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The Captain’s Log Summer 2022 a life well planned is a life well lived
It's A Jungle Out There In June, our Family traveled to Costa Rica for a week-long combined business and personal vacation. Our broker dealer, Prospera Financial, hosted their annual Director’s Circle Awards Trip on the Papagayo Peninsula located on the northern Pacific Coast of this beautiful Latin American country. These annual trips are great fun and extremely important to our Firm because they force us to take a few days away from our normal routines to reconnect and share with similar business owners from around the United States. These fellow industry warriors are facing the same issues we do and regardless of where they hail, have similar challenges and aspirations. The common takeaway for us all from this summer’s Costa Rican adventure was, "It’s a Jungle Out There…”
Inflation, Interest Rates, Recession, Putin; how many times have professionals in our industry during the first half of 2022 used these terms? At some point in this madness, we must wake up, gaze out the window, and re-learn for the ten thousandth time that successful investing does not come without bruises, blemishes, and broken bones. We learned this lesson at the turn of the 21st century, we learned it again during the housing market and financial services meltdown of 2008, we kind-of learned it during the beginning of the Covid-19 outbreak, and yet here we are again – midyear 2022 – reliving the same lessons.
Just like the reliable gears of your grandfather’s pocket watch, every couple of years we suffer a market correction event which causes us to emotionally second guess our decisions, rethink our strategies, and spew tar-like doubt upon our belief in the sanctity and solvency of the United States Capitalist system.
JAMESTOWNE INVESTMENTS NEWS What’s InsIde: PreParing For the exPected a decison not Made is still a decision do Your Kids Know the Value oF a silVer sPoon? KeePing suMMer saFe: Pool and sPa saFetY tiPs caring For aging Parents the secure act starts the clocK on inherited iras Managing the risK oF outliVing Your MoneY reciPe corner Newsletter Disclosures Securities and advisory services offered through Prospera Financial Services, Inc. Member FINRA, SIPC. 5429 LBJ Freeway, Suite 750, Dallas, TX 75240 The material in this newsletter does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Our firm does not provide legal or tax advice. You should consult with legal and tax advisors before making any investment decisions that would have legal/tax consequences. Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/ MAY LOSE VALUE
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CLAYTON JAMES FINANCIAL ADVISOR
A MESSAGE FROM CLAYTON Your Trusted Advisor
Fresh out of college, I took a job in San Antonio, Texas working for a highly unusual and unpredictably explosive employer. As unique as he was, and as all seasoned Bosses will do, words of wisdom and life experience analogies flowed freely from his lips directly to the ears of anyone who would take time to listen. This giver of sage advice, who has now passed on, would have loved this summer’s blockbuster remake of “Top Gun – Maverick” because he had an interesting rule in life about flying planes by instrumentation only. He preached continuously that the guaranteed, sure way to crash into the side of a mountain was to fly with your head stuck in the cockpit. “Regardless of what the gauges tell us, it never hurts to look out the window.”
Thirty years removed from San Antonio, I am now reliving the “look out the window” lesson in life in the context of today’s world of investment decision making. The gauges are telling a story of recession and economic hardship, but when I look out the window I see packed restaurants, overbooked airlines, crowded retail shops, and long lines at Starbucks. I see a healthy housing market, record low unemployment, and all-time high wage and earnings data. How bad can the economy really be when the consumer’s behavior is so convincingly and overwhelmingly positive?
Now back to the Jungle lessons from Costa Rica. The economic instrumentation gauges are spinning like blades of a ceiling fan on a hot, humid August day. The consumer is healthy and financially sound, the stock market is oscillating between recessionary fears and dead cat bounces, BitCoin has lost sixty-five percent of its value, and inflation is hitting thirty-year highs. Where in the madness and jungle of confusion do we find resilience, calm, and confidence? With twenty-two years in this industry, I have learned we find comfort in strong balance sheets, historically low debt service requirements, and entrepreneurial excellence. We make our investment decisions because the companies we own have proven yet again to have an unpassable moat of protection around their organizations. World class products, management ingenuity, and superior branding create investment opportunities that create generational wealth. The best path through the Jungle of doubt is paved with confidence, experience, and skillful preparation. When time tested, solid decisions are made during the days of easy terrain, the impassable jungle is converted to a footpath of minor inconvenience and we continue our march towards our lifelong financial goals.
Please take some time this summer to enjoy the fruits of your labors. Turn off the TV, look out the window and enjoy the great benefits of the areas where you live. The Jungle can be a truly beautiful place if you take time to appreciate its complexity as you pass confidently thought its arms.
