Category: blog

The Trouble with Banks

Fifteen years ago, the financial world hit a huge pothole, and it started with banks. It was known as the “Subprime Crisis.”  Banks lent money to people who could not afford the loans.  These loans were bundled together, re-packaged and re-sold to investors and other financial institutions as “safe.”  They were not. It nearly brought down the economy, and over 600 banks failed.

The current banking crisis started at Silicon Valley Bank (SVB), a bank where many tech companies deposited their money. Because interest rates were so low, SVB used those deposits to buy long-term government bonds.  These paid more than short-term bonds but come with more risk.  The problem became apparent when the Federal Reserve raised interest rates.  When interest rates go up, the price of existing bonds goes down. This reduced the market value of the bonds on SVB’s books.  When depositors at SVB began to withdraw their money, SVB was forced to sell bonds at a big loss.  They could not raise enough cash fast enough and was forced to close their doors.  Signature Bank was a similar story, except that they focused on cryptocurrency businesses, another niche specialty that has seen recent steep declines, as in the tech industry.

The lesson is that you need to know what can go wrong, and a lot of that knowledge comes from experience.  We have over 60 years of combined experience as investment managers.  We have seen a lot of the mistakes that people make with money.  The mistake that SVB and Signature made is a classic. In the last week investors have been flocking to Treasury bills for safety; we have been doing that for over six months.

The FDIC guarantees bank deposits up to $250,000 per individual per bank if your bank runs into trouble. But banks don’t advertise the risks they are taking.  If your faith in banks has been shaken, we would be happy to provide advice as you navigate the troubled waters of the financial ocean.  Give us a call to speak with Arie or Stephen. We provide investment management and planning services to individuals and families throughout the country.

Incentivized to Retire Early? Read This First

You have come to a time in your life when you are debating an early retirement because your company has offered you an early retirement incentive. You may have saved and invested money along the way to where you have created a substantial retirement fund. Yet you are not sure whether the money you saved and the early retirement incentive is enough to handle the current economic times and financial uncertainties. You may wonder whether any type of emergency or the rising costs of living could force you to return to work. 

Seeking early retirement is a big, life-changing decision. Here at Korving & Company, we help people make sound financial decisions regarding their retirement plans. Our firm provides consultations and recommendations regarding your options for building up a retirement fund, pursuing wealth via investments, and developing an income plan for your retirement. Learn more about the advantages and disadvantages of early retirement benefits.

Should I Accept My Employer’s Offer to Retire Early?

Companies may offer their employees early retirement incentive programs (ERI) that encourage them to leave their job before their expected retirement date. The employer may offer these incentive programs for various reasons, such as trimming payroll due to corporate restructuring, having too many full-time employees, or creating short-term employee rollover to bring in new staff. Early retirement incentives may also be offered to a group of eligible employees in a department that the company plans to dissolve or release during layoffs, or they may offer you a personalized retirement package because you are an older worker nearing the customary retirement age range in a few years.

Know that an early retirement incentive is a completely voluntary option. You have the choice of whether to accept the offer or reject it. Acceptance of the offer means you will accept the retirement incentive plan as-is and that you will file your retirement notice by a specified effective date. Some companies may allow you to negotiate the details of your retirement package to tailor it to your present and future financial circumstances. The incentives for early retirement may involve severance pay covering weeks or years of wages. They may also offer other additional benefits, such as help finding another job.

You may also decide to reject the offer. Keep in mind that by making the offer, the company is giving you an indication that they are looking to pare back in some way. ven though you provided years of service, they may eventually decide to let you go at a later date anyway. Try to understand why the company is making the offer so that you can make an informed decision of whether to accept it or not.

What Steps Do I Need to Take to Prepare for Retirement?

You will want to engage in some financial planning before officially reaching retirement. Think about and define how you want to live during retirement. Do you plan to move to a retirement community, travel the world, or downsize to a smaller place closer to family? Think about how much money you will need to pursue your retirement dreams and then take stock of your current assets. Also, evaluate your physical health and mental well-being. You may need continuous medical care that will no longer be covered by your employer’s health insurance. Does your career define you, and will you be comfortable finding new outlets in retirement?

A good financial plan will help you create a retirement budget that covers your living expenses, addresses your other needs and wishes (such as vehicles and travel), and also looks into the potential impact of any emergencies that may appear. Your financial planning professional will also want to know how much income you will collect from Social Security, pensions, settlements, rental properties, and other sources. You should map out how much money flows into your bank account and the payment schedules for your expenses.

How Do I Know If I’m Financially Prepared to Retire?

Once you understand the details of your early retirement incentive package (ERIP) and have created an inventory of your existing assets, you want to create a list of the possible expenses you will have during retirement. These expenses may include housing, transportation, food, clothing, utilities, insurance, taxes, outstanding debts, health care,  and other mandatory expenses you may incur during a fiscal year.

Then, consider how much you typically spend pursuing hobbies, travel, and entertainment. Compare your income versus mandatory expenses to see how much discretionary income is left. This helps determine if you will have enough funds to live comfortably during retirement or if you have to find additional income sources that may be available.

Retirement also involves being mentally prepared. Will you be happy retiring early or does working at a job make you happy or give you a sense of structure and purpose? Job satisfaction or dissatisfaction becomes a major factor in deciding the right time to seek retirement.

Another factor to consider is whether you are physically or mentally able to continue working. For some people with healthcare problems, it becomes too difficult to continue working.

What Are the Advantages of Early Retirement?

Early retirement may provide you with peace of mind. You do not have to worry about deadlines, busy work schedules, getting permission for travel or sick leave, and always trying to please clients or customers. Instead, you now can focus on your personal needs, leading to an increase in mental and physical well-being. You’ll have time to pursue all that you want to do in your life, such as travel, hobbies, or spending more time with family.

You could also have the opportunity to start a new career if you pursue voluntary early retirement. With a lump-sum payment, you may have the working capital to start a business and be your own boss. You could also pursue educational goals or lifelong hobbies during this period of time. Studies have shown that seeking activities that make you happy has beneficial impacts on your mental and physical health, leading to greater levels of happiness.

What Are the Disadvantages of Early Retirement?

Agreeing to take an early retirement incentive may create disadvantages if you are not financially prepared. Loss of employer-sponsored health insurance is one potential disadvantage unless you are eligible for Medicare or you have a working spouse. No insurance means that you may have to pay for medical expenses out of pocket. Even if you purchase individual health insurance, it can be very expensive and may offer fewer benefits than what you had previously with your employer.

