ch ch ch changes - hello, goodbye, and new investment and planning strategies - november 2015
DESCRIPTION
My youngest son has recently discovered classic rock, to his parent’s delight. The Eagles, Paul McCartney, Beatles and Rolling Stones and are now the music du jour at the Gevers residence. If you were to walk by our house any evening you might hear a middle aged couple accompanied by their teenage son belting out a poor rendition of a rock hit from the last century.Reminiscing about those classic songs reminds us of how much and how many things have changed over time, and how different things are now. David Bowie’s biggest hit was a song about changes (in case you missed the obscure reference in the title.) Constant change is one of the few absolutes of both life and the investment world. There are some significant changes occurring both in our firm, and for new planning and investment strategies that have recently become available. Let’s review those changes, and how they might impact you and your financial life.TRANSCRIPT
November 2015
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies My youngest son has recently discovered classic rock, to his parent’s delight. The Eagles, Paul McCartney, Beatles and Rolling Stones and are now the music du jour at the Gevers residence. If you were to walk by our house any evening you might hear a middle aged couple accompanied by their teenage son belting out a poor rendition of a rock hit from the last century. Reminiscing about those classic songs reminds us of how much and how many things have changed over time, and how different things are now. David Bowie’s biggest hit was a song about changes (in case you missed the obscure reference in the title. https://youtu.be/pl3vxEudif8 ) Constant change is one of the few absolutes of both life and the investment world. There are some significant changes occurring both in our firm, and for new planning and investment strategies that have recently become available. Let’s review those changes, and how they might impact you and your financial life. Changes at Gevers Wealth Management A fond goodbye to Dan Garland! Dan has been diligently studying for his Chartered Financial Analyst (CFA) designation over the last 4 years, and obtained it this summer. He has been eager to use his analytical skills in the institutional world, and we have been discussing how to best accomplish that. I am delighted that he has obtained a prestigious position with Frank Russell Company/Russell Investments, one of the largest pension consulting firms in the country, and a great place to be a hard core investment geek. Dan will be working on fascinating stuff including derivative analysis for multi-billion dollar clients. We will miss him, but we will continue to enjoy and use the many analytical tools and spreadsheets he has built for our clients. A warm hello to Jodi Hanson who has recently joined our team. Jodi is a ten plus year registered investment industry veteran who has a great deal of experience in the wealth management world most recently with a billion dollar advisory firm in Bellevue. Jodi lives in Maple Valley with her husband, two children and their boxer. She brings a great deal of knowledge and experience to our firm, and we look forward to introducing you to her when you are in for your next review meeting.
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 2 ETF Portfolios & Dividend Stocks Exchange Traded Funds (ETF’s) have become a favored investment vehicle for pension funds, institutional investors and high net worth investors. Our clients are familiar with ETF’s as we have been using them as a portion of client portfolios for over ten years. We now have an ETF only portfolio option available that we are offering as a major part of our investment services. Another investment option that we are adding to our services are institutionally managed individual dividend stock portfolios. Dividend stocks enjoy a happy space in the stock universe – they pay regular income and have generally lower risk than non-dividend paying stocks. An institutionally managed dividend stock portfolio might be an especially good fit for higher income tax bracket investors. Look for a booklet sometime in 2016 that we have been working on that will review exchange traded fund portfolio planning & strategies and dividend stock portfolio benefits. We can also review a personal example for your portfolio at our next review meeting. (email us at [email protected] if you would like a copy of the book when complete.) New Tax and Legislative Changes There are also a number of new and pending legislative changes that could potentially offer some powerful planning tools, and new strategies. We read several tax newsletters and are monitoring some of these new opportunities to see if they might be appropriate for our clients. There are more new and proposed changes occurring now then I have seen for many years and it would be wise for us to consider them to see if they might be advantageous for our planning. A few of the more significant changes include new DOL regulations for IRA’s, QLAC’s in IRA accounts, 529 ABLE, and IRA Trusts. Proposed Regulations for IRA and Qualified Accounts The Department of Labor (DOL) has been busy crafting new regulations that may impact IRA accounts. Although the regulations have not yet been enacted, President Obama has already signaled his support for them, and most observers believe it is likely they will become law sometime in 2016. These proposed regulations are well meaning and I support the intent behind them. However, in the case of many government laws and regulations the “devil is in the details.” If these new regulations do pass, we should review our IRA accounts and see if any changes might be required. Some commentators have suggested that these new DOL regulations might have the impact of shifting IRA portfolios to institutional ETF and individual stock portfolios (like the ones we have been using.) We will watch these new regulations carefully and report back at your next review meeting.
