Unfamiliar with the Hong Kong protests? Read more about it here.
As part of our Life-Centered Planning process, we’ve talked about how market volatility is a normal part of investing. We’ve also discussed how we’ve structured your investments to “weather the storm” and maintain a comfortable level of income for you and your family during turbulent times so you can avoid knee jerk reactions.
But we also understand that even folks who are armed with this knowledge can get nervous during a market dip. What’s important is that you know how to prevent that initial wave of negativity from leading you to rash decisions that could damage your nest egg much worse than a market correction.
Dr. Martin Seay is a specialist in positive psychology, which focuses on strategies that people can use to improve their sense of well-being. Dr. Seay’s ABCDE method can help you work through your reactions to distressing financial news and arrive at a positive outcome.
Let’s walk through an example of how to use this method to avoid making a bad, emotion-based financial decision.
A. Activating Event
Sometimes stress and anxiety can feel all-encompassing. Dr. Seay believes it’s important that we pinpoint the event that triggered our negative feelings.
So, while you might feel general anxiety about your finances, drill down a little deeper. Is your job secure? OK. Are you saving and investing according to your financial plan? Good.
Did you just read on social media that today’s market correction was “THE BIGGEST ONE-DAY DROP IN HISTORY!”
Ahh, there it is. Let’s move on to the next step.
Market volatility can rouse some of our worst instincts about investing. We might fall back on long-buried Beliefs like, “This game is rigged!” We might feel like we’ve entrusted our financial future to powers beyond our control.
As you work through this step, it’s important to ask yourself where your Beliefs come from. Have you been unsettled by widespread media coverage of major financial problems, like the 2008-2009 housing crisis? Have you had negative interactions with the finance industry in the past? Perhaps one of your parents distrusted the markets or made a poor investment that had a negative impact on your family.
Figuring out why you believe what you believe about the markets can help alert you before you fall back into bad financial habits.
Panicked investors who can’t shake negative Beliefs about the markets often make poor decisions during downturns. They think they need to “get out fast” to avoid more negative Consequences, like further losses.
Ironically, cashing out your investments during a market correction usually leads to far more serious Consequences in the long run.
So how can you stay focused on the big picture?
Start by using what you know to push back a little against what you Believe.
For example, we’ve discussed in our meetings that the historical, long-term trajectory of the financial markets has been to rise over time. And now, market averages such as the Dow Jones Industrial Average are near all-time highs. Therefore, when the market does have a temporary drop, we might say, “The Dow was down x hundreds of points today.” It sounds like a big number, but as a percentage, it may just be normal volatility.
We’ve also discussed that “market timing” strategies usually just don’t work. That’s why your portfolio is diversified, balanced, and strategically rebalanced as necessary. Decades of market history have shown that sticking to this type of investment strategy may be more effective – and stable – than trying to jump in and out of the market based on what’s happening in the news right now.
Today’s losses are really just a kind of “tax” that you’re paying on the wealth we’re helping you build for tomorrow.
It’s amazing how just reminding ourselves of what we know to be true can make us feel better about a negative situation. Hopefully at the end of this process, you feel a renewed sense of positivity about this present moment and your financial future.
But we understand that market volatility can be complicated. And as you’re nearing retirement, a downturn can be downright nerve-wracking.
So if you need help walking through your ABCDEs the next time the market corrects, make an appointment to meet with us. We’ll run through the important facts you need to know and decide what moves, if any, we need to make to keep you on track with your financial plan and avoid those costly knee jerk reactions.
How are you going to get the best, most fulfilling life possible with the money you have once you retire? Generosity is key, but it can be costly.
Study after study has shown that retirees who spend their time and money on experiences are much happier than those who just buy stuff. Charitable giving can be a particularly meaningful way to keep yourself active and put your assets to good use. Too much generosity can be costly, so it’s important you follow these steps.
Just as long as you don’t overdo it.
If you’re feeling an increased desire to give back now that you’ve retired, here are some tips on balancing your good intentions with what’s best for you and your family.
1. Do your homework.
Recently, there have been high-profile cases of fraud and misappropriated funds at some very famous charitable organizations. But even if you’re giving to a charity that is run well, you should understand where your money is really going. If you’re happy with your dollars helping a larger organization to pay its bills and employees, great. If you want your money to have a more immediate impact on those in need, consider giving to smaller organizations in your community.
Do some googling and check online watchdog databases to make sure your favored charity is on the up-and-up. And unless you know the organizers personally, avoid online crowd-funding campaigns that aren’t legally accountable for how they use donations.
2. Consider a volunteer position.
Your favorite non-profit or charitable organizations need money. But they also need manpower.
If you’re thinking about working part time in retirement and a paycheck isn’t really important to you, schedule regular volunteer hours instead. You’ll get all the same benefits of having a job: structure, responsibility, camaraderie. Plus, seniors who volunteer report lower levels of stress, an increased sense of purpose, and better physical and emotional health.
3. Teach, tutor, or consult.
When looking for a charitable outlet, don’t overlook the professional skills that you honed over your career.
You might not have the qualifications to teach at a school or university, but you could talk to your local community center about holding a seminar that could benefit your neighborhood. You might be done balancing your company’s books, but there are high school kids who could benefit from your mastery of math. Open your door to local small business owners or recent college graduates who need an entrepreneurial mentor.
4. Make a plan.
It’s a scientific fact that giving makes us feel good. But some seniors may get too caught up in their generosity. They forget that gifts and donations are coming from that same pool of assets that are supposed to keep them safe and secure for the rest of their lives. They may have trouble setting limits and saying no.
There is indeed such a thing as too much giving. You might not think much about writing an extra check or two early in retirement. But seniors have to maintain a long-term perspective on their nest eggs. This generation of retirees is going to live longer, more active lives than any in history. You need to make sure that helping someone today isn’t going to make it harder to cover your health care and cost of living needs tomorrow.
So, if you and your spouse want to make regular charitable donations, it’s important that you come in and talk to us. We can incorporate giving into your monthly budget and retirement income plan. If you want to make your generosity more permanent, we can also help you establish a charitable trust and add sustained giving to your estate plan.
We’re always happy when our clients want to help others. But it’s our responsibility to make sure your financial plan covers your best interests first. Let’s work together on a plan that will make your retirement secure and the world around you a little brighter.
Ever wonder how you can improve your relationship with money? Many people have a complicated relationship with money. Hang-ups carried over from childhood experiences get mixed together with positive and negative experiences from adulthood. Few people ever take the time to reflect on what money really means to them and how they can “get right” with money to make smarter decisions.
Take time to answer these 5 questions and you’ll do a better job of living your best life possible with the money you have.
1. What’s your first money memory?
Your earliest experiences with money probably happened in your home. You saw how your parents earned and managed their money. You probably compared the quality of your family home and vehicles to what you saw at friends’ and neighbors’ houses. An unexpected job loss or illness might have led to some very lean holidays or a skipped vacation. Or, if you grew up in an affluent household, you might have taken money for granted in a way you no longer do now that you’re the one earning it.
Identifying some of these early memories is critical to reassessing your relationship with money. Are you following positive examples towards decisions that are going to improve your life? Or, without even realizing it, are you repeating poor money habits that are going to hurt you in the long run?
2. Do you feel like money is your servant or your master?
Sometimes money makes us feel like we’re a hamster on a wheel, running as fast as we can without ever really getting anywhere. But if you never stop chasing after that next dollar, when it comes time to retire, all you’re going to have is money, and a whole lot of empty days on your calendar.
People who get the most out of their money recognize that it’s a tool they can use to skillfully navigate to where they want to be in life. So, instead of working too long and hard for more money, think about how to put the money you have to work for you.
3. What would you do if you had more money?
You’ve probably read about studies that show lottery winners don’t end up any happier than they were before their windfalls. This is a dramatic example proving some pretty conventional wisdom: money doesn’t buy happiness. That’s especially true if you’re stuck on your wheel for 40 hours every week just chasing more and more money.
If the idea of having more money gets you thinking about all the things you’d buy, it’s important to remember how quickly even the fanciest new car smell will fade.
If you would immediately quit your job if you had enough money to support your family and live comfortably, then maybe you need to think about a more fulfilling career.
Having more money might not “solve” some issues you’re currently experiencing, but asking what would you do if you had more money might lead you to new decisions that improve your current life satisfaction.
4. What would you do if you had more time?
Imagine you don’t have to work. You can spend every single day doing exactly what you want. What does your ideal week look like? What things are you doing? What hobbies are you perfecting? Where are you travelling? With whom are you spending your time?
These things often get pushed to the side when we’re busy working. But if your money isn’t providing you with opportunities to spend time doing what you love with the people you love, then your work-life balance might need an adjustment.
5. What would your life look like to you if it turned out “well”?
Hopefully by now you’re starting to think about how your relationship to money could be keeping you from getting the most out of your money.
The successful retirees that we work with don’t look back fondly on the amount of money they made or how much stuff they were able to buy. They tell us their lives turned out well because they used money to make progress towards major life goals. They say their money provided them the freedom to pursue their passions. And their sense of well-being increased as they committed time and resources to health, spirituality, and continual self-improvement.
When you reach retirement age, we want you to look back happily on a life well-lived. Come in and talk to us about how our interactive tools and Life-Centered Planning process can improve your relationship to your money.
There’s also some really great resources you can find at www.investopedia.com to help you improve your relationship with money.
Get Your Financial House in Order
“Does this spark joy?”
Millions of people are asking themselves this question about their homes and possessions thanks to Marie Kondo and her wildly popular decluttering philosophy.
Once the kids are moved out, it’s just you, your spouse, and whatever is still boxed up in extra bedrooms and the basement. Whether you’re looking for joy or just a little less space and stuff to manage, you might be thinking about decluttering and “downsizing” into a smaller home before you retire.
But sometimes less can be more: more hassle, more complicated, and more expensive. Before you and your spouse order that dumpster and make a down payment on that condo, consider these important pros and cons of downsizing.
PRO: Make a change while you can still enjoy it.
The younger you are during a downsize, the less help you’re going to need clearing out what you don’t want and relocating. And a clean, organized home can be a great “blank slate” as you start easing into your new life. You might even organize a move around interests you want to pursue in retirement, like a community with golf and tennis facilities, or a burgeoning foodie hotspot with an exploding restaurant scene.
CON: You might make a change you don’t both enjoy.
Couples need to be very clear with each other about their expectations for what life is going to be like in retirement, and how each of you want to spend your time separately and together. A downsizing that moves you to a new town, away from friends, family, and familiar comforts, can go from exciting to exasperating very quickly if both spouses aren’t committed to adventuring together. One spouse might be happily teeing off while the other is puttering around the house bored silly.
And while a smaller house without kids and clutter might mean more room for you and your spouse, it’s still going to be closer quarters than you’re used to. Is less space going to provide you both with enough personal space?
PRO: Simplified living.
A smaller home means less upkeep. If you buy, you’ll probably pay less in taxes than you did at your larger house. With less space to heat and cool, and no kids soaking up extra water, food, and electricity, your monthly bills might go down. If your smaller house is relatively new, it might require less upkeep and age well right along with you.
CON: Simple isn’t free.
There’s a pretty good chance your current furniture isn’t going to fit or fit in at your new house. Our old stuff is never as valuable to resellers as we want it to be, so you’ll probably end up dipping into your nest egg to buy new furnishings. Anything you don’t want to get rid of you’re going to have to store, either in that beautiful, empty basement, or at a storage facility you’ll have to pay for. If you move to a different state, your smaller home might come with higher taxes. What you save on taxes buying a condo might be offset by association and communal maintenance fees.
