Preparedness

Preparedness

The idea of being prepared requires a unique mindset. It demands that we think about and plan for a situation that is much worse than our current one. Mentally and emotionally, it’s difficult to put ourselves in the middle of the hypothetical thunderstorm when it’s sunny outside. It’s easy to fall into a false sense of security that the bad times won’t be as bad or scary as they often are. This, then, leads to not actually preparing for those times, but more so going through the motions of a plan to make ourselves feel a little better. Proper preparedness requires careful thought, planning, and a realization that when, not if, things go sideways, we have already rehearsed the steps to avoid a bad outcome. 

As some of you may know from our podcast, I recently had a pretty serious health scare that landed me in UW Hospital twice for three-day admissions. Fortunately, the incredible doctors, nurses and staff have me back on the mend and feeling much better. But I can’t seem to shake the feeling of laying in that hospital bed and wondering what I could have done differently to be more prepared. My case was one with little notice and didn’t afford me any warning. That said, there were still things that I could have done to improve the outcome. 

I will admit that I somewhat took my health for granted, having lived the last twenty years of my life without a medical issue of any kind. Unfortunately, this led me to my false sense of security and failure to be proactive. Why do I need a physical, I feel great? Why do I need a primary physician, I never get sick? It was this kind of thinking that led to a lack of planning and foresight as to what could happen. My situation would have been helped greatly with a few proactive steps, such as the annual baseline of health that having a yearly physical provides, and a solid relationship with a general practitioner. 

And the idea of being prepared isn’t limited to our health and wellbeing. We should absolutely apply these lessons to our financial lives. Financial advisors preach about the importance of having an emergency fund and liquid assets for unforeseen expenses, and rightly so. This year has illustrated just how quickly things can go awry. Stable employment was no longer stable with the unemployment rate reaching into the double digits. The first half of 2020 was the litmus test for preparedness. We will get past the ugliness of COVID and the economy will recover, but we should think critically about how we handled this situation and what we may do differently the next time it happens.  

When you consider your own preparedness, I would recommend focusing on these four areas of your financial situation. Liquid assets or an emergency fund is the first area. Ideally, we would like to see at least three months of expenses built up in bank accounts or safer investments. This will help to bridge the gap of a sudden layoff or gap in employment. A mid-term investment account is the second area of focus. This is an account that is typically using market related investments, however, the money can be withdrawn without penalty. This is the backup to your emergency fund. We generally use this money in the event that our emergency fund is depleted, but we are still not out of harm’s way. Insurance coverage is the third area. Do you have short-term and long-term disability coverages and, if so, how much do they actually cover? These are questions to ask prior to needing the coverage as the amount of the benefit may not replace your entire income. You may decide to buy additional coverage if your work benefit is lacking. The fourth area is comprehensive estate planning. In the event that you become unable to make decisions on your own, it is crucial that you have powers of attorney in place. If you do not have these documents as part of your estate plan, I would strongly recommend having your plan reviewed with an attorney. 

Ultimately, we need to live our lives and not be scared about what tomorrow will bring. It doesn’t make sense to constantly live in fear. With that being said, being prepared and mentally ready is the panacea for the unexpected. It gives us the confidence that the next big thing, whatever it may be, won’t catch us off guard. They say that an ounce of prevention is worth a pound of cure, and I now have a much better understanding of that phrase. Be conscious of what might happen, think through the different scenarios and make changes to your current situation to be a little more prepared. Trust me, you will be happy that you did. 

 

Nate Condon

Financial Planning for Special Needs Families

Financial Planning for Special Needs Families

There can be many challenges for families with medically complex or special needs children: emotional, physical, and financial. Some considerations include increased medical and care costs, an inability to qualify for certain types of insurance or social programs, and planning for their life as an adult if they are unable to financially support themselves or live independently. This blog is a follow up from a Gimme Some Truth podcast request and looks to touch on some of the aforementioned topics.

Raising children is expensive; the USDA estimates that middle-class, married couple families can expect to pay close to $240,000 per child by the time the child becomes an adult (that number is excluding college!). It may be more expensive to raise a special needs child. Autism Speaks estimates a lifetime cost for a person with autism, for example, can be $1.4 – $2.4 million.

