All Posts By

Zach Abraham

Aug 24
0

Retirement Saving at Each Age

By | Financial Planning, Retirement

While it’s true that each person is unique and every financial plan should be customized according to their situation, it is generally accepted that people should start saving for retirement early in their lives so they can take advantage of compounding returns.

Here is some general information and things to consider about saving for retirement for each age group.

Gen Z

Roth IRA accounts. As soon as children or grandchildren have earned income, either you or they can open and contribute to a Roth IRA (Individual Retirement Account) in their name. Roth IRA contributions can’t exceed the child’s earned income and the maximum amount that can be contributed for the year is $6,000 for 2021. The benefit is that Roth accounts grow tax-free as long as all IRS rules are followed. After the account has been open for five years, any amount contributed can be borrowed or taken out for any reason without any taxes or tax penalties due. (But Roth IRA account earnings—meaning returns or interest credited—can’t be taken out before age 59-1/2 without a 10% penalty.) That means your child could have a very flexible way to borrow for college, down payment on a house or any other purpose—including retirement—later on.

Permanent life insurance. Another option to help children, teens and young adults save for retirement is permanent life insurance. New types of life insurance policies can be a tax-advantaged way to save and borrow later from the policy for retirement, college or any other purpose. Often the cost of insurance is very low for healthy young people.

Gen Y

Workplace retirement plans. People in their mid-20s to 40s are often pursuing careers where their employers provide 401(k) or similar retirement plans with a “match” for contributions. One rule of thumb says to max out pre-tax contributions during these years up to the maximum match by your employer; you get the added benefit of lowering your taxable income.

Traditional IRA accounts, Roth IRAs, permanent life insurance, investment portfolios. For those who don’t have a workplace retirement plan, or for those that want to invest beyond their employer’s group retirement offering, traditional pre-tax IRAs are available depending on your income level while providing a tax write-off, while tax-advantaged Roth IRAs and permanent life insurance can offer other benefits. Once you reach the maximums on retirement savings, you may want to begin to invest in stocks and bonds, forming your first investment portfolio. If possible, hire a financial professional to help you create a complete financial plan which can be updated and reviewed every year.

Gen X

Save, invest, and save some more. People in their 40s and early 50s can be sandwiched between providing for their older children’s expensive needs—like transportation, health care and college—while caring for their parents as they get older. Yet it is incredibly important for Gen X to begin to maximize their retirement savings. All of the possibilities discussed for younger ages also apply to Gen X, and after age 50, you can contribute $7,000 per year ($1,000 extra) to an IRA or Roth IRA in 2021, depending on your income and IRS rules. Some permanent life insurance or deferred income annuity products can allow you to save for retirement while providing other optional benefits like disability, long-term care insurance or spousal protection should you need it. Find efficient ways to pay for your kids’ college, and as you make more money, use it for retirement investing while keeping your spending on housing, automobiles and similar items as low as you can. Work closely with your financial professional to make sure you are on track to achieve your retirement goals.

Baby Boomers

How much money will you need to retire? If you are 55 or older, it is probably time to get serious about what you want your retirement lifestyle to be so that you can get some idea of what kind of retirement savings you will need to support yourself after you are no longer receiving a paycheck. For instance, someone who wants to do a lot of international traveling will need a lot more saved than someone who plans to stay close to home during retirement. Retirement planning is essential, since pulling money out of your portfolio is much different than putting money in as you have been used to. Make sure your financial professional is focused on retirement; retirement planning is a distinct specialty.

Claiming Social Security. It’s time to start learning about Social Security. The Social Security Administration recently changed the design of your statement to show you how much your benefit will be at the earliest time you can file (age 62), at full retirement age (around age 66 or 67 depending on your birth year) and at age 70, when your benefit amount stops growing. You can obtain your latest statement here. Important: Remember that Medicare is not free; premiums come out of your Social Security check.

Consider taxation. Remember that if you have the majority of your retirement savings held in taxable accounts like traditional 401(k)s, you will owe income taxes on that money. Depending on your tax bracket, your savings may actually be from 22% to 35% less after you pay income taxes. As an example, someone with $500,000 saved for retirement may actually only have $385,000 if they are in the 23% tax bracket. Current tax law requires you to start withdrawing money and paying income taxes on taxable, tax-deferred retirement accounts every year beginning at age 72. Start working with your financial professional early, because there may be ways to save on taxes for the long-term using strategies over the five to 10 years preceding retirement.

Multigenerational Wealth

As part of retirement planning, it is important that each member of the family works together for tax-efficient wealth transfer in the future, minimizing the chance for strife, confusion or excess taxation during family transitions or adverse events. New legislation—the SECURE Act—changed the rules about inherited traditional IRA accounts, and potential tax impacts should be addressed now rather than later.

