Rid yourself of some or all taxes

Most of our clients and followers already know about certain retirement hacks you should be thinking about in markets like we're facing right now. Even though most of us remember them when we're reminded, it's a topic worth revisiting. You know there are choices in most of your retirement plans at work. You choose to have money held out of your paycheck to invest in the income your future self will use in retirement. We call those retirement plans and they come in all sorts of flavors; 401(k), 403(b), 457, and so on and so forth.

We handle tons of small to mid-sized companies' retirement plans and work with the business owners and sponsors to draft the plan design. There are tons of choices they make for their staff long before any notices go out and the plan goes live. We put a ton of effort into plan design to meet the needs of the employees and customize the chassis. With that being said, our focus is on the pre and post-tax options. Roth options are not right for every single person. You'll want to discuss things with your CPA or accountant to make sure you're making the right choice for your circumstance.

We often get asked how much a person should be saving. Is it a fixed dollar amount, a percentage, and what are 401(k) plans paying these days? First, the amount of savings varies quite a bit depending on your lifestyle, time horizon until retirement, and how much income you'll need when you decide to call it quits. Percentages tend to work out best as they'll adjust based on your earned income versus a flat and stagnant amount that requires you to make changes manually. Above and beyond is to ensure that you're revisiting your deferral percentage each and every year. If you're able to afford it, increase your savings by at least one percent until you max out.

Once you set up your deferrals, you're going to look at savings to defer taxes or square up right now. Making pre-tax elections allows the participant to defer taxes and save towards their retirement goals. That can be a great option for high-income earners who are looking for the reduced tax liability. It's a good choice with an immediate incentive so it has some level of reward you don't have to wait years to realize.

Choosing to pay the taxes now and draw income-tax-free, later on, can be an enticing consideration. You may have to do a bit of guessing when it comes to the impact of the tax benefits. Ask yourself if you see yourself in a tax bracket that's higher or lower in retirement. It's not often that brackets go lower, but it's not that simple. You have to consider how old you'll be when you retire and what your income sources look like. Things like social security, pensions (if you're lucky), non-retirement investments, real estate, or business income.

Our blog title implies that you have more than just pre-tax and post-tax options and that's true. We get this question every now and again, but you are able to choose both if your plan allows. Most of the plans we work with have a Roth component to them and if it's a plan design we're helping clients with, it will allow the participants to make this choice. You could make the choice to save part pre-tax and some post-tax. This choice will give you an immediate benefit with the reduced tax liability today and tax-free distributions when you take money out.

Where does that leave plan participants with respect to their company match or profit-sharing? That's a great question and it often leaves employees confused. Your savings option has no bearing on the company match or profit share. That's right, those employer contributions are always made on a pre-tax basis. It's nothing you can change, but it's good to know because you may think your election to contribute 100% in a Roth 401(k) will leave you a nest egg that's completely income tax-free. That's not the case. Your company's contributions will get taxed down the road. If you're one of the lucky employees that have a company willing and able to help contribute to your retirement plan, embrace it. Be sure you contribute enough to max out the company matching incentive and give yourself that well-deserved raise you've worked hard for.

And that's only the beginning...Reach out and schedule a consultation to discuss your situation. We'll walk you through your options and help you make the right choice for your goals. Click below to take a listen to the latest PennyWise Financial Podcast and hear more commentary on the stuff you need to know, and much more.

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Near-Term response may be just the beginning

Just a couple days ago the Russian armed forces moved in and attacked numerous targets throughout Ukraine and Putin made a vow to make massive changes to their government. Change that could go as far as replacing it all together. We have been keeping our ears to the ground for the past several months and sharing our opinions via our blogs and Podcasts so the actual event itself although unpleasant, is not as shocking to the markets, our clients and followers. Believe it or not the past couple of days have ended on a high note despite what you may think when the announcement of a major conflict fills the media. The market and the public have been well informed of the looming turmoil and the animosity leading up to these events. It would seem after two trading sessions from the initial attack, that the market is beginning to shrug off some of the building volatility as the build up to the event itself has caused quite a bit of challenges in the market.

Something to remember about how the stock market tends to react to geopolitical shocks. On average the drawdown is about 5% and the rebound itself is a short couple of months. Is this considered an "average" shock, or is this more? Could this be considered a much larger conflict which leads to a deeper and longer lasting impact? We feel that although possible, it won't come to this. That does not mean that we think market volatility is over and losses will be kept to a minimum moving forward. The tweaks we've made over the past 4 months have positioned portfolios to improve given the current landscape, but containment will be important if we want to avoid a long-lasting shakeup to broader markets. The stats below can give us a glimpse of what happened in other times of major events. Although every event is very different and we don't know how the Ukraine invasion might develop, it does give some perspective and hope that things can recover if contained.

