We truly are blessed in America. A phrase we often say but it's meaning takes on a crisper form when you can compare how easy our lives are vs those that live in the midst of chaos and conflict every single day. Running to a bomb shelter is foreign to any American child but is standard operating procedure for children in Israel. On the morning of Saturday, October 7, Hamas launched a surprise attack on Israel killing hundreds and plunging the region into further conflict. Israel immediately declared war on Hamas, responded with air strikes, and called up 300,000 army reservists. The U.S. and many U.N. Security Council members have condemned the attacks by Hamas, which is designated a terrorist organization by many major countries, and are providing assistance to Israel, including the positioning of a U.S. aircraft carrier in the Eastern Mediterranean. The situation is evolving, and we all hope for a return to stability in the region, and especially for the continued safety of civilians and any friends and family that might be impacted. The impact of regional wars on markets depends on the economy Without minimizing or trivializing the severity of this conflict, especially the humanitarian consequences, many investors will naturally have questions and concerns about the impact on markets in the coming weeks. What does history tell us about regional wars and their implications for markets and the economy? Unfortunately, for long-term investors, geopolitical risk is unavoidable. Headlines on regional and global conflicts are alarming since they involve violence and the loss of life, and are therefore unlike the typical flow of business and market news involving earnings, valuations, and mergers and acquisitions. These events are also difficult to analyze and their outcomes challenging to predict. As a recent example, many of the predictions around Europe's access to oil and gas following Russia's invasion of Ukraine, fortunately, did not play out. So, while short-term traders may be tempted to guess the direction of oil prices, the S&P 500, and interest rates, it's often better for long-term investors to hold a properly diversified portfolio and stay level-headed as events unfold. Calling the history of the Middle East complex would be a vast understatement, making the current situation even more difficult for investors to analyze. Many diplomats have spent their entire careers attempting to broker peace, countless volumes have been written on the subject, and decades, if not centuries, of ethnic and religious history complicate relations between the region's nation-states. At the risk of oversimplifying matters, the numerous attempts at achieving peace by the U.S. since the mid-twentieth century have been largely unsuccessful. While the Camp David Accords in the late 1970s and the Oslo Accords in the 1990s did improve relations and helped to end conflicts at the time, violence has erupted many times over the past decade. Over long periods of time, markets have recovered from geopolitical conflicts From the perspective of investors, it's always important to separate feelings and beliefs around politics and global matters from portfolio decisions. As the first chart above shows, the impact that wars have on markets varies depending on the business cycle. Some events such as 9/11 and the ensuing wars in Iraq and Afghanistan were met with market declines. This was because these events coincided with the dot-com crash which, while unrelated, required years to stabilize. In contrast, most of the conflicts since the 2010s, including wars in the Middle East, the annexation of Crimea by Russia, and the on-going nuclear threats in North Korea and Iran, were against the backdrop of an expansionary economic cycle. While some of these periods experienced market declines over the following three to six months, economic growth tended to lift markets higher over longer time horizons despite geopolitical uncertainty. The history of strong bull markets in the 20th century across World War II, the Vietnam War, and the Cold War further underscores this point. Of course, last year's invasion of Ukraine by Russia is still ongoing and, so far, markets have not yet recovered their previous peaks. Again, this is largely due to the interaction with other economic forces, namely rising inflation, supply chain disruptions, and elevated market valuations following the pandemic. One direct impact of the Ukraine war and uncertainty in the Middle East is on energy prices. Oil prices did jump following the recent attack on Israel, with Brent crude rising from $84 per barrel to above $87, partially reversing the decline over the past two weeks from a high of about $97. However, this pales in comparison to the sharp rise in oil last year when prices approached $128. There was little direct impact on oil when Russia annexed Crimea in 2014, and even the 2019 drone strikes against Saudi Aramco by Iran and others, which knocked out 5% of global oil production overnight, saw only a short-lived reaction in oil markets. Thus, the impact on energy prices from Middle East conflicts is far from a sure thing. Oil prices have risen following the attack on Israel Perhaps the broadest implication for investors is the idea that markets depend on global stability, the rule of law, and business/consumer confidence. Regional conflicts, especially those that involve the United States and its allies, increase the "risk premium" on financial assets because the future becomes more uncertain. This uncertainty is the idea that even the possibility that markets and businesses could be affected is enough to hurt investor confidence. This is why many investors tend to focus on questions around global dynamics as the world shifts from the U.S.