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Socially Responsible Investing: Invest in a World You Can Be Proud Of

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By Justin Pritchard, CFP®, a Colorado-grown financial advisor serving clients nationwide. Clients can work on a one-time or ongoing basis, and services include investment management, retirement planning, and more.

Want to do some good with your money? Socially responsible investing (SRI) allows you to make an impact with your savings—and avoid putting money into some of the world’s worst offenders.

You don’t necessarily have to choose between good returns and good values. While sustainable investing reduces the universe of options to invest in, there are still plenty of quality investments to pick from. Some argue that socially conscious companies should actually do better over the long-term due to a happier and more diverse workforce, healthy community relations, and less “headline risk.”

On this page:

  • What is SRI?
  • Environmental, social, and governance (ESG) issues
  • How to invest with your values
  • Financial impact of irresponsible businesses
  • Is this a smart investing strategy? Spoiler alert: Yes, it can be.

What Is SRI?

SRI is the practice of investing according to your morals. Using positive and negative screens, you invest only in organizations that meet specific criteria. In practice, SRI (also known as sustainable, ESG, responsible, or impact investing) means different things to different people—because one individual might value certain things more than others. But the concepts are similar, whether you value sustainability-themed investments or companies that promote social justice.

  • Positive screens: To make an impact, you invest in companies that behave in ways that align with your ethics. The goal is to support those organizations and be involved with positive change.
  • Negative screens: You can also steer clear of companies and activities that conflict with your values. On a large scale, doing so makes it harder for those companies to raise capital and encourages them to change their ways. In the nearer-term, at least you can avoid participating in harmful practices.
  • Shareholder activism: When you invest in a company, you’re a partial owner, so you have the right to vote for boards of directors and other corporate decisions. Large shareholders can steer the direction of things even before they come to a vote by applying pressure to companies. You and I might not have the billions to pull that off, but pooled funds run by activist managers (including pension plans and SRI mutual funds) have more power—and you can add to those pools of money.
  • Material risks: Investment managers often want to quantify what they’re doing and measure the risk (including the risks they’re avoiding). Sustainable investing attempts to reduce exposure to events and issues that will have a financial impact on the companies you invest in. In many cases, those types of controversies can also align with your values.

How Sustainable Investing Works

Values screening, impact efforts, and material risks: Three elements (that may interact with each other) of sustainable investing
Three elements (that may interact with each other) of sustainable investing.

SRI is not new—individuals and institutions have been doing it for decades. Early versions of SRI focused on so-called “sin stocks” like gambling, tobacco, pornography, and alcohol.

But values differ among different groups, making the topic confusing. Some sustainability-focused investors have no problem with alcohol, and they value organizations that make an impact. Another challenge is that it’s hard to measure some values-based approaches (although that doesn’t make them bad approaches).

The category of environmental, social, and governance (ESG) investing has gained traction in recent years. We’ll use a summary of ESG to illustrate the basic concepts of SRI.

Environmental:

  • Favors companies and projects are good for the natural environment. Those might include services related to renewable energy and clean water.
  • Avoids companies that produce harmful products or pollute the environment. Examples include companies involved with major spills or other, less-publicized disasters.

Environmental issues may be among the easiest to get a handle on because they’re often based on physical science. You can measure things like how many gallons were lost in a toxic spill, and you can quantify carbon emissions relatively easily.

Social:

  • Favors companies that are beneficial to the communities they operate in. They may be active with local charities, hire and promote a diverse workforce, and pay employees a fair wage.
  • Avoids companies that lack engagement and diversity, and which put profit over community. Examples include those with PR problems, and those associated with sexual harassment and data breaches.

Social topics are harder to define and measure. The most interesting data may exist only in anecdotes and news stories, and it’s a challenge to organize, categorize, and report on the topics you care most about. Plus, a company may be “less good” than it appears, depending on who you ask, making the definition somewhat subjective.

