Most clients have investment accounts in each of the three major tax buckets: tax-deferred (ex. 401(k)), tax-free (ex. Roth IRA), and after-tax (ex. Brokerage account). Due to the different tax statuses, each account type “behaves” differently.

When investors save adequately across these accounts, there are a myriad of benefits. From a tax management standpoint, a financial advisor can help design a tax efficient withdrawal strategy. With that in mind, there are also drawbacks to investing when there is a lack of coordination across these different accounts. This often happens when accounts are managed outside of one’s advisor-managed accounts.

Advisor-Managed Accounts

At a high level, advisors are licensed professionals with access to tools and services that the general public typically does not have. Financial advisors can create a consistent investment strategy that should be integrated across client accounts. At the individual level, this is just one less thing for each client to navigate on their own in the midst of their own personal and professional responsibilities.

At a more detailed level, fully integrated advisor-managed accounts allow for more accurate management of capital gains, including:

  • Realizing short-term losses used to offset income tax instead of capital gains tax.
  • Accurate management of realized gains to prevent unnecessary tax payments.
  • More efficient tax bill for Roth conversions due to proper management of realized gains when using brokerage assets to pay tax on conversions.

Outside-Managed Accounts 

While consolidating all of your investment accounts with one advisor can be time consuming, that process is largely offset by the potential lack of coordination between advisors which can complicate financial planning goals and prevent plans from being executed. As more and more investors are switching their investments to exchange traded funds (ETFs) from mutual funds, many still hold mutual fund shares in their accounts outside of Rockbridge.  Actively managed mutual funds tend to have higher expense ratios and are less tax efficient than exchange traded funds. For example, as mutual fund shares are redeemed (outflows) at a greater rate than shares are purchased (inflows), fund managers will realize gains inside the fund portfolio, which passes capital gain costs onto the investors.


  • Consider consolidating accounts with one manager.
  • If mutual funds are held in qualified accounts, reinvest mutual fund shares into ETFs with no tax consequences.
  • Turn off “auto-reinvest” of dividends of mutual fund shares.

To address investor concerns related to 529 Plan savings going unused, a provision of SECURE ACT 2.0 allows the opportunity to rollover unused 529 education savings into a Roth IRA in the beneficiary’s name, penalty free. As a result, investors should feel a sense of relief about leftover 529 savings that weren’t used for education. Likewise, parents of younger children may have more confidence about saving in a 529 plan knowing they have this option for future unused 529 assets.

Of course, the increased flexibility surrounding 529 savings is not without some constraints. Below is a list of items that investors should be mindful of:

  • Effective beginning in 2024.
  • The lifetime limit eligible for rollover to Roth is $35,000 per beneficiary.
  • 529 account must have been open for at least 15 years before making the rollover to avoid taxes and penalties.
  • The amount that can be rolled over each year is limited to the Roth IRA contribution limit for the year ($6,500 in 2023, $7,500 for those 50 and older), less any other Roth IRA contributions.
    • As an example, if the beneficiary contributed $3,000 to their Roth IRA, the amount remaining that could be rolled over from the 529 plan is $3,500.
  • Roth IRA beneficiary must be the same beneficiary of the 529 plan.
  • Contributions (and investment earnings on those contributions) made within the last 5 years are not eligible for rollover to a Roth IRA.

Given the annual rollover limit, coupled with the restrictions on contributions made within the last 5 years, this rollover strategy may take more than one year to complete depending on the size of the rollover.

Once in the Roth IRA, the funds can now be used for other purposes beyond education, such as retirement savings.

This new consideration may allow families to begin saving for a child’s education AND/OR retirement at an early age. By opening a single 529 Plan early on, contributions and growth could accumulate for 18+ years, and up to $35,000 of unused funds (per beneficiary) could be rolled over to a Roth IRA, kickstarting retirement savings. With an initial rollover of $35,000 after college plus annual contributions of $6,500/year and a reasonable investment return of 6%, the balance of the Roth IRA could exceed over $1,000,000 by the beneficiary’s retirement age.

Important Note:

Whether or not 529 rollovers to a Roth IRA are determined to be a qualified distribution for state tax purposes will depend on each state. States are still working out these details.

Please reach out to your Rockbridge advisor with any questions.

October is Estate Planning Awareness Month, which serves as an important reminder for all of us to take time to review our estate plans or create one if we haven’t already. Estate planning is not just for the wealthy or elderly – it’s important for everyone to have a plan in place to protect your assets and ensure they are distributed according to your wishes in the event of incapacity or death.

Having an up-to-date estate plan can save your loved ones significant time, money, and stress in the future. There are three key legal documents that everyone should have:

  • Will – This lets you determine who inherits your assets and allows you to name a guardian for minor children. For families with young children, this guardianship provision is extremely important.
  • Durable Power of Attorney – In the event that you become incapacitated, this document will allow someone of your choosing to make legal and financial decisions on your behalf.
  • Healthcare Proxies – This document outlines your preferences for healthcare treatment in various situations and allows someone to make medical decisions on your behalf if you become incapacitated.

In addition to the basics, there may be other estate planning strategies to consider based on your specific situation, such as setting up trusts, making gifts, or transferring property. For example, trusts can help minimize estate taxes, avoid probate, or set aside assets for special purposes. Proper titling of assets, beneficiary designations, and joint ownership provisions are also important components of an estate plan.

We recommend that our clients review their estate plans regularly and update them as needed when life circumstances change. Events like marriages, divorces, births, deaths, retirement, or moving to another state are all good reasons to review and potentially modify your existing documents. Keeping beneficiary designations up-to-date is particularly important.

The estate planning process can seem daunting, which is why many people put it off. But having a thoughtful plan in place is one of the best gifts you can leave for your loved ones. Reach out to a Rockbridge advisor if you have questions about starting or reviewing your current estate plan.

With over 28 million borrowers of Federal student loans resuming payments following a multi-year hiatus, the Biden-Harris Administration released a new income-driven repayment (IDR) plan. Known as the Saving on a Valuable Education (SAVE) plan, this IDR approach calculates monthly payments according to a borrower’s income and family size, ultimately forgiving any outstanding balances after a specified duration.

Outlined below are the major distinctions between the SAVE plan and the former REPAYE plan:

  • Reduces cap on discretionary income. The monthly payment amount is calculated with a maximum of 5% of discretionary income. The cap under the REPAYE plan was formerly 10%.
  • Change in calculation of discretionary income. Discretionary income is now calculated as the difference between Adjusted Gross Income (AGI) and 225% of the U.S. Poverty line, up from 150% under REPAYE. For borrowers with an AGI around or below this threshold, their payments can be as low as $0/month.
  • Loan balances will not grow as long as borrowers make their payments. If a borrower’s calculated monthly payment amount is less than interest accrued on the loan, the government will pay the interest. For example, if a borrower qualifies for payments of $0/month and their loans generate $100/month of interest- the government pays the cost to keep the balance from growing.
  • Early forgiveness for low-balance borrowers. Under the SAVE plan, borrowers whose original principal balances were $12,000 or less will receive forgiveness after 120 payments. For each additional $1,000 borrowed above that level, the plan adds an additional 12 payments for up to a maximum of 20 years for undergraduate debt or 25 years for graduate loans. Therefore, all borrowers who maintain monthly payments under this plan will have their loans forgiven in either 20 or 25 years.

The loans eligible for the SAVE Plan include:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans that did not repay any PLUS loans made to parents.

To sign up for the SAVE plan, federal student loan borrowers can go to the Student Aid website found at this link here: If you are already on the Revised Pay As You Earn (REPAYE) plan, you will be automatically enrolled in the new SAVE plan.

If you’re currently weighing your loan repayment options and have questions, contact a Rockbridge advisor.

The original SECURE Act enacted back in 2019 made two notable changes (among many) for those who owned retirement accounts.

  1. The first major change increased the age at which account owners must begin taking Required Minimum Distributions (RMDs) from their tax-deferred retirement accounts from age 70 ½ to 72.
  2. The second major change addressed how retirement accounts were distributed after the owner’s death. This change aimed to reduce the classes of beneficiaries allowed to stretch out RMDs over their remaining lifetime.  The SECURE Act introduced a new 10-year distribution period for “Non-Eligible Designated Beneficiaries”; those who are NOT a surviving spouse or those who fall under a small number of limited exceptions.

The general industry consensus around this new 10-year distribution period was that beneficiaries were not required to take specific annual distributions so long as the entire account balance was distributed by the end of the 10th year.  The IRS issued new guidance in February of 2022 that further complicated the matter.  The IRS proposed two different distribution regimes based on the age of the decedent.

  1. If the decedent passed away PRIOR TO commencing their own Required Minimum Distributions (the IRS calls this milestone the Required Beginning Date), then the beneficiary needs only to withdraw the entire account balance by the end of the 10th
  2. If the decedent passed away AFTER commencing their own RMDs, then the beneficiary must withdraw the entire account balance by the end of the 10th year AND adhere to the decedents original RMD schedule.

As you can imagine, this caused tremendous confusion amongst account owners and beneficiaries, but also forced the industry to perform a rapid overhaul of its systems and processes to calculate Required Minimum Distributions.  The IRS then issued a notice in October of 2022 that waived any penalties associated with Non-Eligible Designated Beneficiaries missing their RMDs for 2021 and 2022.  Essentially, beneficiaries were given relief from their 2021 and 2022 RMDs.  While helpful, beneficiaries still had to withdraw the entire account balance by the end of their original 10-year period, compressing the distributions schedule across the remaining years.

Fast forward to July of 2023 and the IRS released another notice, which provided another year of relief for Non-Eligible Designated Beneficiaries for decedents that passed away AFTER their Required Beginning Date.  Effectively, this class of beneficiaries are NOT required to take any distributions from their Inherited IRAs in 2023, kicking the can further down the road.  This relief further compresses the 10-year distribution schedule and may not be in the best interest of all clients.  Beneficiaries of inherited IRAs can take voluntary distributions at any time, and you should consult with your advisor to better understand your options for your specific tax situation.

The July IRS notice also provides RMD relief for any retirement account owner turning 72 in 2023 (anyone born in 1951).  When the SECURE Act 2.0 was enacted in late-December 2022, the RMD age was pushed back again from age 72 to age 73 (and ultimately age 75 in year 2033).  This last-minute change caused some confusion for those turning 72 in 2023, so the IRS is excusing 2023 RMDs for anyone turning 72 this year.  Because the most recent IRS notice came out mid-year, the IRS is also allowing these individuals to treat any year-to-date distributions as a rollover and the account owner can return these amounts back to their retirement account.  This is effectively an extension of the 60-day rollover rules and gives account owners until September 30th to return any unwanted year-to-date distributions.

As with many financial planning decisions, it’s important to understand your unique tax situation.  If you have an Inherited IRA or if you’re turning 72 in 2023, please reach out to your Rockbridge advisor to best understand your options.

When deciding what electric vehicle to purchase, tax credit eligibility can be a big factor. All-electric, plug-in hybrid, and fuel cell electric vehicles purchased new, in 2023 or after, may be eligible for a federal tax credit. However, there are various qualifications for both the buyer and the manufacturer that must be met in order to qualify for tax credits. The tax credit applies to battery electric vehicles with an MSRP below $55,000. It also includes zero emission vans, SUVs, and trucks with an MSRP up to $80,000.

Filers’ eligibility for this tax credit depends on their Adjusted Gross Income (AGI). Eligible AGI values vary based on if the vehicle is new or used. For all new vehicles these following income guidelines must to qualify. For married couples filing jointly, AGI must not exceed $300,000. For a head of household, AGI must not exceed $225,000. For all other filers, AGI must not exceed $150,000.

The following AGI thresholds apply when purchasing a qualifying used EV.  For married couples filing jointly, AGI must not exceed $150,000. For head of household, AGI must not exceed $112,500. Finally, for all other filers, AGI must not exceed $75,000.

If you are purchasing a new car that meets all requirements AND your income is below the AGI thresholds, you are eligible for a federal income tax credit of up to $7,500. The tax credit breaks down as follows:

  • $2,500 base tax credit
  • Plus $417 for a vehicle with at least 7 kilowatt hours of battery capacity.
  • Plus $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours, up to $7,500 total.

If eligible, your tax credit will be applied to your tax owed.  It’s important to note that any unused tax credit will not rollover into the next year nor is it refundable as cash.  To take full advantage of an EV tax credit, you may want to consider adjusting your withholdings or estimated tax payments to ensure you have enough tax owed to utilize the entire credit.

Starting in 2024 there will be a new electric vehicle credit rule allowing the option to take a tax credit as a discount at the time of purchase. The tax credit would be transferred to the dealer and the price of the vehicle would decrease by the expected tax credit amount. This would allow people who qualified for the tax credit to benefit sooner rather than being forced to wait until it’s time to file tax returns.



  • If not all vehicle and income requirements are met, then a $3,750 tax credit may still be available if the vehicle meets either the critical minerals requirement or the battery components requirement.
  • New York residents may be eligible for a state-level rebate of up to $2,000 on top of the federal tax credit. It is important to take advantage of this opportunity and understand which vehicles qualify for tax credit in 2023.


Vehicles that qualify for the full tax credit ($7,500):

Tesla Model 3 (Performance Model included)

Tesla Model Y

Chevrolet Equinox

Chevrolet Blazer

Chevrolet Bolt

Chevrolet Silverado

Ford F-150 Lightning

Cadillac Lyriq

Volkswagen ID.4

Chrysler Pacifica PHEV

Lincoln Aviator Grand Touring PHEV

Partial Tax Credit ($3,750):

Jeep Grand Cherokee PHEV 4xe

Jeep Wrangler PHEV 4xe

Lincoln Corsair Grand Touring PHEV

Rivian R1S

Rivian R1T

Ford Mustang Mach-E

Tesla Model 3 (Single motor model)

Vehicles that no longer qualify for tax credit if put into service after April 18, 2023:

Audi Q5

BMW 330e

BMW X5 (may return to 2024 list)

Genesis GV70

Nissan Leaf

Volvo S60

For those saving in the NYSaves 529 Direct Plan, you’ve likely received an email by now announcing the transition from Age-Based Portfolios to Target Enrollment Portfolios happening July 28th, 2023. If you’re currently using a custom allocation from the investment options within the plan, this change will not impact your account.

However, if you are using one of the Age-Based Portfolios, your investments will be automatically mapped over into one of the Target Enrollment Portfolios. Shown below are how those changes will be made:

Conservative Age-Based Portfolio- These portfolios will be mapped over to a Target Enrollment Portfolio ~12 years from the date of birth of the beneficiary.

Moderate Age-Based Portfolio- These portfolios will be mapped over to a Target Enrollment Portfolio ~18 years from the date of birth of the beneficiary.

Aggressive Age-Based Portfolio- These portfolios will be mapped over to a Target Enrollment Portfolio ~21 years from the date of birth of the beneficiary.

The goal of these changes is to have the Target Enrollment Portfolios reduce stock market risk more gradually than the Age-Based Portfolios. The Age-Based Portfolios use age-bands and as the beneficiary’s age moves into another band, the stock allocation drops significantly (~12.5%, in most cases). With the Target Enrollment Portfolios, the stock allocation will be reduced each year, but the changes are much smaller.

If you have questions about the strategy within your NYSaves 529 plan, you should contact your financial advisor to ensure that the investment mix is appropriate for your situation and goals.

Recent periods of high inflation have led to an increase in interest rates to levels not seen in well over a decade. During times like these, it’s important to continue to stay diligent and avoid leaving money on the sidelines earning low returns that are outpaced by inflation and losing purchasing power.

With interest rates continuing to rise, investors with excess cash should be taking advantage of opportunities that will allow them to maximize their returns without compromising their principal. Individuals will often turn to bond funds or certificates of deposit as a priority when attempting to keep excess cash yielding meaningful returns. One main reason is that financial institutions will market and advertise appealing rates. While these are great options for some, one additional option that is often overlooked is the Money Market fund.

Money Market funds are highly liquid open-ended mutual funds that invest in short-term instruments. Designed to prioritize the preservation of capital while generating a reasonable level of income, these funds become even more attractive as they offer higher yields compared to traditional savings accounts or even some certificates of deposit. By investing in Money Market funds, one can safeguard their capital and earn a competitive return on their investment, thus effectively preserving their purchasing power over time. Money Market funds combine the benefits of stability, competitive returns, and perhaps most importantly they provide excellent liquidity.

Unfortunately, as interest rates rose in the past ~12 months, so did average mortgage rates, a fact not lost on prospective home buyers. As such, many of those prospective home buyers may be waiting to commit to purchasing a home until mortgage rates begin to dip. This is an excellent example of someone that may have a large cash reserve built up from years of saving for a house, that doesn’t want to see their hard-earned money lose purchasing power to inflation but also does not want to expose their savings to the volatility of the stock market. A fixed-income strategy would be very beneficial in this instance and provide the liquidity to access their money when the time comes. This is just one specific example of a fixed-income strategy.

While we certainly cannot discount the safety and advantages offered with a high-yield savings account, or certificate of deposit, Money Market funds such as the Charles Schwab Advantage Money Fund (SWVXX) offers extremely high liquidity while providing an annualized yield of 4.90%. If liquidity is not a high priority, certain CD’s are offering returns in excess of 5.0%.

The Bureau Of Labor Statistics recently reported the 12-month percentage change, Consumer Price Index (CPI), for All Items is 4.9%. While inflation has pulled back some in recent months, it remains an eroding factor in one’s portfolio but fortunately can be mitigated with the right investment strategy.

Fixed-income investments should always be matched to one’s goals. For the long-term investor, a Money Market fund, or CD is not our recommended investment strategy. However, the individual with excess cash set aside for future known expenses may find value in the appropriate strategy and simultaneously maintain purchasing power during a period of high inflation.

Please reach out to your financial advisor if you would like to further discuss fixed-income investment strategies and how they may or may not align with your goals.

Receiving a tax refund can be a great way to boost your savings, pay down debt, or invest in your future. But once you have that money in your pocket, where should you put it? Here are some of the best places to save a tax refund.

  1. Emergency fund

An emergency fund is a crucial part of any financial plan. It’s a safety net that can help you weather unexpected expenses or job loss without going into debt. If you don’t have an emergency fund yet, using your tax refund to start one can be a wise choice.

  1. Retirement account

If you’re not already contributing to a retirement account, using your tax refund to start one can be a great way to secure your financial future. Whether you opt for a traditional IRA or a Roth IRA, putting your refund into a retirement account can give you a tax break now and help you build a nest egg for later.

  1. Debt repayment

If you have high-interest debt, such as credit card debt or a personal loan, using your tax refund to pay it down can be a smart move. By reducing your debt load, you’ll save money on interest charges and improve your credit score. Plus, you’ll free up more cash flow each month to put towards other financial goals.

  1. Education savings account

If you have children or plan to go back to school yourself, using your tax refund to start or contribute to an education savings account can be a smart move. Depending on the type of account you choose, you may be eligible for tax benefits and the money can be used to pay for qualified educational expenses.

  1. Health savings account

If you have a high-deductible health plan, you may be eligible for a health savings account (HSA). HSAs allow you to save money tax-free to pay for qualified medical expenses. Using your tax refund to fund your HSA can help you prepare for future healthcare costs and reduce your taxable income.

There are many options available when it comes to saving a tax refund. The best choice for you will depend on your financial situation, goals, and personal preferences. By considering your options carefully and seeking the advice of a financial professional, you can make the most of your tax refund and set yourself up for a more secure financial future.

The tax filing season can often be filled with angst as many filers are unsure whether they will receive a tax bill, a refund, or make it through unscathed. Fortunately, much of this stress can be avoided by properly filling out (or updating) your W-4 form. Employees are required to fill out their W-4 forms when starting a new job. As a result, this form is often included amidst a mountain of paperwork or e-forms and can go overlooked. In some instances, this form was filled out several years ago and has been long since forgotten as you’ve remained with the same company. However, buried in the details of this 4-page document are the instructions that can help you gain a better understanding of what to expect when filing your annual tax return.

The W-4 form collects pertinent tax filing information that is unknown to your employer such as filing status, deductions, etc. This information helps your employer determine how much federal income tax should be withheld from your paycheck based on your responses. Many of the line items are representative of questions or calculations one would see on their 1040. In essence, the W-4 helps your employer capture a high-level picture of your filing status and projected taxable income as well as deductions and break it down into a “per paycheck” amount of federal taxes to be withheld.

At the end of the year, your total federal withholdings are included on your W-2. This amount will help determine if you are owed a refund or must pay the federal government as a result of an overpayment or underpayment of your federal taxes for the year. While there are many deductions, credits, and other sources of income that can impact your return, for most individuals their annual salary is the largest determining factor. As such, having proper federal withholdings applied each pay period can eliminate much of the unknown.

Below we will discuss and summarize the different Steps of the W-4:

Step 1:

Enter your personal information — in step 1 (c) you will enter the filing status that matches your filing status on your 1040.

Step 2:

This step is only applicable for an individual that has more than one job or those that file as “Married Filing Jointly” and each spouse is employed. If neither of these is apply, this step can be skipped. If Step 2 is applicable then you will follow the instructions for only one of the options listed under (a), (b), or (c).

If you and your spouse each have only one job and your salaries are roughly the same, you can check the box at 2(c) — this box should be checked on each spouse’s W-4.

If one spouse earns a salary that is more than double the other’s salary, then you should consider completing the “Multiple Jobs Worksheet” on page 3 of the W-4 and follow the instructions based on the tables provided.

Step 3:

This step is only applicable to those that will claim dependents and have an income of $200,000 or less for Single filers, and $400,000 or less for Married Filing Jointly filers.

Step 4:

This step captures any other potential adjustments such as income from other jobs, or deductions such as student loan interest and deductible IRA contributions. To assist you in completing Step 4(b) there is a “Deductions Worksheet” on page 3. While most individuals apply the standard deduction, this section helps refine your withholdings for those additional circumstances.

Step 5:

Don’t forget to sign and date your form.

As most individuals would like to avoid a large tax bill, we recommend revisiting your W-4 annually, and at a minimum, after a significant life event (marriage or birth of a child) to avoid any potential surprise when filing your tax return. If you are often presented with a large tax bill each year, reexamining this form may help you avoid that inconvenience.

In addition to the instructions included on the form, there are many sources available to assist with any questions you may have as well as reaching out to your tax professional or financial advisor.

To say the least, there’s been plenty of political, financial, and economic activity this year—from rising interest rates to elevated inflation, to ongoing market turmoil.

How will all the excitement translate into annual performance in our investment portfolios? Markets often deliver their best returns just when we’re most discouraged. So, who knows! While we wait to find out, here are six action items worth tending to before 2022 is a wrap.

  1. Revisit Your Cash Reserves

Where is your cash stashed these days? After years of offering essentially zero interest in money markets, savings accounts, and similar platforms, some banks are now offering higher interest rates to savers. Others are not. Plus, some money market funds may have quietly resumed charging underlying management fees they had waived during low-rate times. It might pay to …

Shop around: If you have significant cash reserves, now may be a good time to compare rates and fees among local institutions, virtual banks, and/or online services that shift your money around depending on the best available offers (for a fee). Double check fees; make sure your money remains FDIC-insured; and remember, if it sounds too amazing to be true, it probably is.

  1. Put Your Money to Work

If you’re sitting on excess cash, you may be able to put it to even better use under current conditions. Here are three possibilities:

Rebalance: You can use cash reserves to top off investments that may be underweight in your portfolio. Many stock market prices have been depressed as well, so this may be an opportunity to “buy low,” if it makes sense within your investment plans.

Lighten your debt load: Carrying high-interest debt is a threat to your financial well-being, especially in times of rising rates. Consider paying off credit card balances, or at least avoid adding to them during the holiday season.

Buy some I bonds: For cash, you won’t need for a year or more, Treasury Series I bonds may still be a good deal, as described in this Humble Dollar post. Until April 2023, the current yield is 6.89%.

