Author: Minich MacGregor Wealth Management

Tax Refunds

Tax season is winding down. For adults like us, this time of year is like a second Christmas.
The stress of filing is over, and now we have our tax refunds to look forward to. The question is, what will you do with yours?

Because tax refunds come outside our regular income, some people treat them like change beneath the couch cushions—it’s extra spending money. They think, “Now I can buy that new iPad, or go away for the weekend!” Others are more prudent, and use the cash to pay down their debt, handle every-day expenses, or line their savings account. How do I know? Back in 2011, CNN did a study to see how most Americans spend their tax refund. This is what they found1:

As financial advisors, we don’t have a problem with any of these categories. It’s always good to save, and it’s always good to pay down your debt. It’s equally important to enjoy the money you’ve worked so hard to attain. So, if there’s a dream vacation you’ve been planning to take, go for it! Just remember to send a postcard.

BUT. (And there’s always a “but.”)

Don’t just spend your tax refund for the sake of spending it. Don’t just stick it in a savings account because you can’t think of anything else. As financial advisors, this is something we feel every investor should remember. Our philosophy is that the money you earn not earmarked for expenses should always be put toward reaching your goals. Remember, goals can be short-term, mid-term, or long-term. So if one of your goals is to see the beaches of Copacabana, then there’s no harm in using your tax refund to go there. But if you don’t have a goal like that in mind, it would be a mistake to think, “Okay, I’ve got my refund … might as well have some fun in Vegas this weekend!” That’s not a goal. That’s a whim. And we think it’s a shame to waste your tax refund on a whim.

Instead, consider this: invest your tax refund. It’s not sexy. It may not provide immediate gratification. But it could make you happier down the road. Why? Because achieving our goals is always a bigger thrill than satisfying our whims.

Now, we don’t think you should invest money just to invest it, either. That’s why we’d advise you to invest in a way that will help you reach your goals. For instance, you could invest your refund in an IRA or Roth IRA. (We’re not necessarily recommending this; we would never do that without knowing more about you or your situation. This is just an example.)

Here’s the point. Never give up the things you want the most for the things you only want right now. Investing your tax refund is a fantastic way to get that much closer to the things you want most in life. A refund is a vehicle you can use to reach your goals; investing is the road that takes you there.

So, here’s what we propose. When you get your refund, don’t do anything with it immediately. Instead, take five minutes to stop and think. Would using the money now really get you what you want … or is investing it the smarter choice? It’s at least worth considering.

Regardless of what you do, enjoy your refund! Happy end-of-tax season!

1 “How do Americans spend their tax refunds?” CNN.com, accessed April 12th, 2013. http://money.cnn.com/pf/storysupplement/tax_refunds/index.html

Resolution #4: Decide where you want to live after retirement.

Over the past few months, different retirement-related “resolutions” have been the topic of several Weekly Wires.

This Weekly Wire’s resolution is a no-brainer … but we’re often surprised how many pre- retirees fail to think about it ahead of time.

Traditionally, most retirees have one or two vague ideas about where they’re going to live after retirement.

Option #1: Stay where you are.

If you’ve lived in the same home for ten, twenty, thirty years, why not just stay put? You know which pizza places are open past nine o’ clock, and the quickest route to the grocery store. More importantly, you’ve got a lifetime of memories stored up in that house, and if walls could talk …

On the other hand, maybe you don’t like the climate and long for a change. Maybe you live farther away from your grandkids than you would like. Maybe you don’t like the recent spate of changes you’ve seen in your community. All these potential cons are important, especially as you get older. If you don’t start planning how to deal with them now, you may never have the chance again.

Option #2: Go and live near a beach.
Ah, the classic image of the happy retiree: strolling hand-in-hand with your significant other on

some magnificent beach, preferably at sunset. It sounds idyllic, and for many people, it is.

On the other hand, all the classic retirement hotspots often come with an extremely high cost of living. Not to mention that sometimes “warm and sunny” really means “hot and humid.” And is it really worth it if you’re moving even farther away from the people you love?

“Location, location, location” isn’t just a cliché. It’s a critical decision you must make while planning for retirement. That’s because it’s a decision that impacts every facet of your retirement. How you spend your time and how comfortable and happy you are. And of course, how it will affect your retirement savings.

So your next resolution should be to stop daydreaming about the beach for a moment. Alternatively, stop assuming you’ll just stay where you are. Instead, take a hard look at where you’ll live by asking yourself the following questions:

1. Do you like the climate of the city where you live now or are planning to move to? Very few people want to shovel snow during their golden years, but you may not want to live in an area with high temperatures and humidity either.
2. What is the cost-of-living and the property-tax rate in your area, or the area you’ve always dreamed of retiring to? Many a retirement has been ruined by not considering everything that can impact spending. Moving to an area with a lower cost-of-living can be an easy way to get some extra mileage out of your retirement income.
3. Are the housing prices within your budget? Unfortunately, not all of us can retire in the Hamptons.