You may find yourself in a financially unstable position if you don’t closely watch your spending habits. If you spend too much of your pension plan, monthly Social Security, and/or retirement savings on items that are discretionary and unnecessary, you could find yourself without a financial safety net and unable to handle emergency expenses. You don’t want to end up in a situation in retirement where an emergency could put a financial strain on your retirement savings. Things that many people look at to help them determine whether to retire early are how much they may gain from retirement system benefits such as Social Security and employer-sponsored retirement plans, as well as the cost and benefits of Medicare. You will not qualify for Medicare until reaching the age of 65. While you may be eligible to opt-in to COBRA to stay on employer-based health insurance, this is a short-term option as COBRA benefits don’t last very long until they expire.

Employer-sponsored retirement plans, such as 401(k) plans, typically require you to be age  59 1/2 to be allowed to take a distribution without an early withdrawal penalty. If you start withdrawing funds from the plan before that age, you are typically subject to a 10% penalty. You also have to pay income taxes on the money you take out, regardless of your age.

When it comes to Social Security, you receive a smaller benefit amount at your earliest retirement age. You become eligible for Social Security at the age of 62, yet if you were born after 1960 you will not get your full benefit amount until you are 67 years of age. Instead, if you take Social Security at age 62, you’ll only get 75% of your expected benefit.  If you delay taking Social Security until age 70, you will get your largest possible benefit amount.

Lastly, think about whether you would really be happy retiring early.  Some retirees find themselves bored and wishing for things to do. Consider whether you’ll miss the friendships and camaraderie created at work or socializing with customers, or if instead, you look forward to keeping and strengthening old friendships or creating new ones and looking forward to new adventures.

How Can Korving & Company Help Me Decide?

Korving & Company offers financial planning, retirement planning, wealth management, income planning, and general financial investment advice for our clients. Located in Suffolk, Virginia, we help people decide whether they can retire early. We strive to provide financial planning services that allow clients to make the appropriate retirement decisions that suit their lifestyles. Call today (757) 638-5490 or complete the online contact form to speak with an experienced financial planner at Korving & Company.

Women Aren’t Planning for Retirement Early Enough

Everybody knows that women tend to outlive men, and on average by 6 to 8 years. They often act as caregivers to their ailing spouses or elderly parents. Despite this, too many women are not planning for their retirement nearly early enough.

Too often, retired women find themselves in situations where they do not have enough income to finish out their retirement years the way they started them. This can send them in search of part-time or even full-time work when they would rather be enjoying their retirement. If you are thinking ahead to retirement, or if you are a Baby Boomer who is nearing retirement age, it’s time to take a closer look at your income, your goals, and your retirement plans.

What Is the Average Retirement Age for Women?

On average, women retire at just over 62 years of age. This is two years earlier than men, who on average retire around 64 or 65 years of age. While many people retire earlier or later, depending on their goals, this is the average.

Choosing to retire early can give you time to enjoy your hobbies, take a volunteer opportunity or spend time traveling while you still have the energy and health to do so. Choosing to retire later can give you more time to enjoy corporate perks, like healthcare, and save more money to use in your retirement. While both are valid reasons, you need to make sure your retirement plans match up with your retirement goals.

What Do Most Women Do in Retirement?

The way women spend their retirement varies as much as the women themselves. You may choose to spend your retirement enjoying your hobby, such as doing crafts or reading, or you may choose to get involved in the community as a volunteer. Many retired women want to travel and see parts of the world they haven’t seen before. A recent report from Forbes found that socializing or caregiving are important tasks women take on during retirement, as well.

All of these are great options for your retirement time, but many women find that the drop in income during retirement keeps them from enjoying these activities. Income received from Social Security benefits is barely enough to live on for the rest of your life, let alone to pursue outside activities, leaving women who didn’t do much retirement planning before retirement struggling.

Women Tend To Invest Less

It should not come as a surprise that men and women typically spend money differently. Women, for some reason, tend to invest less. A recent study reported that over 70% of the money women have sits in cash. That is a shocking number. Cash not only doesn’t earn much of a return, it actually declines in value over time due to inflation. The stock market, on the other hand, has averaged over 9% per year over the past 90 years, including the Great Recession of 2007-2008.

Both men and women tend to put off things that are not urgent or that they don’t feel confident with… and learning the skill of money management takes time. For women with a husband or companion who does the planning and makes the investment decisions, it makes sense to accept the division of labor. However, in this scenario, we too often find that these women become totally removed from those decisions, and by the time those financial decisions do fall to them as the surviving spouse, they don’t even know where to begin, leaving them feeling helpless and scared.

There is another little secret that a lot of men would rather not admit: they’re often not the experts on investing and planning that they think they are. The men who lost half the value of their 401k retirement plans when the market crashed in the Great Recession may not be the ones from whom women should take investment guidance.

Our advice for women (and men who love their wives) is to find a knowledgeable financial advisor, preferably a Certified Financial Planner™ (CFP®) who specializes in retirement planning and is an independent fee-only RIA (Registered Investment Advisor).

They will provide guidance, help you create a plan, manage your investments in accordance with your goals, and be there to help you plan for retirement at any age.

What Is the Fastest Way to Save Money for Retirement?

Saving for a reasonable retirement income does not happen overnight. You are going to have to budget a reasonable amount of money from every paycheck to ensure you have the financial security you want and need during retirement. Here are some tips to make it happen.

Start Early

The best and fastest way to save for retirement is to start as early as possible. Many women think that they are too late to start planning, so they give up. We always say that the best time to start is today.  But to really get a jump on an early retirement, start saving from the moment you get your first job.

Understand the Power of Compound Interest

Compound interest makes your retirement savings grow faster. It happens when you earn interest or growth on both the money you initially save and the interest or growth that it earns. For example, if you invest $10,000 (your principal) and it grows by 10 percent over the next year (either from interest or earnings). After the end of the year, you would have $11,000 – your original principal plus 10 percent or $1,000.  If you earn 10 percent the second year, you will have $12,100.  This is because the 10 percent growth the second year is off of the $11,000 starting balance, which equates to $1,100. So every year when you get a return on your money, that return is added into the principal balance, and it also starts generating a return. With compounding interest, your savings grow substantially faster over time. 

Use Employer-Sponsored Programs

If your employer offers a 401(k) or similar retirement benefits program, take advantage of it. These plans typically offer an employer match, which is essentially free money just for participating and allows you to save even more money for your retirement.

Find Ways to Save Money

Women, especially married women, often find themselves in the position of caretaker. Older women may take care of their working spouse or an elderly parent, and younger women often have kids at home. If you are not sure whether you have enough money set aside for your next avenue of life, we have identified some ways to cut costs now so you can redirect that money towards your retirement savings.


Save money on groceries by clipping coupons and shopping for generic brands when possible. Join a wholesale club and buy your main staple foods in bulk. Learn to shop sales and stock up when items you need are at their lowest price.


