As we approach the end of 2018, many employers are scheduling their benefits meeting requiring you to select yours before the end of the year. Not all benefit options are the same and understand each is crucial to making an informed decision. Ask your HR department or the advisor or agent representing the benefit what you don’t understand or ask them to provide you additional information prior to the benefits selection deadline. Many insurance and health benefits don’t allow you to change them once selected. However, employer-sponsored retirement plans allow you to select different funds, rebalance and change payroll contributions at any time per federal law.
Retirement Plan Options & Employer Match
You may have multiple choices of providers or funds available for you to choose from. Not all employer retirement plan providers provide assistance on fund selection or on-going advice. We can help you with the following:
Determining how the retirement plan fund options fit your risk profile
Including your company retirement plan assets in your financial plan
Monitoring the fund options and offer guidance on rebalancing
Rolling over your former employers plan into an IRA
Employer-Sponsored Life Insurance
Life insurance is the most inexpensive way to add protection to your family and your assets if you die. Employer life insurance plans ‘group’ you with other employees to reduce the cost of the insurance. Many times there is a need for additional life insurance outside of their employer plan since the death benefit is usually limited and based on your income.
Questions to ask:
Is this life insurance portable if I leave?
Will I still be insured after age 65 (some plans drop you after this age) if I’m still employed?
Can I add more insurance or am I committed to a certain death benefit amount?
Can I insure other members of my family?
Note that death can cause the early liquidation of assets if there isn’t adequate life insurance.
Employer-Sponsored Disability Insurance
Not being able to work due to injury can quickly deplete financial assets. Disability insurance replaces lost income from a short-term injury or disability or a permanent disability. Social Security Disability benefits won’t replace 100% of your income. Purchasing additional disability insurance coverage is a good idea if you’re in your prime earning years. Ask, so you understand:
Is disability insurance is underwritten based on my profession, age, and my possible risk of injury at work?
If I take Social Security Disability Benefits if I’m injured, is my Social Security Retirement Benefit reduced or eliminated in retirement?
Employer-Sponsored Health Insurance Solutions
Your company may provide you with health insurance choices that you are unable to modify. Ask your insurance provider:
Are there additional coverage choices for vision, dental, wellness, or indemnity insurance coverage based on my job role?
Can I customize a health insurance plan based on my specific needs?
Can I insure additional family members?
Part of asset protection is having insurance coverage in place so that you don’t have to prematurely liquidate personal savings, investment accounts or retirement accounts.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
Scheduling a fall financial review is especially important this year due to the Tax and Jobs Act and impending market changes. We’ve been enjoying an overall robust stock market and seeing some recent volatility, which makes now a prime time to meet. Fall tends to be when people start thinking about next year and what they want to accomplish financially by reviewing the following:
Your Financial Plan
People with a written financial plan are more likely to follow it when they work with their advisor and monitor the plan’s recommendations throughout the year. If you don’t have one, it’s time to have one done now. Having a financial plan puts you in a better position to start on your plan immediately at the beginning of 2019.
How the Tax and Jobs Act May Impact Your Investments
Along with your tax professional, I may suggest extra contributions to your pre-tax accounts before the end of this year or converting pre-tax investments to after-tax investments. With the income ranges for tax bracket changed for 2018, you still have time to make some strategic changes before the end of the year if you are on the upside of a higher tax bracket. In addition, receiving a bonus at the end of the year can impact this if you’re trying to keep your taxable income lower and stay in the same tax bracket.
Planning for Next Year
Starting the New Year strong with a financial plan in place after a fall review puts you in a better position to start your plan immediately at the beginning of next year. People with a written financial plan are more likely to follow the plan when they work with their advisor and can monitor recommendations throughout the year.
Reviewing This Year’s Investment Performance
Reviewing fund and stock performance over 2018 helps us assess what changes are necessary for next year in your portfolio. At some time the bull market will come to an end, which is why planning for underperformance is critical. If your investments didn’t perform to your expectations it’s time we evaluate your portfolio.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
How is my social security calculated? Social Security is calculated using your 35 highest paid earnings years and then averaged using the benefits calculation formula. You must have worked full time for at least 10 years to qualify for any social security retirement benefit. Currently, full retirement benefits age is between age 66 and 67 (October 2018). More adjustments by the Social Security Administration for the full benefit payment age are anticipated affecting calculations for those born after 1967. To see what your payment may be based on your age visit: https://www.ssa.gov/benefits/retirement/
Will Social Security Be There For Me?Social Security will pay promised benefits through 2033. After that, it will pay about 75% of benefits. Options to raise taxes to cover this shortage or to decrease benefits after 2035 are being discussed. American workers currently employed pay for those currently receiving benefits; benefits paid into Social Security are not ‘banked’ for an individual’s future use.
