There is a new sheriff in town, and a whole new supporting cast of characters. I'm kidding of course, but there is a new FAFSA coming your way. You may have heard that if you don't want to miss out on financial aid you have to get your FAFSA in early. Well, that's not going to happen this year. Typically, the FAFSA is available on October 1st. But this year, the Department of Education is saying sometime in December. But we think January 1, 2024 is more likely. When it does go online, we advise not jumping the gun to complete it right away. You'd be a guinea pig, and I'm sure you don't want to be experimented on! The fact that everything will be completely brand new is reason enough to avoid submitting a FAFSA for at least the first two weeks. This is because the FAFSA Simplification Act is in its final phase of implementation of the new FAFSA for the 2024-2025 school year, and there are 20 different systems connected to it. What are the odds that the government makes a tectonic shift in rules, regulations, formulas, forms, websites, etc., and does it with a slashed budget and staff cuts and does it bug free? Haha! Healthcare.Gov anyone? If you're concerned or worried about your student missing Early Decision, Early Action, or state grant deadlines, don't be. Colleges and states are already postponing the deadlines by at least a couple of months. Changes to Financial Aid FAFSA Simplification is anything but simple! The first change is the formula used to determine how much aid a student is eligible for. This is the last year (2023-2024) that the federal needs analysis formula will calculate an Expected Family Contribution (EFC). From 2024-2025 onward, that formula is called the Student Aid Index (SAI). The new SAI will be based on much of the same information as the old EFC. But, for many middle to upper income parents, the results will be painful (costly). Divorced and Separated Parents It used to be the parent the student lived with more than 50% of the time completed the FAFSA. For example, if one parent made considerably less than the other, the FAFSA would favor the parent making less. The result being that financial aid eligibly would be higher. Now, the rules require that the parent who provides the majority of material support is the one to complete the FAFSA. This does not necessarily mean that the parent who makes the most money is automatically the parent who files. Discount Based on Number of Students Enrolled in College Is Gone For almost 30 years, the Federal Methodology that produced the EFC has discounted that the number of students in college at the same time by 50% or more, depending on the number in college. The removal of this discount will be harsh and possibly devastating to many families. The new rationale is that the discount wasn't fair to those parents with only one student in college. But that's flawed thinking. If a parent has three in college at the same time, the cost would be the same as a parent with one in college. Families with more than one student in college will in many cases be eligible for less financial aid. That said, we expect the CSS Profile will continue to consider the number of students a family has in college. The CSS Profile is a form used by 200 of the more to most selective colleges used to award their own money. This may be a big reason to consider colleges that require the CSS Profile for school based financial aid. Sending your children to a CSS Profile school may save you thousands in out-of-pocket college costs and you may be sending your child to a great private college! It's hard to imagine that parents with multiple students currently in college at the same time losing their aid. That would be bad business for colleges. It's likely that the multiple discount will be grandfathered. However, that's no guarantee, and parents should be prepared to appeal based on multiple students in college at the same time. Family Businesses and Farms Are Now Counted In past years, the net worth of a family small business with fewer than 100 employees was not reported. Starting with the 2024-2025 FAFSA, the net worth of each will be part of the FAFSA calculation. Here's an example of how devastating this can be to families who would otherwise qualify for a good deal of financial aid. Without including the business or farm, a family earning $100,000 could expect an EFC of $20,000. Add a business or farm with a valuation of one million dollars and see what happens: A formulaic adjustment reduces the net worth of $1,000,000 to $666,000. Then multiply $666,000 by an assessment rate of 5.64%. That increases the new SAI by $37,562! What was once a contribution of $20 thousand is now almost three times as much at over $57 thousand! For many parents with a business or farm, that means the end of any need-based financial aid (grants, some scholarships) for their student. It may even be the end of their ability to afford college. Parents who don't own either a business or a farm may say, "Well, that's fair. They have money." But, the truth is that to get the equity out of a business to pay for college, or to borrow money against the equity of a farm is usually not possible. There is an expression: "Land rich and cash poor". That's the situation of most closely held businesses and farms. However, with foresight and planning the value of both can be eliminated!. That's something you will want to discuss with us as soon as possible. If any of the above scenarios apply to your family circumstances, I can't encourage you enough to reach out to me at lcurry@whitakerwealth.com to schedule a college-planning consultation. There are strategies and workarounds that can greatly mitigate the effect of the new rules for your family! The result can be thousands of dollars in savings on your out-of-pocket college costs. Each month, we provide you with tips on your best ways to pay for college regardless of your financial situation. A Hack To Increase Financial Aid Eligibility The old EFC formula had retirement contributions added back into income that would go on the FAFSA and reduce eligibility. However, if you have earned income, the kind that generates a W-2 form, and you make contributions to your employer sponsored retirement plan; i.e., 401k, 403b, or 457b, that income will no longer be counted. This is a big change in parents' favor. But, if you make contributions to an IRA, SIMPLE IRA, SEP IRA OR Keogh Plan, that income will be added back into the SAI formula. If you're asking why that is, here is the answer: The W-2 deduction is not part of the IRS 1040. StudentAid.Gov apparently has no interest in any income that doesn't appear on the 1040. If you are a business owner who doesn't get a W-2, contact us for a consultation and learn how to get that deduction from the financial aid formula! The impact could be huge savings on your out-of-pocket college costs! Don't Pay Full Price There are more trapdoors and landmines than ever before! Do everything you can to avoid mistakes by preparing now for the financial aid process. If you aren't a client already, please contact us at 330-345-5000 to schedule a consultation to discuss your personal circumstances to learn ways you may be able to reduce your college costs.

For those of us with children, we've lived through the "why" phase. That period in our child's life where they need to have a rational or understanding of everything they do or that happens in the world. My desire was that I never squash that curiosity, even though, at times, it seemed redundant to have to explain to our kids, for the hundredth time, why they needed to wash their hands before eating. In the same way, as Financial Planners, we have to be the greatest critical thinkers in the world. Thus, we must be the greatest inquisitors of why someone should or should not do something. So, when I was first introduced to Dave Ramsey in my church Financial Peace University class, I wanted to understand and potentially critique Dave's investment recommendations if there was anything to critique. Heaven knows there are thousands of Financial Advisors (many of the insurance agents in Financial Advisor clothes) that have an opinion, and not in a good way, about Dave. To refresh, Dave tells folks that they need to invest into four basic categories: Growth, Growth & Income, Aggressive Growth and International. Obviously, every person's situation is unique and someone who is close to or in retirement needs to hedge their assets using some form of non-correlated asset class(es) to diversify their risk when they enter retirement or come to a close proximity to using the money they've saved and invested. But why these four categories? His basis for these four categories is the same basis any Financial Advisor, Planner or Investment Professional would have. Don't put all your eggs into one basket; diversify your portfolio to reduce risk and smooth out returns (as much as possible) and have exposure to parts of the market that are counter-cyclical to each other. Essentially, he is trying to help you live out. Ecclesiastes 11:2, which says, "Give a portion to seven, or even to eight, for you know not what disaster may happen on the earth." So, let's dive into the more technical argument for what Dave is trying to teach us. For a more baseline understanding of what we mean by growth, growth & income, aggressive growth, and international read this article here. For patient investors with time horizons of years and decades, the primary drivers of portfolio returns are not day-to-day market fluctuations but the business cycle and other longer-term trends. One reason that questions around inflation, the Fed, and geopolitics have resulted in market swings is that they shed light on where we might be in the cycle. Additionally, the business cycle impacts not only the broader stock market and interest rates, but individual sectors as well. And individual sectors are what comprise each of the four categories Dave speaks about. Check out this chart below to see how, in an individual year, each sector can fluctuate from top to bottom. Sectors can be cyclical or defensive relative to the business cycle At the moment, there seems to be little agreement among investors and economists about where we are in the business cycle, just as there is little agreement about whether there might be a recession. Are we experiencing late-cycle dynamics in which the economy overheats, policy rates are too restrictive, and growth begins to slow, signaling an impending recession? Or are there early-cycle dynamics in which inflation stabilizes, financial conditions improve, and demand accelerates, all of which set the stage for future growth? While it remains uncertain, recent economic data are consistent with an economy that is robust but slowing, alongside improving inflation. This matters not only for the broad market but for sectors as well. Sectors are defined by the types of activity that businesses perform. There are many classification systems including the North American Industry Classification System (NAICS) used by the federal government, but most investors tend to use the Global Industry Classification Standard (GICS) from Standard & Poor's. This divides the S&P 500 (or any index) into 11 sectors ranging