Faith Based Investment Solutions

Excerpt from: In God we trust, the dollar we worship, By Donald A. Galade

What Does the Bible Say About Money?

First, we all must agree that the Bible is the divinely inspired, ultimate, and infallible Word of God given to man, by the power of the Holy Spirit. We must also agree that Jesus Christ is Lord and Savior, and that He came to save the world to deliver us from sin. Only through Him can we gain access to God the Father.

No one can serve two masters; for either he will hate the one and love the other, or else he will be loyal to the one and despise the other. You cannot serve God and mammon. Matthew 6:24 (NKJV)

In this verse we see the word mammon is used to represent money. Mammon from the original language was a translation of a common Aramaic word. It was derived from the Hebrew word that meant to be established or to be certain; and thus originally meant to entrust. Before we go on, ask yourself an important question. What do you place your trust in?

Mammon was used to describe material wealth or greed, most often personified as a deity. The term is often used to refer to excessive materialism or greed as a negative influence. We see its personification in Luke 16:9, Luke 16:11, Luke 16:13, and Matthew 6:24. Webster’s dictionary defines mammon as: 1) the false God of riches and avarice. 2) Riches regarded as an object of worship and greedy pursuit; wealth as an evil, more or less personified.

Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes?  Matthew 6:25

This is a verse that Madison Avenue wouldn’t want the world to implement I am sure. Imagine what could happen if we took this verse to heart in America. We spend billions on food and clothing each year, yet millions of people in the world will go to sleep hungry and naked tonight. How much different can the world be if we all did our part?

I am not saying this because I am in need, for I have learned to be content whatever the circumstances. I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. Philippians 4:11-12

This scripture does not say, I want to be rich, or I am unhappy about being poor. It talks about contentment. Contentment is a heart issue. I believe this is the biggest reason many do not receive the scriptures about finances taught in the Bible. I will talk about God’s will and our responsibilities to unlock an overflow from the Lord later, but for now, realize that abundance is not provided to us so we can buy boats, cars and houses. It is to be used to further the Kingdom of God. Many preach on God’s goodness to provide wealth for their own use. I am preaching on God’s goodness to provide blessings to others. Paul speaks of contentment, and that is the key word here; so before we move on you need to have a clear understanding of God’s will and His intentions. We must be content in our seasons, no matter what they are; that is how God allows us to go from glory to glory. The Bible talks about money more than anything else, even more than Heaven, Hell and salvation. This issue has plagued man since the dawn of time, second only to lust of the flesh.

In the King James Version of the Bible, money is referenced in the form of gold, silver, and wealth some 870 times. Giving is mentioned 2,165 times. To put this in perspective, wisdom is mentioned 234 times, love is spoken of 310 times, joy 165 times, faith 247 times, and angels are mentioned 273 times. Only God, Jesus, and sin are mentioned more than money in both testaments of the Bible. There is a reason for this. The quest for wealth has toppled kingdoms, caused millions to perish, destroyed families, and instilled a life of crime in some for generations. However, there are those that have done wonderful things for the Kingdom of God with their resources.

Many have the attitude that money is evil. After all it is the root of all evil, right? Wrong! What the scriptures actually tell us is that the love of money is evil, not the money itself. Money by itself can do nothing right or wrong. For years this scripture has been incorrectly interpreted and more importantly, incorrectly taught. It is my opinion that no other scripture is more misunderstood and misquoted. We have all heard money is the root of all evil so much so that we actually start to believe that is how the scripture reads.

For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. —1 Timothy 6:10 (KJV)

For the love of money is a root of all kinds of evil. Some people, in their eagerness to get rich, have wandered away from the faith and caused themselves a lot of pain. — (ISV)

So you see it is how we think of the money, or our heart issues that dictate what the true evil is. Money, in and of itself, has no evil qualities what-so-ever. God created everything, yes, even money! Let’s look at this scripture along with the verses that accompany it prior to and following:

Yet true religion with contentment is great wealth. After all, we didn’t bring anything with us when we came into the world, and we certainly cannot carry anything with us when we die. So if we have enough food and clothing, let us be content. But people who long to be rich fall into temptation and are trapped by many foolish and harmful desires that plunge them into ruin and destruction. For the love of money is at the root of all kinds of evil. And some people, craving money, have wandered from the faith and pierced themselves with many sorrows. But you, Timothy, belong to God; so run from all these evil things, and follow what is right and good. Pursue a Godly life, along with faith, love, perseverance, and gentleness. Fight the good fight for what we believe. Hold tightly to the eternal life that God has given you, which you have confessed so well before many witnesses. 1 Timothy 6:6-12 (NLT)

Notice in verse nine the emphasis is on those who long to be rich. The verb “longing” in this sentence identifies the sin issue. You can be totally broke and long to be rich and fall away from God. This is idolatry.

