Having studied economics academically in undergraduate and graduate courses, then living and helping clients through the economics of U.S. Healthcare system through many surgeries and healthcare issues, I would offer the following adjustment to the U.S. Healthcare system.
Big changes happen when it is time to retire. Your financial life such as sources of income and expenditures can change. Where do you begin to manage it all? When it comes to retirement cash flow there are 2 main ideas to understand: cash flow and liquidity.
Cash flow is the amount of money you have coming in and out each month. Income includes social security, annuity income, pension income, investment income, etc. Expenses could be your living needs (housing, groceries, HOA fees, taxes, insurance, vehicle) and other expenses such as entertainment, travel, and repairs.
Liquidity is defined as turning assets into cash. The more 'liquid' it is the easier it is to turn into cash. An example could be selling mutual funds, converting insurance policies into cash, selling art or coin collections to pay for your expenses. It is a balancing act of sorts as you don't want too much money in cash and then be missing out on potential growths.
To start, you need to replace your weekly/bi-weekly income in retirement. The replacement income could be social security, pension disbursements, part-time employment, or real estate rental income. With multiple sources of income, it is convenient to set up direct deposit or remote banking (scanning checks for deposit with your smart phone). Keeping your income organized will help you easily manage it all.
Many times, you will have excess cash from your multiple sources of income. In this case, use these tips to invest the cash. For living expenses, invest in lower-risk, high liquid funds such as money markets. For your short-term savings goals, consider treasury bonds or FDIC-insured CDs with maturities that fit the same date you need the money. For emergencies, make sure to save 3-6 months of expenses in case any unexpected expenses arise.
Another thing to keep in mind is that once you reach the age of 70 1/2 there are Required Minimum Distributions (RMDs) you must take from your retirement account. You have until December 31st each year to take your RMD. Consider automatic withdrawals or a one time distribution to avoid paying a penalty for forgetting to take your RMD.
'The key to managing cash in your retirement is to make sure your money can be easily accessed, moved, and invested according to your needs, and, ideally, to do so in a way that mitigates overall fees' according to Fidelity Viewpoints. Make sure to take advantage of ways to streamline how you manage money coming in and going out. Your cash flow will change during the course of your retirement so make sure to contact Brien at Traditions Wealth Advisors at Brien@TraditionsWealthAdvisors.com or 979-694-9100 to manage your financial resources.
Austin Trip 7/23/19 Reflection by Madison Flores
On Tuesday, Brien and the current Aggie student interns at Traditions Wealth Advisors road tripped from College Station to Austin for the day. We were able to meet with Liberty Park Capital Management and Dimensional Fund Advisors in Austin to get more information on what their companies are all about. We met with Chuck Murphy of Liberty Park Capital Management who was an intern for Traditions Wealth Advisors back in 2004. Chuck graduated from Texas A&M and went straight to Wall Street. After several years of researching, Chuck was named the #1 small cap researcher on Wall Street and was written up in the Wall Street Journal. He then parlayed that honor into his own firm back in Austin. Chuck gave us insights on small-cap funds and what he focuses on to give his clients the best possible returns. Their expertise in the field helped us gain knowledge on what to look for when adjusting stock recommendations and why. He was also able to give a broader definition of what a hedge fund can look like which will help when looking at news that could be giving off construed financial information. He helped us learn how to separate the noise from what information is important for investments.
We also visited Dimensional Fund Advisors. They let us investigate their business model and how they manage their systematic investment approach. By listening to their firms take on economic indicators, it helped broaden the scope of what to pay attention to in the news as well as what economic trends have been historically important.
Both firms brought two different ideas together and gave us insights on what to focus more of our research on to make sure the necessary information is being taken into our clients' portfolios.
Pictured above from left to right: Meredith Storey (current TWA intern), Madison Flores (current TWA intern), Charles Murphy (former TWA intern from 2004; current portfolio manager at Liberty Park Capital Management) and Spencer Fredericks (current TWA intern)
As the Accounting Intern here at Traditions Wealth Advisors, Dan assists Brien Smith (CEO) in managing different functions of TWA. Dan handles the bookkeeping, cash flow forecasting, and other accounting related functions around the office. He is dedicated, precise, and loves to work within Excel.
