Post on 04-Apr-2023
KEYS TO BETTER
COLLEGE SAVING
MEET YOUR TRAVEL
GOALS IN RETIREMENT
HOW TO MAKE YOUR
MONEY LAST
The Magazine for Smart Investing and Better Living
Working for You
TA ILOR ED CLIENT
ENGAGEMENT
SPECIA LIZED
EXPERTISE
ACCOUNTA BILITY
& ATTENTION
1T R U S T P O I N T I N C . C O M
elcome to the third
issue of Trust Point
Magazine. This pub-
lication is dedicated
to our clients, friends,
and individuals inter-
ested in the world of
finance, and anyone who
would like to learn more about Trust Point.
For those who might not know us, Trust
Point is an independent trust and invest-
ment management firm that provides a
full range of financial and advisory ser-
vices. We are uniquely positioned to offer
the highest level of sophistication and
professional expertise with genuine per-
sonalized service.
Trust Point’s exceptional staff—locat-
ed in La Crosse, Minneapolis, and a new
office in Eau Claire—is committed to
delivering service that demonstrates the
highest standards of integrity, objectivity,
and responsiveness. This magazine deliv-
ers valuable, educational financial content
from their perspective.
These articles represent the situations
we encounter each day, and showcase our
team’s expertise. From managing finances
in marriage (page 16) to making money last
in retirement (page 24), socially responsi-
ble investing (page 34) to building a travel
budget (page 46), we hope this publication
helps guide your financial journey. We also
hope it leaves you inspired, and reaffirms
your trust in us.
Since our founding a century ago, we
have operated by a simple philosophy: In
doing what is best for our clients, we will be
doing what is best for Trust Point.
This belief is embedded in our structure
and our business practices. From the Board
of Directors (pictured on this page) to each
employee at Trust Point, our goal is to do
what is in the best interest of our clients.
Wherever your journey takes you,
you can be certain that Trust Point
will be there as your trusted finan-
cial partner (and advocate) to ensure
your wishes are met both now and for
generations to come.
We hope you enjoy reading Trust Point
Magazine. We also invite you to visit our
website, trustpointinc.com for even more
of our research and insights. Thank you for
your continued trust and confidence in us.
Regards,
Kent C. Handel
President and CEO
From left, Trust Point board members Clara Gelatt, Mark Glendenning, Kent Handel, Daniel Gelatt, Janet Hess, Duane Ring Jr., Steven Heuslein, Matthew Binsfeld and John McHugh.
4
4 // BUILDING A BRIGHTER FUTUREGuiding future generations and engaging communities
10 // RETIREMENT PLANNING YOU CAN TRUST As fiduciaries, Trust Point works in your best interest
14 // TRANSITIONING FAMILY WEALTHMolding good stewards of family wealth
16 // MARRIAGE AND MONEYHow to keep money troubles from ruining marital bliss
22 // SAVING FOR COLLEGEHow to expand family savings for future students
24 // MAKING MONEY LASTMaking the most of your nest egg in retirement
38 // BUYING A SECOND HOMEConsiderations for making your second property a smart investment
42 // SOUTH FOR THE WINTERFinancial considerations for a snowbird lifestyle
46 // DREAM. PLAN. TRAVEL!Building a budget to achieve your travel dreams in retirement
48 // RIDING OUT THE WAVESWhy it pays to avoid emotional investing after geopolitical events
CO
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V
AL
UE
S
BO
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OM
LIN
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LIV
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WE
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PUBLISHING PARTNER
TOUCHPOINT MEDIA INC., TOUCHPOINTMEDIA.COM505 N. Hwy 169, Suite 100, Minneapolis, MN 55441, PHONE: (763) 595-0808, E-MAIL: info@touchpointmedia.com
VP, MARKETING & CLIENT STRATEGY
Jessica DischSENIOR EDITOR
Jake WeyerASSOCIATE EDITOR
Tom SellwoodCREATIVE DIRECTOR
Rob JohnsonART DIRECTOR
Mike DeArmondSENIOR DESIGNER
Brandon Favre
42
1628 // TAX INCENTIVES FOR CHARITABLE GIVINGTechniques to provide tax benefits from your donations
30 // INDEPENDENCE FOR SPECIAL NEEDS FAMILIES Helping disabled individuals and their families overcome financial barriers
34 // REDEFINING ‘GOOD’ INVESTMENTSAligning financial decisions with social or environmental causes
3T R U S T P O I N T I N C . C O M
4
Co
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alu
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CL
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T &
CO
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UN
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FIR
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T R U S T P O I N T
The work of Trust Point volunteers has clearly left traces of positive impact in the lives of our students.”—Sandy Brauer, principal at North Woods International School
“
5T R U S T P O I N T I N C . C O M
Building a Brighter Future School partnership promotes education, plus social and emotional well-being for students // by Jake Weyer
From left, Trust Point tutors Hilary Whitaker, Lydia Danielson and Nicole Vogel, with students at North Woods International School in La Crosse. Trust Point has worked with the school since 2018 to provide mentorship, friendship and support to students in need.
As any employee at Trust Point will tell you, community involve-
ment is at the core of the company’s culture.
From a riverfront restoration project to food drives to vol-
unteering at and sponsoring local events, the team is always
engaged in projects beyond financial management. One effort that has made
a significant impact during the last couple of years is a partnership with
North Woods International School in La Crosse.
The goal of the TRACES program, as it was named, is to use Trust Point
(TR) staff involvement to counteract adverse childhood experiences (ACES).
Since its launch in early 2018, the program has provided mentorship,
friendship, and support to children in kindergarten through fifth grade that
teachers have identified as being in need of additional guidance and resources.
“When you get hired at Trust Point,
one of the things that is made evident
right away is that it is good to give back
to the community that you do business
in,” says Andrew Steger, a CFP® pro-
fessional at Trust Point who helped
establish the school partnership.
“Providing our time and talents to give
back to the teachers and children at
North Woods made us realize how this
can lead to a very impactful change in
our community.”
CLOSING GAPSNorth Woods, one of the area schools
considered for the TRACES project,
ultimately accepted the partnership
after district officials and represen-
tatives from all schools agreed it was
the best fit. Nearly half of the students
there qualify for free or reduced meals
and many face barriers in their lives
because of family crisis, whether related
to finances, issues surrounding parental
health, incarceration, or addiction, or a
range of other challenges.
“The ones who have been identified
for the program are the ones who have
gaps between where they need to be
and where they are,” says
Sandy Brauer, principal
at North Woods Interna-
tional. “And our goal is to
close those gaps—to pro-
vide additional opportuni-
ties for students who are marginalized
for whatever reason. The goal is to
increase equity.”
Roughly 20 students par-
ticipate in TRACES, meet-
ing with a rotation of Trust
Point staff every Tuesday
and Thursday during hour-
long timeslots between 8
a.m. and 3 p.m. Teachers select activities
based on individual needs and to rein-
force class curriculum. Sessions range
Building a Brighter Future
Students at North Woods International
School meet with Trust Point staff twice a week
to work on a variety of teacher-specified
coursework.
6 T R U S T P O I N T
continued on pg.8
TRUST POINT further enhanced its community engagement efforts with the introduction of the Trust Point Young Profes-sionals (TPYP) group in 2018.
The program helps to instill the company’s culture in its newest and less experienced team members (all under age 35), utilizing peer mentorship, community networking
and meaningful service projects to develop participants into future leaders. The group has already made itself known in the community through efforts including packing meals at Feed My Starving Children in Eagan and volunteering at The Community Table in Eau Claire.
Hilary Whitaker, a marketing assistant at Trust Point and participant in TPYP, says the 22
LEARN. LEAD. SERVE.TRUST POINT’S YOUNG PROFESSIONALS GROUP MAKES COMMUNITY ENGAGEMENT A PRIORITY
“ Our goal is to close those gaps—to provide additional opportunities for students who are marginalized for whatever reason.”—Sandy Brauer, principal at North Woods International School
Building a Brighter Future
from playing word games to review-
ing books to working on math skills or
helping with homework assignments.
“We definitely found it extreme-
ly valuable for our kids,” says Sara
Depaolo, a Title 1 teacher and Inter-
national Baccalaureate coordinator
at North Woods International. “We
have many students with needs—
needs for a mentor, an adult who cares
about them.”
Trust Point also donated funds to
help the school with its International
Baccalaureate curriculum, providing
books and materials for each class-
room, and training for teachers. The
International Baccalaureate program
is aimed at helping students become
responsible, productive,
and compassionate glob-
al citizens.
“Without Trust Point
it would be incredibly
difficult to move forward
with our baccalaureate
curriculum and I hear all
the time from teachers
and students how valu-
able those books are,”
Brauer says.
participants are learning to be stew-ards of Trust Point’s history and mis-sion, while simultaneously developing important relationships in the com-munity. It’s important, Whitaker says, for community members to know that Trust Point is planning long-term, just as it does for its clients.
“We’re hoping to build our brand and the newer people coming in hopefully get insight into what Trust Point is, how it got its start and how to keep it going into the future,” she says.
Kelleen Nolan, an administrative as-sistant and another member of TPYP, says after jumping around from job to job for years, Trust Point’s investment in her professional growth has changed her career outlook. She isn’t just learn-ing to improve in her current role—she is also discovering how to reach future goals within the company.
“To come here and have the young professionals group, to have people actively teaching you your job and the next job that you want, it’s something that’s very special.”
Whitaker agrees, noting that after a little more than a year with the com-pany, she views Trust Point and the community it serves as a place to work and grow for many years to come.
“It’s really nice to go somewhere where you know you can grow and they actually invest in you and they want you to succeed,” she says. “It feels like family. That may sound cliché but it’s true.”
8 T R U S T P O I N T
LEARN, LEAD, SERVE continued from pg.6
BEYOND EDUCATIONThough helping students with their
education is an important part of Trust
Point’s efforts, just as much attention is
paid to social needs.
