Q&A: Value vs. Growth Stocks, from a Value Manager Perspective

Below is an excerpt from our recent webinar, "Value vs. Growth", originally aired on September, 22nd 2020 - featuring Metin Akyol, Ph.D, CFA, Data Scientist at Zacks Investment Management.

Did you miss the original video? Click here to watch.

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Historically, the average investor significantly underperforms the market – Why?

The reason investors tend to underperform is simple: the average investor works without a disciplined system, and he/she allows emotions or behavioral biases to drive investment decisions.

Sometimes investors become overconfident and misjudge risk. Other times they latch onto a price target or think they have identified a pattern that isn’t there. Whatever the case, the emotional decisions that result often lead to suboptimal investment outcomes. This is often referred to as the “behavior gap,” which can be catastrophic to retirement planning.

How to we overcome our investor biases?

Stay the course! Trying to time the market, means increasing the probability that you won’t be invested on big “up” days. And if stock market history tells us anything, it’s that there are a lot of up days.

With that stretch in outperformance in Growth/Technology stocks, are Value Managers stretching their parameters a little bit, in where they go hunting for their value names?

Zack’s Investment Management has not changed it’s parameters and will stay true to their process. Particularly in their dividend strategy, they are not changing their process because volatility and exposure pullback is expected.

Is there anything that you see in the overall evaluation of the market that would lead you to a more muted expected return over the next 5-10 years?

Not necessarily. History shows us that in the long-run, value stocks typically outperform growth stocks, because they are cheaper and stand the test of time. Recently however, the Growth space has taken off due to the overall dominance of the technology sector.

It is important to remember, when you are looking into performance, that it’s not just a difference of “Value vs. Growth” approach, but also a matter of which stocks are overly represented in each classification.

“Value” stocks are represented heavily in the energy and financial sector.

“Growth” space consists of an over-weight of technology businesses. Lately, the overall dominance of the tech sector drives a lot of what we’re seeing in growth.

Ultimately, we are expecting a convergence in the long-run of the growth and value sectors, due to an increased adaption of technology in the other sectors.

We have seen this before and the important thing to remember is that, in the long-run, short-term performance is not a reliable predictor for what you expect in the future. Instead, rely on the long-term investment plan your Advisor has put in place.

Understanding Social Security Benefits

When planning for your financial future, decisions around claiming Social Security benefits can be one of the most important financial considerations. We often hear questions from clients, and prospective clients alike, regarding their Social Security benefits.

When’s the best time to take my benefit?

Should I take it as early as possible or wait until I’m 70?

First, let's review how Social Security came to be, how we make decisions with clients on their Social Security benefit, and look into the future for the Social Security program as a whole.

In 1935, the Social Security Act was signed into law. This program was created in response to the Great Depression and providing some sort of an income stream to retired workers 65 and older. It should be noted that the life expectancy at birth in 1930 was only 58 for men and 62 for women. Increases in life expectancy are a factor in the long-range financing of Social Security; but other factors, such as the sheer size of the "baby boom" generation, and the relative proportion of workers to beneficiaries, are larger determinants of Social Security's future financial condition.

Here's a look at how life expectancy has changed over the years and how it originally impacted the development of the Social Security Act.

Over the years, there have been various amendments that have transformed the program into what it is today. Changes such as added benefits for spouses and minor children, benefits for disabled individuals, cost of living adjustments on payments, and the creation of Medicare in 1965. Today, one in seven Americans receive some form of Social Security, and when looking towards the retirement benefit specifically, it’s not inconceivable for individuals to receive a benefit for 20-plus years in retirement.

As we discuss Social Security benefits with our clients, there’s much more to the conversation than originally meets the eye. We begin by sitting down and getting a better understanding of their overall situation, including retirement goals and any additional thoughts and concerns.

We walk through various topics such as:

• What benefits are they entitled to (personal, spousal or ex-spousal, etc.)

• Family medical history and their own personal health situation

• Their investment accounts and assets

• Their income sources in retirement such as pensions and employment income (if someone decides to work while receiving benefits, we discuss how benefits may be reduced because of income)

• Spending desires/needs in retirement.

Considering the specific situation of each individual, we can begin to analyze the optimal time to begin receiving their benefit. We ultimately visit with the client to find the Social Security strategy they’re most comfortable with and walk them through what they can expect with their payments (tax withholdings, Medicare premiums, etc.).

Will the Social Security program last until I retire?

One concern we hear from younger clients is regarding the program’s longevity and the benefits they’ll receive. With the number of retiree’s claiming their benefits rising and fewer people paying into the program, we certainly understand, but do want to reduce some of that concern.

As of right now, the Social Security Board of Trustees projects that due to increasing costs, by 2037 the program’s cash reserves will be depleted and payroll taxes will only be able to cover 75% of the scheduled benefits going forward. With this in mind, we do see changes coming for Social Security and feel those changes will mirror those made back in the 1980s: increasing the retirement age for individuals born after a certain age, changes to the payroll tax rate, and slightly reduced benefits. As we move into the future, this is certainly something we will continuously monitor and work to navigate through together with clients.

If you have any questions regarding your personal financial situation, please don't hesitate to call a member of our Gilbert & Cook team at 515.270.6444 or email info@gilbertcook.com

Gilbert & Cook is named US Top 300 Registered Investment Advisors in 2020 by the Financial Times

Gilbert & Cook is honored to announce that we have been named one of the Top 300 Registered Investment Advisors in 2020 by the Financial Times!

The list recognizes elite advisors and independent RIA (Registered Investment Advisor) firms from across the United States. The FT 300 represents an elite group segmented by state, rather than a competitive ranking of one to 300.

Breadth of service is a key theme in this year’s list, with many advisers managing retirement planning, tax management, philanthropy and other aspects of clients’ financial lives beyond just investments. Read more about this honor on the FT.com

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Disclosure: The Financial Times 300 Top Registered Investment Advisers is an independent listing produced annually by Ignites Research, a division of Money-Media, Inc., on behalf of the Financial Times (July 2020). The FT 300 is based on data gathered from RIA firms, regulatory disclosures, and the FT’s research. The listing reflected each practice’s performance in six primary areas: assets under management, asset growth, compliance record, years in existence, credentials and online accessibility. Over 750 qualified firms applied for the award, 300 of which were selected (40%). This award does not evaluate the quality of services provided to clients and is not indicative of the practice’s future performance. Neither the RIA firms nor their employees pay a fee to The Financial Times in exchange for inclusion in the FT 300.

What do all those letters mean?

Megan Rosenstiel, is interviewed by Steve Dinnen, DSM Wealth

Below is an excerpt from the article, originally published on July 2nd 2020. Read the full article from DSM Wealth (Here).

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Meet Megan Rosenstiel, CFP and partner at West Des Moines-based financial advisory firm Gilbert & Cook. The CFP stands for certified financial planner, which is common in her field. But there’s more, as she also is a CDFA, an AWMA, an ADPA and a LTCP.

What’s going on with this run on the alphabet?

All these initials might seem confusing, or even meaningless, to an outsider. But if you want your adviser to be as skilled as is possible, look at each of these abbreviations as shorthand for a particular postgraduate expertise that they have acquired to serve you better. Each abbreviation stands for a subset of skills that has added on to the CFP designation that, as Rosenstiel says, "is the cornerstone" to competent financial planning.

