Get the facts about saving for retirement and college at the same time. Understanding that funding each is equally important, and that even a late start is a good start. Every dollar saved is a dollar you don’t have to borrow.IND_Flyer
This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.
The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.
Click HERE to download this quarter’s breakdown!
In spite of slowing economic growth, ongoing trade tensions and a presidential impeachment inquiry, U.S. equities recovered in September to end the third quarter on a positive note. Year-to-date, large-caps outperformed mid- and small-caps, with the S&P 500® up 21%, while the S&P MidCap 400® and S&P SmallCap 600® gained 18% and 13%, respectively.
Despite gains in September, international markets ended the quarter with losses while holding on to year-to-date gains, with the S&P Developed Ex-U.S. and the S&P Emerging BMI up 13% and 8%, respectively.
Enhanced Value outperformed its factor peers in September, and Value outperformed Growth, but time will tell whether this reversal continues. Year-to-date, Low Volatility remains the top performing factor index, up a remarkable 26%.
It’s open enrollment in the American workplace every fall, and employers will begin to pass out packets, forms, memos, hold meetings and launch apps for the benefits enrollment season. Navigating your benefits package can be overwhelming, and has a direct effect on your long-term savings. WE WANT TO HELP!
Below is your quick guide to navigating your benefits booklet from start to finish:
Health Insurance – pay close attention to the following variables to the health insurance options:
- Coverage – compare what’s covered to your anticipated needs, i.e. maternity?
- Co-payments and Prescriptions – if you go to the doctor often, or have a recurring prescription to fill, evaluate these fees closely.
- Deductibles – the amount you have to pay out of your pocket before coverage begins. A high deductible plan typically means lower premiums, but participants pay more out of pocket if an unexpected illness occurs.
- Premiums – the monthly fee for coverage. A higher premium usually means lower deductibles, co-pays and more coverage. But that’s not always the best financial choice.
Tax advantaged accounts – beyond health coverage, these accounts allow you to save pre-tax dollars for ancillary health and other expenses.
- FSA (Flexible Savings Account) – similar in tax savings, a FSA allows you to use the funds for medical and child care services. There are limits to contributions and to carry over funds.
- HSA (Health Savings Account) – contribute to this account to help cover medical expenses you are paying out of pocket. Choosing a high deductible plan warrants opening an HSA due to the anticipated higher out of pocket costs. These funds roll over from year-to-year.
Vision and Dental – Simply put…
- Dental care is expensive. Insurance doesn’t cover a lot, but what it does cover usually outweighs the cost of the dental care without it.
- Vision care is inexpensive, but sometimes unnecessary. If you have healthy eyes you need a checkup only every 2 years, so vision premiums may not be worth it.
Life and Disability – Important Voluntary Benefits!!!
- Short-term Disability – are you covered for a short-term illness or injury?
- Long-term Disability – if you are unable to work for an extended period of time, how will you pay your bills?
- Life Insurance – How much should you leave your family if something happens to you?
401(k) – the likely #1 source of retirement savings, this benefit is the major player in your ability to retire.
- Make a goal to increase your contributions every year
- Take full advantage of your employer’s match
- Make catch-up contributions if you are eligible
- Evaluate the need to defer some of your funds to a Roth 401(k) to provide future tax diversification.
- Evaluate your risk tolerance and allocate appropriately
- Choose low-cost funds
The best way to make the most of open enrollment is to simply set aside adequate time to review all your options carefully and ask any questions you may have. Consult with your financial advisor, as these benefits choices will affect your long-term savings. To make the most of open enrollment, read the fine print, consider your family’s needs and make an educated, rather than a rash, decision. We are here to help you navigate these important choices. Please let us know if you would like a more detailed COMPLIMENTARY REVIEW of your benefits booklet!
Dimensional Founder David Booth shares his perspective on the limitations of market forecasting in this less than two minute video. Instead of enticing people to try to stock-pick, Dimensional wants to educate investors, with the over 90 years of data, on investing in capital markets.
September is LIFE INSURANCE AWARENESS MONTH so we are starting a drive to help clients and friends review and shop for the best and most appropriate coverage possible.
DID YOU KNOW…A recent survey found only 32% of Americans have life insurance.
How would you assess the financial loss your family would incur if you were to die today? Are you the sole provider for your family, or at least a significant provider to the family budget? If you had a money making machine in your home, would you insure it? Life insurance is not for you, it’s for your loved ones once you’re gone.
This calculator provides only a rough estimate of your human life value, which can factor into how much insurance you need.
After calculating a typical lifetime income based on your specific circumstances, you’ll see a final number that gives an approximate measure of your net contribution to your family—your human life value. This should not be considered a comprehensive assessment, as it only takes generalities into account. Still, given the limited information you’re providing, we believe it is the best estimate available.
NOT SURE WHERE TO START ASSESSING YOUR NEEDS? START HERE!
Contact us TODAY to get a FREE assessment of your life insurance needs, and a FREE QUOTE!
855-PARKELM OR email@example.com
Looking at the stock market over the past 20 years, you might think of Charles Dickens: It was the best of times—and the worst. But while the 2000s and 2010s have differed starkly in performance, collectively they have reinforced investing lessons on patience and discipline.
This piece from our partner, Dimensional Funds, discusses the well supported thought that maintaining patience and discipline, through the bad times and the good, puts investors in position to increase the likelihood of long‑term success.
…or check it out below:
U.S. equities stumbled in August, buffeted by economic implications of an inverted yield curve and a possible trade war with China. Large-caps declined, with the S&P 500® down 2%, while the S&P MidCap 400® and S&P SmallCap 600® performed even worse, down 4% and 5%, respectively.
