Is This the Season to Change Jobs? The top financial considerations for those ready to make a move.

Provided by Ryan Maroney, CFP®

Switching from one job to another can literally pay off. Data from payroll processing giant ADP confirms that statement. In the first quarter of this year, the average job hopper realized a 6% pay boost. The salary increase averaged 11% for workers younger than 25.1

A recent LinkedIn study found that Generation Y is making job switching something of a habit: on average, millennials will change jobs four times from age 22-32. This compares to an average of two job moves in the first decade out of college for Generation X.2    

As you change jobs at any age, you need to take care of a few things during the transition. On your way to (presumably) higher pay, be sure you address these matters. 

How quickly can you arrange health coverage? If you already pay for your own health insurance, this will not be an issue. If you had coverage at your old job and now need to find your own, fall is the prime time to start shopping for it. Open enrollment season at the Health Insurance Marketplace runs from November 1 to January 31. If you enroll in a plan by December 15, 2016, your coverage will begin on January 1, 2017.3     

If you were enrolled in an employer-sponsored health plan, you need to find out when the coverage from your previous job ends – and, if applicable, when coverage under your new employer’s health plan begins. If the interval between jobs is prolonged, and COBRA will not cover you for the entirety of it, you may want to check whether you can obtain coverage from your alumni association, your guild or union, or AARP. If you are leaving a career to start a business, confer with an insurance professional to search for a good group health plan.

What happens with your retirement savings? You likely have four options regarding the money you have saved up in your workplace retirement plan: you can leave the money in the plan, roll it over into an IRA, transfer the assets into the retirement plan at your new job (if the new employer allows), or cash out (the withdrawal will be taxed and you may be hit with an early withdrawal penalty as well).4  

You will want to see how quickly you can start saving and investing through your new employer’s retirement program, whether you are able to transfer assets from the old plan into the new one or not. If the company offers a match, when will it apply?

Can you manage your cash flow effectively between one job & the next? You do not want to tap your emergency fund or your retirement accounts for cash during the transition, so do the little things to guard against that possibility. Postpone big purchases, avoid running up large credit card debts you will regret later, eat in rather than out, and buy what you really need rather than what you merely want. See if you can put off most of your holiday spending until late November. A cash flow worksheet (which can be found online, for free) can help you track your essential and discretionary household spending.

Each year, about 20 million Americans move on to a new job. If you will soon join their ranks, make sure that you keep household money and insurance matters top of mind, and strive to keep saving for your future at your new workplace.     

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - qz.com/666915/when-to-switch-jobs-to-get-the-biggest-salary-increase/ [4/21/16]

2 - money.cnn.com/2016/04/12/news/economy/millennials-change-jobs-frequently/ [4/12/16]

3 - healthcare.gov/quick-guide/dates-and-deadlines/ [9/29/16]

4 - lifereimagined.aarp.org/stories/14481-Financial-Checklist-for-Job-Changers [9/29/16]

October Is National Financial Planning Month

Saving is a great start, but planning to reach your financial goals is even better.

Provided by Ryan Maroney, CFP®

Are you saving for retirement? Great. Are you planning for retirement? That is even better. Planning for your retirement and other long-range financial goals is an essential step – one that could make achieving those goals easier.

Saving without investing isn’t enough. Since interest rates are so low today, money in a typical savings account barely grows. It may not even grow enough to keep up with inflation, leaving the saver at a long-term financial disadvantage.

Very few Americans retire on savings alone. Rather, they invest some of their savings and retire mostly on the accumulated earnings those invested dollars generate over time.

Investing without planning usually isn’t enough. Most people invest with a general idea of building wealth, particularly for retirement. The problem is that too many of them invest without a plan. They are guessing how much money they will need once they leave work, and that guess may be way off. Some have no idea at all.

Growing and retaining wealth takes more than just investing. Along the way, you must plan to manage risk and defer or reduce taxes. A good financial plan – created with the assistance of an experienced financial professional – addresses those priorities while defining your investment approach. It changes over time, to reflect changes in your life and your financial objectives.

With a plan, you can set short-term and long-term goals and benchmarks. You can estimate the amount of money you will likely need to meet retirement, college, and health care expenses. You can plot a way to wind down your business or exit your career with confidence. You can also get a good look at your present financial situation – where you stand in terms of your assets and liabilities, the distance between where you are financially and where you would like to be.

Last year, a Gallup poll found that just 38% of investors had a written financial plan. Gallup asked those with no written financial strategy why they lacked one. The top two reasons? They just hadn’t taken the time (29%) or they simply hadn’t thought about it (27%).1

October is National Financial Planning Month – an ideal time to plan your financial future. The end of the year is approaching and a new one will soon begin, so this is the right time to think about what you have done in 2016 and what you could do in 2017. You might want to do something new; you may want to do some things differently. Your financial future is in your hands, so be proactive and plan.

Ryan Maroney may be reached at 949-455-0300 or www.fmnc.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - gallup.com/poll/184421/nonretired-investors-written-financial-plan.aspx [7/31/15]

Characteristics of the Millionaires Next Door

The habits and values of wealthy Americans.

 Provided by Ryan Maroney, CFP®

Just how many millionaires does America have? By the latest estimation of Spectrem Group, a research firm studying affluent and high net worth investors, it has more than ever before. In 2015, the U.S. had 10.4 million households with assets of $1 million or greater, aside from their homes. That represents a 3% increase from 2014. Impressively, 1.2 million of those households were worth between $5 million and $25 million.1  

How did these people become rich? Did they come from money? In most cases, the answer is no. The 2016 edition of U.S. Trust’s Insights on Wealth and Worth survey shares characteristics of nearly 700 Americans with $3 million or more in investable assets. Seventy-seven percent of the survey respondents reported growing up in middle class or working class households. A slight majority (52%) said that the bulk of their wealth came from earned income; 32% credited investing.2  

It appears most of these individuals benefited not from silver spoons in their mouths, but from taking a particular outlook on life and following sound financial principles. U.S. Trust asked these multi-millionaires to state the three values that were most emphasized to them by their parents. The top answers? Educational achievement, financial discipline, and the importance of working.2  

Is education the first step toward wealth? There may be a strong correlation. Ninety percent of those polled in a recent BMO Private Bank millionaire survey said that they had earned college degrees. (The National Center for Education Statistics notes that in 2015, only 36% of Americans aged 25-29 were college graduates.)3       

Interestingly, a lasting marriage may also help. Studies from Ohio State University and the National Bureau of Economic Research (NBER) both conclude that married people end up economically better off by the time they retire than singles who have never married. In fact, NBER finds that, on average, married people will have ten times the assets of single people by the start of retirement. Divorce, on the other hand, often wrecks finances. The OSU study found that the average divorced person loses 77% of the wealth he or she had while married.3 

Most of the multi-millionaires in the U.S. Trust study got off to an early start. On average, they began saving money at 14; held their first job at 15; and invested in equities by the time they were 25.2

Most of them have invested conventionally. Eighty-three percent of those polled by U.S. Trust credited buy-and-hold investment strategies for part of their wealth. Eighty-nine percent reported that equities and debt instruments had generated most of their portfolio gains.2

Many of these millionaires keep a close eye on taxes & risk. Fifty-five percent agreed with the statement that it is “more important to minimize the impact of taxes when making investment decisions than it is to pursue the highest possible returns regardless of the tax consequences.” In a similar vein, 60% said that lessening their risk exposure is important, even if they end up with less yield as a consequence.2

Are these people mostly entrepreneurs? No. The aforementioned Spectrem Group survey found that millionaires and multi-millionaires come from all kinds of career fields. The most commonly cited occupations? Manager (16%), professional (15%), and educator (13%).4 

Here is one last detail that is certainly worth noting. According to Spectrem Group, 78% of millionaires turn to financial professionals for help managing their investments.4

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. 