The family that plans together, stays happy together, hopefully for the long-term. Whenever possible, everyone should be involved in financial, retirement and estate planning matters working hand-in-hand with a trusted financial professional, tax professional and estate attorney to document inheritance matters, final wishes, health care directives, wills and trusts.

If you have any questions about this article, please call us. We’re happy to help you and your family members. You can reach Bulwark Capital Management at 253.509.0395. 

Jul 23
0

7 Budgeting Tips For July

By | Financial Literacy, Financial Planning
Budgeting can help you achieve your goals faster.

Once you realize that budgeting can help you achieve the goals you’ve set out for yourself, you may find the process inspiring.

  1. Think of your budget as a spending plan

Think of your budget as your “how-to” plan for spending your money rather than what you “can’t” spend. The upside is that by budgeting for short- and long-term expenditures, you can spend money without feeling guilty about it, because you’ve actually planned to spend it!

With a budget, you will simply be allocating all your expenditures with a means to an end, whether it’s getting out of debt, keeping your food bill down, having some fun in life, or saving for retirement. You may even discover that you have more money than you thought. Once you become intentional about what you’re spending, you may realize that your gym membership or all those monthly subscriptions you’re not using won’t be missed and you’ll have more cash free for other purposes, like the occasional Starbucks run or other little treat that makes you happy.

  1. Try using a zero-sum approach

A zero-sum budget means that every penny you have coming in each month gets allocated to a category. The goal is that your monthly income minus your allocations equals zero, so that you’ve put every dollar you have to use.

Start your zero-sum budget by figuring out your monthly net take-home pay or income amount, then allocate all of it to either savings, investments, bills, expenses or debt payoff. This forces you to be accountable for every penny, which puts you in control.

  1. Start with the most important categories first

Start with your true necessities, like mortgage, utilities, food and transportation. Make sure savings is a top priority. Then you can fill in the other categories that are discretionary.

  1. Strive to save 20-30% of your net for short- and long-term goals, and limit housing costs to 30%

So how does this break out? If your net income is $4,000 per month, you should strive to save $800 – $1,200 per month towards short- and long-term goals* and limit your mortgage or rent to $1,200 per month or less.

*Your short-term goals might include a vacation, wedding or down payment for a home. Long-term goals might be accumulating an emergency fund that equals six months’ expenses, getting out of debt, or saving for college or retirement.

  1. Label savings

Rather than have a lump savings account that includes everything you are saving for, try to use separate accounts or find a way to label them using a software program. That way you can see at a glance how close you are getting to each individual goal, like your vacation fund, emergency fund, etc.

Labeled savings accounts can help you keep track of progress toward your goals separately and feel a sense of accomplishment as you achieve each one.

  1. Remember each month’s varying expenses

Your spouse’s birthday, your birthday, holidays, back-to-school, annual car or home maintenance, Christmas each December—don’t forget to include varying annual expenses in each month’s budget. Not having money allocated for special occasions or annual expenses can take the joy out of life, while planning for them can do the opposite.

  1. Create a buffer, and use cash for problem areas

Create a buffer of cash that’s available; think of it as a little temporary augment to your emergency fund until you’ve been budgeting for a year or more. That way if something you forgot comes up, you’ll have the money for it—and you can put it in the regular budget for next time.

If you run into problem areas—for example, maybe you always grab extra unplanned items at the grocery store—consider using cash for problem categories rather than a credit card. Envelopes with cash can hold you more accountable because when the cash runs out, you have to stop spending.

 

If you’d like to discuss this or any other financial matter, please call us. We’re here to help. You can reach Bulwark Capital Management at 253.509.0395. 

Jun 24
0

It’s Annuity Awareness Month. How much do you know about annuities?

By | Financial Literacy, Retirement

Because June is Annuity Awareness Month, here is an overview about them.

Annuity product designs and types continue to evolve, primarily to meet the demands of people nearing retirement. In addition to their original purpose of providing retirement income, insurance companies have developed hybrid policies, adding features to address the multiple risks consumers face as they get older.

The most important thing you should know about annuities is that they are insurance policies, or contracts between you and an insurance company. Guarantees in them are backed by the financial strength and claims-paying ability of the issuing insurance company.

As with any contract, it’s important to read and understand the fine print before you sign, and you should compare policies from multiple insurance companies to find the best value. That’s where a good independent financial advisor can help.

