Cam Goodwin, COO and managing partner, shares valuable information in this short video. Please enjoy.
Lisa Butler, Director of Client Services at HawsGoodwin Financial, is featured as a guest blogger in the Nashville Business Journal along with Frank Cardenas, President of FEDlogic LLC.
We recently learned that the Social Security Administration announced a three-tenths of one percent raise in Social Security Benefits.
Though any increase is welcomed by beneficiaries, the increase is tied to the Consumer Price Index and the rate of inflation. These two have stayed stagnant in the last year which is the reason the increase was slight. However, the price of healthcare has been on the rise and the increase is simply not enough for our Medicare beneficiaries to combat the price of healthcare. This is why it is so important to understand that there are certain policies and laws that individuals should know about regarding their healthcare premiums, especially with Medicare.
Medicare retrieves their information from the latest tax report from the IRS. Since taxes are not due until April of each year, they are not reported onto each individual tax payers’ record until later into the year — making Medicare’s data behind by one to two years. What a lot of families are encountering is that their earnings may be vastly different from two years prior.
For example: Your 2016 Medicare premiums are derived by what the family’s earnings were in 2014, but what if your family’s earnings are considerably lower in 2015 or 2016?
Does a family have to pay inflated premiums when their financial situation has changed? For some families, the answer is “no.” This is called IRMAA (Income Related Monthly Adjustment Amount). There are certain provisions that allow some of these families that have a life qualifying changing event, to have their Medicare premiums adjusted based on the latest tax records available. It is important for families to evaluate their Medicare premiums on a yearly basis to see if they may receive a premium adjustment on their Medicare.
We have seen families paying additional Medicare premiums based on their income but through evaluation we are finding that many of these families are able to take advantage of the IRMAA policy and thus saving them thousands of dollars in premiums each year. It is important that families talk to their advisors on whether they may qualify.
When discussing retirement planning in younger years, many think about spending more time with family, traveling, and/or other leisure activities. We’ve experienced clients in retirement having second careers, volunteering or being caregivers to loved ones. Longer term financial and investment planning are essential to address the benefits and challenges of retirement; including Medicare and Social Security. Coupled with that, it is a necessity for clients to incorporate knowledgeable advisors when retirement actually arrives.
Planning can help guide them through the many factors facing them, including deciphering major governmental programs such as Medicare.
See the article in the Nashville Business Journal What we don’t know about Medicare could cost us.
By Art Haws, CFP| Guest Column for the Nashville Business Journal | November 2016
Presidents and Markets: What the election means for you
With the election finally over and President Trump preparing to enter office in January, it’s time to take stock of what having a new president means for us. The truth is that this election cycle has been tough and extremely uncertain, with the media predicting market instability. So now that the election is over, what exactly does it mean for you?
First, we need to acknowledge that fact that our financial markets will most likely be impacted. However, this impact might be less than we’ve been lead to believe. On election night, when it became apparent that Trump would win, the S&P 500 futures market was down as much as 700 points. However, the market bounced back Wednesday morning, opening approximately 76 points up, and traded up during parts of the day.
A good way to gauge the impact of this election is to take a look at the impact of past presidential elections.
By Cam Goodwin, CFP | Guest Column for the Nashville Business Journal | August 2016
The increasingly high cost of higher education has a lot of parents in a very real dilemma: should retirement savings efforts be put on a temporary hold (or reduced) in order to save for children’s education. It’s a legitimate question and one that more and more investors are facing. For the purpose of this column, let’s examine some perspectives on why retirement should take precedent over education saving even in the face of increasing tuitions.
In most cases, a child’s financial needs for education arise before retirement age. So chronological thinking would indicate that you build that investment fund first. Another common decision-driving factor is emotion. For most parents, educating their children is one of their largest — and possibly most costly — parental obligations. This generates a sense of urgency that can drive short-sighted decision making.
Assuming that you are not able to simultaneously fully fund retirement and education savings, stay the course and keep retirement in the priority seat. Here’s why:
You can borrow for college. You can’t borrow for retirement.
Interest rates on student loans are normally not too excessive. According to bankrate.com the current average is 4%. It would be to your advantage to borrow for college and continue to invest for retirement if you felt your retirement portfolio could generate an average rate of return in excess of your borrowing costs. A qualified advisor can help you develop an investment strategy with this goal in mind.
Consider also that there are other means for securing education financing. These would include grants, scholarships, part-time jobs for the student, and other creative ways to meet tuition needs. Helping your kids to identify these avenues for savings may not provide the same satisfaction as cutting a check for the full cost of college, but it certainly lends itself to helping them prepare and understand the need for building their own investment strategy for the future.
While the current mindset in today’s society is that a college education is essential for a successful career, it still goes in to the “want” versus “ need” category in the investment world. You want your children to be educated, but you need retirement savings to do things like eat and shelter yourself once you are no longer earning an income.
Ideally, you can fund your retirement savings while also putting any extra money toward an education-saving vehicle. There are a lot of good options available for building an education portfolio, and with the help of a Certified Financial Planner professional, you can identify a plan and a strategy that will work for investment needs for your future and the future of your children.
For parents, the welfare and security of their children is often their greatest emotional and fiscal investment. As it relates to education, it is important to separate out the emotional component and keep the focus on a solid retirement plan so your savings are intact when the grandkids start showing up; keeping in mind that helping to educate your children’s children can be an equally rewarding experience complete with all the emotion you have to give.
Financially Split: How to plan and invest in the wake of a divorce
By Caroline Galbraith, CFP | NBJ Column Submission | July 11, 2016
According to a New York Times data study, the divorce rate in the U.S. has been dropping since the 1980s. The common “statistic” that 50% of American marriages end in divorce has no basis in statistical fact. And while that can be considered good news, it does not change the reality that divorce is a distressing and often painful juncture for many couples.
Despite the very real emotional toll of divorce, there are vital considerations that must be addressed. For the purpose of this article, we will focus on some critical decisions that individuals need to make in terms of planning for his or her financial future as an unmarried adult.
Supporting Two Households
Whether you are living in a dual income household, or a single provider household, your cost of living can essentially double in the event of a divorce. For many couples, this can cause significant financial strain, and often times, the first line item to go is saving for retirement or other important future expenditures. In the short-term, it may be inevitable that you reduce the amount you are allocating to savings, but it is not a strategy that you can afford to implement in the long-term. If possible, identify a timeline that allows for retirement saving to continue once the independent households have been established and are stable.
Selling the family house, splitting bank accounts, and splitting retirement accounts can derail a solid financial plan. A financial plan is put in place so you can work towards a goal. Once the divorce is final, communication between households is essential to recalculate your savings and investment strategy. If the divorced party is unable to discuss this reevaluation amicably, they should lean on legal and financial advisors to establish a mutually beneficial plan. This is particularly important if your financial considerations are tied to children.
Incomes and Alimony
A dual income household could experience a lifestyle change. Alimony or spousal support will depend upon the comparative earning ability of each of the parties to a divorce. Paying support to the ex-spouse will become an added expense. Each person will then be obligated to run a household on the new designated income. Typically this added expense is firmly established by the court and therefore can be anticipated and budgeted on a monthly basis. While it may require lifestyle sacrifices this is a very real expense, and thus should be factored into your commitment to saving.
If you are covered under your spouse’s company health plan, a divorce may force you to obtain new coverage. COBRA (a federal law: ‘Consolidated Omnibus Budget Reconciliation Act) may be an option, but there are rules and restrictions to adhere to which takes careful planning before a divorce is finalized. If you are eligible for COBRA, it may be more expensive than other options, plus COBRA coverage from a former spouse ends within 36 months. Utilize your financial advisor in conjunction with an insurance professional to determine the best method of providing health insurance beyond COBRA.
Debt and Bills
Go through your expenses twice. Once to eliminate what you don’t need. Twice to determine if you can get better pricing on things you do need such as home or car insurance, a mortgage, internet and cable services, etc. If you are not the one who typically paid the bills in the marriage, you must learn how to stay on top of your expenses. Not paying your bills on time can lead to late-payment fees and charges. Late payments can also affect your credit score. If you need to borrow money in the future, it’s to your advantage to have a higher credit score.
Divorce can cause a great deal of financial stress. However, it should not necessarily mean that your options for getting back on track are limited. Look at every aspect of your portfolio and adjust according to the new dynamics of your relationship status.
