Jonathan Pond


Managing Your Workplace Retirement Savings Plans

Here are a couple of suggestions for those who are investing in retirement plans at work.

First, most 401(k) and 403(b) plan choices are stock funds. When participants spread their money among the various choices, they often end up with more money in stocks than befits their investment comfort level. Check where you stand. If most of your retirement savings plan money is in stock funds and you’re getting fairly close to retiring, you may want to move some of your holdings over to bond funds or, if they’re available in your workplace plan, so-called low correlation funds like real estate and utilities that offer some protection in the event stocks suffer a big decline. Low correlation investments tend not to move in lockstep with the stock market.

Our second suggestion involves target date funds, which are offered by most workplace retirement savings plans. These diversify your money according to how far away you are from retirement. That’s a pretty good idea. The further away you are from retirement, the higher the percentage that the target date fund invests in stocks. Some long-dated target funds will invest 85 percent or more of your money in stocks. That’s okay if you can stand the risk of investing most of your money in stock, particularly if you’re a long way from retirement. But if you can’t tolerate having so much retirement money in the stock market, rather than abandoning target date funds, simply move some or all of your money into a target date fund that is closer to the present. The closer the date is to the present, the less money is invested in stocks. That way, you’ll lower the percentage of money you have in stocks, but you’ll still have a well-diversified portfolio of both stocks and interest-earning securities in your target date fund.  

Smart Money Tips

  • Last minute vacation deals. Travel bargains abound for those who can be flexible. For example, owners of vacation rental properties who still have some weeks to rent this summer will be more than happy to offer a good deal. You might get a great bargain on a cruise. A few years ago, our family booked a cruise about two weeks before it embarked. We paid a fraction of what most passengers had paid. So use your imagination, visit some travel websites, and make some calls. You’ll be pleasantly surprised.
  • Passing on wealth without spoiling the children. Many parents are understandably horrified by the abominable financial habits of an adult child, and they worry that any inheritance will be squandered in short order. There are many ways to pass on an estate with some strings attached, but they can become very complicated and costly if elaborate trusts are involved. One relatively straightforward method of gradually distributing an estate, particularly where there is concern about the inheritor’s ability to prudently handle the money, is sometimes described as “three bites of the apple.” While there is virtually unlimited flexibility in how the distribution is set up, the estate is typically distributed in thirds: one-third immediately, one-third perhaps five years later, and the final third a decade hence. Informal research into the outcome of this approach may not be too surprising for those with spendthrift family members. The first third was squandered almost immediately with the second third lasting longer, but nonetheless consumed. By the time the final third is received, the inheritor has nothing to show for the first two distributions and comes to the realization that the remainder must be prudently handled for lifetime needs.
Food for Thought

I do not know the word “quit.” Either I never did, or I have abolished it.
      –Susan Butcher, Iditarod Sled Dog Race Champion

Money Can Be Funny

Well, whiles I am a beggar, I will rail,
And say there is no sin, but to be rich;
And being rich, my virtue then shall be,
To say there is no vice, but beggary.
      -William Shakespeare (King John)

Word of the Week

matrocliny (MA-truh-kli-nee), also matricliny – Inheritance of traits, primarily from the mother.

Origin: From Latin matro– (mother) + -clino, from Greek klinein (to lean)

Patrocliny is the male counterpart of this term.

There comes a time when a young woman becomes aware of the inevitable matrocliny: “Yikes, I’m becoming just like my mother.”