Category: Content

Now is the time to act so you don’t miss important year-end tax deadlines. Here are some key reminders as we approach the end of 2023:

By proactively addressing these year-end tax considerations, you can be better prepared for the upcoming tax season and position yourself for long-term financial success.  

Reach out to our team if you have questions about your specific situation and any last-minute strategies to optimize your tax position.

Please note that certain financial transactions and tax-related actions may have processing and settlement times that extend beyond the end of the calendar year. It is important to be aware of these timelines and to initiate any necessary actions well in advance to ensure they are credited for the current tax year. Waiting until the last minute to take action on year-end tax deadlines may result in transactions being credited for the following tax year, potentially impacting your tax liability and financial planning. We strongly advise you to consult with your financial advisor and tax professional for guidance on the specific timelines and requirements related to your financial transactions and tax planning.

There are a number of reasons we ask you to meet with your wealth advisor on an annual basis. The most basic reason is that things change more than we might think over the course of a year, and even minor changes can have big impacts on our lives – and our financial plans. A less-than-expected bonus or raise, or a higher-than-expected bonus or raise, can really effect financial projections, and hence our investment advice to you. Major expenses, such as a wedding, lifestyle purchase (boats, vacation house, expensive trips, etc.), changing employment conditions, unexpected medical situations, and more can put larger-than-expected dents in our budgets, and will want to be accounted for in your financial plan. By sitting down once a year, it gives us a chance to review all of these life changes and make necessary adjustments to your financial plan. It also gives us a chance to review overall market and economic conditions with you, and allows us to ascertain if your current investment objectives are in line with your current strategy.

By meeting with us annually, you also help us meet our Fiduciary obligations to you. A Fiduciary is someone who must always act in your best interest, which means that we need current, relevant information in order to make those Fiduciary decisions on your behalf. We cannot continue to offer you investment advice based on out-of-date information. So that means that we need to be continually updating your information with the latest, most relevant, information. And an annual meeting is the best way to do that.

We know meetings are time consuming, but we can be as efficient as need be based on your time constraints. We are also flexible in how and where to meet, offering meetings in our office or in your home, video meetings via a variety of platforms, or even old-fashioned phone calls. Though if you do come into the office for your annual meeting, you leave with an SBC cookie, and having eaten a number of these over the years, I can assure you that they are worth the trip.

However you choose to satisfy your annual meeting obligation, please know that this meeting is an important component of what we do, and a vital way that we help meet our fiduciary obligation to you. So the next time one of our Client Service Associates calls to set one up with you, please keep these things in mind, and accept our thanks in advance!

Ho! Ho! Ho! The end of the year is quickly approaching, and Santa will be here before you know it! As you’re making your financial list and checking it twice to prepare for a new year, consider:

• Are you or should you consider contributing to a College Choice 529 Plan? Indiana taxpayers can get a state income tax credit equal to 20% of their contributions, up to $1,000 per year. The deadline for making 2022 contributions is December 31.
• Have you taken your Required Minimum Distribution (age 72) from your Retirement Account(s)?  Remember, there is a 50% penalty on any portion that hasn’t been satisfied by December 31. 
• Ever thought about making a Charitable Distribution? By making a Qualified Charitable Distribution (QCD), you may reduce the amount of taxes owed. You may be able to donate your Required Minimum Distribution to the charity of your choice (or a portion of it) and not have your adjusted gross income affected, depending on age. These funds need to go to the charity directly from your retirement account. You may donate up to $100,000.
• When was the last time you reviewed your 401K and IRA contributions? By maximizing the contributions, you benefit from compounded interest year after year. Keep in mind investing is a marathon, not a sprint.
• Anything major or life changing that you’re aware of for 2023? Planning any big purchases?  Preparing for retirement? Getting ready to change jobs? Will you be relocating? Are you planning for a wedding? Saving for surgery? Planning ahead will help reduce stress when the time comes.
• Have you updated or do you have an estate plan? Have you heard the saying that if you don’t have a plan for your life, someone else will? Do you have beneficiaries on your investment accounts? Do you have a Will or Medical Proxy? Life can throw curveballs; be prepared.
• Look at your insurance policies to make sure they are up to date. Has the Fair Market Value gone up on your home? If so, make sure you have enough homeowner’s insurance. What about life insurance? Have you reviewed your auto insurance recently?