  1. Replenish Your Cash Reserves

Not everybody has extra money sitting around in their savings accounts. Here are a couple of ways to rebuild your reserves.

Earning more? Save more: To offset inflation, Social Security recipients are set to receive among the biggest Cost-of-Living Adjustments (COLAs) ever. Or, if you’re still employed, you may have received a raise or bonus at work for similar reasons. Rather than simply spending these or other new-found assets, consider channeling a prescribed percentage of them to saving or investing activities, as described above. If you repurpose extra money as soon as it comes in, you’re less likely to miss it.

Tap Required Minimum Distributions (RMDs): If you need to take required minimum distributions (RMDs) from your own or inherited retirement accounts, that’s a must-do before year-end. Set aside enough to cover the taxes, but the rest could be used for any of the aforementioned activities. Another option during down markets is to make “in-kind” distributions: Instead of converting to cash, you simply distribute holdings as is from a tax-sheltered to a taxable account.

  1. Make Some Smooth Tax-Planning Moves

Another way to save more money is to pay less tax. Here are a couple of year-end ideas for that.

It’s still harvesting season: Market downturns often present opportunities to engage in tax-loss harvesting by selling taxable shares at a loss, and promptly reinvesting the proceeds in a similar (but not identical) fund. You can then use the losses to offset taxable gains, without significantly altering your investment mix. When appropriate, we’ve been helping Rockbridge clients harvest tax losses throughout 2022. There still may be opportunities before year-end, especially if you’ve not yet harvested losses year to date. We encourage you to consult with a tax professional first; tax-loss harvesting isn’t for everyone and must be carefully managed.

Watch out for dividend distributions: Whether a fund’s share price has gone up, down, or sideways, its managers typically make capital gain distributions in early December, based on the fund’s underlying year-to-date trading activities through October. In your taxable accounts, if you don’t have compelling reasons to buy into a fund just before its distribution date, you may want to wait until afterward. On the flip side, if you are planning to sell a taxable fund anyway—or you were planning to donate a highly appreciated fund to a charity—doing so prior to its distribution date might spare you some taxable gains.

Donate to your favorite charity from your IRA: Instead of writing a check or giving cash to your local church or favorite non-profit organization, you also could donate the assets through a Qualified Charitable Distribution. All you do is work with your Advisor to have a check sent from your IRA to a qualified charity of your choice and you’ll avoid paying taxes to the government and help out the community in the process.

Convert some of your IRA funds to your Roth IRA: At the end of every year, sit down with your tax professional and see if it makes sense to convert some of your pre-tax dollars for tax-free growth. You’ll pay taxes on the amount converted, but it’s possible you can save on taxes long-term by being proactive. Now, you’ve created a tax-free bucket to use down the road with flexibility.

  1. Check Up on Your Healthcare Coverage

As year-end approaches, make sure you and your family have made the most of your healthcare coverage.

Examine all your benefits: For example, if you have a Health Savings Account (HSA), have you funded it for the year? If you have a Flexible Spending Account (FSA), have you spent any balance you cannot carry forward? If you’ve already met your annual deductible, are there additional covered expenses worth incurring before 2023 re-sets the meter? If you’re eligible for free annual wellness exams or other benefits, have you used them?

  1. Get Set for 2023

Why wait for 2023 to start anew? Year-end can be an ideal time to take stock of where you stand, and what you’d like to achieve in the year ahead.

Audit your household interests: What’s changed, and what hasn’t? Have you welcomed new family members or bid others farewell? Changed careers or decided to retire? Received financial windfalls or incurred capital losses? Added new hobbies or encountered personal setbacks? How might these and other significant life events alter your ideal investment allocations, cash-flow requirements, insurance coverage, estate plans, and more? Take an hour or so to list key updates in your life, so you can hit the ground running in 2023.

How Can We Help?

How else can we help you wrap 2022, and position you and your loved ones for the year ahead? Whether it’s helping you manage your investment portfolio, optimize your tax planning, consider your cash reserves, weigh insurance offerings, or assess any other components that contribute to your financial well-being, we stand ready to assist—today, and throughout the year

During the pandemic, unemployment benefits were increased significantly to help alleviate the financial burden for those who found themselves out of work. An unfortunate outcome is that unemployment fraud has become much more common, and many people have unknowingly had unemployment benefits claimed against their Social Security number in 2021.

The NYS Department of Taxation has been sending out letters over the last few weeks for taxes owed on employment benefits during 2021. If you have received a letter stating that you owe taxes for fraudulent unemployment benefits received in 2021, here’s the website for submitting a fraud claim:

This claim will be reviewed by the Department of Labor, and they will follow up with you if they need more information.

Here are other things you should do in addition to filing the claim with the DOL.

  • Dispute NYS Taxation and Finance Letter: The letter itself will come with your options for filing a protest. You can either do so online (at, by phone (518-599-6837), or by mailing/faxing in the letter with an explanation. Once the DOL has confirmed that the benefits paid were fraudulent, they’ll communicate with the Department of Taxation and Finance to clear up any balance owed. You should receive a corrected 1099-G showing no unemployment benefits paid for your records
  • Contact the three major credit bureaus: If someone was able to claim unemployment benefits on your behalf, they likely have your Social Security number. Knowing that’s the case, you should freeze your credit by contacting Equifax, Experian, and TransUnion.

If you or somebody you know has had this happen to you or have questions about the process, don’t hesitate to reach out to a Rockbridge advisor.

As if the financial industry weren’t complicated enough, there are fee-only investment advisors and fee-based advisors — and a Registered Investment Advisor firm can be either. As the wording implies, fee-only investment advisors like Rockbridge receive NO commissions or any other forms of compensation from ANY outside sources. At the other end of the spectrum, commissioned brokers receive most or all of their revenue from the companies whose products they buy and sell.

Fee-based advisors fall into a gray area. They receive most of their revenue from client fees, but they can also receive portions of their revenue from outside sources. A common example is investment advisors who also are insurance agents, receiving fees from their clients as well as commissions from selling insurance policies, annuities, mutual funds loaded with fees, etc.  Most importantly, fee-based advisors are not required by law to act in the best interest of their clients.  They are held to a much more lenient standard, knows as a “suitability standard”, meaning, as long as they provide advice that’s suitable for their clients they can’t get in any trouble.  Fee-only advisors, like Rockbridge, are held to a much more stringent standard known as a “Fiduciary Standard”, meaning we are required by law to act in your best interest.

Imagine if you went to a doctor with a health issue.  The doctor diagnoses the condition as life threatening.  There are two known treatment regimens for this condition, one consists of a regimen that will cure the condition forever (but means the doctor won’t receive much compensation for it), and the other consists of taking multiple prescriptions for the rest of your life to treat the condition, but means the doctor will receive large commissions for recommending the prescriptions.  If the doctor was a fee-based advisor, he would only be required to provide advice that’s suitable for you, and he may be inclined to recommend the lifetime treatment and receive kickbacks from the drug companies for the rest of your life.  This is why suitable advice ≠ advice that’s in your best interest, and why fee-only advisors  ≠ fee-based advisors.  A fee-only advisor is required by law to act in the best interest of the client.  Period.  

Unfortunately, Syracuse and all of Central New York is littered with fee-based advisors that have slick sales pitches about why the fact that they aren’t fee-only doesn’t matter, and how they always act in the best interest of their clients because they are “nice guys”.  There are plenty of advisors, doctors, attorneys, you name it, that are in jail even though they are nice guys.  If the advisor isn’t required by law to act in your best interest, then why bother?

Personally, we prefer to keep things clean and simple. If an insurance policy or any other wealth management strategy is in your best interest, we provide you with our unbiased, fee-only advice on how to proceed. We collaborate with our team of Certified Financial Planners (CFP’s) to implement the advice. With this arrangement, you have the peace of mind in knowing we have no conflicting incentives.  

Whether it’s giving Tuesday or end-of-year outreach, many non-profits will be asking their supporters for donations as we head into holiday season & year-end. To our readers who are charitably inclined, first let us say thanks for your generosity helping those in need. We also want to make sure you are giving your money in the most tax-efficient way possible. The three things we’ll go over in this article are gifting appreciated securities, Qualified Charitable Distributions (QCDs), and Donor Advised Funds (DAFs).

Gifting appreciated securities: If you plan on making a donation over a few hundred dollars, and you plan on writing a check, you’re probably making a mistake. A better option is to gift appreciated securities. With how much the market has gone up in recent years, there’s a good chance you have some after-tax (brokerage) holdings bought at a low price compared to what they’re worth now. If you were to sell the stock and gift the cash, you’d pay taxes on the gain. By gifting the appreciated security directly, you avoid paying the capital gains taxes.

Making the transfer is easy, you submit a form to your custodian (Schwab or TD) with details on what stock you want to gift and information on the non-profit receiving the gift. You can also donate the appreciated securities to a donor advised fund. The dollar benefit will vary based on how much of the gift is unrealized gain, your tax bracket, and if you’re itemizing. For some, a $10,000 gift will only cost you $2,500 or less on an after-tax basis.

Qualified Charitable Distributions: This option is limited to people aged 70.5 and over. With a QCD, you donate funds directly from your IRA to the charity. The advantage of this is the distribution never shows up on your tax return. This is most beneficial to individuals who give less than fifteen thousand dollars a year, so they don’t itemize on their tax return. If you aren’t itemizing, and instead taking the standard deduction, you don’t receive the tax write-off for a cash donation. By doing a QCD, you get the tax benefit. A lesser advantage is it may keep some people’s adjusted gross income (AGI) below a breakpoint where they would have to pay more for their Medicare Part B Premium. Similar to gifting appreciated securities, this just requires a form instructing the custodian to distribute the funds to your chosen charity.

Donor Advised Fund: These accounts make sense if you plan on giving $5,000 – $15,000 each year for the next several years – this amount isn’t enough in a single year to get a deduction. So rather than give $10,000 each of the next five years, give $50,000 this year and then none for the next four. This way you get the tax deduction for most of your gift. The funds that remain in the account get invested and hopefully appreciate over that time allowing you to give more. Charles Schwab has a great donor advised program we can help you open. Like we mentioned above, these are best funded with highly appreciated securities.

These are some guidelines to consider when making end-of-year donations. Please reach out to your Rockbridge advisor with questions on how your gifting desires mesh with your specific financial situation.

Many people in the financial planning world referred to the SECURE Act as the “death of the stretch IRA” because of the new 10-year rule. The 10-year rule requires most non-spouse owners of inherited IRA’s to spend down the balance of their Inherited IRAs by the end of the 10th year. Beneficiaries may be forced to recognize income from Inherited IRAs in their peak earning years, which may come with a sizeable tax bill. Here are five alternative strategies to consider if you have questions about leaving behind a pre-tax inheritance:


Roth Conversions– If the future beneficiaries are in a higher tax bracket than the current account owner, it would make sense to convert pre-tax dollars to a Roth IRA. Doing so would allow the current account owner to pre-pay the taxes at a lower rate for the eventual beneficiaries to inherit. The Roth IRA would still need to be withdrawn over 10 years, but there would be no tax consequences for doing so. This strategy also makes sense if tax brackets are equal, if you assume tax rates will increase over time.


Split Beneficiaries– If a couple ultimately believes they won’t spend all of their pre-tax assets, and the eventual beneficiary (usually a child) will be subject to the 10-year rule, then you should consider naming the eventual heirs as primary beneficiaries of all pre-tax accounts. This strategy would provide the non-spouse beneficiaries a 10-year window at the death of the first spouse and another 10-year window at the death of the second spouse, ultimately spreading out the tax costs over a 20-year period.


IRA to Brokerage Assets– Similar to Roth conversions, this strategy shifts pre-tax assets to after-tax accounts. If the owner of an IRA is in a low tax bracket, they could take withdrawals from their IRA above and beyond their own spending needs and then reinvest the excess in a brokerage account. Under current tax law, the beneficiary would receive a full step-up in basis at the time of death. The beneficiary would have no tax due (at that time) and would have no withdrawal requirements, allowing the assets to grow until needed. The beneficiary would also have a smaller pre-tax inheritance to which the 10-year rule applies.


Personally Owned Life Insurance– If the owner of an IRA does not need the assets for their living expenses, they could take withdrawals from the IRA to fund a personally owned life insurance policy. Ultimately, the beneficiary would receive the life insurance death benefits tax-free.


Charitable Trust– For IRA owners who are charitably inclined, but also want to see their heirs receive income over their lifetime, this could be a great strategy. Putting IRA assets into a charitable trust would allow the beneficiaries to receive income (interest and dividends) generated by the trust assets, and the principal balance would eventually be distributed to charities at the beneficiaries’ death.


The above strategies are designed to get the most out of your pre-tax assets and reduce the overall tax burden on your heirs.  If you have any questions about these strategies, don’t hesitate to reach out to your advisor to schedule a call.

If you itemize deductions on your federal tax return, you’ll recall that the 2017 tax law changes imposed a $10,000 cap on the amount of state income and property taxes (SALT) that you could deduct on your federal return. For many New York State taxpayers, this greatly reduced their federal itemized deductions and potentially forced them to take the standard deduction instead. 
To reduce the impact of the SALT cap, New York enacted a new law allowing owners of certain entities, including multi-member LLCs and S-corps, to deduct a larger portion of their NYS income taxes paid against their federal income than previously eligible.
The new law essentially allows an eligible entity to elect to pay a new pass-through entity tax (PTET) directly to New York on behalf of the owner(s). The tax paid is treated as a business expense that reduces the income reported on the taxpayer’s K-1 – effectively lowering the amount of income reported on your federal return by the amount of the entity tax paid. 
The new tax is optional, and entities must make an annual election by March 15th to be subject to the tax each year – for 2021, that election is October 15th. Owners of eligible pass-through entities should reach out to their accountants or their Rockbridge advisor with questions on how this new law may impact your tax situation.

Rockbridge works with several physicians in the Syracuse area, and more specifically, physicians employed at Syracuse Orthopedic Specialists. Through these experiences, Rockbridge has become well-versed with the benefit programs offered by SOS. Discussed below are two areas in which we have been able to add value to our clients employed by SOS.

401(k) Investment Options

The SOS 401(k) plan is held at Fidelity and has a few very good investment options. These options are well-diversified, low-cost index funds. The plan also has a full range of target retirement date funds. Most 401(k) plans are designed to use a target date fund as the default investment option for all new participants, which is not a bad place to invest if you want diversification without the need to research all the investment options.

However, not all target date funds are created equal (visit link here to read an article on the differences) and some are more expensive than others. In this plan specifically, the target date funds have an expense ratio of 0.60%, whereas a portfolio made up of individuals fund options in the plan, with a comparable mix of stocks/bonds has an expense ratio of 0.07%, which is less than 1/8th the cost of the target date fund. On an account balance of $1,000,000, the difference in costs is $5,300/year. This adds up over time. Over the course of a 25-year career of maximizing contributions to this plan, the difference in account balance could be as high as ~$280,000.

Outside of using more cost-effective funds to manage your investments, we also recommend implementing a goal-based allocation (mix of stocks/bonds) rather than an age-based strategy. For example, most 2020 target date funds now have a mix of 40% stocks and 60% bonds, whereas most 2025 funds have a mix of 60% stocks and 40% bonds. We want our clients to take an appropriate amount of risk for their individual financial goals, which shouldn’t change all that much between the end of their working career and retirement.

Defined Benefit Plan

The defined benefit plan offered by SOS is a great way to differ additional income for retirement, and we recommend maximizing contributions to this bucket for anyone who can. One thing to keep in mind is that the growth of your balance in this plan is tied to the interest rate of 30-year US treasuries. Today that rate is roughly 2%. Given that this account is tied to interest rates, we tend to look at it as a bond for the purposes of allocation.

For example, someone has $900,000 in their 401(k) and $100,000 in their DB plan and our recommended allocation is 70% stocks and 30% bonds. In this case, we would invest the 401(k) plan at ~80% stocks and ~20% bonds to offset the fact that 10% of investable assets are held in the DB plan.

These are just two of the areas of expertise we have been able to shed some light on for our clients. Whether you’re an employee at SOS, or just have general questions about either of the items discussed above, please don’t hesitate to schedule a call.

Rockbridge and National Grid are both strongly rooted in the Syracuse community. As a result, Rockbridge has a significant number of clients who are employees of National Grid. Through our experience helping current clients, we have developed a level of expertise with National Grid’s benefits program. Discussed below are a few areas in which we’ve added value to our National Grid clients.

Pension Plan

One of the hardest decisions National Grid employees face heading into retirement is how to elect their pension benefits. There are a lot of options, and this decision can only be made once, so it’s important to understand the choices and how each one might impact your financial plan.

This pension plan gives you three main options as to how you can take your pension benefit.

  • Lump Sum- Roll the balance of your benefit into a tax-deferred IRA
  • Annuity- Take a stream of fixed monthly payments over yours / yours and your spouse’s lifetime
  • Mix of options 1 & 2- For example, 50% lump sum and 50% annuity

There are pros and cons to each benefit option and there isn’t one answer that fits every retiree. For our clients, we evaluate what the monthly payments options are as a percentage of the pension balance, their appetite for stock market risk, spending goals, Social Security benefits, estate planning goals, etc. before deciding which benefit is optimal for them.

401(k) Investment Options

The National Grid 401(k) plan is held at Vanguard and has plenty of good investment options. These options are well-diversified, low-cost index funds. In addition to these low-cost funds, there are some expensive funds, with expense ratios in the plan ranging from 0.01%-0.71%. Picking the right mix of funds can be difficult.

The plan also has a full range of target retirement date funds. Most 401(k) plans are designed to use a target date fund as the default investment option for all new participants, which is not a bad place to invest if you want diversification without the need to research all the investment options. However, not all target date funds are created equal (visit link here to read an article on the differences) and there are benefits to creating your own allocation from other fund choices.

We recommend implementing a goal-based allocation (mix of stocks/bonds) rather than an age-based strategy. For example, most 2020 target date funds now have a mix of 40% stocks and 60% bonds, whereas most 2025 funds have a mix of 60% stocks and 40% bonds. We want our clients to take an appropriate amount of risk to meet their financial goals, which shouldn’t change all that much between the end of their working career and retirement.

National Grid ESPP

National Grid also has an employee stock purchase plan (ESPP), which allows you to purchase National Grid stock at a 15% discount via automatic payroll deductions. In almost all situations, it makes sense to take advantage of this benefit to some degree. We help our clients figure out to what extent they should participate in this program. However, something to consider is that over time, National Grid stock will become an increasing portion of your overall portfolio, and with that comes concentration risk. We also help our clients determine what a comfortable level of National Grid stock to own looks like, and then invest the rest in a globally diversified, low-cost portfolio of index funds

Health Care Benefits

Retiring pre-65 is difficult for most people because the cost of health care on the exchange is so expensive. Fortunately, as an employee of National Grid, you and your spouse will remain covered by the plan until each of you reaches Medicare. At that point, your National Grid coverage will become secondary to Medicare. This is a unique benefit that not many employers offer today. We help our clients understand how this benefit might allow them to retire earlier than originally thought. When the time comes, we also help our clients sign up for and transition to Medicare.

These are just a few areas of expertise in which we’ve been able to help our National Grid clients. Whether you’re an employee at National Grid, or just have general questions about any of the items discussed above, please don’t hesitate to give us a call.

Whether you’re saving, investing, spending, bequeathing, or receiving wealth, there’s scarcely a move you can make without considering how taxes might influence the outcome. No wonder people get nervous when there’s lots of talk about higher taxes, but little certainty on what may come of it, and who it might affect.

How do we plan when we cannot know? The particulars may evolve, but it seems there are always an array of tax breaks to encourage us to save toward our major life goals—such as retirement, healthcare, education, emergency spending, charitable giving, and wealth transfer.

However, it remains up to us to make the best use of these “tools of the trade.” Today, let’s take a look at some of most familiar tax breaks available. In our next piece, we’ll cover how we help our clients incorporate them into and across their greater wealth goals.

Saving for retirement

The good and bad news about saving for retirement is how many tax-favored savings accounts exist for this purpose. There are a number of employer-sponsored plans, like the 401(k), 403(b) and SIMPLE IRA. There also are individual IRAs you establish outside of work. For both, there are traditional and Roth structures available.

In any of these types of retirement accounts, your dollars have the opportunity to grow tax-free while they remain in the account. This helps your retirement assets accumulate more quickly than if they were subject to the ongoing taxes that taxable accounts incur annually along the way (such as realized capital gains, dividends, or interest paid).

Tax treatments for different types of retirement accounts can differ dramatically from there. For some, you can make pre-tax contributions, but withdrawals are taxed at ordinary income rates in the year you take them. For others, you contribute after-tax dollars, but withdrawals are tax-free—again, with some caveats. Each account type has varying rules about when, how, and how much money you can contribute and withdraw without incurring burdensome penalties or unexpected taxes owed.

Saving for healthcare Costs (HSAs)

The Healthcare Savings Account (HSA) offers a rare, triple-tax-free treatment to help families save for current or future healthcare costs. You contribute to your HSA with pre-tax dollars; HSA investments then grow tax-free; and you can spend the money tax-free on qualified healthcare costs. That’s a good deal. Plus, you can invest unspent HSA dollars, and still spend them tax-free years later, as long as it’s on qualified healthcare costs. But again, there are some catches. Most notably, HSAs are only available as a complement to a high-deductible healthcare plan, to help cover higher expected out-of-pocket expenses.

Employers also can offer Flexible Spending Accounts (FSAs), into which you and they can add pre-tax dollars to spend on out-of-pocket healthcare costs. However, FSA funds must be spent relatively quickly, so investment and tax-saving opportunities are limited.

Saving for education (529 Plans)

529 plans are among the most familiar tools for catching a tax break on educational costs. You fund your 529 plan(s) with after-tax dollars. Those dollars can then grow tax-free, and the beneficiary (usually, your kids or grandkids) can spend them tax-free on qualified educational expenses.

Saving for giving (DAFs)

The Donor-Advised Fund (DAF) is among the simplest, but still relatively effective tools for pursuing tax breaks for your charitable giving. Instead of giving smaller amounts annually, you can establish a DAF, and fund it with a larger, lump-sum contribution in one year. You then recommend DAF distributions to your charities of choice over future years. Combined with other deductibles, you might be able to take a sizeable tax write-off the year you contribute to your DAF—beyond the currently higher standard deduction. There also are many other resources for higher-end planned giving. For these, you’d typically collaborate with a team of tax, legal, and financial professionals to pursue your tax-efficient philanthropic interests.

Saving for emergencies

There also are a variety of tax-friendly incentives to facilitate general “rainy day fund” saving, and to offset crisis spending, like the kind many of us have been experiencing during the pandemic. These include state, federal, and municipal savings vehicles; along with targeted tax credits and tax deductions.

Saving for heirs

Last but not least, a bounty of trusts, insurance policies, and other estate planning structures help families leverage existing tax breaks to tax-efficiently transfer their wealth to future generations.

With recent negotiations over the tax treatment on inherited assets, families may well need to revisit their estate planning in the years ahead. In fact, whether times are turbulent or tame, there’s always an array of best practices we can aim at reducing your lifetime tax bills by leveraging available tools to maximum effect. We’ll cover those next.

In our last piece, we emphasized the importance of estate planning as the greatest gift you can bequeath to your loved ones, to reduce their painful stress load during an already stressful time. If you’ve been putting off your estate planning, taking the initial steps can be daunting—but liberating. So, let’s get started today, one hurdle at a time.

Hurdle #1: Deciding Who Gets What

A great first step is to think through what you’d like to have happen after you die.

Who are your heirs and other beneficiaries? How much should each receive? Who’s going to get your vintage bomber jacket and grandmother’s pearls?

Don’t become overwhelmed by trying to control every detail. Instead, start with what leaps to mind as your greatest possessions, goals, and challenges. You can always build on this base over time, but your biggest benefits will come from resolving that which you care about the most.

