Faith Based Investing

People often ask me about coaching them on their business and in their personal finances.  Here is how I look at a person’s financial life analyzing ten key areas.

Analyzing the Ten Key Areas of  Your Faith-Based Financial Plan

1: Ownership. God Owns 100% of everything. This i the foundation of any plan determining who is the owner of all that is entrusted to you.

Key Verses:

Haggai 2:8 “The silver is mine and the gold is mine,” declares the Lord.

Psalm 24:1 “The earth is the Lord’s, and everything in it, the world and all who live in it.”

Key Coaching Areas:

• Assess attitudes & motives in your personal financial planning.

• Rather than, “How do I protect/use my money?” the question becomes, “How can I best look after/use God’s money?”

• To rely on God and his provision not on our wealth or our ability to create wealth.

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If you haven’t reviewed your retirement plan recently, it’s probably time to have another look.

Circumstances change throughout your life, and as they do – your retirement plan may need to be updated to address those changes. Even if you established a plan years ago, it may no longer be focused on your current goals or your new financial situation.

To map out a solid plan for retirement income, you should talk with a Certified Financial Planner® (CFP^®).

Did you know … ?
Unlike a Doctor or Lawyer, there are really no established educational requirements to call yourself a Financial Professional. While you must pass the FINRA (Financial Industry Regulatory Authority) Series 65 Uniform Investment Advisor Law Examination in order to collect a fee as a Financial Advisor, no real life experience or even a Bachelor’s degree in Finance is necessary.

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Spending too much can ruin any good financial plan

Baby boomers are known for wanting more out of life – and for living life on their own terms. They also get a bad rap as a generation weaned on instant gratification – wanting it all now, wanting to have it both ways.

It is neither wise nor truthful to paint a generation with a broad brush. What we do know in 2010 is that more Americans than ever are poised to retire. In fact, 10,000 Americans will turn 65 each day during the next 18 years. Will their retirements match their expectations?

Are boomers in for a collective shock? Many boomers are used to affluence and expect creature comforts in retirement. Yet many may not understand how much money retirement will require. A 2010 study from the non-profit Employee Benefit Research Institute estimates that about half of “early” boomers (those aged 56-62) will face a retirement shortfall – someday, they will have inadequate income to pay medical costs and core retirement expenses. EBRI also estimates that 43.7% of “late” boomers (those aged 46-55) are likely to exhaust their retirement savings as well.

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What don’t you know? Many Americans know about Roth and traditional IRAs … but there are also many other types of IRAs. Here’s a quick look at several basic classes of IRAs, as well as some variations and additional information.

Traditional IRA.

A traditional IRA (or deductible IRA) is an individual savings plan for anyone who receives taxable compensation. IRA assets may be invested in any number of vehicles, and contributions may be tax-deductible. Earnings in a traditional IRA grow tax-deferred until withdrawal, but they will be taxed when withdrawal begins – and withdrawals must begin by the time the IRA owner reaches age 70½. If these Required Minimum Distributions (RMDs) are not taken at that age, a 50% penalty will be assessed on the amount not distributed. You cannot contribute to a traditional IRA after age 70½. The IRS considers all IRAs other than Roth and SIMPLE IRAs as traditional IRAs.

Roth IRA.

A Roth IRA offers you a) tax-free compounding, b) tax-free withdrawals if you are older than age 59½ and have owned your account for at least five years, c) the potential to make contributions to your IRA after age 70½ without having to take RMDs. While contributions to a Roth IRA are not tax-deductible, a Roth IRA has an advantage on the back end, with fewer requirements and limitations regarding withdrawals.  For 2010, anyone with a traditional IRA may convert it to a Roth IRA.

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Have you changed jobs?

Do you have a 401(k) from a former employer?

Have you wondered what to do with it?

There are many misconceptions about what must be done with a 401(k) when someone leaves a company. Some people think they have to cash out their 401(k) upon leaving a job. Others think they must “roll it over” into a new 401(k). Still others believe that they must leave the 401(k) where it is. None of these are true … and none are false. These aren’t “musts”, they are options. The big question is, which option is the right option for YOU?

If you have enough money in your current 401(k) to meet the minimum requirement, you could leave your money where it is. Should you? Well, it depends. If you feel the plan has good investment choices and the annual fees are reasonable, leaving your money there to mature could be a good option for you.

If your new employer offers a 401(k), you could choose to “roll” your money into that plan, but then you will be limited to the new plan’s investment options. So should you? Once again, it depends. You’ll want to look into the structure of the new plan, the fees and the investment options.

If managing where your account is held and how it is invested is important to you, moving your money into an IRA rollover account could give you a great deal of flexibility. It also offers you more distribution options, once you are eligible. Additionally, you could open a brokerage account or purchase a CD, provided the account is titled as your IRA Rollover Account.

The temptation to get a lump sum of money can be too great for some, especially if they have just lost their job or feel that they are in some sort of financial bind. They may choose to cash out their 401(k) upon leaving a job. But what are they giving up? Well, 10% for starters. If they are younger than 59 ½ years old and cash out their 401(k), most of them will incur a 10% penalty. Additionally, they will owe taxes on the amount they cash out. But here’s what really hurts: they are giving up part of their retirement fund or (in many cases) starting over from zero.

Fighting temptation now could lead to big rewards later …

For example, let’s say a 35-year-old leaves a job and rolls over $15,000 from a 401(k) into an IRA earning an average of 7% annually, letting the money mature over 30 years … by the time of retirement, that money could potentially grow to over $100,000.

If you’re unsure which choice is best for you, or if you’d like to learn more about your options, I would be happy to speak with you.

Many people have difficulty figuring out the proper strategy before and especially during retirement.  If you are too aggressive you could lose capital and deplete assets during a downturn. If you are too conservative you may not keep up with inflation and again you risk deleting your assets.   So what is the proper way to invest?

Should retirement mean ultra-conservative investments? That’s a good question. Many couples and families are urged to invest more cautiously as they get older – with the help of their financial advisor, they refine the asset allocation of their portfolio to make their investment choices a bit more conservative.

On the other hand, some people want to invest really conservatively. Perhaps they are acting reflexively, given what has happened with the stock market in recent months. Or maybe they believe in a longstanding myth: the idea that retirees should embrace fixed-income investments exclusively and leave stock market investing to younger people.

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Why do so many Americans refuse to create a financial plan?

I mean come on! The average person spends more time planning a vacation than they do trying to build financial freedom.  How about you?  Yes I’m taking to you.  you know who you are.  The guy right there flying by the seat of his pants.  The gal right there with no plan – just wishful thinking…You can’t do nothing and expect God to bless the results!

64% of Americans have no financial strategy at all. That’s right – no plan whatsoever to build wealth or keep it. That finding comes from the 2009 National Consumer Survey on Personal Finance conducted by the Certified Financial Planner Board of Standards, Inc. (The survey collected data from 1,700+ U.S. residents.)

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