Governance:

  • Favors companies that embrace shareholder activism, have diverse leadership teams, and operate transparently. Those companies may come from any industry, as long as they don’t fail any negative screens.
  • Avoids companies that use “creative” and unfair practices to enhance profits (or create incentives that skew executive compensation and promote reckless behavior). Examples include those associated with accounting scandals or questionable political contributions.

Governance measures are somewhat straightforward. You can use logical tests and some basic math to determine if companies pass your screens. For example, does the company have women and people of color in executive leadership, and how many?

Good business is good business. And being mean can often come back to haunt you.

How to Invest With Your Values

If that all sounds good to you, there are several ways to implement a socially-conscious investing strategy.

Tip: To learn more about your risk preference, try this risk questionnaire developed with input from psychologists.

Mutual funds: The easiest approach might be to use mutual funds or ETFs with an SRI focus. You have numerous options to choose from, and new competitors enter the space regularly.

  • Advantages: If you find a fund that aligns with your ethics and risk tolerance, you can invest and be done with it. By pooling funds with like-minded investors, you can limit where your money goes and feel some satisfaction about investing with your ethics. Both active and passive fund options exist.
  • Disadvantages: It may be hard to find a fund that matches your morals exactly, and it’s important to understand the fees involved. Passively managed funds are typically less costly than active funds.

Institutional money managers: Another option is to use SRI investment advisors that are not packaged into retail mutual funds (in other words, not available directly to the general public). Those managers may share some of the same features as mutual funds, but they are slightly different.

  • Advantages: Higher investment minimums and dedicated investors may help to reduce expenses and turnover. These managers may have a more niche focus than broadly available mutual funds.
  • Disadvantages: You may need to commit to fewer managers if you have limited funds. Depending on the manager, fees may still be higher than you like.

Do-it-yourself: If you want to select individual stocks, bonds, and other investments on your own, you can do so. Several databases and rating services may help you identify investments that align with your goals.

  • Advantages: You can customize the positive and negative screens to fit your needs. You can vote proxies yourself instead of relying on anybody else to do so.
  • Disadvantages: Transaction costs may be high, especially if you make ongoing (monthly) investments. It’s hard for most individuals to diversify, leaving you vulnerable to concentrated positions. It takes time, energy, and know-how to select securities, execute trades, and maintain the portfolio. SRI ratings might be too simple, giving high scores when an organization does not meet your standards.

Impact vs. Risk

As you evaluate your sustainable investing strategy, it might be helpful to distinguish between investment risk and investment impact.

Investment risk refers to losing money as a result of some type of event. When we’re talking about SRI or ESG, those events might things that result in bad press and financial consequences. For example, a company might lose customer information in a data breach. In addition to making people unhappy and losing trust (which can reduce revenue going forward), the company might have to pay fines, penalties, or other costs to clean up the mess. There’s a real financial risk that can impact the stock’s performance—and even traditional financial models would see that as a problem.

Impact is often about things you value personally. For example, you might prefer companies that have diversity in their boards of directors and executives, even if there’s not an (easily identifiable) instant and direct impact on revenue. However, the company is doing good things, and we’d expect it to perform well with diverse viewpoints. Or, you might want to invest in companies that focus on renewable energy—simply because you think that’s what’s best for the earth.

As you look at scoring models for SRI and ESG, you might find that they focus on one of these factors while ignoring the other. The investment risk is the most easily quantifiable, so large financial firms are eager to measure and publish information on those factors. However, if impact is more important to you, you may need to do some extra homework.

“The perfect is the enemy of the good.”

When it comes to socially conscious investing, you might not be able to focus on the issues with the perfect level of detail.

If you move your IRA into ESG-focused funds, the ice caps won’t stop melting, poor people won’t immediately see fewer hurdles, and executive boardrooms won’t suddenly reflect the racial and gender makeup of the U.S. population.