Who Gets What? A Handy Checklist

  • Estimate your net worth, including assets and debts. For now, just ballpark it.
  • Identify key beneficiaries, including heirs, charities, and any other significant relationships.
  • Think about how you would like to divide the bulk of your estate among your beneficiaries.
  • Think about prized possessions you would like to pass on to specific people or places—such as collectibles, heirlooms, keepsakes, and historical memorabilia.
  • Consider to whom or what entity you might like to leave these particular possessions.
  • Identify who you’d like to name as legal representatives and/or administrators, to settle or manage your estate once you pass. (As described in this AARP post, “Things to Know About Being an Executor of an Estate,” ask them if they are actually willing to accept the role.)
  • Identify conflicts of interest, such as multiple heirs each hoping to inherit the family cabin.
  • Also identify anyone you might want to explicitly exclude from inheriting anything, such as ex-spouses or estranged family members.

Hurdle #2: Making It Legal

Once you’ve got an idea of what you’ve got, to whom you’d like to leave it, and how you’d like to implement your plans, the next step is to create a legal road map for others to follow.

It’s possible to tackle this hurdle on your own, but we don’t usually recommend it. Any missing or misguided legal language can sabotage your best intentions. As such, a generic template rarely replaces a reputable estate planning attorney who takes the time to get to know you, translates your wishes into legally binding documents, and collaborates with your financial partners to seek the strongest outcomes for you and your beneficiaries. After you’ve established the relationship, it also will be easier to maintain your estate plans over time.

What if you die intestate (without a will)? It usually takes a lot more time and money to settle even a simple estate, leaving a spouse, parent, or adult child with extra work during a painful time. Plus, your heirs will likely inherit less, as extra settlement costs eat into their inheritance. You’re also opening the door to ugly, and even costlier infighting if your potential heirs don’t see eye to eye.

Another common question is which legal document(s) will best serve your needs:

  • A Will: Nearly everyone should have a will to specify who gets what when you go. If you have minimal net worth and obvious beneficiaries, a basic will might do it. You typically name one or more executors to move your estate through probate (the legal process for carrying out the terms in your will). Your executors can be family members or professionals such as a bank’s trust services.
  • A Revocable Living Trust (RLT): If your relationships and/or financial affairs are more elaborate, you might want to supplement your will with a revocable living trust (RLT). You should also still have a will, to settle any assets that remain outside of your trust(s). But an RLT lets the bulk of your estate bypass public probate, which usually means a more rapid, private, and cost-effective settlement. It also can resolve complex family dynamics that a will alone cannot address. For example:

What if you want your second spouse to be supported financially during their lifetime, with the remainder left to children from a first marriage? What if your children aren’t yet ready to manage their inheritance? What if an heir’s spouse is a spendthrift?

With an RLT, you can establish successor trusts and trustees to oversee your estate over time and across these and other scenarios.

  • Other Specialized Trusts: If you’re preparing for a business succession, philanthropic endowment, multigenerational legacy, or similar higher goals, a specialized trust may help minimize tax ramifications and facilitate optimal outcomes. Various trusts can also be combined with targeted insurance coverage, to help fund critical financial gaps. For example, what if you co-own a business, and your spouse would prefer to be bought out by your partners once you pass? Life insurance may be an affordable way to resolve the challenge.

Hurdle #3: Getting It Together

You’re nearly to the finish line, so don’t stop now! No matter how carefully you’ve structured your legal documents, it can be difficult for others to settle your estate as intended if your affairs are in chaos. So, once you’ve formalized your estate plans, the final hurdle is to complete the goals you established during your initial “Who Gets What” planning. In other words, it’s time to organize the important loose ends—and keep them organized over time.

How Do You Get It Together? A Handy Checklist

  • List your financial assets in detail (investment and bank accounts, retirement plans, etc.).
  • List who should receive specific collectibles, heirlooms, etc. (typically accompanied by broad language in your will or trust, pointing to this adjustable list).
  • List key professionals your trustees, executors, and/or beneficiaries might need to contact (such as your financial advisor, accountant, and estate planning attorney).
  • List other helpful information for your trustees or executors: Where will they find your will, trust, and any additional estate planning documents (marriage/divorce certificates, military records, etc.)? Where do you keep your house keys, wallet, security codes, computer logins, etc.? What about a favorite babysitter, pet sitter, or nearby neighbor?
  • If you’ve got an RLT, make sure you’ve funded it with most or all of your major assets, otherwise the trust can’t fulfill its purpose. Your estate planner should be able to assist.
  • With or without an RLT, make sure your home(s), vehicles, and other major assets are correctly titled (Who owns what: you, both of you, your trust(s), a lending company?)
  • Make sure all beneficiary designations are correct and current in your financial accounts, retirement plans, and insurance policies.
  • Go through your home(s) and clear out any decades of accumulated clutter. Don’t burden your heirs with this painful duty.
  • Review each of these steps annually to adjust as needed for births, deaths, marriages, divorces, moves, financial changes, career changes, legislative updates, etc.

Last but not least, let’s touch on security. Even once you’re gone, your private information needs to remain private, to protect against identity theft, legal challenges, and other concerns. And yet it also needs to be relatively accessible to your legal representatives and administrators. That’s a tricky balance to strike, and one more reason to use a reputable password manager to securely store all your logins. We suggest selecting one that lets you name an emergency contact who can access your account once you’ve passed. Or, if you already have a password manager in place, now is a great time to set up this important role.

How Can We Help?

Of course, it’s possible to skip all three of these hurdles on your way to the estate planning finish line. If you don’t say otherwise, your state’s laws typically govern who gets what. You also can let the chips fall where they may on who gets to settle your estate (assuming they can find it).

But make no mistake: If you do nothing, you’re still doing something. It just may not be the “something” you and your loved ones would prefer. If you’ve been procrastinating on your estate planning, we hope our handy summary has served as a source of inspiration. Contact us today, and we’ll help you navigate past your estate planning hurdles, connecting you with the relationships and resources you need to speed you on your way. That’s what we’re here for!

Fact: When you pass, you will leave behind an estate, and somebody will need to settle it. Your estate may be worth a little or a lot, but there’s no escaping death and taxes.

So why do so many families put off their essential estate planning until push comes to shove?

Estate Planning Is an Act of Love

Since 2015, has been conducting a periodic survey of Americans’ estate planning habits. Its most recent results suggest the pandemic has spurred an uptick in estate planning, especially among younger adults. That’s good news. But still, an enormous divide remains:

Some 60% of those surveyed agreed it’s important to have a will.
But, as of December 2020, only about a third of them actually had one.

Among those without a will, the top reason cited across multiple years remained the same:

“I haven’t gotten around to it.”

This isn’t surprising, given the logistical and emotional stumbling blocks involved. Plus, most families are plenty busy with interests that seem more immediate … right up until they’re not.

The Upsides of Estate Planning

In short, if you’ve been procrastinating on your estate planning, you’re not alone. But regardless of your age or net worth, let’s correct that oversight today, because …

By reducing their stress load during an already stressful time,

a well-structured estate plan is the greatest gift you can bequeath to your loved ones.

According to a 2018 EstateExec survey, it typically takes just under 700 hours to settle an estate valued between $1–$5 million. Every painful task and each extra hour you can take care of in advance will be one more way you can give back to the loved ones you leave behind, granting them the space they’ll need to grieve and process the emotional toll of their loss.

Estate planning also brings important practical advantages to nearly every family:

Clarity: Your actual wishes are far more likely to be realized if you’ve written them down and made them legally binding.

Speed: Your estate is likely to settle far more quickly, with less red tape and fewer frustrating delays before your beneficiaries receive their inheritance as hoped for.

Cost Savings: Faster settlements usually translate to fewer costs. 

Tax Benefits: Estate planning can include basic and advanced strategies for facilitating a more tax-efficient wealth transfer.

Protection: By addressing potential problems in advance, distributions are less likely to end up in the wrong hands, such as estranged family members or debt collectors.

Step-by-Step Planning

So, what’s stopping you from getting a grip on your estate planning? In our next post, we’ll take you through the three common hurdles that stand between you and your effective estate planning. These include: (1) deciding who gets what, (2) making it legal, and (3) getting (and remaining) organized.

Our Lockheed Martin clients in the Syracuse and Owego plants often ask for our recommendation on how to elect their pension payment.  

Take the hypothetical example: John works at Lockheed Martin in Syracuse and his life only pension benefit is $5,000/month, or $60,000/year.  At the other extreme, his 100% survivorship benefit is $4,000/month, or $48,000/year; a $12,000/year difference between the benefits.  

When trying to determine the most appropriate pension benefit, keep in mind that they all yield a similar end result because they are based on actuarial tables for life expectancy.  We have explained the pros and cons of a few options below:

Option 1: Take Life Only Benefit

This is a relatively risky option as it leaves John’s spouse vulnerable to John passing away early on in retirement.  This option is typically not recommended unless clients have significant assets and/or other sources of retirement income.

Option 2: Take 100% Survivorship Benefit

This option is more common than life-only as it provides protection for John’s spouse in the event he predeceases her, especially early in retirement.  However, this option has little value if John and his spouse pass away around the same time or John’s spouse predeceases him (assuming no pop-up provision).  

Option 3: “Pension Maximization” Strategy

A less common, but interesting strategy, is using life insurance coupled with the life only benefit to provide protection for John’s spouse.  Here’s some background to set the stage followed by an explanation of the strategy:

We like to think of the 100% survivorship option as an insurance policy.  If John elects the 100% survivorship option, he is essentially purchasing a $12,000/year  insurance policy (difference between life only and 100% survivorship option) with an unknown, declining death benefit for his spouse. 

For example, the 100% survivorship option would provide a large death benefit if John were to pass away early (say, 5 years into retirement) and his spouse lived a long life.  He would have “paid” $60,000 of insurance premiums ($12,000/year x 5 years) and his spouse would receive $960,000 of pension payments if she lived for 20 years after John’s early death.  Not a bad return on investment!

Alternatively, if John elects the 100% survivorship option there are two scenarios to be aware of.  First, if John’s spouse predeceases him early in retirement, the $12,000/year “premium” is lost entirely for the remainder of his life.  Second, let’s assume they both live long lives and die together at age 90; John would have paid 30-years of survivorship “premiums” ($360,000) in “premiums” and received no death benefit for those payments.   In both scenarios John would have been much better off if he elected the life only option.

The obvious problem is that death ages are unknown and benefit elections can only be made once.  The best we can do is develop a strategy to protect the surviving spouse in the event of an untimely death.  This would favor electing some sort of survivorship option; acknowledging the “worst-case” scenario of John predeceasing his spouse early in retirement is possible, although unlikely.

The “Pension Maximization” strategy using life insurance works as follows:

Instead of choosing a survivorship option, John elects the “life only” option and purchases life insurance to protect his spouse if he were to predecease her.  Example:  As previously stated, the difference between life-only and 100% survivorship option is $12,000/year.  John would choose the “life only” option and then purchase a life insurance policy with the $12,000/year difference between the benefits.  This provides the same pension payment as the 100% survivorship option after the insurance premiums are paid.  This strategy has a few advantages:

  1. Flexibility – If John predeceases his spouse at any time in retirement, he can simply cancel the insurance policy and his realized benefit will “pop-up” to the full life only amount.  Additionally, if his spouse predeceases him late in retirement, he might choose to keep the policy and leave the death benefit to his heirs.  These options are not available with the traditional 100% survivorship election.
  1. Statistical significance – There is a higher probability that John and his spouse will pass away within ~5 years of each other.  Recognizing this probability, the life insurance strategy would be ideal.  If John were to pass away at age 90 and his spouse at age 91, she would receive the entire insurance policy death benefit (say $1,000,000) and could live on the funds for 1 year, then leave the remainder to heirs.  Alternatively, if John had chosen the 100% survivorship option, his spouse would only receive one year of survivor pension payments and would have nothing to leave to their heirs after all the years of “paying” survivorship premiums.  

As financial planning nerds, we enjoy exploring all these unique strategies to determine what’s best for each client.  As a fee-only advisor, we don’t sell insurance (or anything for that matter), but we can help clients price insurance policies and help them make the best decision for their personal situation.  Feel free to reach out if you have questions about your pension from Lockheed Martin or any other employer!

A good portion of our clients are employees of Lockheed Martin’s plant in Syracuse.  As a result, we receive a lot of questions about Lockheed’s Martin benefit program, 401(k) allocation, etc.  We took some time and did a deep dive into their benefits package and highlighted some areas you don’t want to overlook if you work at Lockheed Martin:

Wellness Incentives in HSA/HRA

Lockheed Martin offers you and your spouse can earn wellness incentives that are contributed in your HSA account (free money).  Once the account reaches $1,000 you are able to invest the funds in the market, just like your 401(k).  The incentive amounts change every year so it’s best to check the benefits guide for information on how to qualify and the dollar amounts.  You can only enroll in this HSA account if you are covered under one of Lockheed Martin’s high deductible health insurance plans, however, if you have coverage through your spouse you can still enroll in Lockheed’s HRA account and the wellness incentives will be deposited there.

Dependent Care Savings Account

Lockheed Martin offers employees the ability to save in an Dependent Care Savings Account (DCSA).  This account allows for up to $5,000/year of tax deductible contributions that can be used for dependent care-related expenses (child care, etc).  This account is a great way to make some of your child care expenses tax deductible!  You can enroll in a DCSA account during annual enrollment or a Qualifying Life Event (QLE).  This account does not come with a debit card so you will need to save receipts and submit them to BenefitWallet.

“Broad” vs “Premier” Health Insurance Plans

Lockheed offers two types of high deductible plans for employees- Broad and Premier.  The premier network has fewer in network providers (thus a slightly lower premium) than the broad network, so It’s important you make sure your providers are in the premier network if you choose that option.

Rally Coins

Lockheed Martin offers a neat and fun way to earn discounts on popular exercise gear like FitBits, yoga mats, etc.  You earn these Rally Coins by signing up for “Rally” and completing the challenges and missions.  You can sync your Apple Watch, FitBit, etc. so your progress is tracked in real-time

The defense and aerospace company, Saab Inc., has their US Headquarters, and several hundred employees in our hometown of Syracuse, NY. In addition to their 401(k) match and great pay, they offer one of the most appealing Employee Stock Purchase Plans we’ve ever seen.

At its core, this is an employee stock purchase plan that provides a match if the shares are held for 3 years. In order to get the free doubling of your investment, you must take on additional risk related to the health of your employer and currency risk. Still, it’s a tradeoff worth taking.

In this piece we go into detail on how it works, the financial aspects that make it so great, and a recommended strategy for it.

How it Works: For U.S. employees, you must either enroll in the plan in November or May. At enrollment you choose to have between 1% and 5% of your paycheck withheld for the Share Matching Plan. Once enrolled, you will have money taken out of each paycheck and set aside for purchases of Saab AB B. These purchases happen each month.  

The stock, Saab series B shares, is custodied in an account in your name at Computershare. The shares carry both market risk and currency risk as they are held in Swedish Krona. The shares bought with money withheld from your paycheck are 100% yours the moment they are invested. You can sell the shares and withdraw the money at any time and pay the applicable taxes. If you sell them within a year, you will pay short-term gains or losses. If you sell them after holding them for a year, you will pay long-term gains or losses. If you sell them at the exact price you purchased them, you will owe nothing as the purchase was made with after-tax dollars from your paycheck. While you hold the shares, you will receive a cash dividend that you will pay taxes on.

Once the shares are held for three years, you will be matched 1 for 1, doubling your position.  You will owe ordinary income taxes on the value of the match you are receiving at the time it is received. Taxes on the sale of the matched shares will be short-term gains/losses if done in the first year, and long-term gains/losses if done after one-year. If you sell the matched shares as soon as they become yours, your taxable gain/loss will be minimal.

The Benefit: You could think of this as free money, though it comes with risk. We will look to quantify how much the extra benefit is worth and how much Saab can underperform the market and still be profitable.

The following table outlines how the Share Matching Plan would work assuming a hypothetical employee with a $200,000 salary and doing the full 5% match. We assumed a 6% price appreciation and ignored dividends. We also assumed the employee sells all the stock as soon as it is matched in year 3. In reality payments are made each month, but we analyzed the data as if it were a year-long program to help visualize what is happening.

In this scenario, $10,000 worth of Saab stock grows to $11,910 by the end of the third year. When that is sold the employee pays long-term capital gains on the $1,910 of growth. Assuming a combined federal and state tax rate of 21%, they would owe $401 of taxes, leaving them with $11,509. At the same time, they also receive $11,910 worth of matched shares. That entire amount is taxable as ordinary income, at an assumed rate of 33%. That means $3,930 of taxes are paid on the $11,910 of benefit, for an after-tax net of $7,980. In total the employee is left with $19,489 at the end of the third year, roughly doubling their money.

Let’s say Saab didn’t have this program and instead the employee invested the $10,000 in a stock market index fund. Assuming the market appreciated by 6% (not including dividends), and at the end of 3 years the employee sold their position for cash, they’d have the same $11,910 of proceeds for an after-tax value of $11,509.

A good question is – how much can Saab underperform the market and have the participant still not be harmed by the Share Matching Plan?

We can solve to find that Saab stock (plus the currency movement) can underperform the market by 19.6% and the plan is roughly a wash, as seen by the table below.

In this example, Saab stock is losing 13.6% per year for 3 years, and the end result is an after-tax balance of $11,509, the same as what you would have gotten from the stock market if the market returned a positive 6%. In total that’s roughly a 20% annualized difference.

There is no reason to expect Saab’s stock and the Swedish Krona to underperform by an annualized 20% making this plan attractive.

Recommendation: We recommend Saab employees take full advantage of the Share Matching Plan, putting in the 5% maximum each month. Once the shares are matched, they should be immediately sold. For a Saab employee with a $200,000 salary, and assuming market returns, you’d be reducing your monthly paycheck by about $830, but after three years in the plan, you are getting a $1,625 rolling after-tax cash out. In order to take advantage of this you’re exposing yourself to an additional $60,000 of market risk in Saab stock and the Swedish Krona.

Whether you’re an employee of Saab AB looking with further questions on the Share Matching Plan, or you’re a client with questions related to your employee stock purchase plan, please reach out to your advisor, e-mail us, or schedule a call.

Investors nerves were tried throughout 2020, yet those investors who avoided behavioral mistakes and didn’t let their emotions get the best of them were rewarded handsomely.  The year was full of lessons, but some highlights were:


  • Market results are unpredictable- Missing the best market day in March would have cost you 10%.  That “lost” 10% will compound over time and never be recovered.  Investors that resisted the urge to bet against the market came out ahead, investors that didn’t made a mistake they will regret.


  • Stocks prices reflect thoughts about the future- Markets are forward looking, and reacting about “news” that is common knowledge is already baked into stock prices. In other words, making investment decisions about what you see, read, or hear will often have poor results.


  • The impact of Washington- Stocks have appreciated almost 15% since election day. The party in power does not drive stock prices.  Stocks will find a path to profitability regardless of Washington.  This year, many investors realized their predictions on what should happen in financial markets as a result of an election were trumped (no pun intended) by an always unpredictable market.


  • Don’t confuse luck and skill- In 2019, nobody would have guessed 2020 would look anything like it did. The few investors that made great timing decisions (got out of the market and back in) or bought any of the large technology stocks early on should know that sometimes bad decisions have good outcomes (i.e. they got lucky).  Don’t confuse luck and skill.  Buying a winning lottery ticket was a bad decision that had a good outcome and there is no skill in picking winning lottery numbers.

Congress recently passed a highly anticipated economic stimulus bill just in time for the holidays. The entire bill contains over 5,000 pages of new legislation appropriating over $900 billion in government spending. The following is an outline of the provisions most pertinent to our clients here at Rockbridge.

The headline provision in the bill is the additional direct payment stimulus checks to individuals who qualify based on their income. The base credit amount is $600 per individual and includes additional payments to taxpayers who claim child tax credits for children under the age of 17. Similar to the CARES Act, taxpayers whose adjusted gross income (AGI) is above a certain amount will see their payment reduced or eliminated altogether.

Example: David is a single taxpayer with 2 children under the age of 17, and AGI of $65,000 in 2019. Therefore, David will receive $1,800 – $600 for David and $600 for each child under 17.

Similar to the CARES Act, these payments begin phasing out for single filers with AGI above $75,000 and married fliers with AGI above $150,000. The phaseout provision reduces the taxpayer’s payment by $5 for every $100 of AGI above the limit.

Example: David and Jenna file a joint return and claim Child Tax Credits for 3 children under the age of 17. Before taking into account their AGI, the couple would expect to receive direct payments of $3,000 – $600 for David, $600 for Jenna, and $1,800 total for the children. However, David and Jenna have an AGI of $175,000. Therefore, the couple will see their payment reduced by $1,250, leaving them with a direct payment of $1,750.

The stimulus bill also addressed the Paycheck Protection Program (PPP), another major program enacted under the CARES Act. Arguably the most significant item addressed for small businesses who already have an outstanding PPP loan, is the deductibility of business expenses paid for with funds from the PPP loan. This is significant because while the CARES Act specifically stated that PPP loans would not be included as income, the IRS subsequently took the position that expenses paid for with PPP loan funds were therefore not deductible – effectively making the loans taxable. Fortunately, small business owners now have clarity that they can seek loan forgiveness without increasing their tax bill.

Other important PPP related items contained in the bill include: both reopening the window for small businesses to apply for an initial loan; and providing those business who received a PPP loan, but continue to need financial support, an opportunity for a second loan, albeit with more strict qualification requirements. The bill also expands the types of business expenses that qualify for loan forgiveness.

People may be wondering if the new stimulus bill extends certain popular provisions enacted by the CARES Act, including waiving required minimum distributions (RMDs) and Federal student loan relief. Unfortunately, the answer is no. At this point individuals should plan on taking their RMD for 2021, and those with Federal student loans should plan to resume making those payments beginning in February.

Those who do not need distributions from their retirement accounts to meet their living expenses may want to wait until later in the year (if they do not already), in the event that additional legislation is passed further waiving RMDs. Contact your Rockbridge advisor if you would like to discuss a plan for your 2021 RMDs.

Has 2020 left you feeling like the fabled Sisyphus, forever pushing a boulder up a steep hill? Thankfully, with multiple COVID-19 vaccines in the works, there’s hope the load will lighten in the new year, fast approaching. While we prepare for a fresh start, here are six financial best practices for year-end 2020 and beyond, none of which require any heavy lifting.

  1. Give as you’re able, get a little back. What the 2017 Tax Cuts and Jobs Act (TCJA) took from charitable giving, this year’s CARES Act partially gave back – at least for 2020.
  • A $300 “Gift”: Under the TCJA, it became much harder to realize itemized tax deductions beyond what the increased standard deductions already allow. But this year, the CARES Act lets you donate up to $300 to a qualified charity, and deduct it “above the line.” In other words, even if you’re taking a standard deduction, you can give a little extra, and receive an extra tax break back, without having to itemize your deductions.
  • Giving Large: If you are itemizing deductions, the CARES Act also temporarily suspends the usual “60% of your AGI” limit on qualified cash contributions. The exception does NOT apply to Donor Advised Fund contributions, and has a few other restrictions. But if you’ve already been thinking about making a large donation to a favorite charity, 2020 might be an especially good year to do so – for all concerned.


  1. Revisit life’s risks. As the pandemic reminded us, life is full of surprises. That’s why it’s imperative to build wealth, and protect it against the inevitable unexpected. Is your current coverage still well-aligned with your potentially altered lifestyle? Perhaps you’re driving less, with lower coverage requirements. Or new health or career risks now warrant stronger disability insurance. Might it be time to consider long-term care or umbrella coverage? Bottom line, there’s no time like the present to prepare for your future greatest risks.


