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Retirement Planning

Vaccines and the Stock Market

If there’s one thing that can move the economy and stock market forward, it’s hope. This year, that hope is being presented in the form of COVID-19 vaccines. Economists and Wall Street analysts have long proclaimed that comprehensive economic recovery is not possible until we have contained the virus. The prospect of wide distribution of effective vaccines and herd immunity by the end of the year has put recovery in our crosshairs.1

What does this mean for investors? Review your investment portfolio and get your financial house in order. If we are due for improvement, it could be beneficial to get into the market when prices are low, rebalance often and take advantage of market dips for additional investment opportunities. As always, we are here to help guide on the best way to meet your financial goals.

This hopeful sentiment was echoed by CNBC’s ever-enthusiastic “Mad Money” host, Jim Cramer. He recently proclaimed that the U.S. stock market will be poised for even greater heights if President Biden is successful in forging a plan to quickly and widely distribute the COVID vaccinations.2

Phil Orlando, Federated Hermes’ chief equity market strategist and one of Wall Street’s bullish market analysts, advocates a combination of vaccine rollout and additional fiscal stimulus. He believes one of the surefire ways to boost economic growth is to help lower-skilled unemployed people find work. He predicted that by July 4, the U.S. will be coronavirus-free, setting the stage for a “monster market year.”3

Unfortunately, European stocks continue to struggle despite market exuberance in the U.S. over a new presidential administration. Part of this concern may be that many EU countries have suffered setbacks due to subsequent and more virulent strains of the coronavirus. As before, the U.S. continues to lag on the worst of the effects of the virus as they occur.4 This foreshadowing makes it all the more important that vaccines get into as many arms as possible in the next few months.

Market sectors that have suffered terribly from calls for lockdowns and social distancing are likely to benefit the most from widespread distribution of the COVID-19 vaccine. This includes the aviation and hospitality sectors, as well as the office and retail property market in Europe and the U.S. Of course, the opposite could be true: Pandemic beneficiaries could see a loss in revenues once people get out and about — for example, Amazon, Netflix and Zoom Video.5

Content prepared by Kara Stefan Communications.
1 Robin Wigglesworth. Financial Times. Dec. 2, 2020. “The ‘everything rally’: vaccines prompt wave of market exuberance.” https://www.ft.com/content/d785632d-d9a0-45ae-ae57-7b98bb2fb8d6. Accessed Jan. 25, 2021.
2 Kevin Stankiewicz. CNBC. Jan. 20, 2021. “Jim Cramer says the stock market could ‘explode’ if Biden improves Covid vaccine rollout.” https://www.cnbc.com/2021/01/20/jim-cramer-stocks-could-explode-if-biden-improves-covid-vaccine-rollout.html?recirc=taboolainternal. Accessed Jan. 25, 2021.
3 Stephanie Landsman. CNBC. Jan. 20, 2021. “Covid-19 vaccines will end pandemic in U.S. by early summer, Federated Hermes’ chief equity market strategist predicts.” https://www.cnbc.com/2021/01/20/covid-19-vaccines-will-end-pandemic-in-us-by-early-summer-federated.html. Accessed Jan. 25, 2021.
4 Jim Armitage. Evening Standard. Jan. 25, 2021. “FTSE 100 rises slightly as investors balance surging Wall Street with Covid worries.” https://www.standard.co.uk/business/ftse-100-rises-covid-joe-biden-quarantine-b900967.html. Accessed Jan. 25, 2021.
5 Sumathi Bala. CNBC. Nov. 23, 2020. “Hopes for a coronavirus vaccine are creating market winners – and losers.” https://www.cnbc.com/2020/11/23/investing-coronavirus-vaccine-creates-market-winners-and-losers-.html. Accessed Jan. 25, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
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Incapacity and Advance Medical Directives

At some point in your life, you may lose the ability to make or communicate responsible health-care decisions for yourself. Without directions to the contrary, medical professionals are generally compelled to make every effort to save and sustain your life. Depending on your attitude toward various medical treatments and your views on the quality of life, you may wish to take steps now to control future health-care decisions with one or more advance medical directives.

