COVID-19 Week Six Update

Last week was an eventful one for investors and in the US in general. In the coming days and weeks, we will see policymakers and officials make difficult decisions based on the information that is starting to come out—both in the numbers of COVID-19 cases and deaths and quarterly economic numbers. 

US jobless claims topped 5.2 million last week, which brings the total to 22 million in the past four weeks. Getting the jobless back to work will become a main topic of discussion as local and state governments weigh continuing current stay at home guidelines vs lifting these orders.

You may have seen that Tennessee governor Bill Lee has suspended public schools for the remainder of the 2019-2020 school year. This decision is being made in school systems across the country. From a personal perspective, this has been difficult for families and school staff—to leave for Spring Break and not come back without saying goodbye to friends and teachers has been hard. Colleges continue with classes and will be moving on to final exams in the next week or two. Right now, universities are making contingency plans for the fall in case students cannot come back to campus.

As a follow-up to our update from last week on the CARES Act, the Payroll Protection Program (PPP) loan provision of the Act was funded with $349 billion to help small businesses keep their employees on the payroll. That $349 million ran out of money last Thursday before many of the applications made it to the Small Business Administration for review. It is expected that Congress will approve another $400 billion for the program this week.

The stock market continued its recovery off the March lows. We will more than likely have more volatility in the coming months, so we should prepare to see more ups and downs. As advisors, we are sometimes asked the question, “If you think the market may come down, why don’t we liquidate and get back in when the market is lower?” The boiled-down answer is for one, the market may not go down. Secondly and more importantly, is where do we get back in? This can prove to be a difficult decision for investors and advisors. Often there are tax and other considerations involved as well.

Again, we recommend our clients stay invested and stick with their original investment plans. Our goal during this time continues to be communicating with you and discussing issues you feel may impact your financial goals. As always, thank you for your continued confidence, and please contact us any time we can be of assistance.

The CrestPoint Wealth Management Team

COVID-19 Week Five Update

As promised, we would like to summarize some of the more salient points of the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act, which aims to reduce the economic impact of the current coronavirus outbreak.

On Friday, March 27, 2020, the CARES Act was signed into law. This $2 trillion emergency relief package is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis. Following are major provisions of the bill:

Unemployment provisions
The legislation provides for:
• An additional $600 weekly benefit to those collecting unemployment benefits, through July 31, 2020
• An additional 13 weeks of federally funded unemployment benefits, through the end of 2020, for individuals who exhaust their state unemployment benefits
• Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits
• Unemployment benefits through 2020 for many who would not otherwise qualify, including independent contractors and part-time workers

Recovery rebates
Most individuals will receive a direct payment from the federal government. Technically a 2020 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed (2018 returns in cases where a 2019 return hasn't been filed) and sent automatically via check or direct deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.

The amount of the recovery rebate is $1,200 ($2,400 if married filing a joint return) plus $500 for each qualifying child under age 17. Recovery rebates are phased out for those with adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGI exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold.

While details are still being worked out, the IRS will be coordinating with other federal agencies to facilitate payment determination and distribution. For example, eligible individuals collecting Social Security benefits may not need to file a tax return in order to receive a payment.

Retirement plan provisions
• Required minimum distributions (RMDs) from employer-sponsored retirement plans and IRAs will not apply for the 2020 calendar year; this includes any 2019 RMDs that would otherwise have to be taken in 2020
• The 10% early-distribution penalty tax that would normally apply to distributions made prior to age 59½ (unless an exception applies) is waived for retirement plan distributions of up to $100,000 relating to the coronavirus; special re-contribution rules and income inclusion rules for tax purposes apply as well
• Limits on loans from employer-sponsored retirement plans are expanded, with repayment delays provided

Student loans
• The legislation provides a six-month automatic payment suspension for any student loan held by the federal government; this six-month period ends on September 30, 2020
• Under already existing rules, up to $5,250 in payments made by an employer under an education assistance program could be excluded from an employee's taxable income; this exclusion is expanded to include eligible student loan repayments an employer makes on an employee's behalf before January 1, 2021

Business relief
• An employee retention tax credit is now available to employers significantly impacted by the crisis and is applied to offset Social Security payroll taxes; the credit is equal to 50% of qualified wages up to a certain maximum
• Employers may defer paying the employer portion of Social Security payroll taxes through the end of 2020 and may pay the deferred taxes over a two-year period of time; self-employed individuals are able to do the same
• Net operating loss rules expanded
• Deductibility of business interest expanded
• Provisions relating to specified Small Business Administration (SBA) loans increase the federal government guarantee to 100% and allow small businesses to borrow up to $10 million and defer payments for six months to one year; self-employed individuals, independent contractors, and sole proprietors may qualify for loans

There is likely to be a steady stream of guidance forthcoming with details relating to many of these provisions. The market has recovered a substantial portion of its losses over the past two weeks, but we remain in a fluid situation. As always, please contact us if we can be of assistance, and thank you for letting CrestPoint Wealth Management work with you on your planning goals.