Citations.

1 - cnbc.com/2016/03/07/record-number-of-millionaires-living-in-the-us.html [3/7/16]

2 - forbes.com/sites/maggiemcgrath/2016/05/23/the-6-most-important-wealth-building-lessons-from-multi-millionaires/ [5/23/16]

3 - businessinsider.com/ap-liz-weston-secrets-of-next-door-millionaires-2016-8 [8/22/16]

4 - cnbc.com/2016/05/05/are-you-a-millionaire-in-the-making.html [5/5/16]

Are There Really Tax-Free Retirement Plan Distributions?

A look at some popular & obscure options for receiving money with little or no tax.

Provided by Ryan Maroney, CFP®

Will you receive tax-free money in retirement? Some retirees do. You should know about some of your options for tax-free retirement distributions, some of which are less publicized than others.

Qualified distributions from Roth accounts are tax-free. If you own a Roth IRA or have a Roth retirement account at work, you can take a tax-free distribution from that IRA or workplace retirement plan once you are older than 59½ and have held the account for at least five tax years. One other nice perk: original owners of Roth IRAs never have to take Required Minimum Distributions (RMDs) during their lifetimes. (Owners of employer-sponsored Roth retirement accounts are required to take RMDs.)1,2

Trustee-to-trustee transfers of retirement plan money occur without being taxed. In a rollover of this kind, the custodian financial firm that hosts your workplace retirement plan account makes a payment directly out of the account to an IRA you have waiting, with not a penny in taxes levied or withheld. Trustee-to-trustee transfers of IRAs work the same way.

If you are older than 80, you might get a tax break on a lump-sum withdrawal. If you were born prior to January 2, 1936, you could be entitled to a tax reduction on a lump-sum distribution out of a qualified retirement plan in certain cases. Unfortunately, this is never the case with an IRA RMD.4

Your heirs could receive tax-free dollars resulting from life insurance. Payouts on permanent life insurance policies are normally exempt from federal income tax. (The payout may be included in the value of your taxable estate, though.) A life insurance death benefit paid out from a qualified retirement plan is also tax-exempt provided the death benefit is greater than the policy’s pre-death cash surrender value. Even if an employee takes a distribution from a corporate-owned life insurance policy on his or her life while still alive, that distribution may not be fully taxable as it may constitute a return of the principal invested in the life insurance contract.4,5

Sometimes the basis in a workplace retirement account can be withdrawn tax-free. If you have made non-deductible contributions through the years to an IRA or an employer-sponsored retirement plan account, these contributions are not taxable when they are distributed to the original account owner, accountholder, or an account beneficiary – it is considered return of principal, a recovery of the original account owner or accountholder’s cost of investment.4

IRA contributions can optionally be withdrawn tax-free before their due date. As an example, your 2016 IRA contribution can be withdrawn tax-free by the due date of your federal tax return – April 15 or thereabouts. If you file Form 4868, you have until October 15 (or thereabouts) to do this.6

Withdrawals such as these can only happen, however, if you meet two tests set forth by the IRS. First, you must not have taken a deduction for your contribution. Second, you must, additionally, withdraw any interest or income those invested dollars earned. You can also take investment losses into account. (There is a worksheet in IRS Publication 590 you can use to calculate applicable gains or losses.)6 

These common and obscure paths toward tax-free retirement income may be worth exploring. Who knows? Perhaps, this year, your retirement will be less taxing than you think.

Ryan Maroney, CFP® may be reached at 949-455-0300

www.fmncc.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]

2 - irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions [7/28/16]

3 - irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions [2/19/16]

4 - news.morningstar.com/articlenet/article.aspx?id=764726 [8/13/16]

5 - doughroller.net/personal-finance/life-insurance-proceeds-tax/ [8/18/16]

6 - tinyurl.com/gwoxed8 [8/18/16]

Will millennials face a retirement crisis in their fifties and sixties?

Will millennials face a retirement crisis in their fifties and sixties? A MarketWatch post takes a look: http://tinyurl.com/zadcchp 

When Is Social Security Income Taxable?

The answer depends on your income.

Provided by Ryan Maroney, CFP® 

Your Social Security income could be taxed. That may seem unfair, or unfathomable. Regardless of how you feel about it, it is a possibility.

Seniors have had to contend with this possibility since 1984. Social Security benefits became taxable above certain yearly income thresholds in that year. Frustratingly for retirees, these income thresholds have been left at the same levels for 32 years.1

Those frozen income limits have exposed many more people to the tax over time. In 1984, just 8% of Social Security recipients had total incomes high enough to trigger the tax. In contrast, the Social Security Administration estimates that 52% of households receiving benefits in 2015 had to claim some of those benefits as taxable income.1

Only part of your Social Security income may be taxable, not all of it. Two factors come into play here: your filing status and your combined income.

Social Security defines your combined income as the sum of your adjusted gross income, any non-taxable interest earned, and 50% of your Social Security benefit income. (Your combined income is actually a form of modified adjusted gross income, or MAGI.)2

Single filers with a combined income from $25,000-$34,000 and joint filers with combined incomes from $32,000-$44,000 may have up to 50% of their Social Security benefits taxed.2

Single filers whose combined income tops $34,000 and joint filers with combined incomes above $44,000 may see up to 85% of their Social Security benefits taxed.2

What if you are married and file separately? No income threshold applies. Your benefits will likely be taxed no matter how much you earn or how much Social Security you receive.2

You may be able to estimate these taxes in advance. You can use an online calculator (a Google search will lead you to a few such tools), or the worksheet in IRS Publication 915.2  

You can even have these taxes withheld from your Social Security income. You can choose either 7%, 10%, 15%, or 25% withholding per payment. Another alternative is to make estimated tax payments per quarter, like a business owner does.2

Did you know that 13 states also tax Social Security payments? North Dakota, Minnesota, West Virginia, and Vermont use the exact same formula as the federal government to calculate the degree to which your Social Security benefits may be taxable. Nine other states use more lenient formulas: Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, and Utah.2

What can you do if it appears your benefits will be taxed? You could explore a few options to try and lessen or avoid the tax hit, but keep in mind that if your combined income is far greater than the $34,000 single filer and $44,000 joint filer thresholds, your chances of averting tax on Social Security income are slim. If your combined income is reasonably near the respective upper threshold, though, some moves might help.

