February is the month for our annual Money Issue, and no time like the present for a serious review of your overall financial situation. We consulted with experts in the areas of investing, investment planning, mortgages, insurance, and real estate on how to maximize and protect your assets as 2021 brings sweeping change.
For those 55 and under, retirement may still seem far away. But it’s never too early to save for retirement with sound investment strategies. Leigh Anne Hughes, CFP® Senior Vice President - Investment Officer with Wells Fargo Advisors guides us through setting priorities and appropriate plans of action to take the guesswork out of building a comfortable financial future.
Leigh Anne recommends focusing first on paying down high-interest debt, contributing enough to your 401(k) to receive the full company match, and having an emergency fund. Once these fundamental considerations are in place, you can prioritize other major life goals.
“Whether it’s saving for a down payment on a home, investing in an education account, or another major purchase, a financial advisor can help people achieve the goals they value most.”
In times of uncertainty, our instinct may be to change the way we manage our money. Leigh Anne recommends a calm, level-headed approach. “This past year has been one of the most difficult many clients have ever faced emotionally and financially. There were times they wanted to get out of the market because the volatility and uncertainty scared them. However, having a plan and making small adjustments based on your goals rather than making major shifts due to factors out of your control, like a pandemic, can help you stay on track even when obstacles present.”
Often younger employees will claim that they cannot afford to contribute to a retirement account, not understanding that, with company matching and tax advantages, they can’t afford not to contribute. “That’s free money! I will always encourage young investors to save more. The more time your money has to work for you, the better! Saving more now can offer you more flexibility later, which means you could potentially retire earlier, spend more in retirement, or make a purchase you have always dreamed of. It’s much harder to play catch-up closer to retirement than to save consistently over a longer period of time.”
But does our age determine whether we should move into more or less risky investments within those retirement accounts?
Leigh Anne says, “Although there is no ‘one-size-fits-all’ approach to investing, many people under 55 are working to grow their money, which means stocks would play the primary role in their future goals. More stock generally equates to more return over time, but that also means there may be more risk. Weighing the reward versus the risk of any investment and determining the proper balance will depend heavily on each person’s unique goals and risk tolerance. Developing a plan with a financial advisor can help a person determine an appropriate mix of investments and the level of risk they are willing to accept to achieve their goals.”
When deciding whether to take out a loan, Leigh Anne believes in worthy goals such as purchasing a home or starting or expanding a business. Taking advantage of historically low-interest rates to borrow money may be an excellent way to allow investments to continue growing. Just be sure to maintain an appropriate emergency fund. She suggests at least 3-12 months of living expenses.
If you see a tax refund or stimulus payment in your near future, Leigh Anne has advice for that, too. “If 2021 is the year that you want to pay off your credit card debt, use these funds to pay down your highest interest-rate debt. If you want to give more to certain causes that are close to your heart this year, choose to give some of your refund or stimulus check to your favorite charities. And have a little fun! Investing is not supposed to be all work and no play.”
Just as it’s never too early to start saving, it’s never too early to begin meeting with a trusted financial advisor. “It’s important to talk with your financial advisor whenever you have a life-changing event, which would include getting married, buying a home, changing jobs, having a baby, paying for a child’s education, retiring, etc. Outside of these major events, we recommend meeting with your advisor to evaluate progress toward financial goals and make adjustments as needed.” Visit wellsfargoadvisors.com for more information.
Wells Fargo Advisors, 297 N Hubbards Lane, Louisville, KY 40507
If the only constant is change, investors will undoubtedly see a steady stream of it in 2021. With a global pandemic and national vaccine rollout, as well as a new Presidential administration and change of control in congress, we turned to Pamela Thompson, CFA, Managing Director at Mariner Wealth Advisors, for some clarity and perspective. With 29 years’ experience in investments, wealth management, finance, and banking, Pamela oversees the Louisville market for Mariner Wealth Advisors, a privately owned registered investment advisory firm with 41 offices across the country.
In light of the COVID pandemic, clients are understandably “worried about their investments and what will happen to their long-term goals in the midst of market volatility,” says Pamela. “I regularly talk with clients about what is the appropriate balance for the investments in their portfolio. The first defense against the harmful effects of volatility is to have planned properly from the beginning.” Two factors to consider are 1) how much liquidity is needed and when; and 2) the client’s comfort level with fluctuation versus the growth their financial goals require. For example, Pamela advises, “Funds needed within five years should be in cash or conservative investments, not in the stock market. Beyond that, the appropriate balance between stock investments and bonds or cash will depend on how much growth someone needs to achieve their long-term goals, how much income they need to take out along the way, and how much fluctuation they can tolerate from market volatility.” According to her, such decisions should be goal-based, not based on age or a formula. “Long gone are the days when interest rates were high enough to rely on CDs or bonds in retirement. With a ten-year treasury bond currently yielding just 1%, most retirees will need to have at least some investment in equities to meet their goals,” Pamela advises. “Once the appropriate long-term balance is in place, then volatility can present an opportunity. When the market drops, look for investments to buy at a discount, and then when values become very high, look for places to trim.”
While she expects volatility to continue, Pamela projects a positive market environment amid the new Presidential administration and Democratic Senate majority.