If you need childcare while your kids are small, shop around to find the best rate. Or, if you know other parents who work alternately to your schedule, consider trading childcare with them rather than paying for daycare. Look for cooperatives that can help lessen the cost, or consider dependent care flexible spending accounts.

Travel Expenses

No one says you have to wait for retirement to travel, but look for ways to save when you do travel. For example, use apps like GasBuddy to save on gas costs, and use fuel rewards. Improve your car’s gas mileage by driving in an eco-friendlier way to further reduce your fuel costs (many owner’s manuals or a quick internet search will provide the highest MPG rating for your vehicle). Consider using a travel rewards credit card and paying it off each month to earn points for airline travel.

Beauty Routines

When it comes to beauty products, you’re probably well aware that the cost is high. Ways to save on beauty products include finding products that do double-duty, such as using hair conditioner as your shaving cream. You can also avoid excessive costs by choosing the generic version of some of your favorite products. Finally, consider home remedies for minor healthcare and beauty routines that can cost quite a bit less than expensive prescription creams or name-brand products.

Bills for the Home

Your utility bills can be a huge drain on your income. There are many ways to save on your utility bills if you know where to look. First, make sure you are using energy-efficient light bulbs. recommends CFL or LED bulbs. Then, change your furnace filter regularly and keep air vents open and clear. Use a programmable or smart thermostat. You can also save by unplugging electronics when you call it quits for the night, rather than just turning them off. If you leave devices plugged in, even if they are not on or in use, they will use some electricity.

Look around your home to see if there are updates or repairs that you can make to your fixtures and appliances to make them less wasteful. For example, make sure they are working properly, without leaks or drips, or install eco-friendly options, like low-flow toilets or showerheads. Then, shorten your shower or opt for the dishwasher rather than hand-washing dishes to save even more on your water bill.

If you have subscriptions, like streaming services or magazines, consider eliminating some of them, especially those you don’t use much.

Eating Out

While it would be easy to say avoid eating out, the reality is that most everyone does eat out from time to time. So how can you save on this cost?

It is common for us to see seemingly small costs nickel and dime clients into way bigger dining expenses than they realize. Take a trip to the coffee shop, for example.  People typically tell themselves that it’s only $3-$6 per trip, but add up a trip (or two) a day five (or seven) days a week, and suddenly that becomes a big cost over the course of a month. Try making your own coffee most days, and limit yourself to fewer trips to the coffee shop. Same thing with fast food and convenience items. Make a bag lunch or take in leftovers instead of dining out for lunch regularly. And if you run to the convenience store for snack items often, consider stocking up on a big box at the wholesale or grocery store, where the cost per item is certainly lower, and leave some of the items in your car or purse for when you need a snack.  

When dining out at a restaurant, especially one with large portions, eat half there and take the other half of it home. When you get two meals out of the cost of one, you stretch your money. Use coupons and discounts whenever possible, and consider going out for lunch instead of dinner, as lunch prices are typically lower. Or try skipping the appetizer and drinks and instead opting for a filling meal and water. 

If you are nearing retirement age, do not be afraid to ask about senior discounts. There may be additional savings available for older people if you simply ask.

Apply Savings Toward Retirement

Spending less money on these things is great, but that is just the first step. Once you start spending less, apply the money you’ve saved  toward your retirement, rather than just putting it in your daily budget and finding other things to spend it on.

Remember, these are just starting points. Talk to an expert in personal finance or financial planning to help you find additional ways to save, and funnel that money towards your retirement.

How Korving & Company Helps Women Save for Retirement

Women and men tend to have different savings strategies for their retirement. Working with a professional who understands retirement strategies is key. We have many decades of experience that we can put to work for you and your financial goals.

Korving & Company, LLC, offers a wide range of services to help you with your retirement planning. Our financial planning and asset management services will ensure you have the right strategies in place to help you meet your retirement goals. We are not only knowledgeable about finances, but we are also compassionate to the needs of women who want to retire safely and securely.

Don’t leave your retirement to chance. Call 757-638-5490 or complete the online contact form to speak with an experienced financial planner at Korving & Company today.

How Much Should I Have in Savings at Each Age?

Life throws you many curveballs that make it hard to always stick to a financial plan. With the right insight, you can build flexibility into your financial plan to deflect some of those curveballs. You know you need a roadmap to follow. However, establishing what you need to do and how to stay on track can cause anxiety. That is especially true in the case of large expenses, such as weddings and college expenses.

Losing a spouse, losing a job, or not being able to afford emergency expenses when they arise can derail plans that were made without the right preparation. All of these events can result in your retirement savings taking a back seat, pushing you further away from your goals.

Contact Korving & Company, LLC to take control of your future today. Our expert staff can help you make a plan that allows you peace of mind. We specialize in comprehensive planning and all its facets (retirement, income, estate, college), and coordinated wealth management and investment advice. Our team can help you create a retirement plan that will get you on track to meet your goals while teaching you what you need to know along the way.

How Much Money Has The Average 30-Year-Old Saved?

The Transamerica Center for Retirement Studies reported the average retirement savings per age group in the United States is:

  • Americans at age 30: $45,000
  • Americans at age 40: $63,000
  • Americans at age 50: $117,000
  • Americans at age 60: $172,000

How does your retirement savings account compare? Everyone manages and saves their money differently. There are several types of accounts to use to save, but one of the first accounts you should create is one for emergency funds.

What Is an Emergency Fund?

An emergency fund is a sum of money that you set aside specifically for one of life’s curve balls, an unforeseen crisis. It provides a financial safety net in the event of job loss, time off for a health issue, a major expense to a home or vehicle, and a variety of other situations that could be a potential reality but are hard to plan around that you would otherwise not be able to pay for immediately with cash in your regular checking account. Even though you will probably keep the emergency fund money in a checking or savings account, you have the peace of mind of knowing it is there for when life does throw you a curve ball and that it is protected by the FDIC

When faced with an unexpected financial emergency, you want to avoid at all costs having to resort to high-interest options, such as credit cards and unsecured loans, or having to endanger your retirement savings by dipping into those funds.

We typically recommend that your emergency fund should equal three to six months’ worth of your salary or living expenses. These funds should be liquid assets or funds (like cash or money market funds) that are easily and readily available to you.

How Do You Create an Emergency Fund?

Here are tips for building an emergency fund to help safeguard your retirement goals:

  • Utilize a tax refund or other unexpected windfalls to help fund your emergency savings account.
  • Inquire if your business or company has a program to assist you in starting or maintaining an emergency fund.
  • Determine an amount that you can comfortably have withdrawn from your income or your checking every month, and then set up an automatic deposit to your emergency savings account. Often, if you do not see the money in your regular account, you will not miss it.