When we long for riches we are œtrapped by our foolish and harmful desires. Watch the news sometime and count how many crimes have resulted from someone longing to be rich. The quest for wealth is the cause of ruin and destruction of lives, families, and separates us from God.

As the title states, everything we have is God’s to begin with. He’s more or less just letting us use it while we are here in our earthly suit. Our heavenly suit will not have a need for money once we reach our final reward. Since the streets of Heaven are paved with gold, and the gates are made from giant pearls, it is obvious riches have no numismatic value there.

So God was the creator of everything that was ever created including all of our financial resources, get it?

Then God said, Let Us make man in Our image, according to Our likeness; let them have dominion over the fish of the sea, over the birds of the air, and over the cattle, over all the earth and over every creeping thing that creeps on the earth. Genesis 1:26 (NKJV)

The word dominion comes from the Hebrew word radah, meaning to rule over, to reign over that which is owned by God. As illustrated in Strong’ Exhaustive Concordance. Radah, (raw-daw); a prim. Root; to tread down, i.e. subjugate; spec. to crumble off (come to, make to) have dominion, In other words, God has given us the ability and the command to rule and reign over his property and to become faithful stewards. Then God gave us dominion over the earth. We have the power to rule the earth as given by God, thus the resources we utilize in that dominion also come from him.

So God created man in His own image; in the image of God He created him; male and female He created them. And God blessed them, and God said unto them, Be fruitful, and multiply, and replenish the earth, and subdue it: and have dominion over the fish of the sea, and over the fowl of the air, and over every living thing that moveth upon the earth. –Genesis 1:27-28 (KJV)

To Tithe or Not to Tithe? That’s Not the Question.

God was very clear from the beginning how His church was to receive its provision. After God used Moses to deliver His people from bondage in Egypt, He gave each tribe specific roles. The Levites were the priests. Since they had no way of producing income, they were totally dependent upon the other tribes for one hundred percent of their food and support. In other words, they did not eat unless it was directly given to them by their brothers.

Churches today are no different. The church is totally dependent upon the body of Christ to meet its obligations. In the Old Testament the tithe was to be brought in to the Temple, and that is how God provided provisions for the Levite priests. A tithe is money given by you to the church from which you are being fed.

Tithing is generally the only source of income the church receives. If the congregation refuses to tithe, then the church will have a hard time keeping the lights on and the public address system fired up for worshipping the Lord, and yes, this is also how the administrators of the church get paid. This is the way God set up the pay scale for the Levites in the Old Testament. Read: 2 Corinthians 9:7, 2 Corinthians 13:1-4, and John 10:12-13.

God uses money while we are on earth to teach, groom, and even correct us. But most importantly He uses money to keep our obedience in check. Where your treasure is there is your heart, thus the most important thing we can give God is our obedience. After all, what else could we possibly give God?

Bring ye all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the LORD of hosts, if I will not open you the windows of Heaven, and pour you out a blessing, that there shall not be room enough to receive it. Malachi 3: 10 (KJV)

Bring the whole tithe into the storehouse, so that there may be food in My house, and test Me now in this, says the LORD of hosts, if I will not open for you the windows of Heaven and pour out for you a blessing until it overflows. (NAS)

Malachi, an Old Testament prophet, stated that the first ten percent of what God blesses us with must go back to God. Notice I said what God blesses us with, not what we earn. This is the first and most important facet we must get our head around. It all comes from God, thus it’s not ours to begin with. God is our source, not our jobs; our inheritance is with the Kingdom of God, not man. We are first introduced to the word tithe in Genesis after Abraham defeated Chedorlaomer (Kedorlaomer) King of Elam in his quest to get his nephew Lot free from captivity.

Then Melchizedek king of Salem brought out bread and wine; he was the priest of God Most High. And he blessed him and said: “Blessed be Abram of God Most High, Possessor of Heaven and earth; And blessed be God Most High, Who has delivered your enemies into your hand. And he [Abram] gave him a tithe of all. —Genesis 14:18-20 (NKJV)

Melchizedek was given a tithe, or one tenth of the spoils of war Abraham received in an act of grace, not obligation. This is very important to understand. So many get hung up on the percentage of giving that they lose sight of the big picture.