At SBC, we help keep you on the path to financial success through careful planning and preparation. We are passionate about helping you reach your financial goals. As the end of the year approaches, please keep the above things in mind. Reach out if you need help in planning—we’re here for you!

Happy Holidays!

In the pension and Social Security law infancy of the 1930s, normal retirement was age 67 and life expectancy was age 62. It simply wasn’t expected that most were ever going to collect on either. 

With the advancement of modern medicine, life expectancy has been extended closer to age 84. Yet corporate America has a pension system that would allow the employees the ability to retire as early as age 55, with an unreduced pension, based on an 85-point system (combination of age and years of service). 

Today, with extended life expectancy and an early retirement feature, the actual years spent in retirement has been extended well beyond what pension actuaries were prepared for. Traditional defined benefit pension plans guarantee a retiree an income for life. If married, it is possible to guarantee an income for the lives of both spouses. Over time, this has become a crippling financial obligation for corporate America. With the approval of the IRS and ERISA, corporate America decided to start unwinding traditional defined benefit pension plans and convert them to cash balance plans. They were obligated to use a certain formula tied to current interest rates and an actuarial life expectancy. It is somewhat counterintuitive that a rising interest rate environment would actually lower a potential lump sum pension payout. The reason the direction interest rates moving have an inverse effect on lump sum pension values lies within how the conversion calculation is done. First, the original traditional pension benefit obligation is calculated based on the employees earned credits. This results in an amount the employee is to receive monthly. Then, that monthly income amount is converted into a lump sum present value of what the total future payout would be over the participants lifetime. The participant’s lifetime is determined by actuarial life tables. 

For example, if you’re trying to calculate for an income replacement, the higher the interest rate the lower the actual lump sum needed. So if I need $5,000 per year of income and can earn 5% on my money, I need $100,000 invested. If I could earn 8% on my money I only need approximately $62,500 invested to replace that same $5,000 of income. The higher the interest rate at the time of retirement the lower the lump sum. The US government has been raising interest rates in an attempt to slow inflation. 

All this is quite confusing and complex. Most people just want to retire worry free, but today they feel as though they are required to become pension actuaries and investment professionals before doing so. It is fair to say most are just trying to make their best informed retirement decision. This is where it becomes invaluable to seek the advice of a trained professional. These types of decisions are typically irreversible and will impact you for life. 

Please reach out to one of our financial advisors before trying to make this life-altering decision on your own. We are here for you and your friends and co-workers. Let us help!

The most common question I hear regarding social security is simply, “When should I take it?” To find a blanket answer would be like trying to answer the question, “What car should I buy?” The answer will always be “it depends.” What is your commute? How large is your family? Should you consider electric? Do you haul heavy items regularly? Simply put, one cannot recommend a car without more information. Answering when to take Social security is no different, it depends. 

Below are some items to consider when speaking with your financial professional. 

Earned Income: How long do you plan to earn income through wages and when is your full retirement age? If you earn income through wages or a business, it can affect your social security amount if you have taken benefits prior to your full social security retirement age. Benefits are withheld after a specified amount, and your benefits are then recalculated after full retirement age. 

Cashflow: What is your cashflow picture now, after retirement, and after starting social security? Everyone may have different resources to consider, and income is taxed in various ways. A retiree may have substantial passive income from real estate or farm cash rent that meets current living expenses. As a result, delaying social security may be a wise decision because additional cashflow is not necessary. Understanding your cashflow picture and integrating all financial resources can help make the social security picture clearer.  

Pension: Do you have a pension that interacts with social security? A social security component often exists and corresponds with traditional pension plans. It must be considered when deciding which pension option is right for you.  