4. Is there good health care within a reasonable distance? This is a concern that grows with time. It might not seem like a big issue at 65, but by the time you get to 75 it could change everything.
5. What is the crime rate in your present location? How common is financial fraud and identity theft? Alternatively, answer those same questions for that beachside community you’ve been thinking about. Not only can the answers impact your quality of life, they are an ever-increasing problem for seniors.
6. Does your location offer the activities you enjoy? If you like the beach you may not want to be in the mountains, or vice versa.
7. Most importantly, do you want to be closer to the people you love? If so, does that mean moving … or staying put?

There are plenty of other factors to consider when deciding where to live. The goal of this article is to get you thinking about the issue—because there’s a lot to think about! Also, keep in mind that this issue is one area where the help of a retirement planning expert can really come in handy. So, as you ponder this and other retirement questions you might have, always remember that we’re here to help. Please feel free to call us anytime at Minich MacGregor if there’s ever anything we can do for you.

March Madness

As financial advisors, it’s our job to provide our clients with sound, qualified investment advice. We trust that most of the time our advice makes sense. However, there may be occasions, like today, where our advice makes people blink. Ready?

Don’t let the ball control you.

We know, that’s pretty cryptic. But take a look at your calendar and things will start to become clear. What month is it? That’s right, it’s March. And we all know what happens in March.

Madness.

March Madness, to be exact, the annual NCAA basketball tournament to crown a national champion. It’s a three-week event that, allegedly at least, leads to higher gambling1 and lower productivity.2 But, the real danger, to you at least, is the impact that it has on investing.

What’s the correlation between March Madness and investing? While there’s no direct link between basketball and the markets, one can impact the other. Specifically, we’re speaking about the effect March Madness has on people’s emotions. We all know that following sports often involves emotional commitment. We don’t just watch teams play, we root for them. Whether it’s our local school, our alma mater, the schools our children go to, or just because we like their mascot, many of us tend to favor one team over the other. We’re ecstatic when they win; we’re depressed when they lose.

Some people might not be quite so affected by the way the ball bounces. But for those who are, it’s crucial that you remember not to make emotional investment decisions. This is never truer than during the month of March. Some people are more likely to make impulsive decisions based solely on how they are feeling. So if you’re emotionally invested in the tournament, try to resist making any meaningful decisions until it’s over. If your team loses, you might be so depressed or angry that you end up doing things you regret. Especially when it comes to your portfolio.3

One study4 done in 2005 looked at the effect of countries’ stock markets after their national teams lose in the World Cup. They found in many cases that if a country’s team lost, their stock market would drop 38 points. And that’s just the average—imagine what the number might be for individuals. The only explanation for this is that the loss influenced investors’ moods to a startling degree.

When it comes to our finances, we can’t afford to let our emotions get the better of us. The wisest investing is done with our heads, not with our hearts. So if you find yourself sitting on the couch, watching a game, remember: don’t let the ball control you. Instead, give us a call. We’d be happy to discuss your portfolio with you if you’re a client. If you’re not a client, give us a call anyways. We’d welcome the opportunity to talk about how we may be able to help you.

Sources:
1 One expert estimates that more than 7 billion dollars are wagered illegally. http://tinyurl.com/7zy2xgm 2 http://tinyurl.com/8ykvtw9
3 http://www.marketwatch.com/story/march-madness-and-your-portfolio-2011-03-11
4 http://tinyurl.com/dar9y

Overcoming the Odds: George Lucas

No matter who you are or where you come from, you have goals in life. But no matter who you are or where you come from, there will come a time when you encounter obstacles to your goals. There will be times when the odds are stacked against you.

Fortunately, for those times we have heroes and legends to turn to.

We enjoy reading about the men and women of history who did great things despite the enormous barriers they faced. We find it gives us the inspiration we need to work toward our own goals.

“Wait a minute,” you’re probably saying. “George Lucas? The guy who made Star Wars? That George

Lucas?”

Yep. That one.

Come back with me to the early 1970s when Lucas was a young, up-and-coming filmmaker fresh off a new blockbuster hit called American Graffiti. A low budget movie about teens and cars, American Graffiti cost less than $1 million to make, but it earned $50 million in the theaters. At that point, Lucas’s destiny seemed bright. All he had to do was continue on the path he had laid for himself and everything would be fine.