“We are living in a more polarized world. Clients wonder, ‘What does it mean for their investments?’ Republican administrations are generally thought to be more ‘business-friendly,’ while Democratic administrations are expected to raise taxes. This leads some clients to jump to conclusions and worry about their investments long-term. But it is important also to consider the counter-balancing factors of a likely increase in infrastructure and other types of stimulus spending that help the economy, not to mention the improved sentiment that is likely to continue with the new administration’s focus on ‘unity’ in our country. At the end of the day, it is important to remain focused on ‘real data’ to drive investment decisions, and to consider all factors - not just the ones most publicized by one political party or the other.”
As for her investment team’s 2021 predictions, Pamela dares to forecast the financial future for us. “After two years of strong market returns, stocks have become ‘fully valued' and need to see corporate earnings catch up. If the COVID vaccine rollout can be implemented smoothly and our activities return to a more normal state by the second half of the year, our team would place the most likely outcome on a mid-single-digit return for the US stock market. If the Federal Reserve remains accommodative and interest rates remain at their historic lows, then one more above-average year is possible for the market. But our current expectation is for more modest returns in 2021.”
Mariner Wealth Advisors is an SEC-registered investment adviser with 41 offices across the country, including Louisville, KY and New Albany, IN. Services include comprehensive wealth management, financial planning, customized investment portfolios, business advisory services, tax planning and preparation, insurance solutions, and estate planning and trust services. For more information, visit marinerwealthadvsors.com. Follow @MarinerWealthAdvisors on Facebook, Instagram, and LinkedIn and @MarinerWealth on Twitter.
Founded in Louisville, Kentucky, in 1998 by Brady Webb, American Mortgage Solutions helps clients in Kentucky, Indiana, Tennessee, Florida, and Colorado. President Brady Webb, who now splits his time between Louisville and Cape Coral, Florida, has been in the real estate and financial services business for over 30 years. Brady attended Shelby County High School, where he played baseball and continued playing throughout college. After college, he went to work for a Fortune 500 bank, where he first began to realize the lending limitations of larger financial institutions. After receiving his mortgage broker’s license, Brady was determined to offer clients more options and flexibility in getting them the best deal to fit their needs. He is also a licensed real estate agent, giving him insight into all aspects of the business and a more seamless working relationship with real estate agents.
American Mortgage Solutions offers all the same loans as big banks and lenders, plus special programs and lending sources not limited by the FDIC. “We can show you and coach you through the process to help you achieve the dream of being a homeowner.” Now is the time to take advantage of historically low-interest rates. With low housing inventory, the real estate market is highly competitive. Getting 100% pre-approved now will ensure you are ready to make an offer and help you avoid the “cost of waiting” that comes with higher interest rates resulting in higher payments.
Brady cautions those interested in refinancing to do so without delay. The bond market decline signals higher interest rates ahead.
Another alternative he suggests to his clients in addition to the rate-and-term mortgage is to consider a cash-out refinance. Some advantages to the cash-out option are:
1. The ability to pay off higher-interest debt using home equity
2. Releasing funds for home improvements to lift the overall home value
3. Making new investments to pay off the mortgage much faster
“Home equity is a vehicle to financial independence,” says Brady. Knowing how to leverage that equity to your advantage can make all the difference to your financial freedom and peace of mind. In addition to working with clients, Brady values his relationships with other real estate agents and financial planners. “We work together to grow our businesses and make them better for our clients.”
For more information, visit www. loansolutionsnow.com. Follow @americanmortgagesolutions on Facebook and Instagram.
In turbulent times, protecting your assets and liability protection should become top priorities. With so much uncertainty, some reassurance can lessen your decision fatigue and guard against the unexpected. Kentucky Farm Bureau spokesperson and General Counsel Greg Kosse outline here what to keep in mind about insurance coverage. Greg has been with Kentucky Farm Bureau for over 30 years, starting as an adjuster in 1989. He attended night classes at Louis D. Brandeis School of Law at the University of Louisville. “Kentucky Farm Bureau is a great company to work for, and they focus on their employees.”
Kentucky Farm Bureau is the largest property insurer and the largest commercial insurer in the state, and the second-largest overall property/casualty insurer. They began insuring autos in 1943, and the one-state operation is now the only state Farm Bureau leading its state in market share in the last year. They provide insurance for homes, farms, automobiles, boats, personal property, rental property, and small businesses. Kentucky Farm Bureau agents also offer life insurance underwritten through Southern Farm Bureau Life Insurance. “Life insurance protects your family, providing financial stability and security for your loved ones,” says Greg.
Greg recommends speaking with your insurance agent to determine how often and when to review insurance coverage.
This review should take place regularly. Having all of your insurance through a single company and developing a good working relationship with your insurance agent is a “good practice, which allows the agent to evaluate all your insurance needs to help you determine what coverage is best for you.” Other benefits include convenience and discounts.
With 15 claim offices across the state and agent offices in all 120 Kentucky counties, Kentucky Farm Bureau can provide the “appropriate insurance to protect your assets and the availability to walk you through a claim. There is great value in having a local insurance agent and local claim service. Especially during traumatic events, local is a real advantage.” For more information, visit kyfb.com, and follow @kyfarmbureau on Facebook and Kentucky Farm Bureau on LinkedIn.