Intrinsic and market value or the price of a stock are important distinctions that investors should understand as they develop their investment portfolios. The intrinsic value or price of a stock is the fundamental value of the stock. Fundamental value takes a variety of near-real-time business metrics to define. On the other hand, market value/price takes fundamental value and pricing based on market dynamics into play. Market value equates to what you would pay for the stock in the public market.  Market factors such as momentum, popularity, and others continue to define the ‘value’ of a stock and, thus, the market price.  Let’s look at both intrinsic and market value more closely. Intrinsic Value/Price As mentioned above, intrinsic value is a key component of a company's actual valuation. It is part of the fundamental analysis conducted and is usually expressed as a capitalization value. This can vary based on the analysis completed, as no single source defines how to calculate intrinsic value. Some analysts use Torbin’s Q ratio (market value of the replacement of assets), book value (assets-liabilities), liquidation value, and other calculations that essentially put a ‘value’ on the business. The difficulty with intrinsic valuation is not only the calculations used and access to this information but also evaluating companies with a lot of Intellectual property (IP). Traditional (fundamental) analyses don’t have appropriate calculations to integrate IP or other intangible assets. Example – what would Apple/Google/Nvidia/Microsoft’s valuation be without their proprietary technology and patents? The key takeaway is that intrinsic value is the best calculation (or estimate) of the company's actual value. However, this is not what any of us pay for stock in the company. That is where Market Value comes into the picture. Market Value The ‘market’ in this discussion refers to the stock market. Given our financial discussion, this is fairly obvious, but it is important to make it clear. So, if intrinsic value is the most accurate representation of the value of a company, why is the stock selling so much higher than the capitalization of the company? Think supply and demand. When higher demand for a product or service and supply stays constant, prices increase. When supply exceeds the demand for a product or service, prices decrease. This is the tale of the stock market. The stock market reports a company's market valuation based on all market participants. If we all buy the same stock, the stock for that company will go up. Also, if we all sell the same stock, the price will come down. Obviously, there are more factors moving the market, but from a simplistic lens, this is the movement we see. As investors participate in the market, the supply and demand responses impact pricing changes. Other vital components we mentioned above are related to popularity and momentum. As a stock gains popularity (think any big technology stock right now related to AI) or momentum (Nvidia, Apple, Google, Microsoft), we see market shifts as well. Market sentiment is another factor to consider when trying to understand a stock's market value. Market value tends to be much higher than intrinsic value, but investors must be cautious about valuation metrics. Due to many of the factors we mentioned in this article, concerns around overvaluation should always be considered. In the end The market is tricky. There are unlimited metrics and analyses to consider when creating your portfolio. As always, it’s better to have an expert with the heart of a teacher at your side to walk you through the complexity. Our team at Whitaker-Myers Wealth Managers is trained and ready to walk with you on this path. If you need help getting out of debt or understanding the best path to financial freedom, consider talking to our incredible Financial Coaches. Ask them about the 7 baby steps to financial peace and anything else on your mind. If you would like to talk more about investing or have questions about your portfolio, talk to one of our Financial Advisors today.

Navigating the complex landscape of real estate investment often requires a keen understanding of various financial strategies and tax advantages. One such strategy that stands out for savvy investors is the Section 1031 exchange, particularly regarding rental properties. Section 1031 of the Internal Revenue Code offers a unique opportunity to defer capital gains taxes by reinvesting the proceeds from a sold property into a like-kind property. This article delves into the intricacies of Section 1031 exchanges, exploring how they can be leveraged to optimize rental property investments. From understanding the eligibility criteria to the step-by-step process and potential pitfalls, we provide a comprehensive guide to help investors make informed decisions and maximize their returns through strategic property exchanges. We've written about converting actively managed rental properties to passive real estate strategies before using the Delaware Statutory Trust (DST) option, and you can read more about that here. However, the attached flow chart can be a starting point to help you determine if you could qualify for a 1031 Exchange with your rental property. Should you be interested in pursuing this option, please contact our in-house CPA, Kage Rush or a Financial Advisor Team Member.

