Jon K. HancockHancock Advisors LLC
6 Steps to Get Your Affairs in Order
It is certainly nobody’s idea of fun, but planning for the inevitable future is a worthwhile endeavor that gives you control over your legacy and eases the process for your loved ones who will settle your estate.
It is crucial that your estate plan meets your state’s legal requirements.  You can consult with an estate planning attorney to ensure that documents are correctly prepared, or as an alternative the site Trust & Will says “We’re here to help you through life’s most challenging moments with unlimited chat and technical support. Get personalized guidance when you choose a service-focused plan.”

1. What do you want to accomplish? Do you need to provide for minor children under age 18? Or are your children adults?  Will you leave assets to other beneficiaries such as friends, relatives, or charities?  Do you want to minimize estate taxes?  Do you value the privacy of your affairs?
   

A Will is usually a good start. A will is a legal document that takes effect upon your death. The one thing that a will can accomplish that a trust cannot is to allow its creator to name guardians for minor children.
What about a Trust? Trusts offer privacy, discretion over how assets are distributed, and potential estate tax benefits. 
Are you interested in reducing estate taxes? If so, an irrevocable trust might make sense. An irrevocable trust can be used to minimize the estate's worth for estate tax purposes. Irrevocable trusts can also aid in asset protection in court cases, in addition to estate tax reasons.
You may also decide to create a living trust, which transfers your assets to your beneficiaries, maintains privacy, and avoids probate headaches

1. Create an inventory of your assets.  Consider making a list of your real estate, bank accounts, insurance policies, investment accounts, and other items with substantial value.  Make sure your loved ones know where important documents and financial statements are located in the event of your sudden passing - this can prevent unnecessary stress and confusion during a difficult time.
   
2. Choose the right trustee (Trust) or executor (Will). Appoint someone who is organized, dependable, fair, and financially savvy.  Taking the time to select a trustworthy individual or institution will give you peace of mind knowing that your affairs will be handled properly.
   
3. Be sure to designate and regularly update your beneficiaries. This is the easy button in estate planning!  You’ll find beneficiaries for retirement accounts such as IRAs and 401(k)s, and life insurance policies.  Keep in mind that designated beneficiaries trump what is in your Will or Trust.
   
4. Prepare for possible incapacitation. It's important to make sure your estate planning is complete by preparing legal documents such as a durable power of attorney for financial matters and a medical power of attorney for medical decisions. These documents appoint trusted individuals to make decisions on your behalf when you can't. 
   
5. Update your estate plan regularly.  Your life can change in many ways. You may get married or divorced, have children or lose loved ones. These events can affect your goals and priorities. You may also change your mind about the causes you care about. That's why you need to check and update your plan regularly. This is something we always discuss at client annual reviews.
   

Estate planning is not a one-size-fits-all process, and we want to make it clear that the steps we have mentioned are just a general guide.  Our goal is to start a conversation and help you create or update a plan that suits your needs. We are always ready to answer any questions you may have - schedule a meeting at your convenience here: https://calendly.com/hancockadvisors/15-minute-get-acquainted-call​

The path to financial security and a relaxed retirement begins with making a plan - much like a driving vacation might begin with planning waypoints on a roadmap.  The goal is to accumulate sufficient assets so you can maintain your current lifestyle AND pursue new interests that you may develop in retirement.  Dog sledding in Alaska?  Surfing in California?  Sounds like a ton of fun!
A good place to start is by asking yourself a few questions:

• When do you want to retire?
• What would you like to do in retirement?
• Do you want to downsize, or stay in your current home?
• Would you like to move to a different location based on climate?
• Would you move closer to kids or grandkids?

