Changes – If you ever change jobs, don't leave your 401(k) money behind. Do a “direct rollover” (Trustee to Trustee Transfer) into a personal IRA,
where you will have more control over your money and better investment options.
Long-Term – Pay special attention to proper asset allocation. Always be honest with yourself when completing an investor risk tolerance
questionnaire. Remember that the longer you have until retirement, the more time you have to ride out the “ups and downs” (fluctuations) of the stock and bond markets.
Rule – Save & Invest 10–15% of your income into an IRA & / or company retirement plan. Try to cut back on the non-essentials to help you
reach that 10-15% mark. Budget a little extra today, so you can have what you want tomorrow.
an Annuity – Consider adding a guaranteed income component such as an annuity to your portfolio. Adding guaranteed income or income that you cannot
outlive such as an annuity product that provides a guaranteed lifetime income rider, can improve the odds that your portfolio will survive throughout retirement. This can allow you to
allocate a greater proportion of your nest egg towards stocks, which historically have outpaced inflation.
5. IRA Withdrawals – When retiring and deciding which accounts to withdraw from first
(Roth IRA or Traditional IRA), it’s best to receive income from your taxable Traditional IRA first. Let your Roth IRA continue to compound as long as possible, as all withdrawals of your then
greater dollar amounts will be tax–free.
1. Mutual Funds – Mutual funds are a pool of stocks or bonds that are managed by a team of professional fund managers. People "mutually"
invest their money, and the investment managers then manage these "funds" by researching and deciding what stocks or bonds to buy or sell. Some of the major benefits of mutual
funds are: broad diversification, liquidity, and professional management. Mutual funds are ideal for long-term investment programs, and are best used in IRAs and
2. Share Classes (“A” & “C”) – Mutual Funds come in different share classes, the two most
common are "A" and "C". The class “A” share has an upfront sales charge of up to 5.75% for stock mutual funds and up to 4.25% for bond mutual funds. “A” shares have breakpoints, meaning the
more money you invest & accumulate, the lower the upfront sales charge. Class “A” shares also have very low annual operating expenses, making them ideal for long-term investing (such as
in IRAs & 401Ks). The class “C” share has no upfront sales charge, but will charge a 1% fee if you sell within 12 months of purchase. “C” shares however do have higher annual
operating expenses than class “A” shares. So which do you choose? It all depends on how long before you plan to sell. Class “C” shares will best suit you if your holding period
is no more than 6 or 7 years, and class “A” shares are best if you plan to hold for longer than that. Always read a mutual fund’s prospectus to see the actual difference in costs/fees over
various holding periods between class “A” and class “C” shares.
3. Asset Allocation – Diversify your investments through various asset classes. You may have read or heard the numbers “80 / 20” or “60 / 40” thrown
around. An “80 / 20” asset allocation mix is basically 80% Equities (Stocks) and 20% Income (Bonds & Cash). This allocation may be suitable for one person but not for another.
What’s the right asset allocation mix for you? The best way to find out is to complete an “investor profile” / “risk tolerance” questionnaire. This will help you decide on the right
allocation mix for your specific risk tolerance and time horizon.
4. Diversification – Spreading your money throughout different asset classes helps
reduce your overall risk of loss. You can do this by investing a portion into different size stocks: large, medium, and small that are in the US and in other countries. Different types of bonds:
government, municipal, corporate, and high-yield in the US and also other countries. A diversified mutual fund portfolio can help you to best utilize this strategy.
5. Rebalancing – Once you have your mutual fund asset allocation mix percentages
all set, and are fully diversified, it’s best to rebalance every once in a while. Ideally you should rebalance only once annually, to keep all allocation percentages in check.
However, in volatile markets you should rebalance every time you see a shift of at least 5% from your original allocation.
1. Life Insurance – Life Insurance is meant
to replace your income should you die while still having financial responsibilities, typically during your income earning years. During those working years as you contribute to your 401k
& IRA, and pay down your debt, your need for life insurance will decrease. By the time you retire, (outside of any estate tax planning or business succession planning needs) your need
for life insurance will be minimal, if any. Conduct a life insurance needs analysis every couple of years to ensure that you have the optimal amount of coverage.