Creating an emergency fund may feel like a challenge if you’ve never done it before, especially when you are living paycheck to paycheck, but it is the foundation or creating financial freedom.  If you focus on the fact that you are saving for your future self in a future crisis, you can find the discipline and willpower to help you make that small change every month. When you realize the satisfaction of funding your emergency savings account, you are now well on your way to developing the discipline to continue to save for other future expenses, including things such as a down payment on a home, your retirement, and other important milestones.

What Is the Cost of Retirement? 

How much money do you need in your retirement account? According to a study done by Sofi, the average 65-year-old retiree in the U.S. spent an average of $48,791 per year during the study’s time period of 2016 – 2020. Retired Americans aged 65-74 spent an average of $53,916, and the average 75-year-old spent $41,637 during the same time period. This benchmark is a useful starting point for thinking about your retirement expenses.

The breakdown of the study’s cost of living expenses during retirement consists of:

  • Housing – The average expense for housing during retirement was $16,880 for the 65-year-old, $18,027 for 65- to 74-year-olds, and $15,281 for 75-year-olds. This expense can dramatically fluctuate depending on the state or area you live in as well as the type of housing you live in.
  • Healthcare – This category includes medications, hospitalizations, insurance, supplies, and medical services. Not surprisingly, this expense goes up as a person ages due to an increased need for medical interventions required with an aging body. People 65 and over spent an average of $6,583 per year during the 2016-2020 period. This amount varied based on genetics, pre-existing conditions, and lifestyle choices such as smoking.
  • Transportation – Retirees over age 65 spent on average $7,062 annually on transportation. In comparison, those aged 65 to 74 spent $8,497 per year, and people 75 and older spent $5,073 per year during the 2016-2020 period. With the skyrocketing prices of fuel and other factors that affect transportation, this will only increase. This cost will also be higher for people who are more active and plan on traveling and going on adventures in their retirement years.
  • Entertainment – The concept of retirement isn’t the same as it was many years ago, and now many retirees plan for an active retirement with lots of fun and entertainment.  The Sofi study found that people over 65 spent an average of $2,527 annually on entertainment, which included things such as fees and admissions to places like museums and movies. People 65 to 74 spent an average of $3,080 per year on entertainment during the past five years, but once they hit age 75, spending on entertainment dropped to $1,749 annually for a variety of reasons expected as a person ages.
  • Food costs – The average 65-year-old retiree spent an average of $6,207 per year on food expenses.  These expenses include groceries and meals eaten at restaurants.  Retirees aged 65 to 74 spent an average of $6,864 per year, and people over age 75 averaged $5,274 per year.  Food expenses will vary, based on habits and diet. 

With Social Security often well below these annual amounts, it is essential to have your own savings, especially if the annual expense numbers seem low to you.

What Is the Retirement Savings Goal for the 30s, 40s, and 50s?

As a rule of thumb, you should begin saving for your retirement as soon as you begin working in your first job. Realistically, however, many people often do not start thinking about their retirement until their 30s or after. According to Forbes, at the age of 30, you should have savings equal to your yearly salary. For example, if you make $100,000 annually, you should have at least $100,000 saved for your retirement when you turn 30.

By the time you are 40, you should have at least three times your salary, which when using the $100,000 example, you should have saved at least $300,000. When you turn 50, you should have retirement savings of at least five to six times your salary, and with our example of $100,000, that would equal $500,000 – $600,000. Finally, at the age of 60, you ideally want to have at least seven to eight times your salary, meaning $700,000 – $800,000.

However, the average savings rates of Americans often don’t live up to these ideal goals. So, how can you save money to meet the goals of your age group?

Strategies to Reach Your Savings Goal

A retirement fund is a savings option that allows an employee to set aside a portion of their income for retirement. This allows a person, after retirement, to continue receiving a regular income. It is a way to defer a portion of your income for after you stop working at retirement age.

There are a variety of retirement funds and options available to allow a worker the option that best suits their needs. Our financial advisors can help everyone from Baby Boomers to Generation Z create a financial plan to increase their retirement income.

Defined Contribution Plans

The most recognizable type of defined contribution plan is the 401(k). A traditional 401(k) allows an employee to contribute to the plan with pre-tax wages. This allows the participant to avoid paying taxes on the money they are saving in the plan. The plan lets the employee’s contributions grow tax-free for as long as they remain in the plan or in another tax-deferred account. Eventually, when money is taken out of the account in retirement, at that time it is taxed as ordinary income.  We always recommend that you put in at least enough to maximize the employer match.  (A good rule of thumb for everyone without a pension is to save at least 15% of your earnings for retirement.)

A Roth 401(k) also allows an employee to save for retirement and not pay taxes along the way.  Contributions to the plan are made after taxes have been taken out, but when money is taken out of the account in retirement (after age 59 ½), you are not taxed on it.  

The major consideration when choosing between a traditional 401(k) and a Roth 401(k) is this: is it more beneficial for you to pay taxes now, or later?  Our financial advisors can review your current situation to help you make an informed choice.

IRA (Individual Retirement Account) Plans

A traditional IRA is a plan that is tax-advantaged to allow a significant tax break while you save for retirement. The IRA allows your contributions to grow tax-free until the funds are withdrawn at retirement and become taxable.  You may be eligible for a tax deduction for contributing to a traditional IRA.  

The Roth IRA is another type of IRA.  Like a traditional IRA, contributions to a Roth IRA grow tax-free within the account.  While Roth IRA contributions are not eligible for a tax deduction, all withdrawals from a Roth IRA in retirement come out tax-free and are not taxed as ordinary income. 

Withdrawals made from an IRA before age 59 ½ may result in taxes and penalties. Retirement accounts often have a diverse array of investment options. Our financial advisors can help you decide the best way to build a nest egg to supplement your retirement savings.

Solo 401(k) Plan

This plan is designed for a business owner with no employees (and potentially their spouse). The business owner is considered both the employer and employee, so elective deferrals of up to $20,500 can be made in 2022.  Additionally,  an elective profit-sharing contribution of up to 25 percent of compensation, up to a total annual contribution of $61,000 in 2022, can be made to these accounts for business owners, not including catch-up contributions. If you are considering the solo 401(k) for a side gig, be aware that 401(k) limits apply by individual person, not by plan, so if you’re also participating in a 401(k) at your day job, the limits apply across both plans instead of on each individual plan.

Traditional Pensions

If you are lucky enough to have a traditional pension, congratulations.  Employees don’t have to fund a traditional pension, and therefore it is the easiest form of retirement option. Instead of the employee contributing to the plan, the employer is required to fund it for your retirement. Pensions, which are payable for life, usually replace a percentage of your pay based on your tenure and salary.