What is Social Security? A Retirement Plan? Social Security is considered insurance and was proposed by President Roosevelt and Congress and signed into law in 1935. It was never intended to be enough to completely fund retirement for individuals but meant to supplement an individual’s retirement investments and savings.
How do I file for Social Security Retirement Benefits? You can file by visiting an office, by calling (800) SSA-1213, or online at www.ssa.gov. You can file up to 4 months before you want payments to begin.
Can My family receive benefits upon my death for certain situations? If you die your surviving spouse can be paid up to 100% of your payment if they are at least Full Retirement Age or receive a reduced amount as early as age 60. An individual can be paid 75% of your benefits at any age if they are caring for your child under age 16. Your unmarried child can be paid 75% of your benefits if they are under 18, under 19 and in high school or at any age if they were permanently disabled before age 22. Your parent over age 62 can be paid your benefits if they were dependent upon you.
The continuation of Social Security Retirement benefits after 2033 continues to be a hot topic as the U.S. population ages and younger generations continue to decline in population. Fewer Social Security taxes paid into the Social Security system will continue to impact future payments. Individuals reaching full retirement age after 2035 may want to consider contributing more to their after-tax and pre-tax retirement accounts or purchasing a fixed annuity as a replacement for decreased or lost Social Security Retirement benefits.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
Volatility will always be around on Wall Street, and as you invest for the long term, you must learn to tolerate it. Rocky moments, fortunately, are not the norm.
Since the end of World War II, there have been dozens of Wall Street shocks.
Wall Street has seen 56 pullbacks (retreats of 5-9.99%) in the past 73 years; the S&P index dipped 6.9% in this last one. On average, the benchmark fully rebounded from these pullbacks within two months. The S&P has also seen 22 corrections (descents of 10-19.99%) and 12 bear markets (falls of 20% or more) in the post-WWII era.1
Even with all those setbacks, the S&P has grown exponentially larger. During the month World War II ended (September 1945), its closing price hovered around 16. At this writing, it is above 2,750. Those two numbers communicate the value of staying invested for the long run.2
This current bull market has witnessed five corrections, and nearly a sixth (a 9.8% pullback in 2011, a year that also saw a 19.4% correction). It has risen roughly 335% since its beginning even with those stumbles. Investors who stayed in equities through those downturns watched the major indices soar to all-time highs.1
As all this history shows, waiting out the shocks may be highly worthwhile.
The alternative is trying to time the market. That can be a fool’s errand. To succeed at market timing, investors have to be right twice, which is a tall order. Instead of selling in response to paper losses, perhaps they should respond to the fear of missing out on great gains during a recovery and hang on through the choppiness.
After all, volatility creates buying opportunities. Shares of quality companies are suddenly available at a discount. Investors effectively pay a lower average cost per share to obtain them.
Bad market days shock us because they are uncommon.
If pullbacks or corrections occurred regularly, they would discourage many of us from investing in equities; we would look elsewhere to try and build wealth. A decade ago, in the middle of the terrible 2007-09 bear market, some investors convinced themselves that bad days were becoming the new normal. History proved them wrong.
As you ride out this current outbreak of volatility, keep two things in mind:
One, your time horizon. You are investing for goals that may be five, ten, twenty, or thirty years in the future. One bad market week, month, or year is but a blip on that timeline and is unlikely to have a severe impact on your long-run asset accumulation strategy. Two, remember that there have been more good days on Wall Street than bad ones. The S&P 500 rose in 53.7% of its trading sessions during the years 1950-2017, and it advanced in 68 of the 92 years ending in 2017.3
Sudden volatility should not lead you to exit the market.
If you react anxiously and move out of equities in response to short-term downturns, you may impede your progress toward your long-term goals. Please reach out to us to review your portfolio and goals in today’s market.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
In light of the past week activity in the market, we wanted to share a short update. Amazingly 6 trading days ago the U.S. Markets were trading at all-time highs. With today’s selloff, the S&P 500 is now down approximately 5% from those all-time highs. Many of the salient points today were covered in our latest monthly market update, which can be found here. The largest issue seems to be stemming from the relative strength of the U.S. economy, which is causing the Fed to raise rates and driving strength in the U.S. dollar. The result has been significant outperformance of the U.S. equity markets relative to the rest of the world.
Our position is to focus on the long-term, global diversification and taking an appropriate level of risk. As you look at your accounts, you will see the equity portion lower. However, as the selloff in equities intensified, we saw bonds go up in price. So, the conservative portion of your allocation, fixed income, was essentially flat today and dampened the volatility of the equity sell-off. The sell-off has been sharp and quick, but certainly not out of historical expectations. We will continue to monitor markets and adjust as necessary. Please feel free to contact your advisor with additional questions.