What Is an Advance Medical Directive?

The laws of your state may allow you to adopt one or more advance medical directives to manage your future medical care. There are three main types of advance medical directives:

  1. A living will
  2. A durable power of attorney for health care
  3. A do-not-resuscitate order.

Each has unique characteristics and is useful under specific circumstances. You may find that one, two, or all three advance medical directives are necessary to express all your wishes regarding medical treatment.

Living Will

A living will is a legal document that specifies the types of medical treatment you would want, or not want, under particular circumstances. In most states, a living will takes effect only under certain circumstances, such as a terminal illness or injury. Generally, one can be used solely to decline medical treatment that “serves only to postpone the moment of death.”

Durable Power of Attorney for Health Care/Health-Care Proxy

A durable power of attorney for health care (DPAHC), also known as a health-care proxy, is a legal document in which you appoint a representative to make medical decisions on your behalf if you become unable to make or communicate them yourself. It allows you to exercise control over your health care through this representative, who will have the authority to make most medical care decisions for you.

You may want to appoint such a representative to act on your behalf. If you don’t, medical professionals will generally be compelled to do everything possible to save and sustain your life. A DPAHC can resolve conflicts and help ensure that your choices regarding medical treatment are respected. A DPAHC may not be practical in an emergency — your representative must be present to act on your behalf.

Do-Not-Resuscitate Order

A do-not-resuscitate (DNR) order is a legally binding order, signed by both you and your physician, that directs medical personnel not to perform cardiopulmonary resuscitation (CPR) or other invasive procedures on you if you stop breathing or your heart stops beating. A DNR is the only advance medical directive specifically intended for use in an emergency. There are two types of DNRs: One is effective only while you are hospitalized; the other is used by people outside the hospital. ID bracelets, MedicAlert® necklaces, and wallet cards are some methods of noting DNR status.

More to Consider

  • The laws on advance medical directives vary considerably from state to state. If you spend a significant amount of time in a state other than where you live, you may want to research that state’s laws as well.
  • Review your advance medical directives periodically to ensure they reflect your current wishes and attitude.
  • Discuss your advance medical directives with appropriate persons (perhaps your doctor, your DPAHC representative, your family, and your friends).
  • If you have multiple advance medical directives, make sure your instructions are stated consistently throughout. In many states, the most recent document prevails in case of a conflict
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Accumulating Funds for Short-Term Goals

Stock market volatility in 2020 has clearly reinforced at least one important investing principle: Short-term goals typically require a conservative investment approach. If your portfolio loses 20% of its value due to a temporary event, it would require a 25% gain just to regain that loss. This could take months or even years to achieve.

So how should you strive to accumulate funds for a short-term goal, such as a wedding or a down payment on a home? First, you’ll need to define “short term,” and then select appropriate vehicles for your money.

Investing time periods are usually expressed in general terms. Long term is typically considered 15 years or longer; midterm is between five and 15 years; and short term is generally five or fewer years.

The basic guidelines of investing apply to short-term goals just as they do for longer-term goals. When determining your investment mix, three factors come into play — your goals, time horizon, and risk tolerance. While all three factors are important, your risk tolerance — or ability to withstand losses while pursuing your goals — may warrant careful consideration.

Example: Say you’re trying to save $50,000 for a down payment on your first home. You’d like to achieve that goal in three years. As you’re approaching your target, the market suddenly drops and your portfolio loses 10% of its value. How concerned would you feel? Would you be able to make up that loss from another source without risking other financial goals? Or might you be able to delay buying your new home until you could recoup your loss?

These are the types of questions you should consider before you decide where to put those short-term dollars. If your time frame is not flexible or you would not be able to make up a loss, an appropriate choice may be lower-risk, conservative vehicles. Examples include standard savings accounts, certificates of deposit, and conservative mutual funds. Although these vehicles typically earn lower returns than higher-risk investments, a disciplined (and automated) saving habit combined with a realistic goal and time horizon can help you stay on course.