If you have a number of income-generating investments, you could opt to try and revise your portfolio, so that less income and tax-exempt interest are produced annually.

A charitable IRA gift may be a good idea. You can make one if you are 70½ or older in the year of the donation. You can endow a qualified charity with as much as $100,000 in a single year this way. The amount of the gift may be used to fully or partly satisfy your Required Minimum Distribution (RMD), and the amount will not be counted in your adjusted gross income.3

You could withdraw more retirement income from Roth accounts. Distributions from Roth IRAs and Roth workplace retirement plan accounts are tax-exempt as long as you are age 59½ or older and have held the account for at least five tax years.4

Will the income limits linked to taxation of Social Security benefits ever be raised? Retirees can only hope so, but with more baby boomers becoming eligible for Social Security, the IRS and the Treasury stand to receive greater tax revenue with the current limits in place.

Ryan Maroney, CFP®  may be reached at 949-455-0300 or www.fmncc.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - ssa.gov/policy/docs/issuepapers/ip2015-02.html [12/15]

2 - fool.com/retirement/general/2016/04/30/is-social-security-taxable.aspx [4/30/16]

3 - kiplinger.com/article/retirement/T051-C001-S003-how-to-limit-taxes-on-social-security-benefits.html [7/16]

4 - irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]

Is Your Adviser a Butcher or Dietitian??

Here's a fun video describing the difference between a broker and a fiduciary.  The takeaway.... most people think when they see their adviser that they're talking to a dietitian, when in reality they're taking to the butcher.

https://youtu.be/AfSaENxAe0M 

Protecting Your Parents From Elder Financial Abuse

 

How to help your family avoid scams and other fraud.

Provided by Ryan Maroney, CFP®

We are becoming more familiar with the notion of financial abuse targeting elders – scams and other exploitation targeting the savings of people aged 60 and older – but many may think, “it won’t happen to my family” or “my relative is too smart to be taken in by this.”

These assumptions are only wishful thinking; this sort of fraud is on the rise, so it’s important to talk to your loved ones about what to look for, and how they can protect their finances.

More common than you think. The U.S. Department of Justice’s Elder Justice Initiative offers a sobering statistic: in the United States alone, multiple studies have found that, every year, 3-5% of seniors endures financial abuse by family members. This form of exploitation is, typically, one of the top two most frequently reported means of elder abuse.1

Talk about money. It can be uncomfortable to talk with family about financial issues, but this is often the best first step toward guarding against financial abuse. Find out the information you would already need to know in the event of a sudden calamity. Questions to ask include: where is the important paperwork kept - i.e. bills, deeds, and wills? Who are the professionals they work with – accountants, lawyers, and those who assist with financial matters?2

It’s also important for you to have a clear idea in what sorts of accounts and investments your parents or loved ones keep their money. You will also want to have a conversation about when and under what circumstances they would like for you to step in and handle their finances for them.2

Trouble takes many forms. Not all financial trouble that elders experience is necessarily a sign of abuse, but having open and clear communication can be a great help. Look for unpaid bills piling up, creditor notices, and suspicious activity on their bank accounts.2

There are a number of scams out there that target the elderly, in particular, and many of them come via telephone calls. There are scammers who pose as officials from a sweepstakes, lottery, or some other contest claiming that your parent or loved one is in line to receive a prize. Others will pretend to be from the Internal Revenue Service and threaten legal action over some long-forgotten overdue balance. The real IRS only sends notices via regular mail, of course, but that can be easily forgotten when dealing with a wily and confrontational con artist.2

Talk about these scams with your parents or loved ones. Make sure that they understand that they shouldn’t give out Medicare or Social Security numbers, and always be absolutely certain before signing anything, particularly legal documents, contracts, and anything to do with making an investment. For the latter, if you don’t already know the people who handle your financial matters for your parents or loved ones, suggest that a meeting be arranged and, if necessary, that they be instructed to work with you under certain circumstances.2

Stay informed. There are a number of resources to keep you and your parents or loved ones aware of fraud, both in terms of new scams and even instances of elder financial abuse in your area. StopFraud.gov offers a number of resources and tips for identifying and reporting the financial exploitation of elders. The AARP website features a Fraud Watch program and offers and interactive national fraud map that can look at specific reports and alerts from law enforcement.2,3,4  

With careful planning and communication, you can make a real effort to protect your parents and other elders in your family from an embarrassing and costly set of circumstances.

Ryan Maroney, CFP® may be reached at 949-455-0300 or www.fmncc.com  

Investment advisory services are offered by Financial Management Network, Inc.(“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. Securities are not FDIC-Insured, are not bank-guaranteed, may lose value. FMN and FMNCC may only transact business in those states and international jurisdictions where we are registered/filed notice or otherwise excluded or exempted from registration requirements. The purpose of this web site is for information distribution on products and services. Information herein is taken from sources deemed reliable and neither FMN nor FMNCC are responsible for any errors that might occur.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – justice.gov/elderjustice/research/prevalence-and-diversity.html [7/14/16]

2 – nbcnews.com/business/retirement/worried-about-elder-financial-abuse-how-protect-your-parents-n559151 [4/20/16]

3 – stopfraud.gov/protect.html [7/14/16]
4 – action.aarp.org/site/SPageNavigator/FraudMap.html [7/14/16]

Is Cooking Cheaper than Eating Out?

Is cooking always cheaper than eating out? Some Americans think not, International Business Times reports:

http://tinyurl.com/hp8fdbq  

A shift in the way America Saves:

View fullsize

Why Are We Saving More and Spending Less? Have our memories of the Great Recession altered our habits?

By: Ryan Maroney, CFP®

Consumer spending accounts for more than two-thirds of economic activity in the United States. Lately, that spending has moderated. Across the 12 months ending in March, personal spending advanced 3.4%. That matched the gain seen in 2015.1,2

Is a 3.4% annualized gain in personal spending adequate? Not in historical terms. During 2014, consumer spending accelerated 4.2%. The average monthly gain in consumer spending across the past 12 months (0.28%) is roughly half the historical average seen since 1959 (0.54%).1,2

While the personal spending rate has slumped recently, the personal savings rate has not. In March, it was at 5.4%. It has varied between 4-6% for more than three years, staying notably above the levels seen prior to the Great Recession of 2007-2009.3

Has consumer psychology been altered since then? That is an interesting question to consider, and it especially begs consideration, given the fact that inflation-adjusted personal spending has declined for three straight quarters.4

Real disposable income (that is, disposable income adjusted for inflation) has been rising without fail. It has increased for 13 straight quarters, beginning in Q1 2013 after the payroll tax cut at the end of 2012. You would think unflagging increases in real disposable income would promote greater economic expansion, but real gross domestic product grew just 1.5% in 2013 and only 2.4% in both 2014 and 2015. Those GDP levels are well below those seen in the early 2000s, not to mention the 1990s.4,5    

When is too much frugality a bad thing? When it risks hampering economic growth. The 5.4% personal savings rate recorded in March tied a three-and-a-half-year high. As we are well into an economic recovery, it would seem only natural for Americans to spend more than they did several years ago.4

