Tricia Mulcare

Four Steps For The Suddenly Single Spouse Unsure About Finances

By: Tricia Mulcare

03/21/2019

After a spouse passes away or a couple divorces, the “suddenly single” spouse may find the prospect of handling finances complicated and daunting. The financial industry is full of phrases and terminology that can be confusing, and oftentimes someone else was in charge of making the financial decisions for the family. Now is the time to take control of your finances by changing your mindset around money and ensuring you have the right systems in place. For those not sure where to start, here are four steps for the suddenly single spouse.

Step One: Understand the investments in your portfolio.

Do you have bonds? Stocks? Are the stocks domestic or international companies? What percentage of your portfolio is liquid and readily available versus tied up in longer term partnerships? Do you have a long-term financial plan? If so, what are your financial goals and objectives? What assumptions have been made regarding future income, expenses and rates of return? Does your portfolio reflect the needed “mix” to meet the rate of return assumptions and ultimately your goals and objectives?

If you are answering “no” or “I don’t know” or “slow down please” to the above questions, you can begin to take control by building a team of unbiased advisors. This entails adding financial experts, including a wealth manager and CPA, who can help you understand what you are looking at.

Step Two: Find the right advisor for you.

Financial planners are not one-size-fits-all, the term can apply to a wide variety of people or to digital services called robo-advisors. Some things to consider when choosing the right advisor for you include their qualifications and standards, services offered, and compensation models (commission based, fee-based, or fee-only). See our How to Select An Advisor page (https://homrichberg.com/resources/how-to-select-an-advisor/) for more questions to consider when selecting an advisor.

Be wary of the professional who does not encourage you to ask questions. As the decision maker, it’s important to ask as many questions as needed until you understand the general asset mix of your portfolio and are able to articulate your long-term financial plan. Similar to discussing a sick child with a pediatrician, no questions should remain unanswered when discussing finances with your financial team.

Step Three: Build your financial plan.

It’s time to reevaluate and consider your goals in the short-term, mid-term, and long-term. Short-term goals (0-3 years) might include building an emergency fund, or saving for a home improvement project. Mid-term goals (3-10 years) might include saving for a vehicle, major trip, or the purchase of a home. Finally, long-term goals (10 years or more), would include things like saving for retirement, or college.

Step Four: Freeze your credit.

Freezing your credit with all three major credit agencies (Equifax, Experian, and Transunion) prevents someone else from pretending to be you and opening credit accounts in your name without your knowledge. All three agencies should be contacted separately and will ask a series of identification questions. Once frozen, you will receive a PIN that should be stored in a very safe place as it will be required when you need to temporarily thaw your credit to apply for a loan or other line of credit.

These four simple steps will give you the confidence to take control of your financial future and allow you to maintain your financial independence.

Todd-Hall

The Benefits Of Having A Financial Advisor

By: Todd Hall

03/15/2019

Multiple studies have shown that investors who seek the help of financial advisors often outperform their peers who choose to do it themselves. Below is a brief review of two studies that examined the benefits advisors bring to their clients.

One study by Aon Hewitt compared “do it yourself” investors to investors who were receiving some sort of guidance or help managing their investments. The study looked at a 10-year period that included the financial crisis of 2008 and the broader period of the late 2000s that is often referred to now as The Great Recession. They found that those who sought the advice of a financial advisor outperformed those who did not by 1.86% annually. Importantly, this difference was measured on a “net of fee” basis. The impact of financial advice became even more pronounced during the worst years of market turmoil. In 2009 and 2010 those who were relying on a financial advisor outperformed their “do it yourself” peers by 2.92% net of fees.

Another study that showed similar results was done by Vanguard. The Vanguard study called “Advisor Alpha” showed that investors with advisors outperformed their peers by 3% per year. The Vanguard study also sought to identify the reasons why. This study found that at least 50% of the difference in performance (or 1.5% per year, net of fees) can be explained by what they termed “behavioral coaching.” In other words, half of the increased performance had to do with investor behavior and not with investment selection.