The FDIC insures CDs and savings accounts, which generally provide a fixed rate of return, up to $250,000 per depositor, per insured institution.
All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost.
Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
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Stock Ownership Slow to Recover

Dynamic versus Static Investment Risk Strategy

This is the first of a two-part article on Dynamic versus Static Risk Strategy. 

Fifty-five percent of Americans said that they (and/or a spouse) had money invested in the stock market in 2019. Since this is the same percentage of Americans as was reported in 2018, it’s obvious stock ownership still has a way to go before it recovers to pre-recession ownership levels. Cleary, stock market investor caution remains high despite a decade of strong market recovery.

Where are people placing their investment bets? Most likely, they’re using a financial industry-standard method of managing portfolio risk, exemplified by the widely-used “60/40 portfolio.

A 60/40 portfolio refers to allocating 60% of asset investments to stocks and  40% to bonds. The “risk management” aspect of this strategy is the 40% of assets held in bonds, which are expected to act as a buffer to stocks during Bear markets. Bonds tend to hold up in times of stock distress.

The 60/40 portfolio is so common that investors can find a Balanced Fund by throwing a dart at the mutual funds page of their Sunday newspapers. This passive, unchanging method to manage risk is termed static risk management and it’s not the best approach.

We recommend a dynamic versus a static portfolio strategy. Why is that you ask?

In a bear market, when risk and losses are high, static risk-management measures are not enough. In a bull market, when stock risk is low, static risk-management measures are too much to minimize your risk and optimize your returns.

If you think about it, a STATIC portfolio – with its constant, unchanging allocations to stocks and bonds – is a bit like preparing for any weather you might encounter by dressing half your body for warm weather and the other half for cold weather. On average, you’ll be comfortable. But, as that analogy shows, an average like that doesn’t really make much sense.

For example, if for the 2008 and 2009 bear market, we had a static risk-managed balanced portfolio of 60% stocks and 40% bonds, we’d have a top-to-bottom loss of -34.70%.

This loss is well beyond the risk tolerance capacity of the vast majority of investors and would be deemed a disaster by any reasonable person.

Now, consider what would happen with a static risk management approach in the subsequent up years that followed the recession. The 60/40 allocation wouldn’t have performed as well as it could have because of the drag on performance caused by the 40% bond allocation.

As you can see, STATIC risk management would have supplied too little protection in the recession, but too much to keep you from capitalizing on significant gains during the good times that followed.

The goal of Dynamic Risk Management is to apply more risk management in the bad times – when the need is greatest – and less in the good times – when the need is reduced.

In the second part installment of this article, we’ll cover how can you accurately identify the conditions in which more or less risk management should be applied.

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SECURE Act passed by Congress in 2019

The SECURE Act – What You Need to Know and How It Changes Your Retirement Plans

In the past two years, Congress has passed two pieces of legislation that have made an impact on individuals. The first was the “Tax Cuts and Jobs Act”, the largest tax overhaul of the tax code in 30 years. The second, more recently passed (and effective January 1st, 2020) was the “Setting Every Community Up For Retirement Enhancement” Act or as is now known, the “SECURE” Act.

The SECURE Act brings about significant changes that impact retirement planning and retirement plans (IRA, 401k, etc.). In fact, it causing more sweeping changes than we’ve seen in decades.  And, there are some important things you need to know.

This article focuses primarily on the individual investor or plan participant but there are important considerations for corporate plan sponsors as well, which are not covered here.  Although we don’t have space here to cover everything in the Act, we’ve focused on some of the items that will have the most effect on individual retirement account investors.

