Meeting with a financial advisor for the first time can feel intimidating, and that’s completely normal. Many people walk into that first conversation feeling unsure of themselves, worried they don’t know enough to ask the right questions.

But here’s something worth remembering: you already understand more about investing than you think.

If you once applied to several colleges instead of banking on just one, you were diversifying. If you chose a job with better benefits over a higher salary, you were weighing risk against reward. If you’ve ever worn a life jacket even though you know how to swim, you were managing risk. These are core investment principles, and you’ve been applying them to your whole life.

Think of this first meeting not as a test, but as the beginning of what could be a decades-long partnership. You are interviewing someone for one of the most important roles in your life. The person who will help guide your family’s financial future. Good advisors welcome your questions. They know that understanding builds trust, and trust is the foundation for everything that follows.

Here are five questions to help you find the right fit.

1. “What’s your investment philosophy?”

A financial philosophy is like a compass. It guides decision-making when markets get rocky, and at some point, they always do.

Be cautious of any advisor who promises to eliminate risk or guarantees they’ll consistently beat the market. Markets work precisely because uncertainty exists. Without it, there would be no opportunity for returns above what you would earn from a basic savings account.

The kind of advisor worth working with might say something like: “I can’t predict the future, but I can help you prepare for it.” That kind of honesty is a green flag.

2. “How do you get paid and for what?”

This is one of the most important questions you can ask, and it’s one many people skip. How an advisor is compensated directly affects the interests they serve. Here’s a simple breakdown of the most common models:

• Fee-Only: The advisor is paid directly by you through a flat fee, an hourly rate, or a percentage of the assets they manage (often called an AUM, or Assets Under Management fee). Because they don’t earn commissions from product sales, their recommendations are more likely to align with your goals.
• Commission-Based: The advisor earns money when they sell you financial products such as certain mutual funds or insurance policies. This selling can create a conflict of interest, since their income depends on what they sell you, not necessarily on what’s best for you.
• Fee-Based: A hybrid of the two. The advisor charges a fee for their services and may earn commissions on certain products. This model requires more transparency, so be sure to ask exactly when and how commissions apply.

Regardless of the model, ask for a full breakdown of all costs, not just the advisor’s management fee, but every underlying expense, including fund costs, trading fees, and custodial charges. Ask whether financial planning is included or billed separately. The right advisor will walk you through every line item and explain why their model works for clients in your situation.

3. “Do you work with people in my circumstances?”

Experience matters, especially when your situation involves specific challenges, such as managing Social Security income, drawing down retirement savings, or covering healthcare costs in later years.

Ask the advisor to describe how they typically work with someone like you. A good advisor should be able to share real examples (with client privacy protected, of course) of how they’ve helped people navigate similar milestones and concerns.

4. “How do you help beyond investments?”

A great advisor does more than manage a portfolio. They can coordinate with tax professionals, estate attorneys, and insurance specialists. They help with retirement income strategies, long-term care planning, and even family financial literacy.

In other words, they help you see the full picture, not just the numbers on a statement.

5. “How are my assets protected?”

An independent custodian, a separate institution from your advisor, should always hold your money. Your advisor directs how investments are managed in accordance with your plan, but they should never have direct access to your funds. This separation is an important safeguard worth confirming upfront.

What to Expect in That First Meeting

A good advisor may spend more time listening than talking during your initial conversation. They’ll want to understand your goals, what concerns you most, and what a successful retirement looks like for you, not just in financial terms, but in terms of your family, your values, and your peace of mind.

Pay attention to how you feel in that conversation. Your advisor is someone you may call during the next market downturn or financial crisis. You need someone whose voice calms you, someone you trust enough to follow when every headline urges panic.

You Are More Ready Than You Think

The fact that you’re preparing for this conversation, doing your research, and asking thoughtful questions already puts you ahead. The best advisors genuinely appreciate a prepared client. They know that clients who understand their approach are more likely to stay the course, reach their goals, and build lasting confidence in their financial future.

Walk into that first meeting knowing that you deserve clear answers, straightforward explanations, and an advisor who truly gets you. Not someone who promises unrealistic returns, but someone who will be your thinking partner for life’s biggest financial decisions, part educator, part strategist, part coach, and sometimes part counselor.

The right partnership can make all the difference.

The post 5 Questions to Ask Before Hiring a Financial Advisor first appeared on Stalwart Financial Planning.

Investing can sometimes feel like a road trip. There are smooth stretches of highway, but also plenty of potholes, detours, and traffic jams along the way. 2025 was a perfect example of this journey. It wasn’t always a comfortable ride, but for those who stayed buckled in, the destination was well worth the trip.

US stocks marked their third consecutive year of double-digit gains, despite a landscape filled with economic twists and turns. Let’s break down what happened in the markets last year and what it means for your long-term financial journey.

The Big Picture: Climbing Higher in 2025

Despite some mid-year jitters, 2025 was a strong year for the markets. The S&P 500 climbed nearly 18%, closing near record levels and continuing its upward trend. However, the real standout performances came from international stocks, which soared an impressive 32%, and emerging markets, which outpaced even that with a 33.6% gain. US bonds also delivered solid returns, rising 6.3%.

This year’s numbers highlight the importance of diversification, reminding us not to keep all our eggs in one basket. Here’s a quick snapshot of the year’s performance:

• US Stocks (S&P 500): Up 17.9% [i]

• International Stocks: Up 31.9%[ii]

• Emerging Markets: Up 33.6%

• US Bonds: Up 6.3%[iii]

Overall, it was a year of broad gains, reinforcing the value of a well-rounded investment strategy.

This growth happened against a backdrop of significant events:

• Interest Rate Cuts: The Federal Reserve lowered interest rates by 0.75 percentage points (three separate cuts) to address labor-market concerns, even as it kept an eye on stubborn inflation.[iv]

• Tariff Uncertainty: New tariff announcements in the spring caused market jitters, but stocks rebounded as trade deals were announced.

• Government Shutdown: We saw the longest government shutdown in US history (43 days), yet the markets proved resilient, continuing to post gains during the closure.

Tech, AI, and Diversification

Technology companies remained a major topic of conversation. The tech-heavy Nasdaq advanced nearly 21% in 2025. You likely heard headlines about massive companies hitting multi-trillion-dollar market caps. While AI continues to drive excitement, it’s a good reminder that you don’t need to chase a few “big names” to capture that growth.

Technology touches almost every type of business today. By maintaining a broadly diversified portfolio, you ensure you aren’t missing out on the winners, regardless of where they appear or what industry they are in.

 A Look Abroad

For the first time in recent years, developed international markets outperformed the US significantly—the widest margin since 1993. Emerging markets did even better, rising over 33%.

This serves as a powerful reminder of why we don’t put all our eggs in one basket. Just as you wouldn’t fish in only one spot of the lake all day if the fish aren’t biting, a globally diversified portfolio helps you catch growth wherever it happens to be occurring.

 The Value of Staying the Course

If you had checked your portfolio on April 1st and then ignored it until May 1st, you might have thought 2025 was a calm year. But if you watched the daily news during April, it likely felt like a rollercoaster. Volatility is a normal part of investing, but it can be uncomfortable in the moment.

The lesson from 2025 and indeed, from the last 100 years of market data—is that patience pays off. Investors who reacted to the spring swoon or the government shutdown by exiting the market might have missed the recovery and subsequent gains[v].

Thinking about investments over the long term can help ease the urge to make hasty changes.[vi] Just like a well-planned road trip, if you know where you are going, a few detours shouldn’t stop you from reaching your destination.

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[i] US stocks performance based on S&P 500 data. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global.

[ii] International stocks performance based on MSCI World ex USA Index and MSCI Emerging Markets Index. MSCI data © MSCI 2025, all rights reserved.

[iii] Bond market performance based on Bloomberg US Treasury Bond Index and Bloomberg US Aggregate Bond Index. Bloomberg data provided by Bloomberg Finance LP.

[iv] Interest rate data sourced from the US Federal Reserve statements, 2025.

[v] Past performance is not a guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio

[vi] This material is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security.

The post 2025 Market Review: Navigating the Rocky Road to Gains first appeared on Stalwart Financial Planning.

The holidays are often a time of hustle and bustle with crowded shopping malls, last-minute wrapping, and the endless search for the “perfect” gift. We frequently default to the usual suspects: toys that break in a week, sweaters that get pushed to the back of the closet, or gadgets that become obsolete by next season. But what if you could give something that doesn’t just sit on a shelf? What if you could give a gift that grows, teaches valuable lessons, and helps secure a loved one’s future? Financial gifts are increasingly popular among grandparents and parents who want to make a lasting impact by instilling investing for kids into their gifts.  Unlike a toy that provides momentary joy, a financial gift can help pay for a college education, fund a first car, or even start a retirement nest egg decades in advance. It’s a way to pass down not just wealth but also values, teaching the younger generation about the power of saving, compound interest, and financial responsibility.

In this guide, we will explore some of the most effective ways to give financial gifts, from college savings plans to micro-investing accounts. Whether you are looking to contribute to a grandchild’s education or want to help them get a head start on their financial journey, you’ll find practical options here to suit your needs.

Introduction to Financial Gifts

What Are Financial Gifts?

At its core, a financial gift is exactly what it sounds like. It is money or an asset given to another person. However, in the context of strategic gifting, it goes beyond handing over a crisp $20 bill in a holiday card. Financial gifts

are structured vehicles, such as investment accounts, savings bonds, or education funds, designed to appreciate over time.

Why are they valuable? Think of it like planting a tree. If you give a child a toy today, it’s like giving them a cut flower; it’s beautiful for a moment, but it fades. A financial gift is a seed. It might look small now, but with time, patience, and the right environment (in this case, compound interest and market growth), it can grow into something substantial that provides shade and fruit for years to come.

The Benefits of Giving Financial Gifts

There are three primary benefits to choosing financial gifts over traditional material items:

1. Long-Term Growth: The most apparent benefit is the potential for growth. A $100 toy is worth $0 in a few years. A $100 investment in a diversified portfolio, given enough time, can grow significantly. This growth is from the magic of compound interest, earning interest on your interest. For a grandchild or child who has decades ahead of them, time is their greatest asset.
2. Education Funding: With the rising cost of higher education, student loan debt is a significant concern for many young families. By contributing to an education-specific account, you alleviate some of that future burden, allowing your loved ones to graduate with more freedom and fewer financial shackles.
3. Financial Literacy: Perhaps the most underrated benefit is the educational aspect. When you open an investment account for a child, it opens the door to conversations about money. You can show them statements, explain how the stock market works in simple terms, and help them understand the value of patience. You are not just giving them fish. You are teaching them how to fish.

Detailed Gift Ideas

There are several vehicles available for financial gifting, each with its own set of rules, tax advantages, and purposes. Let’s walk through four popular options to help you decide if any might be a good fit for your family.

529 Plans: Investing in Education

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. These plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions.

How They Work:
You contribute after-tax money into the account. The money is then invested, typically in a mix of mutual funds similar to a 401(k). The funds grow tax-free, and withdrawals are also tax-free as long as they are used for qualified education expenses. This includes tuition, fees, books, and room and board at eligible colleges and universities. In recent years, the rules have expanded to include K-12 tuition (up to certain limits) and even apprenticeship programs.

Benefits and Tax Advantages:

• Tax-Free Growth: The earnings on your investments are not subject to federal tax, and generally not subject to state tax when used for qualified education expenses.

• State Tax Deductions: Over 30 states offer a tax deduction or credit for 529 plan contributions (North Carolina is currently not one of them). Even if you don’t live in the state sponsoring the plan, you can still invest in it, though you should check if your home state offers tax breaks for investing in its specific plan.

• Control: As the account owner, you retain control of the funds. If the beneficiary decides not to go to college, you can change the beneficiary to another eligible family member without penalty.

How to Set Up a 529 Plan:
Setting up a 529 is relatively straightforward. You can usually open an account directly through a state’s plan website or through a financial advisor. You will need the beneficiary’s Social Security number and date of birth. Most plans allow you to start with a low minimum contribution, sometimes as little as $25.

UTMA/UGMA Accounts: Flexibility for the Future

The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) allow you to transfer financial assets to a minor without the need for a formal trust.

What Are UTMA/UGMA Accounts?
These are custodial accounts. You (the donor) or another adult acts as the custodian, managing the assets until the child reaches the age of majority in their state (usually 18 or 21). Once they hit that age, the account legally becomes theirs to do with as they please.

Benefits and How They Differ from 529 Plans:

• Flexibility: Unlike a 529 plan, the funds in a UTMA/UGMA account are not restricted to education expenses. The money can be used for anything, such as a down payment on a house, a wedding, a car, or travel.

• Asset Variety: UGMA accounts are typically limited to financial assets like cash, stocks, mutual funds, and bonds. UTMA accounts can hold virtually any kind of asset, including real estate and art.

• No Contribution Limits: While there are gift tax implications to consider (more on that later), there are no hard limits on how much you can put into these accounts, unlike the aggregate limits found in 529 plans.

Considerations for Custodial Accounts:
The biggest drawback for some is the lack of control once the child comes of age. If your grandchild turns the age of majority (age 18 in some states) and decides to spend the money on a sports car rather than college tuition, you cannot stop them. Additionally, assets in these accounts are considered the child’s assets, which can weigh more heavily against them in financial aid calculations than assets in a 529 plan.

EE Savings Bonds: The Classic Conservative Choice

For decades, savings bonds were the go-to gift from grandparents. While they may not be as flashy as the stock market, Series EE Savings Bonds remain a safe, low-risk option backed by the U.S. government.

What Are EE Savings Bonds and How Do They Work?
Series EE bonds earn interest monthly. They are guaranteed to double in value if you hold them for 20 years. If you cash them in before five years, you forfeit the interest for the previous three months. After five years, there is no penalty for redemption.

Benefits of EE Savings Bonds:

• Safety: They are backed by the full faith and credit of the United States government, making them one of the safest investments available.

• Tax Advantages: The interest earned is exempt from state and local taxes. If used for qualified higher education expenses, the interest may also be free from federal income tax (subject to income limitations).

• Accessibility: They are affordable, with purchase prices starting at $25.

How to Purchase EE Savings Bonds:
Paper bonds are mostly a thing of the past. Today, you must buy electronic savings bonds through the TreasuryDirect.gov website. You will need the recipient’s Social Security number to gift a bond electronically.

Micro-Investing Accounts: Start Small, Dream Big

In the digital age, micro-investing apps like Acorns and Stash have revolutionized how we think about saving. These platforms are designed to make investing accessible to everyone, regardless of their net worth.

What Are Micro-Investing Accounts?
These apps often use a “round-up” feature. For example, if you buy a coffee for $3.50, the app rounds up the purchase to $4.00 and invests the extra $0.50 into a diversified portfolio. They also allow for small recurring investments or one-time gifts.

How They Work and Who They Are For:
Many of these platforms offer custodial accounts specifically for children (often called Acorns Early or Stash Stock-Back). You set up the account, and the money is invested in Exchange Traded Funds (ETFs) based on a risk profile. These platforms can be an excellent option for teenagers who are comfortable with technology. It allows them to see their balance grow on a smartphone app, making the concept of investing tangible and engaging.

Benefits of Starting Early with Small Investments:
The power of these accounts lies in consistency. It shows that you don’t need thousands of dollars to be an investor. By contributing small amounts regularly, you demonstrate the habit of “paying yourself first.” Over time, those spare change contributions can add up to a surprising amount.

Considerations Before Giving

While the intent behind financial gifting is noble, there are a few logistical hurdles to clear before you write the check.

Understanding the Recipient’s Financial Situation

Before setting up an account, it is wise to speak with the child’s parents. They may already have a 529 plan established that you can contribute to, rather than opening a separate one. Coordinating your efforts ensures that you aren’t duplicating work or complicating their financial picture.

Tax Implications for Both Giver and Receiver

Under current tax law, you can give up to a certain amount per year to any single individual without having to file a gift tax return. For 2025, this annual exclusion amount is $19,000 per donor, per recipient. If you are married, you and your spouse can give a combined $38,000.

• For 529 Plans: There is a special rule that allows you to “superfund” a 529 plan. You can contribute up to five years’ worth of gifts at once (e.g., $95,000 for an individual) without triggering gift taxes, provided you treat the contribution as if it were spread over five years.

• “Kiddie Tax”: For UTMA/UGMA accounts, be aware of the “Kiddie Tax.” Earnings above a certain threshold (currently $2,500 for 2024) may be taxed at the parents’ marginal tax rate rather than the child’s lower rate.

Legal and Regulatory Considerations

When opening custodial accounts, you are acting as a fiduciary. Being a fiduciary means you must manage the assets in the child’s best interest. You cannot use the funds for expenses that are legally the parents’ obligation, such as food, shelter, and basic clothing. Keeping clear records of how funds are used is essential to avoid any legal complications down the road.

How a Financial Planner Can Help

Navigating the alphabet soup of 529s, UTMAs, and IRS rules can be confusing. Helping you with this navigation is where a professional can provide clarity and confidence.

Introduction to Personal Financial Planning

Personal financial planning is not just about picking stocks; it’s about aligning your resources with your life goals. A CERTIFIED FINANCIAL PLANNER (CFP®) professional looks at your entire financial picture, your retirement income, your estate plan, and your gifting desires to create a cohesive strategy.

How They Help with Gifting Strategies

A financial planner can help you determine:

• How much you can afford to give: Ensuring your generosity doesn’t jeopardize your own retirement security.

• Which vehicle is best: Analyzing whether a 529, UTMA, or a simple brokerage account aligns best with your goals for the grandchild.

• Tax efficiency: Structuring gifts to minimize taxes for both you and your heirs.

Seek a Fiduciary

When looking for a planner, it is crucial to find someone who adheres to a fiduciary standard. The fiduciary standard means they are legally and ethically bound to act in your best interest, putting your needs ahead of their own. At Stalwart Financial Planning, we pride ourselves on our commitment to ethical practices and client-first service. We don’t sell any products; we build plans that help you sleep better at night.

Making a Lasting Impact with Financial Gifts

As you browse through holiday gifts online or wander through department stores this season, consider the impact of a different kind of gift.

• 529 Plans offer a tax-smart way to fuel education dreams.

• UTMA/UGMA Accounts provide flexibility for a variety of future needs.

• EE Savings Bonds offer a risk-free, guaranteed return.

• Micro-Investing Accounts engage the younger generation with modern tools and habits.

Giving a financial gift is an investment in the future. It’s a way to say, “I believe in you, and I want to help you build a secure foundation.” The toy car will eventually lose its wheels, and the trendy jacket will go out of style. But an education, a down payment on a home, or the knowledge of how to manage money? Those are gifts that truly last a lifetime.

If you would like assistance navigating these options or ensuring your retirement plan allows for this kind of generosity, don’t hesitate to get in touch with a financial planning professional today. We are here to help you plan for tomorrow so that you can enjoy today.

The post Financial Gifts & Investing for Kids | A Guide for Grandparents first appeared on Stalwart Financial Planning.

As the end of the year approaches, many of us start thinking about taxes. While it might not be the most exciting topic, a little tax planning can lead to significant savings. Think of it like preparing for a fishing trip. You would not just show up at the water with a random lure or fly. You would choose the right fly for the fish you want to catch. Similarly, selecting the right year-end tax strategies can help you secure your financial future and maximize your refund.

We understand that navigating tax laws can feel complicated. That is why we have put together this guide to break down smart, actionable tax-saving ideas. Whether you plan to itemize your deductions or take the standard deduction, there are steps you can take to lower your tax bill.

Key Strategies for Everyone

Certain tax-saving moves are beneficial regardless of whether you itemize or take the standard deduction. These strategies focus on “above-the-line” deductions, which reduce your adjusted gross income (AGI), and tax credits, which directly lower the amount of tax you owe.

Maximize Your Retirement Contributions

One of the most powerful tools for tax savings is contributing to a tax-deferred retirement account. Money you put into a traditional 401(k) or a traditional IRA is often deductible, meaning it lowers your taxable income for the year.

For example, if you are in the 22% tax bracket, every $1,000 you contribute to your traditional 401(k) could save you $220 on your tax bill. It’s a win-win: you save for your future while reducing your taxes today. Check the annual contribution limits and aim to contribute as much as you can before the deadline.

Contribute to a Health Savings Account (HSA)

If you have a high-deductible health plan, an HSA is an incredible triple-tax-advantaged account.

• Contributions are tax-deductible: The money you put in lowers your taxable income.

• The money grows tax-free: Any interest or investment gains are not taxed.

• Withdrawals are tax-free: You can take money out for qualified medical expenses without paying taxes.

An HSA is a great way to plan for future healthcare costs, which can be a significant concern in retirement. By contributing now, you secure funding for future medical needs and receive an immediate tax break.

Harvest Tax Losses in Your Investment Portfolio

Did some of your investments lose value this year? While nobody likes seeing their portfolio go down, you can turn those losses into a tax-saving opportunity through tax-loss harvesting. This involves selling investments at a loss to offset capital gains realized from selling other investments at a profit.

If your losses are greater than your gains, you can use up to $3,000 of the excess loss to reduce your ordinary income. This can be a smart way to manage both your portfolio and your tax liability.

Make a Qualified Charitable Distribution (QCD)

If you are age 70½ or older (yes, even if you are not yet required to take RMDs), you have a unique opportunity to make a big impact while saving on taxes. A Qualified Charitable Distribution (QCD) allows you to donate up to $100,000 directly from your IRA to a qualified charity.

A QCD is especially powerful because the distribution counts toward your Required Minimum Distribution (RMD) but is not included in your taxable income. A QCD can help keep your income lower, which may prevent your Social Security benefits from being taxed or stop you from being pushed into a higher tax bracket.

Strategies If You Take the Standard Deduction

The standard deduction has increased significantly in recent years, meaning more people choose it over itemizing. If you fall into this group, you can still find plenty of ways to save. The key is to focus on the above-the-line deductions and credits mentioned earlier, as they don’t require you to itemize.

Here’s a quick recap of the best moves:

• Contribute to a Traditional IRA or 401(k): This is one of the most effective ways to reduce your taxable income directly.

• Fund Your HSA: Take advantage of the triple tax benefits to save for healthcare costs.

• Look for Tax Credits: Credits are more valuable than deductions because they reduce your tax bill dollar-for-dollar. Explore credits like the Child Tax Credit, education credits (American Opportunity Credit, Lifetime Learning Credit), and energy-efficient home improvement credits.

• Deduct Student Loan Interest: You may be able to deduct the interest you paid on student loans, up to a specific limit.

Strategies If You Itemize Deductions

If your total deductible expenses exceed the standard deduction, itemizing is the way to go. This allows you to deduct a variety of specific expenses, potentially leading to substantial tax savings. Think of it like having more than one type of fly in your tackle box—it gives you more options to get the job done.

Bunch Your Charitable Contributions

One popular strategy is “bunching.” Instead of making smaller annual donations, you can combine several years’ worth of charitable giving into a single year. Bunching can push you over the standard deduction threshold for that year, allowing you to itemize and get a larger tax benefit. In the following years, you can simply take the standard deduction.

For example, if you usually donate $5,000 a year, you could donate $15,000 (paired with a donor-advised fund) in one year and then skip the next two. This larger donation, combined with other itemized deductions, might provide a much greater tax benefit than three smaller, separate donations.

