Making Up For Lost Time: Prepping for Return to Normal Spending in 2022

Making Up For Lost Time: Prepping for Return to Normal Spending in 2022

I originally wrote this blog post in July 2021. I am updating the post as a great deal has changed in our lives since last summer. We are still dealing with the impact of COVID on a daily basis; albeit, it is in many different ways. Our consumer habits are much closer to pre-pandemic patterns. We are dining in restaurants and shopping in stores. Travel is returning to more normal levels as well. All of that said, we are still a country very much dealing with this virus. Our hospitals are better equipped to handle life-threatening cases and, fortunately, those case numbers are falling. We are still seeing friends and family members test positive at a high rate, and we are frequently utilizing home testing kits to determine the cause of symptoms. I believe that most people are coming to the realization that COVID will be us, in some form, for many years to come.    

Through the first year and a half of the pandemic, we heard the phrase “new normal” ad nauseam. Pundits and media types love to tell us that this is a different time, situation, or environment than we have ever seen before. I tend to look skeptically at these prognostications because history has a way of repeating itself. However, this won’t be a new normal as much as a move toward “back to normal,” not only in our personal and social lives but also in our financial lives. 

In the chart above, 2020 became one of only two years since 2000 that Americans’ personal savings rate eclipsed 10%. Click here for the interactive chart. Source: Statista.com

Savings Rates Are Off Of Their Early Pandemic Highs

We all were forced to adjust our lives and adapt to a COVID world. We all stayed at home more and limited our exposure to crowded situations. A silver lining emerged from this very difficult period in our lives by way of our personal savings rates. Personal savings rates in the United States skyrocketed in 2020. The savings rate in 2020 was almost double that of 2019 and more than doubled the respective rates of 2016 and 2017

That’s changed over the last year. Savings rates have fallen off of their pandemic highs, dropping in all but two of the last 13 months since March 2021 and trending below the 10-year average. The recently released rate for the month of April shows that the savings rate for Americans hit its lowest level since 2008 (4.4%). This is likely a result of people’s spending habits returning to pre-pandemic levels as well as an increase in the cost of goods. Inflation is having a very real impact on household budgets. For this reason, we should review our cash/emergency savings levels and determine if we need to allocate more of our income to short-term savings accounts. The economy is facing headwinds that we haven’t seen in some time, and we should all be prepared for a possible slowing of economic growth. 

The Challenging Beginning to 2022

The domestic stock markets are dealing with myriad economic issues as we near the mid-year point. Supply chain issues caused by COVID shutdowns are still generating disruptions with companies trying to deliver finished products and keep shelves stocked. As a result, companies are having to forecast lower revenue projections, and the equity markets are reacting negatively. This, in conjunction with a bond market facing strong indications from the Federal Reserve of significantly higher interest rates, is stressing the fixed income markets and yielding an uncertain second half of 2022. The country is also seeing a shift away from work-from-home employment to workers going back to offices, stores, and production facilities. This puts pressure, particularly on technology companies such as Zoom, DocuSign, and others, which soared in the WFH environment and are now struggling to adjust to employees traveling back to work.

Assess Your Financial Situation 

Your financial life is in a different place than it was at the beginning of 2020. 

We are all attempting to find the correct footing for ourselves and our families in this post-pandemic, but still lingering COVID world. From a financial perspective, it is important to keep in mind that correctly positioned emergency funds are imperative. It is difficult to predict how 2022 will finish and where the economy will sit at this time next year. For that reason, reviewing your financial plan and understanding the impact of recent market downturns have had on your plan is critical. Prioritizing your financial situation during these times will most likely produce better results as the country hopefully gets beyond this current phase of COVID. 