  1. Leverage lower tax rates. While it’s never a sure bet, Federal income tax rates seem more likely to rise than fall over the next little while. Even before this year’s massive relief spending, the TCJA’s reduced individual income tax rates were set to expire after 2025, reverting to their prior, higher levels. As such, it may be worth deliberately incurring some lower-rate income taxes today, if they’ll probably spare you higher taxes on the same income later on. As a prime example, consider converting or contributing to a Roth IRA. You’ll pay income taxes today on the conversions or contributions, but then the assets grow tax-free, and remain tax-free when you withdraw them in retirement.


  1. Harness an HSA. Health Savings Accounts (HSAs) are another often-overlooked tax-planning tool. Instead of paying for a traditional lower-deductible/higher-cost healthcare plan, some may benefit from a higher-deductible/lower-cost plan plus an HSA. If a high-deductible plan/HSA combination is available to you, it may be worth considering – especially if a career change, early retirement, or some other triggering event has altered your healthcare coverage. HSA assets receive generous “triple tax-free” treatment – going in pre-tax, growing tax-free, and coming out tax-free (if spent on qualified medical expenses).


  1. Read a great book (or few). As we swing into a winter of continued social distancing, you may have more time than usual to curl up with a good book – whether in print or on your favorite device. Why not add a best financial book or two to the list? As good timing would have it, The Wall Street Journal personal financial columnist Jason Zweig recently shared an excellent “short shelf” list of his top picks. As Zweig reflects, “they all will help teach you how to think more clearly, which is the only way to become a wiser and better investor.” Looking for our own favorites? Let us know.


  1. Live a little more. Really, it’s always a best practice to ensure your financial priorities are driven by your life’s greatest goals – not the other way around. Perhaps our greatest purpose as your wealth advisor is to assist you and your family in achieving a satisfying work-life balance, come what may. What does this balance look like for you? Speaking of good reads, in his new book, “The Coffeehouse Investor’s Ground Rules,” Bill Schultheis offers his take:


“When you … have everything you need materially, how do you honor that part of your DNA that will forever yearn for more? It seems to me that the challenge is to turn this pursuit of ‘more’ away from material consumption and toward a ‘more’ that fosters more family, more community, more connections, more art, more creativity, more beauty.”

What more can we say about how to make best use of your time and money, this and every year? As always, we’re here to help you implement any or all of these best practices. In the meantime, we wish you and yours a happy and healthy 2021.

Now and then, we all wrestle with the fact that we will not live forever. While most of us find this topic difficult to think about, it will happen to all of us and the circumstances will vary. For some, it will be sudden, while others will have prolonged battles with health issues and may require nursing facility assistance for end of life care.  Responsible adults should be mindful of the fact that they are unlikely to choose how and when they will die. Once you accept this notion, your thoughts should eventually drift to, “How do I want my assets distributed after I die?”  This is where the Last Will & Testament comes into play.

As you may know, your “Last Will,” as it is commonly called, specifies how assets held in your name will be transferred to family members, friends, relatives or charities after you die.  I cringe when clients, friends, and relatives say they don’t have a will. Sometimes, they say, “Why would I need a will…I don’t have a lot of assets.”  Or they incorrectly assume things will just “get worked out” among a spouse, parent, minor child, stepchild, ex-spouse or relative. They often don’t.

The truth is, even if you don’t have a valid Last Will and Testament, you do have a ‘default’ estate plan provided to you by New York State. New York State’s intestacy laws (dying without a will) dictate how assets are divided at your death.  Unfortunately, these rules may not match the manner in which you want your assets distributed among your heirs.

If you have a few minutes, I recommend that you Google “New York State intestacy laws” to see how your assets would be distributed according to New York State.  The intestacy laws as a safety next protecting New York state residents who don’t have a valid will.  But, with a little effort, you can control exactly what happens to your assets when you pass.  I recommend meeting with an attorney who specializes in this area law since they are adept at answering your questions and spotting issues that may require more than a simple will (Trusts, buy-sell agreements…etc).  A Last Will nominates your Executor, a person who carries out the process of retitling assets, retiring debts, paying final expenses, etc.  Without a will, the New York State Courts will appoint an Administrator for you (identical duties as an Executor). We think it’s best that you name a capable and trustworthy Executor to ensure that your wishes are adhered to and family disputes are avoided.  You may own a private company, have involvement with business partners, a farm, real estate holdings, alimony, leases, child support, valuables, artwork or die in a wrongful death case.  The possibilities are endless and it is best to have a plan in place that suits your particular needs.

Assets such as IRAs, 401(k)s , 403(b)s, life insurance policies or annuity contracts should contain designated beneficiaries that you have named to inherit your assets. Your will does not control these assets unless you name your estate as your beneficiary (not typically recommended).  Assets jointly owned with your spouse will typically fall into their control when you pass.  However, assets jointly owned with persons other than your spouse need to be carefully titled to ensure they are passed on to the heirs you specify.  A Last Will can help avoid family disputes or costly court proceedings to sort out these matters after you die.

Financial advisors who have been in this field long enough will have seen some real family inheritance disasters.  Many of these disasters could have been avoided with a simple 1-3 page Last Will drafted by an attorney.  The costs of such a document can be only a few hundred dollars.  If you need to revisit your estate plan, please contact your Rockbridge advisor.  While we don’t provide legal advice or draft legal documents, we can guide you through the scenarios and options specific to you and your family.  Then we can refer you to trusted partners to help you draft the appropriate legal documents.

Roth IRA conversions can be an important potential tool for implementing a tax efficient retirement plan. At its core, a Roth conversion involves prepaying a deferred tax liability in exchange for tax free growth going forward. Conversions are ideal for people who are in lower tax bracket today than they are likely to be in the future.

Having the ability to pay the tax due on the conversion with after-tax dollars (i.e. cash in a checking/savings account or brokerage account) increases the benefit of the conversion strategy. Furthermore, Roth IRAs do not have minimum distribution requirements (RMDs) during an account owner’s lifetime.

Dan, age 62, is recently retired. He anticipates funding his lifestyle in retirement with income from a pension, other after-tax investments, and eventually Social Security. Dan anticipates being in a higher tax bracket once he starts taking RMDs at age 72, than he is today. Dan decides to convert a portion of his pre-tax IRA assets each year so that by the time he turns 72 he will greatly reduce or eliminate his RMDs. Dan further benefits if he pays the resulting tax on the conversions each year from his bank account rather than from his IRA.

Legislation in response to the global pandemic has suspended the distribution requirement for 2020, presenting a unique opportunity to do a Roth conversion for those already taking RMDs.

Dave, age 74, had a $50,000 distribution requirement from his IRA in 2020 that he no longer has to take. Assuming Dave would remain in the same marginal tax bracket with or without the $50,000 of income, he might decide to make a $50,000 Roth conversion instead. Future growth on the converted assets is now tax-free, and Dave has the same tax bill he would have had if required to take the $50,000 as a taxable distribution.

The recent stock market decline is another reason to consider doing a Roth conversion now. Converting assets at depressed values allows for potentially greater tax-free growth as the market recovers. The timeline for a market recovery is unknown. However, investors who have a positive long-term view of the market (as we certainly do) might consider a conversion sooner rather than later.

Diane has a pre-tax IRA that was worth $1,000,000 on December 31, 2019. The value of her account has since decreased by 10% to $900,000. If she converts the $900,000 to a Roth now, and the value of the account recovers to its previous $1,000,000 mark, Diane would shield $100,000 from future taxes by doing the conversion.

Roth conversions can play an important role in a tax efficient retirement plan. Whether or not a conversion strategy is appropriate depends on your individual situation. A Rockbridge advisor can work with you and your accountant to see if a Roth conversion strategy makes sense for you.

The word “recession” makes investors feel uneasy and with good reason; the correlation between a bear market and an economic recession is very high. For anyone with money in the stock market, especially those nearing retirement, this can be scary. The “r” word has been making headlines in recent months as investors worry about trade wars, the yield curve inverting, and drops in manufacturing activity. In this piece, we’ll unpack what a recession is, what it means for markets, and what can be done to protect a portfolio against one.

A recession is defined as a period of two consecutive quarters where economic activity declines on an inflation-adjusted basis. The main cause of this is economic activity decreasing; however high inflation and population growth can play a factor as well. For example, Japan has had three recessions in the last 10 years as their population has shrunk by 1.52%.

In the United States, economic activity is measured by the Bureau of Economic Analysis’ calculation of Gross Domestic Product (GDP). This measure takes three months to publish and is then revised each of the next two months before we are given a final reading. Because of the definition and the time it takes to report, we don’t know we’re in a recession until 9 months after it is upon us.

Regarding impact, we analyzed the six recessions we’ve seen over the last 50 years.

For example, in November 1973, a 16-month recession began in the United States which saw GDP shrink by 3.2%. The stock market peaked 11 months prior to the start of the recession (December 1972). It took 21 months to bottom out with a loss of 45.6%. During that time international stocks dropped 29% and five-year government bonds rose 4.5%. Fourteen months after the bottom, a balanced portfolio recovered all it had lost.

A recession’s impact on the market varies. Sometimes the impact is small (the drop we had in Q4 of last year was worse than the market’s reaction in three of the recessions) and other times it is very large. The thing that struck our team was how quickly a balanced portfolio recovers from a recession. A 60% stock portfolio that is diversified among international stocks, and is rebalanced quarterly, recovered on average 9 months after the market bottom. When you’re living through the drop, it can feel like a long time, but for investors whose money has a 30+ year investing horizon, it isn’t that long.

Another thing to remember is we don’t know when/if the next recession is coming. The Wall Street Journal Survey of Economists puts the odds of a recession in 2020 at less than 50%. Australia has gone 28 years since their last recession.

While there is no such thing as an average recession, let’s play one out. Say we begin a recession in January of 2020. We won’t know it’s a recession until next September. The market will have peaked this past July and will drop 31% before bottoming in October of 2020. A diversified 60/40 portfolio will decline 13.3% and recover those losses by July of 2021. Again, it’s not fun, but it’s not the end of the world.

And to reiterate, we don’t know when or if this will happen. We’d bet a lot of money a recession won’t start in January of 2020, not because we think we know what the economy will do, but because it’s a low probability event. In the 48 hours we took to research and write this piece, we’ve had a bit of good data and positive news from trade negotiations. The market is up 2.7% over that time and the headlines talking about a recession have vanished. That could easily change; the only point is that no one knows, and headlines are fickle and sensational.

If the fear of a recession is keeping you up at night, it’s a good idea to reach out to your advisor and discuss your asset allocation. A financial planning best practice is to periodically make sure you’re appropriately allocated for your long-term goals and individual risk tolerance. But alterations that are “short-term” by nature or “tactical” are usually mistakes. As Peter Lynch (one of the most successful investors of all time) once said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” Our job as your fee-only fiduciary advisor is to make sure you don’t prove Peter Lynch right.

Whether it’s your first house, you are relocating to a new area, or you are upgrading to your “forever” home, buying a house is one of the most significant purchases you will make. Properly budgeting for the costs to buy, finance, and maintain the new home can help set you up for financial success and keep you from feeling “house poor.” While there are many considerations that go into finding the right house for you and your family, reviewing the points below will start you off on a solid foundation (pun intended!).

How much can you afford? – 3 primary rules of thumb include:

  • Maximum purchase price is 3x your gross household income.
  • Housing-related payments (mortgage, taxes, homeowner’s insurance) should be less than 28% of your monthly gross household income.
  • Total debt payments should be less than 36% of your monthly gross household income.

What type of mortgage to get and how much to put down:

  • The most common types of mortgages are conventional mortgages. Conventional mortgages have a fixed interest rate and vary in duration, with 15 or 30 years being the most common.
    • A 30-year mortgage will generally have the lowest monthly payment but a higher interest rate.
    • A 15-year mortgage is the opposite. Your interest rate (and therefore the overall cost of the mortgage) will be lower, but your monthly payments will be much higher.
  • Regardless of the term length, lenders typically require you to make a down payment of 10% to 20% of the purchase price. If you put less than 20% of the purchase price down, you will likely be required to pay Private Mortgage Insurance (PMI). This insurance protects the bank in case of a home mortgage default and is typically between 0.5% and 1% of the loan amount each year.

What are some of the other costs to consider?

  • Property taxes and homeowner’s insurance – Property taxes can add a significant amount of cost on a home. Taxes vary by state and by county; however, it is not unreasonable to assume that if you are targeting a $1M+ home, you should estimate paying $25K to $40K a year in property taxes. Property taxes may be included as a portion of your monthly mortgage payment, or you may need to pay them directly during the year. Don’t forget to take advantage of state programs, like New York’s STAR program, which can reduce your property tax burden. While not nearly as expensive, homeowner’s insurance goes up as the purchase value of the home increases. It may be advantageous to bundle your various insurance policies together through one carrier. Often insurance companies will provide discounts for having homeowner’s, car insurance, umbrella policy, etc. with them.
  • Closing costs – Most mortgages will have some form of closing costs associated with them. The fees cover the loan recording and processing, attorney costs, title insurance, appraisal and various other new mortgage requirements.   Expect closing costs to be approximately 2%-5% of the loan value.
  • Maintenance and upkeep expenses – Homes can be expensive to maintain. Routine repairs and improvements on an older home can be a few thousand dollars a year. Major repairs such as replacing the roof, or damage from a weather event, can cost tens of thousands of dollars and can be unexpected. Plan on budgeting about 1% of the home value for annual maintenance.

 How to title the property?

  • Tenants by the Entirety (TBE) – For married couples, this is typically the default titling option. Advantages of TBE include creditor protection in certain circumstances and probate avoidance when the first spouse passes away. Just like with owning property as joint tenants with rights of survivorship (JTWRS), the deceased tenant’s share passes to the surviving tenant via operation of law and not through the decedent’s Will or revocable trust.
  • Tenants in Common – In some instances, it will be advantageous to own the property jointly as tenants in common. The main difference between tenants in common and TBE or JTWRS is that each tenant can direct the passing of their interest through their Will or revocable trust. This is advantageous if real property is needed to fund a testamentary trust, such as a credit shelter trust.
  • In Trust – For those using a revocable trust (or trusts) as part of their estate plan, making sure to title the property in the name of the trust(s) is essential. Usually the attorney who drafts the trust will also draft a deed to transfer existing property into the trust(s). If a trust is already in place and you are purchasing new property, the new property should be purchased directly in the name of the trust(s).

So, whether you are purchasing a first home, a forever home, or perhaps a second (or third) property, there are a number of considerations (financial and otherwise) that should be reviewed beforehand. Proper planning will not only help you acquire the house of your dreams, but can also help make sure that dream does not end up in a financial nightmare down the road.

Congratulations! You are officially married and get to enjoy all the financial benefits that come along with it. After you’ve had some time to relax after the big day, be sure to consider the following.

  • Beneficiary Designations – Update beneficiary designations on any life insurance, retirement accounts, etc., to name your spouse as primary beneficiary.
  • Income Tax Withholding – Review the amount you are withholding from your paycheck. You may want to make an adjustment if you plan on filing a joint tax return in 2019. Remember you can file a joint return if you are married by the last day of the calendar year.
  • Review the benefits you are receiving, or are eligible to receive from your employer.
    • Health Insurance – If only one spouse is working, make sure both of you are covered under your company plan. Most companies only allow their employees to change their insurance elections once a year during their “open enrollment” period. However, exceptions are permitted for certain qualifying life events, which typically include marriage. If you are both working, it may be less expensive to pay for a plan that includes a spouse at one employer rather than paying for two single plans. One of you could even have better coverage than the other. It is in your best interest to review all the options available to you.
    • Life/Disability Insurance – You may have declined life insurance or disability insurance coverage when you were single. Now that there is someone else in the picture, you will want to review your options. Even if you are covered by an employer plan, you may want to purchase additional term life insurance coverage which would help to cover any joint debt and provide income replacement for the surviving spouse.
  • IRA Contributions – Getting married can affect your ability to save in certain retirement accounts, such as Roth IRAs. Roth IRAs allow you to save up-to the lessor of $6,000/year ($7,000/year if you are 50 or older), or the amount of income you, and or, your spouse earns in 2019. Contributions are made with after-tax money, and investment earnings and gains are not taxed when distributed (unlike with traditional IRAs). Getting married can affect your ability to save in these types of accounts in the following ways:
    • Individuals can contribute to a Roth IRA for their spouse as long they file a joint tax return. This allows a spouse who may have not been able, or eligible, to contribute to a Roth before getting married, to benefit from the favorable tax treatment of saving in Roth accounts.
    • The ability to contribute to a Roth is reduced when a taxpayer’s adjusted gross income (AGI) reached certain levels for the year. In 2019, someone filing an individual tax return is forced to reduce the amount they can contribute to a Roth once their AGI reaches $122,000, and is no longer eligible to make contributions once their AGI reaches $137,000. These amounts increase to $193,000 and $203,000 respectively, for married couples filing jointly. Therefore, someone who makes over $137,000, but less than $193,000 on a joint return, can now make Roth IRA contributions for both themselves and their spouse.
    • There are similar opportunities with regards to traditional IRA contributions. However, because most people are covered by an employer retirement plan, these contribution strategies can be more complex.

While the points above illustrate many of the common planning items that are relevant to newly married couples, each piece is only one part of a comprehensive financial plan. Please contact your Rockbridge advisor with any questions! Keep checking back for more articles as part of the “Life Events” series.

Rockbridge is involved in many organizations that advocate for children with disabilities and their caretakers.  As a result, we’ve helped numerous families financially navigate through their working years and successfully transition into retirement.  Special needs families tend to have common questions, one of which is how and when to file for Social Security benefits.

In order to provide a special needs child with the highest quality of care, it’s common for one spouse to stay at home full-time.  As a result, the non-working spouse doesn’t accumulate a significant work history and their future Social Security benefit suffers. Sure, the non-working spouse could file for Spousal benefits, but today we take a look at a special filing method called “Child-in-Care”.  Here’s how it works:

To file for this benefit, the working spouse must have retired and started collecting his/her Social Security benefit.  At this point, the non-working spouse can file for and start collecting Child-in-Care Spousal benefits AT ANY AGE.  That’s right, the non-working spouse can start collecting Child-in-Care benefits at any age.  Moreover, Child-in-Care benefits have preferential calculations over traditional Spousal benefits.  The non-working spouse is entitled to 50% of the working spouse’s Full Retirement Age (FRA) benefit.  Benefits would continue as long as the special needs child remains an eligible dependent (more on this later).

On its face, the Child-in-Care strategy sounds like an excellent way for a non-working spouse to receive a significant Social Security benefit.  However, there are two potential issues to consider:

  • First, the working spouse must start collecting his/her benefit in order for the non-working spouse to file and collect. If the working spouse starts collecting at age 62 (earliest age possible), he/she is locking in a permanent benefit reduction for the rest of their life.  Depending on the family’s assets, the working spouse could delay their benefit until a later age, providing a significantly higher lifetime income.  Delaying benefits could also provide protection for the non-working spouse should the working spouse pass away early in retirement.
  • Second, depending on the amount of SSI/SSDI benefits that the special needs child receives, you may exceed the Family Maximum Benefit.  Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) are benefits paid on the working parent’s earnings record. The same is also true for spousal benefits.  As a result, combining SSI/SSDI benefits with the higher Child-in-Care spousal benefit can often exceed the Family Maximum Benefit.

So, how do you make an optimal filing decision?  It’s important to consider the following.

  • What’s the age discrepancy between the two spouses?
  • What’s the size of current SSI/SSDI benefits?
  • What’s the life expectancy of the child with special needs?
  • Does your family have other income and/or retirement assets?
  • What’s the family health history of the two spouses?
  • What’s your comfort level with delaying Social Security benefits?

As always, please feel free to reach out to your financial advisor at Rockbridge for an analysis that’s specific to your situation.

Many of us are familiar with insurance for your home, auto and life, but the reality is – we don’t often know our specific coverages until we need to make a claim.  Insurance has become so specific it’s worthwhile to contact you carrier and become more familiar with exactly what your policy is going to cover in a time of need. In our society, there is insurance for your pet’s medical bills, canceled vacations, or a defective home appliance. If you have an insurable interest in something, there’s likely a policy out there to cover you.  However, one of the most overlooked types of insurance is one that protects your income, or lack thereof, in the event of an extended long-term disability.

When you hear that a friend or family member is “on disability” many of us assume that most, if not all, of their income is being replaced, but that is not usually the case.  Generally, there are two types of disabilities;  “Permanent” or “Non-Permanent”.  Some common disabilities are “short-term” such as maternity leave or “longer-term” such as a chronic illness that prevents someone from returning to work in any meaningful way; but I will focus on long-term disabilities here.

Under limited circumstances, a person can file for Social Security Disability Income (SSDI) and be approved for benefit payments for the rest of their life or until they reach their Full Retirement Age (FRA). Upon reaching their FRA the benefits convert from SSDI to Social Security Retirement benefits. There will be a gap if your FRA is 67, and your LTD policy only pays benefits until the age of 65, another reason to pause and consider the consequences and impact on your life.

There are two primary types of insurance policies:  group LTD insurance offered by your employer or a private policy that you purchase on your own.  More importantly, there are two methods for paying for LTD insurance that determine how your benefits will be taxed.  Premiums can be paid with after-tax income (non-deductible) or pre-tax income (deductible).  Group LTD policies typically have lower premiums than individual policies, but typically offer lower benefits, or may be combined with other disability benefits (i.e. Worker’s Compensation or SSDI).

For a private LTD policy that you own and pay for, the benefits are excluded from your taxable income. On the other hand, if you are covered under a policy that your employer pays for (with pre-tax income), expect the benefit payments to be considered taxable income.  This is where it can get confusing.  Your employer may offer access to a group plan but require that you pay the premiums on an after-tax basis.  In this case, you may have the benefits “reduced”, “offset” or “integrated” by other non-salary payments you are eligible to receive, such as Worker’s Compensation (if the injury took place while on the job).  The important thing to note is that LTD benefits provided in a group plan are typically computed after Worker’s Compensation, SSDI and/or pension payments are calculated. You can see that the carrier is not going to allow you to collect as much as you may have originally believed and it’s unlikely you will receive more than 60% of your wages with a combination of Worker’s Compensation, Pension and LTD benefits.

LTD policies can be complex when it comes to understanding basic coverage, exclusions and elimination periods (which may be up to 180 days or more).  This is only meant to serve as a primer and general overview of LTD.  As with life insurance, we at Rockbridge generally recommend owning a private policy that is not affected by employer changes.  Private policies are typically more expensive and require an underwriting process that evaluates your age, health and medical history. The fact is, the loss of your future earnings is something you may wish to consider insuring against, for the financial well-being of your family, especially if you are under age 60.  If you feel the need to review your situation and perform an LTD needs analysis, please contact your advisor at Rockbridge.

If you’re like most people, you know that planning to achieve your financial goals involves more than just budgeting and saving for retirement. You’ve undoubtedly received financial advice, solicited or otherwise, from some combination of family, friends, coworkers, or even just from the myriad financial planning advertisements on TV and online. With all of this information out there, it’s no wonder that there’s more than a little confusion as to what financial planning is all about.

At Rockbridge, we view financial planning as the ongoing process of identifying goals, evaluating strategies to achieve those goals, implementing the action items necessary for those strategies to be effective, and monitoring the results.

This process sounds simple enough, but how do you know where to begin? How do you identify which goals are relevant to the planning process? Should they be specific or broad? Should you focus on short-term or long-term goals, and how do you prioritize them? What happens if your goals change?

Often it takes a major life event to draw attention on our true financial goals. While there are any number of events that may impact a person’s financial objectives, there are a handful of life events that, we as advisors, get a lot of financial planning questions about. These events include:

  • Getting married
  • Buying a house
  • Having a child/adopting
  • Changing jobs or starting a business
  • Retiring

Visit our blog at, where we will be rolling out dedicated posts discussing many of the common (and sometimes not so common) planning considerations associated with these life events.