-centric, unipolar world since World War II to a multipolar one. Consistent GDP Growth Despite Regional Geopolitical Events Within a segment of our portfolios at Whitaker-Myers Wealth Managers, we have a tactical allocation to Israel within our international exposure. This is born out of the mindset that within international investing, alpha can be generated by strong and prudent country selection. We believe in Israel for many reasons, which can be tied back to their strong birth rates, consistent GDP growth despite having to run a security state because of their geographic placement in the world, being a beacon for democracy in the Middle East, where the normal is authoritative dictators killing in the name of a false god. Their economy is exciting and built for the future. Some of the sectors they have specialization in are technology, healthcare, defense, and financials. Have you ever wondered where the USB flash drive comes from? You guessed it - Israel. Israel has the nickname "start-up nation" because of its long history of innovation. With a young, highly educated workforce and a world-class technology industry, we see them being a heavyweight in the international markets for years. According to Van Eck, our provider on the ETF side, gaining our client's exposure to Israel's economy, the key strength to this economy is demographics. As is the common phrase, "Demographics equal destiny in terms of your economy." Van Eck goes on to point out, "Israel has one of the youngest and most educated populations amongst developed market countries. In 2022, 28% of the population was under the age of 15, with 60% of the country's population falling within the work age range." We remain firmly committed to our tactical allocation in Israel for all these reasons and more, despite the events that transpired over the weekend. Many of these issues are deeply challenging and often theoretical. As such, their impacts on markets, the economy, and corporate activity are far from certain. History shows that it's a mistake to make dramatic shifts in portfolios in response to geopolitical crises. Properly diversified portfolios, especially those built around long-term financial plans crafted in partnership with a trusted advisor, are designed to handle exactly these periods of uncertainty. None of this is to dismiss or detract from the severity of the conflict in Israel, especially from a humanitarian perspective. While the situation will be closely watched as events unfold, investors should avoid overreacting with their portfolios. The bottom line? While the hope is for stability in the Middle East, investors should maintain perspective when it comes to their portfolios. History shows that it's often better to hold onto a diversified, properly constructed portfolio than to try to time the market due to geopolitical events. So, while the war should have no impact on our investment decisions, let's commit to praying for the nation of Israel, the safe return of all those taken from their homeland, and the repentance of the wicked people inflicting this harm and their turning to the one true God, the God of Abraham, the God of Issac, the true Yahweh. Copyright (c) 2023 Clearnomics, Inc and Whitaker-Myers Wealth Managers, LTD.. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. 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By a mile, the most asked question I get is, "am I ready to retire?" Retirement is technically the single largest expense you'll ever make in your life, even though in reality it is a series of many, many single different decisions one must make. And if I had to guess, the second most asked question I get is, "How do I save money on taxes?" That would then be followed somewhere in the top ten, I would like to own real estate, other than my primary residence one day, "How do I do that?". I wonder if there is a transaction that combines elements of all three: smart retirement planning, tax reduction on income, and private real estate ownership? One such answer (of many) could be the sale-leaseback arrangement within families. As we age, our financial needs and priorities often shift, especially for elderly individuals who may be living on a fixed income or have accumulated substantial home equity. One innovative financial option that elderly clients and their families could consider is a sale-leaseback arrangement. This unique financial tool offers several benefits for seniors and their loved ones, providing financial stability, peace of mind, and the opportunity to enjoy their golden years to the fullest. What is a Sale-Leaseback? A sale-leaseback is a financial transaction in which an individual, typically an elderly homeowner, sells their property to a third party, many times a family member like a child, and then leases it back immediately. In essence, they become a tenant in their own home. This arrangement allows the homeowner to access the equity tied up in their property while continuing to live in the same place. Many times the lease allows the tenant the right to live in the property for the rest of their life. Here are some of the common reasons why elderly clients might consider a sale-leaseback with their family: Unlocking Home Equity One of the most significant advantages of a sale-leaseback arrangement is that it provides immediate access to the equity built up in the property. This can be a valuable source of funds for seniors who have limited income and substantial home equity but do not want to sell their home outright. These funds can be used to cover healthcare costs, home improvements, travel, or to enhance their quality of life in retirement. Additionally, this extra cash can help with the sequence of return risks that so often create havoc for retirees during their golden years. For example, someone who is unlucky and must start withdrawing their portfolio right into a negative market that takes too many years to recover from would face the unfortunate reality that they are withdrawing funds at -10%, -20%, -30% values that can lead to much faster depletion of assets than would otherwise be realized. Hopefully, your Financial Advisor has hedged your portfolio in a way to help offset some of this risk but it is still a reality for most retirees. Financial Security For many elderly individuals, the cost of maintaining a home can become burdensome. Property taxes, maintenance, and unexpected repairs can strain a fixed income. By selling their property and leasing it back, seniors can free themselves from the financial responsibilities of homeownership. They can budget more effectively, knowing exactly how much they'll pay in rent each month, which can provide a greater sense of financial security. Aging in Place or Emotional Ties to Property Seniors who are emotionally attached to their homes may be hesitant to move to assisted living or other retirement communities. A sale-leaseback allows them to continue living in the comfort of their own home while also providing access to funds they may need for in-home care or renovations to make their living space more accessible as they age. Many families have had properties that for generations have been in the family. If this is the case the sale-leaseback scenario provides a confirmation, should the property be sold to a member of the family, that it will remain in the family for another generation. Simplified Estate Planning A sale-leaseback can be an excellent estate planning tool. By converting home equity into liquid assets, individuals can ensure a smoother transfer of wealth to their heirs. It can also help reduce the complexity of estate planning by simplifying the division of assets among beneficiaries. Tax Advantages In some cases, a sale-leaseback arrangement can offer potential tax benefits. It's essential to consult with a tax advisor, like our in-house CPA Kage Rush, to understand how this option may impact your specific financial situation. Let me give a quick example of how one might benefit from the sale-leaseback, within a family structure Example - Susie (Mother) & Johnny (Son) Susie who is 80 and a widow owns a $200,000 home. She also has a $2,000 monthly Social Security benefit and $300,000 in investment assets. She needs $4,000 / month which he investments and Social Security comfortably provide for her. She decides it would be in her best interest to sell her home to her son Johnny who will rent the property back to her for $1,500 / month (not quite market rent because a standard rule landlords will use is 1% of value, each month) but hey, it is Johnny's mother. Now Johnny, as the property owner will handle all the maintenance and upkeep going forward for his mother. Johnny is a Dave Ramsey and Ramsey Solutions fan so he has the cash and purchases his mother's home with no debt. If Susie were to earn 5.50% on those dollars (current yield on a 6-month Treasury bond) received from the sale of the home, the money would pay for the rent for 17 years or until she is 97. If she took more risk and built a structured note with a 50% S&P 500 Protection on the principal and 40% protection on the coupon payments, with a European style execution (which means she receives a loss if the S&P 500 is down 50% on the contract end date typically 5 years in the future), those typically pay around 8.00% and it would last somewhere around 27.5 years. Every investment decision should be made with the help of a qualified investment professional and with a full understanding of your entire financial situation Johnny receives the $1,500 but is able to depreciate the value of the property, write off the expenses, and also possibly have other business write-offs for expenses while managing his mother's property. If his mother had lived to 97 then he would have been paid $309,000 ($200,000 plus the interest it earned at the 5.5% rate), some of it not taxable because of the right-offs and he would own her $200,000 house that could have appreciated to $281,000 (2% appreciation rate). As a general rule, investment properties that take deductions have that reflected in their cost basis, so Johnny may have to pay the taxes back when he sells the property unless he does a 1031 exchange, which I have written about in the past. As mentioned above, I am not a tax advisor or CPA, thus we would highly recommend you discuss everything mentioned above with your tax professional. Flexibility Sale-leaseback agreements can be customized to fit the needs and preferences of the elderly client and their family. The terms of the lease, including the duration and monthly rent, can be negotiated, providing flexibility and peace of mind. But this also provides one of the greatest risks of a