But for his next project, Lucas had something much bigger in mind.

As a kid, Lucas had loved watching campy science-fiction serials like Flash Gordon. He longed to create his own space adventure, but one much grander in scale. In his mind, Lucas envisioned something closer to an opera in space (and indeed, the term “space opera” is now a real thing).

But shooting for the stars isn’t easy. After all, the stars are a long ways away.

Still, Lucas decided to give it a try. Very soon, the obstacles started piling up, and they were formidable indeed. The first thing he had to do was write a story. Easy enough—or so it seemed. In fact, it took Lucas multiple drafts across four years to write what would eventually become Star Wars. Through it all, he struggled over everything from characters to dialogue (some would argue he never quite got this one right) to the basic mythology that underpinned his fictional galaxy. At one point, the character of Han Solo was a green frog. You get the idea.

All this at a time when Hollywood expected him to keep making small-scope, small-budget films like American Graffiti. Even many of Lucas’s fellow directors wondered just what in the world he was thinking.

Lucas persevered, though, and eventually finished his script. But the next step was even more daunting. In order to make the movie, he’d have to convince a studio to back it.

Once again, the odds were against him. First, United Artists turned him down. Then, Universal. Other studios followed suit. No one wanted to take a chance on an outlandish story about a farm boy and a princess battling an evil empire in a galaxy far, far away. It seems impossible to believe now, but at the time, no one thought a film like Star Wars would ever resonate with audiences … or make any money.

Well, almost no one. Eventually, a studio executive at 20th Century Fox agreed to take a chance. Star Wars got the green light, but Lucas still had obstacles to overcome. For one thing, his budget was only $7.5 million, when he was sure he needed at least $18. And then came the actual shooting. Much of the film was shot on location in the brutally sweltering Tunisian desert. Equipment kept breaking down. Crew members kept fainting. It didn’t take long to exhaust their budget and overrun their schedule. Even many of the cast and crew expressed doubts as to whether the movie would be any good.

But Lucas persevered. He believed in himself and in his movie.

More challenges. The studio, anxious about how long and expensive the project was becoming, started pressuring him. But he persevered. His cinematographer quit, and his editor, too. But he persevered. The responsibility was becoming unbearable, and things only got worse when Lucas started experiencing alarming chest pain. But he persevered. As he explained it:

“The reason I’m making Star Wars is that I want to give young people some sort of faraway exotic environment for their imaginations to run around in. I want them to get beyond the basic stupidities of the moment and think about colonizing Venus and Mars. And the only way it’s going to happen is to have some kid fantasize about it—to get his ray gun, jump in his ship and run off with this wookie into outer space. It’s our only hope in a way.”

Star Wars was released on May 25, 1977, Star Wars. It earned $775 million worldwide. It prompted (as of this writing) seven other films, and countless novels, comic books, and video games. It remains one of the most beloved films of all time.

All because George Lucas persevered, and persevered, and persevered—and overcame the odds.

No matter who we are, we all have goals in life. May we always follow George Lucas’ example in achieving them. May we exhibit the same self-belief, determination, and perseverance that he did.

As you work toward your goals, may the Force be with you!

Resolution #2: Make a List of Retirement Goals

As mentioned in our Weekly Wire dated January 24, 2017 about planning for retirement, here is another practical retirement-related resolution you can set. This one is also very simple, and can apply to pretty much everyone.

When it comes to retirement, besides the myriad of things you know you need to plan for financially, don’t ignore creating a very important VISION of your future that may help you to look forward to retiring rather than be concerned over it!

A good way to start is to make a list of 5 to 10 things you want to DO or ACHIEVE in retirement. Some parents teach their children to MAKE A LIST and then cross off the things they accomplish. It almost seems too simple of a task to be of the great value that it is. Making lists are a great way to organize your information and prioritize. They provide a simple structure and are easy to read and write.

Every goal or dream you have can be broken down into steps. And as you follow each step you will begin to see your goal come to fruition, and it is so pleasing to enjoy the anticipated end result. It’s good to make a list because some things do take planning ahead of time, especially when it comes to retirement.

We read that when you make a list (like for groceries as an example) with bulleted or numbered points, even if you forget to bring the list with you, it is easier to recall what was on the list because you can think back to the location of the words on the paper. Lists can appeal to our general tendency to categorize things, and then we can process information more easily.*

We encourage you to stop for a minute from your usual daily schedule, and make this list with a real pen and paper, (or an electronic version) of a few things you would like to do or achieve when you retire. As the saying goes, “Put it Down in Ink.” Writing it down makes your goals easier to visualize. Then begin a sub-list under each goal for the first step you would need to take in order to reach this goal. You may be magically surprised at what you write down! You may have some subconscious ideas that you didn’t even know you had.