It is how your heart approaches the subject of the tithe that matters. Melchizedek in his office of high priest received a tithe from Abraham (Genesis 14:18-20). Thus tithing took place over a century before the Old Covenant was made at Sinai. Abraham was paying tithes for about one hundred and forty years before Levi, the father of the Levites and Abraham’s great-grandson, was born. Obviously since this was before the law was written, tithing is older than the law itself. So in my opinion we cannot say tithing is part of the law, at least in its inception.

To Save or Invest?

Savings is for a short term goal such as an emergency fund or a vacation. i.e. I am saving for my vacation in July, or I am saving to buy someone a special present. Investing is indicative of a long-term goal such as a child’s education fund or retirement. When you invest, your time horizon is generally different than when you save. Since your goals are different, you need to place the funds in different vehicles in order to achieve or reach your goal. I will often use the term vehicle to describe a particular investment or savings instrument. For example, if you and I were at the mall and we chose to leave and go to another store, we would get in our vehicles to arrive at our new destination. If I chose to drive a motorcycle and you drove a school bus, we would arrive at our destinations at different times. I would get there faster than you and I would probably take a lot more risk in doing so, thus we used different vehicles to achieve a similar goal. With that being said, you do not place your savings in the same type of vehicles that you would use for investing. Since the required end result is different, the end result should be different as well. An example of a savings vehicle would be a certificate of deposit or a money market account. It is liquid and has no market risk. It does have inflation risk, but that is acceptable since we realize there is no perfect vehicle for every goal. An example of an investment vehicle may be a mutual fund or common stock. The time horizon is longer than our savings goal, so we can afford to take some market risk in the hopes of receiving a much higher appreciated account value when we need the funds.

You save for a rainy day but you invest for the future. Please be sure to match the best vehicle to your goal. Many do not, and they become disappointed when they lose their savings in the market, since this bucket of money was ear-marked for a goal that could not sustain market risk, thus it was inappropriately assigned. Notice I said the assignment was inappropriate, not the investment. You cannot blame the vehicle for “losing money. That’s what it is capable of. If you utilize the wrong tool for the job, you cannot blame the tool for the outcome.

The biggest questions we get from those nearing retirement are Do I have enough money to live on? and What accounts should I spend first?. Unless you have defined all of your current savings and investment vehicles, and have had a detailed analysis performed on the portfolio, this question does not have a one-size fits all answer.

The average American spends more time planning next year’s vacation, or their daughter’s wedding than they do building a financial plan. If you decided to build a house, the first thing you would do is have someone draw up a floor plan. From that drawing an architect would draw blue prints. These prints will become the bible to the contractor in order to build your dream house. It tells the carpenters where everything goes; the precise measurements of the walls and ceilings, and the types of materials to be utilized in construction. You would never build a house without a blueprint, right? Then why do people invest without a carefully structured plan? The reason is they usually take the advice of many different stock brokers and insurance salespeople, and are not working with a true advisor, let alone someone who specializes in income planning estate conservation.

One must constantly monitor the progress of the plan in conjunction with the long-term goal, not the short-term result in any one year. If you lose sight of the big picture, you may find yourself changing products within your portfolio. Those changes may not be in alignment with your original goals. As the date of your retirement draws closer, you should assume less risk in your portfolio. At this point of your life, your focus should switch to conservation of what you have built and income generation for the rest of your life, rather than capital appreciation. Obviously, you still want your assets to grow, but be sure you are comfortable with the amount of risk you have assumed in retirement years.

Some have a concern about leaving a legacy to the next generation, others do not. Many clients are concerned about minimizing taxes both short-term and long-term; all are worried about cash flow, Will I run out of money before I die?

A colleague of mine had a client whose goal was to eliminate risk and generate a lifetime income. All of his assets were subject to risk. At 79 years young, 100 percent of his assets were subject to 100 percent risk. If his goal was truly to generate an income that he could not outlive and eliminate risk, he would have agreed to the recommendation to reallocate monies away from a risk position. He did not heed this advice, thus he did not implement the strategies prepared for him. In short, he ended up losing 50 percent of his nest egg in retirement years when he needed the income most. He now has less money to leave to his children as a legacy as well. He may never recoup the losses he witnessed in his lifetime, for time is not on his side. His un-teachable spirit caused him to lose the very thing he sought to protect. The market did not

let him down; he chose to listen to the wrong advice and utilized the wrong advisor. You may know this advisor, Mr. don’t worry; it’s only a paper loss.