sale-leaseback transaction as well. The IRS will more than likely audit a transaction like this involving family members. Thus one should use excellent legal counsel, a trusted realtor to ensure proper value is given to the buyer and seller and your tax professional, whom will most likely be helping you when the IRS comes knocking. Another possible drawback could be that some states provide a spouse that enters a nursing home the ability to not have to use all their assets before Medicaid kicks in, so as to not improvish the non-nursing home-bound spouse. The husband goes into the nursing home and you don't want the wife to be left with nothing if the husband stays there too long. Many times it's a level of assets and the primary residence however if there is no primary residence because those assets are now in a liquid form (investments, savings, checking) then it would require the remaining spouse to not have a home that was paid for and providing housing utility for them. All this to say, I'm not an estate planning attorney nor an elder law attorney, so as discussed above, one should consult the entirety of their professional advisor team before making such large financial decisions. For elderly clients and their families, a sale-leaseback arrangement can be an attractive financial option that offers multiple benefits along with some drawbacks. It allows seniors to access their home equity, provides financial security, and enables them to age in place comfortably. Additionally, it simplifies estate planning and offers flexibility in tailoring the agreement to individual needs. However, it's essential to approach a sale-leaseback with careful consideration and seek guidance from financial advisors and legal professionals experienced in such transactions. While the benefits can be substantial, it's crucial to thoroughly understand the terms and potential implications before entering into a sale-leaseback agreement. With the right guidance and planning, this innovative financial concept can help elderly clients and their families enjoy a more comfortable and financially secure retirement.

As we head into Fall Weather, Football, Halloween, and the holidays, we are getting close to the 2023 Tax Filing Season. As this time of year seems to fly by, we at Whitaker-Myers want to ensure you are as financially prepared as possible. Within the Whitaker-Myers Group, we have an extension focusing primarily on tax advisory services. This article will discuss some items to review before year-end to prepare for a smooth, stress-free 2023 tax filing season. Reviewing Pay Stubs It is important to review paystubs to ensure proper withholding at work. Significant pay increases or changes to dependents can affect your tax withholding and cause you to under-withhold at work. Under-withholding at work can lead to surprise tax bills when it comes time to file in 2024 and can put households under unnecessary stress. I recommend consulting with a tax preparer to verify if you still qualify for the child tax credit or other credits you have previously claimed. By taking these steps – you can catch the under-withholding early and start planning how to fix the withholding before the tax filing. Reviewing Contributions Another essential year-end tax item to review is contributions to your retirement accounts (Roth IRA, Traditional IRA, 401(k)s, etc.). You want to ensure your retirement contributions to a Roth IRA are still allowed under normal circumstances. If your income in 2023 is above $218,000 for married filing jointly or $138,000 for single, your allowable contribution to a Roth IRA starts to be reduced. It is completely phased out at $228,000 for married filing jointly or $153,000 for single. If you end up over-contributing to a Roth because of income limits, detecting this early can help your Financial Advisor and tax preparer rectify the problem before filing the tax return. Failing to watch this can result in interest and penalties by the IRS. If you are contributing to a 401(k) – You can review your contributions to see how close you are to maxing out your contributions if you want to take advantage of that. New Financial Situations The most important item on this list is to discuss any abnormal financial situations with your preparer before year-end. Financial situations that can be considered abnormal can be selling your home, having any debt forgiven, starting a small business, investing in rental properties, opening up new investment accounts (IRAs, brokerage accounts, or money market), and receiving proceeds related to an inheritance. These financial situations can lead to new filing requirements with your tax return that you may not have had in any previous tax year. Meet with a tax advisor, and they can clarify for you what items they need to report the transaction properly on your tax return and help you plan for the tax ramifications of the transaction. Setting yourself up for a successful tax-filling Doing the above items will make you more informed about your financial situation and help you prepare for a smooth tax filing season. At Whitaker-Myers Tax Advisors, we pride ourselves on being there for all of our client’s tax questions and giving them peace of mind when navigating the complex tax environment. If you would like to schedule a tax consultation with CPA Kage Rush, please don’t hesitate to contact your financial advisor at Whitaker-Myers Wealth Managers or email Kage directly to schedule a meeting.