New Rules for Retirement

There are a number of new retirement rules the SECURE Act implements:

  1. Elimination of the “stretch” IRA / Retirement account provision – For people passing away in and after 2020, their non-spousal beneficiaries have now lost the ability to “stretch” forced taxable required minimum distributions over their lifetime. They will now be forced to liquidate the beneficiary IRA or other inherited retirement accounts within 10 years.  This does not affect the spouse as a beneficiary and there are some other narrow exclusions to the new rule such as certain minors (till the age of majority) and the disabled (as IRS defined) but check with your advisor for more specifics as to whether any of those exclusions apply to your situation. For most, even if the spouse is the beneficiary of your retirement account, when your spouse is gone, they’re non-spousal beneficiaries will be subject to the new rule. Sooner or later it will affect every retirement account, so plan now to the extent you can. Also if you have a trust involved with your IRA at death, you’ll want to review this arrangement as well since certain “see-through” trust arrangements could be affected.
  2. Contributions to traditional IRA’s post 70.5 – The new law now allows contributions after 70.5 to your IRA as long as you have earned income.
  3. Required Minimum Distribution (RMD) age increase – If you turned 70.5 and were due to take an RMD in 2019, sorry, you will have to continue taking those taxable distributions as originally scheduled. However, if you weren’t 70.5 in 2019 then you now get to defer RMD’s till age 72. Congratulations! The round age will also help clear up the confusion many have as to exactly when the first RMD must be withdrawn and which life expectancy factor age to use.
  4. Qualified Charitable Distribution (QCD) unaffected – This is important to the charitably minded folks out there who are already 70.5 or will be in 2020 and beyond. If you’re already 70.5 the QCD rules don’t change. The law kept the QCD rules intact allowing them to start at 70.5 and satisfy RMD requirements but not count towards income. For those who can defer RMD’s to 72, this is giving you a 1-2 year tax planning or giving opportunity window where IRA distributions may be counted as a charitable contribution but not as an RMD.
  5. Ten-percent early withdrawal change – For those seeking a distribution before 59.5 from a retirement account for a Qualified Birth or Adoption distribution, the typical 10% penalty you would incur doesn’t apply up to $5000 as long as you follow the timing rules for the withdrawal. Get with an advisor for more details on this change.

Non-Retirement Account SECURE Act Tax Benefits

The SECURE Act also makes several tax benefits available that don’t pertain directly to retirement accounts but may have an impact on a retirees income:

  1. Mortgage Insurance premium deduction – Retroactive to 2018 and through 2020.
  2. Medical expense deduction – The AGI threshold has been kept at 7.5% of AGI for 2019 and 2020.
  3. Qualified Disaster Distributions from retirement accounts – If meeting the qualifications in the Act, distributions up to $100,000 would be exempt from the 10% early withdrawal penalty, be treated as distributed evenly over 3 years if desired, be exempt from mandatory withholding requirements and may be repaid within 3 years of the distribution.

To be sure, the SECURE Act will require some adjustment and repositioning of many financial plans. It is important that you visit with a fiduciary advisor and review your financial plan to see how this may affect you, your spouse and most importantly, the beneficiaries of your retirement accounts, as they are the ones that will be most impacted.

If you’ve not done financial planning with a professional in the past, now’s a good time to start. Give us a call or come see us for an initial, no-obligation review so we can help you set Clear Direction for Your Retirement.

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Two Keys to 401(k) and Retirement Investment Planning Success

Want to know a secret? The two keys to 401k investment and retirement success* are:

  1. Save and invest aggressively when young
  2. Manage risk well in allocations as you approach and enter retirement

I know those are oversimplified but they are accurate. Knowing this, when was the last time you evaluated how much you’re saving or made changes to the investment mix in your 401k; or for that matter, any of your investment accounts? If you’re like most Americans, it’s been a while.

According to an ICI.org analysis of over 30 million defined contribution plans in 2018, only 7.1 percent of 401(k ) participants made changes to the allocation of their existing 401k balances and only 4 percent made changes to new contribution allocations. Compare this to finding from this same research taken ten years earlier (2008) where 14.4 percent made changes to the allocation of their existing balances and  12.4 percent made changes to new contribution allowances and it’s apparent people do not stay on top of their retirement savings investments. Some of this complacency is due in large part to a long-running bull market where complacency towards risk management has taken control. You may be saving well, but if you’re not managing risk it will come back to bite you.