Perhaps people are just not ready to do that. As a Deutsche Bank research note asserted this month, the memory of the Great Recession may be too hard to erase: “The shock of the crisis likely increased the desire to hold more savings for precautionary motives.”4

Since 2001, Gallup has consistently asked Americans a question each year: “Are you the type of person who more enjoys spending money or who more enjoys saving money?”6

This year, 65% of respondents said they preferred saving and 33% of respondents said they preferred spending. That gap has never been so pronounced in fifteen years of polling.6

As recently as 2009, just 53% of Americans told Gallup they preferred saving while 44% indicated they preferred spending. The gap has gradually widened ever since, and it is now fairly consistent across all age groups.6

A little more polling history seems to affirm a perception shift. In 2006, Gallup found that 51% of Americans rated their personal financial situation as “excellent/good;” in that year, 50% of Americans preferred saving to spending. Four years later, only 41% of Americans felt their personal financial situation was “excellent/good”, and 62% indicated a preference for saving. This year, 50% of Americans ranked their personal finances as “excellent/good,” yet 65% preferred saving dollars to spending them. “The appeal of saving over spending shows some signs of being the new normal rather than a temporary reaction to the hard times after 2008,” Gallup’s Jim Norman observed last month.6

In its latest report on personal income and outlays, the Bureau of Economic Analysis says personal incomes were up 4.2% year-over-year as of March. Consumer prices rose but 0.9% in the same span. Unimpressive wage growth aside, it would appear that many households are nicely positioned to spend. Of course, what these two numbers do not take into account is debt: mortgage debt, student loan debt, credit card debt. The rebound in the personal savings rate surely relates to the goal of reducing such liabilities.7,8

The Great Recession taught America a great lesson about living within one’s means. Could that lesson, as vital as it is, now be constraining the economy? As economists try to pinpoint reasons for America’s slow recovery, they may want to cite the psychology of the consumer.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
  

Citations.

1 - cnbc.com/2016/02/01/us-personal-income-dec-2015.html [2/1/16]

2 - tradingeconomics.com/united-states/personal-spending [5/22/16]

3 - tradingeconomics.com/united-states/personal-savings [5/12/16]

4 - usnews.com/news/articles/2016-05-11/years-later-psychological-scars-from-great-recession-skew-spending [5/11/16]

5 - statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/ [5/12/16]

6 - gallup.com/poll/190952/nearly-two-thirds-americans-prefer-saving-spending.aspx [4/25/16]

7 - shopfloor.org/2016/04/personal-spending-remained-soft-in-march-despite-decent-income-growth/ [4/29/16]

8 - reuters.com/article/us-usa-economy-inflation-idUSKCN0XB1I4 [4/14/16]

How Millennials Can Get a Good Start on Retirement Planning

Provided by Ryan Maroney, CFP®

If you are younger than 35, saving for retirement may not feel like a priority. After all, retirement may be 30 years away; if your employer does not sponsor a retirement plan, there may be less incentive for you to start.

Even so, you must save and invest for retirement as soon as you can. Time is your greatest ally. The earlier you begin, the more years your invested assets have to grow and compound. If you put off retirement planning until your fifties, you may end up having to devote huge chunks of your income just to catch up, at a time when you may have to care for elderly parents, fund college educations, and pay off a mortgage.

Do your part to reject the financial stereotype that the media places on millennials. Are you familiar with it? According to the mainstream media, millennials are wary of saving and investing; they are just too indebted, too pessimistic, and too scared get into the market after seeing what happened to the investments of their parents during the Great Recession.

In truth, savers of all ages were traumatized by the 2007-09 bear market. Last month, Gallup asked American households if they had any money in equity investments; just 52% said yes. That compares to 65% in April 2007. In 2014, Gallup asked Americans if investing $1,000 in equities was a good idea or a bad idea; 50% of those surveyed called it a bad one.1

A recent study from HowMuch.Net found that 52% of Americans aged 18-34 have less than $1,000 in savings. Well, guess what: another study from Go Banking Rates reveals that 62% of all Americans have less than $1,000 in savings.2

Now is the time to take some crucial financial steps. According to a poll taken by millennial advocacy group Young Invincibles, only 43% of 18-to-34-year-olds without access to a workplace retirement plan save consistently for retirement; whether your employer sponsors a plan or not, though, you can still make some wise moves before you turn 40.3

Make saving a top priority. Resolve to pay yourself first. That is, direct money toward your retirement before you do anything else, like pay the bills or spend it on needs or wants. Your future should come first.

Invest some or most of what you save. Investing in equities is vital, because it gives you the potential to grow and compound your money to outpace inflation. With interest rates so low right now, ultra-conservative fixed-income investments are generating very low returns, and most savings accounts are offering minimal interest rates. Thirty or forty years from now, you will probably not be able to retire solely on your savings. If you invest your retirement money in equities, you have the opportunity to retire on the earnings and compound interest accumulated through both saving and investing.

The effect of compounding can be profound. For example, suppose you want to retire with $1 million in savings. (By 2050, this may be a common goal rather than a lofty one.) We will project that your investments will yield 6.5% a year between now and the year you turn 65 (a reasonably optimistic assumption) and, for the sake of simplicity, we will put any potential capital gains taxes and investment fees aside. Given all that, how early would you have to begin saving and investing to reach that $1 million goal, and how much would you have to save per month to reach it?

If you start saving at 45, the answer is $2,039. If you start saving at 35, the monthly number drops to $904. How about if you start saving at 25? Only $438 a month would be needed. The earlier you start saving and investing, the more compounding power you can harness.4    

Strive to get the match. Some companies reward employees with matching retirement plan contributions; they will contribute 50 cents for every dollar the worker does or, perhaps, even match the contribution dollar-for-dollar. An employer match is too good to pass up.  

Invest in a way you are comfortable with. In the mid-2000s, some Wall Street money managers directed assets into investments they did not fully understand, a gamble that contributed to the last bear market. Take a lesson from that example and avoid investing in what seems utterly convoluted or mysterious.

Realize that friends and family may not know it all. The people closest to you may or may not be familiar with investing. If they are not, take what they tell you with a few grains of salt.

Getting a double-digit annual return is great, but the main concern is staying invested. The market goes up and down, sometimes violently, but there has never been a 20-year period in which the market has lost value. As you save for the long run, that is worth remembering.2

Ryan Maroney may be reached at 949-455-0300 or www.fmncc.com

Investment advisory services are offered by Financial Management Network, Inc.(“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. Securities are not FDIC-Insured, are not bank-guaranteed, may lose value. FMN and FMNCC may only transact business in those states and international jurisdictions where we are registered/filed notice or otherwise excluded or exempted from registration requirements. The purpose of this web site is for information distribution on products and services. Information herein is taken from sources deemed reliable and neither FMN nor FMNCC are responsible for any errors that might occur.

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

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

 Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market.  They are methods used to help manage investment risk.