Timing the market refers to moving funds in or out of a financial market based on predictive methods. Active investors, who day trade and try to time the market, argue that they can receive additional gain compared to long-term investors. This is due to them making market-timed exits. These exits are not easy, and because of that, many active traders tend to underperform investors who remain invested. Make the change today, not tomorrow Timing the market is especially ineffective when investing for the long term. When funding our retirement accounts, we want to put money IN the market consistently. If we have a fixed contribution of $100, then some days, that dollar amount will buy us more and some days less, depending on whether the market is up or down. A bad habit to get into is pulling money out of the market and waiting for the “perfect” time to get back in. This causes you to lose potential gains had you been in the market. Charles Schwab said, “Sometimes my mistake has been hesitancy about acting on the decisions I’ve made. When’s the best time to invest? It’s today, not tomorrow.” Being in the market often and consistently William Sharpe, an American economist and Noble Prize winner concluded from his studies that an investor using a market-timing-based strategy would need to be right 74% of the time just to beat the benchmark portfolio of similar risk annually. That is a high mark to meet, especially when dealing with something as unpredictable as the market. If the task of timing the market is challenging for even the brightest of “market-timers,” then we as investors need to stick to our guns of consistently getting in the market. We can invest effectively by diversifying our portfolios and adjusting based on goals, retirement timelines, and life changes. More time in for more reward History has shown that the longer the time frame of investments — the higher the chance of a positive outcome. If you look at the past 94 years of the S&P 500 (through Dec. 31, 2022), 94% of 10-year periods have been positive. This number decreases significantly if you look at this over one year. One-year periods have a positive outcome of 73% and a negative of 27%. Fluctuations in the market are a guarantee. The key to success is our time IN the market and not trying to time the market. In the Ramsey Solutions National Study of Millionaires, 3 out of 4 millionaires said that consistently investing leads to success. Emotions tend to follow suit when the market seems to be going haywire. It is easy to want to pull money out and wait for that “perfect” time to buy in. However, the best time to put money in the market is when you have it. Your investment strategy is based on you and your needs. The best way to meet those needs is with consistency and making intelligent adjustments along the way. If you have questions about what is happening in the market or how it affects your situation, contact one of our advisors to help answer any concerns you may have. Source: Market Timing: What It Is and How It Can Backfire (investopedia.com) Stock-Yo-Yo.pdf (crestmontresearch.com)

Ohio recently expanded the EdChoice program to allow families of all income levels to apply for some scholarships to be used in grades K-8 and 9-12. The program provides state-funded scholarships to K-12 students who meet the eligibility criteria. The scholarship must be used to attend private schools that meet the requirements for program participation. You can find a complete list of the schools in your county by clicking the link here and selecting your county from the dropdown menu. Scholarship limits For 2023, the maximum voucher a family can qualify for in grades K-8 is $6,165, and for 9-12, $8,407. This maximum voucher amount is reduced as household income increases. Those in the highest bracket can only receive a maximum of $650 for grades K-8 and $950 for grades 9-12. The voucher amount is based on household income and the percentage above the federal poverty level. The federal poverty levels are adjusted for family size. You can find a complete breakdown of this in the chart below. Income brackets Use your household income and family members to find out your maximum voucher. Then, divide that number by the poverty guideline to get a percentage. For example, for a family of 4 making $140,000 a year, $140,000 / $30,000 is 4.66. Convert to a percentage, 466%, and use the following chart to see what voucher you would qualify for. So, in the above example, the family would be eligible for $5,200 for grades K-8 and $7,050 9-12. Anyone under 450% qualifies for the maximum voucher. Here is another chart that displays the scholarship eligibility based on income and family size: Applying for the Ohio EdChoice Scholarship If you meet the eligibility requirements and have chosen a school, you must complete a scholarship request. The process may vary by school, so check with the school Principal to be sure, but a general guideline of the application process is as follows: · Verify your income on the Ohio Department of Education’s website. Use the document below to guide you through the income verification process · Complete the EdChoice Request Form Application – your school will be able to get you this application. · Have a copy of your utility bill that shows your name, mailing address, AND service address. EdChoice is particular about it being a utility bill that lists mailing and service addresses. · Have a copy of your child’s birth certificate The application, utility bill, and birth certificate will likely get submitted to the school, and they will submit it to Ohio EdChoice, but just check with them on the process. Then, you must wait for mail confirmation from the Ohio Department of Education regarding the scholarship decision and/or if there are any issues in verifying your income and/or eligibility. Your school will also be notified. Qualifying for the Scholarships If you are close to reaching one of the income breakpoints and have access to an employer-sponsored plan, you may want to consider contributing pre-tax dollars to lower your yearly income. This will impact your annual income and scholarship eligibility for next year and might be a good option, especially if you have multiple children receiving the voucher. Your Financial Advisor would be happy to discuss this with you in more detail if you have any questions that are specific to your situation.