Dan is currently a senior accounting major at Texas A&M University. He is enrolled in the Professional Program in Accounting (PPA) at Mays Business School and will receive a bachelor’s degree and a master’s degree in accounting. Before his graduation in 2021, Dan hopes to get his CPA and secure a career at a Big 4 accounting firm.
In addition to working at Traditions Wealth Advisors, Dan is involved with multiple organizations at Texas A&M. He is a counselor for Fish Camp as well as a member of Ol’ AGS, a men’s organization on campus. In his spare time, he likes to golf, watch sports, and spend time with his friends and family.
When visiting the British Isles back in late March during Spring Break of this year, we decided to take the train from Edinburgh, Scotland to London. We sat at a table with two lovely sisters that were natives of Edinburgh. Both ladies were senior citizens and one of the sisters had just had a hip replacement. With all the political talks about “Medicare for all” in the U.S. lately, my ears perked up when she mentioned her surgery. When I casually questioned her about the surgery, she said it was her second surgery for the same hip replacement, as the first one was not successful. I furthered queried her about the procedure. She said it happened in London. Further she did not know who the surgeon was, as they do not pick the surgeon, it is whatever surgeon happens to be on call at that time. The Scotsman lady, who was now a London resident, said she either paid very little if anything for the surgery. Nor did she have to pay for the second surgery to correct the first one. I asked her how she was feeling now after the second surgery—she said o.k. but was still recuperating. I also asked her if she was able to pick the hospital, since she could not pick her surgeon. She said no, the government, the National Health Service or NHS dictates everything.
When it comes to visiting the doctor, the last thing people want to think about is the cost of services. Often, patients are more worried about when they’re going to see the physician or undergo the procedure. Insurance plays a role in both situations. Many countries approach insurance slightly differently, but the United States and the United Kingdom find themselves on opposite sides of the health care system spectrum. While both face financial issues, the US and UK health care systems differ greatly, especially when it comes down to choice.
America: The Great Experiment
Across the political spectrum, most people would agree that the American health care system is broken. Private insurance companies run the industry with 67.2 percent of citizens receiving private voluntary health insurance (source). With the premium-deductible paradigm, most individuals and families face high out-of-pocket costs—averaging out to just above $1000 per capita per year (source). Furthermore, since a majority of health industry income is collected from insurance companies (some say over 80%, but my calculation has on average the insurance paying 57% of the bill), hospitals and doctors can see insurance companies as their clients rather than their patients. With this as the case, health professionals inflate their prices, knowing insurance companies will only pay for a fraction of the actual bill (source). In this way, we have seen health industry prices increase at exorbitant rates.
That being said, US citizens also have a great amount of freedom in deciding what level of insurance they wish to pay for. These vary from no insurance to insurance paying for 90% of medical expenses (companies compensate by charging higher premiums). Furthermore, individuals and families can choose which insurance company they use for service. With this choice, they can align their values and beliefs with a company that has similar standards. In this way, they more easily can receive the coverage they desire.
Great Britain: How long will it last?
Insurance in England only has one name: NHS – the National Health Service. Individuals pay into the system via tax whether or not they use medical services for that year; however, when they walk into a hospital, there is little to no out-of-pocket costs at the point of service (there is some logistics that must be worked out for the NHS to cover the cost). The Commonwealth Fund (a US-based think tank) ranked the UK as the top health care system among the top 11 affluent countries (source). The group found the NHS had the best care process and equity among clients and the third best access to care and administrative efficiency. The Guardian hinted at a warning in a recent article, noting that with a growing aged population, the government may have trouble in the future continuing to manage these costs and services (source).
Another weakness that researchers have found regards patient outcome. In the same Commonwealth Fund report, the group found the UK ranked 10th in terms of health outcome (the US placed 11th). What’s concerning about this is the disturbing logical implication of having a government-run insurance policy: the government gets to say who gets treated when. Now, there are many stories that illustrate the great work doctors can do under the NHS system (source), but there are other stories that point to the worrisome dangers of a monopolized insurance system. The Guardian reported in 2016 that an NHS watchdog found that NHS-run hospitals sent home elderly patients without informing relatives close to them (source). Furthermore, another think tank, the Nuffield Trust, found that the UK does not compare well to peers when it comes to people who die from situations that could benefit from medical treatment (source).
