Though the market changes, our commitment to clients does not. Our Chief Executive Officer, Greg Weimer, and Director of Investments, Bill Winkeler, give you an update on the current market and share insights on how to navigate these times.

Why the ‘Last Dance’ was about more than just sports…

Over a five-week period in April and May, millions of people tuned in to watch the ESPN docuseries, “The Last Dance”, about Michael Jordan and the 1990s Chicago Bulls dynasty. Whether it’s the lack of live sports and entertainment in a COVID-19 world or the never-ending admiration people have for Michael Jordan, everyone was talking about the series. Basketball fan or not, it was an incredible story that people of all ages and backgrounds will enjoy.

Spoiler alert: Michael Jordan and the Chicago Bulls won six NBA championships during the 1990s, twice winning three in a row, and went down in history as one of the best sports dynasties in history. Michael Jordan will forever be part of the debate for greatest of all time and Dennis Rodman will be remembered for his wild tendencies. Most of us knew all of this before watching a single episode of the series and yet something about it captured the attention of millions. Every episode was about so much more than just sports.

I would argue that everyone who watched, either consciously or sub-consciously, took something away from it. Here are a few of the lessons that we walked away with:

PATIENCE IS REQUIRED

The age of technology is creating an issue across all generations, especially the younger ones. Yes, we are guilty of this also. Technology has created a society where people look for and need instant gratification. The problem is that becoming an overnight success or getting rich quick shouldn’t be expected and is highly unlikely. Michael Jordan, arguably the greatest basketball player ever, didn’t have overnight success so why should we expect it? He may have been known as a great basketball player, but that doesn’t mean he immediately started winning championships. As many of us have heard, he was even cut from his high school basketball team.

We shouldn’t mistake patience for complacency either. Exhibiting patience by sitting back while the word keeps turning won’t bring success. Hard work is always required, but don’t expect results overnight. Success can be a slow grind and is different for each and every individual based on their circumstances.

MAKE THE COMMITMENT

The 1990s Chicago Bulls made a commitment to win. They had a clear goal to win a championship and made the commitment to do whatever it would take to win. It’s easy to make a lofty goal, but it’s difficult to commit to the amount of work needed to achieve that goal. There were numerous interviews during “The Last Dance” where someone mentioned the amount of time and thought that Michael Jordan put in to his craft. Michael Jordan’s commitment to the Bulls organization, his family, and himself was always something to be admired. For most people, there isn’t a better example of commitment than his infamous “flu game” where he scored 38 points while being exhausted from flu-like symptoms.

He also acted as a leader by pushing this commitment on to his team. His leadership style was criticized at times, but the results speak for themselves. Did his commitment and leadership style come across as ruthless? At times. Whether this leadership style would work in other environments is a debate for another day, but what can’t be debated is how he was able to make his entire team as committed as he was. As Jordan said in “The Last Dance”, “winning has a price and leadership has a price”. Jordan later said “I never asked a teammate to do something that I am not currently doing”.

IT TAKES A TEAM

Michael Jordan may have been the star of the show, but he couldn’t have done it by himself. There were so many people that had a part in the dynasty it would be hard to list them all. From Phil Jackson and Scottie Pippen to Steve Kerr and Scott Burrell, they all had their role. We’ve seen time and time again situations where a superstar doesn’t have the right cast of supporting characters around him or her and struggles to have success. This doesn’t always mean that it needs to be the most talented team either. We’ve also seen situations where the most talented group isn’t the best team.

How do we relate this to life and business? If you want to have success in your personal or professional life surround yourself with the people that will help you succeed. Find your “coach” in Phil Jackson, find your right-hand man in Scottie Pippen, and find the teammate you can trust in Steve Kerr. Without the right team it will be difficult to succeed.

“The Last Dance” was an incredible documentary and one that everyone should watch. Even if you are watching purely for enjoyment try to find a few lessons that you can apply to your life. As Michael Jordan said at the end of the docuseries, “all you needed was one little match to start the whole fire”. Find that match in your own life.

Wealth Managers | Confluence Financial Partners

Bear Markets – Did You Know?