Recent research from Research Affiliates reiterates that there are two keys to success in the investment world: investor contributions and investment returns. “Well, duh! Of course!” you may say. But what seems simple is rarely easy. Contributions and returns today can have a large influence on how well your retirement plan serves you into retirement. But, as this research also shows, each of these has distinct effects over your time of saving.

Let’s take a look at both of these and I’ll make some suggestions for you to implement immediately if you want to grow and protect your retirement savings.

 “When” trumps “How Much”

When you save can be more important to success than how much you save. The obvious challenge with trying to save when you’re younger is that there are competing demands on a smaller income.

You’ve probably seen the multitude of tables that illustrate the dramatic impact saving early can have on your future. Not too long ago I was able to illustrate this to a young man who came seeking advice. We looked at the tremendous impact of just a single annual Roth IRA contribution beginning in his twenties and lasting for just twenty years (ignoring taxes and inflation).

We assumed a 25-year-old making an annual contribution of $5,500 into an account earning 6% annually. Over twenty years this creates a balance of ~$207,038 at age 45. With no further contributions, at his age 65, the balance would be ~$663,998. Only $110,000 of this value represents contributions.

Now, take the same case above but reduce the annual savings rate to $3000 for the first 20 years. At 45 he has ~$112,929 and at 65 ~$362,178. He actually contributed $60,000.

The takeaway with our example is that starting early makes a huge difference and the more the better. Even if you can’t save the maximum amount, just start saving now! Unfortunately, many savers wait until their 40’s to begin saving, putting themselves at the detriment of time instead of using time early to multiply their money.

While the rate of return is certainly important, it’s more important that you ‘just do it!’ when you’re younger. For example, in the initial scenario above, if the rate of return were 8% instead of 6% over the first twenty years the increase in the balance is about ~$55,000. That’s certainly better, but not nearly as important as the fact he started early. Considering 55 percent of Americans have less than $10,000 in retirement savings (Cameron Huddleston – GOBankingRates) I’d say he’s off to a great start.

Rate of Return Matters More – Later

In the latter stages of saving (like in our 45-65 example above), the rate of return on your money, rather than adding more to it, is the principal driver of the ending value when it’s time to start living off of your life savings. I’m not suggesting that contributions are unimportant; but the facts are that your rate of return is more important. A $25,000 contribution in one year into a balance of $750,000 is only 3% of the total. An 8% ROR producing $60,000 on that same balance is much more significant. Higher rates of return on larger pools of money in later years makes a bigger difference than additions (combined they’re even better obviously). The problem here is that just when this ROR need is most prevalent is when you must begin to think about reducing risk ergo rate of return to some degree.

Allocation Matters Most

So how do you balance return needs knowing there’s a risk trade-off? A primary way is to be in the right part of the market at the right time. We refer to this as ‘asset allocation’. However, because no one can time the market, most investors embrace a buy and hold approach that allocates assets across many asset classes in the thought that the winners will outweigh losers over time. Just ride it out and let time be your friend.

Our approach by comparison is to actively monitor the different asset classes and market sectors and do our best to regularly navigate between them, even being willing to move out of them altogether to seek to avoid periods of extreme volatility (risk of loss).

Another way to increase return is to use lower-cost instruments. Your 401k account and many advisors most likely offer mutual funds. Many mutual funds have internal fees and sales charges that are typically more expensive than comparable exchange-traded funds (ETF’s).

With respect to the younger readers – start now.

With respect to older readers – proper positioning matters considerably more to risk and return than any time in your life.

If you want clear direction for your retirement and you’d like a no obligation analysis of your holdings, please call to arrange a time to do so. You may be shocked at what you really own!

* Asset Allocation does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.


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Automated Financial Advice – Robo or No Robo?

Clients hear a lot about different types of financial risks they are exposed to when they plan for retirement; however, when you boil it all down they really care about only one risk and that is the risk of loss.

Investors have lost 40% of their portfolio value since 2000… twice! One loss alone requires a recovery of 67% to get back to even and again this has happened twice within 20 years. So what does this have to do with Robo advisors? Perhaps some history and description is in order to begin.

