Investing and Inheritance: Take Your Time … Emotions Will Be Involved
Plus Three Other Key Considerations
If you’ve received a windfall in the form of an inheritance, you might be surprised at the emotional aspect of the news. Being involved in an inheritance means many decisions, and investing an inheritance can be a complicated process.
Take some time. While you may feel an urgency to look at investment decisions quickly and plan to wait for later to work through your emotions, the opposite may be healthier. Most experts agree that taking some time before any action can be beneficial in the process.
Choose advisors wisely. You may have people all around you, and once they hear that you’ve received an inheritance, they’ll have a lot of opinions about the “right way” to handle the money. Be sure to work with a professional that you trust, and it might be a good idea to come up with a standard response for well-meaning friends and family that want to share their ideas (i.e., “I’ll bring that up to my advisor, thanks.”).
Keep the process positive. Hiring an investment professional to handle the estate can avoid surprise disagreements and keep the process positive for everyone. Long before the time comes for an inheritance to be passed along, it often helps to have an intergenerational meeting in which the plans for the inheritance are disclosed. A neutral advisor can help open the door to good communication and efficiency.
Think through financial categories. You may be tempted to start by scheduling a trip or buying that piece of property you’ve been thinking about for years, but it’s better to do some cool-headed planning in the early months following a windfall. Take a look at these four categories as a suggestion, and determine where you may need to contribute part of the money:
Safety: includes medical, transportation, home repair and insurance
Fun: vacations, entertainment
Future: money that won’t be touched in the near future
Cushion: for true emergencies
You could also include charity as an optional category. Each category does not need to be equal, nor does it need to be decided quickly. Fill out some ideas and then revisit the list in a few days or weeks and make adjustments.
If you have questions and concerns related to a financial windfall, such as an inheritance of the sale of a business, contact us at Lawson Kroeker. Our professional team is trained for investing an inheritance and in the art of building trust through diligence and a focused strategy. At Lawson Kroeker, we not only understand the need to take your time; we encourage it.
Have You Made These Common (But Lesser-Known) Missteps When Planning for Retirement?
Surprise. There is a fair amount of complexity associated with retiring. Sometimes there are feelings of genuine confusion over “what’s next?” For many retirees, it can take several months or a year (or more) to find a new and meaningful routine. For others, a big move to a new city can lead to excitement … mixed with a sense of disconnection.
The good news is that each of these challenges can be systematically and effectively resolved. However, when planning for retirement, you could have made a few missteps along your investment journey that could affect your plans in a different way.
Here are some common errors to avoid:
You think you’ll need less money in retirement. Think about what expenses you’ll have as a retired person: housing, utilities, clothing, health, groceries. None of these are items that are dependent on you having a job. Your expenses may even increase in retirement, depending on the plans you have for travel or entertainment. Most Americans will live 10 to 15 years longer than they anticipate.
You are not taking advantage of catch-up contributions. If you got a bit behind in your retirement savings while you were pursuing education or raising children during your 20s and 30s, don’t worry. Your 50s can be a time to shore up retirement funds, with the government allowing you to make catch-up contributions. This increases the maximum amount you can contribute; an extra $6,000 to a 401(k) or an extra $1,000 to an IRA.
You may feel that you can’t possibly put more away for retirement, but this is a prime opportunity to get your savings in line. Consider cutting expenses like eating out or take a more budget-friendly vacation, or you can take on a side job to maximize your contributions.
You could be under-thinking when it comes to taxes. Don’t forget to factor in taxes when planning for retirement. You may have saved well, and combined with your Social Security, you may be in good shape for a healthy income in retirement. But you can plan on the IRS claiming its share, as well. Unless you have a 401(k) or a Roth IRA, your income will be taxed as ordinary income.
Planning for retirement requires a long view of your financial situation. Contact us at Lawson Kroeker to get started on a vision for your retirement and what steps are necessary to make it a reality. We’re diligent, focused and consistent – and we can help you to be, also.
Why Are we Thankful to be in the Midwest?
Many of our team at Lawson Kroeker have experience at big investment firms, located in bigger cities.
Why have many returned to the Midwest? While each Chartered Financial Analyst at Lawson Kroeker may offer a slightly different answer to that question, many of the themes are the same. From the opportunity to personally serve clients to the benefits of raising kids in a great city like Omaha, they all enjoy advising clients and working hard in the Midwest.
While Omaha is a competitive market with an entrepreneurial spirit, it’s still small enough to allow for a more personal approach to advising clients. At Lawson Kroeker, decisions are never farmed out to another company, and there’s time to think carefully through the advice given to clients.