The CrestPoint Wealth Management Team

*Information for this piece was sourced from Broadridge Advisor

COVID-19 Week Four Update

For week four of our updates, we thought we would focus on our business capabilities and discuss recent legislation that may be of assistance to clients or friends in this unusual time.

As we have mentioned in previous updates, CrestPoint can continue to work with clients and address client needs as normal, with the exception of meeting face to face. Following is a sample of services CrestPoint has provided for clients in just the past two weeks:

• Opened new accounts
• Deposited client checks
• Conducted annual reviews
• Met clients via Zoom
• Transferred client accounts from outside brokerages to Cambridge
• Completed life insurance applications

The last two weeks have seen about ten million new applications for unemployment in the US. Hopefully, as restaurants, entertainment venues, and other businesses open back up, many of these recently unemployed people will get their jobs back. As part of the CARES Act, mortgage lenders have the ability to defer three months of mortgage payments. This does not affect a borrower’s credit report or standing with the lender. Please pass this information along to anyone who is being financially affected by this situation.

You will be receiving your monthly and quarterly statements this coming week. The month of March 2020 was one of the most difficult months in history for the stock markets, and so no accounts were immune. We continue to repeat our advice to clients of staying with your original investment strategy, but please feel free to call us should you want to talk about your particular situation. As stated above, we are conducting business as (almost) usual—again, thank you for the opportunity to work with you.

The CrestPoint Wealth Management Team

COVID-19 Week Three Update

Hello, and welcome to our third weekly report. If you are new to these updates, we at CrestPoint Wealth Management have made a commitment to deliver our perspective on how the COVID-19 outbreak is affecting our clients.

Last week we touched on a few key topics:
• COVID-19 cases in the US will continue to rise.
• The stock markets can bounce off lows rather quickly.
• The Federal Reserve and policy makers had made it clear drastic measures would be taken to prop-up the US economy.

As we have all seen, reports of new coronavirus cases continue to rise, both globally and in the US. Two sources of raw data we regularly track that you may find interesting are the daily situation reports from the World Health Organization and the US Centers for Disease Control and Prevention. The links are below:

https://www.who.int/…/novel-coronavirus-2…/situation-reports

https://www.cdc.gov/…/2019-n…/cases-updates/cases-in-us.html

The Dow Jones Industrial Average had its first three days of successive gains Tuesday through Thursday, a period in which the index gained 21.3%, its largest three-day jump since 1931. It should be pointed out that this is a fluid situation, and that market volatility in the near term is still likely.

We saw two major actions from the federal government last week—the Federal Reserve announced an unprecedented program to purchase investment grade corporate bonds, a move slated to provide $300 billion in financing to keep the economy moving. Most important was the relief bill (the CARES {The Coronavirus Aid, Relief, and Economic Security} Act) passed by Congress. While not perfect, this bill does provide some major items for investors such as temporary easing of IRA borrowing rules, and suspension of required minimum distributions (RMDs) for 2020. We will have a piece coming out soon detailing major items in the coronavirus relief bill.

At least for the short-term, coronavirus cases in the US will continue to increase. Unfortunately, we have seen unemployment numbers spike. We should expect to see some volatility in the markets, but the drastic swings we had throughout March should settle as a clearer picture of our economic condition becomes evident. As stated in last week’s update, the stock market is a predictor of the economy and not a reflector of the current situation. It’s impossible to identify a bottom, and this period we are in may prove to be a very good time to invest additional funds. 

We encourage our clients to maintain their long-term perspective unless they've had a major life change. We're here to help—please give us a call if we can be of assistance. Again, thank you for the opportunity to work with you.

The CrestPoint Wealth Management Team

COVID-19 Week Two Update

Hello everyone, we made the decision early last week to provide a weekly update through this rapidly evolving situation in order to give you some perspective from the investment side of things.