Hilary Whitaker, a marketing assistant
at Trust Point, has helped students with
reading, but notes that much more time
is spent developing relationships.
“A lot of times, more often than not, I
think the kids really just want someone
to talk to,” Whitaker says. “These are
kids that are not in the best situations in
life, so it’s nice to have that one-on-one
attention with them.”
Brauer says she can see the emotional
impact in the hugs, giggles and excite-
ment of the students. Other TRACES
initiatives have included a movie day (in
a theater for older students, in school for
younger children), planting and prepar-
ing the International Garden in front of
the school, and contributing weekly to
food and clothing bags for children who
need them.
TRACES has proven so successful that
the La Crosse Public Education Founda-
tion has used it as a model to create an
Adopt-a-School program, so other area
businesses can help students in a sim-
ilar way. For its part, Trust Point plans
to continue its relationship with North
Woods International, which Brauer wel-
comes wholeheartedly.
“This provides an opportunity again
for us to grow these relationships,” Brau-
er says. “We know that the best thing
to do for children in trauma is to form
those really strong relationships with a
caring adult who is consistent and who
cares about them unconditionally and
loves them for who they are, and that
has a huge impact.”
HELPING OUT APTIV (MAY)Spruced up the courtyard at the Aptiv Foundation, which generates charitable gifts for infrastructure and services provided to people with disabilities.
WALK A MILE IN HER SHOES (MAY)Proudly sponsored Walk a Mile in Her Shoes in Anoka, part of an international men’s march (in heels) to stop rape, sexual assault, and gender violence.
SOUNDS LIKE SUMMER CONCERT (JUNE)Sponsored Volume One’s Sounds Like Summer Concert Series at Phoenix Park in Eau Claire, where local bands play each Thursday from June through August.
A GRAND EVENING ON THE BRIDGE (AUGUST)Sponsored this community event in Eau Claire, which provided the opportunity to enjoy an evening of dining and socializing on the Grand Avenue Footbridge, with food and beverages from local establishments.
THE COMMUNITY TABLE (SEPTEMBER)Volunteered on various projects to help nonprofit meal provider The Community Table in Eau Claire prepare for its 25th anniversary celebration.
FEED MY STARVING CHILDREN (DECEMBER)Volunteered at nonprofit Feed My Starving Children in Eagan, packing 152 boxes, or 32,832 meals, for children in need.
ADOPT-A-STUDENT (DECEMBER)Purchased holiday gifts for students at Trust Point’s adopted school, North Woods International in La Crosse.
Providing books and materials for North Woods’ International Baccalaureate program has helped further a curriculum aimed at helping students become responsible, productive, and compassionate global citizens.
9T R U S T P O I N T I N C . C O M
COMMITTED TO COMMUNITY
Active participation in charities and community organizations is the norm for the Trust Point team, with employees volunteering their time in a total of roughly 90 nonprofit organizations.
Jason Munz, vice president at Trust Point’s Eau Claire office, for example, is involved with Big Brothers Big Sisters of Northwestern Wisconsin, the Children’s Museum of Eau Claire, the North Barstow/Medical Business Improvement District, and the Rotary Club of Eau Claire.
“A healthy community is a healthy business,” Munz says. “So we benefit as much from our support to the community as they do from our support.
“And I think when employees are involved in an organization that they realize has a bigger-picture mentality, then you’re going to have more productive, happier employees, and you’re going to have happier clients.”
Trust Point is also regularly involved in community initiatives throughout the year. Here’s a look at some of the ways employees gave back in the last year:
10 T R U S T P O I N T
WE WERE ALWAYS
COMFORTABLE WITH
THE IDEA THAT THEY
WERE LOOKING
OUT FOR OUR
BEST INTEREST.”
– MIKE DAVY,
PRESIDENT, DAVY
ENGINEERING
Retirement Planning You Can Trust From large companies to individual plans, Trust Point’s retirement plan services team works in the best interest of its clients
Davy Engineering has been trusted since 1929 to
find solutions to complex infrastructure prob-
lems in La Crosse and the surrounding region.
The engineering consulting company does
everything from street and highway design to
water system planning to industrial develop-
ment. Founded by company president Mike Davy’s grandfather,
Davy Engineering (and its Davy Laboratories branch) is still a
family-run corporation, but it has grown from a handful of people
to roughly 50 full-time engineers, biologists and chemists.
To handle the profit sharing and retirement plans for those
employees, Davy Engineering has—for more than 60 years—
placed its trust in another local institution: Trust Point.
“That means that the staff that we’ve worked with are profes-
sional, they’re knowledgeable, and we do think that they’ve always
had the attitude that—before it was a buzzword—they understood
what a fiduciary responsibility was,” Davy says. “And we were
always comfortable with the idea that they were looking out for
our best interest rather than trying to generate fees.”
Competition for retirement planning services is fierce—Davy
knows it as he’s fielded calls from many other providers and met
with some to compare plans. But he’s always felt confident in
Trust Point for his company, and his own personal plan.
From single plans to businesses like Davy’s to companies of
more than 600 employees, Trust Point offers retirement solutions
built on real relationships and the best interests of clients.
CoreValues
by Jake Weyer
11T R U S T P O I N T I N C . C O M
A COMPLETE SOLUTIONMichele Seidel is a compliance special-
ist at Trust Point, a part of the retire-
ment plan services team, and an expert
in 401(k) administration.
Trust Point provides what Seidel calls
an “all-inclusive solution” for 401(k)
plan sponsors (the people making the
decisions) or employers, helping them
with their investments, plan docu-
ments, record keeping, and everything
else associated with a plan. Other insti-
tutions commonly send clients to third
parties for various services, producing
numerous contacts and limiting rela-
tionship development.
“We are the all-encompassing solu-
tion for them,” Seidel says.
Typically when approached about
managing a 401(k) plan, Trust Point
will meet with the business or individ-
ual to first learn all of the background.
If someone is looking for a new plan,
what are the drawbacks with their cur-
rent provider? Will a new plan be cost
effective? Is there a better solution?
The Trust Point team then drafts a
proposal that walks through every ser-
vice provided in the bundle and how
each will be implemented. Each plan
has a designated relationship manag-
er as the primary contact, though the
whole retirement plan services team
is accessible so there’s always someone
available to answer questions.
Education is encouraged and pro-
vided at least annually for all plan par-
ticipants and one-on-one guidance is
always available, and often utilized.
For example, Seidel worked with
one business that had a terminally ill
employee who was unable to work for
his company, but his employer kept
him on so he could receive insurance
for medical bills. Unable to withdraw
money from his 401(k) because he
was technically still employed, Seidel
worked with him to set up a loan that
allowed him to borrow money from
his account.
“They appreciated the fact that we
treated him like family, much like they
do with their employees,” Seidel says.
“It was that extra step that they appreci-
ated. That he wasn’t just a number. That
he was a person facing this situation.”
LOOKING OUT FOR CLIENTSTreating clients like family isn’t just a
saying at Trust Point. As a fiduciary, the
company is ethically and legally obli-
gated to operate in a client’s best inter-
est. The company is also considered
a discretionary trustee, which means
12 T R U S T P O I N T
CoreValues
it takes on as much liability with plan
sponsors as it can.
“So if we’re taking on a lot of liability,
we’re going to be very careful in what we
do to make sure we’re compliant with
everything that’s depicted in the law.”
Trust Point’s staff also takes pride
in serving clients, working under the
motto that doing what is best for clients
is doing what is best for the company.
“One of the things I love about this job
is the interaction,” says Beth Erickson,
a relationship manager at Trust Point
and manager of the Davy Engineering
account. “You get to talk to everyone
from maybe a factory worker to a CEO
and all levels in between and establish
relationships with them.”
It’s not unusual for Erickson to be
on the road for days at a time to be able
to meet face-to-face with area clients,
answer their questions, and provide the
guidance they’re looking for. Davy is in
touch with Erickson quarterly about
his business’s 401(k) and profit shar-
ing programs and knows his employees
have developed their own relationships.
“I’ve always been convinced that we
have a good relationship,” Davy says.
“That we have good service, we have
a good plan, fair fees, and we’ve never
found a need to change.”
Retirement Planning You Can Trust
Founded by Mike Davy’s grandfather in 1929, Davy Engineering today employs 50 full-time engineers, biologists and chemists. For decades, the company has relied on Trust Point to manage its retirement and profit sharing programs.
While working with clients of all sizes on 401(k) plans, Trust Point’s Michele Seidel and Beth Erickson have helped par-ticipants overcome a variety of common challenges. Here are a couple tips for anyone saving for retirement:
MAXIMIZE SAVINGS“Probably one of the biggest factors facing people right now is not being able to save enough,” Erickson says. “We aren’t on track as a nation with our retirement accounts and financial wellness scores arenot very good.”
Contributing to a 401(k) is good, but participants should talk to their financial advisor about how to maximize their contributions to ensure they have enough income to retire when they want and live comfortably.
STAY EDUCATED “Some of the struggles that we sometimes run into are when the market is up, we don’t get a lot of inquiries from plan participants,” Seidel says. “But when the market is down, we might get a lot.”
Interest in education tends to fall off during good financial times, she says, but participants should make an effort to maintain their financial education so they are prepared when times get tough. That goes for plan sponsors and employers as well.
“We put the 401(k) in place for a reason,” she says. “It’s important to utilize the sources that can help you and your employees get the most out of it.”
INVESTMENT ADVICE
13T R U S T P O I N T I N C . C O M
Michele SeidelMBA, CRSP, Compliance Specialist Beth Erickson
Relationship Manager
How many times have we been told
the key to success is a good educa-
tion? Usually it was a discussion
with our parents or grandparents
telling us that it is both the journey
and the success of learning that will
get us where we want to go. The same message holds
true for families of wealth and their succession plan-
ning with the next generation.
