CAS News
Asset Titling: A Cautionary Tale
By Jasen M. Gilbert CFP®
Your estate takes years of careful consideration and monitoring to grow, but a small error in the titling of an asset may create unintentional and unwanted consequences for you and your loved ones. Detailed documentation of your asset succession plan could save your family time and money. I recently had the opportunity to sit down with Andrew J. Krause and Juan Bendeck; Board Certified Florida Wills Trusts & Estates Attorneys and Partners with Hahn Loeser & Parks LLP, to discuss some of the common estate planning and asset titling issues to look out for. I have created a fictional scenario to better illustrate some of the points we discussed.
In this scenario, married couple John and Mary, are reviewing their estate plan. They have several heirs including children and grandchildren and want to make sure they have a plan in place that will allow their assets to pass with minimal complications. What are some of the considerations they should account for when titling their assets?
Do accounts which should be going into a trust have a “Payable on Death” (POD) individual beneficiary designation?
John has set up a revocable trust to ensure that assets are dispersed evenly amongst his children. This could prevent family feuding over who gets what and could also allow the assets to pass with less legal complications. Unfortunately, John listed one of his children as a beneficiary of a POD bank account instead of having it go into the trust. When he passes, those assets will then go directly to the beneficiary of the account and completely bypass the trust. After all the work that went into setting up the trust, John may want to make sure that those assets are set to go to the correct place.
Should the trust be named as the beneficiary of an annuity or an IRA account?
Mary has an annuity and an IRA account which she has designated to go into her revocable trust. While this could be a viable option, in many cases this may be problematic when it comes to stretching an inherited account. Retirement accounts are subject to required minimum distributions (RMDs) based on the life expectancy of the account holder. When the account holder passes, in some cases, it can be recalculated for the beneficiary’s life expectancy and distributed over their lifetime. If the beneficiary is a non-human entity, such as a revocable trust, then this may not be available. When an annuity is part of an estate, the entirety of the account may have to be withdrawn over a period of 5 years instead of remaining in the account and continuing to grow. An option could be to have an individual named as a beneficiary or have it pass into a conduit trust. IRA accounts payable to a revocable trust could also be troublesome unless payable to a conduit or customized accumulation trust. Every beneficiary designation situation is unique and may need to be modified based on changing circumstances.
What considerations need to be made if a beneficiary has diminishing capacity?
John and Mary have their children listed as equal beneficiaries of their estate. Their daughter has a condition which will lead to her eventual mental incapacitation. Programs such as Medicaid and Supplemental Security Income (SSI) may be a resource for her in the future. These programs disqualify individuals who have over a certain amount in income and assets. In this case, John and Mary may want to consider establishing a “special needs trust” for their daughter. There could be less chance of her being denied benefits, and a trustee can then be appointed for their estate.
How should we plan for probate?
John moved assets into their revocable trust when it was first created, but has since acquired new assets which have not been updated to go into the trust. If John were to pass, these assets may be subject to probate court proceedings if they were not titled in their trust. While trusts are often set up to avoid any problems with probate, in some cases, probate may be advantageous. During probate, creditors are notified and given a set period of time to make any claims of repayment. If they fail to do so in that time frame, they cannot do so later, and the assets may be safe to pass to beneficiaries. How easily the probate process proceeds can depend on your geographic location.
Plan Ahead to Avoid Problems Down The Road.
Overall, one of the most important steps that John and Mary could take to ensure that their asset titling matches their estate plan is to review it consistently. Over time, life circumstances tend to change and it could prevent problems down the road if they are addressed early on. While many accounts are opened with an intent to update beneficiaries in the future, a sudden life-altering event could leave your heirs without any access to those assets. Meeting with an advisor and an estate attorney to review how your assets are being designated could prevent future obstacles for you and your family.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Kim Kantor Speaks at FSP Institute 2019
Congratulations to Kim Ciccarelli Kantor, CFP®, CAP® who had the opportunity to speak at the 2019 Society of Financial Service Professionals (FSP) Institute. The event took place on February 13, 2019, at the Sanibel Harbor Marriott Resort and Spa, Fort Myers, FL.