The areas of the market where we continue to see risk is the high multiple, high price to earnings type of stocks. Those can include companies that have strong potential to become some of the largest companies with disruptive technologies. The problem continues to be rising rates and inflation and that means those earnings down the road are worth less today than they were a year ago. Sectors that fall into this category are expensive technology, biotech, and large, small and mid-cap growth. We have mentioned this time and time again on the Podcast as well as Blog posts over the past several months. These are areas of the market we feel are out of favor for the time being and will have their time to shine again, but for the near-term we have been trimming, reducing or eliminating exposure to these areas. That's not to say there aren't exceptions to the rule, but broad exposure to these has proven to be a bad place to hang out. The chart below gives some examples of ETF's that represent our rationale and reasoning to reduce positions. Performance is a year to date snapshot of how things have played out.

Market opportunities will present themselves throughout the year and we lean towards more of an active than passive management style. We continue to be focused on more of the longer term performance of portfolios and year end returns versus the weekly or monthly. Areas of the market where we have seen and continue to see promise is in financials, commodities, value, industrials, real-estate and energy. Equities that live in those spaces include banks, insurance companies, staples, precious metals, and other lower multiple stocks that have been left for dead in the past decade. Boring? Yes, but sometimes boring is okay if it's making money in a challenging environment which is attacking broad markets and portfolios around the world.

With growing panic, apprehension and fear, does that mean we're headed for a bear market? We don't believe so and we look to the VIX index to get a better understanding of how volatility plays out in comparison to returns. The VIX or Volatility Index basically measures the amount and extent of pricing fluctuation on the stock market. The higher the VIX levels, the more rapid and violent prices change. Typically when levels are extremely high, it means stocks lose value in the short term. There are some recent levels in change of the VIX that suggest the market will shift before year end. Time will tell and the market impact remains to be seen. If the Ukrainian invasion grows to last longer and become more involved with other countries; our outlook could change quite rapidly. For the time being we remain positive on the outlook of the markets over an extended time frame and believe the best place to be is stocks as a way to hedge against rising costs and inflation.

And that's only the beginning...Reach out and schedule a consultation to discuss your situation. We'll walk you through your options and help you make the right choice for your goals. Click below to take a listen to the latest PennyWise Financial Podcast and hear more commentary on Ukraine, Tax items you need to know and much more.

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Pay me now or pay me later

These days just about anything can be done online. Ordering products can be done with a few clicks and it's delivered to your doorstep in a couple of days and sometimes even a couple of hours. Seems easy enough for most purchases, but sometimes the ease and comfort comes at a cost. I can't tell you how many times we've ordered things on Amazon, Ebay or another shopping site, only to find it at our local BJ's or Home Depot a few days later and much cheaper. It was super easier to search for the product we were looking for, pay and have it sent. Nowadays no one wants to leave the house, head to the store, hunt for their item and I can't blame them. A lot of times you can get decent prices and sometimes even cheaper than the item in the store. There's no rhyme or reason to the way things are priced. We've learn to accept that sometimes things are cheaper and sometimes they're more.

So how do people shop for things that are less tangible; like insurance.? There are all types of insurance coverage from healthcare to home owners. Those get a little trickier to price and compare. For starters, any insurance program is going to have a number of caveat's that needs an attorney review to decipher and truly understand. When shopping online, you're at the mercy of doing your own research and hoping things work they way you've come to understand them.

Auto insurance is one of those things that were traditionally bought and sold with a local agent who reviews your needs, affordability and delivers a proposal. That's the old school way of going about it, but this younger generation and even the tech savvy pre-retirees are doing some homework and shopping online. Many have hesitation about doing that and I would agree that a bit of caution is necessary. Comparing price as your only way to determine which coverage is the "best" option, could cost you; a lot! While things are working as planned and no claims are needed, things are great. You're putting some cash in your back pocket and saving for other things. What happens when you do have an incident - does your policy actually cover that event and what is their claims process like? That can be a very big deal and I've had my fair share of dealings with insurance companies for clients, family and for myself and I can tell you it makes the world of difference when you're going through a tough time.

What other options are available for the consumer to get help when shopping for home, auto or any other insurance? Working with a captive agent is one way to go about it. That means working with a licensed agent who is bound by the product set available by their company. It's not always going to be the best coverage or the cheapest, but they bank on the overall client experience as a value add. There's nothing like getting help with a quit phone call or even dropping by a local office to someone face to face. Just think about anytime you've had an issue with Spectrum, Time Warner or any other big outfit that could care less about wait times or actually helping their customers with a problem. It can be brutal.