Fixed Annuities

Fixed annuities are probably the easiest type of annuity to understand. (They are also the oldest—a simple form of the fixed annuity was originally created for Roman soldiers who grew too old to serve.) An insurance company will guarantee* a fixed interest rate on your fixed annuity contract for a selected term, usually from one to 15 years. You can usually purchase a fixed annuity with either a lump sum of money or a series of payments over time.

At the end of the contract term, you can take the money out, put it into another investment, or “annuitize,” meaning you can begin to take periodic payments over time to create income for retirement. This is called the “payout phase” of an annuity contract and it may last for a specified number of months, years, or be guaranteed* for as long as you live.

If you do choose to annuitize a fixed annuity policy, you can begin to receive periodic payments at once (called an immediate fixed) or you can wait until a certain age or time in the future to start receiving payments (called a deferred fixed).

If you purchase one of these annuities with non-qualified money (meaning you have already paid taxes on it), the interest in the annuity policy accrues on a tax-deferred basis. At the point where you take the money out of the annuity or begin taking periodic annuity payments, distributions are taxed based on an “exclusion ratio” so that you only pay taxes on the interest or gains.

If you purchase one of these annuities with qualified money, such as by rolling it over from a traditional 401(k) or IRA, distributions are 100% taxable, since you have not paid any taxes on any of the money yet. As with any qualified plan, if you take or withdraw money before age 59-1/2 you may owe additional tax penalties.

Variable Annuities

Variable annuities were developed in the 1950s. The best way to explain variable annuities is to compare them to fixed annuities. First of all, most variable annuities require a prospectus since part of your money will actually be invested in the stock market, called “sub-account investments.” That means that there is market risk involved with variable annuities, because you can either make money on the amount invested in sub-accounts, or you can lose it depending on market performance.

Variable annuities are usually purchased with the expectation that at some point the contract owner will annuitize or begin taking periodic payments. These are called deferred variable annuity contracts. (You can also purchase an immediate variable annuity contract.)

The important thing to understand about the variable annuity contract is that your periodic annuity payments may fluctuate based on stock market performance, depending on policy terms. And it’s possible that some variable annuity policies can lose principal due to stock market losses.

Variable annuities often come with a death benefit for your beneficiaries based on the contract terms, but some specify that there must be enough money left in the policy after annuitization payments have been taken out and/or will pay the death benefit as long as the sub-accounts have not lost too much money.

Fixed Indexed Annuities

Fixed indexed annuities were first designed in 1995. The biggest difference between them and variable annuities is that fixed indexed annuities are not actually invested in the stock market so they are not subject to market risk. With fixed indexed annuities, after you have owned the policy for a specified number of years your principal is guaranteed*.

With fixed indexed annuities, any policy gains are credited and then locked in annually, bi-annually or at specified points in time. The gains credited to the policy are determined by the insurance company based on the performance of a selected index (for instance, the S&P 500) or multiple indexes. Some fixed indexed annuity gains are capped relative to index performance, meaning you can only be credited a certain percentage, but some are uncapped.

Index performance is used as a benchmark for policy gains or periodic crediting and lock-in. With fixed indexed annuities, you have the potential to participate in market gains. And if the benchmark index loses money, your policy is credited with 0%, keeping the most current locked-in principal value in place.

Fixed indexed annuities can be purchased on an immediate or deferred basis. They can be purchased with qualified or non-qualified money. And they can offer a lifetime income option and/or a death benefit.

Other Things to Know About Annuities

*The guarantees provided by annuities rely on the claims-paying ability and financial strength of the issuing insurance company.

Annuities must be considered carefully based on your particular situation because they are not liquid. Almost all annuities are subject to early withdrawal penalties. Make sure you understand the contract terms and the type of annuity you are purchasing. Your financial advisor can help you compare and analyze policies.

This article is provided for information purposes only and is accurate to the best of our knowledge. This article is not to be relied on or considered as investment or tax advice.

Have questions about annuities? Please call us! You can reach Bulwark Capital Management at 253.509.0395. 

 

May 25
0

5 Ways to Give Your Finances a $pring Cleaning

By | Financial Planning

Spring is here! Time to get your finances in shipshape condition. Here are five ideas to get you started.

 

  1. Check your credit reports.

While you’re reviewing your expenses and debts in order to see how you are faring in terms of staying within your personal budget, make sure that there aren’t any expenses or debts on your credit report that aren’t yours.

It’s free to check your credit reports once a year to ensure no one has used your name or identity to make unauthorized purchases. Here is what to do: https://www.consumer.ftc.gov/articles/0155-free-credit-reports

 

  1. Consider banking / credit card changes.

If you find yourself with open accounts at multiple banks, it may be time to consolidate, depending on your total balance/s. (FDIC insures each account up to $250,000.) By consolidating, you may be in a better position to negotiate for lower fees and better interest rates.

