McNab Financial

Financial Planning for employees who work at a university (or hospitals associated with a university) can be complex not only to the employees, but also to financial advisors not used to working with clients in this arena. Navigating through the complexities of this niche market requires the experience of working with university benefit offices and retirement plan providers.

Retirement Plan Providers

For employees in the private sector, they typically have the option of a single retirement plan provider. However, university employees typically have the choice of multiple retirement plan providers. These providers are commonly companies such as TIAA-CREF, Fidelity, VALIC, and Vanguard. Each one of these companies has strengths and weaknesses. Professors and other employees have to be careful navigating through the choice of carriers and take into account fees, choice of funds, and restrictions on certain funds to make the most appropriate choice and avoid unwanted mistakes. Two of the most common mistakes include investing in high cost funds or an account that hinders liquidity and locks up the ability to take a lump sum or transfer money – even in retirement.

Unique Accounts and Fund Choices

Due to the type of retirement plan (403(b) and 401(a)) and the uniqueness of the retirement plan providers, employees at universities are offered funds that are often hard to understand or miscategorized by employees and advisors alike. For example, TIAA-CREF and VALIC offer fixed or guaranteed accounts which may have distribution restrictions. TIAA-CREF offers a very unique real estate account often miscategorized by advisors. Often, Fidelity and Vanguard offer a plethora of funds which investors find hard to sift through to put together the highest quality portfolio. In addition to these fund choices, each company sets up a different structure for receiving employer and employee contributions. Understanding each fund, how to put together the most efficient portfolio, and where contributions are places are the foundation of an asset allocation strategy.

Retirement Distribution Choices

The decisions do not get any easier heading into retirement. Distribution options include systematic withdrawals, lifetime income choices (annuitization), interest-only, transfer payout annuities, required minimum distributions, and lump sum options. Each one of these retirement distribution options then has multiple decisions to be made – some which are permanent. Choosing and monitoring the correct income options and distribution amounts are key to flexibility and longevity of a retirement distribution strategy.

Ease into Retirement

Unlike the private sector, many university employees are able to ease into retirement by working out an agreement to work part-time, while receiving benefits, prior to retirement. This allows a professor or professional at a university to ease into retirement while still being a part of the university.

Conclusion

As you can see, there is a complex web of decisions to be made up to and through retirement for employees in the academic, medical and cultural fields. I can make an easy argument that the consequences of failure are much too great to make mistakes. Mistakes can be made by trying to manage these decisions on your own, hiring the incorrect advisor, or relying on shallow guidance from a retirement plan provider.

This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. McNab Financial specializes in working with clients in the academic and medical fields. This article is not intended to contain investment advice. Please contact your investment professional to discuss funds discussed in this article. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.

Most Americans think of doing their taxes as a daunting task that takes place every twelve months. Reactions differ from shock due to the amount owed all the way to joy from planning ways to spend a refund. Most of us want to forget about tax season the minute our returns are filed. Just because tax season is over, doesn’t mean you should forget about taxes until next year. Now is the time to start planning for next year.

A good accountant and investment advisor can team up to plan throughout the year to help you save thousands in taxes. When it comes to your investments, this may mean managing a tax effective portfolio, contributing to a 401(k), or taking distributions from the correct investments and accounts.

Business owners often can save money in tax by setting up the correct business entity, using a SEP IRA or 401(k), and working with a good accountant to make sure they are maximizing their deductions.

Just when you thought it was time to forget about taxes, it’s the perfect time to start planning.

This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. This article is not intended to contain investment or tax advice. Please contact your investment and tax professional to discuss investments discussed in this article. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.

TIAA-CREF has multiple withdrawal and transfer rules which are different depending on the type of contract, type of accounts, and amount in each account. This makes it very difficult for their own investors and advisors to make informed investment decisions. In this article, I will address one unique option for taking money out of the TIAA Traditional Account – the Transfer Payout Annuity (TPA).