The three-day educational event featured presentations from credentialed industry experts in areas of financial planning. Kantor presented on the topic “Multigenerational Family-Focused Planning: Enhancing the Resourcefulness of Family Assets and Values.”
As president and co-founder of Ciccarelli Advisory Services, Inc., Kantor has more than 35 years of comprehensive financial planning experience. By emphasizing the family enterprise concept and facilitating meaningful communication within the family unit, the firm addresses innovative solutions from the very simple to the most complex planning scenarios.
Kim has coauthored the book “Preserving Family Wealth and Peace of Mind, Caring for and Communicating to Your Family Through the Legacies you Leave” with CFP founder, Loren Dunton; served as columnist for the Naples Daily News ,and was an invited guest lecturer and faculty member for the Chautauqua Institute, Chautauqua, NY.
Congratulations Kim on your speaking opportunity!
New Ways to Stay Organized and Simplify Your Life
By Jill Ciccarelli Rapps, CFP®
Keeping your important documents neat and tidy can be a challenging endeavor even for the most organized person. Many of these documents end up buried away in a spare drawer or closet, lost or forgotten. If your family needed a copy of your living will or healthcare proxy, would they know where to find it? Would they be able to retrieve it today if required? If you had to evacuate suddenly due to a natural disaster, would you be able to grab your family’s social security cards, birth certificates, insurance, and property records at a moment’s notice?
Some documents, such as bank and credit card statements could be quickly pulled from an online account. Of course, your family would need to keep updated on all your passwords if you were unable to access them yourself. Other documents require lengthy requests through a records department and may not have an available copy. Having an organized and convenient way to retrieve copies of your most important documents could save you time and stress.
With an online vault, you can keep all these important documents in a single organized location where they can be securely shared and viewed at any time.
Think of it as an online filing cabinet. You log in with your individual password, and your documents are there. Your documents are then separated into folders and subfolders. Most are customizable with the ability to add to or update as you gather more information. The information is kept encrypted, so it is inaccessible to those who do not have authorized access to the account.
The online vault can simplify the process of sharing your documents with family and other important individuals.
Communication is key when it comes to your estate’s legal and financial considerations. Important people named in your estate documents may not live nearby. Having online access becomes critical with your quality-of-life healthcare wishes, where time is of the essence. You may want to ease the strain on your family, and give them the ability to access up-to-date details of your healthcare and financial roadmap. After you have uploaded files into your vault, you can delegate access to select individuals. Most of these systems will either provide them with their own login or a code. If they are out of the state or the country, they will still be able to view and access your documents if they have a secure Wi-Fi connection.
You could be more prepared for emergency situations.
Disaster could strike at any time without notice. The Department of Homeland Security recommends that everyone have a safe and reliable way to organize and contain your most important documents so they are prepped for a quick evacuation. Driver’s licenses, social security cards, insurance policies, and property records may all be required following a disaster to gain temporary housing and replace lost belongings. Recovering items stored in a “stormproof” safe may be futile if a cataclysmic event renders an area inaccessible. Storing the items in an online vault ahead of time could allow you to focus solely on getting you and your family out of harm’s way.
Staying organized and connected to your documents and accounts could give you more control and oversight of your financial goals and vision for the future. As you approach retirement and beyond, you may want to consider importing your information into a vault to help you stay on track and protected from life’s unexpected events. Ciccarelli Advisory Services utilizes its own vault system for clients, which an advisor would be happy to discuss with you. They can help you decide if it is a good fit for you and your family.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Spring Forward To Get a Fresh Start
By Lynn Ferraina
Each year while changing our clocks to Daylight Savings time, it reminds us of “spring cleaning”. In our homes, this could mean dusting ceiling fans and light fixtures, cleaning window sills and window tracts, vacuuming curtains and window blinds, testing batteries in your smoke detectors, cleaning the oven, arranging and purging pantries and closets. In other words, spring cleaning could keep us busy well into summer.