PRO: Living the best life possible with your money.
The best reason to consider downsizing doesn’t really have anything to do with decluttering. It’s not about managing space or what to do with all your possessions.
No, the reason to downsize is because that smaller home you’re thinking about will allow you to live the life you want to live in retirement. It’s because that home is going to give you the space to do the things you want to do with the people you love, while minimizing the things you don’t want to do anymore.
Does that idea spark joy?
Then let’s talk. Come in and tell us why you’re thinking about downsizing. We’ll run some numbers and discuss how a new, smaller home could open a big new world of possibilities for you and your spouse.
“How am I doing?”-Every Investor…..ever
Ever wonder how your retirement savings stack up against other people your age? That’s a big question that most people have when it comes to their money. One way we tend to look for answers is by comparing what we have to what our neighbors, friends, and family, have. Even though we know deep down that “the grass is always greener on the other side,” it can be hard to look away when our phones, computers, and TVs are practically forcing us to make these comparisons.
We understand the worry that you might not be keeping pace with your peers. But if you’re wondering about where your retirement savings “should be,” it’s important that you look at these numbers with the proper context.
According to Nerdwallet, here’s how average retirement savings break down by age:
Average household retirement savings: $32,500
Median household retirement savings: $12,300
Ages 35 to 44
Average household retirement savings: $100,100
Median household retirement savings: $37,000
Ages 45 to 54
Average household retirement savings: $215,800
Median household retirement savings: $82,600
Ages 55 to 64
Average household retirement savings: $374,000
Median household retirement savings: $120,000
Ages 65 to 74
Average household retirement savings: $358,400
Median household retirement savings: $126,000
As you might have guessed, retirement savings tend to ramp up as we age. In part, this is because the older we get, the more real retirement becomes, and more prepared we want to be.
But as fiscally responsible people age, their debt level tends to drop as well. No more kids to support. No more student loan payments. Vehicles and houses get paid off. Credit cards get used less (unless you’re focused on accumulating points) and paid down. There’s only so much you can keep in a low-interest savings account before you want to put more of your money to work.
The numbers behind the numbers
If these figures seem a bit low to you, you’re not wrong. Most financial experts believe that, generally, Americans are not saving nearly enough for retirement.
Yes, having a couple hundred thousand in savings and investment accounts may sound like a lot of money. But people are also living longer and more active lives than ever before. That means your retirement assets are going to have to last longer than your parents’ and grandparents’ did.
And as pensions continue to dry up, the responsibility for preparing for retirement has shifted more and more to individuals. That’s going to be a challenge for anyone who’s significantly below these savings levels. And it’s going to be a BIG problem for the 43% of households headed by someone 35-44 who don’t have any retirement savings at all.
Is an “average” retirement good enough?
Let’s say you’re the average 65-year-old with just over $300,000 in the bank. How long is that $300,000 going to last? Is that nest egg going to provide the retirement you’ve been dreaming about and working for most of your life?
There’s no one-size-fits-all answer to those questions. We all have different passions, goals, healthcare needs, and lifestyle expectations. Some retirees might live quite happily at or even a little below the average level.
But what happens if your spouse has an accident and needs to see a specialist? What if your roof needs a major repair? Will an emergency stretch your “average” retirement too thin?
What happens if, five years into a twenty-year retirement, you start to feel bored and restless? What if you decide you need to see more of the world? What if you can’t let go of that passion project you’ve always wanted to develop into your own business? Will your nest egg provide for changes that will make your retirement more fulfilling?
How your money measures up.
Successful retirement planning balances the things that we can anticipate with the things we can’t. That’s why, as we work together, we’ll never hold up a graph comparing where your money is to where your peers are. We’re not interested in outside standards of “measuring up.” We’re interested in how your money measures up to what YOU want out of life, and what you’ll need to stay comfortable on rainy days.
Many folks who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about IRAs, 401(k)s, or how much you’re saving. Instead, we begin by talking about you, not your money.
Putting your life before your financial plan.
As Life-Centered Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.
Our job is to build a financial plan that will help you make your life plan a reality.
Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets and doing what we can to maximize your return on investment.
But we believe maximizing your Return on Life is just as important, if not more so. People who view money as an end in and of itself never feel like they have enough money. People who learn to view money as a tool start to see a whole new world of possibilities open in front of them.
One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next dollar, you’ll start exploring what more you can get out of life than just more money.
Feeling free to use your money in ways that fulfill you is going to become extremely important once you retire. Afterall, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.
Again, having money and building wealth is a part of the plan. But it’s not THE plan in and of itself.
The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.
And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.
What’s coming next?
So, when does the planning process end?
If you’re like most of the people we work with, never.
Life-Centered Planning isn’t about hitting some number with your savings, investments, and assets. And we’re much more concerned about how your life is going than how the markets are performing.
Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.
Some transitions we’ll be able to anticipate, like a child going to college, a big family vacation you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big out-of-state move for work, we’ll help you adjust for as necessary.
In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start a brand new company.
Planning for and reacting to these moments where your life and your money intersect is what we do best. Come in and talk to us about how Life-Centered Planning can help you get the best life possible with the money you have. Visit Our Website to learn more.
Want to Retire? Take It for a Test Drive
There are many reasons why people who could retire are hesitant to do so. Some people think they need to wait until they’re 65 or older. Some are worried about running out of money. Many parents want to keep supporting their children through some major life transition, like college, marriage, or buying a first home.
Maybe the most common reason we see for a retirement delay is folks who just can’t imagine their lives without work. That’s understandable. A routine that’s sustained you and your family for 30 or 40 years can be a hard routine to shake.
But retirement doesn’t have to be all or nothing right away. If just thinking about retiring makes you jittery, use these tips to ease into retirement a little at a time.
1. Talk to your family.
Clear, open communication is an essential first step to approaching retirement. Be as honest as possible about what you’re feeling. What worries you about retirement? Does the idea excite you? What do you envision your days being like? Where do you want to live? What does your spouse want retirement life to be like?
2. Talk to your employer.
Many companies have established programs to help longtime employees transition into retirement. You might be able to trim back your hours gradually to get an idea of what days without working will be like. You’re also going to want to double-check how any retirement benefits you may have are going to work. Discuss any large outstanding projects with your supervisor. Make a plan to finish what’s important to you so that you can leave your job feeling accomplished.
Self-employed? Give your favorite employee (you) less hours and fewer clients! Update your succession plan and start giving the soon-to-be CEO more of your responsibilities. Make sure you have the absolute best people working for you in key leadership positions so that your company can keep prospering without your daily involvement.
3. Make a “rough draft” of your retirement schedule.
What are you passionate about? What are some hobbies you’d like to develop into a skilled craft? Do you want to get serious about working the kinks out of your golf swing? Are there household projects, repairs, or upgrades you want to tend to? A crazy idea you kicked around at work you’d like to build into a new company? A part-time job or volunteer position you’d like to take at an organization that’s important to you? New things you want to try? New places you want to visit? Grandkids you want to see more often?
Try filling out a calendar with some of your answers to these questions. As you start to scale back your work hours, take a few lessons or volunteer shifts. Sign up for a class. Leave town for a long weekend. See what appeals to you and what doesn’t.
Remember, you don’t have to get your schedule right the first time! A successful retirement will involve some trial and error. Learn from things you don’t like and make a point to spend more time doing the things you do like.
4. Review your finances.
This is where we come in!
Once you and your spouse have settled on a shared vision for retirement, we can help you create a financial plan to help ensure you are financially fit for (semi)-retirement. We’ll go through all of your sources of income, retirement accounts, pensions, savings, and other investments to lay out a projection of where your money is coming from and where it’s going.
We can coordinate all aspects of your situation and collaborate with you on the best course of action. You don’t have to face retirement alone and make big decisions without expert guidance.
Coming in and talking to us about your retirement is a great “Step 1” option as well. So if you are dreaming of those days when work is optional, give us a call and we can help you through this phase of life.
Is How You Use Your Money Aligned With Your Values?
A hamster in a wheel.
Have you ever watched a hamster running in a wheel? All that running, all that effort, day after day after day … But the poor little critter never really gets anywhere, does he?
Many of us feel the same way about our money.
More specifically, we feel that way about the work we do to get that money. We spend forty hours every week on a wheel, running after a paycheck. And then, first thing Monday morning, we’re back on the wheel, and the whole thing starts over again.
Many folks just keep repeating this cycle, over and over, until they finally retire. They think that stepping off the wheel just isn’t an option because they have bills to pay, college expenses to save for, and a dream to be “financially set” before retiring from work. It begs the question if he we use our money is aligned with our values.
How much is enough?
These are all persuasive arguments that keep people on the wheel. And the hope is that someday, you’ll be able to stop running and enjoy the fruits of all that hard work.
Unfortunately, more often than not, “someday” never comes. If your focus in your work and in your financial planning is just having enough money, you’ll never feel like you have enough. There’s always another dollar to chase, another way to economize so that you can save more.
But for what? Is having more and more money, in and of itself, something that you really value? Does having more make running on the wheel worth it?
You might think that this “never enough” mentality ends once a person retires. In fact, it just transitions into a new, related worry: “Am I going to run out of money?” Again, that “someday” gets pushed back in favor of more saving, more super-conservative living. You might not be working any more, but you’re still just chasing after money.
The wind in your sails.
At the end of the day, your money is not the shore we’re sailing for. It’s not the sea you’re sailing on. It’s not even the boat you’re steering.
Your money is the sail. It’s the tool you use to get where you want to go.
And the wind in that sail is your values.
Just like a good sailor learns how to maneuver the sails to catch the most wind, aligning what’s most important to you with your financial resources is the key to successful financial planning.
So instead of asking yourself if you have enough money, or if you will run out of money, ask yourself a better question:
Am I managing my money in a way that’s improving my life?
We don’t want you just to “have enough money.” We want you to live the best life possible with the money you have.
That starts with thinking about what’s really important to you. The people whom you love. The causes that are dear to your heart. The activities that keep you feeling fit and full of energy. The hobbies that put your unique skills to their highest uses. The opportunities for learning and self-discovery that enrich your understanding of the world and of yourself. The wisdom that you will pass down to your children and grandchildren so that they live their best possible lives as well.
We believe that aligning your financial plan with these values is every bit as important as analyzing your tax situation or managing your investments. Come in and see how our interactive tools can you help plan for your whole life and get more from your money than just more money.
5 Next Steps When You Are Concerned About Aging Parents
As your aging parents begin to settle into their final phase of life, their health, residence, and finances could become a factor in your retirement planning. This is especially true if you are the person your parents have tasked with settling their estates.
There’s no simple way to tackle all the logistical and emotional challenges associated with caring for an aging parent. But these five steps will help you get the help you’ll need to make sure your parent is safe, cared for, and financially secure.
Call a family meeting.
No two families are the same, but in most cases, you’re going to want to gather together all siblings and close family members for an open and honest discussion. If your parent is dealing with a serious and potentially debilitating health issue, don’t sugar-coat the truth. Hiding the facts now will only lead to hurt feelings, resentment, and poor planning.
Depending on the parent’s condition, you might consider dividing up a caregiving or visitation schedule. Even pitching in on small day-to-day tasks like helping mom or dad buy groceries can be a big help.
If you’re contemplating a more serious decision, like assisted living, make sure you give everyone space to voice an opinion. Try to keep the conversation as positive and solution-focused as possible. Employing a mediator or family counselor to facilitate might be a good option if you’re concerned old family issues could boil over and prevent a solid resolution.
Don’t try to parent.
