The U.S. is in the emergent stages of the omicron variant of the coronavirus. However, we now have some experience in what this could mean moving forward, both for the health and economic impact of the U.S. and our global neighbors.

 

To continue fighting COVID-19 without shutting down schools and businesses, the Biden Administration recently announced new guidelines to help contain the virus. The initiatives include free booster shots for all adults, new quarantine and testing policies in schools, vaccination or weekly testing requirements by businesses, free at-home COVID test kits, more resources allocated to areas with hotspot flare-ups, and greater global distribution of vaccines to help stop the spread.¹

 

Regardless of where individuals stand on the debate of mandated vaccines, it is important to recognize the long-term effects of the continued spread of the virus. The stock market had a strong negative reaction after the omicron variant was identified in the U.S. If the virus continues to spread, we will continue suffering these setbacks. For many, the pandemic is less a health issue than a financial one. If you are looking for ways to shore up your investment portfolio to weather the ongoing volatility presented by COVID-19, please give us a call.

 

The following are key economic questions associated with omicron — or any new variant that develops in the future: 1) What is our capacity to prevent and contain its spread;² 2) How susceptible is it to various demographics; and 3) How will it affect our current vaccination levels and waning immunity?³

 

A recent study of the phenomenon presents a variety of possible scenarios. One positive outcome of omicron is that it motivates more people — and countries — to higher vaccination levels. If the new variant proves more easily transmitted than the delta variant, we may need to step up masking and social distancing measures; even sending workers back to working from home. If the strain proves to be vaccine-resistant, more resources will need to be dedicated to modifying messenger RNA vaccines and getting them out to the public as quickly as possible.

 

What about rising inflation? Some economists believe higher prices are directly linked to global shortages and higher demand — which would abate if omicron constrained the economy again. However, if inflation is due to monetary and fiscal stimulus policies, prices could further increase regardless of the direction of the pandemic.⁴

 

Finally, since vaccine hesitancy appears to be emanating from a lack of trust in the government, the U.S. may be jeopardized by the threat of growing civil instability. This has the potential to land us in the same high-risk category of countries that experience ongoing civil unrest and attempts to overthrow the government.⁵

 

For America’s health, safety, economic prospects and our own financial portfolios, let’s hope the issues surrounding COVID-19 do not manifest in these ways.

 

Content prepared by Kara Stefan Communications.

 

¹ The White House. Dec. 2, 2021. “President Biden Announces New Actions to Protect Americans Against the Delta and Omicron Variants as We Battle COVID-⁠19 this Winter.” https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/02/fact-sheet-president-biden-announces-new-actions-to-protect-americans-against-the-delta-and-omicron-variants-as-we-battle-covid-19-this-winter/. Accessed Dec. 3, 2021.

² Andrew Sheets and Matthew Harrison. Morgan Stanley. Nov. 30, 2021. “Omicron Variant Causes Concern.” https://www.youtube.com/watch?v=8iJNYWeslf8. Accessed Dec. 3, 2021.

³ Mick Costigan. World Economic Forum. Nov. 30, 2021. “The Omicron variant is here – what comes next? Here are 5 possibilities.” https://www.weforum.org/agenda/2021/11/omicron-whats-next-5-scenarios-to-help-business-leaders-make-the-right-decisions/. Accessed Dec. 3, 2021.

⁴ Jeff Cox. CNBC. Nov. 27, 2021. “The current inflation run is similar to other episodes in history, but with important differences.” https://www.cnbc.com/2021/11/27/the-current-inflation-run-is-similar-to-other-episodes-in-us-history-but-with-important-differences.html. Accessed Dec. 3, 2021.