In the financial world “spring cleaning” could mean reviewing your financial house and getting it in order.
Here are some financial house items to consider reviewing:
- When is the last time you reviewed your health care surrogate, power of attorney and/or your will and revocable living trust? Are the people you choose to help you in the documents still a good choice? What has changed in your life since you created the documents? Did you move, do you have a new grandchild, has someone passed away who is named in the documents?
- Insurance – When is the last time you reviewed your life insurance beneficiaries? Do they still reflect your wishes? Do they coincide with your will and/or trust? Did you name a contingent beneficiary if the primary beneficiary should pass away before you? If you named a minor, is there a trustee named to control the assets until the minor is at an age that they would be responsible enough to manage their own affairs. Other insurances – homeowners, health, long- term care, disability, car insurance…When is the last time you checked to make sure you are adequately covered? Many things can change in a year or two time frame that requires an update of insurance. We certainly learned that when Hurricane Irma came through Naples in 2017.
- Asset Allocation – Diversification may provide a safety net in times of market turmoil. Working with your financial advisor to develop a mix of investments such as U.S. stocks, foreign stocks, bonds, and real estate. Whether your diversification is through individual holdings, mutual funds or managed accounts, your advisor can help you create a portfolio that is aligned with your financial goals.
Lastly, your financial spring cleaning should include “communication” with your family, attorney, CPA, and financial advisor. It’s time to touch base to make sure your wishes and concerns are clearly communicated. Make a location list of your financial assets and where they are held, a list of your online accounts (user names and passwords), your insurances, legal documents, deeds, credit cards, the bills that need to paid monthly, quarterly and annually, professional contacts including your doctors, where your safe deposit box is etc. Everything your successor would need to access if you couldn’t. With communication being the key to any plan, your successor will be grateful that you took the time to express your wishes and help them help you when the time comes.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Filling the Gap: Obstacles Women May Face With Retirement Savings
By Judy Alexander-Wasley MBA, CFP®
March is Women’s History Month–a time to commemorate and honor the contributions women have made to history and society. Women play an integral role in nearly every economic sector: healthcare, business, education, and consumer spending. Despite their growth in the workforce and beyond–there is still a large gap in women’s retirement savings. Recent research from the Transamerica Center for Retirement Studies found that 46% of women are “not too confident” or “not confident at all” about saving for retirement. Most of us know the benefits that come from a comprehensive retirement savings plan; however, women may be confronted by some unique challenges.
1. Longevity
Living a long and happy life is a dream of many. Advancements in medicine and preventative healthcare have allowed each generation to typically live longer than the last. This means that today individuals could be looking at life-spans that extend well into their 100’s. While it’s intriguing to imagine such longevity, it will require a decent nest egg to sustain oneself. This process becomes even more vital for women who live on average 2.3 years longer than a man the same age.
One way to plan for longevity is to take a careful look at your lifestyle and determine how much money will be needed to sustain it over a period of 20-30 years. Some individuals may not be willing to adjust their standard of living in retirement so it’s important to understand the projected costs and how to save for them. Savings strategies might need to be adjusted annually to ensure you meet your financial goals and desires.
2. Healthcare Costs
As our population ages we may need to consider the additional health costs related to living longer. A longer life does not necessarily guarantee better health. There are statistics showing individuals living for years with severe health conditions. Often, one major medical event can cost tens of thousands of dollars. A recent report found that woman may need to save approximately 20% more, on average, to cover medical expenses incurred in their later years. Medicare typically does not cover all required expenses. It can be difficult to predict future expenses as they relate to increases in medical treatment and care, especially long term care facilities and specialized medications.
