With Coronavirus worries creating rapid changes in the markets, your portfolio construction can be the difference between continued growth or difficult losses. The markets will ebb and flow, but the secret to investing is not the amount of money in your account, but rather the quality of your portfolio. Setting up a robust portfolio will be vital in handling market volatility. I’d like to touch on some of the ways in which you can build a portfolio that can handle market volatility.
1. Determine an objective
Your portfolio needs direction, or you can’t select appropriate investments. Whether you are looking to invest in your retirement, or save up enough for your children’s schooling, you need an objective. This objective should be long-term, and big enough that it is something to work towards, but not so vast that it is unattainable.
2. Limit Investment Turnover
Your portfolio is not something to play around with. Look at this way: you should not rent a stock. Instead, you should look to invest in a business. Yes, you can have some short-term investments, but the majority of your portfolio should consist of stocks that you are okay to invest and hold on to for up to five years.
3. Be realistic and understand the ups and downs of the market
Investing in a low-yield stock and expecting it to triple in the first year is not realistic. Instead, take the time to understand your investments and know what to expect in terms of return. This will allow you to ride the market during the highs and the lows and continue to keep an even keel over the long-term.
4. Diversify
Investing is a long-term game, and betting all of your money on a single company over a twenty-year period does not make sense. Instead, look to diversify your investment across multiple blue-chip or up-start companies in several industries. Thus, if one market is struggling, one of your other companies will take up the slack until the market corrects. Simply put, diversification will allow you to continue to see substantial returns year over year.
5. Talk to an expert
Helping investors navigate these complexities is my job, and I can help build your portfolio to ensure that it can ride out market volatility. A big part of a financial planner’s job is to help guide your portfolio and grow your money over time, and I am here to help.
No matter if COVID-19 has a continued effect, I can help you navigate the daily ebbs and flows of the market. Need help building a portfolio, or want a second opinion on your current set-up? Let’s chat!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
In part 3 of my series on negotiation and retirement savings, Elizabeth Suárez and I discuss setting up the necessary goals to help ensure you receive a raise in the upcoming year. If you missed part 1 and 2 of my conversation with the national speaker, coach, and the author of “The Art of Getting Everything” you can find them here: https://tinyurl.com/yxjr4tyl and here: https://tinyurl.com/y2c2sude.
Liz Windisch, CFP®: Previously you and I discussed asking for a higher salary when given a job offer. But what about increasing your salary in the job you have? Since we’re heading into the new year, how do you let your supervisor know that you want to do what it takes to achieve a raise or promotion next year?
Before you address the topic of a raise or promotion with your boss, it is imperative to take some time to evaluate how your work has impacted your team/division/company. Many professionals believe they deserve a raise because they are working long days. However, raises and promotions are directly linked to how your work transforms the desired team/division/organization outcomes. I recommend keeping a log of your work and accomplishments on a weekly basis. Before meeting with your boss, review your log and identify your top five accomplishments. Share them by illustrating the positive effect they have had toward the company. Follow up it up with the ask. An example of the ask is: “Based on the accomplishments I have shared, I wanted to discuss a plan on how to improve my compensation to match my performance in this company.”
LW: What is a good communication strategy to “check in” as the year progresses?
One of the biggest mistakes is waiting until performance evaluation time to check in with your boss on how you are doing measured against your objectives. I highly recommend that in every one-on-one meeting with your boss you set aside ten minutes to discuss your performance and identify ways that you can continue to improve. If you do this, there should be no surprises at evaluation time. Quite the opposite - you will feel confident and in charge of your future in the company.
LW: Thank you so much for your insight on this topic!
Next month: You’re making more money! How to put it to work for your retirement.
Liz Windisch, CFP® has guided women toward overcoming their money fears and mastering their finances for over 15 years. She believes women will not be socially equal until they are financially equal. For more information, please visit www.lizwindisch.com or contact her at [email protected].
Elizabeth Suárez is an author, speaker and coach dedicated to helping professionals unleash their potential by transforming them into skilled negotiators and decision makers. For more information, please visit https://www.negotiationunleashed.com/ or contact Elizabeth at [email protected].
