Picking up from where we left off from where we left off with Part 1 of this series , it’s probably important to discuss intentionality in the context of investing, right? The logical thought is that the more intentional and focused I am with my money today, the more that my money will work for me tomorrow. Dave Ramsey  says it nearly every day, “live like no one else today, so you can live and give like no one else tomorrow.” The foundation of intentionality is not only a psychological construct but also an action and reaction component that determines if the intention is positive and yields the desired outcome.   Mud is fun to play with, but it won’t grow anything without seeds How do I reach my end goal if I’m not intentional? Most of you have likely heard the phrase that a farmer who plants cabbage cannot expect to grow corn. Another that states the farmer who waters the soil every day, makes sure to clean the weeds, and always watches for sunlight on his farm only has muddy soil if he doesn’t plant any seeds. Intentionality takes not only the reasonable steps but also the proper steps forward to bring success or the desired outcome. The Social Cognitive Science Research Center at Brown University identified five key components that makeup people’s concept of intentionality, and thus, an action is intentional if:   1.     There is a desire for an outcome 2.     A belief that the action will lead to the outcome 3.     An intention/desire to perform the action 4.     Skill to perform the action 5.     Awareness while performing it   You can read the study here: Intentionality | Malle Lab ( brown.edu )   So, intentionality is not only the longing for a specific outcome or action to achieve it, but intentionality requires the right action at the right time to reach the end goal. There is no way that we all have the proper skill set to accomplish every goal we set. No matter how hard I try, I can never learn everything in the world. So, what do we do? As stated in Proverbs 19:20-21, “Listen to advice and accept instruction, that you may gain wisdom in the future. Many are the plans in the mind of man, but it is the purpose of the Lord that will stand”. We seek advice from our mentors, pastors, teachers, supervisors, family, friends, and others. We learn from each other and base our growth, trajectory, and decisions based off of what we learn. This is an act of intentionality, and incorporating these learnings continues to build our intentionality mindset.   Desire vs Intentionality In the research shared above, the team at Brown University further defines desire vs. intentionality. The desire I have to accomplish a goal versus the intentional steps I’ve taken to achieve that dream should be defined clearly. Their research segmented desires as wants, as any ‘conceivable state’ and is the input function for the goal. On the other hand, the intention that one has is the ‘actionable state’ and the output function for that goal. Remember that neither addresses the capability or capacity to accomplish the objective.   Too academic? Unfortunately (or fortunately), we don’t stop there. This week, I hope you take away that the foundation of an intention, intentionality, or the intentional mindset is a desire for an outcome, belief the action will lead to the result, intention to perform the required action, skillset to perform it, and the awareness (right or wrong) while performing the action.   To help reach our financial goals, we need the support of our trusted financial advisors  to get us to the end goal because we don’t know everything, and we should take it! We’ll dive deeper into creating an intentional mindset in upcoming articles, so stay tuned!

With the number of available funds seemingly endless, it can be hard to tell what a fund’s investing strategy is. With so many ways to differentiate funds, it can be very daunting for investors to determine which fund is right for them. This article will discuss one of, if not the most important, ways to differentiate funds. Active management styles and passive management styles are key differentiators of funds and can be the difference between average and superb returns.   Actively Managed Funds Actively managed funds are funds in which the portfolio management team actively trades the held positions within the fund portfolio in an attempt to outperform a specific index, such as the S&P 500, MSCI EIFA, Russell 2000, etc. Specific securities are traded based on expected performance. Different funds have their own ways of determining the best way to select funds, which is what separates actively managed funds from each other.   The most important thing to remember about actively traded funds is that there is not one that will outperform the market 100% of the time. If there were, that would be the only fund because every investor would be in it. This is why choosing the best actively managed fund becomes so essential. Investors want funds that will outperform the market most of the time and don’t get beat by the market by too much if it underperforms the market. This is also why diversification is important  within an investor’s portfolio. If you are only in one fund and it is underperforming the market, then your entire portfolio is underperforming the market. If you were in multiple funds, and only one was underperforming, your whole portfolio could still outperform the market.   Passively Managed Funds Passively managed funds do not seek to outperform the market but rather to mirror the performance of it. Passively managed funds choose an index, invest in funds to mirror that index, and seek to mirror the performance of it. With passively managed funds, it is not likely that the fund will outperform the index, but it is also not likely to underperform it. Passively managed funds are often referred to as “buying the market” because they have such a similar performance to it. There is little human interference with these funds, as the investing within them is typically automated to match a specified index.   What’s The Difference? Although passively managed funds typically won’t underperform the market, it should also be recognized that they also won’t usually outperform the market either. You will get a good return in a passively managed fund when the market is doing well, but countless actively managed funds are getting an even better return during that time period. That said, just as many, if not more, funds are getting a worse return than the market. It is very easy to choose funds that will offer a lower return than the market offers, sometimes even losing while the market gains. This is why proper research and fund selection are essential with actively managed funds. At Whitaker-Myers Wealth Managers , we take pride in being a fiduciary and believe in picking the funds that best fit your financial goals. Talk to your advisor today if you have questions about what kind of funds you are set up with; if you don’t have an advisor, we have a whole team of financial advisors  ready to help answer your questions.