Shifting from the role of adult child to caregiver is going to be a difficult transition for both you and your parent. Don’t try to do too much too soon. Seniors who feel like they’re being “babied” are prone to depression or dangerous outbursts of independence, like grabbing the car keys or refusing to take medication.
A better approach is to try to frame your caregiving as a way of being more involved in your parent’s current routine. Take a seat at dad’s weekly card game. Put the grandkids’ sports and performance events on the calendar and offer transportation. Bring an extra dish to a dinner party. Drive mom to the movies … and let a sibling know the house will be unoccupied for a few hours if there are any cleaning or hoarding issues that need attention.
Gather the essentials.
If your parent doesn’t keep all important documents in one location, now is the time to collect, copy, and file things like:
- Identification (driver’s license, passport, birth certificate, marriage certificate, etc.)
- Bank records
- Home deeds and vehicle titles
- Insurance records
- Investment and retirement account records
- Wills and trusts
- Power of attorney
- End of life directives
- Login information for important online accounts (banking, subscriptions, social media)
There may be other documents that are unique to your parent’s living or financial situation. We can help you make a comprehensive list.
Start attending doctor’s appointments. Don’t be afraid to ask questions that will help you familiarize yourself with your parent’s medical condition and aid with any at-home care like prescription drugs.
Also ask your parent to introduce you to his or her financial advisor and attorney. Make sure the relevant professionals have all important information about changes to your parent’s health, mental capacity, or living situation.
Plan for the next steps.
At some point, your aging parent may no longer be self-sufficient. The earlier that you and your close family members decide upon an action plan, the better. Do you or anyone in your family have the room, the time, and the means to take in your parent? How can non-caregiving siblings or other family members chip in on associated costs of living?
In many cases an assisted living facility is a more realistic option. But be aware that your parent’s Medicare plan probably will not cover those costs. If your parent does not have retirement funds earmarked for end-of-life care, you and your close family members may need to hold another meeting to discuss how to pay for a facility.
None of these steps are easy, and none of the associated options your family settles on will be perfect. The sooner you loop us in on how caring for an aging parent might affect your financial picture, the sooner we can get to work on the money side so that you can concentrate on giving your family the love and support it needs during this difficult time.
4 Things to Consider Before Financially Bailing Out Your Adult Children
According to a recent study by TD Ameritrade, 25% of baby boomers are supporting their family members financially (1). Support to adult children averages out to $10,000 per year. That’s $10,000 that boomers aren’t saving, contributing to retirement accounts, or investing.
Can your retirement afford that kind of generosity?
If you fall short of your retirement goals, is the adult you’re bailing out going to bail you out during your golden years?
Before you write your struggling young adult another big check, ask yourself these four key questions:
What, specifically, is this money for?
The key word here is SPECIFICALLY.
Many parents tend to err on the side of protecting their child’s feelings when weighing financial support. We know asking for money can be embarrassing, and we don’t want to deepen that embarrassment. Or we’re worried that if we ask too many questions the child will become frustrated and hide serious problems from us going forward.
These are understandable concerns. But it’s also important that you understand whether your child needs support because of something beyond his or her control (a car accident, serious health issues, unexpected job loss) or because they’re struggling with basic adult responsibilities. If your child is making poor budgeting decisions or settling for underemployment, you may be throwing good money after bad.
Be tactful, but get to the root problem before you decide if your money is the best solution.
What is the real cost to me?
Many parents are already helping their adult children more than they realize.
For example, you might not think much of letting your adult children stay on the family cell phone plan or piggyback on an HBO subscription. After all, it’s only twenty bucks a month, right?
But how long have you been giving your child that monthly free pass? Years? You can also set time limits. For example, tell your child they can remain on the family cell phone plan until age 25 or until they get married, whichever comes first.
Are you helping with larger monthly expenses, like student loan or car payments? When will it finally be time to pull the plug?
Our advice: get it all down on paper. Make a spreadsheet that accounts for the financial support you’re already giving your child, large and small. Seeing how even small expenses accumulate over time will be eye-opening for both of you and help inform a good decision.
What are the terms of the bailout?
This is another area that parents tend to tiptoe around because they’re afraid of insulting their children. But do you know of any bank that’s going to loan your kids money indefinitely, charge no interest, and ask for no repayment? Then why should your money be subject to such lousy terms?
Your children have to understand that your generosity is not open-ended, especially as you near retirement age. You’ve probably made many sacrifices for them already. You should not sacrifice your financial security or the nest egg that is meant to support you in retirement.
If your children want you to “be the bank,” then you have every right to act like one. Set clear terms in writing, including a repayment schedule. In more serious cases, you might want to bring us a copy of this agreement so that we can include it in your estate plan.
How else can I help?
It’s very likely that your child spent 16 or more years in school without learning a single thing about managing money. Financial literacy just isn’t taught in schools. This knowledge gap could be a big reason your young adult is struggling.
A BMO Wealth Institute survey found that two-third of parents give money to adult children when a sudden need arises (2). Does your child need money suddenly because he or she doesn’t know how to budget? Help find that balance between covering current expenses and contributing to savings and investment accounts.
Housing and transportation expenses can be a shock to recent college grads. You could help your child negotiate a car lease. You might help a child who’s already chasing after the Joneses by counselling against a rash home purchase that will stretch his or her finances thin.
Introducing your underemployed child to some of your professional connections might lead to a significant career upgrade.
One key connection you should be sure to tap: your fiduciary advisor! We’re always happy to help our clients’ adult children get on their feet. We consider this a service to our clients because we know that the less you’re worried about supporting your children, the more secure your own retirement goals will be.
How to Have More Fun and Meaning After You Retire
A blank calendar filled with nothing but free time can be every bit as stressful as a packed work week.
That’s the surprising fact that many people who retire confront after a few days of hitting the snooze button and puttering around the house. This is usually when the reality of retirement sets in. This is your life now. What are you going to do with it?
Whatever you want!
The only thing better than sleeping in is jumping out of bed early because you’re energized and excited for the day ahead. This is the kind of active and fulfilling retirement that we love to help our clients prepare for.
Here are some ideas for creating a new retirement schedule that will keep you growing, learning, experiencing new things, and making meaningful connections with your community.
Taking all those trips you couldn’t squeeze in around work meetings and kids’ baseball tournaments tops many retirements wish lists. And with good reason. After all that hard work, prudent planning, and disciplined saving, you deserve to treat yourself, do things you never had time for, see places you’ve always wanted to see.
Why not try to be your own travel agent? Planning a few big trips scattered throughout the year can be a fun activity for you and your spouse to do together. And in between those big destination vacations like a river cruise in Europe, you can sprinkle in some long weekends visiting the grandkids, and a few separate getaways to give each of you space to pursue your personal passions.
Work or volunteer part time.
No, “working in retirement” is not an oxymoron. More and more retirees who can afford to stop working are taking part-time jobs and volunteer positions. This can give your week some welcome structure and provide an outlet for things you’re passionate about.
That non-for-profit job you couldn’t afford when you were raising kids and paying a mortgage? Take it. Do some good in your community and make a little spending cash on the side. Put your cultural expertise to work as a docent for an art gallery or museum. Volunteer at a church or charitable organization that’s close to your heart.
Upgrade your living situation.
Whether you’re handy and enjoy doing the work or just like picking out new colors, patterns, and fixtures, take care of all those lingering household projects. Your comfort is important, especially as you age. Don’t let minor inconveniences like leaky faucets and spotty heating turn into major problems. Get rid of that lumpy mattress and hard couch you’ve been torturing yourself with for a decade. Map out the deck and pool you’ve always wanted and turn your backyard into a central hangout for your family and friends.
Of course, that’s assuming you want to “retire in place” at your current residence. A permanent change of scenery can be invigorating as you enter this new phase in your life. Just make sure you talk to us if you see a new beachfront condo in your future. We’ll make sure to incorporate the move and all the necessary tax, health care, and cost of living adjustments into your financial plan.
Get really good at something you love doing.
Been a frustrated weekend golfer your whole life? Sign up for lessons and get that handicap down for good. What better time than when you retire? Or better yet, set up a weekly tee time with a group of retired friends. No more rushing through meals on your way to and from work and school, so let your inner foodie have the run of the kitchen. Dust off your college French lessons before that dream trip to Paris with an online class. Clear out that back bedroom no one uses any more and make a study. Paint the pictures you’ve always wanted to paint. Finish the novel hiding in the bottom of your desk drawer.
The possibilities for an exciting and fulfilling life in retirement are bound only by your imagination and the financial resources you have available to you. Let us help you take care of the money part so you’re free to focus on the fun.
What Did You Learn Today?
“In a world of change, the learners shall inherit the earth, while the learned shall find themselves perfectly suited for a world that no longer exists.”
― Eric Hoffer
It’s never been easier for adults to continue to learn after completing their formal education. Online universities, TED talks, “master classes,” podcasts, and even curated YouTube playlists put world-class professionals, teachers, and thinkers literally at our fingertips.
Are you taking advantage?
One common attribute of successful, happy people is that they are intensely curious. They never feel like the world has passed them by because they have made learning and self-improvement a lifelong process. In fact, Bill Gates places such a high value on continuous learning that he schedules annual “Think Weeks” where he holes himself up in a private study with books, magazines, and scientific papers.
Whether you want to stay ahead of the curve or just cultivate a curious mind, daily learning can have some major personal and professional benefits.
Upgrade your job.
Technology, automation, and the global marketplace have disrupted many jobs and career paths. Learning a new skill is a great way to “future-proof” yourself or even reposition yourself for a new job that you’ll find more fulfilling.
If you have an interest in tech, consider learning how to “code” by studying a programming language. If you’re a pen-and-paper artist, translate those skills to the digital world by learning website or graphic design.
Or, if you want to make yourself a little more global, why not learn a new language? Is your company preparing to expand into Europe or China? Do you have a large customer base that speaks Spanish? Learning the language of your business will prepare you for where that business is travelling next.
Think outside the office.
Learning can make life more exciting outside of the office as well. When we challenge ourselves to learn new things, we step outside of our comfort zones. We bring ourselves in contact with new cultures, new ideas, and new experiences.
French lessons might be your passport to a month vacationing in Paris. Signing up for a cooking class could improve your family’s health, or lead you to farmer’s markets that strengthen your connection to your community. Golf lessons could improve your enjoyment of the game and turn you into a better first coach for your young children.
Of course, learning doesn’t just mean signing up for formal classes. We spend so much of our lives on social media these days that it bears repeating: you can do a whole lot more with your phone and PC than get sucked into the latest tweetstorm. When was the last time you closed that Facebook app and opened up an ebook reader or audiobook player? You could also make your morning commute or exercises more stimulating if you cue up a podcast for some on-the-go learning.
Get ready for the long run.
One of the ways that your financial planning experience will be very different from your parents’ or grandparents’ is how we will account for your plan’s longevity. People today are healthier, living longer, and staying active later in life. In fact, Andrew Scott, Professor of Economics at London Business School and a fellow of All Souls, Oxford University, and the Center for Economic Policy Research, believes that hundred-year lifespans will soon become much more normal.
A commitment to learning and self-improvement will create positive attitudes and habits that will serve you well as you near retirement and prepare to enjoy your golden years. According to Professor Scott, “in a hundred-year life, leisure time will be used not just for recreation, but also, if you’ll excuse the pun, re-creation. You’re going to have to use leisure time not just as a consumption activity by watching Netflix, but as an investment activity. Using your leisure time to invest in yourself and not just rest we think will be crucial to deal with these changes.”
So, why not start making daily learning a part of your routine today?
