Here are a few suggestions that may save you both time and money in 5768:
· Open an IRA. To help reach retirement goals or to complement your employer-sponsored 401(k) plan, you can put up to $4,000 in an IRA ($5,000 if you are age 50 or older as of 2006) into a traditional or Roth IRA. Each program may offer distinct tax advantages, so consult with a tax professional before you invest.
Also, make your IRA contributions as early as possible to receive the maximum benefit of compounding your tax-deferred contribution.
· Maximize Your 401(k). Too many people don't take full advantage of their employer-sponsored retirement programs. Make sure that you are maximizing your contribution. This is important, especially if your employer matches a percentage of your 401(k) contribution.
If you don't make the maximum contribution — or, worse, if you don't even enroll in the 401(k) — you may be leaving real money on the table. Studies have shown that one in four employees do not enroll in their employer's 401(k) plans, and less than 10 percent make the maximum contribution.
It is even more important to invest this money properly. Ask your stockbroker or financial planner what asset allocation would best meet your financial situation, investment objectives and risk tolerance. Remember that you are investing for the long term. The further you are from retirement, the more aggressive you can afford to be.
· Review Your Beneficiary Forms and Wills. If you filled out a beneficiary form years ago when you bought a life-insurance policy or enrolled in your company's retirement plan, you may have named someone who is no longer alive. Or you may have since been married or divorced, but failed to change the beneficiary. These types of life changes can create significant problems years later, which often cannot be resolved easily.
It may sound obvious, but to be a beneficiary, a person must be living. Make sure your beneficiary designations are current and reflect your desires about who should get the proceeds from a retirement account or insurance policy.
In one case, a woman left $1 million to her husband in her will, but her pension beneficiary form that was filled out 40 years earlier named her sister as the sole beneficiary. The husband took the case to court and lost. The beneficiary form decided the outcome, so the woman's sister was entitled to the money.
Invest wisely, use a professional and don't worry about market volatility if your long-term goals, needs and plans haven't changed.
The recent stock market correction is creating a great opportunity for long-term investors.
Now, for the factoid of the day:
According to Marc Hulbert of MarketWatch.com, trading volume on the New York Stock Exchange has recently triggered a bullish signal known as "Nine-to-One Up Day." This refers to days when up volume outpaces down volume by a ratio of 9-to-1 or more.
A single 9-to-1 up day is not always a bullish signal, but multiple days tend to be. We experienced three of them in the second half of August (Aug. 17, Aug. 29 and Aug. 31).
David Aronson and his students at Baruch College in New York researched the 9-to-1 signal, beginning from 1942 through the fall of 2006. Their results found that in the 60-trading-day period following a double 9-to-1 signal, the S&P 500 generated an average annualized return of more than 22 percent.
Craig G. Langweiler is president of Langweiler Financial Group, located in Newtown. He can be reached at 215-860-8088 or online at: [email protected] com.