⁵ Maneet Ahuja. Forbes. Nov. 29, 2021. “Ray Dalio Says America’s Decline Will Upend Lives, Not Just Portfolios.” https://www.forbes.com/sites/maneetahuja/2021/11/29/ray-dalio-says-americas-decline-will-upend-lives-not-just-portfolios-the-billionaire-investor-paints-a-dire-scenario-in-his-new-book/?sh=4961c9b3c4f0. Accessed Dec. 3, 2021.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

 Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

American Conglomerates: Past, Present & Future

Conglomerates are parent companies that own a number of large subsidiaries. They became popular back in the 1960s with corporations like ITT, LTV and GE, to name a few. In recent years, behemoth American conglomerates have spun off, sold off and pared down.1

However, there are ways to invest in a single “parent company” for exposure to a wide range of holdings. For example, you can purchase stock in Berkshire Hathaway (BRK.A, which currently trades at $400,000-plus per share), a holding company that buys what it believes to be high-value companies in key industries and then improves upon them until they are high-revenue performers.2 Similarly, some hedge funds invest in distressed debt at a steep discount of companies that have filed for bankruptcy — with the anticipation that they will emerge stronger.3

Clearly, these are high-risk, high-reward opportunities, but they do offer investors the potential to buy shares in a “conglomerate” type of fund of diversified companies. If you’d like to discuss ways to take advantage of today’s conglomerate breakups, please contact us.

The newest breed of conglomerate today is dubbed Techglomerate. These consist of large, diversified tech giants such as Google, Facebook and Amazon. These powerful technology companies have scooped up many smaller startups in an effort to reduce potential competition and purchase innovations honed by entrepreneurs.4 Unfortunately, this concentration of power has created a bit of a monopoly that is not highly regulated. Without significant competition, it is difficult for the principles of capitalism to work properly — namely, keeping prices competitive.5

In the pharmaceutical industry, companies like Amgen, a biotech firm, have maintained a patent on the arthritis drug Enbrel for 37 years — 17 years past the standard patent term. Through a series of intellectual property protection filings, the company has earned more than $70 billion from sales of this one drug — a practice that contributes to the high price of pharmaceuticals.6

Just recently, Congress introduced the Platform Competition and Opportunity Act, a bill that would restrict acquisitions in digital markets that eliminate competition and enhance monopolies.7

In lieu of legislated regulation, another option is for conglomerates to break up of their own volition. For example, Johnson & Johnson and General Electric recently announced plans to split their conglomerates into separate companies designated by industry. These recent breakups tend to enhance stock prices, which is a positive sign that this may be a better strategy than awaiting legislative measures. And while diversification can help large companies weather volatile swings across a variety of industries, this new trend recognizes that divestiture may create better value. Recent data has shown that splintering into smaller companies offers the potential for superior operational performance and higher returns.8

  

1 Greg Rosalsky. NPR. Nov. 23, 2021. “The Conglomerate Paradox: As GE splinters, Facebook becomes Meta.” https://www.npr.org/sections/money/2021/11/23/1057446470/the-conglomerate-paradox-as-ge-splinters-facebook-becomes-meta. Accessed Nov. 29, 2021.

2 Greg McFarlane. Investopedia. May 5, 2021. “How Warren Buffett Made Berkshire Hathaway a Winner.” https://www.investopedia.com/articles/markets/041714/how-warren-buffett-made-berkshire-hathaway-worldbeater.asp. Accessed Nov. 30, 2021.

3 Rebecca Baldridge. Investopedia. Jan. 30, 2021. “Why Hedge Funds Love Investing in Distressed Debt.” https://www.investopedia.com/articles/bonds/08/distressed-debt-hedge-fund.asp. Accessed Nov. 30, 2021.

4 Greg Rosalsky. NPR. Nov. 23, 2021. “The Conglomerate Paradox: As GE splinters, Facebook becomes Meta.” https://www.npr.org/sections/money/2021/11/23/1057446470/the-conglomerate-paradox-as-ge-splinters-facebook-becomes-meta. Accessed Nov. 29, 2021.

5 Jennifer Ryan. Bloomberg. Nov. 9, 2021. “Big Tech’s ‘Natural Monopoly’ Tough to Self-Regulate, Malone Says.” https://www.bloomberg.com/news/articles/2021-11-09/malone-says-big-tech-s-natural-monopoly-tough-to-self-regulate. Accessed Nov. 29, 2021.

6 Jonathan Gardner. Biopharmadive. Nov. 1, 2021. “A three-decade monopoly: How Amgen built a patent thicket around its top-selling drug.” https://www.biopharmadive.com/news/amgen-enbrel-patent-thicket-monopoly-biosimilar/609042/. Accessed Nov. 29, 2021.

