The Convervative 60/40 Portfolio Split is Dead!
Power Hour Summary
Wins of the Month –
Our greatest reward as an advisor is knowing we have taken financial worry and stress away from a client. Often, this has less to do about what we do, but just that we are here to help guide them.
We have often referred to this as being a financial sherpa. A sherpa is a mountain climber’s guide, not only to help them up the mountain (saving and accumulating assets) but helping them down the mountain (retirement) where inherently are where most of the dangers come in mountain climbing and your financial life.
One of the greatest wins this month was being able to tell a client to choose a retirement date, we had her income covered and she no longer needed to worry about how they would replace their paycheck!
We had a little break from the market volatility for most of this summer, but towards the end and now into fall, volatility has come back in full force. With midterms just around the corner and more talk of rate hikes, it doesn’t look to be going away anytime soon.
The “conservative” 60/40 portfolio
The ’60/40′ Portfolio Is Dead.
The 60/40: Still toast
Correlation is key – being diversified with non-correlated holdings
It’s about more than money management, it is about what is important to you and how to be sure all areas of your financial life are working together for you….
Keeping up with this crazy inflation is important, and one of the best ways to do this is to be invested in companies that will grow with inflation. Think about the types of things people will pay up for through inflation and not cut back on. That would be their healthcare/medications, and consumer essentials. Materials and energy should also go up because they are a reflection of the things being inflated.
When retirement income is needed, then managing to be sure your income is always secure is important. By doing this, we are confident that you can take a much higher income than the industry-recommended 4% (which even is questionable in some circumstances when income management is not a priority).
For taxable accounts, managing in a tax-efficient way should be a priority. There is a saying that it’s not what you make, but what you keep that counts. By making tax management a priority inside your accounts, you are not surprised by a tax bill when you make a withdrawal or worse yet when others do and you pay the price as capital gains are passed thru in pooled strategies (mutual funds and ETFs).
Returns vs Results
Performance numbers alone are honestly not going to look that different over various periods of time in different investment strategies, but results could – meaning having enough income, paying less in taxes, or just the confidence of someone watching out for you…
Health Insurance Options with Health Insurance Specialist, Jim Crump
The Open Enrollment for marketplace (aka Obamacare or the affordable care act insurance), is from November 1 – January 15th. However, if you need coverage by Jan 1st, you have to be enrolled in a plan by December 15th. If you have a plan, your plan will usually automatically renew if you do nothing but the premiums will more than likely increase so this is the time to shop around for the best, most cost-efficient coverage.
Open enrollment is the only time you can enroll or switch plans unless you have a special enrollment period caused by a life event such as moving to a new location, retiring, having a baby…
If you have any pre-existing conditions, you are automatically covered by these plans. You can choose a zero deductible plan or a high deductible plan which could work with an HSA account.
Premiums of these plans are based on your income, age, gender, and location.
You can run numbers on Healthcare.gov but we recommend talking to an advisor to help you find the best plan for you and be sure you don’t have any surprises come tax time!
These plans are usually really good for the employee, often covering between 50-60% of the insurance costs, however, spouses or children may be at the current rates. This is when it may be beneficial to look at private insurance for the family. Again, a healthcare insurance advisor can help you compare your options.
There are no open enrollment periods for private insurance, and there are also no mandatory coverages, meaning pre-existing conditions can result in a decline in coverage.
Private insurance can be less expensive than marketplace plans for healthy individuals, but it is important to know what is covered. You want to be sure there is a catastrophic safety net. The last thing you want is to be diagnosed with cancer or a serious condition only to find out you are only covered to $500,000.
Know your coverage and know when your coverage ends. You don’t want to be without coverage and unable to enroll in a marketplace plan as losing coverage does not qualify for a special enrollment period so you would have to wait for the open enrollment period.
Cost Sharing Groups (such as MediShare)
These companies are not insurance, they do not have a contractual obligation to pay claims, it is based on the integrity of the company and the funds available. They can be great and we have seen them pay large expenses, but it can take time. The bottom line is you need to understand how it works and be okay with it if you go this route.
Medicare and After 65 Insurance
You can enroll in Medicare three months before you turn 65 and 3 months after, so including your birthday month, that is 7 months. If you don’t enroll in Part A and Part D, there could be penalties for life later when you do.
Most people will pay nothing for Medicare Part A, which is considered hospital insurance. However, Part A does have a yearly deductible. In 2022, the deductible is $1,556. You’ll need to spend this amount before your Part A coverage takes over. (this is where a supplement comes into play)
Part B is considered medical insurance that you’ll pay a premium each year. Most people will pay the standard premium amount. In 2022, the standard premium is $170.10. However, if you make more than the preset income limits, ($91,000 for singles and $182,000 for couples) you’ll pay more for your premium.
Medicare Part D is prescription drug coverage. Part D plans have separate premiums which will depend on the plan you choose. Just like with your Part B coverage, you’ll pay an increased cost if you make more than the preset income level.
Medicare Advantage or Part C replaces all the above plans and supplements combing all as one. Prices for plans greatly vary based b your location, the drugs that you take, the doctor that you see, and what you want to be covered. Before choosing an Advantage plan, talk to a specialist to be sure your doctors are covered and if you travel a lot, you need to understand how coverage works.
The open enrollment period for Medicare Advantage plans is January 1 – March 31st each year, but the open enrollment for traditional Medicare supplements is October 15th – December 7th.
Tax Talk – Insurance and taxes
As mentioned above, there are different premiums for certain plans based on income, these are really tax subsidies. If not planned right, you could get a surprise at tax time. It is important you are aware of how this works and talk with not only your insurance advisor but your tax advisor about this and how to best plan for it.
Do you want to possibly have to pay back at tax time ad consider your reduced premiums an interest-free loan throughout the year? Or do you want to be sure you pay nothing at tax time and maybe get a return on your taxes?
Estate Planning Spotlight
Open Enrollment at many companies also includes the ability to add legal services. These services can give you a discount on estate planning with Nels firm, Estate Planning Partners, but not all attorneys in the networks are created equal. This applies to subscription legal services as well, such as Legal Shield.
Oftentimes the attorneys in the networks are a Jack of all Trades, they lack the expertise in any one category. What you are paying for with legal work or any professional service for that matter, is not their time, but their expertise. Planning requires a conversation to be done well, so be cautious if something costs little to nothing to do.
We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL
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