from Information Technology to Real Estate, which can then be broken down further into Industry Groups, Industries, Sub-Industries, and finally to individual stocks. Sectors many times are what dominate certain categories of funds. For example, a growth fund like the QQQ has 49% of its portfolio in technology, 16% in communication services and 14% in consumer discretionary. Additionally, a growth & income fund like the Schwab US Dividend ETF (SCHD) has 18% of it's portfolio in industrials, 16% in healthcare, 13% in consumer staples, and 10% in energy. Each of those funds are buying a different type of stock and those stocks can be allocated into: cyclical versus defensive sectors. Cyclical sectors are ones that perform well in the recovery and expansion phases of a business cycle, sometimes referred to as being pro-cyclical. For example, Consumer Discretionary businesses benefit from growing consumer spending and confidence which, in turn, depends on the health of the economy. Amazon, Netflix, Walt Disney, Nike and Ford would fall into this category. In contrast, defensive sectors are those that perform well relative to the broader index when the economy is slowing or contracting. Consumer Staples, for example, have relatively stable demand and tend to have higher dividend yields, two attributes that make them attractive when the economy and market is uncertain. Procter & Gamble, Coca-Cola, Walmart and Nestle are some examples of these companies. The business cycle is near its pre-pandemic trend The first chart above, which shows the performance of each sector ranked from best to worst each year since 2008, highlights some of these dynamics. Focusing on individual years and sectors, we can see that in 2008, during the global financial crisis, the best-performing sectors were defensive ones such as Consumer Staples, Health Care, and Utilities. In a year like 2019 during which the S&P 500 index experienced a total return of 31.5%, the best-performing sectors were cyclical ones such as Information Technology, Communication Services, and Financials. In between, sectors may experience specific factors that add or detract from performance. One of the key takeaways from any chart of sector performance is how difficult it is to predict how any group will do in any given year. In 2020 and 2021, Energy stocks outperformed by a wide margin after struggling almost every year since 2014. This year, technology-related sectors have outperformed due to trends such as the enthusiasm for artificial intelligence, but this is a sharp reversal of last year's dynamic. Given this history, it makes sense for disciplined investors to stay diversified across sectors in order to take advantage of trends across all areas. In other words, the principle of diversification is as true across sectors within a market as it is across broad asset classes. When considering what a growth fund is accomplishing for your portfolio (grabbing access to sectors like technology and consumer discretionary), it needs a mate to fully compliment your portfolio during different market cycles. Hence, growth & income with its consumer staples and healthcare. The same applies to international markets and smaller and mid-sized companies (aggressive growth). Small and mid-sized companies tend to perform well during the beginning of an economic cycle and lag near the end of a cycle. Recently, we've seen a large dispersion between large companies (growth/growth & income) and small to mid-sized companies (aggressive growth). International markets can perform very differently than the US market, however we would argue that specific country selection is the key, considering the MSCI EAFE (the index for the international market) has only returned 4.38%, on a ten-year basis (ending 8/31/2023). Market cycles have increased in length over time This is especially relevant today given the uncertainty around the business cycle. Many investors who came into 2023 certain that there would be a recession likely focused on the defensive areas of the market that did well last year, only to then have cyclicals outperform. From a longer-run perspective, the pace of economic growth has slowed but is back to pre-pandemic trends. While the S&P 500 is still recovering from last year's bear market, history shows that bull markets can happen swiftly, often when they are least expected. This was true in both 2009 and in mid-2020. In all cases, having an appropriate set of sector exposures across both cyclicals and defensives can help investors to stay balanced regardless of what may come next. The bottom line? The business cycle is what matters for long-term financial success. This directly impacts sector performance, which can be challenging to predict. Disciplined investors should continue to stay diversified across sectors and the growth, growth & income, aggressive growth, and international continuum, as the cycle unfolds.

Probably one of the toughest parts of President Biden's re-election run will be the unrealistic sect of his party that believes the world can survive on less and less oil each year. Much to my surprise (and pleasure) and those individuals' disgust the US has once again taken its rightful place as the number one producer of oil in the world. We hit a historic peak under President Trump, who led our energy renaissance in the US, of 13 million barrels/day, and today we are back around 12.8 million barrels/day. President Biden is learning a simple lesson in politics - ruining someone's pocketbook has a deeper impact than upsetting their ecological worldview. A key driver of global markets and inflation over the past two years has been the price of oil so I thought let's dig a bit deeper into the subject. For the first time in years, we've talked about Exxon and Chevron as stocks to watch. As an essential commodity that fuels the economy, investors watch the oil market closely. While oil has fallen considerably from its peak in 2022, it has also rebounded over the last few months. Since mid-June, Brent crude prices have risen over 26%, from around $72 per barrel to above $90. What do long-term investors need to know about energy prices as the inflation story evolves and the market rally continues? Oil prices have begun to rise after falling steadily for a year Oil is still a critical input into economic activity with the International Energy Agency estimating that global demand will rise to 102 million barrels per day this year. Demand plummeted during the pandemic and the price of oil even briefly turned negative, but this reversed quickly as economic growth surged when lockdown restrictions were lifted. Oil prices then spiked in February last year when Russia invaded Ukraine, raising concerns over the supply of energy for Europe and the rest of the world. Fortunately, oil prices began easing soon thereafter, falling from nearly $128 at the peak. Oil matters to markets and investors for many reasons. Not only does the price of oil interact with broad markets and the U.S. dollar, but it is also an important driver of inflation. Rising energy prices are a direct burden on consumers and businesses who spend more on gasoline and other fuels, putting upward pressure on headline inflation. This also indirectly raises prices on all goods and services as production and transportation costs rise, potentially impacting core inflation. Thus, higher oil prices effectively function as a tax which can slow economic growth and impact corporate profitability. For these reasons, the recent increase in oil prices could hinder improvements in inflation and act as a drag on the broader economy. Why have oil prices risen in recent months? First, the U.S. economy has been much steadier than expected. Weakness in oil prices earlier this year partly reflected fears around an imminent recession. The fact that a recession has not materialized, while the odds of a so-called "soft landing" by the Fed have increased, has helped to propel oil prices higher. Second, Saudi Arabia and Russia recently announced that production cuts of 1.3 million barrels per day would be extended until December. This amounts to 1.3% of global production - not an insignificant sum - and adds to previous cuts. The two countries are among the largest in OPEC+ and have led other cuts in order to prop up oil prices, as well as in response to slower GDP growth and weakness in China. Some economists estimate that this could result in a global deficit of more than 1.5 million barrels per day in the fourth quarter. U.S. oil production is returning to pre-pandemic levels It's important to maintain perspective around these cuts. The relevance of OPEC as a price-setting cartel has declined over the past decade, partly because cuts by each country are voluntary and difficult to enforce, and because the U.S. has become the top producer of oil in the world. U.S. oil production, as shown in the accompanying chart, is nearly back to its pre-pandemic level of 13 million barrels per day. While there are many nuances in terms of the types of oil produced and consumed in the U.S., Europe, and elsewhere, the fact that the U.S. has been a "swing producer" has shifted the dynamics of the energy markets considerably. Another tailwind for oil prices is declining oil inventories. For instance, the Strategic Petroleum Reserve (SPR), a large emergency supply of oil in the U.S., is at its lowest level since the mid 1980s. This is primarily because oil was drawn from the SPR to offset high prices last year when gasoline was averaging more than $5 per gallon nationwide. The federal government would need to purchase 376 million barrels of oil to restore the SPR to its 2010 peak level. While there is no set timeline for doing so, this deficit naturally places upward pressure on oil prices. The energy sector has been volatile over the past year When it comes to the stock market, these dynamics have driven significant volatility for the energy sector of the S&P 500. The sector has risen 17.2% over the past year but this includes a decline of 18.8% from November 2022 to March 2023 followed by full recovery. On a year-over-year basis, its return is third only to the information technology and communication services sectors which have led markets this year. Last year, it was the top performing group. This is another reminder to investors that it is exceedingly hard to predict which parts of the market might outperform in any given year, and chasing what's already performed well can backfire as well. Changes in leadership between energy, tech, consumer sectors, and others have been commonplace as the world stabilizes, the inflation story unfolds, and investors look to the next market cycle. As always, the best course of action is simple: long-term investors should maintain balanced allocations across a variety of sectors and asset classes. Doing so in a way that is tailored to financial goals is still the best approach for increasing the odds of investment success. The bottom line? Oil prices have risen in recent months due to a steadier than expected economy and production cuts. While this may act as a headwind, the economy remains healthy and there are other signs that inflation is improving. Investors should stay balanced in the months ahead.