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through GPS Wealth Strategies Group, LLC, a registered investment advisor. GPS Wealth Strategies Group, LLC and Aspen Wealth Management are separate entities from LPL Financial.
Elizabeth Suarez is not affiliated with LPL Financial and Aspen Wealth Management.
Last month, I discussed how fear of negotiation hurts women’s retirement savings. I spoke with Elizabeth Suárez, a national speaker, coach, and the author of “The Art of Getting Everything” about negotiating a salary offer: https://tinyurl.com/yxjr4tyl. This month she and I cover what options women have when they are denied a salary increase request during negotiation.
Liz Windisch, CFP®: Thank you for continuing this discussion on women and how navigating their salary affects their retirement. When a woman asks for a salary increase and is denied, is “no” the end of the discussion?
Elizabeth Suárez : For me, “no” is not a final answer. I consider the answer of “no” as a U-turn, where you need to go back to the drawing board and figure out a new course of action. When a “no” is given one must assume one or all of the following:
1. The person to whom you are speaking doesn’t have the power to accept your request for higher compensation on the spot.
2. The person feels uncomfortable having to ask a superior about your request and simply wants to close the deal and get you working immediately.
3. The person might be comparing his/her starting salary to what they offer you, and feels you shouldn’t be greedy.
LW: Given those scenarios, what is the appropriate course of action in that situation?
ES: All of the above three explanations should be treated respectfully. The best way to counter a “no” answer is to do the following:
1. First and foremost acknowledge the “no” answer by stating something along the lines of: “I would like to have a better understanding of why my request for a higher salary has been rejected. Are you the right person who can help me with this?”
2. Most of the time, they will claim they offered you a salary at the highest end of the range. With such a response, you can counter by stating, “Thank you for sharing that. I would like to share with you some research I recently conducted which illustrates that someone of my caliber and background, who works for a company like this one, in this city, is making the following…” (Of course, you need to do complete this research even before you interview. You can reference websites like salary.com for some guidance on salary ranges based on location, type of job, company, etc.)
3. If the above steps don’t help, and the potential employer is not willing to provide you any more money you have three options:
Option A: You negotiate other amenities, such as a professional development budget, an extra week of paid vacation, the opportunity to work from home two days a week, or reimbursement for other items, such as Wi-Fi or cellphone charges.
Option B: You negotiate option A with an agreement to re-evaluate your salary in 6 months based on tangible objectives you agree upon at that time. It would be up to you to discuss and agree upon these objectives and then monitor your progress at your one-on-one meeting with your boss. When you seek agreement, you must ensure your new boss and HR are in agreement with this approach, and it needs to be put in writing by you!
Option C: You walk away from the offer. Yes, you are capable of walking away. Sometimes an offer is not worth it, and there are other options out there waiting for you.
Next month: Setting up the necessary goals to ensure you receive a raise in the upcoming year.
Liz Windisch, CFP® has guided women toward overcoming their money fears and mastering their finances for over 15 years. She believes women will not be socially equal until they are financially equal. For more information, please visit www.lizwindisch.com or contact her at [email protected].
Elizabeth Suárez is an author, speaker and coach dedicated to helping professionals unleash their potential by transforming them into skilled negotiators and decision makers. For more information, please visit https://www.negotiationunleashed.com/ or contact Elizabeth at [email protected].
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Elizabeth Suarez is not affiliated with LPL Financial and Aspen Wealth Management.
The common financial wisdom making the rounds these days is that we all need to be saving more money and spending less. While this is true, forgoing the latte isn’t going to move the needle very much on your retirement goals. What never seems to be mentioned is how making more money can have a far greater impact on your retirement than frugality.
