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Tom Licciardello, CFP
Cristina Licciardello
Your Trusted Financial Advisors | |
We don't predict the future, we help our clients prepare for it. |
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Planning for Success
From the Desk of Tom Licciardello, CFP
Rocky Mountain High
 So here we are in the middle of March with the Dow Jones reaching all time highs for the past nine days in a row, a feat not matched in 16 years. The broader S&P Index, too, is within a hair's breath of its all time high. But getting to where we are in the Market has been a rocky road.While there is no one who can predict the direction of the stock market, there are many economic indicators that we can measure that just might give us a clue. To be sure, there are more than a few headwinds and storm clouds on the horizon, but it seems like the Market is willing to shrug them off....for now.
First, some bright spots.
Consumer confidence is rebounding, and that means spending is up. Since consumer spending is such an important part of our economy, this is good news.
The employment picture is improving. The more people that are employed, the greater discretionary spending - again, good for the economy.
The housing market seems to be bouncing off of its lows as prices increase, transactions are increasing, and mortgage rates remain at near historic lows.
Earning reports are mostly better than expected. When earnings are up, the confidence to hire new employees begins to grow.
But then....
Congress bounces from crisis to crisis, seems incapable of compromise, and continues to kick that poor can further down the road. We have faced leaping off of more cliffs than the Acapulco divers.
Signs of economic growth in China are beginning to slow. They are a major economy and slowing there can have a ripple effect on the rest of the world.
Interest rates will have to go up at some point, and how Fed Chairman Bernanke handles impending Inflation can have serious implications.
So, there you have it. Things are looking up, for now, maybe for a long time, maybe not. What it means for you is that its never been more important to have a trusted financial advisor working for you!
As always, give Crissy or me a call if you have questions, concerns, or would like to see how we can be of assistance to you.
Included in this edition are several "101" explanations of financial areas we think you should know about. We hope it helps! |
I Thought Bonds Were Safe...Should I Worry? Bond Class 101
There are some rules in financial planning that most folks believe are always right. Here's one - Live beneath your means. It will absolutely make you a wealthier person.
This one is not always right - Investing in bonds is a good way to avoid investment loss. In fact, we may be in for a rough road ahead. Let's take a look.
First, what is a bond? As individuals, when we need to borrow money (a mortgage for a home, for example), we go to a bank, and based upon our credit rating and term of the loan, the bank will let us borrow money at an interest rate determined by current interest rates and our personal credit rating.
For corporations or governmental agencies, borrowing can be accomplished by "floating a bond". When you or your bond mutual fund buys one of these bonds, you become the bank, and just like a bank, the rate you are paid is based upon current market interest rates as influenced the Federal Reserve, the term of the bond, and the credit rating of the corporation of governmental agency.
Once you have made the investment at the issued interest, only three things can happen while you own that bond or bond fund. Interest rates can stay the same, they can go down, or the can go up. Here's what that means for you, the investor:
Interest rates remain the same - presuming the issuer doesn't default, you get your money back at the same sell price as the buy price plus the agreed interest.
Interest Rates go down - This is what we have experienced for the past few years, and it's good news for bond investors. Let's hypothetically say you bought a bond for $10 that would pay 5% for the next 10 years. Then the rates for 10 year bonds fall to 4%. Should you choose to sell your bond instead of continuing to earn the interest, the sell price would be at a "premium", $11 for example. Since your bond pays a higher rate, it's worth more than current offerings.
Interest rates go up - Here's where it gets dangerous! Again, let's use the hypothetical example we used above, but now the prevailing rate for a 10 year bond goes UP to 6%. The value of your lower paying bond will sink - $9 for example.
Here's the risk we now face - do you think interest rates are more likely to go up in the near future? We do too.
Should you abandon bonds? No, but a strategy change may be warranted. We use techniques such as shifting to shorter term bonds, high yield bonds, non-US bonds, laddered bonds, and preferred securities.
Want to learn more? Give us a call for Bond Class 102! |
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Long Term Disability...the forgotten risk
LTD Class 101
When it comes to risk management and insurance coverage, most of us wouldn't think of owning a home or vehicle without insurance. Nor would we feel safe without health insurance for ourselves or our employees. If we have a family obligations, we are attentive to life insurance.
Ironically, that which allows us to provide all of our financial needs, our income, often goes without adequate coverage. A well crafted Long Term Disability program, whether individually purchased or through a group, employer sponsored program should be high on your priority list. Here is a list of things to look for:
- Definition of Disability - The most favorable is an "Enhanced Own Occupation" definition. That means you receive benefits if you can't perform the material duties of your regular occupation, even if you are earning an income elsewhere. Are you a physician or other highly trained specialist? For you, that is an important benefit.