Like many other issues in life, if you do not have a plan, you are planning to fail. Although we will address the financial aspect of Long-Term Care and how it’s a vital part of the equation, preparing on multiple fronts is necessary for success. Overall health The first non-financial issue should be obvious but never the less is commonly neglected, and that is to be proactive in entering your later years in the best health possible. Being diligent in exercising, having a good diet, and staying active and social should be plan A in managing the golden years. Yes, disease and debilitating conditions can and do hit the healthiest of humans. However, staying active and fit can reduce the necessity and length of time requiring medical assistance in a long-term care setting. Mental health is also a part of the equation. Getting out, being social, staying active in the community, praying, and attending a local church are all ways to improve mental health; multiple studies have shown they boost physical health as well. Another broad category in planning for getting older and potentially experiencing a physical and psychological decline is having a solid support network. Knowing what strengths those around you have is helpful if you need help with various tasks. Ideally, having family fill this role effectively is an excellent way to comfortably delay needing formal care or to make long-term care a more comfortable state. Now, let's focus on the financial planning options of the long-term care discussion. Self-Funding Self-funding is a viable option if you have a net worth of around $4MM and liquid assets of at least $2.5MM. According to Ramsey Solutions, Americans' average long-term care stay is about two years, and the average cost is around $325,000. So even with dementia or a stroke situation that can extend care well past these averages, it would be pretty unlikely to pay much more than $1MM out of pocket for long-term care expenses. So, a wealthy person, especially in good health, entering their 60s, then planning to self-fund is a reasonable option. Not to say that someone is foolish to make other plans for long-term care when 7 out of 10 Americans over 65 will require long-term care, but being a multi-millionaire likely means you won’t have to sell assets to fund this life event. Likely, the only significant financial blow would be to your heirs in the form of reduced inheritance. An Irrevocable Trust or Gifting Funds Although these strategies are distinctly different, I lump them together because both are subject to the 5-year look-back rule if someone applies for Medicaid to cover long-term care expenses. So, financially speaking, both strategies could work if someone made it past the 5-year window without needing long-term care. There are multiple downsides to taking either of these approaches. In both instances, you are losing direct control of the funds, so if things change, you will be unlikely to be able to claw the funds back. When you gift property, cash, or securities to a child who eventually gets married but then gets divorced, half of your gifted funds would likely leave the family. Property and funds could get tied up in a lawsuit with which you have nothing to do with. Still, again, your family would lose some of your funds that would not been exposed had you not used a gifting approach to qualify for Medicaid eligibility. If you listen to the Ramsey Show, you know Dave recommends not to do this because if you can afford to cover the cost, you should. With an irrevocable trust, the risk of losing the funds is not an issue, but decisions and control of the funds are outside your control, which is usually a downside. Putting real estate that you have no current or future intention to sell could be an instance where setting up a trust to protect against long-term care claim exposure could make sense. Buy Long Term Care Insurance This may be the best solution for many individuals to protect their assets and maintain control of their current investments. So, even if a couple feels comfortable financially near or at retirement, absorbing even one long-term care event could considerably dampen and hinder the goal of living in retirement with financial freedom. Going to the other end of the spectrum of the net worth scale, if a couple has a net worth of roughly $300,000 or less, it usually doesn’t make sense to purchase long-term care insurance. An exception may be someone who rents but has a healthy paying pension and around $300,000 in liquid funds; then they may be in a position and choose to pay for a basic policy and still not financially cramp their retirement years. Most Americans have a net worth between $300,000 and $2M and enough assets that it would be painful to spend down to Medicaid-eligible levels, yet they likely could not afford to pay for long-term care expenses out of pocket. Buying long-term care insurance is likely the best solution for these Americans. Most insurance companies give a “couples discount” for a traditional stand-alone policy for couples in their late 50s; they should expect to pay roughly $400 - $500 a month for at least $70,000 a year of coverage. Like any other health-related insurance, your age, health, and health history can significantly change your premium. Even if you like the idea of long-term care insurance protecting your assets, you are not guaranteed that you will be offered a policy. According to a study by Ramsey Solutions, 30.4% of Americans aged 60-64 are declined for coverage, so if you find yourself in your late 50s or early 60s and in good health, don’t put off applying for coverage while you still qualify. One complaint about buying such an expensive insurance policy is not to recover any of the premiums, which can easily be $100,000 - $200,000 over a lifetime. You may want to explore utilizing a hybrid policy that combines long-term care insurance with an annuity, life insurance, or both. With these plans, an insured’s family will likely get all of the premium and sometimes even a little bit of growth on the premium amount, assuming they never had a claim. Summarizing the Long-Term Care Plan in Retirement Much like Life, Health, and Disability Insurance, you are not excited to think about or be forced to use these coverages, but most of the time, without them, it will eventually be even more painful. So, force yourself to plan and do your homework. Many financial planning topics have universal parallels, but coming up with the exact plan that is best for you is usually nuanced and relatively specific. So, rely on not only friends, family, and personal experience but also pull in your network of advisors, which may include an attorney, an insurance agent, an accountant, your doctor, and, of course, your financial advisor. Usually, going to your financial advisor first to quarterback the process works most efficiently. Remember the big picture of how many years it has taken and how much hard work you have put into building your retirement portfolio and growing your estate. Developing sensible and practical plans to protect those assets makes sense. If you have questions about long-term care options or are wondering which would be the best plan for you, contact our advisors. They are happy to help and answer any questions you have.