What makes us different also makes us thankful.
How Charitable Donations Through an IRA Can Impact Taxes and Investing … Are You Familiar with These Tax Changes Toward Charitable Donations?
Changes in determining who will include itemized deductions on their tax returns will affect millions this tax year. The Tax Cut and Jobs Act of 2017 is expected to drastically reduce the number of people enjoying tax savings related to their charitable donations, with only 16 million in 2018 versus 37 million in 2017. The updates impact taxes and investing for many Americans.
The itemized tax deduction will be limited to $10,000 for state and local taxes and the standard deduction will go up, with single returns at $12,000 and those married filing joint returns receiving a $24,000 standard deduction. Head of household returns will have a standardized deduction of $18,000. The thresholds are higher for those over the age of 65.
The percentage of households that report itemized deductions on their tax returns is expected to drop 39% with only 15% itemizing.
The good news for seniors: While this news may make it seem that the benefits of contributing to charity will be drastically changed, and both taxes and investing will require some changes in order to absorb the impact, there is good news for seniors. The new law does not change the ability to make a charitable contribution from an individual retirement account (IRA) without recognizing taxable income.
In the past, the ability to include charitable donations on itemized deductions meant that many people over the age of 70 ½ never took advantage of this ability. With the new changes in place, everyone who meets the minimum age requirement might consider changing the way they make their charitable contributions. (Essentially, individuals over the age of 70 ½ with IRAs could leverage some tax savings while giving to a philanthropy).
How it works: The law is generally referred to as a “charitable IRA rollover,” and it allows seniors to make donations to eligible charities directly from their IRA, excluding the donations from their gross income.
For younger taxpayers: If an investor is under the age of 70 ½, they may still be able to capture some of the benefits of their charitable donations by “bunching” their contributions. Instead of making a donation of $5,000 each year for three years, they could give $15,000 once every three years, allowing them to itemize on that tax return. This method can be a bit challenging for the charity in question because of budgeting and planning, but there are options like a private foundation or donor-advised fund that can manage the donation flow to the charity.
To learn more about how recent laws have impacted investment strategies, contact us at Lawson Kroeker Investment Management. We can help guide you.
Why Lawson Kroeker Favors Long-Term Investment Advice Over Speculation: And, Does Speculating Over Investment Advice Even Work?
As winter approaches the Midwest, some experts say the bear market is stirring from hibernation, ready to come out of its den. As the bull market continues an extensive run since March 2009, many investors wonder what investment advice should guide their decisions.
In truth, if you’ve ever worked with our team at Lawson Kroeker, you know that the headlines don’t have much impact on the steady focus of our Chartered Financial Analysts®. Read on as we share further insights on the topic.
“Is it different this time?” is a common question when talking of the current market conditions and working with those seeking investment advice. There are always variations in how the stock market plays out, and this time is no different. As discussed in one of our “As We See It” quarterly reflection pieces, the factor that differentiates this long bull market run is the speculative (or fast) money flowing in and out of the market.
Is the bull market aging? Peaks in speculation and momentum are telltale signals of an aging bull market. Investors, in a rush of fear of missing out (FOMO), often make purchases at a time when the prices should influence the opposite behavior. This often occurs with initial public offerings (IPOs), which entice investors with the hopes of investing in the next great thing. Unfortunately, many of these IPOs fail their investors, who watch their speculative money slip away quickly after it peaks.
What are areas of new speculation? One of the newest speculative types of investments has been in cryptocurrencies. Many investors jumped to acquire the Bitcoin, but there’s been no emergence of a single platform to support it or provide widespread acceptance of this currency. Those who purchased Bitcoins watched as their value increased from around $900 in early 2017 to around $19,000 in December of that year.
Given the anticipation that the value would significantly increase from there, investors continued to hold tight to Bitcoins as the value then dropped to around $4,400 in the fall of 2018.
Speculative investing and trends come and go, but the investment philosophy at Lawson Kroeker remains consistent, focused and diligent. As we’ve done since our founding year, our team embraces a long-term view of investing that helps build success over time. Contact us today to learn more.
Are You a Thinker? So Are We.
With all you’ve got to do, there’s rarely enough time to really dig into what’s happening in the market. That’s why Lawson Kroeker publishes a quarterly reflection piece, written specifically for the Lawson Kroeker Community of Thinkers. That’s what we call people like you: smart investors who want to know what’s shaping the market and gain some insight into the current investing climate.
When you subscribe to the Lawson Kroeker Community of Thinkers, you’ll receive this piece, called “As We See It,” designed to cover some thought-provoking topics. Here are a few recent subjects that have been covered in recent issues:
Trade Wars: You’ve no doubt seen this phrase tossed around on news sites and in the papers, but what constitutes a trade war and what’s the impact on the global economy. This is your brief primer.