Make a list of two or three things you’ve always wanted to know more about, or skills you wish you had, or talents you’d like to develop. If any of your learning goals are big enough that they might have an impact on your financial planning, we’d love for you to come in and tell us about them.
for more info on this topic and others, visit us at Heritage Financial Advisory Group
A Simple Plan to Achieve More in Life and Feel Good About the Results
Mike Desepoli, Heritage
We tend to overestimate what we can accomplish in the short-term and underestimate what we can accomplish in the long-term. The frustration that results is one big reason why so many New Year’s resolutions die before Spring.
But if you use these key strategies that are supported by deeply-held values – and science! – you’ll set better goals, achieve them, and feel better about yourself while doing so.
Know your values.
Knowing your values can provide real clarity on what you want to achieve in your life.
So ask yourself, what’s important to you? What makes you excited to get up in the morning? What are the passions and interests that fill your time when you’re not working? Who are the people you do those things with?
Another way to explore your values is to try new things. For example, volunteering at your local church or community center might reveal a passion for teaching or philanthropy that you never knew you had. These active experiments can become even more important as you age and start thinking about how you’ll stay happy and engaged in retirement.
Align your goals with your values.
Behavioral scientists have found that achieving goals is rarely a matter of ability or knowledge. For example, a person who wants to lose weight knows that eating ice cream with hot fudge five nights a week is not compatible with weight loss. Yet, the reason they keep downing that ice cream is often due to a lack of motivation. They might feel the immediate pleasure from the ice cream outweighs (no pun intended) the longer-term result of no weight loss, or worse, weight gain.
The more important a goal is to us, the more motivated we are to achieve it. Asking “Why?” can help you align your goals with your values and increase that motivational component:
- Why should you stop eating ice cream five nights a week? Because I want to be healthier.
- Why do you want to be healthier? So that I can live a longer and more active life.
- Why do you want to live longer and be more active? So that I can do more things with my children and grandchildren.
Now we’ve identified core values – health and family – that are tied to the goal. These values will make the goal more important, and more likely to be reached.
Develop an action plan.
Asking “Why?” helps us move our goal-setting to a higher, value-driven space.
Asking “How?” helps us drill down into specific actions we can take to achieve those goals.
“I want to lose weight” is the sort of goal many people set and then abandon. That’s because it’s too unspecific. You can’t just “lose weight” every day until you hit your desired number.
So ask yourself, “How am I going to lose weight?” An answer like, “I’m going to exercise more” is closer, but still not actionable enough.
So how are you going to exercise more? Take a bike ride through your neighborhood every morning? Jog for 30 minutes after work three days every week?
Those are small but solid steps that you can use to develop an action plan. You might even go a little further and join a gym, start a neighborhood walk group, or hire a coach to add an extra layer of accountability and keep you on track. And yes, cut out the ice cream and hot fudge!
Measuring is Motivating.
Whatever goal you set, try to keep score. It could be as simple as pulling out a piece of blank paper and putting a checkmark on it for each day you don’t eat ice cream. We find that the act of keeping score creates its own momentum and can be like a “pat on the back” for a job well done.
Even a perfectly-set, highly-motivated goal will be challenging. Some lazy Saturday you’ll snooze past your workout. You’ll cheat on your diet. An unexpected home repair might throw off your budgeting goals for the month. But that’s ok! We’re all human. Roll with it that day but then get right back to your plan.
All goals and personal improvements require effort. The grit we need to get over those inevitable humps is its own kind of skill that you can cultivate. Try to push yourself above and beyond your smaller targets. Welcome and accept feedback and criticism that can make you perform better. Prepare yourself to do better tomorrow when your alarm goes off.
And most importantly, stay positive. If your goals truly are aligned with your values, then working towards them shouldn’t feel like punishment. When you experience setbacks, try to embrace them as learning opportunities and adjust your action plan accordingly. And here’s an important piece of advice–when you hit small milestones on your way to big goals, treat yourself. We can all use a little positive reinforcement.
We’re here to help you.
What you aspire to achieve may require a financial commitment. Please contact us and we can discuss your particular situation and see how we can help you get on a faster path to achieving your life’s aspirations.
Don’t Just Work for Money, Work for Meaning
In a recent survey of 12,000 workers worldwide conducted by the Energy Project, only 50% of respondents found meaning in their work (1). Imagine spending 40 hours a week doing meaningless work. It’s soul-sucking, but it doesn’t have to be that way.
We understand why so many people stick with jobs that don’t provide meaning—it’s the money.
And working “for the money” is not all bad. Having financial security so we can provide for our families is obviously a worthy reason.
However, as important as money is, feeling that the work we do is meaningful matters too. It’s better for our health. It’s better for our relationships. And it just makes getting up in the morning much more desirable.
In an article in The Atlantic, author and cultural commentator David Brooks said, “There is no income level at which people are not desperate for meaning.” (2)
The good news is, there are proactive things we can do to derive more meaning from our work.
For some of us, finding that meaning in work might require a company or career change. For others, it could be as simple as reframing how we think about our current jobs and finding new ways to engage our talents. Here are a few strategies for maximizing your sense of meaning from 9 to 5.
Craft a new job out of your current job.
Hospital custodian isn’t a job that most people would consider meaningful, or even desirable. But Amy Wrzesniewski, now a professor at the Yale School of Management, found that many of the custodians she talked to didn’t consider their jobs low skilled or unfulfilling (3). Instead, they felt they were part of a team that was helping people get better. They may not have been performing surgery or prescribing drugs, but they believed their job was an important part of a bigger process.
In addition to basic cleaning duties, these custodians also went out of their way to bond with patients and visitors. They talked to unvisited patients, and even kept in touch with some after they were discharged. Rather than trying to find a different job, these custodians had crafted a more meaningful job out of their assigned work.
The job crafting concept can provide a new perspective on the work you do (4). Your current job might provide opportunities for expression, connection, and creativity that you never realized were there. Try to reconfigure your approach to daily work tasks around these opportunities.
Focus on WHY, not what.
It’s easy to get so bogged down in the things we have to do at work that we lose sight of why we do them. It can be helpful to your sense of meaning to consider the end result of your work. Especially, as it impacts other people.
For those happy hospital custodians, the Why was helping the ill. Your Why doesn’t have to be that altruistic. Although, somewhere at the end of all that paperwork and accounting there’s a person with a need you helped fill. Or maybe a problem you helped solve, an experience of joy you helped deliver.
Your Why could be the meaning you find from engaging your unique skill set. Instead of sagging under the weight of all that copy you have to edit, appreciate how your work engages your writing skills. Maybe a problem along the company’s supply chain engages your critical thinking. The company itself could also be your Why, if you’re working for a business that has a mission that you really believe in. You could also find a meaningful Why in the social bonds you create with the people you work with and the customers who rely on your products and services.
Examine your mindset.
If adopting a new mindset about your work doesn’t help you find more meaning … try examining your mindsets.
Business writer Dan Pontefract believes that we have three distinct ways of thinking about our work as it relates to our sense of meaning (5):
The Job Mindset is a “paycheck mentality,” in which people perform their jobs purely for compensation.
The Career Mindset is triggered when we focus on advancement. Things like making more money, getting that big promotion, increasing our power or sphere of influence.
Finally, the Purpose Mindset engages our feelings of passion, innovation, and commitment, and an outward-looking focus on serving your employer as a whole.
Pontefract recommends spending a week tracking your mindset. At the end of every day, write down approximately how much time you’ve spent in the Job, Career, and Purpose mindsets. At the end of the week, tally up the totals.
What do these numbers tell you about your mindset at work? Are you spending the majority of your time grinding towards that Friday paycheck, or looking for ways to get ahead? Further, how does your time spent in the Job and Career mindsets compare to the time you spend in the Purpose mindset? Can you use job crafting to adjust your mindset and focus your energy more? What about how your work contributes to something bigger than money?
If you can’t balance out these mindsets in a way that allows you to find more meaning in your work, you might need to adjust your role. Or you might need to explore new career paths. Either way, we’d be happy to discuss this with you and help you position your financial resources to support your decision. Please contact our office to setup an appointment.
Facebook data scandal: Here’s everything you need to know
Cambridge Analytica is in the midst of a media firestorm. This came after an undercover sting operation caught senior executives boasting about psychological manipulation, entrapment techniques and fake news campaigns. Alongside social media giant Facebook, the London-based elections consultancy is at the center of an ongoing dispute over the alleged harvesting and use of personal data.
It started with an explosive expose broadcast by Britain’s Channel 4 News on Monday. In it, senior executives at Cambridge Analytica, were caught on camera suggesting the firm could use sex workers, bribes and misinformation in order to try and help political candidates win votes around the world.
How did this initially come to light?
The Channel 4 News investigation followed articles published over the weekend by the New York Times and U.K. newspaper The Observer. The reports sought to outline how the data of millions of Facebook profiles ended up being given to Cambridge Analytica.
In this way, 50 million Facebook profiles were mined for data. Kogan then shared this with Cambridge Analytica, which allowed the firm to build a software solution. The software was used to help influence choices in elections, therefore spurring the narrative of collusion. This was according to a whistleblower, who revealed the alleged practices to both newspapers.
How has Facebook Stock responded?
As you might expect it’s been under quite a bit of pressure the last few days. It is currently off about 10% from recent all time highs made in February. With growing calls for executives to appear before congress, it will likely continue to be under pressure. In the news today, there is a group of investors who have filed a class action lawsuit against Facebook with the intention to recoup stock losses.
What happens next?
U.S. senators have urged Facebook boss Mark Zuckerberg to testify before Congress. They will likely ask about how the social media giant will protect its users. Meanwhile, in the U.K., Zuckerberg has been summoned by the chairman of a parliamentary committee in order to explain the “catastrophic failure” to lawmakers.
The head of the European Parliament has also said it will carry out an investigation to see whether data was misused.
Tariffs & Trade Wars
By Emmet Sullivan , Guest Blogger
Many consumers, investors, and ordinary citizens often worry when the word “tariff” is thrown around. Instantly signaling an increase in price in imported goods, the word is almost synonymous with a negative economic impact. Thinking in terms of the big picture, we need not jump to such hasty, and often misguided conclusions.
What is a Tariff?
First, it is important to understand what tariffs are, and what they hope to accomplish. A tariff is an additional tax imposed on imported goods. By imposing these taxes on imports, national governments hope to discourage large-scale outsourcing. As a result they hope to spur domestic production by driving import prices up. When the prices of imports go up, the hope is that consumers will look to domestic suppliers for goods they would normally obtain from international sellers.
The current tariff talks in the U.S. are based around metals. Specifically, President Trump wants to impose a 25% tariff on imported aluminum and steel. The levy is intended to increase demand of domestically manufactured metals by increasing the price of their international substitutes. This in turn might create a number of job opportunities in U.S. metal production related to the surge in demand.
Many worry that this tariff may result in an international trade war between the U.S. and countries like China and South Korea. There is speculation that trading partners might retaliate with similar tariffs. Therefore, this would make it harder for U.S. producers to export their goods. However, Canada (the U.S.’s largest supplier of both aluminum and steel) and Mexico (the U.S.’s third largest trading partner) are both exempt from the tariff as part of the ongoing re-negotiation of the NAFTA agreement.
In summation, the tariff should not be an immediate cause for worry. As stated, some of the U.S.’s largest trading partners are exempt from its effects, and some speculate that it has been implemented as a negotiation tool for international agreements like NAFTA. The tariff’s long term effects remain to be seen, but we caution against fear of an economically-harmful trade war at present.
3 Financial Resolutions for 2018
by Mike Desepoli, VP of Heritage
With 2017 coming to a close and 2018 in our sights, it’s time once again to make that list of new year’s resolutions. Each and every year, we sit down in late December and hammer out a list of things we hope to accomplish next year. While we all certainly have good intentions, studies show that most resolutions have come and gone by the time January ends. Some evidence of this would be going into a gym in early January, you can bet the place is packed. However, head back there in mid march and you can be certain the crowd has thinned out.
So that begs the question, why do so many people fail at keeping their resolutions? Do they reach too far? Maybe they set the bar too high? As we know with goals, they not only need to be measurable, but it helps when they are actually achievable.
I may not be able to help you in every part of your life, but when it comes to personal finance we have your covered. Here are 3 financial resolutions for you to deploy in 2018.
One of root causes of financial problems is lack of attention and accountability to ones finances. It is no longer acceptable not to know what your account balance is, what is your credit limit, and how much money you spend on a monthly basis. The first step to achieving any basic financial goal is awareness. Once you are more in tune with where your money flows every month, you can start to identify financial opportunities that will move you forward towards greater things.
Create a Budget
Yes, I know you have heard this 100 times but how many of you have actually done this? We all think we know what we spend money on, but the fact is without a budget there is no doubt you are wasting money each month. Outlining a budget will help you have a closer relationship with your money. The more we learn to respect money, the more responsible we will handle it. Make sure creating a budget is one of your new year’s resolutions.
This is so simple, yet so important. Most financial problems originate from debt. It starts small, and the next thing you know your credit cards are maxed out and you can only afford the minimum interest payments. This starts the cycle of perpetual debt that is very hard to climb out of. Having a budget will help you avoid debt in the first place, but if you should find yourself in debt start by paying off the highest interest debt first.
These are just a few quick tips to get you on the right track. For more info hit the link below to check out our Youtube Show! Happy Holidays and Happy New Year!
Negotiate Salary with These 3 Tips
By Kristi Desepoli, Heritage
Negotiating a job-offer is rarely an easy task. Although every situation is unique, there are some strategies the can help address many of the obstacles people face when it comes to negotiating with prospective employers.
Here are some rules to help you navigate these discussions:
Do not undervalue the importance of your likability
Although this may seem simple, people are not going to fight for you if they don’t truly like you. If you do anything throughout the negotiation process that makes you less likeable, it’s not probable that they will work to get you a better offer. This pertains to not coming off as greedy when asking for what you deserve and being persistence without being a pest, rather than just making sure you are being polite.
Help them understand that you deserve what you are asking for
Aside from being liked, you also have to appear worth the offer that you are requesting. Never assume that your request can speak for itself, always give the details that go along with it. Rather than just requesting a higher salary, state the reasons why you are more qualified to receive more money. If you do not have any justifying reasons behind your request, it may not be worth your while to make it in the first place.
Make it clear that they can get you
It can be a process for employers to get approval for salary negotiations depending on the structure, and they won’t want to jump through hoops for someone that they think is still going to say “no, thank you” regardless of the outcome. If you plan on negotiating with a prospective employer, make it clear that you are serious about working for them. Although some employers may jump to meet your demands when they hear that other employers are doing the same to get you; some may take that as a sign that they may be wasting their time on someone who isn’t likely to pursue their offer.
Although every situation is unique, be sure to utilize these tips to make your negotiation process as smooth as possible.
8 Federal Tax Credits to Get More from Uncle Sam
By Jackie Waters, Guest Contributor from Hyper-Tidy.com
Every year, federal tax credits can change. Some get added, others are taken away, and changes may occur within the ones that have been around for ages. Tax credits are one way to maximize how much of your money you get to keep. In some cases, they feel a bit like a tax-free “bonus” to offset costs. However, most taxpayers only know about a few federal tax credits—and the majority of taxpayers don’t have a clear understanding of what those credits entail.
Tax credits and tax deductions are wildly different, but often confused. Deductions reduce your taxable income. The goal is to reduce your income as much as possible so you ideally fall within a lower tax bracket (and thus pay less in taxes). However, credits reduce taxes directly and aren’t tied to tax rates. Still, the actual value of each credit might be informed by your basic tax liability. There are also nonrefundable credits which can reduce your taxes to zero, but anything leftover is lost (in other words, you won’t be getting a check for the difference).
Most tax credits are aimed at families and parents, and include:
- Child Tax Credit. For the 2016 tax year, you can claim up to $1,000 per child. This credit is designed to offset the costs related to caring for children.
- Child and Dependent Care Tax Credit. This credit is available on a case by case basis. If you paid someone to take care of your child or dependent who is under 13 years old, you likely qualify. However, this credit works more like a deduction (which is how they can get so confusing!).
- Adoption Tax Credit. Adopting a child can be expensive. Taxpayers can claim up to $13,460 for the 2016 tax year for each child. Adopted children must be under 18 years old, or over 18 if they have special needs.
- Credit for the Elderly and Disabled. If you’re over 65 years old, or if you’ve already retired and have a permanent disability with taxed disability income, you may be eligible for this credit. However, there are income limitations.
Home, Sweet Home (and other Credits)
The second most popular credit category is for homeowners. Buying a home is probably the most expensive purchase you’ll ever make, and Uncle Sam can help ease the burden. There are also special credits for employees, medical expenses and more:
- Home Energy Tax Credits. If you installed a green, renewable-energy item in your home, you can get a credit of up to 30 percent of total expenses. However, not all items qualify. Popular items include solar panels and geothermal heat pumps. Talk with your CPA about qualifying purchases.
- Earned Income Tax Credit. One of the most well-known credits, this one is for those who had low or moderate incomes in 2016. Also known as the EITC, it helps reduce taxes, and may even qualify you for a refund.
- Foreign Tax Credit. If you worked outside the United States, the FTC is designed to protect against double taxation. You don’t pay federal or state taxes for the money earned while you worked abroad, but you do still pay Medicare and Social Security taxes.
- Premium Tax Credit. If you have low or moderate income and bought health insurance via the Health Insurance Marketplace, you may qualify to have a credit paid to your insurance company to minimize monthly premium payments. Another option is to claim the full credit on your taxes.
These are just a few of the tax credits you may qualify for during the 2016 tax year. As you plan for next year’s taxes, pore over the qualifications to make sure you’re not overpaying or missing out on any credits (check out some software here that may help you). The sheer volume of tax credits available is another reminder of how critical a CPA can be when planning your financial future.
About Jackie Waters
Jackie Waters is a mother of four boys, and lives on a farm in Oregon. She is passionate about providing a healthy and happy home for her family, and aims to provide advice for others on how to do the same with her site Hyper-Tidy.com.
The 1 Question Investors Should Ask: Is My Financial Advisor a Fiduciary?
By Mike Desepoli AIF®, Vice President of Heritage Financial Advisory Group
Financial advisors will have a new regulation to deal with starting in April, and it’s the biggest change the financial advice industry has seen since the great recession. It’s called the “Fiduciary Rule”, and it will have a significant impact on how financial advice is delivered. It is important that investors understand what this change is, and why its’s important.
Introduced by the previous administration, the fiduciary rule will require financial advisors to put the client’s needs before their own. Yes, you read that right. Until the rule officially goes into effect, your financial advisor may not have your best interest in mind.
What is the current law?
As the law currently stands, there are two standards that advisors are held to, the suitability standard and the fiduciary standard. The suitability standard gives advisers the most wiggle room. It simply requires that recommendations must fit clients’ investing objectives, time horizon and experience. You can satisfy the suitability standard by recommending the least suitable of the options, as long as it falls within the general suitability test of that client. The suitability standard invites conflicts of interest pertaining to compensation, which can vary greatly from one product to another.
It also doesn’t require advisors to disclose conflicts of interest. So what that means is often the products that are being recommended are best for the broker, and have higher costs for the investor. It is estimated that non fiduciary advice costs Americans approximately $17 billion each year.
The other standard of care, the fiduciary standard, tasks advisors with putting their clients’ best interest ahead of their own. For instance, faced with two identical products but with different fees, an adviser under the fiduciary standard would be compelled to recommend the lower cost option to the client, even if it meant fewer dollars in his or her own pocket.
Unfortunately many investors can’t distinguish among advisors who is a fiduciary, and who isn’t. Studies have shown that individual investors don’t know who is a fiduciary or what a fiduciary actually is. So here are a few questions to help you sort through the rubble:
How often do you monitor my investments?
Investors don’t ask this question often, because most investors assume the advisor keeps a close eye on their portfolio. A common reason for using an advisor is insufficient time to self-manage. Hopefully, you are not paying an annual fee for an advisor to put your money into passive index funds and not monitor their performance. If your advisor is not analyzing your portfolio at least quarterly, you may want to discuss the services offered for the annual fee you pay.
What is your investment philosophy?
Paying careful attention to the advisor’s answer can offer insight into the business model. Although there is no one-size-fits-all approach, all advisors should have a disciplined and repeatable investment approach. Markets fluctuate, and strategies that may have been in favor last year might perform terribly the next year. An advisor who chases performance and lacks an underlying process often generates poor returns. If they are pitching a new “hot” fund every time you meet, they may not have your best interest in mind.
How much am I really paying?
Disclosure requirements have improved since the financial crisis, but “hidden” fees remain for the average investor. Often, when selecting a financial advisor, clients base their decision on the advertised fee. In some cases, there may be no fee referenced at all. Is the advisor working for free? If the fee seems too low, that may also be concerning. The advisor may be receiving ongoing service fees from the investment they are recommending.
This undisclosed compensation is a big conflict of interest. Beware, as these fees can become a significant cost over time, compared to the explicit fees of a fiduciary advisor. A typical fee-based advisor has a tiered structure based on account size that is disclosed to a client up front. Selecting an advisor with a reasonable fee is important, but what you get for that fee is equally relevant. If one advisor is a fiduciary and the other is only held to the suitability standard, the difference in fees may not paint the full picture. Investing in an advisor who has your best interests at heart could pay handsomely over time.
When it comes to choosing a financial advisor, take nothing for granted. Know what you are paying for, and what services you are entitled to. Remember, a misguided broker focused on his or her next commission could cause you financial ruin.
President Trump’s Speech
It was a grand slam.
Major U.S. stock markets were positively euphoric following President Trump’s speech on February 28. Optimism about the new administration’s pro-growth policies propelled the four major U.S. stock indices to record highs, despite a dearth of policy details, reported Financial Times.
It’s hard to pinpoint exactly why stocks have moved so far, so quickly. However, it appears that mom-and-pop investors have become quite enthusiastic about the asset class according to data from JPMorgan Chase cited by Bloomberg. While institutional investors (pensions, insurance companies, etc.) have been reducing exposure to stocks, smaller investors have been loading up on shares.
CNBC reported some industry professionals, including Goldman’s chief U.S. equity strategist David Kostin, believe stocks have become too highly valued. ZeroHedge.com quoted Kostin, who said:
“Cognitive dissonance exists in the U.S. stock market. S&P 500 is up 10 percent since the election despite negative EPS [earnings per share] revisions from sell-side analysts…Investors, S&P 500 management teams, and sell-side analysts do not agree on the most likely path forward. On the one hand, investors, corporate managers, and macroeconomic survey data suggest an increase in optimism about future economic growth. In contrast, sell-side analysts have cut consensus 2017E [estimated] adjusted EPS forecasts by 1 percent since the election and ‘hard’ macroeconomic data show only modest improvement.”
Financial Times reported pessimism prevails in the bond market. One bond market professional said, “The bond market is taking a totally different view from the equity market. Blowing raspberries is a good way to put it…There’s no belief that the growth agenda will be dramatic.”
So, is strong economic growth ahead? Do bond investors or stocks investors have it right? Are institutional investors or mom-and-pop investors positioning themselves correctly? Only time will tell.
in the markets
|Data as of 3/3/17||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||0.7%||6.4%||9.6%||8.9%||11.8%||5.7%|
|Dow Jones Global ex-U.S.||-0.2||5.2||12.2||-1.4||1.7||-0.5|
|10-year Treasury Note (Yield Only)||2.5||NA||1.8||2.6||2.0||4.5|
|Gold (per ounce)||-2.2||5.8||-1.9||-3.1||-6.4||6.8|
|Bloomberg Commodity Index||-0.3||-0.4||13.4||-13.6||-9.8||-6.2|
|DJ Equity All REIT Total Return Index||-1.0||3.2||12.4||11.0||11.2||5.5|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
don’t think so!
Tax season is upon us. That means we can all use some entertainment. While many folks dread the process of completing and filing taxes, some see it as an opportunity to test the boundaries of the system. Here are a few deductions Americans have taken that have failed to pass muster in tax court, courtesy of Kiplinger.com:
You cannot deduct the cost of a good night’s sleep.
A tax preparer who worked from home escaped to a hotel because her clients were calling in the wee hours of the night and causing her to lose sleep. When she attempted to take a business deduction for the hotel expense, the tax court ruled a good night’s sleep is a non-deductible personal expense.
You cannot take a theft loss deduction for poor construction
A couple moved into their newly built dream home only to realize the builder had cut some corners. The house had some serious issues, including its foundation. The couple claimed the builder had defrauded them and took a large theft loss deduction. While taxpayers can deduct losses from a home-related theft, shoddy construction doesn’t qualify.
You cannot take a depletion deduction for bodily fluids
A woman earned $7,000 a year donating blood plasma because of her rare blood type. She took a depletion deduction, claiming “the loss of both her blood’s mineral content and her blood’s ability to regenerate,” wrote Kiplinger. While companies that take coal, iron, and other minerals from the ground can take a depletion deduction, the tax court ruled that individuals cannot claim depletion on their bodies.
You cannot deduct a business trip if there are no formal business meetings involved
A repo firm sponsored a trip to Las Vegas for its bank customers. The firm’s employees chatted with clients about business on the way to Vegas, but no formal meetings were held. The tax court denied the deduction.
Before you get creative with your taxes, consult with a tax professional.
Weekly Focus – Think About It
“Because of your smile, you make life more beautiful.”
–Thich Nhat Hanh, Vietnamese Buddhist monk and peace activist
The Added Value of Financial Advisors
By Mike Desepoli, VP of Heritage Financial Advisory Group
As financial advisors we are often asked whether it is worth the cost to hire a financial advisor. I know, very ironic. After all, there is a cost to make you money. People say they can listen to the news to find out where and how to invest, so, “Wouldn’t I be better off just keeping that fee for myself?” That is an excellent question with an answer that depends on many factors.
Good financial planning decisions extend well beyond where and how you invest. Two major research efforts have attempted to quantify how good financial decision making can enhance one’s lifetime standard of living. It is important to understand what this research means, because this may not always equal a higher portfolio return in the short term. Financial advisors have a range of tasks they manage for clients, and how well they do it can add to the bottom line of your portfolio.
The research identifies how good decision making can enhance sustainable lifetime income on a risk-adjusted basis. The ability to spend more than you could have otherwise can be interpreted as meaning that the assets earned a higher return net of taxes and fees to make that spending possible.
Recent research conducted by financial giant Vanguard took a closer look at the value a financial advisor can add in real percentage terms. Their research indicates that overall, the estimate for value added by an advisor annually is 3%. While there are many different aspects of the financial planning process, they found that advisors add value in 3 key areas.
Constructing a well-diversified portfolio that is both tax and cost efficient is one of the ways a financial advisor helps increase your investment returns. They will also help make sure you stay diversified, and don’t fall victim to the temptation to put all your eggs in one basket. Many do it yourself investors find themselves chasing the latest hot stock, usually at the tail end of a long run. Investors without a plan will ultimately buy high, sell low when they run out of patience, and repeat the process into oblivion. Having a well-constructed portfolio accounts for just over 1% of the overall annual return.
Your advisor has the ability and the time to evaluate your portfolio investments, meet with you to discuss your objectives, and help get you through tough markets even when your emotions try to get in the way. All of these factored together potentially add value to your net returns over time. The single greatest cause of failure in the investment markets can be attributed to emotional decision making. It is no secret that people are emotionally with their money. We work so hard for it who can blame us. However, allowing your emotions to cloud your judgement and decision making is sure to drag down your portfolio. Work with a financial advisor who will keep you calm, cool, and collected even when the chips are down.
This part of the job entails making regular changes to your portfolio to help reduce risk. It also involves helping clients navigate withdrawals in a way to help limit the taxes they will pay. Many investors incur taxes that could have otherwise been avoided or delayed had they navigated their withdrawals differently. It is very important to understand the taxable status of money that you are transferring or withdrawing from your account. If you are dealing with a retirement account, it is imperative to know if the funds are pre or post tax. We’ve come across many folks in our travels that created a taxable mess by simply being uninformed. If you don’t know, ask your financial advisor or accountant.
Heritage Financial Advisory Group is a Long Island based Financial Advisor that specializes in investment management and financial planning. We work primarily with families, entrepreneurs, and Doctors to create financial strategies that have a lasting impact. For more information, say hello to our team of professionals.
Saving for a Rainy Day: Unusual Expenses that Add Up Quickly
By Jackie Waters, Guest Contributor from Hyper-Tidy.com
When you’re living independently as an adult, it’s easy to budget for everyday costs–grocery shopping, mortgage or rent, gas for your car, etc. However, most people end up spending a significant portion of their income on emergency situations that are not expected. The big fault here is not having a disaster, but not planning for one. In your monthly or yearly contribution to your extra savings account, it’s important to think about the price of even the most unusual expenses as a result of unexpected circumstances. Unfortunately, it’s not a matter of if these situations will happen–but when. During tough times, you want to be prepared, so here are some areas in your life for which you should be saving.
If you are living under a roof with your name on the property, you are responsible for fixing all the problems that arise. This ranges from a leaky faucet, to a damaged appliance, and to even more serious issues that attribute to the home’s structure. Some of the home repair afterthoughts include:
- Bug infestation, such as fleas or bedbugs
- Water damage
- Foundation problems (such as a crack or shift)
- Sewer line problems on the outskirts of your property
Often times, water damage and mold can be preventable simply by being aware and immediately fixing leaks throughout the house. Any type of bugs, especially fleas or bedbugs, can attach to you or your belongings as you travel. It’s important to check for bugs any new place you stay, even for a short duration of time. Foundation or sewer problems, on the other hand, are issues that happen over time and can only be fixed by calling professionals for repair.
Depending on where you live in North America, you can take a hit from the environment in a variety of ways. These disasters can be droughts, hurricanes, fires, earthquakes, tornadoes, floods, volcanoes, hail storms, and severe weather that encompasses rain, wind, thunder, and lightening. In 2016 alone, major climate disasters in the United States accumulated to a one-billion-dollar cost per disaster.
- House fires can cost up to $45,000 for homes without fire sprinklers and $2,166 for homes with sprinklers, according to the U.S. Fire Administration.
- Flooding for 2,000 square foot homes with 6 inches of water damage can cost up to $39,150 based on National Flood Insurance Program estimates. Find out the estimated cost for your home here.
- Earthquakes cost the average homeowner $3,914 in property damage and repairs.
It’s important to note that while purchasing homeowner insurance can reduce most costs of natural disasters, the coverage varies state by state. Typically, water damage from floods are not covered by insurance companies.
Death of a loved one, or severe illness, can happen unexpectedly and change the lives of everyone else in an instant. Particularly, American funerals are becoming more and more expensive; the average can range from $8,000 to $10,000 per person.
Major sickness, such as cancer, can require intense pharmaceutical drugs and hospital visits that end up costing an individual thousands of dollars each year. Drugs and other medicinal therapies alone can range from $10,000-$30,000 per month for some people. Insurance companies usually cover 70-80% of medical bills, but that still leaves the average cancer patient with $24,000 to $36,000 in annual debt.
Sudden job loss or cut in pay
No one likes to plan for the day they lose their job, but unfortunately, it can still happen. For those who live on their own independently or whose income provides for an entire family unit, the loss of pay can be quite significant. In these circumstances, having an emergency fund with 3 to 6 months’ worth of expenses can help with daily living until you get back on your feet.
About Jackie Waters
Jackie Waters is a mother of four boys, and lives on a farm in Oregon. She is passionate about providing a healthy and happy home for her family, and aims to provide advice for others on how to do the same with her site Hyper-Tidy.com.
Executive Orders – Heritage Insider
February 7, 2017
U.S. stock markets were unsettled last week.
President Trump’s executive orders banning travel from seven predominantly Muslim countries to the United States for 90 days, in tandem with some disappointing earnings reports. As a result, this inspired turmoil and uncertainty that helped push U.S. stock markets lower early in the week. The Dow Jones Industrial Average dropped below 20,000.
Markets remained confused after the Federal Reserve left interest rates unchanged, leaving many to ponder their next move.
The Federal Reserve left open the door to hike rates further should the trend in inflation accelerate. They also maintained the option to hold rates steady for an extended period. I expect the minutes to be released in a few weeks will show a more wide ranging debate than that indicated by the policy statement. A potential drawback would be the clear lack of visibility on key policy issues. For example, trade, tax, spending, and regulatory initiatives would be welcomed in the next statement.
Late in the week, markets rallied when the Bureau of Labor Statistics delivered a reasonably strong jobs report. Employers added a healthy 227,000 workers to their payrolls in January. However, despite a surge of local minimum-wage increases in states across the country, wage growth was meager.
Financial shares gained on Friday. The market showed great optimism after The Wall Street Journal published an interview with Gary Cohn, White House Economic Council Director. Cohn indicated President Trump planned to sign executive orders preparing to reduce financial regulation. In particular, dismantling Dodd-Frank reforms and limit other regulations affecting the financial industry. Consequently, financial stocks rallied hard. Other executive orders may be on the way in regards to financial reform as well.
The Dow finished the week just above 20,000.
|Data as of 2/3/17||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||0.1%||2.6%||10.1%||9.7%||11.3%||4.7%|
|Dow Jones Global ex-U.S.||0.3||4.3||15.3||-0.1||1.8||-1.0|
|10-year Treasury Note (Yield Only)||2.5||NA||1.9||2.6||2.0||4.8|
|Gold (per ounce)||2.6||4.8||7.4||-1.3||-6.9||6.5|
|Bloomberg Commodity Index||-0.1||0.5||15.3||-11.4||-9.6||-6.1|
|DJ Equity All REIT Total Return Index||0.8||0.7||13.4||12.5||10.2||4.2|
does college open doors?
A new study examined how college affects Americans’ social mobility by researching data from the Department of Education (from 1999-2013) with 30 million tax returns. The researchers looked at the earnings of graduates from various colleges and how graduates’ earnings varied relative to parental income.
Some colleges do a better job of boosting poor students up the income ladder than others. Previously, the best data available showed only average earnings by college. For the first time it is known how the entire earnings distribution of a college’s graduates relates to parental income.
The data shows the likelihood of ending up in the 1 percent. It suggests that graduates of elite universities are the most likely. They credit single-digit admissions rates and billion-dollar endowments as the main catalysts. Having wealth parents also improves the odds. Despite recent efforts to change, their student bodies are still overwhelmingly wealthy.
