The start of a new year often brings self-reflection for many people as they create their New Year’s resolutions. Although New Year’s Resolutions aren’t for everyone, it is still beneficial to self-reflect and set goals for the new year, especially financially. Studies show that by Spring, many people have fallen off track from the goals that they set at the start of the year. As we head into Spring, we would like to encourage you to get back on track with your goals, especially the financial goals you set. Surely, you have heard that you don’t have to wait for a new month or even a new year to start a goal, and that is very true. However, there is something special about the start of a month or season to encourage new beginnings. So, let’s use this Spring to spring us towards the goals we want to achieve. Things to Consider If you are married, an important thing to consider is your spouse. Before making goals, getting on the same page as your spouse to attack your new goal together is essential. Not only will this prevent disagreements down the road, but it will also bring you closer together and improve the bond between you and your spouse. Another essential thing to consider is your financial plan. Are you on track with it? What still needs to be done? Is there any slack that needs to be picked up? These are important questions you should consider as you set your goals. If you do not have a financial plan, contact your advisor about making one because we believe financial plans are the answer to “Am I going to be okay in retirement?” They are important in helping you to know if you are on track and/or what you need to do to get on track. Did You Achieve Last Year’s Goals? If so, that’s great! If not, there is no need to let that affect this year. Maybe you have the same goal this year as last year, or perhaps it’s a new one. Either way, there is no reason to let the fact that you didn’t achieve last year’s goals keep you from reaching this year’s. Achieving a goal can be stressful and daunting enough as is, so there’s no need to carry that over from last year. And there may have been outside factors playing into why you couldn’t reach it that may be different now. It is best to leave that in the past and move on to this year. Setting Goals One of the most beneficial things you can do to achieve what you want in the year is to set goals. Goals can relate to virtually any aspect of your life. Whether hitting a specific number in your portfolio, exercising more, learning an instrument, cutting back on sweets, or finally completing a baby step, goals can help you visualize what you want to obtain better. If you are unsure of a good goal for you and your situation, one of our advisors would be happy to help! Although we may not be able to help you exercise more, we can help with any financial goals or questions. Some reasonable financial goals could be setting up your emergency fund, paying off a big chunk or all of your consumer debt, finally getting life insurance and/or your estate plan situated, saving more for retirement, or anything else you would like to work on. Having a Game Plan The hardest part of achieving a goal is to stay consistent with the actions you need to take. A tried-and-true strategy you can use to achieve your goals is creating a game plan. Looking at a specific goal can be daunting, but taking small actions to work toward and eventually reach your goals often eases the stress of that goal. Much like Dave Ramsey’s Baby Steps, a path to financial freedom, you can create baby steps to your own goals. Write It Out People can have difficulty following through with their game plans once laid out. A way to hold yourself accountable is by writing it out and using it as a checklist. Creating this physical checklist is a way to keep accountability, especially if you put the list in a location where you will see it often, such as in your bedroom, fridge door, etc. Doing this will keep the list at the forefront of your mind, making you more likely to achieve it. Hopefully, these things will help you achieve your goals in this new year! If you need any help with any financial goals, one of our advisors would be happy to help. Feel free to contact our team of advisors to talk to them about financial plans, investment strategies, or retirement. If you want to make budgeting, paying off debt, or saving for your emergency fund one of your goals this year, contact our financial coach.

What do you drive? I wish I could answer this question by saying I have that beautiful 67’ Shelby GT500 Mustang in my garage. Unfortunately, that isn’t the case, but hopefully one day maybe? The vehicle in your garage may get you from point A to point B, but the investment vehicle you drive into retirement can make that phase of your journey much smoother and less stressful. In today’s post, I’ll share three common investment accounts most of us utilize to get to retirement. Going in the right direction is only part of the equation, but what car I take down this road may determine if I get to my destination (freedom in retirement) or if my ‘Uncle’ Sam is waiting for me when I get there. Let’s take a further look at the three most used vehicles that get us to retirement: the Toyota Rav 4 Prime Hybrid (Traditional 401(k)), Tesla Model S (Roth IRA), and the 67’ Shelby GT500 (Brokerage account). **Retirement planning can get complicated, so I always recommend working with a financial advisor to reach your destination. Toyota Rav 4 Prime Hybrid: your traditional 401(k) A hybrid? Summit must be losing his mind. My 401(k) is nothing like a hybrid. Well, actually, it is! Your 401(k) is the most common strategy most investors use and has dual benefits. Just like a hybrid using gas and electricity to improve your mileage and range, traditional 401(k) accounts allow your investments to grow rapidly and decrease your current MAGI (modified adjusted gross income), so you pay fewer taxes now. Traditional 401(k) contributions grow as a tax-deferred account. This means that when you take your money out in retirement, you are required to pay taxes based on your taxable income at that time. If you plan to have a lower income in the future, consider using this ‘hybrid’ strategy to support your retirement. Some 401(k) plans also can contribute to a Roth account (post-tax contributions), which we’ll discuss in more detail next. The annual contribution limit is $23,000, with an additional catch-up option for those aged 50 or older of $7,500 (as of 2024). Traditional 401(k) Pros: ·        Less taxes today, contributions reduce MAGI ·        Larger $ contribution to retirement may lead to better returns ·        If your taxable income is much less during retirement, it could yield great tax savings (depending on future tax rates) ·        Contributions can be automatically deducted from your paycheck ·        Employers can ‘match’ contributions (% dependent on your contributions and company), thus providing access to ‘free’ money Traditional 401(k) Cons: ·        Contributions are capped per year ·        Unknown what taxes may be in the future; withdrawals are taxed at ordinary income tax rates ·        Required Minimum Distributions ·        Inherited 401(k) (non-spouse) required full funds withdrawal within ten years, and taxes paid based on current income bracket ·        May have limited investment selections based on employer plan Tesla Model S, your Roth IRA The Tesla Model S is electric, self-driving, minimalistic, and can do 0-60 in less than 3 seconds, so how is this similar to a Roth IRA? Think of it this way. When you buy a Tesla, you have an initial purchase price and fees. Once you’ve paid the upfront costs, the long-term benefits of owning an electric vehicle come into play. Very low maintenance fees, cost of ownership, low cost to charge, environmentally friendly, and technologically advanced are only a few of the many benefits. Similarly, after you pay your Roth IRA taxes, the contributions can grow with compounding interest, have zero tax liabilities in retirement withdrawals (growth and contributions, as long as the account has been open for five years), and can be inherited with no tax liabilities (as long as the account has been open for five years). Some employers may offer this option in the company’s retirement plan, in which you have a contribution limit of $23,000 plus an additional $7,500 if you are over the age of 50 (as of 2024). However, if your company does not offer a Roth