Issue 11.10

Meet diversification, patience, and consistency.

Any investor would do well to call on three friends during the course of his or her financial life: diversification, patience and consistency.  Regardless of how the markets perform, they should be a part of your investment philosophy.

Diversification.  The saying “don’t put all your eggs in one basket” has real value when it comes to investing.  In a bear market, certain asset classes may perform better than others.  Ditto for a bull market.  If your assets are mostly held in one kind of investment (say, mostly in mutual funds, or mostly in CDs or money market accounts), you could be hit hard by stock market losses, or alternately lose out on potential gains that other kinds of investments may be experiencing.  So there is an opportunity cost as well as risk.

This is why asset allocation strategies are used in portfolio management.  A financial advisor can ask you about your goals and tolerance for risk and assign percentages of your assets to different classes of investments.  This diversification is designed to suit your preferred investment style and your objectives.

Patience.  Impatient investors obsess on the day-to-day doings of the stock market.  Have you ever heard of “stock picking” or “market timing”?  How about “day trading”?  These are all attempts to exploit short-term fluctuations in value.  These investing methods might seem fun and exciting if you like to micromanage, but they will add stress and anxiety to your life, and they are a poor alternative to a long-range investment strategy built around your life goals.

Consistency.  Most people invest a little at a time, within their budget, and with regularity.  They invest $50 or $100 or more per month in their 401(k) and similar investments through payroll deduction or automatic withdrawal.  In essence, they are investing on “autopilot” to help themselves build wealth for retirement and for long-range goals.  Investing regularly (and earlier in life) helps you to take advantage of the power of compounding as well.

Are diversification, patience and consistency part of your investing approach?  Make sure they are.  If you don’t have a long-range investment strategy, talk to a qualified financial advisor today.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518

These views are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.  Diversification does not ensure a profit or protect against loss in a declining market.

Issue 8.10

How’s your pension plan doing?  Many people know they have a pension plan, but they’re not quite sure how it works, how stable it is, or exactly how their money is invested.  The details are often hazy.

Pension plans are also called “defined benefit” plans because they provide a predetermined, continuous income for retirement.  This fixed payout is generally determined by factors such as your exit salary and your seniority or longevity at work.  Government pension plans commonly require employer contributions, though union and private pension plans may not.

If you do not have a pension plan:

It may be worthwhile to find out if your employer offers one.  Ask for the details, and be sure to find out at what point you become eligible.  It’s typical for an employee to gain eligibility after three to five years.

If you have a pension plan:

It’s important to keep tabs on it and make sure you understand it.  For example – do you know if your plan is stable?  Increasingly, employers are terminating pension plans and either directing pension assets into annuities or issuing lump-sum payouts to workers.

If you were in a pension plan that was terminated, or if you had a pension plan with a former employer that has since gone out of business, contact the Pension Benefit Guaranty Corporation (www.pbgc.gov).  This is an agency of the federal government created to protect pension plan assets.

If you are more than five years away from retirement it may seem too soon to bother tracking down pension plan details, but it’s never too soon to start.

It’s important to get all the information you can about your plan, and once you have that information, you need to keep up with it.

After all, your retirement may depend on it.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

This article was written by Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Issue 6.10

A little phrase that may mean a big difference.  When you read about investing and other financial topics, you occasionally see the phrase “tax efficiency” or a reference to a “tax-sensitive” way of investing.  What does that really mean?

The after-tax return vs. the pre-tax return.  Everyone wants their investment portfolio to perform well.  But it is your after-tax return that really matters.  If your portfolio earns you double-digit returns, those returns really aren’t so great if you end up losing 20% or 30% of them to taxes.  In periods when the return on your investments is low, tax efficiency takes on even greater importance.

Tax-sensitive tactics.  Some methods have emerged that are designed to improve after-tax returns.  Money managers commonly consider these strategies when determining whether assets in an investor’s account should be bought or sold.

Holding onto assets.  One possible method for realizing greater tax efficiency is simply to minimize buying and selling to reduce capital gains taxes.  The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions.

Tax-loss harvesting.  This means selling certain securities at a loss to counterbalance capital gains.  In this scenario, the capital losses you incur are applied against your capital gains to lower your personal tax liability.  Basically, you’re making lemonade out of the lemons in your portfolio.

Assigning investments selectively to tax-deferred and taxable accounts.  Here’s a rather basic tactic intended to work over the long run: tax-efficient investments are placed in taxable accounts, and less tax-efficient investments are held in tax-advantaged accounts.  Of course, if you have 100% of your investment money in tax-deferred accounts such as 401(k)s or IRAs, then this isn’t a consideration.

