Example of a Financial Reference Letter

Most importantly, the letter should be placed on your financial institution's letterhead.

To Whom It May Concern:

Mr. Joe Doe has had an account with our bank since 1995.  His account is currently in good standing and he maintains his current relationship with us.

Mr. Doe currently has a combined balance in his checking and savings account of $10,000.

This reference is issued for the interested party and the bank makes no assurances as to the credit worthiness of Mr. Doe.  This letter does not impose any responsibility on the bank.


3 Reasons to Rollover Your 401(k) to an IRA

If you’ve changed jobs or retired, then it’s probably time to move your 401(k) to a rollover RIA.
1. You’ll have more control

Now you have so many options available to you. You can move your money to any brokerage company that offers IRAs, which almost all companies do. The best bet is to find one that offers the lowest fees and gives you the most investment options.

You’ll also have more control over your investment choice. Whereas in a 401(k) you’re limited by the funds that your employer has made available, in an IRA you can make your own investment decisions. This can include individual stocks as well as mutual funds; there are a wide variety of options that are available.

2. You can take cash distributions without mandatory withholdings

When you take a distribution from your 401(k) without directly rolling it over to another qualifying plan, there is a required federal withholding. Most states also have a default withholding which you can opt out of. When you move to an IRA, you can have taxes withholdings taken out of your distributions. This gives you more control over the ways you get your money.

3. Lower Fees

In general, IRAs have lower administrative fees. Lower fees, whether in the form of administrative fees or management fees are key to long term investing success.

Save Early and Often

Early on in my relationship with my husband, when we were both just starting out in our careers, he told me that I was being foolish by not maxing out my 401(k) contribution. I looked at him like he was crazy and told him to stay out of my financial matters, keeping in mind that we had been dating a mere two months at this point.

A few days later I changed my contributions to max out my contribution for the year. For the next twelve months I was able to max out my contribution, but during those same twelve months, I found out I was pregnant. It would be many years before I could even consider upping my contributions to those levels again.

Though I was frustrated by the lack of disposable income at the time, I’ve been grateful that the money has sat, untouched in the account for so many years, and, despite the low returns of the past few years, it has had time to grow.

The most important part of saving for retirement is to start early and put money in your savings often. Whether this is through a personal IRA account or you’re working with your employer’s 401(k), you should save as much as possible whenever you can. The employer’s 401(k) if you’re lucky enough to have one can boost your savings even more.

Where to Put Your Money Now

It's common for people to wonder where they should put their money now. We're often told to save and plan for the future, but not how to get there. Deciding where to put your money depends on your age, income and future plans.

Regardless of your age, you should always have some cash available in the bank. If you have this, you'll have some cash available for short term emergencies. This is the most critical step.

After that you should put enough money into your 401(k) at work, if you have one, to get the company match. Most employers match 50% or more of the first few percentages of your salary. If you're fortunate enough to have one of these plans, go for it! You're not going to beat the tax advantages and the potential doubling of the money from the employer match.

But maybe you’re still wondering where to put your money now because you’ve already followed these first two steps. After this you have to access what point you’re at in your life and how comfortable you are with risk. If the past few years have taught us anything, it’s that the stock market is hardly a safe place to earn a steady return. It can still be a great investment; you just have to decide if you can stomach the often bumpy ride.

There are many options available depending on your tolerance for risk. Savings accounts and CD are some of the lowest risk investments. They are not without risk because the banks can fail, as we’ve seen over the last few years. Savings accounts often earn a bit less, but you have the advantage of access to the money at any time. CDs can force you to save your money by charging early withdrawal penalties, which is useful if you’re often tempted to dig into your savings.

For more savvy investors, there are a wide variety of mutual funds, ETF, bond funds, and individual securities. Each of these are worth exploring and you’ll often end up with a diversified portfolio that’s a combination of several different types of securities.

So if you’re wondering where to put your money now, the first thing you need to do is figure out where you’re at and where you’d like to be.

Should You Invest in Your 401(k)

If you’re wondering if you should invest in your company’s 401(k), the answer is generally a resounding yes. However, there are a few cases in which it might be beneficial to hold off on your retirement investing.

If you’re having trouble making ends meet and you’ve already examined your budget for ways to cut back and haven’t found anything, you might need to hold off on saving for retirement. In general, it’s not worth it to run up debts so that you’ll have money for retirement.

If you don’t receive any sort of matching from your company and you are a disciplined saver on your own, then you may not want to have your money tied up in retirement plans. Keep in mind that any money that goes into a designated retirement plan will have restrictions on when you can withdraw the money without penalty.

In general, you’ll want to save as much as you can in your company’s 401(k) and start as early as possible. Though you may have student loans and some other consumer debt, such as credit cards, your fixed expenses are lowest when you’re young. Before you have a mortgage payment or childcare expenses looming over your head, you should have some money set aside for retirement.

Municipal Bonds: An Overlooked Investment Strategy

One of the least used options when it comes to investment income is Municipal Bonds. The advantage of these investments is that they are currently not federally taxable and if you invest in your state’s muni bonds, then they are generally not taxable by the state either.

This means that your savings will vary depending on your tax bracket and thus will be more significant as your income rises.

In the past municipal bonds were considered a very safe investment. Unfortunately in today’s uncertain financial climate, it’s hard to tell if the municipal bonds are as secure of an investment as they once were. Though the earnings continue to be tax-free, it’s impossible to tell if cities or other municipalities might default in which case you may lose a significant portion of your original investment.

Municipal bonds often have minimum buy ins of at least five figures. This can be a barrier to entry for many smaller investors; however there are funds that specialize in a portfolio of municipal bonds. Contact your investment advisor for more information on these options.