- Residual Disability Benefits - In some cases, a disability may only preclude you from doing "some of the material duties of your regular occupation (or whatever definition your policy contains)" such that your income is reduced, not eliminated. With Residual Disability, a proportionate benefit is paid to the amount of income loss.
- Benefit Amount - Generally, the maximum benefit is 60% of your income. Professionals and business owners, pay attention to what is considered includable compensation. If you receive bonus income or a K1, be sure that is included.
- Benefit Duration - A long term disability loss doesn't get easier after two years. If you can qualify for a longer benefit period (age 65 or normal social security qualification age), get it!
- Waiting Period - This determines how long you must be disabled before receiving benefits. Typically, 90 days is chosen, but potential short term disability insurance benefits may allow for a longer wait period.
- Additional Riders - There are many "bells and whistles' that can be added, but start with the maximum benefits for the basics first.
Employers, be sure to check for specialty programs. Our firm, for example, specializes in physician groups and we have found one Insurance Carrier that far outshines the others both in cost and specialized benefits available.
Need more information, call me or Crissy. We'd be glad to assist. |
Estate Planning 101...have you done it yet?
The good news is that if you haven't addressed the basic needs of estate planning, you're not alone. The bad news is that it is a very important part of your financial plan. Here are the basic documents that you need. If you have them but they are more than 3 years old or if there have been major life changes since they were drafted, they need updating.
- Will - The most basic of estate planning documents, this is an expression of your wishes should you die. If you have minors, the critical role of the will is to name guardians for your children.
- Healthcare Proxy - Should you be unable to make health retlated decisions for yourself in the event of a disability, this allows your trusted proxy to act on your behalf. You may also want to address the issue of extraordinary measures in the event of a catastrophic injury or sickness.
- Power of Attorney - Should you be unable to make legal decisions for yourself in the event of a disability, this allows your trusted proxy to act on your behalf.
- Revocable Family Trust - This may be a good idea for many. It provides your wishes for the disposition of your assets that don't inherently have a beneficiary designation (life insurance policy, IRA, etc.). It avoids probate, assures that your wishes will occur, and can be changed any time during your life.
Most importantly, seek specialized council as the only thing worse than no documents are incorrectly drafted documents. Need a recommendation? We work the best in the business, and would be happy to expedite a meeting.
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On a Personal Note:
Tom Appointed to Board of Trustees
 I am pleased to report that I have accepted a position on the Board of Trustees at the Bellesini Academy in Lawrence. This amazing institution's goal is to break the cycle of poverty through education. Since opening in 2002, its success has been amazing. Mission
Bellesini Academy is dedicated to providing a quality scholarship education to boys from limited financial means living in Lawrence. We believe that the cycle of poverty can be broken through education. The mission of our school is to provide an academically challenging and highly structured environment that develops the potential for each student to succeed in competitive secondary schools & colleges.
Website Relaunch
We are pleased to announce our re-launcehd website. It's been updated, polished, and nicely functional.. Thanks to our web expert, Bob Lussier! Check it out
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Did You Know?
As a fee based financial advisor we can:
- Help you define your most important financial goals based upon your core values
- Create a strategy to help you navigate the financial choices that will help you reach your goals
- Provide ongoing review of your plan to assure that you stay on track
- We can advise on the correct use of financial instruments such as no load mutual funds and ETF funds.
In addition to health insurance, our Benefits division can help your company with:
- 401k plans
- Employee paid payroll deduction benefits
- Group Life, Disability, and Dental Plans
We can advise you on, and find the best rates for:
- Term Life Insurance
- Long Term Care Insurance
- Long Term Disability Insurance
Through our network of Qualified Advisors affiliated with our ProNet Group, we can refer you to the best advisors in the following areas:
- Estate Planning Attorney
- Real Estate Attorney
- Employment Law
- Third Party Administrator
- Certified Business Evaluations Expert
- Property Casualty Agent
- Accountant
- Banker
- Mortgage Broker
Let us know if we can help!
When conditions become volatile and confusing, there is no more important time to have a Trusted Financial Advisor to help guide you. Please remember that you have unrestricted access to us. Call, email, or text any time! |
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Do you have an idea for the next newsletter? Is there an issue you'd like to hear more about? Is there someone you'd like to add to the newsletter list? Let us know!
Sincerely,
Tom Licciardello, CFP Crissy Licciardello Licciardello Financial Services Compass Capital Corporation |
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