If you are not comfortable making a list, then at least imagine it.

We heard a story about a retired gentleman, who was asked if he missed working now that he was retired. We really liked his answer, “I don’t have time to go to work! I don’t know how I got anything done before retirement!” In this case, he didn’t have an official “bucket list,” but his motto and attitude (posted on his refrigerator) created his own bucket list without even being aware—to help everyone he could, and to be cheerful and happy with life … and he enjoyed every minute of his retired life! And every day he made a list of things he needed to do that day whether written or in his mind, including such things as helping a neighbor with a project, picking up something at the store for one of the widows on his street, visiting a sick friend, giving a ride to grandchildren to and from school or other appointments, counseling boy scouts, and a myriad of projects at home! The best thing about retirement for him was that he had time to do what he always wanted without worrying about a clock or a boss!

Remember, “If you can dream it, you can do it!”

Retirement is more than just saving money and finances, but in having dreams and goals in your life. Everyone has different things they would really like to do. Now is your chance to plan for them!

Source:
* “A List of Reasons Why Our Brains Love Lists,” December 2, 2013, The New Yorker. http://www.newyorker.com/tech/elements/a-list-of-reasons-why-our-brains-love-lists

Gone Phishing

Imagine this scenario. You get an email that appears to be from your bank. You open it and read a message riddled with misspelled words that direct you to “click the link below.” You click on the link, and are taken to a page that looks almost exactly like the website you’re used to visiting … almost.

You’ve been phished.

Hopefully, this scenario has never happened to you. Or if it has, you recognized the warning signs and knew to stay away. Unfortunately, many people don’t recognize those warning signs, and fall prey to a particularly insidious form of Internet fraud called phishing.

Phishing is defined as “the creation of email messages and Web pages that are replicas of existing, legitimate sites and businesses. These Web sites and emails are used to trick users into submitting personal, financial, or password data. These emails often ask for information such as credit card numbers, bank account information, Social Security numbers, and passwords that will be used to commit fraud.”1 A play on the word “fishing,” (with regular people as the prey, and fake emails/web sites as the bait), the crooks behind phishing like to target the following areas:

• Retail/Service
• Payment Services
• Email
• Social Networking

People who fall for these scams are often duped into giving out sensitive information, like their Social Security numbers, account passwords, credit card numbers, or even bank PIN numbers. Or, they may be directed to sites that proceed to install malicious software onto their computer or mobile device. Either way, phishing poses a major threat to your finances, your identity, or your data.

Thankfully, phishing is easy to avoid if you follow a few common-sense rules:

• Legitimate banks, retailers, and social media sites should never ask for your personal information via email. If you receive a message from someone asking for this info, assume it’s a scam.
• Furthermore, as a general rule of thumb, do not reply to any message, electronic or otherwise, that requests your personal information.
• Never use links in an email to connect to a website. Open a new browser window and type the site address in directly.
• Always double-check the URL of any site you intend to visit. Some thieves set up sites with URLs that look very similar to a legitimate site. For example, “amzon.com” instead of “amazon,” or “facebok.com” instead of “facebook.” You get the idea.
• When doing business online, look at each website’s address. Secure websites should have a small symbol of a lock next to their URL, or the letters https (instead of merely http) at the beginning of the address. Both the lock and the letter “s” indicate that the site has been verified as secure.

Also, learn to recognize what common phishing messages look like. There are often a few telltale signs:

Dear Costumer,
We have recieved notice that your identity is not secure! This could put your account in

danger. To register for a higher lvel of security, simply:

1. Click the link below to open a secure portal to our site
2. Confirm your the owner of the account by answering a few simple questions

If you do not comply with these instructions in 7 days we have no choice but to permanently delete your account.

Sincerely,

Your Bank, Privacy Division

The warning signs aren’t hard to spot. Look for misspelled words (costumer, recieved, lvel, etc.), links to click on (“Click the link below”), threats (“If you do not comply”), and references to a well-known business or organization.

I hope you found this information valuable. Just remember that by keeping your eyes open and remembering a few common-sense rules, you can protect yourself, your loved ones, and your data from phishing scams.

1 “Phishing scams,” Canadian Anti-Fraud Centre, modified March 11, 2015. http://www.antifraudcentre- centreantifraude.ca/fraud-escroquerie/types/phishing-hameconnage/index-eng.htm

Dow hits 20,000

Imagine you are driving a car down a lonely highway at night. You have no idea where you’re going or why you started driving in the first place. Because the sun isn’t out, and because you don’t have a compass, you have no idea which direction you’re going. It’s disorienting, but you have no choice but to keep driving—because at least if you keep driving, you know you’ll end up somewhere.