These studies show that advisors can (and on average do) add substantial value net of fees. More importantly, though, these studies also show that much of this added value comes from helping clients take the emotions out of their financial decision making. Investors’ long term success often depends on the ability to take two dangerous emotions out of the picture: fear and greed. Think back to what it felt like during the financial crisis of 2008. There was a tremendous amount of fear. A decade before that, we had the “dot-com” boom during which investors kept seeing others around them getting rich from tech stocks, and there was a real fear of missing out. More recently we saw this on a smaller scale with Bitcoin.

History shows that it is most important to remove emotions like fear and greed at the very times when it is most difficult to do so. The research is clear that advisors help investors keep their emotions in check and their financial plans on track.

 

Resources:

https://www.barrons.com/articles/behavioral-alpha-the-true-power-of-financial-advice-1476396872

Aon Hewitt study: https://financialengines.com/~/media/files/financialengines-2014-help-report.pdf

Vanguard Study: https://personal.vanguard.com/pdf/ISGAA.pdf

Jaime-Ruff

Tax Bracket Planning in Early Retirement

By: Jaime Ruff

03/07/2019

We often work with people who have saved enough to stop working and live off of their investments in their early 60s or sooner. The mindset many have as they begin retirement is to spend after-tax investments first and to postpone withdrawals from tax-advantaged accounts like IRAs until required at age 70½. It can be alluring to pay very little in income taxes in the years before IRA distributions have to be taken but deferring too much can actually push future income into a higher tax bracket. In the end is that the most tax-efficient approach?

It may be better to purposely generate some taxable income in early retirement, thereby paying income taxes sooner than required. In creating a financial plan for our clients we often find that a combination of withdrawals from taxable accounts and IRAs is optimal. The idea is to generate some income in early retirement to fill up a lower tax bracket in order to prevent that income from being taxed at a higher rate in later retirement.

One of the best tools available for generating income is the partial Roth IRA conversion. Making partial Roth IRA conversions in early retirement helps nail down the optimal income tax rate, while at the same time reducing the balance of the IRA that will be subject to minimum distributions in the future. The icing on the cake is that the amounts moved into the Roth can now grow tax-free and are not subject to minimum distributions during the retiree’s lifetime. This creates a third “bucket” or type of savings account to invest differently than the others, to potentially tap into in the future, to leave to heirs, etc.

Last but not least, the lower tax rates enacted in the Tax Cuts and Jobs Act of 2017 are scheduled to sunset in 2026, which makes the idea of pre-paying taxes even more appealing between now and then. After sunset, if your RMDs are high enough, you could get nudged into a higher bracket. Converting now means taking advantage of today’s lower rates while they last.

There are of course some “gotchas” to watch out for. Depending on the circumstances, generating income like this can not only trigger income taxes, but it may generate negative consequences that have to be considered in the big picture. Things like greater taxation of social security benefits, higher Medicare premiums, loss of subsidies for health insurance, and reduced deductibility of medical expenses, may be factors. As with most financial planning ideas, there are pros and cons that should be considered in every unique situation.

Ross Bramwell

Maturing Corporate Debt

By: Ross Bramwell

02/27/2019

It appears homeowners have learned from the great recession about not taking on too much debt. However, there is some concern that companies did not learn the same lesson. In the last 10 years since the great recession, companies have been able to borrow significant amounts due to historically low rates. With interest rates low, the economic recovery continuing to extend, and relatively easy lending standards, many companies thought that borrowing for company share buybacks, financing acquisitions, or refinancing old debt was a strategy with little risk. However, over the next few years a significant portion of that debt is maturing which could test that strategy.

As shown in the below chart, over 50% of the total debt maturing before 2050 matures in the next six years. Although we do not believe current economic conditions indicate a U.S. recession in the short term, this is something to watch as companies may have to refinance this debt as lending conditions tighten or economic conditions potentially worsen. If companies are downgraded due to worsening economic conditions, they would be what investors call “fallen angels,” and that can trigger waves of selling. On the positive side, companies are still making record profits, which allow them to repay their debts, and consumer confidence is still high. We believe one thing is for sure: companies will have to alter their strategies going forward around debt as interest rates have risen and corporate debt levels are already high.