Prepay Deductible Expenses

You can increase your itemized deductions by paying for certain expenses before the December 31 deadline.

• State and Local Taxes (SALT): You can deduct property, state, and local income or sales taxes, up to a combined total of $40,000 per household. Consider paying your fourth-quarter estimated state income tax payment in December instead of January.

• Mortgage Interest: Making your January mortgage payment in December allows you to deduct the interest portion on this year’s tax return.

• Medical Expenses: You can deduct medical expenses that exceed 7.5% of your AGI. If you are close to this threshold, consider scheduling and paying for any needed medical or dental procedures before the end of the year.

Plan for Tomorrow, Today

Tax planning is not just about last-minute scrambling. It’s about making thoughtful decisions throughout the year to put yourself in the best possible financial position. By using these strategies, you can navigate retirement confidently, knowing you are making the most of your hard-earned money.

We recommend reviewing your financial situation with a professional who can provide personalized guidance. With a solid plan, you can reduce your tax burden and secure greater peace of mind for the years to come.

Don’t wait to secure your financial future.  To discuss how these tax-saving strategies can work for you. Let’s plan for your tomorrow, together.

Book an appointment with us today

The post Smart Tax Planning Ideas for Year-End first appeared on Stalwart Financial Planning.

Have you ever considered the striking similarities between your investment journey and a game of tennis? It’s not as far-fetched as it sounds. The secret to long-term success in stock market investing might just be hidden in the career statistics of Tennis legend Roger Federer.

Over his illustrious 25-year career, Federer has taken home an impressive 103 singles titles. What’s surprising to note is that he won just a bit over half the points he played — 54%, to be exact. Despite not winning every point, this slight advantage over time contributed to 76% of sets, and 82% of matches won. The tennis court may seem a world apart from the stock exchange, but the parallels are uncanny in this instance.

Let’s take a look at the S&P 500 index since 1990. It closed higher on slightly more trading days — again, 54%, mirroring Federer’s winning point percentage. This minor edge led to 72% of quarters and 82% of years ending positively.

This comparison underscores an invaluable lesson for novice and veteran investors: You don’t have to win every battle to win the war. Incremental wins can compound into substantial gains over time, which is the key to long-term investment success.

Like in a tennis match, the stock market has its fair share of ups and downs. Fluctuations are an inevitable part of the journey, but they should not deter your focus on the long game.

In conclusion, the secret to acing the stock game is not about making the perfect trade each time or getting lucky on a stock pick. It’s about maintaining a steady growth trajectory, capitalizing on minor advantages, and having the patience to see your investments bear fruit in the long run.

So, are you ready to serve your next investment like a champion?

The post Stock: Winning Investment Strategies Inspired by Tennis first appeared on Stalwart Financial Planning.

Change is in the air, with the election upon us. As this year’s US presidential election draws to its end, some investors question whether they should change their investment strategy based on the election’s outcome. It’s natural to wonder how a new administration, whether Democratic or Republican, might affect your investment.

Despite this seemingly significant concern, the good news is that nearly a century of financial data offers a comforting answer. It shows that stocks have trended upward, regardless of the party in power. That’s right! Whether the administration is blue or red does not matter concerning your investments in the long run.

Investment in stocks is an investment in companies, not political parties. It’s crucial to remember that the President of the United States, while influential, is one of many factors that can impact the markets. Economic indicators such as interest rates, health crises, oil prices, natural disasters, technological advancements, corporate activity, and Congressional actions, among others, also have significant bearings on the market’s performance.

History has proven that stocks reward investors, regardless of who sits in the Oval Office. Therefore, rather than making rash investment decisions based on electoral outcomes, sticking to a long-term investment strategy might be wiser.

So, as we follow the exciting, often unpredictable election season, rest assured that your investments will likely withstand the twists and turns of politics. Remember, your carefully planned investment strategy should reap the rewards, not the changing faces in the White House.

The post Impact of Presidential Elections on Investments first appeared on Stalwart Financial Planning.

Securing your financial future in today’s dynamic world is paramount, particularly for seniors or any brokerage account holder. A trusted contact often serves as a powerful ally in this endeavor. But what exactly is a trusted contact, and why is it essential to establish one?

 The Power and Role of a Trusted Contact

A trusted contact is an individual you appoint as an auxiliary liaison for your brokerage firm. Without the authority to conduct trades or withdrawals, this designated person will assist your brokerage firm in protecting your account.

Their duties may include:

• Assist your broker in reaching you in case of account issues.
• Confirming your contact details when discrepancies occur.
• Facilitating the resolution of potential financial fraud and exploitation.

 The Advantages

Designating such a contact offers countless benefits:

• Financial Security: They can play a key role in safeguarding your assets from fraud and exploitation, particularly crucial for seniors prone to financial scams.
• Peace of Mind: Assurance that a reliable ally monitors your account provides substantial peace of mind.
• Prompt Resolution: In urgent situations like a health crisis, your trusted contact can ensure that your financial affairs are addressed promptly and appropriately.

 Choosing Your Trusted Contact: A Guided Approach

Making the right selection necessitates thoughtful deliberation. Follow these suggestions:

• Reliability: Opt for someone you implicitly trust, possibly a close family member or a long-standing friend.
• Financial Literacy: They should comprehend financial matters, although they won’t make decisions for you.
• Communication Prowess: Your contact information should be easily accessible, and you should be able to communicate proficiently with your brokerage firm.
• Legal Aspects: Consult a legal advisor to comprehend any related implications fully.

 Designating a Trusted Contact: A Seamless Process

The procedure to designate your selection is a breeze:

1. Reach out to your brokerage firm for the respective forms.
2. Fill out the necessary information, including name, address, and contact number.
3. Submit the forms to your brokerage firm for processing.
4. Confirm the designation with your brokerage firm.

 Real-World Implications

Consider Mary, a senior citizen displaying memory loss signs. Her trusted contact, her daughter Susan, spotted abnormal transactions in Mary’s brokerage account. Upon contacting the brokerage firm, swift action secured Mary’s investments.

Without question, a contact looking out for your interests is an invaluable safeguard for your financial future, especially during unexpected circumstances. Take the definitive step today and designate a trusted contact. Consult a reputable brokerage firm or financial advisor to guide you.

Conclusion

Safeguarding your financial future has never been more critical. Appointing a trusted contact adds an extra layer of security and peace of mind. A reliable person ready to assist with potential issues will better protect your financial well-being.

Don’t delay action. Appoint your trusted contact today and fortify your financial security.

The post The Power of a Trusted Contact: Enhanced Financial Security first appeared on Stalwart Financial Planning.

Images of volatility often come to mind when we think about the impact of political dynamics on the stock market. However, a deep dive into the returns of the past century of the US stock market offers a different perspective.

Let’s consider a graph depicting the growth path of the US stock market from 1926 to 2023. The data, laid out alongside the political control of the House and Senate, reveal an interesting pattern: overall, stocks have trended higher, regardless of whether Democrats or Republicans were at the helm or whether power was evenly divided.

Does that mean political events have no bearing on the stock market? Not entirely. Congressional actions can indeed sway returns, but they operate in a complex arena where numerous other factors, such as geopolitical developments, interest rate fluctuations, and technological innovations, are also at play.

Investors should remember to invest in companies that strive to serve their customers and grow their businesses irrespective of Washington’s political climate. Therefore, it is advisable not to base investment decisions solely on the control of Congress.

The graph, showing hypothetical growth from a $1 investment in the S&P 500 Index from 1926–2023, depicts stocks trending higher under many political conditions. The values reach a whopping $14,557 under varied political control,  Republican House and Senate, Democratic House and Senate, and Mixed Control.

It’s important to underscore that past performance doesn’t guarantee future results, and the S&P 500 index does not indicate any specific investment. However, the general trend clearly shows that disciplined investors are often rewarded, regardless of who presides in the House and Senate.

In conclusion, keeping your investment strategy flexible, adaptable to multiple variables, and not solely aligned to political control in Congress would be the way to navigate the equity market effectively. Faith in companies’ intrinsic strength, growth potential, and customer commitment can steer your investment journey to higher rewards.

The post Decoding The Influence of Politics on US Stock Market first appeared on Stalwart Financial Planning.

Modern technology’s double-edged sword often cuts deepest when it comes to online security. With the proliferation of Search Engine Optimization (SEO) scams, your safety online is under

continuous threat. Scammers use SEO to create deceptive websites that impersonate trusted companies, like Schwab, to breach your security and steal vital information. By understanding the workings of these scams, you can stay one step ahead and secure your information from these fraudsters.

Understanding the Method Behind SEO Scams

A typical SEO scam involves seasoned fraudsters using advanced techniques to build websites that pop up on your search engines when looking for Schwab or other reputable institutions. These websites are cunningly designed to appear legitimate, and their high ranking in the search results is a ploy to convince users that they are reliable sources. It’s a clever trick because not all users vet every search result meticulously before clicking on a link.

After you land on the deceptive website and try to log in using your credentials, an error message indicating a login issue prompts you to reach out to a hotline number for assistance. The person on the other end of the line usually poses as a representative from Schwab, claiming a security breach on your account. Your supposed ‘rescuer’ then persuades you to download specific software onto your device in the ruse of security. However, the motive is to gain access to your device and facilitate more fraudulent attacks, leading to unauthorized activity and identity theft.

Proactive Measures to Avoid SEO Scams

To keep these cyber thieves at bay, we advise our clients to avoid using search engines like Google, Safari, and Firefox when accessing Schwab or other important websites. The safer alternative is to type the known website directly into your web browser. For example, instead of looking for Schwab on a search engine, type www.schwaballiance.com into your browser to bypass potential scam sites.

Leveraging Bookmarks: Your Personal Online Navigator

Another prudent way to prevent falling prey to SEO scams is by bookmarking your preferred websites. Once you confirm the legitimacy of a website, add it to your browser’s bookmark list. This way, when you need to visit Schwab or any other trusted institution’s site, you can directly access it from your bookmarks, thus eliminating the risk of stumbling upon scam-filled search engine results.

Stay alert and aware in the digital world. Remember, knowledge is power, and understanding the lurking dangers of SEO scams can be the key to safeguarding your online activity.

Summary: Ensuring Online Security Amidst Rising SEO Scams

In today’s digital landscape, SEO scams have evolved into a complex method cybercriminals use to exploit online vulnerabilities. These scammers craft counterfeit websites that closely resemble those of trusted entities to steal personal data and commit identity fraud. Our clients must understand the tactics employed by these scams, which typically include using high-ranking but illegitimate websites in search engine results, leading unsuspecting users into deceptive interactions, and installing malicious software. To safeguard against these threats, we advocate for directly accessing known websites, using bookmarks for swift navigation, and adhering to robust online security practices. Remaining informed and alert is our most vital strategy in navigating and countering the complex maze of SEO scams.

The post Spotting SEO Scams first appeared on Stalwart Financial Planning.

As the warmth of spring approaches, so does my anticipation for this time of year – March Madness. The pride, energy, and sheer unpredictability are a sports fan’s dream. But for me, it’s not just about the thrill of the game but the deep-seated dedication I hold for my team, the North Carolina State University Wolfpack.

There’s something special about being a longtime fan of NCSU. It’s more than casual support or seasonal interest. It’s a profound connection, an unwavering bond that can be passed down through generations. Much like the enduring power of human ingenuity that bolsters the stock market year in and year out, the Wolfpack’s spirit is a testament to the power of collective effort, of working together to achieve a common goal.

I’ve been watching the Wolfpack play basketball for as long as I can remember. Every game, every season, holds a different story, a unique journey filled with moments of triumph (NCAA championships) and lessons of perseverance (we will get them next year). Similar to investment management, I’m not only interested in the final score but in understanding the process, the strategies utilized, the teamwork, and the skill – both on the court and the market.

Witnessing the Wolfpack combat uncertainty, coming together, learning, growing, and evolving is inspiring. Every game and season is a testament to why I enjoy this team and why I am and will always be a Wolfpack fan.

Winning, for me, goes beyond taking home the title. It’s about giving one’s absolute best, it’s about sticking together, it’s about the journey. As a long-term fan and investor, I understand the ups and downs are only steps along the journey, providing invaluable experiences. I stick with my team as I don’t abandon my investments after a short downturn.

So, as March Madness continues, I can’t help but look forward to another thrilling “Sweet 16” round. Not just for the games and predictably unpredictable outcomes but also for my team’s journey, my NC State Wolfpack. Here’s to the players, the coaches, and all of us dedicated fans who, year after year, embrace the process, the highs and lows, and remain devoted to our team. Go Pack!

The post March Madness Strategies on the Court & In the Market first appeared on Stalwart Financial Planning.

When Rachel’s grandmother passed away, she was surprised to learn that her Grandma had a Facebook account and even shared YouTube videos before her passing. Rachel could not manage the accounts and their digital memories without a digital estate plan. Now, Rachel is engaged in Digital Estate Planning, ensuring that in the event of any unforeseen circumstance, her family can easily access her online accounts.

Introduction

Before we begin, I want to clarify that I am not a legal professional, and what follows should not be considered legal advice.

What is Digital Estate Planning?

So, what exactly is a digital estate plan? Simply put, it is preparing to manage your digital assets and accounts in the unfortunate event of your death or incapacitation. Managing your digital assets includes making important decisions about who should access your online accounts and services, such as social media networks, email providers, and cloud storage platforms if you can no longer make those decisions due to a medical condition or unfortunate demise.

Why Digital Estate Planning is Important

Digital Estate Planning is important for many reasons. Not only does it help ensure that your assets and accounts are managed as you wish, but it can also protect your online presence and data from being accessed by unauthorized individuals after death or incapacitation. It can also spare your loved ones the frustration of trying to gain access to information without proper documentation.

Digital Estate Planning also lets you keep your digital assets up-to-date and organized. By creating a plan now, you can ensure that your accounts will be managed appropriately in the future. It also enables you to make important decisions about who should access what information and how they should use it after you’re gone.

Finally, Digital Estate Planning also gives you the peace of mind of knowing your digital assets will be taken care of if something happens to you. No one likes the thought of their online presence and data being left in limbo after death or incapacitation, but Digital Estate Planning can give you, and your loved ones, a sense of security.

Creating a Digital Estate Plan

Creating a Digital Estate Plan requires careful consideration of your digital assets and the decisions you make about who should access them in the event of death or incapacitation.

The first step is to inventory all your digital accounts, passwords, and other relevant information, such as account numbers. The inventory will be a reference document for your executor or agent to use during your death or incapacity.

It would help if you also considered making a will and Power-of-Attorney (POA) that outlines your wishes for managing your digital assets and accounts. The will should include who should have access to which accounts and any instructions you may have about what should be done with them. It’s important to keep this document up to date so your wishes can be easily followed without confusion.

It would help if you also considered setting up an authorization system, such as a digital will or trust and POA, to make sure that only authorized individuals have access to your digital assets after your death or incapacitation. This system can help you ensure that the right people can manage your accounts and data per your wishes.

Finally, you should ensure that digital assets or accounts are backed up and stored securely. Backing the assets up will help ensure that all your data is available for those who need it in the event of death or incapacitation.

Step 1: Inventory and Backup

What Constitutes a digital asset?

Digital assets are any information that is stored in digital form. These assets include documents, photos, music, videos, websites, and social media accounts. Digital assets can also include financial information such as bank statements and account numbers. Essentially, anything you have an online presence for can be considered a digital asset.

 Take an Inventory

Again a digital asset can be anything stored electronically, such as photos, documents, songs, and emails. Do not forget about bank statements and account numbers. It also includes accounts on websites or social media networks. Anything you want to keep safe should be included in your inventory of digital assets.

Tips for Organizing Your Inventory List

Once you’ve compiled an inventory of your digital assets, it’s essential to organize them to make it easy for your executor or agent to manage them. Start by writing down the username and password associated with each asset. Additionally, provide instructions on accessing the account or where the backup data can be found.

It’s also a good idea to keep the list up-to-date. Anytime you create new accounts or passwords, make sure to add them to the inventory list. Additionally, it’s important to store the list in a secure location, such as a safe deposit box or encrypted file.

How to Back Up Your Digital Assets

Backing up your digital assets is integral to creating a digital estate plan. It’s essential to ensure that all of your data is safe and secure in the event of death or incapacitation.

Cloud storage services such as Dropbox, Google Drive, or iCloud are some of the best ways to back up your digital assets. These services offer secure, encrypted storage options that make it easy to store and access your data online.

If you want even more security, you can use an external hard drive or USB drive to back up your data. Physical storage is an excellent option if you don’t want to rely on cloud services or prefer not to have all your data in one place.

In addition to physically backing up your data, you should consider taking the extra step of encrypting it. Encryption will help ensure that any sensitive information is kept safe and secure in the event of death or incapacitation.

Step 2: Decide Who Should Inherit Your Digital Assets

How to choose a Custodian/Trustee for your Digital Assets

Choosing someone you trust is essential when deciding who should manage your digital assets after death or incapacitation. This person should be responsible and have the technical knowledge necessary to access and manage your accounts. Additionally, they should understand how to handle sensitive information per your wishes.

Before choosing a custodian or trustee for your digital assets, it’s important to talk to them and make sure that they understand what they are responsible for. Make sure to discuss any specific instructions you may have on how the accounts should be managed in the event of death or incapacitation. Choosing someone familiar with technology and knowledgeable about internet security is also wise. A wise choice will ensure your digital assets are kept safe and secure.

Finally, choosing someone who can be trusted with the sensitive information often associated with these accounts is important. Sensitive information could include things like passwords or credit card numbers. It’s important to make sure whoever has access to this information understands the importance of keeping it secure.

Steps to Take to Transfer Ownership of Your Social Media Accounts

Transferring ownership of your social media accounts is essential in creating a digital estate plan. Depending on the platform, there may be different ways to do this.

For example, using Facebook, you can designate a legacy contact to manage your account after you’re gone. You can also use the “Memorialize” feature, which allows your account to remain active but will not allow any new posts or updates.

It’s key to ensure that instructions for managing your social media accounts are communicated to the chosen custodian or legacy contact. Additionally, make sure that any passwords for these accounts are stored in a secure location and made available to them so they can access the accounts as needed.

Step 3: Prepare a Detailed Will

What Should Be Included in a Digital Estate Plan?

A digital estate plan should include a detailed will that outlines how your digital assets should be managed after death or incapacitation. This document should consist of instructions for controlling any existing accounts, as well as information about creating new ones if necessary.

The will should also designate the custodian or trustee who will have access to the accounts and manage them according to your wishes. It’s important to include detailed instructions about managing the accounts, including any passwords or other sensitive information necessary to access them.

Additionally, the will should include information about digital assets that may need to be transferred or sold after death or incapacitation. These assets could be anything from domain names and websites to social media accounts.

Finally, the will should include instructions for what should be done with any remaining digital assets. The instructions could include deleting, archiving, or transferring them to someone else. It’s important to ensure these instructions are clear and detailed so your executor can easily follow them.

How To Write and Store Your Will

Writing and securely storing your will is important to ensure that your digital estate plan is legally binding. Using an attorney or legal professional when writing the document is best to ensure everything is done correctly.

Once the document has been written, it should be stored in a safe place, such as a home safe or encrypted file. It’s also important to ensure that the executor of your will knows where the document is located and how to access it in case of death or incapacitation.

Creating a digital estate plan can seem daunting, but these steps can give you peace of mind knowing that your digital assets are taken care of. By taking the time to research and plan, you can ensure that your digital assets are managed according to your wishes.

Additional Tips for Establishing an Effective Digital Estate Plan

Creating an effective digital estate plan doesn’t have to be complicated. Here are some additional tips for ensuring that your digital assets are taken care of:

• Make sure to update your will regularly, as technology and platforms change frequently.

• Consider setting up a trust to manage your digital assets if you don’t want to designate a specific person or group.

• Consider setting up automatic payments for any online services you may use to ensure that they are continued after death or incapacitation.

• Ensure your passwords and other sensitive information are securely stored and available to the designated custodian.
• Think about how you would like your digital assets handled in the event of death or incapacitation. Consider any messages you might want to leave behind and any accounts that should be memorialized or deleted.

Following these tips ensures that your digital assets are managed according to your wishes, even in death or incapacitation. Taking the time to plan will give you and your loved ones peace of mind.

Conclusion

Recap of the Three Things to Remember for Digital Estate Planning

Creating a digital estate plan ensures that your digital assets are cared for after death or incapacitation. There are three key steps to establishing an effective digital estate plan. You should take:

1. Choose the custodian who will manage your accounts and make sure they understand their responsibilities.
2. Ensure a smooth ownership transition for your social media accounts and other digital assets. It is crucial to provide clear instructions and guidelines to avoid any confusion.
3. Prepare a detailed will outlining how you would like your digital assets handled.

Following these steps, you can ensure that your digital assets are managed according to your wishes, even after death or incapacitation. Taking the time to plan can give you and your loved ones peace of mind.

Suggestions For Further Research on Estate Planning for Digital Assets

Creating a digital estate plan is important in protecting your digital assets. If you’re interested in learning more, many resources are available to help you understand the legal and technical aspects of estate planning for digital assets. Here are some suggestions:

• Read up on the laws governing digital estates in your state. Doing this will ensure that your digital estate plan is legally enforceable.

• Research options for online storage solutions that securely store passwords and other sensitive information related to your digital assets.

• Contact a qualified attorney who specializes in digital estate planning. A qualified attorney will ensure you create an effective and legally binding document.
• Join an online forum or support group to exchange ideas with other individuals interested in estate planning for digital assets.

By taking the time to research and plan, you can ensure that your digital assets are taken care of after death or incapacitation. Understanding the legal and technical aspects of estate planning for digital assets will give you peace of mind knowing that your wishes will be honored.

Resources for Estate Planning Assistance

If you’re feeling overwhelmed by the estate planning process, resources are available to help. Here are some organizations and services that can assist:

• The National Association of Estate Planners & Councils (NAEPC) is a nonprofit organization dedicated to helping individuals navigate the estate planning process. They provide information on professional advisors and other resources related to estate planning.
• LegalZoom offers online legal services to help individuals create a will and manage their digital assets. Please be aware this does not serve as a replacement for competent legal counsel.

These resources can help you create an effective digital estate plan to ensure your wishes are honored after death or incapacitation. Doing adequate research and seeking qualified professionals is essential to be confident in your estate plan’s validity.

The post Digital Estate Planning first appeared on Stalwart Financial Planning.

For Jill, who has worked hard and saved for years, having a secure retirement and maintaining the purchasing power of her savings is a top priority. Jill is concerned about the best place to put her money and what changes she should make to their stock market investments during this high inflation period. Jill worries that their savings may not be enough to sustain them throughout retirement in a way they are accustomed to. Should they drastically alter their portfolio to combat inflation? Or do they need to extend their working years? These are some of the questions plaguing Jill and others in a similar situation.

Inflation

Inflation is when the value of money decreases over time, making it harder to buy goods and services with the same amount of money. This decrease in purchasing power happens when prices for goods and services rise faster than wages, salaries, or retirement distributions. Inflation can reduce our standard of living if we don’t have a plan to manage it.

