DM Wealth Management, Inc.
Peggy Frazier Doviak, Ph.D., has been a CERTIFIED FINANCIAL PLANNER™ practitioner and portfolio manager since 2003. An adjunct professor since 2005, she has taught thousands of financial advisers in certification courses, including the CFP(r) and CRPC designations, along with graduate courses for Masters' programs in financial planning.
Peggy entered finance in 2003 after her mother had a bad experience with a stock broker, and she has been a financial education advocate her entire career. In 2007, she served on the task force for the Oklahoma State Department of Education’s “Passport to Financial Literacy,” Oklahoma’s financial education curriculum mandate. She is a former member of the Advisory Board for the Journal of Financial Planning and is on the Academic Committee of the Financial Planning Association. She was recently appointed as an advocate for the Women in Finance initiative (WIN) by the CFP Board of Standards, and she is a graduate adjunct professor at Oklahoma State University.
Additionally, Peggy Doviak is a public speaker and author with experience in radio and television. She is active in financial literacy initiatives and works to promote the financial planning profession. Her book, 52 Things a Broker Might Not Tell You: Planning Your Prosperity In a Year, is available on Amazon and her website, www.peggydoviak.com. Book Peggy for a talk or workshop if your group wants help in planning their prosperity!
Peggy and her husband, Richard, enjoy traveling. She loves her two cats, Pumpkin and Sandy, and she can often be found with her horse, Maggie, training to be a barrel racer.
PhD, Education, University of Oklahoma
MS, Finance & Financial Analysis, College for Financial Planning
MA, Creative Writing, University of Central Oklahoma
Assets Under Management:
Investing is risky, and you can lose money. Consult your CPA, attorney, or CERTIFIED FINANCIAL PLANNER(tm) practitioner, as your situation may be different than the questions and articles you are reading.
Whether or not you can fund a Roth IRA is a function of your Adjusted Gross Income (AGI). In 2016, the phaseouts for funding a Roth are
Married Filing Jointly: $184,000-$194,000
Married Filing Separately: $10,000-$10,000
If you earn more than the phaseout, you cannot fund a Roth. If you earn less than the phaseout, you can fund the Roth. If you earn an amount within the phaseout, you can partially fund the Roth at the percentage of income that is left in the phaseout. To put that in English, if you are MFJ and earn $185,000, you are $1,000 of the way into a $10,000 phase out, or 1/10th. That means you could fund the Roth up to 90% of the allowable amount for the year, $5,500 or $6,500 if you are over age 50.
You may have noticed two peculiar things. First, the single phaseout is broader than the married phaseout. That's because IRA funding still has the "marriage penalty" associated with it. Second, the married filing separately phaseout is amazingly low. That's because the IRS penalizes married couples who file separately to stay in lower tax brackets.
Your participation in an employer-sponsored retirement plan has nothing to do with any of this. You may be thinking about the deductibility of traditional IRAs, which can be affected by plan participation. I hope this helps. Be Prosperous! Peggy Doviak
The Dow Jones Industrial Average, also called the "Dow," is an index of 30 large-cap companies that trade on either the New York Stock Exchange (NYSE) or the NASDAQ. Created by Charles Dow in 1896, the Dow originally had only 12 companies that were leaders in the industrial sector. The only remaining stock in the today's dow is General Electric. Over time, the index increased in size and breadth, although an index of 30 companies is still not large. The other unusual characteristic of Dow holdings is that the index is "price weighted." This means that more expensive stocks hold a bigger position in the index, and as a result, price movements in these stocks impact the Dow more.
On the other hand, the S&P 500 is an index of the 500 largest US companies that also trade on the NYSE or the NASDAQ. The S&P 500 is "size weighted" rather than price weighted. This means that larger companies hold a larger position in the index. This is an important distinction between the Dow and the S&P 500, and it explains why the S&P 500 is seen to be a closer proxy for the condition of the US stock market.
As you can see, both the Dow and the S&P 500 track large cap United States stocks. Because of this similarity, it's more unusual when they move differently than when they move together. These differences are easily accounted for by the weighting structures of the two indices.
If you are only going to follow one index, the S&P 500 is probably a better measure to give you a true sense of large cap stock movement; however, the Dow is so popular, it isn't going anywhere anytime soon!
Be Prosperous! Peggy
Congratulations for starting to invest at the age of 20! When you choose to invest in ETFs instead of single stocks, you are attempting to capture market return and lower risk in ways that are difficult to achieve with single stocks. Companies are exposed to many risks: business risk, market risk, financial risk, along with other variables. Doing research on stocks can help you understand and minimize some of these, but single stocks have a volatility that is lower when you buy an index. It's a pretty straightforward reason; if you own an index fund of 500 companies, one poor investment choice is buffered by the other 499 positions. If you purchase just the poor choice, nothing protects your loss. Now, this doesn't mean that index funds aren't volatile, and they can lose money, however, they have lower volatility.