Rosenstiel joined Gilbert & Cook nearly 15 years ago, and decided after earning the CFP, as well as securities sales licensing (series 7, 66, etc.), that other topics demanded her attention as well.

"How can I educate myself better?" she asked herself, responding with an ADPA—accredited domestic partnership adviser. That was before same-sex marriages were made legal, so she found herself at the forefront of working with domestic partners on topics such as apportioning out retirement plans.

Over time, Rosenstiel also chased down specialization as a Certified Divorce Financial Analyst (CDFA), a long-term care professional (LTCP) and as an accredited wealth management adviser (AWMA).

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Read the full article from DSM Wealth (Here).

Confidence in a Crisis

Below is a summary of our recent webinar, "Confidence in a Crisis", originally aired on May 5th, 2020. The Gilbert & Cook team shares insight on the current economic state and explore some financial and investment opportunities. Even though we are in uncertain times, we believe that you still have choices and we believe in finding confidence in those opportunities. Please know that every situation is unique and we encourage you to speak with your Advisor regarding your individual situation. 

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The Corona-virus Aid, Relief and Economic Security (CARES) Act

Recently the $2.2 trillion CARES Act was signed into law in hopes of helping those most impacted by the COVID-19 pandemic. This brings far-reaching implications for both families and businesses, as well as many opportunities and planning strategies to consider.

Increased Charitable Deductions:

As you might expect, charities are in great need. Charitable donations of cash up to $300 may be as an "above-the-line" deduction when determining your Adjusted Gross Income ("AGI") in 2020. The Act also provides for higher limits (in calendar year 2020) for cash contributions by taxpayers who itemize deductions.

Individual taxpayers will be allowed to deduct cash donations up to 100% of their 2020 AGI - that is up from the limit of 60% in previous (and subsequent) tax years. Corporate taxpayers will by allowed to deduct up to 25% of their taxable income in 2020 - up from 10% in previous years. One caveat here is that the increased limit does not apply to donations to private foundations or donor advised funds - AND to use the increased limits your contributions must be made in cash, directly to the charity.

Qualified Charitable Distributions

Another popular strategy that has often been considered is a Qualified Charitable Distribution ("QCD"). This year, however, you may need to rethink that strategy. Due to the unlimited charitable deduction allowed for cash gifts, IRA holders can utilize cash distributions from their IRAs and give the proceeds to their favorite charity. If you are itemizing deductions for income tax purposes, you can deduct this charitable distribution (subject to reductions in total itemized deduction based on your level of AGI). This may result in a much larger deduction available than in years past, (which was limited to $100,000 (QCDs from IRA accounts)). This may be the only year this strategy can be utilized. We encourage you to talk to your tax preparer and Advisor to determine what strategy is right for you.

 Retirement Plan Distributions

Those who have inherited either 401k or IRA accounts in the past will not be required to take distributions in 2020 under the CARES Act. Additionally, if you would have normally had a Required Minimum Distribution ("RMD") from a retirement account in 2020, those have also been suspended for 2020. RMDs are the distributions that you are required to take from your qualified retirement accounts and IRAs at age 72 (formerly age 70 1/2 prior to the SECURE Act passed at the end of 2019). Many people use these retirement plan distributions for their day-t0-day cashflow, while others have just had to deal with the required distributions as part of their annual personal tax planning. Again, every situation is different so please consult with a qualified tax professional if you have questions about your specific tax situation.

Prior to the CARES Act, if you were under the age of 59½, typically you paid a 10% penalty to take a withdrawal from a retirement account. In calendar year 2020, however, if you are under 59½ AND affected by COVID-19 (specific requirements in the Act must be met), those withdrawal penalties are waived for distributions up to $100,000 (or 100% of your account, if less). Keep in mind that you will still be required to pay income tax on the withdrawal amount, just the 10% early withdrawal penalty is waived. Note: There are also provisions that the withdrawals will not be taxed IF the amounts are returned to the retirement account(s) within specific time-frames. Again, consult with your tax advisor as it relates to your personal tax and financial picture. 

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Timely Tax & Investment Strategies

Tax Loss Harvesting

You may have heard the saying, “when the market is down, you don’t lose any money until you sell the investment and recognize the loss.” So why would you want to sell at a loss?

We are NOT recommending that investors get out of the market. We always challenge investors to think about investment strategies that may be beneficial for their overall individual tax and financial situations.

Tax Loss Harvesting occurs when selling a security at a price less than you paid for it in order to use the recognized loss to offset other recognized gains and/or ordinary income for the current or future tax year. Harvested capital losses can be used to offset capital gains later in the year or possibly decrease your other taxable income (up to $3,000 per year). Any net capital losses (over the $3,000 annual maximum that can be used against ordinary income) can be carried forward to future years. It is important to 1) consider the financial plan you and your Advisor have put into place; 2) review your specific portfolio; and 3) see if there are some losses that it makes sense to harvest. Once again, we encourage you to talk with your Advisor and tax professional to see what is best for you.  

Roth IRA Conversions

What is a Roth Conversion? Basically, it is when you take money out of your traditional IRA and move it into a Roth IRA. In doing that, you are trading tax deferred dollars inside your traditional IRA for completely tax-free growth and tax-free withdrawals in the future in a Roth IRA. As the original account owner, you are not required to take RMDs from Roth IRAs, and the Roth IRA is a great legacy asset to leave for the next generation(s).

There are tax considerations to keep in mind, though. You DO have to pay income tax on the value of the assets that you convert from “traditional” to Roth. Although Roth IRA contributions do not provide immediate tax benefits like traditional IRAs, there is more flexibility in the future when it comes to withdrawing the funds and planning for taxes. This could be an opportune time to take advantage of this simple tax strategy (the Roth Conversion). Be sure, however, to consult with your tax advisor to determine your specific income tax implications.

Frontloading Contributions

If you are a long-term investor, there can be some good opportunities when the market is down. We have encouraged many of our clients to make their annual 401(k) or IRA contributions while the market is down (thereby providing an opportunity to buy into portfolios at a lower cost).

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How to Keep Score During COVID-19

As we started into the economic understanding of this pandemic just two months ago, the world had three big, real-time scoreboard numbers that everyone was watching: 1) the number of new COVID-19 cases; 2) initial unemployment claims; and 3) the stock market. And ALL the numbers were bad! We are still getting constant doses of “Breaking News” and the latest stock market fluctuations. Since our March article, “What Turns a Healthcare Crisis into a Financial Crisis”, we’ve seen the following play out: forced shelter in place, forced business shutdowns, business revenue loss, job loss, economic contraction, debt and rent delinquencies, state and local governments strained, etc.

So, let’s call it what it is, the US is in the midst of a recession. We were due, after the longest run in history of uninterrupted economic expansion. Recessions, as a matter of course, are normal parts of the economic cycle. However, we couldn’t have predicted a recession due to a forced closure of vast parts of the economy due to a global pandemic. So how bad is this recession compared to others?

Gross Domestic Product (GCP)

In the 1st Quarter of 2020, it was reported that US goods and services were down -1.2%. That of course is -4.8% on an annualized basis – which is the reported number for the headlines. Estimates now for the 2nd quarter – April, May, June – are worse yet. Depending on how quickly the economy reopens, probably down somewhere between 20 – 30% on an annualized basis. That would mean that in the first two quarters of the year, the GDP would have contracted somewhere between 6-9%.