TIAA Traditional

The TIAA Traditional Annuity’s primary goal is to protect an investor’s principal while proving the highest rate of return possible. This return comes in the form of a guaranteed return (1% to 3%) with the addition of a dividend (or additional return) at the discretion of the TIAA Board of Trustees. The additional dividend, if any, is primarily determined by current interest rates. In order to offer a guaranteed return, the TIAA Traditional Annuity invests in long-term, relatively illiquid assets. This is the reason a distribution cannot be taken in a lump sum from certain contracts.

Transfer Payout Annuity

This sets the stage for a discussion on Transfer Payout Annuities. However, there are multiple types of contracts TIAA-CREF offers which have different rules, time frames, and possible penalties for moving TIAA Traditional. A TPA allows TIAA Traditional investors to move an amount from a Retirement Annuity or Group Retirement Annuity (employer matching accounts) in 10 annual payments over a 9-year period. Each installment includes a portion of principal and interest. Depending on employment status and rules of the university’s plan, each payment can be transferred to another fund within the contract (CREF), rolled over to an IRA, or taken as a cash distribution.

Conclusion

This provides a glimpse of how a Transfer Payout Annuity works and the reason behind the withdrawal restriction. As mentioned previously, a TPA applies to Retirement Annuities (RA) and Group Retirement Annuities (GRA) with TIAA-CREF. Distributions are different from TIAA Traditional within other contracts offered by TIAA-CREF including Retirement Choice, Group Supplemental Retirement Annuities, and even a GRA mentioned above at retirement.

This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. McNab Financial specializes in working with clients in the academic and medical fields. This article is not intended to contain investment advice. Please contact your investment professional to discuss funds discussed in this article. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.

Anyone can call themselves a financial advisor.  It is often hard for an investor to understand how to choose a competent financial planner.  With hundreds of certifications, they may also have an alphabet soup behind their name. However, CFP® (Certified Financial Planner) is the most significant financial planning credential. A CFP® has passed a rigorous series of tests followed by a comprehensive final exam that nearly 50% of prospective CFPs fail. A CFP® must pass a background check, have a college degree from an accredited university, and at least 3 years of direct financial planning experience. Certified Financial Planners must also commit to continuing education including ethics classes. Although a CFP® is not a failsafe method to pick an advisor, it is a good start. Please view my article titled “Choosing a Financial Planner” found at the following URL http://www.mcnabfinancial.com/_blog/McNab_Financial/post/Choosing_a_Financial_Planner/ for additional tips to find a financial planner.

This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.

Many business owners and CEOs see the value of a 401(k) not only for themselves, but their employees. What once was a well thought out benefit, often becomes a forgotten cost burden. If an experienced advisor is not monitoring a 401(k), the business owner may be left with a 401(k) with high administration fees, high expense funds, along with inappropriate compliance - leaving the business open to risk of a lawsuit or DOL penalties.

Administrative Fees

401(k) administrative fees are the costs associated with keeping track of individual account values, crediting contributions, and sending out quarterly reports – among other things. The administrative costs used to be significant – often pricing out many small businesses. However, there has been a dramatic change due to technology in the administrative costs associated with a 401(k). Many businesses are paying twice what they should. This In turn, costs the business money. An independent advisor has the freedom to shop administrative costs and recommend the best fit, lowest cost option for a business.

Mutual Fund Fees

All mutual funds have a hidden internal fee called an expense ratio. Fund expense ratios can range from .10% up to 2.00%. A high expense ratio eats away at the return of the investor. Hence, a 401(k) with high expense ratios may not have reasonable expenses from a compliance standpoint. In addition, the high costs of the funds eat away at the returns, and ultimately the accumulation, of the 401(k) investors.

Compliance

A business that offers a 401(k) has a fiduciary responsibility to act in the best interest of employees participating in the 401(k). Failure to act in a fiduciary capacity can subject the business to litigation (often from a disgruntled employee) or discipline from the Department of Labor. A compliance program that includes ongoing employee education and an Investment Policy Statement are critical to maintaining appropriate 401(k) compliance.

Taking the time to review a 401(k) has the potential to save money for the business, 401(k) participants, and mitigate risks associated with offering a retirement plan.