Now I ask you, is it his goal or his mindset that needed to be adjusted? He clearly had a well-defined goal, but as I said he had an un-teachable spirit. His mind was made up, and he believed what he was always told. Stay the course, don’t worry it will come back. These adages may be true if you are in your 30s and can sustain excessive market risk, but when you are 65 staring at retirement in 45 days, you have made some bad personnel decisions with regard to whom you have hired to manage your money. If you had a true financial advisor who built a platform for your portfolio, you would not have excessive risk at this age; and the required vehicles needed to generate the lifetime income you need would have been in place. It’s all about the blueprint!

So now where do you actually place your funds? This is the million dollar question, (pun intended) that I am asked constantly, and the answer is simple. I can’t answer you. I could not give the answer until I had the opportunity to spend some time with the client. We must first identify your goals, income needs, risk tolerance, retirement lifestyle, tax bracket, legacy desires and a few other things. We must also know if you are going at this alone or with God, for there is a difference in how you will allocate your funds. I have both believers and non-believers as clients. These two groups will approach investing differently.

Sometimes the best advice we can offer a client will not always be received by our client, such as the gentleman I mentioned previously. I often disagree with colleagues of mine when it comes to asset allocation. Not all advisors are the same. Many choose products for a client that may be more in line with the advisors best interests rather than that of the client. One cannot say a particular product is either good or bad for every person. If they did they are a fool. Not everyone should drive a Buick!

Every vehicle on the market has an expressed designed purpose. If you do not use the vehicle for its designed purpose, you will witness unpleasant results. For example, bonds are generally used as an income-producing vehicle, but many purchase them expecting growth. Stock is generally used for long-term investing and growth, but many retire, or even die with huge portions of their assets at excessive risk, when what they really needed at that time was income. If the adage is to buy low and sell high, when do you sell? You plan that’s how.

Types of vehicles:

Before we talk about what vehicles exist in today’s economy, we must discuss some investment mind sets. It is also very important to know exactly where your income stream will come from when you retire. Some investment products have income producing features, others do not. Also, you may not be able to convert stocks or bonds to cash as soon as you need income. You may witness some unpleasant results if you liquidate a vehicle at the wrong time. You must also properly assess the tax liabilities that can occur from the sale, and whether the gains or losses are long-term or short-term.

I use the bucket system with my clients. It’s very simple. You have theoretical buckets in which you place funds in. Each bucket represents a time-line when you will need the funds for a goal. For example, many people have four buckets. Bucket number one is money you need now. Bucket number two is money you will need in the short-term or five years. Bucket number three represents funds you will need in ten years, and the last bucket represents the money you would need more than ten years from now. Obviously each bucket would hold different vehicles that would be condusive to the time lines associated with each goal. For example; bucket number one which was immediate income would be in cash and cash equivalents. Whereas bucket number four representing income needed ten years from now may be in a fixed annuity. By matching the goal of the funds with the vehicle, you can be more confident your goals can be achieved.

The most common type of retirement income stream we see today is that of the traditional pension plan. Although they are rare, some still exist. About 24 percent of Americans will get a traditional pension plan when they retire. These are funds that are set aside by the employer for whom you worked. In most instances all of the proceeds received were derived from your employer’s contributions.

The next bucket of income we will refer to is Social Security. While the normal age to start collecting full benefits has been pushed back to 67 years for many, you still can take early retirement and collect at age 62, at least for now. The Social Security Administration will send frequent reports on what your benefits will be at the various ages in which you decide to start receiving your checks. I encourage you to visit, the official Social Security website, and see what your benefits “will be before you start to map your trip around the world. Also many people think that they will gain a large increase in Social Security (SS) payments by delaying benefits for a few years. Although you will see a modest increase in benefits by waiting, don’t! I have seen many a 65 year old die waiting for a small increase in SS benefits. There are a multitude of advisors out there who disagree with this theory. That is just one of the reasons, I am different.

Some use complicated formulas to pull from their qualified plan now and leave SS benefits until age 70 or longer in the hopes of a larger pay out. A simple rule of thumb, if you need the money now, take it now. You should also have a qualified advisor perform an analysis of what your survivor benefit would be if your spouse dies before you. In other words, who has the larger SS benefit, and what will my income be when my spouse dies? Knowing that information ahead of time allows you to properly plan. You can earmark a certain bucket of money to grow specifically for the replacement of spousal income that will be needed when your spouse passes away. Now your income will be fixed, but it’s fixed at a number that out-paces inflation and covers your income needs!