To put that into perspective, the entire 2008-2009 contraction was -4%. And it took six quarters to play out. The first half of 2020 will be a number that, most likely, far surpasses that. From a single quarter perspective, if we hit the 6-9% contraction level in the second quarter, we are basically retracing our steps to 2016 GDP levels. 

Bear Market Drawdown and Recovery

From the highpoint on February 19th, to down -34% on March 23rd took 23 trading days. Let’s look at how quickly, and compressed, that market recovered so far. On May 5th, we are up more than 28% from that bottom - a very compressed recovery time of only six weeks. So, what happened? The government has stepped in and provided various supports for our economy, including bond market backstops and the CARES Act as mentioned above.

The US Stock Market is a regenerating, rejuvenating mechanism. After a financial crisis, we find that opportunities emerge, and new ideas replace the old. The economic world is always evolving and adapting, and the stock market is the best way to participate in that. As investors, we have to be focused on the long-term nature of the market. If the recovery takes longer than expected, the markets will likely react negatively. We will need to be patient in terms of our expectations for stocks and GDP output. 

Resetting Expectations

As we look at our current economic situation, we must reset our future expectations upward. 2020 saw Gilbert & Cook start the year with relatively conservative stock and bond expectations. We were at historic highs in the stock market and historic lows in interest rates. We will admit, we did not anticipate a pandemic and recession in 2020. But given that, all stock categories and debt categories (except US Treasuries) now have better long-term expectations from where we sit today. In this pullback, we do hit a reset button to some degree. In periods of crisis and downside like this, it is not the correct time to stray from the long-term financial plan we have put into place.

Keeping Score

Initial jobless claims are a score-keeping mechanism for the economic downtown and recovery. Since the shutdown at the beginning of the COVID-19 crisis, in the last six weeks we’ve seen 30 million people file for initial unemployment claims at their state's unemployment office.

What we truly believe here is that those jobs are not gone – they are in hibernation. Out of isolation – when safe, those workers will return to their jobs and businesses will once again be back near full-capacity. Part of the government stimulus program increased weekly unemployment benefits. In most states, the additional stimulus makes the average replacement wage equal or greater than 100%. Therefore, the impact to individual households will be much more tolerable than in previous economic crises. We are more focused at this time on the number of continuing unemployment claims. In just the last 2 weeks, we saw more workers going back to work than the number of new claims filed.

Risks

The sole villain in this drama is the Coronavirus itself. If you eliminate that enemy, you see the markets react very positively. The risks are:

• A virus relapse causing the economic resuscitation taking longer than anticipated. How much uncertainty will people tolerate? As we go back to work, are we willing to trade possible loss of life? Will the country go back to work, or will there be a fear of further contamination? A recovery is dependent on bringing jobs and consumers back out of hibernation and reinvigorate the economy as quickly and as safely as possible.

• Dividend Payouts – Certain providers in energy, retail, and real estate sectors are cutting their dividend payouts. 

Opportunities

Know yourself as an investor. The stock market will reinvent and regenerate itself. Lean into your Gilbert & Cook team to help you know your course and follow your plan.

We believe that American ingenuity and resilience will persevere. The world health and science communities are smarter and better funded than at any time in history. Ever.

We believe the debate is around when the virus will end, not if. And that COVID-19 is the only enemy. If the virus is contained then all those other issues that we are talking about will begin to dissipate.

We believe that life after the virus will be different. In the same way that 9/11 changed our way of life forever, this pandemic may also. But we will figure it out. And every day, all across the world - people get up, they go to work, and they make the lives of their families and communities better. 

Be safe & healthy. Please reach out to your Gilbert & Cook family if there is anything that you need.

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Disclosure: This event is for informational purposes only. Gilbert & Cook, Inc. does not offer tax or legal advice. You should consult with an attorney for legal advice and a qualified tax professional for tax advice. Gilbert & Cook, Inc. is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Gilbert & Cook, Inc. and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Gilbert & Cook, Inc. unless a client service agreement is in place.

Confidence in a Crisis - A Virtual Event with Gilbert & Cook, Inc.

Thoughtful conversation with Founding Partner & Advisor, Linda Cook, CFP® and Chief Investment Strategist, Chris Cook, CPA, CFA. Covering your questions on the current state of the market, what we know about the pandemic impact on the economy, and financial planning strategies and considerations during a crisis. Original Air Date: May 5th 2020

Disclosure: This event is for informational purposes only. Gilbert & Cook, Inc. does not offer tax or legal advice. You should consult with an attorney for legal advice and a qualified tax professional for tax advice. Gilbert & Cook, Inc. is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Gilbert & Cook, Inc. and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Gilbert & Cook, Inc. unless a client service agreement is in place.

The CARES Act - Q&A

As the world adjusts to a “new normal,” we wanted to share some information with you about the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and about how it may impact you and your family. The $2 trillion stimulus package was signed into law on March 27, 2020. This Act brings with it a host of changes for individuals and small businesses in an effort to provide support to our country’s citizens and economy. So, what does the largest relief package in history mean for you? Reach out to your Gilbert & Cook team to learn more about YOUR specific situation, and in the meantime, here are a handful of inquiries that we’ve recently addressed.

Q&A: Below are some questions that we've received and the answers we provided.

2020 REQUIRED MINIMUM DISTRIBUTIONS

With the CARES Act, all Required Minimum Distributions (“RMDs”) for 2020 have been waived and are not required to be taken. This rule applies to all Traditional IRAs, SEPs and Simple IRAs, as well as Employer-Sponsored Plans such as 401(k)s and 403(b)s. Additionally, if you are the beneficiary of an Inherited IRA and have been taking required distributions, this waiver for 2020 applies to you as well. It is important to keep in mind that, as of right now, this waiver only applies to 2020 required distributions. 

Q: What if I’ve already taken my 2020 Required Minimum Distribution? Is there any way to benefit from the CARES Act waiver?

A: If you have already taken your RMD for calendar year 2020 and have no need for it, there are a couple of options available to you.

Option 1: If your RMD withdrawal took place within the last 60 days, you can simply write a check or transfer money in an amount equal to your RMD back into an IRA in your name before the 60-day window closes. The entire transaction would merely be treated as an IRA Rollover that you’re allowed to do once within a 365-day period (“once-per-year rollover rule”).

Option 2: If your RMD withdrawal was very early in the year and you are no longer within the 60-day window, there MAY be another option available to you (although we sincerely hope that no one is able to utilize it). IF YOU QUALIFY (see below), you would be able to utilize a Coronavirus-Related Distribution, which allows qualifying individuals to repay qualifying 2020 distributions within three years (via an IRA Rollover).

Q: What is a Coronavirus-Related Distribution?

