19% of women report feeling confident selecting investments that align with their goals
This is a discouraging statistic from a recent survey conducted on women and investing. We know that a gender gap exists when it comes to investing – on average, data shows that women’s investment account balances are less than men’s. There are a few often-cited reasons for this. The gender pay gap still exists, and women statistically spend more time outside of the workforce, meaning that women may simply have less money to invest.
But there is another reason. Women tend to feel less confident taking investment risk and therefore hold more cash on the sidelines, hampering their money’s growth potential.
But there is a difference between taking risk, and taking inappropriate risk for your goals. Women tend to benchmark successful investing not by the return numbers themselves, but by progress towards goals – buying a house, funding an education, or retiring comfortably.
Defining your goals and their timeframes is the first step toward building the confidence to invest. Money that you don’t need for 10 or 15 years can afford to be invested for growth. The farther along the timeline your goal is, the more certainty you can have of capturing greater returns by investing.
When women do invest, they see results. On average, women outperformed their male counterparts by 40 basis points or 0.4% over a 10-year analysis
On the flip side, studies show that over time, women’s investment returns tend to outperform men’s, with women exhibiting less impulsive investment decisions and staying the course when there is market volatility.
Starting early is the most powerful thing you can do to put yourself on track. If you didn’t start early, start now. Women already have the proclivity to stay invested to meet their goals, we just need the confidence to invest in the first place!
I joined Integras Partners in 2022 wanting to broaden my impact on people’s lives, particularly groups that have been underserved by the financial advice community – groups like women and single earners, which I am also a part of. Integras Partners was already well suited to women investors – focusing on the partnership and the “why” behind financial goals.
I’ll be writing more about these areas in coming newsletters, as well as general financial wellness and investing topics that I hope you will find interesting.
Employer retirement plans are often an individual’s greatest investment, because employees keep the long-term mindset needed to stay invested during down markets. Plus, investments are made with every paycheck and equal contributions buy more shares when markets are down.
Unfortunately, many employees limit their salary-deferral contributions to only capture their employer’s match. If you pay your bills in full every month and have adequate savings, we recommend increasing your contributions, for all the reasons above.
For 2024, the new deductible limit for employees under 50 is $23,000. If you turn 50 before the end of the year, you can add another $7,500.
Lastly, you want to spread your contributions out to last through every paycheck, so you capture all the employer-matching dollars available to you.
Do you still have money in a former employer’s plan?
Employers have greatly narrowed plan investment choices to avoid liability after the tech bubble of 2001.
Some plans restrict investment choices to “target date” and generic index funds.
If you’re retirement-minded, getting out of employer plans usually provides greater flexibility in taking money out, including frequency and tax withholding choices.
If you are already charitably inclined there are two gifting strategies that you should be aware of, Qualified Charitable Distributions (QCDs) and gifting appreciated stock.
In Strategies for Charitable Giving – Part 1 we discussed the tax benefits of QCDs which can be done by IRA owners who are at least 70.5 years old. But what if you are younger and giving to charities? Are there any tax benefits available? Most people take the standard deduction since the Tax Cuts and Jobs Act increased it, and if you’re not itemizing you lose the ability to deduct charitable contributions.
If you have appreciated stock (owned for more than a year) in a taxable investment account, donating stock instead of cash could provide a tax benefit to you and result in a greater gift to the charity.
Let’s look at an example.
Jim plans to donate to his favorite charity. He owns $30,000 of Microsoft stock that he purchased several years ago for $5,000. Jim is subject to 15% capital gains tax. If he were to sell the stock, he would pay $3,750 in taxes, leaving him with $26,250 to donate. If Jim is able to itemize his tax deductions, he would be able to deduct $26,250.1
If, instead, Jim donated the stock directly to the charity, he would avoid paying the capital gains tax. The charity receives the full $30,000 value, rather than $26,250. And if Jim itemizes, he may be able to deduct the full $30,000.1
To be eligible for a charitable deduction for this tax year, donations of stock need to be received by the end of the year.
Determining charitable giving strategies is one way that we partner with clients. We can help you determine if donating appreciated stock is right for your situation.
Call us to review your investment approach (404) 941-2800.
If you are already charitably inclined there are two gifting strategies that you should be aware of, Qualified Charitable Distributions (QCDs) and gifting appreciated stock. To realize tax benefits for 2023, both need to be done before the end of the year.
