An RIA is a registered investment adviser. Is that a stockbroker? No. Here’s an objective, succinct piece from TD Ameritrade. It explains the stark differences between an RIA and other financial planners and registered reps from broker-dealers. As I shared in my New Year’s article (December 28, 2022), you would think that all financial advisors are legally obligated to act in the best interests of their clients, right? Surprisingly, the answer is no. Only fiduciary financial advisors are required to act in the best interests of their clients. I’m still blown away by that, and clients of investment salespeople should be too.

Benefits of Working with an RIA (TD Ameritrade)

RIA’s are fiduciaries. It is what sets them apart professionally. That word, fiduciary, means a lot. It is an odd word, but arguably the most important word in financial planning and wealth management. It originates from the Latin word, fidere (“to trust”). But as I pointed out previously, it is much more than just a word. It is a service mindset. Serving others’. As fiduciary financial advisors (vs. commission-based agents), we are legally obligated to act in your best interest when helping you make decisions about your money. Do yourself a favor, work with a fiduciary.

Legal disclaimer

The content on this page provides general consumer information. It is not legal advice or regulatory guidance. The TWG LLC updates this information periodically. This information may include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs. Aloha!

The Seesaw Effect of Stocks & Bonds and Yield & Price

With the stock market struggling to break out of this down market, and with bearish experts saying a recession is looming, some clients are seeking fixed income. As investors, we’ve all heard the idiom, stocks & bonds, right? Basic diversification. Remember the seesaw effect: When yields rise, prices fall. Supposedly, the idea is when one goes up, the other goes down, like a seesaw. So, what happened in 2022, when both markets were down? Short answer: Inflation. A fundamental principle of bond investing is that market interest rates and bond prices generally move in opposite directions. When market interest rates rise, prices of fixed-rate bonds fall. This is interest rate risk. Misconception that if a bond is a US Gov’t obligation, the bond will not lose value. In fact, the US Gov’t does not guarantee the market value of a bond if you sell the bond before it matures. But, yes, it is complicated. Check out this PBS special.

https://www.pbs.org/newshour/show/how-interest-rate-hikes-impact-bonds-and-stock-prices

It’s a bit early to state with certainty that the bear market is over for U.S. stocks (look at what happened just yesterday—1/30/23). With a plethora of issues like record inflation, rising interest rates, the ongoing Ukraine war, along with pending profit downgrades, and added tensions with China, we’re in a tough spot as a world economy. And on top of that, there are some forecasters pegging the probability of a recession at 60%+. However, anecdotally, most investors I’ve talked to have moved on from their dire inflation concerns. But the macroeconomic picture is far from being completely rosy. As a result, more and more investors are hedging by increasing their exposure to safer havens like, U.S. Treasuries, Munis and investment-grade bonds. Amidst the turmoil, these investors are just trying to ride it out, staying patient and in the meantime, collecting some income. In my opinion, not a bad idea. But of course, it all depends on where you stand. If you’re getting closer to retirement, you might want to discuss with your financial advisor an allocation shift to hold some of your retirement monies in a traditional savings or money market account. The good news is that interest rates are up. As a result, you’ll be earning more in interest now than you would have over the last several years.

Make no mistake about it, this inflation thing is real. I recently went to Zippy’s here in Honolulu and simple food for the soul, Oxtail Soup, is $28! I was floored, but still ordered it. Inflation is everywhere and impacts everything we buy. But it is nothing new. I still remember the impact inflationary pressures had on us as a kid growing up on the island of Maui in the mid-seventies. At the time, gas prices were soaring, and supply levels were diving. OPEC decisions made us wait in our cars in long lines for hours at a time just to get fuel for our cars. But we survived and just like we did, keiki today will reflect on what it was like to live in 2022 with the worst inflation to hit our U.S. economy in 40 years. Hopefully inflation has peaked in 2022. For more clarity, many of us are waiting for the Federal Reserve to speak up. Up to this point, Powell & Co. has remained committed to their campaign of interest rate hikes. In fact, it has been the most aggressive since the Carter and Reagan administrations. For now, we’ll see what happens tomorrow when Jay Powell talks to the world. My advice: Take it in stride, one step at a time…gw

2023 TRADITIONAL IRA AND ROTH IRA ESTABLISHMENT DATES
The deadline for establishing a Traditional IRA or a Roth IRA in order to make a 2022 contribution is Tuesday, April 18, 2023. All applications must be signed and submitted (including e-signature applications) to Advisor Services in good order by Tuesday, April 18, 2023.