Still, you can invest in a portfolio that dramatically reduces exposure to things you don’t want—and that promotes the things you do want. This is a step in the right direction, and the options should continue to improve for you over time.

As just one example, socially-focused fixed income investing is challenging. If you apply screens that are too strict, you might not have much to choose from. Unless you’re willing to put most of your money into stocks (typically considered a high-risk approach), you may need to be satisfied with partial improvements until this world matures.

It’s All Connected?

Fortunately, there may be some overlap among socially-conscious companies. Imagine an organization that treats workers well and avoids controversial lawsuits. That company might also be likely to employ environmentally sustainable practices and be a positive force in the community.

Perhaps it’s easier to understand this from the opposite direction: Imagine a movie with a company that is environmentally destructive, mean to employees, and lacking diversity in leadership. It would not be surprising if that company was also polluting the environment—especially in poor neighborhoods around the company plant.

When you invest in companies that make an effort to be “good,” you might make an impact in several ways.

But Can You Make Any Money?

The traditional investment world has long held that you make a sacrifice when you use SRI strategies: They say you can feel good about how you invest, but your investments won’t perform as well.

That’s not necessarily true.

To be sure, screening changes the landscape. You may have more or less exposure to certain industries, and that can help you or hurt you. Depending on economic conditions and market cycles, there will undoubtedly be times when you underperform, although you could potentially outperform “standard” investment mixes.

For example, ESG screens tend to favor technology companies over mining companies. Why? Technology companies tend to have more women and people of color in leadership, and they don’t generate waste that needs to go somewhere. That’s not to say that mining companies are evil—we wouldn’t have mobile devices, safe transportation, or other necessary products without them. The question (again, depending on what’s important to you) may be how the companies operate: Do they minimize waste and clean up after themselves, or do they just look for low-income areas to dump by-products in?

Researchers have tried to solve the debate about whether or not performance suffers with ESG. In recent years, several studies have been promising for socially-conscious investors, and (for optimists, at least) that probably makes sense intuitively: “Good business” is good business, and chickens often come home to roost when companies misbehave.

However, no good will come of predicting or expecting outperformance, so let’s not even go there. The world will always surprise us, at least in the short-term—and sometimes the short-term is not long enough to prevent a financial tragedy. Knowing that, it may be best to use SRI strategies primarily because it makes you feel better. If you’re getting market-like returns, given your level of risk, that might be good enough. Outperformance would obviously be nice, but even slight underperformance might be tolerable as long as it does not prevent you from reaching your goals.

If your SRI investments underperform, you have several options. You can live with it, and feel satisfied with your moral choices. Or, you can go back to traditional investing and give to charities to offset any discomfort you have about changing strategies.

What About Greenwashing?

In a world where investors are increasingly focused on responsible corporate action, some organizations make a good show of being environmentally and socially responsible. They might even include buzzwords in advertisements that lead you to believe they’re doing the right things. However, there’s a difference between talking the talk (and even writing policies and procedures related to ESG) and walking the walk. So-called “greenwashing” happens when companies try to present themselves as enlightened—but they’re only doing enough to make themselves look good.

Ready to Move Forward?

If you’d like help investing in a socially-conscious way, please let me know. We can discuss strategies and develop a strategy where you do everything yourself—or have me handle the logistics.

Meet the author: Justin Pritchard, CFP® is a fee-only financial advisor with over 15 years of experience working directly with clients. Based in Colorado, Justin can work with clients across the U.S., offering financial planning, one-time reviews, and investment management.People hiking in Colorado mountainsLearn more about working with Justin and explore pricing options for clients. Or, take it slow: You can get more tips and information like this by downloading the free guide to retirement.

Disclosures:

Investing in mutual funds and other financial vehicles is subject to risk and loss of principal. There is no assurance or certainty that any investment strategy will be successful in meeting its objectives.

