FAQs from Your COVID-19 Financial Survival Kit Webcast
March 25, 2020You may have joined our recent webcast titled Your Covid-19 Financial Survival Kit. We had a lot of questions come through during the sessions so we want to share the commonly asked ones, with their answers! Our facilitator, Bruce Young, CFP, has provided written answers below.
Take a look at the different topic areas, and for more resources see the banner on the home page of your Financial Finesse Hub
401 (k)
Q) Should I keep funding my 401 (k)?
A) Yes! you are buying low and you don’t want to miss out on matching funds if it’s available to you.
Q) Should we lower the amount we are contributing to our 401 (k) for the current time period?
A) Unless you need to redirect funds to beef up your emergency fund, you should avoid lowering your 401 (k) contribution because you are now buying low and can take advantage of dollar-cost averaging.
Q) Is this a good time to increase my 401 (k) payroll deduction?
A) Yes, if you have an emergency fund already then this is a great opportunity to be investing more in your 401 (k) while the market is low.
Q) I am within 11 months of retirement – should more go to fixed income (money market, CD’s) or leave a portion to stocks, etc.?
A) Ideally, you will want to have up to 3 years’ worth of living expenses in a “safe” investment such as money market CD’s, etc. Typically, a conservative portfolio based on your comfort level of risk. An example might be 20 to 35% stocks, 65 to 80% fixed income.
Q) I am retiring in less than a year, should I continue to put money in my 401 (k)?
A) Yes, especially if you have a company match in your 401 (k).
Q) What if you have a 457? Should I borrow from a 457 before my 401 (k)?
A) While a retirement loan is generally a last resort, the benefit of taking a loan from your 457 is IF you had to leave / separate from service you may not be subject to the 10% penalty (if under age 59 ½)
Q) I have two years until retirement – what is my risk tolerance.
A) Typically, a conservative portfolio based on your comfort level of risk. An example might be 20 to 35% stocks, 65 to 80% fixed income.
Q) If I have a 401 (k) loan should I convert it to a distribution payout? I’m 65.
A) Ideally, no as you will be making it a taxable event.
Market
Q) Is there any benefit to withdrawing large sums of money out of bank accounts during these times ie how do you calm a panicked senior?
A) No. That being said, having a set amount of cash on hand ($ 200 – $ 1,000) for emergency cash transactions is a good practice.
Q) How do you communicate to friends and family members that they shouldn’t be liquidating at this point?
A) First off, it’s maintaining a calmness when talking with them. Going over what their time frame is (when they need the money), recognizing that the investment markets do go down and historically they have rebounded, and finally re-assess their risk tolerance, ie do they need to re-balance their portfolio.
Q) When is the market going to go back up?
A) I wish I knew! Seriously, no one knows that answer, hence sticking to the sound fundamentals of investing and (ideally) dollar-cost averaging into the market.
Q) Once the market stops going down, do you recommend investing in the stock market?
A) Since we do not know when that inflection point will occur, you want to maintain your investment strategy through both the ups and downs of the market.
Q) Is now a good time to purchase stocks?
A) Yes, if you have a long-term investment timeline this could be an excellent time to purchase stocks!
College
Q) Should I keep saving for my child’s education? Or keep it for emergencies?
A) Saving for a child’s education should be behind (1) saving for an emergency (2) saving for your retirement. Also, if there is any high-interest rate debt, that should be prioritized over children’s education.
Q) I have a high school senior going off to college in the fall. I’m concerned about the loss we have recently taken on the money we have set aside for college. Will the market rise soon enough, or should we sell and take a loss?
A) We do not know when the market will rebound. Prior to selling at a loss, consider alternative means, ie student loans that could be paid off once the market does return.
Emergency Fund
Q) What is the correct amount of money for an emergency fund?
A) Start with a goal of $ 1,000 working towards 3 – 6 months’ worth of NECESSARY expenses
Qis it a good idea to hide away money in our home if the market does not recover? Is this what you mean about emergency money?
A) Having emergency cash (think a range of $ 200 – $ 1,000) at home is advisable. Your emergency SAVINGS should be in a safe type of investment (think savings account, CDs, money market accounts).
Buying a Home
Q) I just bought a house this month at what seems to have been the peak of the housing market. Should I be concerned? Or is this a long-term, ride-it-out scenario?
A) Unless you bought the house with the expectation of “flipping” it, a home purchase is a long-term investment
Q) I’m saving up a down payment for a house, now that the stock market is plummeting, I want to invest some money in the market while prices are low, how should I prioritize this?
