How The New Budget Affects Your Retirement Plan

The two-year budget deal recently signed by President Trump affects investors in many ways. Since few among us have the patience to read a 652-page government document in their limited free time, we’ve consolidated some of the more noteworthy changes, as they pertain to qualified retirement plans and individual retirement accounts (IRA).

IRS Relief

Under the new deal, employer-sponsored accounts or IRA’s that have been levied by the IRS are given a bit of relief. In circumstances where funds are levied from such accounts by the IRS then afterwards returned to the investor, the money, along with interest earned, can be contributed back into the retirement plan or IRA in a lump sum and treated as a rollover.

Hardship Withdrawals

Effective for plan years after December 31, 2018, the new bill amends regulations surrounding hardship withdrawals from your retirement accounts.

Originally after claiming a hardship withdrawal the investor faced a 6-month prohibition on contributing back into the retirement plan, but under the bill this probation period would be removed. Additionally, access to hardship withdrawals is now extended to profit sharing or stock bonus plans, qualified non-elective contributions, qualified matching contributions and the earnings accrued on these contributions. It also eliminates the requirement that a participant take all available plan loans before taking a hardship withdrawal.


As we have mentioned in past blogs, pensions across the country are at a point of crisis. This new budget plan recognizes that and calls for the assembly of a Joint Select Committee to Solve the Multi-employer Pension Crisis. This team aims to introduce bipartisan legislation to address the pension issues by December of 2018.

Do’s & Don’ts For A Volatile Market

A big part of investing is human behavior. When the market takes big swings in one direction or another people react in unpredictable, but understandable ways. This can create stress and lead to poor decision makings. We’d like to help you mitigate those reactions with a few suggestions.

Do: Call your advisor

Your financial advisor knows you and your plan and has likely dealt with tumultuous times on Wall Street before. One short talk with them at an anxious time is usually enough to relieve your stress.

Don’t: Repeatedly check your accounts

You should know what is in your accounts and what their goals are in the long term. That being said, checking your accounts multiple times in a day or even week will affect your life far less than it will affect how you feel about it. If you are constantly checking your performance you have lost sight of your long-term goals, it’s time to call a professional.

Do: Think before you spend

This is where financial planning meets investment planning. If you have a major purchase planned for the year, talk to your advisor about getting it done strategically. If things are up recently, you are locking in those gains. Conversely, a down market is not the ideal time to take money out of the market.

Don’t: Be afraid to spend

There is a difference between being mindful and making decisions from a state of anxiety, like we mentioned above. If you have reached retirement and are taking income from assets, you’ve likely planned to do so both in good and bad market conditions. Once you have a plan, do not be afraid to execute it.

Do: Think about opportunities

If the market is performing poorly overall, take a minute to think about some investments you missed out on that you’ve been kicking yourself over ever since. Take a look at what they’re trading at and call your advisor to decide together whether now is the time to take advantage.

Don’t: Beat yourself up

The world of investing is incredibly competitive, complicated, and volatile with no place for pride. Even the very best of the professionals make poor decisions. Rather than worry about mistakes you’ve made in the past, now is the time to look to the future with a clear and open mind.

The Pension Problem

Public pensions in the United States are approaching a cliff. Everyone involved can see it coming, but the solutions to avoiding it are either unpalatable or unrealistic. This will have a significant impact on millions of Americans in retirement and yet all we can seem to do is to keep marching toward the cliff as slowly as we can manage.

The problem is many of these pensions simply do not have the assets required to pay out the benefits they have promised. The deficits vary but have become so common that they have almost become a hard and fast rule of such programs. The problem is many of these programs have fallen short of the target rate of return they need to meet to be sustainable. These shortfalls have piled up over the years and now present a borderline impossible goal. In some cases the funds were mismanaged, fees were excessive, expectations were set too high, and sometimes the market just didn’t perform the way it needed to.

Let’s assume that the assets in a particular pension need to hit a target return of 7% to sustain itself. As with any investment, occasionally it outperforms the 7% goal and occasionally it underperforms. This means that the net between the good years and the bad years must remain at or above 7%. Every year the pension fund does not meet its goal, it gets substantially more difficult to reach that net goal. You can see how this problem could compound over the course of 20, 30, or 40 years. There are solutions, but the further the pension gets from its target the more difficult it gets.

This is not to scare those of you with a pension, nor to suggest that they are not a valuable resource for the many Americans who have them, but rather to encourage diversification. As with any investment plan, putting all of one’s eggs in one basket can be a risky proposition. You should consider saving elsewhere on your own in addition to utilizing the pension benefits made available to you by your employer. Even if you have your heart set on guaranteed lifetime income there are ways to supplement that independent of your pension.

