What is an IRA?

by Jonathan G. Cameron, CFP®

Here is something we hear on occasion at CameronDowning: “I’m not sure an IRA is for me. I hear it may be too risky.” The problem with this statement is that an IRA, or Individual Retirement Account, is not an investment. So what is an IRA?

An IRA is Technically an Account Registration

It holds investments, but is not an investment itself. You can put all kinds of investments within an IRA. Consequently, stocks, bonds, mutual funds, CDs, and even gold bullion are investment options within an IRA. You can be 100% in cash in an IRA, which by definition has no risk. We’ve also commonly seen annuities put in IRAs which is typically not a good idea, and I discuss why here.

So What Exactly is an IRA?

Getting the terminology right is important. Picture a candy wrapper holding chocolate inside. An IRA is like the candy wrapper. Likewise, there are different kinds of candy wrappers just like there are various kinds of IRA...

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Your Emergency Fund

 

by Jonathan G. Cameron, CFP®

Your emergency fund is foundational to any financial planning. Here I discuss what it is (and what it is not), why you need to have one, and how much should be in it. 

At the Margin 

An economics professor once said that if you fall asleep in class and he calls on you to just reply, "at the margin," and you’ll likely have the right answer. The entire study of economics is about what happens at the margin: the next unit of production, the next unit of income, the next dollar of debt payment.  Think about it: bankruptcies happen when there’s just one dollar more due that you simply cannot pay. So in talking about an emergency fund, we’re talking about what happens at the margin of your financial life. You’re keeping cash set aside to make sure that you’ll never get to that point where you don’t have the next marginal dollar.

What’s an Emergency Fund For?

Emergencies happen in life:  this is...

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Insurance Frequently Asked Questions

Glenn J. Downing, MBA, CFP®

What kinds of insurance do you offer?

We broker life insurance, disability income insurance, and long-term care insurance. In obtaining Insurance coverage for our clients, We shop the market for the most suitable product at the best price.

Can I get auto or homeowners through you?

No – that requires another license which we do not hold. As part of a complete financial planning engagement, we will evaluate the client’s risk exposure in these areas, and recommend coverage changes as appropriate. We are glad to refer you to insurance agents who can assist you with these policies. BTW we neither pay nor accept referral fees from other professionals, nor do we accept any liability for their actions.

What role does life insurance play in a financial plan?

A crucial part. A life insurance death benefit can complete the overall plan in the event of an untimely death.

Tell me about life insurance for tax-free income.

The strategy is to purchase a...

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Why Should I Pay a Fee for Financial Advice?

by Glenn J. Downing, MBA, CFP®

From time to time I’m asked, Glenn: there are plenty of financial guys out there. They’ll do financial planning for free. So why should I pay you guys?

Good question, and not unexpected in these days of free resources online.  To answer it, let me give you a little background.

Back say, 50 years ago, if you needed professional financial advice, from whom could you get it?  

  • banker
  • stockbroker
  • insurance agent
  • accountant

What’s the issue about taking advice from these providers? It is the potential for conflict of interest. What do I mean by that? Well, the banker wants to open time deposit accounts and initiate loans. The stockbroker wants to trade stocks in your account. The insurance agent makes a living selling policies. The accountant, on the other hand, focuses on preparing financial statements and doing tax returns.  See my blog post about the advice industry here.  

Is There a Conflict of...

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Financial Planning Frequently Asked Questions

by Glenn J. Downing, MBA, CFP®

Why do financial planning?

Short answer: because no one can hit a moving target. The financial plan informs all financial decisions: how to invest, what to save and where, and what insurance should I purchase or drop.

What should I expect when I come in to see you?

At the time you made your appointment you would have discussed your concerns with one of our associates.  After determining if you would be a good fit to work with us, you have been given a list of documents to upload for the financial planners to view before your meeting.

When you come in we’ll meet in one of the conference rooms at our Miami office. We’ll give you a bit of personal introduction and will be interested to learn how you came to us.

From there, we listen and ask questions.  We want a general snapshot of your financial position, and we’ll really want to understand your specific concerns and goals for our engagement.

Toward the end of this initial...