A) It depends on which goal is MOST important to you. If buying a home is, then saving in a savings/money market account is the preferred way to save. If buying a home is a “nice to do, but can wait” then investing in the market can be beneficial when prices are low.
Q) Hi, we have been preparing to buy a house in an area, that is always high demand and expensive and it will stay that way during the crisis too. Should we buy or wait if something good comes up?
A) With mortgage rates at historical lows, it may still be a great time to buy a home, but you’ll want to consider your job stability.
Q) I am currently in a transition, should I purchase a home or continue to lease/rent?
A) Mortgage rates are at historical lows, so you should consider job stability and how long you plan to stay in the area before making the decision.
Q) If possible, would this be a good time to refinance a mortgage?
A) Yes! Mortgage rates are at historical lows.
Student Loan
Q) How should you think about federal student loans now that interest rates are waived?
A) If you can continue to make your normal payment, this is a wonderful opportunity to pay down the balance more quickly. If you are having issues making the payment, contact your student loan servicer for a forbearance program.
What Financial Advisors May Not Tell You About 401(k) Rollovers
December 08, 2015I love the holidays. For me, Christmas is the chocolate time of the year- chocolate cakes, cookies, hot chocolate. It is awesome! I recently made my own Crock-pot hot chocolate and invited friends over to share my sugar rush. Continue reading “What Financial Advisors May Not Tell You About 401(k) Rollovers”
What I Did During Open Enrollment This Year
November 19, 2015Well, it’s that time of year again. No, I don’t mean the holidays. I’m talking about annual open enrollment, the limited period when you get to make your benefits selection at work for the upcoming year. Continue reading “What I Did During Open Enrollment This Year”
Are You Leaving Money On The Table?
November 13, 2015One of the things that I have heard people say in conversations regarding money is “every dollar counts” and…I agree with that. To that end, there is some money that a lot of employees leave on the table on a fairly regular basis. With just a few slight tweaks, they could recover some out-of-pocket expenses that far too often are being put on a credit card and creating a gradual increase in debt level. The best part is that these are all 100% above board and employer-sanctioned. We all work hard, and in the course of doing that work, you should be able to recover some of the expenses of working. Continue reading “Are You Leaving Money On The Table?”
The Best Place To Find Financial Products And Services
November 10, 2015My cousin is the ultimate bargain hunter. If you are looking for that amazing combination of value and quality, she is your woman. She can find the $5,000 vacation for $1,000 or the $500 coat for $69.99. She came to me excited because she found an amazing deal on life insurance. She has been searching for months with no luck and finally went to a financial advisor who gave her the cheapest quote she had gotten so far. Continue reading “The Best Place To Find Financial Products And Services”
5 Things To Know About Group Insurance Discount Programs
November 04, 2015You may not view it as an employee benefit, but discount insurance programs could be a valuable part of your overall benefits package. Employers and other large groups are often able to negotiate much lower rates simply because the risk is spread out over a larger pool than if you just purchased the policy as an individual. Examples of discounted insurance policies you may be able to realize through work include homeowners or renters, auto, umbrella and even pet insurance. Here a few things to consider about these perks: Continue reading “5 Things To Know About Group Insurance Discount Programs”
Making the Most of Your Employee Discount Programs
October 28, 2015A popular component of many employers’ wellness programs is a discount on membership to local fitness centers and/or weight loss programs, which can be a great way to save some money toward your financial goals. If you’re currently paying a gym membership or using a program such as Weight Watchers, definitely check to see if you can get a discount through work. It’s a no-brainer. Our health insurance benefit at Financial Finesse actually offers a $20 per month rebate on participating gyms but in order to receive it, participants need to attend the gym at least twelve times per month. For many people, that’s the motivation they need to show up! Continue reading “Making the Most of Your Employee Discount Programs”
Are You Ready For Open Enrollment?
October 27, 2015It’s open enrollment time…that time of the year when you get this huge booklet or email of benefits and have to wade through all of the papers and links to figure out what to do while planning for the holidays at the same time. Remember to take time to really think about how you used your benefits last year so you can make the best decision. Here are a few things to consider: Continue reading “Are You Ready For Open Enrollment?”