If you’ve watched the news or browsed the web at all recently, no doubt you have seen the term “Bear Market” quite frequently. This term is often used when the worlds’ stock markets go through difficult periods, but what does it mean? And what should investors do about it? Here are five points to consider that will hopefully offer you perspective and confidence:

1. What is a Bear Market? A bear market is generally defined as a stock market decline of at least 20%. The recent market decline (S&P 500) we’ve experienced in 2020 went from the peak in February to the trough in March of -34%.
2. How often do bear markets occur? Since 1949, the S&P 500 has experienced 10 declines of at least 20%, or one every 7 years on average.
3. How long do they typically last?  Since 1949, the average bear market has lasted about 14 months. The average bear market total return was -33%.
4. Bull vs. Bear – Good News! Since 1949, the average bull market has lasted nearly 5 times as long as the average bear market. The average bull market lasted about 71 months and had an average total return of 263% over that time period.
5. A $10,000 hypothetical investment in the S&P 500 in 1980 (with dividends being reinvested) would have grown to more than $870,000 by the end of 2019. During that time period, the investor would have experienced 4 bear markets, 20 market corrections of 10% or more, and 5 recessions.

Key Takeaway: As difficult and unsettling as bear markets can be, it is important to understand that we “earn” the bull markets by being disciplined and patient during the bear markets. The reason that equities can make relatively high returns over time is that those returns are unpredictable in the short-term.

Sources: Capital Group, RIMES, Standard & Poor’s, 2020; MFS Market Insights, 2020; Vanguard Understanding market downturns, 2020; JP Morgan Guide to Markets, 2020.

Traditional 401(k) vs. Roth 401(k)

Retirement plans can be confusing – we know! The decision of whether to contribute to a Traditional 401(k) or a Roth 401(k) is one that many people have or will encounter at some point in their lives. Although these two types of retirement accounts are very similar, they also have key differences. As more and more employers begin to offer a Roth 401(k) option, you should make sure that you have an understanding of each so that you can make the most informed decision possible.

What is the difference?

The main difference between a Traditional or Pre-Tax 401(k) and a Roth 401(k) is the tax impact. With a Traditional 401(k), you receive a tax benefit for your contribution now, but are taxed on the withdrawals later. A Roth 401(k), however, does not provide a tax benefit now. As a result of paying tax on your contribution now, the Roth option allows for tax-free withdrawals later.

Here is a quick example to help explain the tax difference between the two options. This year, if you contribute $10,000 to a Traditional 401(k) and were taxed at a fictional rate of 15% (this would depend on your tax bracket) the $10,000 contribution would decrease your current year taxes by $1,500. If you contributed $10,000 to a Roth 401(k) instead, there would be no reduction to your current year taxes. If we fast forward to retirement and assume the $10,000 contribution is now worth $50,000, there will again be a difference between the two upon withdrawal. If you made a withdrawal of the entire $50,000, the full $50,000 would be taxed at your retirement tax rate with a Traditional 401(k), but the entire $50,000 would be withdrawn tax-free if it were originally invested in a Roth 401(k).

As you can see, the current tax benefit is greater with the Traditional 401(k), but the future tax benefits are better upon withdrawal from a Roth 401(k). One other item to note is that these facts hold no matter what the withdrawal amount is. No matter the amount, a withdrawal from a Traditional 401(k) is generally all taxable and a withdrawal from a Roth 401(k) is generally tax-free.

Which is right for you?

Unfortunately, the answer is that it depends. The primary question to ask yourself is: will my tax rate now or during retirement be higher? If you are in the beginning of your career or expect your income during retirement to be more than it is today, a Roth 401(k) may be right for you. If you believe your tax rate now is going to be higher than what it will be during retirement, then a Traditional 401(k) may be the best option for you.

Another advantage of the Roth 401(k) is that in addition to your original contribution, the growth of the account can be withdrawn tax-free! This is not the case with a Traditional 401(k). Also, if your employer provides a contribution match, you would need to pay tax on this portion of your account at the time of withdrawal whether you use a Traditional or Roth 401(k) as it is a pre-tax contribution.

Other considerations

There are several other differences between the Traditional and Roth 401(k) options that you may want to consider.

• Required minimum distributions (RMDs) – Beginning at age 72, there are required minimum distributions from both 401(k) options unless you are still working. However, a Roth 401(k) could be rolled over to a Roth IRA. Unlike Traditional IRAs, Roth IRAs do not have required minimum distributions.
• Estate planning – Inheriting a Roth retirement account is more beneficial to your heirs than a Traditional account. This is because they would generally not have to pay tax on distributions from the inherited Roth account, whereas they would have to pay tax on distributions from the Traditional.
• Law changes – Just as we can’t predict what your future tax rate will look like we also can’t predict law changes that could occur. Any law changes during your lifetime could change the results of this decision for yourself or your heirs. For example, the recent SECURE Act pushed back RMDs from age 70 ½ to age 72. It also requires an inherited IRA to be distributed within 10 years of inheritance rather than over the beneficiary’s lifetime. This could be a reason to contribute to both a Traditional and a Roth 401(k) to give yourself tax diversification across different accounts. Many employers will allow you to split your contributions between the two.

