Reviewing Your Year End Finances

The end of the fourth quarter is a great time to evaluate the past year and begin looking towards 2018. Evaluating your finances is not quite as simple as looking at your year to date returns. There are a variety of measures to make sure your assets are working toward the goals that are important to you. Every person’s financial picture is different, but for the most part, the points below are the main areas to check in on each year.

The Foundation

The first item to consider is how well you are protecting yourself, and your family. Are your accounts and personal files secure? In cases of identity theft, is your account insured? Do you have enough insurance protecting your family’s assets? Are any of your old insurance policies approaching expiration? A professional should look at these issues more closely, but a quick once over can at least put your mind at ease.

The Checklist

Take a look at your 2017 plan and contemplate how much of what you wanted to accomplish was actually completed. Are the incomplete goals and tasks worth pursuing more attentively in 2018, or are they not as important to you as you had previously thought? Things like a job change, pay fluctuation, arrival or departure of children, entering retirement, or new major commitments are obvious red flags to revisit your finances, but often changes come from within instead. Perhaps you watched as a close friend dealt with an unfortunate situation and would now like to safeguard yourself, or maybe they started a business and are off to a hot start and you’d like to get more aggressive in your own plan. Change is a good thing, but it necessitates preparation. Take the time to be proactive rather than reactive.

The Benchmarks

When it comes to evaluating your investment portfolio, a simple look at the returns is more than likely not sufficient. A better indicator is how your investments are performing relative to its peers. How a fund stacks up compared to similar investments is a better indicator than its performance in any given year. In a bear market, even the smallest gains can often be considered a positive result.

Part of having a strong and viable financial plan is the continued work that must be put into it. If your money is on autopilot, someone is asleep at the wheel. Whether you hire a professional for these services or complete the basic tasks yourself, reviews should be completed at least once per year. The holidays are a busy time, but with the calendar year ending it is also the best time to take a look back at the year, and look ahead to 2018.

How Misunderstanding Your Benefits Coverage Can Cost You

According to a recent Aflac study, over 90% of employees kept the same benefits selections as the prior year, 80% spent less than an hour making that decision, and 3 of 4 don’t fully understand their options. This is a developing problem in our workforce, and we’re here to help you navigate through it.

Health Insurance

It is critical to evaluate all of your options. One of the most under-utilized tools in employee benefits today is the Health Savings Account. That is unfortunate because the triple tax benefits are unparalleled. Contributions to an HSA are tax deductible or pretax, then the interest accrued in the account accumulates tax-free, and last but not least withdrawals are tax free if they are made for qualified medical expenses. If the US government is willing to forego collecting taxes on an investment on that many levels, it would be wise to take advantage. Read carefully through your health offerings for this unique opportunity, or set up an HSA on your own to supplement your employer offerings.

Life Insurance

The first step when deciding on life insurance coverage, is determining how much coverage your family will need if a worst-case scenario were to happen. Many employer plans offer a very low amount of free coverage and it is a mistake to assume this would be enough to protect your family if you pass away. Decide on how much death benefit you would need to provide for your family for an acceptable amount of time should you pass away, then decide on the insurance options that fit your goal, not vice versa.

Retirement Strategies

You likely already know what retirement options are available to you at work. If your employer matchers a portion of your contributions, take full advantage of it before exploring other investment options. One growing segment of the employee retirement plan is the Roth 401k option. Nearly two-thirds of plans offer them now, and they could compliment your traditional account nicely. The Roth 401k (like a Roth IRA) contributes after-tax dollars to be withdrawn tax-free in retirement. Conversely the Traditional 401k contributes pre-tax dollars, before paying taxes on the withdrawals. As you can imagine utilizing both of these strategies is a way of balancing your retirement savings from a tax standpoint.

Tips

  • Take the time to fully understand your plan at open enrollment. It can be tedious but it will save you time, aggravation, and money in the long run.
  • Put your plan in cruise control. It is much easier to control your spending after your savings have already been made. Set your contributions and payments up before your other expenses and spending habits get involved.
  • Save the phone and email addresses of your go-to people into your contacts. This way no lost paperwork, or other interference can get between you and the information you are looking for.
  • Take notes at your open enrollment and plan education meetings. Often times the company offering your benefits can be a valuable financial resource in other areas as well.

GranitPath Announces new Senior Advisor and Chief Compliance Officer

This month, GranitPath has welcomed a new member to the advisory team. Matt Cahill joins us as our Senior Advisor and also as our firm’s Chief Compliance Officer (CCO). He will be helping small business owners and employees to implement low-cost, low-administration retirement plan solutions. As our new CCO, Matt will be in charge of overseeing our rigorous due diligence process.