Investors should consider the investment objectives, risks and charges, and expenses of the funds carefully before investing. The prospectus contains this and other information about the funds. Contact Justin Pritchard at 970-765-0595 to obtain a prospectus, which should be read carefully before investing or sending money.

The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value.

Filed Under: Uncategorized

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Approach Financial
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When Can I Retire?
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Surprising details about using Roth money to fund your retirement.  As you plan for retirement, you need to decide if you want your retirement savings to be in pre-tax or after-tax (Roth) accounts.  Pre-tax savings make it easier to build up your retirement nest egg. Also known as deductible or traditional contributions, those savings can potentially reduce your taxable income. But you need to pay taxes eventually, and the traditional view has been that you might be in a lower tax bracket in retirement. Sometimes that’s true, and sometimes it’s not—and other factors may come into play.  Roth money can potentially provide tax-free income in retirement. But you don’t get a tax break when you contribute to Roth accounts, making it a bit more difficult to build up your savings. However, withdrawals in retirement can be beneficial. When you don’t have to pay income tax, you get to spend all of the money you withdraw. Plus, those withdrawals might not cause issues on your taxes that lead to other “hidden” or unexpected costs.  Taxable income in retirement can affect whether or not you pay taxes on your Social Security income. It can also affect your Medicare premiums and your ability to qualify for credits and deductions. Finally, we don’t know what types of means testing may arise in the future that could impact you in a variety of ways, so having a low income might be helpful.  All of that might point to Roth as a no-brainer. But it’s not so simple. Tax rates and rules could change, making a Roth strategy backfire. We can’t predict how things like consumption taxes, VAT, flat taxes, or other issues might affect the decision to use pre-tax or after-tax accounts. As a result, you need to make the best decision you can with the information available today (and your assumptions about the future).  🌞 Subscribe to this channel (it's free): https://www.youtube.com/channel/UCFFNzgGX4UyGQk12KL38I1Q?sub_confirmation=1  Note that all of this depends on your ability to successfully satisfy IRS rules. For example, if you don’t qualify for a deduction or you don’t qualify for tax-free withdrawals, things get more complicated (and other issues are certainly possible). Be sure to review your strategy with a CPA or a tax expert who is familiar with all of your details before you make any decisions. This video is just high-level information, and it is not made with any knowledge of your circumstances. Plus, the video may contain errors and omissions, and things change over time.  Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.
The Logic Behind Roth IRA and Roth 401(k)
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Hi, I’m Justin Pritchard, CFP®, and I provide fee-only financial planning and investment advice to clients nationwide (see disclosures).

I don’t know everything about everything, but I have been quoted in the New York Times, Consumer Reports, Wall Street Journal, and more. My 15 years of experience working directly with clients helps me offer customized advice to clients planning for retirement and saving for goals.

Right now, get two free guides for retirement planning—you’ll know more about retirement and investing, and that knowledge should help you make smart decisions.Cover of e-book on retirement planning shown in mobile device

What Makes Approach Financial Unique?

  • ✔️ Over 15 years of direct experience working with clients
  • ✔️ Focus on retirement planning and investment management
  • ✔️ Down-to-earth vibe (no suits)
  • ✔️ Privately-owned business
  • ✔️ No executives forcing me to push unnecessary products (“flavor of the month”)
  • ✔️ Don’t need to share half—or more—of revenue with a big company and charge you accordingly
  • ✔️ Skilled at working remotely while keeping your data secure
  • ✔️ Fee-only (no commissions allowed)
  • ✔️ Colorado-grown, and able to work with clients in most other states

 

Let’s talk about working together. I work with clients throughout the U.S.

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Explore your options:

Overview of pricing for one-time financial advice, retirement planning, or investment management

Who Does Approach Financial Work With?

You look like most (but not all) of my clients if you:

  1. Are planning for retirement or a transition
  2. Are in your 40s or older
  3. Have retirement savings of $100,000 to $5 million
  4. Are not struggling with debt
  5. Want help from a financial advisor, even though you’re probably smart enough to figure everything out yourself (there’s just not enough time, or you want professional guidance)

 

Not every client matches this profile, but most people do.