2. Calculating Life Coverage Need – When
calculating your life insurance coverage need, a good rule of thumb is to have between 8 to 12 times your annual income in coverage. Ex: $50,000 annual income X 8 to 12 = $400,000 to $600,000 in
total coverage. There are also other factors that can change that number as well. Are you looking to replace 100% of your income, or just replace half of it and pay off your mortgage
3. Disability Income Insurance – If you become too sick or injured to work, a
Disability Income (D.I.) policy can replace a portion of your income. An employer DI policy can replace up to 60% of your income, however your income benefit will be taxed, further
reducing the amount you receive. The addition of a personal DI policy, which can replace between 30–45% of your income (depending on your occupation & income), has a tax-free
benefit. This can help by giving you more income to get by on until you are ready to work again.
4. D.I. Elimination
Period – With a personal Disability Income insurance policy (and also Long-Term Care policies) your “deductible” is not in the form of money,
but in the form of time. The time deductible, which is known as the “Elimination Period”, is the number of days you must wait until your disability benefit begins. Like any deductible, the longer
the elimination period (90 days, 180 days, etc) the lower your premium, the shorter the elimination period (60 days, 30 days), the higher your premium. Always determine much you have
in your personal savings first when deciding on an elimination period.
5. Long–Term Care Insurance – A Long-Term Care (LTC) insurance policy is designed to provide for
the cost of care that is required when one cannot perform at least two of the five “Activities of Daily Living” (ADLs). These are: dressing, bathing,
eating, continence, and transferring (getting in and out of a bed). Whether you decide to stay at a nursing home or have in-home care, the cost of care is ever increasing. A personal
LTC policy can pay for the cost of that potential future care.
Planning – What exactly is an “estate”? If you have “stuff”, you
have an estate. Stuff as in: your home, car, jewelry, bank accounts, rental property, investments, old baseball cards, vintage Barbie doll collection, and any other personal
possessions, are all part of your estate. So then how do I know if who I say should get my stuff when I die, actually does get it? Enter the Estate Plan. A good estate plan
is comprised of a Will, a Living Will, a Guardianship, and a Trust (if necessary). It will also help in reducing any potential estate taxes that might be due at your death. Your life
insurance has beneficiaries, your retirement accounts have beneficiaries, everything else you own doesn’t. That’s what a Will and an estate plan is for. At the very least, get a Will
prepared by an attorney, don’t try to do it yourself. Your beneficiaries will thank you.
2. Inheritance Equalization – Most family businesses have some family members that are
not involved in the business. Upon your death the splitting of a family-owned business equally among all family members, regardless of their involvement can put
them at odds with each other. This could easily cause conflicts that would interrupt the flow of business. In this situation, a life insurance policy can be used as an intricate part of your
estate plan. The life policy can provide a death benefit to those family members who are not involved in the family business. It can be equal to the value of the business you
leave to the family members who are involved and will take over the business.
3. Irrevocable Life Insurance Trust (ILIT) – This is a type of trust that is designed to hold your
life insurance policy. The trust becomes the owner and beneficiary of the policy, so technically it is not part of your taxable estate. An ILIT can provide readily accessible funds to your
beneficiaries after you pass away, and not be included in their taxable estate either. If you have a large life insurance policy or a sizable net worth, an ILIT can be a very important
part of your overall estate plan.
Plans (NJ) – Withdrawals for qualified higher education expenses are free from federal income taxes. Contributions are not tax deductible. Individuals may contribute up
to $14,000 a year or up to $70,000 (up to $28,000 a year or up to $140,000 if a married couple) per beneficiary to a plan in a single year without paying federal gift tax if no further
contributions to that beneficiary are made for the following 5 years. Assets in a 529 plan are generally not included in your
federal taxable estate. The first $25,000 of plan assets are also not considered when determining a beneficiary's eligibility for
need-based financial aid awarded by the state of New Jersey. Your beneficiary can attend almost any U.S. full-time or part-time undergraduate or graduate school. Plan assets may also be
used for training after high school at many proprietary trade schools.
5. Charitable Remainder Annuity Trust – In
a charitable remainder annuity trust “CRAT” the donor(s) make a contribution to the trust and receives income at least annually for a specified number of years (20 years max), or for the life
of the donor(s). Upon the death of the donor(s), or the expiration of the term of years, the trustee then distributes the remaining trust property to a qualified charity chosen by the
donor(s). In a CRAT, the income payments are determined at the time of the contribution and are a fixed amount based on a percentage of the total value of the contribution. Only one
contribution is allowed to a CRAT.
For a free consultation,
please contact us for an appointment.
blog is strictly the opinion of Michael A. Malleo and not those of
ASH Brokerage Corp., Quest Capital Strategies, Inc., nor any of our affiliates.
Malleo Financial Services LLC cannot and will not give any specific tax or legal
Please consult your tax professional or legal professional for such