Is Becoming a Millionaire in My Future? Let’s start with real-world facts: most people like the sound and appeal of being a millionaire. The simple definition of a millionaire is having a net worth (assets – liabilities) that is at least $1,000,000. The most recent data from the Federal Reserve revealed that 23.7M households in the United States are millionaires. On a percentage basis, this is 18% of Americans. Including the entire globe, the USA has about 39% of the world’s millionaires based on US dollars. In the last 20 years, millionaires have more than doubled in America and globally.   Inflation has made it easier to hit that seven-figure net worth. However, it is still a desired level that usually signifies security and comfort when entering retirement. With obtaining this status becoming more common and doable, how do we start from scratch or even have a negative net worth and still make it happen? Have the Millionaire Mindset Having a millionaire mindset does not necessarily mean it is your main passion and all you think about. Like many topics or segments of our lives, it is having a “winning” versus a “losing” mentality. A big-picture example is how you define “a lot” of money.   A “winning” mindset emphasizes saving and investing more than spending. Spending $50 feels like a lot to them, but investing $500 is not that much. The reoccurring thought is, “I can do this.”   A person with a “losing” mentality doesn’t want to invest that $500 because they don’t see an immediate return on investment and must wait it out. They feel spending $50 right here isn’t as big a deal because it’s a small amount and can be covered by their bank account.   Phrased differently, a “winning” mindset with money says, “I can get ahead by investing in small increments even if my cash flow is not in a big surplus because it all adds up.” A “losing” mindset says spending in small increments is not a big deal; it's not like investing a few dollars will get me anywhere.   Staying Consistent Now that we have established the general idea of a “winner” versus “loser” mentality with money, the next step is making it an ingrained habit so that you are consistently winning  with money. Having the right mindset will get you started on the right path, but it's vital that you stay on track so that the setbacks are few and far between. Many people are debt-free, open an emergency account, and enroll in a retirement account at some point, but somewhere along the line, they get derailed and lose the positive momentum that they started with.   Much like physical and mental health can ebb and flow, our financial health often does as well. Just like people who never get out of shape or “fall off the wagon,” as the saying goes, will usually have the best overall physical health, so too will the people who rarely deviate from winning financial thinking and avoid binge spending be in the best overall financial health. Delayed Gratification and Living Below Your Means Housing and transportation are two large categories that most people think of and are essential pieces of the puzzle in building your net worth.   With housing, whether you rent or pay a mortgage, Ramsey Solutions  recommends not going over 25% of your take-home pay on that part of your budget . If you own your home, this would include your mortgage, taxes, insurance, and any HOA fee, if applicable, not all of your utilities. Those “ordinary” millionaires who live in our neighborhoods and whom we are surprised when we learn of their financial status have applied this principle well. They save and invest better than those who live above their means; they are also much more likely to endure those surprise emergencies that happen to all of us without derailing their plan.   On to transportation. Ramsey Solutions' research of over 10,000 millionaires revealed that 31% drove a Honda and/or a Toyota car and usually owned them for several years. The first “luxury” car brand on the list was Lexus, at only 8%.   In both the housing and vehicle categories, wise consumers are disciplined enough to avoid overspending on these items, mainly because they acknowledge that they can’t afford them. Once they reach millionaire status and increase in years, they can afford both a bigger house and a fancier car. However, they usually still abstain from taking the plunge in upgrading because they have fully embraced the mindset of living below their means. Those status symbols are less of a desire than they once were at earlier stages in their lives.   Looking at other budget categories, such as eating out or grocery shopping, there will be fewer savings in buying generic brands or ordering water at a restaurant. However, if you lump all of the additional categories together, there are significant improvements that a household can make and significantly contribute to their ability to achieve millionaire status. Meaning don’t just stop at living below your means when it comes to the car and house, but also keep yourself in check by not eating out too often (or extravagantly) or overbuying on clothing or unnecessary household items.   Also, be careful and mindful about mental accounting and thinking that because you saved here and there, you can now splurge on expensive hobbies that eat up your savings. This is why having a separate emergency fund is vital, and you are consistently saving 15% toward retirement, plus saving to pay cash for other high-dollar expenditures. Get educated and apply what you learn Being willing and eager to learn and seek out ways to improve are traits that only some have. A quote from Harry Truman addresses the topic: “Not all readers are leaders, but all leaders are readers.”   Finding new ways to save and make money can seem overwhelming, but thinking outside the box can open many doors. Those constantly seeking ways to better their family’s financial strength are necessary for those who do not make a large salary, so they must be efficient and innovative with the dollars they have or ways to make more.   For some people, this may mean buying a few rental properties, or others may start a side business. Still, most modest-income millionaires spend efficiently and get creative with finding hidden savings. To have these savings or multiple sources of extra income to add up and make a difference in the march toward millionaire status, they cannot be occasional one-offs you fall into, but a daily proactive mindset. Most people like and want to save money, so a common thought or sentiment when someone shares a money-saving tip, or extra income option is “great, good to know, I’ll check into that,” but then the follow-through is lacking, and getting ahead remains more of a wish than reality.   Remember, extraordinary people are ordinary people who do ordinary things; they just do them more often than most people. Intelligent, friendly, and curious people have a bit of a head start in bettering their financial position. However, they still have to have the discipline and effort to apply the helpful money-winning information they have learned. Keep good company A Bible verse my mother often quoted to me was 1 Corinthians 15:33, which says, “We should not be deceived because bad company corrupts good character.”   This could be interpreted as if most friends and those we interact with have poor money and life habits, our ability to make sound financial choices will be strained and murky. On the opposite end of the spectrum, if the circles you run in are people who are highly disciplined and wealthier than you, then you naturally are more likely to pick up money-winning habits from them. This concept is heavily correlated with the previous attribute of constant learning. The advantage is that rather than seeking out and broadly applying concepts by trial and error, you can constantly be in learning mode and have built-in coaches and teachers who want to help you. Also, this form of education is more fun because it involves simply having friendly and informal conversations. Even if the “tips” or life lessons you are learning are not directly money-related, having highly effective people speaking into your life and motivating you to improve yourself and become more disciplined, the effect will likely carry over into your money habits. Avoid Debt The only debt that makes sense in most cases to incur for virtually every family is a mortgage. So, as long as you are buying a house within your means (payments, 25% or less of your take-home pay), then it makes sense to start building equity so that by retirement, you have paid for an asset that you have enjoyed years of use and necessary function out of.   