Helping you get out of the paycheck-to-paycheck mentality Living Paycheck to paycheck is a burden many Americans face. Around 78% of all Americans feel like they are living paycheck to paycheck. This means that by the time you have your expenses due, you have nothing left over, and you're stuck anxiously waiting for the next paycheck to do… the same thing all over again. In this article, we will lay out some strategies to help break this cycle for you and help you start living your best life. Track your spending, aka budgeting Set up an emergency fund Set up auto contributions Remember your why 1. Track your Spending (Budgeting) People often feel that what they make is the allotment for what they can spend. While this is true, the way it should be spent is essential. Housing, food, utilities, and transportation are the most essential items in your budget, Dave Ramsey calls these “the 4 walls.” If you cannot cover the costs of these items, it may be time to find additional or alternative sources of income. You must think, ‘If everyone could make more money, they would.’ That’s my point - sign up for Lyft, babysit, dog sit, etc. People find money in many kinds of work; you must make time to do it. Outside of that, you may find in your budget that you purchase $20 worth of Starbucks every week, which is around $100/m. That is just an example. There may be $300 in shopping for unneeded clothing, etc. Or, a monthly gym membership can easily cost anywhere from $10 - $100. The list goes on. The point is that there are always places in our lives where we can consciously try to cut down on the expense. Budgeting allows you to take that by the horns and outline where and how to spend your monthly income. 2. Set up an Emergency Fund Setting up an emergency fund will be difficult at first. One of the best ways to do this is following Dave Ramsey’s Baby Steps. If you feel you are living paycheck to paycheck, you may have some debt, be living outside your means, or have never started saving for yourself. Saving for yourself is an imperative part of financial health and wellness. Monitoring your bank account and other spending statements requires discipline and daily courage. Fun fact: One of the most significant ways people manage their physical health is by weighing themselves on a scale at the same time every morning. Use this same methodology to keep yourself in check and in the know of what your bank account looks like monthly. Sometimes, facing the music is much healthier than burying your head in the sand. Creating an emergency fund acts as a buffer to unforeseen emergencies. Sometimes, a car will break down and cost $1,500 to drive again. If your paycheck every two weeks is around $1,500, or even less, this can shatter your financial health. You will take on consumer debt, or you could miss non-negotiable payments. 3. Set up Auto-Contributions Once you have the buffer of an emergency fund, start allocating some to additional savings/investments (assuming you are debt-free except for the home!) If you successfully created an emergency fund, you had the discipline to set aside money each week to build it up. The same thing applies to auto contributions. “Pay yourself first” is a very common expression. The strategy can be seen in this scenario: - Let’s say you make $40,000 before taxes - which is around $1,250 twice a month. - You receive this on the 15th and the 1st of every month - Your rent or mortgage is $800 on the 1st of the month - On average, spend $1,600 per month using your debit card - Things like food, utilities, fuel, entertainment, etc. all go on this - This means you spend $2,400 monthly, with a wiggle room of about $100. This can feel like you’re living paycheck to paycheck; however, with an emergency fund in place, you’ve tackled budgeting, and now you can continue on the right track. The wiggle room, or the $100 extra monthly, should be contributed to an investment account to plan for retirement. Since we’re starting small, I suggest investing $25 weekly. The goal would be to save 15% of your income, but if you are not there yet, start small. As I related saving to health and fitness earlier, saving a little until you can save a lot is like lifting 5 pounds until you can lift a lot more. This creates disciplined investing and paying yourself first. 4. Remember your "Why" The stress of tackling money problems head-on creates analysis paralysis, which causes more stress regarding money. This can build tense relationships with a loved one or bring unnecessary stress into our everyday lives. Falling asleep every night, knowing that your money is not a concern, will only be a good thing. When you have an emergency fund, emergencies become inconvenient because you have the money there for such a time. Eventually, you will be so good at budgeting that you might be able to adjust the budget to cover the expense and not even need to touch the emergency fund! Regardless, your why is to not live paycheck to paycheck and build your net worth. Maybe along the way, you get a raise or 2 or 3! This allows you to spend a little more and save a little more. That is never a bad thing. The power of speaking with your advisor As mentioned, everyone has different goals and timelines with their money, so it is essential to speak to a Financial Advisor or Financial Coach about your specific needs and goals. Please contact one of the Financial Advisors or Coaches at Whitaker-Myers Wealth Managers; we would be happy to help!

An emergency fund is like a safety net, providing peace of mind during unforeseen circumstances. This money needs to be liquid and accessible in case an expense arises out of the blue. There are many names that an emergency fund can go by, some of which are the following: rainy day fund, savings account, contingency plan, stockpile of cash, stash, or cash reserves, but they all serve the same purpose: to provide relief in the event of a job loss, pay cut or significant unexpected expense. How Much Should I Set Aside in My Emergency Fund? Dave Ramsey and Ramsey Solutions suggest that you set aside at least 3-6 months of expenses once you no longer have any consumer debt (student loans, car payments, credit cards, etc.). As a general rule of thumb, save three (3) months of expenses if you are single with no dependents and a stable income or married and each of you has a steady income. You’ll want to save six (6) months of expenses if you’re married with a single income, you’re a single parent, you have a seasonal job, you or someone in your home has a chronic illness, or if you or your spouse are self-employed, works on commission or has a highly irregular income. Where Should I Put My Emergency Fund? There are many places where you can put your emergency fund: a savings account, a high-yield savings account, an online bank, or a money market fund, to name a few. The most common mistake that people make is commingling their money. An example would be someone putting their “emergency fund” money in their checking account. This provides easy access to the “emergency fund,” which most people don’t have the discipline to let sit there without spending it. Not to mention that a checking account is a terrible place to put your emergency fund due to no interest being earned. Did you know the Charles Schwab money market currently pays a 5.21% annualized interest rate? That’s right! Over the last ten years or so, if your money was in a savings, high-yield, or money market account, you were probably getting 0.1% or something to that effect. At this moment in time, with inflation sitting around 3.3%, your money can actually outpace inflation if you do your homework and put your money to work for you. Talk to a SmartVestor Pro today to get into Schwab’s money market. When To Use My Emergency Fund The first question I ask myself when I am tempted to use my emergency fund is, “Do I really need this?” or “Is this a true emergency?” I don’t want to get into the conversation of “needs” versus “wants,” but there is a very distinct difference between the two, and it is necessary for you to know the difference. The second question I ask myself is, “Can I pay for this expense by adjusting my budget?” Maybe a little delayed gratification can prevent you from spending your emergency fund. You might have to sacrifice your “fun” or “fast food” money for the month to fix your vehicle. From the Ramsey article referenced above, here are three questions that you should ask yourself if your budget can’t cover an emergency: 1. Is it unexpected? 2. Is it necessary? 3. Is it urgent? If the answer to all three of these questions is a resounding “YES,” then you can give yourself permission to use the emergency fund. Just don’t forget to rebuild it. Creating an Emergency Fund A monthly budget is a time-proven tool to help you build an emergency fund. It outlines your necessary monthly payments and gives you goals to stay under in areas with potential overspending. We suggest using a zero-based budget template, so you know where each dollar of your monthly income goes and how it is being spent, saved, or planned for. If you are unfamiliar with budgeting or emergency funds, we have a financial coach on the team who can help create and tailor a budget to help fit your specific needs and lifestyle while keeping you accountable along the way.

Ben and Arthur - I wonder if any parents having two sons have ever named their children Ben & Arthur. I would assume so, but hopefully, none of those parents are Financial Peace University graduates. That would mean they have essentially put the scarlet letter on their child, whom they named Arthur because we all know Arthur was the wayward investor who just started too late in his investing journey and had to save $52,000 more than his brother and still ended up with $756,830 less than his brother Ben. Starting early is the key to success. Many times, when I meditate on Proverbs 13:22, which says, "A good man leaves an inheritance to his children's children, but the sinner's wealth is laid up for the righteous," I come to a conclusion that (whether rightly or wrongly) often this is not in terms of monetary assets but rather a knowledge set that allows my child and their children to succeed in today's world. As the saying goes, catch a fish and feed a man for a day. Teach him to fish, and you'll feed him the rest of his life. An all-too-common phrase I hear is, "I wish someone would have taught this to me at any early age". While I don't condone a lack of personal responsibility, I would agree that we, as parents, do have a responsibility to teach this stuff. Your child, who is 16 and has a job, should have a custodial Roth IRA, and you should be forcing 15% of those dollars into that Roth. That provides a Ben type of longevity and a Proverbs level of Biblical financial instruction. So, let's dive into the financial metrics of why longevity is key in investing. For long-term investors, knowing the difference between what can and cannot be controlled is the key to both financial success and peace of mind. While all investors would like to believe they can predict or even control