About half of US children with special health care needs are covered by private insurance while another half are covered by Medicaid (with 4% uninsured). In many cases, Medicaid covers medical and long-term services that private insurance does not. There are a number of families that find themselves unable to qualify for Medicaid while their private insurance may not provide the coverage that they need for their special needs child. There are programs such as the Katie Beckett Program that helps these types of families “fill the gap”. The Katie Beckett Program allows families that have too much assets or income to qualify for Medicaid still have access to Medicaid programs while their child still lives at home, even if they have private insurance.

If a special needs child has an inability to work or live independently, there will have to be a plan in place for the care and financial wellbeing of the child. Establishing a plan for guardianship (if the parents were to die) of children is highly recommended whether there is a special needs child involved or not. However, additional care and planning for someone with special needs can go beyond childhood and last their entire lifetime.

There are a number of strategies on how to protect someone with special needs financially. One way to support someone with special needs financially without putting them at risk of not qualifying for programs such as Medicaid is a special needs trust. The trust is set up to benefit the person with special needs; the funds in the trust can be used to pay for their needs such as medical, equipment, rehabilitation services, and much more. Special needs trusts can be funded from gifts by the family or even from life insurance proceeds. One thing to note is that the trust should be administered in a way that the trust pays the service providers directly, not the beneficiary (otherwise the beneficiary may be at risk of losing public assistance). Engaging with an estate attorney with experience in special needs and disability planning is a good place to start. One resource is Wispact, which has compiled a list of attorneys that have a focus in this area. 

Each family is unique; some concepts mentioned may apply to their needs, but they might not. This blog post is meant to cover a high-level, informational overview of special needs planning and to include links to some resources that were mentioned in the podcast. If you or someone you know would like to have a more in-depth discussion around their specific scenario, please reach out. We welcome the conversation.

 

Mitch

The Slow Pace of Fast Change in a Post-COVID World

The Slow Pace of Fast Change in a Post-COVID World

One of my favorite (perhaps apochryphal) quotes comes from the French novelist Gustav Flaubert who, while surveying Paris during the Franco-Prussian War of 1871 declared, “After all of this, we will still be stupid.” And while Flaubert’s view of human nature is perhaps slightly more negative than mine, I do think that one of the things at which we excel as a species is overstating the long term effects of recent or current events.  

That quote came to mind when I saw this morning’s headline from the Wall Street Journal: “Europe Lease Deals Suggest Traditional Office Will Endure in Post-Covid World.” The assumption at work in this headline is that a universally accepted truth in a post-COVID world has been that real estate rentals were going to take a hit, as businesses would all shift to work from home via Zoom and the various other productivity apps that link us. However, as this article suggests, the shift away from traditional offices to full-time remote working will likely not happen overnight.  

We have seen a sharp decline in travel in this pandemic, since even in the best circumstances, airplanes tend to be petri dishes of disease. However, this is not the first time that the industry has faced an existential crisis. Recall the predictions about the industry’s demise during the climate of fear immediately after 9/11. Students of history will remember that not two months later, a plane crashed outside of New York City, and, in December of 2001, the infamous shoe bomber was also arrested, compounding the fear of flying that was already in the atmosphere. Similarly, in an article in the Financial Times, airline experts believe that the industry will change– more point-to-point flights, perhaps fewer giant planes– but that ultimately, according to former head of British Airways Sir Rod Eddington, “if we get a vaccine, people will be back to normal in a year.”

None of this is to say change won’t happen– perhaps men will start washing their hands after going to the bathroom more— but the changes will be more subtle and less dramatic than we think. And, like taking our shoes off when we board airplanes, they will likely soon become the new normal.  

Perhaps the greatest confirmation of the fact that the ways of the world will be slow to change is that I, who passionately embraced working from home (almost as much as my dog), am writing this to you from our office on the corner of Glenway and Monroe.    

 

Keith Poniewaz

 

Don’t Skip Your Vacation

Don’t Skip Your Vacation

“I need a vacation!” 

