U.S. Performance Dashboard – August 2022

By | September 1st, 2022|General, Markets|

  • U.S. equities began August continuing in rebound mode but reversed course to end the month in negative territory after a hawkish Fed and recession fears weighed on investors. The S&P 500® posted a loss of 4%, while the S&P MidCap 400® and S&P SmallCap 600® performed similarly with 3% and 4% declines.
  • All factor indices posted losses, with High Beta and Growth in the rear.
  • Most sectors posted losses; Energy and Utilities were the exceptions.

 

dashboard-us-2022-08

U.S. Performance Dashboard – July 2022

By | August 1st, 2022|General, Markets|

  • After a tumultuous first half of the year, U.S. equities staged a stellar comeback in July, driven by Big Tech outperformance and anticipation of a potential slowing in the pace of future rate hikes by the Fed. The S&P 500® posted a gain of 9%, while the S&P MidCap 400® and S&P SmallCap 600® performed relatively better.
  • All factor indices posted gains, with High Beta and Growth in the lead.
  • All sectors posted gains, with Consumer Discretionary and Info Tech in the lead.

 

dashboard-us-2022-07

Thinking about Social Security? Let’s talk options.

By | February 17th, 2022|General, Retirement|

When to claim social security benefits is one of the biggest questions when thinking about retiring. Your retirement income will likely come from various sources, and each will fit into your financial plan in different ways. Still, for most people, social security represents a risk-free source of retirement income. How do you maximize that income? It’s a delicate balance.

Social Security Basics

You can receive social security if you are age 62 or older and have enough work credits. You are eligible if you have 40 quarters of work history. The amount you receive is based on your lifetime earnings. Social security calculates your benefit using the 35 years you earned the most. The calculation will include zeros if you don’t have 35 years of work history. You can find out if you’ve already qualified by going to www.ssa.gov. You can set up an account, get estimates of your benefits, and review your work history to ensure it’s correct.

The Social Security Administration (SSA) defines retirement benefits as Early, Full and Late. The SSA’s goal is to make social security flexible enough to work for people in different situations and be as equal as possible. Full retirement age is the benchmark for benefits. If you retire before full retirement age, monthly benefits will be lower to equalize the longer amount of time they will be paid out.  People who delay retirement receive higher monthly benefits.

Early retirement begins at age 62. Social security has a formula to reduce your benefits if you claim early retirement. It depends on how many months you claim before your full retirement age. For example, someone with a full retirement age of 67 who retires at 62 will see benefits reduced by 30% for the entire time they claim benefits.

Full retirement age (FRA) depends on your birth year. For most people, it’s somewhere between 65-67. This is the age at which you qualify for full benefits.

Late retirement kicks in after your FRA and extends to age 70. For every year that you delay benefits after your FRA, you get an 8% increase in your benefits for life.

The Spousal Option

When it comes to claiming social security, it’s not always just about your working life. Claims may be made on personal work history or a spouse’s work record. If the marriage lasted at least ten years, a claim can also be made on an ex-spouse’s work record. The spousal benefit amount can be up to 50% of the higher earner’s benefits. The same rules on retirement age apply.

The spousal option also applies to surviving spouses, but the eligibility age is reduced to 60. Reduced benefits will still apply.

Claiming Strategies for Married Couples

The decision of when to claim is unique to everyone and should be made by thinking through other sources of income, level of health, family history, and overall retirement goals. Delaying the claim will result in higher monthly payments, but it shouldn’t be the only consideration.

It’s a bit more complicated for married couples as each will likely have a different FRA and a different benefit amount. Making use of these differences to maximize the benefit can make sense. For example, claiming early or at FRA for the lower-earning spouse and delaying the higher-earning spouse’s benefits can result in significantly more income.

Taxes on Social Security Income

Depending on the tax status of other retirement income, up to 85% of social security benefits can be taxable. Income from pensions, interest, dividends, withdrawals from tax-deferred accounts, and other sources of income can all create a tax liability on social security income.

How you structure your overall retirement plan can help avoid these taxes. Whether taxable, tax-deferred, or tax-free, the types of accounts that assets are held in can create a more flexible income stream. Using a Roth conversion to avoid required minimum distributions is another strategy that can be deployed to keep income lower.

The Bottom Line

Social security is a benefit not only in the income it provides – which can add up to more than $1 million over retirement for a couple that claims at FRA – but it can also be a source of guaranteed income that can anchor an investment plan.