It comes down to choice
Ultimately, the difference between the two health care systems is who chooses which non-emergency services get conducted. In the US, the burden falls mostly on the insurance company who dictates (to a large degree) what the cost of the procedure is. In the UK, the burden falls on the NHS (aka, the government) since they manage the funds to services balance. Both systems are broken (with perhaps the US market more fractured than the UK market) and both have financial troubles. It seems that the individual has more of a choice in the United States with a say in who insures him but likely may have to pay more. Contrarily, an individual in the United Kingdom has lower at- time cost but has less freedom to receive care and also probably receives inferior care.
I for one am glad to be in the United States, where although I may have to pay more, I at least have more of a chance to choose.
No matter how large or how small your family is, you need to have a plan in place for when it comes to finances, your children, possessions, and healthcare. The most important thing is to put it in writing according to Stuart Ritter, T. Rowe Price financial planner. Take the stress off of your loved ones with a plan in place by asking yourself these important questions:
Source: T. Rowe Price Securing Your Family's Future
Spencer Fredericks ‘19
Financial Analyst Intern
As one of the two financial analyst interns at Traditions Wealth Advisors, Spencer specializes in investment research on behalf of Brien for all TWA clients. He conducts research on various asset classes and investment vehicles including traditional investments like stocks, bonds, mutual funds, ETFs, and CDs, as well as alternative investments such as master limited partnerships, hedge funds, private equity funds, real estate investment trusts, and opportunity zone funds.
Spencer graduated in May of 2019 with a Bachelor of Business Administration (BBA) in Finance from Texas A&M University. In addition to his degree, Spencer completed the Chartered Financial Analyst (CFA) Level 1 Exam in June. He hopes to pass all three levels to receive his charter.
Spencer hopes to work in the field of financial consulting or investment management, he is currently applying and interviewing for positions both in Texas and across the U.S. Having been born and raised in College Station, he hopes to find an opportunity to have a new experience in a bigger city upon graduation.
In addition to his work with Tradition Wealth Advisors, Spencer is a member of the Financial Management Association and volunteers his time with the Brazos Valley Senior Center and The Big Event. He enjoys spending time with friends and family as well as accumulating various hobbies such as mountain biking, playing pool, reading books, and cooking.
“I’ve never been around a more giving and genuine group of people...Texas A&M is the best-kept secret in America.” -Coach Jimbo Fisher addressing a crowd of over 750 at the @BCAMC Coaches’ Night at Kyle Field.
Traditions Wealth Advisors helped sponsor the event, Coaches' Night, to kick off the 2019 Aggie football season and raise money for student scholarships to TAMU. Gig'em!
We all want what is best for our children and grandchildren. At an early age, we teach them to eat the right foods, we place them in the best preschools, we encourage them in grade school and high school, and we cheer them on when they excel in extracurricular activities.
Put another way, we want our children and grandchildren to succeed in all aspects of life.
As our kids wind their way through high school, most of us want them to attend college. For some, it’s not just about going to a university but being accepted by and graduating from the “right one." Unlike when we were growing up, the pressure today is enormous.
The cost of college has soared. In 1985, the annual tuition, fees, room and board rates charged for full-time undergraduate students at a four-year public university ran $3,859. Thirty years later, the cost had ballooned to $19,189, according to the [[https://nces.ed.gov/fastfacts/display.asp?id=76 National Center for Education Statistics]]. For private schools over the same period: $9,228 to $39,529. That’s a painful hit to the wallet.
Fortunately, there are vehicles that can help ease the burden.
The 529 college savings plan:
One such vehicle is the 529 college savings plan. What is a 529 plan? A 529 plan is sponsored by the state or a state agency. It allows someone to save for college (or kindergarten–12th grade).
Before we jump in, let me say that this is a high-level overview. If you have any questions about college savings or a 529 plan for your son, daughter, or grandchildren, please feel free to reach out to me or my team. We can help get you started and maximize the long-term benefits.
