by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

Do you own an IRA, 401(k), 403(b), 457, Thrift Savings Plan, or some other qualified or pre-tax retirement account? If so, read on.

On December 20, 2019, President Trump signed the SECURE Act into law. This stands for Setting Every Community up for Retirement Enhancement Act. What follows are some of the changes that will impact many retirement account holders. Some people say there are pros and cons to the Act; like most things, it can easily be viewed that way. More important, however, is to understand the changes in order to plan appropriately around each.

Required Minimum Distributions (RMDs) have been pushed back from age 70.5 to age 72. The age limit for IRA contributions has been removed, automatic enrollments in 401(k) plans have more support, annuities within qualified employer sponsored plans are now more of a focus in order to create guaranteed income for participants, and what has been known as the “stretch IRA” for non-spousal beneficiaries has been eliminated. It is this last change upon which I would like to expand and share a few thoughts for this month’s column.

Before the Act was passed, you could leave your IRA or qualified plan to a child or non-spouse beneficiary and he or she had the right to take Required Minimum Distributions (RMDs) over the course of his or her own lifetime, based on their life expectancy. That is no longer the rule. Now, it is required that the non-spouse beneficiary removes the funds from the account over a period of ten years or less. Why is this potentially so important to know? It could greatly affect your retirement spending policy, your estate plans, and you guessed it, your (and your beneficiaries’) taxes.

Imagine leaving your retirement account to a working, non-spouse beneficiary. Imagine this person has an income of their own, and now, they need to take additional income from the inherited account. Will this RMD place them into a higher tax bracket? Due to the fact that the account must be taken over the course of ten years, it means they may need to take a significant amount each year, which could affect their tax bracket.

If you have sizeable accounts and estimate that you will leave some money at death, part of the planning process is to now consider, even more than before, what this could mean for tax purposes for your beneficiaries.

For some people, this means converting to Roth over the next “X” number of years while relatively speaking, we are still in a favorable tax environment. There are a number of strategies to consider and I suggest you speak with your tax professional, estate planning professional, and/or advisor sooner than later.

Here is what I promise: Proper prior planning will allow you to improve your realized results.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

Wow. Look at all the advertising. Look at all the products for sale. Look at all the money being spent on stuff—stuff that will soon be obsolete, no longer the “next-best-thing,” and most likely, thrown away, worn out, or placed on a shelf or in a box to sit in the dark for years.

Millennials (I am one of them), as annoying as we can be to some older generations, have reminded the world of something important: There is more value in memories from life experiences than can be found in most tangible products.

In 1993, my grandparents took my mother, my sister, and myself to Disney World, Epcot, Sea World, A Hawaiian Luau, and other major attractions in Orlando. We rented a small silver car. We stayed at Summerfield Suites in Buena Vista. The breakfast buffet at the resort had a cereal lineup that made me very excited (I love my cereals). We sat together for every meal. I did cannon balls into the pool. So did my grandfather, which made him even cooler in my book. I tried wrestling with my sister in the pool. She wasn’t a fan of that. My grandfather got on stage at the Luau in front of hundreds of people and danced in a way that left us all in stitches. We watched movies together on the planes. We did it all.

My family has reminisced about these moments many times, and each time we do, we smile, we laugh, and we comment how we wish we could go back and do it all over again.

To me, those memories are the best gifts in the world. I carry them with me every day. They will never be put on a shelf. They will never become obsolete. They will always be the “best-thing.”

This year, regardless of your budget, consider giving experiences. Some do not cost a dime. Be creative in the experiences you create. More than anything, the energy behind your intent will determine how the experience is well, experienced.

Here is what I promise: You can give the gift of a lifetime without spending a penny.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767. Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

by Jac M. Arbour CFP®, ChFC®, President
J.M. Arbour Wealth Management

For the most part, people know what they pay per month for their mortgage, their car, property tax, etc. However, the same does not seem to hold true for their investments. We always ask the attendees at our monthly educational workshops (and our clients in personal meetings) if they are aware of their exact costs. It is extremely rare that someone does.

There are clearly reasons why 99 percent of the people we ask don’t know, and I believe the main reason is quite simple. Investment costs, management fees, expense ratios, loads on mutual fund, and other internal costs are not always the easiest to identify, nevermind understand.

If you own mutual funds or are considering purchasing some, be sure you know the “load” on each. The load is essentially a commission you are going to pay. Some mutual funds don’t have a load, and others have load fees averaging almost 6 percent. In addition, mutual funds come with what is called an “expense ratio.” This is an internal fee that helps pay the money managers and their teams to manage the fund.

