Download Greetings and happy spring to you! Wow, it`s an understatement to

Volume 1
Spring 2014
Greetings and happy spring to you! Wow, it’s an understatement to say that old
man winter had a grip on most of the country this year! Between the snow and ice
everyone’s back must be feeling the pain. We hope this letter finds you and your
back in good health and sprits.
In reviewing the first quarter of 2014, equity markets, as measured by the S&P 500,
once again rewarded those who stayed the course. What we learned in a nutshell
is that the US economy is on the move, inflation remains low, the US government
remains dysfunctional, corporate spending is picking up and the Federal Reserve
Board (Fed) implemented another bond taper.
Looking forward to the remaining three quarters of 2014, we see the US economy
continuing to grow. In fact, the forecast consensus among notable sources like the
FED, Bloomberg and World Bank is around 2.5%. Fed will maintain the tapering
program and it appears that the financial markets are adjusting well. We view the
tapering program as a positive for the financial markets as long as it is done in
increments -tapering is a sign that the economy is improving. Interest rates are
expected to rise but not dramatically and credit markets are healthy. Overseas,
Europe appears to be on the path of recovery but special attention must be paid to
the fluid situation between Russia and Ukraine. Overall, we expect the US equity
markets to continue an upward trajectory with pockets of volatility.
On another note, as 2014 began the financial markets experienced a short term stint
of volatility in January. Although volatility is a natural occurrence with the markets,
we witnessed bouts of financial pessimism brought on by what we call financial
“noise”. Whether you listen to self-appointed investment gurus selling ideas on
television and radio or read newspapers, magazines or blogs, the “noise” was
overwhelming and confusing.
One disturbing trend we are still seeing is the continued sale of annuities during
times of volatility. The key word here is “sale”. Unfortunately our industry is full of
opportunistic sales people who will “play” on people’s emotions especially during
periods of volatility. Often times what we discover is that the annuities they are
selling are high commission products with a very long surrender periods especially
annuities being sold in retirement plans with no other retirement assets. Our firm is
not averse to using annuities as part of your retirement plan strategy, however,
careful consideration must be given to your situation since annuities are generally a
long term commitment with little flexibility and can impact your long term
investment picture. Situations in which annuities can add value to a portfolio are
when you need guaranteed income in retirement, you’re looking to defer taxable
income (income you don’t need) or when the annuity is one part of multiple assets
in your retirement portfolio. Whatever the case maybe, if you find yourself
succumbing to the “sales pitch” of an annuity, call our office immediately so that we
can help you determine the viability of this product – we have extensive knowledge
of annuities and how they can impact your investment portfolio.
Moving on from annuities, how do you avoid getting caught up in the headline noise
that is inundating the media? First, try to separate what is fact from fallacy. As an
investor, understanding the difference between overgeneralizations and
oversimplifications is critical. An example of overgeneralizing is when you fear that
another Great Recession is around the corner and your keep all your money is cash.
Oversimplifying is when you think the US economy is going to implode because of
high deficits causing you to pull your money out of the markets. The problem with
this kind of thinking is that it can thwart the power of long term investing and
negatively impact your investment returns over time.
Second, as an investor, you need to differentiate between risk and uncertainty.
Basically, risk is mathematically measurable and uncertainly is not. When our firm
constructs an investment portfolio for clients, we always measure risk tolerance –
this is what an investor can control and we can measure mathematically. What you
cannot control is the uncertainty of the markets – how and when the markets go up
or down. Unfortunately, making decisions based on uncertain markets can cause
an inventor to be overly conservative or lead to inaction. Viewing investments with
uncertainty can be detrimental to the long term performance of your portfolio and
should be avoided.
Third, as an investor, you need to separate the things that are measurable from
things that are immeasurable. It is easy to get caught up in the possibility of a
doomsday scenario, though the probability of it happening is very small. When
investing, it is important to consider all possibilities; however, it is not prudent to
build your investment portfolio around possibilities. Rather, building an investment
portfolio around what is probable and having the flexibility to maneuver around
obstacles is a better plan for the long term.
What can you do if you find yourself getting caught up in this noise? First, call us we act as your filter helping you discern fact from fallacy, risk from uncertainty and
measurable from immeasurable. It is the goal of our firm to help you stay focused
so that you can realize your goals. Secord, have a process in place. Our process
helps you separate overreaction from planning and filters the possible from the
probable. Third, have direction. Having a well-defined investment strategy
(investment policy statement) can help you avoid the temptations of financial noise
which can lead you to speculate with uncertainty and make poor investment
decisions. With patience and self-discipline you can overcome short term market
volatility and avoid financial “noise”. Stay Tuned!