As we stated last week, we still highly recommend our clients stay invested through markets such as the one we are currently experiencing. Although each situation is different, past market drops such as the tech bubble of 2001-2002 and the financial crisis of 2007-2009 showed that the market can bottom out quite quickly and make a bounce off the lows in short order.

Two things became clear last week that are important to point out: the COVID-19 cases in the US will continue to rise over the next few weeks, and the US government, specifically the Fed and policy makers, made it clear that drastic measures would be taken to prop-up the US economy in light of the downturn we will be experiencing over the next few weeks due to social distancing.

It should be noted that the stock market is a predictor of the US economy, not a reflector of the current economic environment. As fiscal stimulus packages are passed, mortality rates are truly known, and a plan for recovery is anticipated, the markets should begin to recover.

Again, this is a time to stay with your original investment plan. If you have cash on the sidelines you have previously considered investing, now may prove to be a very good time to do just that. As always, please feel free to call us if we can be of assistance, and thank you for letting CrestPoint Wealth Management be your partner in your investment plans.

The CrestPoint Wealth Management Team

COVID-19 Week One Update

News of the novel COVID-19 virus has dominated recent events and has had an impact on the capital markets. We would like to address a few areas of interest for our clients and friends: 

As you know, the markets have come down from recent highs very quickly. As investment advisors, we encourage our clients to take a long-term approach to investing—an allocation of investments that was appropriate six months ago is more than likely appropriate today, unless you have experienced a change in your financial situation independent of what the market is currently doing, such as (but not limited to) an unexpected expense, illness, or change in income.

As with any illness, we make it clear to our team members that their health and safety, and that of their loved ones, is of paramount importance. Our support staff knows they can stay at home with our full support. The advisors on our staff can in many situations work from home if necessary. If you have concerns about meeting face-to-face, we can certainly accommodate you—we can meet on the phone, and we also have the ability to meet via video if you so choose. For paperwork that needs to be processed, many of you have opened accounts using Docusign, which can be done through email, and does not require us to meet face-to-face. 

Although not specifically related to COVID-19, this is a good opportunity to share our emergency preparedness and security measures. Going back to September 11, 2001, the investment industry learned a tremendous amount about information backup, access, and how to maintain client information in disaster situations. Furthermore, as cybersecurity has become a larger issue over time, we have received continuous guidance from Cambridge and done our own due diligence on how best to protect and back-up client personal and account information.

From the standpoint of business continuity, we recently completed and signed an operating agreement which assures clients will continue to be taken care of in the event of partner disability or death.

We hope what you take away from this message is that CrestPoint, as a firm, has made preparations for situations such as the current COVID-19 outbreak, and that we do take issues such as the ability for you to continue business as usual and knowing your information is secure very seriously. In addition, we realize that the market having large swings can be somewhat distressing, but we encourage our investors to stay with the original goals of their individual plans. Please feel free to contact us at any time to discuss your investment strategy. As always, we sincerely appreciate the opportunity to help with your investment planning.

The CrestPoint Wealth Management Team

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It’s the End of the World as We Know It and I Feel Fine

The title of this song from the rock group REM sums up the attitude of many investors over the last several months, and indeed, the last several years.  An investment journalist summed-up the situation a few years ago when he used the term “disaster du jour”.  What I’m getting at here is that for some investors, there is always a reason to not invest today.

The most common reason I’ve heard recently has been the government shutdown.  But that’s not the only one—the China tariffs and the possible effects they may have has been a popular one as well.  I don’t want to discount investor sentiment, because being able to sleep at night is a real concern.  As an advisor, I sometimes walk a fine line between advising my clients with unemotional advice, and knowing my clients need to be comfortable with their investments.

Let’s take a look how the market performed after two of the more heralded government shutdowns in recent memory, keeping in mind that as of this writing (February 26,2019) the Dow Jones Industrial Average closed at 26,057.98:

December 5, 1995—the DJIA closed at 5177.45.  Since then, the market has increased by fivefold…a gain of 403.3%.

October 1, 2013—the DJIA closed at 15,191.70  The Dow has moved up by 71.5% in this period.

Although government shutdowns are a phenomenon of recent government inefficiency, once they became en vogue, bickering politicians have enjoyed subjecting us to a number of shutdowns.  This most recent shutdown was the twentieth since 1976.  Our economy has kept chugging on along through them all.

