Category: Kevin

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Charlie Education Kevin Pilots

When Should an Airline Pilot Begin Taking Social Security?

As an airline pilot, you may be eligible to start drawing your Social Security as soon as you retire from the airlines, but should you? As with so many things in finance, it depends. Optimizing your social security benefit is complicated and it can be confusing trying to grasp all of the moving parts. Plus, what about…

 

✈︎  When is your government-defined Full Retirement Age?

✈︎  Will your spouse receive any benefits?

✈︎  Do you anticipate retirement income from other sources?

✈︎  And,… will Social Security even be around by the time I retire? (Spoiler alert: yes, we think it will.)

 

Kevin and Charlie discuss how the answers to these questions correlate and share their 3 RECOMMENDATIONS on how to decide when is right for you to begin your benefit.

We love hearing from you! Please don’t hesitate to call or email if we can help you, 865-240-2292.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 02/10/2020 and are subject to change at any time due to the changes in market or economic conditions.

February 12, 2020

Categories
Charlie Education Kevin Pilots Video

Mandatory Pilot Retirement Age Coming Fast? Get a Plan from a Pilot Specialist

Whether retirement is 5 years away or 15, it’s time to plan NOW.

Are you nearing the end of your aviation career? You may not be ready to take off your epaulettes quite so soon, but the FAA currently mandates all airline pilots retire at the age of 65. Are you financially ready to make the transition?

We are airline pilot specialists!

The planners at Leading Edge have years of experience helping pilots from all of the major U.S. airlines grow and protect wealth so they can have as much fun in retirement as they did flying airplanes! In this video, Charlie Mattingly, Principal, CFP®, MBA and fellow airline pilot describes the value Leading Edge can bring to your financial plan.

Want to skip ahead in the video?

Here are the topics broken down by time marker:

00:04  How does Leading Edge Financial Planning help people execute on plans?
00:36  Why is it a good time to invest TODAY vs waiting?
01:12  Leading Edge helps determine if a second business or real estate is a good idea.
02:33  How can Leading Edge help lessen financial emotion?
03:46  Why should a pilot choose Leading Edge?
04:59  Worst and best financial analogies with flying. (Just for fun!)

Click HERE to book a free one-hour consultation.  Or call us at 865-240-2292.

More reading:
International Civil Aviation Organization (ICAO)
Fair Treatment for Experienced Pilots Act

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 01/27/20 and are subject to change at any time due to the changes in market or economic conditions.

February 12, 2020

Categories
Charlie Education Kevin

2019 Year-End Investment Report

We have just completed the final quarter, not only of the year, but also the decade, so it’s as good a time as any to reflect back on the market behavior for the past year, and also for the past 10 years. The short version is that we have experienced a bull market for the entire ten-year period, with no -20% bear market periods and only a few 10% corrections since June 2009. People who record the history of the markets will remember that the investors of the 2010s participated in the longest bull market in American history – a totally improbable event considering that the decade came right after one of the most dramatic market setbacks in modern times.

Also worth noting is how the predictors of doom were once again totally off-base. When the Federal Reserve Board stepped in to stem the worst of the Great Recession, there were widespread cries that the Fed was “printing money” in a way that would lead to massive inflation and/or the bursting of a stock market bubble. Today, an expansionist Fed is routinely criticized for being too tight, rather than too loose. Inflation, meanwhile, has ranged from 0.7% to 2.1% – which hardly signals a crisis. If you’ve noticed any bubble-bursting in the equities markets, please help us find it.

By any measure, 2019 was a remarkable year for investors – and who could have guessed? Stocks went on sale in December 2018, and many were predicting that the bearish trend would continue through calendar 2019. But investors who took advantage of the lower prices or stayed the course saw well-above-average gains almost literally across the board. The markets went on sale again in August when there were reports of a very slight inversion of the yield curve in the bond markets which (it was widely reported) signaled that a recession was on the near horizon. Those rumors turned out to be false and the yield curve–that is, the difference in bond rates between short-term and long-term issues–had subsequently steepened.

A breakdown shows that just about every investment asset was up strongly in 2019.  The Wilshire 5000 Total Market Index — the broadest measure of U.S. stocks — gained 9.08% in the 4th quarter, finishing the year with a hefty 31.02% gain.  The comparable Russell 3000 index was up 25.52% for the year, and has gained an average of 11.83% for the decade of the 2010s.

 

Looking at large cap stocks, the Wilshire U.S. Large Cap index gained 9.09% in the fourth quarter, providing a 31.51% return for the year.  The Russell 1000 large-cap index finished the year with a similar 31.43% gain (averaging a 13.54% gain over the last 10-year period), while the widely-quoted S&P 500 index of large company stocks gained 8.53% during the year’s final quarter and overall finished up 28.88% in calendar 2019 – narrowly losing out to the decade’s best yearly gain of 29.6% in 2017.   Over the last ten years, investors in the S&P 500 saw annualized gains of 11.22% in the value of their holdings.

 

Meanwhile, the Russell Midcap Index finished the 2019 calendar year up 30.54%, averaging 13.19% a year for the decade.

 

As measured by the Wilshire U.S. Small-Cap index, investors in smaller companies posted 9.01% gains in the final quarter, to end the year with a 26.21% return.  The comparable Russell 2000 Small-Cap Index posted a 25.52% gain in 2019.  

 

Even the foreign markets were generous to investors this year. The broad-based EAFE index of companies in developed foreign economies gained 7.81% in the final quarter, and ended the year up 18.44% in dollar terms. However, the past ten years have not been the best times to invest in international stocks; the index recorded an annualized gain of just 2.57% over that time period.  In aggregate, European stocks were up 20.03% in 2019, while EAFE’s Far East Index gained 15.46%.  Emerging market stocks of less developed countries, as represented by the EAFE EM index, were up 11.36% in dollar terms in the fourth quarter, giving these very small components of most investment portfolios a 15.42% gain for the year.  However, their 10-year track record is not enviable: up just 1.20% a year for the decade.

 

Looking over the other investment categories, real estate, as measured by the Wilshire U.S. REIT index, posted a 1.14% loss during the year’s final quarter, but it finished the year with a 25.76% gain.  The S&P GSCI index, which measures commodities returns, gained 8.31% in the 4th quarter, to finish the year up 17.63%.  Looking back, however, commodities returns dramatically lagged U.S. stocks over the past decade: the total return for the commodities index overall was a negative 5.44%.

 

In the bond markets, coupon rates on 10-year Treasury bonds dropped almost a full percentage point, year-on-year, to stand at 1.75% at year end.   Similarly, 30-year government bond yields have fallen from 3.01% at the beginning of the year to 2.38% coupon rates today.  Five-year municipal bonds are yielding, on average, a meager 1.14% a year, while 30-year munis are yielding 2.15% on average.

 

It’s hard to overstate how unusual this long bull market has been in investing history.  Bear markets tend to occur about every 3.5 years, and the previous record was 9.5 years from November 1990 to March of 2000.  However, we still have a ways to go to match the 418% that was achieved in the 1990s.

 

Longer-term, it is certain that we will experience a recession, but no person alive can predict the hour or the day.  Most economists are reluctant to predict an economic downturn when unemployment is at record lows and the slow-growth economy is chugging along with a 2.3% gain in 2019.  2020 might see a recession or at least a slowdown in growth if there is another trade conflict with China, and a shift toward rising interest rates could drive up the cost of debt servicing for corporations that are highly leveraged.  Nobody knows where the Presidential impeachment process will go from here.

 

At the same time, dramatic increases in domestic oil production has lessened the possibility that the economy will experience an energy recession, and healthcare cost increases have moderated over the course of the decade.

 

Similarly, nobody can predict when or how the bull market will end, how deep the coming recession or bear market will be, or, really, anything other than the fact that all past downturns were followed by upturns which took the markets and the economy to new heights.

 

We love hearing from you!  Please don’t hesitate to call or email if we can help you, 865-240-2292.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 01/10/2020 and are subject to change at any time due to the changes in market or economic conditions.  This article was written by a guest author.

Sources:
Wilshire index data
Russell index data
S&P index data
Nasdaq index data
Morningstar
International indices
Commodities index data
Treasury market rates
Bond rates
Investors.com
Miami Herald
New York Intelligencer
PWC
Focus Economics
MSN

Categories
Charlie Education Kevin

How Financial Markets are Affected in Election Years

You can’t help but notice it’s an election year, and often an election year comes with serious concern that the financial markets will go haywire. So, is this worry justified?

In this video, Kevin summarizes the data of the last 90 years to uncover how the financial markets were affected during each presidential election year as well as what happened in the subsequent year. He discusses if the markets reacted differently based on which party won the election, if there are any patterns of market behavior and if you need to adjust your investment strategy in response to the election cycle.

We love hearing from you! Please don’t hesitate to call or email if we can help you, 865-240-2292.

 

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 01/17/2020 and are subject to change at any time due to the changes in market or economic conditions.  This video was filmed in December 2019.

Categories
Charlie Education Kevin Pilots Video

How Financial Markets are Affected in Election Years

We have all heard the stories about the lottery winner who lost it all. How can this possibly happen?

 

In this video, Kevin dives into the reasons that some lottery winners don’t succeed financially. He shares the financial lessons learned from these scenarios and explains how high-income families can apply those lessons to their lives to achieve better financial outcomes and have less stress.

 

We love hearing from you! Please don’t hesitate to call or email if we can help you.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/20/2019 and are subject to change at any time due to the changes in market or economic conditions.

February 12, 2020

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Charlie Education Kevin Retirement

Major Changes Coming to Retirement Savings Laws (SECURE Act 2019)

This past Friday the SECURE Act of 2019 passed. The act was a bipartisan effort to help Americans be better prepared for retirement. The title is an acronym: Setting Every Community Up for Retirement Enhancement and the act puts the responsibility on individuals to make plans to finance their retirement. The act contains 29 separate provisions, but we are going to share the most notable changes as outlined by a recent Surgent article.

Most of these changes will increase opportunities to save for retirement. Not sure how this will affect you directly? Give us a call, we can walk you through it and see if this opens a new path for your retirement plan.

Stretch IRA

● Current Law: Non-spouse beneficiaries of IRAs can “stretch” minimum distributions over their own lifetime, which allows funds to grow tax-free for an extended period of time.

● SECURE Act: Funds from inherited IRAs would be required to be distributed within 10 years of the IRA owner’s death.

Raised Age Limit

● Current Law: At age 70 ½, individuals are required to withdraw a required minimum distribution (“RMD”) each year. After age 70 ½, individuals can no longer contribute to traditional IRAs (Roth IRAs have no age limit).

● SECURE Act: Individuals could wait until age 72 to begin taking RMDs, which would defer the tax impact of withdrawals and allow savings to accumulate longer. In addition, there would be no age limitation on Roth or Traditional IRA contributions.

Coverage for Part-Time Employees

● Current Law: Employers may exclude part-time employees from 401(k) savings plans.

● SECURE Act: Employees who work 1,000 hours throughout the year or have three consecutive years of at least 500 hours of service would be eligible to participate in a 401(k) savings plan.

Small Business Tax Credit

● Current Law: Employers are eligible for up to a $500 credit for implementing new retirement plans.

● SECURE Act: Employers could receive up to a $5,000 credit for creating new retirement plans. Additionally, a new $500 tax credit would be available to small businesses to encourage automatic enrollment in retirement plans.

Multi-Employer 401(k) Plans

● Current Law: It is costly and burdensome for many small businesses to offer 401(k) plans.

● SECURE Act: Small business employers could join multiple-employer plans or “open MEPS,” which have reduced costs and reduced regulatory barriers, expanding access for their employees to participate in retirement savings plans.

Access to Annuity Options

● Current Law: Many 401(k) plans do not offer annuities due to liability concerns.

● SECURE Act: Plan providers will have decreased liability concerns when offering annuities to participants of 401(k) plans.

Automatic Enrollment Safe Harbor

● Current Law: Employers may set a contribution rate for employees who participate in an auto-enrollment 401(k) plan. Currently, this contribution rate may not exceed 10%.

● SECURE Act: Employers can raise the contribution rate to 15% for employees.

Birth and Adoption Expenses

● Current Law: There is a 10% early withdrawal penalty on 401(k) distributions.

● SECURE Act: Following the birth or adoption of a child, married individuals could withdraw up to $5,000 from their 401(k) accounts without paying the 10% early withdrawal penalty.

Expansion of 529 Plans

● Current Law: Student loan repayments are not considered qualified education expenses.

● SECURE Act: Funds in 529 College Savings Plans could be used to repay qualified student loan repayments, up to $10,000.

Kiddie Tax

● Current Law: The Tax Cuts and Jobs Act of 2017 (“TCJA”) implemented “Kiddie Tax” measures that tax unearned income of children above $2,200 at the top marginal tax rates for trusts and estates.

● SECURE Act: The “Kiddie Tax” rules would revert to pre-TCJA law, in which a child’s unearned income above the threshold would be taxed at the parent’s marginal tax rate.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video and article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/20/2019 and are subject to change at any time due to the changes in market or economic conditions.

February 12, 2020

Categories
Charlie Education Kevin

Increase in Retirement Plan Contribution Limits for 2020

 

’Tis the season for the U.S. Internal Revenue Service to make its annual inflation adjustments to a variety of tax rates and limits, including higher estate and gift tax limits for 2020.  In the coming year, individuals will be able to gift or exclude from federal estate taxes a total of $11.58 million—up from $11.4 million in 2019.  The annual gift tax exclusion—the amount you can give to heirs each year without reporting a gift—remains at $15,000.  

The IRS also lifted the annual limit that can be contributed to a defined contribution (401(k) or similar) plan from $19,000 to $19,500, and people 50 or older can make catch-up additional contributions of $6,500—up from 2019’s $6,000.  The amount you can contribute to an Individual Retirement Account is unchanged at $6,000, with a $1,000 catchup limit for people 50 and older.

If an employer allows after-tax contributions, or if you’re self-employed, the overall defined contribution plan limit was raised from $56,000 to $57,000.

The IRS also changed the tax brackets for working Americans, raising slightly the thresholds for the 10%, 12%, 22%, 24%, 32%, 35% and 37% rates, and raised the standard deduction to $12,400—$24,800 for married people filing jointly in 2020.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/13/2019 and are subject to change at any time due to the changes in market or economic conditions. This article was written by an outside source.

 

Sources:
IRA Announces Higher Estate and Gift Tax Limits for 2020
2020 Limitations Adjusted as Provided in Section 415(d), etc.
IRS Announces Higher 2020 Retirement Plan Contribution Limits for 401(k)s and More
The 2020 Tax Brackets are Out.  What is Your Rate?
IRS RP-19-44.pdf

February 12, 2020

Categories
Charlie Education Kevin Video

The Next U.S. Recession

Bloomberg recently published its recession probability model. The model states that as of November 2019, the chance of a recession in the next 12 months is 26%. That sounds okay but what about this? The chances of NOT having a recession are 74%. Now that’s a pretty great number! But is this predictive model a function of the latest stock market performance or does it have real predictive power?

The stock market has performed nicely in the last few months as well as year-to-date. No wonder no one is talking recession at the moment. But the truth is, the exact timing of the recessions and market downturn is unknowable. In fact, we may not even know we’ve had a recession until it’s nearly over.

In this video, Charlie discusses the only surety is that we WILL have a recession sometime in the future and trying to follow the advice of prognosticators to determine when it will happen can be an expensive mistake. Ask anyone who pulled their money out of the markets in January 2019 because of the inverted yield curve. Now that’s a good predictor of recessions, right?

 

To view the recession tracker visit: Bloomberg, U.S. Recession Chances Inch Down to 26% Within Next 12 Months

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/04/2019 and are subject to change at any time due to the changes in market or economic conditions.

February 12, 2020

Categories
Charlie Education Kevin Pilots

No Regrets: Plan for Tomorrow so you can Live in the Moment TODAY

In the last few days I learned about three fellow pilots that have lost or are losing their battles with cancer.

A good friend of mine from the Air Force will be put on hospice care soon to make his last days here on earth as comfortable as possible.  His doctors recently determined he cannot handle any more chemo treatments.  It’s been four years, around 90 rounds of chemo, radiation and several surgeries.

Another UPS pilot I know is battling a rare form of cancer called esthesioneuroblastoma and the stark reality of this cancer is that he will likely lose his vision entirely within 6-12 months.  Furthermore, his life expectancy is perhaps two to three more years barring a miracle.

Just recently, a pilot I know passed away from cancer.  A friend of mine was by his bedside during the last moments of his life.  Fortunately, he died in peace knowing that he did all he could to make sure his family was taken care of after he was gone.  He was happy and had no regrets my friend said to me.

I didn’t write all of this to depress or upset anyone.  These situations are difficult to comprehend and it’s hard to know what we can do for our friends and loved ones in these difficult moments.  I wrote this article because I know there are things our friends would want us to learn from their terrible circumstances.

For starters, (and I am preaching to myself here) I think they would want us to slow down a little, spend a little more time trying to create special moments, maybe spend a little less time working and striving.  I’m very much a planner in everything I do and sometimes I struggle with being “in the moment.”  I have a fear of possibly missing out on that next achievement, the next goal, and sadly, maybe even the next dollar.  Maybe I should trade in my next three-day trip for a lesser paying “two-day” so I can see my daughter’s homecoming festivities at her school.  What is it worth in dollar numbers to see my daughter during this special moment?  Which is more valuable to her?  I’m pretty sure I know how my friends battling cancer would answer that question.

Of course, there are other practical things we must do now in order to make sure that if we were in similar circumstances we could also leave this world with no regrets:

1. Work to create special moments and great memories.
Many people believe the quality of their relationships and memories created are a better measure of wealth than their money. I tend to agree. No one on their death bed ever wished they would have spent more time working!
2. Get the appropriate amount and the right type of life insurance for your circumstances.
I think it’s a safe generalization to say that most people do not have enough life insurance.  The amount of life insurance depends on several variables; your net worth, family dynamics, age, etc.  Additionally, there is rarely a need for any other type of life insurance than term life.  Do the math on the amount of life insurance you need and consult someone you can trust to help you determine what type of life insurance is right for you.
3. Make sure your Last Will and Testament and your beneficiaries are up to date.
A new client mentioned to me the other day, “Every time I get in the car with my wife for date night, I wonder what would happen to our kids if we died in a car accident.”  This is a terrible feeling.  Let’s not wonder anymore and make sure we clearly articulate in our will what needs to happen in case of our untimely deaths.And yes, we do know of someone that died and their ex-wife was the beneficiary on their life insurance.  “We’ll never know if that was intentional or not,” said one of the family members.
4. Get a financial plan.
We end almost every article we write with this advice.  The reason I think this is an important step in this context is that almost every family, including my own, struggles with the following question; “How do we balance preparing for the future and still enjoy our time now while our kids are young and we’re healthy?”Financial planning will help clarify the answer to this question.  Planning will help bring balance and confidence to our daily lives because we’ll know that we are doing our best to enjoy our time now, staying in the moment, while still giving ourselves the best chance at achieving our financial goals for the future.

Finally, I am going to give up my three day trip for a two-day in order to go to my daughter’s school homecoming festivities.  It’s the right thing to do and when my time on this earth has come to an end, I want to be able to say, “I don’t have any regrets”.

 

All the best,
Charlie

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 11/25/2019 and are subject to change at any time due to the changes in market or economic conditions.

February 12, 2020

Categories
Charlie Clint Education Kevin Quarterly Reviews Retirement

The Strategy Is In the Long Game – 2019 3rd Quarter Financial Review

Investing is not golf. You don’t win with your short game. The 3rd quarter of 2019 reminded us that investing requires a long game approach. Short term investors didn’t see great returns in the 3rd quarter; it was an unexciting period of time.

In his quarterly review, Kevin goes over the numbers, touches on some unexpected outcomes and explains why you should invest your money for at least 10 years to ensure the highest probability of success.

Further information referenced in Kevin’s video:

MYTH or Fact: An Inverted Yield Curve Predicts a Recession

Click below to view the charts and data presented in this video.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 11/07/2019 and are subject to change at any time due to the changes in market or economic conditions.

February 12, 2020