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Know Your 401(k) Options When Leaving Your Job


October 8, 2018

Whether changing jobs or retiring, many investors struggle with the decision about what to do with their 401(k) assets when parting ways with their employer. While everyone’s situation is unique, here’s a quick summary of your options and what to consider. With decades experience helping investors make sound financial decisions, the Foxstone team is happy to lead you through the decision-making process to select an option that makes sense for you.

Option #1: Leave Your Assets in Your Prior Employer’s 401(k) Program

While this is the easiest option since you don’t need to move anything and your assets will remain tax-deferred, many companies don’t allow departing employees to keep their assets in the plan so be sure to check to see if this is a valid option. In addition, you’ll still be restricted to the same limited set of investments options that your current 401(k) offers and likely won’t be able to make additional contributions as a former employee. You’ll also be tied financially to a company you’ve left.

Option #2: Roll Your Assets into Your New Employer’s 401(k) Plan

While this option is only available to job changers (not retirees), it’s one to consider if your new employer allows it. The advantages of this option are the ability to keep your tax-deferred retirement assets in one place and make additional tax-deferred contributions. The disadvantage of a limited set of investment options is similar to the prior option.

Option #3: Roll Your Assets into a Traditional IRA

This option works well for many investors and is one the Foxstone team suggests for many clients. You get to keep your assets tax-deferred and you often get access to a much more robust set of investment options. Many investors prefer the added flexibility and control over their retirement savings that this option provides compared to a traditional 401(k) plan.

Option #4: Take a 401(k) Distribution in Cash

While this option may seem exciting at first, there are many tax implications to consider. The money you take out of your 401(k) plan will be taxable, subject to a 20% mandatory federal withholding rate and also potentially subject to early withdrawal penalties.

 

We suggest consulting with an experienced financial advisor like Foxstone Financial to discuss your options in more detail and for help with the paperwork needed to implement your desired choice.

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About Foxstone Financial Foxstone Financial is a Denver-based investment advisor that uses the latest artificial intelligence investment technology, decades of market experience and a network of specialized partners to serve clients that expect better than average.


 
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Using Technology to Help Clients Understand Their Risk Tolerance


September 28, 2018

A few years ago, the Foxstone Team started using an innovative new investment technology that helps clients understand their “true” tolerance for investment risk. It’s called Riskalyze and it’s built on decades of behavioral economic work and an academic framework that won the Nobel Prize for Economics in 2002.

Finding Your Risk Number
After inputting key attributes and data about the client, their portfolio and their financial goals, the Riskalyze tool calculates a unique Risk Number (1-99) based on the investor’s unique circumstances. What makes Riskalyze so special is that once the client’s Risk Number is determined, the tool highlights what it means in terms of potential performance gains in strong market conditions and potential losses in down market conditions. It’s these hypothetical performance ranges that gets our clients talking more thoroughly about the risk levels they’d be comfortable with and gets all of us aligned about the proper risk profile for their portfolio based on their unique situation as an investor.

Aligning Your Portfolio to Your Unique Tolerance for Risk
Once our client has a more thorough understanding of risk, risk tolerance and what it means regarding investment performance ranges, the Foxstone Team uses their Risk Number as an important input in the development of an investment strategy and portfolio. In addition, the client’s Risk Number is used in the monitoring and management of the portfolio over time.

While many advisors still rely on generic risk tolerance inputs (age, investment experience and portfolio size) to categorize clients into generic risk tolerance categories like conservative, moderately-aggressive and aggressive, the Foxstone team thinks there is a better way and we have brought in a powerful tool that uses cutting-edge investment technology to do it. Our current clients are certainly glad we’re using Riskalyze and they can’t believe how much better they understand investment risk and their tolerance for it.


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About Foxstone Financial
Foxstone Financial is a Denver-based investment advisor that uses the latest artificial intelligence investment technology, decades of market experience and a network of specialized partners to serve clients that expect better than average.
 
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Avoiding Ponzi Schemes – 4 Easy Ways to Protect Your Investments


September 21, 2018

A several years ago, Foxstone Financial’s Chris Ravsten was interviewed by the Denver Business Journal about ways investors can protect themselves and their investments from Ponzi schemes. With a few high-profile schemes being uncovered this summer, we thought the time was right to republish Chris’ suggestions for investors.

Here are 4 easy ways to protect yourself & your investments from Ponzi schemes.

1) Never Make Your Checks Payable to the Individual Advisor or their Firm
Instead make your checks payable to a regulated third-party organization (bank, clearing house, brokerage firm, mutual fund, insurance company, etc.) that will be the custodian of your investment account.