Other debts that sometimes make sense for some people are starting a business or some real estate transactions. These can carry some risk but generally incur a relatively low borrowing cost for an appreciating asset. That said, do extensive homework and proceed with caution.   Consumer debt is the debt category that NEVER makes financial sense. If there is any value at all, it is a depreciating asset, and it usually has a very high borrowing rate. A millionaire built on a modest salary rarely, if ever, has a credit card balance.   There are two primary keys to avoiding consumer debt. The first is to build and maintain an emergency fund. No matter how much someone plans and prepares, life throws curveballs at everyone, and a financial winner will be ready for the unexpected to occur with their emergency fund. The surprise ER visit, or blown transmission, is more of an annoyance than a catastrophic event that blows up your financial goals. Making and sticking to a budget  is the second primary key to avoiding debt. You need to confirm that your spending in all categories aligns with your income, and you predetermine where every dollar will go. The Ramsey Solutions team calls this the zero-based budget , where every dollar is assigned a category. Summary Proverbs 13:11 says: Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time. So our grandpa, who told us that it is a process and takes a lot of time and sacrifice, was not lying to us; he was just agreeing with our Creator. Even when an intelligent person knows the time it takes to become a millionaire, many will look for a secret shortcut or try to take an easier path. Still, God reminds us in Proverbs 28:20 that a person who wants quick riches will get into trouble.   So yes, an instant millionaire does happen for pro athletes or the musician who catches lightning in a bottle with a hit song, but this is not the reality for over 99% of us. So, approaching your finances with humility, knowing that it is not easy, yet with some confidence that you can do it over time, is good clear-eyed thinking. Few get-rich-quick-schemes pan out, but get-rich-slow plans are often successful if you apply the principles we discussed. The earlier you start using these principles, the sooner and easier it will be to become a millionaire. But it is a mistake to think it is too late to work on the millionaire mindset and benefit from good money habits, even if you don’t quite hit that nice round of $1,000,000 net worth.   If you would like to talk to a financial advisor  but do not have one yet, we have a team of advisors at Whitaker-Myers Wealth Managers  with the heart of a teacher who can answer your questions about investing and put together a plan to help you achieve your financial goals.

Most Valu able Asset Your most valuable asset isn’t your home, car, or retirement account. It’s the ability to make an income. Your ability to provide an income is essential to your family’s day-to-day ability to afford goods and their future. What would you do if you couldn’t work? How far could you go without a paycheck? Only 14% of Americans own some form of disability coverage. Fifty-one million Americans lack sufficient disability insurance coverage . Disability insurance is a proven way to help protect you and your family by replacing a portion of the income you would lose if you suffered an illness or injury that prevents you from working.   What is Disability Insurance? Disability Income (DI) insurance is an insurance policy that provides income to individuals who can no longer work because of a disability. Disabilities can disrupt incomes and prevent people from maintaining their  standard of living , paying their bills, or providing for their families. Enrolling in a disability income insurance policy can help individuals mitigate any losses from an illness or accident leading to a short- or long-term disability.   How it works DI insurance isn't designed to guarantee 100% of your regular income. Instead, it intends to replace about 60% of your  gross income . Premiums  are based on a series of factors, including age and occupation. If you work in a field with a higher risk of injury, your premiums will be higher. The amount of income you receive is also factored into how much you pay for coverage—the more you earn, the higher your premiums. Policies pay benefits if illness, accident, or injury prevents you from performing your occupation's material and substantial duties. Benefits are tax-free because the policyholder uses  after-tax dollars  to pay premiums. Unlike health insurance payments, disability benefits are paid directly to you, so you can use the funds however you like. As long as you qualify, payments will continue until you are able to return to work or until the end of your benefit period.   Types of Disability Insurance There are two types of DI coverage: short-term and long-term.   Short-term disability insurance can provide weekly benefits for a limited time, typically about six weeks up to two years. This coverage is often known as “own occupation,” which means you’ll be paid benefits if you are disabled due to an injury or illness that prevents you from being able to perform the duties of your occupation.   Long-term disability insurance provides weekly benefits for an extended period of time up to a specific age, like 65. Most policies will pay long-term benefits if you cannot perform the duties of your occupation for more than 24 months.   Disability Insurance vs. Government Programs You may be wondering why I would need disability insurance when the government offers programs to help me. Government programs like Social Security Disability are available to most workers who have been in the workforce for a specified period of time. Still, the program's benefits may be insufficient to address all of your financial needs, and they usually do not offer all the features you would be able to purchase with an individual policy.   Consider buying an individual policy if you don’t have any or enough disability coverage at work or are self-employed. Employer-sponsored disability insurance usually pays only a portion of your base salary, up to a cap. It’s a good idea to supplement that coverage if your salary exceeds the cap or you depend on bonuses or commissions.   An insurer will consider other sources of disability insurance to determine how much coverage you can buy.   Benefits of buying your own policy By buying your own policy, it lets you: Customize the coverage with extra features, such as annual cost-of-living adjustments Choose the insurance company with the best offerings Keep the coverage when you change jobs Employer-paid coverage ends when you leave the company You might be able to take the coverage if you pay the full premium for disability insurance offered through the workplace Control the disability insurance The coverage stays intact as long as you pay for it Employer-sponsored coverage will end if the employer decides to stop providing disability benefits Collect benefits tax-free if you become disabled If the employer pays for the coverage, you must pay taxes on the benefits   Cost of Disability Insurance The annual price for a disability insurance policy generally ranges from 1% to 3% of your yearly income, according to the Council for Disability Awareness.   