North Capital, Inc.
As a Director at North Capital, Daren's primary responsibilities have included developing the firm's international partnerships, and assisting with the launch of North Capital's own robo-advising platform, Evisor. Daren is also responsible for new-client outreach, as well as maintaining current client relationships, including their portfolio management and planning needs.
What Daren likes best about working in financial services is the combination of people and quantitative skills that is required. As a financial advisor, Daren gets to use his aptitude and interest in math, as well as apply his teaching background, and people skills on a daily basis. This fulfillment drives Daren when he is at work. In his current position, he is fortunate to be surrounded by such qualified individuals whom he learns from every day.
Prior to joining North Capital in 2014, Daren taught in Canyon's School District and at the University of Utah. Daren earned his BA in Spanish Education with a minor in Business Management, and subsequently his Master of Science in Finance, both from the University of Utah. He holds a Series 65 License.
MS, Finance, University of Utah
BA, Spanish Education, University of Utah
Assets Under Management:
Introduction - Daren Dearden, North Capital
Defined benefit pension plans are becoming far less common, due to the high cost to employers. Generally, when you retire, you start receiving your benefit. It is a set amount, and continues until you die. Some pensions offer a survivor clause, whereby you can take a reduced amount, in exchange for the payments continuing for a surviving spouse. The benefit amount is usually based on your average salary, years of service, etc.
A definent contribution plan is like a 401(k). You, and in some cases your employer, contribute a certain amount each paycheck. At retirement, the amount you receive, and for how long, isn't certain as it is with a defined benefit plan. Rather, you will draw down on the sum of your account, for as long as it will last. Many people solicit the help of a financial advisor to determine how much they can afford to withdraw annually, so that the sum can sustain itself throughout the rest of their life.
In a defined benefit plan, the obliger (the employer) assumes all market risk - whether the value of the funds goes up or down, they are obligated to pay the same amount to the retired employee. In a defined contribution plan, the employee assumes all market risk - if the value of the account goes up or down, the amount they can afford to withdraw in retirement will fluctuate accordingly.
One reason to start a Roth IRA is because there are no RMDs (required minimum distributions). This means that, unlike a traditional IRA, you can leave the full amount in the account to keep growing, as long as you don't need it. Many people are forced to withdraw from their IRA, and pay taxes on the distribution, even though they have other assets to live on, because of RMDs.
Another reason is that the growth in a Roth IRA is tax-exempt. Even though you are only 7 years from retirement, it could be several decades before you had to tap into the funds you contribute to a Roth IRA. This is because you could choose to spend down these funds last, thereby leaving them in the account to grow, tax-free, while drawing down on your other tax-deferred assets.
When you retire, you will likely want to roll the funds from your 403(b) into a Traditional IRA. At that point, you could convert some of the funds to Roth, if you haven't started one already.
that's great that you are investing in your 401k at work, and also looking for other ways to save money.
I would consider a mutual fund that holds bonds, rather than individual bonds, for short-term savings. Your long-term investments (in your 401k) could be invested more aggressively, given your age.
Besides investing in your 401k, I would consider a Roth IRA, which is a post-tax retirement account. It has tremendous tax advantages, and the money isn't locked away until you retire - you are able to withdraw the contributions tax-free at any time, without penalty. This would be a good way to get some short-term savings set aside. You can pull out what you need later, but whatever you don't need (which must include the earnings in the account) can be left there, where the tax-advantages are the greatest.
I don't think there is necessarily a wrong answer here, given the information you provided. A specific recommendation would depend on the variables. For example, how much debt do you have, how old are you, what is your aversion to debt, how much excess do you have on a monthly basis to contribute in either case, etc.
To your point, you want to be sensitive to the interest rates of your debt. You also don't want to miss out on compound interest, and meeting your retirement goals.
I think one place to start is that if there is a match in your retirement plan, I would recommend contributing up to the match, in almost any situation, because that is "free" money that you don't want to leave on the table.
Next, I would assess your monthly cashflows to ensure that you are able to meet your needs without going further into debt. If you are (there is excess each month), then you will have to decide where to allocate those funds. Perhaps you can split them between making retirement contributions, and paying off your debts. Hope this helps.
At our firm, we have been able to reduce the costs of our comprehensive financial plans significantly, due to all of the improvements in technology. Besides being able to do so due to technology advancements, many firms will be forced to do so because robo-solutions will offer more economic alternatives. This will make quotes like $5,000 seem astronomical.
While we have a proprietary robo-advisory platform, that is a cost-effective solution for some of our clients, there is still value added by getting a plan from an actual advisor. We are sometimes able to do a comprehensive, full-fledged financial plan, for as low as $1,000. This isn't because we are being compensated in another way (we are fee-only), nor is it because it is a "quick", high-level assessment. It's because we've been able to take our processes, which used to take 15+ hours, and reduce the time required by 50%. We have passed these time-savings on to our clients in the form of heavily discounted, and highly competitively priced financial plans.
I think you should look for a credentialed (CFP or CFA are my preferences), fee-only advisor, who is willing to work with whatever budget you can allocate to this project. I wish you luck!