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2Q 2026 Newsletter

Tue, 07 Apr 2026 21:43:21 GMT

As I discussed in my January letter, and after the market had “climbed a wall of worry” with predictions of doom and gloom over tax policy, tariffs, and employment, to mention a few, we now have a down market—but not from any of the above. So much for headline news and predictions. The broad Morningstar Index is down 3.49% for the quarter and the year. Last year’s high fliers, which made up almost all of the market returns, have come back down to earth. Microsoft, Tesla, Meta, Lilly, and Oracle have all lost 10% or more this year, while last year’s laggards—Exxon, Chevron, Johnson & Johnson, GE, and others—are up 20% or more.

Forgive me for sounding like a broken record, but this is a stunning example of why a diversified portfolio is a smart way to invest and why it is important to be patient with “laggards” you may want to sell. Add to that a 1,000-point swing in the Dow, and you realize that selling and not sticking with your long-term plan can be costly.

Lastly, the market was overvalued by almost every measure. I believe that if the war had not happened, we would be seeing the same market swings because of “Private Credit.” Companies that you have never heard of—but which invest hundreds of billions in funds trying to make big returns by making loans to companies that banks will not lend to—are in trouble. These funds have exit gates, which restrict investors wanting to leave their investments. I am getting calls from New York City firms saying they have 11% returns for our clients to raise funds for their distressed loans. Sometimes, some of the most valuable things we do for you is avoid investing your money into “hot” bad ideas.

On to the war. It has the potential to threaten the economy, and if oil reaches $150 a barrel, we will most likely see bad effects around the world. Currently, we are a long way from $150-per-barrel oil. The U.S. uses about 20 million barrels a day and we produce about 20 million barrels a day. The effect of this is that we may pay more, but we should not run out. The current prices, when adjusted for inflation, may be uncomfortable but not ruinous; however, many places around the world will run out.

A new jobs report of 178,000 when we were expecting 60,000 is positive, and unemployment at 4.3% is good news. The yield on Treasuries is up—not a sign that the market is looking for safety. The projected earnings of the S&P 500 are still in double digits. Another positive that almost no one is talking about is the tax savings from the new tax bill we will enjoy in the next few days. Almost everyone who pays taxes will be saving 3% or 4% depending on their income and filing status. For example, the standard deduction would have been $16,500, but because of the bill, it will be $32,000 for a married couple. That is real money.

Contrary to almost every news outlet, we are not yet heading into Armageddon. If the war ends in the next 6 to 12 weeks, we should see oil prices stabilize and the world may be rid of a regime that has sponsored terrorism around the world and killed 30,000 of its own citizens. Only time will tell; war is very hard to predict. For now, we are sticking with our long-term strategies.

Enclosed is our required annual privacy notice. We do not share your information with anyone unless you direct us to, we need to open your account, or we need to run a planning scenario. Also, if you would like a copy of our ADV, we will be happy to provide one. (This is the document disclosing changes to the firm and how we operate, which we file each year with the SEC).

We are pleased to introduce Ryan Garcia. He is now working to learn about our systems and programs. He has an MBA with a concentration in finance and will start taking his CFP classes soon. He and Alison are working on using AI to enhance our workflows; the result is that some of you will enjoy reduced fees on your portfolios. I am thrilled that we are on the front end of this and not playing catchup. Also, because of these improvements, we are open for new business. We have been very selective about accepting new clients, but we are now able to handle more volume.

As usual, Keith, Alison, Ryan, Kathy, and I thank you for the trust you place with us. We will continue to do our best to provide you with excellent planning and investment advice. If you have any questions, please contact us.

Yours truly,

Willis Ashby, President CFP®

Zacks Investment Research

1Q 2026 Newsletter

Fri, 16 Jan 2026 22:16:18 GMT

I hope you enjoyed a wonderful, safe, and festive holiday season and New Year. Once again, the market has climbed a familiar

“wall of worry” and finished the year higher. The Morningstar Broad Index ended the year up 15.89%, despite widespread

predictions of economic doom stemming from tax policy, inflation, tariffs, deficits, and employment concerns.

To date, much of that pessimism has not materialized. Inflation is, in fact, trending downward—although a trip to the grocery

store may suggest otherwise. Unfortunately, inflation has a stubborn habit of rising quickly and retreating slowly, with only rare

exceptions. Tariffs have produced more ruffled feathers than economic damage, and while trade tensions persist, they have not

triggered the inflation or trade wars many feared.

The recent tax legislation has made tax rates permanent and increased the standard deduction. Employment remains resilient,

with 2.63 million jobs added year-over-year through November. Federal debt has stabilized, and the debt-to-GDP ratio has

improved modestly, declining from 122% to 120%. While government spending has increased, economic growth has outpaced

it.

As a result, most economists at major banks and investment firms now expect the economy to continue growing, with markets

following suit—albeit at a slower pace. I share their cautious optimism, as the underlying economic data supports these

projections.

That said, there are two areas worth watching before going “all in.” First, job hiring has slowed—not stalled, but clearly

decelerating. Second, market valuations remain elevated by nearly every historical measure. We are currently experiencing a

virtuous “wealth effect”: portfolios rise, confidence improves, and spending increases. However, should consumer spending

slow, that same dynamic could reverse—creating a less virtuous cycle of reduced spending, falling profits, and market declines.

This is why—at the risk of sounding like a broken record—a diversified portfolio remains essential. We will continue to closely

monitor earnings, cash flows, and valuations and invest accordingly. While I typically discount short-term market shocks driven

by global events, the current geopolitical landscape bears watching, as disruptions could influence market direction more

meaningfully than in the past.

In closing, please remember to inform us of any changes in your financial situation, such as a new job, home purchase, or other

life events that may affect your investment strategy. Also, a word of caution: be vigilant online. If you are unsure about an email,

link, or attachment—do not open it. The number and sophistication of scams continue to grow, and caution is your best

defense.

We also have some exciting news to share. Alison has completed her 4,000 required hours and is now a fully accredited

Certified Financial Planner™. Congratulations, Alison! She has also become a partner and part owner of Integra. Her

knowledge, dedication, and genuine desire to help others make her an outstanding addition to our leadership team. I could not

be more pleased to have her as my eventual successor.

Additionally, Nick has launched his own financial firm, and we wish him every success in his new venture.

As always, Keith, Alison, Kathy, and I are here to assist you with any questions or concerns.

Yours truly,

Willis Ashby, President CFP®

References: WSJ, First Trust, Morningstar, JP Morgan, BMO

4Q 2025 Newsletter

Tue, 07 Oct 2025 20:47:45 GMT

I hope this letter finds you well and that you enjoyed a pleasant summer. As we wrap up the third quarter of 2025, the environment has been challenging, shaped by geopolitical uncertainty, persistent inflation, and a troubling jobs report alongside other unsettling headlines. Even so, markets largely looked past these concerns, focusing instead on strong corporate earnings growth—which ultimately drove new market highs.

The Morningstar Broad Market Index was up 12.5 % for the year and 8.2 % for the quarter. From an economic standpoint, the data was mixed. We had real GDP growth at 1.3% versus .9% from the previous report. Wage growth was up, and the unemployment rate remained low at 4.1%. This contrasts with a slowing jobs report and inflation is still above the fed's stated goal of 2%. These conflicting reports created tension between the hope for more growth and the risk of a more significant economic slowdown.

As usual, we navigated this environment by remaining disciplined. Our strategy continued to prioritize corporate earnings, being diversified, strong balance sheets and management. While some areas of the market underperformed, our allocations to the growth sector have again paid off handsomely with all the hope of AI.

In times like these, it's easy to get caught up in the 24/7 news cycle and react emotionally to daily market fluctuations. We understand that seeing market volatility can be unsettling, but our job is to look past the noise and remain focused on the long-term fundamentals that drive wealth creation.

Looking ahead, we believe the Fed will lower interest rates and that the market is stronger than many assume. As futurist Roy Amara noted, “We tend to overestimate the effect of technology in the short run and underestimate its effects in the long run.” Radio, air travel, and 3D printing come to mind as we contemplate the transformative potential of AI. In our view, the companies we invest in are well-positioned not only to weather economic headwinds but also to thrive when conditions improve. Stay tuned we are living in interesting times.

In closing, know that our commitment to your financial well-being is unwavering. If you have any questions or if your circumstances have changed, we encourage you to reach out to schedule a conversation. We look forward to speaking with you soon and to a productive end of the year. Thanks for the trust you place with us.

Yours Truly,

Willis Ashby, President CFP®

What to Know About "The Baby Savings Account" or "Trump Savings Account" under "One Big Beautiful Bill Act" (OBBA)

Wed, 24 Sep 2025 22:17:14 GMT

The One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump on July 4, 2025. Among its many provisions is an addition to the numerous tax vehicles available to save for a child’s college education: the so called “Baby Savings Account” or better known as the “Trump Savings Account”. It is created as a special savings account for children under the age of 18 and operates the same as a Traditional IRA after January 1st of the year when the child turns age 18. Here is what you need to know about this new account:

1) What is the effective date of the Trump Savings Account (the account)? July 4, 2025 or when the OBBBA was signed into law. However, under the law, no Trump Savings Account contributions can be accepted until 12 months after enactment of the OBBBA or July 4, 2026.

2) Who owns the Account? Similar to a Section 529 Plan or Education Savings Account (ESA), the account is owned by the child or beneficiary of the account. Before establishing the account, the child must have a Social Security number, already a requirement of the Federal tax law. The IRS is expected to announce further rules about the establishment of and tax reporting for the account.

3) Who and how much can be contributed to the account? There are any number of potential individuals or entities that can contribute to the account, including parents, guardians, grandparents, employers, and for children born between specific dates in the OBBBA legislation, the Federal government. Parents and other individuals may make contributions of up to $5,000 annually.

Employers may contribute up to $2,500 annually for an employee or employee’s dependent who is under the age of 18. The Federal government may deposit a one-time $1,000 contribution for children born between January 1, 2025 and December 31, 2028. Finally, the employer contribution counts against (reduces) the $5,000 overall limit, but the one-time Federal government contribution does not count against the limit.

4) In what investments may the account contributions be made? Currently, the contributed monies may only be invested in an index mutual fund or exchange-traded fund (ETF) with an annual management fee of no more than 0.1% of the account balance. It is anticipated that future regulations will permit contributions in other investment vehicles, similar to Section 529 private savings plans.

5) When must contributions to the account be made (the contribution deadlines)?

Account contributions must be made by December 31st of the contribution year. In the year the child turns age 18, the Traditional IRA contribution rules apply, meaning the contributions may be delayed until the tax filing date (with extension) for that contribution year. As an example, if the child turns age 18 on September 15, 2043, the account contribution need not be made until April 15, 2044 or October 15, 2044 with extension.

6) How is the account taxed until the child attains age 18? The funds in the account grow tax-deferred until the child attains age 18. Contributions from individuals are made with after-tax dollars, similar to a 529 plan. Employers may treat the contribution as taxable wages to the employee or employee dependent; therefore, the contribution is deductible as a business expense and made from pre-tax dollars. The one-time governmental contribution to the account is a tax free contribution.

7) What happens to the account when the child attains age 18? In the year the child turns age 18, the Traditional IRA rules apply. This means the account becomes subject to normal IRA rollover rules (once a year in most cases) and future required minimum distribution (RMD) rules. As a result, if distributions from the account are not made at age 18 (presumably, for college expenses), then the account may be used as a Traditional IRA retirement plan for the child/adult. However, be aware that Traditional IRA retirement plan penalties apply, such as the 10% premature distribution penalty if funds are taken before the owner turns age 59.5 (unless an exception applies).

8) When can distributions from the account be made? In the year the child/owner turns age 18, unless an exception applies (such as the death of the child). Since the contributions by an individual to the account are made with after-tax dollars, and therefore create taxable “basis”, the distributions are not taxable. In contrast, any employer contributions and the one-time Federal government contribution are made with before-tax dollars (a deduction applies), no basis is created and the distribution of this part of the account is fully taxable. Earnings are also fully taxable when distributed.

In summary, for college education savings purposes, a Section 529 plan is still likely preferable since such plan provides for tax free distributions if used in payment of college expenses. However, the Trump Savings Account may be a desirable choice if wanting to establish a combination college education/Traditional IRA retirement plan for a child at an early age. The account is also the only savings vehicle featuring a Federal government contribution, although only temporarily. Talk to your advisor to determine which accounts best fit your situation.

Please feel free to contact your Investment Team at Integra Financial, Inc. if there are any questions about this new investment savings account.

Important Tax Provisions of "The One Big Beautiful Bill" (OBBA)

Wed, 24 Sep 2025 22:17:11 GMT

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. Likely, the most important provision of OBBBA was the “permanent” extension of the lower income tax brackets from the 2017 Tax Cut and Job Act with no expiration date. However, be aware that the term “permanent” in the political world of Washington, DC, simply means that the current tax brackets only exist until a later Congress changes them and obtains the approval of the President then-in-office. Here are the current (2025) “permanent” income tax rates for married filing jointly (and single) taxpayers:

• 10% on income up to $23,850 (single: $11,925)

• 12% on income from $23,851 to $96,950 (single: $11,926-$48,475)

• 22% on income from $96,951 to $206,700 (single: $48,476-$103,350)

• 24% on income from $206,701 to $394,600 (single: $103,351-$197,300)

• 32% on income from $394,601 to $501,050 (single: $197,301-$250,525)

• 35% on income from $501,051 to $751,600 (single: $250,526-$626,350)

• 37% on income over $751,600 (single: over $626,350)

Moreover, the tax brackets continue to be adjusted for inflation each calendar year. In addition, the higher standard deductions from the 2017 Act were made “permanent” and increased further for the year 2025:

• For single taxpayers: $15,750

• For married filing jointly: $31,500

• For seniors (individuals age 65 and over), a new senior citizen deduction of $6,000 for those seniors with Social Security income was enacted ($12,000 for married filing jointly taxpayers). However, the full deduction is available only for single filers with an adjusted gross income (AGI) of $75,000 or less, or married filing jointly couples with an AGI of $150,000 or less. The deduction is completely phased out for single filers with an AGI above $175,000 and married filing jointly taxpayers with an AGI above $250,000. Finally, the provision applies only for taxable years 2025-2028.

Other notable “permanent” tax provisions implemented by OBBBA are:

• The estate and gift tax exemption equivalent amount is increased to $15 million per person (effective in 2026) and is indexed for inflation annually (Note: the 2025 exemption was $13,990,000 per person.)

• The 20% small business (Qualified Business Income or QBI) deduction first enacted in the 2017 Act.

• 100% bonus depreciation deduction for qualified tangible property acquired by a business after January 20, 2025 is reinstated.