A: A Coronavirus-Related Distribution is a distribution of up to $100,000 from a retirement account withdrawn in 2020 by an individual impacted by the Coronavirus in one of the following ways:

• Personally diagnosed with COVID-19

• A spouse or dependent is diagnosed with COVID-19

• Have experienced financial distress due to being quarantined, furloughed, laid off, or had your hours reduced because of the disease

• Unable to work because you lack childcare as a result of the disease

• Own a business that has closed or have reduced hours because of the disease

If you qualify for a Coronavirus-Related Distribution (based on the above requirements), you will:

a)    be exempt from the 10% Early Withdrawal Penalty (if you’re under age 59 ½);

b)    not be subject to normal mandatory tax withholding requirements on certain distributions; and

c)     be allowed to spread the tax on any such withdrawal over three years OR the distribution can be repaid within three years (via an IRA Rollover).

Q: I have an Inherited IRA and already took out my RMD for 2020. What options are available to me?

A: If you’ve already taken out your Inherited IRA RMD, unfortunately, there are no options to do a rollover back into any IRA.

Q: Am I still able to utilize a Qualified Charitable Distribution (“QCD”) from my IRA in 2020?

A: Yes. Although you wouldn’t be able to reduce your RMD (because RMD’s don’t apply for 2020), you can still utilize a Qualified Charitable Distribution from your retirement account to make desired charitable contributions and you will not incur income taxes on the QCD amount (nor can you obtain a charitable contributions deduction for the amounts contributed via the QCD).

“RECOVERY REBATE” CHECKS

The CARES Act also provides for “Recovery Rebate” checks (that should be processed in the coming weeks) as an advance payment on a calendar year 2020 tax credit. The Recovery Rebates will be provided to individuals other than a) nonresident aliens; and b) persons for whom a dependency deduction is allowed to another taxpayer. The Recovery Rebates will be tax-free. To be eligible for the advance payment, you must meet certain income requirements (based on your 2019 Adjusted Gross Income (“AGI”) (or 2018 AGI if your 2019 federal Individual Income Tax Return has not yet been filed)) as follows:

• Single individuals will receive $1,200 if their adjusted gross income is below $75,000. For income between $75,000 and $99,000, there is a phase-out and anyone earning above $99,000, will not receive a check.

• Married individuals will receive $2,400 if their adjusted gross income is below $150,000. For income between $150,000 and $198,000, there is a phase-out and anyone earning above $198,000, will not receive a check.

• For each qualifying dependent under age 17, there will be an additional $500 added to your check.

While the Recovery Rebate you should receive in the next few weeks will be based on your 2018 or 2019 AGI, the ultimate tax credit that you will be entitled to under the CARES Act will be based upon your 2020 income, filing status and qualifying dependents.

Q: How will I receive my payment?

A: If you had a bank account attached to your federal tax return, the IRS will simply deposit your payment into that account. If you previously received a refund check in the mail or have not had your bank account attached to your federal tax return, you will either receive a check or may be able to update your banking information with the IRS in the coming weeks.

For those on Social Security, payment should be received in the account in which your Social Security payment is deposited and may be coming with your monthly Social Security check.

Q: What if my adjusted gross income is above the stated income limits in my last return…Will I qualify based on my 2020 income?

A: If you’re in this situation, you will still receive a benefit (via a credit against your 2020 federal taxes) based on your 2020 adjusted gross income. Unfortunately, you won’t receive that benefit now. When you file your 2020 tax return next year, you should receive a credit toward your taxes IF you qualify at that time.

To stay updated on the “Recovery Rebates,” we recommend checking in periodically to this page on the IRS site.

Additional Resources

Gilbert & Cook does not provide legal or tax advise. If you have questions specific to your legal or tax matters, please consult your Attorney or CPA. For additional web-based resources available to assist you in monitoring the spread of the coronavirus on a global basis, you may wish to visit the CDC and the World Health Organization. 

Please send us any additional question you may have and we will do our best to address them in future newsletters. Thank you again for allowing Gilbert & Cook to help you Live A Life of Abundance. Your Gilbert & Cook team is here for you. Please call us if there is anything that you need.

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About the Author:

Jarret Sheets, CFP®
Associate Advisor

Jarret joined the Gilbert & Cook team as an Associate Advisor in November 2019. In his role as Associate Advisor, Jarret walks alongside the Lead Advisor in helping clients and families achieve their goals.

What Turns a Healthcare Crisis into a Financial Crisis?

By: CHRIS COOK, CPA, CFA
Partner, Chief Investment Strategist

What turns a healthcare crisis into a financial crisis? One word: Solvency

In our opinion, the race to contain the virus is the very same race against time for many large and small businesses around the world. Can those businesses remain solvent until the customers can come back?

Same goes for individual households. If workers and business owners are cut off from their income sources (restaurant workers, hotels, other service industries), how long can they maintain their bills and debts?

The above has very likely turned a slow growing economy to recession. Financial markets have very quickly (less than one month) traded down as if these forward scenarios will come true. Markets have already priced in what has, in the past, been a normal market response to a recession. We knew that stocks especially would have to weather an economic slowdown at some point, they always do. Through March 16th, the S&P 500 is down 30% from its February peak. We did not know what the catalyst of recession would be. Turns out the villain is a communicable virus.

Measures have been taken to both speed up the containment of the virus and slow down the demise of the economy. Hopefully we are all heeding the intelligent advice of our healthcare community. Please do your part.

The government response regarding the economy has been huge and has borrowed some pages out of the ’08-’09 recession playbook. Whether backing commercial paper markets, pledging financial support for key industries, cutting interest rates, delaying tax payment due dates, contemplating a social security payroll tax holiday, or supporting bank liquidity, the Federal Reserve, Treasury, Administration, and Congress are trying to provide defense against those solvency issues. The financial system that provides day-to-day cash for payroll and money markets is simply strained by the sheer volume in the short term. 

Very different than ’08-’09 is that the financial system is not fending off failed mortgage payments across every financial institution. Bank regulations are tighter than 12 years ago as have been lending standards in nearly every consumer and business category. The financial system was much stronger heading into this crisis than at any time in 2007.

The enemy during this war is clear. It scares people when daily life is altered. And during this time, we have taken the biggest and strongest player on the team off the field, the US Consumer, in asking them to sit on the sidelines for most non-essential spending. When coronavirus is ultimately controlled, the reason for behavioral fear and economic stress will be contained with it. With still historically low unemployment and perhaps months of pent up demand, our best player will be back on the field soon with a full head of steam.

Your Gilbert & Cook team is always here for you. Please don’t hesitate to call us if you have any questions or concerns.

Market Insight - March 2020

Brandon Grimm, MBA, CFA

Brandon Grimm, Portfolio Manager at Gilbert & Cook provides insights on recession concerns, recent market volatility, and the importance of re-balancing.

There has been much discussion and debate over where we are in this economic cycle. From our perspective, we remain in the latter stages but believe the modest-growth/modest-inflation/low-interest rate environment we have been living with has a good chance of continuing over the course of at least this year. While the probability of a recession occurring at some point in 2020 is not zero, we do believe it is low. However, as I will discuss later, the chances of a recession do appear to be growing as the coronavirus spreads globally and begins to impact global supply chains and consumer confidence. 

Despite those fears, the Gilbert & Cook Investment Team still maintains a positive view on the U.S. economy, as current fundamentals still support a prolonged recovery where unemployment remains low, job growth and wages increase, borrowing costs remain low, and most importantly we see a healthy and confident consumer base. 

We compare this recovery to running a marathon and reiterate our view for investors to remain fully invested according to their diversified, long-term Strategic Asset Allocation. 

