What are General Market ETFs?

General market ETFs seek to capture the movements of the market as a whole by tracking major market indices. General Market ETFs track the performance of major market indices such as the S&P 500 (SPY), the Dow Jones Industrial Average (DJIA), and NASDAQ-100 (QQQQ). Most funds that track indexes do so by purchasing shares of all the publicly traded companies within an index, usually proportionally weighted by the market cap of the company (but there are other popular weighting methods). Continue reading...

What if I Need the Money in My 401(k) Before I Retire?

What if I Need the Money in My 401(k) Before I Retire?

Withdrawals and loans can be taken out of a 401(k) before retirement, but the money may be subject to penalties, conditions, and taxes. It is quite common that 401(k) funds are needed before retirement, even though the IRS wants you to wait until you’re 59 ½, and will generally want to levy a 10% penalty on any premature withdrawals. Most plans allow employees to take non-taxed loans out on their balance, which may stunt the growth of the account which was intended for retirement, but if the funds are paid back on-schedule, as stipulated in the plan’s loan agreement, the employee can get back on track quickly. Continue reading...

Can I Make Early Withdrawals From My 401(k)?

Can I Make Early Withdrawals From My 401(k)?

It depends on the 401(k) plan, but in general the answer would be “yes,” if you’re willing to pay the penalty. It is generally a pretty bad idea to withdraw 401(k) money early. If you withdraw the money before age 59½, the money will be subject to a 10% penalty in addition to regular income taxes. There are exemptions from the penalty, but there fewer exemptions in a 401(k) than an IRA. In an IRA the penalty can be waived for first-time homebuyer’s expenses up to $10,000, or even for educational expenses, but in a 401(k) the 10% penalty will still be levied if withdrawals are made for these reasons — and a plan may not even permit such withdrawals. Continue reading...

Can I Withdraw Money From My Defined Benefit Plan?

Most pensions will not allow in-service withdrawals but some will allow loans. While you are working for your employer, you typically may not withdraw money from your Defined Benefit Plan. The IRS permits plan loans if the plan administrator permits it. In-service withdrawals are possible after age 62, meaning money can get taken out before separation from service. If you leave your employer before retirement, the funds are usually kept in a Trust until you reach retirement age (or until a specified age at which you can start to receive the benefits). Continue reading...

How Do I Know I’m Getting Credit for the Years I’ve Worked?

How Do I Know I’m Getting Credit for the Years I’ve Worked?

Create an online Social Security Account — Here For about a decade from 2000-2010, every worker in America would receive an annual statement in the mail. This fell subject to budget cuts, and today workers are encouraged to go online to view their social security information. Some workers receive mailings every 5 years to remind them if they have not signed up for the online statements. Starting in 1999, the Social Security Administration mailed 4-page annual statements to over 150 million workers. About 500,000 of these were delivered every day, at an annual cost of about $70 million. Budget costs eventually caused the statements to go paperless for a while, and as of 2016, workers who have not registered online will receive a letter every 5 years that contains a statement and information about how to register for the online statements. Continue reading...

What is GDP?

Gross Domestic Product (GDP) measures the production of all industries within a country, to get a picture of how the national economy is doing. GDP is one of the most important number to economists, and it is calculated every quarter. Growth for the current quarter compared to the previous quarter is a good sign. Two consecutive quarters of decline in GDP are an indication of a recession, but it is not the only metric used to make that call. Continue reading...

What is Federal Reserve Credit?

The Federal Reserve extends credit in the form of short-term loans to member banks. Banks avoid taking loans from the Fed if they can, because it is viewed as a sign of instability. The Federal Discount Rate applies to loans taken from what is known as the discount window at the Fed, and it tends to be a higher rate than what is charged between two banks. The Federal Reserve will extend credit only to banking institutions that are members of the Federal Reserve system. Continue reading...

Do I Need a Financial Advisor?

The answer to this question will depend on the preferences and circumstances of each individual. As your assets grow and your financial picture becomes more complex (with unclear tax implications, and interdependent asset classes), then the answer is more likely to be yes. For those investors with a more modest-size portfolio, it may not be necessary. Financial modeling tools and market research publications are widely available, and while they are not one-size-fits-all answers, they can serve investors quite well when used wisely. Investors who choose not to consult an advisor must be willing to educate themselves. Continue reading...

What is a Swap?

What is a Swap?

A swap is an over-the-counter agreement between institutions to "swap" one thing for another, usually the cash flow related to interest-bearing instruments. Given the negotiable and over-the-counter nature of swaps, there are many permutations and manifestations of this concept. The most common is the interest rate swap, in which the counter-parties agree to pay the interest due on principal amounts which are not exchanged. Continue reading...

Should I use options in my portfolio?

Should I use options in my portfolio?

Options can be a valuable tool in portfolio management, but investors should be well-versed in how options work, and the risks involved, before actively engaging in options trading. Options can provide you a hedge, or provide the potential for unlimited gains or losses. They can also give you a relatively conservative income stream. Proper use of options can be highly profitable, but requires some level of expertise and a watchful eye. Continue reading...