Financially navigate the CoronaVirus​

Financially navigate the CoronaVirus​

Secure your future against the CoronaVirus​

Here at Freeman Capital we are committed to providing you with resources and information that will help ease your fears and answer the questions you may have especially during volatile and uncertain times.

Coronavirus continues to dominate headlines and yesterday we experienced the second biggest single day market decline since the October crash of 1987. 

Fear is at the heart of every market drop. Usually, it’s fear of the unknown. In this case, there are several unknowns for investors to contend with. Why exactly is this virus spreading so fast? How far will it spread? How long will it last? These are questions that no financial advisor can answer.

But fear, as we know, is a bad reason to make decisions. Fear of missing out, for example, often makes us behave too rashly. On the other side of the coin, fear of not getting out leads us to toss away opportunities or abandon the progress we’ve made to our goals.

Fortunately, whenever we feel fear, there are tools that we can use to steady ourselves.

One tool is history. Past performance, as you may have heard, is no guarantee of future results. But past is also prologue, which means history can give us a good idea of what to expect in the future. For example, here is how the S&P 500 performed over a 6-month period after other recent epidemics.(1)

Epedemics and Long Term Impact on the Market

Epidemic

Month End

6-month % change of S&P

SARS

April 2003

+14.59%

Swine flu

April 2009

+18.72%

Cholera

November 2010

+13.95%

MERS

May 2013

+10.74%

Ebola

March 2014

+5.34%

Zika

January 2016

+12.03%

Now, these are all imperfect comparisons, as they dealt with different viruses, at different times, in different regions, in different contexts. The point is that the markets, while occasionally impacted in the short term by epidemics, are rarely impacted over the long-term. And as we are investing to help you achieve your long-term goals, it’s the long-term that we care about.

So if you are contributing to a brokerage or retirement account, now is the time stick with your plan and keep contributing to your accounts.

These are unprecedented times and over the coming weeks things are likely to get worse before they get better and the prospects of going into recession are becoming more likely (in fact we may be in one already.) So what should you be doing to prepare?

Do you have a fully funded emergency fund?

During a recession, you need to be concerned about job stability. The best way to hedge against job instability, is to have a fully funded emergency fund. We like our clients to have at least three to six months of their monthly expenses saved in a readily available fund, preferably a high yield savings account.

If your emergency savings is not where you’d like it to be, there is no time like the present to start focusing on it. Cutting back on unnecessary expenses and lowering your monthly bills as much as possible will help you build it up faster.

Recessions are scary times and hard to predict when they will happen. Now is as good a time as any to make sure you are financially prepared to weather through a recession and come out of it in a position of strength.

How We Can Help:

  1. Schedule your 1st FREE call with your planner to help design your life.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Daryl Shaw

Daryl Shaw

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The High Cost of NOT Having a Financial Advisor

Planning for your long-term goals — especially retirement — can be a lot like driving a car with faulty airbags. In 2019 alone, tens of thousands of cars from at least 5 different auto manufacturers have been recalled because the airbags are in danger of deploying “inadvertently.” Something as minor as driving over a pothole could trigger the airbag.

Imagine driving a car like that… knowing that the airbag could pop out and hit you or a passenger in the head at any moment, without warning. How long would you continue driving that car?

 You wouldn’t put up with that very long — especially when the manufacturer recall gives you the option to get it fixed for free.

Research Doesn’t Lie

Here’s the thing…

According to research, 96% of people who haven’t retired yet are concerned about their post-retirement finances. Retirees aren’t much better: 89% are nervous about their finances over the long-term. You might say they’re worried their plans might blow up in their faces at any time, just like a defective airbag.

But even though that 9 out of 10 people are concerned about their finances, only 52% of pre-retirees and 44% of retirees consult a financial planner or adviser.

You know what? Maybe that’s not surprising. Because unlike recalled cars, financial planning may have a cost attached. It may require you to make some changes in behavior to reach long-term goals. And who wants to change? Instead, they keep moving steadily toward retirement time, feeling anxiety and uncertainty about how they’re going to make it after they stop working.

Reaching out to an adviser is a powerful way to counteract the fear and stress that comes with not knowing what the future will hold — and not knowing what to do now to adequately prepare. So, if for no other reason, most people should consider speaking with a financial adviser for the peace of mind and clarity the conversations can bring. For many, the peace of mind alone (both for themselves and their families) would be worth the cost. But the benefit of speaking with an adviser go far beyond reducing stress and boosting confidence.

