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Staying the Course in a Volatile Market

Market volatility can be nerve-wracking. It’s easy to lose sight of your goals and make rash decisions. When the investment ride gets bumpy, stay calm and remember that, regardless of what the world markets are doing that day, the principles of investing wisely haven’t changed.

~ Diversify your portfolio
A well-structured investment portfolio is one of the best ways to reduce investment risk.
Diversify by asset class. Holding investments from different asset classes — cash, bonds, and stocks — can protect your portfolio against volatility. At any given point in the economic cycle, one asset class may outperform the others. By holding assets from all three asset classes, you’ll benefit no matter which one is leading the pack.

~ Filter out the “Market Noise”
The market gyrates constantly on headlines, but you should pay them little heed. Trading on day-to-day news events may be a good strategy for professional investors, but not for individuals whose long-term goal is wealth accumulation. One reason professionals profit from these events is that people listen to bull or bear voices urging them to act – not based on reason, but on the emotions of fear or greed. These voices are noise that individual investors should filter out. Failing to filter can make you a slave to the news and the talking heads on financial channels – to the detriment of your returns.

~ Commit to the long-term
Day-to-day market fluctuations don’t concern investors who are saving and investing for 10 years down the road. Trying to “buy low and sell high” may seem more exciting, but too often, people buy when the market is at its peak, and sell in a panic when it is near its bottom. History shows the overall trend of investment markets over the long term is up. Investors should hold on and wait for the market to rise again. This strategy ensures you are well-positioned to take advantage of further gains over the long term.

~ Get professional advice
We live in a complex and rapidly changing world. Few people have the time to analyze market conditions and develop a comprehensive investment strategy. Professional investment advice may be your best protection. With the help of expert advice, you can develop a solid financial plan for your future that will take you safely through the ups and downs of the markets. Call today for more strategies to put your investment program on the fast track! 404-321-6950

~~The End of File & Suspend for Married Couples
A great claiming strategy to try & optimize Social Security benefits disappears. 

Provided by Russell C. Hinton, CFP®
     
Congress just changed the Social Security benefit rules. On October 30, Capitol Hill lawmakers approved a two-year federal budget deal. As part of that agreement, they authorized the most significant change to Social Security policy seen in this century, disallowing two popular strategies people have used to try and maximize retirement benefits.
 
The file-and-suspend claiming strategy will soon be eliminated for married couples. It will be phased out within six months after the budget bill is signed into law by President Obama. The restricted application claiming tactic that has been so useful for divorcees will also sunset.
 
This is aggravating news for people who have structured their retirement plans – and the very timing of their retirements – around these strategies.
 
Until the phase-out period ends, couples can still file and suspend. The bottom line here is simply stated: if you have reached full retirement age (FRA) or will reach FRA in the next six months, your chance to file and suspend for full spousal benefits disappears in Spring of 2016.
   
Spouses and children who currently get Social Security benefits based on the work record of a husband, wife, or parent who filed-and-suspended will still be able to receive those benefits.
 
How exactly did the new federal budget deal get rid of these two claiming strategies? It made substantial revisions to Social Security’s rulebook.
 
One, “deemed filing” will only be allowed after an individual’s full retirement age. Previously, it only applied before a person reached FRA. That effectively removes the restricted application claiming strategy, in which an individual could file for spousal benefits only at FRA while their own retirement benefit kept increasing. 
 
The restricted application claiming strategy will not disappear for everyone, however, because the language of the budget bill allows some seniors grandfather rights. Individuals who will be 62 or older as of December 31, 2015 will still have the option to file a restricted application for spousal benefits when they reach Full Retirement Age (FRA) during the next four years.
 
Widows and widowers can breathe a sigh of relief here, because deemed filing has no bearing on Social Security survivor benefits. A widowed person may still file a restricted application for survivor benefits while their own benefit accumulates delayed retirement credits.2
 
Two, the file-and-suspend option will soon only apply for individuals. A person will still be allowed to file for Social Security benefits and voluntarily suspend them to amass delayed retirement credits until age 70. This was actually the original definition of file-and-suspend.2
 
Married couples commonly use the file-and-suspend approach like so: the higher-earning spouse files for Social Security benefits at FRA, then suspends them, allowing the lower-earning spouse to take spousal benefits at his or her FRA while the higher-earning spouse stays in the workforce until 70. When the higher-earning spouse turns 70, he/she claims Social Security benefits made larger by delayed retirement credits while the other spouse trades spousal benefits for his/her own retirement benefits.
 