For example, say you work for 35 years with a starting salary of $50k and earn modest salary increases of 3% a year. You contribute 10% of your salary to a pre-tax 401(k) earning 6%. When you retire you would (hypothetically) have $860,760. If you negotiated for a higher starting salary of $58k and saved that same 10% your hypothetical 401(k) balance would be $998,481. If you also increased your salary by 5% each year instead of 3%, that balance would be $1,334,160, nearly a half million dollars higher than our original calculation. This is just one very simple imaginary illustration, but it does highlight the impact to your savings of consistently negotiating for a higher salary (or consulting fees) throughout your career.(1)
Women have multiple factors that put them at risk of running out of money in retirement. Many of these factors we have little control over, including longevity risk and time out of the workforce to care for a child, spouse or other family member. The salary that a woman earns while she is working, however, can be negotiated. Because negotiating isn’t in many women’s comfort zone, I consulted with Elizabeth Suárez, a national speaker, coach, and the author of “The Art of Getting Everything”. Ms. Suárez has helped hundreds of women advocate for themselves and negotiate successfully for what they want in their professional and personal lives.
Elizabeth Suárez: In most cases employers expect a candidate to negotiate a salary offer. Normally employers don’t offer the highest possible salary range. Based on a study conducted by Salary.com, 84% of the employers interviewed said they expected for every job applicant to negotiate salary during the interview stage.
Interestingly, a hiring manager is normally nervous that their chosen candidate might not accept the job offer. They have gone through an arduous interview process and by the time they have chosen the candidate, they are concerned the person could have other offers on the table or their current employer could counter the offer. Additionally, employers don’t want to come across as insulting if they are offering too low of a salary. Therefore, when participating in the interview process you shouldn’t think you are the only one who is nervous and concerned.
ES: This varies. I normally recommend my clients to do some research on the range of salaries offered at the companies they are interested in pursuing. This can be done by visiting websites such as Salary.com or getting involved with your local chapter of the Society of Human Resources (SHRM). By doing your homework you gain a better understanding of the compensation packages being offered at your location. Once you have this information, you are ready to negotiate your salary.
A formula that helps my clients navigate through a job offer is as follows:
● Take the average of the salaries being offered to other professionals in your field
● Compare your findings with salary tools such as Salary.com
● Take the highest amount from both and add a 20% value to the number in order to identify a range.
● Therefore, if the highest amount was $100,000, your salary range request would be between $100,000 and $120,000.
ES: According to the Society of Human Resources, U.S. employees can expect a 3% salary increase in 2019. Additionally, the advisory firm of Willis Towers Watson conducted a study and found that businesses expect to pay their best employees an average raise slightly above 4.5%. However, these are just average raises. In practice, there is not a specific formula. It will all depend on the employer. Therefore, it is imperative to always strive for outstanding performance in order to secure a higher raise.
Because a large performance pay increase is unlikely, I believe the above statistics show how critical it is to negotiate your salary when a job offer is extended. Multiple studies have found that only 36% of professionals negotiate a job offer! Others simply accept the job offer without counter-offering. GenZ (84%) and Millennials (74%) are more likely than other generations to accept a job offer on the spot.
That being said, if you didn’t negotiate a salary that you believe you deserve, or your request for a performance increase was denied, there are strategies you can use to change that answer.
Liz Windisch, CFP® has guided women toward overcoming their money fears and mastering their finances for over 15 years. She believes women will not be socially equal until they are financially equal. For more information, please visit www.lizwindisch.com or contact her at [email protected].
Elizabeth Suárez is an author, speaker and coach dedicated to helping professionals unleash their potential by transforming them into skilled negotiators and decision makers. For more information, please visit https://www.negotiationunleashed.com/ or contact Elizabeth at [email protected].
(1) This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through GPS Wealth Strategies Group, LLC, a registered investment advisor.
Elizabeth Suarez,GPS Wealth Strategies Group, LLC and Aspen Wealth Management are separate entities from LPL Financial.
Does anyone else remember those commercials about your retirement “number," where people were pushing around an egg with a number on it? Or maybe you’ve seen a recent article about which multiple of your salary you should have saved by each decade of your life?
While rules of thumb can be very helpful, I think they are most useful for those who are still decades away from retirement.
For those of us who are closer to retirement than not (I’m looking at you, Gen Xers) a more specific understanding of your situation is necessary. One thing I’ve learned running retirement plans for people whose financial position runs the gamut from “broke” to “flush” is that there is no specific amount of money that everyone should plan to reach by the time they retire. Obviously, everyone’s situation is different.