A study by HSBC called “The Future of Retirement,” found that people who met with a financial planner accumulated, on average, nearly 2.5 times more retirement savings than those who hadn’t made a plan. That’s the difference between having $200,000 and half a million dollars. Or between $500k and $1.25 million for your retirement. And the earlier you get started, the more time you give your money to grow and compound.

Yes, it’s true that financial advisers and planners have fees, and that might be intimidating for some. But these days, there are advisers to fit virtually any income level. You don’t have to be a six-figure earner to afford financial advice. And, again, when you think about the additional savings and investment returns that may be possible with the help of a professional, those fees may pale in comparison. Trying to avoid paying for financial advice is like squeezing your fists tightly to avoid dropping quarters… and letting your dollar bills fall to the ground.

We encourage you to speak with a financial professional as soon as it makes sense for you to do so. An adviser can walk you through your options and help you build a plan that fits your personal situation and your goals.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Stop Throwing Your Money Away on Company Match 401k

When does it make sense to turn down free money?

The answer is fairly obvious. It never makes sense to pass up on free money (as long as there are truly no strings attached). But even though this is obvious, many people voluntarily pass up the opportunity to receive hundreds or even thousands of dollars every year through their employer’s 401(k) or other retirement savings plans. A study by Financial Engines found that American workers forfeit an estimated $24 billion per year by not taking full advantage of the company matches in their 401(k) plans.

A 401(k) plan is an effective tool you can use to prepare for a comfortable retirement — and a company match is can double the amount of money you tuck away for your golden years. On the other hand, if you’re not “maxing out” that benefit, you’re cutting your potential savings by as much as 50%.

Real World Application

Let’s say you’re:

  • 30 years old
  • Earning $40,000 a year
  • Working at a job that matches your retirement contributions dollar-for-dollar up to 3% of your salary.

For the sake of simplicity, let’s say you keep the same job until you retire at 65… and your boss never gives you a raise. (Disrespect!). At 3%, your employer is willing to deposit up to $1,200 a year into your retirement account — as long as you’re willing to do the same thing. Over the next 35 years, you will have saved $42,000… and your company match will have chipped in another $42,000. That gives you a total of $84,000 in dollars saved.

As you probably know, your retirement account, whether it’s a 401(k), a 403(b), IRA, etc., doesn’t just put your money into a vault for safekeeping. It invests your savings. Again, for the sake of simplicity, let’s say you get a 10% annual return. You’d have about $760,000 in your account when you retire at 65.

What if you decided not to take full advantage of the employer match? Say you invested 2% of your income instead of 3%. All other factors being equal, you would have about $510,000 at age 65 — $250,000 less than if you’d maxed out the benefit.

That’s a whole lot of reasons to take advantage of that company match!

In addition to the extra money you’ll be enjoying when it’s time to retire, you could also get tax advantages right away. Your 401(k) or 403(b) contributions are pre-tax dollars. You don’t have to pay income tax on them until you withdraw them, which shouldn’t be until you retire. In this scenario, you only have to pay taxes on $38,800 instead of $40,000. (Employer-sponsored IRAs are funded with after-tax dollars.)

Take Action

So, are you capitalizing on the full benefit of your employer match? If not, or if you’re not sure where you stand, here are a few action steps:

  1. Find out exactly what your company offers in this area. Not all companies will match your contributions, and the ones that do pay out according to different formulas.According to the most recent data, the most common match is 50 cents on the dollar; about 40% of companies contribute 50 cents for every dollar up to a maximum of 6% of the employee’s salary. Another 38% of companies match dollar-for-dollar up to 3% of the employee’s salary.You also have to look into the vesting schedule. In many plans, the employee only “owns” a percentage of the company match until a certain amount of time has passed. That ownership usually increases over time. According to the Bureau of Labor Statistics, it takes an average of 5 years to be 100% vested.It’s up to you to find out what your company offers. But you don’t have to do it alone. Your financial planner can help you sort through all the details.
  2. Take advantage of every dollar your employer is willing to contribute to your retirement if you’re able to do so. And start as early as possible.

    Remember, it doesn’t make sense to pass up free money!