Conclusion

In summary, there is no easy answer to what type of 401(k) option is better. The decision will depend on your individual circumstances and most likely will change throughout your life. Using the information above should hopefully give you a good starting point to be able to make the most informed decision possible.

Please don’t hesitate to reach out to us if you would like to discuss further!

401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Roth 401(k) plans are long-term retirement savings vehicles. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 72. RMD’s are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation.

Any opinions are those of Gregory Weimer and Chuck Ziants and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Expressions of opinion are as of this date and are subject to change without notice. You should discuss any tax or legal matters with the appropriate professional.

Make Lasting Memories by Savoring Life’s Simple Joys

While extravagant vacations are great, you don’t need to spend a lot of money to make meaningful memories with your loved ones. A slow morning on the first day of summer. Baking cookies with the littles. A great meal surrounded by close friends or family. The best memories come in all shapes and sizes, both planned and unplanned. And while there’s nothing like going on that vacation you’ve been looking forward to for months, sometimes it’s the small, unexpected delights that stay with us the longest.

So how can you lead a life with more moments worth savoring? Here are a few tips to help you get started.

Focus on the Little Things

There’s nothing wrong with a bucket list full of exotic travel destinations or goals to buy that yacht or plan a big family reunion. After all, helping you work toward those goals is what a well-planned life is all about. Still, that’s usually not our day-to-day life. There are so many moments in between those grander experiences that are opportunities to explore smaller joys that, when added together, can be just as memorable or fulfilling as a big trip.

Start by picturing your perfect day. What do you do or eat? Who and what do you see? Perhaps it’s reading a book, listening to music or getting outside. Maybe you want to spend more time with close friends. After thinking it over, consider how to bring a few of those elements into your regular routine.

For example, maybe you want to get outside and see one of your friends more often. Consider putting a weekly date on the calendar with them to go for a walk, helping you fulfill both goals. Or perhaps you want to spend more time with your grandkids and also do more at-home cooking. Can the kids help? It could turn into an opportunity to not only spend time together, but for you to share some of your skills and insights with the next generation – doing something as simple as making a pizza.

When trying to find ways to bring the whole family together, consider what everyone is most interested in. Do your kids or grandkids have favorite activities you can do together? Maybe it’s going to an escape room or planning a watch party for their favorite show. Better yet, take turns choosing the plans for a monthly get-together. Experiences are a great way to connect and they make excellent gifts, too.

Commit to Unplugging

Social media has given us unprecedented access to loved ones near and far, and it’s made it easier than ever to share our lives (for better or for worse). But while it makes capturing a moment so easy, social media can also put extra pressure on ourselves and our experiences to be and look perfect – making it that much harder to cultivate and cherish authentic memories.

Moreover, according to Psychology Today, the average American has five social media accounts and spends an hour and 20 minutes each day browsing their feeds. That’s more than 37 hours every month! Imagine the memories we could create over a year with that time.

If you’ve found yourself getting sucked into social media, consider taking a break or limiting the time you spend scrolling. Time management apps and new settings on phones allow you to set timers so you receive an alert when you’ve gone over your allotted time on specific apps.

Learn to Be Present

It’s hard to fully take in a great moment when we’re distracted, whether by our never-ending to-do list or our phone. Learning how to quiet our mind for even short periods of time can leave us open for moments of serendipity and spontaneity. Perhaps you run into a friend at the grocery store and decide to catch up over lunch, or spot a bed of flowers in full bloom while on a walk – both things you may have missed while checking your phone or worrying over all the errands on your list.

Meditation has been proven to help reduce stress and anxiety while improving our concentration. And with several popular apps out there with guided meditations, it’s never been easier to give it a try. While some require subscriptions, most offer a free trial so you can see how you like it before making a commitment.

Enjoy the Moments Worth Living For

Living for the moment is all about applying that stop-and-smell-the-roses mindset to your daily life. That way, even when you aren’t cruising the Mediterranean or celebrating your birthday with a bash, you might just stumble upon a few more exciting moments and soak up some extra memories along the way.

Sources: Psychology Today; Huffington Post

Raymond James is not affiliated with any organizations mentioned.

Family and Life Events

June 26, 2019

Check This List – Twice – Before Year-End

Proactive investors know that the months before year-end are an ideal time to make any final tax-saving moves.

