Charleston Financial Advisor | Coastal Wealth Advisors

Planning for Retirement

July 1, 2015 by Kelly Scott

Do you think you’re too young to start planning for retirement? Well if that’s the case, then chances are you’re the perfect age! Motivating yourself to begin planning for the far future is never an easy task, but remember the sooner you start, the more time your money has to grow. We’re here to help you take the first step to begin planning for retirement, because we care about your future. We have some great tricks up our sleeves to help you plan for financial success, so let’s get started! Get in touch with us today to set up an appointment.

Roth IRA vs Traditional IRA

June 29, 2015 by Justin M. Follmer, MBA, AIF®

roth ira vs traditional ira

The Roth IRA vs Traditional IRA debate is still one that confuses most investors. And now that employer retirement plans are starting to offer Roth 401ks in addition to Traditional 401ks, it’s obvious that without a resource to guide you in the right direction, you may end up paying more taxes than desirable or making a decision that doesn’t fit your long-term financial plan.

You’ve heard me mention this before – rules of thumb apply to no one – and it’s true here as well. There’s no set rule that says everyone should contribute to a Roth IRA, despite what mainstream financial media may say. And just because it’s “new” and “trendy,” doesn’t mean it’s the best tool for your long-term financial goals.

What is a Roth IRA?

A Roth IRA is an individual retirement account that allows your contributions to grow tax-free and after age 59.5, tax-free when withdrawn. The kicker? You can’t deduct the contributions on your tax return.

What is a Traditional IRA?

A Traditional IRA is an individual retirement account that allows your contributions to grow tax-deferred and upon attainment of age 59.5, taxable when withdrawn. The difference? You CAN deduct the contributions on your tax return – given specific limitations.

Perhaps you missed the definition, so let me highlight the important parts:

Tax-free; tax-deferred: tax-free means it grows each year and can be withdrawn free of taxes; tax deferred means it doesn’t get taxed until withdrawn.

Can deduct; can’t deduct: under a Traditional IRA, your taxable income is decreased (can deduct) by the amount of your contribution (subject to phase-out rules defined below), under a Roth IRA, your taxable income doesn’t change (can’t deduct) by the amount of your contributions.

What about the 401(k) side of the debate?

The traditional 401k versus Roth 401k is the same concept as the IRA, except for contribution limits being greater and an employer match thrown into the mix. Keep in mind, an employer must place matching contributions into the traditional side even if you only contribute to the Roth account.

You keep referring to a “debate,” what do you mean?

In financial planning, there are a lot of variables that must be assumed. Growth rates, contribution rates, inflation rates, tax rates, among others. This last variable, tax rates, is where the heart of the Roth IRA vs Traditional IRA debate is. The question is, does it make better financial sense to pay taxes now (i.e. fund the Roth side) or pay taxes in retirement (fund the traditional side) during which it’s assumed your earned income will be less?

While I would love to give you a one sentence answer to the debate, I can’t, and no one else can either. It’s different for each person. Simple math can help shed light on the debate, but we have to make an educated guess on where tax rates will be in retirement. And trying to guess what our representatives in Washington DC are going to do tomorrow, let alone 30 years from now, is quite a challenge.

Regardless of where you are in your earnings years, perhaps just starting out, mid-career or cramming for retirement, we are of the belief that a sound financial plan can help solve the Roth IRA vs Traditional IRA debate as it pertains to your specific situation. We’ll work with you and your accounting professional to come up with the ideal solution to helping you accomplish your financial goals and then give you actionable steps to take to implement these solutions.

Image credit: WAMY

The Importance of Saving

June 24, 2015 by Kelly Scott

Never underestimate the importance of saving, because it results in future spending. Setting aside just a little at a time can have a big impact on your future financial situation. Keep in mind, slow and steady wins the race. We want to see you succeed in all your financial endeavors, including the most simple. Contact us today and let us help you start saving for the future!

Creating a Successful Financial Plan

June 17, 2015 by Kelly Scott

The first step to creating a successful financial plan is always the hardest, so give yourself a high five for doing what some people can’t. You’ve identified an area in your life where you could save money and diverted those savings towards another goal. But cutting back your lattes only gets you so far. Now’s the time to take further action and develop a sound financial plan with the help of our Charleston Financial Planner. We’ll help you analyze your entire financial picture and give you further ideas that may save you more money than the cost of a daily coffee. We’re excited to see what you’ve already done and believe that we can help you in creating a successful financial plan. Let’s chat today.

Automatic Investing

June 8, 2015 by Justin M. Follmer, MBA, AIF®

We believe that one of the best ways to take advantage of the rise and fall of the stock market is through automatic investing. Automatic investing is exactly as it sounds. You determine a set amount of money you can afford and allow it to automatically invest into a mutual fund or mix of funds on a set schedule each month. We call this Dollar Cost Averaging, or DCA for short and is the very principle by which you invest into your employer’s retirement plan. Using a DCA strategy, you’ll likely achieve the average price of the security over a period of time. Because it is impossible to accurately predict the direction of the markets we usually advise our clients to avoid trying to time the market.

Here’s how to set it up:

Link your bank account to your investment account.
Choose an amount of money to invest.
Choose which funds to invest in.
Choose a time period.
Set up the automatic instructions with your investment advisor.

If you have a long-term time horizon, you’ll want to think of the market in this manner: it’s on sale. This means you want the market to drop in value while you’re buying. It’s a pretty simple concept but yet we often get too lost in the misguidance of measuring short-term gains at the expense of the long-term strategy. The longer you set your focus, we believe the better you’ll feel about your investment strategy. Automatic Investing takes the guesswork out of deciding when to jump into the market. Over time, the markets will hopefully move higher, but while you’re contributing, you want to act selfish and hope you’re buying low so that someday, you can sell high.

There are dozens of decisions involved when choosing an investment strategy. Don’t go at it alone. We’ll help you back test your strategy and offer some suggestions on how you can improve it. We help our clients analyze their investment options and risk tolerance and then build an investment strategy that fits their lifestyle and wherever it may lead them. We want to be your financial partner. Get in touch with a Charleston Financial Advisor today!

What is a Roth IRA?

What is a Traditional IRA?

Perhaps you missed the definition, so let me highlight the important parts:

You keep referring to a “debate,” what do you mean?

Let’s start your conversation.