Early steps to reduce your risk of health issues can often be beneficial. Regular health check-ups along with a doctor-advised diet and exercise plan might alleviate various preventable conditions. It can be advantageous to contribute to a tax-advantaged Healthcare Spending Account (HSA), which permits tax-free withdrawals to cover certain medical expenses in retirement. Your advisor will be able to provide further clarification on HSA eligibility and guidelines.
3. Career Interruptions
Women now comprise nearly half of the U.S. labor force. Many women are also staying in the workforce longer. Despite these trends, women tend to have more career interruptions. A TIAA retirement study discovered out of the individuals surveyed, men averaged 38 years in the workforce and women averaged only 29. They referenced leaving the workforce for various reasons including caring for children, aging parents, or partners. Balancing primary caregiver duties with a full-time career can be difficult and may require reducing hours, reducing pay, or taking a leave of absence. In these instances, making life adjustments to care for children or loved ones may allow for a reduction in certain costs in their care; however, they may have a long-range impact on your savings.
Becoming a parent or primary caregiver often requires a great deal of selflessness, and at times, it may seem appropriate to put your life on hold to help others. Throughout these periods of your life, it is important to ensure that saving for retirement remains in the picture. During career breaks, if you are married, your spouse can continue to make contributions to a Traditional IRA or Roth account on your behalf. It could help to discuss with your advisor the impact a career interruption may have on your current and long-term financial plans. Adjustments may be needed to accommodate your changing circumstances.
Women may be presented with certain challenges pertaining to retirement. On the brighter side, a potentially longer lifespan or time away spent with loved ones should not be feared but celebrated. Developing savings strategies with the guidance of your advisor could help you experience your long-awaited retirement dreams.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Additional securities and investment advisory services offered through FSC Securities Corporation, Member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail N, Naples, FL 34108. 239-262-6577.
Sources
https://www.aarp.org/retirement/retirement-savings/info-2018/men-women-retirement-spending-fd.html
https://www.thebalance.com/how-to-plan-for-health-care-costs-in-retirement-2388478
https://www.tiaa.org/public/pdf/gendergap-whitepaper-b2c.pdf
Learn How to Avoid Costly Healthcare Blunders at Public Panel-RSVP HERE!
Tuesday, March 19, 2019
3:00- 5:00 P.M.
Silverspot Cinemas
RSVP Below—>
Join Marve Ann M. Alaimo, J.D., Jill Ciccarelli Rapps, CFP® and Susan O. Cassidy, M.D., J.D., for a panel discussion that will help you navigate the complexities of health care decisions and avoid common planning pitfalls.
You will leave with important questions to answer about your health care planning above and beyond your health care estate planning documents. You will also learn techniques to communicate with your family/VIP’s to assist with the implementation of your healthcare plans.
This event is FREE and open to the public. The event includes a 1-hour presentation and cocktail reception with light hors d’oeuvres, following the panel.
Seating is limited! Please RSVP by March 8th.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Roth IRAs: What You May Want to Know For the 2018 Tax Season
Written By Josh Espinosa CFP®,CIMA®
Tax season is upon us. While it may not be the most enjoyable time for many, it does provide a great opportunity to take a look at your retirement savings contributions to ensure that they are in line with your future financial goals. Some may find it beneficial to contribute to a Roth IRA to assist in meeting your goals. April 15, 2019, is the cutoff date for your 2018 tax filling and IRA contributions (you can also begin making contributions for 2019 as well). Now is an opportune time to take a look at the financial benefits and current limits of Roth IRA contributions.
The benefits of a Roth IRA could include:
1. Greater financial security in retirement and less tax-stress when withdrawing funds in the future. Unlike a Traditional IRA, which are taxed as you make withdrawals, Roth IRA contributions come from after-tax income. While you may have paid those taxes upfront, you typically won’t have to worry how possible future tax increases may limit your retirement income decisions. And since that money has already been taxed, you’re not required to report withdrawals on your tax return.