The Tenet Financial Group Corner:
What’s new at The Tenet Financial Group? We’ve updated our web site to reflect
our values, mission statement and provide you with additional financial resources.
In particular, we added a tab called “Account Access”. If you’re tired of trying to
remember several passwords / ID s to access your investment accounts, the
“Account Access” was created for you. This Tab allows you to view all your
investment accounts through one point of entry (one ID and password) thus
eliminating the need to remember multiple account passwords. If you are
interested in setting your accounts up for viewing on our Account Access tab, please
contact our office and we will get you started. If you have not visited our web site
recently, I encourage you to take a closer look. Go to: www.thetenetgroup.com
and let us know what you think – We welcome all feedback.
The Insurance Corner:
Taking the bite out of Long Term care Insurance Premiums
Tax-Qualified Long Term Care Insurance (LTCI) premiums are considered medical
expenses. For an individual who itemizes income tax deduction, medical expenses
can be tax deductible to the extent they exceed 10% of the individual’s adjusted
gross income (AGI). For individuals 65 and older the threshold still remains 7.5% of
AGI for 2013-2016. The amount of the LTCI premium treated as a medical expense
is limited to the eligible LTCI premiums as defined by Internal Revenue code section
213(d) (10) based on the age of the insured individual. For example, the LTCI Eligible
Premium for 2014 is $3720 for a 65 year old.
A self- employed individual may be able to deduct 100% of their out-of-pocket LTCI
premiums -up to the IRS age based eligible premium amounts.
Another idea is gifting premiums. In addition to the annual Gift Tax Exclusion of
$14,000 per donee, a donor has the ability to pay for medical expenses of the donee
including tax-qualified LTCI premiums and possibly receive a tax deduction. This
could be a parent paying an adult child’s premium or the adult child paying the
parent’s premium.
A third idea is to use a Health Savings Account (HSA) to pay for your premiums.
These accounts can be used to reimburse for tax-qualified LTCI premiums, tax free,
up to the eligible age based premium limits.
As you can see, there are many possibilities to take the sting out of Long Term Care
premiums. So if you are considering LTCI, it is worth consulting your tax advisor to
see if you are eligible for a tax deduction.
In ConclusionAs we mentioned in prior newsletters, remaining focused and not overacting to
short term financial swings is critical to accomplishing your long term financial goals.
We anticipate this year to be another good year for the financial markets as the
economy continues to improve but expect bouts of short term volatility to continue
throughout the year. As always, call our office if you have any questions or
concerns – we are here for you. We appreciate your continued trust and look
forward to working with you in 2014.
Kevin F Bultman and Mary Burrows
For more information on: The Tenet Financial Group
Contact:
Kevin F Bultman, CLU®, ChFC®, RHU®, CFP®
Mary Burrows
410-494-4495 x109
410-494-4495 x 113
[email protected]
[email protected]
Our Address:
1301 York Road, Suite 400, Lutherville, MD 21093
Our Website:
www.thetenetgroup.com
Disclosure: This material represents an assessment of the market environment at a specific point in time and is not
intended to be a forecast of future events, or a guarantee of future results. This information should not be relied
upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be
construed as a recommendation to purchase or sell a security. Past performance is no guarantee of future results.
Investments will fluctuate and when redeemed may be worth more or less than when originally invested. Financial
Advisors do not provide specific tax/legal advice and this information should not be considered as such. You should
always consult your tax/legal advisor regarding your own specific tax/legal situation. Diversification does not
guarantee against loss. It is a method used to manage risk. The S&P 500 is an unmanaged index 0f 500 stocks that is
generally representative of the performance of larger companies in the U.S. Please note an investor cannot invest
directly in an index. All guarantees are based on the financial strength and claims paying ability of the issuing
insurance company. An annuity is a long-term, tax deferred investment vehicle designed for retirement. Earnings are
taxable as ordinary income when distributed, and if withdrawn before age 59 1/2, may be subject to a 10%federal tax
penalty. If the annuity will fund an IRA or other tax qualified plan, the tax-deferral feature offers no additional value.
Not FDIC/NCUA insured. Not bank guaranteed. Not insured by any Federal Government Agency. There are charges
and expenses associated with annuities, such as deferred sales charges for early withdrawals.
Securities and Investment Advisory Services Offered Through H.Beck, Inc., Member FINRA, SIPC. 6600 Rockledge
Drive, 6th Floor Bethesda, MD 20817
The Tenet Financial Group and H.Beck, Inc. are not affiliated