Growing up, these are the words I used to hear from my parents when the inevitable stresses and pressure of work, kids, and life would get to them. As a child, I loved to go on vacation, whether it was up to northern Wisconsin or down the East coast to a beach. Some of my greatest memories are from those vacations. Going to the beach, enjoying a campfire, and running around Disney World with my siblings are experiences that I will never forget. Now that I’m older (much older!), I have the ability to go on vacations that I hope will have the same impact on my children. So, why, when they have the means to do it and there are so many benefits to them, is it so difficult for some people to actually take that big vacation? I find myself having this conversation with clients routinely, and there are several reasons that I have found.

According to the Oxford English Dictionary, the first appearance of the word “workaholic” occurred in the Toronto Star in 1947. Many Americans have a hard time actually taking the time off due to an inability to “shut out” their work. They find their identity in what they do, and it becomes an addictive, singular focus. I routinely work with people who have a tremendous amount of unused, “banked” vacation time that they plan on taking as a lump-sum when they retire, instead of using it to take paid rest and relaxation or a trip to a place they’ve always wanted to go. They lament not taking vacations in the prior years, but when it comes to the future, it’s one of the first things they want to incorporate into their financial plan in retirement.  Often, they carry the same habits into retirement and find a myriad of excuses as to why they can’t or shouldn’t go on vacation. They fear the cost, their lives are too busy, and sometimes, I hear those dreaded words, “We are going to go NEXT year.” At that point, I like to remind my clients that this is something that’s going to be a good thing for them, something that we have planned for, and that it’s important to execute on that dream we discussed as we laid out their plan. I’ve even gone so far as to retain a travel agent to help facilitate a “planned-for” vacation when I sensed the clients hesitation. Upon returning, they let me know that it was one of the best, most memorable experiences of their lives.  

According to Project Time Off, a survey from the United States Travel Association (USTA), there are 768 million unused vacation days in America. As financial planners, we work with clients who are currently working, planning to work longer in their careers, and retirees. The topic of vacation is generally one we put into the “goals and dreams” category, but there are several studies indicating that people who regularly take vacations, or even staycations, lead more productive and happier lives. It’s no accident that vacationing creates memories, whether you go on a sabbatical by yourself or take a vacation with your family and friends. When you have a daily routine, the brain tends to go on autopilot, collecting fewer memories. It’s the unusual instances, the aberrations we remember and store for life. Planning for and executing on taking a vacation can be difficult, but we find it to be worth the work.

If you have worked with us, we have more than likely had the conversation about planning for your goals and dreams. Since vacations can have a high financial cost and commitment, let us help you to incorporate them into your plan as well as prioritize those goals. We have resources that can project what the future costs will be, what taking the big vacation now will do to your long-term goals, as well as trusted resources in the Madison community to help you plan your trip. If you feel like you “need a vacation”, or want to plan for the ones you’ll be taking in the future, we can discuss it when we meet. All we ask in return is that you share some of the great stories, happy photos, videos, and memories that will last a lifetime.

Jonathon Jordan

Post-Lockdown Changes & Predictions

Post-Lockdown Changes & Predictions

It is a rare event that impacts the entire world. COVID-19 has changed our way of life in the short term, with long-lasting ramifications yet to be determined. In the context of our business at Walkner Condon, we have some items that we believe will be permanently affected and some guesses on others.

More Virtual Meetings

We have offered video appointments for a number of years now, and with the exception of Keith (who works with expats across the globe), very few of our meetings have been conducted virtually. We expect this to change, as our clients and prospective clients have increasingly become much more comfortable with Zoom meetings. With the added comfort of our clients, and frankly, the comfort of our advisors as well, we’ve found that we are able to offer a very similar experience to an in-office meeting. We plan on continuing to offer these meetings, and are likely to schedule “home office days” where we conduct our meetings virtually in the future.

Screen sharing allows us to work collaboratively with our clients in many different ways – including administrative tasks where paperwork is involved, as well as sharing financial plans and allocation information. If you haven’t seen us in a while, now might be a great time to schedule that Zoom meeting! Additionally, for those clients that may have been hesitant to recommend us to their friends and family members outside of Dane County, we want to let you know that we are well-equipped to help them as well, and would welcome the introduction.

