fbpx
Blakely Financial Russia-Ukraine Crisis Investors

What Does the Russia-Ukraine Crisis Mean for Investors?

Presented by Robert Blakely, Emily Promise, and Steve LaFrance

The next phase in the  Russia-Ukraine crisis has begun, as Russia has launched attacks on Ukraine. With a war underway, it’s unsurprising that the markets are reacting. Before the market opened on Thursday, U.S. stock futures were down between 2 1/2 percent and 3 1/2 percent, while gold was up by roughly the same amount. In addition, the yield on 10-Year U.S. Treasury securities has dropped sharply. International markets were down even more than the U.S. markets, as investors fled to the more comfortable haven of U.S. securities.

The Markets Are Being Hit Hard

News of the invasion is hitting the markets hard right now, but the real question is whether that hit will last. It probably will not. History shows the effects are likely to be limited over time. In retrospect, this event is not the only time we have seen military action in recent years. And it’s not the only time we’ve seen aggression from Russia. In none of these cases were the effects long-lasting.

Historical Context and Current Events

Let’s look back at the Russian invasion of Georgia and the Russian takeover of Crimea, which is part of Ukraine. In August 2008, Russia invaded the Republic of Georgia. The U.S. markets dropped by about 5 percent, then rebounded to end the month even. Then, in February and March 2014, Russia invaded and annexed Crimea. Again, the U.S. markets dropped about 6 percent on the invasion but rallied to end March higher. In both of these cases, the initial market drops were erased quickly.

Blakely Financial russia-ukraine geopolitical selloff

We essentially see the same pattern when looking at a broader range of events. For example, the chart below shows market reactions to other acts of war, both with and without U.S. involvement. Historically, the data shows a short-term pullback—as we will likely see today—followed by a bottom within the next couple of weeks. Exceptions include the 9/11 terrorist attacks, the Iraqi invasion of Kuwait, and, looking further back, the Korean War and Pearl Harbor attacks.

With Russia’s attack on Ukraine, the markets are reacting. But history shows the effects should be limited, according to Commonwealth CIO Brad McMillan.

Still, even with these exceptions, the market reaction was limited both on the day of the event and during the overall time to recovery. Moreover, comparing the data provides valuable context for recent events. For example, as tragic as the invasion of Ukraine is, its overall effect will likely be much closer to that of the Russian invasion of Ukraine in 2014, in which Russia annexed Crimea than it will be to the aftermath of 9/11.

Capital Market Returns During Wartime

But even with the short-term effects discounted, should we fear that somehow the war or its impact will derail the economy and markets? Here, too, the historical evidence is encouraging, as demonstrated by the chart below. Returns during wartime have historically been better than all returns, not worse. Although the war in Afghanistan is not included in the chart, it too matches the pattern. During the first six months of that war, the Dow gained 13 percent, and the S&P 500 gained 5.6 percent.

With Russia’s attack on Ukraine, the markets are reacting. But history shows the effects should be limited, according to Commonwealth CIO Brad McMillan.

Sources: The indices used for each asset class are as follows: the S&P 500 Index for large-Cap stocks; CRSP Deciles 6-10 for small-cap stocks; long-term U.S. government bonds for long-term bonds; five-year U.S. Treasury notes for five-year notes; long-term U.S. corporate bonds for long-term credit; one-month Treasury bills for cash; and the Consumer Price Index for inflation. All index returns are total returns for that index.

Returns for a wartime period are calculated as the index’s returns four months before the war and during the entire war itself. Returns for “All Wars” are the annualized geometric return of the index over all “wartime periods.” Risk is the annualized standard deviation of the index over the given period. Past performance is not indicative of future results.

Expect a Headwind

This data is not presented to say that the Russia-Ukraine crisis won’t bring real effects and hardship. Oil prices are up to levels not seen since 2014, which was the last time Russia invaded Ukraine. Higher oil and energy prices will hurt economic growth and drive inflation worldwide, especially in Europe and the U.S. This environment will be a headwind as we advance.