If you think that maybe this an anomaly, an examination of “disasters” over the past five years may be interesting to recall:

·        Ebola epidemic in western Africa

·        Ferguson shooting and riots

·        Charlie Hedbo attack in Paris

·        Charleston church shooting

·        Zika Virus outbreak

·        Orlando nightclub shooting

My point in reviewing these events is to recall how terrible they were at the time.  As uncertain as a government shutdown can be, each of these events were troubling and represented potential instability in various ways.  Yet, each one of these disasters is sooner or later forgotten for another disaster and that one is replaced by another.  As long-term investors, we should be prepared for this type of event and know they are part of everyday life.

A recent New York Times op-ed piece entitled “Why 2018 Was the Best Year in Human History!” reminds us that as a species we are making great strides and meaningful progress that are benefitting a larger portion of our planet’s inhabitants than ever before.  For instance, more people than ever are literate, have access to clean drinking water, are getting online, and are living longer lives.  Also, children are seeing higher survival rates, and are being vaccinated at history’s highest rate.

As an advisor, I’m often asked about my opinion on national or world events, and how those may affect the stock market or interest rates.  We can focus on what’s wrong with this world--the wars, the threat of terrorism, famine, disease, and any number of things, or we can choose to be optimistic about our future. 

Seemingly cataclysmic events will always continue to happen, and as investors it is helpful to have a plan on how to invest in the face of “disasters du jour”.  There is no good time or bad time, no best or worst time, to invest.  The best way to manage risk is to dollar cost average your deposits into the market by investing regular sums on an evenly-spaced interval into your investments.  A reasonable length of time in the market will reduce your risk of fluctuation in your investments, and also reduce your risk (not eliminate it) that your investments will be down at the time you need to cash them in.

If you would like further information or if we can be of assistance, please feel free to give us a call at 865 474-8114.

Market Volatility Got You Down?

The last few months have been a wild ride for investors.  The stock market has seen volatility that we have not had in several years.  This can often be worrisome for investors, but it can also represent an opportunity.  As people near retirement and balances in 401(k)s and IRAs grow, these rough times can induce heartburn in even the most seasoned of investors.

At times like these it’s important to think about your overall strategy, and to remember a few key points.  First, think about your overall asset allocation and how you arrived at the mix of investments you currently have.  If your investment mix made sense six months ago, chances are that it still makes sense.  On the other hand, market fluctuations do a great job of helping people realize if they are actually more conservative investors than they previously thought they were.

One thing I occasionally hear from investors as they near retirement is that they cannot afford fluctuations in their retirement portfolio because they are about to retire.  While this may be true to a certain extent, consider this: a male and female couple, both aged 55, have a 50% chance of one of them living to age 91.6*.  That’s a significant length of time in retirement, and being too conservative with your investments has the potential of being as detrimental as being too aggressive.

Remember that the market being down presents certain opportunities as well.  If you have cash sitting on the sidelines, it may be a good time to invest.  Are you worried that the market may go lower?  Invest that cash over a period of a few months—this is the same concept as dollar cost averaging into your 401(k); you take the guesswork out of trying to invest at the market bottom.  If the market continues lower, you are making additional purchases at a lower price.  Also, if you have positions that you have been thinking about selling, a market dip may present an opportunity to realize a loss that helps on your taxes.  Of course, consult your tax advisor when employing such a strategy.

If you’re concerned about how the recent market volatility is affecting your portfolio and your probability of a sound retirement, set up a meeting with your advisor.  If we can help, contact us today for a no-obligation consultation.

*Male and female joint life expectancies based on Annuity 2000 Mortality Table.

Are You in the Sandwich Generation, or is This All Just a Bunch of Baloney?

3 Reasons Why You Need a Financial Plan

I get a lot of similar questions from clients and people I meet regarding financial planning.  One question that comes up quite often is how much someone needs to save for a comfortable retirement, and where should they be saving.  That’s a very difficult question to answer at a cocktail party, but a very important one to be asking.

Because everyone has a different picture of what they want their retirement to look like, working toward that goal becomes more and more important as the years roll on.  As someone gets into their forties, especially late forties, building a road map toward retirement becomes a solid strategy for success.  This road map takes the form of a financial plan.

Building a financial plan helps us to create a baseline on which to build over the years.  Following are three reasons why doing a financial plan with an advisor makes sense:

You build a current snapshot of your financial situation.  You’ve probably heard the saying, “how can you know where you’re going if you don’t know where you are?”  It helps to take an assessment of your investments, insurance, tolerance for risk, and goals for the future.  If you need to address any shortfalls in risk protection, now is the time to do it.