2. Freedom and liquidity. If you withdraw from a traditional IRA before reaching 59 ½ you will usually have to pay a penalty. In most cases, Roth contributions can be withdrawn penalty-free and tax-free at any point, at any age. If you are over 59 ½ and have had a Roth account for at least 5 years, you can withdraw both your contributions and earnings with no tax or penalty. There are also possible exemptions for those under 59 ½, such as a first time home purchase.
3. No required minimum distribution (RMD) in most cases. Most retirement accounts have a “use by” date requiring account holders to withdraw a minimum amount each year beginning at age 70 1/2. Since Roth accounts are funded with after-tax dollars, the IRS has no stake in the game (so to speak). This can allow you to continue to save, grow, and spend your money while in retirement without pushing yourself into a higher tax bracket. There are some exceptions to the “no RMD” rule, such as a beneficiary(s) inheriting the account; in most cases, it is a great tool for tax-free income in retirement.
While Roth IRAs can be incredibly beneficial for those wanting to have a tax-free withdrawals, there are also some limits to take into consideration.
With a Roth IRA, your contributions won’t help lower your taxable income for the year in which you contribute. In some cases, contributions to a Traditional IRA can help to lower your adjusted gross income. This can allow certain individuals to qualify for tax incentives, such as the Child Tax Credit or American Opportunity Credit.
The contribution amount is also limited as well for both Traditional and Roth IRA’s. For 2018, the maximum contribution you can make into a Roth IRA is $5,500 a year (this was increased to $6,000 for 2019). For those over 50, you can add an additional $1,000. For some, this contribution is not enough as a stand-alone retirement plan, but it can be maintained in conjunction with an employer-sponsored 401(k), which offers a higher yearly contribution limit.
There are also limits in place which may disqualify certain individuals from being able to contribute based on their income levels. Traditional IRAs do not have income limits (although they do have income-based tax deduction limits), but Roth IRA’s have maximum income limits for partial and full contributions. Below are the current income limits for 2018 and 2019.
2018 Roth IRA Income Limits
2019 Roth IRA Income Limits
If your modified Adjusted Gross Income (AGI) does exceed the limit for contributions, some workarounds do exist. Utilizing a Roth conversion (otherwise known as a “backdoor” Roth IRA), where you convert from a Traditional to a Roth IRA, you can take advantage of the future tax-free benefits of a Roth account. There are rules which govern how the conversion is accomplished, and transferred funds are subject to regular income taxes for that year, but it is an option that high-earners could utilize. The processes can be a bit difficult for those who are not familiar, so it can be helpful to consult with your CPA or financial professional for assistance.
There are many factors to consider when deciding if and how much to contribute to a Roth IRA, such as age, current taxable income, financial flexibility, and where your tax rate may fall in the future. Retirement accounts are not typically a “one size fits all”, but a good retirement plan can ensure that your future financial security is preserved and enhanced. As we approach the upcoming tax season deadline, it can help to meet with your advisor to look over your current retirement contributions and discuss any changes in your tax status.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Sources:
Roth IRA Information
https://www.irs.gov/publications/p590a
https://www.irs.gov/publications/p590b
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Love & Finances: Questions to Ask in a Relationship
By Anthony J. Curatolo
Tomorrow night many couples will be celebrating Valentine’s Day with candlelit dinners and declarations of love, while thoughts of financial expectations and responsibilities will most likely take a back seat. Though it may seem like love and finances have no place even standing in the same room together, most relationship experts would agree that honest communication and transparency about your spending and saving habits are essential to a healthy relationship. Staying open and honest about your financial goals and desires can help build trust and intimacy while preventing future problems.
As you and your partner build a life and future together, you should also be discussing the important financial aspects and responsibilities you will face. Some questions you should consider may include:
As a married couple, how should we file our taxes?