7 Dave Kovaleski. Financial Regulation News. Nov. 10, 2021. “Sens. Klobuchar, Cotton introduce bill to halt monopolies among online platforms.” https://financialregnews.com/sens-klobuchar-cotton-introduce-bill-to-halt-monopolies-among-online-platforms/. Accessed Nov. 29, 2021.

8 Knowledge@Wharton. Nov. 16, 2021. “The Breakup of GE and J&J: The End of the Conglomerate?” https://knowledge.wharton.upenn.edu/article/the-breakup-of-ge-and-jj-the-end-of-the-conglomerate/. Accessed Nov. 29, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

Outlook For Equities

The general outlook for equities is positive toward the end of the year and into 2022. Stocks performed relatively well through the autumn earnings season and, as a general rule, the fourth quarter tends to be the best one for stock performance. While the coronavirus, labor shortages, supply chain issues and rising prices have presented headwinds for the economy, low interest rates and positive corporate earnings have kept equity performance in good shape.¹

According to Charles Schwab, investors looking for a higher stock allocation should consider high-quality, reasonably valued companies poised to benefit from worldwide economic recovery. As for individual stock picks, she emphasized company fundamentals and the ability to weather different market conditions over specific sectors.²

If you’ve recently harvested any losses or gains and are looking to rebalance your portfolio, we’d be happy to help you vet investment opportunities appropriate for your situation. Please contact us to get started today.

Merrill Lynch believes the market environment looks to be supportive of stock investments
through the first two quarters of 2022. Its analysts expect job growth to continue and believe the United States will head toward full employment, which will help eliminate the current issues related to labor and supply shortages. Merrill Lynch also sees China’s recovery as a catalyst to spur overall global economic growth. For investors, the wealth manager recommends adding long term investment themes related to innovation. Diversification remains important but key sectors expected to thrive include industrials, materials, energy, financials and large-cap technology.³

Now that factories are back up and running worldwide, Goldman Sachs sees inventories building back up, continued innovations in health care and a boost in consumer spending due to pent-up demand. By the middle of next year, the wealth manager sees a moderate slowdown in the current growth rate of developing markets. It predicts global GDP will increase to about 4½% and does not expect the Fed to begin raising interest rates until July 2022.⁴

Speaking of the Fed, in November it announced plans to begin tapering bond purchases over the next six months. By the middle of 2022, it anticipates no need to ease monetary policy any further. In response to these actions, Morgan Stanley analysts believe that real economic growth will continue to improve in the New Year. Both America’s response to COVID and the new infrastructure bill place the United States in a favorable position relative to the rest of the world. Investors will likely have the confidence to buy riskier assets, whereas inflation risk will continue to put upward pressure on real interest rates.⁵

One thing to note about inflation is that it doesn’t necessarily bode negatively for stocks. In fact, according to research by Fidelity Investments, the stock market has performed relatively well during past historically high inflation periods (except for the 1970s). Energy stocks tend to be positively correlated with high inflation, while consumer discretionary and financials are usually negatively correlated with rising prices.⁶

¹ Paulina Likos. U.S. News & World Report. Oct. 29, 2021. “Stock Market Outlook for Q4 2021.” https://money.usnews.com/investing/stock-market-news/articles/stock-market-outlook-for-q4-2021. Accessed Nov. 15, 2021.

² Ibid.

³ Bank of America, Merrill. November 2021. “Here Comes The Pivot.” https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Viewpoint_November_2021_Merrill.pdf. Accessed Nov. 15, 2021.

⁴ Goldman Sachs. Nov. 8, 2021. “GS Macro Outlook 2022: The Long Road to Higher Rates.” https://www.goldmansachs.com/insights/pages/gs-research/gs-macro-outlook-2022/gs-macro-outlook-2022-the-long-road-to-higher-rates.pdf. Accessed Nov. 15, 2021.

⁵ Matt Hornbach. Morgan Stanley. Nov. 11, 2021. “What the Fed wants, the Fed gets.” https://www.morganstanley.com/ideas/thoughts-on-the-market-rates. Accessed Nov. 15, 2021.