As always, reach out to your Rockbridge advisor with any questions regarding your specific situation.

Over the summer, we had a client ask if there was a place to look for existing accounts or funds they or family members may have accumulated and forgotten about over the years. That sparked Julie’s memory of the New York State Office of Unclaimed Funds ( You may have noticed the Office puts a kiosk at the NYS Fair every year.

Run by the NY State Comptroller’s Office, the Office of Unclaimed Funds serves as custodian of more than $15 billion in assets. When an entity has money that belongs to someone else and can’t reach that person, they turn the money over to the Office of Unclaimed Funds.

This particular client did not have any funds belonging to the Office of the Comptroller, but it seems like a lot do. A few of us had unclaimed funds, as did family members and friends.

Experiences getting the money back are varied. Some submit online and get paid within three weeks. Ethan had a $175 reimbursement from a Doctor’s visit (the insurance company ended up covering it months after the visit and after I had moved); this took five months to process as the State needed separate confirmations of a previous address and a current address.

When completing the online form, you must submit your Social Security number, and some detailed contact information such as phone number/provider and e-mail. Having the check mailed to the address on your driver’s license can speed up the process.

We encourage everyone to give the search a try. In addition to searching by your first and last name, we have found it useful to search by last name and city. As always, reach out to your advisor with questions.

At Rockbridge, we believe that the role of an investment advisor is changing, and investors should be expecting more from their advisors than they have in the past. With options like Vanguard, robo advisors, and all the other investment-only solutions popping up each day, it’s clear that advisors who focus solely on investment management are a thing of the past – or certainly should be!

Yes, even our name “Rockbridge Investment Management” demonstrates that investment management is at the heart of what we do, which it is, but I wanted to take a few moments to share with you some of the additional things we help clients with each and every day:

  1. Asset distribution planning: In retirement, most retirees have pre-tax and post-tax investments, Social Security, and possibly even pensions. Deciding how and where to take distributions in retirement is very important and something we help clients with every day.
  2. Taxes: With the tax code changing for 2018, what does that mean for you? Rockbridge employs experts who help clients make sure they are saving or spending in the most tax-efficient way. Below are some timely examples:
    1. Using Donor-Advised Fund for annual charitable gifts
    2. Using your RMD’s to maximize tax deductibility of charitable gifts
    3. Maximizing employer retirement accounts/Roth IRA’s
    4. Minimizing overall taxes paid with Roth conversions
  1. Goal tracking: Retired or saving for future retirement, Rockbridge advisors help develop and track your financial goals. We make sure you are maximizing every opportunity to maintain or reach your desired standard of living.
  2. Medicare: This is a decision every 65-year-old has to wrestle with and at Rockbridge, we have in-house experts to make this process easier.
  3. Social Security: For most retirees, Social Security is the only retirement asset with a built-in inflation hedge. Determining the ideal time to take this for you and your spouse could be one of the most important retirement decisions you have to make. Rockbridge is here to help you navigate the pros and cons on taking this early or delaying.

Our team is also involved in many projects, such as the Northeast Agricultural Education Foundation and their Agricultural Education Grant.

We expect a lot out of ourselves here at Rockbridge, and we continually try to become better at what we do and provide more for our clients. If any of these things resonate or seem timely, please give your Rockbridge advisor a call.


“Give, but give until it hurts.”
– Mother Teresa – 


I don’t think Mother Teresa paid much attention to the tax code, but her quote is unusually prescient for 2018 taxpayers.  The changes have made it unlikely to get a tax break on money given to your favorite charities.

When the Tax Cuts and Jobs Act was signed into law late last year, the intent was to reduce taxes and simplify the tax code for all Americans.  Some of the more significant provisions were the increase of the standard deduction along with the elimination of many itemized deductions.

The standard deduction has nearly doubled to $24,000 for married couples filing jointly ($12,000 for single filers).  The non-partisan Tax Policy Center estimates that more than 90% of tax filers will no longer need to itemize their deductions.  Therefore, taxpayers who use the standard deduction would not get any tax savings from making charitable donations.

How the New Tax Law Reduces or Eliminates Charitable Deductions:

For example, let’s say that a married couple pays at least $10,000 (maximum deductible amount) in state and local property taxes, has mortgage interest of $5,000 and makes $5,000 in charitable contributions. This adds up to $20,000 in deductions, which is lower than the $24,000 standard deduction. The higher standard deduction eliminates the tax deductibility of charitable contributions.

How Bundling Restores your Charitable Deduction:

One way to get a tax break on your charitable donations is to bundle them into one year.  For example, if you are likely to give $5,000 to charity each year, then making a one-time donation that covers the next 3-5 years to a Donor-Advised fund will allow you to get the tax break back.

Bundling Works Like This:

Say you make a $15,000 contribution to a Donor-Advised fund in 2018.  Using the above example your total itemized deductions are now $30,000. ($10,000 state tax, $5,000 mortgage interest and $15,000 charity).  The additional $6,000 in itemized deductions over the $24,000 standard deduction would be worth 24%-37% of the difference depending on your own marginal tax rate.

Additionally, you can use the Donor-Advised fund to make distributions to your favorite charities anytime (ie. spread equally over 3, 4 or 5 years or in any other timeframe you choose).

There are many Donor-Advised funds to choose from including ones offered by Charles Schwab and TD Ameritrade.  You can contact your Rockbridge advisor, or check out these Step-by-Step Instructions to Set Up a Donor Advised Fund.



  1. How does/and how much does your advisor get paid?

Fees matter.  It is important to know how much you are paying and the value you receive for that payment.  If you’re paying 1% or more for only investment management with no in depth retirement planning, we should talk.

  1. Is your advisor required by law to act in your best interest? If not, why?

Most advisors are only required to do what’s “suitable” for you and are not required to act in your best interest.  If your advisor is anything but a fee-only registered investment advisor (ex. Fee-based, commission based, insurance salesman, bank advisor etc.) they have intentionally decided against being held to a fiduciary standard (acting in your best interest).

  1. Does your advisor invest his own money in the same manner he recommends to his clients?

Rockbridge advisors believe all money (theirs, as well as their clients) should be invested according to an evidence-based investment philosophy studied by academics since the 1960s. If your advisor is investing their own money differently than they are recommending you should invest yours, it should make you stop and think.

  1. Does your advisor help you save money on taxes?

We help clients focus on factors they can control.  Together, we build and create a financial plan incorporating a tax-efficient investing and withdrawal strategy so you end up with more of your own money (and the government doesn’t!).

  1. Does your advisor help you understand how much money you can spend in retirement?

Investment management is just one piece of sound financial advice.  We solve financial problems beyond just the investment management component.  The first step of our process is to help you understand how much you are able to spend throughout retirement relative to how much you are spending today.

  1. Does your advisor have industry professionals to help you in all aspects of your financial life? If not, why?

At Rockbridge, we have built a team of industry professionals (CFP’s, CFA’s, CPA’s, and Legal),  that are committed to client care.  We have the expertise to provide unrivaled advice in all aspects of your financial life.

It’s common for investors to feel nervous when looking at investments by themselves. Are you saving enough? Are you saving in the right place? Are you holding the right mix of investments? Should you own individual stocks or funds? Are you paying too much in fees? What are you actually paying in fees? For the average investor, this is enough uncertainty to make someone feel uncomfortable, and this isn’t even the whole picture.

Dealing with a pension can seem daunting too. How does my retirement date affect my payout? When should I claim my benefit? Should I take the lump sum or the annuity? What, if any, survivorship benefit should I select? The same goes for Social Security:  When should I collect? When should my spouse collect? Will I get the full amount promised to me once I retire?

Any of these items, in a silo, is enough to make an investor nervous. Add them together and you get anxiety. When investors are nervous, they are more likely to make mistakes. That’s where Rockbridge comes in. We can help you answer these questions by framing your financial decisions in a comprehensive financial plan.

Numerous studies have shown investors harm themselves when they act impulsively. This boils down to investors holding cash because they are afraid of the market declining. This may be when the market is at an all-time high and they’re afraid of a correction, or when the market is rapidly falling and the person is worried it will go to 0.

In reality, neither is certain and no one knows what the next day will entail. However, we do know markets go up over time, and every day you hold cash is a day you’re missing out on the next incremental gain.

As advisors, we’ve found investors are less likely to make mistakes or act impulsively when they see their investments as part of a larger plan. Knowing the role each piece of the puzzle plays is helpful in reducing the stresses of personal finance, and makes one more likely to adhere to a course of action that is in the person’s best interest. It can be hard to forego income when you’re middle aged, but understanding the benefit of saving in your 401(k) makes this more doable.

Perhaps a family has a large fixed pension that, combined with Social Security, covers all their living expenses right as they retire. Their investment savings will become important over time as inflation erodes the value of the fixed pension. Knowing this helps a family stay the course when the stock market is volatile.

Alternatively, a person might need to rely heavily on their portfolio in their early 60s while they wait to take Social Security and receive a small inheritance. This investor will want a less risky allocation to protect against large declines in the stock market. They should also stick with their plan and not pursue a riskier allocation because they think the market is about to shoot up. This person’s portfolio plays a much different role than the portfolio of the family in the previous paragraph, despite being close in age.

This is all not to say plans can’t change. For example:  Someone is 68 and delaying their Social Security to claim a larger benefit; if the stock market drops 50%, the course of action giving them the highest probability of success might be to claim Social Security now and not draw down on an investment account while stocks are at depressed levels. These decisions shouldn’t be done impulsively. They should be well thought out and analyzed with mathematical probabilities to ensure that an unemotional, best course of action is being pursued.

No commentary or article you read is going to be perfectly relevant to you because every situation is unique. Investors are best served when they have a plan they buy into that addresses all facets of their financial life. This improves mental well-being and helps families avoid mistakes that can be costly. Rockbridge can help you look at the whole picture and guide you in making the important financial decisions.


Estate planning has often had an air of mystery to some people. The terms used and bantered about by lawyers or planning professionals are not words we use in everyday conversations.  Do you have heirs? Answer: No you don’t – it is a trick question. If you are reading this article, it’s presumed you are alive and breathing. So, only individuals who have died have heirs … but only if they don’t have a last will.  Confused? You are not alone.

Heirs are technically those in your family lineage or by marriage who will receive assets from your estate if you don’t have a will.  Dying without a will is called “intestacy” – not a word you often hear, but it is a term you really need to understand to avoid some unintended consequences created when one dies without a will and no specifications are made in writing.  Probate is known as the court supervised process of an Executor retitling assets to your beneficiaries when you do have a valid will. Beneficiaries are those who are named in your will – or have been listed on such common arrangements as your life insurance, company retirement plan, annuities or your IRA.  Such assets as life insurance and retirement accounts list beneficiaries by contract and therefore supersede the directions of your will in nearly all instances. So, what is stated in your last will – providing you have one – does not control who receives funds from life insurance, IRAs, 401ks, annuities, etc.  Inheritance issues for families can be turned upside down if you do not understand the difference between probate assets and non-probate assets.

The concern with some beneficiary arrangements in retirement and life insurance is they are often signed and then forgotten. Why is this a problem? You may have listed your deceased spouse or still specify your ex-spouse even after a divorce. There are many pitfalls that can occur with beneficiary arrangements due to forgotten policies or bank accounts, children or grandchildren born after the initial acquisition, remarriage, death of a child, etc. At Rockbridge, we urge you to review and discuss with us your beneficiary arrangements with accounts we manage as well as those assets outside of our purview. Too many estate plans can be disrupted or legally contested – much of which could have been avoided by an annual review and discussion of your beneficiaries and general intentions. Changes in family circumstances such as death, remarriage, new family members, and divorces should spur a conversation with your investment, insurance and legal advisors to ensure those individuals or charities who you intend to receive bequests from your estate are those who actually benefit.

Nothing can take the place of an expert attorney skilled at drafting proper estate planning documents such as your last will & testament, any relevant trust documents or Health Care Proxy, Living Will/Advance Healthcare Directive or Power of Attorney. If these terms are confusing, as stated earlier, you’re not alone.  If you have a sizeable estate, complex family dynamics, are charitably inclined, have step-children, second marriages, young children who are minors, for example – you owe it to your loved ones to receive professional guidance in such matters. Please feel free to start the conversation with our team.

It’s tax time again and as you gather your W2s, 1099s, and maybe even your K-1s, we thought it would be a good time to explain our income tax planning approach.

Income tax planning is a crucial aspect of the overall financial planning process. To some degree, taxes impact every area of your financial plan. In certain cases, the tax planning opportunity will be a one-time event; affecting only one or two tax years. Other times, tax decisions will have an impact on multiple tax years well into the future.

At a high level, tax planning consists of the following elements:

  • Accelerating or delaying controllable income
  • Accelerating or delaying controllable deductions
  • Structuring your investment portfolio to maximize the tax advantaged characteristics of income
  • Converting future taxable income into tax protected income

The basis for tax planning involves reviewing and understanding your current year tax situation, and how it compares to projections of future years. Throughout the year, we review the income you’ve received and expect to receive, along with the deductions you’ve taken and expect to take. This will give us an idea of your expected Federal and State marginal tax bracket.

Your projected current year tax situation will be reviewed against what we would project next year’s tax situation to look like (at least on a high level). Based on this comparison, we can make decisions to accelerate or delay income and deductions, to the extent possible.

Tax planning impacts how we approach constructing your portfolio. We pay attention to the different tax characteristics of income, and how that is affected by being held in accounts with different tax structures.

Distributions from Traditional IRAs are taxed at ordinary income rates, which are generally much higher than long-term capital gains or qualified dividend rates. Holding investments we expect to produce income subject to these tax advantaged rates in an IRA causes this income to lose its tax advantaged characteristic when distributed. Therefore, we try and hold as much of your allocation to bonds as possible in your IRA and hold your stock allocation in your Roth and taxable accounts

Finally, we look for opportunities to convert future taxable income into tax protected income. Examples of this include funding 529 Plans and Health Savings Accounts (HSAs). The investment gains and earnings in these accounts will avoid income tax as long as they are used to pay for qualified education and medical expenses. Directly funding and/or converting pre-tax dollars into a Roth IRA shields future investment gains from income taxes.

We do not let taxes alone drive the decisions we make. However, we do consider their impact and look for ways achieve our planning goals in the most tax efficient way possible.

Happy New Year! Now that 2017 is a wrap, one of the best presents you can bestow on yourself and your loved ones is the gift of proper preparation for the rest of the year. Want to get a jump-start on it? Here are 10 financial best practices to energize your wealth management efforts.


  1. Save today for a better retirement tomorrow. Are you maxing out pre-tax contributions to your company retirement plan? Taking full advantage of your and your spouse’s company retirement plans is an important, tax-advantaged way to save for retirement, especially if your employer matches some of your contributions with “extra” money. And, by the way, if you are 50 or older, you may be able to make additional “catch-up contributions” to your plan, to further accelerate your retirement-ready investing.
  2. Verify your valuables are still covered. Most households have insurance: home, auto, life … maybe disability and/or umbrella. But when is the last time you’ve checked to see if these policies remain right for you? Over time, it’s easy to end up with gaps or overlaps, like too much or not enough coverage, deductibles that warrant a fresh take, or beneficiaries who need to be added or removed. If you’ve not performed an insurance “audit” recently, there’s no time like the present to cross this one off your list.
  3. Get a grip on your debt load. Investment returns will only take you so far if excessive debt is weighing you down. Prioritize paying down high-interest credit cards and similar high-cost debt first, and at least meeting minimums on the rest. You may also want to revisit whether you still hold the best credit cards for your circumstances. Do the interest rates, incentives, protections and other perks still reflect your needs? Ditto on that for your home loan.
  4. Check up on your credit reports. Speaking of those credit cards, have you been periodically requesting your free annual credit report from each of the three primary credit reporting agencies? Be sure to use for this purpose, as it’s the only federally authorized source for doing so. By staggering your requests – submitting to one agency every fourth months – you can keep an ongoing eye on your credit, which seems especially important in the wake of last summer’s Equifax breach.
  5. Get a bead on your budget. How much did you spend in 2017? How much do you intend to spend in the year ahead? After current spending, can you still afford to fund your future plans? Do you have enough set aside in a rainy day fund to cover the inevitable emergencies? These days, there are apps available to help you answer these important questions. is one such popular app.
  6. Get ready for tax time … with a twist. While income tax reform looms large in the U.S., the changes won’t apply to 2017 taxes (due by April 17, 2018). Still, there are the usual tax-planning activities to tackle: gathering receipts and reports, making prior-year contributions, wrapping up business revenue and expenses if you’re a business owner, funding or drawing down retirement accounts, and more. Plus, there now may be tax planning opportunities or challenges to consider as the new laws take effect in 2018. You may want to fire up those tax-planning engines on the early side this time around.
  7. Give your investments a good inspection. Where do you stand with your personal wealth? Do you have an investment strategy to see you through? Does your portfolio reflect your personal goals and risk tolerances? If you experienced strong growth in 2017, is it time to lock in some of those gains by rebalancing your portfolio to its original mix? While investment management is a marathon of patient perspective rather than a short-sighted sprint of mad dashes, a new year makes this as good a time as any to review the terrain.
  8. Ensure your estate plans are current. Do you have wills and/or trusts in place for you and your loved ones? If so, when is the last time you took a look at them? Your family may have experienced births, deaths, marriages or divorces. Dependents may have matured. You may have acquired or sold business interests, and added new assets or let go of old ones. Your original intentions may have changed, or government regulations may have changed them for you. For all these reasons and more, it’s worth revisiting your estate plans annually.
  9. Have a look at your healthcare directives. As healthcare becomes increasingly complex, advance directives (living wills) play an increasingly vital role in ensuring your healthcare wishes are met should you be unable to express them when the need arises. Don’t leave your loved ones unaware of and/or unable to act on your critical-care or end-of-life preferences. If you don’t already have a strong living will in place, Aging with Dignity’s Five Wishes is one helpful place to learn more.
  10. Give your newly adult children the gift of continued care. Have any of your children turned 18 recently? You may send them off to college or a career, assuming you can still be there for them should an emergency arise. Be forewarned! If you don’t have the legal paperwork in place, healthcare providers and others may be unable to respond to your requests or even discuss your adult child’s personal information with you. To remain involved in their healthcare interests, you’ll want to have a healthcare power of attorney, durable power of attorney and HIPAA authorization in place. It may also be prudent to establish education record release authorizations while you’re at it.



We get it. Life never stops. The holiday season can be a busy time that often spills right into the New Year. Don’t despair if you can’t get to all ten of these tidbits at once. Take on one each month, and you’ll still have a couple of months to spare before we’re ringing in 2019.

Better yet, don’t go it alone. Let us know if we can help you turn your financial planning jump-start into a mighty wealth management leap. It begins with an exploratory conversation.


By now, you’ve probably heard the news: Your own behavioral biases are often the greatest threat to your financial well-being. As investors, we leap before we look. We stay when we should go. We cringe at the very risks that are expected to generate our greatest rewards. All the while, we rush into nearly every move, only to fret and regret them long after the deed is done.

Why Do We Have Behavioral Biases?

Most of the behavioral biases that influence your investment decisions come from myriad mental shortcuts we depend on to think more efficiently and act more effectively in our busy lives.

Usually (but not always!) these short-cuts work well for us. They can be powerful allies when we encounter physical threats that demand reflexive reaction, or even when we’re simply trying to stay afloat in the rushing roar of deliberations and decisions we face every day.

What Do They Do To Us?

As we’ll cover in this series, those same survival-driven instincts that are otherwise so helpful can turn deadly in investing. They overlap with one another, gang up on us, confuse us and contribute to multiple levels of damage done.

Friend or foe, behavioral biases are a formidable force. Even once you know they’re there, you’ll probably still experience them. It’s what your brain does with the chemically induced instincts that fire off in your head long before your higher functions kick in. They trick us into wallowing in what financial author and neurologist William J. Bernstein, MD,  PhD, describes as a “Petrie dish of financially pathologic behavior,” including:

  • Counterproductive trading – incurring more trading expenses than are necessary, buying when prices are high and selling when they’re low.
  • Excessive risk-taking – rejecting the “risk insurance” that global diversification provides, instead over-concentrating in recent winners and abandoning recent losers.
  • Favoring emotions over evidence – disregarding decades of evidence-based advice on investment best practices.

What Can We Do About Them?

In this multi-part “ABCs of Behavioral Biases,” we’ll offer an alphabetic introduction to investors’ most damaging behavioral biases, so you can more readily recognize and defend against them the next time they’re happening to you.

Here are a few additional ways you can defend against the behaviorally biased enemy within:

Anchor your investing in a solid plan – By anchoring your trading activities in a carefully constructed plan (with predetermined asset allocations that reflect your personal goals and risk tolerances), you’ll stand a much better chance of overcoming the bias-driven distractions that rock your resolve along the way.

Increase your understanding – Don’t just take our word for it. Here is an entertaining and informative library on the fascinating relationship between your mind and your money:

Don’t go it alone – Just as you can’t see your face without the benefit of a mirror, your brain has a difficult time “seeing” its own biases. Having an objective advisor well-versed in behavioral finance, dedicated to serving your highest financial interests, and unafraid to show you what you cannot see for yourself is among your strongest defenses against all of the biases we’ll present throughout the rest of this series.

As you learn and explore, we hope you’ll discover: You may be unable to prevent your behavioral biases from staging attacks on your financial resolve. But, forewarned is forearmed. You stand a much better chance of thwarting them once you know they’re there!

Next week, we’ll begin our A–Z introduction to many of the most common behavioral biases.

Any investor who spends even a modest amount of time reading financially-based magazine articles, or occasionally watches or listens to financially-based TV or radio programs, can’t escape all the pronouncements financial advisors make to prospective clients. So, if you are new to Rockbridge, I thought it would be fun to share a few promises with you. Here are five promises of what Rockbridge will not do with clients or prospective clients:

  1. Make Short-Term Stock Market Predictions

We don’t guess the hourly, daily, quarterly or even annual direction of the stock market or the Fed’s action on interest rates. We don’t think others should either since even the so-called experts are wildly incorrect most of the time, and when they are right, it was more likely luck, not skill.

  1. Tie Stock Market Results to Political Events or Partisan Grips on Congress or White House

While many of us have political leanings or biases of who may be better for the economy (and eventually the stock and bond markets), we don’t believe either major political party provides compelling evidence for a more healthy economy or better results for your portfolio.

  1. Make Changes to Your Portfolio Every Time the Market Swings

Volatility is inherent in the markets – so are daily fluctuations. We believe in keeping asset class target allocations within acceptable parameters, but we will not make knee-jerk reactions to events on a daily basis. Portfolio rebalancing occurs when one asset class substantially outperforms or underperforms and target weightings have a higher than acceptable variance.

  1. Select Only “Good Investments” and Avoid All Those “Bad Investments”

Far too many times I have been asked individually if I can steer someone “into just the good investments.” The fact is, we are deeply rooted in an efficient market theorem, and the best method for participation is low-cost, broad-based index components (either mutual funds or ETFs) using both long domestic and international strategies. We keep a tight handle on our portfolio models and don’t stray to the esoteric or exotic (such as short selling or options contracts) based on a hunch or gut instinct. We know that each strategy we employ will not perform identically to another – the results will rotate in and out of “desirability,” but we focus on how they perform together over long periods of time.

  1. Focus Solely Only On Your Investment Performance or Increasing Your Portfolio Size

While achieving suitable investment performance is often a vital aspect of appropriate financial planning, yearly results are not the most critical measure of a financial advisor’s value or worth to you or your family.  Meeting expected performance should be in the context of achieving your overall financial goals – there are far more important topics to be concerned with rather than losing sleep over a friend or neighbor’s investments “doing better” than your own. We enjoy robust returns as much as anyone else.  However, neglecting tax implications or appropriate insurance coverage and dismissing proper retirement planning or estate planning efforts will impact a family on a much deeper level than worrying about what everyone else is earning from their investments. Trust me, most of the time, your friends or neighbors have no idea what their actual returns are and rarely will they review an actual performance report with their advisor – much less with you.

