401(k) accounts are meant for retirement, making it difficult to withdraw money. For example, the IRS states the following:
Generally, distributions of elective deferrals cannot be made until one of the following occurs:
And if you decide to challenge the rules, any money withdrawn will be taxed as ordinary income, in addition to a 10% penalty. In a perfect world, an individual would leave their 401(k) alone until retirement, but we all know that’s not realistic and individuals may need access to their funds, even if it is temporary. To assist, Congress created relief for employees via the 401(k) loan, which allows employees to take loans directly against their 401(k) or other qualified plan balances, subject to certain restrictions. So, let’s dive into the structure and some of the basics surrounding 401(k) loans.
Judging by the title and image above, you may have an idea as to what this blog is going to reference – that’s right – Mary Jane, Ganja, Grass, Reefer, Pot, Marijuana…Cannabis. Arguably, cannabis has been one of the fastest growing industries in the U.S. over the past three years. Its rapid emergence and star-like publicity has led to multiple questions and requests from our clients, prospects, and passerby, to discuss the legalization of cannabis for recreational and medical use. To clarify, this post will not be politically-driven, no debate on any moral standards will be discussed, nor will we provide our viewpoint on the potential tax revenue streams that could be created (we will discuss later how inflated sales taxes could affect the industry) – these talking points have been covered thoroughly elsewhere. With that said, LBW could care less about other individual’s perspectives and usages as it pertains to cannabis – it’s just not our business. What our business is, however, is to explore investment opportunities that may present value for our clients.
How LBW Sees It
Macroeconomic factors come in a variety of forms (such as monetary policy, inflation, certain sector performance, etc.) and every so often these factors release their “Kraken”0F potential. And like the “Kraken” you usually don’t realize the monster is right beneath you until it’s swallowing you whole.
Okay, we may have started aggressively by acting as if we are going to make an influential market call1F. Well we aren’t. However, we do want to discuss what we feel resembles a “Kraken” and shed some light on an influential change that is occurring in today’s market – passive investing.
Tim and Nathaniel were invited by Tera Johnson of Tera’s Whey to her podcast Edible-Alpha™*. We’d like to thank Tera for the opportunity to speak with her about our take on numerous subjects including business models, company valuations, and what we look for, in general, when we research companies in our pursuit of potential investment opportunities. For those of you who want a more thorough understanding of Nathaniel’s “Beautiful Mind” than what you get from his quarterly commentary, we highly recommend that you check out this podcast (with a shout out to Tera’s assistant Zac for putting the podcast together and editing out Nathaniel’s long pauses as Nathaniel gathered his thoughts). It clocks in at a little over an hour, but it’s well worth a listen.
We hope you enjoy it, and as always, please don’t hesitate to contact us if you have any questions or comments!
*Edible-Alpha™ is a part of the Food Finance Institute which is in turn a part of University of Wisconsin-Extension Division of Business and Entrepreneurship.
In the event the above doesn't work, please use this link to listen to the podcast.
Recently we came across an article, by the wonderful author Andrea Fuller of the Wall Street Journal (WSJ), titled “What’s My Investing Fee? A Frustrating Quest”. After reading it, we were compelled to write a response to Ms. Fuller. Our intention – to provide proof not all investing fees are so nontransparent.
Before you move forward we kindly ask our readers to do a bit of work. If you could please read the article below and then read our response, we would greatly appreciate it. We hope you enjoy it as much as we did putting it together.
As LBW looks inward at our industry, we find a wide push to provide people with convenience; similar to what one would find today in other industries such as retail, healthcare, and even education. At what point does the prioritization of convenience cause harm to other important characteristics? This continued movement towards ultimate convenience coupled with our ever-growing do-it-yourself mentality, can create a dangerous combination.
How LBW See’s It
The start of 2017 came with a bang – President Donald Trump was sworn in, Tom Brady and the New England Patriots won their fifth super bowl in the past 16 years, and the Federal Reserve Bank (“Fed”) raised the federal funds rate for the third time since December 16, 2008 (roughly nine years ago). President Trump and his new administration have led the headlines in regular and financial news, and Brady’s Super Bowl jersey being stolen was a hot topic. However, the increase in the federal funds rate and the Fed’s forward guidance on the economy deserve some notable attention as our clients, prospective clients, and passerby want to know how this will affect them.
Over the last few months we have been asked, and have heard rumblings, of utilizing Individual Retirement Accounts (IRAs) to invest in assets such as private businesses and/or real estate. At first glance, this seems like an attractive deal – invest in a private business with potentially high returns while doing so in a tax-efficient way – yes please. However, like anything else, once you start down the rabbit hole, it becomes more clear that using an IRA to invest in “alternative” assets has as many pro’s as there are con’s. So, let’s dive into the intricacies of utilizing the sought after self-directed IRA.
First, LBW would like to give a shout out to Erin Ogden, co-owner of OgdenGlazer, LLC for providing the article that we have based this blog post on. Second, our post is a response to the article linked below, please read it to gain more clarity on the subject (we apologize for the extra work!). Third, the article was published Jun 23, 2016. We are a little late on our opinion, however this article provides an excellent example of understanding the respective risk vs. reward.
Before I (Tim) get in to my thoughts on the article, I need to disclose a few items: 1) Growing up, I idealized the Chicago Bulls (being from Salt Lake City and watching the Bulls whoop the Jazz was bittersweet), and to see the Warriors break their regular season winning record was tough; 2) Because the Warriors broke the record, I could only hope that they would lose in the finals, so that the 1996 Bulls team could continue to be the best team in NBA history; 3) I will admit, I am a LeBron James fan and have been since he entered the NBA; 4) As a result of my admiration for James and the 1996 Bulls team, I am not a fan of Steph Curry nor the Warriors. With this full disclosure in mind, I will now give my thoughts on the article.
In the financial services industry we constantly hear different jargon and phrases, and one phrase often quoted as it relates to an individual’s finances is: “don’t put all your eggs in one basket”. The saying has been around for centuries, and can be traced back to printed text in the 1660’s. The phrase essentially states that concentrating all of your prospects or resources in one thing or place can be detrimental because the risk of losing everything increases drastically. Simply put, diversification of prospects or resources can help eliminate concentration risk. We recognize a lack of diversification in one’s investment holdings can cause the individual to take on undue risk. The issue we want to address is the misuse of the term “diversification”.