Wages: Who is the higher wage earner for a married couple? Is an ex-spouse to be considered? Because social security rules depend on marriage status, spouses and ex-spouses must be considered. For example, if one spouse passes then the widow will receive the higher benefit of the two.  If delaying social security to increase the benefit is the decision, it may make sense to apply the strategy only to the higher wage earner knowing that the higher benefit will carry forward should one spouse pass prematurely.

These are just a few examples to consider in making your decision. Many other factors may exist for your situation, but a comprehensive understanding of your entire financial picture will help guide you to the right decision. 

Reach out to your financial advisor to review your situation and don’t forget to join us on Tuesday, October 25, for an Education Session on Social Security at SBC Wealth Management. RSVP today. 

Every year, countless numbers of seniors and other vulnerable adults are subjected to financial exploitation, sadly, in many cases, by people they know and trust. And with approximately 10,000 people every day turning 65 years old, older citizens are one of the fastest growing segments of our population. Whether you are a senior yourself or have senior loved ones in your life, please keep the following tips in mind to help recognize the signs of financial exploitation, and, if necessary, take action to protect yourself and the ones you love.

There are certain ‘red flags’ or changes in behavior that could be indicative of senior abuse or financial exploitation.  

New Friends or Connections

One of the biggest red flags are new people involved in a senior’s life. Is someone new injecting themselves into the senior’s life or taking over certain aspects of their life, such as their bill paying or helping them with their mail? While this could be an innocent desire to help, it could also be a sign of potential exploitation. New friends or social connections should be encouraged (social isolation is a major concern for the elderly and a cause of depression and a host of other health issues), but caution should be taken with new associates in a senior’s life. Should this new person act as a ‘gatekeeper’ by restricting access to the senior or not letting them out of their presence when among others, this should definitely be viewed as suspicious behavior.

Change to Legal or Financial Documents

Another red flag is a new desire to change financial or legal documents. Sudden or unexplained changes to trustees, beneficiaries, insurance policies, powers of attorney, and wills or other estate documents, especially when not recommended by a financial or legal professional, should be cause for concern.

Asset Tampering 

Other behavior that should raise red flags are unusual or large charges or cash withdrawals, missing property or other items from the home, unexplained bills or checks, or the inability to respond reasonably to questions about their finances, expenses or bills.

Steps to Take To Protect Loved Ones

What can you do if you suspect that you, or a loved one, friend, or acquaintance, is being exploited? You should report the matter to the state department of Adult Protective Services. While each state has different laws and rules, most states have a system for reporting and handling suspicious behavior. 

Indiana is a ‘Mandatory Reporting’ state, which means that if you believe or have reason to believe that a senior or endangered adult located in Indiana “is the victim of battery, neglect, or exploitation,” you are required to report the matter to Indiana Adult Protective Services. Reports can be made by phone or online at www.in.gov/fssa/da/adult-protective-services/. If you believe that the exploitation is happening at the time, or that the senior or endangered adult is in immediate danger, you should call 911 right away to report the matter.  

FINRA also runs a Securities Helpline for Seniors, where senior investors can receive assistance and support from FINRA staff related to various securities topics. The Helpline operates 9 am to 5 pm eastern time Monday through Friday, and can be reached at the following toll free number: 844-57HELPS, or (844) 574-3577. Additional information about the Helpline can be found at https://www.finra.org/investors/need-help/helpline-seniors. 

There’s no such thing as a free lunch. 

The phrase “free lunch” refers to a once-common tradition of saloons offering a free lunch to patrons who purchased a drink. Often the foods included at lunch were high in salt, so those who ate the free lunch would inevitably be thirsty for at least one additional drink.¹

Urban legend aside, the phrase acknowledges that a person or society cannot get “something for nothing.” This certainly has been the case for stock investing in 2022. While I’m typing, we are experiencing a correction in the S&P 500 (down over 10% from the all-time high) and a bear market in the technology-heavy Nasdaq (down over 20% from the all-time high). 