Nate Condon, Financial Advisor

Don’t Buy Things You Can’t Afford

Don’t Buy Things You Can’t Afford

I grew up watching Saturday Night Live with my dad, and there are a couple of skits that I will remember forever. Who could forget Chris Farley dancing with Patrick Swayze as they auditioned to be Chippendale dancers? Or hearing Matt Foley (Chris Farley again) telling a couple of kids that they would end up living in a “Van down by the RIVER!!”? One of my all-time favorites though was with Steve Martin, as he and his wife were trying to figure out how they could get out of their mounting debt. As they hem and haw about their financial situation, Chris Parnell comes behind them and recommends they read the self-help book that can help them finally get on top of their finances. It’s called “Don’t Buy Stuff You Cannot Afford!” They look at him like he’s crazy as they ask questions like “If I want something but I don’t have the money, shouldn’t I buy it anyway?” and “But then shouldn’t you buy it, and then get the money?” The response was, “No. It’s in the book. It is only one page long.” Don’t buy stuff you cannot afford! 

This hilarious skit is something that many clients, and people that I come across, face every day. They have to make a decision on what they should do when they want something but may not have the money to buy it. It’s a great rule to follow when you are weighing the pros and cons of any purchase. If you can’t afford it, you probably shouldn’t buy it. Many young people put themselves in the hole financially when they get their first taste of credit in the form of a credit card. It seems so easy when you can just buy new clothes, a set of golf clubs, or a nice dinner without paying cash or watching the money leave your checking or savings account. Then, the bill comes, and you don’t have the cash inflows to pay it off. Interest charged on these purchases often begins to compound and make the debt unbearable. It causes stress, depression, anxiety, and regret. 

That presents the question – should you refrain completely from making expensive purchases or buying things that could put you in a tight financial position? Absolutely not! Money is made and meant to be spent. But it is a good financial rule to use a budget, save by paying yourself first, and plan for a purchase that satisfies your want or need while remaining affordable. You can also capitalize on the rewards points that are offered by credit card companies by using the card to pay for the purchase. At the end of the month, you can pay off the expense because you had the money available. These types of expenditures are often the most enjoyed because there was a process to save for them, and they are “paid for.” Many people have to use credit cards when there is an emergency, or they have a large purchase that is immediate and their compensation or income is not regular. That is why our credit is so important to managing the fluctuating things that go on in our financial lives. Using credit but not carrying over debt can be a very good thing!

If you want to have this ability to balance your current wants and needs while building for the future and retirement, we would be happy to meet with you. Although we have more to offer in terms of financial planning and putting together a personal financial strategy for you, it can truly be summed up in one of the most influential books never written – “Don’t Buy Stuff You Cannot Afford!”

Jonathon Jordan, CFP®

What is a Certified Financial Planner®?

What is a Certified Financial Planner®?

Whether you’ve had a financial advisor for years or you manage your own financial plan, you’ve likely seen the acronym CFP® before, even if it’s just been in passing. So, what does it mean and why does it matter? 

What is a CFP®?

CFP® stands for Certified Financial Planner® and is a certification acquired through the Certified Financial Planner Board of Standards, a nonprofit organization that serves the public by establishing and maintaining professional standards in personal financial planning.

Because of the sheer amount of financial professionals – and the fact that anyone can call themselves a financial advisor (and many iterations) – one of the CFP Board’s main priorities is to provide a certification that is the recognized standard of excellence. With thousands of hours of practical experience required, the CFP® certification is by no means easy to achieve. And the work isn’t done once the certification is complete. A CFP® must adhere to a rigorous set of requirements, one of which is committing to the fiduciary duty to act in clients’ best interests.

While there are a number of factors to consider before choosing a financial advisor, the CFP® designation can be a helpful guide in that decision. 

Certified Financial Planner® – Quick Facts

  • 87,784 Certified Financial Planners®
  • 76.8% are male
  • 23.2% are female
  • Wisconsin ranks 19th in the number of Certified Financial Planners® available
  • There are 1,707 CFP® professionals in Wisconsin
  • CFP® certificants must prove themselves in 72 area of expertise and log thousands of hours of practical experience

Walkner Condon Financial Advisors is fortunate to have four CFP® professionals on our team, serving a variety of clients, whether they live in Madison or abroad. Below you will find more background on each CFP® at Walkner Condon and their areas of expertise. 