Economic Momentum Going Forward

Will we see effects from the headwind caused by the Ukraine invasion? Very likely. Will they derail the economy? Not likely at all. During recent waves of Covid-19, the U.S. economy demonstrated substantial momentum, which should move us through the current headwind until markets normalize. Moreover, as has happened before, we already see U.S. production increase, which should help bring prices back down.

The Ukraine invasion has created current market turbulence; we should look at what history tells us. First, past conflicts have not derailed either the economy or the markets over time. Historically, the U.S. has survived and even thrived during wars.

What This Means for Portfolios

Although the current events with the Russia-Ukraine crisis have unique elements, they’re more of what we’ve seen in the past. Events like yesterday’s invasion do come along regularly. Part of successful investing—sometimes the most challenging—is not overreacting. If you’re comfortable with the risks you’re taking, you might not be making any changes—except perhaps to start looking for some stock bargains. Consider whether your portfolio allocations are at a comfortable risk level if you’re worried. If they’re not, talk to your advisor.

 

This material is intended for informational/educational purposes only. It should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Dow Jones Industrial Average (‘the Dow’) is a price-weighted measurement stock market index of 30 prominent companies listed on stock exchanges in the United States.

 

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets, and cannot guarantee that any objective or goal will be achieved.

Authored by Brad McMillan, CFA®, CAIA, MAI, managing principal, chief investment officer, at Commonwealth Financial Network®.

© 2022 Commonwealth Financial Network®

Blakely Financial When Two Goals Collide: Balancing College and Retirement Preparations

When Two Goals Collide: Balancing College and Retirement Preparations

You’ve been doing the right thing financially for many years, saving for your child’s education and your retirement. Yet now, as both goals loom in the years ahead, you may wonder what else you can do to help your child (or children) receive a quality education without compromising your own retirement goals.

Knowledge Is Power

Start by reviewing the financial aid process and understanding how financial need is calculated. Colleges and the federal government use different formulas to determine need by looking at a family’s income (the most crucial factor), assets, and other household information.

A few key points:

  • Generally, the federal government assesses up to 47% of parent income (adjusted gross income plus untaxed income/benefits minus certain deductions) and 50% of a student’s income over a certain amount. Parent assets are counted at 5.6%; student assets are calculated at 20%.1
  • Certain parent assets are excluded, including home equity and retirement assets.
  • The Free Application for Federal Student Aid (FAFSA) relies on your income from two years prior (the “base year”) and current assets for its analysis. For example, for the 2023-2024 school year, the FAFSA will consider your 2021 income tax record and your assets at the time of application.

Strategies to Consider

Financial aid takes two forms: need-based aid and merit-based aid. Although middle- and higher-income families typically have a more challenging time receiving need-based aid, there are some ways to reposition your finances to potentially enhance eligibility:

  • Time the receipt of discretionary income to avoid the base year.
  • Have your child limit their income during the base year to the excludable amount.
  • Use countable assets (such as cash savings) to increase investments in your college and retirement savings accounts and pay down consumer debt and your mortgage.
  • Make a significant purchase, such as a car or home improvement, to reduce liquid assets.

Many colleges use merit-aid packages to attract students, regardless of financial need. As your family explores colleges in the years ahead, be sure to investigate merit-aid opportunities as well. A net price calculator, available on every college website, can give you an estimate of how much financial aid (merit- and need-based) your child might receive at a particular college.

Don’t Lose Sight of Retirement

What if you’ve done all you can and still face a sizable gap between how much college will cost and how much you have saved? To help your child graduate with as little debt as possible, you might consider borrowing or withdrawing funds from your retirement savings. Though tempting, this is not an ideal move. While your child can borrow to finance their education, you generally cannot take a loan to fund your retirement. If you make retirement savings and debt reduction (including a mortgage) a priority now, you may be better positioned to help your child repay any loans later.

Some Parents Use Retirement Funds to Pay for College

Source: Sallie Mae, 2021

Consider speaking with a financial professional about how these strategies may help you balance these two challenging and important goals. Of course, there is no assurance that working with a financial professional will improve investment results.

Withdrawals from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income. They may be subject to a 10% penalty tax if taken before age 59½ unless an exception applies. (IRA withdrawals used for qualified higher-education purposes avoid the early-withdrawal penalty.)