Coming off an extraordinary 2019, the stock market continued its upwards trajectory with the S&P 500 Index closing at a record high of 3,386.15 on Thursday, February 19th (up +4.81% YTD). Then last week fear over the Coronavirus (COVID-19) finally gripped investors as both the Dow Jones Industrial Average and the S&P 500 index fell over 3% multiple days and ended the week down 12.26% and 11.44% respectively. The daily declines were the largest daily declines in two years and the weekly return was the worst since 2008. With minimal volatility over the past six months, one could argue at least a minor pullback was overdue irrespective of the catalysts. 

As we look at the next few quarters, the real economic impact of the coronavirus will need some time before it is fully understood. In the meantime, fear appears to be driving the markets to price in a major economic impact and even a potential recession. Although we are not comfortable going there yet, we recognize the longer the virus disrupts trade and supply chains, the greater the chance the markets remain at correction territory levels and a subsequent economic recession.

Maybe this time is different….or is it?  We look to history for the answers and similar recent events for context. Over a 38-day trading period during the height of the SARS virus back in 2003, the S&P 500 index fell by 12.8%. During the Zika virus, which occurred at the end of 2015 and into 2016 the market fell by 12.9%.1  As we have pointed out during prior times of stress, the S&P 500 Index has never failed to fully recoup any losses sustained from corrections or bear markets over time. In other words, the stock market and more broadly speaking, the U.S. economy, has proven itself to be quite resilient. Last week’s rather quickly pullback was likely overdone as evidenced by the strong market rebounds on Monday, with various stock indices gaining over 5% on the day. For more perspective on pullbacks and market volatility, reference our Timely Topic from October 25th, 2018 entitled Market Update – “Is this still normal?”.

This does not mean investors should dismiss the outbreak altogether, but rather use these pullbacks as:

1) a time to ensure cash needs are supported, or

2) buying opportunities to re-establish or add to equity exposure if your risk tolerance allows.

Certainly, risks remain, and the duration of the outbreak will determine the near-term impact to the global economy. Revenues and earnings from companies that are highly exposed to China will unquestionably be affected. The longer the virus remains, specifically in China, the greater risk to the global supply chain and ultimately the soundness of economic fundamentals.

In the end, we believe the U.S. is relatively insulated given a strong economy and fantastic health system. Robust job growth and more fiscally responsible consumers continue to provide solid underpinnings in the U.S. Economic data has been strong to start the year and so far, nothing has changed. We suspect that any drop in earnings or economic activity will be short lived, and more than made up for in the year to come.  

Right now is not the time to overreact. Instead, Gilbert & Cook has been proactive in protecting portfolios from events and pullbacks like these during this recovery by regularly re-balancing portfolios. Through the planning process we established a Strategic Asset Allocation which is all about balancing risk and reward given your time horizon and other factors. Regular portfolio re-balancing is a disciplined process to help reduce downside investment risk and ensures that your investments are allocated in line with your financial plan. We continue to focus on investing for the long run and potential short-term disruptions can give investors long-term opportunities.

As we’ve said before; Rely on process, not prediction. The Gilbert & Cook team keeps focus on patience and a long-term perspective.

Sources: 1First Trust Advisors L.P.

4 Tax Changes You Should Know About for 2020

By: Al Ryerson

It’s a new year, and with it comes new tax guidelines. At the start of the new decade, the IRS has made adjustments to a number of points, ranging from the amount of money you can contribute to your 401(k) retirement plan to the income tax brackets that help you determine your tax rate.

Here are a few changes you should know about for 2020:

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STANDARD DEDUCTION

When filing your federal tax return, you may either take the standard deduction or itemize deductions on your tax return in order to reduce your taxable income. In 2020 the standard deduction has risen to $12,400 for single tax filers, $24,800 for married couples filing jointly and $18,650 for heads of households.

Remember, although using the standard deduction is easier than itemizing, it’s worth seeing if itemizing will save you money. Taking the standard deduction means you won’t be deducting home mortgage interest or other popular tax deductions such as medical expenses or charitable donations. Work with your tax preparer to identify what itemized expenses may qualify. If your standard deduction is more than your itemized deductions, it might be worth it to take the standard deduction and save some time.

Note: Although it might make sense to take the standard deduction for federal tax purposes, it may still be appropriate to itemize your deductions for state tax purposes.

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CONTRIBUTIONS TO RETIREMENT ACCOUNTS

The IRS has raised the employee contribution limit for 401(k) and 403(b) plans to $19,500 – an increase of $500 from 2019. Savers age 50 and older can contribute an additional $6,500 as part of their “catch-up” contributions, up from $6,000 in 2019.

Contribution limits for IRA & Roth IRA accounts remain the same at $6,000 (plus an additional $1,000 for individuals age 50 and over). 

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HEALTH SAVINGS ACCOUNTS

If you are eligible for an HSA (Health Savings Account) you have the opportunity to put aside pre-tax, or tax-deductible, dollars which can be withdrawn tax-free to cover qualified health expenses.

Health Savings Accounts are a tax-advantaged account for which the contribution limits generally increase year after year with inflation. This year, the 2020 limits have increased to $3,550 for individual coverage, and $7,100 for accounts covering a family plan.

HSA bonus – the monies in your account remain available for you from year-to-year. They are not subject to annual forfeiture like a Flexible Spending Account (FSA).

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GIFT & ESTATE TAX

As you may remember, in 2019 the Tax Cuts & Jobs Act nearly doubled the amount of assets allowed for decedents to gift over their lifetime - and shield from federal estate and gift taxes. In 2020 the lifetime gift and estate tax exemption increased slightly to $11.58 million per individual. An individual can leave $11.58 million to heirs and pay no federal estate or gift tax, while a married couple will be allowed to gift $23.16 million.

The annual gift exclusion – the amount you can gift to another person without it counting against your lifetime exemption – remains at $15,000 annually. Remember - a husband and wife can each make $15,000 gifts, doubling the impact. Separately, you can make unlimited payments to medical and tuition expenses on behalf of others if paid directly to the institutions.

Disclosure: Gilbert & Cook, Inc. does not offer tax or legal advice. You should consult with an attorney for legal advice and a qualified tax professional for tax advice.

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About the Author

Al Ryerson, ASA
Lead Strategist

As a Lead Strategist at Gilbert & Cook, Al focuses on the complex business and personal financial inter-relationships of our clients.

Contact Al Ryerson: aryerson@gilbertcook.com

What is the SECURE Act?

By: Jarret Sheets, CFP®

Welcome to the new year (and decade)! Many take this time of year to look forward and plan for the upcoming year (or decade in this case). One thing we can plan on for sure is that the Setting Every Community Up for Retirement Act (SECURE Act) is officially becoming a law, and changes to how we plan for retirement come along with it. In this article I will discuss the new SECURE Act and highlight a few areas I think will create additional planning conversations as we move into the new decade.

So - What Changes?

Required Minimum Distribution (RMDs)

When money is contributed to a pre-tax account such as a 401k or an IRA, you receive tax benefits when you contribute. Those benefits come in the form of a lower taxable income (your income's reduced by the amount you contribute) and your money can grow tax-deferred until you decide to take it out. Eventually, however, the IRS would like to receive their taxes and you're forced to take money out through a Required Minimum Distribution (or RMD).