When living in the greatest country in the world, often when someone informs you, “You have to protect yourself,” you may not think they are talking about insurance and making sure you have proper coverage for three vulnerable areas of your life. In this week’s article, I will review three kinds of insurance coverage we feel benefit you and your financial health. Term Life Insurance Term Life Insurance is one of the most important types of insurance a person can acquire when they are married or if they have someone who is a dependent. The function of Term Life Insurance is to help replace income if you die before becoming financially independent. The Ramsey Solutions Team’s general rule of thumb is that you need coverage that is ten times your annual income.  The reasoning is that if the market has an average of 10% a year, you can pull the interest earned and use that without touching the principal.  In certain situations, some people need more, and some need less. The goal of Life insurance is not to get rich; it is to protect you in case something happens to you. Car Insurance If you have a car… you need car insurance! A long and sad question... What do you do when someone hits you, and they don’t have car insurance? Answer – sue them so they can cover the cost. What happens when they file for bankruptcy? Answer – if you don’t have car insurance, you are stuck trying to cover the bill. Within car insurance, there are six different parts: Part A: Liability Coverage This is for any person using your car with permission Part B: Medical Payments Covers people inside your car Exclusions: Racing, public livery, and some people using your car without permission Part C: Uninsured Motorists Pays what an “Under-insured” or uninsured driver would have to pay if they were at fault Exclusions: Public livery, auto use without permission, regular use of a non-owned vehicle, auto-used in insured’s business Part D: Coverage for Damage to Your Auto Provides direct coverage on your covered vehicle and any non-owned vehicle (rental or borrowed car); the insurance company can choose to pay for the repairs or provide you with the value of the vehicle if the car was “Totaled” Types: Collision: This type of coverage helps if you collide with another vehicle or object, such as when running off the road Comprehensive: This coverage helps you with damages that do not result from a “Collison,” for instance, vandalism, theft, and… “oh no, DEER!!!” Exclusions: Public livery, radar detectors, most electronic equipment, nuclear damage, auto-used without permission, auto-used in insured ‘s business Part E: Duties of insured after an accident or loss Notify the insurer (insurance company) File a proof of loss Cooperate File a police report (although it is dependent on the situation) If you hit another car, always, always, always file a police report! Worst case scenario: a person hits you, and you agree to move ways, and no one files.  Only to have the police arrive at your house and find out that the other person had reported a hit-and-run.  And yes… this happens! Part F: General Provisions Most car insurance is only good in the United States, Puerto Rico, and Canada Home Owners Insurance There are three general coverage forms: Basic Named Perils Events covered in this are: fire, lightning, windstorm, hail, riot, aircraft, vehicles, smoke, vandalism, explosion, theft, and volcano Broad Named Perils Events covered in this area include events noted in the Basic Named Perils along with: falling objects, the weight of ice, snow, and sleet, accidental overflow of water, sudden bursting of appliances, freezing of a system or appliance, and Damage from an electrical current Open Perils (All Risks) Covers all perils except specifically excluded perils Typical exclusions: Neglect (termite damage or a dead tree that falls on the house) Movement of ground (earthquake or landslide) Damage from rising water (floods, water from underground and sewer backup) Ordinance or law (loss resulting from regulation regarding construction or demolition) War or nuclear hazard (includes nuclear power plant) Power failure (power plan failure) Intentional act (burning your own house down) Types of Home Owners Coverage: Part A: Dwelling Covers repair or replacement of house or attached structures Insured who have an amount equal to the replacement cost Must carry at least 80% of the replacement cost Part B: Other Structures Includes detached garage, storage building, and other structures Other structures not covered if used for business purposes Part C: Personal Property Furniture, electronics, clothing, paintings, etc. Limits are placed on certain personal property losses Schedule high-value items, such as a wedding ring Part D: Loss of use Provides reimbursement for expenses related to additional living expenses Losses resulting from living in a hotel because the residence is damaged or being repaired The insured must suffer a financial loss (I.e., If you have damage from a hurricane and you stay with a family member for free, you cannot collect) Part E: Personal Liability Protects the insured allegations of bodily injury or property damage (for example: your neighbor slips and falls on the sidewalk in front of your house) Cover both damages and costs of defense of claim or suit Part F: Medical payments to others Covers medical payments for injuries that arise even if the insured was not liable for the injury Does not apply to the insured or members of the insured’s household Does not cover thieves or trespassers A Good Foundation These are not the only three areas in which to have insurance. However, it’s a great place to start. It is essential to take your time to understand each area and how that coverage works for you. Insurance is a product that helps protect you from significant expenses. Yes, it’s good to find the best deal, but it is also important to make sure you are not stepping over dollars to pick up pennies. The Whitaker-Myers Group has a division that helps with the various areas of insurance, as mentioned above. If you have questions about any of these, reach out to your advisor today who can help connect you with someone to help.