 

Annual Maturing Debt In Bloomberg Barclays Aggregate Corporate Bond Index

This commentary is for informational purposes only and should not be considered legal, tax, accounting or investment advice. Views and opinions expressed herein are as of the date posted unless indicated otherwise, with no obligation to update. Certain of the information herein has been obtained from third party sources believed to be reliable, but has not been independently verified. Discussions pertaining to potential future events and their impact on the markets are forward-looking in nature, based on current expectations and analysis, and should not be relied upon. Actual results may vary materially. 

William Bolen

The Rise of China

By: Bill Bolen

02/22/2019

As we post this on the blog we are in the middle of ongoing trade and tariff discussions with China that have real implications for our economy and the markets.  Blog readers who are older may remember the “rise of Japan” that occurred in the 1970s and 1980s that moved Japan to the #2 position in the world in terms of GDP.  Japan held onto that #2 position until 2010, when China’s rise that started in the 2000s led them ahead of Japan and into the #2 spot that they still occupy today.  The rise and fall of various world economies can be easily seen in this visualization video courtesy of the Visual Capitalist website at https://www.visualcapitalist.com/animation-the-worlds-10-largest-economies-by-gdp-1960-today/ that shows the top 10 world economies from 1960 to today in an animated video format.  It is a fascinating reminder of how things have changed over time and an easy way to understand why today a trade battle between the U.S. and China is such an important factor in world markets.

For those interested in diving deeper into what has driven the growth of China over the past 20-30 years, the New York Times recently published a five part story on China that digs into the topic with photos and analysis framing how China has attempted to modernize their economy while still holding onto their Communist authoritarian approach to government.  You can start with the first part via this link https://www.nytimes.com/interactive/2018/11/18/world/asia/china-rules.html (may require a subscription depending on how many free articles you have read this month).

Mike-Landsberg

Mike Landsberg Discusses Retirement Planning Stress Points: FA Magazine and ThinkAdvisor

02/21/2019

Mike-Landsberg

HB’s Michael Landsberg sat down with Financial Advisor Magazine and ThinkAdvisor to discuss retirement planning stress points. Read both articles below.

Financial Advisor Magazine                                                     ThinkAdvisor

Shawn-Ayton

5 Tips For Keeping Your Digital Life Secure

By: Shawn Ayton

02/14/2019

Keeping up with computer security can be a daunting and overwhelming task. My goal in this post is to outline five things I think are essential in order to keep your digital life secure.

  1.   Configure all of your computers to automatically download and install operating system updates. 

The steps for setting up automatic updates vary slightly based on your computer system (e.g. Windows 7, Window 10, Mac OS, etc.).  Fortunately, you can Google how to enable automatic updates for your specific system.  For example, here are two links with instructions on how to enable automatic updates for Windows 10 and Mac OS.

   2.   Install antivirus software. 

Windows 10 comes pre-loaded with Windows Defender, Microsoft’s built-in antivirus program that works really well. I recommend Sophos Antivirus for Mac. Sophos continues to be recognized as one of the best antivirus solutions for Macs.

  3.   TREAT ALL EMAILS YOU RECEIVE AS A PHISHING EMAIL until you can verify its authenticity. 

A phishing email is an email sent by a fraudster/hacker that appears to come from a legitimate company (e.g. your financial institution) asking you to provide sensitive information (e.g. your username or password) or asking you to click on a malicious link or attachment with the goal of stealing your financial assets.  It’s estimated that 75-91% of all cyber attacks start by getting the victim to perform an action in a phishing email.  Use these steps to verify each email you receive:

  • Verify senders email address (john.miller@gmail.com vs john.miler@gmail.com)
  • Hover over links in emails to verify the destination (be careful to note the spelling of the domain name). For example, gmail.com vs gma1com.
  • Ask you yourself. Were you expecting the email?  Is the email part of an outgoing conversation?  Do you know the sender?  Is there anything suspicious about the email and request?  Keep in mind that the sender’s email account may have been hacked.
  • Be suspicious of ALL emails that request that you click on a link or open an attachment.
  • If you are uncertain if a link or attachment is malicious, contact the sender by phone or text.
  • Many phishing emails purport to be from DocuSign, Dropbox, and other popular online services – be careful.

