Meritum Wealth Management
Trusted Registered Investment Advisor (RIA) firm for personalized strategies and fiduciary advice.
Which is better, lump-sum investing or dollar-cost-averaging?
Lump-sum investing = larger and fewer contributions
Dollar-cost-averaging = smaller and more frequent contributions
Most individuals find that dollar-cost averaging makes more sense for them because they get paid bi-weekly or once a month and it is easier to budget a percentage of their wages or a fixed dollar amount into a 401(k), IRA, and/or brokerage account. They also don't have to worry about "timing the market" and as they contribute periodically they will be "buying in" at various prices (sometimes when the market is low and sometimes the market is high), which average out over time.
Other individuals may have extra cash on hand, inherit money, sell a business, or have fluctuating income and may prefer or only be able to contribute larger amounts once or twice a year. This often brings anxiety because they want to "time" the market and "buy in" at the best time, which is often impossible to predict since the market is always trading up and down due to company earnings, consumer inflation data, geopolitical news, and many other factors.
Research shows that lump sum investing tends to outperform dollar-cost averaging over time, however, if you are only able to or prefer to invest smaller amounts over time, dollar-cost averaging still outperforms holding cash.
Regardless of which method you choose, the main concept that is important to remember is that investing is a great way to build long-term wealth, so don't overthink it and get started today!
What Is The Difference Between a Roth Conversion and a Backdoor Roth?
Both strategies are a great way to save tax-free assets for retirement, but many people confuse the two. Here are the main differences:
Roth conversions include transferring funds from a Traditional IRA or 401(k) to a Roth IRA. Any amount you convert in a given year is considered taxable income and will need to be reported on your tax return. There are no income or contribution limits to this strategy. Roth conversions are irreversible, so once they are completed they cannot be undone.
A backdoor Roth, on the other hand, involves making a non-deductible contribution to a traditional IRA and then converting the contribution to a Roth IRA. This strategy is typically used for high-income earners who earn too much to contribute directly to a Roth IRA. Any contributions converted are considered taxable income and must be reported on your tax return. A backdoor Roth conversion/contribution typically requires a bit more planning and paperwork to ensure it is documented correctly (pro-rate rule and IRS Form 8606).
If you have any questions on either strategy or would like to see if any of these may benefit your personal situation, feel free to reach out!
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If you have children or plan to grow your family soon, consider these four steps to protect your family and build a solid financial foundation for your loved ones.
1) Create an estate plan. This could include a living will, healthcare and financial power of attorney, guardianship documents, and/or a revocable living trust. Regardless of how "young or healthy" you are, or how "simple" your estate is, please speak with an estate planning attorney to determine which documents you need and get them set up.
2) Check that you have enough and the right types of insurance. Depending on your specific household, you may need to carry life and disability insurance to protect your family in the event of unexpected illness, disability, and/or death.
3) Set up and contribute to investment accounts for your children. If education is important, consider a 529 plan. If you want your child to have more flexibility with the funds when they come of age, consider a custodial brokerage account (UTMA or UGMA).
4) Consult with a tax professional to ensure that you are getting all of the appropriate tax deductions and credits that you are entitled to in order to help reduce your tax liability. This could include the Child Tax Credit, Earned Income Credit, or the Child & Dependent Care Credit (just to name a few).
Everyone's situation is unique so every household may look a bit different, but these are some of the most essential "To-Do" items if you are growing your family.
Feel free to reach out if you have any questions on any of these, or to review your family's personal situation!
The "American Dream" Costs How Much?!?!
Popular finance website and publisher Investopedia ran a study and estimates that the standard "American Dream" costs roughly $3,455,305 over your lifetime. This includes:
🍼 Hospital Birth: $5,708
👨👩👧👦 Raising Children to 18: $576,896
🚗 Car Purchases: $271,330
🎓 College Tuition for One Year: $42,070
💍 Engagement Ring and Wedding: $35,800
🏠 Home Purchases: $796,998
🐕 Owning Pets: $67,935
🏥 Health Insurance Costs: $934,752
💰 Retirement: $715,968
⚰ Funeral: $7,848
Everyone's needs and goals are different so the numbers may differ significantly for your situation. Regardless, comprehending it may seem overwhelming, but that is why we are here to help! If you aren't sure how, when, or where you should save or invest for these various life stages, feel free to reach out to discuss!
Want more wealth? These are the only 6 principles that you need to follow.
Regardless of how or why you want to build wealth, these fundamental principles will help you achieve your wealth-building goals.
💰 Increase Your Income (more income = more you can invest)
💵 Invest More (more money working for you = faster compounding)
⏰ Invest Longer (more time = more compounding)
📈 Increase Returns (higher returns = faster compounding)
🏛 Minimize Taxes (less taxes = more money to invest)
💳 Minimize Fees/Expenses (fewer fees/expenses = more money to invest)
If you have any questions about any of these principles or want to learn how you can implement these principles in your life, feel free to reach out!
Do you weigh the opportunity costs associated with your life decisions?
Opportunity cost is the potential benefit you would miss when choosing one alternative over another.
Every decision in life has some sort of opportunity cost associated with it. Whether it's in regards to investing and finances, your career, or your health and working out - it's important to weigh the pros and cons of all your decisions to determine which outcome will help you achieve your needs and goals the best.
