May 2024

More and more companies are using cash to buy back their stocks since the pandemic. Apple just announced the largest stock repurchase in U.S. history, authorizing the buyback of $110 billion of its own stock. So are stock buybacks good or bad for investors?

The answer depends on what intentions are behind it. A buyback can be good for investors if the management of the company believes it is a good use of excess cash and they buy back the shares at the fair market value or below. It may also drive the stock prices up.

In some cases, it may not be good for investors. For example, if a growth stock company uses the cash to buy back stocks at an over the fair market value instead of investing in R&D, it is not a good use of excess cash. It shows the company is running out of new innovative projects and it may hurt the stock prices later on.

Therefore, investors need to do due diligence to find out the intention of the management if they are acting in shareholders’ best interest.

Full story: MORNINGSTAR

Some new retirees may feel depressed when they realize that their actual retirement life is not what they had dreamt of. Therefore, it is important to have the right expectations when planning your retirement and balance your dreams with reality. We have observed that most new retirees underestimate expenses and the impact of inflation on their retirement life. Also, there are many myths about retirement planning. One of the biggest myths is that it is “Too late” and “I’m too old” to save and invest for retirement. Some pre-retirees in their early 60’s think that they have only a few years to invest for their retirement till age 65. This is not true. Even when you retire at age 65, you may live until your early 90’s and there are about 30 years to invest. And even when you begin to withdraw, you only take a few percent of your retirement savings out every year and leave the majority of the funds invested. Therefore, you do not stop investing once you start taking withdrawals. It is recommended to change the investment strategies along the way though, changing from more aggressive to more conservative with more income-producing strategies.

Another myth is that they think they will be ok to retire without having any formal retirement planning. We strongly recommend that pre-retirees have a written plan to project your cash flow situation at retirement with different “What-If” scenarios. Using conservative assumptions will be prudent to avoid any surprises down the road.

It is advisable to consult a Certified Financial Planner® to discuss your unique situation before your retirement. As such, you are guided to a more realistic path towards your retirement.

Full story: INSTITUTE FINANCIAL WELLNESS

Starting this year, 529 plan account owners are now able to transfer up to a lifetime limit of $35,000 to a Roth IRA for a beneficiary given the contributions are more than 15 years. Prior to the legislative change, contributions to 529 plans were only for education purposes. Therefore, some parents were hesitant to make contributions to 529 plans for their children because “what-If” the children do not go to college. Parents will need to pay a 10% penalty and taxes for non-qualified distributions. The new rule gives parents more flexibility and options to change the education funds to retirement funds for their beneficiaries. Even with only $35,000 for a lifetime transfer with up to the Roth IRA limit every year, the change can relieve the concern of “What-If” scenarios parents have. We believe that more and more legislative changes will come to make contributions for education and retirement more flexible. These are the signals that we will have to rely on to grow our own savings even more.

Full story: TIAA

We at Vibrance Wealth Management are a proponent of teaching kids to learn about personal finances and investing at a young age. Like sports and music, the earlier kids start learning to manage their personal finances, the better. Some schools start teaching kids about personal finances. We also strongly encourage parents to set a good example for their children on how to manage their finances and use interactive resources available to make learning fun and enjoyable. It is never too early to start.

Learn more: PBS