Financial Pathway Advisors, LLC
James Kinney is the founder and owner of Financial Pathway Advisors of Bridgewater New Jersey. Financial Pathways also has offices in Flanders and Cranbury New Jersey.
Jim is a Certified Financial Planner and a NAPFA registered fee only financial advisor. Fee only advisors are committed to maintaining a compensation model that eliminates the potential conflicts of interest which may result when parties other than the client are paying for advice. Fee only advisors are not permitted to accept commissions, referral payments, or any other form of compensation from investment firms, insurance companies, or other professionals.
Jim is a strong believer in the power of financial planning, when done with the clients’ best interests in mind, to improve lives, reduce stress, and achieve goals. Both Jim and Luba have analytical backgrounds (both have spent time working in IT, as well as business and finance), which are demonstrated in the care and attention they pay to even the smallest detail in their clients’ financial plans.
In addition to retirement planning and investing, Jim has specialized training in planning for college, while his partner, Luba, is a Certified Divorce Financial Planning Specialist.
Jim believes that investment risk management should be at the core of every financial plan. Again, his analytical approach is on display as the firm carefully creates, for each client, portfolios that are optimally diversified to balance investment risk vs. the need for positive returns. There are no cookie cutter investment solutions at Financial Pathways. Each client’s investment recommendations are unique and based on his or her carefully considered financial plan.
Jim lives in Hillsborough New Jersey with his wife Laura. They have four adult and college age children. Jim earned his bachelors degree in Business Administration from Drexel University in 1984, his MBA from Fairleigh Dickinson University in 1990. Prior to beginning his current career, Jim had been a successful entrepreneur, founding and growing a successful international manufacturing and data management company from 1990 to 2003. He started his financial planning career in 2004, founded Financial Pathways in 2007, and earned his CFP® certification in 2008. Luba Globerman joined his practice in 2009. Jim is a member of the Financial Planning Association (FPA) as well as the National Association of Personal Financial Advisors (NAPFA). He has been an active adult leader in the Boy Scouts of America for 18 years, and enjoys camping, hiking, fishing, running and the outdoors.
BS, Business Administration, Drexel University
MBA, Fairleigh Dickenson University
Financial Pathway Advisors is a Registered Investment Advisor in the State of New Jersey. Advisory services are offered only to residents of the State of New Jersey, except as permitted by applicable state and federal securities regulations.
I sense your motivation here is that the IRA is not performing well. If this is the case, as others have alluded to, it is not the fault of IRA vs. 401k. It is likely the fault of the investment strategy and/or fees associated with the account.
If you put $100,000 in a 401k and $100,000 in an IRA and invested both in a total stock market index fund, the return should be exactly the same - minus any difference in fees or commissions on the accounts. Most large company 401ks have fairly low fees. Some small company plans have higher fees, due to fewer employees to share recordkeeping costs. You can research your plan at www.brightscope.com.
As for your IRA, I sense that you have an advisor managing that account for you. If so, of course they have a vested interest in telling you to keep it where it is, and not rolling it into your 401k. And of course, the advisor is getting paid, which is a drain on your investment returns. But if you are getting really good advice and direction regarding your investments (and the rest of your financial life) from the advisor, maybe the fees are worth it.
Bottom line, you need to find out WHY your IRA performance is diappointing. Is it the markets? Is it the selection of investments (too much in bonds would have inhibited performance this year with increasing interest rates)? Is it fees or expense load in the investments?
If you are unsure, you can look for an independent CFP who charges by the hour to help analyze your accounts and steer you in the right direction. You can find such an advisor at www.napfa.org.
It's never too early. However, it is also important to ask a few questions first.
1. Before saving for your child, how is your own financial situation? Are you debt free (other than mortgage)? Are you on track with your retirement plan? If not, then it is more important (and beneficial to your child) to get your own life in order first.
2. If the saving is for college, it may be more beneficial to consider 529 college savings plans.
If all is in order with your own life, then feel free to put some money in your childs name in a UGMA or UTMA account. Before doing so, realize that once they reach the age of majority, they can do anything they like with assets in these accounts - and you may not approve. I know it is hard to imagine your little baby may be a foolish and impetuous teenager someday - but trust me, it happens! This is one reason we like 529 accounts - where the child is merely the beneficiary and you retain ownership of the account. You can also open a special account in your own name, but which you understand is for their benefit, then you can gift or use the money for them as appropriate in the future.
To me, the difference is largely one of time frame.
Lets offer an example. We have 2 ten year olds with $100.
Amy uses the $100 to buy lemons, sugar, an old table, and some poster board and sets up a lemonade stand on a busy road. Business is brisk, and she reinvests her profits by buying more supplies. By the end of the summer she has turned $100 into $500. Some days (rainy, cool days) business was slow, some days (the hot sunny ones) it was brisk. She was never discouraged. She did not throw up her hands on the first rainy day and say "no one is ever going to buy lemonade again - I'm going to sell my stand". She is an investor.
Johnny on the other hand goes and spends his entire $100 buying lemons, which he hopes to sell to Amy next week at a higher price. He heard the price of lemons will go up because the forecast is calling for record heat and lemonade is popular in the hot weather. Lo and behold, the forecast is wrong, the price of lemons drops, and Johnny is wiped out. Johnny is a speculator.
Speculators are forever trying to be smarter than the market. Investors simply participate in the markets. Speculating is akin to gambling. Investing is like going to work.
This is complicated. If your 20 year old is receiving financial aid, getting married could increase your Expected Family Contribution and reduce available financial aid.
Federal income tax considerations alone may not be sufficient to sway the decision. Ask your accountant to do a "what if" tax scenario to be certain. I am expecting that the difference will not be sufficient to sway such a big decision on its own.
Does the pension plan allow for non-spouse beneficiaries? If not, this could be important. If the spouse with the pension dies and the pension is lost, will the other spouse have sufficient resources to carry on?
Similarly with Social Security (although maybe less so since you may have similar earnings history) the surviving spouse would have choice of the larger of two benefit payments. So if one partner had a much higher benefit, the surviving spouse (but not unmarried partner) would have greater income security if married.
If you choose NOT to get married, make sure you have done thorough estate planning (will, power of attorney, medical directive). This is crucial for unmarried partners. If you die without a will, the state will pass assets to your living relatives - not to unmarried partners. I would advise working with a financial planner and an estate attorney to dig into these questions in more detail.
No, a car loan is a better choice. 401k loans should be used only for dire emergencies, in my opinion. If he loses his job anytime during the next 5 years, the loan will have to be repaid in full, or the outstanding balance becomes an early distribution subject to taxes and penalties. Also, the funds you borrow are not invested for the next 5 years, which cuts into long term growth. Yes, you pay yourself interest in theory - but paying yourself is not the same as your investments actually earning money! Car financing is quite cheap right now, so why go tapping your retirement money? Maximimizing your 401k contributions will help lower your taxes, but taking out a 401k loan has no effect. (if you happen to have an open Home Equity Line of Credit, you could use that to buy the car, and interest is deductible.- but make sure you pay it back before you are ready to buy another car!)
Generally I like people to pay cash for cars, but I admit that not many people heed that advice. Cars are a tremendous drain on financial resources. Loans and leases encourage people to buy more car than they would otherwise pay, because they focus on the small monthly payment. If you actually have to write a check for the vehicle price, you will almost certainly spend far less money. And that money can be put to more productive use. Most of the clients I work with who are in the best shape for retirement live below their means when it comes to cars and houses.