Very Truly Yours, Clayton W. James, AAMS Managing Director
Healthcare Costs
The challenges seniors have met throughout their lives have made them wiser and stronger, preparing them for the unique challenges that come with aging.
Fortunately, you can look ahead to help protect yourself and your family against the financial consequences of deteriorating health, and in many cases, insurance may play an important role.
Preparing for the Expected
Recognizing this, you may want to consider Medigap insurance to cover the expenses that Medicare does not, which can add up quickly. You also might want to consider some form of extended-care insurance, which can be structured to pay for nursing home and home healthcare services—two services that Medicare doesn't cover.
As Teddy Roosevelt once observed, "Old age is like everything else. To make a success of it, you've got to start young."
Let's examine some of the ways you can employ insurance to help protect your financial health.
For some, healthcare costs represent a larger share of their budget as the years pass.
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As we age, the potential for cognitive decline increases, ranging from simple forgetfulness to dementia. Long-term illness can sap time and energy from tending to your financial affairs in retirement. Even a decline in vision may make it harder to manage your financial affairs.
If you're like many seniors, you have a strong desire to leave something to your children, grandchildren, and perhaps a favorite charity. Through the use of life insurance, you can pursue these objectives. For example, life insurance can be used to create an estate or to equalize an estate transfer among your heirs.
Managing Your Wealth
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1. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies).
Transferring Your Estate
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Insurance will never be able to prevent the health issues that come inexorably with age, but it can be used to mitigate their potential financial consequences.
2. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance.
The involvement you have with managing your investments may change as you age. For many seniors, that sort of day-to-day responsibility is unattractive and even untenable. If that's the case, you may wish to consider what role annuities can play. Annuities can be structured to pay you income for as long as you live, relieving you of the concern of outliving your retirement money. Certain annuities even offer extended-care benefits, which allow you to address two concerns with one decision.
1. CNBC.com, December 28, 2021 A Decison Not Made is Still a Decision 6 /
Whether through inertia or trepidation, investors who put off important investment decisions might consider the admonition offered by motivational speaker Brian Tracy, "Almost any decision is better than no decision at all."
Let's review some of the forms this takes. Your 401(k) Plan One of the worst decisions may be the failure to enroll, although more and more companies are automatically enrolling workers into their retirement plans. Not only do nonparticipants sacrifice one of the best ways to save for their eventual retirement, but they also forfeit the money that any employer matching contributions represent. Not participating holds the potential to be one of the most costly indecisions one can make.1
Over time, we can end up with a collection of investments that may have no connection to our investment objectives. Because of the dynamics of the markets, an investment that may have once made good sense at one time may no longer be advantageous today.
Whatever your situation, your retirement investments require careful attention and may benefit from deliberate, thoughtful decision-making. Your retired self will be grateful that you invested the time... today.
The other way individuals let indecision get the best of them is by not selecting the investments for the contributions they make to the 401(k) plan. When a participant fails to make an investment selection, the plan may have provisions for automatically investing that money. And that investment selection may not be consistent with the individual's time horizon, risk tolerance, and goals. In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 72. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10 percent federal income tax penalty.
Non-Retirement Plan Investments For homeowners, "stuff" just seems to accumulate over time. The same may be true for investors. Some buy investments based on articles they have read or based on the recommendations of a family member. Others may have investments held in a previous employer's 401(k) plan.
By not periodically reviewing what we own, which would allow us to cull inappropriate investments – or even determine if the portfolio reflects our current investment objectives – we are making a default decision to own investments that may be inappropriate.
This investment inaction is played out in many ways, often silently, invisibly, and with potential consequences to an individual's future financial security.
For current college kids, it may be too late to avoid learning about debt the hard way. But if you still have children at home, save them (and yourself) some heartache by teaching them the basics of smart money management.
One study households with student loan debt showed that the average amount owed was $47,671.1 And more than 20% of recipients with outstanding loans will either default or be delinquent in repaying those loans.2
Do Your Kids Know The Value of a Silver Spoon?
You taught them how to read and how to ride a bike, but have you taught your children how to manage money?