How The Tax Bill Helps Craft Brewers

Regardless of how you feel about the recently passed tax bill politically, you may want to propose a toast in celebration with your friendly neighborhood brewer. The American Craft Brewery, which continues to develop into a burgeoning industry in NH, received a much-appreciated tax break that will go down as crisp as a cold IPA.

Small Brewers win big

The measure will be of much bigger help to small brewers than the national behemoths, which could go a long way in protecting these vulnerable but talented businesses from being swallowed up. Brewers that produce 2 million barrels or less will pay $3.50 per barrel in excise tax for the first 60,000 barrels they produce. This is a 50% savings from the previous rate of $7 per barrel. This potential $210,000 savings over the first 60,000 barrels produced could be a make or break figure for new brewers, and the barrel limitations prevent larger brewers from taking advantage of a windfall not intended for them.

A popular move for the populous

The national Brewers Association estimates that 97% of American breweries can produce less than 60,000 barrels, which means most brewers will be paying $3.50 per barrel across the board. The remaining 182 American breweries that surpass the 60,000-barrel mark with pay $16 per barrel (down from $18) from the 60,001st barrel to the last. The Brewers Association lobbied to make the new measure permanent but as of now it expires in two years.

Reviewing Your Year End Finances

The end of the fourth quarter is a great time to evaluate the past year and begin looking towards 2018. Evaluating your finances is not quite as simple as looking at your year to date returns. There are a variety of measures to make sure your assets are working toward the goals that are important to you. Every person’s financial picture is different, but for the most part, the points below are the main areas to check in on each year.

The Foundation

The first item to consider is how well you are protecting yourself, and your family. Are your accounts and personal files secure? In cases of identity theft, is your account insured? Do you have enough insurance protecting your family’s assets? Are any of your old insurance policies approaching expiration? A professional should look at these issues more closely, but a quick once over can at least put your mind at ease.

The Checklist

Take a look at your 2017 plan and contemplate how much of what you wanted to accomplish was actually completed. Are the incomplete goals and tasks worth pursuing more attentively in 2018, or are they not as important to you as you had previously thought? Things like a job change, pay fluctuation, arrival or departure of children, entering retirement, or new major commitments are obvious red flags to revisit your finances, but often changes come from within instead. Perhaps you watched as a close friend dealt with an unfortunate situation and would now like to safeguard yourself, or maybe they started a business and are off to a hot start and you’d like to get more aggressive in your own plan. Change is a good thing, but it necessitates preparation. Take the time to be proactive rather than reactive.

The Benchmarks

When it comes to evaluating your investment portfolio, a simple look at the returns is more than likely not sufficient. A better indicator is how your investments are performing relative to its peers. How a fund stacks up compared to similar investments is a better indicator than its performance in any given year. In a bear market, even the smallest gains can often be considered a positive result.

Part of having a strong and viable financial plan is the continued work that must be put into it. If your money is on autopilot, someone is asleep at the wheel. Whether you hire a professional for these services or complete the basic tasks yourself, reviews should be completed at least once per year. The holidays are a busy time, but with the calendar year ending it is also the best time to take a look back at the year, and look ahead to 2018.

How To Tell When Your Portfolio Is In Trouble

As advisers, we speak to clients about their portfolios on a daily basis. Sometimes a client is thrilled with their investments, sometimes they are not, and sometimes they just need a little clarification on a point or strategy we have employed for them. Often the reasons people get thrown off is that they become misguided or confused by the multitude of outside voices and conversations. It can be anything; a coworker talking about their own portfolio at the water cooler, something you heard on the news, or a professional trying to invoke concern in order to sell you something. We are here to help you cut through that noise, here’s how.

Review Your Plan

Take a second to think back to what your portfolio was designed to do. Is it focused on long-term growth, preservation of capital, or providing income to be spent? Each of these things have very different indicators of success. Think about the life goals you had in mind when your plan was designed, and evaluate whether your investment is contributing toward those goals effectively. If it is not it may be time for an adjustment, otherwise you likely have nothing to worry about.

Check the Time

How long do you have before you need the money that is concerning you in your portfolio? In 225 years of trading on the New York Stock Exchange the market has taken longer than 2 years to rebound from previous losses exactly twice. If the overall stock market trends down for five years or more for the first time ever, you as an American will likely have bigger concerns than your portfolio holdings. With that in mind if you are seeing large swings in your portfolio when you are about to or are already spending down your assets that is something worthy of a conversation with your adviser.

Set the Bar

Just because your portfolio is growing or declining at a seemingly high rate does not mean it is underperforming. Take a look at each individual holding’s ranking as compared to its peers. If you own a mutual fund that is down 11% on the year, but similar funds are down 16% on the year, then your fund is performing exceptionally well. Conversely an 11% gain as compared to 16% gains by peers could be poor performance. In any given asset class there are upwards of 1,000 different funds available, so it is not realistic to expect your fund to consistently be ranked #1 over the long term, but good or bad returns relative to the average could be a strong indicator of performance.