Walkner Condon’s Certified Financial Planners®

Jonathon Jordan is one of the Partners at Walkner Condon and a Certified Financial Planner®.  He decided early in his career that simply selling investment and insurance products did not offer the full value of what a financial advisor should provide to their clients.  After going through the rigorous coursework and classes, he began using this wealth of knowledge to help the clients he was already working with as well as many others since.  He works primarily with families and businesses on their long-term goals such as retirement planning, college savings, estate planning and other philanthropic goals. He is giving back to the financial advisor community by becoming a CFP® mentor for others that have decided to work towards this esteemed credential. Link to Jonathon’s no-cost, no-obligation initial “fit” meeting.

Mitch DeWitt works with individuals and families looking to devise a plan of attack for their financial goals as well as an execution strategy. Typical clients of Mitch’s include those in technical fields such as engineering, software development and programming, or healthcare, among others. Clients seek Mitch’s advice when they are looking to come up with a charitable gifting strategy, how to approach sizable positions of stock that they have obtained through their employer’s stock plan, or when they want to learn more about sustainable investing strategies. An engineer by background, Mitch enjoys being thorough in all stages of the planning process. Link to Mitch’s no-cost, no-obligation initial “fit” meeting.

Stan Farmer, J.D., is the Director of International Financial Planning for Walkner Condon’s International Group. Stan works with a wide variety of cross-border families, including American expat individuals and couples working, retired, or semi-retired abroad. Many client families have multiple nationalities represented (for example, a U.S. and a non-U.S. spouse with dual national children), while other clients are foreign non-U.S. persons who have financial assets in the United States and, in most cases, other countries as well.  These clients present complex financial planning challenges that Stan endeavors to help them identify and overcome. Traditionally, a CFP® becomes an expert in helping clients navigate the myriad of technical tax and estate planning rules in the United States and in their particular state of residence. For Stan’s clients, these U.S. rules still apply (because the U.S. is unique in its approach to taxing its citizens regardless of where they reside), but there is usually a whole other set of foreign (often very different, sometimes conflicting) rules that apply his clients because they are residents and often domiciles of another country. Stan develops financial plans for clients that consider each client’s unique and overlapping tax exposures and recommends strategies to enable these cross-border clients to achieve their financial planning goals in a globally tax-compliant and tax-efficient manner. Link to Stan’s no-cost, no-obligation initial “fit” meeting.

What are my 401k options if I get laid off?

What are my 401k options if I get laid off?

By Mitch DeWitt

Dan Corcoran – the newest member of the Walkner Condon team and social media/marketing extraordinaire – and I were having a casual conversation over coffee one morning, and we naturally turned to the topic of sports. Dan has a background in social media and marketing in the semi-professional hockey space, and I have been a lifelong sports fan, primarily rooting for my Michigan Wolverines and the Detroit professional sports teams (it has been a rough time to be a sports fan in Detroit lately). Dan mentioned the recent ESPN layoffs, which I was previously unaware of. It’s safe to say that most sports fans probably grew up watching SportsCenter and have tuned into ESPN to catch our teams’ games at some point. Being the financial advisor that I am, I thought of the financial planning opportunities and the considerations of rolling over a former employer’s retirement plan. Being the marketing guy that Dan is, he told me to write a blog. (By the way, if you’re one of the many folks who have lost a job over the last few months, here’s another helpful blog about working through a job loss). 

