Integrity Advisory, LLC
As a Financial Advisor at Integrity Advisory, LLC Matt Ahrens is focused on helping business professionals simplify their financial lives and find financial security as they face life's everyday challenges.
Since joining the firm in 2015 as a financial advisor, Matt has overseen the investment management and portfolio construction process for our clients. During this time, he earned the Certified Investment Management Analyst® designation which included an extensive class on portfolio design at the prestigious Wharton School of the University of Pennsylvania. Matt specializes in assisting physicians, small business owners, and young entrepreneurs who often find themselves with little time to manage their own investments.
Matt and his team help their clients track all of their investments in one centralized location and use the information to make sure they can retire when they want to and how they want to.
BS, Accounting, Washburn University
Assets Under Management:
Nope there is no limit. There is only a limit on how much you can contribute on an annual basis. That would be $5,500 ($6,500 if you're over 50), and that is subject to income limits. If you're single and make more than $63,000 in 2018 then you start to lose some of the tax benefit on a Traditional IRA. For married filing jointly that phaseout starts at $101,000.
Good luck to you,
Good question, and I can certainly understand the stress of having a large student loan. I would suggest reviewing one more resource prior to making this decision. We work with a number of physicians who graduate with significant student debt, and this is the same resource we send to them. Click here to view The College Investor.
Whenever possible I would suggest not taking an early distribution on your 401(k). Due to compounding, a distribution could put your retirement picture in worse financial shape than plugging away at the loans. Also, as mentioned previously you would pay a 10% early distribution penalty plus regular income taxes. So whatever you take out of your 401(k) you could see possibly 1/3 or more go to the IRS. I'm not sure how much you are currently contributing to your 401(k), but consider contributing just enough to get the company match and use any excess cash flow to pay down the private loans.
The resource above has links to help you understand your repayment plans, refinancing options, help with a budget, etc.
Good luck to you,
That's a great question, and one that we encounter with regularity. Almost everyone feels that this market is expensive, and is worried about the prospects of another downturn. Another downturn is inevitable, the problem is the timing. I had one client last year who refused to invest the majority of their money, because they felt the market was too expensive, and he missed out on the opportunity for great returns. My philosophy is that if your portfolio is designed correctly, then a market downturn should stretch you but not break you. Let's say your portfolio has a Beta of 0.5 versus the S&P 500. If the S&P 500 were to drop 10% then the expectation is that your portfolio should drop about 5%. If the market drops 20% then the expectation is that your portfolio would drop 10%. Determine how much of a drop in your portfolio you can handle and then start building. Remember that large drops like 2008-2009 are statistical outliers. No one can predict what the market will do, but you can design a portfolio to put odds on your side.
My suggestion for first steps would be to dollar cost average into full positions. We use TD Ameritrade, and at TD there is no transaction fee for systematic purchases. Because we may still see short-term volatility, this approach can help smooth out the entry point until your full position is realized. Start by buying maybe 10% of the total allocation amount and then set up monthly systematic purchases over the next 6 - 9 months.
Second, think in terms of buckets. What money will you need to access in the next 2 years? 5 years? 10 years? Longer? Longer term money can be more aggressive to help fight inflation while shorter term money should be more liquid and conservative.
I do subscribe to the buy and hold philosophy, because again a properly constructed portfolio should meet your retirement objectives and match your risk tolerance. Having said that, one piece of our portfolios is an in-house tactical program that is based on algorithms. These algorithms look at trends in the market, and there is no emotion involved. For advisors and investors alike, emotion is the biggest hurdle to financial peace and security. The client I mentioned at the beginning of this answer did allow me to leave a portion of his money in our tactical program, because he knew that it could get defensive if the equity market deteriorated. Without that emotionless part of his portfolio he would be behind on his retirement goals.
Good luck to you and please let me know if I can answer further questions.
Matt Ahrens, CIMA®
Congratulations on your upcoming retirement! I would agree with John on this one and suggest not paying off your mortgage. We work hard with our clients to get them debt free prior to retirement, but the implications of taking such a large distribution from your 401(k) hardly make this worth it. First, you would need to take much more than $85,000 out of your 401(k) to net $85k after taxes. Second, if you need more monthly income prior to age 70 I would prefer you take that income from your 401(k) balance and allow your Social Security benefits to continue to grow at 8% a year. Third, if you have an emergency or long-term care needs then you will want that money from your 401(k) to help pay expenses. If you are able to do so, then consider paying extra on your mortgage, but keep your nest egg for now.
It's awesome that you're doing your own investing, and getting started at the age of 25. Stocks that pay out (usually quarterly) dividends tend to have nice cash flow, which typically indicates sounds financial footing. Beware a trap here though. There are some companies that pay very high dividends, because of the structure of those companies. Companies like Blackstone (Ticker: BX), Digital Realty (Ticker: DLR) are companies that pay very nice dividends, but companies in their sectors usually pay high dividends. I actually like both of these companies, but the more important thing to consider is do these companies have staying power? Are they leaders in their industry or do they have some form of competitive advantage over their peers? Take Amazon as an example. Amazon has an amazing knack for disrupting industries yet they pay no dividend (really because they don't have high profit margins and they keep reinvesting it back in the business). Illumina (Ticker: ILMN) has done great work in mapping the human genone in the healthcare space. Tesla (Ticker: TSLA), despite its product problems, has the opportunity to disrupt not just the automotive industry but also the solar power industry. There is much more to picking a strong company than picking a company with a dividend. Often times a strong company will pay you a dividend, but paying a dividend is not necessarily indicative of staying power. In addition, in a bear market many companies will lower or shut off their dividend. Prior to making a purchase I would go to a website like SeekingAlpha.com and seeing what others say about that stock. Investopedia also has a great tool where you can invest in companies without using real money. It's a great way to cut your teeth without losing real money until you figure out your routine.
Since you are just getting started I would suggest picking a few that you really like and then blending it with passive ETF. The diversification from the ETF will help control the risk of being overly concentrated in a few individual positions.