Historical Performance

The S&P 500 index broadly measures the U.S. stock market, comprising 500 large publicly traded companies. It is commonly used to gauge the overall performance of the stock market. Conversely, inflation represents the rate at which the general level of prices for goods and services rises, eroding purchasing power. Long term, the stock market is an excellent hedge against inflation. Historically, stocks have outperformed inflation 71% of the time since 1950, meaning investing in the stock market has been a great way to protect against rising prices. Additionally, the stock market can offer diversification. With a long-term approach, investing in the stock market is an effective way of protecting and growing your wealth, even during times with higher than expected inflation.

Investing in the stock market can help you to maximize the return on your investments, regardless of inflation. For example, investing in stocks and bonds can provide an alternative to traditional savings accounts and other fixed-income investments that are more impacted by higher inflation levels. Additionally, stocks tend to have higher returns over longer time periods than do most other financial products and services

Correlations and Patterns

Over the post-1950 period, there has been a mixed relationship between inflation and the stock market. In some periods, the stock market and inflation have exhibited positive correlations; in others, they have displayed negative or no significant correlations. It is important to note that correlation does not imply causation.

Positive Correlation

In the 1970s and early 1980s, there was a special connection between inflation and the stock market. Several factors can explain this. When there’s high inflation, companies can generate more revenue and profits, especially if they can transfer the increased costs to their consumers. Moreover, inflation diminishes the value of cash holdings, encouraging investors to look for other options like stocks.

Negative or No Correlation

During specific periods, such as the late 1990s and early 2000s, there wasn’t a significant correlation between inflation and the stock market. This could be attributed to various factors, such as shifts in monetary policy, economic conditions, or investor sentiment. For instance, when inflation is low, the Federal Reserve may implement accommodating monetary policies to encourage economic growth and bolster stock prices.

2022 was an Unusual Case

In 2022, the stock market (S&P 500) showed a disappointing return of -18.1%, while inflation was 6.5%. This has only happened 29% of the time since 1950. However, it’s worth noting that during this same period, the stock market still had a return of 11.2% before inflation and a respectable 7.5% after inflation was considered. The critical takeaway is to remain steadfast in your stock investing strategy.

Why Should You Invest in the Stock Market Despite Inflation?

Investing in the stock market is still one of the best strategies to protect against inflation and ensure that your savings maintain their purchasing power. Stocks have outperformed inflation 71% of the time since 1950, making it a great way to safeguard your wealth. Additionally, diversifying across different asset classes can help hedge against inflationary pressures elsewhere in the economy. With a long-term approach and patience, investing in the stock market can effectively protect your savings against rising prices. So don’t let inflation get you down. The good news is history shows us you can preserve your wealth by investing in the stock market.

Long-Term Investment Strategy: Stay patient and stay invested for long-term gains

At Stalwart Financial Planning, we understand the importance of investing for the long term and staying patient with your returns. Investing in the stock market is still one of the best strategies to protect against inflation and ensure that your savings maintain their purchasing power. We recommend keeping a diversified portfolio comprising stocks, bonds, cash, real estate, and other assets. In addition, our experienced financial advisors can provide guidance and advice to help you make informed decisions about your investments in the stock market.

Lessons to Takeaway

The stock market is still a great hedge against inflation, with stocks outperforming inflation 71% of the time since 1950. Diversifying across different asset classes can help you protect your wealth against rising prices. However, taking a long-term approach and being patient with your returns is essential. With the right strategy and advice from experienced financial advisors, investing in the stock market is an effective tool for safeguarding your savings from inflation. Investing in the stock market can help you protect against inflation and greatly assist in having your hard-earned money maintain its purchasing power. At Stalwart Financial Planning, we are here to help guide you through every step of the investment process. Contact us today to learn how we can help you protect your wealth against inflation.

The post Inflation High? Investing in Stocks is still Sound first appeared on Stalwart Financial Planning.

Introducing a newborn into the family brings many changes and adjustments, including financial ones. As a new parent or expecting parents, there are specific steps you can take to ensure your child’s future is secure and healthy. This checklist overviews essential financial considerations for new parents, from budgeting to college savings. Taking the time to review these items can help you create a secure financial future for your family.

• Review your budget
• Build an emergency fund
• Consider life insurance
• Review your health insurance
• Create a will
• Consider disability insurance
• Start saving for college
• Review your retirement savings
• Avoid debt
• Evaluate childcare options

Review your Budget: Create a budget that reflects your new family expenses, including the costs of raising a child, such as diapers, formula, baby gear, and childcare expenses. Be sure to factor in any reduction in income due to maternity or paternity leave. Remember to review your current budget expenses that may change, such as entertainment, taxes, and utilities. Keep in mind that your social calendar may be different now that you have a new baby.

Build an Emergency Fund: Set aside funds to cover unexpected expenses such as medical emergencies, car repairs, or job loss. Experts recommend having at least three to six months’ worth of living expenses saved up. You may want to increase your emergency fund if you expect one parent to take time off work.

Consider Life Insurance: If you’re the primary breadwinner, it’s crucial to have a life insurance policy in place to ensure your family’s financial stability if something were to happen to you. Consider a term life insurance policy with enough coverage for your family’s needs. This may be an excellent time to schedule a review of your insurance needs with a professional

Review your Health Insurance: Make sure your health insurance plan covers maternity and pediatric care. If not, consider switching to a plan that does. Additionally, make sure your coverage is current and covers any medical needs that may arise with a new baby.

Create a Will: A will is a legal document that outlines your wishes for your child’s care and inheritance if something happens to you. Seek legal advice to ensure your will is legally binding and reflects your wishes. This is probably also a good time to review the beneficiaries listed on retirement accounts such as 401Ks and insurance policies.

Consider Disability Insurance: Disability insurance can provide financial support if you can’t work due to illness or injury. Disability insurance can be especially important if you’re the primary income earner for your family. Please don’t overlook the need for disability insurance; you may be more likely to need it than traditional life insurance in the next decade or two.

Start Saving for College: Consider setting up a 529 college savings plan for your child. Start saving as early as possible to maximize compound interest and growth. There are several options for tax-advantaged college savings plans, so research your state’s options and seek the advice of a financial advisor to find the best fit for your family.

Review your Retirement Savings: Ensure you’re on track for your retirement goals, considering any additional expenses you’ll face as a parent. Consider taking advantage of any employer-sponsored retirement plan, such as a 401K or 403B. By starting early, you can benefit from compounding interest and have the peace of mind that your future is secure.

Avoid Debt: Avoid accumulating high-interest credit card debt, and pay off any outstanding balances as soon as possible. If you need to borrow money, consider low-interest options such as a home equity loan or personal loan.   If you already have debt, consider talking to a financial advisor about setting up a repayment plan and exploring debt consolidation. Make sure you understand the terms and repayment options before signing any document.

Evaluate Child Care Options: Child care can be a significant expense for new parents. Evaluate your childcare options and research the costs associated with each one. Consider factors such as location, hours of operation, and quality of care. You may also want to consider options such as working from home or adjusting your work schedule to reduce childcare costs.  Childcare subsidies may also be available, so research to determine if you qualify.

In conclusion, preparing for a new baby is exciting and stressful. Taking the necessary steps to ensure your family’s financial security is important. Create an emergency fund, review your insurance needs, create a will, consider disability insurance, and start saving for college. Additionally, strive to get out of debt and evaluate childcare options. With these steps, you can give yourself and your family the best chance for a secure future. And as I have heard many times, “Don’t sweat the small stuff.”

The post Financial Tips for Expecting Parents first appeared on Stalwart Financial Planning.

You’re nearing retirement age, and you’ve been diligently contributing to a traditional IRA for years. But you’ve recently realized that you may be in a higher tax bracket when you retire than you are now. What could you have done to reduce the taxes you’ll pay on your retirement savings?

Roth IRA Option

One option is to have considered a Roth IRA. With a Roth IRA, you pay taxes on the money going into your account, but all future withdrawals are tax-free. So if you think your marginal taxes will be higher in retirement than they are right now, a Roth IRA may be a good choice.

• Taxes – Think Tax-Free
• Income Limits
• RMDs (Required Minimum Distributions)

Roth IRA and Taxes (Think Tax-free)

Here are a few things you can do to ensure you get the most out of your Roth IRA. First, contribute as much as you can each year to your Roth IRA if a direct contribution is allowed.

The deductible amount that you can contribute changes periodically. In 2023, the contribution limit is $6,500 a year—unless you are age 50 or older, in which case, you can deposit up to $7,500. So if you can, take advantage of the higher contribution limit.

Second, be aware of the five-year rule. With a Roth IRA, you can withdraw your contributions at any time, tax-free and penalty-free. But if you want to withdraw your earnings, you must wait until you’re 59 1/2 years old and have held the account for at least five years. So if you’re close to retirement, ensure you won’t need to access your earnings before turning 59 1/2.

To contribute to a Roth IRA, you must have earned income. If you’re retired and have no earned income, you can’t contribute directly to a Roth IRA. But there’s still a way you can get money into a Roth IRA: by converting your traditional IRA into a Roth IRA. You will have to pay taxes on the amount you convert, but if you think your marginal tax rate will be lower in retirement than it is now, it may be worth doing. And remember, once the money is in a Roth IRA, all future withdrawals are tax-free. Talk to your financial advisor to see if a Roth IRA suits you. They can help you decide whether to contribute to a Roth IRA, convert your traditional IRA, or do both. They can also help you determine how much you can contribute and the tax implications.

Finally, remember that a Roth IRA is a great way to pass wealth to your heirs. With a traditional IRA, your heirs will have to pay taxes on the money they inherit. But with a Roth IRA, your heirs can withdraw the money tax-free. So a Roth IRA is a good choice if you’re looking for a way to minimize the taxes your heirs will have to pay.

Roth IRAs and Income limits

If your modified adjusted gross income (MAGI) is above a certain amount, you may be unable to contribute to a Roth IRA. In 2023, the contribution limit begins to phase out for singles with MAGI of $138,001 or more and married couples filing jointly with MAGI of $218,001 or more. If your MAGI is above these limits, you may still be able to contribute to a Roth (tax-free) type plan if your employer offers a retirement plan such as a 401(k) and you meet certain other conditions.

Roth IRA and RMDs

Another advantage of a Roth IRA is that there are no required minimum distributions (RMDs) during the account holder’s lifetime. With a traditional IRA, you are required to start taking distributions at age 73. But with a Roth IRA, you can leave your money invested for as long as you want. This can be a great way to maximize the growth of your account and minimize the taxes you’ll owe in retirement.

Conclusion

A Roth IRA can be a great way to save for retirement. It offers tax-free growth, and there are no required minimum distributions during the account holder’s lifetime. So if you’re looking for a way to minimize the taxes you’ll owe in retirement, a Roth IRA is a good choice.

The post Get the Most From Your Roth IRA first appeared on Stalwart Financial Planning.

Sara had always been an active person. In her youth, she was a competitive swimmer and stayed in shape throughout her life. Even now, in her early-60s, Sara walks around her neighborhood daily. But lately, Sara had been feeling more tired and finding it harder to get around like she used to. Her doctor told her that it was only natural for someone her age to start slowing down, but Sara didn’t like the idea of becoming less active. She wanted to stay independent and keep doing the things she loved. A friend suggested Sara look into a Continuing Care Retirement Community (CCRC). CCRCs provide different levels of care, from independent living to assisted living to skilled nursing, all in one place. Sara liked the idea of staying in one community as she got older and getting the care she needed if her health changed. This way, residents can age in place without having to move if their needs change.

CCRCs Offer a Continuum of Care

A CCRC, or Continuing Care Retirement Community, is a type of senior living facility that offers a wide range of living options and services, all in one location. CCRCs are also called Life Plan Communities. A CCRC can be helpful for those who want to age in place, as it means they won’t have to move if their needs change over time. A CCRC typically includes independent living, assisted living, skilled nursing care, memory care, and other specialized services. CCRCs allow residents to live in one community and receive the care they need without relocating. In addition, many CCRCs offer a wide range of amenities and social activities, which can help to promote a sense of community and provide a stimulating environment. A CCRC can be a good option for those looking for a comprehensive and flexible solution for their long-term care needs.

CCRCs Offer Social Activities and Community Opportunities

CCRCs, or Continuing Care Retirement Communities, are a type of retirement community that offers a variety of housing options and social and recreational activities to residents. CCRCs usually have a main clubhouse or center that hosts regular social events, such as card games, dance classes, and outings to local attractions. In addition, CCRCs often have a variety of clubs and interest groups that residents can join, such as book clubs, gardening clubs, and walking groups. These activities not only provide residents with an opportunity to socialize and make new friends, but they also give residents a chance to get involved in the community. As a result, CCRCs offer an attractive option for retirees looking for an active and engaged lifestyle.

CCRCs Can be Expensive, Do Your Research

A Continuing Care Retirement Community (CCRC) is a type of senior living facility that offers a wide range of services, from independent living to skilled nursing care. Because of the comprehensive nature of these communities, they can be expensive to join. In addition, many CCRCs require residents to pay an upfront entrance fee and monthly fees for services. As a result, it’s important to do your research before signing up for a CCRC. Make sure you understand the fees associated with membership and the level of care that will be available to you as your needs change. Additionally, it’s a good idea to tour several different CCRCs to get a sense of the community and staff before making a decision. By doing your research, you can choose the CCRC that’s right for you and your budget.

CCRCs Financials and Regulations.

Currently, 38 states regulate CCRCs through various organizations such as insurance, financial services, social services, etc. (Retirement Communities in North Carolina, 2022). State regulations vary drastically from state to state. Some states, like Florida, have very little regulation, while others, like New York, have extensive regulation. The primary federal organization that regulates CCRCs is the Centers for Medicare and Medicaid Services (CMS). CMS establishes national standards for nursing homes and home health agencies participating in Medicare and Medicaid programs. In North Carolina, the NC Department of Insurance regulates retirement communities.

It is also essential to review the financial viability of the CCRC you are reviewing. It is a good idea to evaluate the CCRCs’ audited financial statements. By maintaining a strong Balance Sheet, the CCRC demonstrates its ability to pay its debts as they come due. Furthermore, the Income Statement will give you an idea of whether the CCRC is generating enough operating cash flow to cover its expenses. Lastly, the Statement of Cash Flows will show how well the CCRC manages its cash and whether it generates enough cash to fund its operations. You should be able to get the financial statements directly from the CCRC.

It’s Important to Read the Contract Carefully

By doing your research upfront, you can choose the CCRC that best meets your needs and avoid any unexpected surprises down the road. When considering a CCRC, it’s important to carefully read and understand the contract before signing up. Otherwise, you may be inadvertently responsible for hidden fees or penalties. For example, some CCRCs require a minimum number of years of commitment, while others have entrance fees that must be paid even if you decide to move out early. Additionally, be sure to ask about the community’s refund policy in the event that you need to cancel your contract for any reason.

CCRC Can Provide a Sense of Community and Support

Residents of CCRCs typically move in when they are healthy and active and then have the peace of mind of knowing they will have access to the care they need as they age. One of the main benefits of living in a CCRC is the sense of community and support that it can provide. Residents can socialize and interact with their neighbors, and staff members are always available to assist. In addition, many CCRCs offer a variety of amenities, such as swimming pools, fitness centers, and game rooms. As a result, CCRCs can be an ideal option for those looking for an active and engaged lifestyle in their retirement years.

Summary

If you or your loved one is interested in moving into a CCRC, it’s important to do your research. There are many benefits to these communities, but they can also be expensive. Read the contract carefully before signing up for a CCRC, as there may be hidden fees or penalties. Ultimately, CCRCs provide residents with a sense of community and support, which can be extremely helpful as we age.

References

Retirement Communities in North Carolina. (2022, 11 15). Retrieved from My LifeSite: https://mylifesite.net/states/retirement-communities-in-north-carolina.php

The post Pros and Cons of CCRCs first appeared on Stalwart Financial Planning.

The Smiths are a married couple in their early 60s. They have been living in the same house for over 30 years and their children have all moved out. The Smiths are now retired and they want to downsize to a smaller home. They also want to live in a community where there are other people their age so that they can socialize and make new friends. They decide to look into 55+ communities.

What is a 55+ Community and what are the benefits of living in one

A 55+ community is a retirement community that is open to adults aged 55 and over. Many of these communities are located in warm weather climates, although they are located throughout the country. One of the benefits of living in a 55+ community is that it can provide a sense of community and belonging that might be missing from your life after you retire. These communities often have a variety of amenities and activities that are designed to appeal to retirees, such as golf courses, swimming pools, and tennis courts. In addition, many 55+ communities have a calendar of social events that can help you meet new people and stay active. Another benefit of living in a 55+ community is that it can offer a level of security that you might not find in other types of housing. These communities often have gated entrances and 24-hour security, which can give you peace of mind. If you are considering retirement, a 55+ community may be a good option for you to consider.

How do you find a 55+ Community that’s right for you

When you’re ready to retire, you want to find a community that’s just right for you. But with so many different types of 55+ communities, it can be hard to know where to start your search. Here are a few things to keep in mind as you begin your hunt for the perfect retirement community:

First, decide what type of community you’re looking for. Do you want an all-inclusive resort-style community or something more low-key? There are 55+ communities to suit every lifestyle, so it’s important to narrow down your options before you start visiting properties.

Second, think about the amenities that are important to you. Do you want a community with a golf course, or one with plenty of social activities? Consider what you want from your retirement community, and make sure the properties you visit offer the amenities that matter most to you.

A third consideration for many is location. Do you want to be near family and friends, or do you prefer to live in a warmer climate? Consider your location preferences before you start visiting properties.

Finally, take your budget into account. Retirement living can be expensive, so it’s important to find a community that fits within your price range. Don’t be afraid to ask about pricing and fees before you commit to any particular community.

With these factors in mind, you’ll be well on your way to finding the perfect 55+ community for your retirement years.

What to expect when moving into a 55+ Community

When you move into a 55+ community, you can expect to find a tight-knit group of neighbors who are all around the same age. This can be a great way to make friends and stay active in retirement. Most 55+ communities offer a variety of amenities, such as swimming pools, fitness centers, and social clubs. There is usually something for everyone, whether you like to stay active or just relax. In addition, many 55+ communities are located in desirable locations, such as near the beach or in a quiet, rural setting. As a result, you can enjoy all the benefits of retirement living without having to give up your favorite activities.

The different types of homes available in a 55+ Community

A 55+ community is a planned residential community designed for adults aged 55 and over. These communities typically offer a wide range of amenities and social activities, as well as home styles that are designed specifically for the needs of older adults. For example, many 55+ communities offer single-level homes with wider doorways and hallways to accommodate wheelchair users. Other common features include grab bars in the bathrooms and extra handrails on stairs. Some 55+ communities also offer shared facilities such as laundry rooms, fitness centers, and swimming pools. In addition, most 55+ communities are located near shopping centers, medical facilities, and other conveniences. As a result, these communities provide an attractive option for adults who are looking for a maintenance-free lifestyle.

Activities and events available in most communities

Most communities offer a variety of activities and events for residents to enjoy. For example, many towns and cities host free concerts in the park during the summer months. There may also be farmers markets where local growers sell fresh produce, and art fairs featuring the work of local artists. Other popular events include carnivals, festivals, and parades. Many communities also have recreation centers with pools, gyms, and classrooms for various classes and activities. In addition, most communities have public libraries that offer a variety of services, including story times for children, computer access, and book clubs. By taking advantage of the activities and events available in most communities, residents can make the most of their surroundings and meet new people.

The cost of living in a 55+ Community

The cost of living in a 55+ community can vary depending on the location and amenities offered. However, most communities offer a variety of homes at different price points to suit different budgets. In addition, many communities have a range of amenities that are included in the monthly fee, such as swimming pools, fitness centers, and social clubs. Some communities also offer discounts on golf membership or other activities. As a result, the cost of living in a 55+ community can be very affordable, especially when compared to the costs of maintaining a home and yard.

Summary

When you retire, you want to make sure that you are comfortable and have everything that you need. A 55+ Community is a great option for retirees because it offers many benefits, such as social activities, amenities, security, and more. There are different types of homes available in these communities, so there is something for everyone. If you are thinking about moving into a community like this, do some research to find the one that is right for you.

The post Is a 55+ Community Right for You? first appeared on Stalwart Financial Planning.

When saving for a child’s future education costs, there are many different options from which to choose. Two popular options are 529 plans, and UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) accounts. Both offer tax advantages and can be a great way to handle college savings. But there are some critical differences between the two that you should be aware of before making a decision.

529 plans are specifically designed for education savings. They offer tax-deferred growth and the ability to withdraw funds tax-free for qualified education expenses. UTMA or UGMA accounts can also be used for Education Savings, but they are not as specific as 529 plans and may be subject to taxes and penalties on withdrawals not used for Education Savings.

What is a 529 plan?

A 529 plan is a tax-advantaged investment account that can be used to save for qualified education expenses, including tuition, fees, books, and certain room and board costs. 529 plans are sponsored by state governments and offer various benefits, including federal and state tax breaks.

What are the benefits of a 529 plan?

529 plans offer several benefits that make saving for education expenses easier and more affordable.

Some of the main benefits of 529 plans include:

• Federal and state (in some cases) tax breaks. Money invested in a 529 plan grows tax-deferred, and withdrawals are tax-free as long as they are used for qualified education expenses.
• Flexibility in how you save. With a 529 plan, you can set up automatic contributions from your bank account or payroll deductions, making it easy to save on a regular basis.
• Accounts can be used for K-12 education expenses as well as college.
• The account owner maintains control of the account.

What are the drawbacks of a 529 plan?

While 529 plans offer many benefits, there are also a few drawbacks you should understand.

• One potential drawback is that 529 plans have strict rules around how the money can be used. Withdrawals must be used for qualified education expenses, or they may be subject to taxes and penalties.
• Another potential drawback is that 529 plans are sponsored by state governments, which means that you may be limited to investing in the plan offered by your state of residence. However, many states offer residents the ability to invest in any state’s 529 plan.

What is a UTMA or UGMA account?

UTMA and UGMA accounts can also have tax advantages when used to save for qualified education expenses. However, unlike 529 plans, they are not sponsored by state governments. Instead, they are managed by financial institutions like banks and brokerages.

What are the benefits of a UTMA or UGMA account?

There are several benefits of UTMA and UGMA accounts, including:

• They offer flexibility in how the money can be used. Unlike 529 plans, which can only be used for qualified education expenses, money in a UTMA or UGMA account can be used for any purpose, including non-education expenses.
• They offer more control over how the money is invested. With a UTMA account, you can choose from a wide variety of investment options, including stocks, bonds, fine art, real estate, precious metals, mutual funds, and more. With a 529 plan, you are limited to the investment options offered by the plan.
• They offer the potential for lower taxes on earnings. With a UTMA or UGMA account, earnings are taxed at the child’s tax rate, which is usually lower than the parent’s.
• They can be used to save for both college and K-12 expenses.

What are the drawbacks of a UTMA or UGMA account?

• One potential drawback of UTMA and UGMA accounts is that they are not as tax-advantaged as 529 plans. Withdrawals from these accounts are subject to taxes, and the money may also be subject to the gift or estate tax.
• Also, at the age of majority (18 or 21, or even higher depending on the state), you lose all control over the account as the custodian. The child then becomes the complete owner of the account.