How tax-efficient is your portfolio?  It’s an excellent question, one you should consider.  But this brief article shouldn’t be interpreted as tax or investment advice.  If you’d like to find out more about tax-sensitive ways to invest, be sure to talk with a qualified financial advisor who can help you explore your options today.  What you learn could be eye-opening.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

This article was written by Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  Please consult your Financial Advisor for further information.

Issue 4.10

Everyone has an estate.  Rich or poor, it doesn’t matter.  When you die, you leave behind an estate.  For some, this can mean property, cash money, assets and more.  For others it could be as simple as the $10 bill in their wallet and the clothes on their back.  Either way, what you leave behind when you die is considered to be your “estate”.

Why plan?  Well, even if you’re just leaving behind the $10 bill in your wallet, who will inherit it?  Do you have a spouse?  Children?  Is it theirs?  Should it go to just one of them, or be split between them?  This (quite simply) is what estate planning is all about.  

Who needs estate planning?  While it is absolutely possible to die without planning your estate, I wouldn’t say it is advisable.  If you die without an estate plan, your family could face major legal issues and (possibly) bitter disputes.  So in my opinion, everyone should do some form of estate planning.  Your estate plan could include wills and trusts, life insurance, disability insurance, a living will, a pre- or post-nuptial agreement, long-term care insurance, power of attorney and more.

Why not just a will?  Basically, a will tells the world what you’d like to have happen, but other items (like properly prepared and funded trusts) can provide the tools to make things happen, and help your heirs to avoid probate.

So, what is “advanced” estate planning?  Advanced estate planning is generally something those with a very high net worth should consider.  For example, if you are single and your net worth exceeds $1.5 million dollars, or if you are married and (as a couple) your net worth exceeds $3.5 million dollars, you should consider advanced estate planning.  The main purpose of advanced estate planning is to reduce taxes.  The use of unified credit, gifting strategies, trusts and more can help your heirs receive the highest benefits possible under federal and state laws.

Where do you begin?  Whether you need basic or advanced estate planning, I would advise you to speak with qualified professionals.  A Financial Advisor can refer you to a good estate planning attorney and a qualified tax professional, and lead a team effort to assist you in drafting your legal documents.  

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

These views are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Issue 2.10

What it is, why people opt for it.

Ever hear of critical illness insurance?  This isn’t standard-issue disability insurance, but a cousin of sorts.  With people living longer, it is a risk management option entering more people’s lives.

The notable wrinkle about this type of insurance is that the insurer issues you a lump sum while you are alive.

Insurance for a prolonged health crisis.  You buy critical illness insurance to help you out in case you are diagnosed with, suffer from, or experience a serious, potentially life-threatening health concern.  Now, what does an insurer define as “serious” or “life-threatening”?  That varies.

Events or illnesses that often qualify include organ transplants, open-heart surgeries, deafness or blindness, Alzheimer’s disease, HIV or AIDS diagnoses that are not sexually linked, heart attacks, paralysis or the loss of limbs, serious cancers and other maladies.  Many non-fatal, but trying conditions also fall within the category.

The idea is that you will use the payout to get through the crisis financially – the treatment, the surgery, the costs incurred.  The cash premium is either paid directly to you, or to someone that you designate.

A lump sum to use as you see fit.  While critical illness insurance pays out a lump sum to the ill, insured party, there are usually no strings attached to the money.  It usually does not have to be used for medical payments.  The money is tax-free, and you can use it to pay hospital bills, living expenses, business expenses … whatever costs you need or want to pay in a time of crisis.

Things to remember.  Critical illness insurance policies only pay out if you come down with one of the stipulated illnesses.  This is why many people do not purchase them.  However, with lifespans extending, many people recognize that more years may give them more chances to encounter a serious but survivable illness.

If you would like to know more about critical illness insurance and whether it may be appropriate for you or a loved one, then be sure to talk with a qualified insurance or financial professional today.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

These are the views of Peter Montoya, Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Issue 52.09

As retirees live longer, their portfolios need to be stronger.

Decades ago, the “typical” retiree left work for good between age 60-65 and typically passed away at about 70-75.  Retirement lasted 10-12 years for many Americans.  Now the picture has changed: some of us will spend 30, 40, perhaps even 50 years in retirement.  (Imagine retiring at 55 and living to be 105 … it is possible.)  We may live much longer than our parents, and if we do, we will need a lot more money.