1. Pay for qualified educational expenses. One can use the savings for tuition, books, and education-related expenses at accredited universities, vocational-technical schools, and eligible foreign institutions. Funds accumulated in the plan may go to public, private, and religious schools.
2. Tax advantages abound. While there is no deduction when cash is deposited into a 529 plan, any earnings are not subject to federal taxes, and qualified withdrawals are exempt from taxes.Some states also offer full or partial deductions or credits for 529 contributions.
3. Maintain control of the money. Unlike a UGMA account, in which the child will eventually take control of the accumulated funds, you remain in control of the plan. You make sure it goes toward its intended use.
4. Set it and forget it. Most 529 plans have a “set it and forget it” feature. You make the automated investment, and an outside company manages your investment.
5. Just about anyone can open a 529 plan. Contributions are not limited by the donor’s income. Earn $50,000 per year and you can set up a 529. Earn $50 million per year and you also qualify.
6. There is no maximum annual contribution. Unlike with retirement accounts, the IRS doesn’t specify an annual maximum contribution. There are no age limits on contributions. Total contributions range from $235,000-$520,000 depending on the state. While most account owners won’t run afoul of the rules, there are some specifics we can discuss if you are considering a large, one-time contribution.
7. 529 plans complement FAFSA. A 529 plan helps maximize your ability to pay for college without jeopardizing financial aid. The 529 account is the parent’s asset, much as if you had saved the money under your own name. However, with the 529, you’ll receive tax benefits that wouldn’t accrue if it were in a taxable account under the parent’s name.
While 529s are an excellent vehicle, no plan is perfect. So, let’s look at some potential pitfalls.
1. The plan does not guarantee it will cover the full cost of a four-year college education. However, the earlier you get started, the better. We can provide you with various scenarios, i.e. contribution levels, compounding, inflation, etc.
2. Investment options may be limited. You are not in complete control of the plan. Therefore, it is important to invest in a plan that offers flexibility and low-cost funds.
Do you want an age-based portfolio–one that begins with a more aggressive mixture of stocks versus bonds and gradually shifts to a more conservative mix as your child approaches 18? Or will you choose a static asset allocation? If so, you’ll want to rebalance on a regular basis.
3. You don’t need the savings in your 529 after all. What if Johnny received a full ride to college? It’s a high-class problem, but still, alternatives must be considered.
4. You must time your contributions and withdrawals carefully. Contributions must be made by December 31, though states that offer tax advantages may extend the deadline to April 15. And, make sure that any withdrawals coincide with qualified expenses in that year.
As always, let me emphasize that it’s my job to assist you. We do not subscribe to a one size fits all approach. If you have questions about college savings or 529 plans, we’re just a phone call away at 979-694-9100 or e-mail us at Brien@traditionswealthadvisors.com
Raoul Bascon serves the clients of Traditions Wealth Advisors as the Financial Computing Intern—beginning in May of 2018. In that role, he has verified financial data and produced reports that Brien uses to help illustrate each client’s financial status. He has also helped the firm transition to a new financial software system that will automate much of his role’s functions and provide additional value for our clients.
Raoul received a Bachelor of Science in Mathematics from Texas A&M University in 2017 and is currently enrolled in a Master of Financial Management program, expecting to graduate this May. He completed the Trade, Risk and Investment Program (TRIP) in August 2018, which gave him exposure to the energy industry with two internships (one at an oil company and the other at a financial derivatives firm) and countless hours of interactions with industry professionals. After graduation, he will begin work as an Analyst for Munich RE Trading (the location of his second internship through TRIP), focusing on valuing weather derivatives.
Beyond work, Raoul volunteers with St. Thomas Aquinas and has been involved in a number of student organizations at St. Mary’s Catholic Community and Texas A&M University. He also is engaged to be married on June 29th of this year. After the wedding, Raoul and his bride-to-be, Carolyn, will live in Brenham: the halfway point between his work in The Woodlands and her Master Program for Professional Counseling in Round Rock.
When he’s not driving, studying or working, you can find him playing volleyball, training for a marathon, praying, or enjoying the company of friends.