You discuss what you want your plan to look like.  Everyone is different.  The way you plan for your future will probably be different from your friends and colleagues.  Also, we’ve enjoyed a stock market that has seen impressive returns for nearly a decade…do you have a plan for any pullback in the market?  These are concerns that conversations with an advisor should address.

Once you’ve agreed on a plan, you meet regularly to see how you’re tracking toward your goal.  One thing is certain—projections of how your money will grow and what your “expected” retirement date and balance will be are going to change every year.  If you’re working with an advisor and having regular reviews, you’re able to keep on track and keep your goals in focus.

Planning for a retirement that is twenty or thirty years down the road may seem like something that is easy to put off.  Work, school projects, sports, and a myriad of other things occupy our time.  Knowing that we have enough life and disability coverage to protect our families, and that our assets are allocated correctly can surely bring about peace of mind.  By arming yourself with this knowledge as you enter your peak earnings years, you are setting yourself up for a more successful financial future.

How Do I Protect My Family?

Few topics can put a damper on conversation at a party like life insurance, and yet from thirty-somethings, I get questions about life insurance all the time.  As clients move into their thirties, life insurance often becomes a more pressing concern, and rightfully so. 

Looking back at the planning pyramid that we have discussed previously, we see that protection is a basic necessity.  I’ve worked with numerous clients who purchased a nominal amount of coverage when they were married or got their first real job, and now as we start the planning process we learn that they need to increase coverage.  The reasons for doing so are simple:  life insurance is designed to replace income should the person earning it not be alive to earn it.  As one’s income increases, inevitably, their standard of living goes up (bigger house, new cars, private schools and activities for the kids, etc.), and life insurance assures that the family can maintain this standard of living, pay any final costs, and not have to worry about money.

There are many ways to structure a life insurance plan for a family.  Another question I receive quite often is what are the types of insurance, and what should I buy?  The second part of that question requires consultation with the client—every family is different and therefore every solution is different.  Following is a brief breakdown of the three main types of life insurance:

·        Term Life—Term Life is the most basic type of coverage, and for younger clients, the way to buy the most coverage for the least cash outlay.  There are many forms of term life, but the most popular cover someone for a specific period of time (a term).  It could be ten or twenty years, for example.  In return for that coverage, the policy owner pays a premium that is usually guaranteed to be level over that period of time.  Because the person is young (in your thirties) and chances of dying are low, and the insurance company knows that risk is for a set period of time, premiums are generally low.

·        Whole Life—Whole Life is on the opposite end of the spectrum from Term.  It is designed to cover someone for their entire life.  Premiums are level, and are guaranteed to stay the same over the insured person’s lifetime.  The policy builds cash, known as “cash value”, over time.  How much cash is a function of the claims experienced by the company, the interest the company has earned on their investments, and their expenses.  Cash that builds up in a Whole Life policy can be accessed from the policy without being taxed.  In addition, there comes a point where you can stop paying premiums, and let the earnings of the policy pay for itself.

·        Universal Life—Universal Life is sort of a hybrid of Term and Whole Life.  This product was originally designed to be a permanent product like Whole Life, but have internal charges like Term.  What that means is that in the early years the actual cost of the insurance is quite low, and any excess you put in goes into cash value.  The premiums, however, are not guaranteed, and if the interest rates stay low or the premium isn’t high enough, the policy owner may need to pay more premium to keep the policy in force later in life.  This is not an attractive scenario.  There is one type of Universal Life, however, that can be set up as basically “term for life”—it is set up so it does not build cash value, but is guaranteed to stay in force until age 120 or 121, depending on company.  This is a great fit between traditional Term and Whole Life.

The inevitable questions become, how much coverage do I need, and what type of policy is right for me and my family?  Those are questions that generally can’t be answered in a five minute conversation.  I feel it’s important to analyze the coverage you have in place through work (if any), and any existing personal coverage.  Also, it’s critical to know what your needs are.  This comes through analysis of salary, debt, and expenses.  If you have a stay-at-home spouse, he or she should also be covered.  Imagine life without them running the household.

This can seem like a very foreign subject and something that is easy to put off to a “better time”, but it is a very smooth and quite educational process.  We also use powerful planning software that can help with formulating a life insurance plan.  If you’ve been thinking about looking into this, please do not put it off—unfortunately as humans, we don’t tend to get in better health as time goes by; it goes the other way.  The better one’s health, the better one’s rates for coverage are.  I’ve had several instances over the years where people have put this type of planning off and had a major health issue come up, only to be unable to get coverage at all.