When communicating your plan, it is important to
include education, whether formal or experiential,
to help prepare the next generation to support them-
selves and become good stewards of family wealth and
often the business that generated it. Many families
may have thought about education, but are not sure
where and when to start the process. Here are some
simple steps to follow:
HAVE A FAMILY MEETINGJust as you would plan a vacation, it is important to
begin early and communicate plans for your wealth
and share your values as well as your story with the
next generation.
Your estate plan might be your first step and that plan
will help you direct your education program. When
wealth is generated by an existing business, primary
questions include whether the business will continue
and will the next generation be involved either in the
day-to-day management or at a board or ownership
level. These decisions can be difficult if the current
owner(s) have always been involved in daily operations
and might not yet have a plan for when ownership will
transfer to the next generation.
Once a plan is established, organize a family meeting
with your advisors to communicate your individual
plan to your family.
GET TO KNOW YOUR SUCCESSORSNext there is a need to engage the younger generation
in the succession plan and ensure an appropriate
understanding of the family business—if continuing—
or of the related wealth.
Family members might have shared concerns
about the ability of the next generation to manage the
wealth. While the current generation has knowledge
of its children and grandchildren, it can be difficult
to see them as adults and be objective about their
preparedness. This is where family meetings and
advisors can offer assistance.
When families begin to consider whether the next
generation will act on a family board or work in the
business, the process can begin with a simple assess-
ment using a formal personality test. The most com-
mon is the Myers-Briggs Type Indicator (MBTI), and
another option used more in business and profession-
al development is the CliftonStrengths assessment.
These and similar tests help a family identify and
understand an individual’s strengths, tendencies and
readiness for future responsibilities.
Engaging family advisors to communicate topics
and subject matter with the next generation creates
another opportunity to determine abilities.
DEVELOP AN EDUCATION PLANIn some cases, a more developed curriculum for the
next generation is appropriate, as there might be a
larger group that needs to work together as a board
to develop its understanding of the business or
family philanthropy.
The education program can have individual
elements with one-on-one learning like the
basics of investing and personal finance, or group
sessions on the role of family philanthropy, and
responsibilities of trustees and beneficiaries. All
education should incorporate group discussions
and activities supporting communication and deci-
sion making.
Successful families should also incorporate fun
events with multi-generational sharing and learning
as part of the education program, as those times will
build relationships and develop lasting memories.
An education program for families with generational
wealth is as much about the business and finance as
it is about family values and heritage.
15T R U S T P O I N T I N C . C O M
Developing future generations as good stewards of family business and wealth
by Christine Schmidt CFP®, Vice President, Family Office
ven the most blissful couples aren’t immune to mar-
ital challenges, and at the top of the list for many is
managing money. After marriage, financial habits that once only affect-
ed an individual suddenly impact the lives of two people and more if
children enter the picture. How money is spent, how it’s saved, financial
priorities—these things can vary widely from person to person and aren’t
always discussed before vows are exchanged.
And sometimes even the wealthiest couples can’t avoid these conflicts. In
fact, more money often leads to more marital problems. But money struggles
don’t have to be a deal-breaker in the relationship.
Communication is key for overcoming most financial woes and spouses need to
work together to develop a long-term financial plan that both can agree on. Whether
you’re about to be married or have already walked down the aisle, here are some key
considerations for that important discussion.
16 T R U S T P O I N T
Finances are a common cause of frustration for couples, but there are ways to keep money from making a mess of your marriage
Bo
tto
m L
ine
IN
VE
ST
• B
UD
GE
T •
SA
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by Regina SiegelAssistant Vice President
Marriage
18 T R U S T P O I N T
Money Management Financial control can be one of the stickiest subjects that a married couple
will face. There are many ways a couple can manage its finances, and there
is no right or wrong answer, but it’s imperative that both individuals agree
on their level of involvement. Consider the following questions:
• Will you have joint checking and savings accounts, separate
accounts, or both?
• How will you set your budget, and where will the money
come from?
• Who will be in charge of watching your budget and making sure
you’re staying within your plan?
• Who makes the investment decisions?
Where you land on all of these questions will depend on each person’s
comfort with that part of the finances. Some people want to have complete
control and visibility for every cent that comes in and out, and some people
would prefer to have nothing to do with it.
Make sure that you have a conversation about each of the questions above, and
that you know who will be in charge of what. Poor communication, especially
about finances, can put a lot of strain on an otherwise successful marriage.
Existing Loans and DebtsThe existing debts and loans that you each owe are one of the most import-
ant aspects to consider before marriage. Most people of typical marrying
age and some that are marrying later in life will likely have one or several
of the following kinds of debt: student loans, car loans, personal loans, and
credit card debt.
Most debt belongs to the individual who originally borrowed it unless you
have a co-signer. However, while you may not legally be “on the hook” for
your partner’s debts, once you become married, each of your loan responsi-
bilities will impact your joint household, which affects you both.
Make sure that you have an open and transparent conversation about all
forms of debts in each other’s name, and what the plan is to repay it on time.
Your debt-to-income ratio as a couple could play a significant role in getting a
mortgage or other type of loan and especially in getting the best interest rates.
Family SupportThe biggest discussion in this area is proba-
bly whether to have children. Though many
factors go into that decision, from a purely
financial perspective it can cost upwards of
$300,000 to raise a child to the age of 18.
Beyond children, couples might need to
support other family members in one way or
another. Regardless, have a plan and commu-
nicate about it often. Be open and honest with
one another and be sure to listen to your part-
ner to understand their perspective.
Whether you have children or not, you
should probably discuss tax and estate plan-
ning with a financial professional to make
sure you are on the right track and can accom-
plish all of your goals.
“MORE MONEY OFTEN LEADS TO MORE MARITAL PROBLEMS. BUT MONEY
STRUGGLES DON’T HAVE TO BE A DEAL-BREAKER IN THE RELATIONSHIP.”
Marriage
19T R U S T P O I N T I N C . C O M
Reaching Long-Term GoalsMarriage is fundamentally a partnership between
you and your significant other. To make it a suc-
cessful partnership, you need to make sure that
the two of you are on the same page regarding your
financial goals.
Are you both individually and collectively on
track to retire comfortably? If not, how will you
plan to get back on track? We’ve already discussed
debt, but it should be a primary goal to make debt
payments manageable and have a good plan toward
paying it off.
As you begin to build wealth, you should also con-
sider what your long-term plans are for investing
that money. Create common goals and determine
what kind of investment will not only get you there
but also one where you are both comfortable with
the risk level. It’s important you and your partner
agree on the direction you’re working toward.
Mine, Yours, Ours
Power Play
Though it might seem beneficial to evenly divide bills and allocate the extra money for spending to each spouse, it can actually build resentment over individual spending. It also doesn’t teach you to work together and diminishes the spending power you have as a couple.
Using money to get your way in a marriage will only lead to major conflict. This usually occurs when one spouse makes significantly more income than the other, comes from a wealthy family, or when one is temporarily unemployed. Regardless, one spouse dictating how money is spent can be a recipe for disaster. Reaching a mutual understanding is key.
20 T R U S T P O I N T
Prenuptial AgreementWe saved the most awkward topic for last. While in
the moment it seems as though your relationship
will last forever, the stark reality is that somewhere
between 40 percent and 50 percent of marriages in
the U.S. end in divorce, according to the American
Psychological Association.
Without an agreement in place to dictate how assets
are to be defined and divided, a breakup can lead to
significant legal disputes around your current and
future finances. Especially in cases where one indi-
vidual is bringing significant financial assets to the
table, it might make sense to put a prenuptial agree-
ment in place to ensure that there is a fair financial
settlement in the event that the relationship doesn’t
work out in the long run. If you’re afraid to have this
conversation when things are going well, think about
how difficult it will be if things are going poorly.
Here to HelpGetting married is a significant life event that should
bring joy, comfort and happiness. But it also brings
with it a host of financial decisions that are import-
ant to consider. Take heed, use these tips, and money
matters won’t have to come between you and your
happily ever after.
And remember, Trust Point can help. Whatever
stage of life you are in, we take the time to listen to
your values and customize a plan that is just right
for you. For more on topics like this, please visit our
research and insights page at trustpointinc.com.
When the Marriage Ends
Going through a divorce or losing a spouse is never easy. The process can be messy, stressful, and frustrating.
After things have settled and you start getting back into a routine, you still have to deal with handling your finances on your own. Historically, this challenge more commonly affects women. According to a report from global wealth management firm UBS, women are living longer than their husbands, yet 56 percent of women leave financial and investing decisions to their husbands. And regardless of the circumstances, eight out of every 10 women will eventually be solely responsible for handling their own finances.
At Trust Point, we work alongside you to help you make the right financial and investing decisions and to make sure we continue to meet your financial objectives and feel secure in your future. Here are our top tips if you find yourself in sole control of your finances, maybe for the first time:
Get started right away, but wait to make big decisions.It’s natural to be stressed out at the thought of trying to manage your day-to-day life after a significant life event. The key to staying in control is being assertive and confident when it comes to managing your finances. To do this, take an inventory of your assets and know what your cash flow needs are so that you have a better understanding of your situation. You may feel pressured and rushed to start making financial decisions. Slow down. Take your time. When it comes to these decisions, the best practice is to think through all of them.
Find a trusted financial advocate.One way to alleviate the pressure you feel is to recognize that this isn’t something you need to go through on your own. Don’t try and get through it solely off of advice from friends and family.
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87%of those who report
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Marriage
21T R U S T P O I N T I N C . C O M
Trust Point advisors are experts when it comes to situations like this. There are a lot of details that are easy to overlook when it comes to getting your finances in order after a marriage ends, such as closing joint accounts and opening new ones, changing beneficiaries on insurance policies or wills, creating a new estate plan, and more.
Create a budget and stick to it.If you had any joint accounts or were liberal in terms of spending one another’s money during your marriage, then you need to learn to budget with the money that you make. If you don’t have much experience with budgeting, here are three things to keep in mind when creating your first budget:
1] Identify why you want to create a budget. In this case, it is to be able to find financial freedom while learning to adjust to a single income household.