The Federal Thrift Savings Plan

This type of retirement plan is available to government workers and people in the uniformed services. People who are eligible for this option can choose from five low-cost investment options, including an S&P 500 index fund, a bond fund, a small-cap fund, an international stock fund, and a fund that invests in specially issued Treasury securities. Additionally, there are a number of lifecycle funds with different retirement dates that an employee can invest in. Depending on when the employee entered service, employees may or may not be eligible for an employer match on their savings.

Cash Balance Plans

A cash balance plan is a type of pension plan that has characteristics of both a traditional pension and a 401(k) plan.  Like a 401(k) plan, each employee has their own account, complete with a specified account balance. Like a traditional pension, each employee has the option of a lifetime annuity, or payout.  Cash balance plans define the amount that will be available for each employee upon reaching their retirement age.  With a cash balance plan, employers credit a participant’s account with a set percentage of their salary plus an annual interest rate credit.  The real draw and benefit of these plans is that contribution limits increase with age – people that are 60 years and older can save up to $245,000 in 2022.

So How Much Should I Be Saving?

Different personal budgets and life situations  can help you determine how much you should be contributing toward your retirement goals. As you can see from the referenced article, both Fidelity and T. Rowe Price recommend that you try to save at least 15% of your income for retirement.  Fidelity assumes that you will save more aggressively earlier in life and projects you should have 1 time your salary by age 30, which T. Rowe Price assumes you’ll get to 1 time your salary savings by age 35.  However, in following T. Rowe Price’s plan, it is expected that you’d have 11 times your salary by age 65, while Fidelity’s plan has you at 10 times salary by age 67. 

So, as you can see, these are simply educated guesses and rules of thumb. It is about making smart and informed financial decisions at whatever age you start seriously thinking about and planning for retirement that will have the biggest impact on your success.  It is about understanding the plans you have available to you and how to best utilize them to save for retirement and balance those decisions with tax concerns both now and in retirement. Additionally, don’t forget that it is critically important to build up an emergency savings fund so that you will not have to wipe out your savings in the event of a medical, occupational, or other emergency.

Where Are You Compared to the National Average for Your Age When It Comes to Saving Money?

So, where are you compared to the national average of retirement savings for your age? Whether you’re below and want to get back on track with financial services tailored to your financial situation, or whether you’re at or above the average but know that you don’t want to put your retirement at risk by trying to manage it on your own or autopilot anymore, let Korving & Company help. Our experts will review your situation and present options to help secure your financial future. We love helping our clients get to and through retirement with clarity and conviction!  Call us today at 757-638-5490 to learn how we can improve your savings plan.

Roth IRA vs Roth 401(k)

Retirement accounts, such as Roth IRAs and Roth 401(k)s, are confusing for most people. Whether you are preparing for retirement or are newly retired, it is important to make the right choices. It is essential to work with professionals who can explain all your options and help you weigh the pros and cons of each one. A financial planner provides the support and knowledge needed to guide you on the benefits of a Roth IRA vs a Roth 401k. Understanding these unique options can help you make the best personal finance decisions.

Korving & Company can help you understand your investment accounts to make informed choices. Call 757-638-5490 or use our contact page to discuss your investments with one of our experienced financial planners.

Roth IRA vs. Roth 401(k) – Understanding Your Options

Examine the differences between Roth IRA and Roth 401(k) plans to understand how they affect your retirement savings.

What Is a Roth IRA?

Roth IRA, named after William Roth, a senator from Delaware, is an individual retirement account (IRA) that allows you to take tax-free withdrawals when you meet certain conditions. First established in 1997, Roth IRAs are now a familiar retirement tool for millions of Americans. Roth IRAs resemble traditional IRAs in many ways. Both allow your retirement accounts to grow tax-deferred.  The difference is when you get a tax benefit.  Roth IRAs are funded by after-tax dollars, so you do not get a tax break from making a contribution. Instead, you do not pay taxes on qualified distributions when you take money out. That differs from traditional IRAs, which are funded with pretax dollars. Traditional IRA withdrawals during retirement are subject to income tax.  This tax-free withdrawal feature is the key tax benefit of Roth accounts.

Roth IRAs protect earners from future tax increases. When you contribute to a Roth IRA, it does not affect your income tax refund or payment for the current year. However, it could save you money during retirement. Savings in a Roth IRA do not have to be withdrawn at age 72 while traditional IRAs and 401(k)s require you to begin taking money out via Required Minimum Distributions (RMDs) and paying taxes on those withdrawals.

You can fund a Roth IRA as part of a personal retirement plan. There are three ways to do this, as follows:

  • Open a Roth IRA account and contribute to it directly.

  • Convert or partially convert a traditional IRA to a Roth IRA.

  • Rollover funds from your employer’s retirement plan.

Income limits apply to Roth IRA accounts. In 2021, single tax filers making more than $140,000 become ineligible for Roth IRAs [3]. For 2022, the income limit increases to $144,000. The limit for married couples that use the tax status married filing joint is $208,000 for 2021 and $214,000 for 2022. If you are below those income eligibility qualifications, the Roth IRA contribution limits are $6,000 for those under age 50 and $7,000 for those 50 years old or older.

It is important to partner with the right investment management team to open a Roth IRA or other individual retirement account. With a Roth IRA, you are contributing money that you’ve already paid taxes on, but you do not have to pay money on future withdrawals. If you want to reduce your taxes after retirement, you will want to consider a Roth IRA. If you are in a lower tax bracket today than you will be in the future, a Roth IRA makes sense.

To open an IRA, you will need to go to a brokerage firm, bank, credit union, savings and loan association, or other authorized institution. Additionally, if your employer has a retirement plan that offers a Roth 401(k), you need to understand how Roth 401(k)s work to determine whether it’s a better option for you than a Roth IRA.

What Is a Roth 401(k)?

Roth 401(k)s are retirement plans sponsored by your employer and funded through payroll contributions. Under certain circumstances, you can make tax-free withdrawals from your Roth 401(k). With a Roth 401(k), when your employer takes money from your paycheck to deposit into the 401(k) account, you have already paid taxes on it. Roth 401(k)s differ in this way from traditional 401(k)s, which are funded with pretax deferrals. With a traditional 401(k), your employer deducts the money from your gross income, and you pay taxes on it when you withdraw the funds in retirement.

Withdrawals of the contributions and earnings in your account remain tax-free as long as your withdrawal meets the following qualifications:

  • You have had the Roth 401(k) for five or more years and

  • You withdraw money due to the account owner’s death or have expenses related to a disability.

  • The account holder reaches or exceeds age 59½.