Too often, the emotional toll of a divorce has far-reaching financial repercussions that could have been avoided with objective, strategic planning. Taking this step will help ensure that you have time to recover without the added concern of fiscal health.
By Art Haws, CEO HawsGoodwin Financial | Guest Column for the Nashville Business Journal
In 1929, the State of Tennessee signed into law what is known as the Hall Tax. This tax structure is the state’s only means of taxing personal income in Tennessee. Essentially, the Hall Tax is levied against out-of-state taxable interest and dividend income exceeding $1250 for an individual or $2500 for a married couple.
The current Hall Tax rate is 6%, but the proposed legislation which was presented to the Governor’s office in April, and was signed by Haslam on May 20, would reduce that rate to 5% for the 2016 tax year, and would continue reducing the rate by one percentage point until the tax is ultimately eliminated.
The Hall Tax was essentially created to financially bolster state and municipal governments in Tennessee. In 2015, the tax generated a total of $304 million with $198 million dispersed to the state and $106 million dispersed to Tennessee cities. The disbursement proportions were based on the number of individuals paying the tax within their respective municipalities.
Examples of taxable items under the Hall legislation include dividends from corporations; investment trusts or mutual funds; bank stocks or savings and loan associations outside Tennessee; bonds issued by states, counties, and municipalities outside of Tennessee; and bonds issued by foreign governments.
Given the breadth of what the state considers taxable as evidenced by the examples above, what does the elimination of the Hall Tax ultimately mean for Tennessee investors? On the one hand, it’s most certainly a tax break. On the other hand, there may be some negative impact as it relates to the Tennessee Municipal Bond market.
A decrease and projected elimination of the Hall Tax will make out-of-state municipal bonds more attractive to TN residents than they have been in the past. When/if the tax is eliminated, bond buyers will no longer be penalized for buying out of state bonds, which will allow for a broader selection and diversification of investment products.
At the same time, Tennessee bonds will most likely see a decrease in-state demand and slightly higher yields to attract both in-state and out of state buyers. SVP and Senior Market Strategist Mike Davern of Nuveen Investments, the manager of the largest Tennessee municipal bond fund feels any effect will be minimal.
“This is not a situation where demand will suddenly flip one way or the other,” said Davern. “What is of greater significance is how the state — and the cities which use Hall tax funds — run their finances over time.”
In the grand scheme of things, the Hall Tax has been a headache for investors and their advisors. The numerous intricacies associated with what constitutes taxable dividends and interest under the tax, along with the additional taxes due won’t be missed by many once the tax is completely eliminated. With the legislation in place to phase it out, this will create new opportunities for Tennessee investors to further diversify their portfolios and save a little money at tax time.
By Cam Goodwin, COO & Managing Partner | Guest Columnist for the Nashville Business Journal
One has to believe that the rippling response and critical acclaim of last year’s “The Big Short” movie had less to do with acting and more to do with the possibility that Wall Street plays by its own rules at the potential peril of investors.
It seems the film must have hit home with the Department of Labor, because in April of this year, they published their long-awaited fiduciary definition, succinctly titled: “Definition of the term ‘Fiduciary’; Conflict of Interest Rule — Retirement Investment Advice.”
In an overview of the DOL rule and its implications for advisers and investors,Scott Cooley, director of policy research with Morningstar, quipped, “Where you and I would have said ‘act in your client’s best interest,’ the DOL generated a manifesto that runs to more than 1,000 double-spaced pages.” Here’s a breakdown into something more digestible:
What does the rule mean?
In its most concise definition, the DOL’s fiduciary rule applies a client-first policy for those who provide professional advice on retirement accounts, including IRAs and 401(k)s. That means that all advisers are now obligated to document and support their investment advice and recommendations to ensure they were delivered in the best interest of their clients.
This ruling, in our opinion, is a much needed development for an industry that has been resisting fiduciary responsibility for quite some time. While Registered Investment Advisors have always maintained a fiduciary responsibility, current brokers that serve broker/dealers are only required to provide “suitable recommendations” at the time of an investment product sale.