A variety of factors affect the cost: Your age and health You’ll pay more the older you are and the more health problems you have Your gender Women usually pay more because they tend to file more claims Whether you smoke You pay less if you don’t smoke Your occupation You’ll pay more if you work in a job with a high risk of injuries The definition of disability The broader the definition of disability, the higher the premium A policy that covers you if you can’t work in your own occupation but could earn income in a lower-paying job will cost more than a policy that covers you only if you can’t work at all Length of waiting period This is known as the elimination period You can reduce the premium by increasing the waiting period before benefits kick in Your income The more income you have to protect, the more you’ll pay for coverage Length of benefits The longer the period that the policy promises to pay out if you become disabled, the more you’ll pay in premiums Extra features Additional features, such as cost-of-living adjustments to protect against inflation, will increase the premium   When to get Disability Insurance Everyone needs to review their coverage options, but most importantly, if you are a small business owner, self-employed certified professional, the primary income generator, or a high earner. Small business owners do not have the option of purchasing coverage through a large employer.   Individual disability insurance can help replace more than just your salary, such as bonuses and commissions, that sales professionals, stockbrokers, and others who receive income above straight salaries rely on.   All of this information is great, but the best way to express how important disability insurance is is to share its impact on someone who has been able to utilize its benefits.   A Real-life Example When my friend Tim decided to open his own business, thankfully, he worked very closely with his insurance agent to put comprehensive personal and business insurance in place. At the time, he didn’t know that his careful planning would save both his business and his family from financial ruin. Tim suffered a life-threatening aneurysm that left him unable to work. Thanks to disability insurance, he received financial support during this challenging time. The policy helped cover essential expenses like his mortgage payments, utility bills, and medical costs, allowing his business to continue operating even when he couldn’t be actively involved. The coverage provided a very crucial safety net that protected his income and safeguarded his operations. It was and is a valuable asset that offers peace of mind to Tim and his family.   If you are interested in learning more about Disability Insurance or feel like this could benefit you and your family, reach out to your financial advisor . They can speak with you more about this topic and get you in contact with the right resource.

It seems that the topics of inflation and interest rates have been all over the news this year, as buying groceries and owning a home have both become expensive ventures in their own right. The Federal Reserve’s September meeting is expected to reveal the first interest rate cut since March 2020. With that impending news, it might be helpful to look at two of the main influences on the U.S. Economy, which may seem cloaked in mystery to the Average American: Monetary Policy and Fiscal Policy.  This article will explore each of them and their impact on our lives.   Monetary Policy This refers to the actions taken by central banks, including the Federal Reserve (AKA, The Fed), to affect change in the economy on a macro level. The government created the Fed to manage the money supply and prevent economic collapse. Their policies are intended to impact employment (in a good way), economic growth, and, most notably, prices of goods. Monetary Policy deals directly with interest rates and the economy's money supply.   Interest Rates This is the buzzword for many. An interest rate is the price an individual or entity pays to borrow money from the lender. The home mortgage is perhaps the most talked about type of loan impacted by interest rates, but car loans, credit card interest and even bond yields are other notable arenas where interest rates reign. You might wonder what goes into changing interest rates. How do they go up, and how do they go down? This can be a complicated question, but we’ll put it simply. The Federal Reserve raises interest rates when the economy heats up. This can help them achieve their goals of stabilizing prices and maximizing employment. The Fed will cut rates when the economy has cooled, in an attempt to reignite economic activity (get people to spend their money). The adjustments of interest rates are reactionary, and the overall success of the macro-economy is (supposed to be) in their best interests when doing so.   Money Supply This is a bit more complicated. Money is far more intangible than many of us think it to be. It all goes back to the advent of paper money, which served as a depositor’s receipt, representing the value of a stash of metal somewhere else, without requiring the owner to lug it around with them. The paper (or plastic) we carry now is merely a representation of a tangible thing that is somewhere else.   Is your head spinning yet? I recommend the book “Money – the true story of a made-up thing”  which delves deeper into this topic and the history of money for further learning. I’ve digressed, so let’s move back to how the Fed impacts the money supply.   By adjusting the monetary base, or amount of money in circulation, and the amount of money required to be on deposit with the reserve, they can help cool or heat up the economy, whichever is needed. There’s far more that could be said about monetary policy, but simply put, it is less political than fiscal policy and more about keeping the economy functioning than anything else.   Fiscal Policy This is far more entangled in politics as it pertains to the government’s revenue. Fiscal policy boils down to two main things: Taxes and Government Spending. It’s all about the government’s balance sheet and deals directly with the government's ability to fund its operations, which can also impact economic growth.   Taxes As you may have noticed, taxes are constantly changing. You may have also noticed that with each newly elected regime, the tax code takes on a particular flavor that jives with the policy of that regime. How does that actually happen, though? In short, it looks like this: In order for a new tax to be implemented, it has to pass through Congress and work its way up the chain of command, and then it gets written into law as part of our lovely tax code.   Government Spending As I write this, the national debt sits at around $35,000,000,000,000. Actually, it isn’t sitting at all but climbing by the hundreds of thousands each second. Take a look for yourself here .  The bottom line is that to operate this country, the government has to spend money. How they get that money is simple: They bring in tax revenue and sell debt. However, the things on which they spend that money is a hot debate topic that I don’t intend to ignite here. Government spending is the second of two critical footers upon which the fiscal policy is built.   Selling Debt This refers to Government Bonds. Simply put, when the Government needs money to fund their spending (always), they issue bonds to the public. When you buy a bond, you’re loaning money to the government. In return, they promise to return that money to you and pay you interest, making you the lender in the relationship. This provides the government with the cash it needs to operate while it provides the investor/lender a safe investment with clear expectations, backed by the full faith and credit of the U.S. of A.   You might notice a beautiful dovetail of the Monetary and Fiscal policies in the above example, as interest rates play an essential role in the transaction. Though the country’s monetary and fiscal policies are separate and set by separate entities, they’ll forever be intertwined.   If you have questions about these topics or about investing, please reach out to our team of financial advisors .