When searching for a Financial Advisor, here are some key things to look for Looking for a Financial Advisor can be a long and overwhelming process, from people trying to push Whole Life policies to advisors not returning your phone calls. To help make your search easier, here are a few simple questions to ask the Financial Advisors you are interviewing. What are the account minimums at your firm? Here at Whitaker-Myers Wealth Managers, it is an integral part of our mission to help people as they start the wealth-building process. This is one of the reasons why we use Charles Schwab as our custodian; they do not require minimal account balances or have fees associated with smaller accounts. This allows you, as a client, to open accounts starting at a $0 balance to slowly build that Roth IRA over time to help you win, just like the Tortoise over the Hare. It would be inconsistent with Dave Ramsey’s philosophy for us to say, “Now that you are on baby step 4, take $10,000 from your emergency fund to start your investments.” Are you a Fiduciary? This is an important question that many financial advisors try hard to avoid or downplay the answer to. For example, some financial advisors will claim to be fiduciaries, but they mean they are fiduciaries with financial planning. That means they try to keep your best interest in mind while building your financial plan. However, when they go to manage your money, they are putting you into funds that provide them with profit sharing or using proprietary products (funds that are developed by the company that is helping you manage your funds.) We do not use any of those funds or products at Whitaker-Myers Wealth Managers, which means we avoid that conflict of interest. Being a fiduciary is the highest standard in the industry, so the Financial Advisor you are interviewing must always be a fiduciary. How do you get paid? This is something you want to make sure your advisor can easily explain. At Whitaker-Myers Wealth Managers, we keep it simple and transparent. We charge based on a percentage of the assets managed, and that percentage only goes down the more you have, thereby making us more efficient as a firm. This fee structure is essential because it aligns the advisor's and client's interests, incentivizing the advisor and their team to grow your assets over time. Your success becomes your advisor's success, putting us on the same team. How do we communicate, and how quickly can I expect a response? Technology has dramatically enhanced our ability to communicate with clients. At Whitaker-Myers Wealth Managers, we try hard to make it easy for clients to communicate with us. When you do reach out, we strive to respond within the same business day, but if we cannot, for some reason, we will respond as soon as possible the following day. You can also access our online calendar on our website and schedule meetings with us at your convenience. How do I know what you are doing for us? This is an important part of our Whitaker-Myers Wealth Managers philosophy, which our Chief Investment Officer emphasizes. We provide you with weekly blog posts written by our team, also sent in our “Better Than I Deserve” newsletter. Most importantly, John-Mark Young produces a weekly video with a market update in the “What we learned in the Markets” video, and Amanda Sharratt produces a “Question of the Week” video answering a question from one of our clients. What do you provide to allow me to track the progress of my portfolio? A benefit to using Charles Schwab is that they provide you, the client, with a helpful app for your phone that allows you to track the daily progress of your account. If you make a contribution, you can know that we got it in the market within a timely manner, and it’s not just sitting 100% in cash missing the growth or ability to buy at a sale. In addition to Charles Schwab, we provide you with Morningstar, a 3rd party research firm. Morningstar provides you with a monthly report of all of your accounts. If you are married, you and your spouse’s accounts will be combined into one report. Not to mention, Morningstar also provides you with research on the funds we have in your portfolio to make sure we are not putting you in 1 or 2-star funds. We are happy to help We understand that finding a Financial Advisor you can trust can be an overwhelming process, but hopefully, this article has provided some helpful questions to ask when you are interviewing. If you want to discuss your financial questions, one of our Financial Advisors would happily help.