McNab Financial is a leading firm providing 401(k) management to business in Colorado. This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. This article is not intended to contain investment advice. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.

The growth of Socially Responsible Investing (SRI) has been phenomenal -- socially screened portfolios have grown from $165 Billion in 1995 to well over $3 Trillion in 2012. Most studies suggest that SRI-screened portfolios have about the same risk-adjusted returns as their unscreened counterparts. Socially Responsible Investing not only earns competitive returns, but also helps to build a sustainable future and enhance our quality of life through shareholder activism.

The universe of socially responsible investments is extremely small compared to the universe of mutual funds and exchange traded funds available. As a result of the smaller number of choices, I am often appalled at some of the internal costs association with SRI-screened funds. If there is a cost for sustainable investors, it is the expense ratio associated with many SRI-screened funds. It is more challenging for a SRI investor to find a good low cost option. However, they are available. I have provided a list of five low cost, no-load SRI options below.

                                                                                         

Investment                                                           
TIAA-CREF Social Choice Equity Fund (TICRX) - .44% Expense Ratio
Vanguard FTSE Social Index Fund (VFTSX) - .29% Expense Ratio
TIAA-CREF Social Choice Bond Fund (TSBBX) - .65% Expense Ratio
Parnassus Fixed-Income Fund (PRFIX) - .75% Expense Ratio
iShares FTSE KLD Social Index Fund (KLD) - .50% Expense Ratio

The information provided in the chart above was gathered through each company’s website and MorningStar, Inc. as of the date of this article.

McNab Financial, LLC is a national firm specializing in comprehensive financial planning and asset management. Kevin McNab one of the leading experts in Social Responsible Investing in Colorado. Kevin is President of McNab Financial and is a CFP®, ChFC®, CRPC. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado. This article is not intended to provide investment advice. Please contact your investment professional with questions.

McNab Financial LLC, a Westminster, Colorado based wealth management firm, is proud to announce a partnership with Michael Bailey Law Office LLC to offer Willmaking Seminars in the Denver Metro area.  Willmaking Seminars offer a perfect solution for families that need estate planning, but do not want to pay thousands of dollars.

 

What is a Willmaking Seminar?

A Willmaking Seminar is a simple one-step class which provides a Notarized will, general power of attorney, medical power of attorney, and living will by the end of the seminar from an experienced estate planning attorney. This unique 3-hour class provides great value to participants by providing finished estate planning documents and personal time with an attorney for $110 per person - a fraction of the typical cost for these documents.

 

Who do We Work With?

The value provided through a Willmaking Seminar is offered to groups of six or more through multiple sources including:

Private Events

If you have enough friends and family to get six or more attendees to a Willmaking Seminar, we will come to your house or provide a conference room for you to use in our Westminster, Colorado office for your own private event.

School or Church Fundraiser

Willmaking Seminars provide tremendous value to schools and churches by giving back 20% of revenue to the organization that hosted the event. Not only do members and parents receive a vital document, but the organization uses our services as a fundraiser! Often, schools and churches will offer multiple events due to demand.

Professional

Realtors, insurance agents, financial advisors, mortgage advisors, banks, credit unions, and other professionals - Are you looking for a truly unique event to invite clients, potential clients, and important partners? Offer a Willmaking Seminar to add value to these important people and touch base with your network. We will work hard to understand your business, provide extreme value to your important people, and provide direction regarding how to set up your event.

Human Resources

Are you a cutting edge company that wants to provide a unique benefit to your employees? We will contract with businesses to provide an agreed upon number of seminars throughout a specific period of time - retain and attract talent.

Willmaking Seminar provides a truly unique value by providing an interactive seminar to receive absolutely necessary estate planning. Please visit www.willclass.com or contact us at info@willclass.com for more information.

If lawmakers cannot agree on how to address the pending “fiscal cliff”, and why would we think they would, $7 trillion worth of tax increases and spending cuts will begin to go into effect in January. So how can you and your business plan for this? And what does it mean?

