Retirement Plan Compliance Training Crucial

The Pilot, a local newspaper for the Southern Pines area, has published an article about Carolina Wealth Management’s recent 401(k) workshops.  In this article, written by Ted M. Natt Jr., Derek Pszenny explains the importance of retirement plan compliance training and why it is crucial for small businesses to become educated on the matter.  To read this article and other related articles please visit The Pilot‘s website or click on the link below.

Retirement Plan Compliance Training Crucial

Check our calendar for updates on up coming 401(k) workshops and other Carolina Wealth Management events.

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Reasons to Roll Over Your 401k to an IRA

If your money is still sitting in your previous employer’s 401k account, it’s time to move it into an account where you can control the fees and investment choices instead of letting your old employer make those decisions.

Why Roll Over?

Rolling over your previous employer’s 401k account into a single IRA is the only way to make sure that your portfolio account will follow proven investing strategies such as asset allocation, diversification, control over investment fees, and have the ability to invest in the best performing investments for your personal situation.   And with an IRA rollover, you preserve all of the existing tax advantages of your 401k.  Here are some of the advantages to rolling over:

1. More and Better Investment Options

In an IRA, you can select your own investments. You won’t be limited to the funds and managers selected by your employer. Consider that the average 401k employer plan contains just 13 investment choices making it difficult, if not impossible, to achieve a diversified portfolio whereas an IRA can give you access to thousands of investments, including stocks, bonds, and mutual funds.

2. Lower Fees

Some 401k plans are loaded with hidden fees, including administrative, insurance and management costs.  These fees represent money that is being wasted and worse, this money isn’t being used to fund your investments. Most IRA rollover accounts do not have any administrative or insurances fees associated with them and this represents an immediate savings to your portfolio.

3. Easier Account Management

With your retirement money earned from prior jobs in a single place, you’ll be able to see whether you are on track for retirement, without having to check multiple accounts.  You can obtain daily account valuations and you will be able to track the performance of your account.

4. Greater Control and Flexibility

Combining your 401k account(s) into an IRA will allow you to have control over your retirement plan.  You can choose to manage the account on your own or hire an advisor for help.  As long as you do not purchase an annuity based product or hire a broker that charges back end fees, you will have flexibility to move your account at anytime if you become unhappy with the portfolio.

Rolling over your 401k to an IRA Rollover account can have a positive impact on your retirement plan.  However, make sure you seek advice from a trusted resource before making a decision.

Need Help Rolling Your 401k Plan into an IRA?

Carolina Wealth Management can help guide you through this important process.   We specialize in helping our clients transfer their 401(k) accounts into an IRA rollover to maximize their savings opportunity.  We educate each client on proper diversification strategies, reducing fees, minimizing risks, and avoiding tax implications.  We design prudent investment strategies and tailor portfolios to our clients needs.  For more information, contact David Damm at 252-439-1344.

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Money Management Tips for Newlyweds

Congratulations on getting married! Your first experience as a newlywed is learning that everything that was “mine” is now “ours”.  This includes sharing your bathroom, your television and yes… your money!  Each of you will now learn the other’s personal habits, (hint for guys:  Don’t use the nice hand towels in the bathroom, they are for decoration).  And you will also discover that one of you may be better at managing your finances than the other.  Studies have shown that the most common reason for divorce is money.  Therefore, I want to start your lifetime journey together by listing a few simple tasks that will help improve your financial future.

1. Agree on Financial Goals and Get Organized

It is very important to discuss financial goals with each other in the beginning of your marriage.  You should discuss both short term and long term goals.  Be specific about your goals and discuss how you can accomplish them together.  Remember, communication is the key to ALL successful relationships.  Determine who will and how to organize your financial records.  You need to come up with a system that you both agree on and can follow.  I recommend using personal financial software like Quicken to track your bills and finances.  DO NOT make financial goals more complicated than they have to be.  Keep it simple and be flexible.  As life changes, you and your partner’s needs will change.