Conclusion

When saving for a child’s future education costs, several options exist. One popular option is a 529 plan (college and K-12), which offers tax advantages. Another option is UTMA or UGMA accounts, which are tax-advantaged but offer more flexibility. Each type of account has its benefits and drawbacks, so it’s essential to consider your investment objectives. Both 529 plans and UTMA/UGMA accounts have benefits that may make them a better choice for different people.

The post 529 vs. UTMA/UGMA Accounts first appeared on Stalwart Financial Planning.

When it comes to gifting money to children, parents have a few different options. One popular option is the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account. These accounts are created under state law and allow parents or other adults to gift money or assets to a minor child. The account’s custodian manages the funds and the gifts or transfers are irrevocable.

UGMA accounts are limited to financial products such as cash, stocks, mutual funds, bonds, other securitized instruments, and insurance policies. UTMA accounts can also hold any property, including real estate. The details of the recipient’s dependency status and income define how UGMA and UTMA accounts are taxed. However, in many cases, any returns in the account are taxed at the recipient’s tax rate.

UGMA / UTMA saving accounts offer flexibility in spending money. The child can use the funds for any purpose they choose once they reach the age of majority (18 or 21, depending on the state). This can be an excellent option for parents who want their children to have financial independence when they reach adulthood.

However, there are also some disadvantages to using UGMA / UTMA accounts. First, these accounts can be expensive to maintain due to annual fees charged by the custodian bank or institution. Second, since these accounts are irrevocable, the money may not be available if something happens to the child and you need access to the funds in the account. Lastly, when the child reaches adulthood and takes control of the account, they become fully responsible for any taxes owed on the account’s earnings.

The post Intro to UGMA & UTMA Accounts first appeared on Stalwart Financial Planning.

Your daughter just graduated college and is about to start her dream job. But there’s one problem: she still has student loans to pay off. She is not alone – the average graduate leaves school with over $28,800 in debt (Hanson, 2022). So how can you ensure your child does not end up in the same situation? One way is to start saving for your child’s education early on with a 529 plan.

• What is a 529 Plan?
• Savings Plans vs. Prepaid Plans
• Tax Benefits of a 529 Plan

What is a 529 Plan?

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

What are the benefits of a 529 plan?

Some of the main benefits of 529 plans include:

• Federal and state (in some cases) tax breaks. Money invested in a 529 plan grows tax-deferred, and withdrawals are tax-free as long as they are used for qualified education expenses.
• Flexibility in how you save. With a 529 plan, you can set up automatic contributions from your bank account or payroll deductions, making it easy to save on a regular basis.
• Accounts can be used for K-12 education expenses as well as college.
• The account owner maintains control of the account.

What are the drawbacks of a 529 plan?

While 529 plans offer many benefits, there are also a few drawbacks you should understand.

• One potential drawback is that 529 plans have strict rules around how the money can be used. Withdrawals must be used for qualified education expenses, or they may be subject to taxes and penalties.
• Another potential drawback is that 529 plans are sponsored by state governments, which means that you may be limited to investing in the plan offered by your state of residence. However, many states offer residents the ability to invest in any state’s 529 plan.

Savings Plans vs. Prepaid Plans

There are two types of 529 plans: prepaid tuition plans and education savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a prepaid tuition plan.

The main difference between the two types of plans is that with a savings plan, the money is invested and allowed to grow tax-deferred. With a prepaid tuition plan, the account holder buys units or credits at participating colleges at today’s tuition rates. When the beneficiary attends college, the units or credits are redeemed for tuition and fees at that school.

Tax Benefits of a 529 Plan

529 plans offer several tax benefits that make them an attractive way to save for college. The earnings on the account are not subject to federal income tax; in most cases, they are not subject to state income tax either. This can result in substantial tax savings over time.

529 Plan account control and flexibility

One of the great things about 529 plans is that they offer account holders a high degree of control and flexibility. The account holder is the one who controls the account, regardless of who sets it up or who contributes to it. These benefits mean that the account holder can change the beneficiary at any time.

The account holder can also decide how and when the money in the account is used. For example, if the beneficiary earns a scholarship, the account holder can withdraw the money (up to the value of the scholarship) without penalty. The money can be used for other purposes, such as funding other retirement goals.

Conclusion

529 plans offer many benefits that make them an attractive way to save for college. They provide tax benefits, account flexibility, and control. If you are considering starting a 529 plan for your child’s education, research the options available to find the best fit for your family. If you have additional questions or need assistance, consider asking a Certified Financial Planning Professional.

References

Hanson, M. (2022, August 14). Average Student Loan Debt for a Bachelor’s Degree. Retrieved from Education Data Initiative: https://educationdata.org/average-debt-for-a-bachelors-degree

The post The Benefits of Opening a 529 Plan first appeared on Stalwart Financial Planning.

John and Sarah had been married for five years and had just welcomed their first child. Despite having steady jobs, they felt overwhelmed by the added financial strain that came with having a baby. They created a household budget to help them stay on track with their finances to better provide for their growing family. With an organized budget, they could make sure their bills were paid on time and have enough money saved for a rainy day. Creating a household budget gave them the peace of mind of knowing that no matter what unexpected expenses came up, they could handle it financially.

I often ask clients if they have a budget. If they say no, I will ask them, “Do you think your employer has a budget”? My point is businesses operate on a budget. Don’t you think running your family finances like a business is a good idea? Household budgets can be a pain to stick to, but the savings are worth it in the end. Here are some tips and tricks to help you stay on track without feeling like you’re depriving yourself.

Here are the keys to creating a successful household budget:

• Know Where Your Money is Going
• Make a budget and stick to it
• Cut Back on Unnecessary Expenses
• Find Ways to Saving Money on the Budget Big 3
• Stay Disciplined with your Spending
• Review your Budget Regularly and Make Changes as Needed

Know where your money is going – Track all spending for one month to get an idea of where your money goes

Whether you’re trying to build savings for the future or make your way out of debt, knowing where your money is going is the key to success. It’s best to track all spending

for at least one month to get the most accurate picture. An overview of expenses such as groceries, rent, and monthly subscription services will help you decide which costs can be cut and which are necessary. Once you’ve got a clear idea of your financial habits, you’ll be able to start making smarter decisions with your money – or even reap some rewards from that new budget plan!

Make a budget and stick to it – Include paying yourself first (saving) in your budget so you can reach your financial goals

Have you ever felt overwhelmed by financial obligations? Do you want to make the most of your hard-earned money? When taking control of your finances, there’s no better place than a budget. It may feel unromantic or intimidating to set aside time and energy for managing our finances, but if there was ever an investment worth making, this is it! On top of that, don’t forget to make saving (paying yourself first) part of the budget. That way, no matter how small the amount may seem initially, you will be well on your way to growing your nest egg. Think of it as buying peace of mind, not to mention savings down the road! So don’t just dive right into paying off bills and never look back. Invest in yourself today!

Cut Back on Unnecessary Expenses – Do you need that daily coffee or to play golf every week?

Our society tells us often that it’s okay to borrow and buy things we don’t truly need, making it even harder to cut back on those extra expenses. In today’s world, it has become increasingly easier to splurge on things that might not be necessary. From our daily coffee run or pizza night with friends, it can quickly add up over time. While these expenses may seem small, over time, they can make a huge difference in our wallets if we’re not careful! The next time you feel the urge to splurge on something you want but don’t need, like playing golf every week, take a second and consider whether you could be putting that money to better use. You’ll thank yourself later!

Find ways to save money on the Budget Big 3 – Groceries, Transportation, and Entertainment.

Saving money on groceries, transportation, and entertainment (the Budget Big 3) can be challenging because these may be some of your most significant expenses. However, you can see some monthly savings with a little effort and planning. When it comes to groceries, try making a shopping list before you go to the store so that you only buy what you need. If you have access to a carpool or public transportation system, give ridesharing or public transit a try. It could save you quite a bit compared to driving alone. Finally, when it comes to entertainment and having fun, there are often ways to save on activities, like checking for discounts online and attending free events near you. Another example is checking out a book from your local library vs. buying it. With just a few tweaks, your wallet will thank you!

Stay Disciplined with Your Spending – it’s easy to overspend when you use credit cards or have cash in hand.

Sticking to your budget isn’t always easy. However, self-restraint is a must in today’s world of swipe-and-go. Credit cards can make overspending worry free – well, not so worry-free for your wallet! Especially if you have had a hard time battling temptation in the past. With that said, know when it is okay to give into small guilt-free pleasures here and there, but don’t let those tiny purchases slowly snowball into something much bigger than you expected. And even with cash on deck, consider limiting yourself to just what you need rather than letting yourself get caught up in the moment. Happy spending!

Review Your Budget Regularly and Make Changes as Needed – Life happens, and budgets should be flexible. Don’t forget to create at least a $1000 emergency fund and try to grow it to at least 3 months of expenses.

Making and sticking to a budget can be hard work, but it’s worth the effort. While life is unpredictable, having a flexible budget gives you power and control over your finances. After all, if you need to double-check the contents of their wallet five times before leaving the house, this is for you! Setting aside an emergency fund for that inevitable rainy day becomes even more critical in these uncertain times. Aim for at least $1000 to start rebuilding faster; then, once you’ve settled in, expand your safety net until it covers at least three months’ worth of expenses. This way, whatever life throws at you, you’ll be ready.

Summary

Now that you know where your money has been going, it’s time to take control and make a budget. But not just any budget, a solid budget that includes savings so you can reach your financial goals. And don’t forget to cut back on unnecessary expenses like that daily coffee habit or extra rounds of golf every week. You may even be surprised at how much money you can save by making small changes in your spending habits. Stay disciplined with your spending. It’s easy to overspend when you use credit cards or have cash in hand. Review your budget regularly and make changes as needed. Life happens, and budgets should be flexible. Let Stalwart Financial Planning help you create a personal budget that makes sense for you and your family.

The post Do I Need a Household Budget? first appeared on Stalwart Financial Planning.

John wants to be able to retire comfortably in 20 years. He knows he will need to start saving now and make wise investment choices to make this happen. Part of John’s retirement planning includes creating an asset allocation that will allow him to reach his goals.

By looking at his current situation and future goals, John can create an asset allocation right for him. His plan should include choosing how to invest his money in different assets, such as stocks, bonds, and cash. By diversifying his investments, John can help protect himself from market volatility and potentially generate more returns over time.

Creating an asset allocation is an integral part of John’s retirement planning process, and it can help him stay on track to reach his goals.

What is asset allocation, and why is it important

Asset allocation is an investment strategy that involves spreading your money across different asset classes to diversify your risk. The main asset classes are stocks, bonds, and cash. Each asset class has unique risk and return characteristics, so by diversifying your investments across asset classes, you can reduce your overall risk while potentially earning a higher return than if you had invested all of your money in just one asset class. While there is no “right” asset allocation for everyone, it is generally recommended that most people allocate some of their overall portfolio to stocks. This allocation allows them to maximize their long-term return potential and help battle against the reduction of purchasing power that inflation brings. However, how much you allocate to each asset class should be based on your individual goals, risk tolerance, and time horizon. For example, if you are retired or close to retirement, you may want to allocate a more significant portion of your portfolio to bonds and cash to minimize your investment portfolio’s volatility.

How to determine an appropriate asset allocation for your investment portfolio

Asset allocation is a crucial component of any investment strategy. Simply put, it is apportioning your investment portfolio among different asset classes, such as stocks, bonds, and cash. The proper asset allocation for you will depend on several factors, including your investment goals, risk tolerance, and time horizon. For example, if you are saving for retirement, you will likely want to invest more heavily in stocks than if you were saving for a short-term goal. Likewise, if you are comfortable with a higher degree of risk, you may be willing to allocate more of your portfolio to volatile assets such as stocks. Ultimately, the best way to determine an appropriate asset allocation for your portfolio is to work with a financial advisor who can help you assess your individual needs and objectives.

The benefits of a well-diversified investment portfolio

Diversification is an essential element of any investment strategy. By spreading your money across various asset classes, you can minimize your risk and maximize your potential return. A well-diversified portfolio will typically include stocks (both international and domestic holds) and diversification company size(i.e., large and small), bonds, cash, and real estate. Each asset class has its own set of risks and rewards, and by including all four in your portfolio, you can strike a balance between stability and growth. Over time, a diversified portfolio can provide better returns than a portfolio focused on just one or two assets. In addition, a diversified portfolio is more likely to weather market fluctuations better than a less diversified one. For these reasons, diversification should be an important consideration for any investor.

The risks associated with not having an adequate asset allocation

One of the most important decisions an investor can make is how to allocate their assets. Asset allocation divides an investment portfolio among different asset classes, such as stocks, bonds, and cash. Each asset class’s risk and return characteristics differ, so the mix of asset classes that an investor holds will have a major impact on their overall performance.

If an investor does not have an adequate asset allocation, they may take on more risk than may be comfortable for them. For example, someone who is retired or close to retirement may want to limit their exposure to stocks since stock prices can be volatile and may not recover in time to reach their financial goals. On the other hand, someone with a longer time horizon may be willing to take on more risk to earn higher returns potentially.

No matter an investor’s goals or time horizon, it is important to ensure their asset allocation is appropriate for their situation. Failing to do so could lead to suboptimal results and put their hard-earned money at risk.

Examples of how different asset allocations can impact your investment portfolio

When it comes to investing, there is no one-size-fits-all approach. The best investment strategy for you will depend on several factors, including your age, risk tolerance, and financial goals. However, one of the most important considerations is your asset allocation. Asset allocation refers to the mix of different types of investments in your portfolio, which can significantly impact your overall performance. For example, a portfolio heavily weighted towards stocks may provide higher returns in the long run, but it will also be more volatile in the short term.

On the other hand, a portfolio with a greater proportion of bonds may be less risky, but it will also offer lower potential returns. The key is to strike the right balance for your individual needs. As your circumstances change over time, so too should your asset allocation. By periodically reviewing and rebalancing your portfolio, you can help ensure that it continues to meet your changing needs.

Summary

Proper asset allocation is one of the most important aspects of investing, yet individual investors often overlook it. Not having an adequate asset allocation is one of the most significant risks that investors face – but with a little bit of planning, it’s easy to avoid. By understanding what asset allocation is and how to determine an appropriate mix for your own investment portfolio, you can help ensure that your investments are working hard for you. A well-diversified investment portfolio can offer a number of benefits, including improved risk-adjusted returns and peace of mind. If you need help getting started, contact a CERTIFIED FINANCIAL PLANNER Professional today.

The post Is Asset Allocation Important? first appeared on Stalwart Financial Planning.

You’ve been diligently saving and investing for years, and your portfolio has grown nicely. But as time passes, your asset mix starts to get out of balance. That’s because some investments will grow faster than others, causing your original asset allocation to change. If you don’t rebalance your portfolio, you could take on more risk than what you are comfortable. Or, your portfolio might not provide the growth you need to reach your financial goals. Portfolio rebalancing is where you sell some winners and reinvest the proceeds into lagging investments. Rebalancing helps you stay disciplined, buy low and sell high, and maintain your original investment strategy.

What is portfolio rebalancing, and why is it important

Portfolio rebalancing is restoring your investment mix to its original proportions. Rebalancing forces you to “buy low, sell high.” When one asset class in your portfolio outperforms the others, selling some of your investment in that asset class reduces your exposure to it. You then reinvest the proceeds into the other asset classes. The reinvestment has the effect of bringing your portfolio back into balance.

For example, say you initially allocated 60% of your portfolio to stocks and 40% to bonds. After a year in which stocks have done well, your portfolio may now be 70% stocks and 30% bonds. To rebalance, you would sell some of your stock investments and use the proceeds to buy more bonds, getting your portfolio back to its original 60/40 split.

Rebalancing has several benefits. First, it helps to control risk by ensuring that no one asset class becomes too large a part of your portfolio. Second, it helps improve returns by forcing you to sell assets that have become overvalued and buy assets that have become undervalued. Finally, regular rebalancing can help simplify your investment strategy by keeping you focused on your long-term goals.

Portfolio rebalancing is a crucial element of any successful investing strategy. Regularly restoring your portfolio to its original proportions can help control risk, improve returns, and simplify your investment approach.

How to rebalance your portfolio

If you’re like most people, you probably have a mix of different investments in your portfolio – stocks, bonds, mutual funds, etc. But over time, the composition of your portfolio can change, sometimes quite dramatically. The transformation of your portfolio can happen for various reasons, including changes in the market, your circumstances, or the passage of time. When this happens, it’s important to rebalance your portfolio to make sure that it still meets your goals and objectives. Otherwise, you could take on more risk than you’re comfortable with or miss out on potential gains.

So how do you rebalance your portfolio? The first step is to figure out what your target asset allocation should be. Your target allocation will depend on your circumstances, age, risk tolerance, and investment goals. Once you know your target asset allocation, you can figure out how much of each type of investment you need to own. For example, if you currently have 60% of your money in stocks and 40% in bonds, but your target is 50-50, then you need to sell some of your stock holdings and buy more bonds. You can do this yourself by selling investments above your target allocation and buying investments below your target allocation. Or you can work with a financial advisor who can help you rebalance your portfolio to meet your specific needs and goals.

The benefits of rebalancing your portfolio

When it comes to investing, there’s no one-size-fits-all approach. However, one general principle that all investors should follow is regularly rebalancing their portfolio. By definition, rebalancing is the process of realigning the weightings of your investment assets to maintain your desired level of risk. Rebalancing can help you stay disciplined, buy low and sell high, and improve your long-term returns. For example, let’s say you initially allocated 60% of your portfolio to stocks and 40% to bonds. Over time, your asset allocation will become more skewed toward stocks as the stock market goes up. If you’re still comfortable with that level of risk, then no action is necessary. However, if you want to reduce your exposure to stocks and bring your portfolio back into balance, you need to sell some of your stock holdings and use the proceeds to buy more bonds. While there’s no perfect formula for rebalancing, most experts recommend doing it at least once yearly. So if you haven’t reviewed your portfolio recently, now might be a good time to take a closer look and ensure it’s still aligned with your goals.

Examples of when you should consider rebalancing your portfolio

A portfolio rebalance is when you shift the percentages of assets in your investment mix back to their original targets. You generally rebalance when an asset class has moved a long way from its target, either up or down. Rebalancing forces you to “sell high” and “buy low.” That may sound like market timing, but it’s not. The key is to have predetermined targets for each asset class, so you’re buying and selling based on your own goals and risk tolerance instead of trying to time the market. Rebalancing also keeps your portfolio focused on your goals. Over time, your asset mix will inevitably drift away from its original allocation due to different rates of return among asset classes. Rebalancing gets things back on track.

There are three main times when you should consider rebalancing your portfolio:

1. When your asset allocation gets out of whack;
2. When you experience a significant life event; and
3. When there’s a major market shift. 

Let’s take a closer look at each one:

1) If your asset allocation gets out of whack, it’s time to rebalance. For example, let’s say you have a target allocation of 60% stocks and 40% bonds. But after a strong run in the stock market, your portfolio is now 70% stocks and 30% bonds. To return to your original allocation, you need to sell some stocks and use the proceeds to purchase more bonds. Of course, you don’t want to do this too frequently because every time you sell and buy, there are transaction costs involved.

2) A significant life event is another reason to rebalance your portfolio. For example, your financial goals and risk tolerance will likely change if you retire or have a child heading off to college. As a result, you’ll need to adjust your asset mix accordingly.

3)Finally, a significant market shift is another good time to consider rebalancing. For example, let’s say the stock market has taken a big hit and is now down 20%. Meanwhile, bonds have held steady. As a result, your portfolio is much more heavily weighted toward stocks than before (assuming you didn’t sell any during the downturn). This imbalance would be an excellent time to trim back on stocks and increase your bond holdings.

By rebalancing, you can help keep your portfolio focused on your long-term goals and reduce your risk exposure when markets are volatile.

The risks associated with not rebalancing your portfolio

Investors often make the mistake of not rebalancing their portfolios regularly. This lack of consistency can be costly, leading to your portfolio becoming overweight in certain assets or sectors. Over time, this can have a significant impact on your returns. It can also expose you to greater risk if the markets experience a sudden downturn. Rebalancing forces you to sell assets that have gone up in value and buy those that have fallen, which helps to minimize your losses. It also helps to ensure that your portfolio remains diversified, which is critical for long-term success. While some short-term discomfort may be associated with rebalancing, it is generally well worth it in the long run.

Tips for staying on track with portfolio rebalancing

For many investors, staying disciplined is the most challenging part of portfolio rebalancing. It can be tempting to sell winners and buy more of the assets that have been lagging, but this can be a recipe for disaster. Instead, investors should focus on buying low and selling high, which can be difficult when emotions are involved. One way to stay disciplined is to set up alerts that remind you when it’s time to rebalance. An alert system could include setting up a calendar reminder or signing up for an automated rebalancing service. Another way to stay disciplined is to keep your long-term goals in mind. Remember that rebalancing is designed to protect your portfolio from volatility, so resist the urge to make short-term changes that could jeopardize your long-term prospects. By following these tips, you can ensure that you stay on track with your portfolio rebalancing strategy.

Summary

Portfolio rebalancing is essential to help you stay on track with your financial goals and manage risk. By regularly evaluating your asset allocation and rebalancing as needed, you can ensure that your portfolio remains well-diversified and continues to align with your investment objectives. If you need help getting started or staying on track with rebalancing, our team at Stalwart Financial Planning would be happy to assist you. Give us a call today!

The post Why Portfolio Rebalancing is Important first appeared on Stalwart Financial Planning.

Jane, a 74-year-old retiree, had enjoyed a comfortable and financially secure retirement for the past few years. With each passing year, however, her tax burden was growing due to a steady increase in Required Minimum Distributions (RMDs) from her IRA account. To ease this strain, Jane recently learned about Qualified Charitable Distributions (QCDs) and decided to take advantage of the tax benefits they offer. By taking a QCD, she was able to direct her RMD funds directly to her favorite charity while also avoiding paying taxes on them. Thanks to this simple solution, Jane’s financial life is now less complicated—and she can feel great about supporting a cause close to her heart.

If you’re looking for a way to reduce your taxes in retirement, you may want to consider making Qualified Charitable Distributions (QCDs) withdrawals from your IRA. QCDs can be an effective way to lower your tax bill and support the charities of your choice. Here’s what you need to know about how QCDs work.

How to use a QCD to reduce your taxes

Taking advantage of tax breaks is crucial to reducing the amount you owe. Qualified charitable distributions (QCDs) are one tool that can help save you money by allowing individuals aged 70½ and older to transfer up to $100,000 from their IRA accounts each year to charitable organizations. A QCD could reduce your taxable income and overall tax bill when done correctly. The donation must be made directly from the IRA custodian to an IRS- approved charity to qualify for this tax break. The money cannot be given directly to you first. The process may seem complicated initially, but it doesn’t have to be. Implementing a QCD could lead to significant savings by reducing some or all of your current taxable income on IRA distributions! Working with an experienced financial planner or accountant can help ensure that all requirements are met. This way you get every possible benefit from using a QCD as part of your overall tax strategy.

What is a QCD, and how does it reduce taxes on RMDs?