Recap Last week, we dove into defining the difference between asset location and asset allocation. As a quick refresher, asset location focuses on the ‘where’ question of your investments. Where should I invest my money to align with my goals in a tax-efficient plan? On the other hand, asset allocation is the selection of the securities, assets, or “beanie-baby” investments in your portfolio. The allocation component focuses on the ‘what’ aspect of your investments.  If you’d like a bit more than a refresher, here is the link to the article from last week, Asset Location vs Asset Allocation (whitakerwealth.com). To rebalance or not to rebalance, that is today’s question In a previously written article, our Whitaker-Myers Wealth Managers (WMWM) team discusses the importance of rebalancing. Rebalancing an investor’s portfolio is an excellent strategic decision that keeps their account within the appropriate allocation percentages. For example, imagine that you’ve created a portfolio with the intent to reach a specified goal with 70% in equities and 30% in bonds/fixed income. However, when you log in this morning, you notice 50% in equities and 50% in bonds. Well, that is a pretty significant deviation from the goal allocations. In this scenario, timing-dependent, you may consider rebalancing the portfolio to stay within your goal and allocation requirements. Our team at Whitaker-Myers Wealth Managers pays close attention to tolerance levels and has the tools at our disposal to manage any rebalancing procedures as necessary and efficiently. To rebalance or not to rebalance doesn’t seem like much of a question anymore, does it? However, depending on the account type you or your advisor have selected, you may not want to rebalance. Let’s keep swimming into the deeper ends of this ocean of knowledge. Types of Allocation Accounts Buy and Hold This account is self-explanatory. In a buy-and-hold account, the investor never rebalances. The investor buys a security and holds it. Earlier this week, a colleague shared with us that if we invested in NIVIDA 10 years ago for $1000, that same account would be >$300,000 today with no additional investment. Hindsight is 20/20, and the reality is that most of us would have sold before hitting the 300k mark.  Key takeaway: Buy-and-hold investors do not rebalance; they buy and then hold until sold. “Hold until sold” – the next hit song on the WMWM album. Tactical Asset Allocation (TAA) Some may consider the buy-and-hold strategy part of the tactical asset allocation umbrella, but I believe they are quite different. The key distinction is that tactical asset allocation will not be the hit track on the WMWM album. All jokes aside, the TAA portfolio differs from the buy-and-hold portfolio by selling securities more regularly and thus ‘rebalancing’ without traditional allocation percentages. Some of the key benefits of the TAA are: More active investment approach Buying and selling securities (many times individual stocks) based on market trends/analysis/gut feeling Allows investors to make ‘tactical,’ short-term decisions Much more flexibility and risk management (debatable) Strategic short-term changes based on micro and macroeconomic influences (we’ll have a very detailed post about this in the future) For those who prefer individual stocks, this is a great investment style to consider. However, the disadvantages are important to consider as well: tax liability, increased risk with single stock exposure, diversification risk, and individual security risk (based on security type). Strategic Asset Allocation (SAA) This strategy is the strategy most investors are familiar with. Your 401k and other retirement accounts are likely invested using the strategic asset allocation strategy or something very similar. This strategy defines allocation percentages to the asset classes in which the investor wants to invest. As shared in the earlier example, a 70% equity and 30% bond/fixed income portfolio is a type of SAA portfolio. This portfolio rebalances based on the investor/advisor's discretion; however, rebalancing this type of account is more commonly dependent on tolerance/ranges determined by the account managers (individual or organization investment committee). Benefits of the SAA style include: Period-based rebalancing to stay aligned with goals and projections Diversification benefits, based on low correlation and multi-asset class allocations Most common type of long-term investment, short-term benefits are present as well (allocation and time horizon dependent) Can fit almost any investor profile based on their investment philosophies and goals I believe there are very few disadvantages. However, when analyzing returns specifically, this strategy works best with a long-term horizon. Other types of accounts include Dynamic Asset Allocation, Core and satellite, and absolute return allocations.  We’ll spend some time exploring these next week as we continue our exploration. To summarize The account type you select, what is within the account, the strategy you deploy, AND who manages your account all need to align to get you to your goals. A savvy investor may be able to do 3 out of 4, but it is difficult to reach the end goal without the skills and knowledge of the experts. Our team of Financial Advisors at Whitaker-Myers Wealth Managers have the expertise you need to succeed, and we always come with the heart of a teacher to guide you to success. Schedule some time with one of our advisors or coaches today!

