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Choices for Your 401(k) at a Former Employee

November 17, 2015 by admin

One of the common threads of a mobile workforce is that many individuals who leave their job are faced with a decision about what to do with their 401(k) account.¹

Individuals have three basic choices with the 401(k) account they accrued at a previous employer.

Choice 1: Leave it with your previous employer

You may choose to do nothing and leave your account in your previous employer’s 401(k) plan. However, if your account balance is under a certain amount, be aware that your ex-employer may elect to distribute the funds to you.

While inertia is the one of the primary reason for not moving a 401(k), there may be reasons to keep it there — such as investments that are low cost or have limited availability outside of the plan.Other reasons are to maintain certain creditor protections that are unique to qualified retirement plans, or retain the ability to borrow from it, if the plan allows for such loans to ex-employees.²

The primary downside is that individuals can become disconnected from the old account and pay less attention to the ongoing management of its investments.

Choice 2: Transfer to Your New Employer’s 401(k) Plan

Provided your current employer’s 401(k) accepts the transfer of assets from a pre-existing 401(k), you may want to consider moving these assets to your new plan.

The primary benefits to transferring are the convenience of consolidating your assets, retaining their strong creditor protections and keeping them accessible via the plan’s loan feature.

Provided your new plan has a competitive investment menu, many individuals prefer to transfer their account and make a full break with their former employer.

Choice 3: Roll Over to a traditional individual retirement account (IRA)

The last choice is to roll it over into a new or existing traditional IRA.³ A traditional IRA may provide a wider range of investment choices than what may exist in your new 401(k) plan.

The drawback to this approach may be less creditor protection and the loss of access to these funds via a 401(k) loan feature.

Remember, don’t feel rushed into making a decision. You have time to consider your choices and may want to seek professional guidance to answer any questions you may have.

  1. Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.
  2. A 401(k) loan not paid is deemed a distribution, subject to income taxes and a 10% penalty tax if the account owner is under 59½. If the account owner switches jobs or gets laid off, the 401(k) loan becomes immediately due. If the account owner does not have the cash to pay the balance, it will have tax consequences.

Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.

Long-Term Care: Biggest Retirement Income Risk

November 9, 2015 by admin

For current retirees and those nearing retirement, healthcare costs are expected to pose the single greatest risk to income in retirement. A recent study reports a 65-year-old healthy couple retiring in 2015 can expect to pay an average of $394,954 in total healthcare costs in retirement. For a 55-year-old couple retiring in 10 years, total lifetime healthcare costs are projected to rise to $463,849 on average.*

When custodial care is factored into the heath care equation, costs can quickly skyrocket well above average projections. When planning for your healthcare needs in retirement, it’s important to keep in mind that Medicare, Medicare supplement plans and private medical insurance do not cover long-term in-home maintenance or nursing care.

Long-Term Care (LTC) insurance was developed to fill this void and help retirees manage the impact of rising healthcare costs. The right policy and coverage can help protect the income you and your spouse rely upon in retirement to maintain your lifestyle as well as your ability to choose the type of care you prefer –when and if you need it. If you’re considering LTC insurance, now is the time to learn more. Typically, the younger you are when you purchase the policy, the lower the monthly premium.

If you’re wondering whether LTC insurance or another strategy may be right for you, give us a call at (714) 634-8051. We’ll talk about the different alternatives available to help you prevent a lifetime of assets from falling short when you need them most.

*HealthView Services: 2015 Retirement Health Care Costs Data Report. Projections assume: life expectancy of 87 for the male, 89 for the female, and an MAGI income level below $170,000; Medicare Parts B and D coverage and a supplemental insurance policy; insurance premiums for medical, dental, vision; co-pays; and out-of-pocket expenses.