It’s Different This Time: Many investors fear that it’s “different this time,” that a maturing market is expected to tank in a spectacularly unprecedented way. Find out what really is unique about the current condition, and whether there’s any reason to be concerned about this market.
What to Expect When it’s Tax Time: Every year, there are changes to the tax law that affect personal and corporate returns. Find out how changes in how itemized deductions are handled and a changing corporate tax rate are expected to impact your tax return.
The Greenhouse Effect: Surprisingly, this post has nothing to do with the environment, but instead revisits the wisdom of the late Frank Lawson, co-founder of Lawson Kroeker. Find out how the maturing trajectory of an investment can be compared to the cultivation of plants.
The Difference Between Information and Insight: No matter how many gauges you put in the cockpit, information is only as good as the pilot that uses it. Learn how information and insight come together for a better investment strategy.
To access these, plus ongoing issues of “As We See It,” become a member of the Lawson Kroeker Community of Thinkers today!
Planning for Retirement: Good News. It’s Not Too Late.
For many Americans, planning for retirement hasn’t been a regular part of their financial planning. The causes are different for every household, but nearly half of all Americans have no retirement savings at all, and for those that have been able to save, the median balance is only $10,000. Currently, the average contribution rate to a retirement account is only around 3%.
Americans are feeling the expected impact of their inability to save, with only 17% feeling confident in experiencing a comfortable retirement in the future. These types of statistics lead advisors to counsel their clients to take drastic measures: either delay retirement by 10 years or learn to live on a smaller budget so that up to 60% of their income can be directed to saving for retirement.
For many Americans, these options aren’t realistic. Scaling back a budget to only 40% of what a household is accustomed to is a challenge but working an extra 10 years with potentially escalating age-related health challenges could also be unrealistic.
It’s important to note that strategies like these are not universally applicable. Each household has different needs and circumstances and requires a personalized and specific solution for retirement planning. With that in mind, there may be two reliable practices that could help many households get back on track for retirement planning:
Set aside six percent. This action particularly benefits younger investors, but it also helps those in their 40s and 50s who are behind in planning for retirement. It helps to begin this practice and then look every six months at how it is impacting their retirement savings. It won’t take long to see progress.
Investors may also be encouraged when they see how their retirement savings stack up to others in their age group. A little sense of competition with peers can spur more positive behaviors.
Best of all, increasing savings from three to six percent isn’t likely to force a household to put austerity measures in place. While there may be a bit of a cinch on the budget at first, this change is relatively easy to accommodate.
Delay retirement by two years. Working for another 10 years is a hard concept to consider when you’re reaching retirement age and beginning to count the years. Two years can help build up savings while still presenting a retirement date that allows time for plenty of leisure and fun. It’s also good to do your homework to see how a delay of two years impacts social security benefits. It might be worth a short delay.
If you’re planning for retirement, don’t worry if you find that you’re a bit behind. Our team at Lawson Kroeker Investment Management can help you build an investment portfolio that will help ensure a secure future while allowing you to enjoy life right now. Contact us for an appointment. There’s no time like today!
Your Investment Portfolio May Thrive From a Shift in Perspective
“You make money buying when the world seems risky and lose money buying when the world seems safe. When you’re really scared is the time to buy, not sell.”
There are times when the headlines are full of words that may strike fear in the hearts of investors, like “bear” and “recession.”
Your instinct might be to sell and avoid the potential for further loss, but some investing principles say that this impulse is the opposite of action you should be taking. Rather than running away from the market in a downturn, some investors may try to get in deeper – and at the least, commit to stay the course – even if it seems against the grain.
Smart billionaires like Warren Buffett and George Soros have built their wealth by running the opposite direction of the crowd. For instance, in the winter of 2016, when oil was anything but a hot commodity, investors like Buffett and Soros disclosed stakes in the Houston pipeline company Kinder Morgan. The share price had fallen about two-thirds in a one-year period, but once it recovered, those investors smart enough to put their confidence in the company’s strengths made a great return. One of the reasons why investing in Kinder Morgan was a safe bet that only appeared to be risky is that their core business is in natural gas, which remains a strong business segment. (Read more in the Los Angeles Times article “Smart Billionaires Buy When Everyone Else is Selling.”)
No investor can eliminate risk, but you can choose companies that have a history of making money. These companies demonstrate an ability to navigate the competitive landscape and have a foundation that allows them to weather a market downturn without going out of business.