the direction of the market, experience teaches us that this is difficult to do. Constructing and managing an appropriate portfolio while making strategic and tactical allocations based on market opportunities, ideally with the guidance of a trusted advisor, is often the best approach. However, while following markets and maintaining perspective on the economy is important, an even more fundamental key to success is to start saving early, stay invested, and remain focused on long-term financial goals. What can investors do to benefit from these principles today? The growth of an initial $1 investment over the last century has been remarkable Staying financially disciplined has never been more important due to the sheer volume of noise from the media and the financial services industry. It seems as if headlines bounce from one concern to the next every week, with markets constantly swinging from exuberance to distress, as they have already done many times this year. For inexperienced investors and financial professionals alike, this can often be overwhelming. The reality is that this is nothing new. In 1979, for instance, the cover of BusinessWeek famously proclaimed "the death of equities" due to inflation - just as many did last year. In the short run, these assessments were correct as markets pulled back due to economic shocks and recessions. However, both the market and economy eventually recovered. Not only has the market experienced strong returns this year, recent volatility notwithstanding, but the past forty years since that magazine cover was published have been some of the best in history. This pattern plays out when looking back even further: the accompanying chart highlights the growth of $1 invested in 1926 in stocks and government bonds. Amazingly, a $1 stock investment almost a century ago would have grown to over $13,000 today despite the numerous challenges along the way. Even when invested in risk-free government bonds, the value of that dollar would have climbed to $98. In comparison, inflation has eroded the purchasing power of cash, with $17 now needed to buy what $1 used to. What this chart shows is that over this time frame, the stock market has created significant wealth for patient investors. However, bonds are also needed to smooth out the bumps along the way in order to preserve wealth. A proper asset allocation that takes advantage of both asset classes, and possibly many others, is the best way to navigate turbulence while positioning for long run growth. (Please note that this chart uses a "logarithmic scale" to highlight the comparison between stocks, bonds, and inflation. If shown on a linear scale, the steepness of the stock market line would be even more dramatic.) Saving early can have a significant impact on portfolio values What's just as important, and fully within an investor's control, is when they begin to save and invest. For example, an initial $1,000 investment, compounded annually at 7%, can hypothetically grow to over $10,000 by age 65 if the investment is made at age 30. If it's instead made at age 35, only 5 years later, the investment will only grow to about $7,600. The accompanying chart shows this pattern across different ages and return assumptions, highlighting how significant a difference any delay can make. While investing is often viewed as the activity of following markets, economic data, stocks, and current events, this underscores the fact that budgeting and planning are equally important, if not more so. After all, investors don't get to choose whether they live in an era of low or high annual returns. However, this chart shows that investing at age 30, instead of age 40, makes as big a difference as experiencing a 5% or 7% annual return over the course of one's life. The compounding effect of investments requires time This is because the compounding nature of investments can only work if there is sufficient runway. Given enough time, not only do investment returns add to a portfolio, but those returns generate their own returns, and so on and so forth. In this way, compound interest is what creates true wealth for investors over long periods of time. The rule of 72 is a simple way to understand this compounding effect. It is a rule of thumb that estimates how quickly a rate of return would lead to a doubling of a portfolio, or similarly, what return is needed to double a portfolio in a certain amount of time. For example, with a 5% to 10% annual rate of return - a range consistent with long run historical returns - a portfolio would double in 7 to 14 years. Thus, starting early creates more opportunities to benefit from this effect. Of course, while the rule of 72 is based on pure arithmetic, markets can vary wildly on a week-to-week or month-to-month basis. The bottom line? While investors should understand and maintain perspective on the market and economic environment, it's equally important to invest early and stay invested through challenging times. History shows that this is the best way to achieve long-term financial goals. Contact your Financial Advisor or Planner today to help ensure your plan is on track. Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

My wife is a high school women's basketball coach. As such, and considering we have one daughter in junior high and one in late elementary school, guess who was "promoted" to junior high girls' basketball coach after spending five years at the high school level? That's right, yours truly. Now, I count it a blessing to be able to coach these motivated young ladies, and one of our key tenets is the ability to drive the ball into the paint. You can't just stand and pass on the three-point line. Once we learn the art of the drive or attack, we transition to the hardest part: finishing! Many times, things don't go as planned, and we teach them the pivot. Without the pivot, a bad shot is taken, or a terrible pass is made, and it usually spells trouble for our team. In much the same way, this is how we teach our clients about their retirement savings and investing plans. One caveat here is every situation is unique, and you should talk to your own personal financial advisor or planner about how your investments should be structured. But much like these young ladies, the first step is attacking, and that's what you're doing in Baby Step 4. Attacking through a savings rate of 15% of your income and investing into the four categories that Dave and his team teach you. Then, when the attack is made, and you're closer to or at retirement, it's not always going to go as planned. Said another way, the stock market doesn't go up in a straight line, nor is it promised to go up at all. Therefore, you must have a pivot, like the girls on my basketball team. You must be able to say, that when the market is bad, I better have something in my tool belt to deal with this. Typically, for most clients using the systematic withdrawal approach in retirement (taking out a predetermined amount from their investments each year - say 4% or 5%), this is fixed income (bonds) and real estate. Throughout this article, let's talk about what happened to bonds last year to reset the paradigm for retirees in a most favorable way, in my opinion. While 2023 has been a better year for bonds after last year's bear market, rising interest rates over the past three months have acted as a headwind. The U.S. Aggregate bond index has gained 0.6% this year, down from a peak return of 4.2% in April. Similarly, corporate bond returns have receded to 1.8% from 5% prior to the banking crisis earlier this year. Our favorite strategy, the PIMCO Income Fund, has fared much better this year, coming off a high of 4.80%, earlier in July to settling around 4.38% to end the month of August. High-yield bonds, which are volatile and often behave more like stocks, have hung onto their gains with a year-to-date return of 6.6%. At the same time, rising yields mean that bonds are able to generate more portfolio income than at any other time over the past 15 years. What do long-term investors need to know about recent swings in the bond market and how it affects their portfolios? The bond market is having a better year than in 2022 despite recent volatility Several market and economic factors have created uncertainty in the bond market. First, recent events have led to swings in interest rates beginning with the U.S. debt downgrade by Fitch Ratings on August 1. This jump in rates had ripple effects across the market since U.S. Treasury securities serve as a benchmark for riskier bonds. However, just a week later, Moody's downgraded 10 banks, placed six under review, and shifted the outlooks on 11 to negative. These ratings and outlook changes briefly renewed concerns over the financial system which caused interest rates to fall. Since then, there have been concerns around the supply and demand of Treasury securities, worries over China's housing sector, and more. All told, these events caused large intra-day rate swings with the 10-year Treasury yield rising to 4.2%, then falling to 3.9%, before surging again over the past few days. This volatility directly impacts bonds since prices and interest rates are two sides of the same coin. In general, rising interest rates lead to lower bond prices, and vice versa. One intuitive way to understand this is that the cheaper you can buy a bond with a specified payout schedule, the higher your eventual return, or yield, will be. Despite these changes in rates and bond prices, it's important to maintain perspective on the bond market behavior of the past two years. Last year's historic surge in inflation resulted in the worst bear market for bonds in recent history, as shown on the accompanying chart. The Wall Street Journal called last year the worst bond market since 1842. This year, bond returns have mostly been positive, and the largest intra-year decline of 4% is well in line with historical patterns since most years experience similar declines between 2% and 5%. So, while bond prices are generally much steadier than those of stocks, history shows that fluctuating interest rates result in some bond market swings each year. The yields on riskier bonds have fallen Second, while the Fed is expected to keep policy rates high, there is less pressure to hike rates again as inflation improves. The latest Consumer Price Index report shows that price pressures are not only easing, but that headline inflation is already back to the Fed's 2% target when considering the latest annualized rate. Core CPI is also just under the target at 1.9% on an annualized basis and the trend is deflationary when shelter costs are also excluded. These numbers are important because they represent what is happening to consumer prices today, compared to the more commonly cited year-over-year measures that tend to be more backward-looking. So, while the Fed has penciled in one more rate hike this year, markets believe this may not be necessary. The probability of a so-called "soft landing" has increased as economic growth has remained steady as well. This has helped to reduce credit risk concerns which were elevated during the banking crisis. As the accompanying chart shows, yields on riskier bonds have come down as recession concerns have faded and corporate earnings have beaten low expectations. Ironically, only the yields on the highest rated bonds have increased due to the U.S. debt downgrade. All in all, this means that even if a recession does occur, markets expect that it would be mild and that companies would still be well-positioned to repay their debts. Bonds are offering attractive yields for long-term investors Finally, investors can be better positioned to generate portfolio income today, without "reaching for yield" by taking inappropriate risks, than at any point since I started my career in 2007, right before the global financial crisis. A diversified index of bonds now yields 5% - nearly double the 2.6% average since 2009. PIMCO Income today clocks in around 6.00%. 