If you are an OPERS employee, you may or may not already know that you have a choice in the type of retirement plan you participate in. OPERS has three options: Traditional Pension Plan Member-Directed Plan Combined Plan   This article will discuss the differences between the Traditional Pension and Member-Directed Plans. The Combined Plan, as it sounds, combines the Traditional Pension Plan and Member-Directed Plan. If you are well established in your OPERS career and already in the Traditional Pension Plan, it will likely be beneficial for you to stay in that plan. If you are early in your OPERS career, you would likely find the Member-Directed Plan more beneficial. Those are generalizations, and a lot goes into determining the right plan for you, so please get in touch  with one of our financial advisors. We would be happy to discuss the options and help you decide based on your situation.   OPERS Traditional Pension Plan Overview The Traditional Pension Plan  is a defined benefit plan that provides a fixed monthly income in retirement (pension). At retirement, your pension amount is determined by a formula that rewards you for working longer. The formula uses your final average salary (the average of your highest 3-5 salary years) and your years of service. The benefit calculated with this formula is what your pension would be if you chose only to cover your life (single life). This means you would get that amount for your lifetime, and then when you pass away, your spouse would not get your pension. Instead, if you decide to do a joint life pension, your monthly benefit will be reduced, but your spouse will get your pension when you pass away. Health Care Under the Traditional Pension Plan Retirees will need to sign up for health coverage and receive a monthly HRA (Health Reimbursement Arrangement) from OPERS. Signing up for health coverage can be a difficult and confusing task, so if you would like help, the Whitaker-Myers Benefits Team  would be happy to help you! Employee & Employer Contributions Under the Traditional Pension Plan Employee Contribution: An employee's contribution rate is the same for all three OPERS retirement plans. Currently, OPERS members contribute the following percentage of their salary: 10% for local and state government employees 12% for public safety employees 13% for law enforcement employees   Employer Contribution: Currently, employer contribution rates are: 14% for state government employees 14% for local government employees 18.1% for law enforcement or public safety employees   For members participating in the Traditional Pension Plan and the Combined Plan, the employer contribution is used to fund the pension trust fund and the health care trust fund.   If you retire from OPERS and choose the Traditional Pension Plan, the employer/employee contributions do not impact your final benefit since your pension is calculated based on the above formula (using your Final Average Salary and your service years).   OPERS Member-Directed Plan Overview The Member-Directed Plan  is a defined contribution plan where you contribute to an account similar to a 401(k) and decide how your contributions are invested.   In retirement, your benefit is based on the amount you contributed and the account's growth. Again, this is similar to a 401(k) in the private sector.   At retirement, if you decide you want a monthly benefit, you can turn the account into an annuity. The calculation formula for members in the member-directed plan who choose to have a monthly benefit is their final account value multiplied by an annuity factor that OPERS determines. Employee & Employer Contributions Under the Member-Directed Plan Employee Contribution: An employee's contribution rate is the same for all three OPERS retirement plans. Currently, OPERS members contribute the following percentage of their salary: 10% for local and state government employees 12% for public safety employees 13% for law enforcement employees   Employer Contribution: Currently, employer contributions for those in the Member-Directed plan are 7.5%. This is deposited into the member's employer contribution account and invested as directed by the member. A percentage of the remaining portion of the employer contribution amount (determined by the OPERS Board of Trustees, based on the OPERS actuary's recommendation) will be credited to a Retiree Medical Account, which is invested as directed by OPERS investment professionals. This is currently 4%. Health Care Under the Member-Directed Plan With the Member-Directed Plan, you do not qualify for health care when you retire, but you will have a Retiree Medical Account (RMA) that you can use for health care expenses. This account is funded from contributions from your employer, currently 4% of your salary, as mentioned above. The Retiree Medical Account investments are managed and directed by OPERS. The interest rate is tied to the performance of the OPERS Stable Value Fund. If the investment return is positive, interest will be applied in the same amount as the return but will not exceed 4%. If the investment return is negative, zero interest will be applied.   In retirement, the RMA can be used to pay health care expenses, including insurance premiums, co-pays, medical services, and even transportation to receive medical care. You can also use it to pay for limited amounts of long-term care insurance.   If you were hired after July 1, 2015, you would be fully vested in the RMA in 15 years. You are vested in 5 years if you were hired before that.   Investment Choices Under the Member-Directed Plan Remember that if you participate in the Member-Directed Plan, you choose the investments in your retirement plan account (similar to a 401(k)). You get to select from the funds OPERS offers, including Index Funds and Target Date Funds.   OPERS also offers a mutual fund-only Self-Directed Brokerage Account through Charles Schwab's Personal Choice Retirement Account®. This means that the Advisors at Whitaker-Myers Wealth Managers  can be the Advisors on your OPERS Member-Directed Plan account. Once the account reaches $10,000, a Whitaker-Myers Advisor can get you access to the high-quality mutual funds that we recommend within your OPERS account.   If you just switched your account to the Member-Directed Plan and do not have a $10,000 balance yet, your Whitaker-Myers Advisor would be happy to help you pick the OPERS funds available to you.   If you are an OPERS member, the retirement plan you choose can significantly impact your retirement benefits. We know this was a lot of information, so if you still have questions, please call us; we’d be happy to help guide you through the decision. Everyone's situation is unique, so you should talk with an Advisor before deciding which retirement plan is the best option for you.