If you are anything like me, you have probably registered for hundreds, and what feels like maybe even thousands, of accounts online that require a username and password. Even if you are trying to buy a pair of pants online, now it asks you to register for an account. Because of this, one of two scenarios typically plays out. Either you reuse your “go to” password and username, which can cause a security threat if, for some reason, those login details were to be breached, or you can try to create a unique username and password combination for each profile or new account. This requires you to remember countless usernames and passwords and hope you get the right one before you are locked out of your account by accidentally putting in a different password. Neither is ideal, and both pose problems for you in this online world. Identity Theft Identity Theft is a very real concern for personal information that is frequently used online every day. If your sensitive personal information is compromised, you could spend several weeks or months trying to straighten things out with the various accounts. In the worst-case scenario, your bank account is impacted. Is there a solution? One solution I have recently implemented is using a password manager. This option gives you the best of both worlds, as it allows you to create and generate thousands of unique and complex passwords without having to remember them all while still protecting your individual password for the overall account. A password manager app allows you to log in to one secure web browser and then securely stores all of your passwords to autogenerate when you go to a site to log in. It may also have a feature to “auto-generate” a unique password with upper- and lower-case numbers and special characters, which is much more secure than using your favorite pet name(s). Once you log in, you can import all of your current passwords. Some password manager apps give you a security score on each one, and you can go to each website to autogenerate a new, much more complex password to use moving forward. The service costs money, but it is a small price to pay for the security it offers. Estate Planning This can also be a valuable tool for estate planning. By giving loved ones the ability to see and locate important login information all in one place, you can save them time and headaches rather than trying to find all the required information for your accounts if something prevents you from giving them access. There are many different options for services, and I am sure there are some free options as well, but it is worth the time to try and centralize things and provide more security for your most sensitive information. At Whitaker-Myers Wealth Managers, we take financial security very seriously as part of your overall financial health. If you have other questions about retirement or saving for your future, contact one of our financial advisors.

SIMPLE IRAs are often mentioned when talking to clients. They either have one with a previous employer or want to know if they would benefit from opening one themselves. SIMPLE IRAs have unique characteristics and rules. Educating yourself on these rules will give you a better understanding of what a SIMPLE IRA is and who it is for. What is a SIMPLE IRA? A SIMPLE IRA is a low-cost plan for self-employed or small business owners that is low-cost and easy to maintain. Who is it for? SIMPLE IRAs are for self-employed individuals or businesses with 100 or fewer employees. A caveat is that it must be the only retirement plan you fund. If you already have an existing employee retirement fund, you are not eligible to establish a SIMPLE IRA. Who is eligible? All employees who have received at least $5,000 in compensation in any of the two prior years or are expected to receive (at least) $5,000 in the current calendar year. Side Note: You can impose or eliminate less restrictive eligibility requirements for prior year compensation. How is it funded? SIMPLE IRAs are funded with salary-deducted contributions and annual employer contributions. Eligible employees can decide whether to contribute/participate, but employer contributions are mandatory. Contribution Limits (2024) Eligible employees may contribute 100% of their compensation or a maximum of $16,000. If they are 50 or older, that amount is increased to $19,500. Administering Information SIMPLE IRAs must be established by October 1st if you will make contributions for that same year. Annual employer contributions must be made by the employer’s tax filing deadline. In addition, plan vesting is immediate, and employer contributions are tax-deductible. Early Withdrawal Penalties Withdrawing from your SIMPLE IRA will result in income tax paid. However, additional penalties may be paid depending on your age and time in the plan. If you withdraw any amount before age 59 ½, you will be charged an additional tax of 10%. This tax increases to 25% if you withdraw within 2 years of first starting to participate in the plan. Are they right for you? SIMPLE IRAs have more intricacies than the ones listed, but hopefully, the broad overview of SIMPLE IRAs has helped you understand their purpose and function better. If you think you or your business would benefit from setting up a SIMPLE IRA, reach out to your advisor. If you don’t have an advisor, Whitaker-Myers Wealth Managers has a team of financial advisors with the heart of a teacher able to help explain and answer questions you may have. Schedule a meeting with one, as they can assess your situation personally.