A qualifying charitable distribution (QCD) is an often-overlooked way for people over 70½ to make tax-advantaged charitable contributions. By taking advantage of a QCD, individuals can receive an income tax deduction of up to $100,000 of their required minimum distribution (RMD), which reduces the taxable portion of their income and any associated taxes due. To take advantage of this possibility, you must donate directly from your IRA account, payable to a qualified charity. Gifts from other retirement plans are not eligible for QCDs. Furthermore, the donation wouldn’t be subject to the usual limits on itemized deductions or the additional restriction imposed due to higher AGI levels. Also, it is advisable to make sure you have documentation of your donation for future IRS reference and for review by your financial advisor to confirm that you meet all eligibility requirements. Whichever method you use, remember that a QCD can get you substantially greater savings than itemized deductions without burdening you with additional paperwork or effort: it’s something any serious donor should consider when planning their charitable giving strategy.

What are the benefits of a Qualified Charitable Distribution?

A QCD (Qualified Charitable Distribution) can be an excellent way to make a tax-free donation. Donating money directly from your retirement account allows you to bypass taxes on the donation amount and make it go further for the causes you support. QCDs also provide additional benefits, such as maintaining the funds in your retirement account so that you have more control over your investments. Moreover, they may reduce your taxable income and corresponding tax rate, thus potentially leaving more money in your pocket at the end of the year. Finally, QCDs can assist in managing mandatory minimum distributions (RMDs) that may otherwise apply when taking money out of a retirement account. All these factors can make a QCD an attractive option for those wishing to contribute to their favorite charities or non-profits. Additionally, since there are no limits on the number of times one can do a QCD in a year, they are an effective way to ensure significant donations over time with minimal financial burden. So if you’re looking for an efficient way to help those in need and maximize your contributions, a QCD could be a great solution.

How to make sure your QCD is tax-deductible

Qualified Charitable Distributions (QCDs) are an excellent way for retirees to reduce their taxable income easily. It is important to have the right strategy to ensure that your QCD is tax-deductible. First, you need to make sure you meet the eligibility requirements. First, you must be at least 70 1/2 years old and have funds stored in an Individual Retirement Account (IRA). Additionally, some retirement plans do not qualify, so checking with your provider before investing is important. Next, you’ll want to ensure that your charitable organization is eligible for tax-deductible donations – if in doubt, contact the charity directly or check their website for more information. Finally, make sure your withdrawal amount does not exceed $100,000 per year – going over this limit may render part of your donation non-tax deductible. By following these tips, you can rest assured that your QCD will be as tax-efficient as possible!

FAQs about QCDs

QCDs, or Qualified Charitable Distributions, are an excellent way for retirees to donate annually to their favorite charities. In contrast to regular tax-deductible contributions, QCDs forgo withdrawing the funds for your accounts, incurring the tax, and then contributing to a charity to get the deduction. The donor can designate up to $100,000 per year in QCDs, making this an accessible way for retirees to make sizable donations throughout their retirement years. As with other tax matters, QCDs come with specific rules and regulations that are vital to be aware of. For example, QCDs must come from traditional IRAs or Roth IRAs and cannot be taken from 401(k) accounts or SEP IRAs. Instead, a QCD allows the money to go directly from your IRA account into the charity of your choice.

Furthermore, all distributions must take place after age 70½ to qualify as a QCD. It is essential to keep in mind that you can benefit from a QCD even if you itemize or take the standard deduction on your taxes. These rules can help maximize the amount of charitably donated funds without any additional taxation. Ultimately, understanding the requirements and benefits of QCDs can ensure those nearing retirement ages have all the information needed when it comes time for them to make their charitable donations during retirement.

Summary

A Qualified Charitable Distribution (QCD) is a powerful tool that can be used to reduce your taxes and support your favorite charities. QCDs have the dual benefit of reducing your taxable income and supporting the causes that are important to you. If you are over 70½ and have an IRA, you can use a QCD to make charitable gifts directly from your IRA. If you have questions about QCDs, contact a Certified Financial Planning Professional today.

The post Qualified Charitable Distributions (QCDs) to the Rescue first appeared on Stalwart Financial Planning.

You’re 72 years old and have been enjoying retirement for a few years. You diligently contributed to your 401(k) during your working years. Now you and your husband live comfortably on Social Security benefits and his pension. But there’s a new issue. The issue coming into play is the Required Minimum Distributions (RMDs). The IRS calls them Minimum Required Distributions.

What are Required Minimum Distributions (RMDs)?

RMDs are amounts a retirement account owner must withdraw annually starting at 72 years old or the year they retire (if later and the exceptions apply) (Julie Jason, 2021). RMDs aim to ensure that retirees don’t defer taxes on their retirement savings for too long.

RMDs are required from all employer-sponsored retirement plans, including 401(k)s, 403(b)s, and 457(b)s. They are also required from traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

Of particular note, RMD rules apply to Roth 401(k) accounts. However, the RMD rules do not apply to Roth IRA accounts while the owner is alive.

How do I Take my Required Minimum Distribution -RMDs?

How much is the RMD? The amount of the RMD is based on the account balance and life expectancy. The IRS provides life expectancy tables that account owners can use to calculate their RMD. There are multiple life expectancy tables, so be sure to use the one based on your situation (Publication 590-B (2021), Distribution from Individual Retirement Arrangements (IRAs), 2022).

IRA and 403(b) account Owners

• The IRA or 403(b) owner must calculate the RMD for each account they own but can withdraw the total amount from one account.

401(k) and other Retirement Plans

• On the other hand, other retirement plans, like owners of 401(k)s and 457(b)s, must take the RMD separately from each account in which they participate.

What if I don’t take my Required Minimum Distribution -RMD?

While the custodian or retirement plan administrator may calculate your RMD, it is vital to note that the account owner is ultimately responsible for ensuring that the correct RMD is taken. If the RMD is not taken, the amount not withdrawn will be subject to a 50% excise tax.

 

Other RMD rules

• You can withdraw more than the RMD amount. As the name suggests, RMD is the minimum amount you must withdraw in a particular year.
• RMD distributions cannot be rolled into another tax-deferred account.
• RMDs are taxed at the owner’s income tax rate. Of course, RMD distributions from a Roth (a special case) account are tax-free.

Conclusion

There you have it! The essential information you need to know about Required Minimum Distributions. Regarding retirement planning and IRA or 401(k) withdrawals, be sure to consider your RMDs. Contact a Certified Financial Planning Professional or a tax professional if you have any questions.

References

Julie Jason, J. L. (2021, December 15). If You Are Still Working Do You Need To Take An RMD? Retrieved from forbes.com: https://www.forbes.com/sites/juliejason/2021/12/15/if-you-are-still-working-do-you-need-to-take-an-rmd/?sh=701fa0344a11

Publication 590-B (2021), Distribution from Individual Retirement Arrangements (IRAs). (2022, August 20). Retrieved from irs.gov: https://www.irs.gov/publications/p590b#en_US_2021_publink100095124

 

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You’ve just had a tough year. Your investments have taken a beating, and you’re looking at a pretty hefty tax bill come April. But there’s a silver lining – you can use tax-loss harvesting as an investment strategy to offset some of that taxable income.

Tax-loss harvesting is a technique that involves selling losing investments to realize the losses for tax purposes. Doing this can offset some of the gains from your other investments, which can help lower your overall tax bill.

Tax-loss harvesting may be a good strategy if you’re looking to reduce your taxes this year.

What is tax-loss harvesting, and how does it work?

Tax-loss harvesting is a strategy investors can use to offset capital gains and reduce their tax bills. It works by selling securities that have decreased in value and using the losses to offset any gains from other investments. For example, let’s say you have a stock with a long-term capital gain of $10,000 after you sold it. You also own another long-term stock holding that has decreased in value by $5,000. If you sell the second stock, you can use the $5,000 loss to offset some of the $10,000 gain, resulting in a net gain of $5,000. Tax-loss harvesting can be an effective way to reduce your tax liability. Tax-loss harvesting only works in taxable accounts, so it will not work in accounts such as IRAs. Still, it’s important to consult a financial advisor to determine if it’s the right strategy for you.

The benefits of tax-loss harvesting

Tax-loss harvesting is a strategy investors use to minimize their taxable capital gains. By selling lost value investments, investors can offset some of the taxes they would otherwise owe on their profits. While tax-loss harvesting can be complex, the basic idea is simple: Investors can reduce their overall tax bill by selling losing investments and reinvesting the proceeds in similar but lower-priced assets.

Tax-loss harvesting can effectively reduce your tax liability, but it’s essential to understand the rules before you begin. For example, you can only offset capital gains with capital losses, so if you don’t have any gains to offset, tax-loss harvesting won’t help you. And if you plan to sell an asset soon anyway, it may not make sense to wait until it loses value just for the tax benefits. However, if you’re disciplined about only selling losing investments and have a long-term investment horizon, tax-loss harvesting can be a valuable tool for minimizing your taxes. 

How to do tax-loss harvesting yourself

Tax-loss harvesting is a strategy that investors use to minimize their capital gains taxes. By selling securities that have lost value, investors can offset any capital gains they may have incurred during the year. To be eligible for tax-loss harvesting, investors must have held the security for at least one year. Short-term losses can be used to offset short-term gains, while long-term losses can be used to offset long-term gains. This strategy can be used to lower your tax bill, but it’s important to consider the cost of the transaction and the effect it will have on your investment portfolio. Here’s what you need to know if you’re thinking of using this strategy.

First, you’ll need to identify which securities in your portfolio have lost value. Identification can be made by looking at your investment statements or speaking with your financial advisor. Once you’ve identified the lost value securities, you’ll need to decide how much you’re willing to sell. Selling too much of a security can trigger a capital gains tax, so it’s important to talk with your financial advisor about the best way to maximize your tax savings. Finally, you’ll need to execute the sale and report it on your taxes. If you have questions about how to do this, speak with a tax professional. You can successfully harvest your losses and lower your tax bill by taking these steps.

Things to keep in mind when doing tax-loss harvesting

Doing your taxes can be complex and time-consuming, but you must ensure you get all the deductions and credits to which you are entitled. One way to do this is by taking advantage of tax-loss harvesting. Tax-loss harvesting involves selling investments at a loss to offset capital gains from other investments. There are a few things to remember if you’re considering tax-loss harvesting. First, staying within the IRS guidelines is crucial to avoid penalties. Second, you need to ensure you have accurate records of your transactions to deduct the losses on your taxes. Finally, you should consult a financial advisor to ensure that tax-loss harvesting suits your situation. You can make the most of this valuable tax strategy by following these tips.

The potential downsides of tax-loss harvesting

Tax-loss harvesting is a strategy investors can use to offset capital gains taxes by selling investments at a loss and reinvesting the proceeds. While tax-loss harvesting can effectively reduce your tax bill, there are also potential downsides to consider. First of all, tax-loss harvesting can only be used to offset capital gains. If you have losses from other sources, such as salary or business income, you cannot use tax-loss harvesting to offset those losses. Furthermore, you can only use tax-loss harvesting if you have held the investment for at least one year. Finally, it’s important to remember that tax-loss harvesting is a taxable event, so you will still owe taxes on any gains you realize from the sale of the investment. Despite these potential drawbacks, tax-loss harvesting can be a valuable tool for investors looking to minimize their tax liability.

When is the best time to do tax-loss harvesting?

Tax-loss harvesting is selling investments at a loss to offset capital gains. It can effectively reduce your tax bill, but it’s important to understand the rules and timing associated with the strategy. First, you can only offset capital gains with capital losses. If you don’t have any gains for the year, then there’s no need to harvest losses. Second, you can only deduct up to $3,000 in losses yearly. Any losses beyond that can be carried forward to offset future gains. Finally, it’s generally better to harvest losses near the end of the year, so you have 12 months to reinvest the proceeds. By following these guidelines, you can maximize the benefits of tax-loss harvesting while minimizing the risk of running afoul of the IRS.

Summary

Tax-loss harvesting can be a great way to offset some of your capital gains and reduce your tax bill, but it’s important to understand how it works and the potential downsides before you start. If you’re comfortable doing your taxes, then tax-loss harvesting is something you can do yourself. Just keep an eye on the overall picture and ensure you’re not jeopardizing your financial goals in the process.

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I was excited to be on the College and Career Conversations with Dr. B podcast. I had a wonderful time talking with Dr. Belinda Wilkerson of Steps to the Future LLC. Suppose you have a young person thinking about going to college and are unsure of their career choice. I encourage you to have them check out College and Career Conversations with Dr. B, where Dr. B has a chat with different professionals about how they go prepared and the requirements of their career choice.

The post On the College and Career Conversations w Dr. B Podcast first appeared on Stalwart Financial Planning.

This Pandemic! The Covid-19 pandemic has probably put you through a few changes. I know I have gone through a few. With the new year upon us, it got me thinking. What has the pandemic changed in my life, and what has remained the same?

• Family
• Social Gatherings
• Concerns

My interactions with family have changed. I never thought a Zoom call would replace going over my sister’s for Christmas dinner. The vital part of this is my family still cares deeply for each other, but we have adapted how we interact together. We are still family.

Before the Covid-19 pandemic, it would not be uncommon for me to go to lunch or have dinner with a good friend. Since the pandemic has started, I have been getting more meals “to-go” from restaurants (Doordash and UberEats) and replaced social gatherings with friends with the occasional text or phone call. For my true friends, we are still friends. For now, we just adapted.

The most significant change I have noticed during the pandemic is what “concerns” me the most. Before the pandemic, I might be worried about some superficial self-imposed deadline. But since the pandemic has been here, I worry more about “how do I get more out of life.” I am sure the near-daily bombardment of Covid-19 death tolls and the such have influenced my change in thoughts. For now, I will take that as a positive.

We all will continue to have deadlines in our lives. It is just the way things go. But I encourage each of you to ask yourself this question. How has the pandemic had a positive impact on my mindset? If you think it has not, I challenge you to create a positive in your life in the next 90 days. Be it financial, spiritual, or totally selfish (like dreaming of a new sailboat ).

Please share with me some of your positive impacts.

The post This Pandemic! first appeared on Stalwart Financial Planning.

The anticipation building up to elections often brings with it questions about how financial markets will respond. But the outcome of an election is only one of many inputs to the market. This interactive exhibit examines market and economic data for nearly 100 years of US presidential terms and shows a consistent upward march for US equities regardless of the administration in place. This is an important lesson on the benefits of a long-term investment approach.

You can click here to see the impact Presidents over the last 100 have had on the stock market.

The post How Much Impact Does the President Have on Stocks? first appeared on Stalwart Financial Planning.

What is 23 years, 3 months, and 4 days? If we were playing Jeopardy, this would be the correct response to, “How long $1 million retirement dollars will last on average in NC?”.

While this is great information to know, you need more information to make this Your Number. To get a better handle in determining ‘Your Number’ for retirement, you will at least need to answer these 3 questions:

• A) How much are average expenses in my state?
• B) Do I spend more or less than this average?
• C) How long will I be in retirement?

The Answers 

The answer to question A in North Carolina is $42,965. But you also want to know the responses to questions B and C. Once you know these answers, you will know if you need more or less than $1 million in retirement.

Armed with A, B & C responses, you are homing in on how much you will need in retirement. But you still have other questions you need to answer. One example, “Is the $1 million in a traditional 401K?” If so, you still need to pay taxes (both federal and state in NC) on these funds. Armed with these answers, you now have a good preliminary target of how much you need for retirement (Your Number).

If you need help determining Your Number or would like a more detailed analysis of Your Number (i.e., the impact of when you take Social Security on Your Number), you can contact Stalwart Financial Planning.

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Have you ever embarked on a home improvement project? You are confident you can complete the task, but you are unfamiliar with the details. A “how-to” clip is usually available on YouTube, but there isn’t a practical way to reach out with follow-up questions. It would help if you had guidance from a caring individual. That is where your local home improvement store comes into play. I have usually had good luck with True Value. The employees not only know their craft exceedingly well but are excited to share their ideas.

What I’ve learned through various projects in life is a relatively simple concept: “Experience isn’t the best teacher–someone else’s experience is.”

Of course, I understand that there are differences between a financial plan and a home improvement project. But I draw up the analogy because they have one commonality–the educational component links them.

In fact, being a lifelong student might be the first principle of becoming a great investor.

So, let’s get started.

1. Create a long-term investment plan and follow that plan

Back 50 or 60 years, the choice of investment vehicles was limited. Today, there has been an explosion of investment vehicles. It provides us with options, but options create complexity and even confusion for all but the most experienced investors.

I have assisted many of you in developing a long-term financial plan designed with your financial goals in mind.

Great investors have a financial plan. It becomes our guide. It is a financial roadmap that puts you on the best path to your financial destination.

2. Learn to control your emotions

Successful investors learn how to control their emotions.

Most of us remember Mr. Spock from the original Star Trek series. He was half human and half Vulcan. His Vulcan half made him the epitome of rational thought, and he rejected emotional responses. However, we don’t need to be Mr. Spock if we have a well-thought-out financial plan. The plan is grounded in empirical research. It keeps us on track when storm clouds gather.

I recognize the plans I recommend are not bulletproof, but I am confident they put people on the long-term path to reaching their goals. I also know that when volatility strikes, some folks take it in stride while others want to take a detour from the plan. They are tempted to react emotionally. While heading to the safety of cash may feel good in the short term, I’ve seen the anguish of those who have opted for the sidelines near a market bottom and then watch in dismay as shares began to climb. Remember, longer-term, markets rise in most years.

Recall 2008. According to a Fidelity study, “Investors who stayed in the markets saw their account balances grow 147%” between Q4 2008 and the end of 2015. “That’s twice the average 74% return for those who moved out of stocks and into cash during the fourth quarter of 2008 or first quarter of 2009.” Stocks bottomed in early March. Even worse, over 25% who sold out of stocks during that downturn never got back into the market.

The opposite is true, too. Don’t become overconfident when stocks are surging. Some folks begin to feel invincible and are tempted to take on too much risk. It gets them into trouble again.

Sticking with the plan helps to avoid mistakes that can be costly in the long run.

3. Become disciplined and be patient

As the control over emotions, a financial plan helps to enforce discipline. By design, the plan puts you on a gradual path to wealth accumulation, which encourages patience. There are no shortcuts. Remember the dot-com boom? Like shooting stars, fast-growing companies soared into view for a brief period before fading into obscurity.

The legendary investor Warren Buffett sticks to what he knows best and invests over a very long time horizon. His disciplined approach and his patience have brought him rich rewards.

4. You must diversify

Here’s a principle I live by: a one-investment portfolio is too risky.  Diversifying among stocks, bonds, cash, real estate, and commodities doesn’t guarantee there won’t be short-term losses. Still, it significantly reduces risks and allows you to participate in investments rooted across the U.S. and global economy.

5. Never lose a healthy level of skepticism

A good investor asks questions. Following simple but time-tested principles can prevent fraud. Be wary of investments that promise riches or offer returns that are too good to be true. Today, a con artist won’t use the phrase “get rich quick.” But you will see ads that hype strategies that have quickly turned a meager sum of cash into a big pile of wealth. Such claims should be viewed with a healthy level of suspicion. If these strategies worked, wouldn’t high-powered institutional investors implement them? They don’t. If you come across such a tempting scheme, please ask me to review it. I promise to offer you an objective analysis.

Let me sum this up by getting back to the foundation, or the cornerstone, of becoming a skilled investor. Become a lifelong student. Never stop learning and immerse yourself in the principles I have shared.

If you need assistance on any of the points or discuss any other matters, I am happy to be of service. Please email me at iallen@StalwartPlanning.com call me at (910) 867-8464 in Fayetteville or (919)627-1567 in Durham we can talk.

The post 5 Principles That Will Sharpen Your Skills as an Investor first appeared on Stalwart Financial Planning.

Looking at broad market indices, the US outperformed both non-US developed and emerging markets during the quarter. US and non-US real estate investment trusts (REITs) recorded negative returns and lagged the US and non-US equity markets.

The value effect was positive in the US, non-US, and emerging markets. Small caps outperformed large caps in the US and developed markets outside the US but underperformed in emerging markets.

In the “Power of Markets” section, we discuss the complexity of production and how it relates to global markets.  Here we entertain producing something seemingly as simple as a pencil, but upon closer inspection morphs into something requiring vast knowledge.

To get details on the 4th Quarter and why trying to out guess the market is usually a losing battle.  Click Here for Details

The post 4Q 2016 Market Review first appeared on Stalwart Financial Planning.

For the 3rd Quarter of 2016, looking at broad market indices, emerging markets outperformed all other equity markets during the quarter. The US equity market lagged developed markets outside the US. US real estate investment trusts (REITs) recorded negative absolute returns and lagged the US equity market.

The value effect was negative in the US and emerging markets but positive in developed markets outside the US. Small caps outperformed large caps in the US and in developed markets outside the US but underperformed in emerging markets.

Next month, Americans will head to the polls to elect the next president of the United States.  Though we do not know the outcome of the election, we do believe that investors would be well‑served to avoid the temptation to make significant changes to a long‑term investment plan based upon these sorts of predictions.

To get details on the 3rd Quarter and why we think staying put in a well designed portfolio is best this election season. Click Here for details

The post Third Quarter 2016 Market Review and Presidential Election Portfolio Advice first appeared on Stalwart Financial Planning.

What is more devastating to your 401K plan?

• Taking a loan from your 401K account
• Cashing out when switching jobs and paying taxes and penalties

It has been debated over the years, but we now have an answer.  Studies by the EBRI (Employee Benefit Research Institute) points out there are cases where two-thirds of the reduction in retirement saving is due to the latter.  I have encouraged employers to not create a loan provision when creating a company 401K plan.  Even though research shows that by removing this provision form a 401K, it is in the best long term interest of the employees.  Employees on the other hand love this addition.  There are some who would be reluctant to participate in a 401K plan unless a loan provision was present.

When switching jobs, 67% with #401Ks <$5K will spend it simply because they think it easier https://t.co/kQS8Iwe9vo pic.twitter.com/HPIKwszR5u

— Isaac R. Allen, CFP® (@IFAdvice) August 15, 2016

Back when employees had pensions to fall back on during retirement they did not have to worry about how to manage their pension.  The employer had this obligation.  But now, most employers are going with a defined contribution (DC) plan such as a 401(k).  With the advent of 401(k) plans the onerous task of managing retirement savings plans has moved the employee.  Many employees are ill equipped to be able to handle this management.  Case in point is when they switch jobs.  The recent study by the EBRI revealed that 67% of employees with 401(k)s of less than $5,000 would spend the money instead of rolling the funds over.  This represents about 5 million working Americans a year.  They would rather spend the money and pay early withdrawal penalties and taxes, not because they need the money, but because they feel it is easier.  This is a surprising result, considering they have solutions of rolling their previous 401(k) over to their new employers’ 401(k).  If this option is not available to them, they can open a Rollover IRA.

This study by the EBRI is focused only the employees with small 401(k)s (less than $5,000).  If employees are this nonchalant with less they $5000 how are they handling and managing the average 401(k) of $91,300.  Employees should make sure they are doing the right thing by the retirement savings.

The employee is left holding the proverbial bag.  This type of poor retirement saving plan management is what is hurting many employees.  I encourage you to be come in formed of your options when switching jobs.  The fact that 401(k)s are portable is a great thing if used wisely.  If not, then it can have employees wondering why they are so ill prepared for retirement.