Kevin M. Churchill, CFA, CFP®
Chief Investment Officer
Over the next twenty years, there will be a wealth transfer that exceeds $30 trillion as the Baby Boomer generation passes the remainder of their wealth to the Millennials and subsequent generations. The Baby Boomers (born 1946-1964) are considered the wealthiest generation, currently controlling 70% of all the disposable income in the United States. Its imperative families develop a plan to transfer assets since the transfer of wealth is inevitable. For most families, the transferring wealth was acquired during this lifetime and not inherited from the previous generation.
When starting to plan for wealth transfer pre-retirees should prepare for their retirement first, healthcare costs second, and the remaining transferring assets last. Although some individuals choose not to involve their family members that will become the beneficiaries of their assets, including qualified tax and legal professionals are important. But don’t write off including your heirs in all aspects of wealth transfer planning if you’d like more than just one generation to benefit.
Preparing your heirs to take over your estate eventually passing their remaining assets on to their beneficiaries is equally important. Heirs that are unprepared in managing money, investments or seeking financial guidance from qualified professionals seldom have enough inheritance left over for their heirs. Some families choose to ‘train’ heirs by teaching how to wisely invest so they can give some away through philanthropy. Without financial education, frequent investment decision making and a purpose to preserve the inherited wealth, many estate transfers rarely survive. The complexities of wealth preservation are not taught in school or other institutions and can only demonstrate through modeling, professional guidance, and the generation’s intention to pass their wealth forward.
If the generation set to inherit from the Baby Boomers does a good job preserving what they inherit, it’s possible it could easily provide financial benefits to others for the next thirty to forty years. And that’s worth planning.
As financial advisors, we spend a lot of time preparing for building wealth, but not passing it on to subsequent generations. If you would like guidance on The Great Wealth Transfer to your beneficiaries, we welcome a meeting with all of you.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
After months of verbal threats between the EU, China and the US, tariffs, and counter-tariffs started in July 2018, leaving American consumers and investors wondering how much of an impact it will have on them. Already three months into the trade war, consumers are not swaying from buying imports despite the increasing costs. In July, the US Trade Deficit increased to $50.1 billion, a 9.6 percent increase from the previous month while imports increased .9% to a record $261.2 billion, proving that Americans’ demand for imports remains strong. August’s data is expected to be out the first week of October and indications are it will be higher than the July’s. It’s notable that the EU and China exported the most goods into the US of any of the trade partners during this time.
What will the impact be as the tariffs continue? Increased costs of goods (including food, clothing and other necessities) may cause households to have the less discretionary cash to spend on other items considered non-essential, such as electronics, entertainment, automobiles or even events. If costs continue to rise, Americans may eventually choose to not spend on goods produced in the United States either.
The counter-tariffs imposed to hurt foreign buyers will impact American companies, farmers and workers, and eventually overall company profits as countries impose their tariffs on US goods. Many retirement savings accounts invest in US-based companies which may see decreased earnings and share values as tariffs apply to their products. Eventually, this could reflect in the account values of American investors. Retaliation has started from other countries by the US being left out of new trade agreements as the current administration considers pulling out of the World Trade Organization.
Despite the tariffs and trade war, it is positive that the American economy has remained strong throughout the latest quarter. Because we are in the early stages of the trade war economists are unable to predict how prices and portfolios will fare in the future. The trade war landscape is changing day-by-day which is why now may be a good time to review your portfolio if you have concerns.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
There’s a number that is going away soon that has an impact on your life; it’s called LIBOR. LIBOR (London Interbank Offered Rate) is used to determine the interest rates banks charge each other for overnight, one-month, three-month, six-month, and one-year loans. LIBOR is a substantial number because it decides, in part, the interest rate you will pay for loans, credit cards, and even your mortgage or refinance. Banks add their markup (another percentage) to LIBOR to calculate what to charge consumers. LIBOR has been the benchmark for banks throughout the world since 1969, but will be phased out worldwide by the end of 2021.
LIBOR seemed to work well until the financial crisis when inaccurate bank reporting to LIBOR made way for rate manipulation. Unlike a stock price which calculates on the buying and selling of the public, LIBOR compiles information from a bank’s observation or reporting of their daily rate, which is voluntary. By making up false information during the financial crisis, some banks profited illegally. For this reason, regulators worldwide are phasing out LIBOR.
In the United States, LIBOR is being replaced by SOFR (Secured Overnight Financing Rate), which is already approved for rate calculation. SOFR has compiled information back to 2014 and began publishing earlier this summer. SOFR uses the Federal Reserve’s fed funds rate and the yield on the ten-year Treasury note and others, using real data on the previous day’s trading on our currency.
