol consumption, poor eating habits, and inactivity.* A closer look at each of these behaviors demonstrates the health-money connection.

Tobacco and alcohol
The American Cancer Society (ACS) reports that the average price of a pack of cigarettes in the United States is $6.36. That means the average annual cost for a pack-a-day smoker is more than $2,300. However, the average health-related cost to a smoker, says the ACS, is $35 per pack–or $12,775 per year for someone who smokes a pack a day.

The National Institute on Alcohol Abuse and Alcoholism defines moderate drinking as one drink per day for women and two for men. Drinking more than that can lead to health problems, including various forms of cancer as well as impairment of your brain, heart, liver, and pancreas.

Such outcomes have economic costs. The CDC reports that in 2006, the national cost of excessive alcohol consumption was $223.5 billion, 42% of which was shouldered by excessive drinkers and their families.

SONY DSCEating habits and activity level
Proper nutrition and regular exercise are vital to staying healthy, but they can also save you money. For example, reducing the amount of high-in-saturated-fat products, processed foods, and red meat in your diet can result in benefits to your heart and wallet.

Replacing high-fat ingredients in some recipes with healthier, low-cost options–such as using beans instead of ground beef–can help trim your grocery bills. And replacing high-calorie meals eaten at restaurants with meals made at home using fresh, in-season ingredients can benefit both body and bank account.

Current guidelines from the U.S. Department of Health and Human Services recommend at least 2½ hours of moderate physical activity per week. Many opportunities exist in everyday life to both accumulate active minutes and save money. Instead of driving to your destination, walk or ride a bike.

Do your own yard work or house cleaning instead of hiring help. Go for a hike or play ball with your kids rather than going to the movies or visiting an amusement park.

Long-term considerations

Chronic disease also has indirect long-term costs. Leaving the workforce for extended periods–or having to retire early–means fewer paychecks, less chance to benefit from workplace-provided retirement plans and health-care benefits, and lower earnings to apply toward Social Security benefits.

In addition, chronic diseases often necessitate home renovations, the hiring of specialized care providers, or even permanent nursing care. When viewed over the long term, taking steps today to reduce your risks of getting sick down the road may make good health and financial sense.

*Sources: Centers for Disease Control and Prevention, the Department of Health and Human Services, and the Partnership to Fight Chronic Disease

Helpful Tips for Women Taking a Career Break

Caregiver-Senior-Couch1Balancing the commitments of both work and family can be a struggle for many women. As a result, you may have to take a break from your career to stay home and raise a family or care for an elderly parent or relative.

Whether you are taking a break for just a few months or many years, there are things you can do now to help make it a bit easier to jump back on the career track later.

Stay Connected
When taking a career break, it’s important to stay connected. Having relationships with former co-workers and colleagues allows you to maintain your networking connections and stay on top of developments in your former workplace or industry. The following are some simple ways to stay connected while on a career break:

1. Make sure that you have a presence on professional social media sites such as LinkedIn
2. Enroll or become a member of relevant professional associations
3. Attend industry events and trade shows that are open to the general public
4. Consider part-time/consultant work within your particular industry or field of expertise
Keep up-to-date on your job skills

If you plan on re-entering the workforce at some point in the future, you’ll need to keep up-to-date on skills that are necessary for your particular field or industry. You can avoid letting your skills fall by the wayside by:

1. Reading industry trade journals and publications
2. Taking continuing education classes or enrolling in relevant courses at your local college or university
3. Keeping abreast of the latest technology developments relevant to your field or industry

resume-sampleLook for alternative resume builders
While you’re out of the workforce and staying at home, it’s important to find alternative ways to build your resume. Nontraditional work environments that demonstrate your skills and draw upon your previous work experiences can be used to fill in any significant gaps in your resume. They can also provide you with a source of contacts when you want to re-enter the workforce.

Some examples of alternative resume builders include teaching a class at a local community college on a subject in your field of expertise; joining a nonprofit board (e.g., library or charitable foundation); and staying active in local volunteer organizations (e.g., parent/teacher groups and sport associations).

Consider easing back into the workforce with an internship
Today, employers recognize the value of hiring women who want to work after taking a career break. These women often have family obligations behind them, along with prior professional experience.

As a result, some companies are offering internship or “returnship” opportunities that provide women with an opportunity to ease back into the workforce. These internships allow employers to test the waters before determining whether someone would be a good fit for a permanent position.

If you are interested in an internship opportunity, many options are available, from informal arrangements with an employer to high-structured returning professional programs that are part of a company’s larger recruiting efforts.