Increase in Customized Asset Management Offerings

When you are able to take time to work on your business instead of in your business, that’s when we have found unique solutions for client needs. In analyzing feedback from clients and meeting as an investment team, we will be building out customized portfolios using individual equities. Currently, we are looking at developing a few core models, focusing for now on U.S. large cap stocks with strong balance sheets, as well as U.S. small and mid cap stocks. In the future, we anticipate rounding these out with additional models, including a focus on ESG (environmental, social, governance) factors and international stocks.

The barrier to entry on many of these in the past has been “ticket” charges charged by the custodian per trade, as well as fees by outside investment providers for these strategies. Our team, spearheaded by Keith Poniewaz and Mitch DeWitt, have been working on developing these in-house to eliminate those manager fees. Additionally, by  lowering trading commissions down to very low in some cases and zero in others, this strategy becomes significantly more feasible. 

There is much to write about the benefits of these strategies, including the ability to manage taxation, lower or eliminate expense ratios, and offer greater customization. Keith and I discussed “direct indexing” about a year ago on Gimme Some Truth, and will expand on this topic in a future blog post.

Probable: The Death of the Suit

As we’ve all become accustomed to working from home, the dress code has become increasingly relaxed. It’s certainly not uncommon to see people in sweatshirts and hats conducting meetings, and it’s become an anomaly to see someone show up to a Zoom meeting in something as formal as a dress shirt. While a return to the office will likely send us back to business casual, it’s difficult to imagine anyone reaching for a suit anytime soon.

Possible: The Elimination of Handshakes

Certainly a more minor – but still important – interpersonal moment may be coming to a close. With a greater focus on the communication of viruses, could this be the end of the handshake? As we enter a post-lockdown world, it seems like a certainty in the short term that handshakes will be out of fashion, and polite waves or nods will become the preferred greeting. (Though, if elbow-bumps get too popular, we reserve the right to revert back to good ol’ fashioned handshakes!) 

Probs Not: Zoom Happy Hours the New Normal

I’ve been on a few Zoom happy hours, which have been kind of nice to do with people I haven’t been able to see for a while. It’s also brought together family members and friends that live far away. But to think that it will replace your favorite dive bar and those greasy burgers? Doubtful, at least in Wisconsin.

Our In-Person Reopening Plan

Our In-Person Reopening Plan

As the country begins to reopen gradually, here in Dane County it appears that the “safer at home” restrictions will lift after Memorial Day. We have used some guidance from the Wisconsin Economic Development Corporation (WEDC) to assist us in preparing for our return to the office, and are also working on developing written policies to comply with the Forward Dane reopening plan.   

Clients will be allowed to again schedule in-person meetings with us at their convenience. We have moved the seating areas apart to socially distance. We will do our best to refrain from sharing items, such as passing iPads to each other or office supplies, like pens. We also will not be offering water or coffee in our meetings, so we kindly ask that you bring in your own beverages. 

We will not be shaking hands or hugging clients (as much as it pains us!). Clients will not be required to wear masks, but they may wear them if they choose. We will disinfect chairs and wipe down surfaces after each meeting, and our staff will communicate with each other to avoid back-to-back meetings in conference rooms. Additionally, we will attempt to keep clients from having contact with other clients in waiting areas by utilizing both office spaces inside our building.

Our staff will be responsible for disinfecting their workstations as well as washing their hands after any meeting and throughout the day. We will also be encouraging our staff to work remotely from home offices on days where we don’t have in-person meetings scheduled. We will attempt to keep a six foot distance between workstations, as well.

If you are concerned at all about coming in for an in-person meeting, we recommend that you schedule a video conference (“Zoom meeting”) instead. As COVID-19 made us “safer at home”, we all have lots of practice on video conferencing! We believe that with screen sharing and video, we can help give you a virtual experience that is similar to an in-person one, without the drive time or worry. It is our intention to continue to offer 1-2 dedicated days of video conference meetings per week.

As we all continue to navigate through this pandemic, we assure you that we will continue to try to keep you as safe as possible when meeting at our office. For those of you who choose to use a virtual meeting structure, we pledge to you to make your experience as equal to an in-person one as possible. In the end, it’s about giving you choices and meeting your needs. We welcome your feedback and wish you all good health.

 

The Walkner Condon Team