1) College Savings Plan Network, 2021

Building Blocks for Financing College with Less Debt

Building Blocks for Financing College with Less Debt

Financing a college education with the least debt involves putting together various resources in the most favorable way for your family. It requires planning, savings discipline, an understanding of financial aid, innovative college research, and good decision making at college time.

Your College Fund

Your savings are the cornerstone of any successful college financing plan. It’s helpful to think of your college savings as a down payment on the total cost, similar to a down payment on a home. Then, you can supplement your savings with other available resources at college time.

Setting aside money for college over many years takes discipline, and in many cases, sacrifice, including lifestyle changes. Of course, every family’s situation is different. But if you save regularly over time, you might be surprised at how much you could accumulate in your college fund.

A College Fund Takes Shape

Financial Aid

Financial aid is the next piece of the puzzle. It’s a broad term that can mean many things, with concepts that are often used interchangeably. At its core, financial aid is money to help pay for college: loans, grants, scholarships, and work-study. Your overall goal is to get the most grants and scholarships (grant aid) and the least amount of loans.

Colleges are the largest source of grant aid, with annual need-based and merit-based grant awards that can be in the tens of thousands of dollars. By contrast, the federal government’s two central grants, the Pell Grant and the Supplemental Educational Opportunity Grant, are generally smaller and reserved for students with the greatest financial need.

To help find colleges with the most generous grant aid, use a net price calculator available on every college website. A net price calculator estimates how much grant aid a student might expect based on their financial information and academic profile. By completing a net price calculator for several colleges, you can compare what your out-of-pocket cost (net price) might be at different schools and rank colleges based on affordability.

The federal government’s main contribution to the world of financial aid is student loans. Regardless of financial need, all students are eligible for federal student loans.

Additional Funding Sources

Other potential resources at college time might help reduce the overall amount you’ll need to borrow: what you can contribute from current income during the college years; your child’s earnings from a school or summer job; education tax credits, which could be worth up to $2,500 per year; financial help from grandparents or other relatives; and scholarships from civic, private, or nonprofit groups.

On the cost-cutting side, your child might consider graduating in less than four years; attending community college for two years and then transferring to a four-year college; becoming a resident assistant to get free or discounted room and board; living at home for a semester or two; exploring all in-state public college options, and deferring enrollment for a year to earn money and take advantage of any employer educational assistance.

After taking everything into account — the amount of your college fund, the grant aid your child might receive at specific colleges, the amount of money you and your child can contribute from current income during the college years, and the availability of other resources and cost-cutting measures — you can determine how much borrowing would be required for specific colleges and make an informed choice.

Borrowing money to pay for college can quickly spiral out of control. Make sure your child understands the monthly payment for different loan amounts over a 10-year repayment term. If the numbers look daunting, don’t be afraid to say “no” to specific colleges. Unfortunately, most teenagers experienced in finance enough to understand the negative consequences of excessive borrowing fully, so it’s up to parents to help eliminate options that aren’t economically viable.

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Annuity Income Annuitization vs. Lifetime Withdrawal

Annuity Income: Annuitization vs. Lifetime Withdrawal

During your working years, you’re accustomed to living on an income from your job. However, when you retire, the income from employment ends. Social Security provides a steady income, but it probably isn’t enough to meet your retirement income needs. An annuity is an option that can provide a stream of income during retirement.

There are usually two choices available to generate a steady income with most annuities: annuitization and lifetime withdrawals from a guaranteed lifetime withdrawal benefit. Here’s how each option works.

Annuitization

This is a fancy word to describe converting funds in an annuity into a stream of income for a fixed period or a lifetime. Often, once the annuity is annuitized, it can’t be changed, reversed, or revoked — you’re pretty much locked into the payments for the duration of time chosen.

The amount of annuitization payments is based on several factors, including the duration of the annuity payments (either a fixed period or lifetime), the cash value of the annuity, current interest rates applied by the annuity issuer, and the age of the person (referred to as the “annuitant”) over whose life the payments are based. With annuitization payments from nonqualified annuities (i.e., annuities funded with after-tax dollars), each distribution consists of two components: principal (a return of the money paid into the annuity) and earnings. The percentages of principal and earnings for each distribution will depend on the annuitization option chosen.

