Category Archives: Safety

Investment Insights, Q4: 2018

invest 1We Always Bring Something to the Table

KathyBy Kathy Thompson, J.D.

A table has several different meanings. It can refer to a set of facts and figures displayed in rows and columns. It can also indicate postponing consideration of something, as in, “Let’s table this discussion for another time.” But frequently the first image that comes to mind when hearing the word “table” is a piece of furniture that can be used for such purposes as eating, writing, or working.  Gathering around a table is conducive to discussion, problem-solving, and teamwork. For us, the table symbolizes this team-oriented, synergistic approach to wealth management that makes our collaborative method so effective.  We call our experienced and knowledgeable professionals our Table of Experts and we’re pleased to announce that it’s growing!  We’ve added three new place settings, and they all bring something valuable to the table. ♦

laura georgeLaura George, CTFA, CFP®

Wealth Advisor

With more than 20 years of extensive experience in wealth management with several major regional banks and asset management firms, Laura concentrates her efforts on the planning and administration of personal and institutional trust accounts and estates.  After receiving her Bachelor of Science from the University of Kentucky, she earned a master’s degree at Bellarmine University and is a Certified Trust and Financial Advisor and certified financial planner® professional.

(502) 625-9132    Laura.George@syb.com

 

j steStephen Turner II

Investment Advisor

Stephen provides professional investment advice for the successful accumulation, distribution, and transfer of wealth across generations.  Prior to joining Stock Yards Bank & Trust, he worked for a large, regional brokerage and money management firm, and holds various professional licenses in the investment and brokerage industry.  Stephen received his Bachelor of Science in Finance from Murray State University, and his MBA from Southern Illinois University Carbondale.

(502) 625-1010    Stephen.Turner@syb.com

maria.jpgMaria Tipton, JD

Wealth Advisor

Building relationships and working collaboratively with clients to achieve their goals and protect their financial future, Maria is responsible for the administration of personal trust accounts and client relationship management.  After receiving her Bachlor of Arts degree magna cum laude from the University of Louisville, Maria earned her Juris Doctor magna cum laude from the Louis D. Brandeis School of Law at the University of Louisville.

(502) 625-9904    Maria.Tipton@syb.com


 

Economic Update Q4: 2018
Oct. 5, 2018

markThe stock market as measured by the Standard & Poor 500 turned in a quiet but very positive return in the third quarter gaining 7.7% for the three months ending September 30th.  Year to date the domestic market has provided investors with a return of 10.6%.  Bond investors were not as fortunate.  The return from the Barclays U. S. Aggregate Bond Index was +0.02 and -1.6% for the quarter and first nine months respectively.

The United States domestic economy continues to build momentum.  The latest revision to second quarter Gross Domestic Product estimates came in at a 4.2% rate.  The increase in economic activity has surprised many economists and strategists.  This has been one of the longest periods of economic expansion in post-World War II history.  Generally, growth tends to slow as an economic expansion ages.  Accelerating growth in an economy that has been expanding this long is a rarity.    Because of the duration and slow pace of the recovery, market strategists and economists have been worried that the recovery could end abruptly.  This economy has gotten very little respect.  However, the pace of economic growth continues to accelerate.   What happened to cause this growth?  Two primary factors were responsible for the increase in growth.

  • Consumer and business confidence is soaring resulting in increased spending and consumption.  This is primarily the result of the recent tax law changes that lowered corporate and individual tax rates and reduced regulation which lowered some key barriers to investment in the United States.  Giving businesses and consumers more money to save, invest, and spend has always been a positive for economic growth.
  • The unemployment rate has dropped dramatically.  Most economists consider our current level of unemployment to be full employment because a small portion of the labor market is either between jobs or temporarily or permanently unemployed at any given point in time.  A high employment rate is very positive for economic activity.  People receiving paychecks are much more likely to spend money, and consumption accounts for over two thirds of our economy.

We expect economic growth to continue to improve in 2018 from the anemic 2% growth we have experienced for the last ten years to something north of 3% both this year and next.

Capital Markets

What does this mean for the capital markets the remainder of this year and next?  Addressing the stock market first, we believe that we are in a secular bull market for stocks.  What does that mean?  It means that the general trend of the stock market is up with higher highs and higher lows for an extended period of time.  It does not mean we will not have corrections or volatility.  What is driving our positive outlook for stocks?  The corporate profit picture is the main reason we are positive about the stock market.  Earnings are the fuel that drive stock prices higher.  The impact of faster economic growth and lower taxes will have a positive impact on corporate earnings in 2018 and beyond.  In fact the growth in corporate profits has exceeded the growth in the market for the last three years.  This has reduced valuation levels to much more reasonable ranges.  The combination of lower valuations and higher profit growth have historically given us very good long term returns from stocks.

The fixed income markets may not be so fortunate.  The bond market had a negative total rate of return in the first nine months of this year.  We expect fixed income returns to be meager for the next eighteen months or so for several reasons.   Generally, faster economic growth increases the demand for capital which results in higher interest rates.  In addition, the Federal Reserve has promised that it will continue to increase short term rates and unwind its quantitative easing program.  The Fed will shrink its balance sheet by not reinvesting the income or proceeds from maturing bonds and by beginning to sell bond holdings outright.  This reduction in demand and increase in supply is generally not good for bond prices.  Lastly, wage pressure appears to be increasing as the economy operates at full employment.  Wage pressure has been a precursor to inflationary pressure in the past.  Bond prices are negatively impacted by inflation as investors demand higher rates of interest to compensate for the loss of purchasing power that inflation creates.

What could blow this up and make us change our economic and capital markets outlook?  The first problem is the Federal Reserve and rising interest rates.  The Fed could normalize interest rates too quickly which would undo many of the positive economic initiatives.  The high debt level in the United States will leverage any increases in rates by immediately increasing the cost of servicing that debt.  This could disrupt economic growth.   If the Fed moves too slowly to unwind the quantitative easing they could create inflationary pressures especially in a full employment environment.  We are already seeing some wage pressure because of the increasing demand for workers.  This has been an early sign of increasing inflation in past economic cycles.  The second problem is tariffs.  Tariffs are essentially taxes placed by countries on imported goods.  These taxes are imposed to make the cost of locally produced goods more attractive and to punish low cost producing countries.  However, countries seldom sit idly by and allow their exports to be taxed.  They retaliate with tariffs of their own which can escalate to the extent that global trade is diminished and world economic growth is negatively impacted.  Some of you will remember from history that this was one of the reasons for the severity and length of the Great Depression in the 1930’s.  Finally, the shape of the yield curve is flashing a warning signal.  The yield curve graphically represents the yields available from fixed income investments at different maturities.  It is traditionally upward sloping meaning that shorter term fixed income investments yield less than longer term investments.  When the reverse is true, short term rates yield more than long term rates or the yield curve becomes inverted, it has been a very good indicator of a recession on the horizon.  Right now the yield curve is very flat.  If the Federal Reserve increases short term interest rates one more time this year and all other yields remain the same we will have an inverted yield curve.  The yield curve has inverted anywhere from ten months to two years before each of the last five recessions.

What could go right over the next year to six months that may not be factored into the markets?  What economic or political factors could provide a catalyst for higher stock prices for the remainder of this year and into 2019?  I want to mention a few possible scenarios because they are things you will probably not see or hear in the financial press or on the nightly news telecasts.

  • The Federal Reserve signals an end to rate hikes after the December increase in the Fed Funds Rate calling a time out on future rate hikes.  They could do this for several reasons.  The need to unwind the quantitative easing bond purchases on their balance sheet while interest rates remain relatively low would be the first reason.  Secondly, the Fed is also very much aware of the dilemma they have placed themselves in.  The last thing they would want to do is disrupt the economic growth that we are currently experiencing by increasing interest rates too quickly or to disrupt the supply and demand equation for bonds.
  • Trade negotiations could end positively with renegotiated agreements and no trade war.  This would be very positive for consumer and business confidence and global growth.   Right now the headlines could not be any worse.  Economists here and overseas are expecting a trade war that will slow global growth and lead to the next recession.  We have said all along that this might just be an art of the deal strategy to coerce our trading partners back to the table.  What if the unconventional methods used by the President result in continued successes like the recently announced USMCA that replaced NAFTA with positive results for Canada, Mexico, and the United States?  That is certainly not priced into the current stock markets here at home or abroad.
  • The economy and corporate profits could continue to expand.  This economy has been suspect because of the length of the economic expansion with few strategists expecting the recovery to last let alone accelerate.  What if the tax cuts continue to boost economic growth that translates into better earnings and cash flows for corporations for the next several years?  What if the economic expansion goes on through 2020?  A larger than expected earnings surprise resulting from faster and/or longer economic growth would be very positive for the stock market.
  • Investors might also come to realize that we may have already had our correction.  Market volatility has become more intense since January.  We have talked a lot about how normal a 10% correction is in a secular bull market.  Federated Investments recently noted that an astounding 83% of the stocks in the Standard & Poor 500 have had a correction of 10% or more year to date; just not all at the same time.  Does it matter that the market has not had the 10% correction when most stocks seem to have already experienced one?

ratioThe combination of lower valuation and faster corporate profit growth will eventually kick start the market.  The combination of faster profit growth and reasonable valuations has historically been a prescription for above average stock market returns.  If any one of the above unanticipated events happens, it could provide the catalyst for a much better second half and positive stock market returns in 2019.

Thank you again for the confidence you have placed in the Wealth Management and Trust team at Stock Yards Bank & Trust.  Please contact us at any time to discuss our outlook in more detail. ♦

Source: FactSet, FRB, Robert Shiller, Standard & Poor’s, Thomson Reuters, J.P. Morgan Asset Management. Price to earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months as provided by IBES since December 1989, and FactSet for June 30, 2018. Average P/E and standard deviations are calculated using 25 years of FactSet history. Shiller’s P/E uses trailing 10-years of inflation-adjusted earnings as reported by companies. Dividend yield is calculated as the next 12-month consensus dividend divided by most recent price. Price to book ratio is the price divided by book value per share. Price to cash flow is price divided by NTM cash flow. EY minus Baa yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price) minus the Moody’sBaa seasoned corporate bond yield. Std. dev. over-/under-valued is calculated using the average and standard deviation over 25 years for each measure. *P/CF is a 20-year average due to cash flow data availability.Guide to the Markets –U.S.Data are as of June 30, 2018.


Paving the Road to Retirement: “Prudent” Spending Matters

laura georgeOne of the milestones on the road to retirement is reaching an understanding that you will be able to achieve the lifestyle and legacy you want with the assets and income you will have.  Developing dependable and/or varied sources of income gives strength to part of the retirement equation. The other part of achieving one’s retirement dreams lies in understanding how much you will personally need and working toward that goal through “prudent” spending.

The financial media provides a plentitude of recommended savings rates based on age and income level. We have also been educated that our current national savings rate hovering just above 3% will not adequately prepare most families for this special time of their lives. Rules of thumb like saving 10-15% of your annual income are less relevant to those nearing retirement since they are based on starting young and having a longer time horizon to “fill the bucket” through contributions and compounding.  Those beginning to develop a savings plan later in life will likely find they need to accumulate even more to maintain their current lifestyle, especially higher income individuals for whom Social Security will replace less of their income.

Understanding how much of your current income needs to be replaced is best achieved by breaking down what you will actually need in retirement. Rather than throwing a dart and accepting an arbitrary 60-80% income replacement guideline which may not be accurate for you, it is far better to undergo a simple assessment and understand the inputs to your personal retirement budget.

One way to consider what will be needed is to break retirement life down into spending categories-an easy mental walk with your favorite drink in hand or relaxing in your favorite space. Do what you need to do in order to make this process a rewarding one, but let your imagination take you to a place where every day you can choose how you spend your time and how robust your activity level will be.

Remembering that most of us will be in retirement for around 20 years, lean back, relax, and consider these categories:

Food and Dining Out:  What is your preference on eating in or dining out? Do you enjoy cooking, and for reduced numbers of people? If you dine out, how often and at what average cost?

Digital Services: What subscriptions or information access do you currently have personally or through your employer? Will you have the same needs/desires for access at retirement? What change in costs, if any, will be related to your needs for news, online, courses, or any retirement activity to supplement your income?

Recharge: What personal or recreational services do you wish to have in retirement?  Are hard copy or audiobooks, trips to the spa, mani-and-pedicures part of your vision? Are you planning to join or continue your country club membership?

Travel: Do your retirement plans include travel to places yet unseen? How frequently do you plan to get away, and how far will you travel by air or another vehicle?  Will you purchase or continue to maintain a vacation home?

Entertainment: What sort of sports activities, fine arts events, or classes do you like to attend?  Will you continue these or add to/subtract from the list during your retirement years?  Do you enjoy these activities with friends and will they continue into your twilight years?

Shopping and Gifts: Do you like to shop and give gifts to friends and family?  Are you charitably inclined?  How much change to your current spending on clothing and household goods do you imagine?

Basic Needs: What essential spending needs to occur to bring you happiness?  Utilities, and replacement appliances are not exciting, but are a necessary part of life. Housing and transportation are likely the two biggest parts of your current budget.  Do you plan to create more or less space for you and your family in retirement? Will you splurge on the luxury car you have worked hard to enjoy? How much will your healthcare costs change with age and when any employer subsidies are gone?

As you can see, there are many inputs to formulating an accurate retirement budget, and often handing the answers to these questions over to a professional can be a very rewarding experience. Quality financial advisors are trained to be your partner in constructing an easy-to-understand plan which includes tax implications and investment return projections. There is also no replacement for an objective opinion which highlights issues that can throw you off track, like assessing excessively high risk in your portfolio needed to achieve unrealistic goals.

Once you have worked the puzzle of what expenses you will have in retirement, it is an easy bridge to understand how much your current asset mix will support and any shortfall of income which needs attention between now and the time you retire.  For the average family, greater headway toward building the proper sized nest egg will be achieved by placing the focus on controlling “prudent” spending rather than attempting to target an arbitrary savings rate.

Examination of consumer spending for U.S. households clearly shows that transportation and housing monopolize the largest shares of overall spending.  It is highly probable these categories also consume the largest portion of your personal household budget as well.  Focusing your efforts on prudent spending in categories with the highest potential to increase savings for retirement clearly makes sense. Will reducing home expenses over the long term get you closer to your retirement dreams than eliminating your occasional stop at the coffee shop? It sounds all too simple. But what does it really mean to “live within your means”?

Distinguishing between “saving what is left over” and “prudently controlling flexible spending” to achieve your long-term goals is important. How often do any of us have something left over with no added attention given to our spending habits? If we are being good stewards of our resources and paying attention to high impact items, there are opportunities to make headway toward long-term goals as fixed expenses change from time to time. Focusing on prudent spending decisions even during periods when fixed expenses are lower provides greater positive results than curbing expenses with less budget impact. Although we sometimes feel hit with one outlay after another, indeed there are many expense decisions we can control and holding ourselves accountable for making those with a long-term mindset is key to making your retirement dreams a reality.

Given your new understanding of exactly what will be needed in retirement from the exercise above, there is no need to accept that simply being within acceptable debt ratios will keep your spending at the proper levels. In fact, consumer debt ratios are set by lenders to satisfy a different set of criteria, not to help average families select a level of debt in line with their long-term family goals. Prudent spending is actually the key driver to controlling what you can and reducing the risk of missing your retirement target.  Let us help you create a baseline plan and talk through the obstacles you see to reaching your ideal retirement.  With a quality conversation about a prudent spending plan, you may be closer than you think! ♦


Wealth Management & Trust

KATHY THOMPSON, Senior Executive Vice President, (502) 625-2291
E. GORDON MAYNARD, Managing Director of Trust, (502) 625-0814
MARK HOLLOWAY, Chief Investment Officer, (502) 625-9124
SHANNON BUDNICK, Managing Director of Investment Advisors, (502) 625-2513
REBECCA HOWARD, Managing Director of Wealth Advisors, (502) 625-0855

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE


We provide the information in this newsletter for general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, investment, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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6 Smart Money Moves for College Graduates

achievement-cap-celebrate-1205651.jpg

SYB-Logo_Since1904Living expenses add up quickly once you’re out on your own, and many young adults who didn’t plan ahead are delaying major milestones like getting married or buying a home because of their financial situation. The good news is that you can have a bright financial future if you think strategically about money right out of the gate.

We recommend the following financial tips for new college graduates:

  1. Live within your means. Supporting yourself can be expensive, and you can quickly find yourself struggling financially if you don’t take time to create a budget. Calculate the amount of money you’re taking home after taxes, then figure out how much money you can afford to spend each month while contributing to your savings. Be sure to factor in recurring expenses such as student loans, monthly rent, utilities, groceries, transportation expenses and car loans.
  2. Pay bills on time. Missed payments can hurt your credit history for up to seven years and can affect your ability to get loans, the interest rates you pay and your ability to get a job or rent an apartment. Consider setting up automatic payments for regular expenses like student loans, car payments and phone bills. Take advantage of any reminders or notification features. You can also contact creditors and lenders to request a different monthly due date from the one provided by default (e.g., switching from the 1st of the month to the 15th).
  3. Avoid racking up too much debt. Understand the responsibilities and benefits of credit. Shop around for a card that best suits your needs, and spend only what you can afford to pay back. Credit is a great tool, but only if you use it responsibly.
  4. Plan for retirement.  It may seem odd since you’re just beginning your career, but now is the best time to start planning for your retirement. Contribute to retirement accounts like a Roth IRA or your employer’s 401(k), especially if there is a company match. Invest enough to qualify for your company’s full match – it’s free money that adds up to a significant chunk of change over the years. Automatic retirement contributions quickly become part of your financial lifestyle without having to think about it.
  5. Prepare for emergencies. Hardships can happen in a split second. Start an emergency fund and do your best to set aside the equivalent of three to six months’ worth of living expenses. Start saving immediately, no matter how small the amount. Make saving a part of your lifestyle with automatic payroll deductions or automatic transfers from checking to savings. Put your tax refund toward saving instead of an impulse buy.
  6. Get free help from your bank. Many banks offer personalized financial checkups to help you identify and meet your financial goals. You can also take advantage of their free digital banking tools that let you check balances, pay bills, deposit checks, monitor transaction history and track your budget.

Resource information provided by the American Bankers Association

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The Details More People Should Know About Medicare

medicareUntitled-logoBefore you enroll, take note of what the insurance does not cover and the changes ahead.

Misconceptions about Medicare coverage abound. Our national health insurance program provides seniors with some great benefits. Even so, traditional Medicare does not pay for dental care, vision care, or any real degree of long-term care. How about medicines? Again, it falls short.1

Original Medicare (Parts A & B) offers no prescription drug coverage. You may not currently take prescription medicines, but you may later, and can you imagine paying out of pocket for them? Since 2013, the prices of the 20 most-prescribed drugs for seniors have risen an average of 12% annually. Will Social Security give you a 12% cost-of-living adjustment next year?1pills

To address the issue, many seniors sign up for Part D (prescription drug) plans, which may reduce the co-pays for certain generic medicines down to $1 or $0. As private insurers provide Part D plans, the list of medicines each plan covers varies — so, carefully check the list, also called the formulary, before you enroll in one.  Keep checking it, as insurers are permitted to change it from one year to the next.1, 2

You may want a Medigap policy, considering your Part B co-payments. If you stick with original Medicare, you will routinely pay 20% of the cost of medical services and procedures covered by Part B. If you need a hip replacement or a triple bypass, you could face a five-figure co-pay. Medigap insurance (also called Medicare Supplement insurance) addresses this problem with supplemental Part B coverage. Premiums and services can vary greatly on these plans, which are sold by insurers.1

If you want dental and vision coverage (and much more), you may want a Part C plan. Around a third of Medicare beneficiaries enroll in these plans, also called Medicare glasses.jpgAdvantage programs. The typical Part C plan includes all the coverage of Medicare Parts A, B, and D, plus the dental and vision insurance that original Medicare cannot provide. Medicare Advantage plans also limit beneficiary out- of-pocket costs for the services they cover.1

Part C plans may soon offer even more benefits. They will be allowed to include services beyond normal medical insurance beginning in 2019. Starting in October, they can reveal what new perks, if any, they have chosen to offer. Some of the new benefits you might see: coverage for the cost of home health aides, adult day care, palliative care, the installation of grab bars and mobility ramps in the home, and trips to and from medical appointments. The list of potential benefits could expand further in 2020.3

Few seniors who enroll in Part C plans switch out of them. If you enroll in one, you should realize that these plans are regional rather than national – so, if you move, you may have to find another Part C plan or return to traditional Medicare, with or without Medigap coverage.1,3

The Medicare Advantage Disenrollment Period is disappearing. A recently passed federal law, the 21st Century Cures Act, does away with this annual January 1-February 14 window. Beginning in 2019, there will simply be an annual Medicare Advantage Open Enrollment Period from January 1-March 31. During these three months, Medicare recipients will have the chance to either switch Part C plans or disenroll from a Part C plan and go back to original Medicare.4

Some Medicare Cost plans are being phased out. These plans, which offer some features of Medigap policies and some features of Medicare Advantage programs, are ending in certain counties within 15 states and in the District of Columbia. Enrollees are being left to search for new coverage.4

If you are financially challenged, you may have options. State subsidies and Medicare savings programs are available to help households handle co-payments and deductibles under original Medicare. Some non-profit groups offer pharmaceutical assistance programs (PAPs) to help Medicare beneficiaries pay less for medicines.4

Lastly, diabetics who use insulin pumps sometimes find they are better off with original Medicare as well as a Medigap policy, rather than a Part C plan. Some Medigap plans cover the entire cost of insulin. Many infusion treatments (such as chemotherapy) are also 100% covered by Medigap policies.4