We are excited to have Matt on board as he has a wealth of talent and knowledge to bring to our colleagues and clients. Not only does he hold a law degree and have years of hands-on experience with ERISA issues, he is also a Chartered Financial Analyst charterholder. For more details about Matt’s experience and role here at GranitPath, please read his full biography.

GranitPath is Committed to Helping Businesses Succeed

Each one of our team members plays an integral role in our firm’s mission to help businesses attract and retain quality employees. We specialize in retirement solutions including 401(k)s, executive deferred compensation, employee stock ownership plans and other custom employee retirement plan solutions. For more information on retirement services for your association, contact us today.
If you are a client of GranitPath and would like to schedule a time to meet Matt, please contact Eunice Halbedel at (603) 554-8551.

The full press release is available for download.

How to Tell When Your Portfolio Is In Trouble

As advisers, we speak to clients about their portfolios on a daily basis. Sometimes a client is thrilled with their investments, sometimes they are not, and sometimes they just need a little clarification on a point or strategy we have employed for them. Often the reasons people get thrown off is that they become misguided or confused by the multitude of outside voices and conversations. It can be anything; a coworker talking about their own portfolio at the water cooler, something you heard on the news, or a professional trying to invoke concern in order to sell you something. We are here to help you cut through that noise, here’s how.

Review Your Plan

Take a second to think back to what your portfolio was designed to do. Is it focused on long-term growth, preservation of capital, or providing income to be spent? Each of these things have very different indicators of success. Think about the life goals you had in mind when your plan was designed, and evaluate whether your investment is contributing toward those goals effectively. If it is not it may be time for an adjustment, otherwise you likely have nothing to worry about.

Check the Time

How long do you have before you need the money that is concerning you in your portfolio? In 225 years of trading on the New York Stock Exchange the market has taken longer than 2 years to rebound from previous losses exactly twice. If the overall stock market trends down for five years or more for the first time ever, you as an American will likely have bigger concerns than your portfolio holdings. With that in mind if you are seeing large swings in your portfolio when you are about to or are already spending down your assets that is something worthy of a conversation with your adviser.

Set the Bar

Just because your portfolio is growing or declining at a seemingly high rate does not mean it is underperforming. Take a look at each individual holding’s ranking as compared to its peers. If you own a mutual fund that is down 11% on the year, but similar funds are down 16% on the year, then your fund is performing exceptionally well. Conversely an 11% gain as compared to 16% gains by peers could be poor performance. In any given asset class there are upwards of 1,000 different funds available, so it is not realistic to expect your fund to consistently be ranked #1 over the long term, but good or bad returns relative to the average could be a strong indicator of performance.

Risk Tolerance

In many ways investing is a study in human behavior. As an investor, how will you react to various changes in the market? Are you a risk taker or a conservative investor willing to trade upside for a better chance at steady returns? A well-constructed portfolio of highly rated funds can still be a poor fit, if it does not match the investor’s risk profile. Even if the fund you invested in many years ago was properly allocated for a long time, you may need to adjust. This is not a major emergency, just a potential cause for adjustment. If you are worried or curious about your portfolio, click the button at the top of your screen for your Free Portfolio Risk Analyis. In 5-10 short minutes, you will be assigned a number that can allow us to hone in on how you should be invested in order to match your personality. From there if changes are necessary, we can help you make them. You are doing the responsible thing in saving for your future, this should relieve anxiety rather than cause it.

How Should My 401k Be Invested?

At GranitPath the most frequent line of questioning we face when talking to plan participants is regarding allocation within the plan. Many who utilize their company’s 401(k) don’t fully understand how they are invested or what their alternatives are within the plan. There are so many different options available that it is not fair to expect the common investor to fully understand each of them. There is far more to consider, which necessitates professional help, but let’s establish a foundational level of understanding to instill some confidence.

Time Horizon

This is a term you will hear a lot in retirement planning. Your age and retirement date set the basis for how you will be invested. If you are young with no dreams of retiring in your 40’s, you have plenty of time to ride the ups and downs of market participation. Because of this long-term growth will be your priority. As you get closer to your desired retirement date, preservation becomes a greater priority. Late in the process some growth is still in play, but a market dip stands to do greater damage to your portfolio than it did before. If you don’t need the money anytime soon, you would want it to grow as much as possible over time. These portfolios typically would have a large portion invested in stocks and other equity devices. Conversely if you are approaching retirement more closely, a greater priority should be placed on investments that generate income to be spent in retirement. Things like bond funds and other debt related devices accomplish this with varying degrees of risk.