A home purchased with CASH While driving to the gym this morning, I turned on “The Ramsey Show’s Highlights” for 8/26/24 and listened to a caller ask Dave a question. The question was from a couple who had saved enough to buy their home in cash. When I heard that, my hand flew into the air as I wanted to give the caller a High-Five! Wow, paying cash for your home in this market where the median home price is >$400k?! Incredible! However, I digress.   The caller asked Dave if he should buy the cash home or invest the money and take out a traditional mortgage. He heard from those close to him that he could have a higher return from the market, and even though interest rates were higher now, they could always refinance. Also, the spread (difference between the market returns and interest on the mortgage) would be positive. As you can probably discern, Dave’s response to this question was to pay cash for the home. And what I’ve learned to appreciate by listening to the show, even more than the response, is the WHY to his answer. For his reason for his response, he goes on to talk about the largest-ever Millionaire study they conducted, and uses the phrase: “ If your WHY doesn’t make you cry, FIND ANOTHER WHY!’   10,000 Millionaire Study You may be familiar with the millionaire study conducted by the Ramsey Solutions team many years ago, and there is the possibility that you have heard Dave or other personalities reference it on their podcasts, YouTube videos, or other media outlets.   This study has many highlights, but one statement from the study that I have always appreciated is that “Millionaires are made, not born.”  This means intentionality is critical to success, and only 3% of millionaires (according to the study) have inherited $1 million or more. Needless to say, the opportunity for success and to become a millionaire is available to all!   To read more about the study, click on the link below:   The National Study of Millionaires - Ramsey ( ramseysolutions.com )   Intentionality We’ll dive into intentionality and how all this ties in with your investment methodologies, but it is essential to understand that just like millionaires – success is not born. Some may be blessed with high-performing talents, from athletic abilities to academics, communication, and even emotional intelligence. Almost all are not innate; rather, they are made/taught. Thus, the intentional decisions that lead to our heuristic mentality/capacity and capabilities are derivatives of our exposure to and exploration of these talents. Trust me, you all have a talent; some are more obvious than others. Whether you are saving for your emergency fund, paying off debt, or saving for retirement, intentionality is a huge factor when building wealth. Regardless of where you are at with your financial journey, the financial advisors on the team can help point you in a direction to start.   We’ll explore intentionality and components of intentionality throughout the next few weeks, so come along for the ride!

Home appreciation has many sellers worried about the tax consequences that may come with selling their house. A frequently asked question by sellers is, “How can I minimize the tax on the gain from my property.” A section 121 exclusion allows you to exclude the first $250k of gain from the sale of your home (or $500k if you file a joint return.) A Section 121 exclusion is something that many people are eligible for without even knowing it. So, what do you need to qualify for a section 121 exclusion?   Automatic Disqualification for Section 121 Exclusion If either of the following is true, you are not eligible for the Section 121 exclusion: You acquired the property through a like-kind (section 1031) exchange in the past five years You are subject to expatriate tax (this applies to US citizens who give up their citizenship and long-term residents who end their US resident status for federal tax purposes.)   Primary Residence You must be selling your primary residence (main home) to qualify for this exclusion. Your main home is the address listed on your voter registration card, federal and state tax returns, driver’s license, and US postal service address. The definition of a primary residence is not limited to a traditional house like you would imagine. It includes houseboats, mobile homes, condominiums, cooperative apartments, and a single-family home.   Ownership To meet the ownership requirement, you must have owned the home for two of the last five years leading up to the date of the sale. For married filing jointly, only one spouse needs to meet this requirement.   Residency To meet the residency requirement, you must use the home as your primary residence for two out of the last five years. This time frame can be broken up and does not have to be a single block of time, but if you were ever away from the home, you need to determine where that time counts towards your residency. For example, a taxpayer could live in the home for one year, move away for three years, and then use it as their primary residence the last year.   Look Back Period The look-back period refers to the 2-years before selling the home. You must not have sold another home during the last two years to meet this requirement as you can only take the exclusion one every 2-year period.   There are exceptions to the Eligibility test, so it is important to talk to your tax professional  if you think you may qualify for a Section 121 exclusion. However, this is a great way to avoid paying capital gains  when selling a primary residence. As always, contact your financial advisor  if you have any questions about the tax implications of selling a home.