Suitable can mean a lot of things, but it does not always mean that an adviser made his or her recommendation based on your short- and long-term financial needs. In fact, a non-fiduciary adviser — prior to now — was under no obligation to disclose how he or she was compensated. And because they had no reporting obligation, the products they chose may have been more aligned with the broker fees associated with the investment, rather than the long-term retirement benefit for the client.
Impact on 401(k) plans
The DOL ruling will effectively put a stop to just anyone selling company retirement plans for which they have no long-term fiduciary responsibility. Prior to this crack down, HR and finance departments could be sold plan packages for which the adviser had no management, measurement or performance obligations. It’s not hard to see how this lack of accountability could have a negative impact on a company’s benefits and ultimately hurt the people for whom the package was supposed to be of future value.
With the boomer generation nearing retirement on a large scale, this new accountability requirement for retirement plan advisers is critical; particularly as it pertains to rollovers from 401(k) plans to Individual Retirement Accounts.
Again, according to Mr. Cooley’s report: “In the past when brokers only needed to meet a suitability requirement, they frequently persuaded investors to roll money out of low-fee 401(k) plans to higher fee IRAs.” While on face value this may seem like a good strategy at the time, investors did not realize that their advisor may be basing his or her decision on their own compensation.
The DOL’s ruling begins to level the playing field for financial professionals, and subsequently, investors. At the same time, investors have a responsibility to understand the true nature of their relationship with their financial adviser.
If the adviser’s fiduciary commitment is not evident and completely clear, you need to do some research. While the new ruling is in place to help make all advisers more transparent about their compensation related to the products and services they sell, investors also have a responsibility to understand the financial dynamics of the relationship.
By Lisa Butler, Director of Client Services | Guest Column for the Nashville Business Journal
For most people, naming beneficiaries can be an emotional process. After all, you are making plans for a time when you will no longer be around, and you want to ensure that the people whom you care about most will be well taken care of in your absence. Thus, it’s critical that you not only have a solid estate plan in place, but also that you communicate how things will unfold when the time arrives for your beneficiaries to receive their inheritance.
Designated Point of Contact
While estate planning and naming beneficiaries may feel like a private matter, it is important that all of your plans are made clear to a specific individual or select group of professionals who can take an immediate leadership role in managing your estate.
Because most beneficiaries are often family or friends, it is a common mistake to assume that things will go smoothly once you are gone. Communicating your directives and assigning responsibility to a trusted confidant will help avoid any misinterpretation of your intention, and will take pressure off of the family. Choosing a confidant should be an objective decision which is why many people choose a combination of both an individual and a professional advisor.
A beneficiary can be named through a very broad range of investment vehicles which include life insurance policies, individual retirement accounts (IRAs) and annuities. In each case, it is incumbent on the individual to identify the beneficiary based on the criteria of the particular investment. Keep in mind that while your intention in naming a beneficiary may be very clear at the time that you make the designation, subtle nuances in the language can cause difficulty in discerning the intent and recipient of the benefit. As a precaution, it is highly recommended that you utilize the expertise of an advisor to make certain that all the details have been addressed as they relate to each investment/beneficiary.
Another important planning step is to coordinate your beneficiary designations with all other estate planning documents. Failing to take this step can cause conflicting interpretations of how benefits should be dispersed, creating tension in what is already an emotionally charged environment for family and friends. Avoiding this situation requires open lines of communication between all of the professionals managing your estate which will probably include attorneys, financial advisors, and CPAs. Coordinating the efforts and responsibilities of these professionals early in the planning process will help facilitate a clearly defined disbursement once the time arrives.
As an example of the importance of coordinating your estate planning, consider that in most scenarios a beneficiary designation will supersede the language in a last will and testament. That can be a very challenging and potentially confusing situation for individuals and families. Proactive planning, communication and attention to detail can help avert this problem, and allow your estate plan to be implemented as you intended.
Goodwin Receives Certified Plan Fiduciary Advisor Credential
Franklin, Tenn — HawsGoodwin Chief Operating Officer and managing partner Cam Goodwin has received the Certified Plan Fiduciary Advisor (CPFA) credential from the National Association of Plan Advisors (NAPA.)
According to NAPA, the CPFA credential was developed by some of the nation’s leading advisors and retirement plan experts and demonstrates the recipient advisor’s knowledge, expertise and commitment to working with retirement plans.