option in their retirement solution, you can still contribute to a Roth account for a maximum of $7,000, or if you are older than 50, then the maximum contribution is $8,000 (as of 2024). There are contribution limits based on your income, but don’t be discouraged. Consult your financial advisor if a backdoor Roth is a good option for you. Roth IRA and 401(k) Pros: ·        Taxes paid, growth, and contributions grow tax-free! ·        No tax liability for inheritance beneficiaries ·        Contributions can be automatically deducted from your paycheck ·        Employers can ‘match’ contributions (% dependent on your contributions and company), thus providing access to ‘free’ money – made available in the SECURE 2.0 Act, but dependent on availability within your employer’s plan. ·        Mega-backdoor Roth strategy (we’ll explore in detail in a future post) ·        Contributions can be withdrawn at any time with no penalties, but earnings cannot be withdrawn until 59 ½, and the account has been open for 5 years. ·        Indirect benefit - Backdoor Roth strategy, if your MAGI exceeds contribution limits Roth IRA and 401(k) Cons: ·        Contributions are capped per year ·        No tax deduction or impact on current taxes ·        No RMD, but inherited Roth Accounts require complete withdrawal within ten years of inheritance. This is only for non-spouse beneficiaries; additional rules are based on whether a minor or chronically ill/disabled person is the beneficiary. ·        Depending on your tax bracket, you may end up paying more taxes now ·        Contributions based on income are capped ·        Roth IRA contributions limits are much less than 401(k) contributions ·        May have limited investment selections based on employer plan 67’ Shelby GT500, your Brokerage account Finally, we come to the beautiful 67’ Shelby GT500. Since this is an article with no video features, I’ll ask you to imagine Nicholas Cage’s reaction to meeting ‘Elanore’ in Gone in 60 Seconds. If you recall, he was initially timid, frightened even. This beautiful vehicle had him nervous. There is no reason to fear Elanore; we just need to learn to embrace the power of this vehicle. Similar to the power and strength of Elanore, we cannot overlook the power of a Brokerage account. The flexibility, options, and potential are vast. Credit – www.Musclecarzone.com Let’s review some of the pros and cons of having a brokerage account: Brokerage account Pros: ·        The principal (amount you contributed) is not taxed, and as long as the money is invested in the appropriate funds, the gains are not taxed until you sell. This is a complex topic, so be sure to discuss it with your Financial Advisor. ·        Unlimited deposits ·        Appreciation is taxed at the capital gains rates instead of ordinary income rates for long-term gains (+1 year) ·        Investors can buy and sell anything available in the market, access to all – maximum flexibility for diversification ·        Can be used for retirement or other goals – college tuition, down payment, etc. ·        Money can be withdrawn at anytime ·        Beneficiaries get a step-up in basis when they inherit the funds ·        Very easy to open and maintain ·        No RMDs Brokerage account Cons: ·        Dividends and interest are taxed at ordinary income rates o   1099 Composite is issued to pay taxes on interest and dividends from the year ·        No current-year tax deductions for contributions ·        May have minimum deposit and balance requirements. However, at Whitaker-Myers, we do not maintain this requirement ·        Due to the liquid nature of the funds, investments can be sold at any time. This can greatly impact the long-term growth of the portfolio ·        Incorrect fund selection can lead to unexpected capital gains What do you want to drive? As with all investing, it’s never one size fits all. I’ve previously mentioned that we should never focus on one metric to drive our decision when analyzing investments. Similarly, we should never only look at one vehicle’s pros and cons list to determine what is best for our future. Honestly, there is sometimes a need or desire to have all 3 vehicles. This is because, with all three types, you have the maximum flexibility and options as you approach and are in retirement. To clearly understand the holistic picture, speak to your financial advisor. Simply stating that one vehicle is better than the other is not the right approach toward retirement. Questions such as: How much fixed income will you have in the future? What are your projected expenses? How much do you anticipate living off of each year? Are your expenses going down as you get to retirement? These are just a few questions your financial advisor will ask to determine if one, two, or all three strategies align with your goals. Diversified investing is excellent not only within your portfolio based on the key four categories that the Ramsey team talks about (Growth, Growth and Income, Aggressive growth, and International) but also the vehicles you take to get there. Are you driving a Toyota Rav 4 Prime Hybrid (traditional 401(k)), Tesla Model S (Roth IRA), or a 67’ Shelby GT 500 (Brokerage account)? Whichever one or more you choose, our team of Financial Advisors at Whitaker-Myers Wealth Managers will sit in your passenger seat with the windows open and cruise with you to your favorite tunes (figuratively, of course!).

The new feature of the Secure Act 2.0 legislation allowing 529 plan account beneficiaries to roll over funds into their Roth IRA is now available starting in 2024.  You would avoid the normal 10% withdrawal penalty when funds are not used towards qualified education expenses. Qualifications and limitations As a reminder, here are the qualifications/limitations you must meet to take advantage of this feature. The account must be set up for at least 15 years before you can utilize this feature.  If you’re looking at setting up a 529 account for your kid(s), the sooner, the better with this consideration, in addition to the power of more time for compounding. The Roth IRA account holder must be the same as the 529 beneficiary There’s a lifetime cap of $35,000 per person/account owner.  So, intentionally overfunding a 529 is limited. The 529 beneficiary must have earned income to be able to roll over funds from a 529 to a Roth IRA.  The 2024 Roth IRA limits are $7,000 annually (under 50) / $8,000 (over 50).  You’re limited to the lesser of your earned income or the maximum. For example, if you only earned $4,000, you could only roll over $4,000 from your 529 to your Roth IRA. Rollovers are subject to the annual Traditional and Roth IRA contribution limits (less if you’ve made any contributions directly); I.e., You made a $1,500 contribution to your Traditional IRA in 2024.  The Traditional/Roth IRA maximum is $7,000; you would only be able to roll over $5,500 to your Roth IRA, given you meet the other qualifications There are no maximum income limits on completing the rollover like there are for Roth IRA contributions You cannot transfer contributions and earnings made in the last five years before distributions start. Still to clarify What still needs to be clarified by the IRS regarding the legislation: It has not been determined if you change the beneficiary of the 529 if that resets the 15-year clock. Reminder: If there are still leftover funds for one of your 529 beneficiaries/accounts, you can always transfer the account to another family member to utilize for their education expense needs.  It isn’t known whether you could still utilize the 529 to Roth rollover feature if you do this. If you roll over funds from one 529 plan to another, it is unclear if that resets the 15-year clock to the 529 plan you are transferring them to or if some other method would be used. This new feature can further emphasize school choice while removing some of the worry of having excess 529 funds or funding a 529 if a child decides not to pursue higher education or has more than they need for trade or vocational school.  The child can still benefit from your early 529 contributions by jump-starting their retirement early. Whether this is something you should take advantage of depends on your family's situation. If you are looking for guidance around education planning and saving for yourself or your children, meet today with your Whitaker-Myers Wealth Managers financial advisor to help you achieve your financial goals and objectives.