You may find that you want to move your banking life online in order to reduce clutter and find a bank paying the highest rates / charging no fees. But be sure to download and back up your statements (and make backups of the backups) since most banks only keep them around for 12-18 months.

While you’re taking stock of your banking situation, take a look at your credit cards and assess whether or not you’re getting the best deals. It’s easy to do a little online investigating about cards have the best cash back benefits. (But make sure you pay off the balances monthly.)

 

  1. Home maintenance to save money in the long run.

Your home is often one of your bigger assets, so consider putting these important home maintenance projects on your financial to-do list:

  • Repair any roof leaks the minute you spot them to help prevent mold, structural damage and loss of personal property. Make sure your gutters and downspouts are clean and debris-free every year.
  • Water on the ground can cause even more expensive problems. Grading and drainage issues need to be dealt with lest they damage your home’s foundation or cause flooding, often not covered by insurance.
  • Deal with plumbing leaks immediately. Inspect and caulk around showers and tubs as well as windows and doors on a regular basis. Caulk is cheap, but water damage is very expensive.
  • Just like you remove lint from your dryer vent with each load of laundry, you should change your HVAC filter monthly to prevent system problems as well as reduce monthly electric bills.
  • Take immediate measures to eliminate pests like termites, roaches, ants or rodents if they take up residence. Waiting can only lead to more damage.

 

  1. Tax changes / tax record storage.

Very importantly this year, get up to speed on the new tax changes and how they might affect you by meeting with your financial advisor and tax specialist. The two disciplines often have different perspectives and you can often benefit by including both of them in your discussions. Make sure you review your retirement tax distribution plan in terms of RMDs (Required Minimum Distributions) which start at age 72, because there may be ways to mitigate income taxes for the long term if you start early.

In terms of tax document storage, Kiplinger recommends keeping your tax returns indefinitely, and supporting documentation for seven years. If you decide to clean out old tax supporting documents, make sure to shred them to reduce the possibility of identity theft.

 

  1. Beneficiary review: Insurance policy / retirement accounts / estate plans.

You may not realize that the beneficiaries you have listed on your insurance policies and retirement accounts take precedence over wills and trusts. It’s really important to keep all of your documents, including your estate documents, up to date at all times. Life changes, and so does your family. You probably don’t want an ex-spouse receiving your 401(k) money if you pass.

If you have a lot of assets and a very large estate, you may want to meet with your financial advisor and estate attorney since the new, higher estate tax exclusion sunsets in 2026 (or may be changed sooner by Congress under the new Biden Administration.)

 

If you want to discuss any of these ideas, or have questions about your financial or retirement plan, please don’t hesitate to contact us. You can reach Bulwark Capital Management at 253.509.0395. 

May 12
7

Zach Abraham Featured on MSN

By | Bonds, In The Headlines, News
Apr 26
0

RMDs Are Back for 2021

By | Retirement, Tax Planning

RMDs, or Required Minimum Distributions, are withdrawals that are required by the IRS each year out of your traditional retirement accounts like 401(k)s and IRAs starting at age 72. The money that you have to take out annually by December 31st at midnight is taxed based on your income tax rate for that tax year.

Some retirees forget about RMDs when planning for retirement, and don’t realize how big the tax bite may be for them. This year, because of the pandemic, the CARES Act suspended the RMD for the 2020 tax year in an effort to help retirees avoid withdrawing money from accounts when the market was down.

(An RMD is calculated based on the closing balance of the account at the end of the previous year. When the markets drop significantly, the RMD represents a much higher percentage of a diminished portfolio and that reduces the ability to recover from big losses.)

In 2021, the RMD will be back. As an example, a 75-year-old man with a traditional IRA worth $100,000 will have to withdraw $4,367 this year.

Roth 401(k) Plans

Roth 401(k) plans, which are funded with after-tax dollars, are subject to the same RMD rules that traditional 401(k) and IRA plans are. The amounts are calculated using the same IRS life expectancy tables and account holders must begin taking them after they turn 72. (One exception is if you continue working after age 72 for the company that sponsors the plan and you don’t own more than 50% of the company.)

The difference is that Roth 401(k) withdrawals are usually not taxed.

You can avoid taking the minimum distributions entirely by rolling a Roth 401(k) into a personal Roth IRA, which is not subject to RMD rules.

