Happy Holidays from Longview!

From our families to yours, we at Longview want to wish you a safe and happy holiday season.

The Longview offices will be closed on the following days as we allow time off for our team members to spend time with their families:

  • Wednesday, December 24th
  • Thursday, December 25th
  • Monday, January 1st

Wishing you a prosperous and happy New Year in 2015!

Sincerely,

Your Longview Team

It’s Time to Retire “Retirement”

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 By Jeff Jones, MS
Financial Planner 

“Old.”

That was the number one answer to a recent online survey conducted by Financial Engines when they asked individuals this question: 

How do you feel when you hear the word retirement?

Out of 1,134 respondents at the time of this writing, the #1 answer was “old!” While this answer certainly comes from an unscientific poll, as pointed out by the Wall Street Journal, it speaks to a greater issue. Just look at the rest of the top ten words and phrases associated with “retirement”:

  1. Old
  2. Excited
  3. Happy
  4. Long time away
  5. Scared
  6. Nervous
  7. Anxious
  8. Worried
  9. Good
  10. Sad

It’s clear the definition of the word “retirement” is changing. The feelings associated with it are taking on a negative connotation for many individuals. I, along with many of my financial planner counterparts, frequently use the phrase “retirement planning” as part of the comprehensive financial planning process. The last thing I want is to have old, scared, nervous, anxious, worried, and sad be a part of what I do.

It’s time to retire “retirement” from our planning vocabulary. I propose “inspirement” as a replacement.

I rolled the idea of my newly-coined term out to a few people. Even when I say it with such emphasis and with hands thrown up in wonder, it was met with the rolling of eyes and a smile. I may have to go back to the drawing board, but I’m sticking with it for now.

I want the “Planning Formerly Known as Retirement” to mean something more than simply the end of our working life, more than “old” or “scared”. I want it to mean the beginning of something, the beginning of the rest of our life. Yes, that sounds cliché-ish but that doesn’t make it any less true. Rather than retiring from something, we need to plan on retiring to something.

But we can’t wait until the last hour to talk about what that something is going to be. The conversation has to start now, regardless of age. We must begin to identify goals that extend beyond the next automobile purchase, beyond planning for children’s education, beyond next year’s vacation. We have to plan for goals for beyond “retirement”, and that means more than simply planning to maintain our standard of living. I want it to mean living the life that you’ve only imagined.

So, what do you plan to do during your “inspirement?”

Jeff Jones is a part of the planning team at Longview Financial Advisors in Huntsville, Alabama.  He is a graduate from the University of Alabama with a Masters in Financial Planning as well as a candidate for CFP Board certification.   Visit “Our Team” to learn more about him and other team members at Longview. Jeff can be reached via e-mail at jjones@longviewfa.com 

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Crude Oil Meets Bond, James Bond.

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By Jeffrey Cedarholm, CFP®, ChFC®, CLU®

Chief Investment Officer

Rule No. 1: Most things will prove to be cyclical.

Rule No 2: Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1. 

-Howard Marks

 

Sounds like a Bond movie to me, cloak and dagger and much intrigue.  Over the last year, the ministers of OPEC have had closed door meetings to discuss America’s upsurge in oil production.  In its December 13 edition, The Wall Street Journal reported that U.S. oil output has grown from 4.8 million barrels a day in 2008 to 8.9 million as recently as this past summer.  The Saudis in particular were worried that in a slowly rising demand environment, the U.S. wildcatters drilling in the Bakken and Eagle Ford shale deposits, would produce a global glut of supply.  They were right; not only is production up and all reservoirs filled, but in late summer, global demand from emerging market economies began to fall sharply.

When commodity supply/demand ratios become unbalanced, even by a small amount, immediate price adjustments follow. When circumstances lead to these ratios becoming widely unbalanced – such as now with too much supply and little demand – the price adjustments are precipitous. You are seeing this play out at your local pump!

Now I have had more than a few clients ask what could possibly be wrong when gas prices are almost half of what they were six months ago. For those economies that are not petroleum producers, and are also  predominately consumer driven, this is a fantastic economic boost, like a giant wind at our backs. Airline and trucking companies have seen an immediate boost to their bottom lines and their stock values. And who could possibly argue with having a few more dollars in your pocket during the holidays? Eventually, the price of oil will rise and stabilize somewhere between $50 and $100. It’s impossible to know the eventual price, but a range of between $60 and $80 per barrel might be a safe guess.

But what seems to be a tailwind to us as petroleum consumers is a headwind to the oil industry and those countries who are commodity exporters. There is a dark cloud on the horizon, always an evil villain in a Bond film. The villain here is a “lack of demand” in many parts of the world. And not just lack of demand for oil and other commodities, but the lack of demand that leads to slow growth, no growth, or negative growth that leads to deflation and eventual recession. The U.S. has been a global business bright spot, but we are not self-contained. We need strong demand from abroad for our exports and without it; our strong level of growth (relatively speaking) may quickly wither.

OPEC is playing a dangerous game of chicken with American producers by not agreeing to cut their own oil production.  They probably have the financial resources (and in the case of the Saudis, according to The Economist, a much lower cost of production) to outlast us and retain their global market share.  There will much economic pain and suffering in the global energy sector!

Many smaller companies will go out of business, while others will be absorbed into larger, stronger companies. But as oil production begins to fall, that magic supply/demand ratio begins to come back into balance, stabilizing and then slowly increasing oil prices. 

Normality will eventually return to both the commodity and currency markets. Because oil is valued in U.S. dollars, large foreign oil exporters have taken a double financial hit and the recent currency crisis in Russia is a good example. Such a large global dislocation as the drop in the price of oil may create abnormally high market volatility before it eventually evens out. But here’s hoping for smooth sailing through the Holidays. 

Enjoy your eggnog! Shaken, not stirred.

Jeffrey Cedarholm is the Chief Investment Officer at Longview Financial Advisors, Inc.  He is a CERTIFIED FINANCIAL PLANNER™ practitioner with a passion for investment and wealth management. Jeff can be reached via e-mail at jeff@longviewfa.com.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Understanding Mechanical Breakdown Insurance – Is It Necessary to Purchase?

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By Whitney Rhyne, MS
Associate Financial Planner 

When looking at your latest automobile insurance statement, you may find something new: Mechanical Breakdown Insurance. If you’re like me, your first thoughts were “what is this and is it necessary?”  

What is Mechanical Breakdown Insurance (MBI)?

MBI typically covers new or leased cars with few miles. For example, most insurers require that the vehicle must be less than 15 months old or have less than 15,000 miles, but the policy can be renewed until the car is 7 years old or has 100,000 miles. Typically, the first owner of the vehicle is the only one that can purchase the insurance.

The coverage includes mechanical failure or collapse that includes all parts and systems of the vehicle, and generally allows for repair wherever the owner chooses.  This is coverage that is in addition to your manufacturer’s warranty. 

MBI does not include typical wear and tear on your car or coverage for an accident and liability.

Is Mechanical Breakdown Insurance for you?

For some, MBI could be an important piece to their automobile insurance policy because it offers coverage longer and for more miles than their manufacturer’s warranty (if you sign up before the month and mileage limit). Also, if you would be at financial risk if a mechanical breakdown were to occur, this insurance could be something to consider. You cannot put a price on being able to sleep at night, knowing that if something were to happen, you would be covered. One option is to use this as an extended warranty, knowing that it could have added benefits with a lower cost, as well as generally being able to cancel at any time.

Most new cars already come with warranties, so MBI can be seen as duplicated coverage, and simply unnecessary. For these, having this added into their policy would not be as important. If MBI isn’t for you, one option is to set aside these premium dollars in an account to use if a problem arises, and if one doesn’t, this money can be used on anything else for your vehicle.

Whitney Rhyne is a part of the planning team at Longview Financial Advisors in Huntsville, Alabama. She holds a Masters in Financial Planning from the University of Alabama. Whitney can be reached via e-mail at whitney@longviewfa.com  

What Do You Want to Hear?

With financial planning being our passion, there is a wide array of topics that we are always willing to talk about. However, we want to write about what you are interested in! Call or e-mail us on any topic in financial planning you want to read about. We may not get to them right away, but we will do our best to incorporate them in future posts.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

IRS Clears the Way for After-Tax 401(k) Rollover to Roth

Internal Revenue Service (IRS) Notice 2014-54 has cleared the way allowing direct rollover of after-tax contributions in a 401(k), 403(b), or a § 457(b) plan maintained by a governmental employer to be rolled directly into a Roth IRA. Before we get into the details, here’s a little background on the Roth IRA.

For tax year 2014, if a single taxpayer’s adjusted gross income (AGI) is over $114,000 or married filing jointly taxpayers’ AGI is over $181,000, they begin to be phased out of making Roth IRA contributions. When eligible for the full annual Roth IRA contribution, each taxpayer can contribute $5,500 (plus $1,000 extra if over age 50) to a Roth IRA. Why is the Roth IRA so important? While contributions are made with after-tax dollars and you receive no tax-deduction, qualified Roth IRA distributions are tax-free. That means you pay no taxes on the growth!

In the past, the IRS has said if you make after-tax contributions to a 401(k) and you rollover the monies, all must go to a IRA or distributions are considered to be split pro rata, essentially removing the option to breakout the after-tax contributions from the pre-taxed contributions without paying taxes.  It appears that so many taxpayers have complained about this and tried to find ways around it that the IRS has acquiesced and changed the rule.

As long as your employer’s 401(k) plan allows for it, you can max out the pre-tax contributions for the 401(k) ($17,500) and then make additional after-tax contributions as long as the total of all employee and employer contributions for 2014 do not exceed $52,000. Any after-tax 401(k) contributions would be eligible for a direct rollover upon separation of service to a Roth IRA with no tax consequences.  Beware of a “gotcha:” The rollover to the Roth has to be made at the same time as the pre-tax contributions are rolled to avoid having them treated as two separate rollovers thus triggering the pro-rata rollover rules. You also have to ensure that the growth on the post-tax contributions are not rolled to the Roth and stay with the pre-tax monies during the rollover process to avoid having to deal with conversions.

This new rule is great news and now opens up another avenue for high income earners to utilize a Roth IRA.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.