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An Advanced Medical Directive: What it is and How to Create One

As we go through life, we may face unexpected situations where we cannot make medical decisions for ourselves. In such cases, an Advanced Medical Directive (AMD) is a legal document that can help guide our healthcare choices. An AMD allows us to appoint a trusted individual as our agent to make medical decisions for us if we become incapacitated or unable to communicate. In this blog post, we will discuss what an AMD is, how to create one, where to file it, where to store it, and when to update it.

What is an Advanced Medical Directive?

An Advanced Medical Directive is an estate planning document that gives people the power to make medical decisions for us if we become incapacitated. This document is also known as a Living Will, Health Care Directive, or Medical Power of Attorney. It is a legal document that states our wishes regarding medical treatment if we cannot express them ourselves. The AMD is a way to ensure that our medical care is in line with our values and preferences.

Separating Powers: Operational and Financial

As a business owner, you probably want to separate powers between operational and financial. Similarly, when creating an AMD, it is essential to consider who the successor agent is and when they can take authority. The successor agent is the person who will take over as the decision-maker if the primary agent is unable to act. It is important to choose someone you trust and who shares your values and beliefs.

When choosing a successor agent, consider their availability, willingness to take on the role, and their ability to communicate with healthcare providers. You may also want to consider the circumstances in which they can take authority, such as disability, death, or incarceration.

Creating an Advanced Medical Directive

Creating an AMD involves several steps. The first step is to decide who you want to appoint as your agent. It is crucial to choose someone you trust and who understands your values and beliefs. Once you have chosen your agent, you should discuss your wishes with them and make sure they understand your healthcare preferences.

The next step is to complete an AMD form. You can find these forms online or from an estate planning attorney. The form typically includes the following information:

  • Your name, address, and contact information
  • The name, address, and contact information of your agent
  • The circumstances under which your agent can take authority
  • Your healthcare preferences, such as whether you want life support, pain management, or resuscitation
  • Any other instructions you want to provide, such as your religious or spiritual beliefs

Filing an Advanced Medical Directive

Once you have completed the AMD form, you should file it with your state’s health department or other relevant agency. You should also give copies to your agent, your healthcare providers, and any family members or loved ones who may be involved in your healthcare decisions. It is important to keep a copy of the AMD in a safe and easily accessible place.

Storing an Advanced Medical Directive

The AMD should be stored in a safe and easily accessible place. You may want to keep a copy with your other important documents, such as your will or insurance policies. You should also give a copy to your agent and any healthcare providers who may be involved in your care. You may also want to consider storing a copy of the AMD online, such as on a cloud-based platform, in case the physical copy is lost or damaged.

Updating an Advanced Medical Directive

It is important to update your AMD regularly, especially if your healthcare preferences or circumstances change. You should review your AMD every few years or after any major life event, such as a divorce, marriage, or the birth of a child. You should also review it if you move to a new state or if there are changes in the laws related to healthcare directives.

Why You Need a Will at Every Age: An Overview

A will is a legal document that specifies how your assets and property will be distributed after your death. It’s a crucial tool that everyone should have, regardless of their age. Many people think that wills are only necessary for the elderly or those with significant assets, but that’s not the case. In this blog post, we’ll explain why you need a will at every age and the benefits of having one.

Why Young Adults Need a Will

Young adults often think that they don’t need a will because they don’t have many assets, but that’s not necessarily true. If you have any property, savings, or investments, you need a will to ensure that your wishes are carried out in the event of your death. A will also allows you to name an executor who will be responsible for distributing your assets and handling your affairs after your death.

In addition, a will can provide guidance for your loved ones in the event of your untimely death. For example, if you have children, you can use your will to name a guardian for them. Without a will, the court will be left to decide who should take care of your children, which can lead to conflicts and uncertainty.

Why Middle-Aged Adults Need a Will

As you enter your middle age, you’re likely to have accumulated more assets and have more complex financial and family situations. For example, you may own a home, have multiple bank accounts, and have investments and retirement accounts. You may also have children who are approaching adulthood or elderly parents who rely on your support.

Having a will can help you ensure that your assets are distributed according to your wishes and that your loved ones are provided for after your death. It can also help you avoid conflicts and legal challenges that can arise when there’s no clear plan for the distribution of assets. 

Why Seniors Need a Will

Seniors often have more assets and are more likely to have health issues that can lead to unexpected death. As you age, it becomes increasingly important to have a will in place to ensure that your wishes are carried out and that your loved ones are provided for after your death.

A will can also be used to name a power of attorney, who will make decisions on your behalf if you become unable to do so. This can be especially important if you have health issues that can affect your decision-making ability.

The Benefits of Having a Will

Regardless of your age, there are many benefits to having a will. Here are a few:

Ensuring that your wishes are carried out – A will allows you to specify how your assets should be distributed after your death. This ensures that your wishes are carried out and that your loved ones are provided for.

Avoiding conflicts – When there’s no clear plan for the distribution of assets, conflicts can arise between family members. A will can help you avoid these conflicts by clearly stating your wishes.

Saving time and money – Without a will, your loved ones may have to go through a lengthy and expensive probate process to distribute your assets. A will can help streamline this process and save your loved ones time and money.

Protecting your children – If you have children, a will can be used to name a guardian for them in the event of your death. This ensures that your children are cared for by someone you trust.

Providing for charities – If you’re passionate about a particular charity, a will can be used to leave a bequest to that organization.

Conclusion

In conclusion, a will is a crucial tool that everyone should have, regardless of their age. It allows you to ensure that your wishes are carried out, avoid conflicts, and provide for your loved ones after your death. Whether you’re a young adult, middle aged or are more established in life a will is an essential part of your wealth management toolkit. If you’d like guidance on building a wealth plan register for a free Pocket Plan today.

What is Dollar Cost Averaging?

Dollar cost averaging is a strategy of buying into an investment over time by purchasing small amounts periodically instead of making one large purchase.

This strategy allows investors to get the average price of the asset over time and reduces the risk of making a single large investment at an unfavorable price.

By spreading out the investment amount over multiple periods, such as investing $1 per day for 100 days with a $100 investment, investors can benefit from the fluctuation of prices. Dollar cost averaging is particularly suitable for long-term assets.

Many investment custodians and programs offer the option to dollar cost average. Dollar cost averaging can help mitigate the fear of market timing and the risk of missing out on investment opportunities.

Purchasing assets at lower prices over time provides the benefit of managing the basis and allows investors to take advantage of any price available. Dollar cost averaging can be used in various investment accounts, such as a 401(k), IRA, or accounts set up for children. It is a useful tool to invest without the need to time the market.

How Does Dollar Cost Averaging Work?

Reduce the impact of short-term market fluctuations

how does dollar cost averaging work

If you’re new to investing,  think about dollar cost averaging as a way to reduce the risk of investing a large amount of money all at once. Instead of trying to time the market and make a single purchase of an investment, you can invest the same amount of money over a longer period in order to buy the same amount and invest the same amount over time. 

This approach allows you to take advantage of the average prices over time and reduce the impact of short-term market changes. It also provides a sense of predictability and removes the pressure of trying to make perfect timing decisions. Dollar cost averaging can be particularly beneficial for long-term investments and can be used in various types of investment accounts, such as a 401(k) or IRA.

MSFT - Daily - 2023-11-30

The chart above shows the price of Microsoft in 2023 on a Daily basis. (source: Finviz). The chart below shows the price of Microsoft on a Monthly basis. Buying periodically using Dollar Cost Averaging (DCA) could allow you to avoid large spikes and drops in the price by averaging the purchase price over a longer period of time. 

MSFT - Monthly - 2023-11-30

What are the benefits of Dollar Cost Averaging?

1. Reduce the impact of market volatility:
By spreading out your investments over time, you are less affected by short-term market fluctuations. This can help mitigate the risk of buying at a high price during a market peak.

2. Average out the purchase price:
Dollar cost averaging allows you to buy shares or assets at different prices over time. This means that you will get an average purchase price, which can be beneficial if the price fluctuates significantly.

3. Disciplined investing approach:
Dollar cost averaging encourages regular and consistent investing. It helps you avoid making impulsive investment decisions based on short-term market movements.

4. Reducing the risk of mistiming the market: Trying to time the market by buying at the lowest point and selling at the highest point is extremely difficult. Dollar cost averaging eliminates the need to predict market movements, as you are consistently investing regardless of short-term price fluctuations.

5. Emotional control: Dollar cost averaging helps remove the emotional aspect of investing. Instead of making decisions based on fear or greed, you stick to a predetermined investment plan, which can lead to more rational decision-making.

6. Long-term wealth accumulation:
By consistently investing over time, you have the potential to accumulate wealth in the long run. Dollar cost averaging allows you to take advantage of the power of compounding returns.

It’s important to note that dollar cost averaging does not guarantee profits or protect against losses. It is simply a strategy that can help mitigate risks and provide a disciplined approach to investing.

  • The retirement score is a measure of the odds that your money will last until age eighty six.

  • If you have a high retirement score, it means you have good odds of not running out of money before age eighty six.

  • If you have a low retirement score, it means you are likely to run out of money before the intended time.

  • The retirement score is made up of personal information including age, retirement age, how much money is needed in retirement, and how much is currently invested.

  • It also looks at the inflation rate and how success is defined.

  • Expected portfolio value is calculated assuming returns continue at a set amount

    each year

  • Simulated portfolio uses real market returns from the S&P 500 to estimate future

    value

  • We can add in a random shock to see what the returns would be during a specific

    time period. For example, we could look at returns from 1929 to 1959 or 1961 to 1991.

  • By adding in a random variable, we can mimic real world results and get a more accurate idea of the odds of success.

  • To get a realistic retirement score, input your goals and run the calculation. It will take longer for more trials, but this will give you your best case, worst case, and median results.

  • Stick to median results most of the time for a more accurate view of what will happen with money majority of the time.

  • Retirement score can be improved by changing inputs like income and percentage needed.

  • You can create a new retirement scenario by clicking the “add scenario” button and customizing the inputs.

  • If you want to see what would happen if you increased your retirement age, go to the “scenarios” tab, edit your current scenario, and change the retirement age input. Then, go back to the “plan” tab and observe the changes in your retirement score.

  • The retirement score would change significantly if the inflation rate was dropped from 5.4% to the historic average of 2.4%.

  • Savings rate significantly increases retirement score.

  • Understanding how changes to finances will influence future wellbeing is important.

Proof of work vs. Proof of stake

In the world of cryptocurrency, two methods of validating transactions and maintaining the integrity of the network stand out: proof of work and proof of stake. These two systems are the backbone of some of the most popular cryptocurrencies in the world, including Bitcoin and Ethereum. In this blog post, we’ll explore the differences between proof of work and proof of stake, and how they impact the world of cryptocurrency.

Proof of work (PoW) is the original consensus algorithm used in the creation of Bitcoin. In PoW, miners compete to solve a complex mathematical problem, known as the hash function. The first miner to solve the problem is rewarded with newly minted cryptocurrency and a transaction fee. This process is known as mining, and it requires significant computational power, as the hash function gets more complex with time, making it more difficult to mine new blocks.

One of the significant advantages of PoW is its security. Because miners have to invest significant amounts of computational power to mine new blocks, it becomes prohibitively expensive to launch a 51% attack (where a single miner controls more than 51% of the network’s computational power), making it more secure. However, PoW has some significant drawbacks, the most prominent of which is its high energy consumption. As the computational power required to mine new blocks increases, so does the energy required to power the mining rigs.

Proof of stake (PoS) was developed as an alternative to PoW in response to concerns about energy consumption and centralization. In PoS, validators, also known as forgers or minters, validate transactions and create new blocks. Validators are chosen based on the amount of cryptocurrency they hold, meaning that the more cryptocurrency they own, the more likely they are to be chosen to validate a transaction. Validators are also required to hold their cryptocurrency as collateral, which is forfeited if they attempt to validate fraudulent transactions.

One of the most significant advantages of PoS is its energy efficiency. Unlike PoW, where miners require significant amounts of computational power, PoS validators require minimal computational power, making it less energy-intensive. Additionally, PoS encourages decentralization by distributing decision-making power more widely. Because validators are chosen based on the amount of cryptocurrency they hold, large holders of cryptocurrency are encouraged to participate in the validation process, making the network more decentralized.

However, PoS also has some disadvantages, including the potential for centralization. Because validators are chosen based on the amount of cryptocurrency they hold, it is possible for a small group of validators to hold a disproportionate amount of power over the network, making it more centralized. Additionally, the security of PoS is still an open question, as it is relatively new compared to PoW.

Another difference between PoW and PoS is the way they handle forks. In PoW, if two miners solve the hash function at the same time, it results in a fork in the blockchain. However, in PoS, forks are resolved through a voting process, with validators voting on which chain to follow. This makes forks less common in PoS, as they are resolved more quickly and efficiently.

In conclusion, PoW and PoS are two different methods of maintaining the integrity of a cryptocurrency network. While PoW is the original method and is more secure, it is also energy-intensive and can be prone to centralization. PoS, on the other hand, is more energy-efficient and encourages decentralization, but its security is still an open question. Both methods have their advantages and disadvantages, and the choice between them ultimately depends on the specific needs and goals of the cryptocurrency project in question.

Understanding the Difference Between Tax Deduction and Tax Credit

As the tax season approaches, taxpayers start looking for ways to reduce their tax liability. Taxpayers often confuse the terms “tax deduction” and “tax credit”. Although both terms sound similar, they have a significant difference. Understanding the difference between the two can help taxpayers plan their taxes better and avoid mistakes. In this article, we’ll discuss the difference between tax deductions and tax credits, and how they can affect your tax liability.

Tax Deductions: What are they?

Tax deductions are a way to reduce your taxable income. When you claim a tax deduction, you’re reducing the amount of your income that is subject to tax. Tax deductions reduce your tax liability by reducing your taxable income. The more deductions you have, the lower your tax bill will be.

Tax deductions can be either standard or itemized. The standard deduction is a fixed amount that the IRS allows you to deduct from your taxable income. The amount of the standard deduction varies depending on your filing status, age, and whether or not you’re blind. In 2022, the standard deduction for single filers is $12,950, and for married couples filing jointly, it’s $27,300.

Itemized deductions, on the other hand, are specific expenses that you can deduct from your taxable income. Examples of itemized deductions include medical expenses, mortgage interest, charitable contributions, and state and local taxes. You can only claim itemized deductions if the total amount of your deductions is greater than the standard deduction.

In addition to standard and itemized tax deductions, there are also pre-tax and post-tax deductions that can affect your taxable income. Pre-tax deductions are taken out of your income before taxes are calculated, while post-tax deductions are taken out after taxes are calculated. Let’s take a closer look at each type of deduction.

Pre-tax Deductions

Pre-tax deductions are amounts that are taken out of your income before taxes are calculated. These deductions are subtracted from your gross income, which reduces your taxable income. By reducing your taxable income, you reduce the amount of tax you owe. Some examples of pre-tax deductions include:

Retirement contributions, such as contributions to a 401(k) or traditional IRA

Health insurance premiums

Flexible Spending Accounts (FSAs) for medical or dependent care expenses

Transportation expenses, such as parking or transit passes

Pre-tax deductions are beneficial because they reduce your taxable income, which can result in a lower tax bill. For example, if you earn $50,000 per year and contribute $5,000 to a 401(k), your taxable income will be reduced to $45,000. This means you’ll owe less in taxes.

Post-tax Deductions

Post-tax deductions, also known as after-tax deductions, are amounts that are taken out of your income after taxes are calculated. Unlike pre-tax deductions, post-tax deductions do not reduce your taxable income. Instead, they reduce your take-home pay. Some examples of post-tax deductions include:

Charitable contributions

Union dues

Health Savings Account (HSA) contributions

Roth IRA contributions

Post-tax deductions do not reduce your taxable income, but they can still be beneficial. For example, if you make a $1,000 charitable contribution, you won’t get a deduction on your taxes, but you will have the satisfaction of helping a good cause.

Choosing Between Pre-tax and Post-tax Deductions

When choosing between pre-tax and post-tax deductions, it’s important to consider your overall tax situation. Pre-tax deductions reduce your taxable income, which can result in a lower tax bill. Post-tax deductions do not reduce your taxable income, but they can still provide benefits.

For retirement contributions, it’s generally beneficial to contribute to a pre-tax retirement account, such as a 401(k) or traditional IRA. This is because the contributions reduce your taxable income, which can result in a lower tax bill. However, if you’re in a low tax bracket, it may be beneficial to contribute to a post-tax retirement account, such as a Roth IRA.

For other deductions, such as charitable contributions or union dues, it’s generally better to take them as post-tax deductions. This is because these deductions do not reduce your taxable income, so taking them as pre-tax deductions wouldn’t provide any tax benefit.

Tax Credits: What are they?

Tax credits are a way to reduce your tax liability directly. Unlike tax deductions, tax credits reduce the amount of tax you owe, dollar for dollar. So, if you owe $5,000 in taxes, and you’re eligible for a $1,000 tax credit, your tax liability will be reduced to $4,000. Tax credits are more valuable than tax deductions because they reduce your tax bill directly, instead of reducing your taxable income.

Tax credits come in two types: refundable and non-refundable. Refundable tax credits are those that can reduce your tax liability below zero, and you can receive a refund for the excess amount. Non-refundable tax credits can only reduce your tax liability to zero, and you can’t receive a refund for any excess amount.

Examples of tax credits include the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the American Opportunity Tax Credit (AOTC). These credits are designed to help low- and middle-income families reduce their tax liability and provide financial assistance for education expenses.

How to Choose Between Tax Deductions and Tax Credits

Taxpayers often face the dilemma of whether to take the standard deduction or itemize their deductions. Choosing between tax deductions and tax credits depends on your tax situation. If you have many expenses that qualify for itemized deductions, it may be more beneficial to itemize your deductions. However, if your itemized deductions are less than the standard deduction, it may be more beneficial to take the standard deduction.

Tax credits, on the other hand, are a direct reduction of your tax liability. If you’re eligible for a tax credit, it’s always beneficial to take it. Some tax credits, such as the Child Tax Credit and the Earned Income Tax Credit, are refundable, which means you can receive a refund for the excess amount.

In some cases, you may be eligible for both tax deductions and tax credits. For example, if you contribute to a retirement account, you may be eligible for a tax deduction for your contributions and a tax credit for low- and middle-income taxpayers. It’s important to understand the tax laws and regulations and consult a tax professional if you’re unsure which tax deduction or tax credit to take.

Conclusion

In conclusion, understanding the difference between tax deductions and tax credits is crucial for taxpayers to reduce their tax liability. Tax deductions reduce your taxable income, while tax credits reduce your tax liability directly. Taxpayers should choose between tax deductions and tax credits based on their tax situation. If you’re unsure which tax deduction or tax credit to take, it’s always best to consult a tax professional.

By taking advantage of tax deductions and tax credits, taxpayers can save money on their taxes and keep more of their hard-earned income. The IRS provides a wide range of tax deductions and tax credits to help taxpayers reduce their tax liability. By understanding these tax laws and regulations, taxpayers can make informed decisions and plan their taxes accordingly.

Does a weak dollar help stock multiple expansion?

The relationship between the dollar and the stock market has long been a topic of debate. Many investors and analysts believe that a weak dollar can help stocks by boosting earnings, while others argue that a strong dollar is more beneficial. In this blog post, we will examine whether a weak dollar helps stock multiple expansion.

Before we delve into the topic, let’s first define what stock multiple expansion means. Stock multiple expansion refers to an increase in a company’s stock price multiple, which is the ratio of the company’s stock price to its earnings per share (EPS). This increase can occur due to various reasons, such as an increase in earnings, revenue growth, or investor sentiment. In general, a higher stock multiple indicates that investors are willing to pay more for a company’s earnings.

How the dollar affects Stock Multiple Expansion

Now, let’s examine the relationship between the dollar and stock multiple expansion. When the dollar weakens, it becomes cheaper for foreign investors to invest in US stocks. This can increase demand for US stocks and boost their prices, resulting in stock multiple expansion. Additionally, a weaker dollar can boost the earnings of US companies that have significant overseas operations. When these companies convert their foreign earnings into dollars, they get more dollars for their earnings, which can boost their EPS and lead to higher stock prices.

On the other hand, a strong dollar can have the opposite effect on stocks. When the dollar strengthens, it becomes more expensive for foreign investors to invest in US stocks. This can decrease demand for US stocks and lead to lower stock prices, resulting in a decrease in stock multiple. Additionally, a strong dollar can hurt the earnings of US companies that have significant overseas operations. When these companies convert their foreign earnings into dollars, they get fewer dollars for their earnings, which can lower their EPS and lead to lower stock prices.


Drawbacks of a weak dollar

Despite the potential benefits of a weak dollar for stock multiple expansion, it is important to note that there are also downsides to a weak dollar. A weak dollar can lead to higher inflation, as imported goods become more expensive. This can hurt consumer purchasing power and reduce demand for goods and services, which can ultimately hurt corporate earnings and stock prices. Additionally, a weak dollar can lead to higher interest rates, as investors demand higher yields to compensate for the depreciation of the dollar. Higher interest rates can hurt corporate earnings by increasing borrowing costs and reducing consumer spending.

Furthermore, a weak dollar can have negative implications for the broader economy. A weak dollar can lead to a trade deficit, as imports become more expensive and exports become cheaper. This can hurt US manufacturers and lead to job losses. Additionally, a weak dollar can hurt the purchasing power of US consumers abroad, as they get fewer foreign currencies for their dollars.

Advantages of a weak dollar

One of the key advantages of a weak dollar for stock multiple expansion is that it can make US stocks more attractive to foreign investors. When the dollar weakens, foreign investors can buy US stocks at a lower cost. This can increase demand for US stocks and drive up their prices, leading to stock multiple expansion. Additionally, a weak dollar can boost the earnings of US companies with significant overseas operations. When these companies convert their foreign earnings into dollars, they get more dollars for their earnings. This can boost their EPS and lead to higher stock prices.

Another potential benefit of a weak dollar for stock multiple expansion is that it can boost exports. When the dollar weakens, US exports become cheaper for foreign buyers. This can increase demand for US exports and boost the earnings of US companies that rely on exports. This can lead to higher stock prices and stock multiple expansion.

However, it is important to consider the downsides of a weak dollar as well. A weak dollar can lead to higher inflation, which can hurt corporate earnings and reduce demand for goods and services. Additionally, a weak dollar can lead to higher interest rates, which can hurt corporate earnings.

In conclusion, the relationship between the dollar and stock multiple expansion is complex and multifaceted. While a weak dollar can potentially boost stock multiple expansion by increasing demand for US stocks and boosting the earnings of US companies with significant overseas operations, it is important to consider the downsides of a weak dollar, such as higher inflation and higher interest rates. Ultimately, the impact of the dollar on the stock market depends on a variety of factors, including the state of the global economy, interest rates, and investor sentiment. As always, it is important for investors to carefully evaluate market conditions and make informed investment decisions based on their individual goals and risk tolerance.

Rebalancing your 401(k) asset allocation is an essential aspect of successful retirement planning. It helps to ensure that your investment portfolio is aligned with your long-term goals and risk tolerance. If you haven’t reviewed your asset allocation in a while, or you’re unsure of where to start, don’t worry. This article will guide you through the process of rebalancing your 401(k) asset allocation.
Understanding Asset Allocation
Asset allocation refers to the way in which you divide your investment portfolio among different asset classes, such as stocks, bonds, and cash. Each asset class carries its level of risk and potential returns. For example, stocks are typically more volatile than bonds, but they also offer the potential for higher returns over the long-term.
The goal of asset allocation is to create a diversified portfolio that balances risk and potential return. By diversifying your investments, you can reduce the impact of any one investment’s poor performance on your overall portfolio.

The Importance of Rebalancing

Asset allocation is not a one-time decision; it requires regular monitoring and adjustments. As market values fluctuate over time, your portfolio’s allocation will shift, potentially exposing you to higher levels of risk than you initially intended. Rebalancing is the process of adjusting your asset allocation to bring it back to its original allocation targets.

Rebalancing is crucial because it helps ensure that your portfolio remains aligned with your risk tolerance and financial goals. It also forces you to sell high and buy low, which is the opposite of what many investors do.

Rebalancing Frequency

The frequency at which you rebalance your portfolio will depend on your investment goals and risk tolerance. Some investors may rebalance annually, while others may choose to do so every few years. It’s essential to have a plan and stick to it, regardless of market conditions.

If you’re unsure of how often to rebalance, consider using a rule of thumb. For example, the 5/25 rule suggests rebalancing your portfolio if any asset class deviates more than 5% from its target allocation or if your overall portfolio’s allocation deviates more than 25% from your target allocation.

How to Rebalance Your 401(k) Asset Allocation

  1. Review Your Current Asset Allocation

The first step in rebalancing your 401(k) asset allocation is to review your current allocation. Most 401(k) providers offer tools that allow you to view your allocation by asset class. Reviewing this information can help you identify any areas of your portfolio that may need adjustment.

  1. Determine Your Target Allocation

Once you’ve reviewed your current allocation, you’ll need to determine your target allocation. Your target allocation should be based on your investment goals, risk tolerance, and time horizon. For example, if you have a long-term investment horizon and are comfortable with risk, you may choose to have a higher allocation to stocks than bonds.

  1. Identify the Asset Classes That Need Adjustment

Compare your current allocation to your target allocation and identify any asset classes that need adjustment. For example, if your target allocation is 60% stocks and 40% bonds, but your current allocation is 70% stocks and 30% bonds, you may need to sell some stocks and buy bonds to bring your allocation back in line with your target.

  1. Determine Your Rebalancing Strategy

Once you’ve identified the asset classes that need adjustment, you’ll need to determine your rebalancing strategy. You can either sell some of the over-allocated asset class and buy the under-allocated asset class or direct new contributions to the under-allocated asset class until your allocation is back in line with your target.

  1. Implement Your Rebalancing Strategy

After you’ve determined your rebalancing strategy, it’s time to implement it. If you’re rebalancing by selling and buying, you’ll need to place trades to execute the transactions. If you’re directing new contributions, you’ll need to adjust your contribution allocations. Be sure to double-check your work and confirm that your allocation is now in line with your target.

  1. Monitor Your Portfolio Regularly

After rebalancing your portfolio, it’s important to continue monitoring it regularly. Market conditions can quickly shift your allocation, and you may need to rebalance again sooner than you expect. Set up a reminder to review your allocation periodically, and be prepared to make adjustments as needed.

Conclusion

Rebalancing your 401(k) asset allocation is an important part of retirement planning. It helps ensure that your investment portfolio remains aligned with your goals and risk tolerance. The process of rebalancing may seem daunting at first, but it’s relatively straightforward once you understand the steps involved. Review your current allocation, determine your target allocation, identify the asset classes that need adjustment, determine your rebalancing strategy, implement your strategy, and monitor your portfolio regularly. By following these steps, you can maintain a diversified and balanced portfolio that will help you achieve your long-term financial goals.

Maximize Your Financial Decisions with Pocket Plan

• Pocket Plan simplifies financial management and decision-making by
organizing all your financial data in one place.
• You can log in securely with your Google or Apple ID to gain access to
features such as two-factor authentication.
• The dashboard is your starting point to track your financial well-being,
model future outcomes, and test different investment scenarios.
• Add your financial accounts, including 401k, IRA, crypto wallet, checking,
and banking accounts, to Pocket Plan via Plaid.
• You can also add offline accounts that you don’t want to have regular
updates for.
• Pocket Plan supports Ethereum-based securities and will soon add Bitcoin
to its list of supported securities.
• You can find professionals to help you with opening new accounts or
making adjustments to your investments in the Advisors section.
• You can submit a help ticket if you need assistance with any part of the
app.

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