2] Do a deep dive into current spending habits. What are you spending the most money on per week? What is necessary spending, and what are expenses that you can try and cut back on?
3] Determine your financial goals. Do you still want to retire at a certain age, or assist your kids in getting through college? Create some measurable goals that will motivate you to stick to your budget.
Financial planning and budgeting may seem intimidating at first, but most people find out that the process is actually quite enjoyable, as it gives them a new sense of control over their wealth.
Invest wisely. Investing your money is a great way to gain more financial freedom.
If you’re sitting on extra cash in your account after a financial settlement following your divorce, it’s smart to hang onto it for the short term until you’ve adjusted to your new lifestyle. But at some point, you may want to invest your money to help preserve and increase your wealth to help reach the financial goals that you’ve created.
When it comes to smart investing, you need to construct the right portfolio that takes into consideration how much money you will need to support your lifestyle, as well as the amount of risk you’re comfortable with. At Trust Point, our investment professionals can help mitigate various risks, including market risk, interest rate risk, inflation risk, and more.
Investing can be intimidating for some, but at Trust Point we will customize your plan and educate you along the way to ensure your feel confident in knowing where you stand and what you need to do to reach your goals.
With the cost of college on the rise year
after year, continuing education can
present a huge challenge for families.
The 2018-2019 average annual tuition
and fee prices for in-state students at
public four-year colleges range from
$5,400 to more than $16,500, according
to The College Board, a nonprofit organization aimed at helping
students succeed in higher education. Those costs can easily double
for out-of-state students and rise even higher for those attending
private institutions.
For families anticipating a college education for their children,
there’s no question that smart saving—and saving early—is import-
ant. Erica Rytilahti, assistant vice president of wealth management
at Trust Point, helps families plan for future education every day.
“Tuition costs have gone up much higher over the last 10 years
than inflation rates, so there’s definitely a need,” Rytilahti says.
“There are still opportunities out there for scholarships and grants
and student loans, but there’s a lot of news about how students are
graduating with very high debt loads and family members want to
try to alleviate that.”
And when she speaks of family, she means more than just parents.
She’s found that more grandparents and other family members,
even friends, want to chip in. One way to do that, she advises, is
through a 529 plan.
22 T R U S T P O I N T
How to expand family saving
for future college students
by Jake Weyer
$AVING FOR COLLEGE
BottomLineB
23T R U S T P O I N T I N C . C O M
How it WorksA 529 plan can be created at any time, and is set up for one
specific beneficiary. The account owner can be the grandpar-
ent, parent, or even the beneficiary. Once established, anyone
can contribute to the account—parents, grandparents, aunts,
uncles, or friends. And if plans change, the beneficiary can, too,
whether it’s another child or an adult pursuing a degree, as long
as they are an eligible family member of the current beneficiary.
To avoid federal gift tax consequences, annual contributions
to 529 plans are capped at $15,000 for each contributor ($30,000
jointly for couples), though a larger one-time contri-
bution of up to $75,000 can be made and prorated
over five years, helping investors to get a head start.
“And obviously the sooner you start the better,
so that contributions and earnings can com-
pound,” Rytilahti says. “But certainly there are
benefits even if you start later in the child’s life.”
New to 529 plans in the last year is the ability to
use dollars for elementary and private school tui-
tion as well, though those expenses are capped at $10,000 a year.
Withdrawals for college expenses do not have a limit and can be
made anytime.
Balance limits do exist for 529 plans and vary from state to
state. For 2019, the maximum balance is $425,000 in Minnesota
and $488,000 in Wisconsin.
The BenefitsThe federal and state tax benefits are perhaps the best part
of a 529 plan.
It is similar to an IRA in that the assets can be invested and
grow tax free, Rytilahti says. And as long as contributions are
used for qualified educational expenses—tuition, books, room
and board, technology, etc.—withdrawals are also tax free.
It’s important to note that if a withdrawal is made for
non-education reasons, it will come with a 10 percent penalty
tax and incur income tax as well. If a beneficiary does not use
all of the plan’s funds, they can always be put toward another
beneficiary’s education.
A 529 plan can also be used to reduce your taxable income,
since you may be able to use contributions as a deduction on
your state tax return depending on your individual tax situa-
tion. Minnesotans can claim up to a $1,500 deduction ($3,000
per married couple filling jointly) against state income tax or
a credit equal to 50 percent (but no greater than $500) of the
contributions made. In Wisconsin, up to $3,280 per benefi-
ciary per year is deductible.
If someone makes a contribution between $15,000 and
$75,000, the ability to prorate that lump sum over five years
provides relief from potentially substantial gift taxes as well.
Deciding What’s BestThough 529 plans are excellent college savings tools, Rytilahti
notes that every family is different and Trust Point can work
with anyone to determine the best path to accom-
plish their goals.
For example, she has worked with grandpar-
ents who pay tuition directly to a school, which is
another nice way to help students while avoiding
federal gift taxes. She has also advised families to
work with their attorney to establish irrevocable
trusts for education, and helped others who used
savings bonds for college expenses.
And though early saving is best, Rytilahti says families should
act on any opportunity to save, regardless of the timeframe.
“It’s never too late to start,” she says. “Even if you didn’t start
when the child was born, even if they’re in their teens, any-
thing you can get into an account to start earning money and
possibly get a tax deduction will help.”
“THE SOONER
YOU START THE
BETTER, SO THAT
CONTRIBUTIONS
AND EARNINGS
CAN COMPOUND.”
Understanding how to withdraw from your nest egg for stable retirement // by Jake Weyer
BottomLineB
Making Money Last
24 T R U S T P O I N T
25T R U S T P O I N T I N C . C O M 25T R U S T P O I N T I N C . C O M
or all the joy and
freedom that retire-
ment can bring, it also
often arrives with a
little anxiety.
S u d d e n l y t h e p a y -
checks stop and it’s time
to rely on your hard-earned
nest egg for daily income.
Will you be able to withdraw
enough to live out your retire-
ment dreams without running out of
money? Dustin Cunningham, a CFP®
professional and regional account
executive at Trust Point, is well versed
in addressing this question.
“Usually the biggest question that
retirees have or the hardest part for
them is what they’re actually going to
spend in retirement,” Cunningham says.
“Figuring out what they’re going to need
to live on to accomplish their goals.”
The answer is different for everyone,
of course, but the steps taken to arrive
there are the same. Cunningham walks
us through the process:
CONSIDER GOALS AND RESOURCES“First we want to find out what your
goals are, what your retirement plans
are, and what you want to spend,” Cun-
ningham says.
Calculating your annual pre-retire-
ment expenses can help, but it’s import-
ant to consider lifestyle changes. Some
people want to travel, some change
their living situations, or take up a new
hobby—lifestyle changes come with
expense changes.
Other considerations include whether
you want to give to charity or leave a leg-
acy for your children or others. If that’s
not the case and you want to use all of
your funds during your lifetime, one
can have a more significant draw rate.
As you are determining your retirement
goals and budget, it is important to con-
sider all of the financial aspects of the
life you want to live.
Trust Point offers a questionnaire to
help start this dialogue, but one-on-one
or family conversations with an advisor
can be a big help.
“There are unknown factors such
as health issues and sickness that can
change the latter end of withdrawals,
but we want to get to know you, get to
know your goals and values,” Cunning-
ham says.
And regardless of your spending plans
in retirement, Cunningham advises
building up six to 12 months worth of
savings before retirement to account for
potential market shifts.
“Then you don’t have to draw down
on your assets in a correcting market,”
he says.
Trust Point will also help to evalu-
ate every asset, from social security to
pension income to investment port-
folios. Are the portfolios taxable, tax
deferred, or tax free? It is important
to understand the tax implications of
where to draw assets from as certain
account types may have tax advantages
or disadvantages. A well thought-out
decumulation strategy can help reduce
taxes in retirement and ensure a more
sustainable distribution pattern.
f It’s been said that
the single biggest mistake investors make is not running a retirement calculator. Trust Point’s retirement calculator allows you to calculate the potential retirement savings for you and/or for you and your spouse combined.
Features include allowing you to estimate how much money you’ll need in retirement, your rate of return during and after retirement, your retirement savings and contributions, your company match, and more. To use the retirement calculator, login to your account at trustpointinc.com and choose “Plan” from the toolbar at the top of your account dashboard.
Run a Retirement Calculator
USE BENCHMARKSOne of the best-known strategies
for withdrawing from retirement
accounts—from 401(k)s to IRAs—is
the 4 percent rule.
Developed by financial advisor Wil-
liam Bengen in the 1990s, the rule
essentially states that starting retire-
ment with a 4 percent withdrawal
rate and adjusting for inflation should
extend the life of a portfolio for more
than 30 years. Of course that assumes
you have saved enough (saving 25 times
your annual expenses is another widely
accepted rule).
“I wouldn’t say that it’s the golden
rule for everyone to follow verbatim
because everybody’s goals are unique
to them,” Cunningham says of the 4
percent rule. “But it is definitely a
benchmark to start with.”
To maintain a 4 percent distribu-
tion rate, Cunningham suggests a
balanced portfolio of 50 to 60 per-
cent stocks and the balance in bonds,
though that can change over time as
interest rates normalize or increase. If
there is a low interest rate period, equi-
ties may be more important than bonds
to keep up with growth and distribution
rates, and in a high interest rate period,
bonds become more attractive, he says.
The first few years of retirement can
involve some trial and error as retirees
adjust to their new life and get a better
handle on their monthly and annual bud-
gets. Cunningham says he tries to stay
conservative during this time—keeping
the withdrawal rate near 4 percent—as
to not overstate projections. New retir-
ees tend to be on the same page.
“More often than not I find that retir-
ees are more cautious in their spending
habits,” Cunningham says. “They are
adjusting to not having that monthly
paycheck so they tend to put off some
bigger purchases, such as another car.”
