Author Archives: Claire Harrison

Claire Harrison
Claire Harrison is a Campaign Manager at blooom. A high-fiver, thinker, and coffee drinker, Claire loves the Oxford comma and clean design. She’s werkin’ hard to help people learn about their retirement savings and how easy blooom is to use.

Our August PastCast

What’s going on in the market?

August has been full of mostly positive economic news for the US, but the noise is starting to build in the headlines. As mid-term elections approach, political contests around the country are heating up, and as expected, markets are unsure of what to make of the potential outcomes and ramifications this November. That said, stocks keep rolling. While we are nowhere near the returns investors experienced broadly in 2017, the market has now entered the longest bull market in history. Milestones like this tend to lead to a heyday for market “experts” and tv pundits beginning to predict the next huge crash, which quite honestly has been going on since this recovery began in 2009. Our view hasn’t changed: none of this matters for those investing for a long-term goal like retirement. All-time highs are a great thing, but our focus is on the long-term and the potential for a correction is always on the table. It is no reason to change your strategy.

 

Here’s the lowdown on all-time highs.

For some context, it’s important to remember just how easy it is to reach a new all-time high so we don’t get too carried away with return expectations. Over just the last five years alone, here are the number of times the Dow has hit record highs (source: the balance)

 

  • YTD 2018: 11 times
  • 2017: 70 times
  • 2016: 26 times
  • 2015: 6 times
  • 2014: 39 times
  • 2013: 52 times

 

Think about it for a second…it really only takes an increase of any amount, even 0.00000000000001% to reach a new all-time high, once you’re already sitting at an all-time high. Over the many years, if not decades most blooom clients have until they retire, they are likely to experience hundreds, if not thousands more record highs, so why worry about the potential for a crash? Why not instead keep your eyes on the prize? Stay focused on the end goal and remind yourself that along with the many new all-time highs you’re likely in for over the years ahead, your investments will also experience many many market dips. Historically, it has always benefited those with a disciplined approach, to view those pullbacks as opportunities and a market “on sale”, rather than a reason to run for the hills.

 

Enjoy the summer heat while it lasts, folks.

As we enter this last month of summer, remember that things could very well cool down soon in the market, BUT they could also very well continue to stay hot. And that’s the kind of forecast the most successful investors will pay attention to, because the only short-term prediction that can be made about the stock market with 100% certainty is this: nobody has a clue. But for those focused on the long-term forecast, we see no reason to believe that it won’t remain sunny for those that are patient, just as it historically always has.

 

To be clear, we are not recommending or even hinting that investors should attempt to sell high or time the market. Sure, It would be great to sell at the all time high and time it perfectly so that you don’t miss any potential gains, and then buy back in at the lowest point…but there are some hurdles to this: 1) you could be, but we doubt that you’re watching the market 24/7, 2) no one knows when the trends truly start to turn, 3) you have to be right twice for that to happen, 4) most 401k accounts have restrictions on trading within it like a brokerage account, and 5) you’re restricted to the funds that are available through your plan.

Consider this: you hear horror stories of the crash in late ’07 through ’08 – people losing everything, retirement’s being ruined…. those do happen, unfortunately. HOWEVER, short of positions going to $0, had those investors not sold, they would be considerably better off today than they were pre-recession.

Stay focused and please reach out if you’d like to discuss with our advisors.

 

 

This information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed.

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5 Ways to Save for Retirement When You Have Student Loan Debt

Graduation caps have landed, tassels have been switched to the other side, and mom has all the pictures she could ever want. Graduation day is one of the most memorable occasions in a person’s lifetime, but as seventy percent of new grads know, it also starts the countdown to one of life’s most-dreaded evils: paying back student loans. Recent research suggests millennials are now spending one fifth of their annual salaries on student loans alone, and now expect to be making payments well into their forties. At the same time, most millennials know they need to start saving for retirement in their twenties – from their first day at their first job if possible – but when Sallie Mae comes knocking it can seem impossible to both pay back debt and save for retirement on an entry level salary.

 

So how can you manage your student loan debt and also make sure you have enough to retire comfortably?

 

Here are a few tips to get started:

1. Create a budget

Your first step should be to come up with a plan outlining your long-term financial priorities, including everything from paying off student loans and contributing to retirement to having immediate funds for an emergency. You can’t focus on realizing long term goals when you’re trapped lurching from one immediate crisis to the next. Take some time to breathe and focus on the future.