At the end of 2010, Congress extended the Bush tax cuts through December 31, 2012. These cuts include income tax reductions, credits, and other opportunities that have been in effect for almost a decade. If no action is taken by lawmakers, the tax cuts will expire to previous levels.

Tax Increase

Almost all Federal tax brackets will increase by 3% to 5%. The 10% bracket falls off and now becomes the 15% bracket, the 25% bracket becomes the 28% bracket, and this continues until the highest Federal income tax bracket is just below 40%. This is hard to plan for, but it may be advantageous to delay large deductions or purchases for a business until next year.

In addition, long-term capital gains rates increase from 15% to 20% including an higher rate in certain situations for high earners. In addition, all dividends will be taxed at your ordinary income rate no matter how long the asset has been held. With this in mind, individuals and business owners may consider selling an asset that has significant appreciation this year to take advantage of a potentially lower long-term capital gains rate.

Deductions and Credits

Many deductions and credits Americans are used to will fall by the wayside. Here is a list of just a few of the more common provisions that will be affected: Child tax credit is cut in half, dependent care expense credit will decrease, the marriage penalty is back, FICA tax holiday goes away, itemized deductions will be reduced significantly, and Section 179 provision that allows direct write offs of capital expenditures will be reduced.

What’s Next?

If the tax cuts expire, increased taxes will affect everyone - individuals, business owners, wealthy, and poor. As the end of the year gets closer, additional planning may be needed for business owners and individuals. McNab Financial collaborates with CPAs to determine what is the best course of action given current economic and policy related issues.

At this point, the responsibility falls on our lawmakers to come up with a solution or extend the tax cuts for a short period of time so they can come to an agreement.

This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. This article is not intended to provide tax or investment advice and the information is generally thought correct, but not guaranteed. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.

The government recently announced that over 55 million Social Security recipients will receive a 1.7 percent increase in their benefits starting in January. This is among the lowest increases since 1975.  However, this figure is tied to inflation which has been at extremely low levels since the great recession.

This article is written by Kevin J. McNab. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.

Investors have trouble keeping perspective of investing for the long-term after a decade of underachieving returns, volatility, and the recent slowing down of the economy. The psychology of investing dictates that investors remember periods of declining returns and the most recent economy rather than periods of high growth and the overall increase in returns over a long period of time. It is human nature. Here are some things to consider:

• Investment Allocations: Do you have a target allocation that is tied to your goals and risk tolerance. If so, is your asset allocation within the parameters of your target allocation? Many investors get caught off guard in a volatile market with out of balance allocations and taking inappropriate amounts of risk. Controlling these parameters help control risk and returns.

• Tracking: How are you tracking your portfolio? Many investors track their investments based on the returns over a short period of time. Tracking your portfolio based on the success of reaching your goals may be a better way to understand how your portfolio is performing. After all, achieving your overall financial goals is the most important aspect of investing.

• Choosing Investments: How do you choose your investments? Creating a disciplined approach using a list of criteria to choose investments keeps unnecessary risks out of your portfolio and funds that typically will outperform their peers. Continuing to monitor these funds is just as important as initially choosing your funds.

Investing is very much like life from the perspective that you must focus on the things you can control. Volatility in the market and the economy seem to be similar to death and taxes – you can’t avoid them. As an investment advisor, I am often asked if the market is headed up or down or how the election might impact the economy. I often express my opinions, but I am always brought back to my financial planning roots. In a sense, none of this really matters. Either Obama or Romney wins the election. If the Eurozone solves their problem, another problem will arise somewhere else in the world. In short, there is always something in the world affecting the markets.
What you can do is worry about what you can control:

• How much are you saving and investing?

• Is your allocation appropriate and balanced?

• Have you chosen low cost quality investments?

• How are you tracking against your financial plans or goals?

As you navigate through this economy, try to keep a long-term prospective and focus on what you can control.

This article is written by Kevin J. McNab of McNab Financial LLC. Kevin is President of McNab Financial, LLC and is a CFP®, ChFC®, and CRPC®. McNab Financial, LLC is a Registered Investment Advisor in the State of Colorado.