2020 RMDs Without Penalty, But With Taxes

As part of the CARES Act, the IRS allowed COVID-related withdrawals from traditional retirement plans up to $100,000 without penalty in 2020 for those who were impacted by the pandemic. Income taxes were due on those withdrawals, which could be paid over a three-year period. Those who can afford to can pay the withdrawals back this year (or over a three-year period) can get the taxes back by filing amended tax returns.

Those Who Just Turned 72—It’s Complicated

The SECURE Act of 2019 raised the age when RMDs must begin to age 72. If you turned 70-1/2 in 2019, the old rules applied—your first RMD should have been due April 1st, 2020. However, because the CARES Act suspended RMDs, the new due date was April 1, 2021 for those individuals.

For retirees who turned 72 in 2020 or will turn 72 this year, you can take your RMD at any point in 2021, or even delay it up until April 1, 2022. But if you choose to delay it, you will owe two RMDs in 2022, which could put you into a higher tax bracket.

You should check with your tax professional before making decisions about RMDs, because there are strict rules about which accounts must be withdrawn from and stiff penalties for mistakes—to the tune of taxes owed plus an additional 50%!

 

To discuss your retirement plan, including RMDs, please call us. We are happy to discuss ideas with you and/or your tax professional. You can reach Bulwark Capital Management at 253.509.0395. 

 

This article is provided for educational purposes only and its content should not be relied upon for tax advice. As always, check with your tax professional or attorney for specific tax advice related to your situation.

Source:

https://www.cnbc.com/2021/03/01/required-minimum-distributions-on-retirement-plans-are-back.html

Mar 30
7

Zach Abraham Featured on MSN Last Week

By | In The Headlines, News, Stock Market

On Monday, March 22nd, stocks finished higher as the 10-year U.S. Treasury yield was slightly down compared to its recent highs.

Bond yields recently have been rising on investor concern that a stronger economic rebound will lead to higher inflation. However, the Federal Reserve said that, although as pandemic recedes and the economy recovers prices will be pushed up, there was no sign yet that this will deliver unwanted inflation.

In fact, the Fed has said it believes an increase in inflation in 2021 will be temporary given COVID-19’s disruption to the labor market.

Bulwark CIO Zach Abraham watches trends closely, and implements investment strategies to help take advantage of all market conditions. His comments were published by MSN last week:

“The recent rise in rates should continue to compress multiples on high flyers and stocks with rich valuations,” said Zach Abraham, principal and chief investment officer of Bulwark Capital Management. “A rise in inflation should also result in a much more friendly environment for value stocks and dividend payers.

“We’ve had a historic run in growth. But the time for value has come. This rotation has a lot of kegs and should run for a while,” Abraham added.

 

Read the original story on MSN here:

https://www.msn.com/en-us/money/markets/stocks-rise-as-tech-gains-lead-wall-street-higher-nasdaq-up-17percent/ar-BB1eQbSu

The article was also picked up by The Street:

https://www.thestreet.com/markets/stock-market-dow-jones-nasdaq-bond-yields-032221

 

Mar 23
0

Interest rates, bond prices and inflation are related. Here’s how.

By | Bonds

The Federal Reserve

“Part of the mission given to the Federal Reserve by Congress is to keep [consumer] prices stable–that is, to keep prices from rising or falling too quickly. The Federal Reserve sees a rate of inflation of 2 percent per year–as measured by a particular price index, called the price index for personal consumption expenditures–as the right amount of inflation.

“The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down. When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.”  ~The Federal Reserve of Cleveland

Interest Rate Risk

In general, low interest rates can be good for mortgage and other consumer loans because you will pay less to borrow money. However, low interest rates are not so good when you’re looking at the low interest credited on savings accounts and CDs.

But the main reason interest rate risk is considered a risk has to do with bond prices.

About Bonds

Bonds are basically fixed-rate loans with set maturity dates. Buying or selling them before maturity, when current interest rates might be higher or lower than the bond’s face value interest rate, is what affects their price.

In general, when interest rates go up, bond values go down. As bond prices increase, bond yields fall. Interest rate risk is common to all bonds, even U.S. Treasury bonds.

“The most important difference between the face value of a bond and its price is that the face value is fixed, while the price varies. The face value remains the same until the bond reaches maturity. On the other hand, bond prices can change dramatically.” ~Investopedia

Why You Should Care

Pre-retirees and retirees with money invested in the stock market often have the majority of their investments held in bonds after they reach age 50+ because in general, bonds are often considered “safer” than stocks.

A common principle used by some stockbrokers and bankers called “the Rule of 100” uses age to determine how much of their client portfolios are held in bonds versus stocks. The rule works like this: When you are 60, 60% of your portfolio will be in bonds versus 40% in stocks, when you’re 70, 70% will be in bonds versus 30% in stocks, etc. going up from there.