But after getting beyond those ini-
tial adjustments, the “go-go” phase of
retirement in which a retiree is most
active tends to begin. That can lead to
adjustments.
“It’s never set it and forget it,” Cun-
ningham says. “We are actively manag-
ing the portfolio and distribution rate
and communicating with clients.”
MANAGE INCOMEAnother common question Cunning-
ham fields from retirees is how to get
paid. After years of scheduling life—
everything from grocery shopping to
date night to large purchases—around
a paycheck schedule, that schedule is
gone. But it doesn’t have to be.
Trust Point can work with you to
receive distributions monthly, quar-
terly, annually—whatever works, as
long as it also works best for the plan
and doesn’t impact the sustainabil-
ity of resources, or their potential
for growth. With a careful balance
between spending and portfolio
management, it is possible to make
money in retirement.
“If you manage toward a 4 percent
distribution rate and you have a portfo-
lio with an expected rate of return of 6
percent, you can maintain or grow that
principal,” Cunningham says. “Obvi-
ously we want to keep up with inflation,
so those dollars continue to purchase
the same amount of goods today as they
do 10–15 years from now.”
He says it’s also important to be
mindful of long-term investing. There
will be periods of positive returns and
periods of negative returns. As fiducia-
ries, Trust Point advisors work in your
best interest.
“Don’t let emotions kick in during vol-
atile markets,” Cunningham says. “Stay
the course that’s in line with your long-
term objectives and goals.”
26 T R U S T P O I N T
“DON’T LET EMOTIONS KICK IN DURING
VOLATILE MARKETS. STAY THE COURSE
THAT’S IN LINE WITH YOUR LONG-TERM
OBJECTIVES AND GOALS.”
Making Money Last
27T R U S T P O I N T I N C . C O M
When to Take Social SecuritySocial Security benefits can be claimed as soon as age 62 or as late as age 70, but if you take Social Security before your full retirement age, your benefits will be reduced. For example, if you were born between January 2, 1943 and January 1, 1955, the following Social Security benefit payout is created:
The good news for many early retirees, Cunningham says, is that a later withdrawal is preferable to avoid being pushed into a higher tax bracket.
“So it makes sense sometimes for those clients to wait until closer to age 70 to receive social security and draw down their qualified balances between retirement age and 70,” he says. “There is definitely some tax strategy when considering when to draw from Social Security.”
Social Security is a key consideration when developing any Trust Point client’s retirement plan and whether taken early or late, the funds will be used for the greatest benefit.
age ageof your full benefit amount
of your full benefit amountY
OU
GE
T
YO
U G
ET
63 6780% 108%
70%
85%
100%
115%
130%
Source: Social Security Administration
YO
U G
ET
YO
U G
ETage age
93.3% 124%65 69
YO
U G
ET
YO
U G
ET
age age86.6% 116%64 68
YO
U G
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YO
U G
ET
age age
100% 132%66 70
62 75%age
YO
U G
ET of your
full benefit amount
of your full benefit amount
of your full benefit amount
of your full benefit amount
of your full benefit amount
of your full benefit amount
of your full benefit amount
BottomLineB
28 T R U S T P O I N T
Taxpayers began to see the
impact of the 2017 Tax Cuts
and Jobs Act (TCJA) when
they filed their 2018 federal income
tax returns.
The TCJA made major changes,
including increasing the amount of the
standard deduction, removing personal
exemptions, dropping income tax rates
and limiting the amount of state and
local income tax (SALT) that an item-
izing taxpayer can deduct to $10,000.
These changes may limit the tax
incentives for charitable giving for
many taxpayers who no longer item-
ize. Let’s take a look at three techniques
that provide a tax benefit to support a
person’s desire to give charitably.
BUNCHING CHARITABLE CONTRIBUTIONSA technique that is seeing renewed inter-
est is bunching charitable contributions
every other year or even less frequently.
In the year that you bunch your charita-
ble contributions, you would plan that
your total itemized deductions, includ-
ing charitable contributions, exceed the
standard deduction. In other years, you
would take the standard deduction and
not make any charitable contributions.
This technique works well from an
income tax planning standpoint, but
may make it difficult for the charities
you support to budget and maintain
appropriate cash flow each year. Addi-
tionally, this technique requires that
you create a monitoring system for
yourself to track the years you plan to
itemize and match that to the years that
you make your charitable gifts.
DONOR ADVISED FUNDSAnother version of bunching is to use
a donor-advised fund (DAF) offered by
your local community foundation or
other providers. Using the DAF meth-
od, you would contribute the equivalent
amount of money of your normal chari-
table giving over a number of years and
instruct the fund to spread that amount
over a period of years to specific char-
ities. You would itemize deductions in
the year that you use the DAF and use
the standard deduction in other years.
The advantage of this approach over
bunching is that your selected charities
continue to receive monies each year.
Rather than you making a direct contri-
bution, the DAF makes the annual dis-
tribution on your behalf. See tax benefit
illustration for tax savings impact.
For those who are charitably inclined,
these techniques can assist you in gain-
ing an income tax benefit. Contact your
Trust Point advisor to learn more about
what options are best for you.
CHARITABLE IRA DISTRIBUTIONSCharitable IRA distributions actually
predate the TCJA, becoming a perma-
Three techniques to provide tax benefit from your donations
By Mark Chamberlain & Brenda Stuhr JD, CPA, Senior Vice President / CPA, CTFA, Vice President
Tax Incentives for Charitable Giving
29T R U S T P O I N T I N C . C O M 29T R U S T P O I N T I N C . C O M
nent part of federal tax law on Decem-
ber 12, 2015. If a taxpayer meets the
requirements, this is an excellent way
to receive a tax benefit for those who
are charitably inclined, regardless of
whether they itemize.
The regulations allow an IRA hold-
er to make a distribution from their
IRA directly to a qualified charitable
organization.
Requirements include:
• The IRA holder must be age 70 1/2 or
older when the charitable IRA distri-
bution is processed.
• The charitable IRA distribution must
be distributed directly from the IRA
by the custodian/trustee to the IRA
holder’s charity of choice.
• The maximum annual charitable IRA
distribution (in total) is $100,000.
• In the case of a married couple, if
both spouses meet the requirements
for a charitable IRA distribution, they
can each use the technique, which
increases the maximum allowed char-
itable IRA distribution to $200,000
for the household.
Benefits of charitable IRA
distributions include:
• The distribution is not federally tax-
able (Note: Both WI and MN have also
adopted charitable IRA distributions;
for residents of those states, the dis-
tribution is also not state taxable).
• The distribution counts toward the
IRA holder’s required minimum dis-
tribution (RMD).
• Distributing all or part of your
RMD as a charitable IRA distribu-
tion reduces your adjusted gross
income (AGI).
- AGI is used to determine social
security taxability; lowering AGI
may lead to reduced taxable social
security benefits.
- AGI is also used to determine
Medicare premiums; lowering
AGI may lead to reduced Medicare
premiums.
29T R U S T P O I N T I N C . C O M
Real Estate Taxes
State Income Taxes
Mortgage Interest
Charitable Giving
Charitable IRA Distributions
The illustrations below assume the following: A couple uses the married filing jointly (MFJ) status; one IRA holder is over 70½; the couple wishes to donate, on average, $5,000 per year to charity.
Bunching or Using a Donor Advised Fund
Tax Advantage = $1,980
$24K STANDARD DEDUCTION
YEAR 1 YEAR 2 YEAR 3
6K
4K
8K
15K
No Charitable IRA Distributions, Bunching or
Donor Advised Funds
YEAR 1 YEAR 2 YEAR 3
6K
4K
8K
5K
Tax Advantage = $0
$24K STANDARD DEDUCTION
Tax Benefits
Tax advantage over bunching
or using a donor advised fund =
$1,320
No charitable planning =
$0
Tax advantage over no bunching or use of
a donor advised fund = $3,300
30 T R U S T P O I N T
BottomLineB
FAMILIES OF
LOVED ONES WITH
DISABILITIES CAN
USE A SPECIAL NEEDS
TRUST TO ENHANCE
THE INDIVIDUAL’S
QUALITY OF LIFE.
Independence for Special Needs Families
31T R U S T P O I N T I N C . C O M
amilies of disabled individuals face unique financial challenges,
especially if the individual receives public assistance.
A special needs trust enhances a disabled individual’s quality of
life and allows the individual to receive needs-based government
benefits, such as Medicaid and Supplemental Security Income
(SSI). Here’s an overview of the two types of special needs trusts,
how they differ, and what they can provide.
GETTING STARTEDA first-party Special Needs Trust is funded with assets owned
outright by a disabled beneficiary that may be received from an
inheritance, personal injury settlement or a medical malprac-
tice settlement. This type of Special Needs Trust must include
a provision that any assets remaining at the beneficiary’s death
are first to be used to pay the state Medicaid agency for benefits
received. A third-party Special Needs Trust, also referred to as a
Supplemental Needs Trust, is funded with assets that belonged
to someone other than the disabled individual. The trust grantor,
or creator, of a third-party Special Needs Trust can direct how
the assets are distributed after the disabled beneficiary’s death.
Special and Supplemental Needs Trusts (collectively SNTs) differ
from other trusts in that they supplement benefits already provided
by government programs. The assets in the SNT are not considered
an available asset when qualifying for government benefits.
A SNT must name either an individual person or a profession-
al fiduciary, such as Trust Point, as the trustee. SNTs are gov-
erned by complex rules and laws. It is critical that the trustee be
familiar with fiduciary duties, public benefits laws, investment
standards, and trust accounting before accepting a trusteeship.
A trustee’s improper administration of a SNT might jeopardize
the beneficiary’s eligibility for government benefits.
SNTs are designed to supplement, and not replace, the support
provided by public benefits. Qualification for public benefits,
such as SSI and Medicaid, depends on the beneficiary’s income
and assets. Therefore, improper trust distributions will be con-
sidered income to the beneficiary and benefits may be denied.