The most common knee jerk reaction to this question is “jointly, of course!” Filing jointly could provide the greatest advantages. The IRS gives joint filers one of the largest standard deductions and partners that file together can usually qualify for multiple tax credits. Credits such as:
• The child and dependent care tax credit
• The adoption credit
• Tax-free exclusion of Social Security benefits
• The credit for the elderly and disabled
In 2018, taxpayers who were married but filed separately, on average, will receive a standard deduction of $12,000. Comparatively, those who are married and file jointly will receive an average $24,000 deduction.
In some cases though, couples may want to consider filing separately. If one spouse has very high out of pocket medical expenses to claim, the IRS allows them to deduct the amount of these costs that exceed 7.5% of their adjusted gross income. If one spouse has high medical costs and a lower income, the deduction may be higher when applied to their sole income.
Many tax experts would agree that when debating which filing status to choose, have them prepared both ways and see which one provides the highest deduction.
Should we sign a prenuptial agreement?
In the past, there has been a stigma around prenuptial agreements, and many couples have forgone them with the mindset that signing one signifies a doomed relationship. While it is understandable to be hesitant, this couldn’t be farther from the truth. A prenuptial agreement allows you both to fully disclose your assets, income, and any debt and allows couples a chance to face their finances together to start planning for the future.
With this in mind, a prenuptial agreement may not be right for every couple. Most prenuptial agreements can take a few weeks to negotiate and finalize, and there are some legal fees that are required, but discussing it can bring forward any concerns you may have regarding finances and alleviate these worries. It may be a difficult conversation to have, but once the information is out in the open, you can decide together how it should be handled.
How will we budget/invest/maintain our finances?
For many couples, an avoidance of the topic of money can seem like the right move to preserve relationship harmony. Ask any marriage counselor what is the most common cause of problems in a relationship and they will tell you: lack of communication. In the short term, avoiding the topic of money may keep the peace. If you wait until the day before you tie-the-knot to discuss your financial situation, you may end up spending your honeymoon in separate rooms.
Figuring out a financial plan together is one of the most important decisions you make as a couple and can ensure that you both have a plan for the future that you work toward, together. A great place to start is setting up a budget. Add up both of your after-tax incomes and expenses and compare the totals. You should generally be spending less than you make. Once you know these numbers you can break them down into categories such as wants, needs, and savings. You can make a list of long and short term financial goals you both have, a timeline for these goals, and then adjust your budget accordingly.
It can be a good idea to sit down with an advisor to discuss your financial habits and goals so you can build a comprehensive financial roadmap together. While these conversations may be awkward and uncomfortable to discuss, an advisor can assist in opening up the dialogue with you and partner, so that together you can build a sustainable plan that is in line with your vision for the future.
As we spend the day celebrating love, our team would like to extend our appreciation for allowing us to serve you and your loved ones. Happy Valentine’s Day!
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Sources:
Tax Information
https://www.irs.gov/taxtopics/tc607
https://www.irs.gov/pub/irs-pdf/p501.pdf
https://www.irs.gov/pub/irs-pdf/p501.pdf
https://www.rightathome.net/blog/2018-tax-deductions-exemptions-and-credits-for-seniors
Alimony
Money Management Mistakes to Avoid
By Kim Ciccarelli Kantor, CFP®, CAP®
While some people do an exceptional job of instilling sound financial education within their families, the level of formal education offered on this topic is quite lacking. And, if you wait too long to learn valuable money principles, lessons are especially hard to come by in our adult lives. All too often, we learn the hard way. Scores of inexperienced investors have fallen prey to “quick fixes” that prove disastrous.
Any of us can learn and benefit from another’s experience – regardless of your age or financial circumstance. When considering the intentional process of building wealth over time, the words of my father come to mind: “Focus on what you can control: helping to avoid mistakes.”
