We’ve crafted hundreds of financial plans over the years.

Here are some of the most overlooked opportunities we see during our financial planning meetings.

Not fully understanding different accounts/their roles

• Employee benefits – Your employer retirement plan is likely one of the best benefits you have access to during your working years. We often see people not fully understanding their plan or not fully utilizing the plan(s). This can also be said about Roth 401(k) options, Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).

• Tax implications – Your employer 401(k) is a tax-deferred account and is one of a few savings buckets you can utilize for big life goals like buying a second home or retiring. Would it make sense to funnel money into the taxable and/or tax-free buckets? From there, additional tax-planning may revolve around things like tax loss harvesting in the taxable bucket or making Qualified Charitable Contributions (QCDs) from the tax-deferred (IRA) bucket, when appropriate.

Not having a cohesive investment strategy

This is a big one. It’s why investment management is such a big part of our work.

• Asset allocation – Most often, we find people utilizing an approach that is too aggressive given their stage of life. Occasionally we’ll run into a family that is too conservative. Remember “Goldilocks and the Three Bears?” We’re looking to craft portfolios that aren’t too “hot” or too “cold”, but just right!

• Poor advice – You’d be amazed how often we run into poor investments because “their neighbor told them it was a good pick” or they’re chasing past performance!

• Ignoring fees – There are many investments (and advisors) that come with hidden fees. These fees can eat away at returns, and they can be very hard to find!

Some of the fees we look out for include: 12b-1 fees, front-end load, back-end load, annuity fees, etc. We push clients to ask outside advisors: “How do you get paid?” and “What are all of my fees?”

• Ask the question – When all else fails, it’s always a good idea to ask, “Does this account and its investments fit my long-term goals?”

Not fully understanding when (and how) to retire

• By far, the most common question we get – “Do I have enough to retire?” It’s understandable and there are a lot of factors to consider. Even those with large amounts of savings are asking this question – they may not have a good handle on how much their household is actually spending.

• Transitioning from saving to spending – We save, save, save, for so many years. People often struggle with the idea of flipping that switch from saving to spending (and how to do so tax efficiently).

Getting the family on the same page

• How do I balance retirement savings with helping my children? – Many people struggle with how to balance their own retirement savings/spending with sharing their wealth with children for things like college, cars, weddings, homes, etc.

• Only one family member knows about the finances – Oftentimes one person in the family handles the money, and that’s okay. But it’s important for multiple family members to be educated and aware of the financial situation, accounts, and planning information. This ensures your legacy wishes are adhered to and that there are no (burdensome) surprises for the survivors after your passing.

Of course, every person and family are different. These are simply some of the more commonly overlooked opportunities we see.

If you work with us, we may have talked about one (or multiple) of these items.

If you haven’t worked with us and you think you may be falling into one of these missed opportunities, reach out to us!

“What should we have for dinner tonight?”

Do you ever find yourself asking that question? It’s a dilemma that we face regularly, whether we’re cooking for ourselves, our families, or even planning a dinner party for friends.

In this article, we’re talking about cooking and investing. Why? We’ve found that most people are quite passionate about both food and money. Both require a blend of art and science, a touch of creativity, and a lot of planning.

Getting Started: Setting Your Goals

Before cooking can begin, you need to decide what you’re making. Are you in the mood for something quick and easy, or do you want to challenge yourself with a gourmet recipe? Do you have dietary restrictions or specific nutritional goals?

In the financial world, this is equivalent to deciding your goals. What do you hope to accomplish by investing? Are you saving for retirement, building an emergency fund, or aiming for a major purchase like a home? Just like in cooking, where the end goal determines the choice of dish, your investment goals will shape your financial strategy.

Selecting Ingredients: Asset Allocation

Once you’ve decided what you’re making, the next step in the kitchen is to gather the right ingredients in the right amounts. Are you baking a cake, roasting a chicken, or preparing a salad? Each requires a unique set of ingredients and proportions.

In investing, this step is called “asset allocation.” It’s one of the most important decisions an investor can make. Just as you wouldn’t want too much salt in your dish, you need to balance your investments appropriately. What combination of stocks, bonds, and cash makes sense for your situation?