How long will we live? Some of you may know that I have a clinical and operational background. However, I have always had a passion for finance and have recently made this career change. This week, during an internal call with our team, one of our senior advisors asked me a question that I hadn’t thought about for a while. His question was, “Has there been any new data (in the world of medicine) that talks about longevity or average life expectancy?”. His question was 100% valid and important for him to know. In conversations with his clients (many of you), as he’s building out their financial plans, knowing how long to project them for (realistically or ideally) is quite essential. We, as humans, don’t think about mortality until it becomes ‘real.’ Usually, it is due to some life-changing event or realization, but the reality is we need to talk about it and plan for it even more. Your financial plan and even the plan of what you want to do with your money after you’re gone is essential. That said, this is an excellent reminder to always keep your estate and financial plans at the top of your list. One- Two-Two When my son was learning how to count, he would start with one and then say two twice before moving on to three (and so on.) Ironically, he certainly doesn’t know this, but did you know that the oldest person ever recorded was 122 years and 164 days old?! Jeanne Calment, a Frenchwoman, holds the record for the longest documented human lifespan. Unfortunately, the average lifespan for most is around 73 years, with variability based on country, region, lifestyle, socioeconomic status, and access to healthcare. All of these factors come into play when you’re evaluating health and longevity, but we must also consider the varying factors that also must come into view when reviewing our financial lives. Let’s Get We(a)LL-thy! Eating healthy and exercising has been shown to improve overall physical health, but also improve mental health as well. Exercising is a great way to lose any extra body fat just hanging around, and there is a simple equation: we’re all taught to lose weight. Burn more calories than you consume. The more you exercise, stand, and move around, the more likely you are to be healthy, considering you also maintain healthy eating habits. However, none of this happens automatically or automagically, as I like to call it; it all requires focused intentionality. Being intentional about your health and not picking up that extra Little Debbie snack takes a lot of willpower and focus (most certainly for me!). Similarly, as Dave says, your financial health and ability to ‘live and give like no one else’ is directly related to how intentional you are.  There is a simple financial formula that has been proven to lead to financial success as well. That is, live on less than you make. Like the living healthy formula, this formula sounds easy but can be much more difficult in practice. Put Down the Cookie Mentality Our ability to put down that cookie or walk away from the item that is ‘on sale’ takes intentionality, no question, but to be intentional, we need to have our WHY at the forefront. Your WHY can be anything that is a driving force in your reason to make a change. Mine always highlights my family and our future together. I love this quote from the Ramsey team – “If your Why doesn’t make you Cry, you need to find a different why.” It’s simple: intentionality comes naturally once we’re focused on our WHY and always keep that in plain sight. Focus on your WHY and every part of your wellness to the point where you can retire financially free, and We(a)LL-thy! By now, you may have figured out that losing weight is not my specialty; I would even boast that my superpower is I can beat the cookie monster in a cookie-eating contest.  However, if you’re looking for an incredible team of teachers to walk with you on your financial journey, consider talking to one of our world-class financial advisors or our financial coach at Whitaker-Myers Wealth Managers. If you’d like to submit a topic for me to discuss or write about, contact your advisor or submit a topic request here.

As the calendar turns over, it is an excellent time to review your current tax situation and see if there are tax strategies that you can employ to lower your long-term tax liability. One of the go-to questions I frequently get from clients is, “Should I consider a Roth conversion?”. This question is great and can often lead to follow-up questions to see if a Roth conversion would make sense. What is a Roth Conversion? To elaborate on what a Roth conversion is, A Roth conversion occurs when an individual takes money in a pretax IRA, Traditional or Rollover, and converts that money to Roth dollars by transferring them to a Roth IRA. This incurs a tax liability for the amount you convert, so if you transfer $10,000 from your traditional IRA to a Roth IRA, you would realize $10,000 in taxable income for the year. Unlike Roth contributions, there is no limit to the amount you can convert. So theoretically, if you wanted to and had a million dollars in your IRA, you could convert that entire balance to Roth. When could this work for you There are a couple of scenarios that I generally see as most optimal for Roth conversions and a couple of triggers associated with them. Age: the younger a person is, the more time the money has to compound; the growth is all tax-free in a Roth IRA. So, converting a dollar that has 50 years to grow tax-free can significantly impact your overall tax liability in the long term. Remember, pretax accounts grow tax-deferred, but you will ultimately pay taxes on the growth, which should be substantial given a longer timeframe. If you convert $10k and pay 12% federal income tax, or $1,200 today, and that money grows to $100k and you find yourself in the same tax bracket, you could potentially save yourself over $10k in taxes. Recently retired individuals or couples that have seen a significant drop in taxable income. This drop in income can open a window that allows them to target and fill up a certain tax bracket. The 12% bracket is often a good one to look at. The next bracket up is 22%, so there is a large jump after you get out of the 12% bracket. When not to do this There are also scenarios where doing Roth conversions does not make sense. The first would be a scenario where you do not already have significant pretax assets. If you do not have significant Traditional IRA assets, then there is generally no need to convert what you have to Roth. This is because if you use those pretax monies in retirement, you can usually spread your withdrawals out over several years and have minimal tax liability. If you are close to retirement and are in a high tax bracket, then it also does not generally make sense to do Roth conversions. If retirement is right around the corner and you will see a decrease in taxable income, then it would generally benefit you to delay doing those conversions until you retire. Lifetime span The specifics of the amount and timing should always be thought of through the scope of a complete financial plan. Part of the planning process is determining tax strategies that allow clients to minimize their tax liability over their lifetime, not just in a specific calendar year. This is why it is essential to understand your spending needs in retirement as well as other sources of income such as social security and pensions. If you wonder if Roth conversions would make sense for you, don’t hesitate to contact your financial advisor. At Whitaker-Myers Wealth Managers, we believe a financial plan is the answer to “am I going to be okay in retirement,” and we want to ensure we are looking at all aspects of your financial picture. We would be happy to meet with you and discuss your questions.