Guaranteed Lifetime Withdrawal Benefit

A guaranteed lifetime withdrawal benefit (GLWB) enables the annuity owner to receive payments without having to annuitize the annuity or give up access to the remaining cash value in the annuity. Typically, an annual fee is charged for a GLWB.

The amount of the GLWB payment is usually determined by applying a withdrawal percentage to the annuity’s principal amount or cash value, whichever is greater at the time of election. Then, the amount of each withdrawal is subtracted from the cash value. Generally, the withdrawal amount will not decrease, even if the cash value decreases or is exhausted. However, optional benefits are available for an additional fee and are subject to contractual terms, conditions, and limitations as outlined in the prospectus and may not benefit all investors.

Annuitization vs. Lifetime Withdrawal

Annuities are designed to be long-term investment vehicles. Generally, annuity contracts have fees, expenses, limitations, exclusions, holding periods, termination provisions, and terms for keeping the annuity in force. Surrender charges may be assessed during the early years of the contract if the annuity is surrendered. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty. Any annuity guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company. Annuities are not insured by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Planning for Expectant Parents

Authored by Blakely Financial

If you or a loved one are planning to start a family, there are changes coming your way.  Many you have heard about: changing diapers, soothing crying babies, or getting the bottle just the right temperature.  Those are important, but the ones you don’t know about can be even more critical to prepare for before the little one comes.

Budgeting

Creating a budget for the pregnancy, labor and delivery, and first year after birth can be critical.  It is recommended that you build an emergency fund to be prepared for some unexpected expenses.

A budget will keep you from buying too many gadgets that friends/bloggers/ads say you “NEED.”  You will find that you don’t need too many gadgets, although it’s certainly okay to have items that make life easier for mom and baby.  I would also recommend not buying too much of one thing.  Yes, having more bottles is nice, so you don’t have to wash them as often, but you’ll still have to wash ALL of them!  Try starting with one or two of some things just to make sure you like them.  You can always get more very quickly these days if you find you need more.  Sometimes it’s not that you don’t use it, but that you found a different version you like better.  It’s easy to get lost amongst all the options that are available.  I mean how many strollers could you possibly need for one child?!? (That one will make so much sense after a few years for some of you.)

Ok, more on the strollers…

You have an everyday stroller, but it’s not great for jogging/soft soil, so you may be tempted to buy a jogging or all-terrain stroller.  Also, wouldn’t it be great to have an umbrella stroller for those quick trips or for airports?  That’s three! Just wait until you have a second child and you want a double stroller or find a brand that you didn’t know about with some cool new feature.  It can add up quickly!

Back to general budgeting…

Make sure you don’t buy too many newborn-sized clothes or diapers.  Your baby will grow out of that size fairly quick.  For diapers, I would buy some newborn size, mostly size 1 and maybe a box of size 2’s.  Don’t go overboard and buy past size 2.  It will be a long time before baby needs to move past those, and many children will stop at Size 4, go through potty training and never need anything bigger.

On the baby clothing, you may feel pressure to buy your kids designer brand clothing or special outfits, but that can get out of hand quickly.  Try to stick to off-brand clothing most of the time, especially when they are young because they will literally wear it once in some cases.

Employer Benefits / Health Insurance

If you have health insurance coverage, it’s important to learn your deductibles and max out-of-pocket costs.  Some plans will cover some local hospitals, but other hospitals are out-of-network or carry a higher deductible.  When choosing your doctor, make sure he or she delivers at an in-network hospital.  You will need to choose a pediatrician that is in-network as well.

If employed, does your employer offer paid maternity leave?  You are entitled to 12 weeks of leave under FMLA (Family and Medical Leave Act), but your employer may provide some weeks of paid leave.  You can use PTO or vacation/sick leave to cover weeks of paid leave.  Keep in mind that if you have a health plan through the mother’s employer, you will need to cover your portion of the healthcare costs during leave that normally come out of your paycheck.  Often times, you can spread out your PTO/vacation days, so you won’t have to come out-of-pocket for those premiums.  If you still have unpaid weeks at the end, you’ll need to decide if you can afford to take the full 12 weeks, which would result in an income gap.