⁶ Jurrien Timmer. Fidelity. Nov. 3, 2021. “Top sectors amid inflation.” https://www.fidelity.com/insights/markets-economy/inflation-sector-returns. Accessed Nov. 15, 2021.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

 

Reshoring: What's the Future for Products & Services Made in America?

According to a recent survey of supply chain professionals, the COVID-19 pandemic interrupted 98% of global supply chains. Among the most disruptive supply challenges was the procurement of personal protective equipment, pharmaceuticals and semiconductors. Companies that had outsourced manufacturing to other countries experienced firsthand the types of risks associated with offshoring.

The previous administration placed a huge emphasis on reshoring U.S. manufacturing, and the current administration is reiterating that call. Within days of his inauguration, President Biden signed an executive order that increased the domestic threshold for companies to meet to win federal contracts. The order also is designed to limit Chinese clean-tech exports and encourage offshore manufacturers specializing in clean-tech supply chains to relocate to the U.S. The objective is to enable America to produce and scale its own solar, electric vehicle and battery production by bringing supply chains closer to U.S. customers, or at least to rely on countries considered allies. Tech experts consider data to be “the new oil” and therefore it is vital that the U.S. become more self-sufficient in developing and manufacturing semiconductor technology.1

The call for reshoring to generate domestic jobs, data and energy independence is popular, bipartisan and likely inevitable to some extent. Market sectors poised to benefit include construction engineering and machinery, factory automation and robotics, electrical and electronic equipment manufacturing, application software and other auxiliary services. Moreover, North American, European and South Asian banks should see enhanced economic activity associated with reshoring.2 If you’re interested in ways to incorporate reshoring growth potential into your portfolio, please give us a call.

With that said, the decision to bring operations back to the U.S. involves a lot of considerations. These include the risks of running out of inventory, potential labor strikes, tariffs, intellectual property rights, government incentives and the value of the Made in USA label — not to mention the impact of future pandemics. One of the biggest challenges is reskilling the U.S. labor force to manufacture things like semiconductor chips used in mobile phones. We do not currently possess that level of expertise on a mass scale, so it will take time and resources to train our labor pool to the level of Germany, Switzerland, Japan and other countries.3

Companies (and by extension, shareholders) also need to see a return on their reshoring investments. In addition to corporate management exploring ways to offset the higher operating costs associated with reshoring, policymakers are expected to facilitate this effort via tax breaks, low-cost loans and other subsidies.

The “State of North American Manufacturing 2021 Annual Report” found that manufacturers are more concerned with the higher costs associated with reshoring than they are with other risks, such as supply chain shortages, proximity to market, demand for U.S.-made products and potential shipping disruptions.4 In other words, the carrot for reshoring needs to be worth their effort from a strictly financial perspective. That will be much harder to achieve given the lack of skilled workers, higher cost of wages and potential labor shortages in the U.S.

The other factor is that Asia not only showed supply chain resiliency during the pandemic, but its growing population represents a tremendous market for U.S. companies. This means they are less inclined to move operations to the U.S. and subsequently incur higher shipping costs to get the goods back to the lucrative Asian consumer market.5

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

1 Bank of America Merrill Lynch. 2021. “Made in America.” https://www.bofaml.com/en-us/content/reshoring/made-in-america.html. Accessed June 22, 2021.

2 Bank of America Merrill Lynch. July 23, 2020. “The USD 1 trillion cost of remaking supply chains: Significant but not prohibitive.” https://www.bofaml.com/content/dam/boamlimages/documents/articles/ID20_0734/cost_of_remaking_supply_chains.pdf. Accessed June 16, 2021.

3 Deborah Abrams Kaplan. Supply Chain Dive. April 8, 2021. “Supply chains do the math on reshoring’s pros and cons.” https://www.supplychaindive.com/news/supply-chains-reshoring-decisions-sourcing-manufacturing-china/597596/. Accessed June 22, 2021.

4 Edwin Lopez. Supply Chain Dive. June 7, 2021. “Supply chain managers shift reshoring focus to total cost of ownership.” https://www.supplychaindive.com/news/inventory-supply-chain-managers-TCO-reshoring-Thomas/601148/. Accessed June 22, 2021.