Approach Financial

Approach Financial
It can feel great to pay off your mortgage when you retire. And sometimes that becomes a possibility because you get access to the money in your (former) employer’s retirement plan. You’ll be free of the monthly payment, and you stop paying interest on your loan balance.  But there may be a catch (and there are solutions). If you’re going to use money from a pre-tax retirement account to pay off your home loan, things can get complicated. Taking a substantial withdrawal may cause you to pay taxes at high rates. Plus, you may make your Social Security income taxable,and you could pay higher costs for health coverage like Medicare.  See those issues in more detail in this video: https://youtu.be/Utzru1S2vAI  Now, let’s talk about solutions.  With some strategy, you can minimize the impact on your taxes and other financial matters. The trick is to pay off the loan in stages instead of all at once.  We’re assuming that paying off your mortgage at retirement is the right move. That might or might not be the case (my other video reviews some pros and cons), but we’ll assume that you’ve decided this is right for you.  We’re also assuming that the money is in pre-tax retirement accounts. If you have the funds available to pay off your home loan in taxable or Roth accounts, things are different. That doesn’t mean you should or should not move forward—it’s just that we’re looking at traditional IRA and pre-tax 401(k) money (or TSP, 403(b), and others).  Figure out how much you can withdraw each year to avoid unwanted costs, and take out as much as you want up to that limit. You should definitely review your strategy with your tax preparer and other financial professionals before you decide on anything, as they may be able to spot things or share insight based on their knowledge of your tax return and your bigger-picture finances.  Remember that there are infinite ways to approach this, and this is only one way of looking at the issues. There may be other (better) solutions out there, and you need to evaluate if aggressively paying off the mortgage early makes sense. Hopefully, this gives you food for thought and helps start the conversation with your professional advisors.  Chapters:
0:00 Intro, and How to See Pros and Cons
0:48 2 Critical Assumptions: It's the right move, and it's pre-tax money
1:24 Your Plan, Light at the End of the Tunnel
1:38 Overview: Slower Withdrawals Over a Few Years
2:17 Avoid a High Federal Income Tax Bracket
3:33 Avoid Income Tax on Social Security Benefits
4:37 Avoid Higher Medicare Premiums (IRMAA)
5:44 Under Age 65? Note ACA Subsidy Levels
6:31 Evaluate the Costs, Pros, and Cons  🌞 Subscribe to this channel (it's free): https://www.youtube.com/channel/UCFFNzgGX4UyGQk12KL38I1Q?sub_confirmation=1  Get free retirement planning resources: https://approachfp.com/2-downloads/
🔑 9 Keys to Retirement Planning
🐢 6 Safest Investments  Learn about working with me at https://approachfp.com/  Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states.  IMPORTANT:
It's impossible to cover every detail and topic in a video like this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a restult, you need to speak with your own tax, legal, and financial professional who is familiar with your details. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.
A SMART Way to Pay off the Mortgage With Retirement Savings
YouTube Video UCFFNzgGX4UyGQk12KL38I1Q_xWt7QGw9toI
A Roth IRA can provide tax-free income in retirement when you follow IRS rules. But sometimes you need to take early withdrawals, and a Roth can be a flexible account. Even if you’re at retirement age, the tax rules can be complicated, so we’ll review how things work in this video.  Whether or not you get a tax-free withdrawal from your Roth depends on several factors. The type of money you take, how long you’ve had your account, and your age are all important.  You can typically take back your regular contributions at any time with no taxes and penalties. Those are your standard annual Roth IRA contributions of several thousand dollars per year. Then, you may have earnings in your account (you could also have losses, which change things), and it’s possible that you’ll owe income tax and penalties on the earnings portion of your withdrawal.  Roth conversions are not regular contributions, and they’re treated separately. It’s possible to owe the IRS money when you withdraw conversions, especially if you’re under age 59.5. Plus, each conversion has its own 5-year rule, which might delay the availability of tax-free access.  And what about your Roth 401(k) or Roth 403(b) accounts? Most people roll those funds over to a Roth IRA, but that’s not always the right move. Evaluate the pros and cons, and if you decide that a Roth IRA is the right place for that money, consider opening and funding a Roth (if you don’t already have one) to start the 5-year clock for that account.  🌞 Subscribe to this channel (it's free): https://www.youtube.com/channel/UCFFNzgGX4UyGQk12KL38I1Q?sub_confirmation=1  A few resources to help you research this topic. It’s critical that you triple-check everything.