FMN/FMN Capital Corp. does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - gallup.com/poll/1711/stock-market.aspx [4/28/16]

2 - usatoday.com/story/money/personalfinance/2016/02/04/7-ways-millennials-can-get-jump-start-retirement-planning/78310100/ [2/4/16]

3 - marketwatch.com/story/the-real-reason-many-millennials-arent-saving-for-retirement-2016-02-17 [2/17/16]

4 - tinyurl.com/zmncqz6 [4/27/16]

Comprehensive Financial Planning: What It Is, Why It Matters

Just what is “comprehensive financial planning?” As you invest and save for retirement, you will no doubt hear or read about it – but what does that phrase really mean? Just what does comprehensive financial planning entail, and why do knowledgeable investors request this kind of approach?

While the phrase may seem ambiguous to some, it can be simply defined.

Comprehensive financial planning is about building wealth through a process, not a product.

Financial products are everywhere, and simply putting money into an investment is not a gateway to getting rich, nor a solution to your financial issues.

Comprehensive financial planning is holistic. It is about more than “money”. A comprehensive financial plan is not only built around your goals, but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?

Comprehensive financial planning considers the entirety of your financial life. Your assets, your liabilities, your taxes, your income, your business – these aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation.

Comprehensive financial planning is

Just what is “comprehensive financial planning?” As you invest and save for retirement, you will no doubt hear or read about it – but what does that phrase really mean? Just what does comprehensive financial planning entail, and why do knowledgeable investors request this kind of approach?

While the phrase may seem ambiguous to some, it can be simply defined.  

Comprehensive financial planning is about building wealth through a process, not a product.  Financial products are everywhere, and simply putting money into an investment is not a gateway to getting rich, nor a solution to your financial issues.

Comprehensive financial planning is holistic. It is about more than “money”. A comprehensive financial plan is not only built around your goals, but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?

Comprehensive financial planning considers the entirety of your financial life. Your assets, your liabilities, your taxes, your income, your business – these aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation.

Comprehensive financial planning is long-range. It presents a strategy for the accumulation, maintenance and eventual distribution of your wealth, in a written plan to be implemented and fine-tuned over time.

What makes this kind of planning so necessary? If you aim to build and preserve wealth, you must play “defense” as well as “offense.” Too many people see building wealth only in terms of investing – you invest, you “make money,” and that is how you become rich.

That is only a small part of the story. The rich carefully plan to minimize their taxes and debts, and adjust their wealth accumulation and wealth preservation tactics in accordance with their personal risk tolerance and changing market climates.  

Basing decisions on a plan prevents destructive behaviors when markets turn unstable. Impulsive decision-making is what leads many investors to buy high and sell low. Buying and selling in reaction to short-term volatility is a day trading mentality. On the whole, investors lose ground by buying and selling too actively. The Boston-based investment research firm Dalbar found that from 1994-2013, the average retail investor earned 5% a year compared to the 9% average return for U.S. equities – and chasing the return would be a major reason for that difference. A comprehensive financial plan – and its long-range vision – helps to discourage this sort of behavior. At the same time, the plan – and the financial professional(s) who helped create it – can encourage the investor to stay the course.1

A comprehensive financial plan is a collaboration & results in an ongoing relationship. Since the plan is goal-based and values-rooted, both the investor and the financial professional involved have spent considerable time on its articulation. There are shared responsibilities between them. Trust strengthens as they live up to and follow through on those responsibilities. That continuing engagement promotes commitment and a view of success.

Think of a comprehensive financial plan as your compass. Accordingly, the financial professional who works with you to craft and refine the plan can serve as your navigator on the journey toward your goals.

The plan provides not only direction, but also an integrated strategy to try and better your overall financial life over time. As the years go by, this approach may do more than “make money” for you – it may help you to build and retain lifelong wealth.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - fool.com/investing/general/2015/03/22/3-common-mistakes-that-cost-investors-dearly.aspx [3/22/15]

Terrorism & the Financial Markets

Wall Street has the potential to recover quickly from geopolitical shocks.

Provided by Ryan Maroney, CFP®

In the past few months, the world has seen several high-profile terrorist attacks. Incidents in the U.S., Belgium, Pakistan, Lebanon, Russia, and France have claimed more than 500 lives and injured approximately 1,000 people. Beyond these incidents, many other deaths and injuries have been caused by terrorist bombings that garnered less media attention.1,2

As an anxious world worries about the ongoing threat posed by ISIS, the Taliban, al-Qaeda, Boko Haram, and other terror groups, there is also concern about the effect of such incidents on global financial markets. Wall Street, which has had a trying first quarter, hopes that such shocks will not prompt downturns. Even in such instances, history suggests that any damage to global shares might be temporary.

While geopolitical shocks tend to scare bulls, the effect is usually short-term. On September 11, 2001, the attack on America occurred roughly at the beginning of the market day. U.S. financial markets immediately closed (as they were a potential target) and remained shuttered the rest of that trading week. When Wall Street reopened, stocks fell sharply; the S&P 500 lost 11.6% and the Nasdaq Composite 16.1% in the week of September 17-21, 2001. Even so, the market rebounded. By October 11, the S&P had returned to the level it was at prior to the tragedy, and it continued to rise for the next few months.3,4

In the U.S., investors seemed only momentarily concerned by the March 11, 2004 Madrid train bombings. The S&P 500 fell 17.11 on that day, as part of a descent that had begun earlier in the month; just a few trading days later, it had gained back what it had lost.5

Perhaps you recall the London Underground bombing of July 7, 2005. That terror attack occurred on a trading day, but U.K. investors were not rattled; the FTSE 100 closed higher on July 8 and gained 21% for the year.4

Wall Street is remarkably resilient. Institutional investors ride through many of these disruptions with remarkable assurance. Investors (especially overseas investors) have acknowledged the threat of terrorism for decades, also realizing that it does not ordinarily impact whole economies or alter market climates for any sustained length of time.

You could argue that the events of fall 2008 panicked U.S. investors perhaps more than any geopolitical event in this century: the credit crisis, the collapse of Lehman Bros. and the troubles of Fannie, Freddie, Merrill Lynch, and Bear Stearns snowballed to encourage the worst bear market in recent times.

When Hurricane Katrina hit in 2005, truly devastating New Orleans and impacting the whole Gulf Coast, it was the costliest natural disaster in the history of the nation. It did $108 billion in damage and took more than 1,200 lives. Yet on the day it slammed ashore, U.S. stocks rose 0.6% while global stocks were flat.4,6

The recent terror attacks in Belgium, Pakistan, and France have stunned us. Attacks like these can stun the financial markets as well, but the markets are capable of rebounding from their initial reaction.    

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - nytimes.com/interactive/2016/03/25/world/map-isis-attacks-around-the-world.html [3/25/16]

2 - latimes.com/world/afghanistan-pakistan/la-fg-pakistan-lahore-children-20160328-story.html [3/28/16]

3 - tinyurl.com/pzwzrmb [11/14/15]

4 - moneyobserver.com/opinion/terrorism-terrorises-stocks-fishers-financial-mythbusters [10/22/15]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F11%2F04&x=34&y=18 [11/14/15]

6 - cnn.com/2013/08/23/us/hurricane-katrina-statistics-fast-facts/ [8/23/15]

Consider an IRA Charitable Rollover

If you want a tax break and want to help a non-profit, this may be a good move.