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 3 QLAC May Defer RMD in IRA’s That is several mouthfuls of acronyms - let me try and translate. Recent Treasury rules now allow a Qualified Longevity Annuity Contract or QLAC to be held inside an IRA account. QLAC’s are quite boring – they are a low risk investment that pay a low fixed interest rate for a certain time period, and are backed and guaranteed by an insurance company. However, the new Treasury department rules also allows an IRA owner that is over 70 to potentially exclude any part of their IRA that is in a QLAC from their Required Minimum Distribution (RMD) calculation. This a brand new wrinkle and offers what might be a significant tax deferral and savings strategy for IRA owners over 70 that are subject to the RMD requirements. We have just started reviewing and exploring this strategy with our clients and their CPA’s. If you are over 70 and do not need income from your IRA accounts, but are still paying income taxes on your mandatory withdrawals, this might be a strategy we may want to review. 529 ABLE Plans for Special Needs A new type of tax friendly plan was recently signed into law by President Obama. Dubbed a 529 ABLE plan, these accounts are meant for persons that have significant mental or physical challenges and disabilities. Similar to a College 529 plan, they may offer tax-free distributions and tax-deferred growth in a relatively simple package. We have a number of families we have helped manage various types of trust accounts for family members with physical challenges. The 529 ABLE plan may be an attractive and tax favored option for the investment and financial needs of those who need special help. If you have a family member with special needs let’s review this new planning tool. IRA Trusts for Adult Children One worry that many parents have is for the financial security of their children and how they will manage and deal with assets that are left them as an inheritance. IRA’s are fairly complicated assets to inherit and subject to many rules and possible tax blowups. There are other family issues at play also. Poor money skills and habits, shaky marriages and creditor issues should all be considered when creating a purposeful plan to leave assets like an IRA to your heirs. Trusts are an important planning tool for situations like these – legal experts often say to use a trust if you are worried about “Predators, Creditors, and the IRS!” A special type of trust known as an IRA trust may help parents to achieve their goals for their kid’s financial needs. A properly drafted IRA trust can help your son or daughter who inherits your IRA to enjoy a lifetime income stream, help them comply with tax laws and regulations, and help protect against poor decisions, creditors, and shaky marriages. Recent law changes regarding IRA accounts
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 4 have made these special IRA trusts more attractive and many estate attorneys are using and recommending IRA trusts as a planning strategy. If this type of strategy might be a fit for your family circumstances, let’s review IRA trusts at our next planning meeting. There are other changes and possible pending legislation, and we will try and keep you apprised of them, and how they might impact you. I hope you and your family had a wonderful Thanksgiving! Our family had a small family reunion for Thanksgiving and decided to do so in Walla Walla. We had a wonderful long weekend of eating, family time, wine tasting, and more eating, and we also enjoyed visiting a delightful town that I had never been to before. We live in a great country and Washington is a special state. I look forward to seeing you at your next review meeting, and we are all thankful for your trust and relationship. Warm regards,
William R. Gevers Financial Advisor PS: We have been repeatedly asked by clients if they could share these e-mail notes with their friends or neighbors. Please feel free to forward this with the stipulation that it may only be forwarded if done so in its entirety with no portions omitted. We would be delighted to share our comments and opinions with your friends, and welcome your comments and feedback. If you received this and would like to be included on our newsletter list, please email us at [email protected] Copyright 2015 William R. Gevers. All rights reserved.
Gevers Wealth Management, LLC 5825 221st Place SE
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 5 Suite 102 Issaquah, WA98027 Office: 425.902.4840 Fax: 425.902.4841 Email: [email protected] Website: www.geverswealth.com The views are those of Gevers Wealth Management, LLC, and should not be construed as individual investment advice. All information is believed to be from reliable sources; however, no representation is made as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Investors cannot invest directly in an index. Please consult your financial advisor for more information. Securities and advisory services offered through Cetera Advisor Networks LLC Member FINRA/SIPC. Cetera is under separate ownership from an any other named entity.
Exchange Traded Funds (ETFs) are subject to market risk, including the possible loss of principal. The value of the portfolio will fluctuate with the value of the underlying securities. ETFs trade like a stock, and there will be brokerage commissions associated with buying and selling exchange traded funds unless trading occurs in a fee-based account. ETFs may trade for less than their net asset value. Investors should consider an ETF's investment objective, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other important information, is available from your Financial Advisor and should be read carefully before investing.
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 6
US Money Supply, US Dollar, and Inflation/Deflation Watch "Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him." - Dwight D. Eisenhower
US Money Supply – Adjusted Monetary Base
(http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMBNS#)
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 7 US Dollar Price – (DXY) USD Index measured against other currencies
(http://www.barchart.com/chart.php?sym=DXY00&style=technical&template=&p=MC&d=X&sd=&ed=06%2F11%2F2015&size=M&log=0&t=LINE&v=0&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=06%2F11%2F2015#jump)
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 8 Inflation/Deflation -Year to Date price increase in commodities and basics as measured by futures
(http://www.finviz.com/futures_performance.ashx?v=17)
Ch Ch Ch Changes – Hello, Goodbye, and New Investment & Planning Strategies November, 2015 Gevers Wealth Management, LLC Page 9 Velocity of Money – Velocity is a measure of how quickly money is spent. High velocity is typically a precondition for inflation.
(http://research.stlouisfed.org/fred2/series/MZMV)