This shift to more bonds and less stocks as you get older happens automatically in many 401(k) “target date” funds as well.

Bonds Versus Bond Funds

Because the term “bonds” is often used interchangeably with “bond funds,” it’s important to know that some Wall Street experts consider bond funds to be correlated with stock market risk, and therefore not “safer.”

“A bond fund is simply a mutual fund that invests solely in bonds… An investor who invests in a bond fund is putting his money into a pool managed by a portfolio manager. Most bond funds are comprised of a certain type of bond, such as corporate or government bonds, and are further defined by time period to maturity, such as short-term, intermediate-term, and long-term. Some bond funds comprise of only one type…Still, other bond funds have a mix of the different types of bonds in order to create multi-asset class options.

“The types of bond funds available include: US government bond funds, municipal bond funds, corporate bond funds, mortgage-backed securities (MBS) funds, high-yield bond funds, emerging market bond funds, and global bond funds…Typically, a bond fund manager buys and sells according to market conditions and rarely holds bonds until maturity.

“In other words, bond funds are traded on the market, and the market prices on bonds change daily, just like any other publicly-traded security.” ~Investopedia

 

What’s Happening Now: The Headlines

 

  • Inflation Fears

“Inflation is near a decade low and well below the 2% level the Federal Reserve targets as ideal. The usual conditions for rising inflation—tight job markets and public expectations of rising prices—are glaringly absent. Yet anxiety about inflation is at a fever pitch, among economists and in markets, where long-term interest rates have been grinding higher since President Biden unveiled plans for huge new fiscal stimulus.” ~Wall Street Journal

  • Rock Bottom Interest Rates

“The Federal Reserve’s emergency rate cut back in March [2020], which dropped the benchmark interest rate to zero, is likely here to stay…the Fed publicly stated that even if inflation starts to pick up again amid the economic recovery from the coronavirus pandemic, it doesn’t expect to raise interest rates any time soon as the labor market rebounds. Wall Street economists predict that these rock-bottom rates may be around for the next several years. In fact, after the 2008 Global Financial Crisis, the Fed kept benchmark rates low for seven years. While this means that borrowing becomes cheaper for those who can get approved for loans, it’s not such good news for savers.” ~CNBC

  • Bond Yields Higher

“The 10-year U.S. Treasury yield climbed back above the 1.5% level on Thursday [3/4/21] after Fed Chair Jerome Powell said there was potential for a temporary jump in inflation and that he had noticed the recent rise in yields. The yield on the benchmark 10-year Treasury note rose to 1.541% shortly in afternoon trading. The yield on the 30-year Treasury bond pushed higher to 2.304%. Yields move inversely to prices.” ~CNBC

“If you hear that bond prices have dropped, then you know that there is not a lot of demand for the bonds. Yields must increase to compensate for lower demand.” ~The Balance

  • Long-Term Bonds Face Nearly Zero Upside

“Buffett is bearish on bonds. Why does [Warren] Buffet think that “bonds are not the place to be these days”? Yields on Treasurys are near historical lows, and investors locking in these low returns by investing in long-term bonds face nearly zero upside with significant downside if rates rise.” ~Think Advisor

 

To Recap: Interest Rate Risk / Bond Risk / Inflation Risk

  • Bond Risk: In general, when interest rates go up, bond values go down. Interest rate risk is common to all bonds, even U.S. Treasury bonds. A bond’s maturity and coupon rate generally affect how much its price will change as a result of changes in market interest rates.
  • Inflation Risk: Inflation risk is the risk that rising costs will undermine purchasing power over time. The Fed will raise interest rates if inflation rises.

 

Inflation risk, bond risk, and interest rate risk can be managed through strategies like portfolio diversification, insured solutions that offer inflation adjustments, and by proper financial and retirement planning.

It’s more important than ever to make sure you are protected from multiple risks as you get closer to or are already in retirement. If you have any questions about your situation, please don’t hesitate to call us. You can reach Bulwark Capital Management at 253.509.0395. 