There is much to be said about having a home to call your own. If you’ve worked to purchase your first home (mortgage-free or even just a down payment), good for you—your hard work has paid off! Not only is it a wise investment, as real estate tends to appreciate over time, but it can also serve your family practically by giving you the space you need and the ability to customize your living spaces. Unfortunately, dream homes don’t grow on trees. So, finding a house in your price range that can check most of your boxes is the first thing to do. Making that house into a home is a whole other beast. Renovations to your home, especially those done by professionals, can cost up to tens of thousands of dollars, depending on the magnitude of the project(s). In this article, we’ll look at a few budget-friendly upgrades you can make to your home that will change the feel and add value without costing you dearly. Replacing Outlets, Switched and Wall Plates Living in a house previously owned by someone else can be challenging at first, as it often still smells and feels like them. A fresh coat of paint is one of the best ways to brighten a room and immediately change things. Any time we’ve moved, the first thing we do is paint the bedrooms and main living space to a color(s) that makes it feel like ours. If you want to take it a step further and complete the look, I recommend replacing the almond-colored outlets and light switches with white ones. Many homes built before the 2010s used the off-white, almost yellow-looking almond switches. Making the switch and changing these out to white-colored wall plates can brighten the space at minimal cost. Be sure you’re comfortable working with wires, or you find a trusty friend who has done so before. I’m not giving you electrical advice, nor am I qualified to do so, so be careful and consult a professional if you’re unsure how to do this safely and correctly. If you do this right, it’ll brighten your home for just a few dollars. Replacement 15 Amp Wall Outlet: $0.77 Replacement Single Pole Light Switch: $.085 Replacement Cover Plates: $.46 New Light Fixtures At the risk of this sounding like an article about electrical work, I share another recommendation involving wires. Replacing the dining room chandelier, bathroom vanity light fixture, and even a ceiling fan in an outdated bedroom will make your house feel like a home. Again, I would suggest talking to a professional if you have not done electrical work before. Still, a project like this typically involves minimal tools to get the job done. If you check your local home improvement store for deals, they usually have good options for new light fixtures and ceiling fans for under $100. Here are some deals I’ve recently seen online: Replacement Fan: $50 Replacement Vanity Light: $19.99 Landscaping With spring in full swing, it makes sense to address the outside of your home for a little bit of curb appeal. New plants, mulch, and professional landscaping services can be another significant expense. Buying some perennial flowers is one way to freshen up the look of your home’s exterior on a budget. That one-time investment will pay off yearly as those flowers return year after year. If you buy bulbs that are also perennials, you can get them for under a dollar a piece, depending on the flower. It’s a cheap way to add a pop of color and make your house look like your home on the outside. Another tip is to edge your walkways, driveway, and flower beds with a line trimmer after mowing. This creates clean lines and adds a professional flair to your exterior. Battery-powered line trimmers can be found online for less than $100. Flower Bulbs: $0.72/bulb Line Trimmer: $ 49.99 These little changes will allow you to customize your space without spending top dollar on significant renovations. If you enjoy a weekend project or working with your hands, be careful because these little fixes will show you how capable you are of taking on even bigger projects. They could be the tip of the iceberg of future projects to come—I know from experience! If you are trying to make a house a home with multiple things on the to-do list but don’t have enough in savings to accommodate them and need to work on a budget but don’t know where to start, reach out to our financial coach to help create a customized budget plan that can include these weekend projects just for you!

I came across the topic of “Asset Location vs. Asset Allocation” a few weeks ago when I was reading, and knowing how similar they sound, I thought they would make an excellent article to write. Asset Allocation and Asset Location are two completely different strategies but must be understood to build the most effective portfolio that aligns with your goals. Let’s first dive into Asset Location. Asset Location Asset location is the process of placing your investment selections into specific accounts based on tax status. This is done with one goal in mind: appropriately managing and planning your tax liability during your investment cycle's growth and distribution phases. There are many discussions around retirement savings and planning, but many don’t consider the tax liabilities that may occur during retirement. This is why an accountant and financial advisor are essential, valuable members of your investment team. Depending on your account type and investment type, your tax liabilities may be near or far-term. Consider: Taxable accounts: Index and other Passive accounts Growth Funds with low turnover Tax-managed funds REITs Municipal bonds Tax-Deferred accounts: Dividends Most taxable bonds Actively managed, high-turnover funds Partnerships (MLPs) Asset location essentially answers the ‘where’ question: “Where should I invest to align my goals with a tax-efficient plan?” Asset Allocation On the other hand, Asset allocation answers the ‘what’ question. “What should I invest my money in?” This is where you or your advisor helps select the funds and classes you invest in. If you’re interested in learning more about asset classes, enjoy this quick read: Asset Classes: Understanding your investments (whitakerwealth.com). Asset allocation is more than just selecting assets or asset classes or assigning a percentage to each. It is the output and culmination of the various inputs that the investor provides to their advisor. This includes four key input components: The time horizon of the investment(s) and investor Strategic goals of the investor Objectives of the portfolio Investor risk tolerance Each of the four items listed above has a qualitative and quantitative component. Recently, I’ve seen many complex methods that try to quantify and stratify an investor's risk tolerance. These are done through surveys, scenario builds/discussions, or, most commonly, interviews. However the data is collected, the goal is to define and align all four key inputs to build a targeted asset allocation plan. *An important aspect of asset allocation I purposely avoided was selecting funds with low correlations. I’ve discussed this in detail in this post if you’re interested in learning more about it: Correlation of Assets in Your Portfolio (whitakerwealth.com) Does it even matter? Well, simply put, yes, it does! Knowing what to invest in and where to invest it will significantly influence your ability to meet your strategic goals in the future. Winning the lottery is not a good plan, but the team of Whitaker-Myers Wealth Manager Teachers(advisors) is ready to work with you to achieve your goals. Schedule some time with our team to explore this further and get on the right path. Next week, we’ll take this topic one onion peel further, digging into strategic, tactical, and dynamic allocation portfolios. Stay tuned!