The Rise of Robo Advisors

Robo advisors appeared primarily after the 2008 financial crisis but the term was coined back in 2002 following the Enron collapse and the world of intense 401k anxiety generated by this this major corporate debacle. Robo advisors are essentially technology that allow investors to access automated investment advice. The supposed benefit to investors is that if offers an affordable and convenient investment advice solution.

There are robo advisors that serve two different customer types: business to consumer (B2C) and, business to advisory business (B2B). B2C robos are directed toward the end user investor while B2B focus more on helping advisors help end-users.

B2C advisors are meant to primarily serve the “underserved” investment community, meaning the young and the end user investor, while B2B focus more on helping advisors help end users.

The B2C investment advice is produced algorithmically and there is typically little-to-no interaction with a human advisor unless additional fees are added and typically they offer no guarantee you’ll be dealing with the same person each time you use the advisor. You simply get whoever is available at the time. While the B2C segment saw initial growth, it has actually declined over the past several years. This segment continues to attract venture capital into a business model that has yet to prove profitable and doesn’t appear to be close to doing so.

This brings us back to the risk concern mentioned above. Although I believe there is a place for the robos in our industry, I do not believe, as many do, that they will replace the human touch in our industry.

One of the larger concerns about these automated advisors is they have not experienced a financial crisis or time of economic distress. The algorithms robo advisors use aren’t battle tested and there is no personal relationship to guide you through decision-making during the most critical of times.

Because there is no personal relationship, robo advisors also offer no customization of your retirement plan. Their retirement advice will not be unique to your situation not will it come from someone familiar to you and in whom you trust. You are simply part of a computer program algorithm. If you’ve never experienced the difference you simply don’t know what you don’t know and what you don’t know can and will hurt you.

The fact that the robo advisor business model has yet to be profitable raises questions as well. It’s great that they can offer a “lower cost” product in certain respects but at what expense to the investor? If your fees can’t cover your costs and you are essentially subsisting on continued venture capital, long-term you may have a failing business plan. It is estimated that it takes one of these firms gathering $16 billion in managed assets to break-even. After 10+ years there is only one that is even half-way to this amount. Time will tell how they adjust. Adjustments typically mean cost adjustment of some type to the consumer or being bought up by a competitor.

There is also the question as to how B2C robos assess risk. Some of them and their assessments given to participants are found lacking, to say the least. A professional human advisor with a good risk assessment approach who can talk with you the investor about your risk tolerance and options will do a better job of meeting your expectations over automation.

It remains to be seen as to how B2C robos serving the individual investor masses will play out over time but I do believe they can offer valuable services, especially in the context of the B2B segment. They can and do offer ways for existing advisory firms to offer services that ordinarily would not be feasible given costs and liability.

Our 401k service, which helps our clients manage their 401k while still employed, is an example of B2B advisor that helps us provide an extremely valuable service to our clients while maintaining the same risk and investment philosophies and tools that we use for our in-house non-401k assets.

Give us a call and let us show you how we can help serve you in the personalized way you deserve.

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IRA Planning

IRA Planning – What Now with New Tax Laws?

Change, as annoying as it can be, is inevitable and so we must be proactive in dealing with it. This is especially true as it pertains to our finances.

For most investors, qualified tax-deferred accounts (IRA’s, 401k’s, etc) are where the majority of their retirement assets are held. In that regard, there have been recent changes in the tax laws that should be analyzed for their impact on the future of your retirement plan. Furthermore, possible legislation like the “Secure Act” could further change implications to these types of accounts but we’ll address that in a separate publication.

Specifically, there are some IRA ideas on the individual (non-corporate) side that should be considered given these changes.

  1. Deductibility of IRA management fees:

Advisor fees may be deductible on an itemized basis depending on the type of fee. Fee-based investment management fees could be deductible subject to your AGI. However, fees paid for fee-only, advice-only, fee-for-service planners/advisors generally are not deductible. The costs of transactions and the financial products themselves are not deductible on an itemized basis. Your CPA can help you with this so you know what’s deductible and what’s not as well as the best place(s) from which to pay fees for particular types of accounts (IRA vs Non-IRA).