IRA CONTRIBUTION DEADLINE FOR TRADITIONAL IRA AND ROTH IRA ACCOUNTS
The contribution funding deadline for Traditional IRA and Roth IRA Accounts is Tuesday, April 18, 2023, regardless of whether the client has filed an extension with the Internal Revenue Service (IRS) to file their tax return.
It is very important that IRA contribution checks and deposit manifest clearly indicate the contribution year as 2022 or 2023. Per IRS regulations, if a tax year is not indicated, the contribution will be coded and processed as a current year contribution. In order to adjust 2023 contributions to 2022, a letter of instruction is required from the client no later than Tuesday, April 18, 2023.

“RMD Time”—Required Minimum Distributions (RMD)

Of course, clients’ The Wheeler Group LLC can reach out to us with any specific RMD questions. Since it is highly dependent on your unique situation (i.e. age, holdings, etc.) you need to reach out to your personal financial advisor. Here are some general RMD points of discussion:

• For clients who attained the age of 72 in 2022 and are taking advantage of the April 1^st, 2023, extension please see below to determine applicable deadline regarding Required Minimum Distribution (RMD).  Note:  Any requests to sell mutual funds, stocks, or bonds in order to make an RMD must be received by Advisor Services prior to the dates noted below to allow for trade settlement and processing.

Year client reached the age of 72	RMD MUST be made by:	Investments must be sold by:
2022	Friday, March 31, 2023	Wednesday March 29, 2023

• Clients are subject to a 50% federal excise tax on any percentage of an RMD not taken by the required deadline.

As fiduciaries, we are here to help our clients. However, when it comes to tax advice and preparation, you need to contact your CPA, or accountantcy provider. At The Wheeler Group LLC, we DO NOT PROVIDE TAX ADVICE. We are trusted financial advisors and as such, we are here as a financial resource to provide valuable information and keep you on track. At the same time, never hesitate to reach out and contact us. Here’s to a healthy, prosperous 2023 to you all. Aloha!

“It’s good to learn from your mistakes. It is better to learn from other people’s mistakes.” — Warren Buffett

I recently watched a CBS Morning news segment entitled, ‘What would you tell your younger self?’ Great segway into planning for a long retirement, God willing, right? Stats say that many retirees are not happy with the way they prepared for retirement. The way I see it, today’s workers can learn from these regrets and avoid them by creating a retirement plan and sticking to it. Yep, I know, easier said than done.

Planning for retirement can seem confusing and complicated, so it’s not surprising that two-thirds of retirees say they have regrets about how they prepared for it, according to a recent survey. More worrisome is the fact that many of today’s workers continue to do the same things the retirees wish they had not. So, I suggest to younger people that they learn what can go wrong in retirement NOW, to avoid it later in life. Same old story: If I only knew what I know now, right? Anyway. Life is unpredictable. Help yourself. Do what you can to plan for a long life.

After 22 years of helping people with planning for a rewarding retirement, I hear a lot of the same things repeated from retirees about what they would have done differently. Many preretirees ask themselves questions like, ‘Have I saved enough money to retire?,’ or ‘Will I be able to maintain the standard of living I’ve grown accustomed to?’. Financial planners cite three retirement phases: Go-Go, Slow-Go and No-Go. In the Go-Go years, typically 65 to 75, healthy young retirees spend a lot on travel, hobbies, and scratching life-long dreams off their bucket list. Retirees are less active between 76 and 85 in the Slow-Go years and tend to spend their No-Go years of 86 to 100 quietly. More than more than half (55 percent) of retirees said they have retirement planning regrets. The Washington Post ran an article entitled, “The top regrets of retirees” (https://www.washingtonpost.com/business/2018/12/10/top-regrets-retirees/). Citing a Global Atlantic survey (2018 survey of 4,200 pre-retirees and retirees in the United States), here are three (3) regrets of retirees:

1.               Being too reliant on Social Security.

2.               They did not pay down debt before retiring.

3.               They didn’t save enough.

See the article for more details. One point it made was that thirty-nine percent (39%) of retirees reported spending more than they expected. And consistent universally in the financial planning world, the article reiterated, “The risk of running out of money is real.” When you get right down it, why waste your energy mourning the past? Move on. You can’t change the past. And if you do have regrets, well, avoid spending too much time in what my mother (author, Dr. Linda Wheeler, https://www.drlindawheeler.com/) calls, ‘the tunnel of suffering.’ She tells audiences, ‘Don’t grow roots there…work to get out!’ So, the point is, adapt and take a page from the late poet and author Maya Angelou’s playbook. Angelou said, “Do the best you can until you know better. Then when you know better, do better.” What else is there, right?

Another idea is to focus on what really matters. At 88, Clint Eastwood was asked, “How do you remain so young and active?” The now 92 y.o. Clint replied, “I don’t let the old man in.” Yep, tough mindset for sure. Some fight the frailty aspect of aging. Others just give in, saying c’est la vie. All I know is that life is unpredictable. In my practice, we discuss risks in retirement. Longevity happens to be one of them. Optimists will comment, what is wrong with living a long life? Nada. It is about addressing the risks if you choose. My partners at St. Francis Healthcare are sponsoring a FREE virtual LTCi educ session I am conducting tomorrow evening via Zoom. Join us. Here is the link to register: https://www.stfrancishawaii.org/s/courses

By now you have heard about the implosion of FTX. Among others, the Brady’s, Shaquille O’Neal, Steph Curry, David Ortiz, Shohei Ohtani and Naomi Osaka. Even “Mr. Wonderful”, Kevin O’Leary is apparently named in the lawsuit. The suit said FTX needed these big names, “to continue funneling investors into the FTX Ponzi scheme…” It also said their “misrepresentations and omissions” make them liable after FTX’s downfall.

So, what does FTX do? We all know the term cryptocurrency. It is ubiquitous. Let’s face it, “Crypto” is part of our vernacular today, but what is it? That’s the problem, we don’t know what it is. It’s crazy. I learned that there are over 17,000 different types of cryptocurrencies. Yup, 17k. Get this, it’s become so acceptable as ‘currency’ today that some professional stud athletes are requesting that their salaries be paid in Bitcoin. Scary, but true. We all have a choice. It’s your decision.

Many equate FTX with Bitcoin, as being one in the same. Two of a kind. They’re two very different things. With equities, that’s like saying Apple stock is the same as Revlon stock. Very different, one is very profitable (and some say, overvalued), whereas the other is bankrupt. The crypto understanding gap is huge; we need accurate information. Understanding what it is, and what it is not crucial.

A WSJ article (11/17/22) spells it out. Entitled, “New CEO Says FTX Suffered ‘Complete Failure of Corporate Controls”.

Closer to home, here’s a question I get from well-intentioned clients: ‘Hey G, should crypto be a part of my investment portfolio?’ My boilerplate response, ‘it depends’. My response is often twofold: Number one, do your due diligence (your homework) based on your risk tolerance (crypto is not for the frail at heart). Secondly, why do you have an interest in crypto? Of course, like all investing, most blurt out: ‘to make money’. But is it worth the immense risk? To be sure, there’s a lot of equities and securities out there that are equally risk oriented. But why crypto? Because it’s exciting and relatively new? I get it. But please do your research.

Despite the long-term unknown, I actually believe that cryptocurrencies will be around in the future. At least some iteration of it. In what form exactly? Who knows? One thing I do know is it remains an emerging asset class. And if you’re going to invest serious money (‘serious’ is relative to you), you need to triple-down on your research. Go deep and study. It’s your money. I’ve said it repeatedly vis-à-vis investments—caveat emptor (buyer beware). We live in the age of scams and scammers. Protect yourself or just don’t play the game. It is zero-sum. It’s just too easy to fall prey to these rip-off artists with their slick, manipulative marketing. Research. Take your time. And I implore you, do not invest your life savings into crypto. Unless, of course, you’re willing to lose it all. Not unlike Vegas in that way.

Compliance Statement

In full transparency, I have a small investment in Bitcoin through Gemini. However, I do not put myself out as an expert in Cryptocurrency, nor do I have specialized knowledge in blockchain technology. I am a licensed fiduciary; fee-based financial advisor (series 7, 65, 63). This is not an offer to sell or buy any security or interest. The content of this article is strictly for informational purposes only. It is not intended as professional or expert advice in any way. Seek advice from your legal counsel, and/or financial advisor.

Valid question. Here’s a Vanguard study with the facts. Again, as I’ve always said, it depends. Your unique situation drives everything.

We’re in the fourth quarter of 2022, and I feel it’s more important now than ever to review your overall financial plan with a fiduciary level advisor. Here’s one reason from Bank of America’s investment division. BofA says, “economic growth won’t approach ‘normal’ until as late as 2025. So what? Well, this could mean your current financial plan might leave you without enough money to last your retirement. And with longevity being a huge risk in retirement, it matters. In addition, ’emotionally-charged decisions to sell off large quantities of stocks or other investments now lock in your losses, removing any chance for future growth. Research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.¹

Consider this example: A recent Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.²

Assuming 5% annualized growth of $500k portfolio vs 8% annualized growth of advisor managed portfolio over 25 years. The hypothetical study discussed above assumes a 5% net return and a 3% net annual value add for professional financial advice to performance based on the Vanguard Whitepaper “Putting a Value on your Value, Quantifying Vanguard Advisor’s Alpha”. Please carefully review the methodologies employed in the Vanguard Whitepaper. The value of professional investment advice is only an illustrative estimate and varies with each unique client’s individual circumstances and portfolio composition. Carefully consider your investment objectives, risk factors, and perform your own due diligence before choosing an investment adviser.

1. Journal of Retirement Study Winter (2020). The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.

2. Vanguard (July 2022), Putting a Value on Your Value. he projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Vanguard whitepaper.

This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest. The Wheeler Group LLC is a licensed Investment Advisor Representative and fiduciary-level advisor.

November 2022 is Long-Term Care (LTC) awareness month, so let’s be real. When it comes to LTC insurance, ‘caveat emptor’–“let the buyer beware.” My position is that traditional long-term care is NOT for everyone. Don’t be sold a bill of goods. Do your due diligence (your homework). You may not be a candidate for this type of coverage.

The good news is that people are living longer. The bad news is that the longer we live, there is a greater risk that we will need long-term care services, which can be costly and financially devastating, especially here in the islands. A colleague of mine, Mike Pinkans, who is a well-respected CFA & CFP, shared a recent study suggesting that only 16% of Americans have financially prepared for a possible LTC need while statistics suggest that 70% of those age 65 and older will need it. That’s a cavernous divide. Why? People understand the need, they just haven’t done anything about it.

Let’s be clear: Long-term care doesn’t just affect an individual; it impacts their entire ohana. Family members provide most of the informal care, which requires time, willingness and sacrifice. I have a friend going through this situation right now. They’ve divided up the days between siblings to care for their mom. And their mom knows the all-too-real physical and emotional toll it takes on the family caregiver. It can be very stressful and taxing. Mom previously took care of their dad, who has since passed. With Long-term care insurance in place, it puts people in control, preserves their dignity and independence, protects assets and provides choice of care settings. Having a long-term care plan can save your relationships too. Nothing is more important, to me.

What place comes to mind when you hear the words “Long Term Care?” If you’re like me, ‘Nursing Home’. But let me ask, have you ever known anyone who needed assistance or help to get through the day? They were probably at home, right? So why don’t more of us have LTCi? It’s the old, ‘it won’t happen to me’ syndrome. But with glaring statistics suggesting that 70% of those age 65 and older will need it, it’s a weak argument against the need to carry such coverage. But again, an expert, fiduciary-level analysis needs to take place. With no assets comes no need for protection. With capital assets comes the real need to protect them. But yes, it is complicated because it involves emotion; revolving around dignity, control and independence. So it requires expert advice; not product peddlers.

My connection to disability and long-term care (LTC) insurance isn’t strictly a professional one. It’s a personal one too. For this reason, I believe every American deserves that some level of financial protection.

Do you actually need Long-Term Care Insurance(LTCi)? The chances of needing long-term care are 7 out of 10. Parallel, did you know that every 3 seconds someone in the US develops dementia? I did not. One thing I do know is that disabilities primarily occur due to illness, not accidents. The chances are only 7 out of 100 that you will have an auto accident sometime in your life. It is a further anomaly to have a life changing auto accident; but it happened to me in 2005(spinal cord injury). What kind of financial lifestyle would you be returning to after you recovered and then you lived another 50+ years? Unfortunately, for many, it means spending down a significant portion of your savings and assets.

