Winter 2022 - Client Newsletter
Welcome to the Cove Client Newsletter!
Every summer and winter, I will prepare a video and newsletter for you as a client of Cove Financial Planning.
In between our meetings, my hope is to keep you informed about Updates on my end and The Big 3 planning and market topics that are impacting your financial plan and investment portfolio.
Updates
Time with Family
I hope you all had a fantastic holiday season with your families and your new year is off to a great start! Vaccinated and boosted, my wife and I had the opportunity to visit her family in Lithuania over Christmas.
Though the weather wasn't much warmer than here in the Midwest, we had a great time during our visit. I’m slowly but surely learning the language, and I was able to practice in “real life.”
My sister-in-law's French Bulldog (Coco) even warmed up to me by the end of the trip.
My “Hit By A Bus” Contingency Plan
If the pandemic has taught me one thing it's that "stuff" happens. As a planner, it's important that I prepare for the unexpected within my business.
I love being a solo advisor and hope that I'm the first person you reach out to when you face money questions in your life. Working independently, while with many advantages, has one main drawback – what happens if I get hit by a bus?
You should not be inconvenienced if something were to happen to me and I am no longer able to do my job. As such, I worked hard to develop a Business Contingency Plan, as I endearingly refer to as my "Hit By A Bus Plan."
If I become disabled—or worse—pass away, I have elected the help of Rick Epple with Aurochs Financial Group in Minneapolis to facilitate my Contingency Plan. Rick is a fiduciary, fee-only Certified Financial Planner and runs his own, similarly sized and structured financial planning practice.
Rick has agreed to reach out to you and share the news of my demise (God forbid) and continue the great work we've started on your financial plan and investment strategy. Rick uses the same investment custodians and planning tools/technology that you are accustomed to using with me, and I believe the transition, however unlikely, would be seamless.
All that said, I hope you never meet Rick! I plan on doing this job for many years to come, but it's important that—like with your financial plan—I address roadblocks that could derail our progress towards all the things you're working to accomplish financially.
I will make a point to discuss this plan in more detail during our Spring Review Meeting, if we haven't yet spoken about it at that time, and I'll come prepared to answer any questions you have.
New, Fancy Tax Tool
As you know, I am always working hard to find ways to lower your taxes each year.
Since all the recent changes to the tax code, it has never been more important to take a close look at your tax situation in the context of your financial plan.
This spring, I will be introducing a brand new tax software called Holistiplan.
The tool uses artificial intelligence to analyze your tax return so we can take advantage of deductions, credits, Roth conversion opportunities, tax-efficient withdrawal thresholds, charitable giving, filing status updates and much more.
In short, this tool will allow us to take immediate action to lower your ongoing taxes.
After you file your 2021 taxes, I will request a copy of your return, and we can get to work on analyzing the most impactful actions to reduce your taxes in the current year and years ahead.
Click here to check out a Sample Tax Report (screenshot below).
The Big 3
1. Market Volatility
Last week marked the worst week in the stock market since 2020, and the volatility continued this week. The main cause of the selloff this month related to the government tightening its monetary policy. No more government stimulus checks!
In addition, the conflict with Russia and Ukraine also sent global markets into turmoil. Corporate earnings were also less rosy than expected, and more earnings reports will become available in the weeks ahead.
I prepared video on New-Year Market Volatility and What to do About It in hopes that it will help explain the recent downturn.
This is normal!
I think the best course of action is to stay the course and put the blinders on! As always, I will be working to tax-loss harvest your taxable accounts during this volatility to help you save on your tax bill.
2. Inflation
You are probably sick of hearing me talk about inflation, but October 2021 marked the biggest increase in inflation since the 1980s. Look no further than car and gas prices.
This was largely expected as a result of the government stimulus payments and “easing” monetary policy to prop up the economy and markets during the pandemic.
There are a few things you can do to maintain your purchasing power in the face of inflation. For starters, within your bond (fixed income) portfolio, we have incorporated inflation-protected securities to better protect your bonds during this inflationary environment. We will likely taper out of these when inflation returns to normal levels.
In addition, you might also consider buying Series I Savings Bonds. If you made the maximum purchase of $10,000 in 2021, it might make sense for you to buy them again with the start of the new calendar year.
The interest rate is pegged to inflation and currently pays 7.12% per year, though this will reset in April. Keep in mind, you need to hold on to these bonds for at least one year.
3. Interest Rates
The Federal Reserve has hinted at raising interest rates on a few occasions in 2022. This is largely meant to curb the recent spike in inflation.
Rates have been low for years now, and it’s a natural transition coming out of the pandemic-related economic uncertainty for the government to consider raising rates.
In response to likely interest rate hikes, if you are anticipating financing a large purchase, such as a new home or car, you may benefit by pulling the trigger sooner rather than later.
Reason being, consumer and mortgage rates tend to follow suit after the Fed changes federal rates, and you may be able to lock in lower interest rates today vs. the relatively near future.
I’m looking forward to catching up during our upcoming Spring Review Meeting. In the meantime, please let me know if there’s anything I can be helping with.
Thanks,
Ben