Your employer may provide short term disability, or it may be optional to elect through payroll.  This typically provides some coverage for income replacement due to pregnancy, but each policy is different.  If you have a short term disability policy, please consult with your benefits manager or financial advisor.

Also, some employers offer a FSA for Childcare (Flexible spending account) sometimes called a Dependent Care FSA.  If you have a FSA, you have to choose between it and the Dependent Care Tax Credit.  Consult your tax advisor to help make the right decision for you.  This is different from a standard FSA, so if you have questions please consult with your benefits manager for more information.

Childcare

Childcare is something you should discuss well in advance of needing it.  Several questions will need to be addressed. Will mom work after maternity leave?  If so, will you use daycare or have family to help out?  If family is willing and able to help, spend some time discussing a schedule with them. They will be giving a significant portion of their time, and they may not realize what they are committing to.  Even if they’re committed to the time aspect, what happens when they need to go to a doctor’s appointment or get their car serviced?  Mom might not have any PTO left if she used it all up during maternity leave. If family cannot assist full-time, is there a part-time daycare that you could use to give them a break?  If any kind of daycare is in the plans, you might need to get on a waitlist for a spot for your child.

529’s / UTMA’s / Savings

One way to help prevent wasted spending on gadgets AND plan for future expenses, is to take the money that you receive in lieu of gifts at the baby shower and fund a 529 or a UTMA for your child for college savings.  We are going to elaborate on this topic in more depth on National 529 Day on May 29th, so be on the lookout for a blog on this topic soon.

Estate Planning

A wise step to take before baby arrives is to create or review your estate plan and beneficiaries of life insurance or existing retirement plans.  Estate plans can be drafted to include all children you have/will have so having a name, birth date, or social is not required in most cases.  You can also adjust in the future, but it is best to go ahead and put a plan in place as you will have little free time after your baby is here to meet with an attorney.  As part of that review, you’ll want to consult with your financial advisor to see if you have an appropriate amount of life insurance.

Birthing Class & Hospital Tour

And finally, as you enter the third trimester, I highly recommend going to the hospital where you plan to deliver and signing up for a class for new parents.  This will cover a lot more than breathing techniques like your parents likely experienced.  You will cover a wide variety of topics so when you hear phrases like, “my water broke,” or “you’re 10 centimeters dilated,” or “do you want an epidural?” You’ll know what to do! Plus, these usually include a tour of the hospital, so you know where to go when it is time.  You will also be more comfortable knowing what to expect.  Most hospitals give you the opportunity to pre-fill the birth certificate and social security application, so you don’t have to do it in the hospital after birth.  That means you have to CHOOSE A NAME! (Something my wife and I seem to always do at the last possible second!)

These are just a few things to think about when planning a family.  As you think about these topics it is always recommended to consult with your tax, legal or financial advisor where appropriate to make sure you are making the right decision for your specific situation.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262 and can be reached at (336) 885-2530.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Caring for Aging Parents

Presented by ROBERT BLAKELY, CFP®, AIF®, CHFC®

Caring for aging parents can be a difficult planning aspect to balance. If you are among the “sandwich generation,” you may be trying to support your aging parents as well as your own children. Today, individuals are living longer than before, so it is better to be prepared.

Having the Conversation

The first step—and often the most challenging one—is to find out what your parent needs or expects from you. It’s always best to have this conversation before a crisis occurs. Also, keep in mind that your parent may resist discussing the topic at first. He or she has lived a long time without much assistance from you, and the transition to accepting your new role in his or her life may be bumpy. Understanding and respecting your parent’s wishes will go a long way toward smoothing the process. How will your parent deal with incapacity, the fear of becoming dependent, or the reluctance to burden you with his or her needs?

Gathering Information and Documents

Create a list of emergency contact numbers, including your parent’s medical providers; religious leader; neighbors; friends; and financial, tax, and legal advisors. You should also gather copies of legal documents, funeral plans, medical records, and medication information. Keep a list of investment, bank, and insurance accounts, in addition to the locations of safe deposit boxes, real estate deeds, and automobile titles. You may find it helpful to upload all of this information to a USB flash drive so that it’s readily available when you need it.