Crafting the Recipe: Portfolio Construction

A recipe is a set of instructions for preparing a meal. It outlines the right ingredients in the right proportions, combined and cooked in a specific way. Similarly, portfolio construction involves selecting investments based on their expected return and risk characteristics and how they interact together.

Imagine you’re making a complex dish. Each ingredient needs to complement the others, creating a harmonious final product. Investments work the same way. A well-constructed portfolio is a blend of different assets that together aim to achieve your financial goals while managing risk.

Our US Stock Recipe: A Balanced Approach

When creating a US stock portfolio, one of Conrad Siegel’s main ingredients would be the S&P 500. This index represents a broad spectrum of large, established companies across various industries.

To add diversity and potential for higher returns, we might add a dash of smaller stocks (Mid Caps and Small Caps) and sprinkle in some Value stocks. Academic and financial market research has shown that there is a long-term premium associated with value and smaller stocks. These additions can enhance the flavor of your portfolio, much like how spices can elevate a dish.

The Influence of Culture: Global Diversification

One of the best parts about cooking is the influence that culture has on what ends up on our plates. Our culinary experiences are enriched by global ingredients, spices, and techniques. Similarly, your portfolio should have global exposure to benefit from opportunities outside your home market.

Our global portfolio follows a similar recipe. We add exposure to smaller stocks and value stocks and sprinkle in emerging markets. This diversification helps manage risk and can offer growth opportunities as different markets may perform well at different times.

The Importance of Fresh Ingredients

Just as fresher ingredients typically result in a better entrée, high-quality investments can enhance your portfolio’s performance. Staying informed about market trends, economic conditions, and company performance can help you make better investment choices.

Conclusion: The Art and Science of Cooking and Investing

Cooking and investing share many parallels. Both require careful planning, thoughtful selection of ingredients, and a balanced approach to achieve the desired outcome. Whether you’re crafting a delicious meal or building a robust portfolio, the right recipe can make all the difference.

So, next time you find yourself asking, “What should we have for dinner tonight?” remember that the principles you apply in the kitchen can also guide you in the financial world.

The internet is all abuzz about Artificial Intelligence (AI). If you’ve tuned into any news show, website, or podcast in the last few months, chances are you’ve heard a story about AI. The clickbait titles range the gamut from the negative to the positive:

“AI Will Take Your Job!”

“AI: The Future of Healthcare”

“AI Could Be Humanity’s Last Invention”

“How AI is Revolutionizing Education”

This hot topic seems to have captured our collective imagination in a big way. But is AI going to save us or destroy us?

It shouldn’t surprise you to hear that our answer is “neither.” As with most issues the media blows up into larger stories, the answer is somewhere in the middle. No question, AI has some positive applications, and these are surely going to be a game-changer in certain fields. For example, AI-driven medical diagnostics have the potential to catch diseases earlier and more accurately than human doctors. In the realm of climate science, AI can help model and predict changes more precisely, aiding in the fight against global warming.

On the other hand, there are risks involved with AI. Concerns range from job displacement due to automation to ethical issues surrounding surveillance and privacy. High-profile voices in tech, such as Elon Musk and the late Stephen Hawking, have warned about the existential risks AI could pose if not properly managed. But that doesn’t mean it will sound the death knell for humanity.

What about AI and investing? One area where AI has not shown incredible promise is that of picking stocks. Don’t believe us? David Booth, from Dimensional Advisors, asked ChatGPT about investing, and the answer was basically “Do Not Trust ChatGPT.” This highlights a crucial point: while AI can process vast amounts of data and identify patterns that humans might miss, it doesn’t possess the intuitive judgment and foresight that experienced investors bring to the table.

Additionally, the stock market is influenced by a multitude of factors that are often unpredictable and driven by human emotions. AI, despite its advanced algorithms, can’t account for the whims and irrational behaviors of human investors. This is why, despite the potential of AI in many areas, it hasn’t revolutionized stock picking as some might have hoped.