    But keep in mind, you don’t have to limit your contributions to what your employer will match. In 2019, the IRS will allow you to put up to $19,000 into a 401(k) and $6,000 in an IRA without penalty. The more you can invest into your account, the more comfortable your retirement is likely to be.
  1. Get advice from a professional financial advisor. Advice from a professional can make all the difference in the world when it comes to getting the most “bang” for your retirement buck.

The financial advisors at Freeman Capital can help you understand your company retirement plan, maximize your total benefit, pick the right funds to invest in (which is another conversation entirely) and make wise choices in many other areas of your financial life.

Schedule a time to speak with one of our financial advisors today.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

4 Steps to a (Very) Early Retirement

Do you know your number?

More specifically, do you know how much money you need to financially independent and leave the workforce for good? How old do you expect to be when you reach that number?

If you don’t have solid answers to those questions, don’t worry. You’re not alone. If you figure you’ll be forced to work more years than you’d like, you’re not alone in that, either. A recent study shows that nearly 1 in 4 people believe they will never have enough money socked away to retire. And another 1 in 4 feel certain they’ll still be working after their 65th birthday. On the other hand, there is a growing number of people who are preparing to retire in their 40s or even their 30s — before most Americans even start seriously thinking about retirement.

You may have heard some of these stories. It’s called the F.I.R.E. (Financial Independence/Retire Early) movement. Individuals who adhere to the F.I.R.E. philosophy live far beneath their means. They rarely if ever eat out at restaurants… live in small homes or apartments… and cut back on expenses others take for granted.  Their minimalist lifestyle enables them to save and/or invest 50%, 60%, even 70% or more of their income.

Obviously, this path isn’t right for everyone. All of us would love to achieve financial independence as quickly as possible. But the sacrifices and delayed gratification required may not seem worth it.

But the truth is this: you — yes, YOU — may be able to retire sooner than you previously thought possible by applying some aspects of the F.I.R.E. mentality. You don’t need a six-figure salary and you don’t have to strip every luxury out of your current standard of living.

The Ins and Outs

Here are four F.I.R.E. principles to consider. Think about how they might fit into your life and how they could impact your retirement savings.

1) Know your “number.” With any plan, it’s critical that you know your end goal. If you don’t know exactly where you’re going, how can you get there?

So, the amount of money you need to retire and live comfortably is your “number.”

A simple way to find that number, according to some F.I.R.E. experts, is to multiply your current annual expenses by 25. That means if you’re living on $35,000 now, your number is $875,000. You can hit that number in two different ways:

  • You can save and invest until you’ve accumulated the $875k…
  • Or you can invest in assets that will pay you $35k per year in passive income. If you can get a 10% annual net return — through dividends, selling shares of a growth stock, rental income from real estate, etc. — you’d need just $350,000 invested.

Once you know how much dinero you need, you can create a formal and intentional plan to achieve that goal. The point of F.I.R.E. is to reach your number as quickly as possible.

With that in mind…

3) Save as much as you (comfortably) can. There is no shortage of nice things you can spend your hard-earned money on. And if you’re honest, you deserve those nice things. But you could also argue that you deserve to retire early — or at least have sufficient finances where retirement is an option. If that’s the case, it makes sense to re-evaluate your budget. Determine what’s worth buying and what’s worth skipping for now.

The more you can save, the faster your money will grow

4) Make your money work as hard as you do. Saving is great, and it’s important. But if you’re sitting on cash, or if the money from your paycheck is piling up in a savings account, your money is growing at the slowest conceivable rate. Most savings accounts pay approximately the same interest as burying the money in a coffee can in the backyard.

Want your money to grow? Invest it.

Let’s say you’re aggressive and you’re able to save $25,000 per year. It will take you 35 years to hit your $875,000 number. On the other hand, if you invest that $25,000 into an investment vehicle that returns 10% per year, you can hit that figure in less than 14 years. You get there twice as quickly.

That’s why compound interest has been called the “8th wonder of the world.” And your investment can keep growing and working for you after you quit working. Many followers of the F.I.R.E. movement believe it’s possible for anyone to reach financial independence decades ahead of schedule.

Check out this retirement calculator and find out how you may be able to turn a few hundred dollars a month into tens or hundreds of thousands of dollars over time.

With discipline and some careful planning, you could be retiring much sooner than you think.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.