2. Budget and Track Expenses

In the past, many families did not budget their expenses and have encountered too much debt as a result.  There are many unknown factors that you will face as newlyweds and things can quickly get out of hand if you don’t set a budget.  Another good aspect about setting a budget is that it teaches both partners good spending habits early in the relationship.  Remember to put your budget in writing as this will help you accomplish your goals.  As a married couple you will have different spending patterns than you did previously.  Your budget will not be perfect at first.  You will need to figure things out and that is where keeping track of your expenses will come in handy.  Again, you can use personal finance tools for these tasks.  These days, you can even keep track on your smart phone.

3. Plan for a successful retirement future

I cannot stress enough that you and your parnter will need to start saving for retirement as soon as you can.  I understand that you have many short-term goals to think about and it’s hard to start an investment account when you are young.  However, retirement income is not being provided in the same manner as when your parents and grandparents retired.  Today, there are very few pension plans that will offer retirement income and Social Security may not offer you the benefit that you would expect.  Therefore, you will NEED to start saving for yourself in order to be successful.  The sooner you can invest, the less money you will need to save and the greater your chance of having a comfortable savings amount when you retire.  How can you start a savings plan?  If you work, allocate as much as you can afford into a 401(k) plan.  Most companies match up to 3% of your salary if you contribute.   Another great savings account is a Roth IRA.  This is an account which grows tax FREE for your retirement.  There are income restrictions to Roth deposits so check with your advisor before you consider investing.

You will need to educate yourselves about investing and savings for your future.  There are many independent resources (books, magazines, internet sites) to help you.  For example, you can obtain articles and links to educational sites if you go to the www.mycarolinawealthreports.com ‘s homepage.  Also, make sure that you talk about insurance protection for each of you.  Life insurance policies are very important to own for younger couples.  They cover debts (like a home mortgage) and are will provide much needed protection when you start to have a family.

Congratulations! You should now be well on your way to building your family net worth and working towards your financial goals.  Remember to get your finances organized, set a budget and invest for a successful future.  Finally, remember… communication is the key to success!  Best wishes.

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The Psychology of Investing

One of my favorite quotes concerning investor behavior comes from the original guru of value investing, Mr. Benjamin Graham.  His quote; “The investor’s chief problem and even worst enemy is likely to be himself.”  In my opinion this quote points to one the biggest reasons why individual investors fail to outperform the markets (other reasons are high fees, poor funds and lack of diversification).  In fact, a study done by Dalbar, Inc. found that from the period of 1987 to 2007 the average investor underperformed the market index (i.e. S&P 500) by an average 7.3% per year!  This is an amazing difference of returns!  How can individuals produce such low returns compared to the market index?

Investor Behavior Causes Poor Market Returns

Several studies about investor behavior show that when the stock market goes up, people pour money into equity mutual funds, and when the market goes down, they pull money out. During bear markets, they pull even more money out. Therefore, they continuously chase trends (buy high and sell low) focusing on what is happening right now, not what will happen in the future.

Let’s face it, our emotions are our biggest enemy when it comes to successful investing.  This destructive behavior is what I like to call, “the greed vs. fear battle”.    When fear takes hold, it impinges our ability to make informed decisions.  That is, we tend to want to reevaluate our risk tolerance when the market is going down for “fear” of losing money. This behavior causes us to sell or change our investments at or near the market bottom.  Conversely, when the markets are going higher, we want to start investing again so we do not miss the big rally.  This “greedy” behavior generally backfires, as we will enter the market at or near the highs. Both irrational behaviors cause individual performance returns to be substantially less than index stock market returns.

Four Ways to Increase Your Market Returns

When it comes to your investments, if you feel your emotions are getting the best of you, come back to the following rules:

  1. Do nothing  -   A conscious decision to do nothing is still a form of action.
  2. Your money is like soap  -   To quote Gene Fama Jr., a famed economist, “Your money is like soap. The more you handle it, the less you’ll have.”
  3. Never sell equities in a down market  -  If your funds are allocated correctly you should never have a need to sell equities during a down market cycle. This holds true even if you are taking income. Just as you wouldn’t run out and put a for sale sign on your home when the housing market turns south, don’t be rash to sell equities when the stock market goes through a bear cycle.  Wait it out.
  4. Science works  -  It’s been academically proven that a disciplined approach to investing delivers higher market returns. Yeah, it’s boring; but it works.

Start following these truths now and become one of the few investors earning above average market returns!

(CWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by David Damm and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all readers thereof should be guided accordingly.)

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