Evaluating Your Parent’s Situation

It may be difficult for you to evaluate your parent’s mental and physical capabilities or to locate community services to support his or her independence. If that’s the case, a geriatric care manager can be indispensable, particularly if you live some distance from your parent. This person can perform an in-home assessment, determine your parent’s housing needs, and recommend a plan of action. Your parent’s doctor should be able to refer you to a qualified geriatric care manager.

Can your parent remain at home? Just because your parent can no longer care for his or her home doesn’t mean that he or she has to move. In fact, staying in one’s home may offer better support and social networks than moving in with one’s children. If your parent can stay safely alone, you may want to divide up the household chores among family members or hire someone to provide housekeeping, cooking, and personal care. Here are a few other items to consider:

  • Find out if Meals on Wheels is available in your area. The organization’s volunteers deliver meals to seniors who can no longer cook for themselves.
  • Look into modifying your parent’s home to help with any physical limitations.
  • Install a security system to summon emergency personnel if necessary.
  • Call the local police department to find out if it offers a program to check on elderly residents. If not, churches often have a volunteer group dedicated to checking in on older parishioners.
  • Post important telephone numbers for contacting you, emergency services, and your parent’s doctor in a prominent location.

As your parent grows older, an assisted living facility or retirement community may be a better solution than living at home. Such residences provide additional benefits, such as transportation, access to medical personnel, and a richer social life.

Can your parent move in with family? Another solution is moving mom or dad into your home. This is a big decision, and it may not be the best choice for every family. Ask yourself:

  • Will living together put stress on your relationship with your parent or on your relationship with your family?
  • Can you afford to remodel your home to provide a comfortable and private environment for your parent?
  • Do you have the flexibility to provide transportation as needed?
  • Will other family members step in to help, both financially and physically?
  • Will other family members share the cost of adult day care?

Can your parent continue to drive? If your parent is older than age 75, takes medications, or both, his or her ability to drive a car may be impaired. Of course, it’s difficult to know when older drivers have become a danger to themselves or others. Give your parent’s friends and neighbors your contact information and ask them to make you aware of any changes in his or her driving skills. Or suggest that your parent accompany you for grocery shopping and other errands rather than driving alone. Many communities offer driver’s education courses that teach best practices for seniors (e.g., limiting drive time to daylight hours and good weather conditions, avoiding highway or high-traffic situations).

Keep in mind that this may be a very sensitive topic for your parent. Many seniors view driving as essential to their independence and will resist giving up the car keys. For help approaching the conversation, visit the NIH National Institute on Aging website on older drivers at www.nia.nih.gov/health/older-drivers.

Financial and Legal Issues

As we age, we lose mental alertness. Due dates for bills pass, insurance policies lapse, and poor financial decisions may be made. Your elderly parent will likely need your assistance with his or her financial, legal, and medical matters.

Banking. Most banks offer automatic bill-payment services from checking or savings accounts—a convenient option if your parent is internet savvy. Or your parent can give you responsibility for his or her finances by having bills and financial statements sent to your address. You might also consider a bill-pay service, which receives a copy of invoices and then requests your parent’s bank or financial institution to send checks directly to payees.

Investments and insurance. If day-to-day management of your parent’s finances is too much for you to handle, talk to your financial advisor. He or she can recommend products that provide income on a regular basis, such as managed retirement income portfolios, annuities, or bonds. Your financial advisor can also propose cash-management solutions that allow your parent’s monthly social security, retirement plan, and annuity payments to be deposited automatically into an account. You can typically access these funds through a debit card, unlimited checkwriting capabilities, and online bill-pay services—everything that a bank checking account offers.

Also, review your parent’s existing life and long-term care insurance coverage and make changes if necessary.