Each year, as we turn our calendars to January, we brace for the inevitable change that comes with a new year. The IRS has been on a tear regarding changes, increasing the allowable limits for retirement plan contributions in consecutive years. While you’re likely aware that you’re now able to contribute $7,000 to your IRA as opposed to last year’s $6,500 (investors under age 50), you may not be aware that the beginning of the year offers a unique advantage to you if you were not able to get your IRA funded last year. The recommended 15% The recommended rule of thumb for stashing (and investing) cash for retirement is 15% of your annual gross income. The reality is that sometimes, especially in a high inflation environment like 2023, life happens, and that 15% can get cut down or even eliminated in some cases. While it may feel like you’ve missed out on the ability to contribute to your Roth or Traditional IRA for 2023, it's actually not too late (yet). If you missed out on contributing or at least maxing out your IRA last year, you can take advantage of a unique moment in time. Prior to filing your 2023 taxes, you have the ability to catch up by double-dipping and making both a 2023 and 2024 IRA contribution. Let’s look at an example: You planned to save $541 per month into your Roth IRA last year, but you had a number of bigger expenses pop up and found yourself needing to pause your retirement contributions for a few months, so you only contributed $4,875 to your Roth IRA during the calendar year. Now, it’s 2024, and you’re getting back on track. You would like to fund your Roth IRA with the additional $1,625 to max it out. You’d also like to begin funding your Roth IRA for 2024 at $583 per month. Because you have not yet filed your taxes for 2023, you can take advantage of this unique moment in time by funding both accounts. Let’s examine another scenario together: You’re new to investing and recently decided you want to use some of your extra savings to fund a Roth IRA. You’re bummed that you missed out on the opportunity to open and fund an account in 2023, but you’re ready to get going now with a single max-out contribution for the year. You have $13,500 ready to be invested and want to compensate for lost time. Again, before filing your taxes for 2023, you’re allowed to max out your IRA for 2023 at $6,500 and for 2024 at $7,000. Other Catch-up Options For investors who are over the age of 50, your catch-up contribution can be tacked onto those max contribution amounts (an additional $1,000 per year), allowing you to contribute a total of $15,500. This is not a specific feature of this year, but it is a unique feature of IRAs, as they are not funded through payroll deductions like employer plans. If you’re married and file jointly, you can make an even bigger splash by maxing out IRAs for each of you and your spouse for the two years in question. If you’re 50 or older, that number can be as high as $31,000 that can be saved across your IRAs during this sweet spot for contributions. If you work with a financial institution like a bank or a brokerage like Charles Schwab, you’ll want to be specific about the years for which you’re making contributions. If you’re a client of Whitaker Myers Wealth Managers, you should let your financial advisor know that you would like to take advantage of this moment in time by funding your IRA for last year before it’s too late.

Artificial Intelligence (AI) is a hot-button topic and has been for many years now. At the 2024 CES (Consumer Electronics Show) in Las Vegas, every vendor had some form of AI on display. Utilizing various forms of machine learning, neural networks, computer vision, natural language processing, and, of course, artificial intelligence. We can spend hours digging into how each is different and their various use cases, but in this article, we’ll focus primarily on understanding how these new technologies are being used in finance and investing to strengthen our understanding of what is next. To be with or without AI: That is the question! Tropicana launched a campaign saying they’re ditching “AI” and are going ‘all natural.’ The ironic piece is that there isn’t anything artificial about their orange juice, and thus, they’ve always been without “AI.” For most of us, having some form of AI in our lives makes our day run a little bit smoother. Some examples of this are an automation script that turns the lights on when I walk into the room, sets a timer to automatically turn off a screen at a specific time (great tip for the kiddos!), or one that even opens your car door as soon as you reach for the handle. This little automation can add up to significant time savings, but more importantly, it allows us to focus on more critical or complex tasks. Source: Tropicana is one company that’s ditching AI | CNN Business Focusing on the Value Add Removing the non-value-added tasks from our work or home lives is not something I would ever complain about. In finance and investing, we see the integration of AI helping remove many menial tasks that limit productivity and impact. Using AI to analyze vast data sets, identifying hidden patterns, and even predictive modeling have all become much easier because of it. Many years ago, large databases were the golden ticket to the market. If you knew how to use a spreadsheet tool to comb the data and manually find the minor correlation, you could have made millions. Now, being able to unlock the power of the data is available to all. Diving deep into these vast data sets, including historical trends and correlations between markets and sectors, can be concluded in minutes. AI and technology have made it much more accessible for all of us to track financial metrics in real-time. Other Areas of AI Integration By far, the most significant and most obvious use of AI is in finance/investment data. However, that is not the only place where AI lives in finance. Algorithmic trading, portfolio optimization, sentiment analysis, and even Robo-advisors are all other points of integration. Algorithmic trading completes trades based on pre-defined parameters, limiting the fear of missed opportunities (finance FOMO). Portfolio optimization allows investors to construct diversified portfolios with their risk tolerances in mind. Rebalancing can also be automated through some platforms. Sentiment analysis uses AI to read articles or social media posts to gauge investor sentiment toward the company or sector. Robo-advisors are AI-powered platforms that provide automated investment advice and portfolio management. What is next for AI and Investing? Mic Drop! Robots are taking over starting next week!  Well, not exactly. Lucky for us, we’re not there yet. I predict that AI will continue to drive innovation and speed in the industry. We’ll see more of these in-depth analyses conducted by AI, some interpreted and some even giving next-step recommendations.  This is where it gets tricky. Almost all foresight (prediction) models take historical trends, seasonality, variability, and various key data point injections into account (new leadership, new technology, new billing…) to compute the projections. History is important, but it doesn’t always repeat, nor can we accurately predict what it will bring. What we do know is that over the long term, investments in the market do well.  Consistent investing with compound interest is key to success as well. This is why we highly recommend a financial advisor who acts as a fiduciary for you and has the heart of a teacher to walk with you. Our team at Whitaker-Myers Wealth Managers focuses on the intangibles and has the analytical power of Robo-advisors with the human touch to provide you with the best experience on your journey. If you don’t have an advisor, please contact anyone on our team, as they are ready to help answer your questions. If you’d like to submit a question for Summit to Answer, please click here.