      4.   Turn on two-factor authentication on all online services that support it.  

Two-factor authentication requires you to enter a code or approve the connection from an app after you have entered your username and password.  This is the best way to safeguard your online access because it prevents a fraudster/hacker from accessing your account with merely your username and password.  Contact your online service provider for help setting up two-factor authentication.

      5.   Monitor your Phone Calls/Text/Social Media. 

Fraudsters are also using these avenues to trick people into providing sensitive information.  Be careful about what information you provide through these services.

Remember, if you suspect that your account has been hacked, change your password immediately and contact the service provider.

Homrich Berg Welcomes Philip H. Clinkscales III As Director

02/08/2019

 

ATLANTA – February 8, 2019 – Homrich Berg is pleased to announce the appointment of Philip H. Clinkscales III, CPA, CFA, CAIA, CGMA, CFP®, PFS as a new director for the firm. “Philip has extensive financial planning expertise and will be an invaluable asset to HB,” said Andy Berg, co-founder and CEO of Homrich Berg. “My partners and I are proud to welcome him to HB.”

Philip received dual bachelor degrees in Business (Real Estate) and Landscape Architecture from the University of Georgia and holds a master’s in Public Accountancy from Georgia State University. He joins Homrich Berg after co-founding an independent financial planning firm in 2013 where he served his clients in the areas of individual tax, estate, investment, and retirement planning. Prior experience also includes 11 years in wealth management with PPA Investments, Inc., and serving as an Executive Director at SoundRiver Advisors. Philip is actively involved in the Georgia golf community serving as Secretary-Treasurer and Member of the Executive Committee of the Georgia State Golf Association. He is also a Trustee and Scholarship Committee Chairman of the affiliated GSGA Foundation, an organization that provides educational opportunities through the Yates & Moncrief scholarship program.

Ross Bramwell

Annual Returns Are Almost Never Average, Volatility Is A Normal Part Of Investing

By: Ross Bramwell

02/05/2019

Going back over the last 93 years the average return of the S&P 500 has been 11.9%. However, the annual total return has only ever fallen inside of a range of +/- 2% of the average (10-14%) eight times. With the Fed still trying to “normalize” interest rates, ongoing trade tensions between the U.S. and China, and the 2020 Presidential Election already appearing to ramp up, we believe it’s important for investors to remember that there will always be bumps along the road of investing. We believe the best path along that road is to create and follow a financial plan that can allow investors to keep perspective during those inevitable bumps, and to take advantage of opportunities as they present themselves over time.

*The S&P index returns start in 1926 when the index was first composed of 90 companies. The name of the index at that time was the Composite Index or S&P 90. In 1957 the index expanded to include the 500 components we now have today. The returns include both price returns and re-invested dividends. Data as of December 31, 2018.

Past performance is not a guarantee or indicator of future results. Inherent in any investment is the potential for loss. This commentary is for informational purposes only and should not be considered legal, tax, accounting or investment advice. Views and opinions expressed herein are as of the date posted unless indicated otherwise, with no obligation to update. Certain of the information herein has been obtained from third party sources believed to be reliable, but has not been independently verified. Discussions pertaining to potential future events and their impact on the markets are based on current expectations and analysis. Actual results may vary.

Stephanie Lang on CNBC!

01/29/2019

Our CIO Stephanie Lang appeared on CNBC‘s Squawk Box this morning where she discussed the broader markets. 

Click Here to See Full Interview