So, the bottom-line question for you remains, if it does happen, will you be able to afford to pay the bills yourself? We know this: If you become disabled, so that long-term care is required, it is killer expensive. No doubt about it. And it’s not getting any cheaper anytime soon—especially in Hawaii, where a severe shortage of nursing homes is driving prices higher each and every year. Again, we live in paradise and the ‘paradise tax’ is no joke. So, ask yourself: if long-term care is so expensive, how long will my assets and investments last if I became disabled? That tells you whether you need LTCi.

As a financial advisor, I’m sharing with clients that National Long Term Care Awareness Month is a prompt to have conversations, learn the facts and analyze the options, and put something officially in place before a need arises.

Today, there are tax-advantaged ‘hybrid’ options to protect yourself and your assets. Learn about Extended Care and Long-Term Care Planning and discover new ways to protect yourself and your assets. Make it a goal to be financially and emotionally prepared to manage longevity for you and your loved ones.

Our goal is to make it as easy as possible to secure LTC coverage with the most consumer-friendly hybrid programs in the marketplace with features such as, no intrusive underwriting (no paramed exams, etc.). We deal with only the very best companies out there, all with an ‘A’ (Excellent) rating with A.M.  Speak to one of our specialists or attend one of our free webinars hosted by St. Francis Healthcare Systems of Hawaii. Find out if long-term care insurance fits into your plans. Call us today at (808)216-4147 or visit https://ltcconsumer.com/awareness-month-could-save-your-retirement/

In 2001, when I joined this industry, Roth 401(k)’s just came into existence. Unlike a traditional 401(k), contributions to a Roth 401(k) aren’t tax-deductible, but the upside kicker is this: withdrawals are tax-free in retirement. A Roth 401(k) offer an after-tax contribution option with tax-free withdrawals provided these withdrawals are ‘qualified distributions’ made after a 5-taxable-year period of participation. Got that? It’s “a 5-taxable-year period”. This is a critical number. Also, if qualified distributions are either made on, or after the date participants attain age 59½, made after death, or attributable to a participant being disabled, it is entirely tax-free. (As a planning side note: If you’re a business owner or plan sponsor, a Roth 401k option opens up another cool feature that allows participants to take advantage of another—often overlooked and underutilized—tax strategy, that is, the “in-plan” Roth Conversion. (Ask your financial advisor about this unique strategy if it make sense for your entity).

By the way, did you hear? We got good news from the IRS. Well, a relatively positive outcome, anyway. For 2023 the 401(k) limit has increased to $22,500 (plus an add’l $7,500 ‘catch-up’ provision for those of us age 50+). In lockstep, the IRA limit has now risen to $6,500 (+$1k ‘catch-up’ rider). Changes mean that retirement savers, 50+ years old can now sock away a combined $30k/year in their 401(k)’s. Yep, $30,000! If offered at their workplace (in fact, an estimated 70% of 401(k)s now have a Roth feature), I think younger workers (<50) should seriously consider a Roth 401(k) to help minimize taxes in the long run. As you may know, there are no income limits for a traditional IRA, but how much you make has a direct bearing on how much you can contribute to a Roth IRA. However, Roth 401k’s are different. High earners can actually take advantage of the Roth option in their employer’s retirement plan, if they choose. The fact is, there is no income limit for Roth 401(k) contributions. At the same time, it is worth noting that there’s no income limit on deducting contributions to a traditional 401(k) account, either. So, when you get down to it, high income earners may be better off contributing to the traditional 401(k) and taking the tax deduction now at their high marginal tax rate than saving in a Roth account. It comes back to the old, “Now or later” issue, that is the question. No one can foretell the future. So you’ll need to decide. Of course, let’s not forget about Roth IRA’s. They have a place to play in the retirement planning world too.

If you want to take a deeper dive into Roth IRAs, or review your existing 401(k) plans and their benefits, please reach out to us. Because whether you’re feeling bearish or bullish, enlisting the guidance of a licensed “fiduciary” level financial advisor can help you make sense of it all. When you get down to it, it is more than retirement planning. You need a trustworthy, tax advisor. Because as they say, the day will come when Uncle Sam (aka the IRS) wants his pound of flesh. Just remember, you have (or at least, had) a choice in the matter. So, pay now or pay later. That’s for you to decide. Plan well, g.