 

2. Manage your payment plans

While getting out of debt can seem like a more urgent priority, make sure you are on track to meet your retirement goals before accelerating your student loan debt payoff date. According to a Morningstar report, every dollar of student loan debt creates a 35 cent decrease in retirement savings. Try to put at least 10-20 percent of your income throughout your working years aside for retirement. This enables you to take advantage of compounding interest and the time value of money, so you’ll actually end up with more money by the time you retire. Automation makes managing this process easier, so you don’t need to think twice about it!

 

3. Take advantage of employer matching policies

Does your employer match contributions or participate in a pre-tax retirement saving plan? You could be earning a higher rate of return by making sure you’re participating in and capitalizing on those policies. New company, new plan? No problem! Look into rolling over your 401(k) to maximize your benefits. Sometimes money does grow on trees.

 

4. Refinance your existing debt

If you have good to excellent credit and a steady cash flow you’re a prime candidate for loan refinancing. Look for a new loan with a lower interest rate, and make sure you use all the money from the new loan to pay off the old one. Some banks and loan providers also offer loyalty and automation discounts, so you should also make sure you’re familiar with all the options available to you before you sign on the dotted line.

 

5. Keep an eye on pesky fees

Three in four Americans have no idea what they’re paying in 401(k) fees, and nearly 40 percent believe they’re not paying any fees at all. When’s the last time you checked what you’re paying in fees? It’s not enough to just save money if you end up losing thousands of dollars in fees you don’t even know you’re paying. Signing up for Blooom’s 401(k) robo-advisor to manage your 401(k) and minimize those pesky fees costs a flat fee of $10 per month, no matter how much you have saved. No small print, no tricks.

 

Still feel like you’re drowning in debt? Check out blooom’s free 401(k) checkup tool to see how you’re doing with your retirement savings plan.

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Keep Calm and Invest On

Remember when “breaking news” was actually worthy of the term? It’s thrown around so much by networks these days, it feels like everything leading off the news is cause for mass hysteria. Maybe there’s an asteroid heading right for us, or maybe the Sun is supposed to randomly burn out in the next few months.

If that’s the case, your investments aren’t going to do you any good anyway. But in the far-off chance that those things DON’T happen any time soon, it might be good for us to cover something EVERY long-term investor must understand. Just like any set of stairs you encounter, markets go up AND down. It happens ALL the time … so often that at some point investors saving for retirement owe it to themselves to stop paying so much attention to [insert major news network].

We can’t tell you how many times we’ve seen something similar to these following headlines over the years:

“Expert: Crash is Coming, Time to Sell”

“2008 All Over Again?: Analysts Think So”

“Dow Sheds 300: Pros Say Get Out!”

And the very next day…

“Dow Rebounds 350 Points: Bull Market Marches On”

“Analysts: This Year Could Be the Best Year in Decades for Stocks”

“Risk On: Never a Better Time to Buy!”

You get the point. In a world where we now have a 24-hour news cycle, the very existence of any news outlet is highly dependent upon one thing: RATINGS. There is simply nothing better for ratings than fear and panic, which is why those first three headlines will catch more attention than the last three. It’s why negative news will always net more ratings.

Why is this? Well, unfortunately negative events have a greater impact on our psychology than neutral or positive events. This is often referred to as negativity bias and it’s just another annoying and unavoidable part of our human nature. It’s why we tend to pay more attention to a celebrity’s life spiraling out of control than the daily acts of heroism displayed by any of our local fire departments. In the world of finance, it’s why we’re inclined to tune in on the down days and ignore the up days. The media knows this. They thrive on it. It’s also the reason that very simple facts that would likely relieve that fear for the average long-term investor are often left out of the story.

For example, how about the fact that, according to data from the Capital Group, in the last 115 years we’ve seen a decline in stocks of 10% or more on average once every single year? Or the fact that in that same span, we’ve averaged three declines of 5% or more every single year? What about the most comforting fact of all – that there has NEVER been a single time in U.S. history where the stock market has dropped and not recovered. Does that guarantee it will never happen? Absolutely not, but we would have far bigger concerns than our 401k accounts if we saw the first ever permanent crash. When the stock market is falling, viewers are more likely to stay tuned (can you say RATINGS BONANZA?) Do they usually balance it out with historical context and comforting facts? Not so much.