Here’s another way to look at it, from our October 2015 “As We See It” quarterly reflection piece:
“At the daily level, the stock market can seem like a roller coaster even though a purely financial calculation reveals that the gains have historically more than made up for the losses. If people perceive loss at twice the extent as they perceive gain, it’s the sort of ride one might decide to avoid. This is why human nature can be an investor’s worst enemy. The best remedy is a change in mental attitude.
When an investor thinks about stocks, they should be mentally buying a collection of private businesses, not wiggles on a chart. A private business owner does not ask for an appraisal on a daily, weekly, or even monthly basis but instead focuses on profits and long-term growth potential. As Benjamin Graham said, ‘Investing is most intelligent when it is most businesslike.’”
If you’d like to talk more about the importance of resisting the temptation to follow the crowd in your investments, contact us at Lawson Kroeker. We look forward to helping you create the future you want, based on timeless and focused investing principles.
Investment Management: The Lawson Kroeker Difference
No two investors are alike, which is why no two portfolios should be identical. Sure, there may be resemblances here and there, but when you bring the right investment management firm aboard, you get professionals who know that each client deserves individualized attention.
This principle of one-on-one attention is something that smaller firms have the luxury to afford – and it’s what Lawson Kroeker Investment Management is set up to do. Rather than operating from the coasts or from the hectic pace of Wall Street, the professional advisors and team at Lawson Kroeker operate out of the Midwest (by choice, and gladly).
We’re different … and maybe a little bit “old-school.” We’re practicing a philosophy of patience, never letting emotions or media headlines get in the way of rational decision-making. We don’t chase fads, preferring instead to stay the course. This kind of “old school” helps guide clients toward success over time.
Our clients can talk to us about decisions at any time. When our clients reach out to us, they’re actually talking to the people who make the decisions regarding their investment future. We know exactly what they want and need, and we’re making those decisions –instead of an outside resource.
Diverse backgrounds create many solutions. Another aspect that makes us different is that our backgrounds are diverse among our investment professionals. Some come from the mutual fund industry, while others come up from banks and others from brokerage firms. It’s this diversity that helps us to come to the right solutions for our clients.
We don’t follow a philosophy of “if you don’t look busy then you aren’t busy.” Our clients prefer thinkers – and that’s what we allow ourselves to do at Lawson Kroeker. We aren’t afraid to carefully reflect on the industry as we make decisions.
Why is this so important? Because your plans aren’t like anyone else’s plans. Contact us today and let’s talk about what’s possible for your unique future.
Understanding the Past is a Clear Strategy When Investing for Retirement
“To understand what is happening today or what will happen in the future, I look back.” – Oliver Wendell Holmes
Investing for retirement requires a solid measure of discipline. When you’re in the stage of life when you need to set aside money for retirement, it sometimes seems as if you can’t possibly squeak another dime into a 401(k) or another investment vehicle. You’re busy raising a family and building a career, so the discipline to designate money for retirement investing requires constant attention.
Besides this core discipline, investors preparing for retirement also need the ability to look back. As Oliver Wendell Holmes famously said, a focus on the events of the past is valuable for understanding the events of today, and that wisdom aligns with what the most successful investors share about their approach. In fact, you’ll find this famous quote about looking back in the extensive collection of our founder, Ken Kroeker, because it matches his approach to investing and serving clients.
When you focus on fundamentals, rather than chasing the latest Wall Street predictions, you imitate the discipline of some of the investing giants, from Warren Buffett and Peter Lynch to Benjamin Graham and Bill Miller. Each of these investors has built their wealth by using value-investing principles.
You can apply those same principles when investing for retirement. Investors like Warren Buffett may beat the average returns in the market by ignoring the latest headlines and, instead, focusing on the foundations of a company. In other words, when a company is going through a short-term challenge, but they are built on solid business principles, it may be a good investment.
A good current example is Wal-Mart. They’ve closed some stores and often appear to be playing catch-up with Amazon and Costco, but they’re still the most prominent leader in discount retailing in the world and have a history of delivering value over time. The overreaction of the market to Wal-Mart’s challenges make it look like the company is facing an overall decline, but the investor that looks back can see that companies with proven track records usually rebound from challenges.
When you objectively look at the history of a company, and you pair it with confidence that market downturns tend to sort themselves out eventually, you’ll be able to make investments that support your retirement planning.
Investing for retirement requires both discipline and an understanding of past events. It also requires the wisdom of a professional advisor to help guide your investment decisions. Make an appointment with the Lawson Kroeker team and find out why a combination of looking back – and carefully and strategically looking forward – can be part of your individual plan for retirement success.