Should 401k Plans have only Index Funds?

A nice article about how 401k plans are better off with only index funds.  I do have a quibble with the article.  Index funds generally outperform actively managed funds over the long run due to their lower fees.  Looking at the last 10 years, all of the index funds I have recommended for 401k plans have performed in the top half of their peer group, and most in the top third, due to significantly lower fees.

A Random Walk Down Wall Street — A Great Read

Listen to this interview with the author of A Random Walk Down Wall Street. The book explains the basics of investing in a very simple way and cuts through a lot of investment myths and hype.

Marketplace Weekend Interview — Inheritance

Last week I was interviewed for Marketplace Weekend, a syndicated program on NPR on the topic of inheritance.  One thing that I found interesting was the idea that people can plan to spend all of their money before they die leaving no inheritance.  In my experience this is rare.  What is much more likely is people will run out of assets prior to death or will still have assets when they die.    For example, many people own a house with equity when they die which their heirs will inherit.

To listen to the entire show click here.  My segment begins at 34:45.

Check Out Our Mobile Client Site

Our Full Financial Planning clients have the option to review their finances on their mobile devices using the Long Financial Planning mobile site from emoney .

The mobile site gives you a quick snapshot of your accounts, net worth, investments, spending, and budgets with the option to drill down on your transactions and to view documents in your vault.  I’ve been using the mobile site for my own personal finances and in some ways I prefer it to the regular website.   You can save the mobile site as an app on your phone and create a 4-digit code for access.  Once you do this you can use the site just as you would use an app.

To see how to load the mobile site and save it as an app click below.

Long Financial Planning Mobile Site Instructions


No Creditor Protection for Inherited IRAs

On June 12 the Supreme Court ruled that Inherited IRAs no longer offer protection from creditors. In the past all types of IRAs offered creditor protection. With this ruling, IRAs that you inherit are stripped of that protection. Other types of IRAs still offer protection from creditors. If you are a spouse inheriting an IRA you can change the inherited IRA into your own IRA which would grant it protection from creditors.

To read more about the ruling: Inherited IRAs lose bankruptcy protection

When should I move my 401(k) over to my new job?

This is a repost of a recent question I answered on NerdWallet

 That is a great question that I get often.  There are a couple of things to think about.

In most circumstances rolling your old employer plan into IRA is probably the best option.  That option allows you to access low cost funds from places like Vanguard and Fidelity that may not be available in your old employer plan.  It also makes it easier for you to keep up with the money, if you change addresses etc.

If you are thinking about rolling your old employer plan to a Traditional IRA and your Adjusted Gross Income (at the bottom of the first page of your tax return) is more than about $112,000 (single) or $178,000 (married) and you do not have a Traditional IRA now, you may want to skip rolling over your old employer plan into a Traditional IRA.  Keeping that money out of a Traditional IRA allows you to make a tax-free “back door” Roth IRA contribution by contributing to a Traditional IRA and then immediately converting it to a Roth IRA. In that case you would move your old 401k plan balance directly to your new employer plan if it had lower cost options than your old plan, or leave it at your old plan if the opposite were true.

On the small chance that your old employer 401k balance was in a Roth 401k, I recommend rolling the balance directly into a Roth IRA and not into your new employer plan.

I hope this helps.

View the original post on Nerd Wallet

Why “Fee Based” = “Fee and Commission”

There’s and interesting article in today’s WSJ about how brokers are calling themselves “Fee Based” advisors to make themselves sound like “Fee-Only” advisors.  Fee-Only advisors are almost always are fiduciaries in all aspects of their work, where Fee-Based advisors almost never are.  The article points out that Fee-Based advisors are really “Fee and Commission” and make money from selling products to clients and have all of the inherent conflicts of interests that entails.

Chicago Public Radio Interview

I was interviewed on Chicago Public Radio about retirement planning.  I was able to make the point that many small companies have 401k plans with hidden fees, that could cost employees a good chuck of their retirement savings.  Even worse, because the fees are hidden there are unaware of how much they are losing.