While keeping in mind your long-term investment goals, meet with your advisor and coordinate with your tax professional to examine nuances and changes that could impact your typical year-end planning.

Mind Your RMDs

Be thoughtful about required minimum distributions (RMDs) to ensure that you comply with the rules. If applicable and you have yet to do so, take your 2017 RMD to avoid a 50% penalty on required amounts not taken. Other considerations:

• By automating your RMDs with your advisor, ensure that you never miss this important deadline.
• You can take your first RMD during the year you reach age 70½, or you can delay it until April 1 of the following year. Know, however, that if you delay and take two distributions in the first year after turning 70½, your income could be inflated, which may affect your tax-bracket standing.
• Subsequent RMDs must be taken no later than December 31 of each calendar year.
• Qualified charitable distributions allow traditional IRA owners who transfer RMDs to qualified charities to exclude the amount donated from their adjusted gross incomes, up to $100,000.
• Be mindful of how taking a distribution will impact your taxable income or tax bracket. If you have space left in your bracket or a down income year, you may want to consider taking additional distributions.

To Harvest or Not to Harvest

Evaluate whether you could benefit from tax-loss harvesting – selling a losing investment to offset gains or establish a deduction of up to $3,000. Excess losses also can be carried forward to future years. With your advisor, examine the following subtleties when aiming to decrease your tax bill:

• Short-term gains are taxed at a higher marginal rate; aim to reduce those first.
• Don’t disrupt your long-term investment strategy when harvesting losses.
• Be aware of “wash sale” rules that affect new purchases before and after the sale of a security. If you sell a security at a loss but purchase another “substantially identical” security – within 30 days before or after the sale date – the IRS likely will consider that a “wash sale” and disallow the loss deduction. The IRS will look at all your accounts – 401(k), IRA, etc. – when determining if a wash sale occurred.

Manage Your Income and Deductions

Those at or near the next tax bracket should pay close attention to anything that might bump them up and plan to reduce taxable income before the end of the year.

• Consider making a donation. Giving to a charity can benefit a cause you care about and reduce your taxable income. Make sure your gifts are well-documented. You also can gift up to $14,000 tax free to as many individuals as you wish.
• Determine if it makes sense to accelerate deductions or defer income, potentially allowing you to minimize your current tax liability. Some companies may give you an opportunity to defer bonuses and so forth into a future year as well.
• Certain retirement plans also can help you defer taxes. Contributing to a traditional 401(k) allows you to pay income tax only when you withdraw money from the plan in the future, at which point your income and tax rate may be lower or you may have more deductions available to offset the income.*
• Evaluate your income sources – earned income, corporate bonds, municipal bonds, qualified dividends, etc. – to reduce the overall tax impact.

Evaluate Life Changes

From welcoming a new family member to moving to a new state, any number of life changes may have impacted your circumstances over the past year. Bring your financial advisor up to speed on major life changes and ask how they could affect your year-end planning.

• Moving, for example, can have a significant impact on taxes and estate planning, especially if you have relocated from a high income tax state to a low income tax state, from a state with an estate income tax to one without or vice versa, or if you have moved to a state with increased asset protection. Note that moving expenses themselves, however, are no longer deductible as an itemized deduction for non-military members.
• Give thought to your family members’ life changes as well as your own – job changes, births, deaths, weddings and divorces for example can all necessitate changes – and consider updating your estate documents accordingly.

Next Steps

Consider these to-dos as you prepare to make the most of year-end financial moves, and discuss with your financial advisor and tax professional:

• Manage your income and deductions, paying close attention to your tax bracket, especially if you are on the edge.
• Remember to take your RMD, if applicable.
• Evaluate your investments, keeping in mind whether you could benefit from tax-loss harvesting.
• Make a list of the life changes you and your family have experienced during the year.

*Withdrawals prior to age 59 1/2 may also be subject to a 10% federal penalty tax. RMDs are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. Raymond James advisors do not provide tax advice. 

TAX PLANNING

November 21, 2018

Redefining Your Retirement

Today’s retirees are choosing from a variety of retirement styles. What’s yours?

Although an estimated 10,000 baby boomers reach retirement age every day, how each chooses to spend their free time can be quite different. Today’s retirees wish to forge new identities and seek new experiences, while redefining how they spend their time and money.

See if one or more of these new retiree profiles resonates with you. Deciding how you’ll stay busy can go a long way toward helping you plan and save for your dream retirement.