If you are at least 72 years old, you must make a minimum withdrawal from your Roth 401(k) account each year. There are exceptions to this rule. For example, if you still work at the company that manages the 401(k) and do not own more than 5% of the company, you do not have to make a minimum withdrawal. Otherwise, it would help to take out the first required minimum distribution by April 1st following your 72nd birthday. Note that you can take out more than the minimum distribution amount.  For this reason, many people choose to do a tax-free rollover from their Roth 401(k) account to a Roth IRA upon leaving their employer for retirement since Roth IRAs are not subject to required minimum distribution rules.

Not all companies sponsor retirement plans that include a Roth 401(k) option. According to the Transamerica Center for Retirement Studies, 43% of retirement savers choose a Roth 401(k) versus a traditional 401(k). Further, millennials are more likely to choose a Roth 401(k) than baby boomers or Gen Xers [7].

Roth 401(k)s have contribution limits based on your age, set annually by the IRS. For example, in 2021, the maximum contribution was $19,500, while the 2022 limit increases to $20,500. However, those aged 50 and above have higher contribution limits and can add another $6,500 as part of a catch-up contribution. Additionally, Roth 401(k)s don’t have a taxable income limit to prevent high income earners from using them.  This is a key difference between the Roth 401(k) and the Roth IRA.

How Are Roth IRAs and Roth 401(k)s the Same?

Both Roth IRAs and Roth 401(k)s are funded with post-tax dollars and do not require you to pay taxes on withdrawals. Neither will reduce your gross income since contributions are not deductible, but both do have Roth contribution limits. Take an in-depth look at some of the similarities between these two types of retirement accounts:

  • Tax-Sheltered Growth: Once you contribute money to your Roth IRA or Roth 401(k) and invest it, it will continue to grow tax-free. So, your money will grow more efficiently because you don’t have to pay taxes on the growth every year.

  • Compensation Required: You need to have earned income to contribute to either a Roth IRA or a Roth 401(k). You can use taxable alimony or earned income to fund a Roth IRA, which you can set up on our own or with the help of a financial advisor. The company you work for administers your Roth 401(k). If your job pays you $12,000 per year, you cannot contribute more than $12,000 to your Roth 401(k) with that company.  If your job pays you $120,000 per year, per our explanation above, you can not contribute more than $20,500 to your Roth 401(k) with that company (or $27,000 if you are age 50 or older).

  • Contribution Limits: Both of these accounts have annual contribution limits. The contribution limits appear in the individual sections above, but both include catch-up amounts that allow savers over age 50 to put aside more money for retirement. While Roth IRAs require individual contributions, your 401(k) plan will accept contributions from you or your employer.

  • Early Withdrawal Penalties: Knowing and understanding early withdrawal penalties can save you a lot of money. If you withdraw funds early, you face a 10% penalty on top of income taxes. So, if you are in the 15% income tax bracket, you would pay 25% of the money you withdraw when you prepare your federal taxes. The early withdrawal penalties for a 401(k) plan ends when you reach age 59 ½. The early withdrawal penalties for a Roth IRA ends at age 59 ½ or after you hold the account for at least five years. Additionally, you can take up to $10,000 out of a Roth IRA to purchase a first home. We typically recommend that you can hold off on taking any money from your Roth accounts if you can and wait to take and withdrawals after age 59 ½ penalty-free and tax-free.

  • Penalty Exceptions: Most of these retirement accounts also have early withdrawal penalty exceptions. If you have a permanent disability, inherit the funds in a retirement account as a beneficiary, or have considerable medical expenses, you may qualify for a penalty exception on both accounts. Early withdrawals from a Roth IRA to pay for higher education do not result in a penalty, and you can take advantage of a waived penalty for those leaving a job after age 55.

How Are Roth IRA and Roth 401(k) Plans Different?

When comparing key differences between a Roth IRA vs Roth 401(k), you also need to know how these accounts differ. For example, some people consider a Roth IRA a better choice because it typically has more flexible investment options than a Roth 401(k), which usually has a limited investment menu. However, if you have a high income, you may not qualify for a Roth IRA. In that case, if you want to save as much money as possible and take advantage of an employer match, a Roth 401(k) might make sense.

Here is a closer look at the significant differences between these two types of retirement accounts:

  • If you choose a Roth IRA, you make your own contributions and select your own investments or hire a financial advisor to do that for you. In a Roth 401(k), you usually have a limited menu of investment options, typically mutual funds chosen by your employer.

  • A Roth IRA makes early withdrawals slightly easier. Do you plan to retire before age 59½?  If this is a consideration, a Roth IRA may best meet your future needs.

  • A Roth 401(k) has higher contribution limits. If you want to invest more than $6,000 per year in a Roth account to fund your retirement, a Roth 401(k) might be the best option.

  • Roth 401(k)s offer paycheck deduction options and potential employer matching. Both of these options make a Roth 401(k)s attractive. Many employees choose to save at least the amount that their employers match. Also, having the amount taken out of your paycheck and never even hit your bank account makes it easy to save for retirement before you even miss the money.  (Keep in mind that any employer contributions to your Roth 401(k) savings will be made in a pre-tax account and will be considered traditional 401(k) savings.  Still, employer matches are essentially free money and are always a nice benefit that employees should take advantage of.)

  • Roth IRAs may offer more investment variety. If you want to diversify your retirement portfolio and you know a lot about investing or work with a financial advisor that you trust, a Roth IRA might give you more options and control.

Taxpayers can benefit from both types of Roth retirement accounts. If you can manage it, you might want to have both a Roth 401(k) and a Roth IRA. You can put enough into your 401(k) to take full advantage of your employer’s matching contributions limit. Then, put any additional funds into a Roth IRA. If you still have money available to invest after maximizing the Roth IRA, you can contribute even more to the Roth 401(k) sponsored by your employer. It is important to note that maxing out your contribution to either a Roth 401(k) or Roth IRA does not keep you from contributing to the other.  For example, if you are under age 50 and are able to save the full $20,500 in a Roth 401(k) in 2022, you can open a Roth IRA and save the max $6,000 this year, too.  If this is a consideration, it is important to review the income limitations on a Roth IRA we reviewed above to confirm that you don’t make too much to contribute directly to a Roth IRA.  Remember, there is no income cap to be able to contribute to a Roth 401(k).

Which Is Best?

Roth 401(k)s and Roth IRAs both give you an option for tax-deferred savings. If your employer offers a match for the company’s 401(k), it makes sense to contribute up at least up to the percentage they will match. While you don’t get any tax deduction for Roth IRA or Roth 401(k) contributions, you can withdraw them without paying taxes when you retire, which will be a long-term tax savings if you expect tax rates to be higher in the future than they are now.

So, which type of account is best for you between Roth 401(k) vs. Roth IRA? That answer depends on your investment goals and how much money you make. Therefore, it is essential to work with a financial advisor who can help you understand the differences between these two accounts and how each will affect your personal income now and in the future.

