Moneta Partner Peter Racen launches the UMSL Accelerate Entrepreneur of the Year Awards to celebrate entrepreneurship

Moneta Partner Peter Racen recently celebrated entrepreneurship and recognized the contributions of five outstanding individuals in the St. Louis area. The UMSL Accelerate Entrepreneur of the Year Award was established by Racen and his wife Linda to spotlight the impact of University of Missouri – St. Louis (UMSL) and UMSL Accelerate to transform lives through education and an emphasis on entrepreneurship. In addition, the award encourages UMSL alumni to join in developing opportunities to create businesses and jobs in underserved areas of the greater St. Louis community.

On October 20, 2022, five awardees were commended for outstanding entrepreneurial achievement, including impacting thousands of lives through the creation of jobs and opportunities for individuals to fulfill their dreams.

• Lifetime Achievement award: the late George Paz, chairman and former CEO of Express Scripts
• Entrepreneur of the Year award: Akeem Shannon, founder and CEO of Flipstik
• Social Entrepreneur of the Year award: Maxine Clark, founder and former CEO of Build-A-Bear Workshop
• Entrepreneur Advocate: Marc Bowers, executive director of St. Louis Makes
• Student Entrepreneur of the Year award: Celsi Lyons, owner of Celsi’s Dog Care and UMSL student

“I firmly believe that entrepreneurship can transform communities by lifting people out of hopelessness and allowing them to use their God-given gifts and talents to serve their communities and support their families,“ Racen said. “Being surrounded by these five award-winners was truly humbling.”

Racen credits the book Practicing the King’s Economy as the catalyst for founding this award and providing a vision for what is possible when established businesses direct a portion of their profits toward job creation in underserved communities. Harnessing the power of each persons’ talents to collectively nurture and accelerate the creation of business is the overarching goal.

“UMSL transformed my life by providing a world-class education at an affordable price. I grew up in an entrepreneurial family. My grandfather, who immigrated from Russia, started our family business in 1946. UMSL equipped me to run that successful family business for 20 years, employ 120 people, sell it to a publicly traded company 24 years ago, and then start a wealth management business focused on helping other business owners with the issues we faced,” explained Racen. “I continue that mission now as a partner of the Gast Freeman Troyer Racen team at Moneta, which was ranked No. 11 among the nation’s Top 100 RIA firms by Barron’s in 2022. I am deeply grateful for the impact UMSL has had in my life as well as that of other entrepreneurs.”

The Entrepreneur of the Year committee responsible for shaping the vision for the UMSL Award includes:

• Laura Burkemper
• Michael Butler
• Susan Elliott
• Sharon Fenoglio
• Michael Kehoe
• Dan Lauer
• Chelsea Nollau
• Jim Schallom

To learn more about becoming involved in the UMSL Accelerate Entrepreneurial ecosystem, please contact Peter Racen at pracen@monetagroup.com or Dan Lauer, UMSL Accelerate, at lauerd@umsl.edu.

© 2022 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified.

Trademarks and copyrights of materials referenced herein are the property of their respective owners. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise. Rankings and/or recognition by unaffiliated rating services and/or publications are not indicative of performance and should not be construed as a guarantee of future investment success, nor should they be construed as a current or past endorsement of Company by any of its clients.

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Not Exactly the Same Song Sheet

Aoifinn Devitt – Chief Investment Officer

As we write today, more earnings numbers are rolling in and, as so often this year, the word on the street from “Main Street” is somewhat incoherent.  While some consumer staples stocks started to focus on lower-priced products (e.g. Coke), others saw supply chains loosen and robust demand (e.g. GM customer demand for pick-ups).  In broad terms, companies continue to beat estimates, but fewer companies are doing so, and those that do are on average doing it by less – but this only indicates that the telegraphing of what is to come, and the managing of expectations is getting better.  As we noted last week, the markets have clearly reached their fill of “surprises” and when it comes to company earnings – there would appear to be no excuse to have them.

Home prices are slowing, according to the Case-Schiller National Home Price Index which fell 1.1% in August after a decline of 0.3% in July, suggesting a direct flow through of the Fed’s tightening agenda.  This has, in turn, led to a fall in the 10-year yield (to 4.08% from 4.23%), but notably, not the 2-year, which still sits at around 4.4% as we write, showing a sharply inverted shape.