Then, all of a sudden, you see it: a green sign on the side of the road that reads

MILE 32

That seems encouraging, but a few minutes later, you see another sign that says “Mile 33.” Then Mile 34, 35, and so on. The brief spark of excitement you felt is gone, because it doesn’t take long for you to realize the truth:

Milestones tell you where you are. But they can’t tell you where you’re going.

Why are we asking you to imagine all this? Because it’s a useful exercise in light of the recent news out of Wall Street: for the first time ever, the Dow has hit 20,000.

The media always makes a big fuss whenever an index (or an average, as the Dow technically is) hits a milestone. That’s because milestones are inherently interesting to humans. They suggest a good story, and humans have always been suckers for a good story.

But for investors, market milestones shouldn’t be seen as particularly meaningful.

Of course, that’s not to say milestones serve no purpose. After all, if you’re driving down the highway and you do know where you’re headed, a milestone becomes a useful barometer of your progress. Similarly, if you’ve set a goal for yourself, milestones can be a great motivator. A form of encouragement to keep going.

As far as the markets go, however, a milestone can be a bit like fool’s gold: shiny and exciting, but of little value in and of itself. It can even be a little dangerous, because it suggests a story while masquerading as a statistic. Because it fools us into thinking it’s the needle on a compass rather than a mere measurement of distance traveled. (A number feels high, so the markets will probably keep going higher! Or, a number feels low, and will probably just keep getting lower!) But really, milestones tell us no such thing. They only let us know where we are. Not where we’re going.

The circumstances behind this particular milestone confirm this. Ask just about any market analyst and they’ll tell you the Dow hit 20,000 by riding a wave of optimism about President Trump’s economic agenda. Take this line from a recent New York Times article:

Or this one from CNN:

Wall Street is clearly betting that Trump’s plans to slash taxes, ramp up infrastructure spending and cut regulation will make the American economy grow faster.2

The recent postelection surge toward 20,000 has been driven by what investors are calling a

reflation trade, or a bet that the economy under President Trump will benefit from proposed tax

cuts and a move toward more aggressive government spending.1

The key word in both passages is “bet.” Investors don’t know how much of Trump’s agenda will actually be enacted, or if it will work, or if it’s even possible. They’re simply betting on it. This is a perfectly natural thing to do, because investors have always tried to get ahead by setting educated expectations for the future.

But when that big, round 20,000 is achieved on the back of a bet, it doesn’t look quite so momentous, does it? It tells us what investors are doing and feeling right now. It tells us where we are. But it doesn’t tell us where we’re going.

The point of all this is not to say that the Dow hitting 20,000 is a bad thing. The point is that it’s just a milestone, just a story, and we should be properly cautious about both. That’s especially true with regards to the Dow. As you probably know, the Dow is comprised of only 30 companies. Important companies, to be sure, but hardly representative of the overall economy. So 20,000 is not only a story, but a fairly limited one. It would be like watching only the first 30 seconds of the Super Bowl, and then trying to predict the outcome.

So as you read about this milestone or any other, don’t allow yourself to get too caught up in the story that goes with it. Don’t try to predict where we’re going just by looking at where we are.

Instead, do this:

Whenever the markets hit a new milestone, turn off the TV or shut down that internet browser. Try to tune out the noise. Then, focus on your own personal financial journey. Ask yourself: “Do I still know which direction I’m heading? Has anything changed that may have put me off track?” In essence, pull out your personal compass and see which way the needle is pointing. Are you going north or south? Then, make a list of your own milestones. What great things have you achieved lately? How far have you come? And what milestones are you looking forward to reaching over the next few years?

By doing this every time the financial media starts selling the latest story, you’ll actually be setting a wonderful habit: consistently reviewing your financial situation and planning your financial future. If there’s anything we’ve learned over the course of my career, it’s that this is the road to success.

After all, milestones are only meaningful when you know where you’re going … and on the road to success, the only story that matters is yours.

We will continue watching the markets, tracking portfolios, and keeping our clients’ financial compasses pointing north. In the meantime, please let us know if you have any questions or if there is ever anything we can do to help you work toward your own personal milestones!

Sources:
1 Landon Thomas, “The Dow Hit 20,000. Now What?” The New York Times, January 25, 2017.

2 Matt Egan, “Boom: Dow hits 20,000 for first time ever.” CNN Money, January 25, 2017. http://money.cnn.com/2017/01/25/investing/dow-20000-stocks/