While these bumps in the road may feel tough to stomach while they’re happening, periods of negative performance are not all that uncommon for the stock market historically. In fact, since 1950, the S&P 500 has experienced 36 corrections, 10 bear markets, and 6 crashes. This translates to a correction (-10%) roughly every 2 years, a bear market (-20%) every 7 years, and a crash (-30%) every 12 years.²

This is precisely why our investment philosophy centers around building diversified portfolios that are durable in all market environments. In the past, stock market volatility has historically provided opportunities to rebalance and buy stocks “on sale” using proceeds from bond investments (buy low, sell high).

What has made 2022 uniquely challenging, however, has been the severe negative performance of US Bonds:

A combination of restrictive monetary policy, rising interest rates, and inflation have created a “perfect storm” for bond investors resulting in their worst quarter of performance in over 40 years.³

In response, economists, PhD’s and market pundits have begun to question whether bonds should have a role in your portfolio. Clients with an aggressive risk tolerance, or those planning to build wealth for future generations are wondering, “Why would I invest in bonds making 3% per year when inflation is running over 8%? Why not just invest 100% in stocks?” Indeed, locking in a negative 5% inflation-adjusted (real) return on your bond investments doesn’t sound great, but this way of thinking ignores why we choose to invest in bonds in the first place:

“We buy stocks so we can eat well, but we buy bonds so we can sleep well.” – Cliff Asness⁴

Bond investments generally provide a consistent income stream and greater safety of principal. If your portfolio is a boat, then picture your bond investments are your ballast. When winds, waves, and other forces of nature threaten to tip or capsize your boat, your ballast allows it to maintain its balance and power through. During market crashes, demand for bonds tends to surge, as investors exchange risky assets for safer investments in what’s commonly called a “flight to safety.” This is why portfolios with more bonds in them have experienced less of a crash in the past three recessions: 

More importantly, investors that owned bond investments and rebalanced during the above crashes experienced an even bigger benefit during the recovery that followed. Of course, correctly timing the rebalancing would have required some luck but having that ability and owning bonds in the first place didn’t happen by chance.

Retirees and folks nearing retirement age know that negative returns are much more painful later in life. So, while the talking heads sell fear of recession and aim to convince the public that there is no alternative to stocks (“TINA”), remember bonds will be your safety net for the next black swan event. Removing our emotions and taking our lumps can be difficult in the short-term for even the most intelligent investors. This is why it’s important to maintain a long-term, rules-based investment philosophy and why it pays to have professional help. 

The information provided in this post is being provided for educational and informational purposes only and should not be considered an individualized recommendation or personalized investment advice.  Those seeking information regarding their individual financial needs should consult a financial professional.  Opinions expressed are current as of the day of posting but are subject to change without notice based upon changing market, economic, political, or social conditions.  All information is from sources deemed to be reliable, but no warranty is made as to its accuracy or completeness.  SBC, our employees, or our clients, may or may not be invested in any individual securities or market segments discussed in this material.  Past performance is no guarantee of future results and any opinions presented can not be viewed as an indicator of future performance.  Investing involves risk, including loss of principal.

Sources:

1. https://en.wikipedia.org/wiki/There_ain%27t_no_such_thing_as_a_free_lunch
2. https://awealthofcommonsense.com/2022/01/how-often-should-you-expect-a-stock-market-correction/#:~:text=Over%20this%2072%20year%20period,every%207%20years%20(20%25%2B)
3. https://www.wsj.com/articles/fed-signals-half-percentage-point-increases-could-be-warranted-at-coming-meetings-11649268002?mod=article_inline
4. Maggiulli, Nick. Just Keep Buying. HARRIMAN HOUSE PUBLISHING, 2022.

• Economic and Market Commentary | Advisor Perspective from Kevin Sasena, MBA, SBC Wealth Advisor
• Breaking Market Commentary | May 2022 from Andrew Fairman, CFA, CFP(R), SBC Wealth CIO