If I can be of assistance in this foundational area of planning, please feel free to contact me. 

Monte Miller   (865) 776-5577   monte@crestpointwealth.com

Tips for Retirement Savings in your Thirties

As you move from your twenties into your thirties, chances are that your income will rise substantially, especially if you make strategic moves from one employer to the next.  One thing you should examine while evaluating a potential employer is the retirement plan offered.  There are several nuances available in retirement plans, and they can potentially result in large benefits later down the road.  Please note that this blog post is meant to be a general piece of information and not to be taken as specific advice for your individual situation.

For many years, pensions were the most common retirement vehicle. Technically known as "defined benefit" programs, employers funded these, and upon retirement paid an income based on a formula using the factors of time of service, age, and income. Now, employer-funded pension plans are very rare, and the burden of saving for retirement has been shifted to the employee. For most people, this retirement vehicle comes in the form of a 401k (or 403b for a non-profit employer). There are other plans available, but for the purposes of this post, we're going to discuss the 401k.

If you're looking for a new employer, one of the questions you should be asking is if they provide a match for your contributions into the plan. The match can be calculated many different ways, so do the math to see how much you can contribute. Also, if you are a high-income earner, you may be capped in how much you can contribute to the 401k.  Because of this, you will want to ask if the employer has other plans in place that allow additional dollars to be set aside on a tax-advantaged basis.  If a match is available--I can't stress this enough--contribute at least the minimum to get the full match. This sounds pretty basic, but I’ve seen dozens of instances of people not taking advantage of the match.  It's basically free money from your employer, so you want to make sure and get all you can.

You may have the option to choose between a Traditional 401k or a Roth 401k. Consider the Roth option. Here's why: the Roth option allows you to make your deposit, have it grow tax deferred, and make withdrawals tax-free. In addition, with traditional retirement funds, you are required to begin distributions at age 70 1/2. I have many clients who already have adequate income and do not want to take income from a tax-deferred vehicle that has never been taxed before. The Roth option allows you to keep money invested as long as you like, and when you do access it, withdrawals are tax free.

Finally, a word of advice if you move from employer to employer and accumulate multiple retirement plans along the way. According to Fidelity, 41% of employees between 20 and 39 cashed out their 401k after leaving their job.  That effectively puts them at zero going into their forties—in order to save the same amount by age 65, they have to put away much more money each month than the person who saved starting in their twenties or thirties and kept their retirement accounts from each employer.  Do what you can to keep your retirement plan dollars invested; you’ll be glad you did!

Saving for retirement is a complex process.  Often, an investor’s retirement account becomes their largest account, yet due to the fact it is an employer-sponsored account, it regrettably receives too little attention.  If you have questions about your overall investment allocation, or how you are progressing toward your retirement goals, please feel free to contact me.  Monte B Miller  (865) 776-5577  monte@crestpointwealth.com

It's Time to Get Serious

Last month we examined financial planning issues for people in their twenties.  This month we will continue with a look at several issues facing families and professionals in their thirties.

As college graduates begin careers and enter the real world, cash flow is often very tight for several years.  Buying and furnishing a home, getting married and having kids, and the other myriad expenses associated with “starting out” can be overwhelming.  Even when being very conscientious in making purchases, unanticipated expenses such as health crises or needing a new vehicle, put together with college loans can add to a struggling cash flow.

Moving from one’s twenties into the thirties is not only marks a progression of time, but also a subtle shift in the growth of a young person’s financial journey.  I often see clients make substantial gains in their income throughout their thirties.  Some of this is happens because of work experience, some comes from looking for better and higher paying positions.  Having a plan to use these growing earnings in an intentional manner will be greatly beneficial in the years ahead.

If you have credit card debt, work on eliminating it as quickly as possible.  High interest, revolving debt is the worst type of debt.  If you still have college loans, put together a strategy for paying off the debt.  Work out an amortization schedule and pay them down faster than the minimum payments if possible.

Contribute regularly to a separate account to build up your emergency fund.  I have many clients who set up an account that we call a “Cash Management Account”.  It’s simply a brokerage account designed to receive monthly contributions that we keep in cash.  After a few years we may invest a portion, but the key is that although the money is very accessible, it takes another step or two to get to than just going to the bank or ATM, and therefore the money tends to stay there. 