Seek out others in your situation
If you are on a career break, it’s important to remember that you are not alone in choosing to stay at home to focus on family obligations. Consider seeking out support and guidance from other women who have chosen to veer off the traditional career path for family reasons.

Whether you have just made the decision to take a career break or are looking to reenter the workforce, there are numerous resources available to assist you, ranging from local stay-at-home mom networks to nationwide career relaunching services.

Investor, Know Thyself: How Your Biases Can Affect Investment Decisions

Traditional economic models are based on a simple premise: people make rational financial decisions that are designed to maximize their economic benefits. In reality, however, most humans don’t make decisions based on a sterile analysis of the pros and cons.

DSC_0390_Iván_Melenchón_Serrano_MorgueFileWhile most of us do think carefully about financial decisions, it is nearly impossible to completely disconnect from our “gut feelings,” that nagging intuition that seems to have been deeply implanted in the recesses of our brain.

Over the past few decades, another school of thought has emerged that examines how human psychological factors influence economic and financial decisions. This field–known as behavioral economics, or in the investing arena, behavioral finance–has identified several biases that can unnerve even the most stoic investor.

Understanding these biases may help you avoid questionable calls in the heat of the financial moment. Sound familiar? Following is a brief summary of some common biases influencing even the most experienced investors. Can you relate to any of these?

1. Anchoring refers to the tendency to become attached to something, even when it may not make sense. Examples include a piece of furniture that has outlived its usefulness, a home or car that one can no longer afford, or a piece of information that is believed to be true, but is in fact, false. In investing, it can refer to the tendency to either hold an investment too long or place too much reliance on a certain piece of data or information.

2. Loss-aversion bias is the term used to describe the tendency to fear losses more than celebrate equivalent gains. For example, you may experience joy at the thought of finding yourself $5,000 richer, but the thought of losing $5,000 might provoke a far greater fear. Similar to anchoring, loss aversion could cause you to hold onto a losing investment too long, with the fear of turning a paper loss into a real loss.

DSCN897633. Endowment bias is also similar to loss-aversion bias and anchoring in that it encourages investors to “endow” a greater value in what they currently own over other possibilities. You may presume the investments in your portfolio are of higher quality than other available alternatives, simply because you own them.

4. Overconfidence is simply having so much confidence in your own ability to select investments for your portfolio that you might ignore warning signals.

5. Confirmation bias is the tendency to latch onto, and assign more authority to, opinions that agree with your own. For example, you might give more credence to an analyst report that favors a stock you recently purchased, in spite of several other reports indicating a neutral or negative outlook.

6. The bandwagon effect, also known as herd behavior, happens when decisions are made simply because “everyone else is doing it.” For an example of this, one might look no further than a fairly recent and much-hyped social media company’s initial public offering (IPO). Many a discouraged investor jumped at that IPO only to sell at a significant loss a few months later. (Some of these investors may have also suffered from overconfidence bias.)

7. Recency bias refers to the fact that recent events can have a stronger influence on your decisions than other, more distant events. For example, if you were severely burned by the market downturn in 2008, you may have been hesitant about continuing or increasing your investments once the markets settled down.

nyc4_carolinaantunesConversely, if you were encouraged by the stock market’s subsequent bull run, you may have increased the money you put into equities, hoping to take advantage of any further gains. Consider that neither of these perspectives may be entirely rational given that investment decisions should be based on your individual goals, time horizon, and risk tolerance.

8. A negativity bias indicates the tendency to give more importance to negative news than positive news, which can cause you to be more risk-averse than appropriate for your situation.

An objective view can help
The human brain has evolved over millennia into a complex decision-making tool, allowing us to retrieve past experiences and process information so quickly that we can respond almost instantaneously to perceived threats and opportunities.

However, when it comes to your finances, these gut feelings may not be your strongest ally, and in fact may work against you. Before jumping to any conclusions about your finances, consider what biases may be at work beneath your conscious radar. It might also help to consider the opinions of an objective third party, such as a qualified financial professional, who could help identify any biases that may be clouding your judgment.

Is the Stock Market Casting a Spell on Investors?

After the financial markets posted another strong performance during the first half of this year, the word “magic” keeps coming to mind! And it’s not just because the word offers an apt description of the pretty wizardly stock market returns lately.

bull-markets-604cs030413My current interest in sorcery also comes from observing a noticeable shift in investor behavior. Just a few years ago, some investors were very apprehensive about stocks, and very reticent to take on very much risk in their investment plans. But in recent months, some of these folks seem to have come under a magic spell and have begun to appreciate the potential rewards (and the risks?) of equity investing.