5 Questions to Ask About Your Employer Tuition Benefit
October 21, 2015Despite the inflation of college tuition far outpacing the growth of wages, having a bachelor’s degree is still one of the best ways to boost earning power and job opportunities. A 2014 report found that a person with a bachelor’s degree earns over $20,000 more per year on average than someone with just a high school diploma. One way to help defray the cost of college is to take advantage of your employer’s tuition reimbursement program, but before you do, here are some questions to answer: Continue reading “5 Questions to Ask About Your Employer Tuition Benefit”
Don’t Leave Any Money On The Way Out
October 06, 2015I was recently talking to a dear friend of mine who just lost her job due to a layoff. She was shell-shocked, scared and not sure what to do. As I listened to her talk about her plan, I asked her about her workplace benefits and she said that she got the package, saw no value in anything she had and was getting ready to throw the package away. Continue reading “Don’t Leave Any Money On The Way Out”
Take Advantage Of Your EAP
September 29, 2015As I talk to people about their finances, I find that many need guidance for the everyday issues like daycare, eldercare, and legal or financial issues to get them on the right track. My guidance is always to research your company benefits to take full advantage of everything your company has to offer to help you financially. I find that one of the most underutilized benefits is the employee assistance program. Continue reading “Take Advantage Of Your EAP”
The Hidden Costs Of Overlooked Benefits
July 29, 2015August is an overlooked month. Every other month of the year has a holiday or is associated with an exciting beginning, but not August. Many of us try to sneak in one last summer weekend or some back to school shopping but other than that, August is usually a lull in the calendar. A great way to make August productive is to examine the employee benefits programs that you aren’t taking advantage of so that you know which options you do want to sign up for during open enrollment this fall. A few minutes now can help you be prepared to maximize your benefits and possibly save thousands of dollars instead of rushing through a decision or just doing what you did last year. Continue reading “The Hidden Costs Of Overlooked Benefits”
5 Retirement Plan Benefits You’re Probably Overlooking
July 02, 2015One thing that I’ve noticed when speaking to HR executives and other employees about their benefits is that many valuable retirement plan benefits aren’t being taken advantage of. These benefits are part of your compensation so not utilizing them is like not taking your whole paycheck. Here are 5 in particular: Continue reading “5 Retirement Plan Benefits You’re Probably Overlooking”
The Value of Your EAP Program
June 09, 2015Years ago when I was pregnant, I was a nervous wreck. I did what every pregnant woman should not do. I found every article I could on every worse-case scenario imaginable about daycare. Continue reading “The Value of Your EAP Program”
Don’t Leave Any Money On The Table
June 02, 2015A few days ago, I was meeting with a friend that just changed jobs. She was excited about the pay, her new co-workers and the shorter commute to work. As she started talking, I mentioned that she should take advantage of all the benefits her company offers and not leave any extra money on the table. Continue reading “Don’t Leave Any Money On The Table”
My $280 Mistake
February 05, 2015I admit it. I goofed. Despite being a financial planner who often helps people with their benefits, I made a mistake with my own. As I was looking at my expenses and taxes for last year, I realized that I could have reduced my taxes by $230. That’s the amount I would have saved if I contributed the $817 I spent on eligible vision and dental expenses last year to my company’s limited-purpose FSA (flexible spending account). Continue reading “My $280 Mistake”
Your Best Financial Services Provider Might Be Your Employer
February 03, 2015It always amazes me how people overlook their employee benefits and will pay out-of-pocket for what they can in some cases, get for free. Years ago, I worked with a couple in which the wife was diagnosed with breast cancer about 5 years ago but thankfully, is in remission. They were trying to get their estate plan in order and had hired their friend’s attorney to help them. Several thousand dollars later, they wondered if they made the right choice. Since I am not an attorney, I would never give legal advice, but I had to admit to them that considering the simplicity of their estate and wishes, they had an amazingly complex plan. Continue reading “Your Best Financial Services Provider Might Be Your Employer”
The Hidden Benefits of After-Tax Contributions
November 20, 2014No, I’m not talking about Roth contributions. If your employer’s retirement plan offers this option, you may be able to contribute more than the annual limit of $17,500 (or $23,000 if you’re 50 or older) to your plan in the form of “after-tax” contributions. As the name implies, the contributions are taxed before you put them into the plan. And unlike Roth contributions (which are also “after-tax”), the earnings are taxed when you withdraw them. Continue reading “The Hidden Benefits of After-Tax Contributions”
How to Thank and Help Our Future Veterans
November 04, 2014With Veteran’s Day around the corner, we stop to thank those, past and present, who have served our nation and protected our freedoms. We all know that they volunteer to spend time away from home and family and risk their lives to keep us safe. The tragic stories of service members suffering from PTSD and life altering injuries tear at our hearts. What no one talks about is the financial hardships that many of our service members face. Continue reading “How to Thank and Help Our Future Veterans”