Provided by Ryan Maroney, CFP®

Have you ever wanted to make a major charitable gift? Would you like a significant federal tax break in acknowledgment of that gift? If so, an IRA charitable rollover may be a good financial step to take.

If you are age 70½ or older and have one or more traditional IRAs, you may want to explore the potential of this tax provision, first introduced in 2006 and recently made permanent by Congress. In the language of federal tax law, it is called a Qualified Charitable Distribution (QCD) – a direct transfer of up to $100,000 from the IRA to a qualified charity.1,2

An IRA charitable rollover may help you lower your adjusted gross income. That may be a goal in your tax strategy, especially if your AGI is large enough to position you for increased Medicare premiums, greater taxation of your Social Security benefits, or exposure to the 3.8% investment income tax and the 0.9% Medicare surtax. If your AGI passes a certain threshold, you also lose the ability to itemize deductions.2

Up to $100,000 may be excluded from your gross income in the year in which you make the gift. The gifted amount also counts toward your Required Minimum Distribution (RMD).1,2

By the way, this $100,000 annual QCD limit is per individual. If you are married, you and your spouse may gift up to $200,000 in a year through IRA charitable rollovers. Imagine lowering your household’s AGI by as much as $200,000 in a tax year.2

A QCD will not afford you an opportunity for a charitable deduction. That would amount to a double benefit for the taxpayer making the gift, which is not something federal tax law allows.3

You need not be rich to do this. When many people first learn about the IRA charitable rollover, they think it is only for multi-millionaires. That is a misconception. Even if you do not think of yourself as wealthy, a QCD could prove a significant element in your tax strategy.

How does it work? Logistically speaking, an IRA charitable rollover is a trustee-to-trustee transfer: the IRA owner does not take possession of the money as the gift is arranged. Rather, the custodian or trustee overseeing the IRA writes a check for the amount of the gift payable to the charity. It is a direct transfer of funds, not a withdrawal.2

An IRA owner must be age 70½ or older to do this, and he or she must be the original owner of the IRA (an inherited IRA may not be used). The gifted assets must come from an IRA (or multiple IRAs) subject to RMD rules. SEPs and SIMPLE IRAs are ineligible if an employer contribution has been made for the particular year.4,5

Can you gift appreciated securities as well as cash? You can. Securities held within an IRA may be directly transferred from an IRA to a qualified charity in a QCD. You can claim an income tax deduction for the full fair market value of those securities.4,5

The charity or non-profit involved must pass muster with the IRS. It must be an entity that qualifies for a charitable income tax deduction of an individual taxpayer, and it cannot be a donor-advised fund, a private foundation that makes grants, or a supporting organization under Internal Revenue Code Section 509(a)(3). The charity must provide you with a letter of acknowledgement denoting that you received no goods, services, or benefits of any kind in exchange for your gift, and that you shall not receive any in the future as a consequence of your gift. If that letter is not quickly sent to you, be firm in requesting it.4,5

In case you are wondering, you can actually contribute more than your IRA RMD amount for a particular year through an IRA charitable rollover, as long as the gifted amount does not exceed $100,000. If you pledge a donation to a qualified charity or non-profit, an IRA charitable rollover can be used to satisfy your pledge.5

This tax break has been a boon to charities and IRA owners alike. Correctly performed, a charitable IRA rollover may help to lessen tax issues while benefiting qualified non-profit organizations.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/ira-charitable-rollover-provision-made-permanent-2015-12-25 [12/25/15]

2 - forbes.com/sites/jamiehopkins/2016/01/20/why-retirees-need-to-stop-writing-checks-to-charities/ [1/20/16]

3 - cof.org/content/analysis-ira-charitable-rollover-extension [12/22/15]

4 - wealthmanagement.com/retirement-planning/ira-qualified-charitable-contributions-reinstated-made-permanent [12/21/15]

5 - forbes.com/sites/berniekent/2015/12/20/should-you-make-a-charitable-contribution-from-your-ira/ [12/20/15]

A Most Challenging Year

 

2016 was off to a rocky start when trading opened on January 4, and that only served to sharpen the sense that investing will continue to face the pervasive challenges of the year before. A bad start to the year, of course, is not nearly the harbinger that too many hyperbolic news outlets would have us believe, but it does offer an opportunity to assess the past year with an eye toward what might lie ahead.

Without a doubt, 2015 was a difficult year for investing. Not difficult as in catastrophically or dramatically bad, such as 2008 and early 2009, or 2002. But unlike prior years, 2015 offered very few opportunities for positive returns in any asset class, especially liquid, traded assets.

According to analysis done by Societe´ Generale, 2015 was the hardest year to generate returns since 1937. In the 78 years since then, at least one asset class tended to boast returns of 10%. Another study found that a quarter of the time, there was one asset class that had returns of at least 30%, even if other assets were down by double digits.

In 2015, however, none of that pertained. Of the major stock indices in the United States, only the Nasdaq had a decently positive year, with greater than 5% returns. Everything else either was flat or down. The global picture was similar: developed markets were down about 3.5%, as measured by the MSCI EAFE, while emerging markets were down a whopping 18%. A few outliers posted positive returns: Japan (up more than 9%), New Zealand (up 13%), and China’s Shanghai exchange (up more than 9%). Some European exchanges were up as well, with Germany and France generating about 6% and 9%, respectively.

Bonds did not offer much as an alternative asset class.  Yields barely budged year over year in the United States, despite bouts of volatility as investors attempted to game when the Federal Reserve would at last raise rates (which it did by 25 basis points in its final meeting in December). US bond indices were down more than 1%, with many sub-categories, such as high-yield, down as much as 5%. Global bonds were considerably worse, ranging from emerging market bonds indices, down double digits, to developed markets sovereign and corporate bonds, down 5% to 10%.

And alternative asset classes, from hedge funds to commodities to precious metals, did nothing either: many hedge funds dropped by double digits as managers took on outsized bets in an attempt to generate outsized returns. The commodity and energy complex continued a massive price reset that resembled a slow-motion collapse as demand from China shrank rapidly, and too much supply came on line at precisely the same time. Even gold, the asset of choice for those with a defensive mindset who see great trouble in the world, performed quite poorly, declining more than 10%.

But in some respects, the picture was even worse than the tepid landscape charted above. Yes, the Nasdaq did well, but did so largely on the strength of a few stellar names such as Google/Alphabet, Amazon, Microsoft, Facebook, and Netflix. If you removed those, both the Nasdaq and the S&P 500 would have posted unequivocally negative returns for the year.

But if by chance you had been an asset allocator, a stellar portfolio that might have returned 10% or more was possible. It would have required crafting a portfolio composed predominantly of those five stock names, plus a significant exposure to Japan, Germany, New Zealand and France, and either avoiding emerging markets or shorting them. It also had to avoid global bonds and most US names as well, and steered clear of any commodity names (or shorted crude oil). And it needed to add some exposure to U.S.-listed real estate investment trusts (REITs).