FSpecial needs trusts can help disabled individuals and their families overcome common financial barriers
By Julie Westbrock & Peter Hendricks JD, Director of Business Development / JD, Relationship Manager
32 T R U S T P O I N T
The trustee has the discretion to make distributions for
expenses that promote the beneficiary’s independence, such
as higher quality medical equipment, dental care, therapy,
nursing or in-home care or a private room in a care center,
home furnishings, education, vehicles, trips and recreational
items that cannot be obtained through public benefits. The
trust might also pay for a home modification or the purchase
of a specially adapted residence. The trust also pays for trust-
ee fees, legal expenses and taxes.
The trustee makes recurring and one-time distributions
directly to third-party vendors for expenses and services. The
trustee cannot make distributions directly to the beneficiary,
as doing so might attribute unearned income to the beneficia-
ry and affect needs-based benefits.
A professional fiduciary with SNT administration experi-
ence is often the best choice as trustee. Professional trust-
ees help to ensure proper administration and distributions,
preserving eligibility for benefits and allowing the family to
focus on the care and support of the disabled individual rather
than administrative tasks.
ADMINISTRATOR-MANAGED PREPAID CARDSFor beneficiaries who live semi-independently, there is often
a request to receive funds directly from the trust to make
independent purchases. The Social Security Administra-
tion now recognizes and allows a SNT beneficiary to use an
administrator-managed prepaid card, such as a True Link™
card. The True Link card gives the beneficiary access to trust
funds based on restrictions set by the trustee.
The SNT trustee can customize a True Link card to block
access to cash, restrict certain purchases, and control where
the card can be used. Because the trustee is the owner of the
card account, qualified disbursements are not considered
unearned income to the beneficiary, again preserving the
beneficiary’s eligibility for public benefits.
The trustee can activate the card, transfer, disburse, and mon-
itor funds online. The trustee can prohibit the use of the card for
ATM and bank withdrawals, as well as cash back at merchants.
The trustee can also set restrictions so the card cannot be used
for food or shelter, but can be used for gas, clothes, and pharma-
ceutical purchases that are not paid by government benefits.
The trustee has the power to limit the type of business or loca-
tion where the card can be used and to set transaction limits by
spending categories or particular retailers.
SPECIAL NEEDS TRUSTS
1Annual Statistical Report on the Social Security Disability Insurance Program, 2013
Acheiving a Better Life Experience (ABLE)Understanding the ABLE Act
The ABLE Act, signed into law on December 19, 2014, gives individuals with disabilities the oppor-tunity to establish tax-deferred savings accounts to maintain their independence, pursue their dreams and contribute to their communites. ABLE Plans fall under Section 529 of the Internal Revenue Code.
Protects current disability and healthcare benefits
Qualified expenses under the ABLE Act include:
Earnings on ABLE plan contributions (made out of after-tax dollars) would be tax-free as long as the funds are used for quali-fied expenses.
EDUCATION HOUSING TRANSPORTATION
ASSISTIVETECHNOLOGY
EMPLOYMENTTRAINING & SUPPORT
HEALTH, PREVENTION & WELLNESS
FINANCIALMANAGEMENT
ADMINISTRATIVESERVICES
FUNERAL & BURIALEXPENSES
In general , ABLE plan funds would not affect eligil ity for Supplemen-tal Security Income (SSI), Medicaid and other feder-al means tested benefits. Currently, individuals with more than $2,000 in ass-ests are not eligible for SSI.
TAXFREE
SSI/MEDICAID
ELIGIBILITY
33T R U S T P O I N T I N C . C O M
The True Link card is customized to each beneficiary’s spe-
cific needs. The beneficiary can achieve a sense of indepen-
dence by making purchases as needed, and will have quicker
access to funds. After an email or phone call request from a
beneficiary, the trustee can add funds to the card online and,
within minutes, the beneficiary can use it at the approved
vendor location.
ABLE ACCOUNTSMeans-tested public benefits, such as Medicaid and SSI,
require maximum asset limits to determine eligibility.
The maximum asset limit for many single disabled individ-
uals to receive Medicaid benefits is $3,000 in Minnesota but
$2,000 in Wisconsin and the limit for SSI is $2,000. (Medicaid
is a federal benefit but each state administers the program with
slightly different rules.) Therefore, the total amount of assets
an individual can have must be below those limits to qualify
for the benefit. Disabled and special needs individuals who are
able to work and earn income often find it difficult to sustain
meaningful employment because of these low asset limits. A
federal law enacted in 2014 now allows disabled individuals
to create and contribute to a tax-advantaged savings account.
The ABLE (Achieving a Better Life Experience) Act of 2014
gives disabled individuals the opportunity to create and own
an ABLE account. To be eligible for an ABLE account, the
beneficiary must meet the Social Security Administration’s
definition of “disabled” before the age of 26. The account ben-
eficiary is the owner and the account growth is not subject
to income tax. An ABLE account can be used for any expens-
es incurred related to living with a disability and expenses
intended to improve the individual’s quality of life. Funds
remaining in the ABLE account at death are first used to pay
back a claim to the state for Medicaid benefits provided.
Funds in the ABLE account up to $100,000 are excluded
from the SSI resource limit to qualify for these benefits. The
ABLE account balance is not an asset for determining Medicaid
eligibility. An employed ABLE account owner can contribute
earnings to the account and still remain under the asset limits
required by Medicaid and SSI. Unlike a SNT, the total annual
contribution limit to each ABLE account is $15,000 for 2019.
As a professional trustee, Trust Point works together
with attorneys who are experienced in estate planning and
Medicaid planning to provide you the peace of mind knowing
your loved ones are taken care of.
For more information on the ABLE Act, investment management, or trust services, please contact Trust Point at 800.658.9474 or visit us online at trustpointinc.com.
You are eligible for an ABLE Plan if you are disabled before age 26. Proof of disability includes:
Receiving Social Security
Disability Insurance (SSDI)
Receiving SSI Receiving a certification of
disability under rules that the IRS will write
Number of people who receive both SSDI and SSI benefits1.
1.4 Million
IRS certifiedSSISSDI
or or
Who can have an ABLE plan?
ABLE plan amount that would trigger a sus-pension in SSI cash benefits while maintaining an individual’s SSI eligibility.
100,000
Estimated number of Americans who will be eligible for an ABLE account, according to
the National Disability Institute.
5.8Million
Amount each family member and friends can contribute annually into an ABLE plan and
not pay taxes (gift tax exclusion). $14k
Setting up an ABLE Plan
Each state is responsible for establishing and operating an ABLE program.
States began accepting ABLE plan applica-tions at the end of 2015.
34 T R U S T P O I N T
SOCIALLY RESPONSIBLE INVESTING ALIGNS YOUR FINANCIAL DECISIONS WITH SOCIAL OR ENVIRONMENTAL CAUSES
BottomLineB
35T R U S T P O I N T I N C . C O M
by Brandon Hellenbrand CFA, Senior Investment Analyst
ocial investing has a proud and storied history. It
goes all the way back to the 18th century, when
Quakers refused to invest in anything involved
with the slave trade. For most of the 19th and 20th
centuries, concepts of improving human equality
dominated the social investment space.
In the late ’80s and early ’90s, social investing
concepts began to focus on a wider spectrum
of issues, such as environment, social issues,
and governance (ESG). Today’s approach is no longer limited to
exclusions, as analysis of ESG factors are regularly integrated into
wider financial analysis.
The approach one takes to incorporate socially responsible
investing into their investment portfolio can vary depending on
the goals of the investor. This can be achieved by at least one of
these common approaches: using exclusions, integrating ESG fac-
tors into the investment process, or embracing impact investing.
Here’s an overview of each:
Exclusions: The original way to engage in socially responsible
investing was to simply avoid investing in companies involved in
activities that the investor is trying to avoid. A common invest-
ment strategy involves excluding “sin” stocks, such as alcohol,
tobacco, weapons, and gambling. These controversial activities
have evolved over time with some now including coal mining,
carbon, sugar and others.
Redefining ‘Good’
Investments
S
Exclusion screening can always be
customized to the preferences of the
investor. Compared with the other
two approaches, it is seen as the
most clear-cut.
Integration: This is a more mod-
ern approach that began at the onset
of the ESG revolution. The approach,
in theory, would say that companies
that follow the best practices of ESG
will actually experience better finan-
cial returns and are more likely to
succeed over the long term.
There is plenty of academic
research that focuses on singular
issues that conclude superior per-
formance is achieved by companies
that, for example, have a gender-di-
versified board and executive team,
have competitive pay for employees,
or take steps to avoid environmental
wastes or disasters, thus avoiding
costly lawsuits and cleanup.
I m p a c t I nv es t i n g : T h i s
approach is focused on making
investments that have a meaningful
impact on the environment or soci-
ety. Examples include investing in
companies involved in clean ener-
gy production or food processors
focused on improving nutritional
standards. The key components of
impact investing include generating
a positive return with measurable
and transparent financial, social
and environmental benefits, and the
impact must be deliberate and inten-
tional by the investor.
It’s also common to see this
approach used for bonds as there is
a growing market for “green bonds,”
debt issued to fund a project that is
determined to provide a positive
impact on the environment or soci-
ety. An example would include debt
issued to build wind turbines to
power a community or business.
How does an investor determine
which method is best for them?
Generally speaking, if investors
have specific criteria they want to
avoid, they can most easily achieve
this using the exclusion method. For
investors looking to have their money
invested in companies that best fol-
low their beliefs and desires, an ESG
integration strategy will work the best.
Lastly, investors that want to make an
immediate impact on a region, sec-
tor or specific cause would focus on
impact investing.
It is also possible to incorporate
parts of all three methods into a port-
folio—just ask your Trust Point advi-
sor and they will help you determine
which route is best.