Looking at all your assets, understanding your risk tolerance, and having a sense of your goals and how you want to achieve them can help you make the right decision when it comes to claiming the benefits you worked for over the years.

This work is powered by Seven Group under the Terms of Service and may be a derivative of the original. More information can be found here.

U.S. Performance Dashboard – December 2021

By | January 10th, 2022|General, Markets|

  • Despite the ongoing pandemic, record inflation, and looming rate hikes, U.S. equities had a banner year, with the S&P 500® reaching 70 closing highs on its way to a 29% return. Mega-caps outperformed, with the S&P 500 Top 50 up 31%.
  • International performance was positive, with the S&P Developed Ex-U.S. BMI up 11%. Emerging markets managed to eke out a gain, with the S&P Emerging BMI up 1% despite large losses in the S&P China BMI, which makes up almost 40% of the benchmark’s weight.
  • All sectors posted gains in 2021, led by Energy, up a dramatic 55%, a stunning turnaround after its 34% loss in 2020.

 

December 2021 Market Review

October : National Cyber Security Awareness Month – Tips for Protecting Yourself

By | October 21st, 2021|General|

National Cyber Security Awareness Month is observed each October and is designed to increase the public’s awareness of cybersecurity and cyber-crime issues.

To help you protect your personal information, we are sharing content from the American Bankers Association’s brochure “7 Tips for Protecting Yourself Online.” According to Symantec, 12 adults become a victim of cybercrime every second. Though the internet has many advantages, it can also make users vulnerable to fraud.

To help protect yourself we recommend you follow a few easy steps:

  • Keep your computers and mobile devices up to date.  Having the latest security software, web browser, and operating system are the best defenses against viruses, malware, and other online threats. Turn on automatic updates so you receive the newest fixes as they become available.
  • Set strong passwords. A strong password is at least eight characters in length and includes a mix of upper and lowercase letters, numbers, and special characters.
  • Watch out for phishing scams. Phishing scams use fraudulent emails and websites to trick users into disclosing private account or login information. Do not click on links or open any attachments or pop-up screens from sources you are not familiar with.
    • Forward phishing emails to the Federal Trade Commission (FTC) at spam@uce.gov – and to the company, bank, or organization impersonated in the email.
  • Keep personal information personal. Hackers can use social media profiles to figure out your passwords and answer those security questions in the password reset tools. Lock down your privacy settings and avoid posting things like birthdays, addresses, mother’s maiden name, etc.  Be wary of requests to connect from people you do not know.
  • Secure your internet connection. Always protect your home wireless network with a password. When connecting to public Wi-Fi networks, be cautious about what information you are sending over it.
  • Shop safely. Before shopping online, make sure the website uses secure technology. When you are at the checkout screen, verify that the web address begins with https. Also, check to see if a tiny locked padlock symbol appears on the page.
  • Read the site’s privacy policies. Though long and complex, privacy policies tell you how the site protects the personal information it collects. If you don’t see or understand a site’s privacy policy, consider doing business elsewhere.

A few more best practices we would like to share may seem very basic, but each could help keep your personal information safe.

  • Do not leave devices unattended. We suggest always locking or closing personal devices before walking away from your screen.
  • Avoid emailing sensitive information such as credit card numbers or account numbers. Always ask the person you are emailing if they have a secure portal to provide those details.
  • Back up your data regularly. Set a monthly reminder to back up your personal devices.
  • Do not store personal information on mobile devices. It can be tempting to save a quick note in your phone of a password that you will want to reference easily, avoid doing that and instead use a third party password management tool.
  • Do not turn off a Two-Factor or Multi-Factor Authentication service. Some vendors will allow for you to turn that functionally off or suspend the service when you log – in. We recommend keeping it active whenever you can.
  • Use the passcode lock on your smartphone and other personal devices. This will make it more difficult for thieves to access your information if your device is lost or stolen.

By following these tips, you can help protect your personal information from getting in the wrong hands.

For more information, please check out this additional resource:

https://www.cisa.gov/cybersecurity-awareness-month

Donor Advised funds: Tax Benefits, Growth and Control

By | August 26th, 2021|General|

Donor advised funds have been around for decades, but they’ve only become popular vehicles for charitable giving over the last several years. They offer immediate tax benefits as the assets or funds in the donor advised fund convey a tax deduction in the year in which they are gifted. Inside the fund, the assets can grow tax-free and not have to be distributed immediately to a charity.