It’s certainly understandable how the stock market’s performance may have brewed a mystical tonic to bring investors back to stocks. During the first half of 2014, the Standard & Poors 500 Index (the “S&P 500”), a well known and broad measure of the US stock market, gained 7.14% through June 30, 2014.

Hot Equity Market!
These returns came after two consecutive excellent years in 2013 and 2012 when that same index posted increases of 32.39% and 16%, respectively. Since the bear market bottom on March 9, 2009, the S&P 500 has gained a whopping 221.17% through June 30, 2014. The impressive results seem to be the investment equivalent of pulling a rabbit out of a hat!

Earlier this year, I began to hear conservative investors expressing a desire to increase their equity investments. My personal observation of this apparent growing appetite for stocks, combined with other anecdotal evidence of such interest, raises important questions for all investors.

magicoDoes the more optimistic tone in business and among investors makes this a good time to seek out potentially greater investment rewards? Or, are investors setting themselves up to be potentially disappointed if the equity markets shift unexpectedly to a downward trend?

Of course, it is great news that there is more optimism in the air! A more positive economic outlook, an improving job market, and healthy stock returns reflect an environment that some thought just a few years ago could have only come about through economic sleight of hand!

And although there remain some concerns about the strength of the current economic recovery, the current financial climate is certainly far more encouraging than it has been for several years. But does that mean you should increase your exposure to equity investments?

That’s a question which wizards or financial advisors should not answer hastily. Any investment shift, especially a significant change, provides both risks and opportunities that should be evaluated based primarily upon an investor’s financial goals and circumstances, as well as that individual’s risk tolerance. Conversely, the decision should NOT be based on which investments have offered the best returns most recently.

Chasing Attractive Market Returns?
Unfortunately, investors, to their own detriment, sometimes pursue investments that have fared well in the short term, but which might not be priced to perform so well in the future. Some financial journalists have recently suggested that investors who want to reconsider their investment strategies or asset allocation might be acting irrationally, or adding risk to their portfolios at exactly the wrong time.

I don’t completely agree with that perspective since an investor might have valid reasons for re-considering their financial goals and/or their personal circumstances might have changed. Also, stocks might not be so outrageously priced relative to historical valuation models that would suggest a plunge is necessarily imminent (though a wizard would need a crystal ball to know with certainty).

Should You Change Your Investment Path?
iStock_000011359435XSmall appian bottomStill, prudence may likely be the order of the day. Investors should establish and stick with a disciplined asset allocation strategy and look for opportunities to “rebalance” back to your model. That discipline might suggest that selling some stock might be timely if your model is out of balance.

Although we all might wish for a magic wand to make profitable investment decisions, not even the best wizards can time the markets or guarantee investment outcomes. Instead, investors should consider using time-tested investment principles and potions in managing their portfolios. As always, if you have any financial or investment related questions, please send me an email message at bill.pollak@lpl.com or call at (925) 301-4086

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing.

Financial Choices: College, Retirement, or Both?

Life is full of choices. Should you watch Breaking Bad or Modern Family? Eat leftovers for dinner or order out? Exercise before work or after? Some choices, though, are much more significant. Here is one such financial dilemma for parents.

Should you save for retirement or college?
DSCN8976It’s the paramount financial conflict many parents face, especially as more couples start having children later in life. Should you save for college or retirement? The pressure is fierce on both sides.

Over the past 20 years, college costs have grown roughly 4% to 6% each year–generally double the rate of inflation and typical salary increases–with the price for four years at an average private college now hitting $192,876, and a whopping $262,917 at the most expensive private colleges.

Even public colleges, whose costs a generation ago could be covered mostly by student summer jobs and some parental scrimping, now total about $100,000 for four years (Source: College Board’s Trends in College Pricing 2013 and assumed 5% annual college inflation). Many parents have more than one child, adding to the strain. Yet without a college degree, many jobs and career paths are off limits.

On the other side, the pressure to save for retirement is intense. Longer life expectancies, disappearing pensions, and the uncertainty of Social Security’s long-term fiscal health make it critical to build the biggest nest egg you can during your working years.

In order to maintain your current standard of living in retirement, a general guideline is to accumulate enough savings to replace 60% to 90% of your current income in retirement–a sum that could equal hundreds of thousands of dollars or more. And with retirements that can last 20 to 30 years or longer, it’s essential to factor in inflation, which can take a big bite out of your purchasing power and has averaged 2.5% per year over the past 20 years (Source: Consumer Price Index data published by the U.S. Department of Labor, 2013).