Your goals play a big role in how aggressively you plan for retirement.
What might a plan look like?
Most people want to save for retirement at a leisurely pace. Here is a time-tested plan that works well for almost anyone:

1. Have an emergency fund with 6-12 months of expenses.  Finally, due to the Fed raising interest rates, the savers among us can now earn ~5% risk-free.  I would be happy to point you in the right direction.
2. Save as much as 15% in your company’s 401k.  If 15% is too difficult or conflicts with other aims, at the very least always contribute as much as your company’s match.  It’s free money - don’t leave it on the table.
3. Get out of debt.  It is liberating!  Eliminate all consumer debt - this includes vehicle loans, credit cards, and anything else but your home.  Let’s discuss whether it makes sense to pay down your mortgage ahead of time.
4. Max out your IRA (and HSA).  Fully fund your IRA account (Roth IRA is generally preferred), and also max out your Health Savings Account if you have one.  HSA’s are like a superpower - if you aren’t familiar let’s talk and I’ll explain why.
5. Are you 50+? The IRS allows  catch-up contributions for retirement savings. For a traditional or Roth IRA, the contribution limit is $7,500 in 2023.
6. Invest using an asset rotation strategy.  Perfect doesn’t exist in investing.  However, momentum based asset rotation (tilting a portfolio toward performing assets and away from under-performing assets) has been proven to minimize painful drawdowns that we cannot afford as we enter retirement.

A disciplined plan that allows for consistent savings, a modest lifestyle based on your income, and minimal debt will serve you well as you travel the road toward financial security and a comfortable retirement.
I hope you’ve found this to be educational and informative.  If you would like to discuss making your plan, please feel free to give me a call or text me at 360-776-6600 - Jon

"It has long been noted that DIY investors tend to be their own worst enemies. They have an uncanny ability to buy stocks near market tops and sell near market bottoms." 
​https://alphascientist.com/investor_flows.html

Most people just aren’t very good at managing their own investments.  One of the common misconceptions among DIY investors is that they can regularly achieve the same returns (or better!) than the indexes or benchmarks they track. However, this is very rarely the case, as investor behavior - based on fear and greed - usually leads to less than satisfactory results. Those perfectly normal human emotions are exactly the reason individuals frequently buy high and sell low.  In this blog post, we will explain the difference between investment return and investor return, and how you can improve your investor return by avoiding some common mistakes.

Investment return is the performance of a specific asset, such as a stock, a mutual fund, or an exchange-traded fund (ETF), over a given period of time. It is usually expressed as a percentage change in the value of the asset from the beginning to the end of the period, plus any income received from the asset, such as dividends or interest. For example, if you buy a stock for $100 and sell it for $120 after one year, and receive $5 in dividends during that year, your investment return is 25% (($120 + $5 - $100) / $100).

Investor return is the actual return that you earn on your portfolio, taking into account your own buying and selling decisions, as well as any fees, taxes, and inflation that affect your net worth. For example, if you buy the same stock for $100 and sell it for $120 after one year, but you pay a 1% commission on each transaction and a 15% capital gains tax on your profit, your investor return is 19.7% ((($120 - $1.2) - ($100 + $1)) * (1 - 0.15) / ($100 + $1)).

The difference between investment return and investor return is often referred to as the investor gap or the behavior gap. It measures how much value investors lose or gain by their own actions. In general, investor returns tend to be lower than investment returns due to the impact of investor behavior.

The good news is that you can improve your investor return by adopting some simple strategies that can help you overcome your behavioral biases and align your actions with your objectives. Here are some tips:

1. Invest using data, not emotions or hunches - Getting out of our own way is the single best method to improve investor returns.  That is accomplished by buying and selling based on signals generated by data; among the choices available, trend-following and momentum are the clearest winners.  This simply tilts your portfolio toward assets that are performing well, and away from those that aren’t.
2. Have a clear investment plan: Before you invest, you should have a clear idea of why you are investing, what your goals are, how much risk you can tolerate, and how long you plan to invest. 
3. Invest regularly over time: By investing your excess capital over time for the long term, you can take advantage of the miraculous effects of compound growth.  If you have never looked at how powerful that force is, go here and see how much $10,000 at 10% becomes over 50 years.  Then look at what 15% becomes - it will stagger you.

If you would like to know more about overcoming your fear and greed in the markets, feel free to contact me at jon@hancockadvisors.io or (360) 776-6600.