• The child tax credit is increased from $2,000 to $2,200 for each qualifying child under the age of 17. The credit phases out for single taxpayers with AGI of $200,000 and $400,000 for married filing jointly taxpayers.

• The existing limit allowing an itemized deduction of up to 60% of AGI for cash gifts to qualified charities is extended with no expiration date. However, beginning in 2026, the percentage charitable deduction for itemizers is restricted to no more than 0.5% of the taxpayer’s AGI.

• Starting in 2026, a new charitable deduction for non-itemizers is introduced into the law. These taxpayers can now claim a deduction for charitable contributions of cash capped at $1,000 for single taxpayers and $2,000 for married filing jointly taxpayers.

A series of temporary tax provisions effective only for tax years 2025-2028, unless otherwise noted, are also implemented by the OBBBA legislation. Here is a summary:

• The State and Local Tax (SALT) itemized deduction is increased from $10,000 to $40,000 from 2025-2029. The deduction increases 1% per year from 2026-2029 and is phased out with income starting at $250,000 for single taxpayers and $500,000 for married filing jointly. The deduction is phased out completely at $300,000 single filing status and $600,000 married filing jointly.

• Effective for auto loans starting after 12/21/2024, interest is deductible for cars, vans, and trucks weighing less than 14,000 pounds whose final assembly occurred in the United States.

• A deduction for overtime pay capped at $12,500 for single filers and $25,000 for married filing jointly. The deduction is phased out for individuals with AGI exceeding $150,000 for single filers and $300,000 for joint filers. The deduction applies to federal income tax, reducing the overtime wages included in the individual’s taxable income.

Finally, there are several new tax provisions included in the OBBBA legislation. Among these, are:

• No federal income tax on tip income capped at $25,000 per year. However, the tip income is a non-itemized deduction and not an exclusion from taxable income. The deduction is subject to income limitations: for single filers, it begins to phase out at $150,000 of AGI and $300,000 for married filing jointly taxpayers. For self-employed individuals, the deduction is limited to the business’ net income (excluding the deduction itself).

• For children born between 2025-2028, parents can open special “Baby Savings Accounts” or “Trump Accounts”. These accounts are similar to traditional IRAs (but with special rules) for dependent children under the age of 18 where parents or guardians can contribute up to $5,000 annually, and employers can contribute up to $2,500 annually. Contributions are made with after-tax dollars, but investment growth is tax deferred. Moreover, from 2025-2028, a one-time $1,000 federal government contribution may be made for eligible children. Distributions from such accounts are prohibited until January 1st of the year the child/beneficiary attains age 18, at which point the account is treated like a traditional IRA.

• No federal income tax on overtime pay as discussed above under the section on temporary tax provisions. This provision is particularly important for service workers, such as restaurant wait staff and delivery drivers.

If you have any questions about any of these provisions, please contact the Investment team at Integra Financial, Inc. While we are prohibited from giving specific tax advice, we can discuss how tax law and tax changes impact your future personal financial planning.

3Q 2025 Newsletter

Thu, 17 Jul 2025 17:57:22 GMT

I hope you had a joyful and meaningful Fourth of July. I hope you spent it surrounded by family and friends. Governments have come a long way since the Magna Carta in 1215, followed by the English Bill of Rights in 1689, and eventually our own U.S. Constitution. Despite our many flaws—and we certainly have them—I’m grateful to be an American.

As is tradition, we read the Declaration of Independence on the 4th. It’s a powerful reminder of how this nation came into being and the principles it was founded upon.

What a Quarter

After “Liberation Day” was announced on April 4th, concerns about inflation and a potential global trade war sent markets tumbling down -11% within days. Add to that the uncertainty surrounding new tariffs and the now passed tax bill, and it’s easy to understand the market’s volatility.

Yet, the Morningstar Broad Index ended the quarter up 11.14%, and is up 15.30% for the year. How is that possible?

Inflation, once feared to spiral, is now hovering near the 2% target.
The anticipated global trade war has not materialized; instead, we may be witnessing a resetting of global trade relationships.
Oil prices have declined after a brief spike due to tensions in Iran and the Strait of Hormuz.
The trade deficit has narrowed, and a weaker dollar is helping boost U.S. exports.

A Growing Concern: The National Debt

While markets have shown resilience, we must also acknowledge a growing structural challenge: the federal debt, which now exceeds $36.2 trillion. With approximately 153.8 million taxpayers, that equates to over $235,000 per taxpayer.

This level of debt raises serious questions about long-term fiscal sustainability. Despite the top 10% of earners paying 72% of all federal income taxes, the gap between revenue and spending continues to widen. The top 1% alone—those earning over $663,000—contribute 40.4% of all income taxes. Meanwhile, the bottom 50% contribute just 3%.

Even if we were to tax the entire net worth of all U.S. billionaires—estimated at $5.5 trillion—it would barely make a dent in the total debt. This underscores the size and complexity of the issue and the importance of thoughtful, long-term policy solutions. It appears we cannot tax our way out and if we are not willing to cut spending it looks like the only reasonable option is to grow our economy as a way out.

As always, Keith, Nick, Alison, and I are here to help you navigate these uncertain times with clarity and confidence. Please don’t hesitate to reach out with any questions or concerns.

Yours Truly,

Willis Ashby, President CFP®

Govinfo.gov - Usadebtnow.org - Fiscaldata.treasury.gov - Taxfoundation.org - Bloomberg's billionaire index - Forbes - First Trust - WSJ - Morningstar

2Q 2025 Newsletter

Tue, 08 Apr 2025 23:30:03 GMT

I hope this letter finds you well. As I sit down to write this, recent events—particularly the tariff announcements—have prompted me to revisit my initial draft. It’s safe to say that the current climate is far from ordinary.

The Morningstar Broad Market Index posted a decline of 4.94% for the quarter. As I mentioned in my previous letter, I anticipated some jolts perhaps I should have emphasized the word “JOLTS” a little more! The much-discussed “Trump Rally” from last quarter has vanished. While the short-term picture may be concerning, it’s important to remember that the S&P 500 posted impressive gains of over 20% in both 2023 and 2024. As a result, we’ve seen a market that was overheated due to hype surrounding AI and other speculative factors, which inflated valuations. To put this into perspective, the Price-to-Earnings (PE) ratio for the Growth Index stood at 41.9, while the Value Index was at 18.4. Historically, the market PE ratio has hovered around 16, we are still working our way back toward more reasonable levels.

The stated goals to bring key industries such as steel, automobiles, pharmaceuticals, lumber, and semiconductors back to the U.S. stems from a concerning trend: industrial production in the U.S. has increased by only 4.3% over the past 25 years—an annual growth rate of just 0.2%. Additionally, there’s a broader conversation around our national spending habits: while we collect $4.9 trillion in all taxes, we’re currently spending $6.75 trillion. These economic actions are intended to address these fundamental issues, with efforts aimed at reviving domestic manufacturing and resolving our spending imbalance. While these changes have immediate effects, the hope is that we avoid prolonged negative consequences. Some economists believe that the short-term pain will lead to long-term gain, while others question the wisdom of these actions. Remember Paul Volcker’s actions in the Reagan era of sky-high interest rates crushing the economy but ultimately set the stage for stronger, more sustainable growth. As history has often shown, economic cycles tend to repeat themselves, and I am hopeful that history can repeat itself and we’ll see positive results in the long run. I don’t think anyone can predict the long-term impact.

We are comfortable with what we have paid for our positions and while the market may currently disagree with us, our long-term focus has historically paid off. The experiences of 2008 and 2009 serve as a recent reminder that sticking to a disciplined focus can ultimately yield positive results. As Warren Buffett famously said, “Stocks climb a wall of worry.” When fear drives others to the exits, it often creates opportunities for those who stay focused on the bigger picture.

On a different note, we’ve recently encountered some technical issues with our email system. If you’ve reached out to us and haven’t received a response within a couple of days, please feel free to call us directly. Some emails are unexpectedly ending up in our enhanced security filters, and we are working diligently to resolve the issue.

Lastly, I want to remind you to stay vigilant against online scams. These fraudulent schemes are becoming increasingly sophisticated, and even the most cautious individuals can fall victim. It’s more important than ever to be cautious when navigating the digital landscape.

We truly appreciate the trust you place in us, and we’re always here to answer any questions or address any concerns you may have.

Yours Truly

Willis Ashby, CFP

President

Morningstar, WSJ, First Trust, MSNBC, BMO, ZACKS

1Q 2025 Newsletter

Tue, 14 Jan 2025 20:25:07 GMT

Happy New Year! We hope you had a wonderful holiday season and wish you prosperity, good friends, and good health for 2025 and beyond.

We are pleased to report that the broad Morningstar index increased by 24.09% for the year and 2.57% in the fourth quarter. The "growth" segment of the market, particularly companies like Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta, and Tesla, has been a major contributor to this performance. Together, these seven companies are valued at approximately $17.92 trillion, which represents around 44.80% of the S&P 500. Their performance remains a significant driver of broader market trends.

Several key events have recently influenced the financial landscape:

The post-election “Trump Rally.”
Bitcoin's significant rise, recently reaching around $100,000.
Potential tariffs and their uncertain effects.
Government debt interest payments surpassing defense spending, ~$1 trillion vs ~800 billion respectively.
A notable increase in government employment in 2023, with 709,000 jobs added, a jump from 299,000 in 2022 and 392,000 in
2021 (source: www.bls.gov).
The establishment of the Department of Government Efficiency (DOGE).

The full impact of these events is still unfolding, but potential risks to market stability include tariffs, government debt, and the new DOGE department. While tariffs could have far-reaching effects, it is important to recognize that the policies discussed during campaigns may not align with actual implementation. Government debt may not pose an immediate concern, but over time, the bond market may react to the growing debt load, leading to necessary spending cuts. Though such measures could be painful in the short term, they may be necessary for long-term economic stability.

The potential impact of the Department of Government Efficiency remains unclear. Elon Musk’s restructuring of Twitter (now X), which resulted in the elimination of thousands of jobs, has been seen as an effort to increase efficiency. Historically, the closure of government departments has been rare; the only significant example occurred during the Carter administration, when Alfred Kahn successfully dismantled the Civil Aeronautics Board (CAB), leading to lower airline prices and more travel options.

Overall, we expect the companies we monitor and invest in to remain profitable. Despite potential disruptions, 2025 is likely to be another positive year for the market, though some volatility or "jolts" along the way should be anticipated.

Enclosed is our annual privacy notice (mailed letters). Additionally, if you would like a copy of our ADV, it is available on our website or can be sent upon request.

Lastly, I want to express my gratitude to Kathy, Nick, Keith, and Alison for their excellent work. Please feel free to contact us with any

questions or concerns. We remain committed to providing the best financial advice to support your well-being.

Sincerely,

Willis Ashby, President

Integra Financial, Inc.

5105 DTC Parkway, Suite 316

Greenwood Village, CO 80111

303-220-5525 / 303-689-0973 FAX

Bureau of Labor Statics, Wall Street Journal, 1 st Trust, Morningstar, Zacks Research, Co-pilot &/or ChatGPT

4Q 2024 Newsletter

Mon, 14 Oct 2024 21:27:02 GMT

I hope you had a wonderful summer and are enjoying weather similar to what we have in Colorado.

The Morningstar broad index rose by 3.59% this quarter and is up 19.65% for the year. In a long-anticipated shift, value stocks—such as Costco, Comcast, and Home Depot—have outperformed growth stocks like Google and Amazon. The growth sector, which has led the market for so long, is now seeing stretched valuations and limits to growth, making the value side increasingly appealing for investment. As we focus more on value investing, it’s rewarding to maintain a diversified portfolio that includes both value and growth stocks.

Reflecting on the past year and beyond, I’ve been reminded that “the market climbs a wall of worry.” It can be challenging to invest when headline news seems discouraging, but I’ve witnessed this pattern often enough to firmly believe that the best strategy is to enter the market and stay invested. Many of you who have been with us for a decade or more can attest to the benefits of this approach. Viewing investments through a long-term lens—thinking in decades rather than years—helps manage the inevitable market fluctuations.

I don’t want to come across as overly optimistic, but there are positive signs: inflation is declining, incomes are rising, and personal savings rates are up. Gross Domestic Product (GDP) is also on the rise, with many corporations exceeding their earnings expectations. Historically, during periods of high inflation, like the Carter years, the stock market has proven to be an effective hedge against rising costs. As expenses—wages, goods, and taxes—increase, the value of stocks tends to follow suit, as corporations pass these costs onto consumers while striving to maintain their profit margins.

Nick, Keith, Alison, and I are closely monitoring various factors that could impact the market and your portfolios. As always, we’re keeping an eye on the overall economy, particularly monthly employment numbers. Currently, over 60% of new jobs are in government or government-related sectors, which is less favorable than if the majority were in the private sector. The Federal Reserve has recently lowered the Fed Funds Rate by half a percent, a move prompted by falling inflation that appears to be trending toward the target rate of 2%. This reduction has been celebrated on Wall Street, as it lowers the cost of borrowing, benefiting both businesses and the government.

Another trend we’re addressing is the stock-to-bond ratio in your portfolios. The stock side has grown much faster than bonds, for example, an initial 50/50 allocation is now closer to 60% stocks and 40% bonds. To rebalance your portfolio, we will sell some stocks and buy bonds to return to the desired ratio that best suits your investment strategy.

In closing, I want to emphasize the importance of being vigilant with your online activities. The number of malicious actors attempting to hack personal information is increasing daily, so please take precautions.

If you have any questions or if your financial situation changes, don’t hesitate to reach out. Alison, Keith, Nick, Kathy, and I appreciate your trust and are here to support you.

Willis

Willis Ashby, President

Integra Financial, Inc.

5105 DTC Parkway, Suite 316

Greenwood Village, CO 80111

303-220-5525 / 303-689-0973 FAX

401(k) Plan and Other Hardship Distributions

Thu, 01 Aug 2024 20:42:00 GMT

Salary-reduction-type retirement plans have, for some time, permitted so-called “hardship distributions” or “hardship withdrawals” prior to a participant’s retirement date. Salary-reduction-type plans include Section 401(k) plans available to for-profit employees, 403(b) plans for not-for-profit employees, and 457(b) plans for State and local government employees. Generally, such distributions are includible in a participant’s income and are subject to an “early distribution 10 percent penalty”, unless an exception applies.

However, beginning January 1, 2024, participants may withdraw up to $1,000 annually from any qualified retirement plan, including salary- reduction-type plans, to pay for “unforeseeable or immediate financial needs relating to personal or family emergency expenses” without having to pay the withdrawal back or being subject to an early withdrawal penalty. (Such withdrawal is still subject to inclusion in the participant’s income tax for the year.) There is a limit of one emergency distribution or withdrawal per year. In addition, a participant cannot leave his or her retirement plan account with less than $1,000 after the emergency withdrawal is made. A hardship distribution from a salary reduction plan is generally defined as an “immediate and heavy financial need” for which no other sources of payment are available.

Examples of such need, as mentioned in the Treasury Regulations, include:

Medical expenses for the participant, spouse, and dependents; ·
Expenses, including mortgage payments, to purchase a principal residence: ·
Cost-secondary tuition, related fees, and room and board for up to 12 months for the participant, spouse, or dependents; ·
Expenditures to stave off eviction or foreclosure; and ·
Burial or funeral expenses for the participant’s deceased parent, spouse or dependents.

There are additional needs decided on a case-by -case basis. Note that a Section 457(b) salary reduction plan uses a different, though similar standard, of “unforeseen emergency” before funds may be withdrawn from that plan.

The participant is limited to a distribution or withdrawal amount equal to the participant’s elective deferrals, which does not generally include any income or earnings made on the elective deferrals. In addition, the “hardship distribution” may include distributions of any elective contributions made by the employee/participant, if the plan provisions allow. In no case, however, does the permissible amount include employer matching contributions, to which a separate vesting schedule may apply.

As in life, just because you can do something, does not necessarily mean that you should! The cost of making a hardship distribution from a retirement plan is high! In addition to depleting your retirement savings, you lose out on the potential earnings that come from the withdrawn amount. Moreover, you have to pay income taxes earlier than necessary (depleting your retirement savings even more) as well as a potential additional 10 percent non-deductible penalty. For example, if you are not yet age 59.5, in a 10 percent marginal income tax bracket, and you withdraw $20,000 from a $200,000 retirement account, you are left with $176,000. If you had not made the distribution and you earned 10 percent on the account (for a total of $220,000 at the end of one year), you now have to earn a return of 25 percent just to achieve the same result!!

DISTRIBUTION OPTIONS FOR INHERITING TRADITIONAL OR ROTH IRA OR RETIREMENT PLAN PROCEEDS (BEGINNING IN 2020) *

Thu, 01 Aug 2024 20:35:00 GMT

Inheriting Traditional or Roth IRA Proceeds:

To Roll or Not to Roll (Rollover IRAs)

Thu, 01 Aug 2024 19:13:00 GMT

Some points to consider:

1) Likely the biggest distribution question that a 401(k) participant asks is: should I rollover the proceeds to an IRA or retain it within the 401(k), assuming the plan sponsor allows that? There is no certain answer to this question, although in the majority of situations, it is preferable to roll the proceeds because of participant control of the account. See Willis, Nick, or Keith to begin the paperwork for a Rollover IRA.

2) If electing to roll to an IRA, make sure it is a DIRECT rollover and not an INDIRECT rollover. A DIRECT rollover includes a check made payable “FBO” (for the benefit of) the retiring participant. An INDIRECT rollover includes a check to the retirement participant by name and is taxable if the distribution proceeds is not replaced after 60 days from the date of the check.

3) Rollover vs. Traditional IRA: A Rollover IRA has unlimited asset protection (ERISA protection) whereas a Traditional IRA is limited in asset protection to only a $1.0 million indexed amount in personal bankruptcy. Also, a Rollover IRA is not limited to $6,500 per year contribution plus $1,000 catch-up contribution as is a Traditional IRA.

4) Some participants will use a Conduit IRA, where they roll the 401(k) proceeds to a separately-established IRA, and then, assuming the new plan terms allow, roll the proceeds into the new 401(k) (or other employer plan) after finding a new job. The 401(k) proceeds retain ERISA asset protection within the Conduit IRA. However, new contributions to the Conduit IRA may not be accepted under the language of the new employer plan.

5) 401(k) and other qualified plan proceeds can be rolled directly to a Roth IRA (without having to establish a Conduit IRA), although only the after-tax portion can be rolled.

6) A major advantage of leaving the proceeds in the 401(k) plan is, if there is employer stock in the 401(k) portfolio, the stock, once distributed, is eligible for favorable net unrealized appreciation (NUA) tax treatment. This is not possible if the stock is rolled to a Rollover IRA and is then distributed from there!

7) Another major advantage of leaving the proceeds in the 401(k) plan is the preservation of the ability to take a loan from the 401(k); you can NEVER take a loan from any type of IRA, personal or employer-sponsored, such as a SEP-IRA.

8) It is important to understand what is meant by the term “qualified distribution” from a Roth IRA and the tests that must be met: this essentially means that the retiring participant is disabled, deceased, or the distributed proceeds have been held in the Roth IRA for at least five years from the date of the first contribution. As a general rule, contributions and conversions from a Roth IRA are not taxable at the time of distribution, however, the earnings from both an original or converted Roth IRA may be taxable. It is also possible that earnings from both may be subject to the 10% early distribution penalty unless meeting a statutory exception.

9) There are NO required lifetime minimum distributions from a Roth IRA as is the case with a traditional deductible or non-deductible IRA. (There are post-death RMDs from a Roth IRA but these are usually non-taxable.)

10) Beginning in 2020, a non-spouse beneficiary of an inherited IRA LOST the ability to “stretch” the distribution and is generally limited to no more than a 10 year payout form the date of the owner’s date of death. (Under Treasury Regulations, a payout must be made in each of the 10 years, rather than all-at-once in year 10.) The major exception to this rule is a surviving spouse as an “eligible designated beneficiary” (EDB) who retains the ability to roll to his or her own IRA and “stretch” the distribution over his or her lifetime.

11) If the original IRA owner died before beginning required minimum distribution (RMD) withdrawals, minimum withdrawals are not required for non-individual beneficiaries (such as a charity or estate) during years 1-9 of the 10 year withdrawal period. Rather, the IRA has to be emptied by the end of the 10 ^th year after the year of the IRA owner’s death. The same rule applies to Roth IRA owners since the owner is deemed to die before his or her required beginning date (RBD) for distributions.

12) Generally, a designated Roth account, such as a Roth 401(k) or Roth 403(b), may only be rolled to another designated Roth account. (This necessitates the employer previously establishing a designated Roth account for the benefit of employees.) Also, a participant can only roll a SIMPLE IRA to another SIMPLE IRA. It is possible to roll a SIMPLE IRA to a traditional IRA but only after 2 years of SIMPLE plan participation.

13) Designated Roth accounts are subject to the required minimum distribution (RMD) rules in 2023, including those with a required beginning date of April 1, 2024. However beginning in 2024 and later, RMDs are no longer required from designated Roth accounts.

14) The Single Life Expectancy Table in the Treasury Regulations must be used for all inherited IRAs, including Rollover IRAs.

3Q 2024 Newsletter

Wed, 17 Jul 2024 23:12:00 GMT

Greetings!

We hope this letter finds you well. As you head into the heart of summer, we hope you're ready to make the most of the season. Whether you're planning a relaxing vacation, enjoying outdoor activities, or simply basking in the summer sun, we wish you a season filled with joy and memorable moments. Let's dive into the latest updates from the financial world.

Stock Market Performance

Since the start of the second quarter, the stock market has demonstrated remarkable resilience and growth. From April 1, 2024, we've observed a steady upward trajectory across major indices. The S&P 500 has risen by 4.3% this quarter and 15.3% YTD (wow), driven by strong performances in technology and communication services sectors. This positive momentum underscores the market's ability to navigate challenges and capitalize on opportunities.

Corporate Earnings Beat Expectations

Over the past three months, corporate earnings have surpassed expectations, adding fuel to the stock market's rally. Major companies across various sectors reported strong quarterly results, showcasing their ability to adapt and thrive. Almost 79% of companies beat their earnings expectations this quarter, highlighting amazing resiliency given the backdrop of higher inflation. This trend of outperformance has provided a reasonable rationale for market gains. If prices just went up without earnings also going up to support it, we’d be in a much dicier position.

Lower Volatility in the Market

One of the defining features of the stock market this quarter has been the significantly lower volatility. The VIX, often referred to as the "fear gauge," has remained subdued, indicating a period of relative calm. However, as we approach the upcoming elections, we anticipate a potential shift in this trend. Political uncertainty often brings increased volatility, and we are closely monitoring the situation to navigate any market turbulence that may arise. It's worth noting that historical data shows the stock market has performed well under both Republican and Democrat administrations. Regardless of which party holds the White House, the market has a long-term tendency to grow. While elections can create short-term volatility, the overall trajectory of the market remains positive, driven by economic fundamentals rather than political affiliations.

Generation Z's Unprecedented Wealth

A recent article in The Economist sheds light on an interesting phenomenon: Generation Z is starting out wealthier than any previous generation. This generation, born between the late 1990s and early 2010s, is benefitting from a confluence of factors including technological advancements, a strong job market, and early investment opportunities. As a father of two teenage boys, I can anecdotally report that they both make significantly more than minimum wage at their summer jobs and have been able to put money into a Roth IRA each summer with spending money left to spare. This got me thinking, knowing the opportunities presented to them, how do you plan to pass on your values to this generation? What strategies are you considering to ensure that your legacy endures through them? If you’d like help framing the conversation or just want to talk about it, please let us know.

As we move forward into the summer months, we remain committed to keeping you informed and prepared for any market developments. Thank you for your continued trust and partnership. If you have any questions, please don't hesitate to reach out to us.

Wishing you a wonderful summer filled with success and happiness!

Best regards, Nick, Willis, Alison, Keith and Kathy.

Nick Weisert, CFP®️

Sources: The Economist, Zacks Investment Management, JP Morgan Investment Management

2Q 2024 Newsletter

Mon, 08 Apr 2024 22:03:00 GMT

As usual I hope this finds you well. As we welcome spring and having just finished the first quarter, things look good. The broad Morningstar index was up 10.24% through 03-31-24. The large cap companies led the way up 11.08% and the small caps up 5.69%. The S&P 500 experienced 22 “all-time highs” with less than 2% drops in-between. Amazing!

We usually say watch the corporate profits and ignore all the other news. However, with the 1.2 trillion the government just pumped into the economy, I worry that we are on a morphine high caused by so much money being pumped into the economy. As good as these numbers are, we are keeping an eye on several things. First are the geopolitical tensions around the world and the Middle East. The potential for disruptions in the supply chains and oil, let alone the humanitarian consequences are worrisome like a distant thunderstorm. Next is what the Feds are going to do with interest rates and how they will react to inflation which is higher than they want. As I have previously predicted, the expected rate cuts are not coming for a while. Corporate earnings are coming in strong, unemployment is down, industrial production is up, and consumer confidence is up. All this causes a pause in the Feds reducing rates. You do not add fuel to a “hot” economy if you are trying to reduce inflation. While everything today looks positive except inflation, I worry that we are experiencing a sugar high from all the federal spending. We have never had or used QE (Quantitative Easing) and now QT (Quantitative Tightening) and if this great experiment is going to lead to a desired soft landing. On a much smaller scale this was tried in the late 70’s and it resulted in “stagflation". I think of it as state capitalism but like Venezuela and every other country that has tried too much government the morphine wears off. It could lead to a recession or the desired soft landing. All the above affects investor sentiment and often the markets ignore the economics and sway the market in illogical and unexpected ways. Stay tuned.

On another note, a little head up. The WSJ just printed an article about the IRS auditing of taxpayers. The Treasury Inspector General for Tax Administration (TIGTA) released its latest report on how things at the IRS are going. Remember the new agents going after income above the $400,000 and above. Per the report “as of last summer 63% of all audits were on people making less than $200,000 and 80% of all audits were on people earning less than 1 million”. People in the top 3 tax brackets paid 77.1% of all income taxes. We taxpayers are the ones who will be paying the above-mentioned government spending. As for taxing the billionaires, if we taxed them 100% it would fund the government for 8 months. $5 trillion is what the billionaires have our debt is $33.1 trillion. Prepare your taxes accurately in case you are one of the lucky people to be audited. We thank you for the trust you have in us, Nick, Keith, Alison, and I will continue to do our best to give you excellent financial and investment advice.

Yours Truly,

Willis Ashby, President and CFP®

P.S. If you would like to receive future reports via email, please contact the office at 303-220-5525

Sources - Gao.gov; WSJ; First Trust; Morningstar Research; Zacks Research; Tax Foundation.org; Schwab Economics

1Q 2024 Newsletter

Thu, 11 Jan 2024 23:08:00 GMT

I hope you had a safe and enjoyable holiday season. For the first time since COVID we were able to have our entire family together, including the Australians, it was very nice. I hope yours was as enjoyable. The top news stories of the year were the rapid rise of interest rates effectively slowing inflation without crashing the economy:

1) The collapse of the crypto exchange FTX the conviction and jailing of its founder.: 2) push back on the Woke movement whose broad world view is that there are only the oppressed and the oppressor with the latter being vilified with the presidents of Harvard and Penn resigning; 3) COVID officially ending; 4) a Chinese spy balloon being shot down after it flew over the US

5) Taylor Swift concerts setting off Richter scales; and finally, 6) unfortunately, yet another war and add to this, Open AI going from unknown to an estimated 1.6 billion visitors and it was quite a year! Of these I think the expansion of AI will be an enormous event. I remember a speech Bill Gates gave before the internet was to be found anywhere, except a few universities and the government, saying it was going to change the world. I had no idea how big a change it would be; I suspect the AI expansion will have the same effect.

The broad Morningstar Index finished the year up an amazing 26.43% with 12.08% of that in the last 3 months. With a few exceptions, most of the market pundits predicted another year like 2022 (-19.43) and a recession. In hindsight, of course they were wrong!! This is yet another lesson on the importance of staying invested when all you see and hear about is “gloom and doom”. We do our best to keep you in good long-term investment strategies that are appropriate for you. The rapid rise of interest rates bringing down inflation was a good and positive thing, however, unfortunately it does not reverse inflation, so expect higher prices going forward. Most of the above pundits mentioned above are now saying we should have a soft landing and they (Federal Reserve) will likely lower rates this year. I am hopeful they are right, but I am in the camp of higher interest rates for a longer, rather than shorter time. Inflation is a stubborn thing: interestingly, if you remove housing, inflation is running below the Feds target of 2%. However, many things are in place to have the soft-landing we hope for, among them being the multiplicity of jobs!! The jobs report is excellent, but the biggest gains came from government hiring, thereby helping the economy now but not in the long term as our tax dollars fund such hiring. The stimulus and COVID checks will wear off in the next few months; then we should see how strong the economy actually is and if corporate profits can continue to grow. What does all this mean? Do your best to find good well-run companies and hold on; it has worked very well throughout my career which now spans a very long time.

Enclosed is our privacy statement. I must complain a little here. We do not sell or give your information to anyone unless we need to process your account, a court demands it, or you direct us to, for example, your CPA needs the information for tax preparation. The copy you are receiving is two pages of “blather” strongly recommended by our compliance law firm to stay in compliance with the SEC (Securities and Exchange Commission). Our old document was only one page!

Finally, be advised that our ADV will be provided upon request, or you can look at it on the SEC website. This is the document where we explain how Integra is run along with other disclaimers. Nick, Keith, Alison, Kathy and I thank you for allowing us to be of service. If your situation changes or you have any questions about your account(s), please contact us.

Willis Ashby, President and CFP®

P.S. If you would like to receive future reports via email, please contact the office at 303-220-5525

Sources - WSJ, Morningstar, First Trust, Zacks, Forbes, The Economist

4Q 2023 Newsletter

Thu, 05 Oct 2023 17:57:00 GMT

After the bruising market in 2022 where the broad index was down 19.43%, we are in a better place. Year to date the Morningstar broad index is up 12.81% but down 3.19% for the quarter. That said, we have a lot to keep our eyes on. On the positive side, consumer spending is remaining robust, and the Biden administration passed their TRILLION-dollar spending bill, corporate profits are slowing but still positive, unemployment is a low 3.6% and the Fed again passed on raising interest rates. All this means that we may have an economic “soft landing” (i.e., avoid a recession). On the other side of the coin, interest rates are up and may go higher. Inflation has come down but is still well above the Fed's target of 2%. Add to this the concern over the budget deficit and you have a mixed signal on where the markets are going. Putting it all together I am hopeful for a potentially rough but positive overall market. Why do I think this? For the first time in a decade, we can earn interest in the bond market. If we look back on our accounts, you will notice that the bond portion of the accounts made almost nothing. This has meant that we have lived and died on the equities in our accounts. We now can offset declines in stocks with the higher returns we can now earn on the “safe” part of our portfolios. If interest rates drop, we can get bond appreciation, another positive.

The market usually prices itself, trying to predict the next 6 months in advance. Given what just happened as I write this, we have a new issue to deal with. A group of Republicans have ousted their own speaker of the house. Welcome to politics and making sausage! They are fuming about two things: the deficit, and the border issue. The just passed trillion-dollar spending bill (mentioned above) will push our deficit north of $1.7 trillion for the fiscal year. Entitlement spending is grabbing increasingly more of the federal budget and must be trimmed. However, once elected, politicians like the rewards that come with the office and, even though they know we have a problem, will not fix it because they will be voted from office if they do. Most will be long gone when it all comes crashing down! The second issue with the same solving issue is a for a fix is the border. I have family who live less than 90 miles from Mexico and what we are seeing in the news is not a good illustration of the problems we have; they are massive and will add to the annual deficit, among other problems. I find it interesting that the sanctuary cities are now changing their tune. It is a mess! So how does all this matter to the markets? The ousting of the Speaker of the House was about the deficit fight as mentioned. We are now 45 days or so from another government shutdown. The markets do not like unpredictability or large budget deficits. It is impossible to predict the outcomes. But I relearned something that is easy to forget sometimes. We are investors and prices will fall, drop, rise, and fall! In January of this year, everyone I know was fearful and did not want to get in or buy. We were all wrong. Think long term and things will be fine!

I want to also cover the Schwab conversion in this letter. The TD accounts have moved over to Schwab and the few issues we have had with the conversion are being fixed as they pop up. Kathy was prescient and is to be given extra kudos for her understanding of the conversion, and the potential pitfalls, RMDs being just one of the issues she has caught. The calculations did not transfer, but fear not, Kathy thought of it ahead of time and we have spreadsheets with the missing data.

You will receive two statements for September. One from TD and one from Schwab. It should show the positions moving from TD, thus showing an ending balance of zero, and one from Schwab showing the positions received from TD. We expect there to be cases where interest earned, or dividends received but not paid at conversion, will flow into your old TD “accounts” and will then be automatically swept into the Schwab accounts. From our perspective we are learning the Schwab systems and are mostly up to speed on them. Bear with us as we work through the processes and forms. We are here and if you have any questions or concerns, please let us know. Nick, Keith, Alison, and I will as always keep our eyes on the market and make the best decisions we can.

Willis Ashby CFP, President

Q3 2023 Newsletter

Mon, 10 Jul 2023 15:21:00 GMT

I hope you had a wonderful 4th of July celebration. We have a reading of the Declaration at our gatherings, it is always amazing to me to hear how many people under 30 saying they didn’t understand what was declared and to whom it was sent. After the declaration we (our founders) wrote our Constitution taking the best from the Magna Carta of 1215 and the English Parliament’s Bill of Rights of 1689. We have a lot of issues in our country but when you look at our beginning, it is amazing!

The Morningstar broad index is up 16.52% YTD and up 8.49% in the last quarter. Large cap growth is coming back from the beating it took at the end of last year. The Federal reserve skipped raising interest rates last session. I think they were hoping the GDP growth would slow down, but it did not. The numbers that just came out show they were not correct in this assumption. The ECB (European Central Bank) increased their rates and, in a bit of irony, they maybe should have been the ones to have skipped a rate increase, given that growth did slow overseas. This, once again, shows trying to predict economies is close to impossible! You cannot time the market. Most people were very bearish in January. So much for the markets. We will continue to use a long-term view of not trying to hit home runs, which more often than not ends poorly, but look for well-run profitable companies with solid realistic growth. I want to spend the rest of this letter to you to help you understand the Schwab purchase of TD Ameritrade (TD) and what it means to you. The conversion is scheduled to happen on September 5, 2023. You will start to receive a key takeaway letter from Schwab soon, if you have not received one already. All your accounts and positions will automatically transfer to Schwab at that time. You will be assigned a new account number. If you are not set up on TD’s “advisorclient.com” website, we will help you set it up if you desire to use that platform. If you are currently using TD’s platform, about 60 days prior to the conversion to Schwab, you will log into Advisorclient.com and you will be given a choice to create a new username or keep your existing name. TD will send a link to log into the “SchwabAlliance.com” website. That’s it. From what we can tell on our end, there appears to be improvements from TD’s platform. Nick, Keith, Kathy, Alison & I will be available to help answer any questions you might have. We are currently reviewing our records to see if anyone is not set up on the TD AdvisorClient.com site to try and help make the conversion even smoother. Schwab has currently created a website which will go into more detail on the conversion. The site is “welcome.schwaab.com/alliance”, should you wish to access the new platform. Please call or write if you have questions. We all thank you and hope you have a great summer! Sincerely,
Willis Ashby, President and CFP® Wall Street Journal First Trust
Zacks Research

Q2 2023 Newsletter

Thu, 13 Apr 2023 19:49:00 GMT

You cannot say we do not live in interesting times; A past president indicted on criminal charges; bank failures; FTX collapse; and high inflation to mention a few. The Morningstar broad index was up 7.40% for the quarter and YTD. Most of this was the rebounding of the large tech companies which had been crushed at the end of last year.

I have always believed that the best way to gauge the market direction was by predicting company profits. A new factor has entered the picture which I believe may cause problems down the road: the Federal government. The optics are not good. The ring fencing of SVB bank and other banks guaranteeing all deposits may have needed to be done, but it is, nevertheless, highly suspect. The fact that Barney Frank sat on the board of the bank (yes, the “Frank” of the Dodd/Frank banking bill enacted after the 08-09 market crash) and the influence on the Fed to bail out the uninsured accounts is a stretch in my mind! Did politically well-connected people influence the Fed on its actions or delay action by banking regulators? I have had more than several clients who sold their businesses, and all were VERY aware of the 250K Federal Deposit Insurance Corporation (FDIC) insurance limit and acted quickly to address this limit. What “moral hazard” is now arising ? Will others say, “Do not worry, they will bail us out as well”. If it sounds like 08-09 before Lehman Brothers went out of business, you may have a point!

Now to the ironic part. The banks were invested in what was and is considered the safest investment in the world, the 10-year Treasury Note. Unlike 08-09 where it was “credit risk” (bad loans) which got out of control, this bank emergency was caused by “interest rate risk”. When interest rates go up, bond prices go down; That is a financial fact. The banks were forced to sell the bonds at a loss to give people back their deposits. Credit and interest risk are well known in the banking industry and to have a bank of this size fail to manage these risks is amazing to me!! This was poor bank management and reflects poorly on management and the Board of Directors. Add to this that the Feds were aware of the risk and were after the banks to correct these months before and you are back to influence and optics. I will not get into the FTX failure and the relationship of Gary Gensler the head of the Securities and Exchange Commission, Bankman-Fried’s mother and Stanford, optics! We will get past the above, but it is interesting the more you read about what caused the banks to collapse.

Another government issue we are watching is the Federal balance sheet. In 2008 it stood at $875 Billion. Today it is $8.6 TRILLION. When you create that much money you could end up with transitory inflation!! Oh, “we should drop the word transitory.” We are in uncharted territory and Powell is doing his best to tame inflation without crashing the economy. He may yet do it, time will tell. We are watching developments and will respond in the best way possible to protect our clients.

As usual, if you have any changes in your situation, please let us know. We have seen an alarming increase in phishing and spoofing attacks. Please be aware that these things are happening and that emails that come to you may have links that are malicious. We are receiving no less than five of these per day in our emails and we want to make you aware of this potential hazard. We thank you for the trust you place with us and if you have any questions, please contact Keith, Nick, Alison, Kathy, or me.

Yours Truly,
Willis Ashby, CFP®

WSJ 1st Trust
TD Economics Morningstar
New York Times Jerome Powell

Q1 2023 Newsletter

Fri, 30 Dec 2022 22:09:00 GMT

Q1 2023 Newsletter

First Happy New Year. I hope you and your families had a pleasant, safe, and healthy start to the year. There are so many things causing headline news and affecting the market: COVID, “Transitory Inflation”, Ukraine, another $1.7 trillion spending bill, FTX’s downfall, snowstorms, Trumps Tax Returns, Fentanyl and the border. It is no wonder we are having a rough market! The S&P was down 19.4% in 2022, the worst since 2008. I think the three things that are most affecting the market are:1) the COVID shutdowns,2) massive government spending, and 3) inflation. The shutdown of an enormous part of our economy during the pandemic, in hindsight, was a mistake. The necessary government spending following the shutdown went on for too long and now is too much. Thus, we have too much money chasing too few goods and services. This latest everything but the kitchen sink government spending is adding “fuel to the fire”! Months ago, the Federal Reserve and most economists were saying that the inflation we were seeing was “transitory”. Wrong. Fed Chair Powell admitted he was wrong and is clearly stating he will continue to raise rates until inflation gets to the stated goal of 2%. Raise rates too fast and for too long you get into a recession.

I read a lot of economic reports and almost all were wrong, the exception was Brian Wesbury at 1st Trust. Fortunately, the rate of inflation is slowing but it has not yet rolled over, meaning it is going down. It is looking like it may do so soon. If so, the market will turn, and once again we can look at our quarterly account statements and smile! To ease any pain you are feeling, realize the gains we made in the past years have more than offset the drops we have seen. Our firm’s goal is a long-term growth of 7% or better. I am optimistic that we can achieve that in the future.

I will recommend a book my brother in-law recommended. It is relatively short and is an excellent read: The Psychology of Money. If you have younger people in your family, buy them a copy. They will enjoy it and find it very useful in their financial planning.
A little housekeeping. Katie has accepted a new position and has moved on; we wish her the best. However, she is helping us through the year end accounting, and I am VERY grateful. Kathy Patton has graciously stepped in to cover the gap while we hire a new person. Also, Alison Ashby has joined the firm and is bringing smarts and computer skills at which I marvel. Welcome Alison! She is working on her CFP designation and will join Nick, Keith, and I in providing excellent advice and investing ideas. We all thank you for the trust you place in us and will continue to give you our best efforts.

Willis

WSJ, Forbes,1st Trust, Yahoo Finance, TD Economics

Q4 2022 Newsletter

Wed, 05 Oct 2022 22:01:00 GMT

This is not a pretty quarter or year for the markets. The broad Morningstar index is -4.58% for the quarter and- 24.88% for the year. As I noted a few quarters ago the large-cap growth stocks make up the largest part of the index, so when they go up or down the entire market feels it. The Large Cap Growth section of the market is -40.99%, (Time to buy?). We also know on average every 5 years the stock market loses money. It is the price we have to pay for “investing” and receiving better investment results in the long term. It is interesting to note that with few exceptions there have been no safe harbors. Cash -8%, Gold -8%, Bitcoin -70%, Bonds -15% (depends on the class and type Muni vs Corp vs Govt), so if you wanted to go into the currency market and made a “bet” on the US Dollar rising, you would be very happy; too risky for me. As a reminder, when interest rates go up bonds go down, but the usual result of “stocks go down bonds must rise” is not occurring. This is the time to reflect on how much our accounts have gone up in the last few years and to realize it will do so again. It is just a matter of time! Apple, Google, and Procter & Gamble are not going anywhere, just because the market thinks they are a LOT less than last year really means they were overpriced then and now they are likely underpriced.

The S&P earnings are at 8% so why are the markets down? If you strip out energy the number drops to 1% and the market thinks inflation is going to take it away: -no earnings and you get a down market! As much as I do not want to admit it, I agree. We don’t know if wages drive prices or vice versa, but we do know inflation is caused by too much money circulating in the economy. The Federal Balance Sheet in 2007 was $850 Billion, today it is close to $9 trillion. We cannot continue printing and sending out trillions of dollars. The Federal Reserve has said it will continue to raise interest rates until inflation is under control. The economy will likely take a hit but sit tight since it will recover. As a reminder, the market went up 9% in July alone. If you are worried about the markets give us a call, we have been through this before.

Keith, Nick, Katie, and I appreciate the trust you place in us and we feel that this market will be rough for the next several quarters but will recover. The, “This time it’s different”, is most likely not true. We will have a slowing economy, which will turn into a growing one, and our accounts will recover and be fine! Integra is required to register with the SEC, and Nick deserves great praise as he has spearheaded this rather large undertaking. I should also note the expense of doing so is considerable. The Schwab acquisition of TD Ameritrade will happen next year and the changes we are told, will be very minor ; several will even be very good. We will keep you informed as we learn more. We as a firm are committed to keeping our fees low and will not be making any changes. As usual, call us if your situation has changed. Yours Truly,
Willis Ashby, President

First Trust
FRED
Morningstar
WSJ

3Q 2022 Newsletter

Tue, 19 Jul 2022 15:38:39 GMT

I do not like green eggs and ham. I do not like this market; maybe I should change my name to Sam. The broad Morningstar Index is down 21.28% YTD and down 16.85% this past quarter. It has been 40 years since we have had stocks and bonds drop at the same time. Inflation is the highest it has been since 1981. Fed Chairman Powell has said he is more concerned with inflation than a recession and made clear he will continue to raise rates until inflation is heading back to the stated goal of 2%. Now that I said everything is terrible, let me remind you of other times the market dropped like this in 1932, 1939, 1940, 1962, and 1970, when the market rose an average of 24% the following quarter. Now is a great time to get whipsawed. At some point, investors will believe the market has dropped beyond where it should be, and the turnaround begins. It is especially important not to miss the turnaround.

See the graph below.

With that said, please keep in mind that when we project your long-term returns, it includes these market drops. It is uncomfortable but expected. Statistically, this occurs every 5 years and should be of no surprise. However, sit tight as this too shall pass!

Some of you have asked how raising rates stop inflation. I will use home buying as my example. Most people, when buying a home, determine how much they can afford per month. The interest rate you obtain on your mortgage matters more than you may expect. For example, let us assume you can afford a payment of $3,000.00 per month with an old rate of interest (such as 3% with EXCELLENT credit) using a 30-year mortgage.

In the above scenario, you could previously buy a home with a purchase price of approximately $710,000,00.00. Now, if we move the rate of interest up to 6%, you could only afford a home that costs approximately $500,000.00. The approximate $200,000.00 difference is huge for just a 3-percentage point rise in annual interest rates. As a result, you may likely reconsider your decision to buy and choose to stay out of the market, which will effectually slow the rate of inflation.

As always, if you have any questions or concerns, please write or call. Keith, Nick & I worry about the market for you. If history repeats itself, and I think it will, the market will recover, and our investing methods will prove sound again!

Yours Truly,
Willis Ashby, President

Q2 2022 Newsletter

Wed, 06 Apr 2022 20:14:23 GMT

The response to increasing oil prices is another matter. When oil prices go up it affects everything! Think of what is not affected by oil prices. If a product is shipped, plowed, or made it likely has oil in it. We should be doing all we can to reduce the price of oil. I do not understand the administration's action with respect to this. We are placing sanctions on Russia, yet we still want to buy Russian oil and have them broker a deal with Iran. We have shut down the Keystone Pipeline, (a safer and cleaner way to move oil around than rail or trucks) and we are preventing refineries in Texas and North Dakota from producing about 3 million barrels a day, yet we are going to Venezuela, Iran, and Saudi Arabia asking them to produce more! All have said no. It makes no sense to me to ask hostile actors to produce more thus funding them when we can produce it in the US. We are releasing oil from our strategic oil reserves, which is good but not enough to make a difference.

Given inflation and Ukraine, it is hard to know where the markets will go next. The usual indicators point up but with so many unknowns on the horizon, the best advice is to stick to your financial plan! My thoughts are as follows, expect a lot of volatility and stay with your long-term strategy. If our views change, we will act accordingly. In the meantime, buckle up!!

If you have questions or comments let us know and if your circumstances change let us know. We are watching the currents closely. Thanks for your trust.

Willis Ashby, President

Wall Street Journal

Victor Davis Hanson

Morningstar

First Trust

Federal Reserve St Louis Bank

Zacks research

Q1 2022 Newsletter

Wed, 12 Jan 2022 20:22:08 GMT

Welcome to the New Year. The Morningstar broad market index was up 25.78% for the year. The largest gains came for the small cap value funds which were up 31.79% and again show how diversification over time helps our returns. We have had another good year of outperformance.

The three things we are now paying attention to are inflation, Omicron, and the federal deficit. As strange as it sounds, from an investing perspective, inflation is not too concerning yet. Historically stocks that have risen with inflation are an excellent hedge. However, if inflation goes on too long, and too high, it does become a problem. If this happens, the historical "cure" is to raise interest rates, and the Fed has indicated they plan several (three) rate hikes this year. Personally, I think we will only see two. The debate last year was, is it temporary or long term? The long term, I think, has won that discussion and is an issue we may need to address later this year. Next is Omicron, as I write this, it appears to have spread very quickly, however in most cases, it seems to present milder, non-life-threatening symptoms. If businesses are shut down, as we were last year, we may need to shift where we place our funds. A poor business environment with rising interest rates is difficult to navigate. You may think just go to cash, however, cash in a high inflation market can be worse than riding a market through a dip. Remember the concept of permanent loss of capital in this regard. The last issue of concern is the federal deficit which eventually will be a problem. Individuals, businesses, AND governments cannot spend more than they bring in forever! Eventually, this becomes a problem. It seems that the trillion dollars plus "Build Back Better" spending bill is mired in the DC quagmire and will not pass as proposed. Instead, we may see nothing or a pared-down version. The proposed programs may have some good aspects, but raising taxes on business while giving tax breaks to high-income earners in high tax states at the expense of Coloradoans is not something I want. Also, I'm fairly sure the market would react poorly.

Looking forward I think the market will continue to rise with inflation, the supply chain issues will slowly resolve, unemployment will keep dropping and, if corporate profits are close to what is expected, it could be yet another good year. I do expect more market volatility though, so be patient with the headline news.

Our Annual Privacy Notice is available for download below. Please know that we do not share or sell any of your information unless it is necessary to invest your accounts, or you direct us to. If you would like our ADV (the document, we file to be a Registered Investment Advisor) let us know and we will get you a copy. It is a great read. (I can't believe I just wrote that). Also, some news. Nick will be taking over more of the operations of the firm, and we are having discussions on his becoming an owner of Integra. I will be going to a three-day workweek. My wife laughed herself silly when I told her about that! However, be assured I will be available if anything pressing comes up. Finally, the office will continue its current days and hours of operation regardless of these changes.

Keith, Nick, & I want to express our thanks to Katie. We had a busier than usual year end, a lot of the companies we work with are short-staffed and the Schwab acquisition of TD made things more trying than usual. Through her persistence, Katie was able to get time-sensitive things done. It was impressive!! Nicely done and Thanks. We are grateful for the trust you have in us, and we will continue to be the best stewards of your and our own money as we can. Thanks for your trust in all of us!

Download our Annual Privacy Notice … Here

Congratulations Five Star Award Winners, Willis Ashby and Nick Weisert

Wed, 12 Jan 2022 20:07:42 GMT

Q4 2021 Newsletter

Mon, 11 Oct 2021 16:36:04 GMT

It has been a good year for the market so far, but things have started to slow down as we head into the final quarter. The Morningstar Broad Index is up 14.92% overall this year, however, it has only increased by .03% the last quarter. This is a good example of how the market goes up and down in an unpredictable manner with spurts and pauses.

I have just returned from the Morningstar Investor Conference in Chicago where the “best and brightest” investors speak and give their views on the markets. Morningstar claimed that there were 700 people in attendance this year while the majority of attendees (2,400) opted for virtual attendance, however, I would be surprised if there were more than 400 people physically present. Just two years ago, there were well over 3,000 people physically present.

The large money managers, in general, believe, with a few exceptions, that with all of the government money, low-interest rates, and pent-up demand caused by COVID, we will enjoy increased earnings and, thus, an increasing market well into next year. I am more optimistic than I was prior to the conference but I still have concerns. The events that could derail these projections, which we will be watching, are supply chain disruptions, a new COVID variant shutting us down yet again, a federal government shutdown, problems caused by restrictions on non-vaccinated workers, and, finally, the unknown consequences caused by the above. To quote the Chief China Economist from Nomura Holdings, with respect to the supply chain disruptions, “Global markets will feel the pinch of a shortage of supply from textiles, toys to machine parts. The resulting supply shock will likely further push up global inflation, especially in developed markets such as the United States”. The number of container ships sitting and waiting to be unloaded is a good example, meaning you may want to do your holiday shopping early. Just this morning the government shutdown was resolved, but only until December 2021.

I will not speculate on the other issues. I have written in the past that I would much rather own a stock with increasing earnings that pays a 2% dividend rather than a 2% Treasury security with no upside. The pent-up demand is real, and you just need to look at the Denver real estate market to see an example.

Some of the other takeaways from the conference were:

1) Technology, to deposit a check with a teller costs the bank $40.00, an ATM $4.00, and your phone $.04.

2) What may seem like a slowdown, is the market getting back to its usual pace and valuations.

3) The mRNA vaccines are a good example of healthcare improvements that are just now coming to market; gene editing and therapy will revolutionize medicine.

4) Finally, is government spending; spending a trillion on anything is going to boost the market for a while, at least until it must be paid for. Don’t think for a second that the “tax the rich” will not include most wage earners. Paying it back and inflation are issues for another time.

The market is complex and always changing. Nick, Keith, and I will be watching all of these things in order to do our best to give you the most accurate, and up-to-date investment advice possible. As always, we thank you, and if you ever have any questions or concerns, please do not hesitate to contact us.

Willis Ashby, CFP

Integra Financial, Inc.

President

Sources: WSJ, First Trust, Reuters, and Morningstar

Q3 2021 Newsletter

Thu, 01 Jul 2021 15:41:58 GMT

Hello. I hope this letter finds you well and that you were able to enjoy some fun and relaxation with family over the 4th of July. After over a year of uncertainty, stress and often being apart from loved ones, what an amazing and well-deserved turn of events that has us enjoying our time together this summer. Brings a new perspective to Independence Day.

We started the year hitting 300,000 daily COVID cases on January 8th. A little under six months later the US sits at around 4,000 daily new COVID cases. That’s a 98.6% decrease! Truly a remarkable and welcome relief, particularly for those people dealing with COVID daily like healthcare workers. The US economy, in response, is rolling and in many areas getting close to pre-pandemic levels. TSA screening checkpoints, a measure of airport traffic, are at 80%+ of their pre-pandemic levels. Restaurant traffic is at 94% of pre-pandemic levels, a fact I can anecdotally confirm having gone out to a restaurant, sitting indoors for the first time a couple weeks ago. Who would have thought that a stranger sitting next to you at a restaurant would qualify as a novel experience? All told the US economy is now expected to grow 6.5% this year, the highest growth rate since the 1980’s.

Q2 2021 Newsletter

Wed, 28 Apr 2021 15:22:14 GMT

I hope this finds you well, I think winter has finally lost its grip and spring is upon us. The broad Morningstar Index was up 6.01% for the quarter with Small Cap Value up a whopping 21.41%, in contrast to all three sections of the Growth side down. As I have mentioned in prior letters the growth side had been outperforming the value side for a while. This reversal is a classic example of reversion to the mean.

The quarter overall was quiet apart from a $1.9 trillion Covid Relief bill. This much-needed spending is good for all the recipients. I do have an issue with only $400 billion going to citizens and the remaining $1.5 trillion going to government programs, cities, and states. I am going to be optimistic that the money will go to good programs. I do object to my Colorado federal tax dollars bailing out fiscally bankrupt cities like Chicago and others.

In addition to the above, the administration has just announced a new $2.3 trillion-dollar infrastructure bill and it has a reasonable chance of passing (my writing that just doomed it to not passing). I need more time to completely digest the details, however, as I understand it, it would come with a corporate tax hike. It proposes a tax increase from 21% to 28% and a minimum tax on multinational corporations of 21%. The short-term effect of all this government spending is positive for the market, but the long-term effects on the economy are less clear. At some point, all this spending will need to be repaid.

The other concern not currently showing itself is inflation. However, it may come about much quicker than anticipated as an unwanted result of all the cash in the economy. We are printing money to pay for this and if you look at M-2 money supply you see the effect. M2 is closely watched as an indicator of money supply and future inflation, and as a target of central bank monetary policy. Time will tell whether it becomes an issue. The economy is in its 10th month of solid growth, with 17 of the 18 manufacturing industries reporting growth. All this is positive for the market.

In closing Keith and I, both have our vaccines and Nick has received his first shot with his second due shortly. For me, it was a freeing (maybe prematurely) experience knowing that my risk of death and hospitalization has decreased. All of us here send our sincere condolences to those of you who have lost spouses or other loved ones this last quarter and feel for your loss.

Yours Truly,

Willis Ashby, President

Inherited IRAs Before and On or After 2020

Wed, 03 Feb 2021 20:56:38 GMT

As is generally well-understood, retirement accounts such as IRAs and Section 401(k) plans are subject to mandatory distribution requirements at some point, either during the owner’s lifetime or after his or her death by the beneficiary (ies) of the account. In “retirement language”, these requirements are known as the “required minimum distribution” (RMD) rules. Such rules operate to prevent owners of retirement plan accounts from experiencing the tax benefits associated with tax-deferred plans forever. RMDs are an annual calculation and require looking back at the previous year account balance on December 31 ^st , then dividing such balance by an applicable divisor obtained from one of three life expectancy tables provided by the IRS. Most financial advisors can compute the amount of client’s RMD, if applicable, for a client; however, T.D. Ameritrade also provides the required amount to the advisor in its VEO One software. Beginning in 2020, the age at which time distributions must begin is by April 1 ^st of the year following the year in which the owner of the account turns age 72. (Note that this required beginning date was extended by the SECURE Act 2.0 to April 1 ^st of the year following the year in which the owner of the account turns age 73, beginning in 2023. The Act also includes an automatic increase to age 75 by the year 2033.)

As noted, the RMD rules also apply to post-death distributions from an IRA, including a Roth IRA, as well as employer-sponsored retirement plans, such as the Section 401(k) plan. However, the rules for distributing the proceeds from the owner’s account, popularly referred to as an “inherited IRA”, also changes beginning in 2020. As a result, anyone who dies before January 1, 2020, and any existing inherited IRAs would fall under previous RMD rules. Anyone who dies on or after January 1, 2020, falls under another set of rules brought about by the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2020. Prior to the SECURE Act, the determining factor is if the account owner died before or after the age of 70.5 and had previously begun RMDs prior to death. Another primary factor is the beneficiary’s relationship to the account owner (that is, whether there is a “designated beneficiary” of the account). After the SECURE Act, the before-or-after age factor determining the requirement of RMDs was repealed, so that now the beneficiary’s relationship to the account owner is pre-eminent. In addition, a new class of “designated beneficiary”, known as an “eligible designated beneficiary” (or “EDB”) was added to the rules and applies to IRAs inherited in the year 2020 and afterward. Chief among this class of new EDBs is the surviving spouse of the IRA owner or 401(k) participant. A non-spouse beneficiary, such as an adult child, of an IRA or 401(k) is separated out from an EDB as a “designated” or “non-eligible” beneficiary and may no longer “stretch” the inherited IRA proceeds over his or her life expectancy as under previous rules. Rather, the non-spouse must now distribute the inherited proceeds over no longer than a 10-year period following the year of the owner’s death. (Note that a Table showing the allowable options for each type of beneficiary beginning in the year 2020 is included at the end of this blog.)

Let’s look at an example involving Carol and her father both before and after the new SECURE Act provisions (or before and on or after January 1, 2020): Assume Carol inherits her father, Ted’s, $500,000 IRA (end of 2018 balance) in the year 2019. Ted died October 30, 2019 and would have been age 75 by the end of the year. Ted had begun RMDs as of his date of death. Carol is age 50 at the end of 2019. As a result, Carol must take a RMD for Ted’s IRA based on Ted’s remaining life expectancy as determined using Table III from the IRS or a divisor of 22.9 years. This means that she must take a RMD of $21,834.06 in 2019 ($500,000 divided by 22.9). In 2020, the RMD would switch to Carol’s life expectancy divisor using Table I from the IRS or 33.3 years for a beneficiary age 51 at the end of 2020. Assuming the account had declined at the end of 2019 to $400,000, Carol’s RMD in 2020 would be $12,012.01. (Note that the pre-SECURE Act provisions, including Carol’s ability to “stretch” Ted’s IRA is “grandfathered in”.) Finally, in 2021, Carol would reduce the 33.3 factor used in 2020 by one or 32.3 (33.3 less 1) to determine the correct divisor. Operationally, under the pre-SECURE Act provisions, the life expectancy for a non-spouse inheriting an IRA where distributions had already begun at the decedent’s death is fixed the year after the decedent’s date of death.

Now compare the result of Carol inheriting the IRA from Ted if he had died in the year 2020, with the inherited IRA subject to the SECURE Act provisions. First of all, it makes no difference whether Ted, the decedent, had begun RMDs as of his date of death. The only determinative factor is the status of the beneficiary: here Carol, as a legally competent adult child, is classified as a (“ non-eligible”) “designated beneficiary” for RMD purposes. As a result, she is not permitted to “stretch” the IRA and has only 10 years beginning in 2021 to withdraw the full amount of Ted’s IRA account balance. For example, Carol now must spread the entire $500,000 inherited IRA account balance over 10 years instead of 33.3 years. Accordingly, Carol’s 2021 RMD is now $50,000 under the SECURE Act rules and not $12,012.01 as under pre-SECURE Act rules. Additionally, the new rules reduce the amount of time that the account balance in Ted’s IRA can stay invested and grow in a tax-deferred manner.

Finally, it is interesting to note that the IRA announced new life expectancy Tables (Table I, II, and III) in November of 2020, reflecting recent life expectancy gains experienced by most individuals. The Tables will take effect beginning in the year 2022. However, generally, the Tables are only effective for lifetime distributions from an IRA and employer-sponsored retirement plans and do not impact the maximum 10-year payout for non-spouse beneficiaries of an inherited IRA.

Q1 2021 Newsletter

Fri, 15 Jan 2021 22:15:26 GMT

Integra Financial, Inc. 1/4/2021

Welcome to a new year and let’s hope it is brighter than 2020. The pandemic is and will be with us for a while longer, however the promise of several vaccines lets us see the light at the end of the tunnel. Social unrest, the election, the drop in oil prices, and finally, a new variant of the virus threatening another shutdown of the economy are all affecting our markets. Still, despite all this, we finished the year with the Morningstar broad index up an amazing 20.90%. Growth stocks have been outperforming value stocks for a while and it has been frustrating to see the lag in the value sector. Last quarter started to correct the differences. The Value sector was up 17.29% with Small Value up a whopping 33.42%, Mid Value up 20.32%, and Large Value up 14.62%. It is a good lesson on staying with your plan. The temptation to sell was strong but well worth ignoring. The Federal Reserve is continuing to flood the market with liquidity and the newly passed stimulus bill is very helpful. We will wait to see what future problems may come from it, although debt and inflation are two. I think the vaccine combined with the new stimulus is driving the market to its new highs. I have written about volatility and it includes both the up and down. “In the short run the market is a voting machine, but in the long term it is a “weighing machine,” said Benjamin Graham, the father of value investing. We will invest and continue to focus on company profitability.

I have written before about blockchain technology and the currencies using it- Bitcoin etc.- and I confess I still do not fully understand the effects they are bringing. However, I remember a speech by Bill Gates several years before email existed saying that the “Internet” is going to change our lives. I could not then understand how. As I stated, I do not fully understand Blockchain technology now, however, I can say its impact is going to be big! It is now being called the Internet 3.0. I think it is well worth watching and as we find investing opportunities (we understand), we will bring them to our portfolios. It will be exciting. I recommend watching the Prime video “Cryptopia: Bitcoin, Blockchains, and the Future of the Internet”; the trailer can be found here: https://vimeo.com/440636858. I am also reading a very interesting book “Economic Facts and Fallacies” by Thomas Sowell. It is thought-provoking and I recommend it as well.

In closing, please remember to let us know of any changes in your financial situation so we can adjust your portfolio to match your new situation. Nick, Keith, and I thank you for the trust you have in us. Please contact us with concerns you might have. We hope you like the healthy food we sent, enjoy.

Yours Truly;

Willis Ashby, President

if you would like a copy of our ADV (the document which describes who we are and how we run our business), and or a copy of our Privacy Policy, please contact our office. Note that we do not sell anyone your information and only release it to someone if you authorize us to do so, i.e., your CPA, or if it is necessary to conduct your business.

Newsletter Sources

Morningstar | WSJ | Money & Wealth | TD Economics | Westbury 101

5 Financial Questions Every Young Adult Should Ask Themselves

Thu, 05 Nov 2020 19:10:29 GMT

Whether you are a recent graduate or a first-time professional, thinking about the potential the future holds can be so exciting. If you’re not thinking about your finances, however, you could be missing out on a crucial step in ensuring you reach all of that potential. Financial stability in your future starts with making the right choices to protect your wallet right now. If you’re unsure of where to begin your financial planning, ask yourself the following questions.

Do I Really Need Life Insurance Right Now?

There’s a lot of confusion around whether everyone needs life insurance, especially younger adults. The truth is, while people of all ages can benefit from having life insurance coverage, it’s extremely important for those who are the primary source of income or care in their household to be protected by life insurance. Life insurance can also offer financial peace of mind for those who are married or have children or even those who own a home. Plus, signing up for a policy when you are younger can have some perks , like getting more coverage for a lot less.

Should I Be Worried About Saving for a Home?

Renting instead of buying is becoming a popular housing choice for many young adults, but that doesn’t mean you shouldn’t at least save for the possibility of buying a home. You can easily start your savings by paying down debt and limiting your spending.

Saving for a down payment is a savvy financial move because if you don’t buy a home for yourself, you can put your savings toward a real estate investment for extra income that requires minimal effort on your part. Saving for a down payment also works to your benefit because the more you put down , the less you’ll have to pay in monthly mortgage payments.

Do I Really Need Health Insurance Coverage?

Having health insurance can help you afford the preventative care needed to maintain good health, and can also help you avoid paying out of pocket for surprise medical bills after an emergency. Plus, it’s typically easy and inexpensive to get coverage from your employer, especially if you work full time, or you can look for reasonably priced plans via the annual healthcare marketplace. Keep in mind that if you plan on adding coverage from the marketplace, you only have a very short window to do so. This year’s open enrollment runs from November 1 to December 15 for coverage that officially begins in 2020.

Should I Think About Saving for Anything Else?

Even if you never plan on buying a home or investing in real estate, there are still some common savings goals you should think about setting for yourself. One such goal is investing in an emergency fund, which can help out with unexpected expenses and life events. If you can swing it, plan to set aside enough to cover anywhere from 3 to 6 months’ worth of expenses in this account. An emergency fund can really come in handy if you lose your job, experience a sudden illness, or have any other unexpected issues impact your family’s finances. This is another time when a high-interest savings account can be helpful in reaching your goals.

Do I Really Need to Open a Credit Card Account?

Being cautious about credit is crucial when you are venturing out on your own, but don’t let your anxiety prevent you from using credit altogether. You actually do need to start building credit now, especially if you plan on leasing an apartment or buying a home in the future. To ensure that you take the right steps towards building that credit, be sure to look for online guides that will provide all of the ins and outs you need to know, in order to avoid taking on too much debt or getting in over your head with credit cards—all of which can impact your credit score.

These questions can help you create a basic financial plan. If you really want to get some savvy tips for your financial present and future, though, working with an accountant or an Integra Financial investment advisor is wise. That way, you can create a custom financial plan that really works for you.

For a completely free, no-strings-attached 20-minute phone consultation, contact Integra Financial to learn more about their unmatched level of financial expertise. Call (303) 220-5525 or email willis@integrafinancial.ws.

If you have any questions for the author, please email Christopher Haymon, christopher@adultingdigest.com

Q4 2020 Newsletter

Fri, 16 Oct 2020 17:51:20 GMT

Integra Financial 10/05/2020

I hope you are weathering well the environment in which we find ourselves... I’m missing the crowded restaurants and movies we used to attend and look forward to returning to them. On a very positive note I would like to announce that Nick Weisert has sat for and passed his CFP exam. I could not be happier for his latest achievement. It is not an easy 6-hour exam. Congratulations Nick. Keith Fevurly has just published his 4th book. “Planning for the Elderly” A Financial Guide to Aging”, available on Amazon.com. It is an excellent resource and full of very useful information. If you would like a copy let us know, we have copies to give to you. Congratulations Keith on your 4th book. In other news, after looking at all our options, we have decided to renew our lease for another 3 years here in the Tech Center.

On to the markets. In January, if you would have known that we would experience a pandemic, social unrest, and a drop-in business activity last seen in the Great Depression beginning in 1929, who could have been able to predict that at the beginning of the fourth quarter the Morningstar Total Market Index would be UP 5.84%! The Federal Reserve has used a 2% annual inflation target as the targeted amount of inflation as one of its main goals. However, they have now abandoned that metric and said they will allow inflation to go above the 2% number. Historically (last 10 years), inflation has occurred only at around 1.5% annually. This means low interest rates for a long time. The money supply has exploded as has our national debt. Greenspan spoke of “helicopter money” during the 08-09 great recession and it appears that is what the Fed is doing now. This infusion of funds, along with the almost zero interest rates, are what is helping to hold the market up. Low interest rates and a flooded money supply makes the stock market appear to be the only game in town. As a result, cash savers essentially earn nothing after inflation! I am pleased with the current performance of the market, and the economic indicators are looking positive. However, I worry about the mounting Federal debt; it is now greater than our annual GDP. As has been very well said: “Gold is the money of kings, silver is the money of gentleman, barter is the money of peasants—but debt is the money of slaves”. The amount of debt is an issue that must be addressed lest we become a society of those who pay taxes and those who live off them.

You might want to watch a Netflix documentary I found interesting “The Social Dilemma” it is about an hour and a half and helps explain some of issues which may be causing the polarization of our society. In closing, we all thank you for your business and will work to provide excellent service and advice.

Your Truly,

Willis Ashby, President

Annuities and the Retirement Income Process

Fri, 18 Sep 2020 20:10:10 GMT

Unlike life insurance, which provides financial protection against dying a premature death, an annuity provides protection against living too long. Thus, an annuity is insurance designed to provide for the possibility of an individual or retiree outliving his or her income, known in insurance language as the risk of “superannuation”. An annuity product’s inclusion as a payment option in an employer-sponsored retirement plan has been encouraged by recent legislation. Essentially, any employer plan must include an illustration of what an annuity payout would look like if the participant chose to “annuitize” his or her retirement income distribution.

Annuitization is the process of converting an accumulated capital sum, usually at the date of retirement, into a level and regular stream of annual payments. The process is designed to eliminate what is known as “longevity risk” or the “risk of superannuation”, the possibility of outliving one’s money and not dying until after one’s projected life expectancy. An annuity to begin payment after the date of retirement is an “immediate annuity” used in the process of “immediate annuitization”. Often, an employer-sponsor of a retirement plan, particularly a pension plan, will purchase a commercial annuity with the accrued benefits of the plan, thereby transferring the risk of future retiree payments to an insurance company. The default risk associated with non-payment is, as a result, transferred from the balance sheet of an employer to the balance sheet of the insurance company.

Despite the obvious advantage of the immediate annuity in the elimination of longevity risk, most Americans have traditionally not favored the annuity product and process of immediate annuitization. Why? The primary reason for rejecting the form of payment is the loss of control over the retirement assets. Specifically, the “annuitant” (person entitled to the annuity payments) may require a considerable sum of retirement funds to pay for a medical emergency. Whereas annuities often provide for a “guaranteed lifetime withdrawal benefit” (GLWB) of a percentage of funds (for example, five percent of the income base) as an alternative to annuitization, this may not be adequate to meet the financial needs of the annuitant. Annuities sold-in-the-past specified the forfeiture of the capital sum (the “principal”) of the annuity if the annuitant died before collecting the total sum. This has now been remedied by present-day annuities where a death benefit is offered to a named beneficiary. Indeed, a special form of annuity payment option, a “qualified joint and survivor annuity” (QJSA), must be offered to some married participants of an employer-sponsored plan. If a plan requires a QJSA, a married participant opting for a single-life payout of the retirement assets at the time of distribution, must get the written consent of a named beneficiary to waive the joint form of payout.

Other perceived problems with the immediate annuity form include:1) if fixed in amounts payable (as is usually the case), such payments are not adjusted for inflation; and 2) low interest rates (as is currently the case) will lower the amount of payment. Still, the immediate fixed annuity form is often purchased to protect against the possibility of a “bear market” in stocks; that is, such annuity purchased by the retiree will typically cover his or her basic living expenses so that stocks do not need to be sold at a potential loss and reduce the growth of the retiree’s portfolio. For this reason, as well as to implement portfolio diversification, most financial advisors recommend that no more than half, usually less, of a retiree’s investment portfolio consist of an immediate (or variable) annuity.

Annuities may be categorized in several ways, but most investment advisors differentiate annuities by the time and method of payment: an immediate fixed or deferred variable annuity. An immediate fixed annuity makes payments immediately, or within one month from the purchase date of the annuity, and in a fixed or pre-determined amount. Such an annuity is often used by a retiree as an alternative to a reverse mortgage and tends to be “qualified” for tax purposes, meaning all annuity payments are currently taxable (since the annuity was purchased with “before-tax dollars”, either by an employer-sponsor of a retirement plan, or from a rollover IRA established by the annuitant). In contrast, a deferred variable annuity is purchased by a pre-retiree to provide variable payments at the time of the individual’s retirement date. As such, the pre-retiree may increase payments over time through the growth of the annuity’s account value in mutual fund sub-accounts. The variable form of annuity, for tax purposes, may be payable either from qualified funds (such as a rollover IRA) or non-qualified funds, where the “after-tax dollars” expended to purchase the annuity are recovered tax-free by the annuitant during the time of retirement. Both types of annuities provide for a death benefit to the heirs of the annuitant, a feature that is common to insurance products generally. But, unlike a traditional life insurance policy, the death benefit payable from an annuity is income-taxable!

Historically, annuities, particularly deferred variable annuities, have not been recommended by investment advisors because of the high cost of the annuity. The argument goes that a variable annuity is nothing more than a “mutual fund wrapped in a life insurance shell”! Thus, if wanting to invest in mutual funds, a retiree, particularly one that does not need life insurance protection, should merely invest in the mutual fund without the death benefit protection and cost. There are also additional costs incurred with the purchase of “riders” associated with most annuities. However, a major advantage of a deferred variable annuity is that the pre-retiree is permitted to save a large amount of cash and not pay taxes on either the cash or the income generated thereon until a much later date. The annuity can then be used as a supplement to Social Security and personal savings in generating needed retirement income. Moreover, to encourage the inclusion of an annuity as a source of retirement income, the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 made it easier for an employer to offer an annuity in a retirement plan without fear of employer liability for possible underperformance.

A final, and increasing-in-popularity, form of annuity is a deferred income annuity, a type of which was introduced by the Obama administration: the QLAC or qualified longevity annuity contract. A deferred income annuity is a type of insurance contract whereby, in exchange for a lump sum payment, the insurance company promises to make a monthly payment to an individual beginning at some future point of time. In such manner, the individual (known as “the annuitant”) is insured (guaranteed) against running out of money during his or her lifetime. The annuity payment can begin at any point in the annuitant’s future, including in his or her early 80’s when many long-term care payments are initially needed. Moreover, the assumed interest rate used to calculate the amount of deferred annuity income is generally higher than prevailing bank certificate-of-deposit (CD) or Treasury Bill rates.

A “qualified longevity annuity contract” (or “QLAC”) is a type of deferred income annuity funded with proceeds from a tax qualified retirement plan, such as a 401(k) plan or IRA. Under current law, an individual must begin “required minimum distributions” (or “RMDs”) no later than April 1st of the following the year in which he or she attains the age of 72. A QLAC is a retirement strategy whereby a portion of the RMD for the annuitant is deferred until a certain age (currently, the maximum is age 85). The main benefit of the QLAC is a deferral of taxes that is otherwise due on the RMD. The maximum age of 85, which may be chosen by the annuitant, also corresponds nicely to when the annuitant may need the RMD for the payment of long-term care expenses. Under current rules, an individual can expend the lesser of 25% or $135,000 of their employer-sponsored retirement plan or IRA to purchase a QLAC.

If you are interested in using an annuity as a source of retirement income in your portfolio, please contact either Willis or Nick of our office.

Q3 2020 Newsletter

Wed, 22 Jul 2020 16:02:21 GMT

To say we live in interesting times is an understatement. I would be at a loss as to where to start however I can focus on the markets and while that limits the topic it does nothing to anticipate the future. Let me start by saying I hope you had a good 4th of July. We live in an amazing country, yes, we have lots of things that need and will be to be changed and improved upon. Like Vietnam in the late 60’s change is slow and sometimes painful. We can however have the types of protests we are having and while some people may be prosecuted, we will not have beheadings, or be sending people to places like the camps in North Korea. I could go on but I have pontificated enough and can now move to the markets.

The 1st quarter as I stated in my last letter was just plain ugly, we had market drops not seen in decades. Now the 2nd quarter comes along and goes thru the roof with market rises not seen in decades. The last three months saw a rise of 21.98%. The net result is the broad Morningstar index is down -3.11% for the year. The Feds have committed to a very loose monetary policy for the foreseeable future thus supporting the markets. I think the market is looking 6 months into the future and is being optimistic about earnings and the economy in general. If we continue to have businesses reopen AND people use social distancing and are smart about mask use the market makes sense. If the virus is as unpredictable as it has been or turns more deadly, then the market is fooling itself. Time will tell and I like to be an optimist. As I wrote about last quarter and is still keeping me up is the bond side of the market. Historically we have used our bond positions to buffer the volatility of stocks and they have acted as a shock absorber of sorts. Stocks go down bonds go up and we get a smoother ride is the concept. With the 10-year US Treasury yielding .65% the historical shock absorbing effect is lost. Remember if yields go up bonds go down and if yields go down bonds go up. There is nothing left on the down side and if yields rise the “safe” US Bond looks ugly. Nick, Keith, and I will work on coming up with some clever solutions to this issue. We are sticking with our long-term investment themes; it has been a wild ride but so far it has been the right thing to do.

Some housekeeping. My hat is off to Katie who has, with not much help from the rest of the team migrated an amount of data which is incredible (the old system has well over 20 years of history). I thank her for her expertise and hard work on the conversion. While there is more to be “fixed” we can see the light at the end of the tunnel. We will be rolling out our new client portal in the next quarter and we believe you will like it. In closing I am happy to report Integra is able to weather this turmoil without any government PPP loans or other government support. There are a LOT of financial firms whose finances and balance sheets are not as strong as an investment firm should be who have needed these loans. We follow our own advice and we are better for it. We welcome our new clients and thank you so much for the trust you place with us. Stay safe and well.

Yours Truly

Willis Ashby, President

P.S., Drink Gatch Wine from Australia.

Roth IRA Conversions in 2020 and Beyond

Fri, 10 Jul 2020 16:40:45 GMT

The recent pronounced drop in the stock market and waiver of required minimum distributions (RMDs) have proven the wisdom of making a Roth IRA conversion in the year 2020. This is a strategy whereby the account owner of a traditional IRA transfers some or all the money in the traditional IRA to a Roth IRA. The “cost” of accomplishing this transfer is the payment of income taxes due on the contributions and earnings of the traditional IRA at the time of the up-front. Whether to make the conversion primarily comes down to a comparison of the individual’s current marginal income tax rate (at the time of the conversion) and the rate expected to be paid in the future (at the time of retirement). If this rate is expected to be higher in the future than it is currently, the conversion is accomplished with a significant tax savings. For example, the 2017 Tax Cuts and Jobs Act is presently scheduled to expire (“sunset”) in 2025, so rates are likely to be higher in 2026 than currently. Moreover, to make an optimal conversion, the account owner of the traditional IRA should pay any up-front taxes using money other than those funds distributed from the traditional IRA.

However, there are other questions that should be answered before accomplishing a Roth IRA conversion, whether in the year 2020 or beyond. Some of these (with accompanying comment) are as follows:

· Will you have sufficient income from non-retirement account sources to support yourself in retirement? If this is the case, you will also be successful in avoiding future lifetime required minimum distributions (RMDs) from a traditional IRA that could force you into a higher marginal income tax bracket.

· Will your assets have enough time and be invested in such a manner where you can recover the up-front money used to pay taxes due on the conversion? The general rule here is that assets need to be held in the Roth IRA at least 10 years to recover the up-front taxes paid, but this can vary greatly based on the taxpayer’s Roth IRA portfolio and the amount of funds converted on which up-front taxes were paid.

· Do you have enough retirement assets so that you will not need to use them all to support your desired retirement lifestyle? If so, this allows you, as the taxpayer, to effectively use the Roth IRA as an estate planning accumulation device to pass assets to heirs income tax-free. There are still post-death RMDs required from a Roth IRA, however, the surviving spouse beneficiary may “stretch” the post-death RMD over his or her lifetime. Effective 1/1/2020, a non-spouse beneficiary of a traditional or Roth IRA must generally distribute the proceeds over a maximum 10-year payout period (the major exception to this rule is a non-spouse beneficiary where the original owner of the IRA died before 2020).

· Do you have income tax deductions that exceed your income in the current year? If you, as the taxpayer, have experienced a year with a great amount of itemized deductions, such as charitable contributions, and correspondingly less taxable income, then you should probably convert. In this respect, note that the Coronovirus Aid, Relief and Economic Security Act (CARES Act) of 2020 allows itemizers to deduct charitable contributions up to 100 percent of their adjusted gross income (AGI) in 2020 only, thus potentially “zeroing out” any income tax liability entirely!

The best time for retirees to make a Roth IRA conversion is before claiming Social Security benefits and taking required minimum distributions (RMDs). For example, if a woman retires at age 62 with $1.25 million in retirement assets ($1.0 million in a traditional IRA and $250,000 in a taxable account) and plans to spend $72,000 per year in retirement, she should, first, decline to take Social Security until age 70. Next, she should withdraw the needed $72,000 living expenses from the taxable account; the balance in this account should support her for approximately 3.5 years. During that time, she should convert enough money from her traditional IRA at her current tax bracket (likely 22 percent given the amount of traditional IRA balance) to fill up that bracket and deposit the money in a Roth IRA. As her Roth IRA account balance grows income-tax free, her traditional IRA balance declines because of the conversion. Subsequently, beginning in 2026 when the expected tax rate is higher, the woman should change her withdrawal strategy, by taking out enough from the traditional IRA to reduce taxes on her Social Security benefit. Why are her Social Security taxes reduced? Because there is at least a 15 percent exclusion (sometimes, a 50 percent exclusion) of the Social Security benefits under current law. The woman can then use the income-tax-free Roth withdrawals to supplement her income without fear of having the income taxed at the higher rate.

Another lesser-known form of IRA conversion is a “back-door Roth IRA” conversion. This is a two-step technique: 1) the individual saver contributes to non-deductible IRA

traditional IRA and 2) converts the traditional IRA to a Roth IRA. Why does the individual saver use the non-deductible form of traditional IRA as an intermediary form? Because, unlike the traditional IRA, if a saver makes above a certain amount of adjusted gross income (AGI), limitations apply restricting the amount of any contribution that may be made to a Roth IRA. In other words, if the saver makes “too much money” in any taxable year, he or she may not make contributions to a Roth IRA. However, these same AGI limitations do not apply to the non-deductible form of traditional IRA. Hence, the saver makes contributions to the Roth IRA through the “backdoor” of the non-deductible traditional IRA and funds the Roth IRA with after-tax traditional IRA contributions

Distinguishing Exchange Traded Funds (ETFs) from Mutual Funds

Wed, 03 Jun 2020 17:11:41 GMT

Mutual funds and exchange traded funds are types of professionally managed assets, but there are major differences. First, a mutual fund (or its proper name, “open end investment company”), is priced only at the end of the trading day, when its “net asset value” (NAV) is determined. The NAV of any mutual fund is computed by taking the portfolio’s total market value at the end of any trading day, then subtracting any fund liabilities, and, finally, dividing the resulting number by the number of outstanding shares in the fund. The fund is said to be “open ended” since it continually offers new shares to investors and remains ready to buy back outstanding shares from investors. Alternatively, an exchange traded fund (“ETF”), trades like a stock, meaning an immediate price is obtained when there is a trade of the share (or more properly, the “depository receipt”). While the ETF is also valued according to its NAV at the end of the closing day, the more relevant value is its “intraday NAV”, the difference between its NAV and market price.

A second major difference is the type of assets in which a mutual fund invests as compared with the ETF. There are numerous categories of mutual funds depending on the fund’s investment objective, but generally these categories are listed as part of a fund that invests solely in stocks or bonds or a combination of stocks and bonds, referred to as a “balanced fund”. A notable separate type of mutual fund is an “index fund” or a fund that invests only in the shares of a major index such as the Standard & Poor index of 500 stocks (“S&P 500”). Alternatively, an ETF typically invests solely in index funds. Indeed, an ETF is often described as an “index fund that trades like a stock”.

A final major difference is that most mutual funds (with the notable exception of the index fund) are managed “actively”. If the fund portfolio manager practices “active management” techniques, it means that the manager or investment company is attempting to outperform a broad market index, such as the S&P 500 Index of stocks, on a longer term or more-than-one-year performance basis. Alternatively, most ETF’s are managed “passively”. At the heart of “passive management theory” is a belief that any market or stock exchange is “reasonably efficient”, meaning that there is no immediately apparent way to outperform the broad market index. As a result, an ETF manager attempts only to match the market index and does not trade the portfolio’s holdings nearly as frequently as an “active manager”, thereby resulting in lower costs to the investor.

An investor’s annual total return, both in terms of dollars and percentage, from a professionally managed asset, such as a mutual fund or ETF, is heavily dependent on the fees charged to manage the portfolio. For example, if a fund imposes a management fee of one percent (1%) of its total NAV to manage the assets, an investor must achieve an annual return of at least one percentage more than the return the market index returns. Moreover, if the investment advisor charges a fee of an additional one percent to select the fund and manage the investor’s individual portfolio, the “bar” to overcome is now at least two percent (2%) more than the performance of the market index. Studies have shown that over a long period of time, for example 10 or 20 years, the recovery of these fees by the investor is extremely difficult to recoup. Thus, the greater the fees imposed by the fund or advisor, the more difficult it is to accumulate wealth over time.

A major advantage of the ETF form of professionally managed assets is its fee structure, resulting in a relatively low amount of fees imposed on the investor. In part, this is because a fee is only incurred if the underlying assets in the ETF are traded (bought or sold). Since the ETF is managed “passively”, and trading of its underlying assets is relatively infrequent, a fee advantage over the mutual fund results. Still another way in which ETFs achieve a fee advantage is because of how the ETF trades. Specifically, as mentioned previously, an ETF trades its shares like a stock. Accordingly, the sale of an ETF share from one investor to another has no impact on the value of the overall fund. Conversely, when a mutual fund shareholder sells his or her shares, they must be “redeemed” (bought back in cash) from the investor. Sometimes, this requires the mutual fund to sell shares to raise cash to cover the cost of the redemption. As a result, the operating expenses of the mutual fund are typically more as compared to the ETF.

For an individual interested in investing in a professionally managed asset, the question arises: “Which is best, the mutual fund or the ETF”? A related question is: In which category of mutual fund or ETF, such as stocks or bonds, should an individual invest? However, before answering these questions, an individual should understand that both mutual funds and ETFs provide a major advantage over individual stocks and bonds: that of, instant diversification. Diversification is the art of constructing a portfolio to exhibit less total risk without experiencing an equal reduction in expected return. The construction of a fully diversified portfolio is the major benefit that a portfolio manager and investment advisor “brings to the table” and how the advisor in part “earns his fee”!

The key to properly diversifying a portfolio is to diversify “across and within” sectors of the market. There are 11 sectors of the market as follows:

• Technology

• Financials

• Utilities

• Consumer Discretionary

• Consumer Staples

• Energy

• Healthcare

• Industrials

• Telecom

• Materials

• Real Estate

An individual can invest in a sector-specific mutual fund or ETF, but if doing so, has achieved only diversification “within” the sectors of the market. Rather, to achieve further diversification “across the market”, he or she should invest in several mutual funds or ETFs.
Here is a table summarizing the characteristics of ETFs as compared to mutual funds:

EXCHANGE TRADED FUNDS (ETFs) VERSUS MUTUAL FUNDS

How to Maximize Social Security Benefits

Mon, 18 May 2020 20:52:01 GMT

The Social Security Administration in its publication, Social Security Basic Facts (2017), reports that 50 percent of unmarried individuals and 71 percent of married couples rely on Social Security benefits for 50 percent or more of their total retirement income. Some 23 percent of unmarried individuals and 43 percent of married couples rely on such benefits for 90 percent or more of their retirement income! Notwithstanding the fact that Social Security was never intended to constitute such a sizeable portion of a worker’s retirement income, most participants want to ensure that they maximize their retirement benefit from Social Security to the greatest extent possible. Accordingly, other than delaying the start of benefits as long as possible until a maximum age of 70, there are four other methods to maximizing Social Security benefits. They are:

1) Improve the participant’s earnings record with the Social Security Administration

2) Take advantage of any spousal and survivors benefits available under the Social Security program

3) Minimize income taxes on Social Security benefits

4) Consider Social Security as only a part of the participant’s total accumulated savings generating retirement income or retirement income strategy

Earnings Record

There are two methods of improving the participant’s earnings record with the Social Security Administration (SSA) and, thus, maximizing his or her total benefits. These are: 1) work longer and delay benefits; and 2) earn more during the participant’s working years.

If a participant born after 1943 delays the receipt of Social Security retirement benefits until attaining age 70, a maximum amount of monthly benefits will be achieved. Specifically, an annual credit of eight percent (8%) is awarded to the participant for each year delaying the receipt of a benefit beyond his or her full retirement age (FRA). For example, a participant born in 1950 with an FRA of age 66 and with a monthly benefit of $1,500 per month, can increase his or her monthly benefit under Social Security by 32 percent to $1,980 ($1,500 times 1.32) if delaying the receipt of the benefit to age 70. This amount could be increased even further by a cost-of-living-adjustment (COLA) announced by the SSA at the end of each calendar year.

The second method of improving a participant’s earning record is for the worker to earn more money throughout his or her working years when paying into the system. When determining retirement benefits, the SSA first calculates the worker’s “average indexed monthly earnings” (“AIME”) during the 35-year period of the worker’s highest annual earnings. The SSA then applies a formula to those earnings and arrives at a basic benefit, otherwise referred to as the worker’s “primary insurance amount” or “PIA”. (Note: It is this PIA that is indexed for the COLA and increases if the consumer price index of prices also rises.) As a result, if there are a greater amount of worker’s earnings accumulated over the 35-year AIME period, there will be a greater PIA from which to determine the worker’s monthly retirement benefit.

It is important to understand that, currently, only a certain, maximum amount of earnings is accounted for when determining a worker’s AIME and, thus, his or her PIA. This maximum amount of earnings is known in Social Security law as the worker’s “taxable wage base” (TWB) and increases each year based on the rate of inflation. The amount is announced each year, at calendar year-end, by the SSA. The TWB is also the maximum annual amount on which a worker contributes to Social Security or pays a “payroll tax”. Above this amount (TWB), the worker does not qualify for Social Security retirement benefits; thus, a Social Security benefit is not payable for amounts earned above the TWB.

Spousal and Survivor Benefits

A spousal benefit of up to 50 percent of the participant worker’s (other spouse’s) PIA is payable to the spouse at his or her FRA. This is the result even if the electing spouse is not otherwise eligible to receive Social Security retirement benefits on his or her own earnings record. For example, if Jack, the participant worker, has a PIA of $2,000 per month at his FRA of age 66 , and Jill, his spouse, applies for a spousal benefit at her FRA, she will receive a benefit of $1,000 per month or 50 percent of Jack’s PIA. Alternatively, Jill could have elected to retire “early” (at age 62) and apply for spousal benefits using Jack’s earning record, but her benefit may be reduced to as little as 32.5 percent of Jack’s PIA. Finally, if Jill was born before January 2, 1954 and has reached her FRA, she can choose to receive only Jack’s benefit and delay receiving her own retirement benefit until age 70 (commonly referred to as the “suspend and file” strategy).

A survivorship benefit is also payable to the surviving spouse of a deceased participant worker. The surviving spouse, sometimes known as the “widow” or “widower”, may receive the larger of his or her own retirement benefit (PIA) or the deceased worker’s benefit (PIA) when the widow or widower attains FRA. (A reduced benefit from the deceased worker’s PIA is payable when the widow or widower attains age 60.) To maximize the survivor’s benefit that is payable, the deceased worker should delay taking his or her retirement benefit as long as possible since the survivor’s benefit reflects any delayed credit. If the deceased spouse died before his or her FRA, the survivor benefit is based on the amount the deceased spouse would have received at his or her FRA. Alternatively, if the deceased spouse died after his or her FRA and had not yet begun benefits, the survivor is eligible for the deceased spouse’s date-of-death benefit, including delayed-retirement credits.

Minimize Income Taxation of Benefits

Prior to 1983, there was no Federal income tax imposed on Social Security benefits. However, in 1983, and after Congress introduced a concept known as “provisional income” (“PI”) into the tax law, approximately 40 percent of participants pay tax on receipt of Social Security benefits.

The computation of “PI” is made in three steps:

1) Start with gross income not including any Social Security benefits.

2) Add back any tax-free income, such as municipal bond interest or dividends, and any foreign earned income. This amount is known as the taxpayer’s “modified adjusted gross income” or “MAGI”.

3) Calculate 50% of Social Security benefits and add that amount to steps 1 and 2 total to determine the taxpayer’s PI.

Depending on the total amount of PI and a taxpayer’s filing status, compare the PI to several “hurdle amounts” as follows:

Married Filing Jointly Single Taxpayer

1st Hurdle $32,000 $25,000

2nd Hurdle $44,000 $34,000

Then, apply the following rules:

1) If the taxpayer’s PI is less than the 1st hurdle, there is no tax on the Social Security benefit (it is tax-free).

2) If the taxpayer’s PI is between $25,000 and $34,000 ($32,000 and $44,000 for a married filing jointly taxpayer), up to 50 percent of Social Security benefit is, generally, taxable.

3) If the taxpayer’s PI is more than $34,000 ($44,000 for a married filing jointly taxpayer), up to 85 percent of Social Security benefit is, generally, taxable.

So how does an individual minimize the taxation of Social Security benefits? One alternative is to keep one’s PI below the hurdle amounts. Barring this relatively unfavorable alternative (meaning the taxpayer is living on a relatively small amount of income), a second alternative is to not invest in tax-free investments, such as municipal bonds, or work in another country. Still, a third alternative is to suffer a reduction in Social Security benefits, such as some public-school teachers and federal civil service employees, because of a provision in the Social Security law known as the Windfall Elimination Provision (WEP).

Social Security as Part of Overall Retirement Income Strategy

When the program was implemented in 1935, Social Security was intended only as a supplement to an individual’s total retirement income! Thus, a worker should accumulate as much income as possible from the other two legs of the “three-legged retirement stool”. How? By taking advantage of 1) employer-sponsored retirement plans and 2) personal tax-deferred savings accounts.

An individual preparing for retirement usually supplements Social Security benefits with salary reduction before-tax contributions to an employer-sponsored plan, such as a Section 401(k) plan, and tax-deductible contributions to a traditional IRA and, sometimes, after-tax contributions to a Roth IRA. In such manner, the portion of total retirement income constituting Social Security is reduced, usually to an average of between 35-40 percent for most retirees.

*Excerpts from upcoming book entitled “Planning for the Elderly: A Financial Guide to Aging”, to be published later in year 2020

Coronavirus

Tue, 12 May 2020 14:13:44 GMT

With the news concerning the coronavirus ever-present, you may be wondering what the impact on your investment portfolio could be. We know big price movements down like this do not feel good. Although there could be a couple of quarters of lost profits for companies, on most occasions the losses are recovered in subsequesnt quarters. Historically, other epidemics such as SARS or the measles have had short-term impacts on the market. Even if this lasts longer and causes the economy to slow down, remember we are measuring success in decades, not quarters.

You may ask, "What action should I consider taking in response to the stock market fluctuations?" While there are multiple responses investors can have towards market changes, no action or response is a valid answer. The key is to remember your portfolio is for long-term investing. REacting to market changes rather than focusing on your risk tolerance and time horizon may not work in your favor.

We encourage you to contact us if you have any questions.

Tax Time Considerations - 2019

Tue, 12 May 2020 14:12:29 GMT

We recently covered the subject of financial resolutions to consider for the new year. You are probably thinking "great, but I really need to work on filing my 2019 taxes." Let's dive in; are you working with your financial advisor to ensure you have considered how to reduce your taxable income and maximize your return? Have you considered maximizing your retirement plan contributions ? Not only do you reduce your taxable income, but you are contributing to your future. If you are 50 or older, you could also make catch-up contributions.

Although retirement planning is one way to reduce taxable income, there are other options as well. Do you have a high deductible health plan? A high deductible is considered $1,350 for an individual or $2,700 for family coverage. Provided you are eligible to contribute, you could invest pre-tax dollars of either $3,500 for individual or $7,000 for family coverage into a healthcare savings account (HSA). HSA's are the only accounts that are "triple-tax free", meaning as long as they are used for heath care costs, 1) contributions, 2) account growth and 3) withdrawals are not taxed.

Tax loss harvesting can help lower your taxable income up to $3,000. This technique involves selling a security taht has experiences a loss. By realizing, or "harvesting" a loss, investors are able to offset taxes on both gains and income. The sold security is replaced by a similar one, maintaining an optimal assest allocation and expected returns. Tax loss harvesting can be employed throughout the year.

Some employers offer flexible spending accounts (FSA) which allow individuals to make pre-tax contributions for dependent care expenses as well as certain qualifying medical expenses. Understanding the structure of this plan is important. First, individuals usually have to enroll during the employer's open enrollment period. Secondly, plans may be designed where contributions not used by the end of the plan year are lost; use it or lose it. According to care.com, nearly 50% of families spend in excess of 15% of their household income on child care and the costs for an one child exceeds $200/week. If you know what your projected monthly cost of care will be, contributing pre-tax to an FSA could be for you.

Do you itemize your deductions? If so, you are able to deduct your mortgage interest, charitable contributions, and medical expenses (under certain Conditions). There is also the standard deduction to consider. The most recent chart from the IRS shows the following:

One consideration that is different from the prior items mentioned is converting IRA assets to a Roth IRA. This does not reduce your taxable income. In fact, it will raise your taxable income by the amount converted. However, this is a great tax time consideration for those who will not jump to the next tax bracket. Additionally, the funds grow tax-free because you have already paid!

Many of the considerations mentioned can carry exceptions that may apply to you. In order to ensure you are on the right track, it is always best to work with you financial advisor or CPA. And remember that tax filing deadline of April 15th!

*This article is for information purposes only and should not be considered tax advice. Please work with your tax planning professional to see if the situations above apply to you.

The Dangers of Debt

Tue, 12 May 2020 14:09:19 GMT

According to the survey conducted by the Harris Poll as commissioned by the online website, Nerd Wallet, U.S. household debt increased to an all-time high of $13.95 trillion at the end of 2019. This debt includes mortgages, home equity lines of credit, automobile loans, student loans, credit cards, and other household debt. The average U.S. household with revolving credit card debt has an estimated average balance of $6,849 and pays annual interest of over $1,100. So how long does it take to pay off this average balance if making only the card's minimum monthly payments of $20 per month at a prevailing annual percentage rate (APR) of 19%? If you compute this answer on a financial function calculator, a "no solution" is found, meaning that the number of monthly payments is so large that you will never get out of debt!

Even with a relatively modest average credit card balance of $1,000, it will take the borrower almost 100 months or 8.33 years to pay off the card. And the 19% APR is the rate charged for a borrower with a good credit score; those with a poor score pay an even higher rate, sometimes exceeding 30%!

Therefore, it is critical that a good consumer and investor properly manage debt Accordingly, here are some good rules of debt management to follow:

1. If at all possible, pay off credit card debt in full each month. Better yet, do not charge any expense on your credit card for which you can afford to pay cash!!

2.Use credit cards only for convenience (to move money from one month to the next, making the card an interest free loan).

3. With respect to credit cards (and as "a convenience-user" only), shop for a card with the lowest APR and the longest "grace period" possible. Moreover, only keep one general-purpose credit card (such as Visa or Master Card) in you purse or wallet at any time.

4. Use debit card for purchases instead of a credit card.

5. Only incur debt on a purchase or investment if the asset purchase is likely to exceed (the annual investment return) the cost of the debt. For example, If a stock is expected to appreciate at 10 percent, and the interest charged on money used to purchase this stock is only 5 percent, it is preferable to make the purchase. Better yet, buy the stock using a cash account only.

6. Only use debt to buy assets that are expected to appreciate in value and not depreciate. For example, it is preferable to incur mortgage debt on real estate in most areas of the country, but it is generally inadvisable to purchase an automobile using debt, since the automobile is exceedingly likely to depreciate over time!

7. Save for expenses of higher education for you children or grandchildren so as not to have them incur student loan debt.

8. Finally, before retiring, pay off existing mortgage debt. It will do "wonders" for your retirement income cash flow!

Resolve to be Financially Fit

Tue, 12 May 2020 14:07:44 GMT

The new year and the promise of a fresh start is appealing. Begin your new year by committing to you financial goals. Make a new year's resolution to understand your current financial goals. Make a new year's resolution to understand your current financial situation by reviewing your assets and liabilities. There is free planning software to make this process easier. Additional consideration can be give to any life events that may have occurred throughout the previous 18 months. Answering "Yes" to any of the questions is a great reason to contact us to discuss further.

Understanding the state of your finances can provide a picture of your debt and savings. Subsequently, this allows you to focus on retirement planning, emergency savings funds and a budget for the year. Take advantage of the automation that your bank and credit card issuers provide as a way to make the process easier.

As part of your financial resolution, your financial advisor can lend insight on how life events, financial goals, portfolio balance and insurance coverage may need adjusted. Did you have a job change or receive a salary increase? If so, reviewing your retirement accounts is valuable. How does your portfolio look against your retirement horizon? Perhaps it is time to rebalance your asset classes. Are you now an empty nester? Reviewing your insurance coverage to ensure you have removed old policies that are no longer relative or adding a new policy such as disability insurance can be valuable in aligning your finances to your new set of circumstances. These questions and many others can feel quite burdensome, so let us help.

Once you have contacted us, how do you ensure that you stay on track? Start by writing your goals down. Did you know you are 42% more likely to reach you goals if you simply write them down? Checking your goals periodically helps to ensure success. Remember this is a plan for the year so breaking it down into digestible chunks can make reaching your financial goals a reality!

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Greetings!

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Stock Market Performance

Corporate Earnings Beat Expectations

Lower Volatility in the Market

Generation Z's Unprecedented Wealth

As we move forward into the summer months, we remain committed to keeping you informed and prepared for any market developments. Thank you for your continued trust and partnership. If you have any questions, please don't hesitate to reach out to us.

Wishing you a wonderful summer filled with success and happiness!

Best regards, Nick, Willis, Alison, Keith and Kathy.

Nick Weisert, CFP®️

Sources: The Economist, Zacks Investment Management, JP Morgan Investment Management

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