Philanthropy does not always make the list of critical priorities when planning for the future, a process often dominated by other pressing needs like education and retirement.  Yet for those blessed with some success, and financial resources that exceed what we need to survive, philanthropy can be a way to give back, pay it forward, or just do something good for other people.

Philanthropy – Goodwill to fellow members of the human race; the effort or inclination to increase the well-being of humankind, as by charitable aid or donations.

The Central New York Community Foundation is celebrating 90 years of philanthropy in Central NY.  The slogan for the celebration is “Here For Good,” which is intended to carry a double meaning – here to make the community a better place and here for the long term.

Community foundations now serve communities across the U.S., and it has been my privilege to serve on the board of The CNY Community Foundation, where I have been able to observe first-hand the impact it has on people’s lives.  It is now responsible for a pool of charitable capital that surpasses $226 million.  Over the course of its history nearly $170 million has been invested in the Central New York community.  That history includes many stories of transformed lives and improved communities. Some of those stories are told in a recent publication and are also available online at:

Community-wide Impact

The Community Foundation plays a role in some big, community-wide initiatives, like “Say Yes to Education,” which provides a path to college for Syracuse City School District students.  Say Yes funds several support programs and after-school programs for school students and ultimately funds last-dollar college scholarships for those who go on to college.  The Community Foundation provides leadership for many aspects of the program and administers the Say Yes Scholarship Endowment Fund, which is now fully funded at $30 million.


The act of giving can be very rewarding, as we see the impact on those less fortunate, or envision the impact on future generations.  The Community Foundation can help donors work through the process of creating Legacy Plans that identify their motivations for giving, document their giving stories, and preserve their charitable legacy.  One such story is told in the 90th Anniversary publication about the Martha Fund, established to honor Martha Blumberg, a bright, talented young woman who died far too young.  The Martha Fund was established by her mother’s will to honor Martha’s zest for life, and since 2013 the fund has awarded nearly $300,000 to support children’s art programs, health services and learning activities.

Looking Ahead

It is easy to lose sight of philanthropy amidst our day-to-day struggles, so when you do hit the pause button, and make plans for your financial future, keep in mind the resources available to make philanthropy a part of your legacy.

Young or old, wealthy or poor, online or in person … Nobody is immune from financial scams and identity theft slams. No matter who you are or how well-informed you may be, the bad guys are out there, daily devising new tricks for every fraud we fix.

Who Are They? Fraudsters and Thieves

  • Financial fraudsters are after your assets.
  • Identity thieves want to steal your personal information – usually, so they can commit financial fraud by posing as you and breaching your security.

What Do They Want? Your Money and Your Life

Some of your most treasured personal information includes:

  • Social Security Numbers, passports, driver’s licenses and similar identifying information.
  • Financial account and credit card numbers.
  • Passwords (or insights about you that help them guess at weak ones).
  • Your and family members’ contact information (name, address, phone, email).
  • Your and family members’ birth dates.
  • Details about your life (interests, travel plans, relationships, your alma maters, etc.).

How Will They Get It? However They Can!

Criminals come in all shapes and sizes, and will use anything and everything that might work:

  • Most mayhem occurs the same, old ways: the real or virtual equivalent of strong-arm theft; breaking and entering; and increasingly, scams that trick you into giving your goods away.
  • They may be strangers. They may pose as someone you know. Unfortunately, they can be someone you do (Elder abuse, for example, is often perpetrated by family members.)
  • They may commit their crimes online, by phone, in the mail (to a lesser extent) or in person.
  • Phishing emails and deceitful or compromised websites try to trick you into clicking on bad links or opening infected attachments. This exposes you to malware which infects your device with anything from harmless pranks to damaging viruses to serious security breaches.

What Should You Look For? Ten Red Flags

Criminal techniques may be new-fangled, but the tactics – the red flags to look for – are mostly unchanged. Whether online, in the mail, on the phone or in person, be on extra alert whenever:

  1. An offer sounds too good to be true.
  2. A stranger wants to be your real or virtual best friend.
  3. Someone you know is behaving oddly, especially via email or phone. (This may mean it’s an identity thief, posing as someone you know.)
  4. Someone claiming to represent a government agency, financial or legal firm, police department or other authority contacts you out of the blue, demanding money or information.
  5. You’re feeling pressured or tricked into responding RIGHT AWAY to a threat, a temptation or a curiosity.
  6. You’re prioritizing easy access over solid security (weak or absent locks and passwords).
  7. You’re sharing personal information in a public venue (including social media).
  8. Facts or figures aren’t adding up; bank statements, reports or other info is missing entirely.
  9. Your defenses are down: You’re ill, injured, grieving, experiencing dementia or feeling blue.
  10. Your gut feel is warning you: Something seems off.


An Action Plan (Hint: It’s a Lot Like Evidence-Based Investing)

The more of these sorts of alarm bells are sounding off, the more suspicious you should be. What then? The hardest part may be deciding where to begin. We recommend approaching your personal security the same way you approach investing: Instead of feeling you must immediately chase every defensive action out there, start with a plan.

  • Base your plan on how and why identity theft and financial fraud occurs, as described above.
  • Include broad strokes as well as specific action items.
  • Pay extra attention to the risks that pose the greatest threats to you and your lifestyle.
  • Whenever new tricks, techniques and technologies emerge, refer to your plan as a dependable framework in which to consider your next best steps.

What Else Can You Do? Quite a Lot!

While criminals are forever finding new ways to foil our defenses, there are still plenty of sensible steps you can take to protect yourself and your money.

Online Protection

  • Virus software: Install anti-malware and anti-spyware software on all of your devices. Keep it and your operating system current!
  • Backups: Use backup software for system and/or file recovery as needed. Allow for multiple version backups, in case you need to go back in time for a safe recovery.
  • Passwords: Create strong, unique passwords for each of your devices and accounts (long, random combinations). Periodically change them, especially on financial and other sensitive accounts, and whenever you may “smell a rat.” Consider using password management software to securely track them. An application we like to use is LastPass.
  • Extra security: Employ extra security when available, such as two-step verification or biometrics (fingerprints). Starting June 10, 2017, the Social Security Administration will require a second method of authentication in the form of a text message or email code when logging into your account. This will help better protect your account from unauthorized use and potential identity fraud.
  • Hyperlinks and attachments: In emails or on websites, be incredibly cautious about clicking on links or opening attachments, especially from unfamiliar sources. Refer to our “Ten Red Flags” to help spot the most suspicious ones.
  • Social media: Privatize your social media profiles and activities so only those you allow in can see them.
  • WiFi: Be extra careful on public WiFi connections outside of your home or business. Don’t conduct sensitive transactions on them; assume the world can see anything you’re doing.

Suspicious Phone Calls

  • Identify: Whenever a stranger calls you out of the blue demanding or enticing you into sending money or sharing information, it’s probably a scam. Even when a caller claims to be someone you know, if their requests seem urgent, unusual, or emotionally charged – watch out. It’s probably an identity thief in disguise.
  • End the call: Your best line of defense is to immediately hang up. Don’t engage in conversation; you may accidentally divulge information a con artist can then use against you.
  • Don’t cooperate: Unless you initiated the call, never share your credit card number or any other sensitive information, especially in response to an urgent threat or enticing “prize.”
  • Investigate: Do what you can to verify the caller’s legitimacy. For example, if they claim to be from the IRS, end the call and contact the agency directly to inquire further. If they claim to be a family member in distress, tell them you’ll call them back and then call a close relative to double check. Google the suspicious number to see if others have reported it.
  • Report: Report the suspicious number to federal authorities.

Credit and Records Management

  • Watch for inconsistencies: Whether you’re receiving banking, credit card and investment statements online or in the mail, scan each one for odd or unfamiliar transactions.
  • Watch for missing statements: If statements you were expecting to receive suddenly stop arriving, a financial fraudster might have pirated your account and redirected it elsewhere.
  • Monitor your credit reports: Take advantage of your right to request free annual credit reports from Review them carefully for inaccuracies.
  • Consider a credit freeze: If you rarely apply for loans, you may want to freeze your credit, unlocking it only when needed. It costs a bit, but shuts out identity thieves cold.
  • Follow up promptly: If something seems “off,” immediately change any login passwords, and promptly contact the service provider and appropriate federal authorities.

Personal Security

  • Remain on guard: Don’t assume you’re safe just because you’re not online. There is still plenty of old-fashioned theft going on.
  • Secure it: Secure any paperwork you must keep. Lock up your home, desk, file cabinets, car, mailbox and trash bins. (Identity thieves will “dumpster dive” to steal your stuff.)
  • Shred it: Use a shredder to destroy any paperwork you do not need to keep.
  • When you’re out and about: Keep a close eye on your purse or wallet (at work and social events, in the gym and stores, and so on). Avoid keeping personal identification in your car.
  • Filling in forms: When filling out medical forms, credit card applications and similar paperwork, only provide what is essential. Don’t provide your Social Security Number on initial request, and push back if pressed for it. It’s rarely actually required.
  • Banking: When using an ATM machine, be aware of others around you and avoid using one that looks like it might have been tampered with.

What If They Succeed? Act Promptly

If you believe you’ve been exposed to identity theft or financial fraud, time is of the essence.

  • Online: If it’s an online event, immediately change the passwords on any affected accounts. It may help, and it certainly can’t hurt. Your multi-version backups might come in handy too.
  • In general: Check in with any bank or other institution involved, and the government agency responsible for overseeing the breach: the IRS for tax fraud, or the FTC for anything else.
  • Financial: If you feel your financial security has been compromised, we’ll want to hear from you as well! We’ll do all we can to help you fix the breach and minimize any damage done.



Managing clients’ financial assets is at the heart of what we do here at Rockbridge.  However, having a well thought out investment portfolio will only get you so far if every facet of your financial life is not addressed correctly or on time.  Rockbridge is here to help you answer all these tough questions and prepare you and your portfolio for all that lies ahead on this road to retirement.



Proper planning allows you to answer these questions and not miss any needed exits along the way. Rockbridge is here, as your financial PARTNER, ensuring you a smooth journey down “life’s road” well beyond your exit for retirement!

October is National Cyber Security Awareness Month.  With more and more financial transactions happening online, we wanted to share a very helpful infographic (shown below).  Please be mindful of the personal information you provide online!

How to Recognize and Avoid Phishing Attacks Infographic

Infographic by Digital Guardian

Although our name is Rockbridge Investment Management, there are many services that we provide to our clients beyond managing investments.   We wanted to share just a few of these additional skills with our clients.

General Questions

We are here for you as an ongoing resource for every financial question, big or small.  Please ask!

Retirement Income Planning

Investment management is only part of the retirement picture. We are able to plan for what your retirement will look like by combining all sources of future retirement income.

Pension Analysis

If you have a pension, the decision on how to start collecting on the pension is one of the biggest financial decisions you will make.   We can look at the context of the available pension options and your other financial assets to optimize your available retirement spending.

Insurance Evaluation

While we don’t sell any insurance products, we are knowledgeable in life, health and long-term care insurance products.  We can help provide context to how much insurance you need and where the best place is to purchase it.

Social Security Strategies

Often unrealized, Social Security will still provide the backbone of your retirement spending.  There are many different options available for claiming Social Security.  Making sure the right selection is made can have a substantial impact.

Estate Planning

We can help lead you through many complex estate planning scenarios and work with your attorney on finalizing your optimal estate plan.

Tax Planning

There are many ways to optimize your savings and retirement withdrawals by understanding the complicated tax laws.  We have the expertise to understand how your investments and taxes interact.

College Savings

Tuition bills have skyrocketed in the last decade.  We cannot help reduce the cost of tuition, but we can make sure you are saving and paying for college in the most cost effective way for your children.

401(k) Recommendations

Before retirement, employer retirement plans are often the easiest and best way to save.  Even though we cannot directly manage your personal 401(k) account, we can provide guidance on which investments should be in the account.

If you have questions relating to any of the topics listed and more, please feel free to contact us.  Rockbridge has firm-wide expertise to help you achieve your financial goals

Thanks in part to our evidence-based approach to investing, we don’t have to eat our words or advice very often. But recently, we discovered that we stand corrected on one point. Fortunately, it’s a point we’re happy to concede:

Evidence-based investing doesn’t have to be such a boring subject after all.

In his recent “Last Week Tonight” HBO segment on retirement plans, John Oliver showed the world that even the typically eye-rolling conversation on why fiduciary advice matters to your investments can be delivered so effectively that it goes viral … or at least as viral as financial planning is ever likely to get, with nearly 3.5 million views, and counting.

Oliver’s masterful combination of wit and wisdom is worth watching first-hand. If you’ve not yet taken the 20-minute coffee break to check it out, we highly recommend that you do so.

The best part? It’s hard to say. He covers so many of our favorite subjects: avoiding conflicted financial advice, reducing the damaging effects of excessive fees, and participating sensibly in expected market growth.

We also are hopeful that Oliver’s segment will help strengthen the impact of the Department of Labor’s recent rule, requiring all retirement advice to strictly serve the investor’s best interests. We can’t quite bring ourselves to share the analogy that Oliver used to bring that particular point home, but here are a couple of our other favorite zingers (pardon his French):

On stay-the-course investing: “There is growing evidence that over the long term, most managed funds do no better, and often do worse, than the market. It’s basically the plot of ‘Charlie and the Chocolate Factory.’ If you stick around, doing nothing while everyone around you f**ks up, you’re going to win big.”

On hidden fees: “Think of fees like termites. They’re tiny, they’re barely noticeable, and they can eat away your f**king future.”

Lacking Oliver’s comedic timing, our own frequent conversations on these same subjects are unlikely to ever reach 15 million viewers. But that doesn’t diminish our equal levels of passion and enthusiasm for how important it is to safeguard your financial interests by embracing the few relatively simple, but powerful principles that Oliver shared.

One thing we do have over Oliver: We are quite serious about actually serving as a fiduciary advisor, protecting and promoting your highest financial interests. As always, we deeply appreciate your business. If you are aware of other investors who could use a similar helping hand, why not share Oliver’s video with them? We hope you’ll also offer them our name along with it, in case they’d like to continue the conversation.

Selecting the right financial adviser is crucial. You want someone who is trustworthy and who will act in your best interest, but they are not as easy to find as you would think.

A recent article in the Wall Street Journal provides tips on finding an adviser who is the right match for you. The author of the article, Jason Zweig, explains the importance of research, interviewing, asking the right questions and other forms of due diligence. “Only after you have thoroughly questioned the advisers and reviewed their answers should you ask yourself which one feels most likeable and trustworthy.”

You can read Zweig’s article here.

Life insurance is often sold as a “one size fits all” product; it will serve as protection and as an investment account that will grow at an impressive interest rate.  When you take the time to unwind these products, you will often find that the old saying holds true:  “If it seems too good to be true, it probably is.” Like most insurance products, the wording is very confusing and the salespeople are very convincing, which makes it difficult to determine if the policy is right for you.  Hopefully these explanations of the various types of life insurance will help clarify what type of policy is truly in your best interest:

  • Term Life Insurance – Term life insurance, often called “pure insurance,” is the most affordable type of life insurance. It can be purchased for 10-, 15-, 20-, or 30-year “terms.”  For example, if a 30-year old purchases a 20-year term policy, the policy will terminate when the insured reaches 50 years of age.  This is typically the most appropriate life insurance, as it covers a point in your life when you need the most amount of life insurance:  when your children are young, debt is high(er), and retirement savings balances are relatively low.  The need for insurance after 60+ years of age does not really exist for most clients.
  • Whole Life Insurance – In my experience, whole life insurance is the most oversold type of life insurance currently on the market. There are very rare situations where whole life insurance makes sense.  I have seen salespeople sell these products as a better alternative to 401(k) accounts, college savings plans, etc., which is entirely false.  Unlike term life insurance, whole life insurance covers the insured’s “whole life.”  In fact, if the policy is still in force when the insured reaches 100 years of age, the insurance company will write the insured a check for the death benefit!  Whole life premiums are substantially higher than term life insurance, and salespeople may be inclined to sell a client whole life insurance rather than term life insurance to generate higher commissions.  These policies have a “cash value” component of the policy that is often very misleading.  For example, if you pay a $100 monthly premium for a policy, $60 may go to the insurance company for the actual cost of the insurance, and $40 may go into a separate forced savings account (cash value).  Often times, insurance companies project 7% growth on these cash value accounts, which is entirely unsustainable.  There are various components we look at with these policies (“guaranteed” and “non-guaranteed” projected values, dividends, etc.) that are crucial in determining if the product is right for you.
  • Universal Life Insurance – If you want to purchase permanent insurance, universal life insurance is typically a better investment than whole life – “guaranteed” universal life in particular. Old(er) universal life insurance policies need to be reevaluated; clients often expect these policies to last their entire lifetime, when in fact they end prematurely due to the internal cash value earning lower than anticipated interest rates. Insurance companies solved this problem by issuing guaranteed universal life insurance policies.  These policies will stay in force even if interest rates aren’t as projected (as long as certain conditions are met).  There is a subset of universal life insurance called variable universal life insurance which is simply “gambling” with your life insurance.

Most consumers will be much better off by purchasing term insurance rather than either type of permanent insurance, but certain situations may warrant the need for permanent life insurance.  If you have any of these policies and have specific questions, please don’t hesitate to contact me (by phone or email) for evaluation.

A simple Google search for “retirement plan” or “retirement calculator” will provide thousands upon thousands of results.  The number of websites that promise to provide retirement or financial guidance in a short amount of time are plentiful.  The real question is, are they accurate?   As with anything in life, the devil is in the details.  A comprehensive understanding of your personal situation cannot be done in a 5-minute Twitter level analysis.  It does not make sense to have a cursory glance at something as important as retirement.  When considering retirement planning and whether to go alone or with an advisor, please consider the following points:

Are the Plan Results Really Correct?

  • Have you ever heard the saying, Garbage In, Garbage Out (GIGO)? This is more important than anyone realizes when talking about retirement plans spanning 30+ years.   A slight miscalculation can mean the difference between a successful plan and low spending in retirement.  Simple online retirement calculators are high level estimates and should not be used to make major life decisions.

Advanced Scenario-Based Analysis

  • Modern financial plans have moved far past standard Excel models and back-of-the-napkin calculations. Not only should the retirement plan be flexible and easy to update, it should also run many simulations and stress test the results looking at downside scenarios.  This is not something that can be done easily through a quick calculator or fixed rate of return model.


  • The biggest impact on financial and retirement planning has nothing to do with analysis. Emotions and personal experience can heavily weigh decisions as retirement approaches.  Having an unbiased and objective resource can prevent costly mistakes.   Emotions are also amplified the few years around retirement because of the shifting mindset from saving to spending from your portfolio.


  • Another factor that a financial advisor can provide is the framework for good decision making. What decisions need to be made now?  Which decisions have the biggest impact?  Financial planning, like life, is not black and white.  What advisors do is to help you frame your decisions so that you are able to make the best decision for you.

Missed Opportunities

  • Your financial life is filled with several complex topics including investments, savings, debt, taxes, college savings, Social Security, pensions, etc.  Understanding the relationship between all of the topics is far more complicated, and because of this there are often missed opportunities.  Look to an expert to help you capture those opportunities.

The default investment option for the Lockheed Martin Salaried Savings Plan (SSP) and the Capital Accumulation Plan (CAP) is the managed Target Date funds.  A Target Date fund is designed to capture the entire investment market in a single fund.  In addition, as you approach retirement, the Target Date fund becomes less and less risky.  While this sounds good in theory, there are some significant downsides to using Target Date funds, especially the ones available in the LM retirement plan.


For new investors, there are some significant advantages to holding the LM Target Date Funds, the primary of which is simplification.  For an employee in their 20s and 30s, savings rate is by far the most important factor in retirement success.   Focusing on savings rate and simplifying the investment selection with a Target Date fund is a good approach during these years.  Another benefit is that the Target Date funds automatically rebalance on at least an annual basis.   Finally, the Target Date funds decrease in risk over time which could benefit an investor that is disengaged from their accounts.


It is important to consider how much risk you are truly taking with a Target Date fund.  There is no standard for how much stock market risk a particular Target Date fund holds, so two different funds that have the same retirement year (Target Date 2040) could have drastically different holdings inside of them.    By investing in individual asset classes instead of a single fund, you have the ability to better control the risk taken in the portfolio.  In addition, the risk can be controlled better for other facets of your individual retirement picture.   The ideal risk level may be different if you have a LM pension as well as the SSP.


The Target Date funds in the LM 401(k) plan are actively managed by Lockheed Martin Investment Management Company (LMIMCo).  On any given day, the LMIMCo can change the internal account managers in the fund which can change the price.

For example, the annual expense ratio on LM Target Date funds can vary between 0.15% and 0.82% at any given time.  That is quite a broad range.  It would be good to know to a more accurate detail if the annual expenses were either $150/year or $820/year (on a $100,000 account).

In contrast, selecting individual index based funds in the plan would have a lower expense ratio of around 0.04%.   Knowing that you are only paying $40/year instead of $820/year (on a $100,000 account) is a big incentive to re-evaluate your investment selection within your account.

Active vs. Evidence-Based Investment Management

At Rockbridge, we fundamentally believe in the evidence-based or index-based investing approach.  The goal of most investors should be to capture the returns of the entire market for the lowest possible cost.   Unfortunately, the Lockheed Martin Target Date funds fall under a category of active management.   The concept of active management means that a fund is making specific investment decisions in an attempt to outperform their benchmark investment.  While the word “active” sounds like a positive characteristic for an investment manager, academic evidence shows that over the long run, a large majority of active managers have lower returns after fees compared to using an evidence-based approach.  Many of the Lockheed Target Date funds also show this performance lag on their Morningstar reports.


Although the Lockheed Martin Target Date funds hold many different asset classes, there are several that Rockbridge does not believe adds long-term value for clients.  These asset classes include commodities, alternative investments, futures, and Treasury Inflation Protected Securities (TIPS).  In addition, each target date fund held approximately 9% in cash at the end of 2015.  With the goal of long-term investing, holding cash in a retirement account could decrease your expected return, and thus, your retirement account balance.


As you can see, the Target Date funds within the Lockheed Martin 401(k) have both benefits and pitfalls.   The main benefit is simple broad diversification, however this comes with increased costs and risk factors for the investor.

At Rockbridge, we prefer to control the risk in your portfolio and reduce the unneeded costs associated with investing.  As mentioned above, the Lockheed Martin plan does have well diversified, evidenced-based funds that are available.  Please reach out to us for an allocation unique to you.

Lockheed Martin MST recently announced the upcoming Voluntary Layoff Program with the goal of reducing the divisional workforce by 1,500 employees.  If you are considering retirement and are eligible for the Voluntary Layoff Program, it may make sense to deeply consider the options.

As with all retirement and transition decisions, there are two main components: the financial aspects and the non-financial aspects.   Often, the non-financial considerations far outweigh any detailed financial analysis.

Financial Considerations

  • Have you reached the savings level where you can comfortably retire the way you envisioned in the past?
  • Do you have major upcoming costs such as college tuition for children that would hurt your early retirement decision?
  • How will this program affect your taxes this year and future income streams like Social Security?
  • If you are not 65 years old, how does this impact your medical insurance coverage?

Non-Financial Considerations

  • Are you truly ready to retire from day-to-day work? What would that look like?
  • Do you have other career ambitions outside of Lockheed Martin?
  • What does your spouse think of the prospect of you no longer working?
  • Are your primary friends retired or still working?
  • If needed, how will you replace the sense of daily accomplishment that work provides?

Start with a Financial Plan

When considering a major life decision, it makes sense to first take a step back and figure out your priorities and long-term goals in life.   The best way to do this from both the analytical and emotional level is to have a comprehensive financial plan in place.  This living document can help frame the Voluntary Layoff Program decision as well as open the discussion for other missed financial opportunities going forward.  Rockbridge is here to help facilitate the discussion and frame the key decisions for you at this critical time in your career.   We are here when you are ready.