If you would like to chat through some of the opportunity costs associated with your investments and finances, feel free to reach out!
01/03/2024
We are honored to be kicking off our new retirement planning seminar series this Spring with the MidPointe Library System!
As fiduciary advisors who value honest education, these seminars are intended to help individuals nearing retirement avoid costly mistakes and increase their chances of a successful retirement. We will be covering the six main areas of retirement planning, which include:
• Social Security
• Medicare
• Tax Planning
• Investment Management
• Estate Planning
• Long-term Care Planning
If you, or anyone you know, is nearing retirement or has recently retired, please join us for this free in-person seminar at one of the MidPointe Library System locations this Spring!
Offense vs. Defense In Your Financial Plan
With Super Bowl 58 right around the corner, I want to compare your financial journey to a football game. To win a football game or any sporting event, you need to find the perfect balance between offense and defense - the same applies to your financial journey as well.
A few ways you can play offense include investing some of your excess income to help reach your goals quicker, starting a business, purchasing real estate, or utilizing proactive tax planning strategies to reduce your taxes.
On the other hand, a few ways that you could play defense include purchasing a life insurance policy to help protect your loved ones against the unexpected, establishing a comprehensive estate plan, or setting up an emergency fund.
Everyone will have to play some sort of combination between offense and defense, however, depending on where you are at in your financial journey and what your goals and needs are will determine how much of each you should be focusing on.
If you are wondering which you should be focused on, or need help finding a balance between the two, feel free to reach out!
27/03/2023
Building long-term wealth through investing requires more than just picking the hottest stocks of the day or following your friend’s tips. While some people may be able to speculate their way to significant wealth, the proven and secure strategies are what will help you achieve your financial goals. By investing for the long-term, diversifying your investments, practicing patience, minimizing fees, and working with a trusted fiduciary advisor, you can create a solid foundation for your financial future.
On the other hand, day trading, speculating for quick gains, blindly following others’ recommendations, and paying high fees, are just some of the pitfalls that can derail your long-term wealth goals.
Remember, the key to success is not about getting rich quick, it’s about steady progress over time. So, start building your wealth today with a plan that focuses on long-term growth and financial security.
13/03/2023
Are you a new investor feeling overwhelmed by all the investing jargon? Fear not! Let’s break it down into four different layers.
First, there is the brokerage or custodian. This is the third-party firm where your funds are held and where your trades are executed. Think of it as a middleman between you and the market. Popular brokerages include Fidelity, TD Ameritrade, Charles Schwab, and Interactive Brokers.
Next, there are different types of accounts that you can open. Some popular options include Individual Retirement Accounts (IRAs), 401(k)s, and regular brokerage accounts. Each account has its own benefits and restrictions, so make sure you do your research before opening one.
Third, there are different types of investment funds that you could purchase within your investment account. These include ETFs (Exchange-Traded Funds), index funds, and mutual funds. These funds pool together money from multiple investors to purchase a diversified portfolio of stocks and/or bonds. They are often managed by a professional and offer a way to invest in a variety of assets without having to pick individual stocks or bonds.
Finally, there are individual securities like individual stocks or bonds. This is where you can pick specific companies or bonds to invest in. This option requires more research and knowledge but can offer great potential returns.
Remember, investing can be intimidating at first, but it is important to start somewhere! Reach out to us to chat about where you can start.
06/03/2023
If you are thinking of retiring soon - congratulations!
Retirement is a major milestone in your life, and it is important to start thinking about how you want to spend your retirement years. While retirement may seem like a time to relax and enjoy the fruits of your labor, it also required careful planning.
Failing to appropriately plan, or making costly mistakes at the beginning of your retirement, can severely hurt your chances of a successful retirement.
For example, some common mistakes retirees make include:
- Not saving enough for retirement.
- Making poor investment choices.
- Ignoring taxes in retirement, or making mistakes that cost them tens of thousands of dollars throughout their retirement.
- Taking social security too early or too late and missing out on extra benefits.
- Choosing the wrong Medicare supplement or advantage plan for their healthcare needs.
- Assuming they have a proper estate plan in place when they don’t, ultimately leading their beneficiaries to the headache, delays, and costs of the probate court process to inherit assets.
If you are considering retiring in the near future, speak with a fiduciary advisor who can help you plan all aspects of your retirement to help improve your chances of a successful retirement!
27/02/2023
It’s tax season, and many of you may be daydreaming about what you are going to spend your tax refund money on. Before you start swiping that credit card, instead consider how you can effectively use that refund to help your financial future.
Paying off high-interest debt, such as car loans, student loans, or credit card debt, should be a top priority. This will not only reduce the amount of money you owe but also lower your monthly expenses. Imagine what you could do with that extra cash each month! By paying off your debts, you will also improve your credit score, making it easier to borrow in the future.
Another smart option is to set up an emergency fund with at least three to six months of living expenses. Unexpected events can happen at any time, and having a safety net will give you peace of mind. You won’t have to worry about paying your bills if you lose your job or face a medical emergency.
Using your tax refund to invest in your future is also a great idea. Maxing out a retirement account or investing in a taxable brokerage account can help you build wealth over time. The earlier you start investing, the more time your money has to grow. Don’t miss out on the power of compound interest!
If you are interested in learning which strategy may be best for your specific situation, reach out and let’s chat!
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