How popular are they? Total assets in donor-advised funds have more than quadrupled over the past decade, to more than $140 billion. Roughly $1 of every $8 given to charity in America now goes to a donor-advised fund.1

The funds offer an extremely flexible way to craft a gifting strategy that can allow for the gift to be invested and managed, to potentially grow over time, and for the gifter to maintain control over the assets.

Understanding Donor Advised Funds

A donor advised fund (DAF) is a savings vehicle that allows for charitable donations and tax benefits, all while the donor still has control over where the assets are to be donated. Donor advised funds are irrevocable, meaning that you can’t withdraw funds after donating. Still, you can specify how the donation is to be invested and to which charity you’d like to donate.

Given their versatility and flexibility, DAFs have become a popular choice for those with a charitable heart. According to research from the National Philanthropic Trust, contributions to DAFs in 2019 totaled almost $39 billion, an 80% increase since 2015.2

With donor advised funds, you aren’t limited to donating just cash. Acceptable donations range from stocks and bonds to bitcoin and private company stock. Donors can deduct up to 60% of adjusted gross income if donating cash and up to 30% of adjusted gross income if donating appreciated assets.3

To make sure a donation qualifies for the full benefits, the fund administrator must be a public charity that falls under the qualifications of a 501(c)(3) organization.

How They’re Managed and How to Contribute to One

First, it must be opened at a qualifying sponsor. After selecting a sponsor, donors must make an irrevocable contribution to the fund. At that time, they can take the immediate tax deduction and begin naming beneficiaries and successors for the account.

After making a contribution, the sponsor firm then has legal control over the funds. It can invest the money in accordance with the donor’s recommendations, until the donor is ready to decide which charity they’d like the distribute funds to. Since the fund manages the money and handles the administrative tasks that come with donating to charities, administrative fees need to be considered when deciding on which sponsor to use, as those fees are deducted from the donor’s contributions.

When Does It Make Sense to Contribute to a Donor Advised Fund?

There are many situations where it may make sense to contribute to a donor advised fund, but some of the most common are:

  • If you own highly appreciated assets
  • If you’re looking for a tax-deductible transaction
  • If you want to make a sizable future donation

For example, let’s say someone bought Amazon stock when it was $10/share, and it grew to $3,000/share and they didn’t want to pay capital gains tax on the appreciation. With a donor advised fund, they could donate the stock, and no capital gains would be due.

The Pros and Cons of Donor Advised Funds

When contributing money to a donor advised fund, the donor receives an immediate tax deduction on the amount they contributed, even though the funds may not be distributed to a charity until a future date. This allows for greater control and flexibility when compared to making a regular donation directly to a charity.

Additionally, contributing to a donor advised fund makes record-keeping simpler than making multiple donations to different charities and keeping track of all the documents. This is because the fund can act as a “hub” for all donations, and it will record all contributions and provide a single tax document containing all information needed.

Though versatile, a concern amongst many donors is the fees associated with donor advised funds. For example, the fund might charge a 1% administrative fee, which is being taken directly out of the funds to be donated. The underlying investments may also have fees, so it’s important that you carefully evaluate where your money is going and how fees play a role in the donation.

The Takeaway

Overall, donor advised funds are a versatile tool when it comes to making donations. They provide tax benefits and allow donors to choose where their money goes, all while those donations can grow tax-free until a charity is chosen. However, there’s more to consider than just the benefits, so to make sure it’s the right move to make for your financial situation, it’s recommended to talk with a financial advisor before establishing a donor advised fund.

  1. Frank, Robert. Billionaire philanthropist John Arnold says donor-advised funds are ‘wealth-warehousing vehicles’. CNBC. August 11, 2021.
  2. National Philanthropic Trust. The 2020 DAF Report. NPTrust.org
  3. What is a Donor Advised Fund? Fidelity Charitable.
The information contained herein is intended to be used for educational purposes only and is not exhaustive.  Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return.  If applicable, historical discussions and/or opinions are not predictive of future events.  The content is presented in good faith and has been drawn from sources believed to be reliable.  The content is not intended to be legal, tax or financial advice.  Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA
This work is powered by Seven Group under the Terms of Service and may be a derivative of the original. More information can be found here.

Today’s Video – Applying science to investing

By | July 30th, 2018|General|

Have you ever heard the term “Financial Science”? A strong belief in markets can free people to think and act differently about investing. By evolving with advances in financial science, our partner, Dimensional Fund Advisors, has delivered long-term results for investors.