Inverted yield curves traditionally point to a slow-down in the economy, but this time, when viewed against a backdrop of inflation expectations, the position is a bit more complex.  It is clear that investors expect inflation to stay high in the short term (say, 2-year, timeframe), but to moderate after that.  It is natural to demand more for shorter-term paper over this timeframe, when inflation is as good as baked in at current levels, while in the longer term, it is generally expected to fall.  So, is it necessarily a recession that this inverted yield curve is predicting – or a reversion to the mean in terms of inflation?  The reason I ask?  Wouldn’t current conditions suggest the recession is already here?

As the chart below shows, though, markets have been somewhat more positive in the last week, reflecting the lower bond yields, which tend to favor indices such as the Nasdaq, and the more positive corporate earnings trend.

Source: Morningstar as of 10/25/2022

On the global stage, a new Prime Minister, Rishi Sunak, did not sugarcoat the “profound economic crisis” facing the country, while in Italy, new Prime Minister Georgia Meloni rejected “fascism” as she took office, but continued to face scrutiny for her hard-line cultural views. Across the globe in China, we saw the confirmation of Xi Jinping for an unprecedented third term and the likelihood that he will use this to tighten his grip on policy The response to the first two developments was relatively positive – the bond yields on both UK and Italian government debt closed a little tighter but investors “voted with their feet” on China, leading to dramatic sell-offs both in Hong Kong and in US-listed ADRs of Chinese companies, as well as marked asset outflows from Emerging Market Funds, and those dedicated to China-only equities.

 

© 2022 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified.

Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. An index is an unmanaged portfolio of specified securities and does not reflect any initial or ongoing expenses nor can it be invested in directly. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Not Exactly the Same Song Sheet appeared first on Moneta Group.

source https://monetagroup.com/blog/not-exactly-the-same-song-sheet/

Tackling Life in Stages: Financial Hygiene as Your Career Concludes

Kevin Ward – Advisor

Life is full of unknowns—simultaneously a source of tremendous potential joy and anxiety. But with thoughtful planning, you can mitigate some of the unknowns—or at least better position yourself to handle surprises when they arise. In this series, we explore some planning you can undertake, depending on your phase of life. People admittedly do things in their own order—everyone’s on their own journey—so rather than group considerations into age brackets, we’ve grouped it relative to where you are with respect to your (or your significant other’s) career. If you happen to tackle life in a different order, first, good for you. And second, these pieces should nevertheless offer some ideas for you to explore more either on your own or alongside a seasoned financial advisor, so you can still position yourself well to handle whatever the future throws your direction. Among the considerations we consistently explore are those related to benefits management, insurance, your balance sheet (managing liabilities, or debt, and assets), and saving for major life events or purchases.

As your career winds down, you should ideally have your retirement planning and preparation well in hand. If you don’t, the worst course of action would be panicking—rather, seek the advice of an experienced financial advisor who can help objectively evaluate your situation and develop a plan to ensure you’re able to maximize your post-career time and options.

Depending on your age and that of your family, you may have children in college during these years—which could mean your expenses have temporarily increased (possibly meaningfully). If you could save adequately when you were younger, these added expenses may not significantly impact your monthly cash flow. In which case, your disposable income could increase during this period as you have fewer mouths to feed, and you begin to shift from a full-time family to, eventually, empty nesters. As was the case earlier in life, when you first got a job and began accruing disposable income, it can be tempting to spend on splurge items—a sports car, a vacation home, etc.

But it would be wise not to take your eye off the ball just yet—deferring some of those purchases to retirement in favor of maximizing your savings could pay dividends down the road. This is particularly true of your retirement accounts, especially if your employer matches or partially matches your contributions. Capitalizing on the last few years’ maximized contributions could help ensure you reach your goals for retirement and don’t feel financially squeezed down the road.

As in other phases of life and career, periodic reviews of your situation—your benefits, insurance, debt, estate, trust, powers of attorney, etc.—are always well-advised, and this phase is no different. Furthermore, as you get older, make sure to let the relevant parties—heirs, successor trustees, executors, etc.—know where your important documents are kept. You should develop a plan in conjunction with the appropriate professionals (such as your estate planning attorney, financial advisor, etc.) on how the proper parties will be able to access any important documents. This will ensure your plans and preferences are easily accessible when they’re needed. It might also be worth considering what your retired life will look like—especially with an eye to ensuring your plans are sensible and achievable. Though it may be late in the game to make significant adjustments, it’s better to know where potential blind spots are than not.

