Millions of people get tax refunds every year and, according to the IRS, the average refund this year is $1,949.  Much has been said about how a large tax refund is just an interest-free loan to the government and people should adjust their withholdings to keep more of their money in their pocket. That topic has been well covered and so I won’t beat it to death any further.  But for retirees, there is another interesting angle when it comes to tax refunds.  A big tax refund may actually be costing you real money. Let me explain; the tax code is built on a system of complex calculations for different types of income.  Long-term capital gains being taxed differently than wages is just one example.  For retirees, by far the most impactful is how your Social Security is taxed.  Basically, 50% of your total Social Security benefits, plus your other income, determines...

The stock market entered its own polar vortex in December 2018 and tested the discipline of even the most seasoned investors.  December was brutal in both how much the stock market went down, but also in how relentless the decline was.  There was basically no pause button in the three-week span from December 4th to December 24th.  Take a look at the data on the S&P 500 for yourself: [caption id="attachment_7720" align="alignnone" width="255"] *data from Yahoo Finance[/caption] On top of that, the pundits came out punching with claims of the economy entering a recession and how the stock market would continue to go down dramatically.  The S&P 500 ended up losing 9.18% for the month**.  It was a dark moment and people were at their wits’ end.  Some investors inevitably bailed on their investment plans and sold all of their stocks. **according to YCharts We have always maintained, and so has the evidence, that...

2019 is already upon us and with every new year comes the resolutions. If you’re on the verge of retirement it is even more important to have your financial house in order.  With that thought, I’ve created a list of new year’s resolutions specifically geared to those who plan to retire in 2019.  Those of you who are still a few years away from retirement can also use these tips to get a jump start on planning (reminder: the earlier you start planning the easier it will be). 1) TRACK YOUR EXPENSES TO DETERMINE WHAT YOU NEED TO LIVE ON How much money do you need per month to be comfortable? I prefer people calculate this on a monthly basis since many of us can do this with relative ease.  Of course, don’t forget any quarterly or yearly expenses.  This is the most important number when it comes to your retirement.  It is the...

The S&P 500 is down roughly 15% from its recent highs and the NASDAQ is down even more.  This has caused many investors to be concerned about their financial future and wonder what can be done. For most people, the prudent thing to do is to stick with their investment plan and not let fear drive themselves to make major shifts in their strategy during extremely volatile times.  Significant evidence shows that investors have been terrible at timing the market (see the annual Dalbar Quantitative Analysis of Investor Behavior studies ) and that doesn’t even mention the emotional roller coaster that comes with that form of speculation. With that said, there are several things you can do to take advantage of lower stock prices. These strategies involve taking a long term view of investing (think 5+ years) and remaining disciplined in sticking with your financial plan.  Here are the ways to take...

The world’s stock markets have been very volatile in the 4th quarter as investors become more concerned that a trade war will break out between the US and China.  The 90-day truce called at the recent G20 meeting was followed by tweets from the President that seemed to indicate he was still committed to tariffs.  That was followed by the arrest of the CFO of Huawei, a Chinese tech company that makes smartphones and telecommunications equipment.  All of which stokes greater concern that the trade war may continue.  The US and China are the two largest economies in the world, so a trade war between the two could have ripple effects throughout the global economy.  It remains to be seen whether this is simply posturing before a trade deal is made or something with longer term effects. Meanwhile, this has caused the stock market indices to decline significantly from their highs...

Yesterday, Buffalo hit a record high temperature of 82 degrees. Let’s say I told a random person who didn’t know where I live that the temperature in my city was 82 degrees on a particular day. They’d probably say that was a nice day. Now what if I told them that that particular day also happened to be in the middle of October? They’d be a little more impressed. They might even assume I live somewhere warm like Florida. Lastly, imagine if I told them it was 82 degrees in the middle of October in Buffalo, NY. Most people would say that was a GREAT day, given that the average high temperature in Buffalo on October 9th is 62 degrees. Context always matters when comparing and evaluating. This is especially important in investing. Your co-worker’s 401k is up 16% for the year and yours is only up 2%? Good for them, but chances are...

The stock and bond markets have had a bumpy start to 2018.  But one area of the stock market in particular is having a wonderful year so far: technology stocks.  The tech-heavy Nasdaq 100 is up 13.22% year to date (as represented by QQQ).  Meanwhile, the S&P 500 is only up 3.81% and the international stock market (represented by MSCI ACWI ex US) is down -3.52% for 2018. So what exactly is lifting the Nasdaq 100?  Big tech names we all know are crushing it so far this year: Amazon up 47.95% Apple up 10.39% Microsoft up 19.22% Google up 11.02% Facebook up 14.19% Netflix up 116.42% An investor with a diversified portfolio may be hearing this for the first time or, even worse, may have already heard/read about it from their co-worker, neighbor, or in-law.  It’s common for people who are overweight in an investment that is doing great to make sure everyone around them knows it. ...

The average federal tax refund is $2,895 based on 2016 data.  I could write an entire post about why you should change your tax withholding to ensure you don’t end up getting such a large refund, but we’ll save that for another day. A refund provides a great opportunity to make smart a financial decision.  In this post, I’d like to highlight some different uses that would improve your financial life.  Here they are in no particular order: 1. Shore up your emergency savings You might have experienced unexpected car issues, home repairs or other financial emergencies in 2017.  If you did, you probably leaned on your emergency fund to help pay for those unexpected expenses.  You should generally aim to have 3-6 month’s worth of living expenses in a savings account as an emergency fund at all times.  Using your refund to shore up your emergency fund may be a smart...

Imagine I told you that you lost $5,000.  You’d be upset, but probably not devastated.  Now imagine that I told you that you lost $50,000.  You’d feel unsurprisingly worse. But what if this is what happened? You are 30 years old and your $50,000 401k account declined by 10%. There’s your $5,000 loss.  You’d think to yourself, “I’ve got time, I’m young and still saving aggressively for retirement.” OR You are 55 years old and your $500,000 portfolio declined 10% and you lost $50,000. Not only do you feel worse because $50,000 is a lot more than $5,000, but add to that the fact that it took you 20-plus years of saving to accumulate that half a million dollars and you were thinking of retiring in the next 5-10 years.  This situation is much more concerning emotionally. Admittedly, the 55 year old probably has a more conservative portfolio than the 30 year old, so it...

The stock market started a downturn late last week and has continued that decline today.  The S&P 500 was down 113 points today, or 4.1%, and down 224 points from its closing high of 2,873 on January 26.  This represents a 7.8% decline in a matter of days. While nobody could have predicted this type of decline, or its speed, it isn’t terribly unexpected.  The stock market has been on a phenomenal run since March of 2016 and investment portfolios have benefited from that.  This pullback takes the market back to slightly below the end of 2017. This really means that a diversified portfolio of stocks and bonds is probably back to even for 2018.  The context of “just giving up the last month’s gains” can help you feel a little better than thinking the stock market just went down 8% in a couple of days.  Investors should remember that this is...