Do you have a 401(k) from a previous job that you are not managing?

The post Taking the Easy Road Can Destroy your Retirement Savings first appeared on Stalwart Financial Planning.

Today I was reading an article about 5 Things you may not know about your 401(k) plan. In the article, the 3^rd issue listed was ‘Target-date funds aren’t always on target’

I point out this article because I was just telling a new client this same thing the other week.  They had gotten started with their 401K and just went with the default investments (a target date fund based on their age).  During a recent market downturn, they became alarmed by how much their portfolio had loss, thus the reason they came to see me.  After some review of their risk tolerance, it became apparent why they became so alarmed during the recent decline in the stock market.  As they had aged and started thinking more about their retirement, the target date fund really did not match their personal risk tolerance.

You might be asking how did this happen.  Well, the target date fund is matching a risk tolerance for what they have determined is the average person invested in the fund.  In many cases, this will not match your risk tolerance.  By stopping by to see me, I was able to create a portfolio using the investment options available in their 401K that more closely matched their risk tolerance.  As this client gets closer to retirement, together we can make changes to his 401K investments so they will continue to make his risk tolerance and financial goals.

Target date funds are not all bad

The idea behind this is a good one:

• When younger investments are more aggressive
• As you get closer to retirement investments become more conservative
• Automatic rebalancing

This is good because most new clients that walk through my door are too conservative (mostly stable value investments) or too aggressive (100% equity investments).  Also, many do-it-yourselfers are reluctant to rebalance when markets are going up.  I think for people who are not into getting into the details of investing and do not want to get help from a financial professional, then target date funds are a good option for them.

Do your 401K investments match your risk tolerance and financial goal needs?

The post Are Target Date Funds Right for You first appeared on Stalwart Financial Planning.

Can you help me time the market?  This is a question I got recently.  Those of you who have been viewing my blogs already know my answer to this question, but for those of you who are new sit back and listen to my rant.

I do not think I or anyone else can consistently time the stock market.  You will hear people say they called the great recession.  This might be true, but how many times did they call for a major down turn prior to the great recession and how many times have they called it since?  History has taught us that being invested in the stock market has rewarded investors over the long haul.  With this being said, I do not think investors should try to time the market, but instead should always be invested in the market with a portfolio that is congruent with their financial objectives.

Click below to play video

The reasons why I think you should always be invested is because you never know when the next big up day in the market is coming.  If you had invested $1,000 into the market (S&P 500) in 1970, these funds would have grown to $89,678 by the end of 2015.  But if you missed out on the 25 largest days in the market, you would have missed out on 76.3% of the return and only earned $21,224.  To put it another way, by trying to time the market your returns might look like this:

$1000 investing in S&P 500 from January 1970 through December 2015 returns[1]

• $89,678 – if fully invested everyday
• $80,370 – if missed 1 Best day
• $58,214 – if missed 5 best single days
• $33,370 – if missed 15 best sing days
• $21,224 – if missed 25 best single days

The above example can be applied to your investment portfolio.  By staying fully invested in a portfolio that meets your investments objectives, you can generate better results than trying to time the market.

Most of us need to take some risk to get the returns needed to be able to reach our financial goals.  I hope you can see from the above example.  The risk you take should not be in trying to time the stock market.

[1] In US dollars, indices are not available for direct investment.  Their performance does not reflect the expenses associated with the management of an actual portfolio.  Past performance data from January 1970 – August 2008 by CRSP, performance data from August 2008 – December 2015 provided by Bloomberg.  S&P data provide by Standard & Poor’s Index Service Group, US Bond and Bills data © Stocks, Bonds, Bills and Inflation Yearbook^TM Ibbotson Associates, Chicago, regularly updated work by Roger G Ibbotson and Rex Sinquefield

The post Is now a good time to be in the market? first appeared on Stalwart Financial Planning.

Are you looking to create a steady stream of income during your retirement? If so, building a bond ladder might be for you. You can build a simple bond ladder by purchasing government, municipal, corporate bonds or certificates of deposits (CDs) over a consistent period of time (example 5 years). You might be one of those nervous about purchasing long term bonds in this low interest rate environment. If you are one of these people you would not be alone. One way to combat the fears of buying longer term bonds in a low interest atmosphere is to create a bond ladder.

Let me give you an example. Instead of buying a single bond worth $100,000, you would purchase 5 bonds worth $20,000 each.

• One of the bonds would mature in 1 year
• Next bond after 2 years
• Third bond after 3 years
• and so on all the way up to 5 years.

This would in effect create 5 rungs in your bond ladder. When the first bond matures you would simply purchase a new bond that matures in 5 years.

One of the benefits of creating a bond ladder is protection against rising interest rates. If interest rates rise you would simply purchase a new bond at the new rate within a year. There is also a benefit with this approach in a milieu where interest rates are going down, since you have already locked into bonds at higher rates.

As with most things in life and investing, this does not come as a free lunch. There are downsides to a bond ladder. One of the largest is the bond insurer going into default. As was witnessed in the big credit crisis of 2008, even if bonds are rated highly there might still be underlying problems with the issuer. Another risk with bond ladders is the bond debt might be paid back early (the bond was called). In this case you do not get all the interest you thought you would.

When it comes to implementing a bond ladder there are several things you should consider. One is you want to make sure you are building a diverse set of bonds in your portfolio. If you are not sure you are getting enough diversity into your bond ladder, you can consider using target date bond ETFs (Exchange Traded Funds) in your ladder. These are ETFs where the bonds all mature in a specific year. Another implementation issue with building a bond ladder is in common to purchasing bonds in general. With bonds there is not a large clearing house the way there is done for stocks. With stocks you have the NYSE, NASDAQ and etc. as a location to go and get the best trading price for a stock. With bonds they are held at the individual brokerage houses. With this being the case, your brokerage house might not have the best price on a bond. A good way to think of this is like purchasing a new car verse a used car. In this example the new car would be a stock and a used car would be a bond. When you buy a new car you know what the MSRP is for the vehicle. Now you have a target price to pay for any new car you want to buy no matter which dealership you make your purchase. But if you wanted to buy a used car, you would go to the lot and see what was available and see the prices at just that lot. There could be another vehicle, same model, same condition and mileage at another lot across town. Unfortunately, unless you went to this other lot you would not know this. A way to combat this situation is to shop around or go to someone who can get access to a large array of bonds across brokerages.

As you can see building and maintaining a bond ladder takes some time to do, but can reward you with a steady income stream of funds during retirement. If you still would like the benefits of a bond ladder, but do not have the time to devote to it, consider seeking professional help. I am sure there is a financial service professional in your area that is familiar with bond ladders and would be willing to assist you in creating a bond ladder designed around your needs.  Are you ready to step up to a bond ladder?

The post Income Stream through Laddering first appeared on Stalwart Financial Planning.

What if I told you I knew a secret method to increase one of your retirement income sources by 76%?  What if I told you, the increase from this secret method would last a lifetime?  Next if I added in the tidbit that all you had to do to get the extra money was to breathe, would you believe me?  I doubt it!  I think you would think I had changed professions and was now a snake oil salesman.

The things I just mentioned are all true and it is not a secret.  You can increase your social security benefit by 76% by not taking your benefit at age 62, but instead delay taking it until age 70.

For example, if you were to get $10,000 a year in social security benefits at your full retirement age of 66, but say you decided to take a reduced early benefit of $7,500 a year at age 62.  By drawing social security at age 62 you would be giving up $5,700 compared to what you would have received if you had waited until age 70 to start.  The $5,700 is independent of COLA[i] adjustments. As you can see, if you were to delay taking your social security benefit until age 70, you would receive a 76% increase in annual income.

I know what you are saying, “By delaying social security until age 70 it will take me forever to catch up and I will probably die before I catch up”.  This is a common thought, but Wade Pfau wrote an article in Forbes magazine stating the return by year that you would be giving up by delaying when you took social security.

•  Receive $10,000 in Social Security at Full Retirement Age of 66

• Comparison of drawing Social Security at 62 vs. 70

The following information is from the Forbes Article by Wade Pfau (Table 1[1])

[1] Wade Pfau, Forbes, http://www.forbes.com/sites/wadepfau/2014/04/01/delaying-social-security-what-an-investment/ (accessed April 17, 2015).

________________________________

As Pfau’s table points out, if you delayed taking social security until age 70, you would breakeven in less than 10 years (see age 80 is a positive return).  Furthermore, the life expectancy of a healthy 60 year old male would likely yield a 3.2% return on your investment by delaying social security until age 70.  If you are a healthy 60 year old female, your life expectancy would likely provide a 4.0% return.

As you can see, it is not a secret method but a simple cash flow math problem that yields a 76% increase in your social security benefit if instead of taking a reduced early social security benefit at age 62 you wait until age 70.

Do you see why it is important to have other retirement savings to support you until age 70?  By having other income sources during retirement, you can maximize your social security benefit?  If you need help creating multiple retirement income sources contact Isaac.

——————–

[i] COLA – Cost of Living Adjustment is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The post A Retirement Income Secret? first appeared on Stalwart Financial Planning.

Have you ever felt like someone had their hands in your pockets taking some of your hard earned saving dollars away from you?  This uneasy feeling you were having could be more real than you think.  And on top of this, it could be coming from an unexpected source.  It could be your financial advisor.  This is why finding a financial fiduciary to work with you on your finances is important.

The main culprit that could be stealing your saving dollars straight from your pockets could be a conflict of interest.  Watch this video to see an example of a conflict of interest.
https://www.youtube.com/watch?v=dBs6H1P7Wd0&feature=youtu.be

As you can see, when you find a fee-only financial advisor, you are selecting a fiduciary who has your best interest in mind.

You select a financial fiduciary to avoid these back door payments:

• Loads
• Additional fees

My wife and I were at a dinner party recently and the question came up about what I did for a living.  When my wife stated I was a Fee-Only financial advisor the person stated, “Why does that matter?”  They thought their financial advisor deserved to make some money.  They did not see the importance of getting robust investment advice that was free of conflicts of interests.  For me, I see a big difference in someone making a fair living and someone making a killing at my expense.  I think when given the opportunity to see how a conflict of interests can impact your financial future.  Most of you will readily come to the same conclusion.  I want to get the best financial advice for me.

I want you to imagine if we took this idea of, “Why does that matter?” to the professions of physicians and attorneys.  I want you to think of going to the doctor seeking treatment for a heart condition.  After seeking their advice, the cardiologist gave you a treatment that made him the most money without regard to what was in your best interests.  Next, I want you to consider going to an attorney to request assistance about a legal issue.  Upon your request, you get advice from the lawyer that he knew would enrich his practice and maybe provide you with the protections you were seeking.  In both of these examples, I think everyone sees the need for the fiduciary standard of care.  When it comes to finances, I think everyone needs the same standard of care.

I am not saying that everyone that is not a fee-only advisor is giving you biased advisor, but why risk it.  When it comes to your retirement savings, it is in your best interest to get advice that is free of conflicts of interests.

Is your financial advisor offering you advice as a fiduciary?  If you are not sure, I recommend that you ask them.  They should be able to respond with a simple, “yes”.  If not, I think maybe you ought to be concerned.

Do you think finding a Fee-Only advisor matters?

The post Why Fee-Only Should Matter to You first appeared on Stalwart Financial Planning.

Is the retirement you desire in focus?  In other words, do you have a clear picture of what is needed to achieve your desired retirement?  Let us be honest with ourselves, many Americans do not have a retirement plan.  They just plan to continue to work until they cannot work anymore.  We both know that is not much of a plan.

We can do better than this.  I want you to achieve much more than this.  Having a plan means knowing your retirement numbers and where you stand.  Here are the retirement numbers you need to know in order to bring clarity to your plan and to determine if it is in focus.

Retirement Numbers to Know

• How much will I spend a year in retirement?
• How much of my salary should I be saving for retirement?
• How much return can I expect to get on my savings?

How much you will spend in retirement is the first place to start to see if your retirement plan is in focus.  I think if you assume you will spend 100% of what your current income is a good place to start.  With this assumption it will allow you to continue to live your current lifestyle without having to skimp.  In retirement, especially those early retirement years, some spend more than they spent before retirement.  The big factor in this is “free time”.  I know when I have more free time I can spend more money.  With more leisure time, we might innocently rationalize ways to spend more money.  Here are a few examples that I have heard pre-retirees say:

• I want to pick up a new hobby (golf and tennis)
• I need to give myself a retirement gift (an exotic sports car)
• I want to do something I never had the chance to do while working (learn to sail)
• As a reward for my years of hard work, I want to travel more (Visit the major cities in Europe)

I think you get the picture.  With more free time you can find ways to spend more money.

Determining how much of your salary you should be saving to keep your desired retirement in focus can be tricky.  Is it a fixed amount like 10% of my income or is it more? The first key is to be saving.  Once you are saving, you can increase your savings amount each time you get a raise.  Before long you will be saving at your needed amount.  If you are already saving, you should determine if you can put away even more toward retirement and accelerate your path to financial freedom.

The final step in gaining crystal clear focus on your retirement is determining what returns you can expect on your investments.  Be careful here!  Many people, especially if they are late to the retirement savings game, want to be ultra aggressive.  They think they can make up for lost time.  Some of these same people at the first market downturn will get out of the stock market.  They will be out of the stock market for long stretches because of fear.  We know it is very difficult to time the stock market so they are now caught playing another dangerous game. The other end of this extreme is someone who is ultra conservative.

They only want to invest in CDs and money market funds.  They have a fear of losing money, but in the end they are losing purchasing power due to inflation.  As you can see, each of these two extremes is a view that makes your retirement picture look fuzzy.  The best path is to determine your risk tolerance and create a diversified portfolio to match.

At this point do you know the answers to, “How much will I spend a year in retirement?”, “How much of my salary should I be saving for retirement?” and “How much

return can I expect to get on my savings?”  If you know the answer to these three questions, I think your retirement picture should be coming into to focus.

If you need help obtaining your answer to any of the above questions, I suggest you contact a financial professional.

Let me know what you are doing to get your retirement in focus?

The post Is Your Retirement in Focus? first appeared on Stalwart Financial Planning.

Do you remember a game show called “Press Your Luck”?  As a youth growing up, I can remember being on summer break from school and coming inside from playing with my neighborhood friends and watching “Press Your Luck” on the only TV we had in the house.  This was back in the day before every kid had a video game console where they could interface with their virtual friends across the globe.  I am not sure who the game show host was but it was not Wink Martindale or my favorite Bob Barker using that fabulous skinny microphone.  There would be contestants shouting, “Big bucks, big bucks no whammies”!  A whammy was like the old maid card.  Your fortunes would suddenly turn bad when this card showed up in your hand.

Enough of reminiscing about my youth, soon some will find they have come across the dreaded double whammy.  You see as the tax filing deadline approaches these unfortunate people will find out that since they did not have health insurance in 2014 they will get an unexpected tax whammy.  But the story could get worst for them if they are a procrastinator and wait until the close to the ides of April (April 15 for you non Julius Caesar fans) to file their 2014 federal tax return, they will find out they have received the dreaded double whammy.  Not only will they receive a tax penalty for 2014, they will also receive one in 2015.  The deadline to sign up for the health insurance, due to the Affordable Care Act or Obamacare, is the ides of February (February 15^th).

If you do not have health insurance yet for 2015, you do not want to miss the deadline to sign up for health coverage.  You can do so at HealthCare.gov.  By signing up for 2015 health coverage by February 15th, you can at least miss out on the horrible 2015 whammy.  I hope you will not get the terrible double whammy, 2014 and 2015 tax penalties for not having health coverage.

When you were a child on summer break from school, what were some of your favorite shows to watch on TV?  Please take the time to comment below and do not forget to sign up for my newsletter.

The post Are You Pressing Your Luck? first appeared on Stalwart Financial Planning.

Have you ever asked yourself the question, “At what rate should I be saving for retirement?”  If so, you should keep reading.    With this question, you are probably wondering if you need to save  5%, 10%, 15% or more for retirement.  .

I think a better way to phrase and think of the question is:

What is the MINIMUM percentage of my current income, I need to save to retire to the lifestyle I am accustomed to living now?

• Is it the amount to receive the full company match on my 401K?
• Is it 10% of my income?
• Is it 15% of my income?
• or is it a higher percentage of my income? 

(Click here if the video does not display on your device)

To determine the saving rate needed to fund your retirement lifestyle, you first need to establish how much of your current income, you will need to replace.  You have to ask yourself, if you need to replace 50%, 70% or even more of your pre-retirement income.  The next step is to determine the percentage of your income you need to save during your remaining working years, so you can reach your retirement goal.  No matter what percentage of your income you can start saving now, you have 3 keys to establishing a retirement savings plan that will end in success.

1. Save consistently
2. Increase savings as your income grows
3. Monitor your progress

You can read some of the latest research on how much you should save for retirement  by Massi De Santis Ph.D.  & Marlena Lee Ph.D.

At what rate do you save for retirement?  You can leave your response at the end of this blog.  Also do not forget to follow me on Twitter @IfAdvice or on Facebook StalwartFinancialPlanning

The post At What Rate Should I Be Saving For Retirement? first appeared on Stalwart Financial Planning.

When you hear someone talk about “Old Faithful”, what comes to your mind?  If you are like me, you will think of the magnificent geyser in Yellowstone National park.  After initial thoughts of the geyser, I suggest your thoughts drift to your income during retirement.

My wife and I were recently on vacation and one of the attractions we wanted to see was “Old Faithful”.  When we told one of the locals in Bozeman Montana that we wanted to see the geysers in Yellowstone, they asked why.  They recommended instead that we go see some of the wildlife in the park.  They stated you could drive all that distance and if your timing was not perfect you would miss the eruption of a geyser.  We considered their recommendation for a bit, but thought together out loud, “This is not true for Old Faithful”.

Why do you think Old Faithful was such a must see for us and attracts thousands of visitors a year?

• Is it because it is the highest geyser in the world?
• Is it because it has the most spectacular eruptions?
• Is it because the eruptions are rare occasional events like an eclipse?

The answers to these questions are no, no and no.  None of these are the reason for Old Faithful’s popularity.  The reason people travel from around the world to gaze at Old Faithful is because of its consistency and reliability.  I think you would want to use these same attributes to describe your income in retirement.

More than 3 million people a year visit Yellowstone National park and many of them make the trek to see Old Faithful and the other geysers.  Old Faithful is said to be the most predicable geographic feature on earth.  It erupts from 1.5 to 5 minutes approximately every 1 hour and 30 minutes.  Because of the predictability of Old Faithful and the fact that area around it is easily accessible, this is what makes it one of the main attractions of the entire park.

When it comes to creating a retirement portfolio, you need to think about how to create a reliable income source during good and bad times in the stock market.  The way you do this is by adding fixed income to your asset allocation.  If we were to experience another market downturn like the great recession, we know this is not the time to be selling our equity positions.  If we are forced to sell our equity positions during a downturn to fund our retirement spending then, it can blunt the ability of our portfolio to provide income for us later in retirement.  This is because these funds will never get to participate in a market recovery.  But if we have fixed income assets as part of our portfolio, we can use these assets to fund our retirement spending which gives a chance for the equity portion of our portfolio to recover.  This works because normally when the stock market goes down fixed income will hold its value or go up.  Having a proper portfolio does not mean having one that will realize the highest returns during good times, but one which will allow you to meet your goals in good and bad times.

Just as with Old Faithful, one of the best attractions about your retirement portfolio should be its ability to provide you with reliable and consistent income during your retirement years.

Is your retirement portfolio currently designed to be an “Old Faithful” income source for you during retirement?  You can add your response to this question at the bottom of this blog.  Do not forget to follow me on Twitter @IfAdvice and Facebook StalwartFinancialPlanning

The post An Old Faithful Retirement Income first appeared on Stalwart Financial Planning.

How much money do you need for retirement?  This is a question that often comes up.  As with many questions in the financial area, the answers comes back , “It depends.”  Some of you might not like this answer, but again the best financial advice comes customized to the individual.

Marlene Lee, Ph.D. gives an example as to why the answer to, “How much do you need for retirement?”, gets the reply, “It depends”

 (Click here if video does not display on your device)

For more information on the study you can review Marlena’s research paper “The Retirement Income Equation.”  As you can see at different income levels the percentage of income that needs to be replaced during retirement differs.

How much replacement income do you need?  And, are you saving enough to achieve this amount?

The post How Much Do You Need for Retirement? first appeared on Stalwart Financial Planning.

Here at Stalwart Financial Planning we are excited to introduce a new offering available at www.StalwartPlanning.com.  This new offering is the EVENTS tab.  The EVENTS tab will give you information on upcoming financial talks that will be conducted by Isaac R. Allen, CFP®.  The events will be called “Chats with Isaac”.  The Fireside Chats of Theodore Roosevelt they are not.  But if you live in the Fayetteville NC, area, Chats with Isaac will be candid, honest and to the point.

The Chats with Isaac will be small, social gatherings where the topic will be presented and covered at a pace for everyone to enjoy.  Isaac will present you with the facts, let you know about the hype and hopefully clue you in so you can identify the fiction.  While Isaac is sure to present the facts, you should not be afraid to ask Isaac his opinion.  He will give it to you!  But, he will be sure to let you know when his opinion is not fact but just his view on the topic.

Here are some of the reasons you might want to attend one of the Chats with Isaac seminars.

• You are interested in the topic being presented – Retirement Planning, College Planning, Social Security Strategies, Bond Strategies and more
• You have questions you would like answered by a Certified Financial Planning Professional
• You would like to learn more about Isaac’s and Stalwart Financial Planning’s investment planning philosophy and approach.
• You are looking for free snacks and drinks – (my attempt at humor, but snacks and soft drinks will be provided)
• You have a friend, work colleague or family member that could benefit from knowing more about the topic and you want to introduce them to Isaac – You should reserve 2 tickets – 1 for you and 1 for them
• You would like to understand more about the benefits of Fee-Only Financial Planning
• The price is just right (FREE)

To be able to attend one of the ‘Chats with Isaac’ you must register for the session by reserving your ticket or tickets.  For now, all of the Chats with Isaac will be held in the Suite 200 Conference Room at 4200 Morganton Road, Fayetteville NC.

When looking over the upcoming topics, if you do not see a topic you are interested in there, I suggest you contact us.  Once you do so, you should not be surprised to possibly see the topic added the next time you look at the Stalwart Financial Planning EVENTS section.

What are you waiting for? You should reserve your tickets now.

The post Chats with Isaac first appeared on Stalwart Financial Planning.

Toot! Toot!  Do you remember the story of the little engine that could? Great, I want to put you in the mindset of “I think I can. I think I can”.  When it comes to starting a savings plan, this is the mindset you need.

To build a substantial nest egg, you do not have to win the lottery, get a huge inheritance from your great aunt, or marry a millionaire.  To create a nest egg on which you can retire, you can use the following formula:

Regular Savings  x  Time = Substantial Nest Egg

The two components of this formula are simple:

Regular Savings

Regular saving is the little engine that could.  You do not need big chucks of money at a time, but consistently putting even small amounts of money into a savings plan will add up.  By putting the money to work in your savings plan at regular intervals, once a week, a month, or quarter, you use dollar cost averaging.