This week, we continue our journey of navigating financial metrics. Some believe there is a secret sauce to investing, or better yet, they have it. The reality is that investing is a calculated risk. Equipped with the proper knowledge, you can transform from a bewildered wanderer to a confident navigator of the financial markets. You will be equipped with these financial metrics in your toolbelt on this journey. This set of metrics focuses on using a quantitative approach to the company’s financial health, performance, and future growth opportunities. Our team of financial advisors (or financial teachers) Whitaker-Myers Wealth Managers are ready to join your quest and provide additional guidance and tools on your journey. The Metrics Toolbelt Four broad ratios must be reviewed when analyzing a company's or investment's health and outlook. These include profitability ratios, liquidity ratios, solvency ratios, and valuation ratios. Profitability Ratios Profitability ratios look at whether a company is capable of generating a profit and revenue growth. This is one of the most important sets of ratios to look at when analyzing a company. If the organization is not growing (revenue) or profits are down significantly, the stock will likely reflect. Key metrics that focus on profitability are gross profit margin, net profit margin, and return on equity (ROE). Gross Profit Margin Measured by calculated net sales minus the cost of goods sold. This is reported as a percentage of net sales. “Gross profit margin shows the amount of profit made before deducting selling, general, and administrative costs, which is the net profit margin” (Investopedia.com). Net Profit Margin As mentioned in the quote above, the net profit margin considers all expenses. A higher net margin signifies greater profitability. Return on Equity (ROE) This is a measure of how efficient a company is in generating profits. Calculated by dividing a company’s net income by shareholder’s equity. When determining if the ROE is good/bad, evaluate other stocks in the same sector. If the calculated average amongst the selected group is lower than the ROE of the stock you’re looking at, you’re in good shape! Liquidity Ratios “Liquidity is the ability to convert assets into cash quickly and cheaply” (Investopedia.com). Liquidity ratios measure a company’s ability to meet its short-term debt obligations without raising additional capital. These ratios are specifically looking at short-term obligations. Here, we’ll discuss two liquidity ratios: the current ratio and the quick ratio. Quick note: anytime you hear ‘current’ in a financial discussion (current ratio, current asset, current liability…), think of the short term, less than one year. Current Ratio The current ratio measures current assets (cash, accounts receivable, and inventory) divided by current liabilities (any short-term debt obligations). A current ratio of 1 or greater is a good sign. This means the company has enough assets to cover its short-term obligations over the next year. On the other hand, a value of less than 1 would suggest that the company is in a riskier position and may not have all the assets to cover its liabilities over the next year. Quick Ratio The quick ratio has a much more complicated formula. However, the simplest way of understanding the quick ratio is that it excludes inventory from current assets (unlike the current ratio). This ratio measures immediate liquidity by focusing only on available cash and accounts receivables.  A healthy quick ratio is typically above 0.5. Solvency Ratios Unlike current ratios, solvency ratios measure a company’s long-term capability to handle its debt. Organizations with higher solvency ratios tend to be the stronger investments for investors. Prospective lenders also widely use solvency ratios when determining a company’s creditworthiness. Within the category of solvency ratios, we’ll focus on 2 in this article: Debt-to-Equity and Interest coverage. Debt-to-Equity Ratio This compares a company's debt to its shareholder equity. A lower ratio indicates a healthier balance sheet with less reliance on debt. It is measured by dividing total outstanding debt by equity. Interest Coverage Ratio This ratio calculates the company’s ability to meet debt interest obligations in the specified period. This ratio is calculated by dividing EBIT (earnings before interest and tax) by Interest expenses. A ratio greater than 1 signifies sufficient cash flow to cover interest expense. Valuation Ratios Valuation ratios are another category of metrics to keep in your tool belt. These key metrics are widely used to estimate the company’s intrinsic value and future growth opportunities. Commonly, they are also used to evaluate current stock prices. Two of the most common valuation ratios are the Price to Earnings (P/E) and Price-to-book (P/B) ratios. Price-to-Earnings Ratio (P/E Ratio) This metric is calculated by measuring the price of a stock divided by the company earnings. A lower P/E ratio generally indicates undervaluation and opportunity to grow. Price-to-Book Ratio (P/B Ratio) This metric is calculated by measuring the price of a company’s stock divided by the book value per share (BVPS). The book value per share measures all company assets minus liabilities. A lower P/B ratio might imply a bargain buy; values <1 are good to track. Toolbelt Filled, Now What? Remember, when you look at financial metrics, it’s never about one metric or one data point. A complete analysis must be conducted to understand if the investment is right for you. I’ve mentioned this in previous posts, but when discussing any metric, remember that a benchmark also requires a like-to-like measurement. Measuring one valuation metric of a company in the Tech sector vs. a company's valuation in the manufacturing sector is not a good comparison measurement. At the end of the day, financial metrics only tell you a picture at that given moment. Always consider them in context alongside qualitative factors like the company's industry, competitive landscape, and management team. Conduct thorough research, diversify your portfolio, and consult with one of our financial advisors at Whitaker-Myers Wealth Managers for personalized guidance.