His guiding philosophy – one which continues to shape our firm to this day – was that wealth could be achieved by doing the right thing consistently, steadily and patiently. Learning proactively from the mistakes of others (helping to avoid the most common mistakes) can be highly beneficial to your financial health and well-being. A few examples include:
Run your finances like a business: Whether you are investing assets of $500,000 or $5 million+, you have a great deal at stake.
As the CFO of your “financial company”, you must ensure that your assets are invested in a systematic, disciplined way that reflects your desired outcome. To accomplish this, you must have (1) a business plan that encompasses short-term and long-term goals; (2) quantifiable benchmarks by which to measure results; (3) a well-defined strategy for attaining your benchmarks and goals; and (4) an experienced, knowledgeable team of professionals to facilitate and execute your plan.
Define your investment policy: All too often, investors are susceptible to the vogue or conventional wisdom of the day. In reality, blanket statements like “This isn’t the right time to buy stocks,” or “Bonds are safe,” or “Cryptocurrency is hot,” do not constitute an effective investment policy. A smart investment policy is a strategic long-term framework that begins with your asset allocation. Consider your time horizon, income requirements, tolerance for risk and volatility, and return expectations.
When a significant change to assets occurs, such as a large withdrawal or contribution, the asset allocation should be revisited. Otherwise a minimum of every 1-2 years might be appropriate.
Give the market time: Despite all of the evidence to the contrary, our human nature drives us to believe that we will be able to successfully time the market – that is, realize all of the gains and get out in time to avoid all the losses. Regardless of this temptation, the consensus is clear: it is time in the market – not timing the market – that correlates to the greatest gains. Even the most experienced investor would find it nearly impossible to time the market correctly on a consistent basis. This is particularly true with stocks, where most of the gains are made in short, climatic spurts.
Consistency is the one key to success; however, the road to success is filled with peaks and valleys. While some especially gifted people like Warren Buffet or John Templeton have achieved admirable success in the realm of investing, we have seen numerous examples over the years where their investment approaches did not perform as strongly as anticipated. The common thread to their success was to create a distinct, well-articulated philosophy about how money is made in the market and to stick with it.
When you emphasize the process of advancing steadily and purposefully towards your money and life goals, you will likely find it easier to overcome the emotion and disappointment that could arise from searching for a “magic bullet” solution.
Limit your emotions in investing: Investing is all too often a manifestation of one of two emotions: fear and greed. While financial management should not be completely devoid of emotion, irrational fear and excessive greed can be damaging to your long-term prospects. Fear often creates the foundation for a classic money management mistake; directing your manager to sell all your stocks after the market plunges. On the flip side, you could lose your shirt going all-in on an overperforming stock or security during a bull market and not having a planned approach for selling.
Having a well-thought-out investment direction, one you genuinely believe in and are committed to, should be the conduit to making good decisions.
Plan for a lifetime: Most people underestimate the income they will need during each stage of life, with the greatest deficit occurring during retirement. It may be tempting to believe that you will remain in good health indefinitely, or that increasing your savings level is not necessary. However, not accumulating enough capital can leave you in a position where you could outlive your money – infringing on your financial security when you need it most.
Your CAS advisor can help you estimate your income needs throughout retirement, and determine a sustainable level of spending and savings based on your unique short and long term goals. With this in mind, develop an asset allocation policy that coincides with your lifestyle planning throughout your life time.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Additional securities and investment advisory services offered through FSC Securities Corporation, Member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail N, Naples, FL 34108. 239-262-6577.
2018 Year-end Report
There is a relatively old saying that has gone through various reiterations but is typically along the lines of “in life there are mountains, and there are valleys. You have to make it through one to get to the other.” It refers to the ups and downs that one can experience throughout their lifetime, but it can also be applied to other areas. By the end of the 2017 fiscal year, the market had surpassed numerous record highs that many believed would only continue into 2018. While some of those predictions did hold true, 2018 demonstrated that you may have to deal with both the mountains and valleys when investing.