The Giver

Givers contribute time, talent and, yes, even money to support causes close to their hearts. While the typical American spends 20 minutes a day engaged in volunteer, civic or religious activities, the Giver over age 65 dedicates a half hour or more, according to the Bureau of Labor Statistics.

One retiree may use her musical talents to play the violin for hospital patients, while another works behind the scenes updating a nonprofit’s website. Either way, it’s all about making a meaningful difference.

Note: Givers may become too altruistic, spending more time and money than planned, undermining health or financial stability.

Givers represent 33% of working retirees.

The Thinker

Thinkers have a deep desire for lifelong learning. They may retire in a college town, take classes, read for pleasure and engage in contemplative activities.

Many colleges and universities are designing courses aimed at this new senior class. Campuses can be found in areas with affordable housing, quality education, teaching opportunities, walking and biking trails, and excellent transportation, healthcare and entertainment options.

Note: If you’ve established a 529 plan for a child or grandchild, you may be able to use unneeded funds for your own continuing education. Ask your financial advisor about potentially withdrawing funds without penalties.

Cognitively active people are 2.6 times less likely to develop dementia or Alzheimer’s.

The Entrepreneur

Entrepreneurs typically start a business that’s different from a past career, bringing decades of experience, success, passion and emotional intelligence to their new ventures.

Goals include a fulfilling career, increased flexibility and enjoyment in their work. Some hope their new endeavors will becomes self-sustaining, while allowing for work/life balance.

Note: A small business entails a business plan, startup costs, insurance and a financial plan. Work with a professional tax planner and financial advisor to build a successful venture.

Nearly 3 out of 5 working retirees consider a different line of work.

The Explorer

The Explorer dedicates up to a quarter of their financial resources on travel. These globetrotters invest in experiences and indulge their wanderlust while they have the health, energy and resources.

Good saving habits help Explorers immerse themselves among other cultures, foods and languages.

Note: Plan for ongoing travel expenses, desired location, frequency and duration, as well as inflation and foreign exchange rates. Health-related issues may become a limitation in later years.

There are just as many Explorers over age 75 as there are among younger groups.

The Part-Timer

The Part-Timer, like the Entrepreneur, seeks a career change, but may not wish to commit to a full-time position. Some favor mini-retirements – periods of work followed by intermissions for relaxation. Think consulting and contracting, for example.

Note: Returning to work, even part time, can incur expenses such as new work attire, transportation and dining out. Evaluate the impact of additional income on your current tax bracket, Social Security benefits, healthcare coverage, and potential contributions to retirement plans.

There are more than 7.1 million Part-Timers age 55 or older.

The Foodie

Foodies prefer quality dining and enjoying the experience of the meal. They typically spend about an hour and 20 minutes when dining, relishing how food and drink increases their quality of life. They enjoy experimenting with new creations, introducing new flavors or bringing friends and family together.

Since the Foodie spends time shopping for and preparing meals, other expenses are typically lower.

Note: Food connoisseurs need to factor in healthcare costs and inflation, as well as utilities and transportation.

Foodies spend, on average, 28% of their income on food and beverage.

The Athlete

The Athlete may compete in triathlons or play tennis into their 80s and beyond. They stay in top form and enjoy training and competition.

As the Athlete eventually slows down, or faces sudden illness or injury, healthcare costs can account for a significant share of retirement income, including Medicare expenses, prescriptions or long-term care needs.

Note: It’s important to budget for proper equipment and training. Select an appropriate Medicare or healthcare policy and account for expenses that aren’t covered. Be sure to factor in inflation and long-term care or assisted living.

Approximately a third of Americans over 65 are considered physically active.

Next Steps

• Decide what type or types of retirement styles you’d like to pursue
• Further explore the necessary steps to achieving your goals
• Talk to your financial advisor about the best strategy for turning your retirement dream into reality

Sources: Journal of Financial Planning: “How retirees spend their time”; Bureau of Labor Statistics; Robert S. Wilson, Ph.D., Rush Alzheimer’s Disease Center; Work in Retirement: Myths and Motivation; J.P. Morgan “Cost of Waiting” study; President’s Council on Fitness, Sports & Nutrition

Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible education expenses, such as tuition and room and board. However, if you withdraw money from a 529 plan and do not use it on an eligible education expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings. Investors should consider before investing, whether the investor’s or the designated beneficiary’s home state offers state tax or other benefits only available for investments in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. 529 plans offered outside their resident state may not provide the same tax benefits as those offered within their state.

RETIREMENT AND LONGEVITY

August 15, 2018