5 Matt Leonard. Supply Chain Dive. June 17, 2021. “Tariffs, pandemic may not be enough to drive reshoring.” https://www.supplychaindive.com/news/reshoring-china-north-america-supply-chain-biden-forecast/601971/. Accessed June 22, 2021. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

How Infrastructure Spending Affects Municipal Bonds

 .

According to the American Society of Civil Engineers, the 10-year tab to meet the country’s basic infrastructure needs is about $6 trillion. The report, published in March, includes $125 billion needed for bridge repairs, $435 billion for roads and $176 billion for the nation’s transportation systems.¹

For more than 200 years, municipal bonds have been used as public financing instruments in the U.S. Today, two-thirds of infrastructure projects such as schools, hospitals, highways and airports are financed by municipal bonds.²

In addition to providing revenue for infrastructure projects, muni bonds offer an attractive investment opportunity. They provide tax-advantaged yields for current income, stable credit quality and a risk-averse allocation for an investment portfolio. One way to diversify municipal bond investments is through a municipal bond fund or ETF. Given the potential for increased interest and investment in infrastructure in the foreseeable future, we’re happy to discuss opportunities suitable for your portfolio. Give us a call if you’d like to learn more.

President Joe Biden recently proposed a $2.3 trillion plan to invest in the nation’s infrastructure. One funding option Congress may consider is the Build America Bonds (BAB) program, which was introduced during the Great Recession as a means to fund recovery efforts through infrastructure repairs and development. BABs were originally structured for states, cities, schools, airports, mass transit agencies and other public entities to sell for a limited time. They were particularly attractive because the federal government kicked in 35% of interest costs.³

Stimulus packages over the past year have benefited the municipal market by making funds available to state and local governments to make up for lost sales tax revenues due to lockdowns and the beleaguered economy.⁵ Now, with more revenue available, local public agencies may be inclined to issue debt for capital purposes.

Bonds backed by states and cities tend to have high credit ratings and low default risk, and the federal government underwriting municipal debt makes them even more attractive. Historically, muni bonds have offered rates as high as 7% or more.⁶ Furthermore, given the potential that an expensive infrastructure bill may be supported by an increase in income tax rates, municipal bonds offer an opportunity for investors to shield income from taxation.⁷

 

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

¹ Thomas Franck. CNBC. March 26, 2021. “Build America Bonds may be key to financing Biden’s infrastructure plans.” https://www.cnbc.com/2021/03/26/build-america-bonds-may-be-key-to-financing-bidens-infrastructure-plans.html. Accessed May 5, 2021.

² Jenna Ross. Visual Capitalist. Nov. 4, 2019. “From Coast to Coast: How U.S. Muni Bonds Help Build the Nation.” https://www.visualcapitalist.com/municipal-bonds-build-nation/. May 5, 2021.

³ Karen Pierog. Reuters. March 31, 2021. “Build America Bonds may stage a comeback in Biden’s infrastructure plan.” https://www.reuters.com/article/usa-biden-infrastructure-bonds/build-america-bonds-may-stage-a-comeback-in-bidens-infrastructure-plan-idUSL1N2LR1UZ. Accessed May 5, 2021.

⁵ Sanghamitra Saha. Nasdaq. April 7, 2021. “4 Factors Why Muni Bond ETFs Could Rally.” https://www.nasdaq.com/articles/4-factors-why-muni-bond-etfs-could-rally-2021-04-07. Accessed May 5, 2021.

⁶ Ibid.

⁷ Franklin Templeton. March 18, 2021. “Stimulus and Infrastructure: Boon for Muni Bonds?” https://www.franklintempleton.com/investor/tools-and-resources/investor-education/talking-markets-podcast/stimulus-and-infrastructure-boon-for-muni-bonds. Accessed May 5, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

 

 

Investment Consolidation Strategies

Throughout investment industry and financial media sources we constantly hear the message that our money should be diversified. By spreading assets throughout a number of different vehicles, we can take advantage of various market opportunities while helping protect them from some investment risks.

But how much diversification is too much? And what exactly should it cover?