Legacy admissions give preferential treatment to family members of alumni. Many feel that this exacerbates the imbalance at these institutions. Of Harvard’s most recently admitted class, 27 percent of students had a relative who also attended. There’s evidence that this system favors the already wealthy. MIT and the California Institute of Technology, two elite schools with no legacy preferences, have much fewer students who hail from the ranks of the super-rich.
The top colleges by mobility rate , which is defined as students moving from the bottom to the top 20 percent, includes: Cal State University-Los Angeles, Pace University-New York, SUNY-Stony Brook. It also includes, Technical Career Institutes, University of Texas-Pan American, CUNY System, Glendale Community College, South Texas College, Cal State Polytechnic-Pomona, and University of Texas-El Paso.
Weekly Focus – Think About It
“Oh give me a home where the buffalo roam,
Where the deer and the antelope play,
Where seldom is heard a discouraging word,
And the skies are not cloudy all day.”
–Lyrics to Home on the Range
Heritage Financial Advisory Group provides financial planning and investment management to individuals, families, and businesses. For more information how we can help you pursue a work option lifestyle, visit us at Long Island Financial Advisor.
Teaching Your Children Good Money Values
Mike Desepoli, Heritage Financial Advisory Group
The book The Financially Intelligent Parent: 8 Steps to Raising Successful, Generous, Responsible Children, by Eileen and Jon Gallo, focuses on the idea that the way in which parents spend money sends messages to their children about their money values and priorities. It helps you become more aware of the values communicated to children through your spending. It provides some great ideas about how to give children the messages you want them to receive. If you are traveling down this road, here are a few ideas.
Become a charitable family
Teach your children to be generous through your volunteer activities. If you do service work individually, talk about what you are doing and the people for whom you are doing it. If you can, find opportunities to volunteer as a family. Also, when you get requests for charitable donations, discuss the goals of each charity. Have your children help you decide where to give. As a result of introducing the ideas of service and giving, you can teach your children that they have the power to make life better for others.
On their blog, the Gallos refer to the book, Flow: The Psychology of Optimal Experience. Its author suggests that internally motivated people are happier than those who rely on external motivations. As a result, the Gallos suggest that parents can help their children become happier adults by relying less on external motivators. External motivators would be like paying children to do chores. Instead, focus more on internal motivators, like using chores as a means of helping children gain self-respect. It can also teach them to take pride in their work.
Develop a work ethic
The primary work of most children is school. It is important to encourage them to ‘do their best’ as opposed to ‘be the best.’ In addition to taking responsibility for their schoolwork, children should be assigned age-appropriate chores. Also, encourage them to take on part-time employment when they get older. A good work ethic is learned behavior, and parents are the best role models.
Your behavior sends clear messages to your children. They learn money values by seeing what you spend money on and how you treat others. It’s important to teach children that money is something they have and not something they are. Their net worth and their self-worth are entirely different things.
For more information on how to teach your kids good money values, and a whole bunch of other cool topics keep an eye on our Blog
Heritage Financial Advisory Group is located in Port Jefferson, New York. We provide investment management and financial planning strategy solutions to individuals, families, and business owners. For more on our Wealth Management Services visit our website.
Many Investors are not aware of the different between fiduciary and suitability standards
President Obama’s recent endorsement of fiduciary standards for financial advisors could have significant implications for the investment industry. In other words, the president is pushing to require financial advisors to put the client’s needs before their own. While this may come as a surprise, your advisor may not have your best interests in mind. As the law currently stands, any financial professionals operating under the “suitability standard” are merely required to ensure an investment is suitable for a client at the time of the investment.
This contrasts with the “fiduciary standard” where registered investment advisors, and appointed fiduciaries must avoid conflicts of interest and operate with full transparency. It is estimated according to the Council of Economic Advisers that non-fiduciary advice costs Americans 1 percentage point of their return annually, or $17 billion each year.
Fiduciary vs. Suitability
To illustrate the difference between these two standards, consider a middle-aged client who is a long-term investor and is not bothered much by market volatility. Under the suitability standard, an advisor can meet with this client to determine what is suitable at that point in time. Using the goals and risk tolerance as a baseline, the advisor may determine that the majority of savings should go into a stock mutual fund. Many advisors promote funds of the very banks or institutions that employ them, because they provide a back end compensation to the advisor. Investors are largely unaware of this practice. Once the client leave’s this advisor’s office, they have little further legal obligation to monitor this client’s investment.
The picture is much different under the fiduciary standard. First, all conflicts of interest must be disclosed. Also, a fiduciary has a “duty to care” and must continually monitor not only a client’s investments, but also their changing financial situation. Maybe this client’s risk tolerance changed after going through a painful bear market. Perhaps there was a tragedy in the family, causing the client’s medical expenses to skyrocket. Under the suitability standard, the financial planning process can begin and end in a single meeting. For fiduciaries, that first client meeting marks only the beginning of the advisor’s legal obligation. It’s time to be more proactive with your advisor. Here is a list of questions to consider.
How often do you monitor my investments?
Investors don’t ask this question often, because most investors assume the advisor keeps a close eye on their portfolio. A common reason for using an advisor is insufficient time to self-manage. Hopefully, you are not paying an annual fee for an advisor to put your money into passive index funds and not monitor their performance. However, the problem has become so prevalent that the Securities and Exchange Commission is increasing scrutiny of “reverse churning.” As more advisors move their compensation toward annual fees, the incentive has shifted from doing excessive transactions to generate commissions, toward inactivity. If your advisor is not analyzing your portfolio at least quarterly, you may want to discuss the services offered for the annual fee you pay.
What is your investment philosophy?
Paying careful attention to the advisor’s answer can offer insight into the business model. Although there is no one-size-fits-all approach, all advisors should have a disciplined and repeatable investment approach. Markets fluctuate, and strategies that may have been in favor last year might perform terribly the next year. An advisor who chases performance and lacks an underlying process often generates poor returns. If they are pitching a new “hot” fund every time you meet, they may not have a have a disciplined long-term investment philosophy. The tried-and-true advisor with a transparent fee structure and disciplined approach may not provide fodder for cocktail party gossip, but over time, he or she will reward patient investors.
How much am I really paying?
Disclosure requirements have improved since the financial crisis, but “hidden” fees remain. Often, when selecting a financial advisor, clients base their decision on the advertised fee. In some cases, there may be no fee referenced at all. Is the advisor working for free? If the fee seems too low, that may also be concerning. The advisor may be receiving ongoing service fees from the investment they are recommending. This undisclosed compensation is called “soft dollars,” but are basically kickbacks for selling a particular investment product.
Beware, as these fees can become a significant cost over time, compared to the explicit fees of a fiduciary advisor. A typical fee-based advisor has a tiered structure based on account size that is disclosed to a client up front. The average is about 1.3 percent, which does not include fund expenses, another meaningful cost to consider when you choose an advisor. Selecting an advisor with a reasonable fee is important, but what you get for that fee is equally relevant. If one advisor is a fiduciary and the other is only held to the suitability standard, the difference in fees may not paint the full picture. Investing in an advisor who has your best interests at heart could pay handsomely over time.
when it comes to selecting a financial advisor, take nothing for granted. In an environment where the first question is, “Do you have my best interests in mind?” assumptions should be verified. Regardless of which advisor you choose, ask if they adhere to the fiduciary standard. Know what you are paying for. A good advisor will have a customized plan to fit your lifestyle. Finally, make sure your advisor is grounded by a solid philosophy and has experience consistently applying it throughout market cycles. Only after finding advisors who exemplify these attributes should you concern yourself with fees. Remember, a discount broker focused on his or her next commission could cause you financial ruin.
Heritage Financial Weekly – December 12, 2016
Dad: “Fra-gee-lay” …it must be Italian!
Mom: I think that says “fragile,” honey.
Dad: Oh, yeah.
This holiday season, investors’ enthusiasm for U.S. stocks has rivaled old man Parker’s passion for his major-award leg lamp in ‘A Christmas Story.’ Last week, three major U.S. indices hit all-time highs.
Consumer Sentiment on the Rise good for stocks?
Barron’s reported consumer confidence is helping make this the most wonderful time of the year for U.S. stock markets. The University of Michigan’s Index of Consumer Sentiment rose to 98 in December, reflecting a surge in consumer confidence. It was the highest reading since January 2015 and is closing in on the highest level since 2004. Surveys of Consumers chief economist, Richard Curtin, wrote:
“The most important implication of the increase in optimism is that it has raised expectations for the performance of the economy. President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance. Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence.”
In his December Investment Outlook, Bill Gross cautioned while many aspects of Trump’s agenda – tax cuts, deregulation, fiscal stimulus – are good for stocks over the near term, investors should keep an eye on the longer term, as protectionist policies could restrict trade and, together with a strong dollar, could lead to more fragile markets.
European stocks also moved higher last week as a result of the European Central Bank (ECB) announcing a taper. Quantitative easing will continue through 2017, but ECB purchases will fall each month beginning in April.
A Look At The Numbers
|Data as of 12/9/16||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||3.1%||4.6%||5.4%||7.7%||12.5%||4.8%|
|Dow Jones Global ex-U.S.||2.7||2.0||2.1||-2.8||2.7||-1.1|
|10-year Treasury Note (Yield Only)||2.5||NA||2.2||2.9||2.1||4.5|
|Gold (per ounce)||-0.8||9.5||7.6||-2.0||-7.4||6.4|
|Bloomberg Commodity Index||1.3||12.2||11.2||-11.2||-9.2||-6.3|
|DJ Equity All REIT Total Return Index||3.8||7.7||10.8||12.1||12.6||4.8|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Divorced? you may want to investigate spousal benefits.
If you weren’t the top wage earner in your marriage, or your job was raising the children, then Social Security’s spousal benefit could prove advantageous. As a result, it provides the lower earning spouse with 50 percent of the higher earning spouse’s benefit at full retirement age, even if you’re no longer married.
“Social Security operates with a philosophy that a divorced person may deserve a personal benefit, having been the long-term partner and helpmate of a member of the workforce. The benefit is similar, in fact, to the spousal benefit that is available to a person who is still married.”
What Does it all Mean?
To qualify, you do have to answer ‘yes’ to a significant list of requirements:
- Married for at least 10 years
- You are unmarried now
- Age 62 or older
- Your ex-spouse is entitled to Social Security benefits
- The benefit you qualify to receive based on your work, is less than the benefit your ex-spouse qualifies to receive because of several factors. There are other factors that could affect your application for spousal benefits, including whether your ex-spouse has begun taking benefits. If you would like to learn more, contact your financial professional .
Weekly Focus – Think About It
“My mission in life is not merely to survive, but to thrive; and to do so with some passion, some compassion, some humor, and some style.”
–Maya Angelou, American poet
Signs You’re Spending Too much In Retirement
How can you tell that you’re spending more than your savings will support? If any of these five signs describe you, it’s time to make some changes.
You don’t know how much you should be spending.
If you don’t have a budget, you’re probably spending too much. The Center for Retirement Research at Boston College found that 53% of households risk falling more than 10% short of their retirement goal. Another 40% of retirees may run out of money for basic needs. Other statistics show that more than two-thirds of Americans don’t use a budget.
“A budget acts as a roadmap for overall spending during a given week, month or year. A lot of times we are unaware of how much money we spend in any given month.A budget really is an accountability tool to make sure we are living within our means,” says Mark Hebner.
If you don’t follow a disciplined spending plan, start today.
You’re spending more than 6% of your savings per year.
How much you should spend post-retirement depends on many factors. Retirement experts say that depleting more than 4% to 6% of your savings annually is ill-advised. If you have $750,000 saved, a 5% withdrawal rate would give you $37,500 per year plus Social Security benefits. If you want to be safer, go with the traditional guideline of 4%.