Qualified Charitable Distributions:
If you are an IRA owner and are age 70.5 or older, you are eligible to make QCDs. Most people take the standard deduction since the Tax Cuts and Jobs Act increased it, and if you’re not itemizing you lose the ability to deduct charitable contributions. QCDs are gifts to charities made directly from your IRA. Normally, money that you take out of an IRA is taxable income, but QCDs are excluded. So, you are getting money out of your IRA tax-free to give to charity.
Once you’re subject to RMDs (currently at age 73), QCDs are even more beneficial because they count towards satisfying your RMD. If you’re between 70.5 and 73 there is still an extra advantage in that the QCD decreases your IRA balance, which may reduce required minimum distributions in future years.
Let’s say that you are 71 years old, are already gifting to charities every year, and have an IRA. You have social security income which you supplement with money from your investment accounts, all of which is taxed before it hits your checking account. You’re writing checks to charities throughout the year – giving away money that you have already been taxed on. Making QCDs allows you to fulfill your charitable goals with money that you are not taxed on. And because you are reducing the balance of your IRA with these gifts, your RMDs will be lower than they otherwise would have (all else equal) when you turn 73.
There are a few things to note about QCDs, such as annual limits and which charities can accept QCDs. Determining charitable giving strategies is one way that we partner with clients. We can help you determine if QCDs are right for your situation.
In Strategies for Charitable Giving – Part 2, we discuss the strategy of gifting appreciated stock.
Call us to review your investment approach (404) 941-2800.
Retiree spending is not consistent, from month to month or decade to decade. Early retirees usually travel more and increase spending on hobbies. You might buy a car once every 5 years. Healthcare spending increases as we age. Investment performance is not consistent either! So, why would you want a portfolio strategy focused on providing consistent income or a static allocation not adapting to your changing needs?
We start by matching investments to projected cash flows. First, we set aside enough money to supplement social security, etc. for about 30 months, depending on our economic outlook. Taking little risk with immediate income provides comfort to spend. The beauty is now most of your assets seek long-term returns without short-term risk.
Integras Partners uses different strategies for at least three time-horizons, optimizing market risk for each timeframe. We also look beyond stocks, bond and mutual funds, with access to institutional-style real estate and private equity with low minimums. Plus, since we don’t charge commissions, our clients can earn very attractive current yields with a head start in recovering principal. These investments are only sold by prospectus, so give us a call if you have questions.
Long-time employees face this non-revocable and permanent choice upon retirement. While the security of lifetime income can be comforting, several trade-offs exist.
Do I want to rely on the company’s future financial strength? How long will I live? What will inflation do to my pension income over time? What happens if I die? Should I take a lower amount to protect my spouse? What happens if they die? Do I have a choice to take a lump sum and control how and when I spend the money?
Pension distributions are limited to lifetime income options without future inflation adjustments. Additionally, If the income beneficiaries die early, there is often no remainder. Many companies offer a “lump-sum distribution” to effectively buy the retiree out of their pension obligation. This amount can be transferred to a traditional IRA tax-free.
There are several advantages to taking the cash.
Freedom to invest the money, timing and adjusting your income, and protecting your heirs. Lump-sum buyouts are calculated using a specified interest rate, so the lump-sum payout value increases in low-rate environments; it increases the lump-sum payout value.
Once you start a pension, you’re locked in. From an IRA, you might take an increased amount until you start Social Security, allowing you to defer and increase your Social Security payment for both you and your spouse. If you have a life event, you can adjust IRA distributions. You cannot adjust a pension. You may downsize your home, get an inheritance, or need to spend a chunk of cash on a new car or family need. A lump sum allows flexibility a pension cannot. Plus, when you die, there is likely an inheritance, which a pension does not offer.
Integras Partners separates lump sum funds into different IRAs, keeping money for short-term needs conservative while allowing assets needed later to grow. Having more time for the remainder to stay invested reduces market risks. Having control of the funds also protects your heirs. Employing good strategies should increase both lifetime income and protect your family.
Most importantly, a “lump-sum rollover” gives you the peace of mind to enjoy what you’ve worked so long to earn truly.
If you’re interested in learning more, give us a call at (404) 941-2800, or reach out to us about your situation.