International markets also struggled, with the S&P Developed Ex-U.S. and the S&P Emerging BMI down 3% and 4%, respectively. The Far East and Latin America were particularly weak.
Self-employment has may perks, but there’s at least one significant drawback: the lack of an employer-sponsored retirement plan like a 401(k).
We have a solution for you!
The solo 401(k) is designed for self-employed workers with no employees, and mimics many of the features of an employer-sponsored plan.
- Save up to $19,000 (over 50? Make that $25,000)
- Profit sharing options of up to 25% of income on top of the 19k
- Flexibility – rollover, roth, loan options
- High earners can take advantage of a supersized pension option of up to 100k
Check out our Solo 401(k) ebook here and contact us today!
As of today, colleges are back in session in most of the country, and many parents are likely thinking about how best to prepare for their children’s future college expenses. NOW is a good time to sharpen one’s pencil for a few important lessons before heading back into the investing classroom to tackle the issue.
THE CALCULUS OF PLANNING FOR FUTURE COLLEGE EXPENSES
According to recent data published by the College Board, the annual cost of attending college in the US in 2017–2018 averaged $20,770 at public schools, plus an additional $15,650 if one is attending from out of state. At private schools, tuition and fees averaged $46,950.
It is important to note that these figures are averages, meaning actual costs will be higher at certain schools and lower at others. Additionally, these figures do not include the separate cost of books and supplies or the potential benefit of scholarships and other types of financial aid. As a result, actual education costs can vary considerably from family to family.
Exhibit 1. Average Published Cost of Attending College in the US
Source: The College Board, “Trends in College Pricing 2017.”
To complicate matters further, the amount of goods and services $1 can purchase tends to decline over time. This is called inflation. One measure of inflation looks at changes in the price level of a basket of goods and services purchased by households, known as the Consumer Price Index (CPI). Tuition, fees, books, food, and rent are among the goods and services included in the CPI basket. In the US over the past 50 years, inflation measured by this index has averaged around 4% per year. With 4% inflation over 18 years, the purchasing power of $1 would decline by about 50%. If inflation were lower, say 3%, the purchasing power of $1 would decline by about 40%. If it were higher, say 5%, it would decline by around 60%.
While we do not know what inflation will be in the future, we should expect that the amount of goods and services $1 can purchase will decline over time. Going forward, we also do not know what the cost of attending college will be. But again, we should expect that education costs will likely be higher in the future than they are today. So, what can parents do to prepare for the costs of a college education? How can they plan for and make progress toward affording those costs?
DOING YOUR HOMEWORK ON INVESTING
To help reduce the expected costs of funding future college expenses, parents can invest in assets that are expected to grow their savings at a rate of return that outpaces inflation. By doing this, college expenses may ultimately be funded with fewer dollars saved. Because these higher rates of return come with the risk of capital loss, this approach should make use of a robust risk management framework. Additionally, by using a tax-deferred savings vehicle, such as a 529 plan, parents may not pay taxes on the growth of their savings, which can help lower the cost of funding future college expenses.
While inflation has averaged about 4% annually over the past 50 years, stocks (as measured by the S&P 500 Index) have returned around 10% annually during the same period. Therefore, the “real” (inflation-adjusted) growth rate for stocks has been around 6% per annum. Looked at another way, $10,000 of purchasing power invested at this rate over the course of 18 years would result in over $28,000 of purchasing power later on. We can expect the real rate of return on stocks to grow the purchasing power of an investor’s savings over time. We can also expect that the longer the horizon, the greater the expected growth. By investing in stocks, and by starting to save many years before children are college age, parents can expect to afford more college expenses with fewer savings.
It is important to recognize, however, that investing in stocks also comes with investment risks. Like teenage students, investing can be volatile, full of surprises, and, if one is not careful, expensive. While sometimes easy to forget during periods of increased uncertainty in capital markets, volatility is a normal part of investing. Tuning out short-term noise is often difficult to do, but historically, investors who have maintained a disciplined approach over time have been rewarded for doing so.
RISK MANAGEMENT AND DIVERSIFICATION: THE FRIENDS YOU SHOULD ALWAYS SIT WITH AT LUNCH
Working with a trusted advisor who has a transparent approach based on sound investment principles, consistency, and trust can help investors identify an appropriate risk management strategy. Such an approach can limit unpleasant (and often costly) surprises and ultimately may contribute to better investment outcomes.
A key part of maintaining this discipline throughout the investing process is starting with a well-defined investment goal. This allows for investment instruments to be selected that can reduce uncertainty with respect to that goal. When saving for college, risk management assets (e.g., bonds) can help reduce the uncertainty of the level of college expenses a portfolio can support by enrollment time. These types of investments can help one tune out short‑term noise and bring more clarity to the overall investment process. As kids get closer to college age, the right balance of assets is likely to shift from high expected return growth assets to risk management assets.
Diversification is also a key part of an overall risk management strategy for education planning. Nobel laureate Merton Miller used to say, “Diversification is your buddy.” Combined with a long-term approach, broad diversification is essential for risk management. By diversifying an investment portfolio, investors can help reduce the impact of any one company or market segment negatively impacting their wealth. Additionally, diversification helps take the guesswork out of investing. Trying to pick the best performing investment every year is a guessing game. We believe that by holding a broadly diversified portfolio, investors are better positioned to capture returns wherever those returns occur.
Higher education may come with a high and increasing price tag, so it makes sense to plan well in advance. There are many unknowns involved in education planning, and no “one-size-fits-all” approach can solve the problem. By having a disciplined approach toward saving and investing, however, parents can remove some of the uncertainty from the process. A trusted advisor can help parents craft a plan to address their family’s higher education goals.