The National Bureau of Labor Statistics did a study in August 2021 looking at the number of jobs that people born between 1957 and 1964, essentially baby boomers, held from age 18 to 56. The report can be found and read here. Any guess on the number of jobs over a person's working lifetime? 12.7 - that's right, 12.7 jobs over their working career. To be fair, half these jobs were held from ages 18 to 24 when you're still trying to figure your place in this world. But that still means during the heart of their career, most people in this age range switched jobs 6 times. Do you think this will get any better with the current generation? Every one of these job changes creates a series of business transactions that one must think through. New benefit plans, new payroll cycles, new routines, and getting all the business from your former employer wrapped up. The least of which is your former employer's retirement plan. Although individual circumstances must be reviewed, many times, people opt to roll these former employer dollars into their IRA or Roth IRA, depending on the tax treatment of the monies. By the time you do your last rollover, this may feel routine however, the rollover prior to retirement (or around retirement) may be more critical if something called Net Unrealized Appreciation "NUA" is applicable to you. (Note - to be clear NUA can be taken advantage of not just at retirement but for purposes of this article, let's assume that's the most beneficial time to do so). What is Net Unrealized Appreciation (NUA)? NUA is a tax strategy that allows individuals to take advantage of potential tax benefits when distributing employer-sponsored retirement plan assets, typically company stock, from their 401(k) plan. This strategy applies when an individual holds employer stock in their 401(k) plan and is planning to roll over their 401(k) balance into an Individual Retirement Account (IRA) upon retirement or job change. The key concept behind NUA is to differentiate between the two components of your company stock within the 401(k): Basis: The original cost of the employer stock when it was purchased within the 401(k). Net Unrealized Appreciation: The difference between the current market value of the employer stock and its original cost or basis. Let's use a quick example: Johnny works for Tesla. When he started with Tesla in 2018 he bought stock in the company 401(k) plan through 2018 and 2019 but was worried about it becoming too large of a position in his 401(k) (not to mention the stock options he received) so after 2019 he continued contributing to his 401(k) but just allocated new dollars in other mutual fund options available in the plan. Johnny acquired 1,000 shares of Tesla, over the time his contributions went into Tesla stock inside of the plan, and the average price during that timeframe was $20.00 / share, so let's assume that was his average purchase price. Johnny would have a basis in his Tesla stock of $20,000. Then Johnny continued to work for Tesla over the next five years, and here is what happened to Tesla stock over that time frame. So today, Johnny has 1,000 shares, and the closing price is $244.45, thus, it has a market value of $244,450. That means our friend Johnny has net unrealized appreciation of $224,450 (Current Market Value - Basis). Why Consider Using NUA? Using the NUA strategy can offer several advantages for those with substantial employer stock holdings in their 401(k). Here are some compelling reasons to consider NUA when rolling over your 401(k): Tax Efficiency: Perhaps the most significant benefit of NUA is its potential to lower your overall tax liability. When you use the NUA strategy, you are only taxed on the cost basis of the employer stock at your ordinary income tax rate, at the time of the rollover. The NUA itself is taxed at long-term capital gains rates when you decide to sell the stock. In our example above, if Johnny decided to execute an NUA he would be taxed on the $20,000 (cost basis) at his ordinary income tax rate, but the gain would not be taxable until he sold and would be taxed at the capital gains tax rate. Long-term capital gains rates are 0%, 15%, and 20%, while federal income tax rates are: 10%, 12%, 22%, 24% 32%, 35%, and 37%. Estate Planning: NUA can also be advantageous for estate planning purposes. When you pass away, the NUA stock is included in your taxable estate at its current market value, potentially allowing your heirs to receive a step-up on the basis of the gains of the stock after the NUA was executed. This means any gains earned after the NUA would likely be tax-free to your heirs. However, any unused NUA gains would be treated as "income in respect to a decedent" and would still