A slight shift in outlook.  Years ago, retirees were urged to invest conservatively – often, very conservatively.  The idea was to build up your savings and net worth aggressively across two or three decades, and then adopt a risk-averse investment strategy for the “golden years.”  But the reality of a 20- or 30-year retirement has changed that mentality.

The new presumption is that today’s retirees should never retire from accumulating wealth.  Most Americans will not walk away from their careers with assets equivalent to 20 or 30 years worth of income.  If you have $3 million in assets today, you may think you’ll have $100,000 a year to live on for 30 years.  Sounds great, right?  But that may not be enough.  Questions of liquidity and taxes aside, what about the runaway costs of healthcare and eldercare?  What about the effect of inflation across 30 years – do you remember what a gallon of gas or milk cost 30 years ago?

A new reality.  You’re now seeing people in their sixties with the kind of portfolios that people used to have in their forties – portfolios with stocks, mutual funds, and other investments with appreciable risk.  Sometimes they have to invest this way because they haven’t accumulated sufficient wealth for retirement.  Or, they are simply being pragmatic about their long-term need to sustain wealth and keep their retirement assets growing.

What kinds of investments should you retire with?  The answer to that question can only be determined after you carefully consider some variables, such as the age at which you retire, the assets you have saved up, the lifestyle you want to enjoy, family and health considerations, and how comfortable you are with certain types of investment.  Be sure that you speak with a financial advisor who specializes in retirement planning before you make a decision to revise your investment portfolio.  Even if you are ten or more years from retirement or plan to keep working into your seventies, I think you will find it eye-opening and useful.  Most people underestimate their retirement income needs.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

These views are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Issue 50.09

Don’t ignore it; look forward to the chance to get things in order.

Here’s the scenario … you get a card in the mail, one of those little reminders that tells you it’s time for your annual financial checkup.  Your reaction: I’ll take care of that later.  Here’s why you should look forward to it.

Why do I need an annual review?  Because things change, and during the course of the last 12 months, you may have … changed jobs, made major purchases, welcomed a new child, retired, bought or sold a residence, decided upon new goals.  These developments can change your financial objectives.

Also, it is just sensible to measure your financial progress.  If you are not making progress in accumulating assets, or if you are assuming too much risk as a result of your current portfolio or financial decisions, it’s time for change.  

A chance to … stop putting it off.  Imagine just letting your investments go for five or ten years, assuming that they’re doing okay while you wonder what the quarterly statements mean.  Imagine being a few years from retirement only to find you have less than a year’s salary in savings.  Imagine passing away and leaving unresolved money issues for your loved ones, or subjecting them to a contentious probate process.  If they had only reviewed what was happening with their lives financially, they could have planned to avoid these issues in advance.  Putting things off can be dangerous.

Why not start the year right?  January is not only the start of a new year, but an ideal time to take a look under the hood financially.  During your annual review, you can estimate your net worth, and also possibly learn about any tax changes that might affect your investments, business or estate.  It’s also a good time to make voluntary IRA contributions, and get college funding and financial aid applications underway.

Hopefully, you have a qualified financial advisor who you have an existing relationship with.  If you don’t, contact one today.  Financial planning is not an event you do once in your lifetime.  Financial planning should be a priority for you – it can help you manage your money, and allow you to plan for your goals and for the lifestyle you want for the future.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

These views are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Issue 48.09

Now is a good time to examine what’s in your portfolio.

The stock market is unsettled … and perhaps its fluctuations are unsettling you. It’s a stressful time for the economy and Wall Street, and you may be concerned about your portfolio given what’s going on with oil prices, the real estate market, and rising unemployment figures.  It may be a good time to review how your assets are invested.

Is your portfolio balanced?  A balanced portfolio may help you ride out stock market turbulence.  Stocks and mutual funds aren’t the only asset allocation choices you have, and you won’t be alone this winter if you decide to examine other investment options.

Fixed annuities and Treasuries become attractive to investors when the market turns volatile.  Bonds tend to maintain their strength when stocks perform poorly; fixed annuities are simply contracts with insurance firms, not correlated to stock market performance (though certain types of annuities may enable you to take advantage of stock market gains while maintaining your principal).  Fixed-income mutual funds, dividend income funds and bond funds also have their adherents.

Last but not least, you have cash, though cash holdings haven’t traditionally performed anywhere near the level of the stock markets.