For example, should you spread out your money across brokerages and custodians, or maintain a small number of accounts with one or two financial institutions? As young investors, we are often tempted to try out different investment opportunities in response to broker solicitations, direct mail advertisements, money managers we hear on television or radio, as well as a number of other mediums that seem promising.

But as we near retirement, it’s usually a good idea to begin consolidating accounts. This is because it can often be easier to manage fewer accounts as we grow older. It also can help our loved ones or a hired financial professional step in to find and manage money on our behalf. If you have reached this stage and would like to get your finances organized and consolidated, we can help you decide the best options for your situation. Don’t hesitate to call.

Should you consolidate down to just one brokerage and/or one bank? That may depend on the total value of your assets. Note that the Securities Industry Protection Corporation (SIPC) insures up to $500,000 in each account held at each institution. In other words, if you hold a taxable account and a tax-deferred account at the same brokerage firm, each is insured for up to half a million dollars. Also note that your money is kept separate from the assets of the brokerage firm itself. Therefore, if the company gets into trouble, it can’t tap its customers’ money to bail itself out.¹

There are some good reasons to consolidate with one brokerage firm. First of all, it’s simply easier to monitor performance. Second, you also may enjoy additional perks if your total account size exceeds a specific threshold. For example, as a “premium investor” you may be eligible for free advisor consultations, free notary services, etc.

However, just because you consolidate with one broker doesn’t mean you need to put all of your money in one account. In fact, it can be a good idea to vary products for tax diversification. A combination of taxable and tax-free accounts — such as traditional and Roth IRAs (which do not require minimum distributions) – can reduce your tax liability during retirement.

However, be aware of portfolio overlap as you diversify your investments. Your investments — particularly mutual funds and ETFs — may share many of the same securities. When you consolidate, it can be  a good time to cross reference your investments to identify security duplication and concentration. One rule of thumb is to consider holding no more than 10% of your total investment in any particular industry or company. Otherwise, a performance decline may dramatically affect your income during retirement.²

Another idea is to consolidate into a “Target Date” fund which is designed to adjust its allocation mix as you approach the target date (often your retirement date). In doing so, you benefit from a single diversified portfolio managed by financial professionals who periodically rebalance the investment mix to stay on target with its timeline and performance goals.³

Be aware that as working spouses begin to consolidate their individual accounts, they may have many of the same underlying investments. Review all accounts to determine an appropriate asset allocation and retirement timeline for each spouse as well as the household.

If you are considering consolidating multiple 401(k) plans, your choices may be limited by what your past and current plan sponsors allow. Sometimes it’s easier to roll over those assets to a traditional IRA, especially if you tend to change jobs relatively often. The IRA becomes a repository to consolidate old 401(k) assets and maintain a strategic asset allocation without being overly diversified or having too many overlapping securities. Consider your 401(k) options:⁴

·    Leave the assets in the current 401(k) if allowed by your former employer’s plan.

·    When changing jobs, roll your old 401(k) account assets into your new employer’s plan — if allowed by the new plan. This may be preferable if the new plan permits loans, but be sure to compare new and old plan fees and investment options to ensure you get what you want.

·    Roll over your old 401(k) into an individual retirement account (IRA) — do this with each career/company move to maintain one consolidated reservoir. Be aware that an IRA does not permit loans and there may be negative tax consequences if you have significantly appreciated employer stock.

·    Cash out your old 401(k) only if you need the money. Not only are those funds considered taxable income and subject to an immediate tax withholding, but you also may be subject to a 10% tax penalty if you cash out too young. Moreover, you could miss out on future tax-deferred gains.

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

¹ Teri Geske. Investorjunkie. Feb. 23, 2021. “Can You Have Multiple Brokerage Accounts?” https://investorjunkie.com/stock-brokers/can-you-have-more-than-one-brokerage-account/. Accessed April 2, 2021.

² T. Rowe Price. Spring 2021. “Focus on Diversification.” https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-spring.pdf. Accessed April 2, 2021.

³ T. Rowe Price. Spring 2021. “A One-Stop Approach to Retirement Investing.” https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-spring.pdf. Accessed April 2, 2021.

⁴ T. Rowe Price. Spring 2021. “What Should You Do With an Old 401(k)?” https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-spring.pdf. Accessed April 2, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies