Monthly Archives: April 2017

Thoughts from Willis | Building a Customized Investment Plan During Retirement

April 25, 2017

Five Investment Characteristics to Consider When Constructing a Retirement Plan

Should You Have a Customized Retirement and Investment Plan?


Back when you were starting out in your career as young professionals, you may have eventually decided that renting was no longer a wise option, so you decided to make an investment in your first new “track” or “starter” home. Although it was a basic starter home, you may have been lucky to have the opportunity to make certain selections from a pre-approved list, such as: type of floor plan, exterior brick or paint color, interior carpet, wall paint colors, as well as basic appliances.


When you are young, investment plans are very similar to your first-time homeownership goals. The most important thing is just to get started. At this stage of life, a basic aspect of financial security may come from home ownership, as well as commencing with a basic investment plan, such as starting to invest in your company 401(k) plan. 


Fast forward thirty years or so, and you find that the kids are grown and hopefully self-sufficient, your career growth is at its peak, and retirement is on the horizon. At this point, you find yourselves with discretionary income and savings, and you may begin toying with the idea of a major home renovation, buying that second home, or building a dream home customized to fit your current needs for entertaining, a home where the extended family can gather, a room for hobbies, or building in the city for a change of scene, etc.  But to get it your new home just the way you want takes time and planning. You need to imagine how your vision will come together.


At this stage of life, it is also critical to concurrently review your investment plan, and customize it to address your current needs and goals, as well as your future needs and goals. Your time to accumulate assets have stopped or slowed down, and the development of a customized distribution plan is vital at this point in your life.


As you know, a customized investment and retirement plan is rarely accomplished with an individual investment theme or product. However, too often in my career, I have actually seen individuals purchase a product or a single investment, assuming it will achieve all possible characteristics of the perfect investment. Similar to building a custom home, a customized investment plan should provide different investment opportunities for achieving various goals during retirement. The most important investment characteristics are as follows: 


1. Income – both from dividends and interest.

2. Growth – to keep up with inflation.

3. Risk Management – to manage market volatility.

4. Liquidity – an emergency fund/assets.

5. Tax-efficient – on allocations, to manage the long-term effect of Global Investments.


Similar to building a custom home, your custom retirement plan takes time to design, construct, review, and revise as needed. Constructing a retirement plan with a solid foundation that will withstand the test of time should be a priority for individuals approaching retirement. 


Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.
Willis Johnson & Associates is a registered investment advisor. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Insurance products and services are offered or sold through individually licensed and appointed agents in various jurisdictions.





Financial Fact | 3 Rules You Should Know About How an HSA Works

April 11, 2017

Pay For Medical Expenses with Tax-Free Money


Don’t worry about losing your HSA funds if you don’t use them this year because the funds in your account will roll over to the following years.


Here are a few tips for using your HSA to reduce taxes…


Did you know that you can pay for medical expenses with tax-free money?


A Health Savings Account (HSA) is a great way to pay for medical expenses with tax-free money. But there are a few rules as to how an HSA works:


1. You must have a high-deductible health plan (HDHP). Not every employer offers an HDHP, so you must confirm that you have one first before you contribute to an HSA account. An HDHP is a plan with a deductible of at least $1,300 for an individual or $2,600 for a family. You also cannot be enrolled in Medicare to use an HSA.



2. Withdrawals must be for qualified medical expenses in order to be tax-free. The IRS outlines which expenses are considered qualified and it is a fairly broad list. If you withdraw funds for non-qualified expenses, then you will pay income taxes in addition to a 20% tax penalty.


Although, once you reach age 65, you can withdraw funds from an HSA for any retirement expenses without facing a tax penalty: however, you will pay income taxes on the withdrawals.



3. In one calendar year, any contributions to the HSA must be within the annual contribution limits. These contributions are tax-deductible. In 2017, you cannot contribute more than $3,400 for a single person or $6,750 for a family, with a $1,000 catch-up for individuals over 55. Also, it is important to note that the contribution limits apply to all sources, i.e. you, your employer, any person.


However, funds that are not used in an HSA will roll over to following years and can be used for future medical expenses. HSA funds can also be used for previous years’ medical expenses as long as those expenses were incurred while you were covered by an HDHP.




HSA Retirement Tax Savings


An HSA is incredibly tax-efficient because of the tax-deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses. An HSA can be especially advantageous for retirees after age 65 as it can be used for both retirement and medical expenses, which tend to increase with age.


Willis Johnson & Associates is a registered investment advisor. Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed and the accuracy of the information should be independently verified. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Federal tax laws are complex and subject to change. Willis Johnson & Associates does not offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.