Are you retired, or retiring?  If you are, this is all the more reason to review and possibly even revise your portfolio.  

Often, people in their fifties and sixties feel they need to accumulate more money for retirement, and that feeling leads them to accept more risk in their portfolio than they should. In the absence of a salary, however, you’ll likely want consistent income and growth, and therein lies the appeal of a balanced investment approach designed to manage risk while encouraging an adequate return.

Why not take a look into your portfolio?  Ask your financial advisor to assist you.  You may find that you have a mix of investments that matches your risk tolerance.  Or, your portfolio may need minor or major adjustments.  The right balance may help you insulate your assets to a greater degree against financial ups and downs.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

These are the views of Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Issue 46.09

Six things you can do to get in shape financially.

Have you looked at your finances lately?  There’s no wrong time to take a closer look at your financial health.  Why not start today?  Here are several things you may want to do:

Define your goals, set a budget.  The goal setting will motivate you, and the budget (created with your goals in mind) can be reviewed and adjusted.  Changes in your life may prompt you to save, spend and invest differently.

Look at your debts.  What is your monthly debt vs. your monthly income?  Would you benefit from refinancing your home?  Could you improve your credit score?  Set a plan in motion.  Consider making today the day you take care of any nagging, lingering debt – once and for all.

Max out your 401(k) or IRA contributions.  Consider making a bigger investment in your future today.

If your tax status has changed, revise your W-2.  Did you get married or divorced recently?  Is there a new addition to the family?  Did you buy a house, or get a big raise or tax refund last year?  If so, you need to update your withholding status.  

Put all your tax information in one place as it comes in.  Put your W-2, your 1099-INT, your 1099-DIV, and all forms in one folder for your preparer (or yourself).  

Work on wealth protection.  Annually, you should

a) calculate your net worth,

b) review your will and estate plan, and

c) review your level of risk management.  Are you adequately insured?  Too much tax exposure? A professional opinion couldn’t hurt.

We all need a reminder every once in a while to give ourselves a financial “check-up”.  Consider this yours.  Take a closer look at where you’re at, where you’d like to be, and how you’ll get there.  Be sure to look at all the factors, and consider speaking with a Financial Advisor if you don’t already have one.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

This article was written by Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer give tax or legal advice.   Please consult your Financial Advisor for further information.

Issue 44.09

Are you making mistakes with your money?  Many people do, because of inattention, a lack of knowledge or confidence, or relying of the advice of friends rather than professionals.  Here are some all-too-common money errors to avoid …

Putting off financial planning.  This may be the biggest mistake of all.  Procrastination does not help you save for retirement, and it will not help you reduce your taxes or transfer money to your heirs.  Some avoid planning out of fear – they simply don’t know where to begin.  Don’t let this stop you.  Decide today to do something about your financial future.

Putting all your eggs in one basket.  Too many people invest everything in just one place.  Try spreading your assets across multiple investments, and you’ll help to insulate them against the effects of economic ups and downs.

Buying more home than you can afford.  Interest-only loans, option adjustable-rate mortgages (option ARMs) and lease purchases still tantalize couples and families with small nest eggs, modest salaries and credit blemishes into taking on much more liability than they can bear.  The result is often foreclosure.  Speak to a professional to make sure the amount of home you purchase makes sense for you.

Making impulsive or emotional money decisions.  A decision that feels good (or exciting) may not be appropriate for you financially.  Avoid spur-of-the-moment financial choices, and the influences that may trigger them.  The next time you’re about to make a snap decision, stop and think.  Consider and compare whenever possible.

Living above your means.  In the acclaimed book The Millionaire Next Door, authors Thomas Stanley and William Danko found that most millionaires drive used American cars and shun a champagne-and-caviar lifestyle.  It is the middle class that is generally seduced by big-debt, big-ticket luxury items … sometimes all the way into bankruptcy.  Make wise decisions about money, take the time to consider big purchases, and be mindful of what effect they’ll have on finances down the road.

Avoiding all risk.  Caution is good, but being extremely risk-averse (for example, refraining from investment and just putting your money in an FDIC-insured bank account) may cost you in terms of the growth of your retirement savings and assets.  If you’re holding back because you’re unsure, speak with a financial advisor.

Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement Specialist^SM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc.  Member FINRA and SIPC.  For additional information, Scott can be reached at (435) 656-2518.

This article was written by Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative or Broker/Dealer give tax or legal advice.  Please consult your Financial Advisor for further information.