3-Month to 12-month Treasury Bonds come in between 5.4% to 5.5% as of the writing of this article. Investment-grade corporate bonds generate 5.7%, and high-yield bonds 8.5%. In contrast, the forward-looking dividend yield on the S&P 500 is now only 1.9% after this year's strong rally. This is further evidence that diversifying across stocks and bonds continues to be the best way to construct well-balanced portfolios that can achieve income and growth, while withstanding different market environments. The bottom line? The bond market continues to face challenges due to the uncertain economic environment. Still, this year's bond performance is a sharp reversal of last year's bear market, and the level of volatility has been in-line with the typical year. Most importantly, attractive yields underscore the need for bonds in long-term portfolios as inflation improves and the economy recovers. Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

About two weeks ago, we were all hit with the clickbait headline, "credit card balances hit $1 trillion". Immediately, people used this as justification for why the US economy is doomed. What if when we hit half a trillion dollars, which is equally a large enough number, it's hard for us to comprehend we had the same reaction? That was back in September of 1999, and since then, the S&P 500 has delivered 440% of total return, which would have meant $10,000 is now worth $54,000. Imagine making the foolish decision to use a headline or a single data point as a rationale for why you shouldn't invest. Buy and hold and forget the noise. Have an Advisor who will teach you why the US economy (and frankly, the global economy) is the best place to invest long-term money. Throughout this article, I'll try to do just that: educate you on why this single data point is not anything to make decisions around. Despite the economic uncertainty of the past year, everyday individuals and households have been resilient. Consumer spending has remained steady in the face of high inflation, rising interest rates, housing market challenges, and layoffs in sectors such as tech. While it has helped that the recession anticipated by many investors and economists has not materialized, this fact is partially due to the strength of consumer finances. How do consumer balance sheets look today, and how might this impact the economy and markets in the coming year? Personal savings have helped to cushion consumer finances From a financial planning perspective, there is possibly nothing more important than saving and investing enough to meet future goals. After all, how much you save is completely within your control, unlike the short-term direction of the market. Personal savings and spending are equally important for the broader economy. When times are good and consumers are optimistic about their jobs and financial situations, they tend to spend more. This boosts sales for small businesses and large corporations alike, which then hire workers, make investments, develop new products, and more. This in turn, creates new jobs and boosts wages, which increase consumer activity further. Thus, how consumers feel is an important economic indicator for investors to consider across business cycles. During the pandemic, consumer spending plummeted which led to record savings rates from early 2020 through much of 2021. At its peak, consumers in aggregate saved over one-third of their paychecks, an unprecedented rate that is seven times the historical average. Although this occurred under difficult personal and financial circumstances, these savings shored up consumer balance sheets and created a cushion for the inflation that came later. Government stimulus checks through measures such as the CARES Act also helped consumers make important purchases and pay off debts. Since then, savings rates have fallen as consumers have spent more dining out, attending events, and on other services. Still, as shown in the accompanying chart, the trend over the past three years is well above average with individuals saving 8.3% of their disposable income. This is often viewed in terms of "cumulative excess savings" - i.e., the total dollar amount that individuals have saved beyond what they typically might - a figure that rose to $2.1 trillion at its peak. Since mid-2021, these excess savings have fallen as spending has picked back up, declining by $1.9 trillion. Automobile sales have recovered from a low of around 12 million cars per year to 15.7 million recently, dining activity is 23% above pre-pandemic levels, and travel activity has jumped this summer with almost 2.6 million travelers per day. While this spending shrinks financial cushions, it also supports economic growth. Some investors fear that this trend could result in economic problems in the coming quarters. While there could be a slowdown in consumer spending, this isn't guaranteed. History shows that there have been long periods during which consumers saved very little, including throughout the mid-2000s. While it's prudent for consumers to save more from a financial planning perspective, the reality is that savings rates have fluctuated significantly over time - in both good and bad economic environments. Household debt service has risen but is still historically low Additionally, trends such as wage growth due to the strong job market could support both spending and savings. The latest report from the Bureau of Labor Statistics shows that wages rose 4.8% year-over-year. While this has generally been slower than inflation, hourly earnings are still rising at their fastest pace in 40 years. This is happening at a time when the national unemployment rate, at 3.8%, as reported yesterday in the government jobs data, is near historic lows. Job openings have fallen to 9.6 million, but this still represents 1.6 openings per unemployed person across the country. Other trends have helped to support consumer finances, including the steadily growing economy and this year's market rally. While household net worth has not yet recovered to its pre-pandemic peak, it reached $150 trillion at the start of the year according to the latest report by the Federal Reserve on the Financial Accounts of the United States. This is partly because while the aggregate levels of household debt are high across student loans, auto loans, credit cards, etc., what households pay every month is still at reasonable levels. As the chart above shows, debt service levels, with and without mortgage payments, are still below average at 5.7% and 9.6% of incomes, respectively. This is even more true when compared to highly levered periods such as during the housing bubble when debt service ratios were above 13%. Rising interest rates will likely worsen this picture, but this might happen steadily as homeowners benefit from mortgages that were locked in at much lower rates. Consumer sentiment is only slowly improving Of course, how consumers feel can differ from their financial picture, especially as they look to the future. Consumer confidence, as measured by the University of Michigan Survey of Consumers, which is a report we look at each month on our weekly video series, "What We Learned in the Markets This Week, has suffered over the past year due to inflation and economic uncertainty. Fortunately, this is slowly improving as the economy stabilizes. According to the same survey, consumers expect inflation of 3.4% in the next year, which could then decline to 3% over the next five years. While these represent high inflation rates, they are far better than what many had feared even just six months ago. The bottom line? Consumers have been an engine of economic growth over the past three years. Although savings rates have fallen, the strong labor market and manageable debt service levels have supported consumer spending and the broader economy. From a financial planning perspective, investors should continue to save appropriately using the Baby Step Principles, ideally with the guidance of a trusted advisor, who, as Vanguard and Morningstar have pointed out, has helped clients to achieve their long-term goals, with a higher percentage of success than those without an advisor. Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

Working daily to become a Millionaire The premise of which workplace plan to select assumes that you have a workplace plan available to you. If you own your own business, you can start your own plan. There is a statement and a common sentiment among Americans that says: “You can’t get rich working for someone else.” Although most uber-wealthy people are entrepreneurs or own businesses, becoming a millionaire is achievable by working a traditional job without being a business owner or a real estate mogul. Recent Ramsey Solutions Research shows that investing in retirement plans is the #1 contributing factor to millionaires’ high net worth. Their study of over 10,000 millionaires revealed that 79% reached millionaire status through their employer-sponsored retirement plan. Which Plan to Choose Based on the data noted above, it’s clear how important it is to participate in your retirement plan with work. Let’s shift our focus to which plan you should select. The leading choice for most participants is whether to make pre-tax or post-tax contributions, which equates to a Traditional Plan or a Roth. The most common employer-sponsored plan is a 401(k), but 403(b)’s is usually the plan of choice for healthcare employers, educational institutions, and not-for-profit organizations. Another common plan for small businesses is a Simple IRA, which previously only allowed pre-tax contributions, but starting this year (January 2023), Simple plans also allow Roth contributions. All of these plans can match contributions, so if you are torn on whether or not you are better off choosing a traditional or Roth option, either way, maximizing the match your company offers is always a better choice than not participating. As I mentioned, some employers do not have a retirement plan. If so, consider asking your employer to start a payroll deduction IRA. This only costs the employer minimal administrative work, so an employer may not be too resistant to start doing this if prompted by employees. If you are