It is safe to say, however, that almost no one (and in fact perhaps no one) had such an asset allocation strategy. That leaves the rest of the investing universe. Yes, some endowments and institutional investors can go further afield into private equity, venture capital, and direct investment in land and esoteric assets, such as timber. Some evidence suggests that private equity returns have surpassed those of publicly traded assets of late, along with select real estate deals in hot urban markets. But such investments are beyond the reach of the vast majority of investors, and hence offer, at best, a glimpse through the glass window: gaudy, but unobtainable. Even so, those investments are not the general case—deals have become ever pricier, sustained by higher levels of debt, and offer uncertain long-term prospects.

The net result is that 2015 was an astonishingly difficult year to make money for investors in almost every asset class. For asset allocators, who attempt to generate above-average returns by shifting the mix of equity, bonds, and alternatives, it was a year in which no asset class provided much in the way of ballast. Nearly everything was either flat, down, or down even more, and only the most astute (and lucky) tactical managers took advantage of technical signals to shift from cash to bonds to stocks at the right times. If you were a tactical strategist, who turned heavily to cash and away from equities over the summer, and then jumped right back into stocks in September, you were rewarded. But many of the managers who got that right in 2015 (and there were very few) did not exhibit the same acumen in 2014, 2013, or in prior years, raising the question of whether such perfect timing was a product of deep skill or shallow luck.

The year overall was hardly a disaster, but it was a poor year for almost everyone. For active allocators, it often was somewhat worse than the indices and benchmarks. Dynamic and tactical managers, like active fund managers, attempt to generate returns by, well, taking active positions distinct from strategic and static models. In some years, doing so yields returns above the norm; in 2015, for the most part, it yielded returns below the benchmarks.

It’s often said that the past is prologue. While that is always strictly true, what happened last year does not offer much in the way of guidance about what 2016 holds. Already, a slew of pundits predict that 2016 will offer more of the same for returns, with a distinct chorus suggesting that positive returns will be even harder to find. Human nature being what it is, people often predict a continuation of what has just happened; human history being what it is, that is often quite wrong.

What 2015 does show is that in a world of globalized investing, finding real outliers is ever more challenging, and distinctive theses may take some time to play out. Emerging markets, high-yield, one country’s equities versus another’s may be themes that mature over several years rather than one calendar year, even as the time frame to assess performance shrinks from annually to quarterly to monthly. So advisors and managers risk not only whipsaw performance, but also may be playing constant and futile catch-up if they take part in that game.

2015 may have been tepid, and 2016 may be as well, but that doesn’t mean that throwing in the towel and going to cash or going purely passive makes the most sense. Returns may be static, but the world most certainly is not. That is why continued attention to what is working, what is not, and what might be is the only way forward.

Making & Keeping Financial New Year’s Resolutions

What you might do (or do differently) in the months ahead?

Provided by Ryan Maroney, CFP®

How will your money habits change in 2016? What decisions or behaviors might help your personal finances, your retirement prospects, or your net worth?

Each year presents a “clean slate,” so as one year ebbs into another, it is natural to think about what you might do (or do differently) in the 12 months ahead.

Financially speaking, what New Year’s resolutions might you want to make for 2016 – and what can you do to stick by such resolutions as 2016 unfolds?

If you have merely been saving for retirement, save with an end in mind. Accumulating assets for retirement is great; doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year, which will make the “how” clearer as well.

Strive to maximize your 2016 retirement plan contributions. The 2016 limit on IRA contributions is $5,500, $6,500 if you will be 50 or older at some point in the year. Contribution limits are set at $18,000 for 401(k)s, 403(b)s, and most 457 plans; if you will be 50 or older in 2016, you can make an additional catch-up contribution of up to $6,000 to those accounts.1

If you want to retire in 2016, be mindful of the end of “file & suspend.” Social Security is closing the door on the file-and-suspend claiming strategy that married couples have used to try and optimize their Social Security benefits. If you are married and you will you be at least 66 years old by April 30, 2016, you and your spouse still have a chance to use the strategy. Starting May 1, that chance disappears forever for all married couples. (It will still be permitted on an individual basis.)2,3

Similarly, the opportunity to file a restricted application for spousal benefits has also gone away. This was another tactic retirees employed in pursuit of greater lifetime Social Security income.2

Can you review & reduce your debt? Look at your debts, one by one. You may be able to renegotiate the terms of loans and interest rates with lenders and credit card firms. See if you can cut down the number of debts you have – either attack the one with the highest interest rate first or the smallest balance first, then repeat with the remaining debts.

Rebalance your portfolio. If you have rebalanced recently, great. Many investors go years without rebalancing, which can be problematic if you own too much in a declining sector.

See if you can solidify some retirement variables. Accumulating assets for retirement is great; doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year – that may make the “how” and “how much” clearer as well.

The same applies to college planning. If your child has now reached his or her teens, see if you can get a ballpark figure on the cost of attending local and out-of-state colleges. Even better, inquire about their financial aid packages and any relevant scholarships and grants. If you have college savings built up, you can work with those numbers and determine how those savings need to grow in the next few years.

How do you keep New Year’s resolutions from faltering? Often, New Year’s resolutions fail because there is only an end in mind – a clear goal, but no concrete steps toward realizing it.

So, if your aim is to save $20,000 toward retirement this year, map out the month-by-month contribution to your retirement account(s) that will help you do it. Web tools like Level Money and Mint.com can help you examine your cash flow week-to-week and month-to-month – you can use them to keep track of your saving effort as well as other aspects of your finances.4

If you wish, you can let a loved one or a close friend in on your New Year’s financial resolutions. That loved one or friend may decide to adopt them. Even if he or she does not, sharing your resolution might increase your commitment to carrying it out. Dominican University of California did a study on this very subject and found that when people set near-term goals and kept those goals private, they achieved them about 35% of the time – but when they informed friends about them and sent weekly progress updates, the achievement rate surpassed 70%.4  

Lastly, you may want to automate more of your financial life. If you have not set up monthly money transfers to a retirement or investment account, 2016 can be the year this happens.

Ryan Maroney may be reached at 949-455-0300 or rmaroney@fmncc.com

www.fmncc.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - money.usnews.com/money/retirement/articles/2015/10/26/how-401-k-s-and-iras-will-and-wont-change-in-2016 [10/26/15]

2 - money.usnews.com/money/retirement/articles/2015/12/04/say-goodbye-to-the-social-security-file-and-suspend-strategy [12/4/15]

3 - tinyurl.com/p3exq5s [12/18/15]

4 - forbes.com/sites/bethbraverman/2015/12/29/4-tricks-to-get-your-new-years-resolutions-to-actually-stick-this-year/print/ [12/29/15]

End of Year Financial Checklist

The end of the year is less than a couple of weeks away, but there is still time to handle some important financial tasks. Taking care of the items below will help you to have a more confident and financially successful 2016.