Evaluate your insurance coverage.  This is a broad topic, because over the ten or fifteen years since college (or law school, or med school), many things have changed.  More than likely, you have a family, your income has grown, you have a house, cars, possibly a boat, and the list goes on.  Often, I meet with people who get life insurance when they are married and never review it.  Once children come along and income goes up, it’s imperative to assure needs are met.  The same goes for disability coverage as income goes up, especially for certain professionals.  Don’t forget to meet with your property and casualty agent on a regular basis to review coverage as well.

As your family grows, don’t forget the importance of estate planning.  If you and your spouse weren’t here, who would you want to be the guardian (and successor guardian) of your children?  The same goes for trustee of funds for them, and how the funds are paid out.  Also, don’t forget the importance of living wills and powers of attorney.

As the title suggests, these are serious subjects, and “adult” responsibilities.  Although on first glance, some of them may seem complex, they really are not.  They just require planning and the discipline to stick with a plan of regular reviews.  If I can help or if you would like additional information, please feel free to contact me. 

Monte Miller  (865) 776-5577  monte@crestpointwealth.com

I Have My First “Real” Job—What Should I Do to Make Sure I’m On the Right Track to Meet My Financial Goals?

Landing that first big job out of college is a major accomplishment, and a huge landmark in a young person’s life—it’s the culmination of many years of hard work, and in many cases, lifelong dreams that have been fulfilled. 

In my work with young professionals, I see some common threads in planning concerns.  When someone is finally out on their own, has their own place, and their first high-paying job, I often am asked what they should be doing from a planning standpoint.  Following are a few thoughts and observations:

·        If you have student loans, design a plan to pay them down.  Work on the highest interest loans first if you can pay extra, and pay those off, then work on the next ones.  This also goes for any credit card debt you may have accumulated during college.  Craft  a monthly budget for paying off revolving debt and stick to it.

·        Resist the temptation for new, big purchases.  There is plenty of time to buy a nice car and have that fancy condo; immediately putting yourself in a financial bind can lead to years of financial stress.

·        Start building an emergency fund.  The goal is to have an emergency fund of six to twelve months of cash in the bank for emergency expenses.  This could be new tires, a refrigerator that goes out, or any number of things.  Remember, you’re out on your own now, and your new-found freedom brings a lot of expenses.

·        Take advantage of any match available in your employer’s retirement plan.  If your new employer has a retirement plan that matches your contributions, contribute at least what you need to in order to get the full match.  This is basically “free money” your employer is giving you for participating in the retirement plan, so you don’t want to leave it on the table.  In addition, if a Roth option is available, this may be a good choice…while you don’t receive a tax advantage on the contribution, your money grows tax-deferred, and you will not be taxed on the withdrawals.

·        Be aware of the insurance available to you through your employer, and eliminate the “disability gap”.  Most employers will have life and disability insurance available to you at little or no cost.  Most employer disability plans do not cover your entire income, and the benefit they pay is taxable.  This can create a serious shortfall in income should you become disabled.   For more information on this, see this link.

Of course, this article only touches on a few of the issues graduates are hit with as they begin their working lives.  It’s an exciting time, full of opportunity and new adventures.  With proper planning, this time can lay the groundwork for a lifetime of financial success.  If you would like to discuss planning for your future, feel free to contact me. 

Monte Miller (865) 776-5577     monte@crestpointwealth.com

Don't Let Student Loan Debt Keep You Captive

As you no doubt are aware, student loans have become an increasing burden on America’s college students and graduates.  Consider these statistics: according to the Federal Reserve and the Wall Street Journal, there is $1.45 trillion in total student loan debt, second only to US mortgage debt.  Also, 44.2 million Americans have student loan debt—that’s 60% of college graduates.

As the years have gone by, the job market has become increasingly competitive.  Many people have taken loans out to attend college, and have unfortunately found an extremely competitive job market, with fewer jobs and lower wages.  Having been met with poor job prospects, many have opted to continue on to grad school, taking out yet more loans.

If you’re a recent college graduate, how should you approach the task of paying off your loans?  First, make sure you have protection vehicles in place such as life and disability insurance--in case you cannot make these payments, your new family or parents aren’t burdened with them.  Second, avoid temptations from private bankers offering easy credit for cars and large houses; if available, use low interest loans to consolidate these debts.  Pay down higher interest loans first.  As your income grows, you can set up an amortization schedule to maximize payments and eliminate this debt as quickly as possible. 

We have planning tools available that can help analyze loans, and strategies for paying down college loans.  I’ve seen student loan debt linger well into clients’ forties.  It doesn’t go away, so if you’d like to work on a strategy for eliminating it, feel free to contact me. 