In reality, most investment strategies involve both Roth IRAs and Roth 401(k)s, assuming both are available to you. Your investment advisor can help you make the right decisions for you and your family. Whether you are a first-time investor or want help looking at your current retirement strategy, you can benefit from speaking with an experienced financial planning advisor.

If you are self-employed, Roth IRA contributions allow you to save for retirement, even if your company doesn’t offer a 401(k).

Talk to the professionals at Korving & Company who will help you evaluate your options and maximize your retirement savings plan.

Why Experience Matters

Age is no guarantee of wisdom.  But when you entrust your money to a financial advisor there are advantages to having at least a few gray hairs. 

1. The stock market runs in cycles. One thing that experience teaches is that markets are not escalators that always go up.  It helps to have a decade or three of experience to know what to expect when the Federal Reserve changes interest rates, when inflation takes off or when markets get over-priced.  It is good to have an advisor who has experienced similar markets before.

2. Bear markets happen. Was your advisor even alive during the crash of 1987? Was he around for the bubble or the Great Recession?   If not, he may not be prepared for the next one.

3. Clients value commitment. Clients value advisors who will be there for them not just today but for decades in the future.  The relationship a client has with an advisor is a long-term one.

4. Do what you love. Good advisors love their work.  They get satisfaction our of helping people accomplish the important things in their lives, allowing their clients to focus on the things that are important to them and managing their finances so that it is one less thing they need to worry about.   

Our team is made up of people who have worked together for decades with clients who have been with us for even longer.  We often find ourselves working with several generations of the same family.  Investing is usually a long-term relationship. People want to work with someone who understands their unique situation. They want someone they can call a week, a month, or a year from now and still find them at their desk.

Written by Arie J Korving

Baby Steps for Dave Ramsey Fans

We like a lot of things that Dave Ramsey has to say.  Last year Stephen joined the Dave Ramsey SmartVestor Pro program, where people who are ready for baby step 4 can contact investment advisors who are familiar with and aligned with Dave’s process.  Ramsey’s Financial Peace program has been presented in many area churches and we have conducted several of them ourselves.  At the core of Dave’s program is a seven-step process to eliminate debt and build wealth. 

Ramsey is a student of human behavior.  He calls out people who get into financial difficulty by “running around buying things they couldn’t afford with money they didn’t have to impress people they didn’t even like.”  He tells people to “live like no one else today, so you can live like no one else tomorrow.”

Because we get referrals from Dave’s program, we have met many people who are debt-free or have at least gotten their debt under control and are saving rapidly but are not totally sure about the next step.  They are putting money aside monthly, but they are not familiar with the mechanics or intricacies of investing.  Their savings in the bank are getting almost no interest.    

That is where we come in with our decades of investment and financial planning experience.  Part of our job is to teach and educate, helping to alleviate some of the fear, mystery and complexity of investing.  We listen to our clients, identifying their goals and concerns.  We offer them an opportunity to get a personal financial plan.  We help them establish the right kind of accounts they need in order to achieve their goals, including individual accounts, IRAs, Roth IRAs, 401k accounts, college funding plans or trust accounts.  And we create and manage investment portfolios customized to their goals and needs. 

Once the accounts are in place and the money is invested, we monitor their performance, make appropriate corrections and provide regular reports on their progress toward their goals.

We are a local, family-owned small business and treat our clients like family.  We believe in another one of Dave Ramsey’s sayings: “If you wouldn’t want your mother to buy the item or the service then don’t sell it.”   We realize that finance and investing is confusing to many people, so we watch out for our clients, advising them as if they were a member of our family who was asking for our help.  If you have questions about investing or financial planning, schedule an appointment to meet with us either in person, on the phone or via video conference.

Pre and Post Retirement Financial Planning


I  get a lot of questions regarding pre- and post-retirement planning, but today I wanted to address one that is most frequently asked.

I’m retiring at the end of this year. I used a fee-based advisor five years ago to ensure I was on the right track to retire. Based on prior analysis and goals, I have accumulated enough assets to retire as planned. What are the top five areas that I should ask my advisor to focus on now that I’m changing from the accumulation phase to the drawdown phase?

Great question!

Well, first off congratulations on having a plan for your retirement!

First Steps

Now that you have reached your asset goal, here is what you would look at as you enter retirement. Keep in mind that once your paycheck stops, you become totally dependent on your pension and social security plus the income from your investments.

The first thing you and your financial advisor should do is segment your planned spending between three categories: (1) needs, (2) wants, and (3) wishes. Put a price tag to each one.

  • Needs: What do you need to live on? (food, clothing, housing, utilities, etc.)
  • Wants: What would you like to spend money on? (travel, cars, recreation, etc.)
  • Wishes: What would you buy if you had the money? (boat, second home, etc.)

A good retirement plan will determine your probability of success. If the probability of running out of money is high, you can adjust your spending plans before problems arise.

Think About All Possible Outcomes

Meet with your financial planner and discuss what worries you. Most people entering retirement fear major financial losses. Are you concerned about medical expenses? How would premature death affect you and your spouse? What if you lived too long? How will inflation affect your plans?

Determine the effect of these concerns on your lifestyle. Discuss what you can do to minimize these concerns.

How much risk are you taking? Many people don’t really know. As you enter retirement you are most vulnerable to sequence-of-return risks. Major financial losses just before or after retirement can ruin your plan.  

Ask your advisor to determine your portfolio’s Risk Number. This determines how your portfolio would withstand the kind of losses incurred during the last recession, for example. Should you be making some changes?

Ask your financial advisor to review the ownership and beneficiary designation of all your assets. That includes your financial assets as well as your home and anything else of value.

Your financial planner should be able to address these issues.  You have worked a lifetime to get to this point. You want to make sure that the retirement that you dreamed of will become reality.

Looking Back at 2020, Looking Ahead at 2021 | Korving & Co

2020 was a momentous year.  It was dominated by a new kind of war: a war against an invisible enemy that fought most acutely against the sick and the elderly.  It caused fear, unemployment and temporary shortages.  It was a war that tested the American people and the American economy. 

The good news is that we are winning; the American economy stood the test and survived.  The government’s initial reaction to the COVID-19 virus was to close schools and businesses and ask people to stay home to “flatten the curve” so that hospitals would not be overwhelmed.  The economy slowed dramatically, and the stock market dropped by 30%.   

Reacting to widespread economic distress, the Federal government passed the CARES Act, injecting several trillion dollars into the economy to protect jobs and put money into the pockets of workers and small businesses.  People used technology to work and learn from home. 

On the medical front, the government created “Operation Warp Speed,” a public-private partnership to develop vaccines and therapeutics to combat the virus in record time.    