Exchange traded funds (ETFs) and index funds tend to have lower costs than mutual funds; many people seek out such types of investment for this reason alone. With ETFs, which are passively managed, you do not have the active oversight given by fund managers, so it makes sense that the costs are lower.

Most people are coming to the conclusion that it is kind of important to understand what they pay for investment advice, and they want to know. I would encourage you to ask your advisor how much you are paying (or have already paid).

The fee-only investment advisory model is currently gaining major traction. It has been around for a long time, but after the Department of Labor made some noise a couple years ago about investment costs, advocating that advisors should have a fiduciary responsibility to their clients, many more people are now paying attention.

In the fee-only model, you simply pay one, flat, easy-to-understand annual fee that is equal to a percentage of your assets being managed. There are no hidden fees or expenses with this model, and it also ensures that you advisor is incentivized to grow your money, and to protect it when the markets cycle the other way.

Here is what I promise: When you have all the information, you will be able to make better decisions.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

Markets crashed from October of 2007 to March of 2009. Since then, it has been a great ride to record highs. The Dow has skyrocketed and the S&P 500 recently crossed 3,000. The big question is, how long can this thrill ride last?

Bull markets are fun, especially when they last ten years or more like this current one. Such markets build public confidence and increase account values. However, everyone knows that markets are cyclical—our world is governed by certain rules, such as “what goes up, must come down.” So, the question that remains is not if, but when it will drop?

If I knew that answer, I might not be writing this little missive, but rather floating in the Mediterranean somewhere or maybe fly-fishing in a remote and untouched paradise.

I can tell you there are a few things that make me nervous about today’s financial landscape, and the events that surround these things started a long time ago. To be brief, the dollar has not been tied to the gold standard (or any official standard at all) since 1971, financial derivatives are in full swing and mask the extreme over-leveraging of dollars, the Fed has printed trillions of dollars since 2008, and we haven’t yet seen the type of inflation one would expect after this type of increase in the money supply. There is also Brexit and the shaky ground on which numerous world currencies kneel, as well as geopolitical unrest, inverted yield curves, the Fed’s fear of deflation, the roll up of debt to Central Banks and the IMF, and the list goes on.

What’s my point? As basic as it sounds, I believe this is a great time to review your asset allocation models and the diversification within your portfolios. This doesn’t mean diversifying just amongst sectors, but amongst the types of assets you own such as hard assets and physical gold and silver. I believe they could serve as strong hedges in the years to come.

Here is what I promise: The tides will turn and when they do, you will want to know where you stand. You will want to be able to wade it out.

See you all next month.

Jac Arbour, CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

When you pass, who will inherit your assets? Will your assets be distributed via the probate process? (And will information about your estate therefore become public record?) What if someone should challenge your Last Will and Testament? Will the probate of your assets be an extended and costly process for your estate?

Truth be told, most of the pitfalls of estate distribution can be avoided. Your estate can be distributed to whomever you want, as efficiently as you want, and as privately as you want. What is the secret to making this happen? It’s what I call Proper Prior Planning.

When you choose your beneficiaries, think multigenerational: If the primary beneficiary you have listed should pass before you, whom do you want to be next in line? The answer to this question is your contingent beneficiary/beneficiaries. Have you listed one or more contingent beneficiaries as well?

Some of the questions involving beneficiaries can be difficult to think about, but answering them yourself and making your choices clear are gifts you can give your survivors.

What if you have listed two or more of your children as equal beneficiaries and one of them should pass before you? Do you want the surviving child (or children) to receive the deceased child’s share, or do you want the children of that deceased child to receive that percentage? Potential situations like this and many others must be spelled out in your Will or beneficiary designations on insurance contracts and financial accounts.

One of the common errors we see people make is leaving retirement accounts to children without educating them with regard to the tax ramifications. This is when accounts such as IRAs degrade into what I call “IOUs to the IRS.” The good news is, this too is avoidable.

To be prepared, ask yourself all the pertinent questions about estate distribution and develop a thorough plan. The pros at JMA will be happy to help you. And after you choose your beneficiaries, be sure to educate them about what they stand to inherit, people they will need to contact, and your personal preferences about how they will handle your assets.

Here is what I promise: If you do Proper Prior Planning, you will decrease the chances of Potentially Poor Performance!

See you all next month.

Jac Arbour, CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767.

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.