Taxable accounts: You may have various taxable accounts such as non-qualified annuities, brokerage accounts, mutual funds, statement savings, certificate of deposit, money market, limited partnerships, or bonds, just to name a few. Dealing with the right advisor is important when ascertaining which vehicles should be utilized for income now, verses which should be re-allocated into other income producing accounts for the future. Will market exposure and inflation risk play a role in which accounts to spend? How about taxation, do you think it matters? You betcha! Sometimes there are advantages for spending the non-qualified funds first. Your existing tax bracket is an important factor to consider before liquidation starts.

Do you have charitable goals? If you choose to leave a portion of your estate to charity, it may make sense to preserve tax-deferred accounts by naming the charity as the beneficiary before you pass away. Accounts with low tax bases can be earmarked for lifetime charitable gifts to family members in low tax brackets.

If you are dealing with the right advisor, he or she would subscribe to a distribution planning/wealth management software solution. A software solution such as this allows planners the ability to efficiently provide accurate guidance to their clients about complex subject matter. The software has the capability to identify multiple distribution strategies. Such a solution can provide a detailed report which shows the full impact of your liquidation choices as well as cash flow, and the long-term impact on estate gifting choices before you implement the technique. It’s kind-of like being a Monday morning quarterback on Sunday morning. You got all the data before the game, just run the plays!

Previously I spoke a lot about ways to earn but as the title of my book says, it’s what you keep that matters. Even if you had a crystal ball, you would still run the risk of outliving your money if you suffer from a catastrophic illness before you die. Sure you can buy long-term care (LTC) insurance, but the fact is many people don’t. Long-term care (LTC) is the type of care referenced to those who have chronic health conditions or disabilities.

There are three types of care, skilled, intermediate, and custodial. This type of care is broken into two distinct categories; nursing home and home health care. The names are self-explanatory as to how the care is received by medical professionals. Many do purchase this coverage, but a few years later they forget why they purchased it and let it lapse, usually right before a long-term illness, which is why they purchased it in the first place. Others look at the cost of the insurance and assume they cannot afford it. In some cases, I actually agree. If you have a total net worth of $50,000 I do not see long-term care insurance as a real value. If on the other hand, your net worth is $750,000, it may be worth it to have this coverage. You would never cancel your homeowners or auto insurance because you didn’t have a fire yet. Well, odds are that many of us will have some sort of long-term care need before we die. Nursing homes are full of the people who said “I’m never going to a nursing home.” That phrase is from your lips to God’s ears, for only He knows. If you have saved a sizeable nest egg, you should insure it from the potential loss due to the threat of long-term illness.

No one expects to need this type of care but we also do not expect a fire in our home or an auto accident, which is why there are insurance plans to cover this type of loss. Statistically, 40 percent of us will need this type of care before we meet the Lord face to face. According to the Alzheimer’s association’s 2010 statistics, 14 percent of people age 71 and older have Alzheimer’s disease, a disorder that will require extensive long-term care. Younger people may require this type of care as well. A one-year stay in a nursing facility can cost as much as $75,000. So the question is, “Should I buy a long-term care policy?. Since Medicare and most Medi-Gap or Medicare Advantage plans do not provide coverage for anything other than 100 days of skilled care, you may want to consider it if you do not wish to pay for the care out of pocket.

The cost of the coverage is driven by your current age and health. The older you are at the time of purchase obviously the higher the premium will be. The benefit amount is the maximum the policy will pay over the life of the contract broken down by a daily dollar amount i.e. $150 a day up to a policy max of $50,000. The benefit amount usually has a time frame in which payments will be paid such as two years or three years. Most contracts have an elimination period or a time in which no benefits can be received after illness has commenced. This period is set at inception of the policy as it is directly correlated to the premium. The longer elimination period such as 120 days will have a lower premium. The types of facilities one can receive care in vary. You can have a nurse come to your home, thus the name home care. Care can be received in an assisted living facility or a type of facility that simulates your own home and only minimal assistance with activities of daily living (ADL’s) is required. Then there are facilities known as adult day care, which is exactly what the name implies, and lastly the nursing home.