So, before we go any further, what is a rollover? The IRS defines a rollover as the following:  “A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it, within 60 days, to another eligible retirement plan.” Sounds pretty straightforward. But there are many rules about what types of accounts can be rolled over and what types of accounts are acceptable destinations. Furthermore, there are some tax traps that people can fall into. If done correctly, a rollover of tax-deferred assets should not be a taxable event. Unfortunately, I’ve seen “do-it-yourselfers” attempt to roll over their assets from a former employer’s retirement plan and have realized a large and unexpected taxable event. This is where we come in: to help people advise on their options with their retirement plans, make a decision on their best course to align with their retirement goals, and then confidently execute the plan. 

If I got laid off, what are my options with my retirement plan / 401(k)?

Roll it over to another qualified plan or IRA

The IRS publishes a rollover chart to show what they would deem an acceptable rollover. In many cases, we find ourselves interpreting this chart and educating our clients on where they can roll their retirement assets as well as what makes the most sense for their situation. Again, if done correctly, a rollover should not be a taxable event (unless you want it to be in the case of a conversion. More on this in my next point). Many people come to me saying that they want to “consolidate” their accounts or “transfer” their accounts. This presents another education opportunity with clients, since a transfer is treated differently than a rollover. A transfer typically refers to the same type of account moving from one institution to another (e.g. Roth IRA at Fidelity to a Roth IRA at TD Ameritrade), whereas a rollover refers to moving assets from one type of account to another (e.g. 401(k) at Fidelity to a Rollover IRA at TD Ameritrade). Furthermore, there are direct rollovers and indirect rollovers. Direct rollovers are where your assets are sent from one custodian to another (e.g. Fidelity to TD Ameritrade). No taxes are required to be withheld when a direct rollover is performed. An indirect rollover is where you do take possession of your assets during the rollover process. In this case, you are required to withhold taxes from the distribution amount. To avoid paying taxes on an indirect rollover (and ensuring that the amount withheld isn’t included as taxable income), you must deposit your assets into another qualified plan or IRA within a 60-day period. You also must ensure that the amount distributed from the original account (including the withheld amount) is fully deposited into the new account. Generally speaking, direct rollovers are preferred to indirect rollovers because withholding is not required. You will receive a 1099-R for the tax year that you conduct a rollover. Rollovers are reportable to the IRS even though they are not taxable. A 1099-R is issued whether the rollover is direct or indirect. However, in the case of an indirect rollover, it is up to the taxpayer to prove that they properly rolled over their assets to avoid a taxable event (when they file their tax return).

Convert it to Roth

You may be able to convert all or a portion of your tax-deferred assets in your retirement account. Converting your tax-deferred assets to Roth will be a taxable event. Some might wonder why you would want to do that. Let’s say someone might be in a lower tax bracket in the current tax year vs. a higher tax bracket when they take money out of the account in the future. The thought is that if it is going to be taxed at some point, why not tax it at a lower rate? We help many clients analyze their different “buckets” that their assets are in: taxable, tax-deferred, and after-tax (there are technical differences between “after-tax” and Roth, but that is beyond the scope of this blog). Depending on the situation there might be a reason for a client to spread out their assets between the three buckets or it might make sense to heavily favor the Roth bucket, for example. If the client’s circumstances align to make a Roth conversion, it may occur all at once or over a phased approach over several tax years. This is something that should be coordinated between a financial advisor like us and a tax advisor.

Keep it where it’s at

Many plans will allow you to keep the assets in your 401(k) (or similar retirement plan). Although they are able to force you to move the balance out of the plan, usually if there is a less than a $5,000 balance in your account. You might want to do this if you like the investment options, the fee structure, or simply the convenience of not having to take any action.

Cash it out

Yes, this is an option, but in most cases it’s not recommended because of a potentially large tax bill. Additionally, it may be detrimental to your financial plan and ability to obtain retirement goals. Usually, the only time this makes sense is when someone finds themselves in an unexpected and dire financial situation. 