36 T R U S T P O I N T
>> REDEFINING ‘GOOD’ INVESTMENTS
Companies in the top 25th percentile for gender diversity on their executive teams are
21% more likely to experience
above-average profits. Source: McKinsey & Company’s
2018 Delivering Through Diversity report
Did You Know?
37T R U S T P O I N T I N C . C O M
Trust Point offers various versions of socially responsible investing
portfolios to meet specific client needs. Our open architecture approach
to portfolio constructions allows for flexibility while maintaining the
fundamental characteristics of our investment philosophy.
We offer two methods of socially responsible investing, both of which incorporate
aspects of all three approaches.
The first option consists of a globally diversified portfolio of socially responsible low
cost open-end mutual funds and Exchange Traded Funds (ETFs). This approach is
consistent with Trust Point’s core non-ESG investment offerings.
The second approach leverages the expertise of an industry leader in ESG investing,
allowing us to build custom portfolios that meet specific exclusion, integration and/or
impact needs by owning individual stocks.
The trend towards investing beyond returns is here to stay as more investors want
to use their wallets to make the world a better place or simply want to express their
viewpoints or beliefs (non-investment goals) in their portfolios.
CORE OFFERING: One of
the key services that all of
our clients receive is asset
allocation, or making sure their
investment portfolio is diversified between
stocks and bonds so that the expected
risk and return of the portfolio meets their
needs. We use this same asset allocation
philosophy to build a diversified portfolio
of ESG indicated funds.
Through our third-party partnerships
and rigorous due diligence, we are able
to identify investment options that
incorporate some of the three social
investing approaches into low cost funds.
The allocation of these various ESG funds
provides us with a diversified portfolio
that not only meets clients’ risk and return
goals, but also aligns the portfolio with the
most commonly recognized ESG factors.
CUSTOM OFFERING*: Understanding our clients’
goals and values is key to
successfully building their
investment portfolio. Our rules-based
investment system/process allows us to
build custom portfolios that meet very
specific client needs. With the ability
to exclude individual stocks or entire
subsets of the market that violate various
environmental, social, governance or faith-
based guidelines, these portfolios only
hold the companies that meet very specific
guidelines, while maintaining our asset
allocation philosophy.
TRUST POINT’S APPROACH
*Limitations apply
Buying a Second Home
Key considerations for making your second
property a smart investment // by Matt Krumrie
38 T R U S T P O I N T
Liv
ing
We
llH
OM
E •
TR
AV
EL
• L
EI
SU
RE
e
From up-north cabins to warm-weather retreats, a second property can provide years of
enjoyment and, potentially, a source of income.
J
40 T R U S T P O I N T
ennifer Wersal and her husband enjoyed
traveling to Delray Beach, Florida, so
much they decided to buy a second home
in the southeast coastal town about 50
miles north of Miami.
Located four miles off the coast, the single fami-
ly home was in a dream location. Wersal, a realtor
with the Minnesota Real Estate Team and RE/MAX
Advantage Plus in Blaine, Minnesota, worked with her
husband to fully research the property and location
before making the purchase.
“We traveled to South Florida many times and
knew this is where we wanted to be,” Wersal says.
“Sand, sunshine, and fun.”
Many Midwesterners have simi-
lar aspirations of buying property in
warmer climates. Others dream of
purchasing a lake home, something
TJ Simon, a broker and owner of
Wolff & Simon Real Estate in Park
Rapids, Minnesota, has helped sev-
eral clients achieve. Regardless of the
reason, purchasing a second home
can come with many benefits, but it is
also a serious financial commitment.
Wersal and Simon ask anyone inter-
ested in another property to consider
the following:
PROPERTY TAXES & INSURANCEUnderstanding housing markets
in different locations and states is
important. For example, the housing
market in Florida is very different
than the housing market in Minnesota, Wersal says.
Delray Beach is in Palm Beach County, Florida.
Taxes in Palm Beach County are about 33 percent
higher than those in Anoka County, Minnesota.
Because of the threat of hurricanes, homeowners
insurance in Florida was 60 percent higher than the
cost of homeowners insurance for Wersal’s Min-
nesota property. Higher property taxes and home-
owners insurance can quickly add several hundred
dollars per month to one’s mortgage.
RENTAL RESTRICTIONS“Florida is littered with homeowner associations
that have extensive rules created to protect and
upkeep the communities,” Wersal says. “If you’re
planning to purchase a second home with the inten-
tion of renting it out during the months you are not
there it is important to review the association doc-
uments well.”
Some associations will also not allow for nightly or
weekly rentals and some don’t include rental at all.
According to a 2017 report from the
National Association of Realtors, of
vacation properties purchased in 2016:
21% were townhomes
22% were condominiums
36% were beachfront
21% were lakefront
$200K was the median
sales price
Your Own Private
Getaway
“If your plan is to use platforms such as Airbnb or VRBO
this will be important,” Wersal says.
As VRBO and Airbnb have grown in popularity, cities across
the country—including those in the Minnesota and Wiscon-
sin lakes regions—have implemented their own rental ordi-
nances. All vary greatly.
And remember, homeowners associations also charge
monthly fees, which can range from a few hundred dollars
per month to upward of $1,000, Wersal says.
COUNTY, CITY & SHORELAND ORDINANCESWant to buy a lake home or cabin? Make sure you fully under-
stand what you can do within the property once purchased,
Simon says. Ordinances and regulations vary greatly from
township to city, to lake.
“Make sure what you want to do with the property can be
done within the ordinances of the area,” Simon says.
MAINTENANCE & UPKEEPIf you’re not going to be at the property year round, who will
manage upkeep? Exterior maintenance is often part of your
homeowners association fees. If you are in a single family
home, like Wersal, the homeowner is responsible for upkeep.
Added Wersal, “If you find a location you are able to rent,
who will clean and turn it over to the next guests for you?”
LOOK BEYOND MORTGAGE & TAXESYou also have to furnish the second home and account for
utility services and any associated problems with those ser-
vices. Those costs are a constant and will generally increase
over time. Be sure you factor in all related costs before making
the purchase.
FIND THE RIGHT TIMINGEveryone has good intentions. Wersal and her husband liked
Florida so much they moved there for five years while rent-
ing out their Minnesota property. But life got more compli-
cated once they had kids. Finding the time to travel back to
visit family in Minnesota and check on their rental proper-
ty became a challenge, so they ended up selling the Florida
house—though they’re not giving up on their dream.
“Take into consideration the cost to travel to your second
home and how often you will be able to enjoy it during the
year,” Wersal says. “We hope to purchase again in the future
in and around the same location, but something smaller, with
maintenance included versus a single family home.”
41T R U S T P O I N T I N C . C O M
caption here
“Make sure what you want to do with the property can be done within the ordinances of the area.” — TJ Simon, broker and owner
of Wolff & Simon Real Estate
Vacation home rental is popular
throughout the country, but if
renting is your plan, make sure you fully
understand the regulations before
buying.
South for
42 T R U S T P O I N T
by Tom Sellwood
Key financial considerations for a
snowbird lifestyleO
ur Midwest winter was a good reminder of why so many
from the region escape to the South for the winter.
Wisconsin and Minnesota can be incredible states to
live in during the warm months, but lose their appeal
for many once the snow flies (and flies, and flies) and
the cold snaps begin. Beaches, golfing, and perpetual
warmth are some of the main attractions of top snow-
bird destinations such as Florida, California, and Arizona.
But warmer weather isn’t the only reason for this migration. Brian
Koopman, a CFP® professional and senior vice president at Trust Point, says
that tax benefits also play a major role for snowbirds heading to Florida or
Texas, which have no state personal income tax.
Living WellL
r the Winter
T R U S T P O I N T I N C . C O M 43
“They start going for the weather and then at some point
they realize if they stayed for another six to eight weeks, they
could become residents and possibly avoid state income
taxes,” Koopman says.
For anyone interested in the snowbird lifestyle, Koopman
shares a few recommendations:
Establishing ResidencyTo skirt the personal income tax in states like Wisconsin (up
to 7.65 percent for the highest earners) and Minnesota (up to
9.85 percent), snowbirds need to establish residency in a no
income tax state, such as Florida or Texas (although Alaska,
Nevada, South Dakota, and Wash-
ington are also options). Spending
at least 183 days in one of these
states is the first step in estab-
lishing residency. Then you must
obtain a driver’s license, register
your vehicle, and register to vote in
that state. Koopman cautions that
each state has its own requirements, so consulting with your
tax professional is a must.
With that much time dedicated to living in another state,
Koopman says, snowbirds need access to health care across
To enjoy warmer weather and
lower taxes, many snowbirds establish residency in states with no income tax,
such as Florida or Texas.
state lines, as well as making sure their
northern home is adequately prepared
for winter. Preparation may include
snow removal or check-ins from neigh-
bors, family, or friends.
Renting vs. BuyingWhile some snowbirds rent real estate
for their winter residence, others
prefer to buy. If buying, the savings
from avoiding income taxes must be
weighed against the initial investment
and upkeep costs of owning property,
Koopman says.
“If you buy a half a million dollar prop-
erty in Florida, you have half a million
dollars invested in addition to the car-
rying costs. You’re going to have home-
owners insurance, which will likely
include hurricane insurance, homeown-
er association fees and other expenses,”
Koopman says. “You might have fixed
costs of $15,000–$20,000 per year, in
addition to the $500,000 investment.
For $20,000 you can rent a nice place for
two or three months affording you the
flexibility of heading to warmer weath-
er without the initial cash outlay for the
purchase of a property.”
In addition to the financials are life-
style considerations. Would you enjoy
returning to the same location each
winter? Or is experiencing a different
location each year a better fit?
“I have clients that’ll spend some time in
Florida one year, and then the following year
they’re going to rent a place in Arizona, and
the following year it’ll be California.”