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Five Steps to Getting Financially Organized Before Retirement

by Jonathan G. Cameron, CFP®

Getting financially organized before retirement can be a daunting task. There are many unknowns and it can be hard to know where to begin. For that same reason people often wait too long to address retirement needs and, unfortunately, don’t achieve the financial freedom for which they long. When people get serious about retirement, many start by analyzing their investment account(s) (or lack, thereof). Ideally, they’ll meet with a CERTIFIED FINANCIAL PLANNER™ professional to get them on track.

Financial organization starts by identifying and prioritizing what is most important to you.  This is the beginning of a goals-based financial planning approach.

Step 1: Identify What is Most Important to You.

I start by asking clients to list what is most important to them and help them identify what they’d like to accomplish. Spending more time with family, traveling, volunteering, reading, relocating, starting a new...

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Healthcare Flexible Spending Account

by Glenn J. Downing, MBA, CFP®

Do you have a Flexible Spending Account available to you through work?  These can offer tremendous tax savings.  As you do your research, note that FSAs are of two sorts:  The Healthcare FSA and the Dependent Care FSA.  

Flexible Spending Accounts (FSAs)

A flexible spending account (FSA) is offered as an elective benefit by many employers.  This is part one of a two-part series. Here I describe the healthcare flexible spending account. You’ll find my post on the dependent care FSA here.

The Healthcare FSA

This account allows workers to contribute, through payroll deduction, to accounts that are designated for qualifying medical or dental expenses not covered by insurance. All amounts contributed are pretax and funds are not taxed when spent on qualifying health care costs – this is a big tax advantage. The FSA owner can use the funds for deductibles, co-payments, and co-insurance for the employee’s...

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A Fresh Perspective on the Budget

 

by Jonathan G. Cameron, CFP®

All financial planning begins with cash flow planning – your budget, in other words.  Sometimes people recoil from that word - budget.  To them the word is fraught with negative connotation:  I can't spend!  Not in my budget!  I'll have to deny myself!  Life will become intolerable!

Turn this around, though.  If you have a cash flow plan, i.e budget, you have freedom within the form.  This spending plan keeps you focused on working toward achieving your financial goals. You know exactly how much you can spend on eating out this month, in other words, and still achieve your monthly savings goal to retire with an income of $X at age 67.  

Here's How to Do It

Establish and quantify financial goals

Think this through carefully: How much do I need in my emergency fund? How much debt do I have to repay? What interest rates am I being charged? How much should I accumulate in my retirement...

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Watergate and Financial Markets

By Glenn J. Downing, MBA, CFP®

The Watergate Scandal and Today’s Financial Markets

I’ve always enjoyed a good political scandal. There’s something sort of satisfying in seeing powerful people get caught out. Sex scandals are even better. Remember old guy Wilbur Mills and the Argentine Firecracker? You can’t make this stuff up.

The Watergate scandal of the 70’s has come to mind lately, and how it seemed to drag on and on. As I look at the current scandals in Washington (Hillary’s emails; the FISA Court; Coronavirus), I began to wonder what happened to financial markets during Watergate, and whether there are any lessons for us today? I decided to do some research to find out.

Please note: I mean to observe historical facts here, and see if I discern any financial market parallel responses to political scandal. Although it is my objective to stay away from political opinion, please forgive any transgressions.

The Mid-70’s

President Nixon...

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The Advice Industry

by Glenn J. Downing, MBA, CFP®

In this post I’d like to give a little history and background on the advice industry. It may not grab you right off as being the most compelling reading, but please stick with it. I have some valuable points to develop.  In Part II I go into some of the changes in our regulatory environment.  

A Visit to the Stockbroker

When I was a teen I remember going with my father to visit his stockbroker. Dad used the occasion to teach me what owning common stock means (an ownership stake in a publicly-traded company). He explained that the broker brings buyers and sellers of securities together, and facilitates trades. For this service there is a fee on each trade – a fee on both the buy and the sell, paid by the customer to the broker.

Looking back on it, Dad was explaining to me that I, the buyer, and the broker, had a conflict of interest. My interest was getting the cheapest price for the shares. The brokers interest was to...

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