Rebalance your portfolio. Your investment strategy should start with an asset allocation that’s based on your goals, risk tolerance and time horizon. At the end of the year, you’ll probably find that market fluctuations have upset the weighting of each asset class in your portfolio. Rebalancing, like tuning up your car, re-sets your investments to their intended state. If your goals or tolerance for risk have changed, end-of-year rebalancing is a good time to work with your advisor on adjusting your asset allocation.

Tax-Loss Harvesting. Rebalancing is a good time to identify securities you can sell at a loss in order to offset a capital gains tax liability. A simple example: Selling a stock position that has lost $1,000 allows you to erase the capital-gains tax liability on an investment that you sell for a $1,000 profit. You can use up to $3,000 a year in losses to cancel out gains on investment or ordinary income and roll over unused losses to future years.

Be charitable but smart. Consider giving appreciated investments rather than cash when you make charitable gifts this season. This allows you to minimize capital gains taxes while getting a tax deduction for the full market value of the donated investment. 

Take required minimum distribution. You must take RMDs from 401(k)’s and traditional IRAs by December 31 or be penalized 50% of the amount that should have been withdrawn. The only exception: your first RMD, which you can delay until April 1 of the year that follows the year you turn 70½.

Use your FSA dollars. Money in a flexible savings account must be used by December 31 or you will lose it. One new rule does allow an employer to let you roll $500 or give you an additional two and a half months to use it—but that’s not required. A health savings account is different: Funds in HSAs don’t have to be used by yearend.

Beware of mutual fund distributions. Buying mutual funds in taxable accounts is hazardous this time of year. If you’re not careful, you could end up paying taxes on gains you didn’t earn. Most funds distribute their interest, capital gains and dividends to shareholders in December. Those who buy shares before then are subject to the whole tax bill even though they don’t receive the full payout. For that reason, it’s important to make sure a fund has already made its yearly distribution before you buy shares.

Max out retirement contributions. You can stay on track for retirement and save taxes by contributing the maximum to your tax-advantaged retirement accounts. For 2015, you can contribute up to $18,000 to your 401(k), plus a $6,000 catch-up amount if you’re at least 50. IRA's have until April 15th to contribute, but you can stash up to $5,500 in a traditional IRA, plus a $1,000 catch-up contribution if you're 50 or older. If you’re self-employed, you can deposit up to 20% of your income into a SEP-IRA, up to $53,000.

Review and update beneficiaries. A lot can happen in the course of a year, including births, adoptions, deaths, marriages and divorces. It’s important to review your beneficiary designations to ensure your assets, from retirement accounts to insurance proceeds, will go to the people you want to have them.

If you think you’re too busy buying gifts to check off these items, think of them as a gift to yourself—the gift of peace of mind. And remember that we’re here to help you with all of it

Your Best Protection Against a ‘Godzilla El Nino’?

Your Best Protection Against a ‘Godzilla El Nino’? Flood Insurance.
It’s hard to imagine needing flood insurance in a drought‐stricken state like California but with the National Weather Service’s forecast of an El Nino of epic proportions, many homeowners may find themselves the victims of unexpected flooding. That’s because when parched earth meets torrential downpour, the results are often catastrophic. Most homeowner policies don’t offer flood protection – which is why it’s important to talk with a P&C Specialist about all of your options to get the flood insurance policy that’s right for you. ‘Godzilla’ is right around the corner, and flood policies take effect in 30 days. Call 949‐455‐0300 or email our P&C Specialist today to get started.

The Fed Decides to Wait-In a tough time for equities, it elects not to roil the markets.

On Thursday, the Federal Reserve postponed raising short-term interest rates. Citing “global economic and financial developments” that could “somewhat” impair economic progress and lessen inflation pressure, the Federal Open Market Committee voted 9-1 against a rate hike, with Richmond Fed President Jeffrey Lacker being the lone dissenter.1

This spring, a September rate hike seemed probable – but during this past week, assumptions grew that the central bank would put off tightening. On Wednesday, the futures market put the likelihood of a rate hike at less than 30%.2

The latest economic indicators did not suggest the time was right. The August Consumer Price Index retreated 0.1%, and the core CPI ticked up only 0.1%. In annualized terms, core CPI was up 1.8% through August while the Federal Reserve’s own core Personal Consumption Expenditures (PCE) price index was only up 1.2%. Retail sales advanced a mere 0.2% in August, 0.1% minus auto sales. Industrial production slipped 0.4% last month. The healthy labor market aside, none of this data was particularly compelling.3,4

Additionally, central banks have eased across the board the last few years. The Bank of Japan, the Reserve Bank of India, the People’s Bank of China, the Bank of Canada, the European Central Bank – none of them have begun tightening. Fed officials may have worried about the global impact had the FOMC elected to start a rate hike cycle.

Some institutional investors hoped the Fed would tighten. Royal Bank of Scotland researcher Alberto Gallo recently surveyed 135 influential market participants and found that a majority wanted a September rate hike; 80% called for the Fed to make an upward move by the end of 2015. (Just 42% thought a September rate hike would occur, however.)2

That may seem like an odd viewpoint, but another response to the RBS survey helps to explain it: 63% of these institutional investors felt central banks had been too accommodative to equities markets, to the point where their credibility was slipping and exits from easy money policies appeared difficult.2

We may be witnessing a hawkish pause. The Fed uses a dot-plot chart to publish its forecast for the key interest rate, and the latest dot-plot projects the federal funds rate at 0.40% by the end of 2015. In other words, the Fed more or less told investors to get ready for a rate hike on either October 28 or December 16, the dates of its next two policy meetings.1,5

At the press conference following Thursday’s FOMC policy statement, Fed chair Janet Yellen acknowledged that a rate hike could happen in October. (She noted that if it did, the Fed would arrange a press conference following that FOMC meeting.) Yellen said that the central bank wanted “a little more confidence” that annualized core inflation would approach its 2% target before adjusting rates. She also commented that the recent global equities selloff and the strengthening dollar do “represent some tightening of financial conditions.”6

On the whole, investors reacted positively to the news. In the wake of the announcement, the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 were all up more than 1%, with the S&P cresting the 2,000 mark and the Nasdaq approaching the 5,000 level. The CBOE VIX quickly dipped under 20.6

In one respect, it was a day of reassurance for investors – but it was also a day that brought signals that the Fed would soon start the process of normalizing monetary policy.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/federal-reserve-keeps-interest-rates-unchanged-but-forecasts-hike-this-year-2015-09-17 [9/17/15]

2 - msn.com/en-us/money/markets/stocks-rise-as-fed-hike-odds-fade/ar-AAenA97?li=AA9ZWtY [9/16/15]

3 - briefing.com/investor/calendars/economic/2015/09/14-18 [9/17/15]

4 - forbes.com/sites/greatspeculations/2015/09/16/why-the-fed-will-not-hike-rates-this-year/ [9/16/15]

5 - dailyfx.com/calendar/bank-calendar.html [9/17/15]

6 - blogs.marketwatch.com/capitolreport/2015/09/17/live-blog-and-video-of-fed-decision-and-janet-yellen-press-conference-2/ [9/17/15]