 

 

Sources:

https://www.clevelandfed.org/en/our-research/center-for-inflation-research/inflation-101/why-does-the-fed-care-get-started.aspx#

https://www.investopedia.com/terms/b/bond-yield.asp

https://www.investopedia.com/ask/answers/013015/how-does-face-value-differ-price-bond.asp

https://www.cnbc.com/select/what-happens-when-interest-rates-go-down/

https://www.cnbc.com/2021/03/04/us-bonds-treasury-yields-lower-ahead-of-fed-chair-powells-speech.html

https://www.thinkadvisor.com/2021/03/03/is-buffett-right-to-be-bearish-on-bonds/

https://www.investopedia.com/terms/b/bondfund.asp

https://www.wsj.com/articles/is-inflation-a-risk-not-now-but-some-see-danger-ahead-11614614962

 

 

Feb 24
1

7 Tips to Resolve Financial Issues Between Couples

By | Financial Planning

No matter how long you have been together, financial issues can wreak havoc on a committed relationship. According to Investopedia, some of the top money issues between partners include money/personality style clashes, debt, personal spending, children, and extended family differences.

When couples don’t agree about spending and saving habits, it can lead to stress, arguments and resentment. Here are seven ways you can address financial issues positively, preferably before they arise.

  1. Understand Your Money Styles

Think of some extreme examples of money styles in your circle. Like your friend, the foodie, who won’t touch a bottle of wine that costs less than $75. Your sister who constantly surfs Amazon with boxes showing up at the doorstep day and night. Your mom who washes aluminum foil, folds and reuses it. And your stepdad who always insists on buying everything for the grandkids, fixing his own 30-year-old car, and keeping his handwritten savings ledger to the penny.

Everyone has a money style, and it’s helpful to talk about it without any name-calling or labeling involved. Understanding your partner’s spending habits often involves a deep-dive into money fears, scarcity memories and childhood traumas. Empathizing with your partner while freeing yourselves from negative patterns can be done if you work together. The most important thing is to come up with a spending plan that works for both of you, and hold yourselves accountable to work the plan together.

It’s also very important to check any power plays that may be happening at the conscious or subconscious level. The biggest money-earner shouldn’t think they have the largest say or the only right to dictate how the money gets spent; a marriage should be equally balanced. The partner who earns less and the partner who earns more both need to cooperate as a team to create a spending plan that’s fair for both of them.

So, check your ego at the door. It’s true that money is power, and few things build resentment faster than being made to feel inferior. The person earning more should take great care to act with empathy while taking care of their own needs reasonably rather than selfishly.

  1. Decide How to Divvy Up Bills…and Save for Future Goals

There are several ways to pay the bills. You can both put all your earnings in a joint account and pay everything out of that. You can divide bills based on a percentage of your earnings. Or you can split bills down the middle and keep the rest of your own earnings for yourselves.

Once you have decided how the bills get paid, you need to devise a plan for saving for your long-term goals—like purchasing a home or securing your retirement. Remember that you need to work closely together as life changes arise—such as one of you losing a job, cutting back on hours to care for a parent, or one of you becoming disabled. If 2020 has taught us anything, it’s that contingency plans are always advisable. Putting together a financial plan for your future is a great first step toward a financially healthy future.

  1. Create Personal Spending Allowances…That Stay Personal

Having some personal money that’s designated just for you each month can really help how you feel about your relationship. It can also help avoid relationship-ruining behavior like “financial infidelity,” when one spouse hides money or purchases from the other. The personal spending allowance gives each partner the chance to spend their money however they wish, no questions asked—including gifts to each other, a new pair of shoes, or coffee every day on the way to the office. In most cases, the personal monthly spending allowance amount should be equal for both of you so that resentments can’t arise.

  1. Compromise on Spending for Children and Family Members

On average, it costs $233,610 to raise a child to age 18, according to the U.S. Department of Agriculture. That doesn’t include expenses for grown children, helping them with the purchase of cars or homes, or funding other (expensive) needs that might arise for them.

Furthermore, spending related to the extended family on both sides can also be tricky, especially as your expectations can be very different from your spouse’s when it comes to helping family members out or getting involved with costly family vacations or activities.

Addressing these discretionary expenses and agreeing on them before to committing to children or other family members is critical.

  1. Face and Eliminate Undesirable Debt

Some debt may be necessary or even advisable depending on your tax situation, for instance, some people need or want a mortgage interest write-off. Other debt should be paid off following a plan that you both agree upon—be it credit card, car loan or student loan debt.

In most states, debts brought into a marriage stay with the person who incurred them and are not extended to a spouse, but debts incurred together after marriage are owed by both spouses. Debts incurred individually married are still owed by the individual, with the exception of child care, housing, and food, which are all considered joint debt no matter what.

There are nine states where all debts (and property) are shared after marriage regardless of individual or joint account status. These states include Arizona, California, Nevada, Idaho, Washington, New Mexico, Texas, Louisiana, and Wisconsin. In these states you are not liable for most of your spouse’s debt that was incurred before marriage, but any debt incurred after the wedding is automatically shared—even when applied for individually.