Often, in the financial world, terminology can be used that the average person may not understand or have a firm grasp on what is being said since they don’t use it in their daily life. As we strive to have the heart of a teacher here at Whitaker Myers Wealth Managers, we find it important to educate others on what these terms mean and what they imply for the client. This article is intended to inform the reader about what an RMD is and what rules are associated with it. What is an RMD? RMD is an acronym for “Required Minimum Distribution”. RMDs apply to Traditional IRAs, Simple IRAs, SEP IRAs, Inherited IRAs, and most employer-sponsored retirement plan accounts, such as 401(k)’s and 403(b)’s. Your Roth accounts, including Roth 401(k)’s, Roth 403(b)’s, and Roth IRA’s, are not subject to RMDs. Inherited IRAs also follow different rules than all other accounts; because of that, we will talk about those last. When do RMDs start? RMDs typically start April 1st following your 73 birthday. One exception for this applies to employer-sponsored plans. If that company still employs you, then you are not subject to RMDs for that plan only. If you were to have an employer-sponsored plan from an old company that you no longer work for but are employed by a different company, then you are required to take RMDs from your former plan but not your current one. This exception does not apply if you own 5% or more of the business sponsoring the plan. Inherited IRAs Inherited IRAs are very different from these rules. The type of account doesn’t matter for Inherited IRAs, so both Roth and Traditional accounts are subject to the same RMD rules. Rules for Inherited IRA RMDs differ based on the year of death, the relation with the deceased, and the age at the time of death. If the person you inherited the IRA from passed before 2020, you have the option to roll that account into your IRA if you are the spouse. The other options for both spouses and non-spouse beneficiaries are to take distributions based on their own life expectancy, or they may follow the 5-year rule. The 5-Year and 10-Year Rule The 5-year rule says that the account must be liquidated by the end of the 5th year after the year of death. If the person were to have died in 2020, the year 2020 does not count towards their years. There is no required way to take these distributions as long as the account is empty at the end of the 5th year. Theoretically, you could withdraw the whole account on the last day of the 5th year. If the deceased passed after 2020, age becomes a factor. If they were over 75, the spouse has the option to roll the account into their own IRA or take distributions based on their own life expectancy. Non-spouses have some stipulations with them. There is such a thing as an “eligible designated beneficiary” with them. This is considered a disabled or chronically ill individual or an individual who is not more than ten years younger than the deceased. An eligible beneficiary has the option to take distributions over their life expectancy or follow the 10-year rule. In contrast, those individuals not considered eligible designated beneficiaries can only follow the 10-year rule. The 10-year rule requires the account to be liquidated within ten years, but it is on a schedule (unlike the 5-year rule). If they were not over 75 when they passed, then the rules look slightly different. The spouse can delay distributions until the deceased would have turned 72 if it applies, take distributions based on their life expectancy, follow the 10-year rule, or roll the account into their own IRA. Non-spouse beneficiaries must follow the 10-year rule regardless of whether or not they are eligible designated beneficiaries. Consulting with an advisor These rules can be very difficult to follow, so the best course of action is to check with your advisor to ensure you are following them correctly. If you do not have one, schedule with one of our ten financial advisors on our team; they would be happy to help!