No more. The new law says that beginning six months from now, no one may receive benefits based on anyone else’s work history while their own benefits are suspended. In addition, no one may “unsuspend” their suspended Social Security benefits to get a lump sum payment.
 
To some lawmakers, file-and-suspend amounted to exploiting a loophole. Retirees disagreed, and a kind of cottage industry evolved around the strategy with articles, books, and seminars showing seniors how to generate larger retirement benefits. It was too good to last, perhaps. The White House has wanted to end the file-and-suspend option since 2014, when even Alicia Munnell, the director of the Center for Retirement Research at Boston College, wrote that “eliminating this option is an easy call ... when to claim Social Security shouldn’t be a question of gamesmanship for those with the resources to figure out clever claiming strategies.”
   
Gamesmanship or not, the employment of those strategies could make a significant financial difference for spouses. Lawrence Kotlikoff, the economist and PBS NewsHour columnist who has been a huge advocate of file-and-suspend, estimates that their absence could cause a middle-class retired couple to leave as much as $70,000 in Social Security income on the table.
 
What should you do now? If you have been counting on using file-and-suspend or a restricted application strategy, it is time to review and maybe even reassess your retirement plan. Talk with a financial professional to discern how this affects your retirement planning picture.

~~The U.S. Department of Labor website has a lot of valuable information for investors in the form of Fact Sheets. One such "Fact Sheet" that is particulary informative is titled: "How to Tell Whether Your Adviser is Working in Your Best Interest: A Fiduciary Guide for Individual Consumers". We have inserted this Fact Sheet below.

How to Tell Whether Your Adviser is Working in Your Best Interest: A Fiduciary Guide for Individual Consumers

Selecting someone who is being paid to provide you with investment advice is a crucial decision. You want to make sure that the adviser you select is working in your best interest and that your retirement savings are protected.

Before you select an adviser, you need to have a clear understanding of the adviser's responsibilities to you and how he or she may be affected by the fees he or she receives when giving you advice. It is important to understand whether the adviser is acting as a fiduciary, meaning that the adviser is working solely in your best interest, and is not conflicted by compensation arrangements that may encourage him to steer you into investments that are more profitable for him. Asking the following questions, up front, will help you protect yourself and your assets.

Do you consider yourself a fiduciary?

•   If not, why not?
•   Are you willing to act as a fiduciary with a duty to act solely on my behalf?
•   Are you willing to disclose to me any conflicts of interest that may interfere with your acting solely on my behalf?
•   Are you willing to put this commitment in writing?

How are you compensated?

•   Do you earn fees or commissions based on the number of products that I buy or the size of my investment?
•   Will you earn a higher fee or other type of compensation if I invest in certain products you recommend or will you receive fees for services related to specific investment products?
•   Will you provide a list of the fees and commissions you receive either directly from me or from other sources in writing?

Are you a licensed or registered investment adviser?

•   Are you registered with the State, U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or the Certified Financial Planner Board of Standards, Inc. (CFP Board)?
•   For how long? What is your experience?
•   Who supervises you, or, are you a sole practitioner?
•   If a sole practitioner, do you have professional liability insurance?
•   Have you (or your firm) ever been disciplined? For what?

Carefully review the information you receive to look for fees and expenses being charged and possible conflicts of interest. If the information you receive is not clear or you see things that make you uncomfortable, ask questions. If the answers don't ring true or make you uncomfortable, shop around until you find a relationship that gives you confidence that the adviser is working in your best interest. And remember -- Trust but verify!

At Hinton McCurry, LLC , an advisory firm in Atlanta, GA we welcome these and any other questions from existing and potential clients. We believe in full disclosure and complete transparency.