If you qualify for the Voluntary Layoff Program and are interested in applying, the following are some key dates to keep in mind:

  • May 11: Final day to submit application for the Voluntary Layoff Program
  • May 26: Employee notified if application is accepted and the applicable exit date
  • June 9: Date majority of the employees will exit the business; additional dates will continue quarterly through June 8, 2017

When evaluating a financial advisor, the most important factor is that they truly understand you as a person and your personal situation.  At Rockbridge, we have a dedicated focus in working with clients that are employees of Lockheed Martin.  Because of this, we already have an expertise in all employee benefits plans and how each one interacts with other benefits such as Social Security.  This allows us to optimize your retirement plan and gives you the reassurance and confidence that you are not leaving anything on the table.

Over the next several weeks, we will be writing our thoughts on different facets of Lockheed Martin employee benefits.  We hope that you are able to take away some new information that will help you better save and be prepared for when retirement comes.  We are always here to answer your questions as they arise.

Lockheed Martin Retirement Plans

As you well know, there are several different pension and retirement programs offered through Lockheed Martin via Voya.  Each one has their own unique benefits and quirks.   In addition, between now and 2020, the retirement program landscape will change with the pension benefits being frozen for all employees.   We will address each of these items in detail to help eliminate confusion regarding terminology and acronyms.

Salaried Savings Plan (SSP) – This is the company’s 401(k) plan.  Employees are allowed to contribute between 1%-25% of their salary with a max contribution of $18,000/year ($24,000/year for employees 50 and over) for 2016.  In addition to the employee contribution which is always yours, the company will match 50% of your contributions up to 8%.  This means that if you put in 8% of your salary, the company with contribute 4% of your salary toward the plan.

Capital Appreciation Plan (CAP) – For employees that are not part of the Lockheed Martin Pension Plan (hired 1/1/2006 or later), the company will contribute an additional 3%-4% of your salary toward retirement savings.   The CAP will transition fully in 2020 to the new Lockheed Martin Retirement Savings Account (RSA) where the employer will automatically contribute 6% of your salary toward retirement.

Retirement Savings Account (RSA) – A new retirement plan benefit that will function for all employees in place of previous pension benefits.  LM will contribute an automatic 2% of your salary to this program from 2016-2019, and in 2020, that percentage will merge with the CAP and increase to an automatic 6%.

Pension Benefits – The LM pension plan was discontinued for new employees starting 1/1/2006.  Beginning 1/1/2016, the LM pension plan has a locked annuity value for your average pay formula.  Any additional raises will not be factored into the pension formula.  Beginning 1/1/2020, the pension plan will stop accruing additional years of service.  On 1/1/2020, the final pension figure will be 100% fixed.

Lockheed Martin Executive Compensation Plans

In addition to the standard employee plans offered, Rockbridge is well versed in the various executive compensation plans available to highly compensated employees.   With each employee having unique supplemental benefits, we plan individually to optimize every available option.   We have detailed experience working with the Lockheed Non-Qualified Supplemental Savings Plan (NQSSP), the Non-Qualified Pension Plan (NQPP), Deferred Management Incentive Compensation Plan (DMICP), Long-Term Incentive Cash and Restricted Stock Bonuses as well as other legacy compensation plans.

How Plans Interact in Retirement

Understanding the complexities of each Lockheed Martin retirement plan is important, but even more critical is understanding how these plans function together with outside assets (brokerage accounts) and pensions (Social Security).   Using advanced planning software, Rockbridge can make sure your hard earned savings are maximized for your goals.

Framing Solutions

Outside of pure investment management, one of the most valuable services that Rockbridge provides is goal and decision framing.   Unlike simple math problems (1+1=2), retirement decisions are a combination of analytical and emotional decisions.   For many retirement questions, there is no right or wrong answer, but Rockbridge can help frame the decisions so that you are able to select the best solution for YOU.  Having an unbiased and objective third party look over your entire financial picture will give you the peace of mind that the transition to retirement will go smoothly.

First Step

The first step forward is always the most difficult.   When you are ready, Rockbridge would be happy to walk you through the path to retirement to make sure you are making the best decisions going forward.  We offer complimentary discovery meetings so that you can get to know us and see if we are a good fit.   We also offer second-look services to see if your current advisor is maximizing all of your available investment resources.   Your life savings and retirement happiness are always worth a second look.

I will make the argument here: Most people would rather go to the dentist than get their estate documents (Living Will, Power of Attorney and Health Care Proxy) in order.  Why?  The dentist appointment usually only lasts an hour and does not require any preparation or thought in advance.  In contrast, the estate planning process takes some forethought and a few meetings to complete.  In addition, estate planning makes us consciously aware that we are indeed mortal.

Fortunately for estate documents, once you establish them, you hopefully won’t have to update them for years to come.  My advice is as simple as this:  Pull off the Band-Aid and complete your estate planning.  You will be happier with yourself after the fact.  I can speak from experience.  My wife and I finally finished our estate documents 14 months after our daughter was born.  I made sure to purchase my life insurance by the time she was born, but the estate documents found their way to the bottom of the pile of life’s paperwork.

I wanted to share our experience in hopes that it will encourage you to finalize your own estate plan.  What at first seems like a daunting task is really not all that bad or time consuming.  Hopefully after reading, you will feel confident to act.

Why do I need to create/update my estate documents?

The main reason for visiting an estate attorney would be to direct your decision making and assets in the manner you prefer if you become incapacitated or pass away.

When do I need to create/update my estate documents?

Estate documents are usually created around a life event.  The definition of life event is quite wide, but it could include marriage, divorce, new child/grandchild, retirement, financial windfall, etc.

What are the primary roles you need to name in your estate documents?

Guardian – a person appointed to take care of minor children if you were to pass away

Executor – a person who is capable and will carry out your wishes

Power of Attorney – someone who is able to act on your behalf in legal and financial matters

Health Care Agent – someone who will act on your behalf for medical decisions if you are unable to make them.

What work do I need to do in advance?

For families with children, the biggest issue will be selecting a guardian for your children.  Please don’t let this decision paralyze you and prevent you from finishing your estate documents.  Think about the important decision, but then realize that you can always change your wishes at a future time.  In this case, a good plan now is better than a perfect plan in the future.

What was the process like with the attorney?

My wife and I have a fairly simple estate, so we were able to get everything completed in the course of two meetings.  The first meeting took approximately one hour and was an introduction to the process.  We discussed many of the different topics in this article and thought about what-if scenarios.  We were able to make most of the role appointment decisions in the meeting.  About two weeks later, we received a package in the mail with all draft estate documents for us to review.  Once reviewed, we had a final meeting to review and sign the paperwork to make the documents official.

What does it cost?

The completion of most basic estate documents range from $500 to $1,000.  This price range would cover the majority of people.  If your financial or family life is more complicated, this price could be higher.

Why should I visit a real in-person attorney?

With technological advances, there is always a temptation to use a lower-cost online service such as LegalZoom.  Although these solutions could make sense, I feel that it is worth the extra cost to work with a local attorney who knows your situation and can help guide you through difficult questions.  With such important decisions, this is not the area to skimp on a few hundred dollars.  The in-person service also makes the official signing with witnesses and notaries a much easier process.

Hopefully this summary will serve as a reminder of cause to act so that your final wishes are protected in the future.  If you would like, Rockbridge would be happy to give you an attorney referral for someone we have worked with in the past.

The holidays are right around the corner, and it’s time to start thinking about gift shopping, parties, and all the other spending that goes along with them. It’s nothing new that the holidays are expensive. However, it is important to set a budget and avoid overspending during this time of year.

This Reuters article discusses how 62% of parents admit to overspending during the holidays. Many will even dip into their emergency savings or retirement accounts just to pay the holiday bills. They offer a few tips on how to curb your holiday spending and avoid financial stress so you can enjoy what the holidays are really all about.

In a recent WSJ article, they talk about the how smart phone “investment apps” are causing investors to react to short-term market swings and abandoning their long-term established financial plans.

Behavioral economists call this tendency, “myopic loss aversion”- and it can be incredibly costly.

Click on the link above to read the full article!

Would you stop being a fan of the Yankees, Mets, Giants, Jets, Bills or the Syracuse Orangemen and root for a team in Florida in order to save on your tax bill?  It might help!

Many New York State residents planning for retirement expect to maintain a residence in New York, but claim another state as their state of domicile.  Their purpose is to reduce their tax burden (state income taxes and/or estate taxes).  There are currently nine states with little or no state income tax.  The most popular of these for New Yorkers is Florida.  Florida has no state income tax and no estate tax.  Particularly for those with expected high taxable incomes in retirement, and/or high taxable estates, the tax savings can be considerable.

In the “old days,” if you lived out of New York State for more than 183 days per year, you were not deemed to be a “statutory resident” of New York, and this was thought to be the main litmus test for claiming not to be domiciled in New York and not subject to income and estate taxes in New York.   Your domicile is the place you intend to have as your permanent home, where your permanent home is located and the place you intend to return after being away (as on vacation, business assignments, educational leave, or military assignment).  You are a New York State resident for income tax purposes if your domicile is New York State or your domicile is not New York State but you maintain a permanent place of abode in New York State for more than 11 months of the year and spend 184 days or more in New York State during the tax year (note – there are special rules for military members and their spouses).

This still sounds fairly straightforward and not difficult to achieve.  However, in recent years, New York State, as they have been losing considerable revenue from individuals claiming domicile elsewhere, has become far more aggressive in challenging a change in domicile.  From a recent court case, “A domicile once established continues until the individual in question moves to a new location with the bona fide intention of making such individual’s fixed and permanent home there…  The burden is upon any person asserting a change in domicile to show that the necessary intention existed…  Although petitioners may have registered in Florida, obtained driver’s licenses and registered their cars there, there is little convincing evidence as to petitioners’ intent to abandon their New York State domicile and acquire a new one in Florida.”

New York State, in a residency audit, will examine all aspects it considers indicators of domicile, including your “home,” active business involvement, where you spend your time, where you keep things “near and dear” to you, family factors and so forth.  Where you are registered to vote; where your driver’s license is maintained and cars are registered; where you go to church; what clubs you belong to; what charities you support; where your accountant, lawyer, doctors, insurance agent, etc. are located, will all be looked at.

A change in domicile from New York State can be established and defended if you are indeed changing your domicile in substance.  It is advisable to consult with a tax practitioner or lawyer with expertise in this area before claiming the change, so that you can properly defend, document and support your position (without abandoning your favorite New York team!).

Does it feel like you are constantly paying bills all of the time?   It may be time to refresh and automate your current financial process.  Just simply keeping track of all of our various accounts can be mindboggling and often quite tiring.  Since time is one of the most precious aspects in life, why not regain some by automating your personal finances.

Reason To Automate
Initially, it can feel scary automating your finances – like you are losing control over when and out of which account a bill gets paid.  Looking at the bigger picture though, you are going to pay your electric and gas bills anyway, so why not simplify things.


  • Gives you peace of mind that no bill was left behind (think of times where you are away from home such as vacations and holidays).
  • Frees up time to spend on more important tasks.
  • Increases your credit score:  On-time bill payments make up 35% of your overall credit score.
  • Provides safety:  Online bill pay has come a long way over the past decade.  Websites are more secure and most credit cards and bank accounts have built-in fraud monitoring features.

First Steps
In order for financial automation to work, you must build up a checking/savings account balance to a level where all bills can be paid without worrying about the amount (emergency reserve).  Next, you will need to create an online login (if you do not have one) for each bill/payment you would like to automate.  Once your account is setup online, you will then be able to initiate your recurring payments.

What accounts can be automated?

  • Credit Cards (always pay the balance in full)
  • Gas/Electric/Water/Cell Phone/Cable/Garbage Bills
  • Debt Payments (Home Mortgage, Car Loans, Student Loans)
  • Savings (Set up automatic transfers to a different account)
  • EZPass/Car Insurance/Life Insurance

With automatic payments set up, you will not have to continually write checks for monthly bills.  However, I do recommend monitoring all of your transactions so that you can make sure all of your charges are correct.  I personally use to monitor my credit cards, bills and bank account transactions.  It is simple to setup and is very secure.  I use this as a replacement for balancing my checkbook.

Everyone manages their finances in a way that works for them.  If you haven’t considered setting up automating payments, I urge you to give it a try.  If we can help you at Rockbridge, please let us know.

“Rockbridge Investment Management Named a Top 100 Wealth Management Firm by CNBC”

SYRACUSE, NY – Rockbridge Investment Management, an independent, fee-only investment management firm serving individuals and families, has recently been named as one of CNBC’s Top 100 Fee-Only Wealth Management Firms.

Rockbridge is the only Central New York firm to join the elite list of wealth management firms across the country.  The ranking methodology, developed by CNBC in collaboration with Meridan-IQ, was carefully formulated based on a variety of standards, including: assets under management, number of staff with professional designations such as a CFP or CFA, experience working with third-party professionals such as attorneys or CPAs, average account size, growth of assets, years in business, number of clients and ability to provide advice on insurance solutions.

“We are pleased to receive this recognition and believe our ranking is a true testament to our profound commitment and dedication to client care,” comments Anthony Farella, CFP® and a Principal of Rockbridge Investment Management.  “As a fee-only based firm, we are built to provide a unique client experience to help families and individuals achieve long-term financial goals in a meaningful way.”

Since its inception in 1991, Rockbridge Investment Management has been providing sound financial advice to clients.  The firm manages $450 million and serves 531 families across the Central New York region.  In February of 2014, Rockbridge relocated to an expanded office in downtown Syracuse where it continues to meet the investment needs and goals of clients.

Rockbridge Investment Management is an independent, fee-only investment management firm serving individuals and families.  The firm advises clients in investment management, retirement planning, life transition planning and 401(k) Administration.  For more information, visit

Over the weekend, the Wall Street Journal writer Lindsay Gellman covered this important topic.   She did an excellent job articulating the values of both hiring an advisor and managing your own personal finances.  The sole point that I disagree with in the article is titled, “You won’t stick to a pro’s advice, anyway.”  At Rockbridge, our goal is to establish a long-term plan up front and help clients follow that advice over time.  

The full article can be found here:  WSJ Article

In a recent Wall Street Journal (WSJ) article, the debate over whether to use active or passive investments was addressed. The conclusion was just use both! Let’s take a look at the five reasons they give to defend this neutral stance and see if they hold up to scrutiny. 

1. Use index funds for efficient markets, and active funds for others.

The rationale is that it is hard for active managers to beat the index in efficient markets like the S&P 500, but where they thrive is in less efficient markets like domestic small cap and international stocks.  

This sounds reasonable; however, the facts don’t back it up. According to the 2013 SPIVA study, which ranks active managers against their benchmark, the majority of active managers underperformed passive investments in 21 out of 22 categories over the 5-year period ending 12/31/13. Some conclusions from the study:

  • 79.4% of active managers underperformed large US stocks (S&P 500)
  • 74.8% of active managers underperformed small US stocks (Russell 2000)
  • 71% of active managers underperformed international stocks (EAFE)
  • 80% underperformed the “less-efficient” emerging markets asset class  

Clearly, the evidence suggests that active strategies are no more likely to outperform in less efficient markets. 

2. Keep the door open for beating the market. 

The article says, “Index mutual funds and exchange-traded funds offer a low-cost, tax-efficient way of matching broad market returns—which a large percentage of active managers can’t seem to do.”  However, they say there is an emotional element to investing you have to consider. People want to think they can beat the market and don’t want to settle for benchmark returns.

Well, sometimes I like to think I could play golf professionally, but then reality sets in as I wake up! Look at the stats from above; you are playing a loser’s game if you keep trying to beat the market.

3. Add an active manager to fine-tune the volatility of your portfolio. 

This reason doesn’t make much sense since active managers actually just layer an additional level of risk on your portfolio. An investor already has to deal with the volatility of the markets.  Why add the unknown human risk of an active manager to the equation?   

4. Use a mix of funds to hedge against market crosscurrents.  

Michael Ricca, managing director for Morgan Stanley, says, “Passive and active funds tend to perform better in different environments. It can be better to own an active manager who can scout for attractively valued securities or shift to sectors that might hold up better in a correction.”

I think the writers of this article are missing the point. Active managers have consistently underperformed their passive counterparts in 21 out of 22 asset classes over the last 5 years.  There is no credible evidence that active managers can add value through security selection. 

5. Use an active-passive blend to bring down overall expenses.  

The article says that “Many active funds charge 1% or much more in annual expenses, while index funds may charge as little as 0.05%. Even if you generally favor active funds, you might use a blend to lower your overall portfolio expense ratio to perhaps around 0.5%”.

Alternatively, you could use index or low-cost passively managed funds in all investment asset classes to reduce the cost of your investment portfolio. Remember, the saying “you get what you pay for” does not hold true when it comes to investing.

Does hiring an investment advisor improve your portfolio returns?  This question is often on the minds of our clients or prospective clients.  The value of an advisor is often easier to describe than define numerically.  Many clients find value in hiring an advisor to provide “peace of mind” and comfort that a professional is watching over their portfolio.  This value can be difficult to quantify because it varies by client. 

Value measurement – What is Alpha?
Investors have many tools available to evaluate the performance of portfolio managers.  One such tool is the Jensen Measure, named after its creator, Michael Jensen.  The Jensen Measure calculates the excess return that a portfolio generates over its expected return.  This measure of return is commonly known as Alpha.  Alpha is an elusive quality.  Very simply put, it is the ability to beat an index fund without adding risk to a portfolio. Investment managers are always seeking it but rarely sustain it.

The academic evidence strongly suggests that delivering above-average returns without adding additional risk is extremely difficult or nearly impossible in the long run.  However, most of what we read in the business news or watch on TV is directly aimed at uncovering the elusive manager able to “beat the market” and deliver consistent Alpha to investors.  The fixation on market beating returns has often led to dire results for the average investor. 

About 3%
So how does an investor measure the value of an advisor who plans to match market benchmark returns?  It’s a question that Vanguard set out to answer in a recently published paper for investment advisors titled “Putting a value on your value: Quantifying Vanguard Advisor’s Alpha.”  Vanguard explored the idea of advisor Alpha more than a decade ago.  They recognized that the conventional wisdom of advisors providing value by “beating the market” was outdated and disproved by academic evidence.  Interestingly, the areas of best practices for wealth management that Vanguard identifies are identical to the values we have been providing for clients for over 20 years.  They are:

  • Asset allocation
  • Low-cost implementation
  • Rebalancing
  • Discipline and behavioral coaching
  • Asset location
  • Optimal withdrawal strategy
  • Total return vs. income investing

Vanguard quantifies value-add of best practices


As a volunteer tax preparer for the AARP, I often review tax statements from many different brokers and investment companies. The Income Tax preparation process always seems to identify examples of the value of working with a trusted investment advisor.  Here are some examples from my experiences as a volunteer tax preparer for AARP from 2013 and 2014.

Cleo, a widowed tax client, called me last fall to tell me that her broker had retired and a new guy was taking over her accounts.  Cleo said that her deceased husband had been with that broker for many years and liked them.  She really didn’t know how her accounts were invested but her account did “quite well.”  (In 2013 nearly everyone in the equity markets did “quite well”, a relative term)  As I do her taxes this year it will become evident what her new broker has done with her account, especially if the sale of securities create a taxable event, probably to her surprise.  One of our Rockbridge practices is that we have at least two investment advisors who are familiar with each client, and their accounts, and are available if the primary contact is not.

This is similar to the broker moving from one firm to another and taking the account with them.  Most investors don’t realize how this will impact their accounts.  The broker typically sells the invested securities and replaces them with new, at the expense of the client in the form of sales charges, new redemption periods, or unexpected taxable income.  Most brokers’ income is derived from commissions on buy and sell transactions, so their objective is to buy or sell.  A fee only investment advisor like Rockbridge Investments has nothing to gain from the purchase or sale of securities, so would review the value and implications of changing securities with the client before acting.

One tax client in 2013 had sold all of his stocks and brought the Form 1099 showing the transactions which amounted to over $120,000.  His broker either didn’t advise him, didn’t know, or was more interested in the commissions on the sale, but his taxable capital gain on the sale of these stocks, held by him over many years, was over $25,000.  He was incensed that his income tax was so high, both state and federal.  He kept insisting that the money was his, that he should be able to keep it.  It was his, though the IRS wanted their share.  This is the kind of thing one would talk over with their investment advisor before selling everything.

My daughter called me recently to ask about a friend whose accountant told her to take her 401k plan with a former employer and roll it over into an IRA with an associate of his.  Accountants are in a great position to know about their client’s investments, but they are not investment advisors.  I told her that I didn’t know the employer, or the 401k investment options, or the competency, stability, or reputation of the “associate” and that her friend should know all of those things, and more, before making any distribution of her 401k monies.

Every year we get tax clients with distributions from several mutual funds or custodians, Franklin Funds, Fidelity, American Funds, T Rowe Price, Prudential, Met Life, Schwab, Vanguard, to name a few.  When I ask them how their investments performed last year, they typically say “pretty good”, or “not too good”, not really able to have a good idea of their results.  With investments scattered all over the place, one really never knows how they performed compared to relevant market benchmarks.  Our advice is to consolidate wherever possible.   The investor in the family may know what he or she has, but your spouse will never be able to figure it out when the time comes.

Last year one tax client brought his forms in for preparation, including his previous year’s return.  I noted an IRA distribution in 2011 from one custodian but none in 2012.  There was, however, a statement showing a considerable balance in that account.  It was the only IRA owned by this individual, age 74 and making required minimum distributions.  The penalty for not making the minimum distribution when required is half of what the distribution should have been.  We called his local broker who told us the broker on that account had left the firm.  Their response was “Sorry, the client should have told us to make the distribution.”  This would never happen at Rockbridge Investments where we review all client accounts and contact them during the year for distribution discussions.

Communication between the client and the advisor, and between advisors is important for the proper management of the clients’ investments.  Rockbridge has in place a unique system for recording and sharing internally important client information needed to manage the investments.

The Rockbridge Investment Management team is familiar with income tax implications of client transactions, and often discusses such with clients on their request.  However, tax preparation for clients is not practiced as a part of our fee-only investment advisor service.

For almost all New York State homeowners, the School Tax Relief (STAR) program reduces the amount of property tax owed. This program saves families hundreds of dollars every year.  Previously, a new homeowner registered for the STAR property tax exemption when purchasing a home.  After the initial application, the STAR exemption was carried forward into the future.   Unfortunately for 2014, NYS STAR exemption is not automatically renewed and each resident needs to reapply or risk losing the exemption.

Do you qualify?

The exemption is available for owner-occupied, primary residences where the combined income of resident owners and their spouses is $500,000 or less.

What to do now?

New York State is requiring all STAR homeowners (senior citizens with Enhanced STAR are exempt) to reapply for the STAR credit.   In the mail shortly, there will be a letter from the NYS Department of Taxation and Finance with instructions on how to apply for the STAR exemption.   You can also find the information on the NYS tax website at or by calling the Tax department at (518) 457-2036.

Please make sure you reapply for the STAR tax exemption and pass the word around to all friends and family.

Now that we are halfway through 2013 and the federal estate tax debate is far behind us, it is a good time to remember that as New York State residents, we are still subject to the state estate tax.  A common phrase is, “Estate tax, I’m not wealthy enough to have to worry about that!” Unfortunately, the NYS exemption is far lower than the federal government exemption and can cost families that do not prepare for it.

Do I Need to Worry About Estate Taxes?

Reaching the New York estate tax limit of $1m is easier than most people think.  An individual’s estate includes much more than just investment assets.  The estate calculation also includes property owned, life insurance contracts, and even pensions payable after death.