So with these two competing financial needs and often limited funds, what’s a parent to do?

conventional_wisdom_7-10-2012The prevailing wisdom
Answer: retirement should win out. Saving for retirement should be something you do no matter what. It’s an investment in your future security when you’ll no longer be bringing home a paycheck, and it generally should take precedence over saving for your child’s college education.

It’s akin to putting on your own oxygen mask first, and then securing your child’s. Unless your retirement plan is to have your children be on the hook for taking care of you financially later in life, retirement funding should come first.

And yet…
It’s unrealistic to expect parents to ignore college funding altogether, and that approach really isn’t smart anyway because regular contributions–even small ones–can add up over time. One possible solution is to figure out what you can afford to save each month and then split your savings, with a focus on retirement. So, for example, you might decide to allocate 85% of your savings to retirement and 15% to college, or 80/20 or 75/25, or whatever ratio works for you.

Although saving for retirement should take priority, setting aside even a small amount for college can help. For example, parents of a preschooler who save $100 per month for 15 years would have $24,609, assuming an average 4% return. Saving $200 per month in the same scenario would net $49,218.*

These aren’t staggering numbers, but you might be able to add to your savings over the years, and if nothing else, think of this sum as a down payment–many parents don’t save the full amount before college. Rather, they try to save as much as they can, then look for other ways to help pay the bills at college time. Like what?

file000195499258Loans, for one. Borrowing excessively isn’t prudent, but the federal government allows undergraduate students to borrow up to $27,000 in Stafford Loans over four years–a relatively reasonable amount–and these loans come with an income-based repayment option down the road.

In addition, your child can apply for merit scholarships at the colleges he or she is applying to, and may be eligible for need-based college grants. And there are other ways to lower costs–like attending State U over Private U, living at home, graduating in three years instead of four, earning credits through MOOCs (massive open online courses), working during college, or maybe not attending college right away or even at all.

In fact, last summer, a senior vice president at Google responsible for hiring practices at the company noted that 14% of some teams included people who never went to college, but who nevertheless possessed the problem solving, leadership, intellectual humility, and creative skills Google is looking for (“In Head-Hunting, Big Data May Not Be Such a Big Deal,” New York Times, June 19, 2013). One more reason to put a check in the retirement column.

The Decision to Pay Off Your Mortgage in Retirement

For many homeowners, paying off a mortgage is a financial milestone. This is especially true when you are retired. Not having the burden of a monthly mortgage payment during retirement can free up money to help you live the retirement lifestyle you’ve always wanted.

To pay off, or not to pay off: that is the question
NRT-payoffmortgageQ413_02Some retirees are lucky enough to have paid off their mortgage before they reach retirement. For others, however, that monthly obligation continues. If you are retired, you may be wondering whether you should pay off your mortgage. Unfortunately, there’s no one answer that’s right for everyone. Instead, the answer will depend upon a variety of factors and how they relate to your individual situation.

Return on retirement investments vs. mortgage interest rate
One way many retirees pay off their mortgage is by using funds from their retirement investments. To determine whether this is a good option for you, you’ll need to consider the current and anticipated rate of return on your retirement investments versus your current mortgage interest rate. In other words, do you expect to earn a higher after-tax rate of return on your current retirement investments than the after-tax interest rate you currently pay on your mortgage (i.e., the interest rate that you’re paying, factoring in any mortgage interest deduction you’re entitled to)?

For example, assume you pay an after-tax mortgage interest rate of 4%. You are considering withdrawing funds from your retirement investments to pay off your mortgage balance. In general, you would need to earn an after-tax return of greater than 4% on your retirement investments to make keeping your money invested for retirement the smarter choice.

On the other hand, if your retirement funds are primarily held in investments that typically offer a lower rate of return than the interest rate you pay on your mortgage, you may be better off withdrawing your retirement funds to pay off your mortgage.

Additional considerations
As you weigh your options, you’ll also want to consider these additional points:

– Effect on retirement nest egg: If you rely on your retirement savings for most of your income during retirement, you should generally avoid paying off your mortgage if it will end up depleting a significant portion of your retirement savings. Ideally, you should pay off your mortgage only if you have a small mortgage balance in comparison to your overall retirement nest egg.

file00032137357– Tax consequences: Keep in mind that if you are going to withdraw funds from a retirement account to pay off your mortgage, there are some potential tax consequences you should be aware of. First, if you withdraw pretax funds from a retirement account, the amount you withdraw is generally taxable. As a result, you’ll want to be sure to account for the taxes you’ll have to pay on the amount you withdraw from pretax funds. Depending on your tax bracket, that could be a significant amount.