Basics of Roth IRA distributions: https://www.irs.gov/publications/p590b#en_US_2020_publink1000231061
Interactive tool to help you determine if a distribution is taxable: https://www.irs.gov/help/ita/is-the-distribution-from-my-roth-account-taxable
Explainer on Roth IRA withdrawals: https://www.schwab.com/ira/roth-ira/withdrawal-rules
Roth 403(b), 401(k), and 457 (also known as Designated Roth Accounts): https://www.irs.gov/retirement-plans/designated-roth-accounts  Note: It's impossible to cover every detail and topic in a video like this. You need more information, so please consult with a professional who is familiar with your circumstances. This is general information and entertainment, not specific advice.  Always consult with a CPA before making decisions or filing a return. Verify with your plan administrator and a financial professional who is familiar with your individual circumstances. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration. Justin Pritchard, CFP® is a fee-only fiduciary advisor.
Roth IRA: Early Withdrawals & Tax-Free Income
YouTube Video UCFFNzgGX4UyGQk12KL38I1Q_161oT-3Oubc
Three seemingly little questions can have a surprisingly big impact on your retirement happiness. These are non-financial items (at least they’re not directly related to your retirement accounts). But simply thinking about these things helps improve your chances of living a satisfying, comfortable, and rewarding retirement.  By envisioning your retirement years, you can be sure to address some of the most important things: Your day-to-day satisfaction and autonomy, your housing situation, and your connection to loved ones. That’s all crucial to enjoying yourself and maintaining your health after you stop working.  🌞 Subscribe to this channel (it's free): https://www.youtube.com/channel/UCFFNzgGX4UyGQk12KL38I1Q?sub_confirmation=1  This is from research done by MIT’s Agelab and Hartford. Approach Financial is not affiliated with either of those organizations, but Hartford makes the research available to financial advisors like me.  It's impossible to cover every detail and topic in a video like this. You need more information, so please consult with a professional who is familiar with your circumstances. This is general information and entertainment, not specific advice.  Always consult with a CPA before making decisions or filing a return. Verify with your plan administrator and a financial professional who is familiar with your individual circumstances. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration. Justin Pritchard, CFP® is a fee-only fiduciary advisor.  #shorts
3 Retirement Questions (Non-Financial) #shorts
YouTube Video UCFFNzgGX4UyGQk12KL38I1Q_DOJIHUbT60w
See what you need to know when you leave your job and you’re thinking of moving money to an IRA.  You may have the opportunity to roll funds from your 401(k) plan to an IRA that you control. There are several advantages to doing so (like potentially lower fees, more investment choices, and better control over distributions and beneficiaries).  But there may also be disadvantages to making the move. For example, if you leave your job after age 55 or you plan to do Roth conversions, it could make sense to leave your money in your former employer’s 401(k)—at least temporarily.  🌞 Subscribe to this channel (it's free): https://www.youtube.com/channel/UCFFNzgGX4UyGQk12KL38I1Q?sub_confirmation=1  We cover some of the pros and cons of a 401k to IRA rollover here. While there may be other aspects to consider, you’ll learn about some of the biggies, and you’ll be off to a decent start.  Remember that you don’t need to roll the money over immediately. If it makes sense to wait and do it later, that’s often an option. Just verify with your former employer to see what’s available to you.  Read about this topic and download sign up for free downloads and retirement planning resources here: https://approachfp.com/how-and-why-to-transfer-your-401k-to-an-ira/  Be sure to research issues on creditor protection. This might be a good start in your journey as it relates to IRAs: https://www.irahelp.com/slottreport/your-ira-protected-creditors-you-may-be-surprised  Always check with a CPA before making decisions or filing a return. Verify with your plan administrator and a financial professional who is familiar with your individual circumstances. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.  By Justin Pritchard, CFP®.