As you know, ETFs track indices, so they are typically less volatile than stocks. They might outperform a single stock, but it is unusual that an ETF would hit the "home run" that the right stock choice might. But remember--most investors don't hit home runs. Most portfolio managers don't, either. Consistent singles and doubles lead to long-term investing success. Additionally, ETFs can allow you to purchase riskier asset classes where single stocks might be a very bad idea. These asset classes could include, but wouldn't be limited to, small cap stocks and emerging markets. In riskier asset classes, index funds are likely a much better plan than individual stock selection where research might be difficult to obtain.
Best of luck in your investing! Be Prosperous! Peggy
The choice of how to manage an IRA can be complicated. As you consider changing custodians, I would like to suggest that you consider a few components that I think are important.
1. Do you want to work with an advisor or manage the money yourself? Although there will be costs associated with working with an advisor, you need to decide if you have the knowledge and the time to make your own investment decisions.
2. How are your fees charged? There can be platform compensation, advisor compensation, product compensation, and fund compensation. Basically, there are three models: fee only, fee and commission, and commission only. There are advantages and disadvantages to all of these, and sometimes, it may be hard to find all the charges. Make sure you know if the platform, itself, charges an annual fee to hold your account. How much does your advisor receive? If you are not sure, ask. Sometimes, advisors receive payment from product creators (like annuity companies). No one is working for free. Find out how much the advisor is being compensated by the product creator, as well. Additionally, some products have additional fees. Find out what they are. Finally, mutual funds, exchange traded funds, closed end funds, and any other type of fund also have fees. These are sometimes also known as "expense ratios." Determine the expense ratio for each holding.
3. What are the credentials of your advisor? Today, there are a myriad of financial designations. Some of them are quite good, and some merely involve staying conscious for half a day. My opinion is that the CERTIFIED FINANCIAL PLANNER practitioner designation is the gold standard because of its experience requirement, training requirement, college degree requirement, and extensive comprehensive exam. You can learn more about the designation at letsmakeaplan.org. Other credentials are also good, but you should ask your advisor what, specifically, he or she had to do to receive the designation. Trust me--if it was a lot of work, they will be happy to share.
4. Is the advisor willing to be a fiduciary? The Department of Labor has required that starting next spring, anyone who works with your retirement money must be your fiduciary. Simply stated, this means that they must act in your best interest rather than their best interest. Although this sounds very reasonable, it has been fought extensively by much of the financial world. Ask your advisor to put his or her fiduciary duty to you in writing.
Once you have answered these questions, you will be in a much better place to decide how to manage your IRA. Moving it may be a good decision for you, or you may decide you want to leave your money where it is. Either way, you will be making your choice from a sound foundation.
Be Prosperous! Peggy
Congratulations on your recent raise! I would like to address several issues I think you have raised in your question. First, if you are making less money in your take-home paycheck than you were before your raise, it is more likely related to money being withheld for benefits than it is your new tax bracket. Tax brackets work like buckets, and you fill the buckets of the lower tax brackets before you move onto a higher rate. As a result, your nominal tax rate (the highest rate you pay) is not the percentage of tax that you owe for all of your money. You have gotten the benefits of those lower brackets, as well. Even though you have moved to a higher tax bracket as a result of your raise, that bracket is only used for money in excess of the bracket you were in.
It's possible, though, that your paycheck has gone down. You will want to talk to your HR department to examine the costs of any fringe benefits you may be purchasing. For example, maybe the cost of supplemental life insurance has increased at your firm. These changes can be the result of a new carrier, as well as other potential issues. Your HR department will be able to help you better with this much better than I can!
Finally, you don't say why you want to opt out of your 401(k). It's very possible that your employer will match contributions that you make up to certain percentages. For example, some employers will match your contributions up to the level of 3% of your compensation. If you opt out of this, you are turning down free money up to the level of the match. If your employer makes contributions on your behalf regardless of your participation you should know that this makes you an active participant in the plan, even though you aren't putting in any money, yourself. Active participation in a company plan can impact your ability to deduct an IRA contribution. This isn't a bad thing, but it's something you need to know. I have heard some financial celebrities be very critical of 401(k) plans, but an employer match gives you an effective 100% return on the money you choose to defer. Even if the fund choices aren't great or they are somewhat expensive, you should really consider participating, at least up to the level of the match.
Of course, your circumstances may change the usefulness of my response. My answer is educational, not investment advice. Investing is risky, and you can lose money. Consult a financial professional before you make any decisions. Be Prosperous!