employed and no option is offered, you can start your retirement account. For example, you could open a Roth IRA and set up recurring contributions from your checking account. This is not as easy as having it come from your paycheck, but it is the next best thing. Roth vs. Traditional plans There are income limits that limit or prohibit your ability to make Roth IRA contributions once your income reaches specific amounts. Refer to the chart on this website for specific income and contribution limits for 2023. If you are a high-income earner, this article from Financial Advisor Stephen Armstrong walks through techniques that you could use to still be able to contribute to a Roth. Roth With workplace plans, there are no income limits to participate. High-income earners can make a plan top-heavy, and their ability to participate may be reduced, but that is a topic for another article. So, the Roth option is an excellent opportunity for employees in the higher tax brackets who strongly want to accumulate tax-free income. In general, the younger you are, the more the Roth is beneficial, and the older you are, the benefits may be less beneficial. So, an employee in their 20s or 30s selecting the Roth option is a no-brainer because of the number of years that your plan can grow tax-free, saving those individuals a vast amount of tax dollars in retirement. Traditional At the other end of a working career, an individual that is in their late 50s or early 60s, nearing retirement, and in a high tax bracket, it almost always makes sense for them to do a Traditional plan and take the generous tax deduction, then likely withdraw at a lower rate a few years later. A caveat for an employee in this position is if virtually all of their savings are in pre-tax plans, and they have a large sum accumulated (at least $500,000), then they may want to accumulate some tax-free dollars to reduce their tax burden while in retirement and reduce the risk exposure to the government raising income taxes in the future. For employees in their 40s and early 50s, choosing a Roth or Traditional plan is less clear-cut and more nuanced. Without laying out several variables that could tilt this group one way or the other, if you are in the 12% tax bracket (married filers with income below $89,450), it still is usually best to go with the Roth. These individuals get less upfront savings on taxes and likely will withdraw in retirement at the same and relatively likely at a higher rate. The current tax rates will increase for everyone starting in 2026 unless Congress acts, so this is another variable in your decision-making process. Can I do both a Roth and a Traditional? Yes. Many employees like the benefits of both options, so it does not have to be an all-or-nothing proposition. For instance, splitting their contributions would make sense if a 50-year-old in at least the 22% tax bracket has already accumulated a decent amount of pre-tax dollars and wants to start accumulating tax-free dollars. An individual in this position would still have relatively high expenses and may want their contributions to stretch further by having them withheld before taxes come out. Yet, they have never started a Roth IRA and want the flexibility or tax-free income, so if they contribute 10% to their 401(k), doing something like 6% Traditional and 4% Roth could be a good compromise. Although Americans can split their contributions to any percentage they wish, the combination is still subject to the IRS contribution limits of $22,500 for workers under 50 and $30,000 for workers over 50 in the tax year 2023. So, splitting the contributions is not a loophole to contributing more. What if I have a pension? Congratulations, you are among the few as pensions continue getting phased out of retirement. Only around 10% of private companies still have a pension, but most government positions have one. A payroll deduction plan is also an option in either of these cases. Remember that all pension income will be taxable, so doing a Roth option as a supplement would be a good idea. Although pensions may provide a solid retirement income level, they are not flexible and can’t be customized. Like social security, you are told how much income you will receive and when. So, varying withdraws due to your schedule, taxes, need, or several other life events is not an option, so participating in defined contribution plans (Traditional or Roth) through your work makes sense so that you have some flexibility and choices in varying your income as needed in retirement. How much are we saving in taxes by participating in my workplace plan? Whether contributing to a Traditional or a Roth plan through work, you will save tax dollars. Many Americans will have a working career of at least 30 years and the option to participate all those years. So, if a worker contributes an average of $10,000 per year for 30 years and makes a 7% return*, those dollars will compound to $1,016,638. So, if you are doing a Traditional (pre-tax) Plan, you save whatever $300,000 of contributions times your tax bracket equates to, but you will pay tax on all your withdrawals. If you flip this same example to doing a Roth option, you will pay tax on $300,000, but all your withdrawals are tax-free. So, obviously, if you participate for several years, you will pay considerably less in overall taxes doing the Roth option. Participate and be disciplined In summary, focus on your positive opportunity if you have a workplace retirement plan. Sign up on Day 1, and take full advantage of the match. Do not take loans or pre-mature distributions are universal good decisions, regardless of your plan or how much total you contribute. Related to contribution levels, Dave Ramsey recommends saving 15% of your total income. If you are wondering the best way to structure that 15% savings, refer to this video from our Chief Operating Officer, where she walks through how to structure your retirement savings when you have an employer plan and when you don’t. If you have questions about which workplace plan is best for you or if you should be contributing more to another option, contact one of our financial advisors today to clarify the best option(s) for you and your situation. *The annual rate of return given in this article is used for informational purposes to illustrate an example. This is not a guarantee of return.

You recently left an employer where you were contributing to their 401(k), 403(b), or some other qualified retirement plan. Now what? This article will outline your options and point out some pros and cons of each option. Option 1: Leave the funds in the former employer’s plan You can leave your savings in the old plan if its terms allow it. While most plans will let you do this, that is not always true. Many plans will automatically roll your savings into an IRA if it is under a certain balance. They stipulate this in the plan’s description, but most people do not realize that, and trying to track down the IRA becomes a burden. Here are some pros and cons of this option: Pros: 1) Continued investment and growth potential in a tax-deferred account. 2) If you leave the employer in the year you turn 55 or older (50 or older for certain public safety employees), you can take distributions from the plan without having to pay the 10% IRS tax penalty that would typically be imposed for taking a distribution before 59 ½. Keep in mind this only applies to CURRENT plans. This rule no longer applies if you start contributing to a new employer plan. 3) Generally lower fees and expenses than an IRA. Cons: 1) Not all employer plans allow funds from former employees to remain in the plan. They could roll it to an IRA as mentioned previously, OR if it is under a certain amount, they could even force it out by sending you a check, and then you are hit with the taxes and penalty. 2) Leaving behind savings in old plans increases the probability of losing track of them. 3) Limited to the investment options available in the plan only. 4) You will no longer be able to contribute to the plan after your termination. Option 2: Roll funds from the employer plan into an IRA An Individual Retirement Account (IRA) is a tax-deferred investment vehicle that allows you to invest in marketable securities. An employer does not sponsor an IRA. If you hire an independent fiduciary advisor, like Whitaker-Myers Wealth Managers, we can help you with the rollover process and build a portfolio that fits your needs and risk tolerance to achieve your goals. We can also ensure you avoid common mistakes people make when attempting a rollover independently. Here are the pros and cons of rolling your funds into an IRA: Pros: 1) More investment options than an employer-sponsored plan. 2) Gives you the ability to consolidate other tax-deferred accounts into a single IRA. 3) Option to have your IRA managed by one professional. 4) Ability to make additional contributions. 5) Continued tax-deferred growth potential. 6) If appropriately executed, there are no tax consequences or penalties to rollover from an employer plan to an IRA. Cons: 1) Fees and expenses might be higher than an employer-sponsored plan. 2) High-income earners may lose the ability to make deductible contributions to an IRA or to contribute to a back-door Roth IRA. Option 3: Withdraw the funds from the employer plan Another option is to take a partial or full distribution from the plan. This is generally not wise, especially if you are under 59 ½. Here are a few pros and cons of cashing out your savings: Pros: 1) Immediate access to your money. 2) If applicable, the rule of 55, as discussed in the previous option. Cons: 1) All withdrawals are subject to a mandatory 20% federal tax withholding. State and local taxes may apply too. 2) If you are under 59 ½ and do not qualify for the rule of 55, an additional 10% tax penalty may be imposed on your distribution. 3) The funds will no longer have tax-deferred growth potential. Option 4: Roll funds from the old employer plan to a new employer plan This option is not always available. Employers are not required to allow funds from previous plans or IRAs into their sponsored plan. While this is not the worst option, it does come with its pros and cons: Pros: 1) Continued tax-deferred growth potential. 2) Consolidation of assets makes it easier to keep track of savings. 3) Ability to invest in securities available in the plan. 4) No tax consequences or penalties rolling from one plan to another. Cons: 1) Limited to the investments available in the plan. 2) Fees and expenses might be higher than the previous plan. Conclusion This article is for informational purposes only and should not be taken as advice or a recommendation. Several other factors may affect which of these options is best for you. If you have funds in an old employer plan or want to consolidate accounts, we suggest contacting one of our team's financial advisors. Going through a financial plan might be the best way to find out which option would be best for you. Our advisors would be happy to do that and they will answer any questions to make this a seamless process for you.