In addition, if you take a large enough distribution from your retirement account, you could end up pushing yourself into a higher income tax bracket. Finally, unless you are 59½ or older, you may pay a penalty for early withdrawal.

– Comfort with mortgage debt: For many retirees, a monthly mortgage obligation can be a heavy burden. If no longer having a mortgage would give you greater peace of mind, give the emotional benefits of paying off your mortgage some extra consideration.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with a qualified tax advisor.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

Should You Rollover a 401(k) to an IRA?

If you’re entitled to a distribution from your 401(k) plan (for example, because you’ve left your job, or you’ve reached age 59½), and it’s rollover-eligible, you may be faced with a choice. Should you take the distribution and roll the funds over to an IRA, or should you leave your money where it is?

Across the universe
file000290322202In contrast to a 401(k) plan, where your investment options are limited to those selected by your employer (typically mutual funds or employer stock), the universe of IRA investments is virtually unlimited. For example, in addition to the usual IRA mainstays (stocks, bonds, mutual funds, and CDs), an IRA can invest in real estate, options, limited partnership interests, or anything else the law (and your IRA trustee/custodian) allows.*

You can move your money among the various investments offered by your IRA trustee, and divide up your balance among as many of those investments as you want. You can also freely move your IRA dollars among different IRA trustees/custodians–there’s no limit on how many direct, trustee-to-trustee IRA transfers you can do in a year. This gives you the flexibility to change trustees as often as you like if you’re dissatisfied with investment performance or customer service. It also allows you to have IRA accounts with more than one institution for added diversification.

However, while IRAs typically provide more investment choices than a 401(k) plan, there may be certain investment opportunities in your employer’s plan that you cannot replicate with an IRA. And also be sure to compare any fees and expenses.

Know the Distribution Rules
The distribution options available to you and your beneficiaries in a 401(k) plan are typically limited. And some plans require that distributions start if you’ve reached the plan’s normal retirement age (often age 65), even if you don’t yet need the funds.

file000478245189With an IRA, the timing and amount of distributions is generally at your discretion. While you’ll need to start taking required minimum distributions (RMDs) from your IRA after you reach age 70½ (and your beneficiary will need to take RMDs after you die), those payments can generally be spread over your (and your beneficiary’s) lifetime. (You aren’t required to take any distributions from a Roth IRA during your lifetime, but your beneficiary must take RMDs after your death.) A rollover to an IRA may let you and your beneficiary stretch distributions out over the maximum period the law permits, letting your nest egg enjoy the benefits of tax deferral as long as possible.

The RMD rules also apply to 401(k) plans–but a special rule allows you to postpone taking distributions until you retire if you work beyond age 70½. (You also must own no more than 5% of the company.) This deferral opportunity is not available for IRAs. Note: Distributions from 401(k)s and IRAs may be subject to federal income tax, and a 10% early distribution penalty (unless an exception applies). (Special rules apply to Roth 401(k)s and Roth IRAs.)

Gimme shelter – Don’t Forget About Creditor Protection
file000419755272Your 401(k) plan may offer better creditor protection than an IRA. Assets in most 401(k) plans receive virtually unlimited protection from creditors under a federal law known as ERISA. Your creditors cannot attach your plan funds to satisfy any of your debts and obligations, regardless of whether you’ve declared bankruptcy. (Note: individual (solo) 401(k) plans and certain church plans are not covered by ERISA.)

In contrast, traditional and Roth IRAs are generally protected under federal law only if you declare bankruptcy. Federal law currently protects your total IRA assets up to $1,245,475 (as of April 1, 2013)–plus any amount you roll over from your 401(k) plan. Any creditor protection your IRA may receive in cases outside of bankruptcy will generally depend on the laws of your particular state. If you’re concerned about asset protection, be sure to seek the assistance of a qualified professional.

Let’s stay together
Another reason to roll your 401(k) funds over to an IRA is to consolidate your retirement assets. This may make it easier for you to monitor your investments and your beneficiary designations, and to make desired changes. However, make sure you understand how Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SIPC) limits apply if you keep all your IRA funds in one financial institution.

