10 steps toward financial fitness

The first and most important step toward financial health is education. All other steps follow that one. As retirement options become increasingly sophisticated, fine print consequently more lengthy, and pensions decidedly rare, investors need to work harder to understand the impact of the important choices they make. Fortunately, access to quality financial education has improved. Podcasts, blogs, books, seminars and financial education classes all offer plenty of valuable information, most literally available at your fingertips. Of course, you need to check your sources and be leery of sales pitches, but that still leaves a wide variety of legitimate options. Winch Financial offers financial classes in several locations through the University of Wisconsin continuing education system and, while we cover the information in our syllabus, we also tailor each class to its participants because finances are personal and everyone’s risk/reward profile is unique. We also send out a weekly commentary, which not only covers what happens in the stock market each week, but also offers some explanations behind the moves. Many of us subscribe to a variety of financial podcasts. We also follow Dave Ramsey and have taken his Financial Peace University course. If you do one thing for your retirement this year, we urge you to educate yourself. That education is going to lead to other tasks, so here are a few more steps you can take to get financially fit this year: Track you expenses. This may seem like a tedious task (because it is), but you can make it easier by making it part of your daily routine. Digital banking has made it easier to categorize expenses and we find that seeing where your money goes makes you much more intentional about your spending. Once you’ve tracked your expenses for a few months, you can set a realistic budget pretty easily. Random budgets waste time. The best budgets develop from your own spending habits. Change your passwords. This… | Read More »

Take our Christmas Cash Challenge

Though it may feel like coal in your Christmas stocking at first, our Christmas Cash Challenge really is a way to give yourself the kind of present that lasts throughout the year. Let your credit cards be your adult elf on a shelf and stash them in places you can’t reach easily during the Christmas season. Without quick access to them, you can avoid spontaneous over-spending. A cash-only Christmas requires discipline, but it’s the kind of hard work that makes you and your presents more thoughtful and genuine.  Anyone can click a link and mass purchase an eye-catching trinket. To find the true spirit of Christmas, and save yourself the true pain of February bills, you need to think hard about all of the special people on your gift list and remember that the best gifts come from your heart, not your credit line. You’ll have far less buyer’s remorse when you pay with cash because you only have to think how much you’ve spent once – at the time of purchase. Pay with a credit card and you think about the cost three times – when you’ve made the purchase, when you receive your credit card bill, and when you pay that bill. Cash purchases are much cleaner. It’s harder to part with cash when you can watch it dwindle from the palm of your hand. You can swipe your credit card pretty effortlessly but, while the card itself will still look shiny and new, that tiresome debt will continue to accumulate. Celebrate St. Nick Day the old fashioned way, with cash. We challenge you to put your credit card away for all 19 of the remaining shopping days until Christmas. We promise you’ll be glad you did.

LTC planning and the bobcat in your woods

Last weekend, our friend Tom, an experienced hunter, shot a deer with his cross bow from his stand on our property in northern Wisconsin. With a light snow falling, Tom left his stand, tracked the deer a ways, found and began field dressing the animal. A noise caught his attention and he looked up. Just to his left, a large bobcat stood ready to pounce. Tom stood and made himself large, and the bobcat ran away. But, what turned out to be a cool hunting story could have had more dire consequences. It’s important to consider your surroundings when moving through the woods. Not understanding the full picture can unnecessarily land you in a dangerous position. It’s the same with finances. An advisor has to consider your whole landscape – age, income, budget, life expectancy, marital status, risk tolerance – when addressing each element of a retirement plan.  Danger lurks in the woods. Will your money last your life? Will an unexpected health crisis drain your finances?  Can you maintain control over your healthcare decisions? Do you understand your policy’s fine print? In order to provide the best answers to these questions, and to solve some of the issues they raise, a registered investment advisor has a fiduciary responsibility to review your financial documents, to clear the woods of any visible threats. Your retirement plan should be tailored to your current and anticipated needs. The good news is resources are available to do this. For instance, there are a lot of options to pay for long-term care – traditional long term care policies, annuity hybrid policies, life insurance with LTC riders, self-funding and more. These opportunities are all available for you, but it’s important to get a clear look at your financial picture to choose the most appropriate one. November marks deer hunting season in Wisconsin, and it is also Long Term Care Awareness month.  If you have any concerns… | Read More »

Four reasons you need a Roth IRA

In our last post we talked about the importance of saving enough in your employer sponsored retirement plan and cautioned that even if you were contributing your full match, it might not be enough. The vast majority of us will need additional savings and a good place to accumulate that is in a Roth IRA.  A Roth IRA is an excellent savings vehicle because, unlike the traditional IRA, the money in a Roth grows tax free and the withdrawals are not taxed either.  This makes it preferable to the traditional IRA for retirement savings, but there are other advantages to a Roth IRA as well. Here are four reasons you should save money in a Roth IRA: The Roth IRA gives much more freedom of choice.  In an effort to keep the plan simple, many 401(k) and 403(b) plans do not include investment choices that would help diversify your portfolio, nor do they offer the most cost-effective investments available.  Most employer plans limit you to investing in only a handful of mutual funds.  While mutual funds are good investment vehicles, ETFs (Exchange Traded Funds) have emerged as a favorable alternative to mutual funds because of their lower cost and flexibility.  In a portfolio that is large enough to accommodate them, individual stock holdings are also a good choice for low expense and diversification. The money in a Roth IRA that is not inherited is not subject to a Required Minimum Distribution (RMD).  Roth IRAs are funded with after-tax money and the withdrawals from a Roth are not taxed on the way out. Because of this, the IRS has no need to force withdrawals from a Roth because there are no taxes to collect.  Not being subject to an RMD makes the Roth IRA a more flexible option for retirement income.  You can also continue to contribute to your Roth after the RMD mandatory age of 70½ if you are still… | Read More »

There’s no free lunch (except in retirement plans)

We’ve all heard the saying, “There ain’t no such thing as a free lunch.”  It’s used to remind us that there is a cost to everything even, or especially, if it is hidden from view.  The phrase actually comes from the once-common practice of saloon owners advertising a “free lunch” for patrons who would purchase a drink at their establishment.  Of course, the fare offered at these banquets was heavily salted to induce patrons to imbibe more of the money-making beverages.   Social critics at the time were keen to point out the hidden costs of this “free lunch.”  The average price of drinks where a free lunch was offered were higher than at other establishments.  Less obvious, but just as consequential, were the societal costs associated with higher rates of alcohol consumption.  And so, as an admonition against thinking that you can get something for nothing, the phrase, “there ain’t no such thing as a free lunch” entered the American lexicon.  The phrase achieved its current popularity when the free-market economist, Milton Friedman, used it as the title of a book in 1975. For sure, nothing comes for free.   But when we’re talking about saving for retirement there is something that comes as close to a “free lunch” as you can get, and that is the employer match in your 401(k), 403b or other employer sponsored retirement account.  As employers have moved away from providing a life-long pension to retired employees, they have stepped up with a commitment to help their employees contribute to their own retirement accounts and the “Employer Match” was born.  The Federal government supports employers by making the “match” tax deductible. As of 2016, 66 percent of workers had access to an employer sponsored retirement plan, yet only 49 percent of workers participate in the plans available to them.  And worse, of those taking advantage of the employer match about one in four is not getting… | Read More »