Relatedly, it may be advantageous to begin researching some of the choices and decisions retirement will bring your way—e.g., insurance and health care considerations, income sources and paycheck replacement options, where you would like to live, how you would like to spend your time, and others. We explore these topics in more depth in several companion pieces. Given all your planning throughout your adult life to get to your current stage, this is the last moment to abandon your plans or fail to look forward to the next stage.

Planning for all of life’s variables is impossible—particularly in an age where many are fortunate to have more resources (and, therefore, more options) than prior generations. But that hardly means that lack of planning is a viable strategy for achieving long-term success. Rather, as we have sought to emphasize throughout this series, planning and forethought are critical to building a life as free of financial stress or worry as possible. Further, with relatively little effort, it’s often possible to build a sufficient cushion that you’re not only able to care for your immediate family along its unknowable journey, but you’re also able to help friends and family should the need arise. You also may be able to support causes meaningful to you and your family. Financial flexibility is one of life’s greatest freedoms—the sooner you start planning, the likelier you are to experience it to the fullest.

 

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

 

The post Tackling Life in Stages: Financial Hygiene as Your Career Concludes appeared first on Moneta Group.

source https://monetagroup.com/blog/tackling-life-in-stages-financial-hygiene-as-your-career-concludes/

Ask the CFP: What Should I Teach My Teenagers About Money?

 

Hello everyone and welcome to this month’s Ask the CFP segment. This month’s question is, “what should I teach my teenagers about money?” There are a few skills in life that can payoff greatly for children as they become adults. For example, strong communication skills or problem solving. Another skill that just about everyone needs regardless of their profession is discipline with money. It’s important to teach children about money at any age, but let’s cover a few tips for teenagers.

First, determine what’s important to you and your family. Maybe it’s philanthropy and giving to others. Maybe it’s living within your means. Maybe it’s working hard to afford anything you want in life. Once you know the specific habits you want your kids learn, show them by example. As the great American inventor, Charles F. Kettering, once said, “Every father should remember that one day his son will follow his example, rather than his advice.”

Second, help them understand the adult world of banking, budgeting and credit. Set up a custodial bank account in their name where they’ll save their allowance, birthday money or other savings. If they earn a little interest on their bank deposit, teach them about the powers of compounding. Secure a debit card for this account and help them understand how to use it responsibly, including monitoring their spending against a budget. While they won’t be building credit yet, teach them what it means and how their good decisions or poor decisions will be recorded by credit bureaus.

Third, set savings goals for your teen. Maybe they want the newest smartphone since their friends all have one. You might help them learn about delayed gratification and the difference between a want and a need. Set a savings goal where they pay for it on their own or for a part of it. Once your teen is out on her own, you’ll want her to have this discipline to save up for purchases instead of buying now and paying later. We live in a world where credit cards don’t have to be swiped anymore. Borrowing for purchases is as easy as pressing one button on our smartphones now and it will continue to become easier to use credit. Teach your teen how to use spend responsibly.

Lastly, if college is a goal for your teen, come up with a plan together. Maybe they have an idea of what they want to do for a living. Research the typical salary for that profession and show them how much it would cost to earn the appropriate degree. Then show them the different costs of colleges in-state and out-of-state. When the numbers are put down on paper, it’s easy to see college is an investment and something to be taken seriously. Tie in a lesson on scholarships and good grades here while you’re at it.

Overall, show your teen what it’s like being in the adult world when it comes to money and live by example with financial habits that are important to your family. It may not seem like they care, but these are examples they’ll carry with them the rest of their lives. If you have a question about this topic or have a question for next month’s video, please send it to mpeek@monetagroup.com. Thanks for watching and we’ll see you next month.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. You cannot invest directly in an index. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

 

The post Ask the CFP: What Should I Teach My Teenagers About Money? appeared first on Moneta Group.

source https://monetagroup.com/blog/ask-the-cfp-what-should-i-teach-my-teenagers-about-money/

Why, When it Comes to Volatility, Enough is Enough

Aoifinn Devitt – Chief Investment Officer

As Mid-term election debates are dissected and chatter intensifies, now at T- 21 to Election Day as we go to print, the results still evince some uncertainty. This, together with a growing drumbeat of negative outlooks and expectations management from companies and corporate leadership, is continuing to cast a pall over markets.

Volatility has been the name of the game, and sharp market action kicked off last Thursday with the S&P 500 falling by as much as 2.4% following the publication of the US inflation numbers.  This was the lowest level since November 2020, and then stocks reversed course to end up 2.6% for the day. Bonds were similarly active, with the yield of the US 10-year Treasury bond climbing past 4% for the first time since October 2008.

While the September CPI data at 8.2% year on year was down slightly from the 8.3% number, the focus on the relentlessly strong core number as well as the increase in the price of services led to increased market jitters.  While no respite from inflation seems at hand, the US Fed is likely to remain committed to its well-telegraphed path of raising interest rates to attempt to keep it in check.

We are only in the early innings of Earnings Season for Q3 at this stage, and in keeping with the “bad news is good news and good news is bad news” anomaly that seems to plague markets at present, certain bank stocks jumped notwithstanding a drop in revenues and earnings.  In one case, it was a plan to “reshuffle” certain units to ensure more stability in the future that appeased markets and encouraged them to rally around the plan.  Returning to the former point about volatility, it is clear that the turbulent year that 2022 has been has proven almost indigestible, and investors are keenly interested in a smoother ride going forward.

This resistance to volatility squares with the enduring appeal of private assets today – with their longer time horizon, longer liquidity profiles, and exception from mark-to-market policies, interest in private assets has generally stayed resilient amid the market movements year to date.  Of course, these assets do not exist in isolation, and valuations in this area are intrinsically linked to public market valuations.  For this reason, there is some trepidation about a “reckoning” to come in terms of mark-downs, and some of the most high profile institutional investors who often invest significant amount of their portfolios in private assets have warned about “meaningful adjustments”^[1] to the carrying value of some of their holdings, particularly their venture capital holdings. We will be watching this space closely for evidence of corporate frailty and potential default risk.

Wrangling between the Biden Administration and OPEC looked to jeopardize recently lower gas prices, while on the geopolitical stage, a confirmation of an unprecedented third term for Xi Jinping in China indicated prolonged entrenchment of the focus on Zero Covid policy and territorial claims.  In the UK, the administration executed an embarrassing U-turn in terms of its tax cuts and energy price subsidies in response to market gyrations. When we add to this the churning of Russian and Ukrainian hostilities, as well, we can see that it is no wonder that investors are naturally turning inwards, seeking to block out the unknown and the radical when it comes to political uncertainty and change. Maybe in geo-politics, as in investing, they have seen enough.  And, as we face the beginning of winter, it would seem that enough is enough.

Source: Morningstar as of 10/18/2022

 

^[1] See FT Article https://www.ft.com/content/e00fd280-3863-4a12-8dc5-017058590ebe

 

© 2022 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified.

Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. An index is an unmanaged portfolio of specified securities and does not reflect any initial or ongoing expenses nor can it be invested in directly. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Why, When it Comes to Volatility, Enough is Enough appeared first on Moneta Group.

source https://monetagroup.com/blog/why-when-it-comes-to-volatility-enough-is-enough/

Tackling Life in Stages: Financial Hygiene as Your Career Matures

Kevin Ward – Advisor

Life is full of unknowns—simultaneously a source of tremendous potential joy and anxiety. But with thoughtful planning, you can mitigate some of the unknowns—or at least better position yourself to handle surprises when they arise. In this series, we explore some planning you can undertake, depending on your phase of life. People admittedly do things in their own order—everyone’s on their own journey—so rather than group considerations into age brackets, we’ve grouped it relative to where you are with respect to your (or your significant other’s) career. If you happen to tackle life in a different order, first, good for you. And second, these pieces should nevertheless offer some ideas for you to explore more either on your own or alongside a seasoned financial advisor, so you can still position yourself well to handle whatever the future throws in your direction. Among the considerations we consistently explore are those related to benefits management, insurance, your balance sheet (managing liabilities, or debt, and assets), and saving for major life events or purchases.

In this series’ first two pieces, we’ve explored some of the financial options to consider as you begin and establish your career. As your career matures, your focus will likely shift from making decisions to evaluating your position and tweaking any plans to account for life’s inevitable twists and turns. For example, as your career matures, perhaps you receive new opportunities and consequently change companies—maybe even move to a new city or state to pursue those opportunities. Or maybe the causality runs in the reverse—you and your family want to relocate and consequently, you pursue new career opportunities in a new location. Or maybe you’ve climbed the corporate ladder and are on the cusp of making partner or taking a significant leadership position in your current organization. Perhaps you decide to leap from employment into the entrepreneurial realm, start your own business or work as a consultant.

Many such changes will likely entail higher compensation—with the possible exception of starting your own venture, presumably requiring capital and taking some time before it becomes fully profitable. As your income increases, so, too, could the sophistication and complexity of your investing strategy. Diversification is key to long-term investing success—not only because it can help dampen volatility over shorter time horizons, but also because it can help deliver higher long-term returns as some of your investments zig while others zag. A financial advisor can help you determine whether it might be worth broadening your portfolio to include alternative investments like private equity, private debt, real estate, commodities, or other possibilities.

Naturally, it’s important to balance potential risk with potential reward. If you reach this stage of your career later in life—and consequently, closer to your ideal retirement age—it will be important to evaluate your time horizon and ensure that if you add more volatile investment vehicles to your portfolio, you appropriately balance that exposure sufficiently with an appropriate level of exposure to less volatile investments. For example, perhaps you increase your fixed income or bond exposure during this period. Individual considerations are key and enlisting the advice of an experienced financial advisor can ensure you include the relevant factors.

As always, it’s worth reviewing the status of your employment benefits, insurance status, and estate during this phase of your career and life. Though a relatively simple estate may have sufficed earlier in your career when the value of your assets was lower, as your career progresses and your assets grow, it may be worth considering establishing a trust, which can help preserve your assets’ value and clearly delineate how those assets should be distributed among your heirs or charitable causes. Trusts come in many shapes and sizes and varying degrees of complexity—but among the important benefits are potential tax advantages, depending on how you choose to structure it. Speaking with an experienced estate attorney—or even starting with your financial advisor and going from there—can help you ascertain whether a trust might benefit your situation.

Similarly, there are a few ways to think about life insurance during this life phase, depending on your financial and personal situation. If you still have a relatively significant amount of debt—e.g., a mortgage or student loan debt—a life insurance policy could help pay off some or even all of your remaining debts after your passing, helping to potentially mitigate the risk of your family inheriting those burdens. If you have children—particularly young children—a life insurance policy could help ensure your surviving spouse and children are well provided for. A life insurance policy can also cover death-related expenses, such as funeral expenses. Though you may have some insurance through your employer, it’s worth considering whether you have enough insurance given your personal circumstances—particularly as insurance policies typically cost more as you get older, so it’s advisable to investigate earlier in your life rather than later. As we mentioned in our piece on life’s prior phase, it’s equally important to keep insurance in the appropriate perspective—which your financial advisor can help you maintain—and avoid over-insuring yourself or considering insurance as an investment replacement.

As we’ve noted, people will take different paths through their careers and personal lives—but one conversation worth having as your career matures and your financial situation solidifies is with your parents (and your in-laws, too, if you have them). A growing consideration for many as life expectancies extend is senior care—which is naturally intimately related to seniors’ health and personal preferences. It may be worth exploring if you and your family haven’t discussed how the prior generation is positioned concerning their finances. It’s also wise to ask where any important documents are kept—trusts, powers of attorney, wills, etc. Such topics can understandably be sensitive and are intensely personal and private—but it is far better to have a sense of whether aging parents are likely to require financial support in their advanced years sooner than later.

The goal of financial planning is ensuring you and your family are—to the extent possible—well-positioned to not only weather, but thrive, in a world of near-endless possibilities. Though undoubtedly a challenging exercise, it’s one eminently worthwhile—and definitely one better started sooner than later, when you still have time to adjust as necessary.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Tackling Life in Stages: Financial Hygiene as Your Career Matures appeared first on Moneta Group.

source https://monetagroup.com/blog/tackling-life-in-stages-financial-hygiene-as-your-career-matures/

5 Things to Consider With Lump-Sum Pension ffers

The US Federal Reserve Bank came into existence in December of 1913 after Congress passed the Federal Reserve Act. The Federal Reserve had three primary objectives at the time – maximize employment, stabilize prices, and moderate long-term interest rates. While these objectives have changed over time, one of the primary roles of today’s Fed Bank remains to regulate interest rates. This activity by the Fed Bank is often watched closely by financial institutions and foreign governments, but the average person likely paid little attention to these changes in recent decades. Since 2008, following the Great Recession, market interest rates have remained historically low. The target level for the Federal Funds Rate was 3.5% at the start of 2008, and was lowered throughout the year to a target range of 0% to 0.25%. It remained at this unusually low level for seven years, increasing slightly to 0.25%-0.5% at the end of 2015. Rates continued to gradually increase until the COVID outbreak of 2020, when the Fed decided to lower rates to near zero again. Today, we find ourselves in an economic environment not seen since 1994, where the Federal Reserve is increasing rates regularly and rapidly. With this much change in such a short period of time, financial institutions and foreign governments aren’t the only ones paying close attention.

The federal funds rate affects various market rates in the US. This includes US treasuries, certificates of deposit at your local bank, credit card rates, mortgage rates, and even premiums your insurance carrier may charge. If you have a pension through your employer, you may also know that interest rates can influence that. While many people don’t directly see the effects of interest rates on their pensions, for those with lump-sum rollover offers, the impact can be significant. When interest rates are historically low, the actuaries that calculate the value of pension benefits normally assume it will take more money to provide lifetime pension payments for a given person. Imagine if you had to purchase bonds to provide enough monthly income for your retirement needs. Generating a $1,000 monthly income from a bond rate of 1% requires $1,200,000, but generating that same $1,000 monthly payment at a bond rate of 4% requires only $300,000. While actuarial science and pension plan investment practices are more sophisticated than that example, it’s easy to see an inverse relationship between the assumed cash value of a pension and the market rate of interest.

If your employer has offered you a lump-sum pension payout, it may be enticing to consider that option before their actuarial assumptions are updated with higher market rates. Hypothetically, a lump-sum payout would become smaller over time as market rates increase. However, taking the payout may or may not be your best choice. If a lump-sum does turn out to be a wise choice for your situation, doing so before interest rate assumptions change could mean a significant difference in your payout amount.

Below are five things to consider if you’ve been given a lump-sum pension payout offer:

1. Funding – The ability for a pension to make payments to retirees for the rest of their lives (and possibly the rest of their spouses’ lives) is often only as good as the financial health of the pension’s assets. Pension plans regularly publish their funding levels to participants, which shows how well funded the pension is relative to what’s owed to participants. A pension with a funding level of 90% generally means it has 90% of the assets needed to meet its liabilities to participants. Pension plans often invest their assets in bonds, equities, real estate, hedge strategies, private equity, and other investments to keep up with inflation and grow over time. The performance of these investments over time, plus the amount of money put into the pension from the sponsor (employer), will generally determine the financial health of the pension. Some pensions are well-funded while others are behind the curve. If you feel confident in your pension being around for the next 20-40 years or more, leaving it alone and foregoing the lump-sum offer may make sense. However, if you’re concerned about your pension’s funding long-term, a lump-sum rollover may give you control of the dollars instead. Keep in mind, the Pension Benefit Guarantee Corporation (PBGC) is a government agency that may step in to help when a pension is failing. PBGC benefits may or may not be the same amount as promised from the original pension.

 

2. Control – When it comes to investing your lump-sum dollars, you’re accepting the risk of how the investments perform. For some, that sounds terrible. For others, that sounds wonderful. If you have years of experience working with a fiduciary advisor or managing a portfolio of your own, you may welcome the opportunity to gain control of your pension dollars to manage as you see fit. Also, if you want your children to inherit these dollars one day, you may prefer the lump-sum. With traditional pensions, you and possibly a spouse may receive monthly income from the pensions for the rest of your lives. However, if you pass away prematurely before enjoying much of these pension dollars, the pension plan generally keeps what is left of your benefit. With a lump-sum rollover to an IRA, you can pick both primary and contingent beneficiaries to inherit these dollars after you pass away. This offers more control for those who wish to leave an inheritance for family members or charities. Lastly, the lump-sum rollover may give you the option of liquidity in retirement. If you need a new car or a new roof, you can’t request “extra income” from a traditional pension plan. However, if those dollars are in an IRA, they can be withdrawn how and when you need them, including a monthly amount or smaller lump-sums as needed.

 

3. Longevity – Do your family members tend to live well into their 90s? If so, assuming your pension is well-funded into the future, you may be better off with a monthly income stream than a lump-sum. As you enter your 80s and 90s, you may not wish to have much exposure to the same types of investments you had in your 50s and 60s. A monthly income stream may offer the security you need, especially if you haven’t saved well for retirement. However, if your longevity is questionable for health or family history reasons, having the cash may be the better option. If you like the idea of a lump-sum, but don’t like the idea of managing the dollars yourself, some people elect to use annuities with part or all of their lump-sum assets. Please note, some annuities pay a handsome commission to the advisor or agent selling them, while some annuities are low-cost and fee-based. How can you tell the difference? Ask and get it in writing! When it comes to low-cost annuities that don’t have a front-end load (commission), some offer guaranteed monthly income similar to the guarantees a pension may offer. Many of these annuities allow you to choose how to invest the money and also allow you to designate a beneficiary to inherit the assets after you’ve passed away. The downside is the cost. Annuities are provided by insurance companies. An annuity is essentially insurance protection wrapped around an investment account. The additional cost allows the insurance company to take on the risk of paying you income the rest of your life. Annuities are highly complex, so be sure to read the materials well if you decide to use one.

 

4. Fiduciary recommendation – If you’re working with a financial professional, it’s important to understand that person’s motivations if they make a recommendation regarding your pension. Most financial professionals are compensated one of three ways: percentage-based management fees, flat or hourly fees, or commissions. Some professionals are compensated in multiple ways, such as a fee for one service and a commission for another. Advisors that work for broker dealers, or those with a Series 7 or Series 6 license, can often  accept commissions on the products they recommend. This includes commissions from variable annuities. When an advisor is recommending that you roll your pension lump-sum into an IRA with them and they’ll receive a large commission upfront, it’s natural to wonder if any bias is at play. So, how do you know if an advisor can accept commissions? Look them up on this free regulatory website – https://adviserinfo.sec.gov/. If their profile shows they are an active “broker,” then likely, they can  accept commissions. If you prefer to have recommendations from a fee-only fiduciary (a professional that cannot accept commissions of any kind on the investments they recommend), you’ll want to look for an advisor that is not a broker. If an advisor’s profile on the SEC website says “investment advisor,” they generally accept advisory fees for their services and act as a fiduciary. Keep in mind, some advisors are both brokers and investment advisors. If you want a fee-only fiduciary, pay close attention to this website. A fiduciary must make recommendations that are in their clients’ best interests, which may or may not be to roll a pension into an IRA.

 

5. Tax planning – Pensions generally allow a participant to collect monthly benefits as early as age 55 without incurring an early withdrawal penalty. If you retire between age 55 and 59.5 and don’t have any other source of income to meet your needs, rolling a pension into an IRA would generally require you to wait until age 59.5 before being able to take distributions without a 10% penalty. Some exceptions can apply, such as disability or 72(t) distributions. Keep this age 55 rule in mind if you have limited outside assets and don’t plan to work until age 59.5. However, if you don’t need the money thanks to continued work or other assets, rolling a pension into an IRA would allow you to defer taxes until age 72. If you don’t take any distributions whatsoever until age 72, you may enjoy tax-deferred growth on these dollars. Once you reach age 72, annual required minimum distributions (RMDs) apply. This IRS rule is meant to begin paying Uncle Sam tax revenue on some of these pre-tax assets. However, this also opens an opportunity for a new tax strategy – the Qualified Charitable Distribution (QCD). If you’re charitably inclined, instead of gifting cash to your church or favorite 501(c)(3) charity, you can gift part of your RMD to charity. If done properly, neither you nor the charity would owe taxes on these dollars. If you plan on giving to charity, the QCD may be a great tax-advantaged strategy to help both you and the charity. The maximum QCD amount is $100,000 per year and you can technically use this strategy starting at age 70.5. Rolling your pension into an IRA may give you additional tax flexibility and planning opportunities.

As a bonus topic, if you decide to roll your pension into an IRA, remember that stocks and bonds aren’t the only types of investments you may have at your discretion. While not for everyone, you may also be able to use private investments that aren’t traded on a stock exchange. This means these investments may not be as liquid, but they also may not have the daily volatility inherent of the stock market. This may include private real estate, private debt, private equity, and more. A diversified portfolio may encompass an “all of the above” approach to asset allocation that includes both public investments and private investments.

If you would like advice from a fee-only fiduciary, complete the “contact us” section below. A member of our team will reach out to learn more about your goals and what may be best for your unique situation. Moneta is an independent, 100% partner-owned, fee-only RIA serving clients nationwide.

 

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