Have the conversation. Many everyday transactions can lead to discussions about money. At the grocery store, talk with your kids about comparing prices and staying within a budget. At the bank, teach them that the automated teller machine doesn’t just give you money for the asking. Show your kids a credit card statement to help them understand how “swiping the card” actually takes money out of your pocket. Let them live it. An allowance program, where payments are tied to chores or household responsibilities, can help teach children the relationship between work and money. Your program might even include incentives or bonuses for exceptional work. Aside from allowances, you could create a budget for clothing or other items you provide. Let your kids decide how and when to spend the allotted money. This may help them learn to balance their wants and needs at a young age, when the stakes are not too high. Teach kids about saving, investing, and even retirement planning. To encourage teenagers to save, you might offer a match program, say 25 cents for every dollar they put in a savings account. Once they have saved $1,000, consider helping them open a custodial investment account, then teach them how to research performance and ratings online. You might even think about opening an individual retirement account (IRA). Some parents offer to fund an IRA for their children as long as their children are earning a paycheck.3 As you teach your children about money, don’t get discouraged if they don’t take your advice. Mistakes made at this stage in life can leave a lasting impression. Also, resist the temptation to bail them out. We all learn better when we reap the natural consequences of our actions. Your children probably won’t be stellar money managers at first, but what they learn now could pay them back later in life – when it really matters.
1. NerdWallet, 2019 2. U.S. Department of Education, 2019 3. Contributions to a Traditional IRA may be fully or partially deductible, depending on your individual circumstance. Distributions from traditional IRA and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.
Clayton and Paul Keeton, Managing Director, Investments & Advisory Solutions, scubadiving in Costa Rica.
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1. Adult Supervision Always be present when children are using the pool. As any parent knows, it only takes moments for children to place themselves in dangerous situations, so stay attentive.
These chemicals represent a danger not only to children but also to the adults who use them. Find a safe storage area and handle them properly.
5. Lock Your Hot Tub Cover
Seven Safety Tips to Save Lives
Drowning kills nearly 4,000 people a year in the United States. It's also the leading cause of preventable death among children ages 1-4.1,2 If you have a pool or spa, here are seven simple tips to keep your children and their friends safe during swim season.
6. Safely Store All Pool Chemicals
1. CDC.gov, 2022
Suction entrapment can lead to death. Make sure all drains are properly installed with certified covers. Periodically check to ensure that they are not damaged. With these simple steps, you can increase the safety of your pool or hot tub, without any loss in the fun and joy they bring.
3. Fence and Alarms
This can distinguish between the shallow and deep ends and serve as a visual reminder to young children not to pass.
4. Rope or Float Line
2. Keep a Life Ring or Shepherd's Crook Nearby This lifesaver can quickly pull someone from the pool. Always check that it is in good condition.
Make sure your pool is protected by a fence. You may even want to add an alarm system that can warn you of unintended use of the pool.
2. The information in this material is not intended as legal advice. Please consult legal or insurance professionals for specific information regarding your individual situation.
Keeping Summer Safe: Pool and Spa Safety Tips
7. Cover Pool Drains
Young children may not be tall enough to stand up in the hot tub or fully appreciate how quickly heated water can lead to dehydration or other accidents.
The backyard pool can be great summer fun, but it can also be a source of danger for children.
Knowing
Cover
For many people, one of the most difficult conversations to have involves talking with an aging parent about extended medical care. The shifting of roles can be challenging, and emotions often prevent important information from being exchanged and critical decisions from being made.
• Medicare card • Insurance information • Durable
for
• Will,
documents Be
Caring for
• Primary physician • Specialists • Medications and supplements • Allergies to medication It
of
Parents 10 /
When talking to a parent about future care, it's best to have a strategy for structuring the conversation. Here are some key concepts to consider. the Basics ahead of time what information you need to find out may help keep the conversation on track. Here is a checklist that can be a good starting point: is also important to know the location of medical and estate management paperwork, including:2 power attorney healthcare living other Thorough Remember that if you can collect all the critical information, you may be able to save your family time and avoid future emotional discussions. While checklists and scripts may help prepare you, remember that this conversation could signal a major change in your parent's life. The transition from provider to dependent can be difficult for any parent and has the potential to unearth old issues. Be prepared for emotions and the unexpected. Be kind, but do your best to get all the information you need. Aging
Thanks to healthier lifestyles and advances in modern medicine, the worldwide population over age 65 is growing. In the past decade, the population of Americans aged 65 and older has grown 36% and is expected to reach 94.7 million in 2060. As our nation ages, many Americans are turning their attention to caring for aging parents.1
will, trusts and
Chances are that waiting will only make you more so.
The earlier you begin to communicate about important issues, the more likely you will be to have all the information you need when a crisis arises. How will you know when a parent needs your help? Look for indicators like fluctuations in weight, failure to take medication, new health concerns, and diminished social interaction. These can all be warning signs that additional care may soon become necessary. Don't avoid the topic of care just because you are uncomfortable.
