Planning for Retirement: Should You Invest or Pay Off Your Mortgage Early?

There’s something so exciting and so … gulp … eye-opening about buying a home. (You’re going to be paying off your house until you’re how old?) When planning for retirement, many homeowners wonder whether it would be better to pay off their mortgage earlier or invest more in their portfolio.

The logic behind this question seems straightforward. If you could pay off your house, your biggest bill would be out of the way and then you could commit much more money to investing for your retirement years. Better yet, when you hit retirement age, your home would be paid off and your living expenses could, in turn, be less. You could have more room in your budget for travel and hobbies.

However, when it comes to planning for retirement, it’s important to remember that time is uniquely on your side. With a consistent, diligent approach from a trusted investment advisor, you have a strong chance to see your success grow over time.

Meanwhile, the money you put toward your mortgage payments is static. While it might save you from paying some interest, the interest rate you pay on your mortgage is likely lower than the average return you’ll see from a thoughtfully invested portfolio.

Take a look at this example:

Jill pays her mortgage payment each month, but she also invests $500 for her retirement each month. By the time she reaches retirement age, she could have up to $2 million saved.

Contrast this with Jack, who decides it will serve him well to make double house payments and then focus on retirement planning later. He manages to do so in 15 years, but he will need to save $2,600 each month to catch up with Jill.

In order to reach $2 million in retirement savings, Jack will save a total of $468,000, while Jill only had to set aside $180,000 into her retirement accounts.

This is just one example, and each person’s story is different – yet there is a common theme to remember: Planning for retirement isn’t just about the numbers; it’s also about visualizing the kind of life you want and making plans to support that vision. Well-considered and focused plans can be the most powerful element in your personal success story.

If you have questions about retirement planning, such as determining how much you may need for retirement and how to reach your goals, contact us at Lawson Kroeker. Our professional  team will remain true to focused, long-term investing solutions that help you make your money last.

Beyond the Books: 3 Things Tom Sudyka Has Learned About Investment Management From Senior Leaders

An investment advisor can attend conferences, learn about theories of investment management from books, or complete in-depth certification programs, such as the  Chartered Financial Analyst (CFA®).

But there’s a different side of knowledge when it comes to investment management, and that’s the wisdom gained by experience. That’s why Tom Sudyka, Lawson Kroeker Portfolio Manager, is thankful for decades of working alongside some investment management veterans.

Fine-Tuning Decisions Means Adding a Personal Approach:
Tom has more than 30 years of experience in the industry, but some of his most valuable lessons have come working alongside some great investment professionals. Tom says that at every step he has been able to work alongside excellent investment minds who have shared valuable experience with him. Years spent thinking and learning with some of the best minds in the industry helped Tom fine-tune his decisions for client portfolios.

“One of the things I remember Ken Kroeker, co-founder of Lawson Kroeker, telling me very early in my career was to take each client’s portfolio not only as if it were your own, but almost like it was your mother’s or your grandmother’s and treat it that way. We’re not trying to beat an index or trying to beat a benchmark.  We’re trying to help them reach their financial goals. This requires communication and it requires thoughtfulness,” says Tom.

Investment Knowledge is Cumulative and Continuous:
For Tom, who’s experience prior to Lawson Kroeker was from larger national-scale firms, this concept was unusual. At the large-scale firms he had worked, it was rare to see an investment management team that valued these personal, trusted relationships with clients. Lessons learned from Lawson Kroeker co-founders Ken Kroeker and Frank Lawson continue to shape his approach to working with clients, and he takes pride in teaching these same principles to the next generation of investment managers.

“Investment knowledge has a cumulative nature, and the more you work in the industry, the more you have seen and can reference to apply to decisions,” says Tom. “Sometimes it’s good to just pause and reflect on this journey. I have been privileged to work with some of the best in my career.”

There’s a Big Difference Between Book Knowledge and Personal Experience:
Tom notes that the exposure to these senior managers still impacts the way he looks at investments and investment opportunities every day.

“There’s a big difference between learning from books and learning from others who have been there before, and I humbly say thank you,” says Tom.

At Lawson Kroeker, investment management philosophy and wisdom doesn’t just come from book knowledge. Clients can benefit from decades of cumulative experience and wisdom passed down from one generation of advisors to the next. Contact us today to see how three generations of ownership can help you paint your picture of success.

Do You Know the 3 Types of Market Downturns?