The year was 2005 and I was purchasing my first home. It was a small modest ranch with three bedrooms, 1 bathroom and an attached one car garage with a nice fenced in backyard. That fenced in backyard was key because my wife and I, as most newlyweds do, bought our first puppy together, a boxer named Sammy. Sammy being all puppy, loved to run around, so we thought we’d install a doggy door into the garage, which was the entrance to the fenced in backyard, so she could run through the backyard all day and come into the garage when it was too hot or cold outside. My handy brother-in-law came to help me cut the doggy door in the wooden garage door, since it involved using a jig saw, which was something I had little experience doing. We put together the saw; I began cutting and without hesitation I began moving the saw in a manner it was not designed to go, all the while my brother-in-law gently reminding me, “I’m not sure you’re supposed to bend the saw like that, bro”. Eventually, as the cut was being made, the blade of the saw snapped, shot through the air, right past mine and my brother-in-law’s head and lodged itself into the wall… pretty deeply, I might add. My life flashed in front of my eyes. It was in that moment that I realized, sometimes it is better for your health, the health of your family and your own sanity, to hire a professional for tasks you have little desire to do or expertise in. In the same way, your largest financial asset, other than your home is typically your employer sponsored retirement plan such as a 401(k), 403(b), Deferred Compensation or other retirement asset. This is an asset you may be nervous about managing and investing on your own and thus may want to seek the help of a professional, however most plans do not provide professional guidance and help within the plan. (CHEAT – Skip to the end to learn about how regardless of your plans commitment to help, Whitaker-Myers Wealth Managers can now provide this help to you). According to a recent study by Aon Hewitt, a provider of human capital and management consulting services with 500 offices in 120 different countries, you would be correct that seeking help with your retirement accounts has produced superior results, thus additional money available to you, when you retire. Their study showed that the averaged participant that sought and received help within their retirement plan had an outcome that was 3.32% better, than their peers who sought no help with their investing strategy. Makes sense, right? My time is limited, especially the more demanding my job is, thus someone who has a 24/7 job of managing, reviewing and investing my retirement assets, is probably going to be in better position to help create improved outcomes and performance within my investing strategy. Their study which was done from 2006 through 2012, studied 14 very large companies defined contribution plans (which basically means, 401(k) plans). Those plans had 723,000 participants who held around $55 billion worth of retirement assets. One question, you might be asking is, “Why do this study?” Perhaps to cater to Financial Advisors? Considering the fact that Aon Hewitt competes with Financial Advisors for many of these large retirement plans, that wouldn’t make sense. Rather, their intention in doing this study was to encourage Plan Sponsors (people who are in charge of retirement plans at these large companies) to provide help to their participants as opposed to forcing them to make retirement investment decisions on their own with no professional help, as many plans unfortunately do. The results were quite incredible. Define Help Before we actually discuss the results, we should quantify what AON meant when they said an employee “received help”. They categorized these 401(k) participants into four basic groups: Target Date Funds – These are mutual funds with a year within their name. That year quantifies the estimated year of retirement for the client and the investment strategy is managed, to be appropriate for someone retiring in the year of the fund. For a participant in the study to be classified as using target date funds as help, they needed to have 95% or more of their assets invested in the target date fund. Our own Financial Advisor, Griffin Lusk, recently wrote an article about how once you get close to retirement target date funds can provide “negative compound interest” when in a withdrawal mode, thus typically not a good option once you are within 5 years or closer to retirement. Managed Accounts – This is where a participant would be paying a third-party provider, such as Whitaker-Myers Wealth Managers to manage their account. Essentially, they are outsourcing something they are not good at or have little expertise in, to a professional. Online Advice – Here participants were able to pay for one time advice on asset allocation and investment strategy within their plan, however the execution was up to the participant. The advice had to have been given to the participant within the last 12 months. Non-Help Group – Here participants received no help, nor were invested in the target date funds. This group was then compared against the other three groups to try and quantify the value of advice to plan participants. Results – Performance The group of participants that received some form of help – target date funds, managed accounts or online advice, outperformed the group that received non-help by an average of 3.32%. The results then broke out the outperformance by age groups, looking at participants in five year increments, starting at 25 – 30 and going all the way through participants in their 70’s and the outperformance ranged from 2.13% to 3.70%. This amount of out performance creates a very large difference over your working lifetime, perhaps meaning the difference between retiring early and retiring later. The study gave an example of someone receiving help at age 45. If they were to retire by 65, the standard retirement age because of Medicare health insurance eligibility, the participant receiving the help would have had 79% more than the participant that would not have received help. Here is another example to ponder. Let’s say you graduate college at age 25 and begin working with a salary of $50,000 and decide to contribute 15% of your income, with a 4% match from your employer to retirement, all the way until age 65. Additionally, as Dave Ramsey says, let’s assume this person is a loser. A loser in the sense that they never get a raise over their lifetime thus their savings rate of 15% of $50,000 ($7,500) never changes. At an average rate of 7% the participant would have approx. $1.5 million by age 65. The person that received help, according to the AON study earning about 3% better, would have generated a 10% return, which would have netted them approx. $3.7 million by retirement. That’s an incredible $2.2 million improvement AND the person getting help, just as my example with our doggy door, saved themselves the time and hassle of something they didn’t have passion for nor had an expertise in. Bonus, they probably built a great friendship and relationship with their Financial Advisor, as many of us do, with our clients. Chasing Return The number one reason why a participant would see improved performance within their portfolio with the help of an experienced and knowledgeable advisor is a result of asset allocation. Participants in 401(k) plans tend to chase the returns of a few mutual funds in their portfolio, that have the largest amount of performance, which tends to be the lowest performer over the next group of years because of mean reversion, which is to say, the best becomes the worst and the worst becomes the best. That is why, when we manage a 401(k) plan, we break things out into the four basic categories Dave would recommend, Growth, Growth & Income, Aggressive Growth & International. Then from there we allocate capital to the best performers in each category, knowing that some categories, such as Aggressive Growth and International can even have subcategories you should be allocating dollars to. We never let near term underperformance, shift us out of a certain category because just about the time you do, the market will punish you for that decision. Results – Risk Participants that did not seek help also struggled to have appropriate amounts of risk within their portfolio. The risk distribution was the most inappropriate for those near retirement, which is scary considering the fact that those participants had the least amount of time to fix problems, if the additional risk created volatility issues, they were ill prepared to handle. According to the study about 60.5% of non-help participants had inappropriate levels of risk with about 2/3 of those individuals caring too much risk and 1/3 caring too little risk. The appropriate amount of risk was determined by using the applicable target date fund for their age and baselining their portfolio against the target date fund. Results – Help Usage is Growing During this study, of the 723,000 participants, about 1/3 of them were using some form of help, as outlined above, which was an improvement over the last time AON ran this study. 16.9% of the help given was through target date funds, 12.1% was through managed accounts and 5.4% was given through online advice. When viewing usage through the amount of assets dedicated to each level of help an interesting stat emerged. Only about 3.7% of assets were provided help through target date funds, while 15.2% were provided help through managed accounts and 11.4% through online advice. This basically showed, the more in assets that a participant had, the more complex their situation was and they were more likely to seek out help. Whitaker-Myers Wealth Managers 401(k) Managed Account My purpose for writing this article is twofold. First, just as I nearly twenty years ago, almost created a disastrous outcome for my brother-in-law and myself by trying to do something I was ill-prepared to manage myself, Whitaker-Myers Wealth Managers wants to ensure we consistently educate you on the ways your financial future can become more secure. Our firm mission statement says that we, “strive to have the heart of a teacher, so that we can empower and equip people with the knowledge and tools they need to be able to achieve their goals and feel confident about their financial future.” Second purpose being, in March of 2022, we rolled our ability to help our clients manage their 401(k) plans, regardless of where they’re held, through a third-party technology firm, that provides us compliant access to your company held plan, for investment management purposes only! Want us to change your beneficiary, contribution rate, personal information or Roth vs. per-tax allocations on the plan? We can’t do that. However, if you’d like us to be able to make changes to your investment strategy, use our technology firms risk management software to daily watch the portfolio for drift within the investment strategy, be notified when your plan makes investment changes and rebalance the portfolio on a consistent basis, which has proven to manage risk and add return, this service is for you. Reach out to your Whitaker-Myers Financial Advisor today to learn more and begin allowing us to service your 401(k) account. Watch this video of my friend Dave Ramsey discussing what the number one mistake people make, when hiring a Financial Advisor. Making it better – every day!