Alexis Long, MBA, CFP®



Alexis Long is a wealth manager at Willis Johnson & Associates. For Alexis, financial planning combines an interest in producing detail-oriented financial plans with a desire to help people obtain their goals, ranging from retiring early, paying for their grandchildren’s educations, buying a second home or leaving a legacy for their children. Understanding what is truly important to a client is key to good financial planning, along with providing solid technical advice.


Alexis earned her undergraduate degree in International Business from Texas Tech University and her Finance M.B.A. from the University of St. Thomas.


What Nick’s Reading | Income and Net Worth Impact Longevity

April 6, 2017

Is Your Portfolio Prepared if You Spend 30-40 Years in Retirement?

How Should You Be Planning?


You may be 65 years old, but it’s important to still think about growth for your portfolio. One of the things we often talk to our clients about is setting up the correct asset allocation for them. We want to ensure that the allocation takes into account their risk and return needs as well as their time horizon. The natural tendency for many of our clients is to want to get more conservative with their portfolios as they age. Oftentimes, people tend to get too conservative, hold too much in fixed income or cash and not have enough growth for their life expectancy. We see this happen especially when our clients do not feel comfortable with the current market or political environment. 


JPM Count on Longevity

Social Security Administration, Period of Life Table, 2011 (published in 2015).
J.P. Morgan Asset Management Guide to Retirement 2016


We like to remind our clients that even if they are 65 years old today, there is a high probability they will live past the age of 90. The Social Security Administration published data on life expectancies. For a couple at age 65, there is a 47% probability that at least one of them will live to be 90 years old or older. This is great insight, but the dilemma with these numbers is that they are misleading. For many of our clients, we find that they will tend to live past these actuarial numbers. Why? Income and net worth.



Rich Live Longer

(April 11, 2016) New York Times: The Rich Live Longer Everywhere. For the Poor, Geography Matters.


The Journal of the American Medical Association completed its own study on longevity, which you can see in the graph above and can read further in the New York Times. The study shows that income and net worth can have a huge impact on life expectancy. To give you an extreme example, let’s say for men the top 1% of income earners can expect to live about 15 years longer than the bottom 1% of income earners. So, what does this mean for our clients? If a couple is age 65 today, they can expect a 47% chance or more for one spouse to live past age 90, which means they may need to plan for more growth in their portfolio. Simply holding cash and fixed income with a plan to deplete those assets over time may not be enough. Growth still makes sense, even at 65.


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.


nickNick Johnson, CFA®, CFP®


Nick Johnson believes that financial planning is more than numbers on a balance sheet and a standardized process. People are unique and should be treated as such.


As Vice President and a Wealth Manager at Willis Johnson & Associates, his goal is to really get to know his clients, all the while providing a proactive approach to comprehensive wealth management. 



Market Update | The Markets (as of Market close March 31, 2017)

April 6, 2017

Quarterly Market Review: January-March 2017


Market Update 2016Riding the momentum following the presidential election, stocks surged for much of the first quarter of 2017. Buoyed by the anticipation of tax cuts and policies favorable to domestic businesses, the benchmark indexes listed in the full update reached historic highs throughout the quarter. At the end of January, the Dow reached the magic 20000 mark for the first time, while the tech-heavy Nasdaq gained almost 4.50% for the month. The trend continued in February, as stocks posted solid monthly gains. The Dow closed the month with a run of 12 consecutive daily closings that reached all-time highs. The S&P 500 also achieved a milestone — 50 consecutive trading sessions without a daily swing of more than 1.0%. At the close of trading in February, each of the benchmark indexes listed in the full update posted year-to-date gains, led by the Nasdaq, which was up over 8.0%.


March began with a bang but ended with a whimper. The Dow closed the first week of the month at over 21000, while the Nasdaq gained over 9.0% year-to-date. However, energy stocks slipped as the price of oil began to fall. Entering mid-March, investors exercised caution pending the potential Fed interest rate hike and the push for a new health-care law. Following its mid-March meeting, the Fed raised interest rates 25 basis points, while the move to replace the ACA with a new health-care law failed for lack of congressional support.


For the quarter, each of the indexes listed in the full update posted impressive gains over their fourth-quarter closing values. The Nasdaq climbed the most, posting quarterly gains of close to 10.0%, followed by the Global Dow and the S&P 500, which achieved its largest quarterly gain in almost two years. Long-term bond prices increased in the first quarter with the yield on 10-year Treasuries falling 6 basis points. Gold prices also climbed during the first three months of the year, closing the quarter at $1,251.60 — about 8.5% higher than its price at the end of the fourth quarter…Click here for the full update.

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