Both partners should have an honest discussion about curtailing bad spending or financial habits. Couples should also employ a strategy to pay off debt—such as paying off the higher-interest debt first or paying off the smallest loans first (the snowball method).

  1. Set a Budget You Can Both Live With

One of the best ways to keep in sync with your partner when it comes to finances is to have a budget as part of your overall financial plan. The budget includes your household bills, your personal spending allowance, your debt-paying strategy, and your monthly budget for long-term goals like retirement.

  1. Communicate Honestly

Lack of communication is the source of many marital issues, and talking regularly, honestly, and without judgment is where the hard work of marriage comes in. Some couples may even find it helpful to actually schedule a time once a month or once a quarter to revisit short- and long-term goals with each other, and meet at least once a year to discuss objectives with their financial advisor.

Don’t talk about things when you’re tired, angry or have had too much to drink—organize and adhere to clearheaded discussions for success. Honest communication can help you both face and conquer the financial challenges of life, changing course and adjusting along the way.

 

If you have any questions, or would like to review your finances together as a couple, call us! You can reach Bulwark Capital Management at 253.509.0395. 

 

Sources:

https://www.investopedia.com/articles/pf/09/marriage-killing-money-issues.asp

https://www.usda.gov/media/blog/2017/01/13/cost-raising-child

https://www.kiplinger.com/personal-finance/602036/a-marriage-starter-plan-for-finances-even-if-youre-late-to-the-party

https://www.marriage.com/advice/finance/how-to-overcome-financial-conflict/#:~:text=Married%20couples%20fighting%20over%20financial,couples%20fail%20to%20do%20so.

 

 

Jan 25
0

5 Highlights of the New Stimulus Package

By | Legislation

What the latest round of funding may mean for you.

 

The $900 billion Consolidated Appropriations Act of 2021 (2021 CAA) was signed into law by President Trump on December 28th as the COVID-19 pandemic continues to impact employers and employees. The new package resembles March’s $2.2 trillion CARES Act, but will only be $920 billion, with roughly half of that—$429 billion—being paid for with unspent CARES funds.

 

Here’s a quick recap of five key highlights:

 

  1. Stimulus Checks

The new law authorized a second round of $600 checks for people with income that meets the criteria. The checks start to phase out for individuals who earned at least $75,000 in 2019 and $150,000 for married, joint filers.

Each dependent child under age 17 is also eligible for the $600 stimulus payment to the taxpayer claiming them on their taxes. But just like the CARES Act, adult dependents are left out—such as college students and disabled adults—amounting to an estimated 15 million people.

 

  1. Unemployment Benefits

The law provides up to $300 per week in federal benefits on top of state benefits through March 2021. The enhanced benefits also extend to self-employed individuals and gig workers.

An additional $13 billion has been put into SNAP benefits and food banks, among other programs, during one of the biggest hunger crises the U.S. has seen in years.

 

  1. Student Loan Repayment

The 2021 CAA extends the CARES Act provision that allows employers to repay up to $5,250 annually towards an employee’s student loan payments. The payments are tax-free to the employee. There is no data yet about how many employers have actually implemented this benefit.

 

  1. Small Businesses

The 50% limit on the deduction for business meals has been lifted. Business meal expenses after December 31, 2020, and before January 1, 2023, may now be fully deductible. Please consult your tax, legal, or accounting professional for more specific information regarding this provision.

 

  1. PPP Loans

The new law contains $284 billion in relief for a second round of Payment Protection Program loan funding, with some loans eligible for forgiveness. Businesses with 300 or fewer employees may be eligible for a second loan. “Second-draw” loans are available through March 31, 2021.

The bill also includes $20 billion in grants for companies in low-income areas and money set aside for loans from community-based and minority-owned lenders.

 

 

 

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This article is as accurate as our research sources (below), but it is to be used for informational purposes only and is not intended as financial advice. Consult with your tax, legal and accounting professionals before taking any action based on this information.

Like with any new legislation, as 2021 gets underway expect additional guidance from regulators on 2021 CAA. Our office will keep an eye out for updates and pass information as it becomes available.

Call us if you have any questions. You can reach Bulwark Capital Management in the Seattle area at 253.509.0395.

 

 

 

 

 

Sources:

https://www.usatoday.com/in-depth/news/2020/12/31/covid-stimulus-how-compares-other-coronavirus-aid/3922144001/

https://www.forbes.com/advisor/personal-finance/do-adult-dependents-get-the-second-stimulus-check

https://www.cnbc.com/2020/12/21/stimulus-checks-unemployment-aid-and-more-in-900-billion-coronavirus-relief-plan.html