For more Fact Sheets from the DOL go to: http://www.dol.gov/.

~~Retirement Income Planning 

As you approach retirement, the way you think about your finances changes. Rather than focusing on the saving, investment and accumulation of retirement assets, you have an entirely new set of challenges to face.  Retirement Income Planning addresses these new challenges.

Retirement Income Planning is a comprehensive process that starts with your retirement goals and expectations. A successful Retirement Income Plan will put you in the best possible position to support those goals and expectations financially during your retirement, minimizing the risk that you will outlive your savings. When it comes to Retirement Income Planning even the most complicated plan starts with some basic questions:

1. When do you plan to retire?
2. What does retirement mean to you?
3. How long will your savings have to last?

These questions though basic are very important. They tell us the retirement lifestyle that your plan will focus on, when the plan will be implemented and how long a period the plan will be designed to cover.
What should you expect when it comes to Retirement Income Planning? First, you’ll estimate the amount of annual income that you will need in retirement, factoring in inflation and accounting for the potential cost of health care and long term care. Then, you’ll estimate the amount of income that you can count on from Social Security. If you are entitled to employer pension benefits, you’ll factor that income in as well. If you are like most people you will have un-met annual income needs. This gap will be filled with your personal retirement savings. In the end your Retirement Income Plan will focus on the best way to use your personal retirement savings to meet your long term income needs.

While there is no such thing as a “one size fits all plan” all plans face the same challenges. What investment or asset allocation strategy will provide the best opportunity to meet your annual income needs while minimizing overall risk? What specific investment and product choices are appropriate for your plan? How much can you withdraw from your savings each year? How does your withdrawal rate relate to the risk that you will outlive your funds? While the basic principles of Retirement Income Planning are straight forward the details are very complicated and unfortunately there is not a tremendous amount of room for error when it comes to establishing  an effective retirement income strategy. Get it wrong – and you could outlive your savings. Get it right – and you give yourself the best possible chance of meeting your retirement goals and expectations. So ask questions and start planning now.

~Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.

Diversification is a technique that allocates investment dollars among different asset classes  such as bonds, stocks and cash. In addition, one can diversify among their stock holdings by buying a combination of large, small or international stocks, and among their bond holdings by buying short-term and long-term bonds, government bonds, or high and low-quality bonds.

A diversification strategy reduces risk because stocks, bonds, and cash generally do not react identically in changing economic or market conditions.  Diversification does not eliminate the risk of experiencing investment losses; however, by investing in a mix of these investments, investors may be able to protect their portfolios from major declines in any one investment. Over the long run, it is common for a more risky investment (such as stocks) to outperform a less risky diversified portfolio of stocks, bonds, and cash. However, one of the main advantages of diversification is reducing risk, not necessarily increasing return. 

It is important that investment goals and risk tolerance are assessed. Many factors such as age, financial resources, time horizon and investor’s objectives help determine how much risk an investor is willing to accept. A financial advisor can help build an investment strategy that with proper diversification and asset allocation, a comfortable place on the risk/reward spectrum are found.

~One of the easiest and most impactful financial planning “to do” items that can be checked off your list is reassessing beneficiary designations. When meeting with new financial planning clients, this is one of the first things we review. There have been many occasions that we discover a serious mistake or oversight during this process.

Keep in mind, when we are discussing beneficiary designations, we are generally referring to those accounts or insurance policies in which beneficiaries can be named directly. These primarily include qualified plans (401(k)/403(b) plans, IRAs and life insurance policies.

We suggest that you perform a “beneficiary audit” at least every three years, or when there are changes in your family dynamic (birth, death, marriage, divorce, etc.). Here are a few of the more common mistakes that people make:

 
• Not naming a beneficiary at all
• Naming an “estate” as beneficiary
• Naming an ex-husband or ex-wife as beneficiary
• Listing a parent as beneficiary after getting married or having children
• Not having a contingent or secondary beneficiary
• Naming a minor (or even a young adult) directly as a beneficiary instead of a trust for their benefit
• Designating a trust that does not exist or is outdated as a beneficiary

Reviewing and updating beneficiary designations is a painless and quick exercise that can make a huge difference in creating the most efficient distribution of your assets to your heirs. Because there are tax, legal and other logistical issues to consider, it is important  that you choose your beneficiary designations strategically and in the context of your entire estate plan.  We suggest using a qualified attorney to provide valuable insight in this area.