Fools rush in
While some 401(k) plans provide an annuity option, most still don’t. By rolling your 401(k) assets over to an IRA annuity, you can annuitize all or part of your 401(k) dollars. Many 401(k) plans have loan provisions, but you can’t borrow from an IRA. You can only access the money in an IRA by taking a distribution, which may be subject to income tax and penalties.

Is the Stock Market Rigged?

file0001031687320Is the stock market rigged in favor of high-speed electronic trading firms? Perhaps, but that shouldn’t matter to most investors.

Last week, media reports and a new book by author Michael Lewis have focused on a form of high-frequency stock trading where professional traders use sophisticated computers and complex programming to see stock orders coming in and position themselves ahead of the orders as middlemen between existing buyers and sellers.

All of this is done very rapidly, over and over again, often netting the high-frequency trader a few pennies on the stock price. While short-term traders fight it out at lightning speeds over these pennies, long-term investors are generally above the fray. If you are an investor focused on the longer term fundamentals of an investment, generally speaking, you have little to fear over the very small price moves caused by high-frequency trading.

file7781266798375High-frequency trading has been gathering headlines for 15 years. But, in recent years, this trading has shown some signs of stressing the fabric of the markets, for example, with the May 6, 2010 “flash crash,” when the Dow Jones Industrial Average dropped 1,000 points in just minutes, then rebounded by the end of the day. Investors should bear the risk of their investment; they should not have to bear the risk of whether the markets are functioning fairly or effectively. In response, regulators have taken some action.

The Dodd-Frank legislation, passed in 2010, effectively restricted high-frequency trading by the big banks. Yet, not everyone sees high-frequency trading as a negative; some mutual fund companies have publically noted that using such strategies reduces transaction costs and benefits the investors in their funds.

In short, high-frequency trading may create small inefficiencies over the short run, but for long-term investors it has little impact on achieving their financial goals.

As always, if you have questions, I encourage you to contact me at bill.pollak@lpl.com or at (925) 301-4086.

April 2014 Newsletter: Are You Ready to “Spring” Forward?

file7001235656807After a difficult winter which saw many parts of the Midwest and East Coast suffer through severe cold and snow, there is no doubt that much of the country is ready for Spring! And although many in California are likely wishing for our own winter-like conditions to ease the drought, there is still no denying the appeal of the new season.

Spring brings with it, of course, the blossoming of nature as the warmer temperatures and longer days have their desired effect. For some, the start of a new baseball season is also part of the appeal! But I think this particular Spring brings with it the possibilities for other kinds of renewal and regrowth that do not have to be limited to the natural world.

We are now five years past the 2008-09 Great Recession. The journey to the current economic recovery from that difficult time has not always been smooth or in a straight line, but a recovery has nonetheless occurred. And according to some economists, it is possible, if not likely, that the recovery in 2014 may even accelerate from the modest improvement we have seen in recent years.

This potentially more positive economic landscape may provide an exciting opportunity to seek out rejuvenation and new opportunities in your own life. For example, you could consider using this time to evaluate a different career path or new career/professional endeavors.

This could also be a great time to review your personal and financial goals and/or develop a comprehensive financial and investment plan if you have not recently done so. The seeds of those efforts, whether in your professional, personal, or financial life, could create your own Spring bounty in the future!

Earlier in March, we moved our clocks ahead for daylight savings time. Perhaps the following articles will help you “spring” forward to whatever changes you may be considering in 2014:

The Most Critical Step in Starting a Business
In today’s challenging world of traditional employment, starting your own business or endeavor might be an appealing career alternative, especially if you have an idea about how to fill an unmet market need. Here are some thoughts about preparing to make venture your fly! Read more…

Resources for Mid Life Professionals Going Back to School
It’s not unusual for people in the midst of professional change to consider going back to school to enhance their current knowledge or to enter an entirely new field. Learn about some resources that can help you evaluate such a change is right for you. Read more…

Baseball and Financial Planning
Spring training is a tradition that baseball teams and baseball fans look forward to every year. As this year’s baseball season gets under way, here are a few lessons from America’s pastime that might help you reevaluate your finances. Read more…

Impact of Health Care Costs on Social Security
Medical expenses, and particularly Medicare premiums, will likely reduce the money you receive from Social Security at the time you retire. Get the facts about the relationship between these two important US Government benefit programs, and how you can accurately plan for what you will receive from Social Security. Read more…

I hope that the turning of the season is positive for you and your loved ones, and that these articles may inspire you to move toward your goals in 2014! As always, please do not hesitate to contact me at (925) 301-4086 or send me an email if you have any questions about these or other financial topics!