As 2019 unfolds, there are many eyes on the market; many of them are wondering whether the low point experienced at the end of 2018 will prove to be a bottom or a precursor to more hard times to come. Regardless of what you read in the headlines, history shows that maintaining consistency tends to lead to the highest chances of success.

Building knowledge of some key market terms related to shifts may also help boost your confidence. Here are some points that can help:

There are three kinds of downturns. As we talked about in our recent quarterly reflection piece “As We See It,” there is a common approach to how downturns are typically categorized:

  • A pullback is when the market experiences a decline of 5.0% to 9.9%. They typically last about a month, on average, and require about two months for the market to recover.
  • A correction is a decline of 10.0% to 19.9% and its average duration is five months, but requiring only an average of four months to recover.
  • A true bear market is the most formidable, with dips in the market of 20.0% or more. These events last 17 months, on average, and can take around three years for recovery to be complete.

This is where focused, diligent investing requires the discipline to turn from the hype of the media and Wall Street. Whether it’s the start of a bear market or simply a pullback, the tone of the media during a pullback could make you believe the sky may be falling. In reality, this John Rodgers, Jr., quote can help you see the big picture: “The most important thing is to stay the course — not to get shaken out of the market during a difficult time.”

Take an opportunity to think small at times. As you follow a consistent set of principles regarding investment guidance and strategy, you often notice trends that would never make the headlines. For instance, Lawson Kroeker often invests in firms that are listed in the Russell 2000 index. It’s worth noting that the smaller firms in this index tend to have downturns that are less distinct; may last even half the time of the bigger firms; and can recover much more quickly.

Keep looking forward: Categorizing a downturn in the market requires the perspective of history, regardless of what’s being reported in the news. Rather than looking behind, it’s important to continue to look forward. Keep pursuing consistent goals using principles that have led to success over time.

For more investment insight, contact us at Lawson Kroeker. You will find that our firm is different for many reasons  and that we value a “contrarian” approach. Let’s talk today about remaining true to focused, long-term investment solutions that help you make your money last. (If that makes us a little “old school,” we are alright with that, too.)

Investment management shouldn’t always “look” busy. There should be time to think.

Why Strategic Investment Management Doesn’t Always Look Busy

Early members of the Lawson Kroeker team, including Bruce Van Kooten, Portfolio Manager, can look back fondly on memories of co-founder Frank Lawson dedicating a lot of time to work that didn’t look much like investment management. (Or at least how the general public would think of investment management tasks.)

Frank would be in his office, quietly sitting at his desk. If anyone asked what he was up to, he would respond simply with, “Thinking.”

“Smart investing requires careful contemplation of the next step in the strategy, as well as knowledge of how that step might impact future investments. It requires looking at what’s happened, historically, especially because we want to invest with companies we know and understand – and those with a history of making money,” says Tom Sudyka, Portfolio Manager.

There’s also a creative side to investment management, and that requires time to think.

“Like fine art, each investment portfolio should reflect the creative and personalized aspects of a masterpiece. Like the colors and styles in a commissioned piece, your investments are designed for who you are as an individual,” says Sudyka. “This approach takes time. It takes diligence. It requires careful focus – but this is the philosophy our firm was built upon, and it’s how we continue to move forward.”

This approach is harder to find in large-scale investment firms, says Sudyka, who are becoming more commoditized as an industry. “Finding firms that build portfolios for individuals is becoming increasingly more difficult. Large investment firms try to fit you into one of their product models, which is more like a commodity.

We believe our clients value having a portfolio built for their needs and objectives – and that they value the opportunity to enjoy an authentic experience from a thoughtful team they can trust. Investment management isn’t about outperforming an index or other metrics. It’s about helping individuals and families achieve their aspirations for their future and looking for ways to protect the wealth they have,” says Sudyka.

For more information about why having time to think is a key part of success at Lawson Kroeker, send us an email. We also invite you to watch our video to learn more about the value of taking time to think.

Lawson Kroeker advisors talk about how different it is to work at a firm that celebrates discipline and integrity.

3 Values That Distinguish the Lawson Kroeker Approach

When you seek out investment guidance, you want to know that you’re not just a set of numbers. You want a personalized experience that comes from an advisor who shares your values. At Lawson Kroeker, you’ll quickly see that our advisors aren’t the “typical Wall Street” type. In other words, our team’s experience includes large-scale firms at major cities, but we prefer a smaller firm where we can make our decisions in-house.

