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.

Top Questions You Should Be Asking Your Adviser

In this week’s blog, we will examine some of the most pointed questions we’ve been asked by clients. If any of these questions or their answers strike a chord, call us. We can schedule a meeting to alleviate your concerns and probably uncover additional questions you didn’t know you had.

  1. How long do I need to work for my money to last?
  2. What is a realistic withdrawal percentage from my portfolio in retirement?
  3. When should I claim Social Security, and which option should I choose?
  4. What can I do to plan for an extended care situation in retirement?
  5. Now that I am retired, should my investment strategy change?
  6. What will Medicare and Medicaid actually cover for me?
  7. What is the most efficient way for me to leave something for my family?
  8. How can I plan for my tax-deferred accounts and how will it affect my taxes?
  9. When I retire, what is the best way for me to use my portfolio as disposable income?
  10. Do I own too much of my company stock?
  11. Should I take a cash balance or turn my funds into an annuity from my workplace retirement plan?
  12. Will my plan still work if we have another recession?
  13. How can I use my business as an asset for my retirement?

As you read through these questions, a few of them may elicit an emotional response, others may get you thinking about a similar concern you have with your plan. These are the questions we like to hear about as advisers. It is important that your adviser takes you beyond simply chasing returns, and works to structure your plan so that it accomplishes the future goals that are most important to you. Whether you hold the 5th or 6th ranked international bond fund is far less important that whether or not an international bond is the best way to accomplish the particular goal you have for that investment.

This New Investment Philosophy is Here to Stay

A major part of life in 2017 is the increased emphasis on social and environmental responsibility. What a lot of people don’t know is that there has been tremendous growth in investing according to these goals in recent years as well. Impact and Sustainable Investing have burst onto the scene and preliminary research tells us they have potential to be much more than just a passing fad.

Are You Investing With Your Heart Or Your Head?

While the two can overlap, it is important to mind the differences between impact investing and sustainable investing. The key distinction is not in the investments themselves but rather, why you are investing in them. If you want your investments to support social, environmental, or morally sound companies you are an impact investor. Impact investors know there are likely better statistical outcomes to be had but they are more interested in supporting causes and they believe in a “what goes around comes around” philosophy in business.

On the more strategic side of this field is the sustainable investor. While a sustainable investor may be happy that their investments are supporting good, responsible companies, they are more interested in the outcomes that can be achieved for their portfolio by investing this way. If you think about the impact a sustainable and reliable inventory source can have on a company, it is not difficult to imagine the creative strategic advantages of investing in such companies.

What’s In It For Me?

If you are more intrigued with the sustainable investing model there are a few key strategies to keep in mind. The first is the potential for growth, particularly in the energy field. As the technology around sustainable energy improves, the possibilities are endless. For the time being, these companies also can provide a hedge against other investments. Just as your mutual fund portfolio benefits from diversity, investing in sustainable investments can shelter a portion of your risk against some of you more traditional investments in ways that were not available before. For example, if you are invested in things like coal, natural gas, or oil, investments in sustainable funds or companies could react inversely to those energy sources.

What’s the Catch?

As with many new investment trends the challenges that face impact and sustainable investments is the lack of historical data. This is noteworthy from a performance standpoint, as well as an evaluation and identification focus. When attempting to grade risk and performance, it is vital to look back at past trends. Predicting investment performance with strong accuracy is impossible, but looking at how it has reacted to various market trends in the past is essential when determining viability. Because they are so new, many of the funds and companies that make up the impact and sustainable investment strategies simply do not have a strong sample size of past data to evaluate. This carries with it a certain amount of unpredictability risk.

The second pitfall with the youth of impact and sustainable investing has more to do with how we measure and evaluate the investments that are put in this category. Simply put, what makes an investment socially or environmentally responsible, and what is the quantifiable correlation between this responsibility and our financial success as the investor? We continue to draw closer to these key answers, but until we are there we have to stomach some degree of uncertainty when investing in this way.

What 90% of Retirement Plans are Missing

Chances are your employer offers you an array of benefits, one of them most likely being some version of a retirement plan (SEP, SIMPLE, 401(k), 403(b), etc). Business owners are beginning to put more and more importance on their suite of benefits, because they realize it is a major factor in not only recruiting new employees, but also retaining current ones. There’s also a good chance that the retirement plan they put in place for you has some holes.

This is not the fault of your employer, they can’t possibly design a retirement benefit that fits perfectly for every employee’s situation. That’s what Financial Advisers like GranitPath and Granite Financial Partners are here for. We can evaluate your benefits portfolio, as well as your personal situation and develop a comprehensive solution. Below we’ll review one of the more overlooked aspects of retirement planning.

Plan for Distribution as Well as Accumulation

One of the simpler, yet important, concepts in retirement saving is market participation. Even a conservatively allocated portfolio offers at least some protection against long term inflation. This is a great tool for accumulating assets, but what about when it comes time to retire and start using your portfolio as an income source? The same market volatility that helped you grow your nest egg could also damage it when you begin taking withdrawals. Because of this, some retirees can benefit from guaranteeing a portion of their retirement income. Only about half of Americans retirement plans involve any sort of income solution, and only about 20% of those income solutions are guaranteed. So, this is a key piece that many are missing out on.

Benefits of Guaranteed Income

Among the biggest fears both pre-retirees and retirees face is that of outliving their assets. Guaranteeing a portion of a retiree’s income for the remainder of their life can be an appealing solution for a number of reasons. It is much easier for a pre-retiree to exhale and finally retire when they know at least a portion of their income is guaranteed for as long as they live. Upon retirement, this guarantee can relieve a great deal of stress for not only the individual, but also their portfolio. Having an income source that is not tied to market performance allows an investor to be more flexible with their overall portfolio withdrawals.

Not Your Father’s Pension Income

If guaranteed income for life sounds like a familiar concept, that’s because it is. In the past many Americans would retire after years of hard work and live on the income from their company pension plan. In a time where Pension plans are becoming more and more rare, many individuals are using fixed indexed annuities to accomplish the same goals as a pension. With current interest rates on the rise and many analysts projecting continued rate hikes, we believe annuities can be a great way to supplement bond portfolios going forward.

To further explore these and other options in your work benefits program ask your Human Resources Rep for statements detailing the plan’s offerings, then call us to set up a consultation. We can help you navigate the more complicated parts of you plan to identify specific strengths and weaknesses. From there it may be beneficial to have our team analyze your overall plan.