Time in, or Timing investments In an article written by our very own Clay Reynolds , he sets up this discussion really well. I’d recommend reading it before diving further into this discussion - Time in the Market vs. Timing the Market ( whitakerwealth.com ) .   The age-old question of, “Can I beat the market by buying in low and selling high?” Ideally, we all want the ability to do so, and more importantly, we want to maximize these opportunities as they arise. However, think it through. The average investor is not nearly in the weeds enough to identify each of these opportunities. The reality is that when the news reaches the media, the maximum chance has already passed. If the average investor can’t time the market well, how do I maximize my returns?   Maximizing returns Maximizing an investor’s returns is a function of how much risk they are willing to take. This is referred to as utility in finance. It is essential to align your utility with your strategic goals. Our team at Whitaker-Myers Wealth Managers can guide you toward this alignment. Remember, the investor’s risk tolerance , risk aversion, capability and capacity, and behavioral responses all aggregate to determine their risk score. Utilizing this score is an excellent methodology to align your comfort level with your strategies.   When maximizing returns outside the abovementioned factors, we recommend staying invested in the market. Thus, with more time in, the market vastly exceeds the outcome of trying to time investments.    Let’s take a look at some data   The effect of missing the best market return days: The graph above shows the impact of missing the best market days over the past 25 years. As you can see, missing the best ten days in this timeframe resulted in an annualized 3.31% underperformance compared to staying invested. This graph also highlights the importance of compound interest. The 3.31% annualized compounds to nearly $330,000!  Continuing down the list, missing the best 50 total return days decreased the portfolio's value by 42%!  Compound interest, asset class  selection, and staying invested are key drivers of this success strategy.   Stay invested, even in downturns It’s difficult, no question. When the market dives, as we saw in 2008 or during COVID-19, our initial reaction is to sell and save as much as possible before losing it all.  Inherently, we want to solve and save. However, isn’t this the right time to buy? The adage of buy low, sell high? Our intuition can sometimes be the biggest detractor of our financial success. Thus, aligning the investor's risk score with their strategies is important.   I always recommend having an expert with you on this journey. Our team  at Whitaker-Myers   Wealth Managers  is not only capable, but we want to walk with you on your journey—schedule time with one of our advisors to get you on your way.

Although retiring early, let alone before the penalty-free distribution age of 59 ½, seems like an impossible dream for some, it is entirely possible with proper planning. An issue with retiring before 59 ½ comes from the 10% penalty for early withdrawals. As the average person doesn’t want to lose their hard-earned money, this can turn people away from retiring before 59 ½. Some options to get around this penalty include using a Bridge Account, the Rule of 72(t), and the Rule of 55, which I will discuss and explain in this article.   Bridge (Brokerage) Account If you want to retire early, a bridge account could work for you. A bridge account is a nickname for a brokerage account  that is used to “bridge the gap” from retirement to age 59 ½, where you can begin taking withdrawals from IRAs  and employer-sponsored plans penalty-free. One disadvantage of a bridge account is that it does not have the tax advantages of a retirement account, so taxes will need to be paid on all growth, dividends, and realized gains on a yearly basis.   One advantage of a bridge account is that the money can be withdrawn anytime. If an emergency were to take place that your emergency fund  could not cover, then you could take funds from the bridge account. In this aspect, it can double as a retirement fund or an extra emergency fund. A bridge account offers much more flexibility than a traditional retirement account but does not offer the same tax advantages.   Rule of 72(t) The Rule of 72(t)  is issued by the IRS. It allows for penalty-free withdrawals before 59 ½. There must be at least five withdrawals over a substantially equal periodic payment (SEPP) or until you reach 59 ½, whichever comes later. The amount of the withdrawals is calculated using one of three IRS-approved methods: the amortization method, the minimum distribution (also known as the life expectancy method), or the annuitization method.  The Rule of 72(t) should be seen as a last resort, as it can put your financial future at risk, as it essentially sets your distributions in place with no ability to change for the period of five years or until age 59 ½.   Rule of 55 The Rule of 55 only applies to 401(k)s and has many associated rules. The first rule is that you must leave your job in the calendar year you turn 55 or later. This means you cannot leave at 54 or earlier and expect to get distributions when you turn 55. However, there are specific jobs where the rule starts at 50. This mainly applies to public safety employees, such as police officers, firefighters, etc. Another rule is that you cannot draw from another retirement account, so you cannot apply the Rule of 72(t) to draw from another account.   However, since a bridge account is not a retirement account, you could draw from that account. This could be useful if you want to retire before 55. Another rule is that the funds must stay in the employer’s 401(k) while you’re taking distributions. This means that you cannot perform a rollover and withdraw funds penalty-free. One interesting rule is that you can get another job and still withdraw funds penalty-free. Something to consider when using this rule is the possibility that the 401(k) custodian moves the funds into an IRA on their own, which would mean you would begin being penalized for distributions.   Which Option Is Best For You If Retiring Before 59 ½? Everyone’s situation is unique, so no ‘one-size-fits-all’ option exists. If you are interested in seeing which option is best for you, one of our financial advisors  at Whitaker-Myers Wealth Managers  would be happy to help you explore your options. Schedule an initial meeting to discuss the different scenarios and determine which is best for you.