I can remember when I started my savings plan.  I was recently out of college and wanted to invest. I was saving just $25 a month through a DRIP (Dividend Reinvestment Plan).  I must say, when I got my first dividend statement of 5 cents, I was super excited.  I was showing the statement to everyone that came by my apartment.  My girlfriend at the time laughed at me.  She could not understand why I was so excited over a nickel.  Overtime, as I continued to put my money into the DRIP plan, the dividend amount grew to $1, $5, $50 and over $100 after several years.

Time

The second part of the equation is time.  Time is the more powerful variable of the equation and does most of the heavy lifting.  And, if you start your savings plan now (if you have not already started a saving plan), it is the easier of the two steps to do.  The key part of that phrase is the word now.  Again, you need to think like the little engine that could.  Even if you feel the mountain is tall and steep, you must remember the mantra, “I think I can. I think I can.” Once you accept this mindset before long, you will be climbing up the mountainside.

Once you accept the mindset of the “little engine that could” you are on your way up the mountainside of creating the nest egg you desire.  I often tell clients that once you start a regular savings plan, and begin noticing the powerful effects of compounding then you too will get excited and begin saying, “I knew I could. I knew I could”.

Have you started your savings plan? Are you in the, “I think I can” or the “I knew I could” phase of your savings plan?

The post The Little Engine That Could first appeared on Stalwart Financial Planning.

Besides writing our goals down, we know one of the best ways to increase the odds of accomplishing our objective is to create SMART goals.  By this, we mean the goal should be:

• S – Specific
• M – Measurable
• A – Achievable
• R – Realistic
• T – Time bound

You should use these same rules when creating financial goals such as planning for retirement, funding your child’s college education, or scheduling that big anniversary trip.

In fact, I am working on the final touches of our anniversary trip now.  You see this year Angela and I will celebrate 25 years of married bliss.  By sharing our approach, I hope to illustrate how the S.M.A.R.T. technique is used for financial goal setting.

 S – Specific:

• We knew the trip should be one we both would enjoy, so Angela quickly ruled out camping in Alaska.  We started out over a year in advance discussing possible destinations.  After about 4 to 5 months of debate, we came up with three dream locales (China, Australia/New Zealand, and a Coast-to-Coast tour of Canada). 

M-Measurable

• We both understood, with any trip we needed to stay within our budget.  We had a travel agent provide input and price out our three destination choices. After some price checks, the Australia/New Zealand choice was eliminated. 

 A – Achievable:

• Once we started looking at the number of consecutive vacation days we could take, China was eliminated as one of our choices.  China is a large country and to really soak in the culture of this great destination.  We felt it would require more days than we could comfortable take.  With this decision, we now have another item to add to our retirement bucket list. 

 R –Reasonable:

• The goal of a coast-to-coast tour of Canada was an ambitious task.  The concern was would it leave us too tired to enjoy the beauty of the country.  At this point in our selection process, we decided to apply some common sense and reduce the miles of our journey.  We revised our goal a bit and pared the destination down to the resorts of the Canadian Rockies.  This allowed us to add some wonderful excursions in the places we plan to visit.  Next Angela threw in a bonus treat for me.  She suggested we also visit Big Sky Country.  Montana has long been a dream destination for me. 

 T –Time Bound:

• For the trip to be a wedding anniversary gift to ourselves, we wanted the travel to be near our anniversary date.  The other bound was to have the trip be in commemoration of our silver anniversary.  This meant the travel needed to happen in 2014.

I hope that you can can see how we used SMART goal setting to accomplish this life goal.  As stated earlier, when setting life goals, they usually involve financial implications.  As you can see, our 25^th wedding anniversary trip goal had a major financial component to it.  When you are making plans for your life goals (a wedding, college planning, a baby, switching jobs or retirement), I suggest you consider the financial implications and set SMART goals.

What are some of your life and financial goals?  Do your goals meet the criteria to be a SMART financial goal?

The post How to Set Life and Financial Goals first appeared on Stalwart Financial Planning.

Does your portfolio measure up? Does your portfolio have multiple dimensions?  Is there both depth and width?  A proper financial portfolio should have both depth and width.

Most of us have heard the phrase, “Don’t put all of your eggs into one basket”.  When it comes to managing a portfolio many will interpret this statement to mean diversify and they would be right.  The problem here is that several of us think diversification only applies to having multiple stocks. 

In your portfolios, you want to have both depth and width.

Depth:

Depth is having multiple positions in your portfolio.  With depth in your portfolio, one company, or one industry cannot wreck your portfolio if it falls on difficult times.  One way to have depth is by holding multiple stocks.  Another way to accomplish this is through a mutual fund or ETF (Exchange-Traded Fund).  An example of depth is holding the S&P 500 index.  With this example, you now have depth in your portfolio.  The depth is in you holding stock in 500 of the largest companies in the United States.

Width:

Even if you hold the S&P 500 Index fund, this does not add the second dimension you need for a good portfolio.  You do not have width.  To have width in your portfolio you need to add different asset classes.  You want to add width by adding sectors such as international stocks, small cap stocks, short-term bonds and etc..  Within each of these sections, you also want to have depth.

When you put these two dimensions into play within your portfolio, you cover more area and thus make your overall portfolio more stable.  Having a two dimensional portfolio can be as simple as having a well-defined Investment Policy Statement (IPS).  Once you have your portfolio established, still remember to:

• Re-Balance at least annually
• Adjust allocation according to age or investment life cycle

How does your portfolio measure up?  Does your financial portfolio have both depth and width?

The post How does your Portfolio Measure Up first appeared on Stalwart Financial Planning.

Is your financial portfolio lost in the wilderness?  Does it feel like your portfolio has taken a short cut to nowhere?  This is the feeling many do-it-yourselfers get when they put together their own portfolios.

Their portfolio makes them feel like they are meandering through the back sections of the Great Dismal swamp. The reason for this feeling is that they did not use an Investment Policy Statement (IPS) when putting their portfolio together.  An IPS is like a Global Positioning System receiver or GPS.  An IPS keeps your portfolio on track.  It keeps your portfolio working toward your goals.  Moreover, when you get off course, it acts as a GPS and directs you back to the route you need to be following.

You are probably asking, what is an IPS.  An Investment Policy Statement is simply writing down the asset allocation that gives you the best chance of reaching your financial goals.  Here is an example:

Depending on where you are in your life, just starting out, thinking of retirement, or planning a gifting strategy, your IPS will be different.

An IPS keeps you on course in three ways:

• Provides guidance when adding new portfolio positions
• Provides clear direction when re-balancing
• Provides warning if you fall in love with a single investment

If you have an IPS, it gives you direction when you look to add that next hot stock tip you got over lunch.  For instance if this hot tip is a Large Cap Growth stock and you are already over your asset allocation target for Large Cap Growth you have two choices.

1. Do not buy this new hot tip
2. Sell enough of your Large Cap Growth position to allow you to purchase the hot tip

As you can see, an IPS works like a GPS by keeping your portfolio allocations on course.

Another way your Investment Policy Statement GPS keeps you on track is when it comes to re-balancing.  Most of us have heard we need to re-balance at least annually, but many fail to do this.  If you have a written IPS, it is easy to see how your portfolio has moved and you can quickly use the IPS as a GPS and get back on course.

Many do-it-yourselfers can fall in love with one stock or mutual fund.  This position can start to take over their portfolio.  By having an IPS, it is easier to manage your portfolio based on the facts.  In other words, when ACME Computers becomes 33% of your portfolio, you can tell it is time to trim some of this position no matter how much it has gone up.

Get on Course

Now go ahead and write out your Investment Policy Statement today.  If you need some help, you should contact a Fee-Only Financial Advisor such as me to assist in putting your Investment Policy Statement together.

Is your portfolio’s GPS working?

The post A GPS for your Portfolio first appeared on Stalwart Financial Planning.

It is Back to School time again!  At this time, school kids refocus on the basics or the Three Rs (Reading, wRiting, and aRithmetic). Why they are called the three Rs, I will never understand.  Nevertheless, today we want to focus on the basics.

One of the basics, I would like to discuss is “Real Return” verse “Total Return”.  As investors for the long haul, we should focus on Real Returns and not be beguiled by Total Returns.  Total Returns are what most people like to talk about.  Can you recall being out at some function and someone starts to boast about their investment returns?  They might say something like this, 

My broker turned me onto the AxByCz Fund.  She got me into the fund at $100 per share and now a year later it is worth $110 a share.  She made me 10% just like that.

What your friend has failed to take into consideration is the following:

• Inflation
• Account Expenses/Fees
• Investment Expenses/Fees

Real Return

Ten percent is a nice return, but it is not your friend’s Real Return.  A few items need to be accounted for to determine the Real Return.  What was the impact of inflation over this period?  If inflation is mild, it will not have a dramatic impact.  On the other hand, if inflation is high it could clobber your Real Return like a runaway freight train.

One should also consider the Fees/Expenses you have on your account.  Do you have to pay a yearly account expense if you do not meet a minimum balance or number of transactions? Did you take into account any transaction fees or the amount your broker is charging you?  The more trading you conduct to generate your Total Return usually the more expenses you create.  

If you own mutual funds, there may still be other fees and expenses to worry about.  You will still need to adjust for 12b-1 fees, Front or Back-End Sales Loads, and etc.

To calculate your Real Return you take the Total Return and reduce it by the impact of Inflation, Account Expenses, and Investment Expenses.  By knowing your Real Return, you can now determine the score of the game.  I think we all want to know if we are winning or losing the savings game.

In understanding the basics of investing, it is important to understand that Total Return only tells you part of the picture.  Knowing your Real Return makes you a savvy investor.

Do you know the Real Return on your investments from last year?

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The post Back to School for Real Returns first appeared on Stalwart Financial Planning.

I am sure you heard about the debate our elected officials were having over the future of the tax code in North Carolina.  On July 24^th, Governor Pat McCrory signed the new tax changes into law.  Do you know how these changes will affect you starting in 2014?

Here is a summary of the changes:

Personal Income Tax

• Reduces and simplifies the 3-tiered state personal income tax from the current maximum rate of 7.75% and minimum rate of 6% to 5.8% in 2014 and 5.75% in 2015

• Increases the standard deduction for all taxpayers, applied to the first “X” amount of income:
  • $15,000 for those married filing jointly
  • $12,000 for heads of household
  • $7,500 for single filers

• Retains the state child tax credit and increases it for families making less than $40,000
• Offers a $20,000 combined maximum deduction for mortgage interest and property taxes
• Makes charitable contributions fully deductible
• Protects all Social Security income from state taxes

Corporate Income Tax

• Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015
• If the state meets revenue targets (i.e. if tax revenue grows due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017

Other Highlights

• Caps the gas tax
• Eliminates the estate tax

The Tax changes will also end the “North Carolina Tax Free Weekend”.  The tax free weekends have been a popular time for people to purchase “Back-to-School clothing, schools supplies and computers”.  August 2 – 4 will be the last North Carolina Tax Free Weekend.

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The post Tax Changes Coming to North Carolina first appeared on Stalwart Financial Planning.

• Traditional IRA
• Roth IRA Money Purchase Plan
• Money Purchase Plan
• Self-Directed IRA
• 401K
• Roth 401K
• 403(b)
• 457 Plans
• Defined Benefit Pension Plan
• Cash Balance Pension Plan

• Money Purchase Pension Plans
• Target Benefit Pension Plans
• Profit Sharing Plans
• SEPs (Simplified Employee Pension)
• SIMPLES(Savings Incentive Match Plans for Employees)

The key to selecting a Retirement Plan is to find the one that best fits the situation of the business owner.  Here are a few questions to help the business owner narrow down the choices.

1) Why does the Business Owner want a Retirement Plan?

• Is it to provide income in retirement?
• Is it to attract employees?

2) Do you need a Qualified Plan or a Non-Qualified Plan?

• A Qualified Plan is a plan that meets requirements of the Internal Revenue Code and as a result, is eligible to receive certain tax benefits. These plans must be for the exclusive benefit of employees or their beneficiaries
• A Non-Qualified Plan is any type of tax-deferred, employer-sponsored retirement plan that falls outside of employee retirement income security act (ERISA) guidelines. Non-qualified plans are designed to meet specialized retirement needs for key executives and other select employees. These plans also are exempt from the discriminatory and top-heavy testing that qualified plans are required to meet.

3) What makes the most sense for the Business Owner a Defined Benefit Plan or a Defined Contribution Plan?

• Defined Contribution Plan – Business Owner contributes a predetermine amount to the plan each year and employees are responsible for ensuring adequate retirement funding.
• Defined Benefit Plan – Each retirement plan member will receive a predetermined benefit each year during retirement and Business Owner is responsible for ensuring adequate retirement funding.

If you are able to able to answer these questions, you are ready to select the Retirement Plan that best fits your business needs. If you feel you still need more direction, you should consider talking with a Retirement specialist such as a Certified Financial Planning Professional to help you make the best choice for you.

Are you ready to make your retirement plan choice?

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The post Retirement Plans for Small Business Owners first appeared on Stalwart Financial Planning.

Do you have big plans for the Memorial Day weekend?  I hope you do and I hope you have a safe and enjoyable time doing them all.

In the United States, we observe the last Monday of May as Memorial Day (originally called Decoration Day) to honor our brave men and women who died while serving in the United States Armed Forces.

Now on Memorial day, many have fun and forget about if they have a balanced portfolio or if their funds are beating their Lipper Average.  Memorial Day has morphed from its original creation into a long weekend to:

Watch or Attend Auto Racing Events

Get the boat back into the water

Fire up the grill and invite friends over

Or Jump in the car and travel

Personally, I think all of these are fine.  But, sometime during the official kick-off to summer, you should take a moment to reflect back on the reason for the holiday (remember the sacrifices our brave men and women have made to keep America free).  After the meditation, you can get back to enjoying the freedoms, this country grants to all of us.

What are some of the fun things you are planning to do for Memorial Day?

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The post Remembering our Fallen first appeared on Stalwart Financial Planning.

You may be wondering why you should even worry about your credit report.  You may be thinking, I pay my bills on time and my mortgage is already at a good interest rate.  I think you should at least consider getting a copy of your credit report to:

• Check Accuracy
• Guard Against Identity Theft

Accuracy

If you are about to purchase a home or car, apply for a job or buy insurance, you need to know what is in your credit report.  Your credit report can cause you to not get the loan or make you pay higher interest rates for your home or car loan.  Insurance companies use credit reports to predict how safe of a driver you will be.  They do this because they have found a correlation between higher credit scores and safer drivers.  Another situation, where a bad credit report might hurt you is when applying for a job.  Some employers use a credit report to determine if the potential hire might be a security risk.  As you can see, if you are about to purchase a car or home, apply for a job, or buy insurance, it is a good idea to see what is in your credit report.

Identity Theft

Seeing what is in your current credit report is a good way to guard against identity theft.  If someone does happen to start using your identity to make purchases on credit, you will see credit opened in your name that you did not authorize.  It is better to find out these issues earlier than later.

Through the Fair Credit Reporting Act, you are entitled to get a free report every 12 months from each of the major credit-reporting agencies (Equifax, Experian, and TransUnion).  You can get your free credit report by going to www.annualcreditreport.com.  If you request more than 1 credit report from a credit-reporting agency within a 12 month period, you will have to pay for the additional reports.  Be sure to go to the website listed above and not others that may sound like they are free.  The one I have listed is the only one supported by the Fair Credit Reporting Act.

If you are like me, you would like to know what the free credit-reporting website looks like before you start entering your information.  You can go to this website to become familiar with the process: www.gotcredit.com/annualcreditreport-com-review

If you are getting your free credit report to verify all your information is accurate, I recommend getting a report from all three of the agencies in one request.  If you are getting your report as a way of guarding against identity theft, I recommend that you get a report now from one of the agencies.  After getting this one,you should start requesting a report every 4 months from a different agency.  You should rotate the request in the same order each year.  If you do this, you will be getting a FREE credit report from each agency every 12 months.  Moreover, using this process, you will be checking on possible identity theft 3 times a year.

Whether, you are requesting a report for accuracy or identity theft protection, I recommend you also get a credit score from each agency.  Unfortunately, requesting a copy of your credit score is not free.  Since your credit score can vary by agency, you will need a credit score from each agency.

Remember if you see something out of line in your credit report, you should follow up with the agency and have it corrected.

Can you think of other reasons for why you should request your credit report annually?

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The post Do You Know What is in your Credit Report? first appeared on Stalwart Financial Planning.

The 1938 jazz standard from the movie “Going Places”¹ has the lyrics:

“Jeepers Creepers where’d ya those peerers?

Jeepers Creepers, where’d ya get those eyes?”

Some of you might be wondering to yourself, “Where has Isaac been the last several weeks.  We have not seen any blog entries from him”.  Well the story goes: I had a serious eye infection.  At least it was serious to me.  My eyesight was compromised and I became very sensitive to light. This was sunlight, car headlights, room lights, and etc.  In fact, I was so light sensitive at times; I could not even look at my computer or cell phone screens.  As you can imagine, this made it impossible to write a blog entry or even conduct normal Financial Planning business.

You have probably guessed by now, since you are reading a blog entry, my eyesight is much improved.  I have caught up on my office work backlog, which is fantastic, so now I have time to (and the eyesight) to create a new blog entry.  I am not completely out of the woods yet, so I am still wearing my glasses.  The recommendation from the doctor is to not wear my contact lenses for another month and to keep using the eye drop medication for now.  Once I am fully recovered, I cannot wait to get back on the motorcycle and cruise around the countryside.

I hope to talk with you soon.

Footnote¹ – “Going Places” the movie has appearances by both Ronald Reagan and Louis Armstrong

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The post Jeepers Creepers first appeared on Stalwart Financial Planning.

Who are better investors men or women? I was talking to a business owner in my office building last week and he asked me this question, “Who are better investors men or women?” He was shocked when I gave him an immediate response. He then stated, “You did not even have to think about it”.

The answer to the question is one that has been written about many times. I think part of my colleague’s amazement was not in the speed in which I responded, but with the answer itself. The response of women is often a surprise to men. Studies have shown the reason women are better investors has more to do with the how:

• How they trade
• How they select investment vehicles
• How they get their information

How they trade:

In general, men are more active traders than women are. Back in 2008 and 2009 the Vanguard Group, found that men were more likely than women to sell their shares when the market was melting down. The author of this study, John Ameriks, said men tend to think they know what they are doing even when they do not know. When men think they know, they have the tendency to make trades thinking they are improving their position, to learn later that they have not.

Stocks, ETFS, Mutual Funds:

According to Mintel Group and Brinker Capital, men tend to invest in stocks, ETFs (Exchanged Traded Funds), futures and options. On the other hand, women invest in mutual funds. I think the reason for this is the thrills of being able say you are playing the market. When men are around the water cooler, they want to state the company they are invested in. It is more exciting to say I am in Apple or Google instead of saying I am investing in an S&P 500 Index fund.

Asking for Directions:

As men, we all have heard the stereotype of never wanting to stop the car and ask for directions. Well, it looks like we are stuck with the same stereotype again. According to LearnVest.com 87% of women would like to work with an advisor. Men like to think they can figure it out on their own. They like to do this by taking in the infotainment (this is information delivered as entertainment) available to them through TV, blogs and magazines.

The picture is not all rosy for women investors. I heard a speech last week and the speaker Hilda Pinnix-Ragland from Duke Energy was talking about the financial gap between men and women. In fact, the average net worth of a single white female age 36 – 49 is $42,600 (which is only 61% of her male counterpart). The jaw-dropping statistic mentioned by Mrs. Pinnix-Ragland was that the African-American female average net worth for this age group was just $5.
As you can see, both men and women have a lot to learn from each other when it comes to investing.

What can you do better to improve your net worth?

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The post Better Investors Men or Women? first appeared on Stalwart Financial Planning.

With the stock market at or near record highs what do you do?  I suggest you think like a farmer.

It was just a few years back in 2007 – 2008, when we were all lamenting how much the stock market had fallen.  The Dow Jones Industrial Average was cut in half and many feared it would continue to drop.  However, after a 7,800-point gain in the DJIA, I hope we have not forgotten the lessons the 18 months of plummeting stock markets numbers taught us.  It is time to think like a farmer and rebalance our portfolio.

When I was starting out my mentor in Fee-Only Financial Planning taught me the analogy of the farmer.  He said you have to think of equities (stocks, stock mutual funds) as your crops and fixed income investments (bonds, CDs) as your pantry.

Equities = Crops

Fixed Income = Pantry

He went on to state, with crops you plant them in hopes they will grow and be bountiful.  When they have grown there comes a time you will need to harvest your crop.  When harvesting your crop you will move the goods into storage for safekeeping.  You keep your harvest in storage because you know it will be there when you need it.  If you leave the crop in the field too long a storm could come by and wipe out all your hard work very quickly.

With your portfolio, you want to behave much like a farmer.  With the stock market at record highs, it is time to see if your portfolio is in balance with your investment policy statement (Overarching asset allocation for all your investments).   With the recent run up in the stock market, the equity portion of your investment portfolio might be over weighted.  If this is the case now is a good time to trim some of those gains and place them into fixed income. In other words, it may be time to harvest the crops.

The idea of harvesting some of your gains while the market is going up is counterintuitive for some.  If you review your portfolio and it is out of balance, now is the time to make adjustments.  If you adhere to your investment policy, you will still have equities in the market to continue to take advantage of any upside in the market and at the same time, you have put into safe keeping those hard fought gains over the last four years.

Are you ready to think like a farmer?

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The post Stock Market is Up, What to do Now first appeared on Stalwart Financial Planning.

With advances in technology and companies like COURSERA (a for profit company out of Mountain View California), the number of MOOCs being offered is exploding.  On last week, 24 additional universities (including the University of North Carolina at Chapel Hill) announced they would be offering courses through Coursera.  This new announcement brings the total to 62 universities offering classes in Coursera’s catalog.

Even though the number of MOOC offerings is exploding, there are questions that remain:

• How do you award credit to students?
• How do you prevent students from cheating?
• How do you make money from presenting the classes?

You are probably wondering why, with the cost of a college education going up every year, a university would be offering free online classes.  In my opinion, MOOCs are a testing ground for ways to leverage the university’s top commodity.  A university’s top commodity is their high profile professors.  On last year, a single MOOC course on “Logic” offered by Duke University had an initial enrollment of over 180,000 people.  While only about 17,000 were still active at the end, you can see the huge opportunity to make money once the “How do you” questions are answered.  In addition, these universities have spent decades and in some cases centuries positioning their brick and mortar campuses as the best place to receive an education.  They now want to extend this image into the digital cloud before upstart online universities carve this digital space from them.

If you want to take a course from Princeton or want to brush up on your “Statistical Molecular Thermodynamics”, you can through a MOOC.  As you can see, you can take an array of different MOOC classes.

Which courses do you want to take?

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The post College Classes for Free first appeared on Stalwart Financial Planning.

What do you plan to do with your tax refund?  Many people spend their tax refund on a whim.  I encourage you to put a little more thought into it.  Here are 5 ideas on how to spend your tax refund wisely.