Currently, traders in the United States have already started to see the LIBOR-SOFR rate as we transition toward LIBOR’s retirement.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
Divorce is a common occurrence in the US, with 50% of all first marriages ending in divorce. According to the American Psychological Society, that is even higher for those marrying a second time. Marriages end for many reasons from infidelity, stress, personality changes, and financial. They are not only devastating to the children and extended family but devastating to your assets and ability to accumulate future assets. Divorce requires assets to be divided, attorneys to receive payments (on-going sometimes), and the divorcing couple soon finds themselves having to live on less to make ends meet. Studies find that the divorced spouses need more than a 30% increase in their income to maintain the same standard of living they had before divorcing.
When emotions come into play, divorces often turn into battles to take assets, leaving a financial battle scar on the other spouse. Divorce doesn’t have to be this way. Uncontested divorces cost hundreds of dollars, whereas divorces taking months or even years can end up costing thousands of dollars- usually paid from the settlement of assets. The cost of ending a marriage, having to live on less, decreased income (for those paying alimony or child support) from becoming a single-earner household can make divorce almost as destructive to your retirement savings as the Great Recession was. Aside from the above reasons, retirement assets are usually divided to ‘equalize’ the retirement savings of each spouse.
When marriages are going well, couples participate together in financial planning, developing personal budgets, and savings and spending plans. The same should happen when anticipating a divorce, during divorce proceedings, and after the marriage ends. Financial advisors are in a position to discuss with both spouses (at the same meeting if amicable) the effects of fighting over assets, a plan to maintain retirement savings going forward, and keep the couple on track to retire as planned. If solutions can happen without fighting between attorneys, the couple stands to win by ‘playing nice,’ saving what they worked so hard to achieve before the marriage fell apart. The impending divorce now becomes ‘business,’ but understanding what you want and why can have positive financial outcomes for both parties.
Financial advisors can’t provide legal advice when it comes to divorce but can provide financial guidance regarding the liquidating of assets, effects on retirement accounts and future retirement savings, budgeting for a single-earner household, and other economic questions you may have. During this time joint investment accounts, personal investment accounts, and all financial records must be disclosed to the other party. Our office will remain impartial as we view each client as vital while we continue advising both of you.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
Regardless of your age, having a will or estate plan is essential for many reasons, and isn’t just limited to passing assets at death. A will provides necessary asset passing, although many times isn’t enough when situations become more complicated. Although estate plans and wills become typically become active at death, they can be helpful during catastrophic life events, while still living. One such document that is part of both an estate plan and a will is a Medical Directive, which provides the blueprint for your wishes in the event of a debilitating injury or illness.
Without estate plan and will documents in place, the decision is left to your family to make decisions you wouldn’t have been happy about. At times these decisions may lead to conflict among family members, additional expenses paid by heirs or from your estate, or an extended probate at death as its run through the court system in your state of residence.
There’s just as much planning for living as there is for dying, which is why there is no reason to wait to have either done. We recommend working with an attorney that specializes in this type of law (and not everything else). As you age, have children or acquire more assets, your situation changes and so should your estate plan. There are common mistakes to avoid in every estate plan or will to prevent:
Naming Beneficiaries and Contingent Beneficiaries. Update name changes, changing and removing beneficiaries should be done periodically to ensure your estate plan has the most recent information. Common mistakes include misspelling names, incorrect dates of birth, and the wrong former last name of a beneficiary. This pertains to investment accounts that require recipients. Naming a child as a beneficiary requires legal due diligence, as minor can’t inherit assets and need an adult to manage the assets until the child is eighteen years old (or older).
Naming Specific Investments. As people age, the likelihood of an investment no longer owned by the grantor is likely, unless the estate plan or will has been updated to remove it. If a specific asset is named to pass to an individual and no longer part of the estate, it may cause extended probate or lead to the asset being repurchased or ‘equalized’ through another monetary settlement to the beneficiary.
Not Naming the Beneficiary of your Financial Accounts or Life Insurance Policies as your Estate. If you intend to have the estate plan be the final legal document that contains everything in your estate, you can eliminate problems later. Having some accounts or policies that name an individual and some that name the estate may cause heirs to contest the estate plan or will. Your attorney will determine which is best for your situation and wishes. Having a will or estate plan drafted by a legal professional is strongly encouraged as an integral piece of financial planning. Secondly, keep us updated on your desire to changes beneficiaries, contingent beneficiaries, and changes to investment accounts we may not manage but have included in your financial plan. Lastly, please provide us with a copy of your estate plan, will, and other relevant legal documents as they pertain to your investments to help ensure the information we have is streamlined. We are here to provide you with any necessary financial records requested by your legal professional as you create or update your estate plans and wills.
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.