What is rule 72(t)? Rule 72(t) refers to a section of the Internal Revenue Code that gives parameters to follow to make early withdrawals from retirement accounts without penalties. The eligible retirement accounts include traditional IRAs, Roth IRAs, 457(b) plans, 403(b) plans, and 401(k) plans. However, Roth IRAs are subject to different rules, meaning you may not need to execute a 72(t) to get funds penalty-free. The exception for an early withdrawal penalty can only be utilized if the taxpayer follows the 72(t) requirement of substantially equal periodic payments (SEPPs). The number of payments needed to fulfill this requirement varies with age. SEPPs refer to making equal periodic withdrawals from your retirement account. These funds must be withdrawn according to a specific IRS schedule, and the IRS has three different methods for calculating how much your withdrawal amount should be. The 72(t)-payment schedule must be five years or until you reach age 59 ½ (whichever comes later), which means your payment schedule will be at least five years. Example: If you are age 50 ½, you would have to make substantial equal payments for nine years until you reach age 59 ½. Rule 72(t) payment calculation Fixed annuitization method This is the most complex method for calculating SEPP. The annual payment is calculated by factoring your total account balance, an annuity factor provided by the IRS, the federal midterm interest rate, and the account owner's life expectancy. This method differs from the other two as the account owner cannot choose between the different life expectancy tables. This causes the fixed annuitization method to only be affected by interest rate because it is restricted to a specific life expectancy table. Fixed amortization method This method calculates the amount to be distributed annually by amortizing the account balance over the single life expectancy, the uniform life expectancy, or the joint life expectancy with the oldest listed beneficiary. The payments remain the same over the withdrawal period, and recalculating is unnecessary. The fixed amortization method is unique because it is affected by both life expectancy and interest rates. Minimum distribution method This method takes a dividing factor from the IRS’s single or joint life expectancy table and divides the retirement account’s balance. This varies significantly from the amortization method as the annual withdrawal payments are likely to vary yearly. The payments from this method are the lowest possible amounts that can be withdrawn. Here is a brief overview of the different life expectancy table options: The Uniform Table Applies to unmarried account holders, married account holders whose spouses are not more than 10 years younger, and married account holders whose spouses aren’t the sole beneficiaries of their accounts The Joint and Last Survivor Expectancy Table Applies to account holders whose spouses are more than 10 years younger and are also the sole beneficiaries of the account. The Single Expectancy Table Applies to beneficiaries Conclusion Executing a 72(t) should be a last resort when there are no longer other options to exercise. Something to keep in mind is that you MUST be very diligent with monitoring your withdrawals.  If you miss a withdrawal or don’t take the proper amount, you will be assessed all your penalties. This should not be used as an emergency fund as it can significantly impact your future financial situation in retirement. If you need money from retirement accounts and want to avoid the 10% penalty on early withdraws, a 72(t) might be something to investigate. Remember that withdrawals that follow the 72(t) criteria are still subject to the account holder’s normal income tax rate. Most 72(t) options are executed for someone retiring from their employer earlier than 59 ½ and looking to replace their income with interest, growth, and principal from their 401(k), IRA, or retirement asset in a consistent and repeatable manner. Just like you would expect a paycheck each month from your employer, a 72(t) option can create that paycheck from your hard-earned savings while avoiding the dreaded 10% penalty that comes with a withdrawal from a retirement account before 59 ½. In our opinion, the IRS is giving the person who has done a tremendous job of saving the option to retire before the standard 59 ½ retirement date. This should not and cannot be used for someone looking for a one-time access to their funds. If you have questions or want to see what a 72(t) looks like for you, contact your financial advisor. They would be able to show more in-depth what the substantially equal periodic payments would look like for your situation and how long you would need to take those. If you don’t have a financial advisor, we have a team ready to help answer questions at Whitaker-Myers Wealth Managers.

In this week’s edition of the Investment Corner, we explore a few key risk metrics. The correlation coefficient and performance formula are two you should be familiar with. Financial metrics are not a heavily guarded secret, but deciphering them can require translation! Mama’s Secret Sauce At dinner with some friends last night, my wife talked about her ‘secret’ homemade pasta sauce. Her recipe isn’t really a secret, but no, I still can’t share it; however, I must say it is delicious! Much like Mama’s sauce recipe, financial metrics are no secret, but knowing what metrics to use and understanding what they mean can significantly impact how/what you invest in. In many ways, finance talk can be a different language for many. Don’t worry; our team at Whitaker-Myers Wealth Managers is full of expert translators ready to help whenever you’re ready. We will explore many more key metrics in the future and translate them for all to understand. However, we’re digging into some key risk metrics in today's post. Ready, Set, Go! Risk Statistics When measuring risk within a profile or between two assets, two important concepts to familiarize yourself with are the correlation coefficient and the performance equation. These widely used statistical measures provide insight into possible similarities, returns, and unpredictable variability. Correlation Coefficient: The correlation coefficient measures how closely two entities or assets are related or the strength of association between the two data sets. It is reported between -1 and +1. The closer the number gets to -1, the less correlated the two entities are, with -1 showing a negative relationship (opposite). On the other hand, as the correlation coefficient reaches +1, the two entities have a similar or positive correlation. Why does it matter? Our team of advisors tracks this metric to create better diversification within your portfolios. This limits the impact that one part of the portfolio can generate a ripple to the rest of the portfolio. In today’s interconnected global society, the individual sectors do not operate in silos. However, the direct impact can be limited when the correlation coefficient is less. Performance Formula If you’ve listened to any financial podcasts or talked to your financial advisor, you’ve likely heard the terms alpha and beta when discussing investments. These two metrics, or variables, are a part of the performance formula. This equation utilizes a linear regression analysis to identify correlations between the variables. The variables include: y = a + bx + u where, y = the performance of the fund/stock/portfolio a = Alpha, excess return compared to the benchmark b = Beta, measures volatility compared to a benchmark x = the performance of the benchmark (commonly the S&P500) u = residual, this variable considers the market's randomness. These are the unexplainable occurrences that happen in which the performance cannot be attributed to alpha or beta metrics. (Investopedia.com) Alpha measures the positive return in your portfolio compared to the benchmark. When you hear a mutual fund manager yell, “I’ve got alpha,” he’s talking about the difference between the returns from his managed portfolio and their selected benchmark. This is exactly where alpha can get tricky. Last week’s article discussed that not all investments are created equal. Thus, measuring an investment against any index may or may not be appropriate. Having a positive alpha is excellent, and a negative alpha indicates underperformance. Finding the right benchmark with similar assets is crucial to understanding how well your investment is performing and if it’s your turn to yell, “I’ve got alpha!”. Beta, on the other hand, measures the volatility of the investment compared to the benchmark. It more specifically quantifies how much an investment’s price fluctuates compared to the market. A Beta value of 1 indicates the investment correlates with the benchmark’s movement. A Beta value >1 indicates higher volatility than the market; thus, much larger swings can occur compared to the benchmark.  A Beta <1 shows lower volatility than the market/benchmark. Take home points: By now, I hope your eyes haven’t glazed over and you’re still following along.  Here are some key takeaway points to prepare you for the next advisor meeting. Remember: ·        Correlation coefficient - depicts how ‘correlated’ two entities are! ·        Alpha and beta are used to compare and predict returns (though no one can accurately predict returns!) ·        Alpha – Measures positive returns against a benchmark (we all want more alpha!) ·        Beta – Measures Volatility/risk ·        High Alpha, high beta = High reward, high risk ·        High Alpha, Low beta = High reward, low risk ·        Low Alpha, high beta = Low reward, high risk Overall, the performance formula helps quantify the relationship between two variables and estimate the value of the dependent variable based on the independent variable. The model's accuracy depends on how well the equation captures the true relationship between the variables and how small the error term is. Talk to your advisor about these variables when reviewing your investments. Align your strategy with your future goals. At Whitaker-Myers Wealth Managers, our advisors all have the heart of a teacher and are fiduciaries here to help.