As we learned more about the virus, businesses began re-opening and people began very slowly returning to more normal lives.  The economy achieved a record 33% annualized growth rate in the 3rd quarter, giving the U.S. a V-shaped economic recovery.  The stock market also soared, reaching record highs despite continued lockdowns in several important states. 

We referred to this as a war because it resembled the year following the surprise attack on Pearl Harbor.  Despite a string of defeats, the American people went on to win a decisive victory and the American economy rallied.  The attack of COVID-19 has been a test of the American people and the free market system.  We have survived the test and are confident of a looming victory over this enemy.

As we write this, the Presidential election is still undecided.  In Congressional elections, Republicans picked up some seats but the House of Representatives will remain in Democrat hands.  Democrats have picked some Senate seats, but Republicans will hold a majority.  This means that no matter who is President, the odds are strong against any radical changes in domestic policy.  The American people have voted for stability.  Free enterprise, entrepreneurship and great American companies will continue to thrive.  There is a lesson hidden in all of this for investors: don’t let your politics influence your investment decisions. 

As we close out the year and approach the Holiday season, we count our blessings.  For those who are looking for some guidance as we approach 2021, we invite you to call, email or drop by.  We look forward to meeting you.

While Changing Jobs, Simplify Your Financial Life

How many times have you said to yourself that you wish that investing was not so complicated?  It is a fact, investing is complex.  There are a huge number of choices and decisions that need to be made, investing becomes complex.  On top of this, unless you are an expert, the terms used are seldom clear and often hard to understand.

What To Do Financially When Changing Jobs

One of the best times to meet with a financial advisor is when you change jobs.  An advisor can often provide advice about benefits packages offered by your new employer.  They can also help you make sure that your beneficiary designations are correct and provide advice on your life and health insurance needs.  They can explain the investment choices in your new employer’s 401k and tell you how much you should contribute to take full advantage of your new plan. 

This is the ideal time to take care of something known as “orphan” 401k accounts.  When changing change jobs, people often leave their 401k accounts behind.  Changing jobs involves lots of paperwork: personnel forms, tax forms, benefit health insurance forms, retirement forms, etc.  This is often the time people do not want to go to the trouble of transferring the old 401k or rolling it into an IRA.  That means that the job-hopper often leaves a series of “orphan” 401k plans behind; each one of them representing a part of their retirement savings.  A financial advisor has the experience to guide you through the process.

When we first meet new clients, we often find that they have accounts with several investment firms.  Some do this because they believe they are diversifying.  In reality, that’s not what diversifying means.    They are just complicating their lives unnecessarily. 


Changing jobs is an ideal time to consolidate your investments, create a formal retirement plan and review your estate plan to ensure your family is taken care of. 

This is the role we play in our clients’ lives.  In fact, we have written the book on it: Before I Go, complete with a fill-in-the-blank workbook. Before I Go Workbook

If you have recently changed jobs or are planning to change jobs soon and you would like this kind of guidance, give us a call at 757-638-5490 or use our contact page for a free introductory appointment. You will be glad you did.

Preparing for the Biggest Transition of Your Life

Last month we wrote about one of life’s major transitions: changing jobs.  We recommend using that as an opportunity to organize and simplify your life. If you want a copy of that article, call me, or send me an email.

This month I want to talk about a much bigger life-changing event – your final exit – and what you need to do to care about those left behind.

One of the key roles we play in our clients’ lives is to ensure that when they pass on, those left behind are cared for and that their financial affairs are properly managed. 

Everyone is different but here are some of the questions we help our clients resolve in discussing their estate plans

  • Who gets your physical property: your home, car, collections, etc.?
  • Who gets your bank and investment accounts?
  • Who are the beneficiaries on your IRA and other retirement accounts?
  • Do you need life insurance and if so, who is the beneficiary?
  • What is going to happen with your pension and social security income?
  • Who will manage your investments if you become incapacitated or are no longer here?
  • Where are your estate documents?
  • What is the difference between a will and a trust?
  • What is an advance medical directive, and do you need one?
  • What is a Power of Attorney and do you need one?
  • Who will pay the bills when you no longer can?
  • What are your basic living expenses, and can your surviving spouse afford them?

When we began our practice over 30 years ago we were surprised at how many people had not prepared adequately.  As a result, those left behind often spent months trying to understand the departed’s financial affairs.  To help our clients we wrote a book to answer these questions.  It is called Before I Go.  We also created the Before I Go Workbook to give people a fill-in-the-blank guide. 

To order from Amazon, type “Before I Go Korving” in the search bar.  Or you can come to our office for a discounted copy.

If you have questions about financial planning, estate planning or investment management please call for an appointment.  We are always happy to be of service. 

The News is Bad, the Markets are Up

What a year.  We are living in an amazing time.

If we had told you at the beginning of this year that the S&P 500 would be up 3.5% and the NASDAQ up 25% by the end of the third quarter, you would not have believed us.  Heck, we would not have believed us!

COVID-19 has altered, in many ways dramatically, the way that we live our daily lives.  It has also had a huge impact on our economy due to decisions made by our government.  It is one thing for a Fortune 500 business to have hundreds or thousands of their employees switch to working remotely.  However, a local restaurant owner with only a handful of employees cannot go “remote” and cannot shift to a take-out only or partial capacity model without a significant drop in revenues.  Small businesses are the backbone of the economy.  Economists estimate that there are 30 million small businesses and they provide employment for about half of the American workforce.    

During the second quarter, as the economy shut down, economic activity dropped at a 35% annualized rate!  During the third quarter, as the economy gradually began to open back up, the economy is rebounding at about the same rate.   This will be the fastest increase in real GDP for any quarter since at least World War II.

We have just lived through the strangest recession and recovery we have ever seen.  Because it was a government-created recession in reaction to a health and medical emergency rather than an economic issue, we have seen an incredible V-shaped recovery to this point.  However, looking forward we do not believe it will continue to be V-shaped from here.  The rate of economic growth is going to slow from what it was in the third quarter.  Economists predict that it will take several years for the economy – including employment – to get back to where we were in late-2019. 

Despite the virus, the lockdowns, election risks and headlines, the stock market has continued to march upward.  The primary reason is that aggregate corporate earnings are rising, mostly led by several huge technology companies, and interest rates are near zero. 

Ignore the noise.  Many economists are predicting that corporate earnings next year will equal or exceed all-time highs.  Stock market investors believe that higher profits and lower interest rates outweigh the risks.  This is the basic reason that stock prices continue to rise. 

With this as background, we continue to be cautiously optimistic and our portfolios are constructed to participate in market advances and cushion market declines.  We welcome your questions and comments.

©  Korving & Company, LLC