Risk Tolerance

In many ways investing is a study in human behavior. As an investor, how will you react to various changes in the market? Are you a risk taker or a conservative investor willing to trade upside for a better chance at steady returns? A well-constructed portfolio of highly rated funds can still be a poor fit, if it does not match the investor’s risk profile. Even if the fund you invested in many years ago was properly allocated for a long time, you may need to adjust. This is not a major emergency, just a potential cause for adjustment. If you are worried or curious about your portfolio, click the button at the top of your screen for your Free Portfolio Risk Analysis. In 5-10 short minutes, you will be assigned a number that can allow us to hone in on how you should be invested in order to match your personality. From there if changes are necessary, we can help you make them. You are doing the responsible thing in saving for your future, this should relieve anxiety rather than cause it.

How Market Volatility Affects Your Portfolio

The ups and downs of the market are not a bad thing in themselves, but if they are not understood they can wreak havoc on an investor’s portfolio. A young investor has the luxury of riding the market rollercoaster with the knowledge that historically, the overall market has always grown over time. Once retired, and investor does not have that luxury.

Selling Low

Once you retire your portfolio becomes the income generator for you and your family. You gradually withdraw assets from your account in order to pay for your everyday life and expenses. Unfortunately things like food, mortgages, and the gas bills need to be paid regardless of how your portfolio is performing at the moment. Because of this retirees are often forced to withdraw money from their plans at times of poor performance, essentially locking in those losses. As you can imagine this damages the portfolio and affects how long it will last.

Uneven Returns

Some would argue that the periods of good performance and poor performance would even out over time, but that is missing what should be a relatively obvious point. Such logic would suggest a 10% decline in a portfolio is made whole by a subsequent 10% gain, but simple math shows the real damage that such fluctuations can do to a portfolio. If a $100 portfolio loses 10% it is reduced to $90. From $90 a 10% gain only brings the portfolio back up to $99. Now imagine if your million-dollar portfolio dips 20% in a year in which you also have to make withdrawals to pay for household repairs, as well as all your usual bills. You would need substantially more than a 20% gain in the following year in order to make up the ground lost the year before.

The good news is there are things you can do. While it is theoretically possible to time your withdrawals to bull runs in the market, this is nearly statistically impossible to do with any consistency. Instead, portfolios can be designed to generate cash flow in addition to returns, allowing you to spend the portfolio income without selling off assets. Additionally money generated outside of the market like earned income, social security, income annuities, and cash value life insurance allow individuals to account for a large portion of their expenses without dipping into portfolio assets.

This New Investment Philosophy Is Here To Stay

A major part of life in 2017 is the increased emphasis on social and environmental responsibility. What a lot of people don’t know is that there has been tremendous growth in investing according to these goals in recent years as well. Impact and Sustainable Investing have burst onto the scene and preliminary research tells us they have potential to be much more than just a passing fad.

Are You Investing With Your Heart Or Your Head?

While the two can overlap, it is important to mind the differences between impact investing and sustainable investing. The key distinction is not in the investments themselves but rather, why you are investing in them. If you want your investments to support social, environmental, or morally sound companies you are an impact investor. Impact investors know there are likely better statistical outcomes to be had but they are more interested in supporting causes and they believe in a “what goes around comes around” philosophy in business.

On the more strategic side of this field is the sustainable investor. While a sustainable investor may be happy that their investments are supporting good, responsible companies, they are more interested in the outcomes that can be achieved for their portfolio by investing this way. If you think about the impact a sustainable and reliable inventory source can have on a company, it is not difficult to imagine the creative strategic advantages of investing in such companies.

What’s In It For Me?

If you are more intrigued with the sustainable investing model there are a few key strategies to keep in mind. The first is the potential for growth, particularly in the energy field. As the technology around sustainable energy improves, the possibilities are endless. For the time being, these companies also can provide a hedge against other investments. Just as your mutual fund portfolio benefits from diversity, investing in sustainable investments can shelter a portion of your risk against some of you more traditional investments in ways that were not available before. For example, if you are invested in things like coal, natural gas, or oil, investments in sustainable funds or companies could react inversely to those energy sources.

What’s the Catch?

As with many new investment trends the challenges that face impact and sustainable investments is the lack of historical data. This is noteworthy from a performance standpoint, as well as an evaluation and identification focus. When attempting to grade risk and performance, it is vital to look back at past trends. Predicting investment performance with strong accuracy is impossible, but looking at how it has reacted to various market trends in the past is essential when determining viability. Because they are so new, many of the funds and companies that make up the impact and sustainable investment strategies simply do not have a strong sample size of past data to evaluate. This carries with it a certain amount of unpredictability risk.