Take a look at three important values that our advisors embrace and celebrate:

Discipline

Our advisors focus on each client and their individual needs. While there are similarities between some portfolios, they are never identical. It’s clear to us that smaller is better, and this plays out at Lawson Kroeker in terms of discipline.

How? Having a focus on clients means we have time for a disciplined approach. It allows for the opportunity to look at stocks and manage the money using time-honored principles of investing.

Discipline also comes into play with how our advisors respond to events in the market. Rather than responding like the “herd” to media and market headlines, the Lawson Kroeker team is disciplined to ignore the commotion. Instead, we stick to the investment principles that work over time to build your wealth and protect your assets.

Integrity

At Lawson Kroeker, there’s a different approach to investing, and it’s all based on relationships and the determination to serve clients well. As Tom Sudyka discusses, the founders of Lawson Kroeker always encouraged advisors to not just treat a client’s portfolio as if it was their own, but to take it a step further.

In fact, our advisors view each portfolio as if it were their mother’s or their grandmother’s. Rather than trying to beat a benchmark or an index, our team is focused on trying to help each client reach their financial goals. In fact, the entire process is personal. Clients can email or make a phone call at any time and speak directly with the Portfolio Manager who is making the decisions. (Consider this approach compared to a large-scale national firm, where hundreds of employees are each serving dozens of clients).

Experience

At Lawson Kroeker, we work with clients from a wide variety of financial situations. Employees have a variety of backgrounds.

Among the advisors at Lawson Kroeker, there’s an average of 30+ years of experience. This means they can help you navigate the range of situations and scenarios that can impact your investment strategies.

Our professional team at Lawson Kroeker agrees that there’s a key difference in working this way. Here’s how Tom Sudyka, Portfolio Manager, says it: “We understand that being a smaller firm means we have time to focus on individual client needs and individual portfolios. We have all worked at bigger firms, and at Lawson Kroeker, we have the time to do what we’re really hired to do – and that is manage the money. This makes us a little different.”

Today, we invite you to experience the Lawson Kroeker difference. Contact us and let’s get started on something new together.

Investment management at Lawson Kroeker is all about focusing on the client and their needs.

Why Investment Management at Lawson Kroeker is Different by Design

When it’s time to select an investment management firm, you’ll notice a difference at Lawson Kroeker. Why? One of the core reasons is that the Lawson Kroeker team maintains a deliberately smaller client base, across a focused, in-house team. We believe this result is greater client levels of confidence – and continued success over time.

Here’s what some of the leaders at Lawson Kroeker have to say about this philosophy:

Bruce Van Kooten, Portfolio Manager:

“Confidence means trusting your manager to take the steps to preserve and increase wealth over a time period. It’s asking yourself if your firm is doing the best they can for you, and if you’re comfortable with what they’re doing – and how they’re doing it.

Clients should consider asking themselves, ‘Do I believe that Lawson Kroeker as a firm is doing the best they can for me? Am I confident with what they’re doing and how they’re going about doing it?’

We definitely have the talent here within this firm. Any of us could probably be successful on Wall Street or on either coast but we choose to live and practice our profession here.”

Tom Sudyka, Portfolio Manager:

“One of the things that drew us back to Omaha from Wall Street careers was the opportunity to own our own firm. Being the owner, you get to drive the direction to take care of the clients. It’s an entirely different set-up than most of the firms we compete with. Here, in our mutual fund, we know who our investors are, and for our separately managed accounts we know our clients personally. We are the ones making the decisions, and not farming it out to somebody else to make the decisions.”

If you are looking into investment management options, we hope you’ll include Lawson Kroeker in your consideration. Take a look at this video that tells a little bit more about what makes Lawson Kroeker different than the typical investment management firm.

Learn how to maximize your investments for retirement planning in your last five years of working.

Three Retirement Planning Tips for Your Last Five Years of Working

You’re five years from your anticipated retirement date, and things are looking pretty good. You can look back over a satisfying career, and you have plenty of retirement plans to look forward to. From travel to more time for hobbies, you’re expecting to have a lot of fun enjoying the fruits of your labor. Even if things are looking great, are there retirement planning strategies you should be utilizing, particularly in your last five years of working?