  1. Roth Conversions:

This can be substantial if you miss it. You can no longer reverse or re-characterize Roth conversions. Once a conversion is done, it’s done! Gone are the days of seeing your tax bill the following year and deciding to reverse the decision.

This is not to say that Roth conversions are a bad idea. On the contrary, an effective Roth conversion strategy could be more attractive now than ever due to low tax rates and larger standard deductions.


  1. Qualified charitable distributions (QCD):

This one applies for those already over 70.5 years of age. For many, charitable gifts will no longer be deductible because taking the larger standard deduction will be more advantageous than itemizing. However, you can still effectively get the deduction by not only taking the new, larger standard deduction but also making charitable donations by way of QCD, which is excluded from income.

A QCD must be a direct transfer from the IRA to the charity, can be up to $100,000 per person and meet the RMD requirements for IRA’s. The charity must also be an eligible entity. The QCD does not increase Adjusted Gross Income for tax purposes like an IRA distribution does. As a result, charitable giving can be done without affecting Social Security benefits and Medicare premiums. 

  1. Required Minimum Distribution (RMD) Planning:

It is very important to make sure that you are meeting your RMD obligation annually from your IRA’s. Remember, there is a 50% penalty imposed for missing an RMD. That is substantial!

RMD planning can apply to those IRA owners that are over 70.5 but could also apply to younger beneficiary IRA and beneficiary Roth IRA owners depending on the situation. Pending legislation could change the RMD start age but that remains to be seen for the moment.

For those over 70.5, the QCD mentioned above is a good way to help meet those obligations. RMD’s for those who own multiple IRA accounts can be aggregated and pulled from one single account, if desired, and must be pulled by year-end unless it’s your first RMD year.

First-year RMD’s can be deferred till April 1st of the following year but then must be taken in conjunction with the current year’s obligation thus doubling the RMD for that year.

Don’t wait till tax time next year to review your strategies and figure out what changes (if any) need to be made. There is no time like the present to make adjustments and get prepared.

We can help coordinate and implement the items mentioned here with the rest of your overall retirement strategies. We are happy to help so just give us a call and book your no-obligation review today. We look forward to meeting you!

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The Five Critical Puzzle Pieces of Your Retirement Plan – Part 2*

In Part 1 of The Five Critical Puzzle Pieces of Your Retirement Plan (here), we detailed how putting your retirement plan together is like fitting together or coordinating the pieces of a puzzle…some of which are constantly changing. We looked at the first of the five puzzle pieces, the Income Plan. In this post, we’ll explore the other four pieces.

By way of refresher, the five pieces to any retirement plan puzzle are:

  • The Income Plan
  • The Investment Plan
  • The Tax Plan
  • The Health / Life Insurance Plan
  • The Estate Plan

Let’s look first at the investment plan. After all, that funds your income plan.


In retirement, most people care far more about the return OF their money than the return ON it. That is, the only risk they care about is the risk of loss that could affect their income. Yes, return is needed in some capacity, but it’s not typically the driver it was during the working years.

With that in mind, once the plan need for current and future income has been established, you can go about the work of removing as many unknowns as possible. Using the income plan as the template in which to drop in an investment strategy can be very liberating. For most of my career, the coordination of these eluded me, forcing me to stick with traditional, stale strategies. By redefining the target – away from rate of return dependence alone– it allows us to think and proceed with much greater specific intent in our selection of solutions for income and inflation.


Do you think taxes are going to increase or decrease over the next twenty years? I certainly don’t pretend to have a crystal ball, but I’d say the current state of financial affairs in the U.S. are going to play a large role in the determination to raise taxes. We are at historic lows in rates now.

So why would someone retiring in a few years choose to ‘max out’ current 401k contributions today? You may find yourself withdrawing that for living expenses at the price of a much higher tax. From another perspective, what are you doing today to maximize the tax efficiency of the income you’ll need to live on after you retire?