Check out today’s video on applying Science to your investing strategy!

 

Contact us today if you’d like to learn more about financial science and our partnership with DFA!

855.PARKELM or kward@park-elm.com.

 

Park + Elm Investing Principle #4: Let Markets Work for You!

By | July 16th, 2018|General|

 

business person and worldwide business, mixed media abstract

Principle #4 is HERE! Let Markets Work for You!

 Download the rest of our Ebook Here to get all 10 principles!!

The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and historically, the equity and bond markets throughout the world have provided growth of wealth that has more than offset inflation. Companies compete with each other for investment capital, and millions of investors compete with each other to find the most attractive returns. This competition quickly drives prices to fair value, ensuring that no investor can expect greater returns without bearing greater risk. The chart below shows how the growth of $1 is affected by the level of risk an investor is willing to take. It also shows that any level of risk taken has historically outpaced inflation.

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Many investors and investment managers strive to beat the market by taking advantage of pricing “mistakes” and attempting to predict the future. Too often, this proves costly and futile, due to holding the wrong securities at the wrong time, meanwhile, markets are succeeding. Instead of allowing the media to sway you into making impulsive and reactive decisions about your investments, or gambling on hunches, why not let the markets work for you?

When you try to outwit the market, you compete with the collective knowledge of all investors. By harnessing the market’s power, you put their knowledge to work in your portfolio. Markets integrate the combined knowledge of all participants, and enables competition among those who voluntarily agree to transact. We believe that all of this powerful information drives security prices to fair value, and that differences in performance are largely attributed to asset allocation decisions, and differences in average risk.

We know that investing in the market means taking risks. We also know that not investing means taking risks, because your money today will buy less in the future. We want investors to incorporate the vast, complex network of information, expectations, and human behavior that we believe markets reflect, into their portfolio design. This powerful view of market equilibrium has profound investment implications.

Quarterly Market Review: Q2-2018

By | July 6th, 2018|General|

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Click on the link below for a detailed analysis of quarterly performance of the global equity and fixed income markets.

CLICK HERE TO READ THE 2ND QUARTER 2018- QUARTERLY MARKET REVIEW

Park + Elm Investing Principle #3: Resist Chasing Past Performance!

By | June 25th, 2018|General|

Outgess

 

 

Principle #3 is HERE! If you missed #1 and #2…YOU’RE IN LUCK!

Download the rest of our Ebook Here to get all 10 principles!!

 

(Research above shows only 20% of all active mutual funds beat their corresponding index over a 10 year time frame.  And of those, only 37% continued over the next 5 years. This is only 205 of 2758 mutual funds that beat their index over a 15 year time frame.  It’s nearly impossible to pick the right ones)

Some investors select mutual funds based on past returns. However, funds that have outperformed in the past do not always persist as winners. The most important guideline to remember is: If a fund does not fit into your overall investment strategy, it’s a dangerous choice no matter how it’s performed in the recent past.

Investors have a tendency to weight recent events more heavily than history. It’s nearly impossible for the typical investor to choose a fund that had negative returns in the previous year. Yet that fund, historically, may have proven to be an outperformer in its category. And the largest hurdle is that most investors don’t even think they are chasing performance. Research shows, however, that nearly every mutual fund outperforms individual investors in the fund.

Instead of chasing performance, investors should follow on these 4 rules:

1. Develop an investment strategy and COMMIT to it

Every investor should have a disciplined investing strategy and stick to it, through bull and bear markets. A relationship with a professional financial advisor is the first step to developing this strategy, and it insures that you’ll take the right actions at the right time.

2. Rebalance your portfolio

Rebalancing your portfolio will keep you from buying high and selling low.  Investors who chase returns, are adding to a piece of the investment pie that’s already too big. If you rebalance your portfolio once a year, you’ll be insured that you’re adding to the smaller piece of the pie, and inherently buying low and selling high.

3.  Remain Invested

Don’t be tempted to pull your investments from the market when it falls. These are the most opportune times to increase long-term returns through rebalancing.

4. Focus on your personal goals

Your personal goals should drive your investing strategy. Keep that in the front of your mind and it will be much easier to remain disciplined.

Remember, past performance alone provides little insight into a fund’s ability to outperform in the future. A more disciplined approach has proven to be the best way to increase-long term performance.

INTERESTED IN THE REST OF THE INVESTING PRINCIPLES? DOWNLOAD OUR EBOOK HERE!

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