When you think about risk, do you immediately think of the probability that some unfavorable outcome will occur? Most of us do. However, risk is defined as the chance/probability that the result will differ from the expectations. So, inherently, risk can be positive or negative. Sounds counterintuitive, right?  I believe the best way to understand this concept is to look at it mathematically and graphically. Risk as Standard Deviation You’ve probably seen risk defined as ‘beta’ or standard deviation or any other slew of metrics, but in today’s discussion, we’ll focus on standard deviation.  If you want a refresher on other risk metrics at a high level, read this previously posted article I wrote, Investing Metrics, Key Risk Metrics (whitakerwealth.com). Standard deviation, taking us all back to our grade school days, measures the volatility or dispersion from the mean. Simply put, standard deviation measures the probability that a result/outcome will land within n-standard deviations of the mean. In this example, the mean is the expected outcome or expected return for the investment/security. Let’s take a look at this in graphically Source: scribbr.com ‘M’ here is the mean, and the dispersion from the mean is shown as standard deviations. The standard deviation values are important. Imagine that you have an investment that your purchase price was $50/share and this purchase price (hypothetically, of course) was the same as the mean over the specified timeframe. This means that: Your investment should have a return 68% (1 SD) of the time between $40-60 Your investment should have a return 95% (2 SD) of the time between $30-70 Your investment should have a return 99% (3 SD) of the time between $20-80 Or rephrased: Your investment should have a return >$60 or <$40, 32% (1-0.68) of the time Your investment should have a return >$70 or <$30, 5% (1-0.95) of the time Your investment should have a return >$80 or <$20, 1% (1-0.99) of the time So, the question remains: Is this risky calculation/measurement actually risky?  Standard deviation measures the probability of upside and downside risk, but when I think of risk, I only consider the loss possibility. Great, so let’s revisit with only the downside risk. Downside Risk Only looking at downside risk: Your investment could have a return 34% (1 SD) of the time between $40-50 Your investment could have a return 2.5% (2 SD) of the time between $30-50 Your investment could have a return 0.5% (3 SD) of the time between $20-50 Or rephrased: Your investment could have a return <$50, 34% of the time Your investment could have a return <$30, 2.5% of the time Your investment could have a return <$20, 0.5% of the time Did you notice I changed should, to could? – This is called framing; we’ll discuss that in a future post! Sortino Ratio Well, that’s a bit easier to grasp and aligns with the way I see risk in the market. So, how can I understand the standard deviation of my portfolio and measure it against the market? There is a metric called the Sortino ratio. This ratio is a risk-adjusted return metric focused on downside deviation and risk. If you’re a risk-averse investor, consider discussing this ratio with your advisor. More importantly, make sure you discuss your risk tolerance, time horizon, and goals. Our team of financial advisors at Whitaker-Myers Wealth Managers is well-versed in metrics and how to align your goals with results. Schedule time with our team to discuss and if you have any topics you’d like for me to address, please submit them here.

Along with the final high school transcript sent to the college committed to, students who have been placed on wait-lists might send a final transcript to those schools as well. While there's no guarantee that submitting a final transcript will boost their chances, it doesn't hurt to try. In a normal year, students would have completed their roommate preference surveys, submitted housing and health forms, and taken whatever subject placement tests their college requires. If the student is a D1 or D2 athlete, the NCAA also needs a copy of their final high school transcript. A Parent's Right To Know What's Going On Is Not Automatic When a student reaches the age of 18, they are considered adults and thus have certain rights of privacy. Parents should know that the college won't automatically give you the right to access your child's educational and financial records. They won't be able to comment on the health of your child, either. This is because of the Family Educational Rights and Privacy Act or FERPA. To have access to all of the above, your student will have to sign a form explicitly allowing you, as parents, to access certain information. Here is a sample waiver Proxy Access and Authorization. Please check the college’s website on how to gain access to your child's accounts. HS Juniors: Thinking Ahead Because the number of college applications has declined so much (the exception being the "brand-name" institutions where applications have increased exponentially), the smaller regional colleges are at risk of merging with other institutions or of closing their doors altogether. Since 2020, we've seen at least 57 public or nonprofit colleges close, merge, or announce closures or mergers. There are consequences to the towns these campuses inhabit, especially those in rural spaces. If the college your child is considering is seeing a shrinking student body, the town can suffer in ways that may negatively impact the college experience. As an example, there is the town of Montgomery, West Virginia. When West Virginia University decided to move West Virginia Tech to Beckley, a bigger city an hour away, Montgomery effectively became a ghost town. Even the pizza