There's another option that many may not have considered in the past; an insurance broker. How is that any different than an agent? They're not confined to a singular product set or insurer. Some companies provide better coverage, special riders or more competitive rates depending on a persons specific situation. Everyone's needs and wants are different. Things like credit score and other risk factors play a role in the products available as well as the premium they're going to pay.

In my experience the best option is working with a broker you can trust. Not any old broker who's claim to fame is that they're not captive. That only means they have access to a variety of products, but it doesn't necessarily mean you'll get the best response or best policy available. People are motivated by money and they have the ability to steer or direct you to coverage as they deem fit. You hope they are seeing the bigger picture by keeping you as a loyal client who's going to share your experience with friends and family. The longer you remain a client, the more money they make.

How often should you shop for coverage? Typically every two to three years is a good amount of time to go shopping again. That could be a simple call to your broker to make sure you have a competitive premium and the best policies based on your current needs. It's an ongoing process that needs to be reevaluated every so often because you could find gaps in coverage or life changes that need to be addressed. At the end of the day, weighing your options and comfort level will play a role in how and where you shop for coverage. We're all required to carry auto insurance and it's viewed as a necessary evil. The truth is, if you have a major accident, you'll be thanking your lucky stars you have the right coverage and the right team handling your claim. Saving a couple hundred bucks on a bare bones policy you found online might come back to bite you badly when it costs you thousands or more.

And that's only the beginning...Reach out and schedule a consultation to discuss your situation. We'll walk you through your options and help you make the right choice for your goals.

Want to learn more? Follow our latest market commentary, firm updates, or anything financial via our blog or Podcast.

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A battle to the finish

We all carry a smart phone by now - or at least most of us. There are a growing number of retired clients of ours who are new to the smart phone space. For years they fought it and went with a pre-paid, but now they're indulging in the luxuries of having access to a multitude of things at their fingertips.

So, what's the big difference between a website or a fancy new app? They typically offer the same stuff and it can be hard to see the advantages on the surface. Many times the mobile apps don't actually give you as much access or range of functionality. At first, the app sounds like a clunky, water downed version of a fully immersive website with all the bells and whistles you'd expect from that fancy Cadillac. There's more to the debate than meets the eye and those of us who have embraced apps as a way to stay connected and efficient, understand their purpose.

For starters, mobile apps offer much better personalization. This can be done based on interests, location, behavior and even more. The apps allow users to establish preferences when you set things up. A website is static and NOT typically customized for each individual client or consumer.

Then there's notifications and how they're being sent to its users. In the past email was a great way to communicate with users of a site, but some have overused or abused it and its lost some of its effectiveness. Notifications from a mobile app can be tweaked by users to allow for push, in-app or even emails. This gives the user control over how and what they want to get notices for.

Using a mobile web browsers to access a companies website can be a bit challenging even with the largest smart phones. It's a funny thing how trends change over time. In the past phones were on mission to build the smallest phones that could easily fit inside a pocket or jacket. They folded in half, were mainly used for calls then graduated to texting and web browsing. The apps of today provide its users one main thing - access with convenience.

Why blog about an app versus a website and who cares? Although most of our younger clientele have downloaded our app and use it often; many don't even know one exists. It's a fast and easy way to access your accounts with various ways to securely log into your account. Additional features are being added all the time, but the app exists today. We have it available and ready for download now!

Remote deposit, statements, tax forms, biometric log in, performance, announcements and letters are on their way. If you want to know more about our app and begin using it - reach out to your Monarch advisor or schedule a meeting with me to become a new client and explore all the benefits we have to offer.

In terms of a champ - it's not a winner take all but more of a preference. Each has its place in keeping tabs on your investments, performance, statements, communication or anything else financial. More robust options exist on a website, but you always have your phone on you with the ability to quickly take a look at things on the fly. We think both are essential to maintain efficiency and remain active in pursuing your financial goals.

Want to learn more? Follow our latest market commentary, firm updates, or anything financial via our blog or Podcast.

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Navigating the industry, sector, and stocks

It's about time we all treated ourselves to a little getaway, but how do things look in this new world we live in? We'll take a look at different aspects of the travel industry, exam some changes, and explore areas of the market we may see an impact on revenue and perhaps share price over time.

There are a few different elements to pick apart in this sector so I'll divide these into a multi-blog where we cover each segment with detail. When it comes to the backend bookings of hotels, air, bus, car rentals, and vacation rentals, there are several stocks and ETFs that can be used to place wagers on how they'll fare. There's too much to cover on the stock market front in the travel section to be covered in this blog, but it'll be covered in more detail in our podcast and Roch Bottom technical analysis blog.