Asset Classes Asset Classes, are they like Pilates at 9 am on Thursday? For those of you who have a background in science, like me, the chart below may look like a funky periodic table or oddly organized Scrabble board at first glance. Today, instead of discussing molecular weight, reactivity, or how to get the best triple-double combo for the most points, we will delve deep into the 4 investment categories that Dave Ramsey recommends investing in. This will include a quick introduction to some subcategories, which we’ll dissect in a future post. A quick note before diving in: Remember the term ‘fund’ is a group of stocks and other assets vs. a single stock, which refers to one publicly traded entity (company, commodity, etc.). Also, Asset classes are a group of investments with similar characteristics and are regulated similarly. Dave’s 4 Categories for Investing Dave Ramsey’s recommended 4 categories for investment include Growth, Growth and Income, Aggressive growth, and International. The goal of these categories is to provide even diversification. His recommendation is to allot 25% to each category. While this strategy may meet your investing needs at a high level, we hope to educate you on the why behind each fund within the designated categories. Understanding the turnover rate, costs associated with the fund, and potential tax implications are all key components to consider when selecting your funds. Investing can be risky, but creating a well-diversified portfolio can hedge the potential risk. Hedging is NOT having the most well-groomed boxwood evergreens in the neighborhood! Hedging (in investing) is “a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset” (Investopedia.com). For example, having assets in cash or international funds could ‘hedge’ against a loss within other categories. The complete or balanced portfolio should align with your risk tolerance and the time horizon you have for your investments and goals.  Let’s dive deeper into the categories and define them a bit better. Growth Funds Fun fact: Growth funds or large-CAP growth funds have no association with how tall your child is or what size baseball hat they wear. However, they can contribute to your children’s future and may enable you to purchase that fancy new baseball hat! Growth funds or large market capitalization (‘large-cap’) funds are companies or groups of companies that have a market capitalization value >$10 Billion. “Market capitalization is calculated by multiplying the number of a company’s shares outstanding by its stock price per share” (Investopedia.com). Growth stocks or funds include many of the largest companies you’re likely familiar with. Companies such as Apple (APPL), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TLSA), and many others. These companies have been significant drivers of the overall market and have played a significant role in driving not only the U.S. economy but also economies globally. They tend to be relatively stable and would be considered a staple in most portfolios. These growth funds tend to follow the market due to size; however, measuring growth funds against the S&P 500 may lead to inaccurate conclusions. We all want to benchmark to understand if our investment is doing well. To do so, a more accurate representation of a benchmark trend is a measurement against the Russell 1000. The Russell 1000 is a subset of the Russell 3000; however, the Russell 1000 measures compose the largest 1000 growth stocks. Thus, it is a more representative measurement. Even though they’re ‘fruit,’ you can’t measure/eat them the same way! Growth and Income Growth and Income funds are large market capitalization value (‘large-cap value’) stocks/funds that provide a dividend payout that can be realized out or reinvested. If you reinvest those dividends, they can grow along with the portfolio and improve the fund's overall return. Dividend payouts are based on the company's net profit and number of shares in the portfolio. Remember, this is a payout to all shareholders and can come monthly, quarterly, or yearly. Thus, tracking the dividend payout ratio is important. We at Whitaker-Myers Wealth Managers track this metric, which shows us the sustainability of a company’s dividend program. The inherent risk with dividend investing is that if a company does not show a profit, there isn’t a dividend to pay out! Tickers in this category include Coke, Pepsi, Citigroup, and many others. Similar to large-cap funds, benchmarking performance against a market index is most accurately done when comparing the fund to the Russell 1000. However, we must look at the Russell 1000 value index in this case. This index measures the large-cap value funds against each other. As our fearless leader, John-Mark Young, shares in his weekly market update, we can appropriately combine both value and growth funds and use the S&P500 as an appropriate benchmark since the S&P500 includes both categories of funds. Remember, the S&P500 can only be used as a benchmark when both fund types are combined! Tax implications must be considered when a dividend reinvestment or payout strategy is in play. Make sure to talk to your CPA or Financial advisor to understand which is the most appropriate for your situation. Aggressive Growth This category includes both small-market capitalization (small-cap) and mid-market capitalization (mid-cap) funds. Small-cap funds are companies that have a market capitalization of <$2 billion, while mid-cap funds range between $2-10 Billion. The categorization of these funds under ‘aggressive growth’ directly aligns with their volatility. When comparing volatility, small-cap funds tend to be the most volatile, followed by mid-cap and lastly, large-cap. Though these may have higher risks, the upside and earnings potential are also great. When considering this category, consider Amazon starting out early in the 90s or Google in its early stages. Only a few companies make it as large as they did; however, those that do can greatly drive growth in your portfolio. We won’t discuss it this week, but value and growth funds can also be selected within each small-cap and mid-cap asset class. A good market benchmark for Aggressive growth funds is the Russell 2000. International International stock/fund investing has been traditionally used as a hedge against the U.S. economy and a diversification strategy. Though they haven’t performed as well as the other three buckets, we are seeing an emergence of specific international markets driving growth and returns. For example, considering the sociopolitical and economic impact of the local environments of China and India, the OECD (Organization for Economic and Cooperation Development) is projecting India’s 2024 growth of 6.3% compared to China’s 5.2% (Economictimes.com). This would suggest a possible rebalance of the international portfolio or at least tracking the growth of India’s economy to see if this is a good fit for your strategy. We track our international portfolios against the MSCI EAFE at Whitaker-Myers Wealth Managers. This ETF fund (Exchange-Traded Fund) provides an aggregate of small, mid, and large-cap funds, including stocks from Europe, Australasia, and the Far East. Some may debate the need for the international fund in a diversified portfolio since the exposure of many large-cap funds includes their international markets. Discuss with your financial advisor what is best for your portfolio and ask the difficult questions. Ultimately, your investment needs to work how you want it to! Other The elusive ‘other’ category. If you spent some time looking at the periodic table of Scrabble points, you probably noticed we didn’t include many asset classes in this discussion. Don’t worry; we’ll dive deep into those in an upcoming post! These include EM, Fixed Income, Balanced, Commodities and REITS. Summary To SUM(m)-IT all up, yes, a horrible play on words; I hope you walk away with this: Market capitalization plays a significant role and influences your investment risk and returns. Measuring risk small-cap>mid-cap>large-cap also directly correlates to reward/return. Volatility aligns in the same order. While small-cap funds are more volatile, large-cap funds are much more stable. You can find growth or growth and income divisions in each category, which may add another component to your portfolio (with dividend returns). Whatever direction you go, remember to keep diversified, invest intelligently, and talk to your financial advisor about aligning your strategy and long-term financial goals. Investing is never one-size-fits-all. Though I would really like to fit into the jeans I wore 20 years ago, the amount of cake and cookies I’ve eaten over the years doesn’t make that reasonable right now. Investing is similar (minus the cake); your strategies and goals will change as you get older. Remember that our financial coach and advisors are here to walk with you every step of the way, even after 30-40 years when the cake catches up! We’re here to help. Schedule time with our advisors here or submit a question for me to answer here.