1. Make your 2013 IRA contribution now
2. Contribute to a 529 Plan
3. Create Estate Documents
4. Payoff Credit Card debt
5. Get Financial Planning help for family

Put the entire refund amount toward funding your 2013 IRA contribution. You may contribute up to $5500 for an individual in 2013 (unless you are age 50+ then the maximum is $6500) into a Roth IRA assuming your income falls below the government thresholds.  The thresholds or phase outs for singles in 2013 is $112,000-$127,000 and for married couples, is $178,000-$188,000.  If you anticipate that your earned income for 2013 will be higher than the Roth IRA phase out thresholds, you can still contribute to a traditional IRA.

Start a tax-sheltered 529 college savings plan to fund your children’s or grandchildren’s educations. If you plan to pay private school tuitions through secondary school, you should consider funding a Coverdell Education Savings Account (ESA). The Coverdell phase-outs in 2013 are Single- $95,000-$110,000 and for Married Filing Jointly – $190,000-$220,000.

Use your refund money to engage the services of an estate-planning attorney. If you do not have a will then have one drawn up. Without a will issues such as child guardianship and disbursements of assets will not be decided by you, but rather by the laws of your state. For some families, additional estate planning documents may be needed.

If you have credit card debt, pay off as much as possible. For free credit reports go to www.annualcreditreport.com. Use part of the money to obtain your credit score from www.FICO.com (the rating that shows how credit-worthy you are). Correct any incorrect items on your credit report and work to keep your report clean.  To strengthen your credit score make your payments on time and do not take on more debt than you should. Try to live below your means.

Purchase a gift certificate, for a set amount of professional financial advice, for a loved one. If you do not want to pay for a complete financial plan, find a financial planner who like me works by the hour.  You can find other Hourly Fee-Only Financial Planners in your area by visiting the Garrett Planning Network.

What do you plan on doing with your tax refund?

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The post A Valentine Conversation first appeared on Stalwart Financial Planning.

 REIT (pronounced “REET”) is an acronym for Real Estate Investment Trust.  A REIT is a security that sells like a stock but allows you to invest in commercial real estate.  REITs can invest directly in properties or they can invest in mortgages.  Investing in REITs can be a good way to add Commercial Real Estate to your portfolio without going out and purchasing investment properties.

Pros:

• Real Estate with the liquidity of stocks
• Historical low correlation with overall stock market
• Higher yields

Because REITs are securities that trade like a stock, it allows you to have Commercial Real Estate in your portfolio and still maintain considerable liquidity.  Since you do not have to endure the long buy and sell cycles of normal real estate transactions, many investors like this positive.  Historically the correlation between REITs and the overall stock market is negative.  This means when stocks move up or down, REITs normally move in the opposite direction.  This is great for creating a well-diversified portfolio that performs well in both Bull and Bear markets.  Another positive trait of REITs is their tax structure.  REITs are required to pay out 90% of earnings each year to shareholders in the form of dividends.  This rule makes REITs a high yielding investment.

While REITs offer, many positives there are also Cons:

• Fees
• Tax inefficient

REITs typically have higher associated fees than other mutual funds.  This is not the case with all REIT funds though.  For example, the Vanguard REIT Index fund has an expense ratio of 0.10%.  You just have to do your homework to insure you are keeping the expenses low.  Since REITs must payout 90% of their earnings in dividends, this makes them tax-inefficient.  For people in higher tax brackets, it is wise to hold REITs in tax advantaged accounts such as IRAs or Roth IRAs to avoid this con.

A REIT can be a good addition to a portfolio if added in the right ways and percentages.

Do you plan to add REITs to your portfolio?

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The post What the Heck is a REIT? first appeared on Stalwart Financial Planning.

Is investing like fishing?  The more I think about it.  The more I believe it is true.  In both investing and fishing, you are uncertain if you will catch a winner or not.

In fishing, you first select the target species you want to catch.  Selecting the target species will dictate the body of water you should pick.  If you are targeting a brook trout, you might fish a remote mountain stream.  On the other hand, if you were after a blue marlin, you would go fishing in warm ocean waters.

With investing, the concept is the same.  In investing, selecting the target species is synonymous to asset allocation.  Asset allocation is determining what types and percentages of stocks, bonds, real estate, commodities, etc., you will hold in your portfolio.  You select the type of asset you are going after and then you try to catch a winning stock or mutual fund in that category.

Whether casting your line for trout on a cool mountain stream or trolling the aquamarine currents of the Gulf Stream for marlin, you want to catch winners.  When out fishing, you will soon ask yourself, “How can I increase my chances of catching trophy size fish?”   If investing, you would be asking yourself, “How can I increase my chances of finding winning assets?”  The answer to both questions is diversification.  Even as a “Not so Good” fly-fisherman, I know to be successful and catch fish, you need to have diversification in your fly box.  Successful trout anglers understand the need to have a variety of proven flies in their tackle box.  Their lures vary by:

• Type
• Size
• Color

The same tenant holds true with an investment portfolio.  You need diversification of assets in a portfolio.  Just as one would not go fly-fishing with just one type of fly, all in the same size and color, you should not do this with your investments.  Many times people make just this mistake with their company stock.  They overly invest in a single asset.  If you have more than 10% of your investments in one company (be sure to include the holdings in your 401K too), it is like going to a trout stream with only one type of fly, all in the same size and color.  Your portfolio should be diversified by containing:

• Several proven companies
• Companies of different sizes
• Companies from different geographic locations (International companies) 

If you have a diversity of flies (by type, size, and color) in your fly box, you stand a better chance of catching a trophy fish.  The same is true with a diversified portfolio.  Diversification will increase your chances of having an overall winning portfolio.

What kind of winners are you trying to catch?

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The post Fishing for Winners first appeared on Stalwart Financial Planning.

For years, Alfred, has been providing quality, personalized guidance to local individuals and businesses. Alfred Jones, CPA’s expertise covers tax management and accounting services.

Here is the interview with Alfred Jones:

Isaac:   What are some of the most common mistakes self prepares make on their tax returns?

Alfred: Some of the most common errors that self-preparers make are:

• Math errors:   Many self prepares continue to prepare their returns by hand and do not add correctly.
• Failure to sign the return
• Failure to print legible
• Failure put items on the correct line.   The IRS computer will process the information that you have put on your return just as you have it.  Example: Taxpayer received only retirement income.  The retirement income was placed on line 7 where wages (only) should go.   The IRS processed the return showing only wage income and no retirement income.   The IRS then assessed income tax on the unreported retirement income.
• Failure to attach the appropriate W-2, 1099. Etc. that reflect withholding of income tax

 Isaac:   If you find a mistake in a previous year’s tax return, what should you do?

Alfred: If a mistake is found in a previous year’s tax return, the taxpayer should file an amended tax return to correct the mistake.   Please note that the IRS and the State of NC are both barred from issuing a refund 3 years after the due date (to include extensions) of the original return. 

Isaac:   That is good information to know.  How many years back can you amend a return? 

Alfred: Generally, in cases other than fraud, after 3 years, a tax return year is considered out of statute which bars assessment of additional tax by the taxing authorities

Isaac:   If you cannot get your tax return done by the April 15 deadline what should you do? 

Alfred: A taxpayer unable to complete a return by the April 15 deadline should make a timely request for an extension of time to file.   In North Carolina, application must be made to both the Internal Revenue Service and to the State of North Carolina Department of Revenue.   The extension is granted automatically.  The taxpayer isn’t required to sign the extension request, but it will only be granted if timely filed.

Isaac:   Do any special rules apply, if you are in the military and are deployed overseas?

Alfred: Yes, there are rules that apply only to enlisted personnel and other rules that apply to officers.  Enlisted personnel and Warrant Officers are not taxed on combat pay.   Commissioned officers have a limited exclusion.  Military personnel serving in noncombat zones are treated the same as military personnel in the continental United States.

I want to thank Alfred for sharing this information with us.  If you need help, preparing this year’s tax return or amending a previous year’s return, contact Alfred Jones at (910) 488-3144.

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The post Top 5 Mistakes on Tax Returns and More first appeared on Stalwart Financial Planning.

This was not your typical human to bear encounter by any means.  By typical, I mean an altercation with a black bear, grizzly bear, or even a polar bear.  This was an encounter with a ferocious 7 month old, 12-pound red shorthaired Dachshund puppy named Bear.

Bear came to live with Angela and me a few weeks back.  Bear’s stay was originally scheduled to be a short one (just a few days), while he transitioned to a new home.  As it turned out, Bear’s family to be was not quite ready for a new dachshund.  The mission then turned to working with the great folks from a local Dachshund Rescue group (Thanks Elma).  The rescue group’s next candidate wanted a mature dachshund and not a puppy, thus the encounter with this menacing bear was destined to last several more days.

During this time (approximately 6 days):

• Angela took Bear to the Vet for a checkup (results: everything normal) 
• Bear made 4+ trips to the local Petco to pick out toys and goodies (results: lots of squeaky toys and dog treats)
• We started receiving new puppy gifts from well-wishing friends (results: gift cards and even a Christmas ornament in the shape of a dachshund)

You all are probably wondering how this particular close encounter with a Bear changed my life.

Well after 23+ years of marriage, Bear has become OUR first family pet.  What a wonderful holiday gift from Mary and her family.

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The post My Close Encounter with a Bear first appeared on Stalwart Financial Planning.

Did you know the contribution limits for 401Ks and IRAs increased for 2013?  With the Presidential Election in November and all the talk over the Fiscal Cliff, many people missed this announcement out of Washington.

For 2013, the 401K and 403(b) annual contribution limits went from $17,000 to $17,500.  The annual contribution limits for Traditional and Roth IRAs also rose from $5,000 to $5,500.

If you are age 50 or older at any time in 2013, you are eligible to contribute a catch-up amount of an additional $5,500 for 401Ks and 403(b) s.  For IRAs, the catch-up amount is $1,000.

You should do the following:

• Make adjustments to your paycheck to meet new limit for 401Ks and 403(b)s
• Make your Traditional IRA or Roth IRA contribution now

Now is the time to adjust the 401K contributions in your paycheck.  If you make these changes now, the increase in contributions can be spread out over the full year verse playing catch up at the end of the year.  If you are not able to make the maximum allowable annual contribution, you should contribute as much as possible.  The minimum you should contribute is enough to get the company match.  This is free money, so do not give it away!

Have you made your 2013 Traditional IRA or Roth IRA contribution yet?  If not, you should go ahead and contribute now.  This way you get the entire year for your dollars to grow.

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The post New 401K and IRA Contribution Limits for 2013 first appeared on Stalwart Financial Planning.

Have you already made your New Year’s resolutions?  Since many of us make resolutions this time of year, I have identified three that you should keep in the new year:

1. Establish an Emergency Fund
2. Form an Investment Policy Statement and stick to it
3. Create a Budget and use it

1. An emergency fund is like having a fire extinguisher in your kitchen.  You hope you never need it, but in case you do, you want to know it is handy and fully charged.  Your emergency fund should be 3 to 6 months of after tax living expenses (6 to 9 months if you are self-employed).  Added portfolio risk is one of the issues that can be caused by lack of an adequate emergency fund.  Some of you might be asking, “How does this add risk?”  Risk is added, by the fact you might have to sell investments during a temporary dip in price to cover an emergency expense.  If this happens, then changes to your portfolio are not directed by your investment policy, but more by whether or not you need to replace the heating system in your home.

2. Investors form Investment Policies; otherwise, they are just stock pickers.  The framework for building and maintaining portfolios is the investment policy.  This policy should contain more than just a simple ratio of stocks to bonds.  The policy should have the percentages for each of the asset classes you are using in your portfolio.  Here are a few example asset classes:

• Fixed Income: Short Term Bond, Intermediate Term Bond, Long Term Bond
• Equities: Large Cap Stock, Small Cap Stock, International Stock, Developing Nations Stock
• Cash

Now with your investment policy statement in place, the next time you get a hot tip from your Uncle Thomas’ friend, you can determine if it really fits into you portfolio or not.

3. I highly recommend that you create a family budget.  Your budget should include all income, expenses, and saving goals for the month.  Having a family budget allows us to determine each month how we are doing.  In my opinion, creating the family budget is the easy part, or about 30% of the work.  The remaining 70% (the hard part) involves sticking to your budget.  In America, each person is bombarded by more than 3,000 marketing messages every 24 hours.  It is no wonder that sometimes we are persuaded to transform wishes into needs.  Without a budget as a compass, it can be difficult to stay on course and not be enticed by slick marketing hype.

What are some of your New Year’s resolutions?

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The post 3 Financial Resolutions to Keep in the New Year first appeared on Stalwart Financial Planning.

What can you do when you have 6 people over for dessert and two uninvited guest arrive just as you cut into your favorite pie?  This is exactly what happens to your monthly budget when you need to repair the transmission on your minivan.  And in addition, you find out, your spouse must unexpectedly travel across the country to visit their Mother who is having surgery.

Let us take a moment and consider what options we have.  We should only consider options where everyone that wanted a slice of pie got one.  To do this we might select one of the following:

• Slice the pie into smaller pieces
• Hope someone is on a diet
• Immediately start baking another pie

If you slice the pie into smaller pieces, sure, everyone gets some pie.  However, it will probably leave most feeling a little unsatisfied.  The same would be true, with your monthly budget if you decided to pay only part of your mortgage, part of your water bill and so on.

You could hope that someone is on a diet and therefore not want any pie.  You might get lucky and have this happen.  But, the people I know and hang around are not going to turn down pie!  This is probably the case with your monthly budget too.  I cannot remember a time the electric company decided they did not want me to pay my bill for the month.

Another idea would be to start immediately baking another pie.  This could work if you have all the ingredients handy and do not have to go to the market to purchase more sugar.  To boot, your guest will probably not be interested in waiting around for you to cook another pie.  They are busy people with things to do and places to go.

A solution that would work for both the uninvited guests and your budget woe is an emergency fund.  For your guest desiring dessert, you could offer them some of the butter pecan ice cream you were saving for a rainy afternoon.  You were stashing the ice cream for when you had the entire house to yourself (just you, the couch, and an old movie).  As for your budget, this is a good time to break out the ole emergency fund.  Your emergency fund should be 3 to 6 months of after tax living expenses.  You can even use a money market account to store these funds.  If you are self-employed, your emergency fund should be 6 to 9 months of expenses.

My wife makes this wonderful pie she calls Carolina Dark Pecan.  One taste of it and you will see why it is my favorite dessert.Here is the recipe:

1 cup dark corn syrup

½ cup butter (melted)

½ cup whole or chopped pecans

½ cup sugar

3 eggs

½ tsp. vanilla

Brush melted butter on piecrust. Arrange pecans in desired pattern in bottom of pie shell. In a separte bowl beat eggs until foamy. Add sugar, syrup, remaining melted butter and vanilla.  Beat until mixture thickens. Pour into unbaked pie shell, and bake 8-10 minutes at 450. Reduce heat to 325 and bake until filling is firm (about 35 minutes).

Until next time, and remember at Stalwart Financial Planning you do not have to have a fortune to start creating one!

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The post Slicing up the Budget Pie first appeared on Stalwart Financial Planning.

Here we are coming up on the start of a new College Football season.  As many of you know I am a diehard North Carolina State Wolfpack fan.  Go Pack!  I’m planning to travel to see the Wolfpack play their first game of the College Football Season.  While I am excited about the return of College Football and traveling to the game with friends and family, I am also a bit apprehensive.  I am bit afraid of splurging to attend the game and then seeing the Wolfpack play poorly.  This would get me down and then I would be in a bad mood for the remainder of the Labor Day weekend.

This feeling of apprehension is not just contained to Wolfpack or College Football fans, but it also relates to many everyday people with regards to investing.  Many people get overwhelmed by the downside potential they see in the stock market.  To battle this reluctance to invest (notice I did not say speculate) in the stock market, they just decide to stay on the sidelines by keep their money only in cash savings accounts or other ultra conservative investments.

This is not to say you should never have conservative investments in your portfolio, but if you are in your early 30s and could have 30+ years left in your working career and 30+ years to live in retirement, you will need growth.  If this is the case, you should have a percentage of your funds in the stock market, so your funds will be working just as hard for you as you did to originally obtain them.  To do this, you need to have your funds in the proper asset allocation (Equities (both Domestic and International), Fixed Income, Real Estate and etc.) for your risk tolerance and time horizon.  If you have these things in place you should be able to invest with confidence and sleep soundly through the night without countless worries.

Now I hope the Wolfpack has the right allocation of Offense, Defense, and Special Teams to win the first game and kickoff the College Football season off to a great beginning for me.

Until next time, and remember you do not have to have a fortune to start creating one!

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The post Kickoff to New Beginnings first appeared on Stalwart Financial Planning.

I am driving home the other day and I’m greeted with a great site for my eyes — a gorgeous rainbow.

You might never have to think about what to do if you found a pot gold or hit the lottery jackpot. But you might have to plan for money or property you inherit, an unusually large bonus from work or other found money.  With that said, what are some good things to do with your new found funds?  I’m sure some of the things that your heart desires will quickly come to mind, like a new motorcycle, a new boat or that dream around the world vacation.  I recommend the first thing you should do is just place the money into very liquid and safe account(s), and then just wait.  Yes, I suggest you just wait for at least 6 to 9 months and do nothing rash with the funds.   The 6 to 9 month waiting period is to provide you with a cooling off period to fully think things out.

During this cooling off period, I recommend you surround yourself with good counsel, like a Certified Financial Professional, an Attorney, a CPA and others.  Use the assistance of 1 or more of these trusted advisors to help you come up with a sound financial strategy and plan.  This sound strategy should include mapping out a plan to cover your basic needs and any debts, a method to reach your long term goals, incorporate efficient taxation along the way, and provide for any gifts you want to give.  A few fun things should be included in the plan too, as part of a sound plan.  Now that you have gone through all the trouble to create a plan, you should not forgo the next step and forget to implement the plan.  With all the time to think and work on the plan, the implementation should be the fun part.

The monitoring step which is next is one which is often neglected.  Many times after implementing a plan people just let it go on autopilot.  Since financial plans are not created with crystal balls, they require monitoring and tweaking from time to time to keep things flowing smoothly.

As I was thinking of my pot of gold on this day, I had a first for me.

I saw a double rainbow.  It was indeed a day filled with wealthy experiences.

Until next time and remember you do not have to have a fortune to start creating one!

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The post A Pot of Gold first appeared on Stalwart Financial Planning.

If you are like me then this scenario might have happened to you a time or two.  When sitting down to one of Mom’s home cooked meals, and just as you start chewing on those first few bites, you think to yourself, “Mmmm this is good”.  Well this was the case, as I was enjoying a hearty beef stew my Mother had prepared while I was back home visiting.  This meal got me to thinking.  What made the stew so good?  After a little thought and a second bowl of stew, it dawned on me it was not one single extraordinary ingredient but the construction and combination of the ingredients together.I think when constructing a diversified portfolio you should approach it as you would in creating a savory stew. In creating a stew you would start with the basics of perhaps beef, potatoes, carrots and onions.  Much the same is true as you would design a portfolio with some large caps, value stocks, small caps, international stocks and some fixed income and cash.  Once you have the basic ingredients in place you might decide to carefully add in a little seasoning.  While we all know the right amount of spice in our food can add to the depth of flavors enjoyed.  So you too might want to sprinkle in other assets types into your portfolio to make it more robust.  As we think of adding in oil, precious metals, real estate, collectibles and etc., please remember that a little bit can go a long way.  As with the stew, if we add too much salt, it can make the overall stew unpalatable.  And in the long run it can be bad for our health.

As stated earlier the magic flavor of the stew does not come from one secret ingredient, but the real magic is time.  Once, all the ingredients are combined.  Over time and heat the ingredients and flavors are melded together to form a complete meal.  Again this is true of a properly diversified portfolio.  Normally over the long haul it is not the performance of a single stock or fund that makes the portfolio a good one, but the combined group of assets working together to deliver the returns you expect.

If you need help in creating a diversified portfolio, contact Stalwart Financial Planning at (910) 867-8464.  But if you need help making a hearty beef stew, it is better to follow tips from Mom because I’m not much of a cook.

Until next time and remember you do not have to have a fortune to start creating one!

Mom’s Savory Beef Stew

2 lbs.      Stewing Beef

¼ Cup    Oil

1 tbsp.   Butter

Salt and Pepper

2 tbsp.   Flour

2 C         Beef stock

1             medium Onion

4             Potatoes – cubed (peel if desired)

3             Carrots

1             Bay leaf

2             Sprigs of thyme  

Add oil to a large skillet and heat on medium high. In a separate container season the beef with salt and pepper and then coat beef with flour.  Place coated beef into skillet and brown.  Once the beef is browned add the onions and butter to the beef and stir occasionally for about 4 minutes.  Next place browned beef/onion mixture and drippings into a stock pot along with potatoes, carrots, bay leaf and thyme.  Add beef stock and stir thoroughly, cover and cook on medium-low heat for 1 hour 30 minutes or until all ingredients are to desired tenderness. 

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The post Mmmm This is Good first appeared on Stalwart Financial Planning.

Sitting here today I was looking at a picture I took of an overlook at 6053 feet. The picture was taken during the most recent motorcycle trip my brother and I had.  It was during our ride on the Blue Ridge Parkway heading to Cherokee, North Carolina.  We had ridden the stretch of parkway through Virginia the prior year and wanted to complete the byway’s path through North Carolina during this journey.

The parkway is a very scenic meandering 469 mile road.  It connects the Great Smokey Mountain National Park in Cherokee to Shenandoah National Park in Virginia via Skyline drive.  Many people call this ribbon of highway the nation’s narrowest national park and after peering at some of its great vistas I can see why.

I got to reflecting how nice a trip it was and how I am anticipating the next segment in our annual motorcycle jaunt.  I then remembered the rain and how it rained so hard we had to pull over several times.  Next I remembered how hot it was on that August day before the rain came.  Even after all of the ups and downs (literally) of the journey and almost running out of gas, it was a great trip and we got there and back safely.

At this point you are probably asking yourself, what does this have to do with choosing the right investment vehicle?  Well the trip on the Blue Ridge Parkway with all of it curves, tunnels, peaks and valleys and the 45 mph speed limit would not have been as enjoyable if we had selected to drive our pickup trucks.  Just as in investing, the key to this trip was in selecting the right vehicle for the desired goal.

For example, if you know you are going to need to purchase a new car in 2 years.  Say you have set aside some funds to put toward your car purchase.  You want to choose the right investment vehicle for this goal.  The best investment vehicle for the funds you have set aside would not be an aggressive growth stock in hopes of doubling your money in a couple of years.  A better choice would be to select something more conservative like a money market account or a short term CD (even with their low interest rates).  The reason is you know the funds will be there when needed in a couple of years.  As was the case in 2008-2009, with the aggressive growth stock, your investment could be down 30%, 40% or even more with a major downturn in the market.  If the downturn scenario happened with the growth stock, you will have to come up with additional funds to purchase the car you need or you will have to delay the purchase of the car.  It could be a real solemn period just waiting and hoping for a quick return in value of your stock position.

On the other hand, if you were saving for a goal that was 5 years or more out then choosing an aggressive stock might be a good choice.  Then again putting all your eggs in basket with a single stock might not be the best idea either.  But this topic of proper diversification will need to wait until a future blog entry.

Until next time and remember you do not have to have a fortune to start creating one!

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The post Choosing the Right Investment Vehicle first appeared on Stalwart Financial Planning.