Be careful of the company you choose for this coverage. Many smaller health insurance companies have gone out of business because they did not price the coverage to meet the true actuarial costs of this type of care. The cheapest is not always the best. Choose a company that has an A rating or better. Purchase a plan that has an inflation protection rider so that as the costs of the care increases, the coverage does as well. Be sure the plan covers both in-home and nursing home care and make sure it covers all three levels of care: skilled,

intermediate and custodial. Not all plans are equal and DO NOT shop for this coverage based on price; you will get what you pay for.

Another option to adequately protect your nest egg from a catastrophic illness and pending financial ruin is a newer type of contract that has a combination of life, LTC and a savings component built in. A client can deposit a lump sum of money into a single premium product such as a life insurance policy or an annuity contract with a participating insurance company. Depending upon the client’s age and health, the insurance company issues the contract with a pre-determined death benefit and a long term care benefit accordingly. No future premiums are added to the contract. In the event of a catastrophic illness, the contract pays for the long-term care need. If no illness arises, the funds can be withdrawn at a later date as a return of premium feature with a modest interest rate attached, or simply left in reserve with the insurance company to be utilized as a death benefit after the person passes away. Some may witness added tax benefits from this type of plan.

This contract acts like an annuity, has a death benefit provision, and has LTC benefits all in one policy. In the future if you wanted to pull out your cash, you can. In the event you died without a LTC illness, your beneficiaries get the proceeds, but if you got sick, the contract has a pre-determined LTC pay-out provision. For example, say you had $150,000 you wanted to protect. Your advisor can split funds into two separate single premium contracts, each funded with $75,000, one for each spouse. You can then elect benefit of two times the coverage level, so that each contract provides $150,000 of LTC coverage. In this case the fixed deferred annuity will credit each contract approximately 2.32 percent tax-deferred in 10 years. More importantly, you have turned your $150,000 in premium into $300,000 in funds to pay for long-term care expenses tax-free under the Pension Protection Act. In the event you do not need to utilize the LTC benefit the funds can pass the death benefit (which differs on all policies, this example is merely illustrative) to your heirs and in many instances avoid probate.

This is just one way to protect yourself from spending all your cash on care or insurance. You must implement such a plan when you are young and healthy, so do not procrastinate!

Many base their retirement solely on the amount of funds they have before they retire. I present to you that there are many factors to consider before you tell your boss you plan to quit work. You must consider the amount of debt you have at retirement age. Factors such as how you will pay for your health insurance, how

will inflation affect your funds, and do you have other sources of income besides your retirement account must be applied.

Retiring With Too Much Debt: If you have excessive debt, it will be more difficult to sustain your current life style. Feeding the beast takes food off the table.

Inadequate Insurance: At age 65 you qualify for Medicare, but Medicare alone does not pay for all of your health care needs. A supplement must be purchased in order to complete your health coverage. Many retire without exploring the costs associated with this coverage.

Ignoring Inflation and Market Risk: Inflation will slowly have a negative impact upon your nest egg. Retiring with too much market risk can also be detrimental to your expectation of a life income.

Relying Too Heavily on One Income Source: Generations before us worked a single job their entire life. Unfortunately, many find they must continue to work or return to the work force after they retire for a myriad of reasons. Conversely, many retire dependent upon one income source. For example: Let’s say you are dependent upon dividend income from your portfolio to meet your monthly needs. As you know, dividends are not guaranteed. If the dividend paying stock you are relying on suddenly stops paying its dividend, you could suddenly find yourself saying “paper or plastic, against your will.

Too much invested and not enough saved: As discussed previously, a savings account is different than an investment. If you need a new roof, a new car, or suddenly have a great deal on that dream vacation, you should have a pool of money to pull from that will not affect your income stream. Many keep all of their funds in the same bucket, and simply withdraw money as needed for all needs. This is likened to a sailor spending his pay while on shore-leave. You need to allocate funds into specific buckets. If you simply withdraw money from the same account for everything, you run a high risk of over-spending or outliving your money.

According to an ING survey, a majority of workers (87 percent) said they could be saving more in their employer-sponsored retirement plan, a savings vehicle they deem critically important to reaching a secure retirement, and the foundation of most of their retirement savings strategy. In fact, of the 1,000 workplace retirement plan participants surveyed, nearly two-thirds (64 percent) said their employer-sponsored retirement plan accounts for all or most of their

retirement portfolio. However, many participants are not stretching to maximize their contributions when they can. Moreover, they tend to rely on guesswork when setting contribution levels, and don’t fully understand the importance and long-term impact of small increases in contribution rates. *