The time has come to make the next big decision for your future. You have a steady job, making a decent income, and either want to start putting money towards your retirement, or already have and maybe want to contribute more so you know you have enough for your future. But you also have a looming cloud over your head called debt. And you’re trying to figure out why sometimes even just making monthly payments, and juggling money seems like a confusing hassle. Are you trying to do too much all at once? Trying to do it all may makes you feel like you are running in circles. And you are not alone in this as many Americans struggle with trying to get out of debt, “Keep up with the Jones’”, and just try to get by from paycheck to paycheck. But what if you don’t want to live like this anymore? What if you want to be in control of where your money goes, how it’s spent and where it’s saved? Are you asking yourself “How do I accomplish this? What should I do? Or how do I do this?” If you are familiar with Dave Ramsey and the 7 Baby Steps, you already know the answer. If you aren’t familiar with the Dave Ramsey plan, check out the article Crawl, Walk, and then Run to Financial Peace which can be found in the “Blog” area on the Whitaker-Myers website. In the meantime, below are the 7 Baby steps listed in order: Baby Step 1: Save $1,000 for your starter emergency fund. Baby Step 2: Pay off all debt (except the house) using the debt snowball. Baby Step 3: Save 3–6 months of expenses in a fully funded emergency fund. Baby Step 4: Invest 15% of your household income in retirement. Baby Step 5: Save for your children’s college fund. Baby Step 6: Pay off your home early. Baby Step 7: Build wealth and give. As you can see, paying off all your debt (other than your mortgage) is listed as number 2 in his plan, and comes before investing for retirement, and any children’s college fund(s). The reason for this is because you want all the ancillary income you have, to go straight to your debt, throwing everything you have at it. Trying to get out of debt as quickly as you can. We’re talking running as fast as an animal racing for its life mentality. Which is why you must be a gazelle first before you can be “king of the pride land”. If I want to be “king of the pride land”, why must I be a gazelle first? So maybe saying you want to be “king of the pride land” is going a little far (and maybe pulling from a 1990’s Disney quote), but the metaphor is there. You want to be in power of your surroundings, feeling comfortable with your home, and maybe being able to indulge in a luxury or two as a king would. Meaning, you have NO DEBT to worry about and can enjoy the finer things (or even day to day things) in life more care free. So, the question, why must you be a gazelle first though? Come with me and I’ll explain…… Similar to a gazelle trying to out run the lion, cheetah or even the leopard to save its life, you must throw all of your energy into trying to pay off debt. The first place to look when trying to pay off debt is going to be your budget and start asking yourself these questions: Where am I overspending? Where can I decrease spending? Can I cancel this subscription or membership until my debt is paid off? Can we cut back on groceries by $25 or more this month? Am I able to limit myself to going out to eat just once or at most twice a month? Do I really need to buy that shirt this week? But a question a lot of you may not be asking yourself is…… Should I stop investing while I pay off my debt? The answer is not always cut and dry for everyone. And to some, it might seem counter-productive. “Not save for my future? How will I be okay?” Obviously, we know taking care of your future, and investing is something we at Whitaker-Myers Wealth Managers will always encourage someone to do. However, taking a short time to pause and focus on throwing everything you can at your debt to get that paid off, could be more beneficial than trying to invest and pay off debt at the same time. Let’s do some simple math: Your combined debt is $20,000 (this includes student loans, credit card, car payment, etc.) with an average interest rate of 6%. You spend $250 a month towards your debt and $250 towards investments (total $500 monthly). To pay off the $20,000 debt, it would take you just under 8.5 years to pay off (101 months to be exact). Take the same $20,000 of debt and 6% interest rate. Now spend $500 a month towards your debt while you are pausing your investing. To pay off that same $20,000 in debt, now it will only take you just over 3.5 years to pay off (43 months). You literally gained 5 years of being out of debt! That is HUGE! Now you are able to take that now freed up $500 (that you were putting towards your debt) and start putting THAT towards investing. And that is just with the money you stopped putting towards your investments. What if you became REALLY gazelle intense? What is “Gazelle Intense” again? Remember gazelle intense is “running for your life to get out of debt” mentality. Which means, you start doing things to get yourself out of debt as fast as possible. You cut back on your eating out budget to ZERO. You figure out a way to make your grocery line budget come down $100 a month by adapting the “rice and beans” menu planning and seeing where you can save by creating less expensive menus. (For tips on this check out another article on our blog called Gas. Groceries. And Growing Price Increases!) You start selling things around your house you no longer need or want. You pick up a side hustle cleaning houses on the weekends, or driving for UBER or LYFT. Have any natural talents like playing the piano? Maybe start teaching lessons for extra side money. The point is, start seeing where there are extra ways to put money in your bank account today. I’m not saying some of these are going to take away some extra free time, or be hard work, but if you can sacrifice doing these for 1-2 years to be out of debt faster, wouldn’t it be worth it vs. being stressed out, wondering if a check is going to bounce or not as you pay off your debt for the next 8-9 years? And once you are out of debt, you can start to resume your investing, not only earlier, but also at a higher dollar amount than you were before, which in the long run, is setting yourself up for a more comfortable and safe feeling future. So, if you find yourself asking the question: Pay off debt, or save for my future? The key is running the numbers, talking to your trusted financial advisor, and ultimately doing what is best for you. However, if you do decide to pause on investing to focus on paying off your debt, remember to do it with gazelle intensity. As Dave says, “Your income is your greatest wealth-building tool”, so make sure you are using it to your advantage and using all that is available for you to build and save, rather than seeing it go towards others as you slowly pay off your debt. If pausing your investments sounds like something you’d like to do, we encourage you to talk to one of our financial advisors. You can view and schedule a meeting with them at a time that works best for you and your schedule by visiting the Whitaker-Myers website.

The financial world can be notorious for a reputation of confusion, conspiracy and corruption. While such a status will follow any occupation, when it comes to finances, we are most vulnerable and any fraudulent advice can cause a devastating ripple effect. Almost everyone has heard a horror story of an innocent client who had placed their complete investment savings and trust in an advisor just to find out that he or she was completely taken advantage of by self-serving investment recommendations that could only benefit the advisor. Such dishonesty and deception swindled the client out of life savings which would ultimately lead to a loss of livelihood. Thankfully, these stories can be far and few between, but so many are not exempted from such exploitation. My personal “horror” story comes from my grandpa. A financial advisor told my grandpa that the stock market was to volatile and that he needed to invest a significant amount of his savings for retirement in rare coins, multiple insurance products, and inappropriate single stock recommendations. The financial advisor persuasively convinced my grandpa that this was sound investment advice and it was the only way to bring stability to his savings for retirement and to secure his financial future. Several years later, as my grandpa was preparing to retire, he was devastated by the hundreds of thousands of dollars lost through undelivered and underperformed investments. As of today, there are approximately 8,000 different mutual funds and exchange traded funds (ETF) to choose between. According to CNBC, out of those 8,000, 92% of the funds underperform their targeted index. Armed with this knowledge, it begs the following questions; What type of advisor places clients in these underperforming funds? How do the underperforming funds survive in the market? The answer is quite easy, kick-backs! Many of these underperforming funds provide advisors and companies profit sharing and other benefits to place clients within these funds. To help protect innocent clients, the Securities and Exchange Committee has created different standards of care for advisors to follow. Suitability Standard Advisors who follow the Suitability Standard are required to place you in investments that are “suitable”. Unfortunately, this still allows advisors to place you the client within funds that are performing poorly, but, provides them with a great commission. Fiduciary Standard Advisors who follow the Fiduciary Standard are Legally bound to act in your best interest. Fiduciary advisors charge a transparent flat rate fee, generally billed quarterly. This prevents them from using funds that give advisors kickbacks. When it’s broken down, the only way for the Fiduciary advisor to get a raise, it to place you the client into funds that are going to increase your assets. At Whitaker-Myers Wealth Managers, we follow the Fiduciary Standard for caring for our clients and managing their assets. In doing this, we make our fee structure easy to understand and don’t hit clients with unnecessary fees or commissions. This flat fee is based on the amount of Assets that we manage for your account. No transaction fees, No hourly fee for meetings, No Per-Plan Fee, No flat annual fee. On top of having no hidden fees, we do not have any incentive to place you in Mutual Funds from specific companies. Our only incentive is to put you in a fund that has a history of outperforming its targeted index. This is truly what is BEST for clients! If we want to increase our pay, it does not matter how many trades we make, or kickbacks from Mutual Funds. Our revenue increased by making your assets increase. Commission Advisors: There are plenty of well-meaning Financial Advisors out there who work under the Commission model and have to follow the Suitability Standard. The problem as a consumer who uses a Commission based advisor is the constant questions: Are the making this trade in my best interest? Are they making more trades than a traditional financial advisor? Which then starts to add doubt to the integrity of the advisor, then has you as the consumer constantly concerned about the finances you plan on using in retirement. Adding undo stress and anxiety to your current life. Forbes - 5 Things To Look For When Picking a Financial Advisor US News - How to Choose the Right Financial Advisor Investopedia - Finding a Financial Advisor or Planner

There are so many cliches I could start out with, when thinking about writing this article. Would you ever sail the Atlantic without a map? Would you ever begin a road trip across the country without some variation of guidance (phone, map, GPS)? If you went to college, typically your guidance counselor or academic advisor gave you the road path of classes that would lead to your eventual graduation. Yet, the “investment” community, wants to you to invest with them, many times without ever creating or planning for your future. If they do create a plan, it does with little ability to teach you, the main focus of the plan, what you need to do now and in the future. We’ve always tried to buck this trend, regardless of the size and complexity of the client. Sure, the client that has more assets has quite a bit more planning complexities and opportunities for the advisor to add value, however the person that is right out of debt (Baby Step 3-4) should, in our opinion, still be given the right to understand exactly how their retirement funding should be allocated (Baby Step 4) in a very specific manner (what amount to Roth IRA vs 401(k) vs. non-retirement bridge (brokerage) accounts. Additionally, all of them should be given an idea of the approx. net worth range they can expect when executing baby step 4. Let me dive into how we specifically try to serve clients across the most common Baby Steps. For a complete list of the Baby Steps and an explanation for each please click here. Baby Step 1 & 2 Here you’re still in debt and need to complete your debt snowball before moving onto the more exciting wealth building stage. As Dave Ramsey and his team consistently remind you: it’s not about the interest rate of your debt, it is about the feeling of getting small wins, which create a motivation and intensity inside of you, that allows you to move the needle more than you ever thought possible. That is called Gazelle Intensity. Watch this video here for a great Dave Ramsey Gazelle Intensity moment. One way to ensure you’ll pay off your debt as quickly as possible is to free up ALL your income that is not needed for the basics and throw it at your debt. This means GASP, stopping your 401(k) or employer sponsored retirement plan, for a short period to fully focus on the debt. I can’t believe a financial advisor is saying this!! Well, if we were only looking at math, you (and I) wouldn’t be in debt in the first place. To help clients feel more comfortable with stopping their 401(k), to allocate all available cash flow to their debt, we use financial planning! That’s right, our Financial Coach, will work with clients, that have no money to invest, for as little as $99 /month and one, of the many things, she will do is run basic retirement projections for you, showing you stopping all retirement contributions while in Baby Steps 2 and 3 and then restarting them when your expected to arrive at Baby 4, with a full 15% of your income going towards retirement, will still allow you to retire. This helps give you the confidence that stopping your plan, for a short period of time, will only help you pay off the debt faster and not slow down your long term retirement planning. If you’re in Baby Steps 1 or 2, considering connecting with Lindsey today! Baby Steps 3, 4, 5 Now you’re most likely ready to start saving for retirement. But the question is how and with what accounts? This is where financial planning can really provide clarity now and for the future. Our advisors are taught to not only teach clients how they should execute Baby Step 4 (15% of your income into retirement) but give them a break out of how much they should be doing in their 401(k), vs their Roth IRA vs. other retirement vehicles available to them. We strive to answer the why, where, how much per paycheck or month, of Baby Step 4 so you go into this very important step with COMPLETE clarity. Once the clarity is provided in regards to what your Baby Step 4 should look like, we then build this out in our financial planning software so you can see if this actually even works for your retirement goals. Our retirement spending projections are second to none considering we have an in-house Medicare Advisor, who gives us accurate expectations for your health insurance premiums in retirement. Our Tax ELP helps us incorporate accurate tax projections so we can ensure we’re accounting for the impact of taxes in retirement. We also introduce the impact of inflation along with other techniques to really show you how much you’ll need to spend in retirement and if your assets will support that spending. Then this is the basis for our reviews together. Instead of regurgitating investment results that you see monthly (or maybe daily) we think it’s a better use of our time and your time to review your financial plan and projections. Are you still on track based on how the investments preferred or is a course correction necessary? Always knowing where you stand from a retirement perspective is invaluable information, in our opinion. Baby Step 6 You have now paid off the house. Hallelujah, Amen & Praise the Lord! Now is the time to start saving that house payment in a non-retirement brokerage account or as Dave calls these, “bridge accounts”. These are basically savings accounts that are invested in mutual funds and ETF’s, instead of sitting in the bank. Your financial plan can really quantify for you now, how quickly you’ll be able to save for that second home, home upgrade or whatever large expenses that may be on your bucket list, with the help of non-retirement investment accounts. Additionally, the brokerage account now gives your advisor the ability to add in a different level of tax planning because brokerage accounts allow for specialized opportunities like tax loss harvesting, which means selling funds when they take a loss to generate tax losses. Also, these accounts can allow you to donate appreciated securities to your church or charity, which can provide unique gifting opportunities. These are just a few financial planning ideas but you probably get the point, your financial planning has hit another level! Baby Step 7 You’re ready to live and give like no one else. This is the Baby Step where you change your family tree and you change the lives of others. You make an impact for the Kingdom of Christ like you would have never imagined. But giving money away can sometimes create the question of, “Am I giving away money that I might need one day?” Your financial plan can help answer those “what-if” questions. Your Financial Advisor will now have the ability to discuss the most tax advantageous ways to give money away, such as the Qualified Charitable Distribution, which I wrote about a few months back. The point is, in this Baby Step, you still need financial planning to help ensure you’re executing your giving in a manner that is prudent and wise. We love walking clients through these Baby Steps and like Dave, we have seen many people become Baby Step Millionaires. Regardless of what step you’re in today, let’s use financial planning to give you clarity and comfort on your journey!

Did you know that April 1st is 401(k) day? Okay, maybe 401(k) day isn't a real holiday but it might serve as the motivation you have been needing to evaluate your 401(k) (or retirement savings in general). The Advisors at Whitaker-Myers Wealth Managers help clients plan for their retirement and that includes creating a plan for which retirement plans to use and what investments to use. In this article, I'll walk through three things you might want to think about or evaluate if you haven't before or it's been a while. Make Sure You Are Taking Advantage of the Match If I offered to give you a dollar if you saved a dollar, I imagine you would do that all day long. That's exactly what an employer match is - they give you money as long as you are saving money. When planning for your retirement savings, we always prioritize making sure you get the match (free money) first and foremost! If you signed up to contribute the amount to get the match originally but it's been a few years, it might be worthwhile to check to see if anything has changed. We all know that the pandemic has changed many things and employer match percentages are no exception. So, if you haven't checked in a while, take a look to see what your match is. Did You Pick Your Investments in Your 401(k)? If you didn't specifically select your investments inside your 401(k), chances are, you are in a target date fund. This often means you are allocated to bonds even if you are in your 20’s or 30’s. This also means you are not likely diversified in the 4 categories of mutual funds that you hear Dave Ramsey talk about. All 401(k) plans offer target date funds as an investment option if you want them to "do the work for you" or you can choose to "manage it yourself" by selecting the mutual funds you would like to invest in. Often times we hear from clients that they are not sure how to pick their investments. As your advisor, we are more than happy to help you with this. Using a platform called Pontera, your Whitaker-Myers Wealth Managers advisor can manage your 401(k) for you. This includes picking your investments (from the options provided by your plan) for you as well as rebalancing when it is appropriate to do so. This is a new service that we are able to offer so if you are interested in hearing more, be sure to reach out to your advisor! I hear from clients all the time that they would love to see all their accounts in one place and would also like me to be able to review it on a regular basis and Pontera is the solution to this request! Maybe you did pick your own investments or your advisor made recommendations for you, 401(k) day might be the reminder you need to make sure those are still the best investments for you! Fund managers change which in turn can affect the performance of the fund. Also, 401(k) plans have the ability to add and/or take away fund options. For all of these reasons, it's good to check in and make sure you are still in the right funds for your goals and stage of life! If your advisor is managing your 401(k) for you through Pontera, they will be alerted when fund changes happen and will be able to reevaluate your investment options in a timely manner. Our Chief Investment Officer just wrote an article discussing the ways that having help in managing your 401(k) improves the performance of your account. It is a very interesting read and you can check that out HERE. Are you saving enough? This could also be a great time to evaluate whether you are saving enough or not. I often tell clients that the financial plan is the answer to “Am I going to be okay in retirement?” Which means it is also the answer to “Am I saving enough to reach my goals?” If it has been a while since you and your advisor met to discuss your financial plan, maybe 401(k) day is the reminder you have needed to get something scheduled. Also, if you are not a current client with Whitaker-Myers and have questions about your finances and your retirement, please do not hesitate to reach out to one of the Financial Advisors. We would be more than happy to help!

If you are a fan of Dave Ramsey, you are likely aware with the concept of spreading out risk with long-term retirement investing by utilizing 4 categories of mutual funds and ETFs that include Growth, Growth & Income, Aggressive Growth, & International funds. One of our very own advisors, Logan Doup, explains the basics of these 4 categories in-depth in a previous article. You can read that article here to indulge yourself with building a simple foundation of knowledge for the concepts I eagerly dive into below. It is important to note that we are convicted in the potential value of this strategy involving spreading out roughly 25% of stock market investments (whether stock market investments comprise of all or only a part of your comprehensive investment portfolio) to these respective 4 categories through mutual funds and/or ETFs, regardless of fellowship or lack thereof with Dave Ramsey. Whether this strategy makes sense for you could very well be a question worth investigation of goals, understanding, fit on a case-by-case basis, etc. However, what is less arguable, is that falling into the trap of recency bias has historically been harmful regardless of the specific underlying strategy. For the sake of these case studies, let’s stick with it. In all examples, let’s assume you are sitting with a portfolio that is 25% allocated to the entire Growth segment of the market, 25% to Growth & Income, 25% to Aggressive Growth, and 25% Internationally as of ‘YEAR 1. Case Study 1 YEAR 1 – 1995 Investments made into account at 25% Growth, 25% Growth & Income, 25% Aggressive Growth & 25% International Allocation. YEAR 12 – 2006 Out of the 4 categories, Growth was the best performing 4 years in a row from 1995-1998. It was the 2nd best performing category out of the 4 possible in 1999. Consequently, it was the 2nd worst from 2000-2002 and the absolute worst 2003-2006. Let’s establish an informal definition of recency bias with this first example à HYPOTHETICAL: You would have had recency bias in 1999/2000 by assuming that the Growth category would continue to outperform the overall market simply because of a previous 5-year trend of that being the case. A PROBLEM: Not re-balancing My goal is to drive home these two common and potential problems with investing in relation to just this 1st case study, BUT the concept should continue to make sense in the following examples even without specific illustration from me. Re-balancing would consist of “chopping gains” off of out-performing categories (or respective specific funds) and re-allocating these gains to recently under-performing categories at some point in time. This is one of the simplest ways to “buy low, sell high” which is commonly regarded as intelligent investment behavior, in a general sense. With the assumptions of no re-balancing from 1995-1999 and starting off with 25% allocation to the 4 categories in YEAR 1, you are left with this basic breakdown at the end of 1999: 37.69% allocated to Growth 24.83% allocated to Growth & Income 21.09% allocated to Aggressive Growth 16.40% allocated Internationally Consequently, you head into the 21st century significantly over-funded to the Growth category in which you experience the 3 following years of that being the 2nd worst category and 4 additional following years of Growth being the worst place to be. Experiencing these 7 years (2000-2006) with somewhere close to 25% in Growth to start would have meant a world of difference in comparison to almost 38% with no re-balancing at any point. Inversely, International out-performed U.S. Growth in 6 of those 7 years. Heading into this time period with only 16.40% allocation instead of somewhere close to 25% would have also been a mistake, essentially creating a double-edged sword. Note: Growth & Income and Aggressive Growth also generally out-performed Growth from 2000-2006, for 7 out of the 7 years and 5 out of the 7 years, respectively. AN EVEN BIGGER PROBLEM: Speculation Never re-balancing would have been less drastic of a mistake in comparison to using recency bias to further fund the Growth category, sometime around the turn of the century. This bias would have told you to sell Growth & Income, Aggressive Growth, or International investments (or any combination of the 3) to invest additionally in Growth, due to the fact that these 3 significantly under-performed relative to Growth for a number of years. Since we can now look back in time, it’s easy to see how much of a mistake falling into this common trap as an undisciplined investor would have been. Case Study 2 YEAR 1 – 1999 Investments made into account at 25% Growth, 25% Growth & Income, 25% Aggressive Growth & 25% International Allocation. YEAR 5 – 2003 The Aggressive Growth category was highly volatile during this 5-year window (let’s define more intrinsically as ‘small growth stocks’ for this example). 1999 – 43.09% return, best of 4 categories 2000 – 22.43% loss, worst of 4 2001 – 9.23% loss, best of 4 2002 – 30.26% loss, worst of 4 2003 – 48.54% return, best of 4 For 5 straight years, the only definition of consistency here involves this category going from either “best place to be” to “worst place to be” or vice versa, throughout. Any decision that reasonably involved recency bias during this time period and with this category in particular would have likely resulted in a significant mistake! Case Study 3 YEAR 1 – 2017 Investments made into account at 25% Growth, 25% Growth & Income, 25% Aggressive Growth & 25% International Allocation. YEAR 6 – 2022 Growth was the best performing category for 5 straight years, from 2017 to the end of 2021. The market has struggled thus far in 2022 in a general sense, although some recovery being experienced in the past few weeks as of 03/29/2022. Out of the 4 most commonly used U.S. market indexes/indices, the NASDAQ Composite Index best represents the Growth category. For the majority of 2022, this index has been hit the hardest, sitting at nearly 15,833 on Jan. 3 all the way down to roughly 12,581 on March 14 (over 20% loss for this time period). As of mid-afternoon 03/29/2022, we are looking at significant recovery with this index alone, currently sitting in 14,550-14,560 range. With a harder initial downfall, on the reverse this specific recovery has been more drastic than with the other indexes/indices for the past few weeks. Concluding thought à with the market being as widespread, large, and available as it is, combined with the advance of technology… it may be reasonable to conclude that these market shifts and cycles will continue to become more drastic in frequency and the level of loss or gain per whatever time period you are looking at, but less drastic with how long these shifts last… all the more reason to not speculate and potentially get burned by recency bias or some other investment-related negative behavior with something as important as saving for retirement or other goals over the long-term. If you have any questions, please don’t hesitate to reach out to your personal Financial Advisor. If you are not currently a client of Whitaker-Myers Wealth Managers, we are always open to questions. You can use the chat feature on our site or reach out by phone/email to any of our advisors. DISCLOSURE: Past performance does not guarantee and is not indicative of future results. There are limitations to using historical data and calculations, and trends in general are not implied to neither continue nor change. You can view the information used for these illustrations from the Prudential Periodic Table of Investment Returns here. See website disclosure for more information.

Do the current prices at the gas pump have you contemplating pulling out your old 10 speed bike buried deep in the back part of the garage? If the thought has crossed your mind recently, I don’t think you would be alone as gas prices have increased drastically in the last few weeks, reaching a national average of $4.28 according to AAA national gas prices on Friday, March 18, 2022. The lowest areas are reporting just below $4.00 a gallon, where the highest areas are coming in near $6.00 a gallon. With gas prices not looking like they will be decreasing anytime soon, here are a few cash saving things you can do to save you some dollars when it comes to paying at the pump. Gas Buddy App If you don’t already have this app downloaded, do it now. It shows all the local gas stations with their prices near you when you enter in your location. It also has a search feature which allows you to put in a future location to see what gas prices are there, to compare along the way. This is a great feature to use if you’re good on gas right now, but know you will need gas during, or at the end of your travel destination. Grocery Stores Rewards Perks Some grocery store chains have a loyalty card membership. And some of these memberships are paired with gas station chains. With this loyalty card, not only are you getting discounted rates on groceries at your local store, but you can also be saving on fuel by earning credits. All programs are different, but check out your local grocery store and see if their loyalty card can get you discounted gas somewhere. If a loyalty card can save you money on both groceries and gas, why not sign up for it? Gas Station Rewards Perks Similar to grocery stores, gas station chains have adapted the “loyalty card” mentality. By joining their membership program, you can save somewhere between 6-10 cents off each gallon of gas. The only draw back to this, sometimes that specific gas chain isn’t always on your travel route. However, if you pass a gas station that has one of these rewards programs in place on your way to work every day, it may not be a bad idea to stop in and ask some questions about the program. If you routinely get gas from that gas station chain weekly, that could be a huge yearly savings for you. Pair Your Fill Up with A Car Wash Again, gas stations have thought of another way to help you choose them over the neighboring gas station across the street. Need a car wash? Some gas stations have a program where if you purchase an automatic car wash with them at their facility, you can actually save 10-15 cents off each gallon of gas. To do this, make sure you fill-up BEFORE you get your car wash. The prompts on the screen will ask you if you’d like to purchase a car wash, then based on the level you pick dictates how much off each gallon of gas. *Hint* the more premium the car wash, the more savings for each gallon of gas you can receive. Once you are finished pumping your gas, you’ll get a receipt printed out with the car wash code on it. Sometimes the codes are good for several days so be sure to note that when you purchase the carwash. This is a nice feature for gas stations to offer. Especially if you need gas today, but don’t want your car washed today because it’s raining, but it is supposed to be a sunny day 3 days from now, here’s your sign to save money and buy the car wash package today. Just be sure to remember the code on the receipt and don’t throw it away. Bulk Wholesalers Membership Only Programs If you have a Costco or Sam’s Club membership, you could be saving money at the pump. These bulk chain wholesalers have Members Only Gas stations at discounted rates. You have to use your membership card before you start pumping, or you will have to ask the friendly man driving the black Honda CR-V at the pump in front of you to borrow their card before you can start filling up. I do not speak from previous experience…… So, take a look around your area (using your newly downloaded Gas Buddy App), and see if there are any loyalty program associated with any of the gas stations near you. I bet there are some ways you can start saving on your gas budget today that you didn’t even know about!

I’m sure you have seen the rise in gas prices lately. They started out slowly, increasing gradually, but this past few weeks how can you miss the bright red lights showing a price increase as to almost $0.40 to the gallon! Oh, and then the $0.30 increase over night two weeks ago?!?! One contributing factor we can thank for this price increase is inflation. The US Inflation rate in January was 7.5%, which is a 40 year high, the largest move up since 1982. And the gas station isn’t the only place you can see pretty high price increases. Have you been to the grocery store lately? (Curb side pick-up counts too!) Because if you have done any type of grocery shopping in the last year, I am sure you have seen the steady increase in prices as the price of groceries have jumped a record 7% in the past year according to a News Release from the Bureau of Labor and Statistics. The main contributing factors for driving the inflation increases this past year have been rent, food, and energy. And with inflation rates not looking like they are going to decrease anytime soon, budgeting, meal planning (and some creativity) are the key tools you can use to make your dollars count the most right now. Put your budget to work for you. Now is when we need to call on all of our budgeting skills to make sure every dollar is being accounted for, and being used to its most potential. At Whitaker-Myers Wealth Managers, we suggest using a Zero-Based Budget. But budgeting may not be the only trick you need to pull out during these times. Below are some ways we suggest saving a dollar to two on your grocery bill this month. Meal Plan At the start of each week, sit down with your spouse, roommate, kids, or even your dog, and think through your week’s meal needs. Plan out your menus for each night; each meal should include your main entrée, and sides. Make sure you’re accounting for if you know you are doing anything one night of the week (i.e., eating out for someone’s birthday, or at a family members house, etc.) as this will affect how you meal plan. Also, don’t be afraid to account for a “leftovers night” later in the week. This is where you take all the leftovers from the week and have a buffet from all the previous nights. If you and your family do not care for warmed up left overs, as you think through your week’s meals, are there ways to use the leftovers for another meal, but in disguise that you wouldn’t even think they were leftovers? Or does one night’s menu have the same ingredient in another menu for a different night you can use up before it goes bad (think veggies and herbs here! - things that don’t have a long shelf life). Then as your complete the menu, create your grocery list with the items for each meal throughout the week. Meal Planning is a great way to create a targeted grocery list so when you go into the store (or click the online order buttons), you’re not just aimlessly browsing. You have a purpose and know what is needed for these meals. The temptation of impulse buys decreases as you know where to go, what to get, and this also helps cut down on time in the grocery store. Meal planning also eliminates the hassle of the daily question of “What do I/we make for dinner tonight?”, and decreases the mid-week grocery store runs. And with gas prices increasing, the fewer trips made, means fewer trips to the pump hopefully. Double up on Ingredients As I mentioned before, using some of the same ingredients for one menu to use in another for a different day is a great way to save on groceries as well. Get creative here! You don’t have to have the same meal three times just because you have the leftovers. Here are some examples of doubling up on ingredients we use in our house to liven up leftovers by using a pork shoulder roast, buns, BBQ sauce, and a red onion for multiple meal options: Meal idea one – Traditional Pulled Pork Sandwiches All you need is a nice toasted bun, and any sauces you want to top your sandwich off with. Personally, I like to enjoy the flavor of the smoked pulled pork and go plain! Meal idea two – BBQ Pulled Pork Pizza You can either buy a premade crust, or I’ve found at our grocery store has a $0.99 bag crust you make by just adding water and some oil, then letting it rise. We keep a few of these on hand in our pantry for a weekend pizza night! Add BBQ sauce as the “pizza sauce” (from meal idea one), dice up a red onion, sprinkle cheddar and mozzarella cheeses, add pineapple if you are one of those people that believe pineapple belongs on pizza (It’s me, I’m “one of those people”), then layer on the pulled pork. Top it off with a quick swirl of BBQ sauce and bake! Meal idea three – Pulled Pork Cuban (inspired) Sandwiches Pull out the toasted buns from meal idea one dinner, add your pulled pork, slice your red onion from meal idea two, put on some pickles, layer it with some Swiss cheese slices, and top it off with some mustard. We like to add peppers to ours too, there are no rules here – just have fun with it! Have lots of veggies laying around that need used up before they go bad? Here are some ways to use them differently throughout the week other than just steaming them or making a veggie tray: Roast them! After you have cut them all up, lay them on a sheet pan, drizzle olive oil with some salt and pepper to taste, bake on 375* for about 15-20 minutes and you have a healthy and tasty side option. Go Asian and make Stir Fry! Just add some beef, or chicken (or shrimp for my seafood lovers) along with your stir fry sauce and skip the takeout costs! For this we typically use celery, bell peppers (any color will work), onions, mushrooms, broccoli, water chestnuts, and carrots. Taste the rainbow of your vegetables and make Pasta Salad! You don’t have to wait for a summer picnic to make this colorful side dish. Plus, you can use up a lot of vegetables if needed for this yummy side dish. Lastly, veggie soup…..hello! “Veggie” is in the name! Through in all the veggies that are about to go bad in your fridge and save them from the garage can. Add some ground beef or turkey, vegetable stock, tomato sauce, and let all those flavors simmer all day. All these ideas are ways to help you use the same products but in various way throughout the same week. So, as you plan your meals for the week, think of the items you need for one meal, and how can you then turn around and use them in another capacity later that week. This way that one thing (or multiple items) doesn’t go bad because you forgot about it in the back of the fridge, or can’t think of how else to use it besides as the initial meal idea. Go Food Network Channel on your Pantry (and Freezer!) What does this even mean? So, if you are like our house, Food Network is one of the like 6 channels we watch. Some of the shows they have had on lately are premised around the idea of the “creating something out of nothing” idea. Meaning they tell contestants at the supermarket to make an upscale dinner, but by only using frozen food. Or make the judges a burger not using any type of bread. Another show has contestants buying groceries from unknowing customers as they exist the store to make their themed dish for that round, and whatever is in that grocery haul is what they have to make the meal. For some, this is probably anxiety overload. But the idea I’m going for here is to take a deep dive in your pantry and freezer and try to “make something out of nothing”. What’s in there that you have over looked for a while now, or never thought of using it in “that way” …. And, try to make it fun! If the meal doesn’t work out, you’re only out one bad dinner night, right? Have iceberg lettuce in the fridge, and tired of salads? Use the large leaves as your hamburger bun or go Mexican and make it your taco wrap! We’ve used the frozen cauliflower rice not only for our “rice” in our stir fry, but have also added some grated cheese and egg to it and made pizza crust out of it! *Bonus* did you notice these were all HEALHTY substitutes?!? You can thank me later. Have bread, cheese, lunch meat, various condiments and toppings? Make a “Build your own Panini Bar” for dinner. Kids love to do this and gets them involved in making choices about food. You can make this a fun weekend dinner night option for them too. All you need besides your food ingredients is a griddle, or pull out the George Foreman. Many of my college grilled cheeses were made on the Foreman grill and it works great for this! You can also settle the old age debt on if Manwich or homemade Sloppy Joes are better (team homemade here). For this, you need ground beef, diced onions, and you can get a $0.99 seasoning packet from the store. OR our family prefers to use just KETCHUP! Yup, you heard me. Just ground beef and ketchup (salt and pepper to taste). Don’t Skimp on Dessert Just because you’re on a budget and watching the grocery bill doesn’t mean you can’t indulge on dessert. Some money saving tip desserts I’ve used before, often start with just one simple ingredient. Boxed cake mixes. Of course, you cake make cake. Or cupcakes, and even cookies with this mix. But you can switch things up by adding different ingredients to it to change things up. I love making seasonal dump cakes or even cobblers by using boxed cake mixes! Also, remember instant pudding just doesn’t mean plain pudding. Put it in little dixie cups, add a popsicle stick to them and then freeze. Now you’ve got yourself a puddin’ pop for a summer day treat! Also try layering multiple kinds of pudding with some fruit, whipped cream and crumbled graham crackers, and you have a fancy trifle. Does Grandma’s famous cookie dough recipe make like 7 dozen cookies that you know you can’t eat all at once? Freeze the dough in individual balls and pull out a dozen (or just a handful) at a time as you need cookies. Saves both time, and money so you don’t have to buy frozen, store bought, cookie dough! Try to Out Budget Yourself – Make it a Game! I have heard of people on tight budgets who play a little game with their grocery budget. If they are under their targeted budget, they get to treat themselves to have a coffee or a snack. If you are a competitive person, this game is for you! Or if you are a snack driven person, this game is for you too! Who doesn’t like coming in under budget, but also an afternoon treat? Sounds like a win-win to me. For more ideas, check out this article from our friends at Ramsey Solutions How To Save Money On Groceries | RamseySolutions.com for even more money saving tips and tricks when it comes to grocery shopping!

A Health Savings Account (HSA) is a tax advantage savings account that is created for people who have high-deductible health insurance plans. High-deductible insurance plans are usually accompanied with lower premiums. Lower premiums mean the covered employee pays lower monthly fees, however the caveat is that the employee is responsible for the higher out-of-pocket medical expenses. Employer and employee can contribute to the HSA, which then the funds can be used towards qualified medical expenses. Some examples of qualified medical expenses include the following; dental and vision care, prescription and over-the-counter medications, childcare, transportation and parking expenses to and from medical appointments, and service animals. Contributions The IRS allows a yearly max contribution to an HSA to be $3,650 for an individual or $7,300 for a family. If you are over 55 years of age, you are allotted an extra $1,000 per year. These limits include the contributions from both the employer and the employee. Once you enroll in Medicare, you are no longer permitted to contribute to an HSA, however, you are still allowed to withdraw tax-free distributions from the existing account for qualified medical expenses. Tax Benefit People who participate in HSA’s benefit from a triple tax advantage: Contributions are tax-deductible up to the IRS limit. If payroll deduction is an option, these contributions are typically made pre-tax. Using HSA dollars to pay for qualified medical expenses is free from federal income taxes. When you start to invest your HSA dollars, any growth is free from Federal Income Taxes. When to Invest When looking at the past 30-year performance of the stock market, it’s important to consider when to start investing HSA funds. Since 1991, the stock market has been positive 83% of the time and negative 17% of the time. It would be detrimental for an individual to make withdraws from their invested portion when the market is down. This would result in negative compound interest. For this reason, we, at Whitaker-Myers Wealth Managers, recommend keeping the yearly maximum out-of-pocket coverage in cash within the HSA. How to Invest At Whitaker-Myers Wealth Managers, we keep your HSA diversified following Dave Ramseys’ principles; 25% Growth, 25% Growth & Income, 25% Aggressive Growth, and 25% International. Pros of HSA Contributions are payroll deducted and excluded from taxable income Earnings on the account are tax-FREE (if used for qualified medical expenses) Can invest money within the HSA into Mutual Funds Contributions do not need to be used within the same year HSA can be transferred to a surviving spouse tax-free upon the account holder’s death Cons of HSA Must have a high-deductible Insurance plan Must have medical emergency fund to cover higher out of pocket medical expenses Certain filing needs to be completed, which is where using a Tax ELP such as Whitaker- Myers, can help you prepare. Fidelity At Whitaker-Myers Wealth Managers, we typically recommend clients establish their Health Savings Account at Fidelity, since Schwab does not have a Health Savings Account option. We can help manage the Fidelity Health Savings Account through our Pontera platform.

Acquiring life insurance is one of the most important considerations a person can do to protect their loved ones after death. Two of the most popular vehicles are term life insurance and whole life insurance. But which one is best for you? Below we will examine both insurance features and explain why term life insurance will be the better consideration of the two. Term Life Insurance When one purchases term life insurance, they are only covered during the contract term. These policies start at 5 years and can go as high as 40! Naturally, the longer the term, the higher the premiums. Term Life insurance offers the lowest premiums compared to other insurance policies. You also have to qualify for term life insurance through a health exam. Depending on the company sponsoring the plan, you may have to submit to some medical tests and provide family medical history in order to qualify. This will also impact the premiums you will have to pay. If you are a very active and healthy individual, your premiums will be lower than someone who does not take care of themselves. Your death benefit is only effective during the term you select. Once the term expires, you will no longer have coverage. You can always renew your term life insurance, but the premiums will increase from your previous contract. Your Financial Advisor can help you to determine the amount of term you should purchase but a standard amount, as discussed by Dave Ramsey & Ramsey Solutions is 10 times your income. This would mean someone earning $100,000 / year would want to purchase a $1,000,000 term life insurance policy. Typically, we recommend you purchase term insurance until the point with which you are self-insured, which your financial plan can help you determine. Pros Low Premiums Guaranteed Death Benefit Flexibility of Term – 10 Year, 20 Year, 30 Year, 40 year Better discounts for Healthy Lifestyles Cons No Death Benefit after policy is completed Submission to examinations to qualify May not qualify Whole Life Insurance Whole life insurance is a policy that covers you till death (as long as you make the payments). A portion of your monthly premium pays the actual cost of the insurance and a portion of the monthly premium deposit's money into a savings account. This is known as the cash value of the whole life policy. This will increase the death benefit and provide more to the beneficiaries. “Policy dividends can also be reinvested into the cash value and earn interest” (Investopedia). The interest earned would grow tax-deferred. From this cash value, you are able to also take out loans. Like any loan, there is interest charged and the rates may differ from different issuers. If you have a loan out from this policy, whatever is owed at time of death will be deducted from the death benefit to the beneficiaries. When you pass away, most whole life insurance policies, keep the cash value of the life insurance, therefore passing on years of savings to the insurance company, instead of your family and/or beneficiaries. So you build a savings account, that you were required to borrow from, to actually use (thus you must pay back) and when you pass away, your family doesn’t get to keep it. Wow what a deal - for them! Monthly Premium Comparison Through research of a nationally recognized insurance company, I was able to gather cost information. The criteria entered are a male, low 30s, healthy, $1 million death benefit coverage, and looking for a 30 year term (in regards to term life). The cost for a 30-year term life insurance policy is $55 per month. The cost for whole life insurance is $764 per month! So, in a thirty-year span, for term you would invest $19,200 where whole you would spend at least $275,040. Whole Life Insurance Answer = Lower Death Benefits In our example above, which again was a quote delivered to us from a large, national well known insurance company, we see the difference between a whole life policy with the same death benefit of a term policy was $709 / month! The $764 monthly whole life insurance premium is equivalent to some family’s mortgage payment. Obviously, the whole life insurance industry is smart enough to know that most people will not be able to afford to allocate $764 / month to their life insurance premiums. That is why we normally see clients that have whole life insurance policies with only $100,000 or less death benefit. Now it makes the premium comparable to a term policy. What’s the problem with this scenario? Client are severely under-insured, which potentially creates catastrophic issues for the family they left behind. Buy Term & Invest the Rest! Let’s assume our client did have the cash flow to allocate $764 / month to the life insurance line on his budget. Should he buy the whole life policy with a $1,000,000 death benefit or purchase the $1,000,000 term and invest the rest? Let’s assume he had a rock star SmartVestor Pro, that got him hooked with a 30-year term policy for $55 / month. Then our client invested the $709 per month for the next thirty years. With a 10% return, which we can see from the Prudential Asset Allocation Chart, is what the stock market has averaged over the last thirty years, he would have approx. $1,602,685. What if we only generated a 7% return? $864,959.44 Then the client no longer has premium payments and if he continues living the money will continue to grow and compound. The Whole Life Policy will most likely require continued premium payments until the cash value can pay the premium payments, which then means if you use the cash value (through a loan because you can’t take it out) the monthly premium will be required to begin again or they’ll start eating away the cash value until it’s all gone, creating a nightmare scenario later in life. Additionally, this doesn’t account for the fact that our hypothetical male client, should be doing savings through his retirement plan and Roth IRA, while paying down his mortgage and thus by the end of the thirty year period, beyond just the life insurance bucket of money we assumed he built from his whole life insurance savings, he should be a significantly self-insured with his Baby Step 4 bucket. Favorite Dave Ramsey Video Dave Ramsey takes a lot of heat from the insurance industry for his common sense approach to life insurance. One of my favorite video's can be seen here of Dave debating a Whole Life Insurance Agent, who decided he would call the show and debate him in front of a national audience. Bad idea for that poor agent . Conclusion Life Insurance is exactly that – life insurance. Do not merge savings, investing and life insurance into one product, because as Dave Ramsey says, it’ll just provide a way for the insurance company to pick your pocket, the entire time you do business with them. To learn more about how you can have a life insurance strategy that aligns with Dave Ramsey, Ramsey Solutions and a holistic financial plan, please reach out to one of our SmartVestor Pro’s today.

I would like to start off with a basic introduction to retirement-based target date and lifecycle mutual funds: Larger mutual fund companies and similar entities create these particular funds and the composition of this type of investment universally is the following: Layer 1: “Umbrella” Mutual Fund – Let’s use the Vanguard Target Retirement 2050 Fund that is simply just a placeholder for underlying mutual funds (Layer 2) Layer 2: Multiple underlying mutual funds created by same company/entity where your original investment dollar is allocated to varying percentages Layer 3: Hundreds/Thousands of underlying stocks, bonds, or alternative investments within all mutual funds in Layer 2 Here is a real-life example. The Vanguard Target Date 2050 Fund whose ticker symbol is VFIFX would be an example of Layer 1. Inside of the Vanguard 2050 are four mutual funds which are: Vanguard Total Stock Market Index (53.40%), Vanguard Total International Stock Index (36.06%), Vanguard Total Bond Market (6.26%), Vanguard Total International Bond Market (2.86%). All four of these funds are an example of Layer 2. Inside of each of those funds are 11,796 individual stocks and 21,911 individual bonds which is an example of Layer 3. Let’s transition into a quick real-life application to establish potential relevance to you as the reader: Likely, the easiest strategy available in most 401(k) and likewise retirement plans involve using these funds. The commonly recommended concept is to choose the fund that “contains” the year closest to your retirement year, whether that be an educated guess or specific knowledge in your specific situation. Regardless of source, these funds typically exist in 5-year increments. Example: If Company A has a Lifecycle/Target Date funds 2025, 2030, 2035, and so on… and I expect to retire somewhere between 2041-2042, then a common recommendation would consist of choosing to invest solely in the Company A 2040 Fund. I would argue that these types of funds have can have benefits. In the right situation and with the absence of investment knowledge and/or access to good advice, these funds can be the simplest and most effortless way to create a retirement investing decision you could feel good about. Retirement goals aren’t universal, but these funds aim to do what makes sense for a lot of people, in a general sense: being more aggressive in investment strategy earlier in a working career and gradually shifting a larger portion of the retirement account dollars to investments with historically less volatility/risk. This is completed with changes and adjustments in ‘Layer 2.’ ‘Simplest’ and ‘effortless’ do not necessarily equate to best available strategy and this brings me to my main purpose in writing today’s article, being just one specific downfall in utilizing this widely-available option in many retirement plans. I am going to focus on what can happen not when you invest, but rather when you sell out and take withdrawals, most prominently in retirement, after age 59 ½. The U.S. stock market (U.S. equity) has experienced average annual return of roughly 10% over the past 30 years, but there are, of course, ups and downs and periods of high volatility historically and expected in the future again and again. Of the many 2020 & 2025 target date funds, one 2025 fund in particular is composed of roughly 28% U.S. equity while the similar 2020 fund is composed of roughly 15% U.S. equity. The concept I previously mentioned is showing true: less allocation towards higher-volatility investments as you shift into retirement. The problem with withdrawing money in retirement in certain situations is being revealed: when you sell out and withdraw money from a lifecycle/target date fund, you get your investment dollar back from ‘Layer 1,’ right back from where that investment dollar started when you were working and investing income. When you sell out of Layer 1, everything in Layer 2 is sold evenly based on current allocation to each fund. You cannot pick only 1 or 2 funds or any possible incomplete list from Layer 2 to sell from, using recent performance and forward-looking metrics as a basis for a potentially informed decision that saves/creates wealth that you could accomplish otherwise. Being invested in the right target date fund has some pros in some situations, but selling out of these funds at any level does not allow you to take into account current market environments whatsoever. There is not intelligent withdrawal strategy available even though ‘Layer 2’ contains funds of varying strategies, objectives, performance/return characteristics, and so on, because nothing is catered to you and you get no choice. A better strategy is available with the help of a knowledgeable advisor and a portfolio of funds of varying risks and strategies not contained in the lifecycle/target date outer layer. Whether you have 15%, 28% or a different percentage of your nest egg/retirement account(s) in the stock market, it is subjectively not smart to sell out of this bucket when the underlying market is performing poorly in the short-term. The U.S. stock market experienced 37% loss in 2008. More recently, when COVID first hit, the market was down roughly 30% in a few short months. If you are taking regular income from a fund like this in a retirement or non-retirement account, you are essentially guaranteeing the future repetition of selling out of the stock market at inopportune times as inopportune times are inevitable. In-Service Rollovers - 59 1/2 One way to prepare for retirement, with a strategy that is customized to your specific needs and withdrawal requirements, is to have your funds transferred to your IRA or Roth IRA, before you actually retire through an in-service rollover. Investopedia says that, "an in-service rollover allows a current employee the ability to move some or all of the assets in their employer-sponsored 401(k) plan into an IRA without taking the money as a distribution but rather as a rollover." That's right! If you're over the age of 59.5 you can typically move your retirement money while stilled employed. This allows you to ensure your future distribution strategy is not ineffectively selling assets at their low point, like a Target Date Fund could do. Contact one of our Financial Advisors today to discuss your ability to do an in-service rollover.

This is a great question that I get quite often. Many married couples have one income earner in the family and in many circumstances, this can limit their ability to save in tax-advantaged retirement accounts. Let’s say a married couple in their early-40’s has one income earner making $190,000/year and they want to save 15% ($28,500) of their income for retirement. The working spouse has a company 401(k) as well as a Roth IRA. Because the income earner is under 50, the maximum elective deferral for 401(k) in 2022 is $20,500 and the contribution limit to the Roth IRA in 2022 is $6,000. $28,500 – ($20,500 + $6,000) = $2,000 Total Savings – (401k Max + Roth IRA Max) = Unaccounted Savings How do we save the additional $2,000 in a tax-advantaged retirement account? Enter, the spousal IRA. This is a strategy designed for married couples with one income earner. Under spousal IRA rules, married couples with one income earner can contribute up to $6,000 ($7,000 if non-working spouse is over age 50) into their spouses IRA on behalf of the non-working spouse. A few things to consider before implementing this strategy. First, married couples must file a joint return to be eligible to use the spousal IRA strategy. Second, income limits apply to Roth IRA contributions. In this example, the couple’s income is under the $204,000 threshold and they are able to contribute the maximum amount to their Roth IRAs. If you are married filing jointly and your Modified Adjusted Gross Income (MAGI) is over $204,000 you should speak to a Financial Advisor at Whitaker-Myers Wealth Managers about the possibility of the backdoor Roth IRA. Third, the non-working spouse is the account owner even though the working spouse is funding the account. All of the decisions within the spousal IRA are only to be that of the non-working spouse (asset allocation, withdrawals, beneficiaries). The spousal IRA is a great consideration if you are like the hypothetical couple above or if you just want to save in a Roth IRA with tax free growth, tax free distributions after 59½, and NO REQUIRED MINIMUM DISTRIBUTIONS AT AGE 72. If you are interested in opening a spousal IRA or have questions related to backdoor Roth IRAs, retirement planning, or general investing, you can reach out to one of our Financial Advisors here.

If you are currently holding cash that is above the comfort of your emergency fund, you may be stuck in what is called “analysis paralysis”. That is, with extra money to invest, you are holding back as an investor due to uncertainties in markets. A volatile equities market and a low yielding bond market due to low interest rates can do that to you. So, you are keeping money in cash for the time being, all while we are dealing with the highest inflation numbers in 40 years. If this is you, and you are concerned about keeping up with inflation, the Federal Series I Saving Bond (I Bond) can be very attractive. What is the Federal Series I Saving Bond? The Series I Bond is offered by the Treasury Department and are backed by the U.S Government. They can be purchased directly through the TreasuryDirect website. I Bonds are a fixed income investment and the interest rate it earns is what is known as the “Composite Rate”, which is a combination of a fixed (currently 0%), and an inflation rate (currently 7.12%). The current composite rate for these bonds is 7.12%! The I Bond has a 30-year maturity, but can be redeemed after holding the bond for 12 months. The composite rate of these bonds (7.12%) is good for the first six months the bond is held, thereafter, a new rate is applied that is correlated with the current inflation level. How Much Can One Individual Buy? One Individual is limited to purchasing $10,000 in I Bonds for the calendar year. So, for 2022, a married couple may purchase up to $20,000 in I Bonds, $10,000 for each individual. Although, there is a bonus, you may purchase up to $5,000 extra in a calendar year with your tax return refund money. The refund money is per return, so a married filing joint couple could only add an additional $5,000 combined into I Bonds from their tax return refund. These buying limits reset every calendar year, so they could purchase another $20,000 in 2023. What’s the Catch? Timing As mentioned, the current 7.12% composite rate will be evaluated and updated, investors have until May 1st, 2022 to lock in the 7.12% rate for their first six months. Penalties The I Bond has a 30-year maturity but can be redeemed after 12 months. If it is redeemed between 12 months and 5 years, you will lose the last 3 months of interest earned. This results in limited liquidity as the I Bond does not provide liquidity within the first 12 months (Not redeemable in the first 12 months unless a federally declared disaster). Example Susie purchases the I Bond for the maximum amount of $10,000. Susie is safe to assume that the value of her bonds at the time of the 6-month redemption rate will be $10,361. The next 6 months, the composite rate will be adjusted, for the sake of the example, lets assume inflation zeroes out and the composite rate drops to 0%. For the same 12-month period, Susie would still have earned a return of 3.56%! A U.S Government backed return of 3.56% is much more attractive than the current interest rates on high-yield savings instruments, such as 1% CD. Pros and The Cons of I Bonds Pros Extremely low risk and protection of principle Keeps up with inflation in a high inflationary environment (7.12%) **as of 3/5/2022** No state or local tax when the bond is redeemed Growth is tax deferred until redemption Cons Lack of liquidity (no redemption within 12 months) Purchasing limits of $10,000 per person Forfeit the last 3 months of interest earned if redeemed between 1-5 years Overall, I bonds may be a great investment if the alternative is low yielding savings account and fixed income. The investor must be aware of the liquidity timeline (greater than 12 months), as well as the change of the composite rate every 6 months. If inflation continues to roar, I bonds will be a good place to protect principle and keep up with that roaring inflation. To Purchase an I Bond – please follow these instructions here. Please consult with your financial advisor today if I Bonds may be the right thing for you. This article is for educational purposes only and not personal financial advice.