The second pitfall with the youth of impact and sustainable investing has more to do with how we measure and evaluate the investments that are put in this category. Simply put, what makes an investment socially or environmentally responsible, and what is the quantifiable correlation between this responsibility and our financial success as the investor? We continue to draw closer to these key answers, but until we are there we have to stomach some degree of uncertainty when investing in this way.

Five Reasons To Hire A Financial Advisor

In an age of political unrest, ever changing regulations, and an array of different financial services offerings many Americans could benefit from using a wholistic Financial Advisor. More often than not, we find ourselves sitting down with clients who have gone years without getting the help they need (before meeting us, that is). In this week’s blog, we have decided to put together a list of concerns that trigger people to reach out to an advisor.

  1. You Are Feeling Overwhelmed
    We can help you identify your goals and develop a plan that is going to help you achieve them. You work too hard to spend your time studying the complicated world of finance, so let us do it for you.
  2. You Are Not Sure Who to Trust
    If you think you are being sold a product rather than sound advice, you are probably right. It may be time to talk to your current advisor about how they get paid. Your advisor works for you, and should be compensated fairly for their work, but it is important that you understand what their motivations are behind their advice. That is why we take so much pride in our simple and transparent fee structure. We can easily explain exactly what you are paying for our services, so that you can be sure that our best interests are aligned with yours.
  3. You Want to Leave a Legacy
    Whether you want your property or business to stay in the family for generations to come or you want to leave a make a meaningful contribution to a cause that you are passionate about, you need help designing a plan. Without professional oversight your assets could be diminished by after death taxes or worse, not get to their intended destination at all.
  4. You Have a Business to Run
    Is your business structure right for you? What additional benefits could you be providing your employees? Are your business systems correctly aligned with your personal financial goals? What is the long-term plan to grow and expand? We can address these concerns by creating a cohesive plan- implement the correct tools to maximize overall efficiency, monitor the results and adjust the plan as circumstances change over time.
  5. You Are Not a Robot
    Even the most cool and calculated investors benefit from the opinion of a third party. It is human nature to react emotionally to fluctuations in the market, even though we know historically such volatility is to be expected. Having a professional can help talk you through your fears, and build confidence that your plan is strong enough to withstand market downturns.

These are just a few of the compelling reasons to reach out to a financial advisor. At Granite Financial Partners, our wealth advisors are professional stewards and true advocates for our clients. The cornerstone of our client partnerships is our comprehensive wealth planning process, which transcends simple financial planning to provide high-level wealth preservation strategies and coaching. Where knowledge, experience, and education intersect, there lies True North. If you are at all interested in learning more about our process, please do not hesitate to call us at 603-554-8551.

How To Find Money In Your Budget To Invest

This week we’ll review a great clip from Morningstar’s Christine Benz. She is a regular contributor to Morningstar, a highly respected financial research company. She tells us a few basic rules of thumb for squeezing those few extra investment dollars out of your budget. Whether you are barely scraping by on your current budget or coasting on a higher income, there is no reason to let money slip through the cracks. Here is my summary of Christine’s three money saving tips and a link to her video below.

First: Start with the Savings In Mind

It is all too easy to find ourselves budgeting backwards. By this I mean we live our lives and decide what to do with what is left of our income afterwards. Christine suggests starting with a savings target first and living within the parameters of your remaining income second. We at Granite Financial Partners would have to agree. It cannot be said enough, “failing to plan is planning to fail”. Too often we see well intentioned people fail in their financial goals because of simple errors in philosophy. Call us to set up a cash flow planning meeting and we can make sure you are on track.

Second: Higher Salary Should Mean Higher Savings

As your income adjusts, so should your savings goals. Higher earners should be setting aside more, not only from a dollar amount standpoint, but from a percentage of income standpoint as well. Christine recommends targeting at least a 20% savings rate and while that is a good suggestion, we recommend a professional consultation to make sure your additional savings are accomplishing what you want them to. Depending on your situation different tools and strategies have varying efficacies at achieving different goals. Let us help you sort through the financial labyrinth to be sure your additional savings are really accomplishing what you want them to.

Third: Automate

The easiest way to stay on track with a savings goal is to automate your contributions. Just like with a bill payment, your 401k and IRA contributions can be set to take place automatically at an amount and interval of your choosing. This ties closely with our first segment, “Start With the Savings In Mind”. It is much easier to meet your savings goals with it is set to automatically withdraw periodically. This brings the additional benefit of dollar cost averaging. The concept here is if you invest at a scheduled time repeatedly over the years you will be investing in both positive and negative markets. This allows you to invest at the long-term average cost.

Thank you for reading and I hope you enjoy the video below as much as we did. Please reach out to us at Granite Financial Partners directly with any questions or comments and be sure to tune in next week for more helpful insight.

Continue Reading on