Risk Tolerance

The end goal is for your retirement benefit to be there when you need it, but how it gets there along the way has a lot to do with your personal preferences also. Some individuals are simply more tolerant to risk than others. Whether you need income or growth, as mentioned above, there are a multitude of different asset classes to choose from with varying degrees of risk. With greater risk comes greater potential returns, the complicated part is blending this with your time horizon. For example, a young person is looking for large long-term growth but what if they are uncomfortable with aggressive investments? A bond portfolio would satisfy their risk tolerance, but generate income rather than long term growth. A Large Cap Growth fund would be an equity investment, focused in large companies that tend to be more stable. Similarly, an older investor looking for more risk would seem counterintuitive, but an option like investment grade bonds could satisfy their needs.

As you can see there is such a vast world of investment possibilities that professional help is often recommended. Talk to your HR department about what resources are available to you. While it is only the very tip of the investment iceberg, this knowledge can help you at the very least know how to determine what you are looking for. At the end of the day saving in the wrong asset class is still better than not saving at all.

GranitPath Giving Back

Over the years GranitPath has helped clients establish innumerable Donor Advised Funds and planned expansive charitable giving. These contributions go to wonderful causes both locally and internationally, and they make up a large part of our belief system as a firm. Today we recognize contributions made by a member of our staff in action.

This Thursday our newest analyst, Tom Carver, was formally inducted as the President of the Groton- Pepperell Rotary Club. Rotary International is the largest charitable organization in the world, with over 1.2 million members making up 33,000 clubs in over 200 countries. These clubs are empowered by Rotary International to develop and carry out their own initiatives both at home and abroad. Chances are you will see numerous public projects, and working volunteers in your town. The Groton-Pepperell club was chartered in 1941, has hosted such prestigious members as the Kerry family, and completed countless successful projects. At 25 years old, Tom becomes the youngest President in the club’s 76-year history, taking the reins from preceding president Duncan France. As a lifelong Pepperell native, Tom relishes the opportunity to become an integral contributing member of his community from a leadership position with the help of his tight-knit group of dedicated members. We at GFP are very happy for Tom and what he brings the community and look forward to hearing of their collective successes in the coming year.

Why Estate Planning Could Be the Missing Piece in Your Business Plan

It is important for all of us to have some foresight and plan ahead for what will happen to any of our property or financial assets when we pass away. For business owners this is even more important, and for owners in a partnership or family business even more important still. If left to chance what we want to have happen to our assets when we die, is very different from what actually happens. It is not a fun exercise to complete, but estate planning is vitally important to the pieces and reminders of you that remain long after you are gone. A perfectly strong family business can be hurt severely in future generations due to the negligence of current or past generations. Once you pass away it is out of your hands, thus taking the correct steps now is extremely prudent. Read along to find out what impacts can be had and steps can be taken to ensure that your legacy is something you can be proud of.

Individual Entrepreneur

Sole proprietor, owner dependent, private entrepreneur, whatever you’d like the call your business the point is you run the show. Focus is on earning as much income as possible through the business and applying it to personal savings. The personal savings and assets accumulated are then what is of most value in being passed to your heirs, while the business dissolves. There is nothing wrong with choosing this type of succession model, but make sure this is a conscious choice and not simply the only resort left to those inheriting the business. One of the biggest benefits of this business model is total autonomy over all decisions regarding the business, use it!

Transferring Ownership

If you would prefer to pass your business on to your heirs, make sure you dictate all of the details in your estate plan. There are innumerable decisions to consider and because of this it is imperative that you get professional assistance with this plan. Are you passing your business to your wife or your children? Do you have any divorces or step children to consider? Will you be dividing ownership among multiple people? Do your successors have any experience or interest in running such a business themselves? These are just a few of the considerations that you will have to consider.

Death, Taxes & Death Taxes

You already know the two certainties in life, and estate planning deals heavily with both. Without an estate plan, your business’s new owner could be on the hook for an estate tax of anywhere from 35-50% of the company’s value. The heir taking over the business needs a way to pay that substantial tax bill, so you will want your estate plan to include a method of reducing that burden as much as possible without having to sacrifice assets of the business.

Contact us at GranitPath to get things started. We can walk you through this complicated and stressful process.