I think it's important to consider how you book and why you choose one way versus another. What I mean here is, some use an Expedia or TripAdvisor to book, others put together a Frankenstein itinerary and then there are the trusty Travel Agencies. These days it's all about convenience and instant gratification so most people want to be able to book their trip in minutes from their mobile phones. Because last year's pandemic put immense stress on airlines, cruise ships, and just about anything related to travel and tourism, it makes even more sense to use a travel agent to book all your travel. There's nothing wrong with booking things on your own until there is.

Here are a few reasons why I think it's crucial to your vacation and your wallet to book your trips with a partner you can trust:

1. Knowledge - Travel agents do this for a living, book multiple trips a day, and know things about the area you're visiting. Chances are they've been there or had a colleague or client go there in the past so they get it. They're going to give you the details you want to know and be able to answers questions about specifics.

2. Pricing - In most cases a travel agent can get the same or better pricing for your trip. A misconception is they charge hourly fees or planning fees on top of your travel costs - not true. It has never cost me a penny more (although I would gladly pay more) to book any travel. Their compensation is driven by the travel partners like hotels etc. who pay them directly.

3. Bonus Miles - You might even have a booking promo or bonus miles codes that could be applied by your agent. You'll never miss out on those precious airline miles or hotel points!

4. Ease - Call your agent, provide them the details of what you're trying to book, and voila, the research begins. They'll populate y, our frequent flyer numbers, hotel rewards, or any other program you're affiliated with. Any o,f your concerns for price, travel dates or layovers is handled.

5. Hiccups - If you travel a lot you know great things don't always go according to plan. Weather, transportation, and other factors play a role in how your vacation, starts or ends. It's great to have boots on the ground fighting your fight to get the things you paid for. I can tell you from experience, it could cost hours or even days of your vacation, trying to argue and fix problems with tour operators, airline rescheduling, or hotel blunders. Not fun! A travel agent will do, all of this for you so you enjoy your vacation.

Our trusted travel guru has been and continues to be Natalie Fichera from NJF Travel. If you have your travel agent, fantastic, but if not, give Natalie a look and let her know I sent you.

And that's only the beginning...Reach out and schedule a consultation to discuss your situation. We'll walk you through your options and help you make the right choice for your goals.

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Want to learn more? Follow our latest market commentary, firm updates, or anything financial via our blog or Podcast.

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A look around the corner

As the adage of sell in May goes, there is some data that shows the months of August and September could see markets slide a bit. Although history tends to repeat itself, there's isn't compelling evidence that you should liquidate half or all of your investments just before these months.

So what happens in these months? Kids are back to school, summer is over, traveling slows and it's back to business for the adults. This also marks the tail end of the third quarter and the beginning of Q4. Corporate earnings give a clearer picture of how companies and stocks should perform throughout the remainder of the year. So, let's take a look at a chart from LPL research to get a feel for what might be to come.

There's no denying the charts do have good evidence that the upcoming months could take a slight dip; especially in the post-election years. So here's how we are addressing this setup and the potential for a 5 - 10% dip.

• Review of the current holdings

• Take inventory of the market as a whole and momentum

• Factor in any potential tax law changes

• Consider earnings and sector-specific concerns

• Avoid major cash raises

• Adjust and make minor tweaks to ensure positioning

In a similar fashion to the way we stood up to the summer sell-off headline, we believe there is still room for the market gains to continue. There are some areas of the market that remain overvalued and we have been enjoying those gains, but it will be a time to consider taking more profits. Not to get specific on a segment of the market that looks, but don't be surprised to see additional exposure into more value stock exposure. They pay dividends, have less volatility, and are much, much cheaper than some of the red hot growth stocks.

Again, this should come as no surprise to you that we're taking a careful approach to rebalancing or tweaking of our inventory. Attempting to shift and chase areas of the market that have performed well in the past doesn't guarantee that it will continue. We continue to research, listen to earnings calls, review the research reports and make sense of it all. With the data, we integrate into our systems and make decisions that we think will prove beneficial for our clients.

We view this as an opportunity; not pain. It's a time to adjust, make changes and look forward to seeing how those changes play into your portfolio performance. The other part of the chart does show quite a bit of promise as we near the end of the year. Again, one could look at the near-term pessimism and worry about looming fears of the delta variant and an expensive market that may be running out of steam. At this point in time, we don't believe the pessimistic view is the way to position yourself or your portfolio.

And that's only the beginning...Reach out and schedule a consultation to discuss your situation. We'll walk you through your options and help you make the right choice for your goals.

Request a Meeting Here

Want to learn more? Follow our latest market commentary, firm updates, or anything financial via our blog or Podcast.

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