parlor was forced to shut down. One aspect of the college search that isn't usually considered includes learning the financial health of a college and its long-term viability as an institution of higher learning. This can turn out to be very important information to have. The last thing you want to find out is that at the end of your student's sophomore year they will have to transfer because the college is closing. This link lists the credit ratings of 937 colleges and universities. Real Estate, Business Values, and Farms Are Being Counted Against You There are parents who receive income from real estate rentals. These parents mistakenly believed that their real estate was a business and therefore wouldn't be counted in the financial aid formula. To the contrary, rental real estate is considered an investment. However, the FAFSA now asks for the values of any business or farm the family owns. However, there is another option: Instead of filing a Schedule E, discuss with your CPA or accountant the creation of a U.S. Corporation and file an IRS 1120. The income you take is ordinary W-2 income and a portion of the rent can be taken as a loan. Yes, the income is taxable but you can reduce your tax liability in any number of ways. Beginning with the 2024-2025 FAFSA the values of any business the family owns is included. Businesses with hard assets and inventories will be assessed and could reduce or eliminate any need based financial aid that would have been available prior to the 2024-2025 school year. The only type of business that is excluded are US Corporations that file IRS Form 1120. But the value of the business is just the equity. Liabilities are deducted from the market values. Also until now, family farms were excluded from the aid formula. Now the equity, acreage, and the equipment are counted against those families. Unless Congress repeals the law or the parent persuading the college to use it's Professional Judgement to exclude it. This May, the price tag of a student transferring to New York University at $99,000 for the coming year. As a student transferring to the film school the student qualifies for no institutional aid or scholarships. This students aid package included $6,500 in loans and $3,000 in non-guaranteed Federal Work Study. That leaves the family to pay $89,500 out of pocket. I can't imagine any parent wanting to be in this position. The best thing to do is seek guidance from a professional college funding advisor. That way, a parent can learn about options and the benefits and burdens of each one.

What is a Roth IRA A Roth IRA is an investment vehicle that allows people to save for retirement using after-tax dollars. Those dollars are then invested into securities like mutual funds, individual stocks, bonds, or other investable securities. The advantage of a Roth IRA is that the investment grows tax-free, and distributions can be taken tax-free after age 59 ½. This is a great way to get tax-free savings and control your tax liability in retirement. The downside is that there are some rules to how much you can contribute to a Roth IRA each year. In 2024, the maximum contribution to a Roth IRA is $7,000 ($8,000 for those over age 50). That contribution limit starts to phase out the higher your income is—specifically, your modified adjusted gross income (MAGI). 2024 Income Limits for Roth IRA Contributions In 2024, the contribution limit starts to phase out at a MAGI of $230,000 for married couples filing a joint return and at a MAGI of $146,000 for single filers. Married couples who live together and file separately can only contribute to a Roth IRA with a MAGI of less than $10,000. Below is a chart that shows how each filing status and income level affects the maximum Roth IRA contribution for 2024. So, how can high-income earners contribute to a Roth IRA? The Backdoor Roth IRA contribution is the answer. Backdoor Roth IRA Contributions A backdoor Roth IRA contribution is a way for high-income earners to contribute to a Roth IRA regardless of income level. The basic concept is that the investor makes a non-deductible contribution to a Traditional IRA and then does a Roth Conversion to move the funds from the Traditional IRA to the Roth IRA. But it is not as simple as that. First, you cannot make a backdoor Roth contribution if you have any funds in a Traditional IRA, SEP-IRA, or SIMPLE IRA. You could convert the balance of those pre-tax accounts to a Roth IRA, but the entire conversion will be counted as taxable income for the year it is converted. This can be a very poor decision for many people, especially if the balance of the IRA is high. A solution to this would be to do a rollover from your pre-tax IRA to an employer-sponsored plan like a 401(k). If you have a plan that allows rollovers INTO the plan, you could do a tax-free rollover to zero your pre-tax IRA balance. Second, contributions to Traditional IRAs are non-deductible. This means that you cannot deduct backdoor Roth contributions like you could with a Traditional IRA contribution. Third, contributions made to the Traditional IRA with the intent to convert the funds to a Roth IRA typically need to sit for about four days before conversion can happen. Conclusion If you think the backdoor Roth strategy is right for you, consult with a financial advisor at Whitaker-Myers Wealth Managers. We can discuss your overall financial and investment picture and help you figure out if this is something you should be doing. If it turns out the backdoor Roth strategy does not work for you, see if your employer plan will allow for Roth contributions. This would be a great alternative to contributing to a Roth IRA but would be limited to the investment options within the plan.