Investing 101, Live The Live You Love

Max Out Your 401k to LIve the Life You Love

Zurich Awes on December 8, 2017

4k over lower matcumbe key web.jpeg

One of the best ways to build wealth, contribute to your financial security and potentially reduce your taxes is to max out the contributions you make to your 401k, or another retirement plan, before year end.  Here's how...

What is a 401k? 

401k plans are a type of retirement plan sponsored by an employer. Typically, they allow enrolled employees to defer up to $18,000 per year from their paycheck into an account designated for, and directed by, the employee. If the employee is over 50, they can contribute an additional $6,000, for a maximum total of $24,000. 

Contribution limits change regularly, and are different for other retirement plans (like a SEP or SIMPLE). The best place to look up the current limit is on the official IRS website

Make It Work For You

Whether using a traditional 401k plan, a Roth 401k plan, a SEP plan, a 457, a 401a or even a SIMPLE plan, the long term impact of tax deferral as well as compounding interest in a tax deferred account can make a tremendous difference in your long term financial success.  In addition, many companies will match the first 3% to 5% of an employee's contribution.  Making this a lucrative benefit.  

Investing 101 tells us that maxing out these contributions wherever possible is a clear step in the right direction for most people. 

When to Contribute

Ideally, you would be on track, from January of each year to max out your 401k contribution by the end of the year. In 2017, this contribution limit for people under 50 is $18,000.  For those over 50 it is $24,000. This equates to $1,500 and $2,000 per month respectively.  If you can’t afford to make this contribution each month, start with an amount that makes you feel comfortable, and try to increase it every quarter until you can max it out.  

Remember that any matching contribution your employer makes does NOT reduce the amount that you can contribute.

It May Not Be Too Late

If you find yourself at the end of the year, with a long way to go, and can afford to defer your entire pay check (i.e. live off your savings for a month) it might make sense to reach out to your plan administrator and do so for the month of December. Not all plans will allow this. 

If you can’t afford to contribute your entire paycheck, maybe consider increasing it now as a starting point for all of next year. Then review your contribution to try to hit your limit by increasing your savings at the beginning of each quarter (January, April, July, October). 

For Best Results

Navigating retirement plans themselves, not to mention the investment choices, can be an arduous and complex process.  In fact, it can often make investing so challenging that many people don't even try to do it, missing key financial opportunities.  Enlisting the support of a professional can be particularly useful in this area.

After all, your life and financial goals are probably not to become an expert in ERISA regulation and retirement planning complexities.  You're probably much more interested in saving enough money to one day be able to Live the Life You Love.


Photo Location  

The photo above was taken just north of the Seven Mile Bridge in the Florida Keys.  A place well suited to enjoying a lifetime of retirement savings.



Happy Thanksgiving - Live the Life You Love

Zurich Awes on November 23, 2017

IMG_2650 - Version 2.jpg


Writing a blog, publishing an email series, and even giving financial advice is my attempt to share hard won truths with other like minded souls.  Even if just one person reads this or learns something useful, it can be incredibly validating.  The idea that I can make a meaningful, positive difference in another person's life is, at the end of the day, a real standard worth measuring.

Sure, money matters.  As do investment returns over the long term.  But, they're only one part.  The real test of a successful financial plan, financial strategy, or the result of financial advice is if the client is able to follow Thoreau's advice to "Go confidently in the direction of your dreams!"  Or, as I like to say...


The Danger of High P/E Ratios

Zurich Awes on November 14, 2017

S&P 500 PE Ratio From 1881 to Today.png

You've likely heard the phase "Price to Earnings Ratio" or "P/E" for short.  If you look at the chart above, you'll notice that P/E ratios have only been as high as they are now at two other times in history.  What does the pattern tell you? 


Protect Your Credit Score: The Equifax Data Breach

Zurich Awes on September 25, 2017


Recently, Equifax, one of the major three credit bureaus, experienced a data breach and compromised the credit records of 143 million people.  That means that nearly HALF of the US population could be affected.  

While there are a plethora of companies who espouse to monitor your credit, I have found many of them to be essentially useless. Case in point: about two years ago, I was given dubious advice about how to maintain and improve my credit score by a mortgage company I had hired for another project.  I dutifully followed their advice, only to watch my scores plummet by nearly 50 points in 30 days.

Since then, I have studied, tried and tested nearly all of the major theories about what actually impacts our credit scores and have come up with a method to build and maintain them.  I'll publish a series on this later this year.  But in the interim, this is what you can do about Equifax...


Hurricane Irma: Seasonal Economics

Zurich Awes on September 6, 2017


In five hours, Hurricane Irma will pass just a few miles north of the US Virgin Islands. With sustained winds of 180 mph and gusts hitting 220 mph, the Category 5 hurricane promises to be a monster. A few days later, this storm threatens to reach Florida. I have a lot of friends, and a bit of property, in the path of the storm.  Of course, my thoughts, prayers and support go out to everyone in harm's way.

Many of you have recently reached out to me with support and concern.  Thank you.  I am relieved to report that my wife and I are presently in London. And will be bypassing Florida, for now, on our way back to Minnesota.