401k to IRA: Pros and Cons, How to Do It
YouTube Video UCFFNzgGX4UyGQk12KL38I1Q_wRc2EW1aqCg
Your vested balance is the amount of your retirement account that you actually own. But can you take that money out right now and spend it? It depends.  Vesting is a strategy that encourages employees to stay with their jobs, and it can also be a cost-saving measure for employers that offer retirement plans.  Your vested account balance is the amount you can take with you when you leave your job. The funds might also be available for 401(k) loans or hardship withdrawals. Once you’re vested, the employer generally can’t take that money back.  Any money you contribute from your pay (or any rollovers into your retirement plan) are typically 100% vested immediately. But employer contributions, like 401(k) matching dollars, might have a vesting schedule. An exception would be certain safe harbor 401k contributions that vest immediately.  🌞 Subscribe to this channel (it's free): https://www.youtube.com/channel/UCFFNzgGX4UyGQk12KL38I1Q?sub_confirmation=1  There are several different vesting schedules, including a 6-year graded schedule, cliff vesting, and other approaches. It’s important to know what vested means with your particular plan so you can decide what to do about your job. If you’re only 40% vested, does it make sense to stay longer and boost your vested account balance?  Unlike 401k vesting, IRA-based plans don’t use vesting schedules. If you have a SEP or a SIMPLE plan, you generally have access to take that money out whenever you want. However, doing so reduces your retirement savings, and there may be tax consequences.  Find out exactly how your 401k vested balance works before making any decisions. This is a general overview, but every plan is different. Plus, this information may contain errors and omissions, so it’s critical that you double-check everything. Check with a CPA to learn about the tax impact of taking money from a retirement account—you don’t want any unpleasant surprises.  Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.
Vesting: How Your 401k Vested Balance Works
YouTube Video UCFFNzgGX4UyGQk12KL38I1Q_KWffAznGNZA
Roth IRA savers often wonder if lawmakers will change the rules. A Roth 401(k) or IRA can ideally provide tax-free income in retirement. But what if tax laws change 😨?  That would be unfortunate for those who made after-tax contributions and completed Roth contributions expecting to reap the benefits in retirement.  We clearly can’t predict the future. But it’s interesting to see how much revenue might be available if lawmakers wanted to tax the earnings in Roth accounts.  The good news for Roth investors is that it doesn’t look like there’s a significant payoff for changing tax laws. But things could still change, and extra revenue is more than no revenue at all, so anything is possible.  This excellent research comes from JP Morgan, and the retirement team, in particular, cobbled together information from a variety of sources. The latest data is not as of yesterday, but the proportions are probably more important than the specific numbers, and new information will come out eventually.  🌞 Subscribe to this channel (it's free): https://www.youtube.com/channel/UCFFNzgGX4UyGQk12KL38I1Q?sub_confirmation=1  Please discuss your situation with a financial professional who is familiar with your details before you make any decisions. I’m not saying things will go one way or the other—I have no clue what will happen. This information may contain errors and omissions, and things change, so please don’t rely on this for important decisions.  Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.  #shorts
Will Your Roth Get Taxed? #shorts
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Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.

Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Approach Financial in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Approach, unless otherwise specifically cited.  Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness.  All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

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