Filed Under: Orange Capital Management, Retirement Planning

Financial Fears to Forget This Halloween

October 30, 2015 by admin

One of the common investor concerns that Orange Capital Management Inc. have encountered lately includes apprehension over the Federal Reserve’s impending decision to raise interest rates. If rates increase this could impact everything from your savings account to credit card fees. With the ghouls and goblins of the Halloween holiday around the corner, now is an ideal time to put the reins on these common financial concerns, especially as we anticipate a potential rate hike:

  • Fear of not saving enough. Here’s a frightening fact: 60 percent of Americans don’t have enough rainy-day funds to pay for a minor emergency, like a car accident. Avoid being one financial emergency away from a downward spiral. When you have a budget, you know how much cash you’ll have to sock away in a savings or retirement account after expenses are paid.
  • Fear of debt. If you are drowning in debt it can be downright scary! Don’t let those fears control you — know where you are spending. Create a budget and use it as a framework to spend with purpose. Understand your interest rates for credit cards and loans. Set realistic goals to pay down debt, step by step.
  • Fear of checking your credit. A best practice is to check your credit every year, however many are afraid to check it and find out they have a less than ideal score. Knowledge is power — it’s important to know your score and responsibly work to improve your credit. A poor credit score can make it challenging to be approved for a good loan or loan rate and impact other aspects of life.
  • Fear of outliving your savings in retirement. Planning ahead is the best way to conquer your fear of not having enough money for retirement. If you are within 10 years or less of retiring, it’s time to shift your financial priorities, if you haven’t already done so. Focus more on your future, rather than immediate wants and needs. Start putting away more money in a retirement fund. Aim to meet contribution limits for your designated retirement account (especially where there are potential tax benefits). If you have a workplace sponsored plan, get the employer match (if available) — that’s free cash waiting for you!

Want to share your financial fears with an expert on our team? Please give us a call today at (714) 634-8051 to schedule a time to speak with one of our Certified Financial Planners.

Filed Under: Orange Capital Management, Retirement Planning, Time Segmentation

Understanding Long-Term Care

October 20, 2015 by admin

Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

The U.S. Department of Health and Human Services estimates that 70% of people over age 65 can expect to need long-term care services at some point in their lives.1 So understanding the various types of long-term care services—and what those services may cost—is critical as you consider your retirement approach.

Long-term care is not a single activity. It refers to a variety of medical and non–medical services needed by those who have a chronic illness or disability—most commonly associated with aging.

Long-term care can include everything from assistance with activities of daily living—help dressing, bathing, using the bathroom, or even driving to the store—to more intensive therapeutic and medical care requiring the services of skilled medical personnel.

Long-term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.

Long–term care costs vary state–by–state, and region–by–region. The national average for care in a skilled care facility (single occupancy in a nursing home) is $87,600 a year. The national average for care in an assisted living center (single occupancy) is $42,000 a year. Home health aides cost an average $20 per hour, but that rate may increase when a licensed nurse is required.2

Often, long-term care is provided by family and friends. Providing care can be a burden, however, and the need for assistance tends to increase with age.

Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.

Many self-insure by default—simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.

When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concepts are important to you, consider your approach for long-term care.

Filed Under: Orange Capital Management, Retirement Planning

Retirement Plan Beneficiaries

October 13, 2015 by admin

When inheriting retirement assets from a parent, grandparent, or anyone who is not your spouse it’s critical to fully understand all of your options before making a costly decision that may have serious tax consequences. That’s because distribution options for non-spouse beneficiaries of IRA, 401(k), or similar qualified plans are complex and determined by several factors, including:

  • Whether or not the beneficiary is a minor*
  • If the retirement account owner died before the required beginning date (RBD) for plan distributions
  • The age of the beneficiary in relation to the age of the deceased at the time of death

Two of the most common distribution methods for non-spouse beneficiaries who are not minors are:

  • Inherited IRA – While non-spouse beneficiaries can’t roll over an inherited retirement account into their own IRA, they may be able to do a trustee-to-trustee transfer into an “inherited IRA.” Non-spouse beneficiaries have five years after the death of the account owner to take the money out. If they take the money in a lump sum by the end of the fifth year following the account owner’s death, they will pay ordinary income taxes on the entire amount.
  • Stretch IRA – The IRS also allows beneficiaries to “stretch” distributions over the course of their projected lifespan. Using this method, non-spouse beneficiaries elect to have the money paid out over their lifetimes and pay ordinary income taxes on the amount they receive each year. Stretching withdrawals over the course of a non-spouse beneficiary’s projected lifespan enables potentially decades of extra tax deferred (or in the case of Roth IRAs, tax free) growth.

However, it’s important to note that these are not your only options and tax implications can vary greatly between options. If you inherit retirement assets, be sure to check with the plan provider about your available options or contact us at (714) 634-8051 for a no-obligation consultation.

Filed Under: Orange Capital Management, Retirement Planning, Succession Planning

The Power To Change Behaviors!

September 23, 2015 by admin

Habits are hard to break — but not impossible.  We thought you might be interested to learn more about how to make lasting health changes in your life.

Most Americans know the fundamentals of good health: exercise, proper diet, sufficient sleep, regular check-ups and no smoking or excessive alcohol. Yet, despite this knowledge, changing existing behaviors can be difficult. Look no further than the New Year Resolution, with its 8% success rate.¹

Generally, negative motivations are inadequate to affect change. (“I need to quit smoking because my spouse hates it.”) Motivation needs to come from within and be positive oriented. (“I want to quit smoking so I see my grandchildren graduate.”)

Goals must be specific, measurable, realistic, and time-related. In other words, “I am going to exercise more” is not enough. You need to set a more defined goal, e.g., “I am going to walk 30 minutes a day, five days a week.”


As a rule, individuals travel through stages on their way to permanent change. These stages can’t be rushed or skipped.

Phase one: Precontemplation. Whether through lack of knowledge or because of past failures, you are not consciously thinking about any change.

Phase two: Contemplation. You are considering change, but aren’t yet committed to it. To help you move through this phase, it may be helpful to write out the pros and cons of changing your behavior. Examine the barriers to change. Not enough time to exercise? How could you create that time?

Phase three: Preparation. You’re at the point of believing change is necessary and you can succeed. When making plans it’s critical to begin anticipating potential obstacles. How will you address temptations that test your resolve? For instance, how will you decline a work colleague’s lunch invitation to that greasy spoon restaurant?

Phase four: Taking action. This is the start of change. Practice your alternative strategies to avoid temptation. Remind yourself daily of your motivation; write it down if necessary. Get support from family and friends.

Phase five: Maintenance. You’ve been faithful to your new behavior. Now it’s time to prevent relapse and integrate this change into your life.

Remember, this process is not a straight line. You may fail, even repeatedly, but don’t let failure discourage you. Reflect on why you failed and apply that knowledge to your efforts going forward.

  1., January 2014

Filed Under: Orange Capital Management, Retirement Planning

Don’t Be Your Own Worst Enemy

September 9, 2015 by admin

Here’s a quick look at how psychology may play into your investment decisions.  We thought you might find it interesting.

One of the most well-known investors of the 20th Century, Benjamin Graham, said that “the investor’s chief problem—and even his worst enemy—is likely to be himself.”¹

What Graham understood—and modern research is catching up to—is the idea that we all have emotions and biases that affect our decision-making. The innate wiring built to survive pre-modern times can be counterproductive in our modern world, especially when it comes to investing.

Let’s take a quick look at a few of the human emotions and biases that can adversely impact sound investment decision-making.

Fear and Greed — These are the two most powerful emotions that move investors and investment markets. Each emotion clouds our capability for rational and dispassionate decision-making. They are the emotions that lead us to believe that prices may continue to rise (think the Tulip price bubble of 1636) or that everything has gone so wrong that prices may not recover (think Credit Crisis of 2008-2009).

Some investors have found a way to conquer these emotions and be brave when everyone else is fearful and resist the temptations of a too-exuberant market.

Overconfidence — Peter Bernstein, a noted economic historian, argued that the riskiest moment may be when we feel that we are right.² It is at that precise moment that we tend to disregard all information that may conflict with our beliefs, setting ourselves up for investment surprise.

Selective Memory — Human nature is such that we tend to recast history in the manner that emphasizes our successes and downplay our failures. As a result, we may not benefit from the valuable lessons failure can teach. Indeed, failure may be your most valuable investment.

Prediction Fallacy — Humans have an innate desire to recognize patterns and apply these patterns to predicting the future. We erroneously believe that because “A” occurred and “B” happened that if “A” happens again, we can profit by anticipating that “B” will repeat. Market history is littered with examples of “rules of thumb” that have worked, until they no longer worked.

Financial markets are complex and unpredictable. Our endeavors to tap their opportunities to pursue our financial goals are best realized when we don’t burden the enterprise by blindness to the inherent behavioral obstacles we all share.

  1. Quotation Collection, 2014
  1. Strategy in Practice, George Tovstiga. 2103, John Wiley & Sons, Ltd.

Filed Under: Orange Capital Management, Retirement Planning, Time Segmentation

Debt Stress

September 4, 2015 by admin

Stress seems to affect everyone in different ways.  We thought you might like to learn more about how debt may increase your stress level, and what you can do about it.

American households hold an average debt of nearly $54,000, and 35% have debt in collections.¹

Little wonder that money worries are a major cause of stress.


Humans have an innate response called “flight or fight.” It is nature’s way of launching our bodies into action; consider the physical responses we feel during moments of stress—faster heartbeat, accelerated breathing, tightening of muscles, and increase in sweating.

These are response mechanisms that prepared our ancestors to run from, or confront, a danger on the savanna. But they can be less useful in more modern times.

In the short term, stress can manifest itself in physical symptoms, such as headaches, fatigue, difficulty sleeping or concentrating, an upset stomach, and general irritability.

These brief episodes of stress usually do not cause lasting harm to personal health.

However, debt—and the stress it causes—is typically a persistent problem. If your stress system stays activated over longer periods of time, it can lead to serious health problems, such as depression, high blood pressure, weight gain or loss, a change in sex drive, sleep deprivation, stomach complications, and even heart conditions.²


If you are experiencing debt-related stress, you should consider attacking the root of the problem. Generally, it takes time to work down debt, but that doesn’t mean you can’t manage the stress during the interim period.³

The fact that you have a strategy to eliminate your debt is the first step to lowering stress since the sense of control that a strategy gives you might furnish you with hope and optimism.

It’s also important that you keep your debt worries in perspective. Remind yourself that debt may not permanently ruin your life. Writing in a journal can be helpful as an outlet to the worried thoughts that can cycle endlessly through your mind. Seek social support—knowing that family and friends are in your corner can be a great source of strength.

Finally, find time for laughter and extending small kindnesses—each unleashes wonderfully positive chemical reactions that are good for the soul and the body.

  1. USA Today, July 29, 2014
  2., July 2014
  3. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific debt-reduction strategy or approach.

Filed Under: Orange Capital Management, Retirement Planning

Planning Essentials for You and Your Spouse

August 19, 2015 by admin

As financial planners, we get to help plan for some of the most important events in the lives of families we work with. For example, buying a new home or saving to send their kids to college. Some of the harder parts are when we have to plan for the passing of a spouse. While this is often a difficult subject to address, we find that spouses who talk about this early and are on the same page can be better equipped if that time comes. Here are a few items we’ve seen that have helped families better prepare:

  • Plan together. Discuss the “what ifs” (including death). Especially plan for big financial and legal decisions that impact a surviving spouse, like wills, power of attorney, life insurance and financial planning. Consider creating a filing system, such as using colored folders, and house each document in a fireproof safe, or safe deposit box.
  • Gather documents. Store all the necessary documents in a safe place, such as Social Security numbers, marriage license, birth certificates, living wills, banking records, bills, credit card statements, car titles, life insurance, military discharge papers, workplace retirement savings plans, taxes and real estate documents, to name a few.
  • Add spouse to open accounts. Where it applies, add your spouse’s name to your accounts to ensure a smoother transition for the surviving spouse.
  • Inform on how to access all open accounts. Fill each other in on every credit card and/or bank account the other may not be aware of. Provide your login information for your online accounts, such as bank accounts, so monetary and/or legal documents can be accessed.
  • Meet with a financial advisor. One of the most important ways to prepare is to work with a financial professional who can help you both meet your financial and legal obligations.

Are you and your spouse ready for the “what ifs”? We are happy to have that important conversation with you. Please contact us at (714) 634-8051 or if you would like assistance.

Filed Under: Orange Capital Management, Retirement Planning

August Monthly Economic Update

August 13, 2015 by admin

THE MONTH IN BRIEF The debt crisis in Greece, the stock swoon in China, renewed dollar strength, unimpressive quarterly results from some of the blue chips … there were considerable headwinds on Wall Street in July, and yet the S&P 500 overcame them, rising 1.97% for the month. Other important global benchmarks also advanced, but retreats plagued the emerging markets. Key commodities posted big losses. The housing market remained hot. The latest U.S. economic indicators sent mixed signals, making analysts wonder if the Federal Reserve would refrain from raising short-term interest rates in September.  Read The Full Report Here

Filed Under: Orange Capital Management, Retirement Planning