How will you protect your savings for your spouse and heirs from a myriad of risks? Although important, the goal is not simply the legal avoidance of giving your money to the government. Think of it more in terms of providing efficiency of transfer and post-death benefits to your family. Simple things like titling accounts properly and naming beneficiaries correctly can go a long way toward efficiency.


Have you carefully considered the potential costs of retirement medical expenses and come to conclusions about how YOU are going to deal with them? If you retire early, what will you do about health insurance prior to Medicare? What about a potential nursing home stay (Long-Term Care); how’s that going to get handled? If self-insuring LTC, how does this affect your spouse and your existing income plan (among other areas)? Do you really need life insurance and what about non-traditional uses of it to mitigate other risks?

If you are working with advisors who are regularly engaging you in conversations that lead to action steps in each of these previous areas, then you’ve truly found a real advisor. Absent of that leadership, you’re probably making purchase decisions – not financial plans.

If you don’t have a retirement plan, it’s never too late to start. Contact us today and let us help you discover clear direction for your retirement future. We’ll provide a FREE analysis of where you currently stand against your goals and provide important recommendations for getting all the pieces of your retirement puzzle to fit together!

*Tax and Legal Disclaimer: Wootton Financial Group does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstances.

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The Five Critical Puzzle Pieces of Your Retirement Plan – Part 1

My wife and I are pretty spontaneous travelers. In spite of this, we have found that planning around a few basic things based on where we travel can really help us get the most out of our getaways. Doing some pre-planning around things like our ultimate destination, how long we’re going to stay, specific directions to reduce travel time, ensuring we have appropriate attire and equipment for those “just in case” situations that can occur, and… well, you get the drift. Making these plans takes time and effort on our part, but preparing around these essential things also helps ensure we are able to truly enjoy our getaway.

We all make specific plans when we build a home, plan a college experience for our kids, build a business, or plan a menu. But what amazes me is how, without even seeming to be aware of it, aspiring retirees are so casual about their plans for retirement.

Instead, of having a plan that guides their decisions, they allow their focus to be driven by financial product purchase decisions. As a result, they get lost in a sales process.

Seldom do they really focus on seeking to efficiently coordinate foundational elements of a solid financial retirement plan. Our firm has had three decades of enjoying the privilege of assisting others with this exciting journey and it has taught me to focus my energy on coordinating the financial principles, not on selling financial products. Financial products are simply the tools that can help implement what’s found in the financial plan and it is not one-size-fits-all.

There are Five Critical Pieces of a Sustainable Retirement Plan. We like to think of them as pieces to a bigger puzzle but where the pieces are always changing and must be adapted to in order to make the retirement picture stay whole and intact. That is to say, you want all the pieces coordinated together. Many people retire just fine without specific game plans for each of these areas, but those who do make specific plans in these areas reach the destination with much less stress, and quite often reach it sooner than those who just wing it. In this post, we’ll cover the first piece of the puzzle, the Income Plan. In the next post, we’ll look at the other four pieces.


Two of the greatest financial concerns about retirement are:

1) Will I have enough income or financial assets to retire, and

2) Will our income last for the balance of our lives

So what is the specific plan for delivering the income you’ll need over different time-frames in your life? Which assets should produce income first, which should take care of inflation and from which pot will you buy new cars or help out the grandkids? What about the tax efficiency of the plan? Identifying which assets you’re going to use at different stages to meet your income targets allows you to identify where to allocate risk versus more stable and dependable income streams. Without plan considerations like this, most people make decisions out of the fear of not having enough and wind up taking on a lot of unnecessary risk in several of the other components due to no coordination of the plan.

In part 2 of this post, we’ll look at the other four critical pieces of your retirement puzzle.

If you don’t have a retirement plan, it’s never too late to start. Contact us today and let us help you discover clear direction for your retirement future. We’ll provide a FREE analysis of where you currently stand against your goals and provide important recommendations for getting all the pieces of your retirement puzzle to fit together!




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