Florida: No personal state income tax
Texas: No personal state income tax
Arizona: 4.54% on income more than $155,159/individual or $310,317/joint; 2.59% on income less than $10,346/individual or $20,690/joint
California: 13.3% on income more than $1 million/individual or $1,145,960/joint; 1% on income less than $8,544/individual or $17,088/joint
Hawaii: 8.25% on income more than $96,000/individual or married couples filing separately or $48,000/joint and surviving spouses; 1.4% on income less than $2,400/individual or married couples filing separately or $4,800/joint
Source: Kiplinger
44 T R U S T P O I N T
SNOWBIRD DESTINATIONS WITH THE HIGHEST TAX RATES
SNOWBIRD DESTINATIONS WITH THE LOWEST TAX RATES
Living WellL
“We’re seeing more of a shift from
taking up residency in a different
state to providing flexibility during
retirement and going different plac-
es,” Koopman says. “I have clients
that’ll spend some time in Flori-
da one year, and then the following
year they’re going to rent a place in
Arizona, and the following year it’ll
be California.”
Attention to IncomeSnowbirding for just a couple months
out of the year without establishing
residency in another state is essential-
ly just a long vacation, Koopman says.
Whether you return to the same loca-
tion each winter or explore new desti-
nations, there aren’t tax implications if
you’re not earning income in the state
where you snowbird.
“Investment income, such as interest,
dividend and capital gains, along with
pension and social security income is
taxed based on your state of residency,”
Koopman said.
Where’s Your Flock?As for Koopman and his wife, snow-
birding may be in their future, most
likely to Florida. Whether they’ll buy
property or rent is a decision yet to
come. With five children who will likely
raise their own families in the Midwest,
Koopman heavily weighs family in the
decision of when, and how long, to be
away during the winter.
“A big thing that I would personally
think about, and I talk to my clients
about, is where does your family live?
Where are your kids and grandkids?
What stage of life are they in? It’s hard
to be an active grandparent if you’re
trying to take up residency, say, in Flor-
ida,” Koopman says.
Much like the Canadian goose, some-
times it’s about the flock. So whatever
your reasons are for snowbirding—
weather, taxes, adventure—take a close
look at the financials, and your family,
before flying south.
45T R U S T P O I N T I N C . C O M
BY THE NUMBERS
Sources: 1SmartAsset, 2Minnesota Public Radio, 3U.S. Climate Data, 4WalletHub
84,600 25,640 24 1026More retirees moved to Florida than left in 20181
Estimated number of adults age 50 or older and not working who
moved from Minnesota to Arizona from 2007
to 20162
Average high temperature in °F
in Minneapolis in January3
Percentage below average
U.S. cost of living in Texas4
Average snowfall in inches in
Madison, WI in January3
Whether you’re dreaming of cruising the
Panama Canal, riding a train through
the Canadian Rockies or visiting Victoria
Falls in Zambia, it’s never too early to begin plan-
ning—and saving.
According to a recent study by the Transamer-
ica Center for Retirement Studies, travel is a top
retirement dream for baby boomers, Gen X’ers and
millennials alike. But only 58 percent of individu-
als surveyed feel “very or somewhat confident” that
their current financial strategy will enable them to
achieve their goals.
“Something that is often overlooked is a travel
budget,” says Regina Siegel, assistant vice presi-
dent at Trust Point. “People often consider cate-
gories such as restaurants, arts and entertainment,
bills and regular activities as part of their annual
budget, but many of the retired clients that I work
with enjoy traveling regularly and it is important
to include that in the budget as well.”
Siegel has helped her clients achieve their goals
for travel in retirement. She says to start by mak-
ing a list of your travel dreams. Do you want to visit
out-of-state family every year, or are you looking at
an extended getaway in another country? Is it a solo
trip or will it involve your whole family? What is your
mode of transportation and what are your plans for
food and entertainment? Also important—do you
have enough time set aside for volunteering and other
activities that you enjoy on the trips you want to take?
Trust Point advisors will sit down with clients to
go through all of this and put everything into practi-
cal figures. They will evaluate assets and resources
to develop different investment strategies, making
sure cash flow is available when it’s needed.
“We evaluate what they can afford, starting with the
end in mind, what their dreams are and then help our
clients reach them,” Siegel says. “If they’ve dreamed of
going on an African safari that’s going to cost $40,000
or $50,000, then we set up a plan to ensure that they
can get there in the timeframe that they’re looking at.”
Sometimes that means creating a fund that auto-
matically sets money aside for travel. Other times,
assets are reallocated or travel plans are tweaked.
Siegel says seemingly unattainable trips are often
possible with the right planning—and early saving.
Dream. Plan.
46 T R U S T P O I N T
“WHEN I KNOW
WHAT YOUR HOPES
AND DREAMS ARE,
IT HELPS ME WORK
EVEN HARDER
FOR YOU.”
If travel is on your retirement itinerary, be sure you’re planning for it financially
by Melinda NelsonTravel!
47T R U S T P O I N T I N C . C O M
<Viking River Cruises Enjoy a mix of active and cultural experiences along the Rhine or Danube Rivers without having to pack and unpack your suitcase every day.
Luxury Train Trips Take a breathtaking train ride through the highlands of Scotland, the Andes in South America, the Canadian Rockies and other magnificent places.
Photographic African Safaris Watch zebras, gazelles and wildebeest migrate across the Serengeti and Masai Mara and other spectacular experiences.
Insight Trips Explore India, Africa, South America and other developing countries while supporting a nonprofit to create positive impact.
What’s Your Dream Trip?
Cruises, such as one through the Middle Rhine River Valley as pictured here, are a great way to spend time in retirement. But all trips come at a cost and require careful budgeting.
vel!S
ou
rce
: Jim
Be
nd
t, o
wn
er
of
Piq
ue
Tra
vel D
esi
gn
(p
iqu
etr
ave
l.co
m);
ph
oto
left
: Vik
ing
Tra
vel
She recently met with one couple that
wanted to do some home remodeling, pur-
chase a new car, and also wanted to take a trip
across the world to New Zealand. She enlist-
ed the assistance of Trust Point’s Financial
Planning team in order to put together a
presentation that summarized what impact
these individual purchases would have on the
couple’s long-term goals as well as the best
timeline for making the purchases.
“We were able to make the process less
stressful for them, spreading purchases
out a bit so they feel much better about the
whole process and are able to have an even
nicer vacation as a result,” Siegel says.
Trust Point’s advisors will also work with
entire families on multi-generational trav-
el planning, as group vacations are popular
in retirement, Siegel says. Regardless of
whether you want to cruise the world, or
road trip it to the in-laws’ home in Florida
every year, you can do it with some careful
planning and guidance.
“When I know what your hopes and dreams
are, it helps me work even harder for you,”
Siegel says. “Because I want to attain them
with you. I feel like I’m achieving a goal myself,
and have personal satisfaction when I see a cli-
ent who didn’t think they’d be able to make it
work watch their dreams come to fruition.”
48 T R U S T P O I N T
SOME ARGUE THAT THE
W O R L D H A S N E V E R
BEEN SO UNCERTAIN.
The Brexit fiasco in the U.K.,
the government shutdown
over a border wall in the U.S.,
and the trade war with China
are recent examples of geo-
political risks that have been
important sources of anxiety
among investors.
If political uncertainty is
potentially much higher than
in previous decades, inves-
tors are raising an important
question: should they worry?
The answer might be quite
complex because the diverse
nature of geopolitical risks
imply that different events
around the globe will never
lead to the same results. But
when looking at the histori-
cal data, it is clear that major
geopolitical events for the
most part have only had short
lasting effects on markets.
Often, these market effects
can be attributed not only to
the events themselves, but
investors’ interpretation and
reaction to them.
At Trust Point, we like to
think of markets as a still
lake and geopolitical events
as a rock. When a rock is
dropped into a still lake, it
sends ripples throughout the
surface. After a short period
of time, however, the lake
returns to its natural state.
It is the same with mar-
kets. Once a major geopolit-
ical event happens, the rip-
ples can be seen for a short
period of time, often leading
to quick decreases in asset
prices. However, after some
time has passed, the markets
calm down and refocus on
the true fundamentals that
drive them.
Geopolitical risks can move
markets in the short term, but
their importance to markets
over the long run is generally
greatly overstated.
The table above illustrates
that point. Although the
markets experience down-
turns in times of war, terror-
ist attacks, and other major
geopolitical events, these
effects are nothing but rip-
ples in the water and should
not be concerning for long-
term investors.
In conclusion, the next time
we are hit by a big geopolitical
event, think about the rock
and the lake and don’t let your
emotions (or the media) influ-
ence your thinking. It is time
in the market that matters,
not timing the market. The
lake eventually returns to its
natural state. It always does!
Living WellL
Like a rock dropped in a still lake, geopolitical risks only make temporary ripples in the market
By Yan ArsenaultCFA®, CAIA®, Vice President of Investments
Riding Out the Waves
EVENT DATE MAX S&P 500 DECLINE 12 MOS. LATER
GULF WAR AUG 2, 1990 -19.9% (07/16/90–10/11/90) +10.2%
9/11 TERRORIST SEP 11, 2001 -23.1% (06/12/01–09/21/01) -16.8% ATTACKS
LONDON ATTACK JUL 7, 2005 -2.1% (06/17/05–10/06/05) +5.6%
U.S. DEBT CEILING AUG 2, 2011 -19.2% (05/02/11–10/03/11) +8.8%
U.S. FISCAL CRISIS JAN 1, 2013 -2.4% (10/04/12–12/31/12) +29.6%
GOV’T SHUTDOWN OCT 1, 2013 -4.1% (09/18/13–10/08/13) +14.8% & DEBT CEILING
PARIS TERRORIST NOV 13, 2015 -13.3% (11/03/15–02/11/16) +7.0% ATTACKS
BREXIT JUN 23, 2016 -5.6% (06/08/16–06/27/16) +15.4%
AVG. +9.3%
—Sitting Bull
“Let us put our minds together and see what life we can make for our children.”
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