An RMD is a minimum amount you’re required to take out each year once you've reached a certain age and it changes yearly based on your age and account size. You can always take out additional money above the RMD amount, but you must distribute the required amount each year. If you don’t, you’ll be facing a 50% penalty on the amount you did not withdraw.

With the SECURE Act, RMD’s weren’t eliminated, but the starting age did increase from age 70 ½ to age 72, which provides a little extra time for tax-deferred growth.

Note: If you turned 70 ½ in 2019, unfortunately, you still fall under the old rules and must start your RMD’s in 2020.

STRETCH IRAs

Under the old rules, if you inherited a retirement account as a non-spouse beneficiary, you could elect to keep the money in that account and let it grow tax-deferred. If you chose that option, you were required to take an RMD out each year, but RMD’s could be "stretched" over your lifetime, resulting in smaller yearly distributions. As a non-spouse beneficiary, which is typically a younger individual, this was a great opportunity to let that account grow for future use while incurring minimal taxes each year from the required distribution.

With the SECURE Act, those rules changed quite dramatically. Now, as a non-spouse beneficiary, you must distribute the entire retirement account (IRA, 401k, Roth IRA, etc.) within 10 years of receiving that account. During those 10 years, you have flexibility on when to take distributions and how much those distributions are (i.e. could take a lump sum or take 10 yearly distributions), which creates an important planning opportunity for inherited retirement accounts. Additionally, if you've saved a large amount in pre-tax accounts, this may be a good time to review your beneficiaries and consider how those accounts will be passed on.

Note: The SECURE Act would NOT eliminate the stretch IRA for existing inherited IRAs for the current beneficiary.If the IRA owner is already deceased and there is an existing inherited IRA, the SECURE Act would not eliminate the stretch for the current beneficiary. Existing inherited IRAs would be grandfathered. The bill as currently written would make these provisions effective for inherited IRAs when the IRA owner dies after December 31, 2019.  If the current beneficiary dies after December 31, 2019, the successor beneficiary would be subject to the new rules of the SECURE Act.

CONTRIBUTIONS & DISTRIBUTIONS 

If you're charitably inclined in any way and may not need your RMD (or at least a portion of it), a Qualified Charitable Distribution (QCD) may be a strategy to utilize. With a Qualified Charitable Distribution, you can donate up to $100,000 per year ($200,000 for couples) directly from an IRA to a public charity and you can exclude the donated amount from your taxable income. With the SECURE Act, the age to begin utilizing QCDs remained unchanged (starts at age 70 ½).

The last two items to touch on before I close are the age limits for IRA contributions and 529 distributions. With IRA contributions, there is no longer an age limit for when contributions must stop while previously contributions were required to end at 70 ½. For 529 plans, student loan repayments up to a lifetime limit of $10,000 are now considered a “qualified expense”. As an added benefit, an additional $10,000 distribution is allowed for every 529 beneficiaries siblings.

As you can see, the SECURE Act brought about some interesting changes and in turn created new areas for unique planning conversations. If one of these topics or any of the other unmentioned changes from the Act creates questions for you, please reach out your Gilbert & Cook team. - Jarret Sheets, CFP®

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Jarret Sheets, CFP®, Associate Advisor

Jarret joined our firm as an Associate Advisor in November 2019. In this role, he works with the Lead Advisor to help his clients and their families meet their financial goals.

Contact Jarret Sheets: jsheets@gilbertcook.com

2019 Market Review & 2020 Outlook

By: CHRIS COOK, CPA, CFA
Partner, Chief Investment Strategist

Market Update : 2019 Year in Review

Trade wars and a decline in global manufacturing weighed heavily on the overall state of the economy this past year. However, resilient consumers and a cut to interest rates provided a positive counterbalance for the stock market, which reached record highs in 2019.

What drove the 2019 markets? Three key factors had the most influence over investment performance in 2019:

The Fed did a major pivot in U.S. monetary policy in 2019.

In 2019 the central bank made three quarter-point cuts to the benchmark short-term interest rate. Investors welcomed this change, counter to the interest rate hikes in 2018. Since January, when the Fed began changing course, the S&P 500 index has risen more than 600 points, or 25 percent and the unemployment rate fallen from 4 percent to 3.5 percent - putting the economy on solid footing heading into 2020.

 (washingtonpost.com/business/2019/12/11/year-federal-reserve-admitted-it-was-wrong/ [12/11/19])

The trade quarrel with China cooled down slightly.

In December, representatives from both nations agreed on a “phase-one” trade deal after a year-and-a-half of imposing tariffs on each other’s products. The new agreement, which is expected to be signed in early 2020, will be the initial step toward a larger deal in hopes to reduce some US tariffs in exchange for more Chinese purchases of American products and better protection of US intellectual property. bbc.com/news/business-45899310 [12/16/19]

Earnings beat (low) expectations. 

One year ago, stock market analysts were pessimistic about corporate profits. With economies worldwide slowing down in 2018, year-over-year earnings growth for S&P 500 firms seemed ready for a slowdown as well.

Deceleration was evident, but as the year passed, many firms managed to exceed reduced estimates. According to stock market analytics firm FactSet, 75% of S&P 500 components beat earnings-per-share estimates in Q3, compared to a 5-year historical average of 72%. (insight.factset.com/earnings-insight-q319-by-the-numbers-infographic [11/21/19])

The S&P 500 climbed above 3,000 for the first time finishing 2019 up 31.49%. The Dow Jones Industrial Average advanced 25.34%, while the Nasdaq Composite was up 36.69%. (Morningstar)

Certainly an impressive year by any measure, but let’s look longer term. Specifically, at the last two decades. The 2000’s were much tougher for the S&P 500. For the 10-year period 2000-2009, the index was down a cumulative -9.1% (-0.95% per year). The next decade, capped by a notable ‘19, was up by +256% (annualized +13.65%). The average for the entire 20 years? +6.06%.

An innocuous prediction for the next 10 years would be somewhere between those two decades of extreme.

Looking Ahead to 2020

The news and political cycle will remain volatile this year. A U.S. economic outlook split between manufacturing and business investment still struggling to decipher trade deal(s), however, interest rates and borrowing costs are likely to remain unchanged for some time and consumer confidence and spending is expected to stay healthy and strong with low unemployment.

As we’ve said before; Rely on process, not prediction. The Gilbert & Cook team keeps focus on patience and a long-term perspective. Living an abundant life and fulfilling the needs of your future is dependent on the plans and solid process executed today.

Introducing, Jarret Sheets & Garrett York

We are excited to announce that Jarret Sheets and Garrett York have joined our Gilbert & Cook team!

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Jarret Sheets, CFP®, Associate Advisor

Jarret joined our firm as an Associate Advisor in November 2019. In this role, he works with the Lead Advisor to help his clients and their families meet their financial goals.

Prior to joining our team, Jarret was a Financial Advisor in the Des Moines area and obtained the Certified Financial Planner designation in 2018.

Jarret, his wife Jessica and daughter Sophie, live in Des Moines and they enjoy being active outdoors, cycling, and traveling to new places.