Welcome Thank you, and welcome to the first installment of Whitaker-Myers Wealth Manager’s Investment Corner.  We hope you find this section of our newsletter informative and insightful. We intend to highlight various topics based on investing and investment strategies while focusing on our mission and one of our core values: having the heart of a teacher. In this week’s post, we talk about investing strategies and how your past experiences, upbringing, and world events can directly contribute to how and what we invest. The theme of today’s post was inspired by a chapter from Morgan Housel’s book “The Psychology of Money,” where Morgan explores the development of various money habits correlated to geopolitical events and the mindset of future investors. Keep in mind that nobody is crazy! SAVE Whether you invest in gold, equities, ETFs, mutual funds, bonds, Bitcoin, real estate, or businesses, or just prefer to keep your money under your mattress or in a tin can buried deep in your yard, You’re not crazy. Your relationship with money and how you choose to save is deeply seeded in your experiences and nature. Imagine growing up where investing was normalized, taught, and understood. Concepts such as compound interest, dollar cost averaging, and rate of return may come easily. On the other hand, where these concepts are not taught, or the foundation of finance isn’t laid, the investing road ahead may be a bit bumpy. There is, without doubt, a need for this foundation to be laid within the traditional education system. However, to understand one's propensity to save in a particular manner, simply knowing one's understanding of finance and investing is not enough.  Personal finance is only 20% math and 80% behavioral! Cognitive Bias - Familiarity In high school, our economics teacher gave us a project. We could pick our stocks at the beginning of the trimester with an imaginary $10k and buy $10k on margin.  What did I pick? Stocks that were “cool,” Nike (mostly because of Michael Jordan), Coke (I wasn’t allowed to drink as much as I liked, so why not own the company?), and several other ‘tickers’ that I thought sounded ‘cool.’ It wasn’t the best investing strategy, but this assignment taught me valuable lessons I hold on to today. The psychological impact of seeing a daily/weekly uptick or downward trend was more than an emotional feeling; it was physical. The manifestation of these emotional feelings into a physiological sensation can, in part, be explained by the biopsychosocial model of health (https://www.physio-pedia.com/Biopsychosocial_Model). This model suggests that physiological manifestations can be attributed to a combination of biological pathology, psychological factors (fear, stress, and others), and current socio-economic/environmental state. My 14-year-old self still had a strong association with money, although the money was all fictional from the start. I believed it was MY money. At Whitaker-Myers Wealth Managers, we believe this money is not ours, and we are only stewards for God. As fiduciaries, we are responsible to every one of our clients to provide the best management and guidance for our clients, not ours. Thus, our team focuses on doing what is right for our client without any partiality or bias. Bias is a term you’re likely familiar with. However, Cognitive bias may be a bit new. Having a bias is natural and can be an unconscious or automatic process. “(Biases) are designed to make decision-making quick and more efficient. Cognitive biases can be caused by many things, such as heuristics (mental shortcuts), social pressures, and emotions” (Simplypsychology.org). The collective influence of each of these factors plays a crucial role in our ability to process and make decisions (we’ll discuss this much deeper in a future post).  Cognitive bias also takes into account familiarity and relatability. My 14-year-old self chose Nike and Coke because I wanted to ‘Be like Mike’ and be a bit rebellious (without my parents knowing). Luckily for me, this was a school project and didn’t have any long-term real-world consequences. My dartboard strategy may have been very lucky with two of the picks but likely unlucky with the others. Familiarity bias may be a double-edged sword, but not saving can only have one outcome! Nobody is Crazy Playing the lottery is not a winning strategy. Regarding saving, we tend to let our emotions and biases fog our ability to make rational decisions. At the beginning of this post, I mentioned all the ‘crazy’ ways people invest or save their money. None of this was to be judgmental or picking on a tactic. The goal was to highlight that it doesn’t matter what you’re doing; as long as you’re saving, you’re moving in the right direction. You may be in baby step 2, gazelle intense, and don’t have the capability right now to invest. That’s fine; it’s just the season you’re in. The saving and investing will come soon. Remember to invest in yourself, your future, and your family's future.  Saving may be difficult today, but it will get easier. Reaching that first milestone is like the first 1/3 of a race; get past it, and the latter 2/3s will breeze by! Our team at Whitaker-Myers Wealth Managers is here to walk with you on your journey. If you’re looking for guidance and a great coach through baby step 4 or want a further deep dive into your investments and strategy, our team is here to help. We can help develop the most efficient strategies that align with your financial goals. Schedule a meeting with an Advisor today!