How should we feel about AI and the future? Whatever your feelings are on AI, we believe it’s neither a reason to panic nor a reason to go all-in on an untested technology. There is an old saying in the investment world that the four most dangerous words are “This Time Is Different.” All the hype surrounding AI includes claims along those lines. It usually does not behoove investors to make big bets on the latest trends but rather to stay the course with one’s well-diversified portfolio, incorporating an overall asset allocation that matches their risk tolerance and time horizon.

AI represents a significant technological advancement with the potential to transform many aspects of our lives. Its impact will likely be complex, with both positive and negative elements. As we navigate this new landscape, it is crucial to approach AI with a balanced perspective, recognizing its capabilities while remaining vigilant about its risks. Just as with any other major innovation, the key lies in thoughtful and measured integration rather than succumbing to hype or fear.

Whether you’re a working professional who dreams of building a legacy of memories for your children, or a Baby Boomer approaching retirement, eager for a retreat that will draw your friends and family near, the second home trend has its appeal.

A second home looks different for everyone – it may be a house in Ocean City, a cabin set on a lake in Maine, or a peaceful retreat in the countryside. But no matter what it looks like, the big-picture questions are the same: Is it a smart investment? How should it figure into your long-term financial goals and retirement plan? How do you weigh the financial investment with the time and emotional investment?

Here are a few benefits and considerations to keep in mind when evaluating whether investing in a second home is right for you:

Turnkey convenience, tailored to your taste and needs

When you have a second home, you can pick up and go with little to no notice – no reservation required. When you arrive, you’re home – no need to settle in and no chance of being disappointed if your rental doesn’t match the pictures from the online ad. The home is decorated to your specific style and taste, with the amenities that you value and enjoy. Plus, all your vacation clothes, linens and recreational items are in one place and ready for use. Another added benefit is the opportunity to invest in your own equipment – whether it’s camping gear, beach chairs, kayaks, etc. – that you can enjoy year after year.

Immediate return with potential long-term value

At the point of purchase, there is immediate value in the utility of the home. To help offset maintenance and upkeep costs, you can choose to rent out the house. But, keep in mind that managing a rental takes time and resources and that you will need to fit yourself into the rental schedule. In the long-term, the house may serve as a retirement residence. Or, if you monitor the market and sell when conditions are favorable, you can aim to make a profit.

A place to make memories and build your legacy

A second home is more of an emotional investment than traditional investments, such as stocks or bonds. Whether you have a young and growing family or you’re nearing retirement, a second home can serve as a gathering place for family and friends – a place to retreat, discover new hobbies and passions, start traditions and make lifelong memories. Establishing a secondary residence also gives you the opportunity to build new friendships and community outside of your hometown. For many families, the sentimental value attached to a vacation home far exceeds its financial value.

Maintenance and upkeep costs

There are carrying costs associated with a second home, including taxes, insurance, utility bills, and general maintenance. As the owner, you are responsible when something goes wrong – whether it’s a broken window, leaky roof, or liability from an injury on the property. Some homeowners will hire a management company to clean and maintain the grounds, particularly if they plan to rent out the property – however, this additional cost can cut into revenue. Homeowner insurance rates and mortgage financing terms also tend to be higher and more restrictive.

Reduced flexibility to travel and experience new places

Keep in mind that if you’re paying a mortgage and taxes on a second home, you’re probably going to spend most of your vacation time there. To make the most of your investment, you may feel compelled to visit your vacation home as often as possible, foregoing other options. Plus, the associated costs may start to cut into your budget to travel elsewhere. If you like to explore new places and go somewhere different every summer, tying yourself down to one destination might not be the most strategic move.

Financial risk and tax complexities

As with any investment, there is financial risk involved in owning a second home. Real estate is illiquid – there’s no predicting what the economic climate will be in 20-30 years and whether conditions will be favorable to sell. Before you decide to buy a second home, consult with a trusted financial advisor to evaluate your options. A financial planner can conduct an overall cost-benefit analysis and help gauge the impact of the purchase on your long-term financial security and retirement plan. You should also consult with a CPA to evaluate the tax implications, weighing factors such as expected use and revenue from rent.