You need to figure out what you would like your life to look like in retirement and work backward from there. A woman with a pension whose house is paid off will need a smaller pool of investments from which to draw in retirement.
If you have big travel dreams, and children who will still need your assistance (and let’s be honest, maybe parents) you will need to have more saved. I can’t promise you that you’ll achieve your ideal retirement, but you definitely won’t be able to prepare at all if you don’t figure out what it is.
I’m not talking about specific numbers here, but I’m referring to figuring out what kind of life you would like to lead. Advertisements geared toward retirees (or those who would like to retire) mostly show ridiculously fit, white-haired people sailing, cruising, or otherwise frolicking in the sun. This may be exactly what you have planned, or you might prefer to stick closer to home.
The point is that your dreams have a different price tag than your neighbor’s. Figure out what it is that YOU want, and then work on some advanced planning with an advisor to determine what price tag that will have.
Of course you need to plan; I’m not advocating “winging it." At the most basic, you need to figure out how much money you plan to spend each year, how much recurring income you’ll have (social security, pension, rental income, part-time work, etc.) and calculate the difference. Then figure out how much of a nest egg you will need to generate income equal to the difference.
Working with an advisor on developing a retirement plan is strongly advised, as the above doesn’t factor in inflation, fluctuating health care costs, and the fact that spending in retirement isn’t usually a straight line. The bottom line is that there is no one number, no rule of thumb that fits everyone. You don’t need to know a “number”, you need a plan.
If you’ve just started a new job, chances are your old retirement plan isn't top-of-mind for you right now. But putting off dealing with it for too long can be a big mistake. Here are your options, and a few pitfalls to be aware of.
Leave It Where It Is
If your balance is greater than $5,000 you are able to leave your account in your former employer's plan. This can be a good option if the plan has low administrative fees and inexpensive investment choices. Beware the trap of thinking that the administrative fees are the only costs: mutual funds have fees that are not visible on your account statement. Call the provider and ask what the fee range for mutual funds is and if there are any additional charges.
Move to Your New 401(k)
If your new employer offers a 401(k) this again could potentially be a good option based on fees and investments. But once you move money into your new employer's plan, you cannot move it out until you leave that job. This limits your choices to what your employer offers and that is subject to change at any time.
Move to a Rollover IRA (or Rollover Roth IRA)
With this option, you can move your money to an IRA wherever you like. Popular choices are mutual fund companies, brokerage houses or banks. A less expensive alternative is a do-it-yourself account at an online provider. When you've chosen to open your own IRA, you can change investments or providers at any time through a trustee-to-trustee transfer. This option gives you the most flexibility, but can be tricky without professional help. Your best bet is to enlist the help of a professional financial planner. He or she can guide you through the many choices, and help you find inexpensive investments.
Beware These Pitfalls!
- Moving assets in any way other than a rollover. There are ways to move the money to yourself and then to another retirement account within a given window, but this is VERY tricky and can have disastrous consequences if done improperly.
- You have an outstanding loan against your 401(k). This will need to be repaid as soon as you leave your job. If you are not able to repay this, it will be considered a withdrawal and you will owe taxes, and potentially penalties.
- You are over 55 years old, but not yet 59 1/2. You are allowed to withdraw funds from a 401(k) in this situation, but not from an IRA. If you plan to retire (voluntarily or involuntarily) before you turn 59 1/2, you should consider leaving some, if not all of your assets in your former employer plan.
- You have unvested contributions. Your company may have put restrictions on availability of employer contributions, based on years of service. Your account balance will include both employee and employer contributions, but this may not all be available to you. Any unvested contributions were forfeited when you left your job.
Workers are changing jobs with much more frequency than in the past. One last bit of advice: it is very easy to lose track of old 401(k) accounts. Companies move, you move, companies go out of business. While that money is always yours, tracking it down after many years can be extremely difficult. Consolidate all your retirement plans, or make sure you stay on top of where they are.
Congratulations on your new job! Don't forget to sign up for your new 401(k)!
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through GPS Wealth Strategies Group LLC, a registered investment advisor. GPS Wealth Strategies Group LLC and Aspen Wealth Management are separate entities from LPL Financial.