While you’ve saved and you’re thinking that you’re nearing your magic number for a comfortable retirement, it’s not the time to coast into the finish line. Here are three key strategies you should consider for the end of your career:

Reevaluate your equities portfolio. You’ve worked hard to put money away over several decades, but you can experience a major mistake even in just the handful of years you have until retirement and those few years after you retire. You may have heard that you should keep the bulk of your investments in equities, in order to get the best return. As you near retirement, you may want to go over your investments with your advisor to decide if you need to reduce your equities.

Determine whether you can withdraw less than 4%. Retirees are often advised to withdraw 4% of savings their first year and make an adjustment for inflation. Because of low yields, that amount may be too aggressive. Talk to your advisor about your options. (You may want to consider approaching it another way by spending less when there’s a more challenging market year). The takeaway here is that talking to your advisor may be a better step than doing “what everyone does” or what you’ve heard they’re doing.

Think about where your assets will thrive. If you’ve maximized contributions to IRAs and your 401(k), choose taxable accounts that are the most tax-efficient. It may surprise you what options are available – especially since the tax world is constantly changing. (Let it be your advisor’s job to keep up … and your job to enjoy the confidence that comes from that).

But you’re thinking now isn’t a great time to invest. Tom Sudyka, Portfolio Manager, has something to say about that. “Ken Kroeker, a Lawson Kroeker co-founder, is always fond of saying, ‘Now is always the hardest time to invest.’ It doesn’t matter what’s going on in the economy, or what’s going on in the stock market. It’s always hard. The trick is to stay in the market as often as you can with companies you know and understand,” says Tom.

Take a moment to learn more about our philosophy. Or, just send us a note. Now is always a great time to talk about what’s on your mind for your future.

Don’t wait until a crisis to discuss financial planning with your aging parents.

Financial Planning for Aging Parents: 3 Helpful Steps You Can Take

It’s fun to talk with family about holiday traditions or summer plans. It’s fun to talk about how fast the kids are growing. However, discussions around financial planning may not fall into the same category. These conversations are often pushed off until a medical crisis or other event makes avoidance no longer possible.

If your parents are aging rapidly, you may feel compelled to sit down with them and talk about some plans. Here are three suggestions that may ease the stress a bit:

1 Plan ahead and start small. This isn’t a conversation to bring up while you’re carving the turkey at Thanksgiving. Instead, let your parents know that you’d like to talk with them about their preferences as they age, and set a time that’s compatible with their schedule. If you have siblings, let them know that you plan to have this conversation and invite them to participate.

It’s a good idea to keep this first conversation broad and consider it an introduction to what will likely be many conversations around financial planning. They may have more steps in place than you anticipated, or they may be relieved to have help in making plans. There’s also a good chance that they will have complicated emotions about this discussion, and may feel guarded about disclosing information.

2 Discuss their vision. First, it’s a good idea to express your desire for their comfort and fulfillment of their wishes. Then ask them what they have in mind for a living situation as they age. Do they envision a place in assisted living, or would they prefer having assistance in their own home? If they’ve always assumed they’d come live with you, it’s a good idea to have that conversation early.

You should also discuss finances and how they’ll pay for the living situation they anticipate having. Maybe this is a good time to review finances and discuss whether there’s a will in place. They may have an executor in mind or a power of attorney they would like to name. This can be an emotional conversation, as you and your siblings may have different ideas for what you’d like to see next. Prepare to honor your parents’ wishes as much as possible.

3 Handle disagreements wisely. Even if you and your siblings share a close relationship with one another and with your parents, opinions can vary strongly when considering how to care for aging parents. If you and your siblings are at an impasse, consider hiring a professional mediator, who can help sort out challenges and come to resolutions with more confidence.

A well-grounded investment plan can help with these changes and the challenges they may bring. Our team at Lawson Kroeker can help you stay the course when it’s time for a life transition.  Let’s talk about your particular situation and the steps that make sense for you as you move forward.

 

 

 

 

 

 

Financial planning for empty nesters should include a consideration of what you’ll do if a kid returns home.

Financial Planning for the Nearly-Empty Nesters

Three Financial Planning Tips for the Empty Nest Years

A change in the “nest” situation at home naturally brings thoughts and questions about changes in your financial situation. As you reach this milestone of empty nesting (or near it), take a moment to consider what you may need to prioritize in your financial planning:

Maximize opportunities to save for retirement: If you’ve been steadily setting aside 10-15% for your retirement, you’re probably going to be excited to bump that number closer to 25% for the next few years. If you’re in your 50s, you can make catch-up contributions to your 401(k) for up to $23,000 annually. You can also open an individual retirement account (IRA) and contribute up to $5,500, or $6,500 if you’re in your 50s.

