In recent months, we in the financial industry have been increasingly impacted by a set of changing financial conditions and how these changing conditions have impacted our financial investors.  Inflation has raised its ugly head and while it seems to be peaking it still remains at a level not seen since the early 1980’s. Investors looking for the stock market as a solid place ‘to park’ their money, have come back to find their ‘stock market car’ without any wheels, missing a spare tire, and out of windshield washing liquid. At the same time, the ‘diversifying’ bond market also lost value as interest rates rose to reflect increasing price levels. 

In the past when faced with economic or financial conditions not of my liking, I often tried to look to historical conditions with a similar story and with a historically based solution or at least to find a villain (e.g., Banks and the Crash of 2007) to blame. Unfortunately, a simple review of past financial conditions or villains as a basis for current solutions is often inadequate. When I raise these issues, my brother and co-partner often raises his head from the table and correctly corrects me with a: “So now what are you going to do? I don’t need your problem (e.g., declining stock market, rising interest rates, …) I need your solutions”. He reminds me that being ‘Mugged by Reality’ is not an excuse for denying its existence and not moving forward. Today, we live in a global financial market and unlike in the past, what happens in Europe, Asia or Ukraine has an immediate impact on our markets. Today, new forms of ‘financial instruments such as Futures, ETFs, and Options impact today’s financial products, and reliance on individual stocks or mutual funds are often insufficient and inadequate.  

 I often hear my financial investment sisters and brothers tell me to rely on the principles of ‘Modern Portfolio Theory’.  I point out that Modern Portfolio Theory was initiated in 1952 by Harry Markowitz and is no longer Modern and was centered on individual stocks and bonds. Today we cannot simply give an excuse that we were ‘Mugged by (the new) Reality’ and that our reliance on past solutions proved inadequate. We have to remind our investors that while we know we may not have perfect solutions, we do realize that we live in a ‘World of Post-Modern Financial Theory’ in which simple historical data may be meaningless, and what we should understand are new financial ideas and how we can expect them to work in the new financial world.  This is why we at Yes Wealth bring to our clients, solutions that address new ways of providing returns that also manage risk in today’s reality.

In short, financial reality bites especially when it may be in one’s own rear end, but this may also be a good time to get up and to get off it, and move forward into the new financial world of global equity, fixed income, options, futures, private markets, alternative investments, etc. I look forward to meeting you in this new ‘financial’ world’.

Please contact us if you’d like to discuss a plan for you:

Yes Wealth Management:

651-426-5854.

The average American now changes jobs every 4.2 years, yet many are not just leaving their jobs behind, but are also leaving their 401K with their previous employer. While leaving your funds put may be the simplest solution at the time, it can be detrimental to your retirement picture. 401k plans, especially ones that offer a match, can be a useful tool to save for retirement, however, they are not perfect vehicles.  Not only do 401k plans often carry various fees not always understood by the investor, but due to compliance issues the investment offerings within 401ks leave much to be desired.  Most 401K companies have a “less is more” attitude, severely limiting your investment options, making it difficult if not impossible to invest in your best interest.  For their own protection, they often subtly push investors to select Target Retirement Funds, a much simpler option for investors and one which gives the Benefits companies legal cover. The problem is that simplicity may or may not work to the long-term benefit of the investor. These issues are why it is important that when you leave a company, you leave your 401k plan as well. So, if you shouldn’t leave your 401k plan where it is, what should you do with it? When you leave a company, you have 4 options for your 401k funds, only one of which we recommend in most situations.

• Stay Put: Keep your funds in your 401k (not ideal):  While this is the most convenient in the short term, each year Americans lose track of billions of dollars in old retirement accounts they forgot how to access.  Even if you manage to keep track of your various accounts, your 401k investment options are limited, and no active management of your funds is occurring.
• Roll your funds over to another company’s 401k (not ideal): While this would help with the tracking issue of option #1, in this plan you’re simply moving from one poor investment platform to another as your investment options remain limited.
• Cash out your 401k (not ideal): Cash-out withdrawals are considered income, triggering state & federal taxes, and depending on your age, could trigger a 10% penalty in addition to taxes.
• Roll your 401k into an IRA (ideal): A 401k Rollover to an IRA is considered a non-taxable event, meaning you owe no taxes at that time, and your investments can continue to grow tax-free.  You will have superior investment options in your IRA compared to what you had in your 401K, and you will likely be paying fewer fees.

Bottom line:  Moving your 401k to an IRA when you leave a company brings with it many advantages, however, make sure to do your due diligence to find an advisor or IRA provider who promise low expenses, and if you need it – active management, as this too will be crucial for your long-term success.

Please contact us if you’d like to discuss a plan for you:

Yes Wealth Management:

651-426-5854.