be taxed at a long-term capital gains tax when eventually sold by your heirs. Lower Required Minimum Distributions: Considering that an NUA strategy has you allocate the company stock dollars into a taxable brokerage (or bridge account as Dave Ramsey calls them), these dollars are no longer in your IRA, which is subject to a required minimum distribution somewhere between age 73 - 75 (depending on when you were born) and every year after. Required minimum distributions, if not properly managed, can push clients into higher tax brackets later in life, even creating issues where it would make Social Security and Medicare taxed at higher rates. How to Implement NUA To take advantage of the NUA strategy, you must follow specific rules and procedures: Qualifying Employer Stock: First, ensure that the stock held in your 401(k) qualifies for NUA treatment. It must be employer stock of your current or former employer. Distribution of Stock: Instead of rolling over the entire 401(k) balance into an IRA, you should request a distribution of the employer stock in-kind. This means that the stock itself is transferred to a taxable brokerage account in your name. Taxation: You will be taxed on the cost basis of the employer stock in the year of distribution at your ordinary income tax rate. The NUA itself is deferred until you decide to sell the stock, at which point it will be taxed as a long-term capital gain. IRA Rollover: After the distribution, you can roll over the remainder of your 401(k) balance into a traditional or Roth IRA. The NUA portion remains in the taxable brokerage account. Selling the Stock: You can sell the employer stock at any time, but it's essential to consider your tax situation and financial goals when deciding when to do so. Should You Consider NUA? Certified Public Accountant (CPA) at Whitaker-Myers Tax Advisors Kage Rush reminds clients, "While you should never let tax implications and decisions be the only factor when making investment decisions, some general considerations make NUA attractive to certain individuals." If you can answer yes to these conditions below, you may be a good candidate: Are you 59 1/2 (doing so before may open you up to a 10% early withdrawal penalty)? Are you taking Required Minimum Distributions soon? Is your current tax rate similar (or lower) to what it'll be in retirement? Will doing an NUA give you a compliment of tax-diversified assets (taxable, Roth, pre-tax IRA)? NUA Tax Treatment Rules There are some general rules you must follow to ensure that the stock moved into the taxable brokerage account is treated with the NUA rules. If not followed, this can cause your NUA election to be disqualified by the IRS, thereby making the entire distribution taxed at ordinary income tax rates. If you'd like to spend time in the weeds of the IRS publication like Kage and I have to write this article, you can visit that here. Below is a summary of the rules: You must have reached one of the following: A. Separation of service from the company with whom the stock is held. B. Death C. Disability (but this provision only applies to self-employed workers D. 59 1/2 - The typical retirement age or in-service withdrawal age for most plans 2. The entire vested account balance must be distributed within one year. Considering that the NUA transfer may happen first, you don't need to make the entire account distribution in one transaction, it just must be gone within one year. 3. You must distribute all assets from all qualified plans from the employer. This is even if any other plan at the company didn't hold company stock. 4. The transfer to the taxable brokerage must go in actual shares. You can't have the stock sold and turned to cash (and subsequently repurchased). Conclusion Net Unrealized Appreciation (NUA) is a valuable strategy for individuals who hold employer stock within their 401(k) plans. According to an article published by Fidelity in February of 2023, nearly 2 million of their customers hold stock in 401(k) or other workplace retirement plans. By understanding the potential tax advantages, diversification benefits, and estate planning possibilities that NUA offers, you can make an informed decision when rolling over your retirement savings. However, NUA is a complex strategy with tax implications, so it's crucial to consult with a financial advisor or tax professional before implementing it to ensure it aligns with your overall financial plan.

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

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

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

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

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