Macroeconomic Landscape Hopefully, you’re following our weekly market update and have been tuned in to hear President and Chief Investment Officer John-Mark  or myself talk about key learnings from the previous week on our YouTube channel. If you haven’t been following, click the link below to take you to the channel. Don’t forget to subscribe to get the latest updates and content!   Whitaker-Myers Wealth Managers - YouTube   Every week, we discuss the latest update on mortgage rates since so many of our clients have high-interest mortgage rates, and home ownership has become much less affordable over the past few years. The graph below shows the latest update as of 8/13/24, where the current 15-year fixed mortgage rate is 5.63%, and the 30-year fixed mortgage rate is 6.47%. A portion of our readers may have mortgage rates that are much lower than these, but those who bought their homes over the past two years are likely sitting higher than the current rates. The good news, as shown in the graph, is that rates are coming down and will likely continue to come down. Why now? Well, the macroeconomic landscape is changing. Where we were sitting at, high inflation rates, employment, wage growth, and a cooling of demand are all driving factors of this change. The Federal Reserve increased the short-term borrowing rate, hoping to drive each of these factors back to normalization. We’re approaching, or arguably have reached, this normalization, so mortgage rates are starting to come down. Also, the Feds are anticipating a reduction of the short-term rate (which is what banks use to borrow money from each other, not consumers), which will, over time, decrease the borrowing cost for consumers for almost all goods and services.   When is a good time to refinance? Now, on to the practical portion of the post. With back-to-school season upon us, does everyone have their calculators ready?   Let’s use the variables below as our starting point and add ongoing complexity as we progress.   Mortgage value $450,000 Current Interest rate 7.5% Term 30 yr fixed Current monthly payment of $3146.47 (Excluding taxes, insurance, PMI , and other monthly fees) No downpayment   Now, there is an opportunity for this homeowner to get a mortgage at 5.5%. The investor must calculate their break-even period to determine if this transaction makes sense. This is calculated by:   Current Monthly Payment – Potential future monthly payment                                                                          Closing Costs   The value above will show the number of months until the closing costs are recovered. Closing costs are a significant factor to consider. These can include an origination fee, appraisal fee, title insurance fee, and possibly a credit report fee. Typically, these costs are between 2-6% of the loan amount and can vary depending on the loan originator and homeowner’s credit history. Let’s look at this mathematically:   At 5.5%, the new monthly payment would be $2555.05. let’s look at a few scenarios with different closing costs: The two significant variables in this equation are the closing costs and the future payments . If both are low, this results in a short “break even” and a better outcome for the homeowner. Remember, the market may have headlines that it’s a great time to refinance but do the math to verify. If the “break even” is three years or less, it may be a good time to refinance.   Refinance with a FINE tooth comb If you’ve read any of my posts, you know I enjoy a good play on words. Take additional scrutiny when considering to refinance. It may be a great time, or the math may not work out. Wherever you are on your journey, keep in mind our team  is always available to walk with you.   If you don’t feel comfortable doing these calculations on your own or would like advice on how to get through baby steps 1-4  or invest and grow your wealth, contact one of our team members to discuss. The Whitaker-Myers Wealth Managers  team is just a few clicks away.

At Whitaker Myers Wealth Managers , we aren’t shy about the importance of portfolio diversification. Because fund-based investing is great for diversification, it’s generally a widely used strategy among investors looking to spread their money to many different companies. The reality with the fund-based approach is that the fund's performance is ultimately tied to the performance of individual stocks – they’re just surrounded by an entire bracket of other stocks that help protect you from having too much weight in one company. However, some investors like to increase their exposure to certain companies by including individual stock positions inside their investment portfolios. This article will explore the risk vs. reward relationship that individual stocks have within a portfolio.   You might occasionally turn on CNBC or Fox Business and hear about an individual stock that is taking the world by storm. If you’ve ever wondered what makes a good stock pick, it's important to understand that loads of research and analysis go into any investment recommendation. Timing the stock market is hard enough for professional day traders (which we don’t presume to be), but picking a company whose stock is a sure bet is like finding a needle in a haystack. There is an argument for including individual stocks in a portfolio, but shooting from the hip is not advisable, and doing so requires prudence.   The Risk of Individual Stocks In 2020, you may remember a small number of individual stocks that grew in popularity seemingly overnight. Stocks like this were all over the news (and social media feeds) because of their rapid increase in stock price in a short amount of time. Some everyday investors made a small fortune by getting into and out of those positions at the right time. As people flocked to brokerage accounts to get in on the action, many missed the boat and were left on the wrong side of a flash-in-the-pan investment. This highlights the danger of emotionally driven investing and the inherent risk of putting all your eggs in one basket. If the bottom falls out, you have a mess on your hands and no breakfast to boot.   Of course, this is an extreme example of what can go wrong when buying individual stock. An important part of investing is being committed to the process, which, in many cases, is a long time in the making. A far more common outcome is missing out on long-term sustained growth by being too heavy in a company that struggles or eventually fails. The inherent risk is known as company risk. When you have exposure to an entire index like the S&P 500 for your growth and growth and income exposure, you won’t lose sleep if one of those companies struggles for a sustained period of time because that one bad apple is buffered by a basket of surrounding stocks in the fund. If, however, you make the risky decision to put a significant portion of your portfolio into one, two, or even a dozen companies, and a few of them struggle, that could create problems that you feel for a long time.   Individual stock investing is risky, but with that being said, there are ways to include that strategy in your investment portfolio.   The Reward of Individual Stocks It’s important to note that, while not appropriate for everyone, individual stock exposure has some surefire benefits.   Tax-Loss Harvesting If done correctly, your stock exposure can mirror your fund-based strategy through something called Direct Indexing. Our Chief Investment Officer, John-Mark Young , wrote an article last year about Direct Indexing , which gives you many of the benefits of fund-based investing, namely diversification, but gives you the ability to sell individual stock positions at a loss to tax-loss harvest, helping you defray any realized capital gains in the account. This can be a significant benefit if you’re a high-income earner and need help lowering your tax liability.   More Cost-Effective Think of stock investing as an added layer to your investment strategy. Coupled with your fund-based investments, any individual stocks can add sustained appreciation to your portfolio, which is also true for your fund-based investment. Individual stocks do not carry an expense ratio, which is an annual fee charged by the fund companies to the investors in the fund. By utilizing strategy, an investor can potentially save some money, especially when you’re talking about holding onto a position for an extended period of time. Stocks can have front or back-end loads, but they only come into play when a buy-and-sell transaction occurs, unlike an expense ratio that can hit annually.   In general, individual stocks allow investors to be tactical and specific with how they are investing. If you have specific criteria surrounding companies you will and will not support, then buying individual stocks may be the best way to ensure your standards are being upheld. Funds exist that do much of that screening, but the more specific an investor’s needs, the harder it can be to find an appropriate fund(s).   Investing in individual stocks can offer some benefits to an investor's portfolio strategy, but it is important to consult with a financial advisor to help you determine if it’s right for you. If you do not have a financial advisor, contact one of our team members to help answer any questions you may have.