2) Statements Should Always Come From a Third Party
If your advisor is doing things properly, your investment statements should always come from a regulated third-party organization which has custody of your money. Statements should never come directly from your investment advisor or be on the advisor’ letterhead. 

3) Have Real-Time Online Access to Your Account
Another important protection is to make sure you have access and log-in credentials to always see your investment account online at your advisor's third-party custodian. That way you can always verify what your advisor is telling you is indeed accurate. 

4) Be Skeptical & Ask Hard Questions.
If an investment advisor's story or performance sounds too good to be true, it could be. Do your homework, ask lots of tough questions, check unbiased references and if you don't get reasonable answers, look elsewhere

The majority of advisors out there are honest, helpful people that keep their clients’ best interests in mind, and they should have no issues with the protective suggestions we have outlined.

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About Foxstone Financial
Foxstone Financial is a Denver-based investment advisor that uses the latest artificial intelligence investment technology, decades of market experience and a network of specialized partners to serve clients that expect better than average.
 
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Is Cheap or Free a Good Way to Tempt Investors?


September 16, 2018

On the heels of the announcement by Vanguard that they are expanding their lineup of commission-free ETFs, Fidelity announced the launch of two new index funds with an expense ratio of 0%. These are interesting moves that, in our opinion, signal that some of the biggest players in the investment industry no longer feel they need provide any type of investment strategy that attempts to outperform the market. All they have to do is mirror it and investors will be placated with a cheap management price.

You might ask, what’s wrong with this philosophy? “At least, I’m getting the performance of the best 500 stocks in America.” Yes, that may be true, but you are also getting 100% of the risk of the market as well. You’re not getting any leverage whatsoever against the downside of the market, which causes the most damage to a portfolio. This isn’t success…it is status quo. No wonder these large investment companies aren’t charging you for their “expertise.” Perhaps it is because it doesn’t require much expertise to match an index.

So when did investors give up the mindset that an investment firm should strive to beat the market in order to be worth the money we pay them? This is like accepting a tie whenever your favorite professional sports team plays a game. We wouldn’t be happy with that scenario, so why are we accepting this form of complacency regarding our investments? Yes, they may not be charging you anything to match the market, but you aren’t really getting anything out of the ordinary for your money either.

In order to be successful at the investment game, you have to create leverage against the market. This means striving to make more money than the market when it goes up, and lose less than the market when it falls.  However, the “buy and hold” or passive investors will argue that there is no accurate way to outperform the market consistently over time, so you might as well just tag along with the index, take your beatings when the market falls, and by the way, “we won’t charge you anything”. Many investors now buy into this delusionary mindset.

It is time to break the paradigm and start demanding more for your investments. Investors have literally thrown up their hands in defeat by getting beat in the market from bad advice from their financial advisors. Every investor who has been taken to task by the stock market in the last two recessions will tell you their own horror stories about trying to find someone who can consistently beat the market, but has never done so successfully when the market drops. Yes, there are a few timers who read their tea leaves correctly and avoided the perils of the market drop in 2008 by getting out of falling equity positions early. But for the most part, that was more luck than science. Now, investors say they “hope” to avoid another market drop by being in index funds. Isn’t it interesting to note that these same hopeful investors will likely suffer the same fate as before when the market falls and they will lose exactly what the market does.

So, what’s the answer? The answer is to find an investment partner that strives to do better than the market using the best that technology has to offer. This means making investments compete for your money by proving they can find productivity in the market and buy into those productive investments at the right time. Then, tell you how long you should be in these investments, and when you should get out of them. In addition if there isn’t anything productive to invest in, you’ll be put into a cash position until something productive can be purchased. This process of investment management has been successful in the past at outperforming the S&P 500 index by using artificial intelligence software and mathematical algorithms to determine optimal portfolios for both upward market cycles as well as recessionary ones. The computing power that is needed to drive these algorithms is immense, and yes, it does cost money for the investor. However, if historical returns have outperformed the standard index, wouldn’t it be worth it?

Instead of accepting the standard of mediocrity which is the S&P 500 index, why not take advantage of the best that algorithm-based investing can provide? Here at Foxstone Financial, we leverage this advanced technology, and we would encourage you to consider putting “The Future of Investing” to work for you.  Isn’t your future worth it?

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About Foxstone Financial
Foxstone Financial is a Denver-based investment advisor that uses the latest artificial intelligence investment technology, decades of market experience and a network of specialized partners to serve clients that expect better than average.

 
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