~Maximize The Value Of Your 401(k) Plan
 
The responsibility for maximizing the potential benefits of your 401(k) plan falls on your shoulders. Here are some ideas to help you get started!

• Participate
If your employer offers a 401(k) plan, you should participate in the plan. The math is simple: if you don't put anything into it, you won't get anything out of it. Once you've made up your mind to get started, don't procrastinate.

•  Take the Company Match
Invest as much as you can afford, but no less than the amount required to receive the full company match. The company match is free money. Think of it as an instant return on your investment!

• Investing
Proper asset allocation and diversification are responsible for the majority of investment returns. Asset Allocation is an  investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon. The three main asset classes - equities, fixed-income, and cash - have different levels of risk and return, so each will behave differently over time. Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

• Monitor
Once your portfolio is in place, monitor its performance, and rebalance when necessary. Rebalancing means bringing a portfolio that has deviated away from the target asset allocation back into line. Under-weighted securities are purchased with newly saved money, or alternatively, over-weighted securities can be sold to purchase under-weighted securities.

• If you change jobs, take it with you!
Transfer your account to your new employer or roll over to an IRA (Individual Retirement Account) when you change jobs. Rolling your retirement funds into an IRA can give you more investment choices and options. If possible, avoid taking as a distribution which would incur a penalty (if under 59 ½) and income tax.

~You cannot keep retirement funds in your account indefinitely. Individuals are generally required to begin lifetime withdrawals from a Traditional IRA or retirement plan account upon reaching age 70½. These withdrawals are called Required Minimum Distributions, often referred to as RMDs, and represent the minimum amount that the US federal government requires you to withdraw annually from your traditional IRA and employer-sponsored retirement plans.

If you participate in a defined-contribution plan, including 401(k)s and 403(b)s, you can put off taking RMDs if you’re still working. This is the case unless your specific plan’s rules require earlier, age-based RMDs or you own 5 percent or more of the company that runs the defined-contribution plan. Roth IRA’s do not require withdrawals until after the death of the owner.

The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table.” (A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner.) Withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

RMD rules are complex, and failure to take a RMD in any given year can result in steep tax penalties. For more information pertaining to your situation please call or email us.  If you need retirement income advice, please don't hesitate to contact Hinton-McCurry, your Atlanta Retirement Planning specialists.

We recently met with a couple that has been long time clients of ours who posed the question to us “What are we to do to hedge against a falling U.S. dollar?” Well, we thought it was probably a good time to discuss this topic since the dollar’s long-term prospects don’t look so bright.

Well first let’s look at the dollar recently, and note that it has shown some recent strength since it began its decline last March. So, it may not be a bad time to consider adding to your investments outside the dollar.

With that said, let’s look at three categories you can almost always bet will help hedge against a declining dollar: Currency Funds, Hard Assets (Commodities), and International Stocks.

Currency Funds: Currency ETF Funds help capitalize on the strength of foreign currencies relative to the U.S. dollar. Whenever a U.S. investor buys a currency ETF they are automatically short the dollar in the corresponding currency. This type of strategy allows you to hedge against the weakness in the dollar.

Hard Assets: Owning assets not generally correlated to the dollar protect one from the decline of it. Hard assets such as gold and silver have enjoyed a newfound resurgence in popularity.  You can either buy the physical metal; the disadvantage here is having to store and insure it; or purchase ETF funds in these metals.   

Go International: Add some emerging-markets stocks and shares of small foreign companies to your anti-dollar portfolio. Small overseas companies tend to have more exposure to domestic economies and currencies.

Hopefully, these ideas have helped you understand ways in which you can protect your dollar! Please give us a call if you are interested in finding our more about any of these ideas.  If you need invetsment adivce and you are in the Atlanta area, please don't hesitate to contact Hinton-McCurry.

Russell C. Hinton, CFP