Neil Byrne, JD, CPA, LLM may be reached at 502-625-2459 or Neil.Byrne@syb.com. https://www.syb.com/wealth-management-and-trust/our-team/

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

  1. – forbes.com/sites/nextavenue/2018/07/10/avoid-these-big-medicare-mistakes-people-make [7/10/18]
  2. – money.usnews.com/money/retirement/medicare/articles/2018-06-25/prescription-drug-costs-retirees-should-expect-to-pay [6/25/18] 3 – nytimes.com/2018/07/20/health/medicare-advantage-benefits.html [7/20/18]
  3. rd.com/health/healthcare/things-medicare-wont-tell-you/ [7/6/18]

Six Tips for Wealth & Sanity

wealth sanityUntitled-logoAnd the most important tip of all? Hire a financial advisor.

Investing can be stressful, but it doesn’t have to be. If you have a portfolio that was built for you and use the help of a financial advisor, you shouldn’t be too worried about volatility and financial news.

Here are a few tips to help you invest wisely, and stay sane at the same time.

  1. Cut back on financial (entertainment) media. The financial news is entertaining, but the focus is on short-term trends and hype. Sure, you need to keep up with general economic and business news, but it isn’t wise to trade on every piece of information that you come across. Print media tends to be less sensational than TV programs.
  2. Stop checking your accounts online every day. If you have a properly diversified portfolio, built for you, focusing on daily changes in your account value is likely to tempt you to trade too much. Should you make frequent transactions, hoping to profit from price swings, your trading fees increase. Avoid making emotional decisions and wait for your monthly statement to arrive. As a disciplined investor, you need to tolerate volatility. This gives you more peace of mind, too.
  3. Focus on the bottom line, not individual investments. If one investment is doing well and the other is doing poorly, what should you do? The answer may surprise you. You should probably sell some of the investment that went up and buy more of the poor performer. It seems counterintuitive, but this is “buy low, sell high” in a nutshell. If you focus on the value of your portfolio as a whole, you won’t be tempted to make poor trading decisions, like selling lagging stocks out of fear.
  4. Clean old junk out of your portfolio. Do you have stocks you held for a while, just waiting for them to return to the price you bought them? A good way of knowing whether to hold certain stocks is to ask yourself whether you would buy them today as new positions. Investors often think they need to wait until the stock price comes back before selling. Cut your losses and rid your portfolio of those old underperformers. You will feel like a weight is lifted from your shoulders, and you can use that money on better prospects.
  5. Create a plan and follow the rules. One of the biggest mistakes that investors make is failing to make a disciplined plan. Choose your overall asset allocation, such as a mix of stocks and bonds, and stick to it. Check your portfolio every three months to see if your account has fluctuated away from your original plan (say, 60% stocks, 40% bonds).  If needed, make changes to bring your account back to the proper proportion.  This is called rebalancing, a fantastic risk management tool.
  6. Hire an investment advisor. Seeking the advice of a professional doesn’t mean you are not smart enough or capable enough to figure it out on your own. You’re capable of mowing the lawn, cleaning your house and doing your taxes, too. But you don’t mind paying someone else to do those tasks. There are some cases where you should never do things on your own. You don’t see people filling their own cavities, right? A professional financial advisor can help you devise your plan and offer unbiased advice about your portfolio. Who knows, you may even enjoy letting go of the reins.

Hopefully, taking a step back from your investing life gives you greater peace of mind and lets you focus more on other things like your career and family.

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Your Rollover Options

ira rollover 3Untitled-logoLeaving your job can be hectic, whether you’re retired, laid off or moving to a new company.  It may not cross your mind to take care of your previous employer-sponsored retirement plan, but this is an important box to check during your transition.


You have four options when it comes to your retirement assets: leave them with your former employer, roll them over into your new employer’s retirement plan, roll them over into an IRA or cash out. As with most financial decisions, there are pros and cons to each choice, and your specific circumstances may make one choice more appealing than the others.

Leave assets in your former employer’s plan

You can choose to leave your investments where they are when you leave your job, though you will not be eligible to continue making contributions. This is the default option if you choose to do nothing. However, if simplifying your retirement savings is your goal, this is probably not the route for you. If you leave your investments behind at each company, you’ll have various accounts to keep track of throughout your career and distributions to take from each during retirement. Keeping in touch withCapture roll.JPG former employers can be difficult. Your old plan may also have high fees, limited flexibility or poor allocation options when compared with an IRA or your new employer’s plan. If your retirement account has less than $5,000, your former employer has the option of cashing you out of the plan, incurring taxes and penalties. Avoid getting cashed out by rolling the money over when you leave the company.