Legal concerns. An elder law attorney can help you prepare documents to manage your parent’s health care and financial affairs. In fact, many states provide free legal services to the elderly. Your parent may wish to seek an attorney’s help in the following areas:

  • Appointing a health care representative. Without legal authorization from your parent, medical privacy laws prevent doctors from discussing the patient’s medical conditions with you. In addition to appointing a health care power of attorney, your parent may want to consider a living will, which provides instructions on how to manage treatment if he or she has a terminal or irreversible condition and cannot communicate.
  • Understanding the process for qualifying for government programs such as Medicaid or veterans’ benefits. Don’t rely on the experiences of family or friends, as their situations may differ from your parent’s.
  • Reviewing and updating estate planning documents, including his or her will, durable power of attorney, and any revocable trusts. In addition to the basic estate planning documents, your parent may wish to draft a letter outlining who will receive personal effects such as jewelry and family heirlooms.

What About Taking Care of Yourself?

Although caring for an elderly parent can feel overwhelming at times, you are not alone. Many local and national groups are available to support you in providing the care and services your parent will need. To get started, visit the U.S. Administration on Aging’s Eldercare Locator at  https://eldercare.acl.gov/Public/Index.aspx or call 800.677.1116.

At your workplace, talk with a member of the human resources staff to find out if you’re eligible for unpaid leave under the Family and Medical Leave Act. Also, ask about the availability of an employee assistance program (EAP). EAPs are intended to help employees deal with personal problems—including concerns about aging parents—that might adversely impact their work performance, health, and well-being.

Finally, seek the help of a financial planner. In addition to reviewing whether your parent’s resources are sufficient to pay for care, he or she can help you determine how to balance your own goals with your parent’s needs.

Additional Online Resources

For further information on caring for an aging parent, you may find these resources helpful:

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc. celebrating 25 years in business.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Prepared by Commonwealth Financial Network

Understanding 401(k)’s

Presented by EMILY PROMISE AIF®, APMA®, CRPC®

A 401(k) plan is a company-sponsored retirement plan that eligible employees can contribute a portion of their salary into a variety of investment options. In some instances, employers may also offer to make matching contributions. 401(k) plans are an easy way to save for the future through payroll contributions.

If your company offers a 401(k) plan and you are not participating, you may want to revisit your decision as they are a great opportunity to save for retirement. Beginning early and consistently contributing to a 401(k) plan throughout your working years can assist you in reaching your financial goals for retirement.

If you have just entered the workforce, retirement may be the farthest thing from your mind. Or if you are an older employee nearing retirement, you might be thinking it is too late. For both life stages, 401(k)s can offer specific advantages that make them a great option for investing and saving.

401(k) contributions are typically ‘before tax’ money. The amount you choose to contribute is deducted from your paycheck before taxes are taken out.  This means you are paying taxes on a smaller portion of your salary.  There are limits each year on just how much you can put in your 401(k).   In 2020, the maximum amount one can contribute is $19,500. If you are 50 or older, you can make a catch-up contribution of $6,500 in addition to the $19,500 for a total of $26,000.

Many plans also offer options for employees to make post-tax ROTH 401(k) contributions from their paychecks. Post-tax ROTH contributions do not lower an employee’s taxable income, but they do grow tax free and aren’t taxed upon withdrawal.

Many employers offer matching contributions. For example, your employer may offer a 4 percent match. This means they will contribute the same amount that you do, up to 4 percent. Of course, you can personally contribute more, but the company will match only 4 percent.  If you are not contributing to your company’s 401(k) plan and they have a match, you are leaving money on the table! Make sure to begin contributing at least to the amount of the match as soon as you can.

An additional benefit of a 401(k) plan is that when you finally pay the taxes on your 401(k) contributions, you may be at a lower rate. Typically, you begin withdrawing money from your 401(k) when you retire and you may very well be in a lower tax bracket at that time; thus you could end up paying less tax on your savings when you do eventually withdraw funds.

A few key points to remember about a 401(k); It is a retirement savings plan, so once you put money in, it is always best to leave it in. There are penalties if you take the money out before retirement age. Also keep in mind that if you change employers, you can roll your vested balance into your new employer’s 401(k) plan or into another qualifying retirement account such as an IRA.

If you have questions, it is always a great idea to call your financial advisor for guidance. But no matter what, please take advantage of any type of savings plan your current employer offers as the earlier and more aggressive you are, the closer you will come to achieving your financial goals.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

EMILY PROMISE is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262 and can be reached at (336) 885-2530.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser

Estate Planning Documents

Presented by ROBERT BLAKELY, CFP®, AIF®, CHFC®

Estate planning is for everyone regardless of your financial circumstances. Through an estate plan, you have a say how, when and to whom your assets are transferred, in addition to achieving your own specific tax and non-tax planning goals.

Organizing your financial affairs and planning ahead to help alleviate stress for your loved ones is an important financial planning objective. And a well-thought-out estate plan can help manage and preserve your assets during life as well as protect your loved ones by conserving and directing the distribution of assets at death. While this topic is never a pleasant one, it is imperative to any financial planning process that you might embark upon to protect you and your loved ones.

Essential Estate Planning Documents

These are some of the estate planning documents that you need regardless of your age, health or wealth.

  • Durable power of attorney
  • Advance Medical Directives
  • Will
  • Trust Agreement (dependent upon your specific situation)

Durable Power of Attorney –A durable power of attorney (DPOA) can help protect your property in the event you become physically unable or mentally incompetent to handle financial matters. If no one is ready to look after your financial affairs when you cannot, your property may be wasted, abused, or lost.

A DPOA allows you to authorize someone else to act on your behalf, so he or she can do things like pay everyday expenses, collect benefits, watch over your investments, and file taxes.

Advance Medical Directives – With a Healthcare Power of Attorney (HCPOA), you authorize an agent to handle your healthcare needs in a manner consistent with your intentions in the event of your incapacity. This includes permission for the agent to authorize actions regarding the continuation of life support, nutrition, and hydration, as well as to deal with general health care decisions that may arise.

Some states authorize a secondary health care document, typically called a living will. It works in conjunction with a Healthcare POA, authorizing your healthcare providers to take specific action in the event that there is no reasonable hope of your recovery. It also serves an important function when the agent or other individuals you named in your health care POA are unable to make a decision on your behalf relative to continuing life-sustaining treatment.

Will – A will is often said to be the cornerstone of any estate plan. The main purpose of a will is to disburse property to heirs after your death. If you do not leave a will, disbursements will be made according to state law, which might not be what you would want. When writing your will, you can name the person (executor) who will manage and settle your estate and you can name a legal guardian for minor children or dependents with special needs. If you do not appoint a guardian, the state will appoint one for you and that probably will not be within your wishes. It is crucial that your will is well-written, articulated and properly executed under your state’s laws. You must also remember to keep your will up-to-date and make changes when you experience large life events.

Trust – With a trust, you can plan for the management of assets during your life, if you become incapacitated, and upon your death. A trust can also help minimize potential federal or state estate taxes. Trusts come in two general forms: testamentary trusts, which are funded at death, and living trusts, which are funded during your lifetime. Generally revocable, a living trust is the centerpiece of a well-rounded estate plan. When a living trust is established, the process of distributing assets at the time of death will not be subject to the jurisdiction and oversight of the probate court.

Estate Planning Benefits

Spending time now to properly plan for the future includes the following benefits:

  • Provides financial security for your family
  • Ensures that your property will be preserved and passed on to beneficiaries
  • Mitigates or avoids disputes among family members
  • Minimizes estate taxes and other administrative costs
  • Ensures competent management of your property in the case of incapacity
  • Enables you to provide for a favorite charity

Other Considerations

A will governs only probate property; a trust governs only assets owned by the trust. In addition, some assets pass outside of probate by virtue of a beneficiary designation or the manner in which title is held. Therefore, it is important for you and your financial advisor and estate planning attorney to review the ownership and/or beneficiary designation of these assets to be sure that they will be distributed according to your wishes upon death. These assets include:

  • Jointly held property
  • Life insurance proceeds
  • Retirement benefits
  • Employee death benefits
  • Retirement plan proceeds

The team at Blakely Financial is here to work with you and your estate attorney to create an estate plan that suits your needs and that helps you to achieve your financial and personal goals. If you are not a client of our firm, we encourage you to contact your financial advisor to seek guidance with your estate planning goals or contact one of our team members who would be happy to help.

Prepared by Commonwealth Financial Network

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

ROBERT BLAKELY, CFP® is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262. He is the founder and president of Blakely Financial, Inc. celebrating 25 years in business.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.