No one knows for sure what the rest of 2018 will bring to investing. Financial news will continue to keep us informed and sometimes on edge, but its role has little to do with the average investor saving for a far-off goal like retirement. Unless you’re a professional trader trying to interpret market data every second of your day, any news related to the day-to-day movements in the stock market should be irrelevant to you. Investing for your retirement is about retirement. If anything, most investors should embrace the volatility, since the market is really just going on sale. It’s not about today, tomorrow, or even five years from now. And if you ARE that close to retirement, you shouldn’t be heavily invested in stocks anyway.

So relax. Be patient. Chill. Sure, it’s a challenge to any investor, but it may also be what ultimately saves you from making enemies with future you.

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Don’t Sit: How to Rollover Your 401k

Congrats! You’ve landed a new job (never a doubt) and didn’t even have to list us as a reference (Oh, the accolades we would’ve thrown your way). While you’re busy getting acclimated to your new work digs, if you have a 401k with your previous employer, don’t forget to bring it with you, along with your trusty stapler. Here are a couple options on how to roll it over:    

Direct rollover to new company plan

If you plan on performing a direct rollover of your old account, first check to make sure your new employer’s retirement plan will accept 401k rollovers. If so, contact the 401k administrator at your new company for a new account address [Example: ABC 401k Plan FBO (for the benefit of) YOUR NAME]. Once you fill out all required paperwork, your 401k funds will either be transferred directly from your old plan to the new plan, or mailed to you as a check made out to the new account address. Just make sure to turn it over to your new company’s 401k administrator.

Rollover to an IRA

You can also roll over your 401k to a traditional IRA, either by transferring the funds to your existing traditional IRA, or by opening a new IRA to receive the funds. No dollar limit is required for either one. You can also roll over – or convert – your non-Roth 401k money to a Roth IRA. The taxable portion of your distribution from the 401k plan will be included in your income at the time of the rollover.

Leave it where it is.

Sometimes the best move you can make with your 401k is to not make any move at all. At least for the time being. For instance, If you’re happy with the investment alternatives your former job offers, or if you need some more time deciding your next move, or if your new company requires a certain amount of time before you can participate in their 401k plan, you may be able to simply leave your 401k where it is.  

Cash out.

Please advise, we only recommend this as a “last resort” option. After you leave your previous employer, you can choose to withdraw your 401k funds in a lump sum after leaving your previous employer. To do this, request that your 401k plan administrator cut you a check. While the check amount will look great in your hands, remember that cashing out could put a dent in your retirement savings, plus you may be faced with significant taxes and penalties in the short term, too.

Of course, not all 401k plans are created equal. So before you make a final decision, we’ll help you choose the best fit for your retirement goals. Hey, it’s what we’re here for, so let’s chat.  

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Before Booking Your Summer Getaway …

These Money Moves Can Keep You From Sweating the Details on Vacation 

In the heat of summer, it’s hard not to daydream about lounging on sandy beaches and sipping on your favorite frozen concoction. But is taking a summer vacation realistic for you? Before you start planning your escape, consider these vital financial moves first before spending on your next getaway. 

Pad that emergency fund.

Did you know four out of every ten Americans can’t afford a $400 emergency, according to a report from the Federal Reserve Board? Before you hit the road on that summer trip, make sure you’re saving cash to cover any unexpected injuries, illnesses or life-threatening home repairs. Once you have at least $1,000 saved, congratulations! You’re doing better than most. From there, commit to saving at least three to six months of living expenses to ensure you’re protected against any future emergencies.

Don’t be tardy paying down student debt.

Student loans are becoming more and more of a necessary evil for many Americans seeking higher education. The average student loan debt for a graduate in 2017 was $39,400, according to Student Loan Hero. Ensure you have a plan to pay back your debt that works within your budget before you start looking at vacation destinations.

Stay focused on future you.

We all know we should be saving as much as we can for retirement. But if you’re looking for a hard number, 10% to 15% of your income is a good rule of thumb. Once you’ve established the habit of saving for retirement, it’s important to save the right way – by investing in a mix of stocks and bonds in line with your age and risk tolerance. This is where blooom helps.

Save for vacay before spending on vacay.  

Taking a summer vacation is more of a luxury than a cultural norm, according to a recent survey from Bankrate. Forty-nine percent of Americans don’t plan to take a vacation this summer, and one in four survey respondents are not taking a summer vacation because they can’t afford it. Only 36% of respondents who get paid vacation days plan to use all of them this year. So how can you get that well-deserved R&R?

If you think you might have to stay home until next summer, consider changing your destination and/or accommodations to something more practical first. Check out the New York Times’ recent article about the 11 Ways to Save Money When Booking Travel for valuable tips and tricks to maximize your vacation budget.

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