There are some advantages to leaving your money with your former employer. For instance, some large companies have access to lower-cost institutional funds that your new employer might not offer. In this case, it would be cheaper for you to stay with the old plan than to roll over into a new plan or IRA. Additionally, if you’re 55 or older when you leave your job, you may be eligible for penalty-free withdrawals (though income tax would still apply), so keeping your investment in your former plan could give you access to money sooner.

Rollover into new employer’s plan

A rollover is moving assets from one account to another while avoiding taxes and penalties. You can move your assets from your old employer’s plan to your new employer’s plan seamlessly without losing any money. Choosing this option is advantageous because your assets will continue to grow in a tax-advantaged account, and you won’t have to start over at each new company. You can rollover assets from a Roth 401(k) to a traditional 401(k) and vice versa, as long as both plans allow for it. If your new company has a better selection of investments or lower prices than your previous employer, it makes more sense to do a rollover. This way, you can also avoid having to keep track of old accounts with former employers.

Rollover into an IRA

In general, an IRA will offer you the most versatility and flexibility, so if you’re unhappy with either your former or current employer’s plans, an IRA may be a better bet. An IRA can also be more convenient, because you won’t have to worry about rolling it over again if you leave your job in the future. One feature unique to IRAs is the ability to take penalty-free distributions early (before the age of 59 ½) in order to pay for your first home or qualified higher education expenses. You’ll still pay income tax on the distributions, but you’ll avoid the fees that you’d accrue if you cashed out of an employer plan. An IRA can also be a great vehicle for your heirs, who have the option of stretching out required minimum distributions with a traditional IRA, or avoiding them altogether with a Roth IRA.

There are two types of rollovers, whether you’re rolling your money into a new employer plan or an IRA. A direct rollover is from plan to plan. No taxes are withheld, no penalties are owed and no money crosses your hands. For an indirect rollover, your previous plan administrator writes a check to you, withholding 20 percent for taxes. You’ll have 60 days to transfer it to your new plan or IRA. If you exceed 60 days, you won’t get the 20 percent in taxes back when you file a return, and you’ll owe an additional 10 percent penalty for early withdrawals. A direct rollover is a simpler, safer route, but you’ll have to make sure you have an IRA or new employer plan established first.

Cash out

This is the option least likely to be recommended to you, but it can be useful in certain circumstances. It’s important to know that cashing out a retirement plan incurs a 20 percent tax and a 10 percent penalty for early withdrawal, so you won’t actually get the amount listed in your account. If you’re truly strapped for cash, or if you’re over age 55 when you leave your employer (thus avoiding the early withdrawal penalty), you may want to consider cashing out. However, cashing out is generally not advisable. In addition to the taxes and penalties, your money will lose its tax-advantaged growth, and you may be damaging your future financial security. Cashing out in order to reinvest in a new employer plan or IRA is a costly mistake many workers make each year.

Now that you know your options, you can make an informed decision about your retirement assets. Leaving your job for any reason can be stressful, but jeopardizing your retirement security would be even worse.

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This article was written byAdvicent Solutions, an entity unrelated to Stock Yards Bank & Trust Company.  The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties.  Stock Yards Bank & Trust Company does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2013 Advicent Solutions. All rights reserved.

 

Financial Considerations for Single Women

Untitled-logo trustIf you’re divorced or separated, money management will become an important part of your life. While it may be true that money can’t buy or ensure happiness, your ability to manage your finances can play a large role in your financial future, and to a large extent, your ability to live life on your terms.

A huge amount of time is not necessarily required to get your finances moving in the right direction. It is often simply a matter of attending to the “basics.” The following steps may help you stay on track:

1. Pay Yourself First. Transfer a set amount from your earnings to your savings each month. Even a small amount in the beginning helps.

2. Reduce Consumer Debt. Avoid high credit card finance charges by paying off the balances each month, or if you must carry a balance, use only cards offering low finance rates beyond the introductory period.

3. Maintain Good Credit. You can obtain one free annual credit report from each of the three major credit bureaus: TransUnion, Equifax, and Experian. Good credit is required for obtaining loans and low interest rates. Monitoring your credit can also help you guard against identity theft.

4. Diversify Your Savings. Develop a plan for your short- and long-term needs. Consider your liquidity needs, risk tolerance, and time horizon for retirement. Be sure to consult a qualified financial professional to determine an appropriate strategy for your financial future.

5. Take Advantage of Tax Benefits. If you qualify, contribute to an Individual Retirement Account (IRA), an employer-sponsored 401(k) plan, or another similar retirement plan. These plans offer tax benefits that may help enhance your retirement savings.

6. Update Your Estate Plan. Have your will and any trusts reviewed by a legal professional. Prepare advance directives, such as a durable power of attorney, living will, and health care proxy. This is important for everyone at any time, regardless of age.

7. Review Your Insurance Needs. Periodically review your risk management program. Your life, health, and disability income insurance needs will likely change as you progress through various life stages.

8. Plan for Future Care. Consider your possible long-term care needs. Have you ever thought about your future care needs, should you one day require help with activities of daily living, such as meal preparation, personal care, dressing, and housekeeping? Long-term care insurance increases your care options, should the need arise by helping to cover care at home, an assisted living facility or in a nursing home.

9. Build a College Fund. College tuition, at a public or private institution, continues to rise. So, relying on your children to receive scholarships or financial aid may not be the most practical strategy. Look into opening a 529 college savings plan or other college planning account. As soon as possible, begin saving for your child’s education. Eighteen years can pass quickly.

10. Set Long-Term Financial Goals. Establish one-, three-, five- and10-year goals. Evaluate your progress yearly and make adjustments, as appropriate, to achieve long-term success.

Whether you’re divorced or separated, straightening out your finances can become a top priority. Make a commitment now to start this planning process. Attention to the basics may help you meet your financial goals and improve your emotional and financial well-being.

Visit https://www.syb.com/wealth-management-and-trust/how-we-serve-our-clients/ to see how Stock Yards Bank and Trust can help you.

PFSW-0515-19-X

Resource information provided by Financial Media Exchange

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Next Gen Family Wealth and the Softer Side of Planning

Untitled-logo trustNeil ByrneWhat do you want to pass on to future generations?  As the old saying about money goes, “You can’t take it with you.”  Money is important though, undoubtedly.  Of course, so are family, friends, and our social, cultural and intellectual pursuits.  Recent research from Purdue University has even found that money can increase people’s emotional well-being, as well as their overall satisfaction with life – to a point.  According to the researchers, money alone can actually lower a person’s well-being if it is not handled properly.  The research goes on to conclude that “[m]oney is only a part of what really makes us happy. . . .”

So, what else makes us happy?  Well, that depends on what makes you and your family unique.  What’s your family’s story?  Do your children and grandchildren know it?

Traditional financial advisors are good at tackling the technical challenges, such as the legal and financial planning that families must address.  A modern estate plan, however, is not all there is to consider when creating a legacy.  After all, most family interactions are not technical discussions about taxes or investment returns – they are far more interesting than that!

When is the last time you discussed the importance of community involvement, professional development, or shared family goals and expectations?  What non-monetary goals are important for your loved ones to achieve in their lives?  What values should their lives reflect?  Philanthropy?  Entrepreneurship?  The arts?

We frequently have clients who express their concerns about how loved ones would manage an inheritance, and those concerns are well-founded.  Often, however, clients have not told the story of how she or he earned those resources.  The story behind the assets is interesting, and extremely important to the choices that are made by succeeding generations.  If assets become part of the “family legacy” instead of just money in an account, there is a higher likelihood that they will be used wisely.  The story also becomes part of who the family members are, not just what is in their bank accounts.

Telling the family story does not mean telling younger generations every last detail about your finances.  Instead, it means dedicating time and attention to preparing family members for a future inheritance in a meaningful way, and doing that more than once.  It also means sharing with younger generations the intellectual, social, human and spiritual responsibilities they will take on as future family leaders – and as beneficiaries.

Mark Twain has been quoted as saying, “The difference between the right word and the almost right word is the difference between lightning and the lightning bug.”  A singular focus on technical details without discussion about the larger family legacy can be detrimental to a family and a family’s wealth.

We are inviting you to consider some of the less obvious, but incredibly important discussions and plans you may need to have with your family.  Please contact your advisor to talk more about your family’s legacy, or me at neil.byrne@syb.com or (502) 625-2459.


See:  https://www.futurity.org/money-can-buy-happiness-1685132/ “Money can buy happiness.  Here’s how much it takes,” February 21, 2018.

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