A trust is a legal arrangement for the transfer of property by a grantor to a trustee for the benefit of a beneficiary.     There are many types of trusts to consider, each designed to help achieve a specific goal.   With the current high federal estate tax exemption, the purpose of a trust today is more about retaining control over assets during the grantor’s life and upon the grantor’s death than creating an estate tax saving plan.

https://www.fidelity.com/viewpoints/personal-finance/reasons-to-consider-a-trust

William Bernstein suggests that an investor can evaluate their risk tolerance based on how they reacted to the Global Financial Crisis of 2008:

• Sold: low risk tolerance
• Held steady: moderate risk tolerance
• Bought more: high risk tolerance
• Bought more and hoped for further declines: very high risk tolerance

Pick a risk level that lets you sleep at night. Most investors severely overestimate their tolerance for risk, only realizing their true risk tolerance during a market crash when their portfolio value tanks. It’s also been theorized that investors may be embarrassed to admit to their advisor – or to themselves – that they have a low tolerance for risk. Don’t be.
It is imperative to have realistic expectations of both the markets and of one’s own behaviors. The behavioral aspect of investing is unfortunately very real and can have significant consequences. Emotional responses to one’s environment – in this case a financial environment – are hardwired in the human brain. Are you going to lose sleep and panic sell if your portfolio value drops by 57% like it did for an S&P 500 index investor in 2008?

Let's have an honest discussion about this crucial aspect of investing.

“Expect to receive a scam phone call. It won’t be an illegal scam call. It will be an official scam call from the Social Security Administration itself.’’


The issue? The SSA will offer a check equal to six months of past-due benefits, but Kotlikoff explains, “Going for their ‘deal’ means losing ten months of DRCs (delayed retirement benefits). Your benefit will be lower, forever, by 6.67%.’’  


“I’ve been calling them (SSA) out for a long time; I’ve never been shy. Things like this have to be said, otherwise, nobody gets the point. The biggest scam is calling people before they’re 70 to dangle that big check if they start their benefits right away. You do that and you will set your benefits back for the rest of your life. That is just unbelievable.’’

​https://rethinking65.com/2021/10/29/getting-to-know-economist-laurence-kotlikoff/

Your Dollars are a Melting Ice Cube

The latest CPI (Consumer Price Index) numbers came out this week, and they don’t look good. Official numbers say that prices over the past 12 months have jumped an average of 6.2%, which is an incredible amount of purchasing power to be losing each year. It’s also the highest inflation we’ve seen in the USA for 30 years, and some suspect that the number could be even higher than what’s been officially reported.

The recent surge in the crypto asset partly seems to have been caused by investors piling in, seeing it as a hedge against inflation. Some appear to have been enticed by the argument that the huge monetary stimulus programmes unleashed by central bank is fuelling inflation which will see the value of money decrease over time, whereas Bitcoin has a fixed limit on the number of coins which can be created. 

​https://www.advisorpedia.com/cryptocurrency/bitcoin-bounces-near-record-highs-amid-inflation-fears/

Adoption is heating up as bitcoin becomes mainstream.  Game theory built into NGU (number go up)  means that it will become  a race to  own some of the limited supply - Jon

"Commonwealth Bank of Australia will allow its customers to hold and use bitcoin and other cryptocurrencies via its 6.5 million-user banking app in a bid to appeal to young customers and keep pace with rivals such as Square and PayPal, which already allow users to trade and spend bitcoin."

https://www.afr.com/companies/financial-services/cba-to-add-crypto-to-its-banking-app-20211102-p595da

Jelena McWilliams, who chairs the Federal Deposit Insurance Corporation, told Reuters in an interview on Monday that a team of U.S. bank regulators is trying to provide a roadmap for banks to engage with crypto assets.

That could include clearer rules over holding cryptocurrency in custody to facilitate client trading, using them as collateral for loans, or even holding them on their balance sheets like more traditional assets.

"My goal in this interagency group is to basically provide a path for banks to be able to act as a custodian of these assets, use crypto assets, digital assets as some form of collateral," McWilliams said on a conference panel.

https://www.reuters.com/business/finance/us-regulators-exploring-how-banks-could-hold-crypto-assets-fdic-chairman-2021-10-26/