The SECURE Act Starts the Clock on Inherited IRAs
1. ACL.gov, 2021 2. Note: Power of attorney laws can vary from state to state. An estate strategy that includes trusts may involve a complex web of tax rules and regulations. Consider working with a knowledgeable estate management professional before implementing such strategies.
• a surviving spouse • a person with a disability or chronic illness • a person no more than ten years younger than the original account owner
Exceptions to the Rule As with most regulations, there are exceptions to the 10-year rule. If you are:
The SECURE Act altered the retirement landscape in many ways. If you have any questions or concerns, consider speaking to your financial or tax professional.
This conversation is probably not the only one you will have with your parent about their future healthcare needs. It may be the beginning of an ongoing dialogue. Consider involving other siblings in the discussions. Often one sibling takes a lead role when caring for parents, but all family members should be honest about their feelings, situations, and needs. Don't Procrastinate
While the "stretch" rule changed for inherited IRAs, other rules stayed the same. Once the owner reaches age 72, they must begin taking required minimum distributions from a Traditional IRA in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
1. IRS.gov, April 7, 2022 2. IRS.gov, April 7, 2022
Keep the Lines of Communication Open
The "Setting Every Community Up for Retirement Enhancement" Act (SECURE Act) made significant changes to IRAs inherited after January 1, 2020.
One factor to consider: If the original account owner did not take the required minimum distribution the year they died, you must take that distribution for them in that year.2
Remember, whatever your relationship with your parent has been, this new phase of life will present challenges for both parties. By treating your parent with love and respect–and taking the necessary steps toward open communication–you will be able to provide the help needed during this new phase of life.
For those who inherit IRAs after this date, the SECURE Act requires you to withdraw the inherited funds within ten years or less and eliminates the ability to "stretch" your distributions over your lifetime. This change may have created a complex tax environment depending on the account. It may be wise to speak to your tax professional for more details.1
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MaryCarlin and Bill Porter's entire investing family with Jamestowne Investments.
"What is your greatest retirement fear?"
The Census Bureau says that Americans typically retire around age 63 for women and 65 for men. Social Security projects that today's 63-year-olds will live into their mid-eighties, on average. This is a mean life expectancy, so while some of these seniors may pass away earlier, others may live past 90 or 100.2,3 If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement to try and prevent those savings from eroding? As you think ahead, consider the following possibilities and realities. How will Social Security work in the future?
2. TheBalance.com, 2021 3. Social Security Administration, 2021 4. Kiplinger.com, 2021 5. HealthView Services, 2021 Managing the Risk of Outliving Your Money
Retirees face greater "longevity risk" today.
Those who are retiring unaware of these factors may risk outliving their money. Creating a strategy may help you better prepare for retirement. 2021
For decades, Social Security took in more dollars per year than it paid out. That ongoing surplus - also known as the Social Security Trust Fund – may face funding challenges as early as 2034. Congress may act to address this financing issue before then, but the worry is that future retirees could get slightly less back from Social Security than they put in. It's critical that pre-retirees estimate the amount of Social Security benefits they are expected to generate in the future.4
1. TransamericaCenter.org,
If you ask some pre-retirees this question, "outliving my money" may be one of the top answers. In fact, 42% of workers say they fear outliving their savings and investments.1
Luck is not a plan, and hope is not a strategy.
Preparing for out-of-pocket health care costs. You can enroll in Medicare at age 65, but how do you handle the premiums for private health insurance if you retire before then? Striving to work until you are eligible for Medicare makes economic sense and so does setting aside money to pay for health care costs. A healthy couple retiring at age 65 can expect to pay nearly $208,000 in lifetime out-of-pocket healthcare expenses, even if they have additional coverage such as Medicare Part D, Medigap, and dental insurance.5
Congratulations to Clayton for once again qualifying for Prospera's Director's Circle 2022. This conference recognizes the top advisors for their professionalism, productivity, and loyalty to Prospera.
14 / Knowing each client comes to us with a unique individual background and a unique set of personal experiences; our mission is to guide and inspire each client's journey towards financial success, investment confidence and fiscal well-being. To help all clients succeed in this journey, we utilize sound, efficient and relevant investment products, principles, and policies. Our firm places significant value in providing the highest level of personalized customer service and communication. We operate with full transparency, and our success comes alongside our client's success. A life well planned is a life well lived! Peace of Mind Can be an Asset Our Mission
We'veStatement
done it again!
Generously shared by Hunter Berry / 15
Photo credit: Sara Harris Photography