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Garrett York, Relationship Manager

Garrett is the newest addition to Gilbert & Cook, joining us in January 2020. In his role as Relationship Manager, Garrett serves as a direct contact for his clients to answer questions, while conducting client specific tasks and assisting the Advisor in helping clients and families achieve their goals.

Prior to joining Gilbert & Cook, Garrett worked in the financial services industry with an emphasis in compliance and operations.

Gilbert & Cook Awarded one of the Top Advisory Firms in 2019 from Investment News

Our firm is dedicated to providing our clients and their families with sophisticated strategies, and genuine relationships, creating a truly unique experience. Each team member is driven by the same passion and focus to help our clients and empower one another to Live a Life of Abundance®. For these efforts, we are proud to be recognized as a leader in our industry. In November 2019, Gilbert & Cook was honored to receive the 2019 Best Practices Award from Investment News.

November 2019 - Linda Cook & Heather Knight received the Best in Practices Award on behalf of Gilbert & Cook.

Investment News honored a group of Top Advisory Firms who are growing with intent and a focus on fostering a culture of excellence within the firm. Learn more about this award.

Economic Expansion - 2019 Mid-Year Market Outlook

On July 18th 2019, Gilbert & Cook hosted a Mid-Year Market Outlook luncheon and panel discussion.

Chris Cook, Chief Investment Strategist at Gilbert & Cook highlights what’s driving our continued economic expansion and what we can expect to see looking forward:

The economy is now in an uninterrupted expansion for what’s been the longest period in history - It’s also been one of the most uneven. We’ve marched forward, but we’re running at more of a marathon pace than say a Usain Bolt pace. Think of past recessions, the 2008/2009 Recession was the worst since the Great Depression. Where as a more “run of the mill” recession, like in the late 70’s early 90’s is very short-lived and life moves on fairly quickly. The most recent recession was greater in terms of the downside - it lasted a longer period - but we’ve bounced back and this growth trend has been very slow but very steady.

So, what stops an expansion? Let’s go through a normal list of things:

Spike in commodity prices

• That could be a rise in the price of oil, cost of inputs are higher, metals go up – we haven’t had an inflationary period in quite some time, so let’s cross that off the list.

Interest Rates

• An aggressive Federal Reserve raising in interest rates to slow down the economy. Most recent Fed move was easing, not tightening. Again, not an imminent threat.

Extreme valuations in the stock market

• The US stock market, even on the heels of all this growth, is still valued fairly in the global economy. I don’t think that valuations are extreme, I think they’re “fair” and that doesn’t send us into a recession.

Rising Unemployment

• We are moving in the opposite direction – at a 50-year low unemployment rate.

If you check all those boxes, just short of something major and unforeseen in our current economy, our economy is going to keep chugging along – and this recovery, this expansion is going to keep growing. If this is baseball, our economy is going into extra innings… but it’s a double header. We’ll see a brief recession, a pullback in our growth rate for 1 or 2 quarters which will give all the newscasters something to talk about, but then we’ll move on into the future and have further expansion.

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Mergers & Acquisitions - 2019 Mid-Year Market Outlook

Excerpts from Gilbert & Cook's "Mid-Year Outlook - Plans, Priorities & Expectations in the Public & Private Marketplace" By Steve Jacobs

What is the status of the U.S. M&A market and what is the future outlook?

1. Competitive environment and it is definitely a seller’s market, but buyers are doing more strenuous due diligence to make sure of what they acquire.

2. Prices and multiples are high for quality companies due to lack of quality businesses on the market.

3. PEGS and large corporates are willing to look at smaller transactions, actually making venture and angel investments to bolster R&D and technology.

4. Cross border deals are down 50% from last year.

5. Key reasons are unresolved issues like Brexit and trade policies.

6. U.S. economy has been surprisingly resilient as we are experiencing our longest ever economic expansion of 11 years (but global growth has slowed).

7. FACTSET U.S. MergerMetrics for trailing twelve months: 13,569 deals closed, up over 7% year over year.

What is impacting valuations in today’s market?

1. Low interest rates.

2. Banks hungry for earning assets (loans) – funding up to 50% or more of transaction value.

3. Plenty of equity capital.

4. Lack of quality companies on the market for sale.

5. Strong buyer demand for growth via acquisition.

6. According to Warren Buffet’s letter to shareholders the last 3 years, he shared, “Given the army of optimistic purchasers, price seems almost irrelevant.”

Read the full article from Steve Jacobs and BCC Advisors.

Trade Tensions - 2019 Mid-Year Market Outlook

On July 18th 2019, Gilbert & Cook hosted a Mid-Year Market Outlook luncheon and panel discussion.

TRADE TENSIONS

(Moderator, Brandon Grimm)
Obviously there’s a lot of news right now about trade tension. So let’s put that into perspective from each of your respective markets. How is trade impacting your markets and what are some other disruptors that we might see?

(Response by: Dr. Keri Jacobs - Economist, ISU Extension)

As far as tariffs being put on goods, retaliation from china and then our subsequent retaliation. The biggest sectors for Iowa that are feeling the impact are soybean production and pork production.

There are short term consequences, outlined in the recent report released by the Center for Agricultural and Rural Development: CARD Report. This report states that overall losses in Iowa’s Gross State Product are calculated to be $1 to $2 billion. Short term losses are about 10% of the pork and soybean industries respectively.

Longer term, as this trade war continues and as other countries stop taking our goods, what happens is that the countries who can’t produce goods at the low cost that we can, now they have an opportunity to step into the market. The biggest challenge that we could face is some of those markets going away from the US. The longer term challenge is not the acute loss of trade, it’s the larger risk of losing our place in the trade market. If we are no longer the lowest cost producer and if we’re out of the game for some time, we could lose our seat at the table.

(Response by: Steve Jacobs - President, BCC Advisers)

From an M&A  perspective, supply chain disruption can be a key factor. Increase cost of sourcing good and shipping goods, make it very difficult for distributors and manufacturers to be competitive.

The US and China relations on trade seem to have taken another step backwards. But as long as businesses in this country remain profitable and we keep inflation under control, there should be no reason for the market to step back or near a recession.

(Response by: Chris Cook - Chief Financial Strategist, Gilbert & Cook)

If you remember for last year’s event, 1-year ago we were talking about trade in the headlines. Since our discussion last year, we’ve improved our relations with trade partners, Canada, Germany and Mexico, however hog and soybean producers continue to get a disproportionate backlash from the tensions with China.

I think back on a quote from Mike Pyle, and I’ll use his words, “China never intended to ‘Play Fair’ …. Their intention was to take the worlds technology, copy it and make their economy around it”. Is it worth the fight? In my opinion it probably is. Because if we can’t get paid for the technology that we develop in the United States, by the rest of the world, then we will slowly fade. That’s where I come back and say, “Is it worth fighting? Yes”. People that we know in Iowa, people that we share a state with are bearing the brunt of it and hopefully we make it through. On a big picture, it is a very small percentage of our Net GDP is being impacted dollar wise by the tariffs so far. It’s a net effect, a fraction of our GDP in our global economy. At this point we see no clear end, and we should expect it to continue to invoke volatility.

Financial Spring Clean-Up

Spring cleaning season may be coming toward an end as we head into summer, but did you actually take a look at your finances as part of your spring cleaning? 

It’s that time of year again, where people start to open their windows, dust out their closets and start to organize and “tidy up”. Whether it’s deep cleaning the house, garage, yard, or office, it’s about prioritizing. All this spring-cleaning buzz got me to thinking, what are some of the spring-cleaning items people should think about when it comes to their finances.

Often times we get busy in the other things we have to do in life, be it work, family, kids’ activities or social events, whatever it is we put those things in front of less important things like our finances. Wait -I just said our finances are less important than all those things? Well to some degree I do think that is true, because living your life of abundance goes much deeper than your finances. BUT in 10, 15, 20, 25, 30 years, we are all going to want to retire and spend even more time on the afore mentioned things.  So now we should spend time on getting our financial lives organized and prepared for our future goals.

Where do we start?
TAXES

A good time to start thinking about these spring-cleaning finance items could start right after you file your taxes. After you see how your previous year taxes have shaken out, you can make any important changes for the following year. This is a good opportunity to update your tax withholdings or increase your 401k contributions ($19,000 employee max with an additional $6,000 for over 50 catch-up). 

Speaking of 401ks, if you’re a business owner, you should be thinking about what type of retirement plan is right for you and your employees.  A 401k can be a great tax and retention tool for the business.  After tax season, It’s also a good time to start thinking about the other things you can do to reduce your taxable income for the year or even put pencil and paper (yes it’s ok to still use those in this tech world) to your charitable giving strategy for the remainder of the year. 

PERSONAL CREDIT
Next Up – Credit Check

During your spring financial clean-up, you should think about running your first of three free annual credit reports for the year available to you by the credit bureaus, Experian, TransUnion, and Equifax.  (click link for more info: https://www.ftc.gov/faq/consumer-protection/get-my-free-credit-report). 

Looking at your credit report will allow you to see what current credit cards and credit lines are open/closed in your name, what personal information the credit bureaus have like addresses reported, telephone numbers, and employment data, and also current inquiries on your credit which you should be familiar with the names showing up. 

INSURANCE
Now let’s start thinking ahead to fall benefit enrollments. 

It seems like this always sneaks up on us, however, if we start thinking about it early, it should put us in a good spot to make good decisions when the enrollment window opens.  Make sure you are utilizing the benefits right for your family, whether it’s utilizing an HSA account, flex spending accounts, increasing your group term life insurance, or adding something like disability coverage, it’s important to maximize those benefits.

Insurance coverage, yes, I mentioned we should be thinking about it before enrollment period, but it’s also good to review your overall insurance coverage.  Have you had any major life events over the last year which might mean a change to coverage is needed like a big raise, having a new baby, bought a new house, got married, or even retired?  All these life events are good reasons to revisit your insurance plan, but I think it’s also just a good job to think about it annually during your financial spring cleaning.

SPENDING
Now I know you’re waiting for me to write about something fun, so how about I throw one out that we all care about tracking and monitoring…our monthly budget! 

Ok, we all know putting together (and more importantly, following) a budget isn’t the most enjoyable past time; however, it’s a place we can save a few bucks.  Here are a few easy ones: have you looked at different cell phone carrier options lately or compared cable/satellite tv options?  How about looked at your home and car insurance premiums?  Looking at those three items during the spring cleaning could help save $100s of dollars annually.  That’s more money to spend on lattes! (Oh wait, think about cutting that daily drink at your favorite coffee shop as well.)

Wait did I just say you could save $100s of dollar annually? Ok, maybe that doesn’t get a lot of people too excited, so let’s talk about something that can save or make you thousands of dollars annually. I’m talking about having a coordinated allocation for your investments.  Hang with me here, I’m not saying you have to do this on your own but working with a good financial advisor can help ensure this part of your spring financial cleaning is done.  I’m sure lots of us hire someone to do our actual spring cleaning at our house, so there’s nothing wrong with doing the same here with your investments. 

ESTATE PLANNING
Lastly, and this thing is probably more like the basement which only gets cleaned every 5-10 years during spring cleaning and it’s ensuring your estate planning documents are up to date with your wishes.

I know most of you are thinking, now where did I put those things again?  Make sure they are still relevant with current legislation and the people you wrote into the documents are still willing and/or able to handle their duties.  I definitely saved one of the more important things for last on purpose (I was hoping you would read the whole blog).  This is something that’s easily overlooked, and we all know a friend or family member who forgot to update their documents or worse yet, didn’t have any in place.  Blow the dust off the documents and give them a read or contact a good attorney to help in your review.

I’m sure you’ve had enough of my rambling at this point, but let’s recap the Financial Spring Cleaning items quick:

-          Make tax adjustments as needed whether it’s withholding or 401k contributions

-          Run your first of three FREE annual credit reports

-          Start thinking about fall benefit enrollments

-          Review current insurance coverage

-          Update your monthly budget

-          Have a plan for your investments

-          And finally, make sure your estate planning documents follow your current wishes. 

Ok, now what are you waiting for, get a move on it!  Please contact our Gilbert & Cook team if we can help answer any of the questions on this honey-do-list.

Author: Jerit Tripp, Advisor

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Disclosure: This presentation is limited to the dissemination of general information pertaining to its investment advisory/management services. Opinions expressed are those of Gilbert & Cook and are subject to change, not guaranteed and should not be considered recommendations to buy or sell any security. Gilbert & Cook is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Gilbert & Cook, Inc. and its representatives are properly licensed or exempt from licensure. Past performance is not indicative of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Gilbert & Cook, Inc. unless a client service agreement is in place.

Ribbon Cutting at Our New Home!

It has been a very big year for Gilbert & Cook. Celebrating our 25th Anniversary as a firm; we expanded our team to 22 people, added 3 new partners, and found a new home!

The Gilbert & Cook team hosted a Ribbon Cutting event with the West Des Moines Chamber of Commerce in April to welcome guests to our new home in West Des Moines.

Ribbon Cutting Ceremony with the West Des Moines Chamber of Commerce.

Gilbert & Cook Partners: Brandon Grimm, Chris Cook, Linda Cook, Marlis Gilbert, Jerit Tripp & Megan Rosenstiel

Linda Cook, President, Welcoming Guests at the Gilbert & Cook Ribbon Cutting Breakfast

Introducing Al Ryerson, Lead Strategist

We are pleased to announce that Al Ryerson, ASA, has joined our firm as a Lead Strategist.

Al joined Gilbert & Cook in January 2019 following a successful career as a Certified Public Accountant and Tax Advisor, Chief Financial Officer and Business Valuation and Financial Litigation Consultant (and a brief, unsuccessful attempt at retirement).

Over his 40+ year career, Al has earned the following designations and certifications: Certified Public Accountant (CPA), Accredited in Business Valuation, Certified in Financial Forensics, and Accredited Senior Appraiser. He has been active in the Iowa Society of CPAs, Financial Executives International, Des Moines Estate Planners, ESOP Association, and Wednesday Tax Forum.

As a Lead Strategist at Gilbert & Cook, Al focuses on the complex business and personal financial inter-relationships of our clients. We are honored to have Al join our Gilbert & Cook family. Al has been a trusted friend of the firm for many years and we are looking forward to adding his vast experience and talents to our team.

Contact Al via email at: aryerson@gilbertcook.com or call 515.270.6444

Read more about Al and the rest of our Gilbert & Cook team in our “About Us” section.