Plan advisors who earn their CPFA obtain the expertise required to act as a plan fiduciary or help plan fiduciaries manage their roles and responsibilities.
In early April of this year, the Department of Labor (DOL) published a much anticipated rule that provides an in depth overview of a financial advisor’s fiduciary responsibility to his or her clients. In essence, the DOL ruling requires an advisor to put the interests of a client before their own compensation — an investment philosophy that has been a cornerstone of the HawsGoodwin firm since its inception in 2008.
According to Scott Cooley, Director of Policy Research with Morningstar, the DOL rule provides important protections for investors, such as the following:
In the past, when brokers needed to meet only a suitability requirement, they frequently persuaded investors to roll money out of low-fee 401(k) plans to higher-fee IRAs. That sales-oriented conduct simply imposed unacceptable costs on retirement investors — many of whom, surveys showed, already thought their broker had to work in their best interests.
“HawsGoodwin can say with absolute confidence that we have placed our clients’ interest before our own since the day we opened our doors,” said CEO and managing partner Art Haws. “Cam’s determination to further that commitment through this NAPA credential demonstrates his drive to be at the forefront of our industry by embracing his fiduciary responsibility to the fullest extent. Ultimately, this will be of significant benefit to our clients, and we applaud his efforts and his leadership.”
HawsGoodwin Financial is an SEC registered investment advisory firm specializing in wealth management, investment and retirement planning, corporate retirement plans, and employee benefits. To learn more, visit www.hawsgoodwin.com.
By Caroline Galbraith, CFP, Financial Advisor with HawsGoodwin Financial
March 31, 2016
In 2015, Fidelity Investments produced a study that stated that 47% of women are uncomfortable discussing money in a professional investment setting. That is a significant statistic when you consider that 90% of women at some point are going to be solely responsible for their financial future.
On a more positive note, 92% of women expressed a sincere desire to understand more about investment dynamics and strategy, and 74% are proactively saving for retirement in some capacity. At the same time, 60% of the women participating in the study expressed concern that they would not have enough money to carry them through their retirement years.
Looking at these collective stats, you might think you were looking back to 1950 when the roles of men and women were more rigid and driven in large part by stereotypes. Yet here we are in 2016 and statistically, a large percentage of women remain uncertain when it comes to engaging in their financial future.
If you are one of the 92% of women eager to establish more financial independence, here are some thoughts and tips on how you can make that happen.
Researching an Advisor
Start with research. Like any unfamiliar activity, gaining a better understanding of the landscape will make you feel more comfortable and confident. Look for financial advisory firms that value diversity in their workplace. This does not mean that you necessarily have to work with only female advisors, but a firm that makes the effort to diversify its professional structure will more than likely feel less intimidating for women who are new to the investment industry.
Planning Your Investment Strategy with an Advisor
Whether you are a single woman just out of college, a working mother, or an empty nester, you have a responsibility to assert control over your financial situation for both the short- and long-term. Once you have undertaken your research and selected an advisor, it’s time to make a plan. That means identifying your financial needs and objectives, assessing your current assets and investments, and mapping out financial milestones. This process will help you evaluate risk, produce timelines for items such as retirement or paying off your mortgage, and prepare for a child’s education, among many other things.
Also, note that your plan should be an organic document, meaning you need to re-visit it each year with your advisor to make sure you are on track to make necessary adjustments based on your life circumstances.
Ask Questions and Clarify
In addition to your plan, make note of all questions that you have. If you are brand new to this, seek out someone you know and trust to help you pull together specific questions that ensure your needs are being addressed. And most importantly, if you are unclear about any topics that arise, make sure you get the clarification that you need. A good advisor should understand that educating you on investment strategy is an essential component for a trusting and sustained relationship.
Finally, be confident. You don’t have to be an expert in the financial services industry to recognize the need to save for your future; the same way you don’t need an M.D. to know that maintaining your health is important. Good advisors are in place to help you along the way. Put them to work for you and insist on responsiveness and accountability in all of your communications.
The statistics mentioned earlier in the column are somewhat disconcerting. Women should respond to the Fidelity study by proactively engaging in their financial well being. Otherwise our financial role will remain relegated to a 20th century stereotype.