Right out the gate of 2018, the S&P 500 began on a high note, reaching gains of +7.4% in just 18 trading sessions. Despite the initial surge, the S&P 500, Dow 30, and Nasdaq 100 all fell in March after major selloff in the technology sector pulled down stock measures across the board. Early concerns over then reports of imposed tariffs on Chinese trade may have also effected markets as investors weighed possible regulatory ramifications.
When the closing bells finally rang and signaled the end of the day for the 1st quarter, the Index had a decent rise of 1.4% for the day but was down 2.64% for the month. Some of the worst performing areas were: Financials, Materials, and Technology. Energy and Utilities performed quite well.
Many in the investing community voiced concerns over long term economic effects that could result from a possible oncoming trade dispute with China coupled with expected Federal interest rate hikes. Ratios of bull to bear investors remained nearly neck and neck, and many debated whether the longstanding bull market was showing early signs of coming to a close.
Despite these concerns and continued volatility, the 2nd and 3rd quarter ended in gains. The S&P reported total returns of 2.65% and 7.71% for the 1st quarter and 2nd quarter, and overall the index edged up 1.67% for the first 6 months of 2018. By the end of the 3rd quarter, the market had extremely good returns with a 7% quarterly return rate and the S&P 500 experiencing its best performance in nearly five years.
As mentioned earlier, with every mountain, there is typically a valley not too far away. This was the case for the final leg of 2018. Trade war fears, federal interest rate hikes, along with worries about contracting growth outside the U.S. may have played a role in the slowed growth activity and market downturn. In October, the S&P 500 lost $1.91 trillion. By the end of the year, the S&P 500 had a decline of 13.52% for the quarter, and 6.2% for 2018. Overall, the U.S. stocks posted the worst quarterly fall since the 2008 financial crisis.
One of the sectors that was hit the hardest was big technology, with many stocks underperforming and accounts of investors fleeing after earnings reports. By
Several factors may have played into this including bond yields and a fourth Federal interest rate increase. However, the job market has expanded substantially in the last year, with a growth of 3.7 % and a historically low unemployment rate.
The increase is on point with the Federal Reserve’s projections to insure that the inflation rate stay near 2% mark. Many voiced concerns that the hike coupled with an escalation in a Chinese trade war may actually cause an economic downslide. The U.S. has implemented tariffs on $250 billion worth in Chinese goods. There is a full list of products which have had implemented tariffs, but worries that these tariffs may require many tech giants to raise prices or face losses in their profit margins may have had a strong impact on investor’s optimism in the market.
Going forward into 2019, many are unsure of where the market is headed, and if the same issues and volatility will continue in the new fiscal year. Factors such as changing the political climate, many nations high debt levels, overseas trade, and interest rates may be on the top of many people’s minds when trying to gauge where the market is headed.
At the moment, the Federal Reserve has indicated that two more rate increases are to be expected. Some experts believe this may be good in the long run but may cause some turbulence at the start. Only time can truly tell.
The trade dispute with China still continues. Stimulus from tax cuts have been predicted by some to fade in the next year. Many hope that China’s need for a trade deal to combat an economic downturn may prompt a quicker resolution.
One issue that may have had a strong effect on December’s economic turmoil is many investors’ concerns over the ongoing political uncertainty in Washington. At the end of December, the federal government partially shut down after both sides of the aisle were unable to compromise over funding for a U.S. Border Wall. As this shutdown continues, many are uncertain of the long-term economic fallout.
Investment anxiety can arise from uncertainty, which is why it can be beneficial to meet with your advisor to discuss long term goals and risk tolerance so that together we can develop a financial roadmap that best suits you. A review of your asset allocation, time horizon, and risk tolerance is key.
While life may be filled with mountains and valleys, our team is here to guide you throughout the journey – today, tomorrow, and for generations to come.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Sources:
Standard & Poor’s 500 Index Data:
Trade Tariffs Data
Nasdaq Composite Data
Federal Interest Rate Data:
