Tag Archives: Trust

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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The End of the 4 Percent Rule?

retirement plan1Untitled-logoThe “4 percent rule” was a retirement spending approach that became mainstream in the 1990s. The rule suggested that a retiree with an average portfolio distributed between stocks and bonds (approximately 60-40) should withdraw 4 percent of his or her retirement funds each year (adjusting each year for inflation). If the retiree could stay limited to that 4 percent, he or she would be able to fund retirement for at least 30 years.

The simplicity of the 4 percent rule made it a hugely popular with investors. The method made planning easy and was projected to leave the vast majority of retirees with surpluses late in life. Many quickly adopted the method and the approach became a staple of retirement budgeting.

Modern Problems

Recently, the 4 percent rule has begun to fall out of favor with financial planners and investors. The rule, which was designed in the bull market of the mid-90s, relies heavily on regular, high returns from stocks. However, since that time, low economic growth and a major slump [in] the market has made equities look much less attractive. Few retirees will want to take on the risk of holding over half their portfolio in potentially volatile stocks.

The market is simply not what it was once thought to be. Retirees who are trying to reduce the risk of significant loss are less willing to put faith in perpetual stock growth. In addition to smaller gains, the average lifespan is on the rise and people are living longer in retirement. Strategies have become more conservative to deal with these concerns, and individuals planning for retirement must consider changes to saving and investing.

Ideal Rates in Retirement

The changes in the market do not indicate that the 4 percent rule can never work for retirees, just that it causes problematic exposures. The 4 percent rule works when yearly withdrawals are matched by yearly growth. Even if a portfolio averages 4 percent real growth, it could still underperform a target goal because it suffered severe losses early on.

So is there a better rule to follow? A 3 percent rule, perhaps? Unfortunately, there are no fixed guidelines when it comes to retirement income planning. A retiree must adjust his or her plans regularly to match both changing needs and market performance. The 4 percent rule might be a great place for investors to get a rough estimate when planning, but they should always be prepared to adjust their annual withdrawals lower if necessary.

What Can Investors Do to Make Retirement Work?

Since investors cannot control market performance and the rate of return, they often try to increase allowable withdrawals by increasing total portfolio value. By starting with more money in their retirement plan, a smaller rate of withdrawal will still be worth a solid dollar amount.

To sustain larger dollar withdrawals, retirees must either invest more money or delay retirement by a couple of years. Though neither option may seem pleasant, retirement planning is full of these give-and-take situations; an investor must find a way to make retirement income sustainable.

As another option, some retirees might look to an annuity to lock in an income. Annuities do not provide the flexibility or adjustable withdrawals of direct portfolio management, but they are guaranteed to pay out for the rest of the retirees’ lives—always providing them with some level of income.

Changing Rates

There may be many reasons to change withdrawal rates during retirement, but retirees must always keep one eye on the market and the other on the future. A profitable year might entice higher withdrawals, but a retiree could benefit far more if the extra earnings were reinvested for later expenses. On the other hand, if withdrawals are greatly restricted early on, people might miss their opportunity to travel and enjoy active life in retirement.

There are no simple answers when it comes to the chaos of the market and the unknown developments of the future. Investors should prepare themselves for changes and be ready to adjust their portfolios as things come into focus. No matter what hap- pens, it is important to plan with trusted financial advice. If you have concerns about your retirement strategy or want to better understand your financial options, contact Stock Yards Bank & Trust Company with all your questions.

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This article was written by Advicent Solutions, an entity unrelated to Stock Yards Bank & Trust Company. The information contained in this article is not intend- ed 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

Playing by the IRA Rules

ira rulesUntitled-logoIndividual Retirement Accounts (IRAs) offer favorable tax-deferral benefits to individuals who are saving for retirement. But with those benefits, there are certain rules about when distributions may be taken to avoid penalty taxes. Contributions to a traditional IRA, depending on your income and participation in employer-sponsored plans, may entitle you to certain current income tax deductions. Further, because your funds are not taxed until distributions begin, your savings have the potential for tax-deferred growth.

Generally, IRAs are designed to work as long-term savings vehicles, but you may be able to withdraw funds early and without penalty, provided your situation qualifies as an exception.

The Age 59½ Rule

The age 59½ rule provides that, if you take distributions from your traditional IRA before you reach the age of 59½, you may be subject to a 10% Federal penalty tax in addition to regular income tax. However, you may not have to pay the penalty tax if your early distribution meets certain requirements.

Exceptions

You may be eligible for penalty-free qualified distributions, if one of the following exceptions applies:

  1. You are taking distributions as the beneficiary of a deceased IRA owner. Generally, if you inherit an IRA, you are required to take required minimum distributions (RMDs) over a period no longer than your life expectancy. For non-spousal beneficiaries, RMDs must begin in the year following the year in which the IRA owner died.  Spousal beneficiaries may have additional time to begin taking RMDs, depending on certain factors, including whether they opt to treat an inherited IRA as their own. This penalty tax exception does not apply to spousal beneficiaries who opt to treat the account as their own IRA.
  2. You are paying for certain first-time home buyer expenses, generally referred to as qualified acquisition costs, such as buying, building, or renovating a first home. Distributions, which may not exceed $10,000, may be used to cover qualified costs for you, your spouse, your children, or your grandchildren.
  3. You, your spouse, or dependents have un-reimbursed medical expenses that total more than 10% of your adjusted gross income (AGI) (7.5% if you are age 65 or older, but only through 2016). If a medical expense for you, your spouse, or a dependent qualifies as an itemized deduction on your income tax return, it will generally qualify for this penalty tax
  4. The distributions are part of a series of substantially equal periodic payments (SEPPs) made at least annually that meet certain additional requirements. The Internal Revenue Service (IRS) currently recognizes three methods for calculating SEPPS: the required minimum distribution method, the fixed amortization method, and the fixed annuitization method.
  5. Once SEPPs begin, they must be made for five years or until you reach age 59½, whichever is later.
  6. You qualify with certain physical and/or mental conditions as being disabled, determined by a physician and if the disability can be expected to result in death or continue for an indefinite duration.
  7. You are paying medical insurance premiums due to unemployment. If you lost your job, and received unemployment compensation for 12 consecutive weeks, you may take distributions from your IRA account, penalty tax-free, during the year in which you received unemployment compensation, or in the following year, but no later than 60 days after you have been re-employed.
  8. You are paying for higher education expenses, such as tuition, fees, and books at an eligible educational institution (generally all accredited postsecondary institutions). The distributions may not exceed your qualified education expenses, or those of your spouse, your children, or your grandchildren.
  9. The distribution is attributable to an IRS levy of the IRA.
  10. Reservists qualify while serving on active duty for at least 180 days.

IRAs are strictly regulated to ensure that they are used as vehicles for retirement savings. Therefore, they generally work best as long-term savings vehicles. However, if you do need income from your IRA before you reach age 59½, it is important to know if your situation excuses you from the penalty tax levied on early distributions before making a withdrawal. Playing by the rules may save you money and help preserve your savings for retirement. Be sure to consult your tax advisor to determine whether your individual situation will qualify as an exception.

Please visit https://syb.com/wealth-management-and-trust/how-we-serve-our-clients/ira-retirement-rollovers/.  for more information.

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Easing Into Retirement

easing into retirement- pic

Untitled-logoFor many people, crossing the bridge into retirement is a big step. If you’re approaching retirement, it’s time to develop a strategy to facilitate a smooth transition from the more structured world of work to one of leisure.

After spending years building your professional career, you’ve accumulated assets along the way.

While retirement planning usually focuses on preparing for your financial future, nonfinancial matters may also need to be addressed. When retirees feel dissatisfied, it’s often the lifestyle changes that accompany retirement living that tend to create difficulties with self-esteem and identity associated with ending one’s profession.

Staying Active

One possible solution for managing these challenges may be to ease into retirement. Some individuals may welcome the opportunity to continue some form of work, such as consulting, job-sharing, mentoring, or back-up management. Mentoring, in particular, enables you to transfer a lifetime of learning and experience to a friend, relative, or younger colleague. Phased-in retirement provides an “anchor,” allowing new retirees to explore other activities while also maintaining their role at work.

Since some people may have more of an emotional reaction to the separation and disengagement from working than they expected, taking between two to five years to “decompress” may be an appropriate option.

Maintaining a Healthy Perspective

While “retirement” suggests the end of your working life, a more positive perspective to take could be that it’s the beginning of a new phase of life—when you can do all the things you never seemed able to find the time for while you were working. For example, volunteer work can allow you to make a valuable contribution to a charitable cause and meet new people. Taking courses in subjects that interest you can sharpen your intellect and help maintain your cognitive abilities. If chosen thoughtfully, these activities can be enjoyable and fulfilling.

Obviously, it’s a lot easier for a retiree to consider other pursuits if financial considerations are secondary. People may think that it costs less to live in retirement. However, it’s actually common for retirees to increase, rather than decrease, their expenditures, especially in the first few years of transition. Without working full-time, retirees may have more energy and time to enjoy entertainment, dining out, travel, and recreation.

On Spending and Inflation

During the working years, it’s common to take a certain lifestyle for granted. In retirement, however, you may need to change your priorities or consider budgeting depending on your circumstances. On the other hand, you may find that you no longer need or want to do some of the things that seemed so important when you were working.

Additionally, be sure to keep an eye on the effects of inflation after retirement. For example, an item costing $100 when you are age 65 will cost $180 at age 80, assuming a 4% inflation rate compounded annually. Therefore, it’s important that your retirement plan be not only a plan “at” retirement, but also a plan continuing “through” retirement, which may require revision on a regular basis.

If you view retirement as your opportunity for growth and exploration, you can make this transition exciting and enjoyable. Your horizons are limited only by your imagination. After all of your hard work, you’ve earned this opportunity—enjoy the freedom!

Please visit https://syb.com/wealth-management-and-trust/how-we-serve-our-clients/ira-retirement-rollovers/.  for more information.

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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Market Update

by Mark Holloway & Paul Stropkay

Stock Yards Bank Wealth Management and Trust

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markApril 3, 2018

Dear Clients and Friends,

We were all spoiled by last year’s 21% return and low volatility in the stock market.  Yesterday’s 458 drop in the Dow was just the most recent of several days with large point declines in the major stock market indices that began with the 1,032 point drop on February 5th.  The market is now down approximately 3.0% year to date.

Market volatility is traumatic for investors who forget that, while stock prices may be erratic, the fundamental value of quality businesses is actually quite stable.  Over time, price and value tend to converge.  Alert investors can take advantage of opportunities that price volatility provides.  We are encouraged by the growth in corporate profits that we are seeing this year and remind ourselves that stock valuations are reasonable in the context of history.

That said, what is causing the wild market swings?  Increasing interest rate expectations from the Federal Reserve have added a level of uncertainty.  Late last year, most analysts believed that we should expect two and possibly three increases in rates during 2018.  That expectation is now up to four increases based on the strength of the economy and renewed inflation fears related to full employment.  Full employment generally brings increasing wage pressure and has historically been an omen of future inflation.  Increasing interest rates are a threat to economic activity, increase costs for companies that borrow, and pose competition to stocks for new investment dollars.

Secondly, the drama and political turmoil in Washington has added to uncertainty.  The high rate of turnover in key areas of the Trump advisory team including Secretary of State and Chairman of the Economic Advisors rattled the markets.  The failure of Congress to pass an acceptable budget also added to the feeling of political dysfunction.

The third and most important cause of the recent volatility is the discussion of tariffs.  The Trump administration wants to impose tariffs on imported steel and other products.  Tariffs are essentially taxes on imported goods.  Exporting countries seldom sit by idly and accept these taxes.  They retaliate with tariffs of their own.  Remembering our economic history, tariffs were one of the reasons the great depression was so severe and prolonged.  The global trade war that resulted set back economic growth for a decade.  Fear of slowing global growth resulting from a new trade war has rattled markets.  We can only hope that this is part of the “art of the deal” and that the new administration is trying to force our trading partners back to the negotiation table.

We still believe that we are in a secular bull market for common stocks.  A secular bull market is a market in a general uptrend with higher highs and higher lows in absolute index price levels.  This does not mean that there will not be corrections.  The attached chart shows that stock market declines in secular bull markets of 5%, 10%, or even 20% should be expected.  Larger declines have only happened during recessionary periods.  There are no signs that the economy is heading for a recession in the near future.  In fact, economic growth is accelerating.stock vot.jpg

It is important to keep things in perspective.  The 500 point drop in 1987 represented a 21% decline.  The nearly 500 point drop yesterday was only a 1.9% decline on today’s much higher market level.

Remember, no one can time the market.  It is against human nature and too many consecutive correct decisions must be made very quickly to ever be successful.  It is important to stay invested for those good days that make all the difference in portfolio performance.  As the attached chart shows, many times these bounce-backs happen immediately after days like yesterday.neg days.jpg

We appreciate your continued trust and confidence.

The Wealth Management & Trust Group

Stock Yards Bank & Trust

 


The Wealth Management Group

KATHY THOMPSON, J.D., Senior Executive Vice President, (502) 625-2291
E. GORDON MAYNARD, J.D., Managing Director of Trust, (502) 625-0814
MARK HOLLOWAY, CFA, Chief Investment Officer, (502) 625-9124
SHANNON BUDNICK, CTFA, CFP®, Managing Director of Investments, (502) 625-2513
PAUL STROPKAY, CFA, Chief Investment Strategist, (502) 625-0385

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.

The Basics of Creating a Life Plan

by Claudette W. Patton, J.D.

Stock Yards Bank Wealth Management & Trust


Preparing a Life Plan is all about living and making good choices about your legacy. Most people avoid planning because they think it’s morbid to think about death, but a Life Plan – estate planning – isn’t about dying at all. It’s simply providing direction for your legacy and determining how you want to be remembered by your community, family, charities, and personal causes. It is a chronicle of your life’s work with a plan to continue the fruits of your work for the benefit of others.

The most important question remains: “Do you want to control your personal life legacy?” A well written and thought out Life Plan keeps you in control of your life even after you’re gone. The list of those who do not plan is replete with examples of unintended ex- spouses, estranged siblings, children with addictions, and others being granted inheritances by state intestacy law (lawyer lingo for “without a will”). A recent example of a man who did not control his legacy is the music legend, Prince. According to court documents filed in a Minnesota probate court, Prince Roger Nelson left no instructions to divide his belongings. As a result, state law could divide his vast estate equally among 8 siblings. It is reported Prince has one surviving full sister, five surviving half siblings, and two deceased half siblings (with surviving children). Some of these heirs had not spoken with Prince in over twenty years. However, Minnesota state law does not distinguish between full and half siblings, plus any personal relationship to Prince is irrelevant. Would Prince have approved of this distribution? Would you?

The following is a Life Plan “Control Checklist” to assist in protecting and directing your legacy:

Control Who Inherits Your Legacy and Designate The Amount For Each Heir

Many people assume everything in an estate automatically goes to the spouse. Please be aware not every state law automatically passes the entire estate to a spouse! I repeat. A spouse may not automatically inherit everything without a Will. Some states only allow a spouse 1/3 of an estate due to parental inheritance distribution laws. According to Kentucky intestacy law, a spouse may be fourth in the line of distribution. Also, state laws typically divide assets equally to the state designated heirs without consideration of a spendthrift relative, or someone with special medical needs. Children born out of wedlock may not be recognized in some states. Charitable giving may not occur. Additionally, if no living descendants are located the estate may “escheat” (go to) to the state coffers.

Control Who Will Take Care Of Your Minor Children

Preparing a Will and naming a guardian for your children places you in control of the person(s) you desire to meet the needs of your children and reflect your values. Without a Will the court may select a guardian from any family member, regardless if you were estranged during your life. If no family member agrees to guardianship or is deemed appropriate, the court may choose a state appointed guardian such as foster care.

Control Estate Taxes

Controlling taxes is a continuous event during our lifetime. An estate plan continues the control in minimizing estate taxes. A spouse may not take an inheritance tax free. Now is the time to put a plan in place to ensure the maximum of your legacy goes to your heirs rather than for taxes. Let’s revisit the example of music legend Prince. Without a Will or other estate planning, roughly one half of Prince’s estate could go to Federal and state taxes.

Control Probate

Having an estate plan helps speed the probate process, reduces probate costs, or in some circumstances, avoids probate completely.

Control Who Does Not Inherit

Earlier we discussed a plan to choose the exact people who receive your legacy. Now, we draw attention to controlling who will not inherit from your estate. An estate plan is your personal outline and direction of exactly how you want your personal legacy to be distributed. The estate plan allows you to be as detailed as possible and gives you the opportunity to exclude heirs making your intention of distribution clear. For example, perhaps some family members are financially established and you want to distribute assets based upon need, perhaps a family member may be incapable or irresponsible with money management needing small distributions of money over time using a trust, or perhaps a family member participates in lifestyle choices you may not wish to support.

Control Family Feuding

Estate planning may reduce the fighting and conflict among family members. Executing a well drafted estate plan places you in control of potential conflicts. Family members may not view your clear directions of dividing assets in a favorable manner, but your intentions will be clear to the court. Further, some states allow forfeiture/no contest clauses, indicating if an heir contests your estate plan then the heir may forfeit any gift made under the Will.

Control Charitable Legacy

An estate plan allows your legacy to live on by personally choosing charitable giving reflective of your values, interests, and social concerns.

Control Financial and Medical Care

Through estate planning with a Durable Power of Attorney, you control your financial and medical care in the event of a disability.

You can take control of your Life Plan now by engaging an experienced estate planning attorney to assist with the personal legacy you want to create. An estate plan expresses your values and outlines how you desire your assets to be preserved and protected. Who is in control of your legacy?

For more information about Life Plans, please contact our Wealth Management and Trust department.