It’s also a good idea at this point to take a step back and examine your investment risk. Risk should be evaluated throughout your life and as you near retirement age. Is it time to determine a different level than you chose when you first entered the workforce?

Assess your insurance needs: Health insurance costs. Life insurance ins and outs. Long-term care insurance. While no one particularly enjoys these logistics, how you plan for changing insurance needs is an important part of your retirement planning. Take a moment to see what your advisor has to say about these concerns. (Remember, if you work with a professional, you don’t have to weigh all these options on your own.)

Plan for surprises: Sometimes … they come back. Your financial planning for the empty nest years should include a plan for how you’ll handle things if you need to support an aging parent or if a child returns to live at home. When it comes to a returning child, there’s a difference between a short-term stay for a young adult that needs a little help getting started and plans to stay long term. If they stay longer, how will you determine how much they should contribute to the household finances or upkeep of your home? Having this conversation means you can acknowledge their “adulthood” without compromising the plans you have for your investment portfolio. The same concept applies when an aging parent needs to join your household.

Life changes, and it brings … life changes. At each step, your ideas, concerns and plans can change, too. Our team at Lawson Kroeker Investment Management is diligent and focused, and we enjoy working with clients one-on-one.  A well-grounded investment plan can help with these changes and the challenges they may bring.

Take a moment to learn more about our philosophy today. We look forward to helping you address life changes with confidence.

Planning for retirement often takes on new significance after you reach the age of 50.

Planning for Retirement in Your 50s: What’s Your Vision, and Are You On Track?

If you’ve recently celebrated a milestone birthday of turning 50, then you may notice a few things. You may be more interested in activities that have meaning – or those activities that you just enjoy for the sake of enjoying them. You may be making regular visits to a child who is away at college. (You may even find yourself starting a lot of sentences with, “Kids these days…”)

What else comes to mind in your 50s? It’s normal to question whether your planning for retirement is on track, or if you need to prioritize making some changes as you head toward 65.

Planning for retirement isn’t just about the numbers; it’s also about visualizing the kind of life you want and making plans to support that vision. Maybe you can’t wait to travel to other countries, or maybe you’re excited to garden and read in your most comfortable chair. Both are great plans, and they require different strategies.

Accelerate your savings: When you hit 50, the IRS gives you a little more of a break on your savings plan. Instead of the typical $18,500 contribution limit for 401(k) plans, you’re allowed to contribute an extra $6,000 with the catch-up rule. This applies to traditional plans and to Roth 401(k)s.

While the rules for IRAs are a bit less generous, you can still put an extra $1,000 each year after you turn 50 into your traditional or Roth IRA.

Finding extra cash may not seem high on your “that’s fun to do” list, but it may not be all that challenging, either. It’s a good idea to try using a budgeting tool to see where your money is going. You may find that you could easily find extra savings in your budget with a few minor adjustments.

A few other key steps to consider:

Assessing your investment portfolio: A big change that comes in your 50s is that you need to examine your risk tolerance and make plans for when you expect to begin receiving distributions from investments. You may want to put some money in a fixed income investment so that you aren’t as vulnerable to the market swings that may affect your retirement date.

Getting rid of “bad” debt: Credit card debt interest is likely in the vicinity of 16%, often three times higher than a fixed mortgage or car loan. In addition, that debt doesn’t come with any benefits, such as mortgage interest deductions. There’s nothing wrong with enjoying the speedy convenience or the reward points a credit card can offer – but you might be surprised how quickly you could put extra money away for retirement if you’re not carrying a balance.

Planning for health concerns: The reality is that most people need increasingly more health care as they age. You also may want to consider long-term care insurance, particularly if you’d like to avoid asking family members to shoulder your care.

Investing in a Health Savings Account (HSA) is a good step because the money can be set aside, tax-free, for health-related costs. Any money not spent can be invested and grown until you use it.

Enjoying your 50s can mean a unique set of life changes, new decisions and new opportunities. You can really enjoy each of these changes with confidence if you feel like your retirement strategy is on track. Contact us at Lawson Kroeker to talk. We’ve been diligent, consistent and client-focused since our founding more than 30 years ago.