You’re paying too much to service your debts.
Recent data from the Bureau of Labor Statistics found that the average retiree is spending 31% of his or her income on a house payment. That works out to about $13,833 per year, assuming an average income of $44,713. (And that’s just the house payment.)
Experts advise no more than a 36% debt-to-income ratio. Debt hurts you in two ways. First, the interest drives up the cost of the item. Second, you’re using money that could remain invested to service the debt. The more money that remains invested, the more your accounts will continue to grow. This is even more important now that you’re no longer bringing home a salary.
You’re displaying evidence of a “cut loose” mindset.
You spent decades working more than full time, supporting a family, paying into Social Security and delaying the fun things that come with making a comfortable salary. Now you’ve reached retirement and it’s time to do all those things you’ve always dreamed of doing.
That’s true, but not all at once. Rewarding yourself in the first year by purchasing a Corvette, going on an around-the-world vacation and purchasing a summer home will give you very few years of comfortable living. Spread those purchases over time if they fit into the budget.
“Financial planning in general is focused on the long game. Retirees should not only view the investment process as long term, but they should also make the most of their savings in retirement. Spending down all of your savings in the first few years of retirement is a recipe for complete disaster,” says Hebner.
You aren’t supporting your excess spending with a side job.
If you didn’t save enough for retirement – or you discover that your desire for adventure is costing more than your budget can support – working to support your spending can fill in the gap. Even a part time job that brings in $15,000 per year allows you to spend a lot more than the confines of your retirement budget may allow. Don’t fall into the trap of spending without a plan to augment your retirement income if you find yourself falling short.
The Bottom Line
It’s true that your thinking should change from amassing money to using it once you retire. But you need to create a transition plan. Your money may have to last 30 years or more – you probably hope you need it that long. Just keep in mind that over time, as your healthcare requirements rise, you may naturally spend more. Be sure you leave yourself enough of a cushion.
4 Important Qualities When Hiring A Financial Advisor
When it comes to choosing someone to help handle your finances, it can be somewhat terrifying. Providing insights into your funds, investments and needs requires the right professional.. While any professional will identify himself or herself as trustworthy and honest, here is something to consider…are they making guarantees? While financial advisors are skilled professionals with a background in this industry, no financial advisor can guarantee results. If you’re being guaranteed returns, chances are this individual is not being honest and forthcoming.
Your potential financial advisor should be able to provide evidence to you that they are knowledgeable about the financial areas you need managed. Don’t misread this into thinking your advisor should speak over your head with corporate lingo you don’t understand. Your advisor should be able to explain the topics being discussed in a graspable, educated way. After all, Albert Einstein once said, “You do not really understand something unless you can explain it to your grandmother.” If your advisor is knowledgeable of the ins and outs of his or her trade, they should be able to articulate these insights in clear, logical ways.
This is a tough one. Not every financial advisor has been in practice for multiple decades, nor do they need to have been. Any advisor resting on their past laurels is not guaranteed to be a perfect fit for you as the regulations and industries of finance change regularly and last year’s success does not infer an assumed return this year. By the same token, you should strive to find a financial advisor who can identify and discuss how they’ve been able to successfully advise other clients with similar needs in order to provide additional assurance that your circumstances fit well within their wheelhouse. Ask for specific situations (not requiring identities of current or past clients, though) and what research and factors informed the advisor’s actions that helped create success.
Your finances, along with your financial circumstances, are always evolving and changing, just like the numerous markets associated with them. You need a financial advisor who is available to you based on your needs. For many, you may only need to communicate with your financial advisor quarterly. However, when preparing for a major financial decision, you will likely need more frequent communication. Speak to your potential advisor about their availability. What good is having a financial advisor if they are never available to give you advice when you need it?
What Does the Brexit Mean to You?
And What Does it Mean for Britain
Voters in the United Kingdom chose to Brexit from the European Union (EU) late Thursday, June 23. The “Brexiters” (those who voted in favor of leaving the EU) were victorious, snatching 52 percent of the vote and setting Britain on a historic path to be the first country ever to do so.
Stock markets reacted swiftly to the news. Asian exchanges, which were open as the results came in, fell sharply with Japan’s Nikkei 225 Average down as much as 8 percent and China’s Shanghai Composite lower by 1.3 percent. European markets opened the morning off as well. German and French stocks are down 6.8 percent and 8.5 percent, respectively. Financial companies and banks, especially those in Europe, have been the hardest hit with some down as much as 25 percent. Furthermore, our domestic stock markets pointed to a Friday morning open down more than 2.5 percent.
The bank of England, the central bank for Britain, has promised 250 billion pound sterling to ease the markets. This will help create liquidity for the embattled currency. This had a somewhat calming effect and helped bring many off their intraday lows. However, global equities are still trading sharply lower than their previous close as is the British pound. The pound sterling was off as much as 11 percent yesterday before rebounding to close down 6 percent.
How will the Markets React?
In the short-term, we expect volatility to spike as investors reassess the global markets. Britain is already experiencing political fallout with the Prime Minister, David Cameron, announcing his resignation. However, he will stay in office for a few more months to ensure a smooth transition. The vote is historic and U.K. politicians have every intention of honoring the vote. However, while going through with the “Brexit,” the U.K. is still technically part of the EU and must abide by its rules and regulations until the separation is finalized.
In the intermediate-term, much work is ahead in Britain. Trade agreements, treaties, and many regulations must be renegotiated and reworked. The U.K. economy and markets should experience significant volatility. The government will seek to reestablish its global relationships and put the country on the best possible path going forward.
Long-term, the future of the EU is much more in doubt than it was two days ago. Whether the British know it or not, they are being watched very closely by other members of the EU to see how they weather the coming months and years. If they are successful in their separation, they could be paving the way for other countries to leave as well.
We are watching the markets closely and will continue to do so, providing updates as it relates to U.K.’s economic future and what this means for investors in general. Although events such as these are impossible to time, we continue to stand by the benefits of a comprehensive wealth plan as well as the process we follow in volatile situations such as these.
Can Presidential Election Years Forecast Stock Market Movement?
Stock Markets and election years go together like oil and water. Super Bowl winners, Triple Crown Winners, and Sports Illustrated covers. All of these have been used to develop theories about the direction in which stock markets may be headed. Presidential elections and terms have also inspired a significant number of theories.
Rational and not-so-rational decision making
Historically, economists believed people’s financial decisions were grounded in rational thought and a single-minded pursuit of their best interests. Theories about the economy were built on the notion that people unconsciously understand probabilities and make rational decisions.
Psychologists and sociologists however weren’t convinced people were as rational as economists believed. Sociologists have found that having limited time and brainpower meant many people did not make well-informed decisions. Instead, they developed rules of thumb that helped simplify their decision-making.
Election-related rules of thumb
When it comes to investing, there are an abundance of rules of thumb. Since it’s an election year, you’ve probably encountered at least one article discussing the ways in which elections may affect stock markets and the economy.
Let’s take a look at some of the stock markets strangest theories.
Presidential Election Cycle Theory
Suggests stock markets tend to be weaker during the first two years of a presidential term and stronger during the last two. This is because before an election, politicians tend to promote a pro-business agenda. This is done so the economy is strong, the stock market is moving higher, and voters are feeling optimistic. Analysts who have tirelessly crunched the data have found that U.S. stock markets tend to hit bottom during the second year of a president’s term. Although that is not always the case. There have been some notable exceptions in recent years during the final years of the Clinton and G.W. Bush presidencies. While history does suggest that the performance in years three and four of a presidential cycle are indeed stronger, many pundits argue that the true driver of performance is the overall macro economy.
Party Affiliation Theory
Suggests that stock markets perform better following the election of a Democratic candidate. In 2003, research published in the Journal of Finance indicated large company stocks did better under Democratic administrations. Later research from the Federal Reserve showed the difference in large company stock returns under Democratic and Republican administrations was negligible after you controlled for risk.
Political Party Convention Theory
Puts forth the idea stock market performance during political conventions may reflect investors’ expectations. This theory is very difficult to prove accurate without factoring in other data that can move the markets. The state of the economy and the stance of the Federal Reserve’s monetary policy is also worth considering.
Presidential Approval Rating Theory
Is sometimes misunderstood. The theory states that as the stock market increases, the president’s popularity ratings tend to improve. Others have interpreted this theory to say that stocks rise and fall with a president’s approval rating, and not the other way around.
Presidential Election Anxiety Theory
Believes that fluctuation of the S&P 500 index increases as the probable winner of the presidential election becomes less uncertain. In other words, investors’ anxiety increases, causing markets to become more volatile. When they begin to wonder how the presumptive winner’s policies may affect the economy, we see that trickle into the markets.
Post-Election Stock Market Performance Theory
Suggests stock market performance following a presidential election correlates to gross domestic product (GDP) growth. This provides little data for investors since economic growth does not always translate into strong stock returns. In part, this is because economic growth may be the result of new businesses forming rather than existing ones growing.
Clearly, a lot of thought has been given to the influence of presidential cycles on the stock market. Some theories that inform rules of thumb are clearly better researched than others. Regardless, none appear to provide actionable information that has the potential to benefit long-term investors. In fact, it is our opinion investors would be better served by selecting an investment strategy that meets their long-term financial goals. Chasing returns based on political outcomes is not a game worth playing.
Pink Tie 1000
This Monday May 9th we attended the annual Pink Tie Gala event. The Crest Hollow Country Club in Woodbury, NY played host to this year’s gala. It was truly an incredible event. There were over 2500 professionals in attendance, as well as numerous local sports heroes. Consequently, the event featured numerous auctions and opportunities to purchase memorabilia. As a result, it was a great place to raise money for charity. The proceeds raised from the event will benefit the Don Monti Memorial Research Foundation. Billy Joel cover band “Big Shot” rocked and rolled all night long to the delight of the crowd. I am honored to be a member of such a fantastic organization like pink tie, and I know my father Lou is as well.
The pink tie 1000’s mission is to create a networking community of 1000 professionals that contribute 100$ per quarter for membership. As a result, $100,000 is generated per quarter to be donated. Then, these proceeds are contributed in their entirety to charity.
Here is a quick picture from the festivities.
4th Quarter GDP
4th quarter GDP was reported this morning, coming in at 1%.This number was higher than the expectation of 0.7%, but it is still not a very impressive number for an economy that is projected to grow (according to the white house) at 2.5 – 3% for the full year. A majority of the increase in GDP was due to an increase in inventories on the balance sheet. That means consumers essentially consumed less goods in the 4th quarter That is not a great sign for retail. Whether or not this number is an indication that the economy is slowing remains to be seen. This continues a lackluster streak for the current administration of sub 3% annual growth.
Are markets worrying too much?
Last week, markets headed south because investors were concerned about the possibility of negative interest rates in the United States, even though the Federal reserve just began raising interest rates.
The worries appear to have taken root after the Fed chair Janet Yellen was called before the house financial services committee to testify about the current path of monetary policy.
What Should Investors do if we see negative interest rates?
Worried investors may want to consider their longer term goals and objectives before bailing on their investment plan. Switching investment strategies can sometimes feel like changing lanes in traffic. As soon as you move out of that lane that is at a stand still, it starts to move again.
Don’t take your eye off the ball….step back, take a deep breath, and ask yourself what has changed so dramatically in your life that it would be prudent to tear up your investment plan and start over. More often than not, the best thing to do is nothing.
It’s times like now that many pundits come out and call a market top. These are the same critics that have not participated in the current bull market at all. They have a vested interest in creating fear and euphoria.