Monte Miller (865) 776-5577monte@crestpointweallth.com

We Recently Got Married or Had Kids…What Kind of Basic Planning Should We Be Doing?

Over the next few days, we are going to examine a few topics that are often of concern to many people in their twenties.  This is the first edition in a series of blogs that will examine hot-button issues that over the years I have seen consistently be of concern to certain age groups.  I will also try to give some practical advice on how to address them.

Things are going great…you both graduated from college a couple of years ago, you got married, you both got super jobs making good money, you have a baby on the way.  You’re drifting off to sleep in each other’s arms…when all of a sudden, your eyes pop open and you panic and realize, “I’m about to become an adult now!!!”  I know that exact feeling.  If you haven’t had it yet, it’s coming, and it’s scary.

I’m often asked by young parents what they should be doing from a financial planning standpoint.  That’s a tough question, because everyone is different, but I’ll start with a few generalities:

Think about planning kind of like the old food pyramid.  You have the essentials at the bottom, and then you build on those essentials with other elements of the plan as you make your way to the top.

Protection: Think about what would happen if the breadwinner(s) were too sick or hurt to work, or died and that income was gone.  What impact would that have on the family?  Think not only in terms of the dollars missing, but also the help with kids, and doing chores around the house.  Also, don’t discount the value of a stay-at-home spouse.  Check out this video.  This means taking a look at life and disability coverage that you may already have, and then seeing if you need more to keep your family in the same standard of living.

College Funding:  According to US News and World Report, the average cost of a four-year public college education in 2030 will be $205,000.  Tuition in America is rising by 6.5%, far outpacing inflation.  Putting money into a 529 college savings plan is a great way to set money aside (with limits) that can grow tax-deferred for college expenses.

Retirement Savings:  If there is a match available to you, make sure that you are at least getting that match.  Remember, your employer is effectively giving you free money, but you must put in a certain amount for them to give you the full match.  Know what those amounts are!

Estate Planning: Don’t forget the kids!  If you don’t have a will, powers of attorney, and living wills, stop what you’re doing, and get in touch with an estate planning attorney to get them done.  Here’s why: if you die and haven’t named a guardian for your children, the courts will decide who that guardian will be (and think about successor guardians if parents or other potential guardians are getting older).  Also, you have the power to name a trustee for the funds you leave behind, and how the funds will be distributed to your beneficiaries.

Of course, this piece touches on a few of the main concerns I often see.  If you are interested in discussing your particular situation, feel free to contact me. 

Monte Miller (865) 776-5577monte@crestpointwealth.com

Our Children Have Been Scammed!

Disclaimer:  This is a departure from our normal, serious, blog posts.  Sometimes we just need to take a step back and lighten-up.

It seems that with each passing year things just get a little bit tougher.  The news is more upsetting, the world is more dangerous, crime is up, and on and on.  As a father, I read a deluge of articles about human trafficking, vaccinations, medications and their side effects later in life, phone and tablet screen dangers…if you’re a parent to a youngster or adolescent, you know exactly what I’m talking about.   If you’re retired, thank your lucky stars you raised us in the good ole’ days when we rode bikes without helmets and drank from the water hose.

The past few weeks, however, we’ve all seen something going on that quite frankly, bugs me a little bit.  Somewhere down the line, kids all over America started getting ripped-off regarding their summer vacation.  I’m not sure exactly when it happened, and I do enjoy having the household on somewhat of a regular schedule, but if today’s kids knew what our summers were like, there would be a revolution of grade schoolers demanding their summer back.

Now I realize the rationale behind this—kids don’t have as much time to forget everything they learned and so the first month isn’t just re-learning the previous year, they can build in more snow days, etc.  I guess there aren’t too many farmers going to school in the Knox County School System either.

I grew up in Memphis, TN, and we started school the day after Labor Day.  There was a very good reason for this.  I never went to a school that was air conditioned.  And the dress code was such that boys could not wear shorts.  If you’ve ever spent time in Memphis in August, you know this would be a terrible combination.  Not that September was much better.  And when we finally got out in June, it was pretty miserable also.

I just feel kind of bad for the kids.  I know a lot of parents like getting them out of the house, and I’ll admit—I love my girls more than anything, but sometimes I wonder how my wife survives being a stay-at-home mom.  All this being said, I think as a society we’re pushing these little ones into adulthood too soon.

If you and your family are back into the daily school routine, I hope you all have a fun and successful school year, and that your children can look back on these years with great fondness and memories of wonderful teachers and friends.