It is worth having a conversation with us if you find yourself in a situation where you have been laid off or even if you have several outstanding 401(k) accounts spattered across different retirement plans and financial institutions. We would love the opportunity to educate, offer some guidance, and eventually help execute your plan. You can reach out directly to us here, so we can get the conversation rolling (pun intended, I couldn’t help it).

Challenges, Additions and Optimism: Where Walkner Condon is Going

Challenges, Additions and Optimism: Where Walkner Condon is Going

The story of 2020 is yet to be over, but it will be a year that will never be forgotten. We have faced some of the greatest challenges as a company, namely the battle that the co-founder of our namesake, Nate Condon, has undertaken. As his winding road towards recovery has taken its twists and turns, we are happy to report that he has improved from a rather grave position just a short six weeks ago to improving metrics and hopefulness that a serious but necessary surgery will finally be the answer to long-term health. There is one major surgery in Nate’s future that is expected to ultimately get him better, and we anticipate a full recovery.

We will have answers in the next couple of months on how long this journey will take, but his strength and resolve have been awe-inspiring. And speaking of awe-inspiring, the way Sylina, Nate’s wife, has taken on the role of full-time caregiver during this process has been the most incredible example of true, selfless love and devotion. Nothing reveals the core of a person or a relationship like these types of sudden, life-changing events, and the whole Condon family has proven to be solid as a rock. The Walkner Condon team is certainly happy to have our rock back, as Nate’s strength and nutrition has improved, and he has been able to become involved again in our weekly meetings. 

Despite these unforeseen challenges, we still have a job to do. Jon, Mitch, and Keith have thrived under the virtual meeting environment, and we have collectively worked to enhance the client experience through technology. Each day as clients become more adjusted to the nuances of working together online, the process gets easier to navigate and more personal. We have recently purchased software that will further assist us in gathering and sharing personalized data with secure document sharing. This will also help us conduct our strategy meetings through a more efficient way by getting updated client information prior to our appointment. 

In late August, we had another unforeseen development when Stan Farmer and Syl Michelin began discussions about joining us as financial advisors. It was a natural fit with Keith previously working with these two talented individuals. And, at the two months+ mark of tenure, we can report that they are indeed excellent at what they do, as well as great fits for the “comfortably unique” office culture we all enjoy so much. And we would be remiss to not mention Hannah’s contributions during this time, as she has been instrumental in Stan and Syl’s success in onboarding. Her positive attitude and ability to offer a trusted perspective on many topics is invaluable. 

The interesting thing about change is that it is unyielding and unrepentant, but it is your choice whether to embrace it or allow it to become a barrier to true progress. Even “good” change can be a painfully uneven experience, but regardless of what iteration of change you face, it forces you to look inward and accept your own limitations. For me, it is the understanding that I cannot be all things to all people, and that I will simply never be good at all things. Even things I enjoy doing, I realize that a true specialist is far better suited for than someone that dabbles. 

Resultantly, two new employees have recently joined us and we will be embarking on a new venture with the goal of expanding our service level to our clients. Dan Corcoran, marketing and social media specialist, was added to our team with the goal of telling our story and increasing our engagement and communication. We believe that being “comfortably unique” is our secret sauce, and adding staff that can help us get this message out is incredibly valuable.

Next, Anna Lautenbach is a highly credentialed financial advisor that will also be assisting us with compliance responsibilities. She also will be partnering with us to establish tax services as a new entity. We believe that we can offer the same customized, friendly experience on the tax consulting and preparation side to compliment our investment management and financial planning services to both Wisconsin-based and U.S. expat clients. We intend on carrying forward our prompt response time and ease of doing business, and offering clear and concise advice from Walkner Condon Financial Advisors to Walkner Condon Tax Services.

On behalf of the partners, Nate and Jon, we look forward with optimistic eyes and hearts. We are humbled by our clients’ genuine care for us as a group. We exist because of all of you, and we will tirelessly strive to make your experience with comprehensive wealth management an exemplary one.

The future is bright.

Clint Walkner