Federal vs. New York State Estate Tax Differences

Federal and New York State have rules that differ and those differences greatly affect financial planning.   The individual estate tax limit for New York is far lower than the federal estate tax limit.  Additionally, the lower New York State exemption limit does not allow for portability (The ability to transfer unused estate tax exemptions to a surviving spouse.  Portability essentially doubles the estate tax limit for a couple.)  The table below shows the key differences between the two estate tax laws.

.                                                                                               Federal                                  New York

Individual Exemption Limit (2013)                        $5.25m                                  $1.00m

Taxation Percentage Above Exemption                   40%                                        5%-16%

Portability                                                                              Yes                                          No

Annually Adjusts For Inflation                                      Yes                                          No

Gift Tax Limit                                                                     $5.25m                                  None

Double Trouble

If potentially owing New York State estate taxes leaves a sour taste in your mouth, then the knowledge of double taxation compounds the flavor.  When pre-tax retirement assets are left in an estate (Traditional IRA, 401(k), 403(b), etc), not only are they included in the estate tax total due, but the recipients of the pre-tax accounts will also have to pay ordinary income taxes on the account when the money is withdrawn.

Potential Solutions

An AB Trust is no longer needed to avoid most federal estate taxation issues; however it still has a very important place in New York State estate taxation.   Since New York does not allow for portability between spouses, having each spouse fully utilize the $1m exemption can avoid $99,600 (2013) of estate taxes due.

Family gift planning can also reduce the New York estate tax by establishing a plan of distributing estate assets prior to death. For the federal tax system, every individual is allowed to gift up to $14,000 per person in a calendar year (2013).  In a case of a couple with 4 married children, they may exclude $224,000 annually from their potential estate.    (2 in the couple X 8 children and spouses * $14,000)

In addition to the $14,000 per personal annual gift, New York State does not impose a taxation limit on gifts, only on estates.  Toward the end of an individual’s life, there is a possibility to gift up to the federal estate tax limit ($5.25m) without federal or New York State taxation.  Gifting above $14,000 per person annually will reduce the federal estate tax limit upon death.

When In Doubt, Ask!

Estate taxes can be a very complex issue and should be looked at in conjunction with an entire financial plan.   If you believe you are in an estate tax scenario, please contact us and we can help you determine the best course of action.

This is a topic that has been relevant in my life and also a recently asked question by a family member.  Am I paying too much for auto insurance?  If you haven’t received a new quote online recently, the answer is probably YES.

When I moved down to Texas, I found out auto insurance rates down there were higher than New York.  Needless to say, when we moved back to New York, I want to be paying the least amount possible, so I got a new quote online.  I knew the yearly payments would go down some because of location, but I now have a better policy (lower deductibles/higher liability limits) and reduced payments (from $1400/year to less than $1000/year).

Where to start?

The easiest way to get an instant quote is online.  You type in a few pieces of information about yourself, your car(s), driving history, location, current insurer, education, etc and the website will give a quote that you can customize to meet your needs.  Please make sure you are comparing apples-to-apples coverage between the different carrier to get an accurate comparison.

A good first stop is  The website is an aggregator that pulls information from various insurance companies and provides the least expensive coverage for your needs.  Consider this a Google search for auto insurance.   This is a good method for most people that want a one stop quote.

Another option is to go to a few different individual insurers and see which policy is the least expensive. I chose this method myself, but should be fine as well.  A few companies to explore are Geico, Progressive, Esurance, AllState, etc.

If you do find a less expensive policy with the same coverage, you can start the new policy and cancel the old policy on the same day.  You will get a refund in the mail from your previous insurance policy for the pre-paid cost that was not used.   Insurance cards and documents can be printed from the Internet which will allow you to be up and running in no time.

So please take 10 minutes, and review your auto insurance policy.  You would be surprised at how much money you can save!

When is the last time you checked your auto insurance rates?  After reading this, were you able to save some money on your auto policy by getting a quick quote?  If you have questions on each part of the auto insurance policy, please ask! And it’s worth it….what if we had hail damage we need fixed?

One last note: I personally prefer a lower deductible for my auto insurance policies.  It may cost slightly more every year, but I would rather not have to write a large check on the same day that I get into an auto accident!   I also strongly recommend the addition of a rental car to your insurance policy if you do not have an alternative means of transportation.

I know this might be hard to imagine for most of us golfers, but which of the following scenarios would you rather choose:

1.   Shooting par every time you go out and play a round of golf.

2.   Shooting below par 25% of the time you play and failing to reach par the remaining 75% of the time


It’s an easy decision, right?

The game of golf has many parallels to investing.  A score of par is similar to a stock index.  It is the base score everyone is trying to reach.

Continuously shooting par, similar to passive (index) investing, is what we do here at Rockbridge.  We try to control costs, manage risk and get as much return as the markets allow.  With index funds, you always get what you expect when it comes to returns and are left with no surprises.  It’s much like going out and shooting par every time you golf.  Basically, we help you avoid the double and triple bogeys that we are all too familiar with!

The other scenario is to strive for a score lower than par, which is similar to active investing.  You incur additional costs – Wall Street “experts”– in an attempt to beat the return produced by an index.  However, evidence shows that you will only be able to do so 25% of the time.  The remaining 75% of the time you will underperform; and to make matters worse, you will underperform by a much bigger margin than you will ever outperform!  This makes perfect sense.  When active managers continuously strive for outperformance, they must take additional risks which lead to mistakes.  No different than a golfer trying to make eagle on every hole.  He will find himself shooting much worse with that constant added pressure!

The situation only gets worse with time as well. Just like shooting a score below par gets harder as we age, your chances of beating index returns goes down drastically when you look at longer time periods.  Over extended periods of time, your probability of beating index returns falls into the single digits!  Larry Swedroe, in a recent CBS News article, goes on to state that this value is lower than what we would expect by sheer chance!  When most investors are saving for long-term goals, like retirement, those don’t seem like odds I would be willing to pay extra for!

So, if shooting consistent pars on the golf course sounds like the no-brainer choice, then why do so many people still engage in active management when it comes to investing?  In golf, spending additional time/money to improve your game might pay off in a lower score, but unfortunately this does not hold true when it comes to investing.  Control costs and shoot for par (index returns) and you will be much farther ahead in the long run.  Sometimes it takes a simple analogy to help lead us to making wiser and more prudent life decisions!

The benchmark bond index that we follow, Barclays U.S. Government/Credit Index, lost 2.5%, the worst quarter since 1994.  In fact the quarterly result has only been worse 8 times in the past 40+ years (162 quarters).

The Barclays U.S. TIPS Index had its worst quarter ever losing 7.1% (data only goes back to 1997).

Markets do not like surprises – even when the information is not really a surprise.  The financial media has dubbed it the Taper Tantrum, which started when Ben Bernanke came out of the Fed’s June meeting and said the Fed would taper its purchases of long-term bonds, if the economy continues to improve.  The so-called quantitative easing program was intended to hold down long-term interest rates to encourage investment, lending, and economic growth.

The market was surprised by Bernanke’s comments, and long-term interest rates immediately jumped.

Morningstar recently reported, “Over the past two-plus weeks, many bond investors have headed for the exits, on the heels of Federal Reserve Bank chairman Ben Bernanke disclosing plans to end quantitative easing.”  This suggests that market participants were assuming the Fed would continue its bond buying indefinitely.

Two things strike me as very ironic:

  1. The market was surprised to hear that something always considered a temporary measure, would eventually end… (when unemployment falls to a target of 6.5% and economic growth seems sustainable without the crutch of monetary policy).
  2. The prospect of improving unemployment and economic growth hammered both stock and bond investors at the end of June, contrary to an expectation that confirmation of economic improvement should be good for stocks.

There is little doubt that markets will continue to be volatile as the Fed proceeds to unwind the unprecedented monetary policy currently in place.  Market participants will try to predict what is going to happen (interest rates will rise – that’s easy); when it is going to happen (more difficult); and how to take advantage (approaching impossible).

There has been a general consensus that interest rates must rise since the Fed took short-term rates to zero at the end of 2008.  Since January 2009 the bond index has provided an annual return of 4.8%, including the most recent quarter, while money market funds and short-term CDs have provided almost no return.  Once again illustrating our long-held beliefs:

  • Markets work, and respond to new information.
  • Markets cannot be predicted.
  • Long-term investors must be willing to endure quarters like this and maintain the discipline of a long-term strategy that is consistent with their risk tolerance.

Recently, I read a blog article by a Bob Seawright titled, “Financial Advice: A Top Ten List”.   The article describes how financial planners provide clients with a far greater benefit than just investment returns.   Bob provided an excellent list of ancillary benefits.  His list is spot-on and a worthy read by anyone considering a financial advisor.  Bob’s list is shown below and the full article can be found here.

1)      Goal Formation

2)      Investment Policy Statement

3)      Asset Allocation

4)      Persistence-Weighting

5)      Risk Management

6)      Behavioral Management

7)      Productive Simplicity

8)      Senior Protection

9)      Tax Efficiency

10)   Financial Planning

In fact, I would even add two additional items to round out a dozen.

11)   Time Savings – For many clients, having a financial advisor frees up time to spend with family and friends.

12)   Second Opinion – Peer review is commonplace in academia and most professions.  Why wouldn’t you want a second set of eyes on your retirement plan?

You get what you pay for, right?

Actually, when it comes to investing, it’s what you don’t pay for that really counts. Vanguard’s latest ad’s have all revolved around “at-cost” investing for this very reason.

Check out the link below where Vanguard explains “at-cost” investing and how it can help investors reach financial success over time.

Vanguard’s At-Cost Investing Café

Remember, while you can’t control what happens on Wall Street, you can control how much you pay to invest.  By reducing your overall investment costs, you will be paving the road to a much brighter financial future!

At Rockbridge, we take a holistic approach to personal wealth, and home buying is the single biggest transaction most of us will ever make.   We have simplified the process through an easy to understand white paper on what to expect when purchasing or refinancing a home.  The paper provides valuable information on the major considerations and describes how to get the best deal for your individual situation.

When you have  personal financial planning questions, please contact us.  As an objective advisor, we can often provide clarity and insight when making important financial decisions.

Download here: Rockbridge Investment Management – Home Mortgage Search Process

Over the years there has been a shift of burden in retirement savings from the employer to the employee.  The era of company pension plans is fading, leaving Americans on their own to save for retirement; primarily through company-sponsored 401(k) plans. 

Frontline recently aired The Retirement Gamble, where it highlights some of the downfalls of company 401(k) plans and how they are keeping many investors from ever reaching a successful retirement.

Have you ever looked at one of your 401(k) statements and asked yourself “Why does it seem like this thing never goes up in value?”  The market has been good and you are making regular contributions to it, so why does it seem like something is eating away all your return?  It’s because there is:  FEES! 

So how can you control or minimize your fees?  The easiest way to do so is to cut your mutual fund costs.  The average actively managed mutual fund costs 1.3% annually to own, when you can purchase a passively managed mutual fund for a fraction of that price.  Very few actively managed mutual funds outperform their benchmark index, and picking which ones will do so ahead of time is yet another challenge.  Jack Bogle, founder of Vanguard, states in the documentary “that to maximize your retirement outcome you must minimize Wall Street’s take”!

Jack Bogle goes on to say that if you expect to get a 7% gross return each year and give 2% of that up to fees, then you are ultimately sacrificing almost two-thirds of your potential return! 

Assumptions: Start with $100,000 earning 7% annually for 50 years.  Red line
shows 5% annual return (7% return reduced by 2% of annual fees)

Jack continues by saying that “if you want to gamble with your retirement, be my guest.  Yet be aware of the mathematical reality that you may have a 1% chance of beating the market.  This has been proven true year after year, because it can’t be proven wrong”! 

Jason Zweig, an investing columnist for The Wall Street Journal, added that “one of the ultimate dirty secrets of Wall Street is that a great deal of fund managers own index funds in their own retirement portfolios.  This is something they don’t like to talk about unless you put a couple beers in them!”  So if these highly paid fund managers don’t even believe in their ability to outperform index fund returns, then why should we?

Remember, that as investors, we have to control the controllable, and mutual fund costs is one cost we can control.  We can’t know what direction the market will be heading in or what our annual return might be, but we can maximize the percentage of that return that goes into our pockets and stays out of Wall Street!

How many times have you heard someone say, “In 2008 I knew the market was going to crash…” – or some similar statement of prescience?


That would be an example of how hindsight creates an illusion of understanding, as described by psychologist Daniel Kahneman, who won a Nobel Prize in economics for his work in behavioral finance.  In his recent book Thinking, Fast and Slow, he explains how hindsight alters our memory.  A result that seems obvious when viewed in hindsight is remembered as being evident at the time, when in fact it was not.

No one knew what was going to happen in 2008.  Some people thought there would be a crisis, but they did not know it.  Kahneman points out that using the word “know” fosters the illusion (an unsubstantiated belief) that we understand the past, and therefore the future should be knowable.  You will not hear anyone say, “I had a premonition that the sub-prime debt crisis was overblown and knew markets would recover nicely in 2008 – but I was wrong.”  First off, it sounds silly, and secondly, most prognosticators have forgotten they ever held that belief!  Author Nassim Taleb describes a similar effect of hindsight in his book The Black Swan:  The Impact of the Highly Improbable where he introduces the notion of a narrative fallacy, to describe how flawed stories of the past shape our views of the world and our expectations for the future. . . .  Taleb suggests that we humans constantly fool ourselves by constructing flimsy accounts of the past and believing they are true.

In the same section of his book that elaborates on many manifestations of overconfidence, Kahneman goes on to describe a specific incident where he was invited to speak to a group of investment advisors.  In preparation he asked for some data and was given the investment outcomes of twenty-five anonymous stock pickers, for each of eight consecutive years.  A careful statistical analysis of their stock-picking ability found no evidence of persistence of skill – none.  “The results resembled what you would expect from a dice-rolling contest, not a game of skill.”

The fact that he could find no evidence of skill is not remarkable.  What is remarkable is that no one changed his or her beliefs when presented with the evidence.  The advisors and their superiors went on believing that they were all competent professionals doing a serious job, when the evidence clearly suggested that luck was being interpreted as skill.  Kahneman’s conclusion:

The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the industry.  Facts that challenge such basic assumptions – and thereby threaten people’s livelihood and self-esteem – are simply not absorbed.

Three Lessons for Investors

1.  Overconfidence may have helped cavemen survive when facing overwhelming odds of failure, but it rarely helps investors.

2.  Beware of the narrative fallacy – A reckless leader can be labeled as prescient and bold, when a crazy gamble pays off.  So consider the role of chance and luck when an investment decision turns out well.  Luck does not equal skill, and remember that even good decisions can lead to bad outcomes, when the future is uncertain.

3.  When a mistake appears obvious in hindsight, try to remember how uncertain the situation was in advance.  No one “knew” how things would actually turn out.u

During this time of the year office brackets and friendly wagers are seen everywhere, luring in even the faintest of sports fans.  This epidemic, also known as March Madness, has gotten ahold of everybody and is the craze of the nation for almost a full month!  So besides edge of your seat excitement filled games, what other takeaways can this basketball tournament bring us?

Let’s take a look at some common mistakes made when filling out your brackets and why you want to make sure they don’t translate to the way you run your personal finances!

Hometown Bias: People have a tendency to be partial towards what they know.  In NCAA Tournament brackets, this is seen by people advancing teams they know or have heard of.  They build a bias in their heads that since they know the team, they must win.  This is apparent by the plethora of Central New Yorkers advancing Syracuse to the NCAA championship, the staggering amount of all Big East teams in the Final Four, and other similar bias’ you see every day in local office bracket pools.

The key is to not let this bias run into your personal investing life.  Just because you work for a company, recognize a stocks name, or feel you know a particular industry does not mean that it is worth owning.  Take a step back and make sure you are making a sound investment decision, and not an off-the-cuff “hometown bias” guess!

Expert Analysts:  Being an expert does not always give you an edge, but rather can make you more dangerous.  This was very evident in our Rockbridge office pool where Tony’s ten-year-old daughter, Lauren, has won two of the last three years!  I’m a bit embarrassed to admit it, but there are very few college basketball games I don’t watch; however it certainly didn’t give me any strategic advantage over Lauren who filled out her bracket over a bowl of Cheerios the morning they were due!

Overconfidence can lead investors to believe they can outperform the market.  It will lead you to make non-prudent investment decisions that will ultimately have a negative effect on your retirement portfolio.  One basketball expert couldn’t see any way for this small school to make it to the Final Four.

No. 8 Pittsburgh over No. 9 Wichita State: Pittsburgh goes 10 deep with no stars. The Panthers are a very good offensive rebounding team, ranking fourth in the nation in getting more than 40 percent of their own misses … Because Pitt is better on the offensive end, The Bilastrator favors Pittsburgh, and the Panthers will move on to face Gonzaga.  “

–        Jay Bilas, ESPN Analyst 2013

Don’t leave your retirement accounts to chance.  Make sure you have a financial plan in place and be disciplined enough to adhere to it.  Even bright people make bad predictions.  Don’t let your finances fall victim to one of them!

The Cinderella Story:  We Americans love our underdog stories.  When I glance at ESPN in the morning it is filled with the best of yesterday’s sports, which always includes a few “Cinderella-like” comebacks! Have you ever seen a movie where the worst team in the league didn’t end up winning the championship in a stunning comeback?  A team that starts out bad and stays bad just isn’t worthy of the spotlight! I certainly remember the 2010 NCAA Tournament when my alma mater, Cornell University, made it to the Sweet 16!  I seem to forget to mention their quick exit from the tournament in 2008 and 2009. Ooops!

So don’t forget the parallel that can be made to your own finances.  We all know the guy who tells you about the great stock he bought and how it has tripled in value since, but what do you think he is choosing to not tell you? Stick with what you can control when it comes to your finances and leave the guesswork to your office NCAA Tourney pools!

The last part of our “Why to Use a Financial Advisor” series involves missed opportunities.  Knowing there are unknowns out there in financial planning is the first step in identifying areas that can be improved.  A few examples of common missed items that we optimize for clients are:

529 Savings Plan in NYS – New York allows a state tax deduction for 529 contributions on up to $10,000 of yearly additions.  At a rate of 6.85%, that is an extra $685 annually just to save for college in the right bucket.  This can even be contributed in the years where college tuition is being paid.

Savings Buckets – There are many investment vehicles to save money for retirement, college or even a rainy day.  Using the optimal buckets (401(k), IRA, Roth IRA, 529, 403(b), Simple IRA, etc.) can help reduce your tax responsibility

Optimal Diversification – Diversification is becoming easier with target date funds, but many clients have suboptimal portfolios causing them to take an increased level of risk for a given return.

Tax Efficiency – If you are fortunate enough to have savings in both taxable and tax-deferred accounts, the portfolio should be optimized to include both account type characteristics.  In short, bonds and REITs should be in tax-deferred accounts and stocks should be in taxable accounts (using the same asset allocation for a level of risk tolerance).

Simplification – As the years go on, the various number of financial accounts continue to accumulate and complicate the picture.   A financial advisor can help sort through the accounts, combine some, eliminate others and come up with a simplified optimal solution customized to you.

Large Transactions – House purchases, car purchases, and new student loans are just three examples of large purchases that could make or break your financial strategy.  A financial planner can assist you in these transactions, sometimes saving thousands of dollars over the course of a loan.

Legal Documents –Wills, Estates, Trusts, Power of Attorneys, and Health Care Proxies are just as important as savings and investing.  A financial advisor can make sure you have the proper documents in place and recommend excellent professionals who can take care of the paperwork.

Social Security –With Social Security being the primary source of retirement income for most Americans, optimizing lifetime benefits is essential for most retirees.   By delaying and utilizing techniques like “file and suspend with spousal benefit,” a married couple could increase the overall lifetime value of Social Security by up to $500,000.

Return to “Why Do I Need a Financial Advisor?”

Believe it or not, the simple answer is, “You can, but most likely you won’t.”

Emotions – How do you feel about a 10% market downturn?  If you have $10,000 in savings, the $1,000 loss stings, but it is not the end of the world in terms of retirement.   How about if you have $1,000,000?  Now that 10% loss has a value of $100,000!  A large loss close to retirement could jar anyone’s emotions.  This is a primary area where a financial advisor can provide a world of difference.  With experience in financial markets, an advisor can take the emotions out of the financial asset decisions and plot a logical course for their clients.

Emotions are also stoked by a relentless advertisement and journalism barrage created to grab headlines instead of focusing on what is important.  The entire financial service industry thrives on your emotions as a way for them to profit.  In contrast, a fiduciary (one who always holds the clients’ best interests first) financial advisor can separate the signal through the noise and take the emotions out of financial decision making.

Desire – Saving and investing are traditionally not in the forefront of our minds and often get ignored.  A good example of this is that the average person spends more time planning their vacation than planning for retirement!  Is this you? By delaying uncomfortable but essential financial conversations, you will only hurt yourself.

Knowledge – Career knowledge is another reason that it is advantageous to hire a financial advisor.  Similar to a doctor or lawyer, advisors have spent many years learning and perfecting their craft.

Time – Finally, the most important value that a financial planner can offer a client is time.  Time saved from stressing about money; time saved from trying to learn complex financial topics; time that can be used for your family, friends, or hobbies.  This concept is no different than hiring a lawn mowing company in the summer to take care of your yard.  You can do it, but it takes time and you most likely won’t be as diligent nor enjoy it.

Return to “Why Do I Need a Financial Advisor?”

Years go by with casual spending and saving until one day a major life event materializes.  It could be a happy moment such as a marriage, retirement or an additional child.  A life event could also be a sorrow-filled experience of a death, a divorce or a loss of a job. Regardless of the event, financial planners can add the most value for clients in key life phases.

Objectivity – A financial planner will provide an outside view of the situation and deliver an objective opinion.  A simple, fresh perspective can enlighten a path in a confusing time of life.

Scenario Analysis – A financial advisor can analyze the what-if scenarios that run through a client’s mind and streamline the decision making process.  How much can I retire on?  What happens to my children if I die?  How will this marriage affect my savings?  Answering these, and many more similar questions, can give a client peace of mind in a confusing time.

Planning for the Unknown – Another key concern in a life transition is understanding future unknowns.  Each transition causes a unique set of new circumstances to analyze and plan for.  Although the federal estate tax limit is greater than $5 million dollars for an individual, did you know the New York State limit is $1 million? How do you plan on avoiding the New York State estate tax while minimizing the loss of control when gifting money?  Digging deeper into the unknowns can protect a family’s wealth and minimize planning mistakes.

Simplifying the Complex – Life transitions come with complexities.  For example, a client on the cusp of retirement came to us with nine different retirement/investment accounts and a dozen various funds in each.  With account consolidation and unified reporting, we were able to properly diversify the portfolio and illustrate all of the assets on a single sheet of paper.  An advisor can help streamline the financial portion of a life transition so that you can focus on the aspects that matter to you!

Return to “Why Do I Need a Financial Advisor?”

No matter how good a swimmer Michael Phelps was, he would have never reached his level of success without a patient and willing coach like Bob Bowman.  The coach-athlete interaction, which includes accountability, camaraderie and hard work, pays off in all aspect of sports.  No one would question that Syracuse University’s basketball success was in large part due to Jim Boeheim!

The benefits of coaching can be easily translated into financial planning.

Goal Setting – Goal setting is an art and a financial planner can help focus the goals to create a tailored individual plan.  All too often, people set their financial savings goals far below their retirement needs.  By identifying an achievable savings goal, an advisor can illuminate the correct path for every client.

Accountability – Stephen Covey’s famous quote “Accountability breeds response-ability” rings true in financial planning.   By interacting with a financial advisor, the thought of saving is always at the forefront of your mind; creating a favorable saving response.  The adherence to a saving habit increases greatly by just reviewing the past, talking about the present, and planning for the future.

Focus on Items that Matter – It is human nature to tinker and try to improve oneself.  It happens in golf when elite athletes disassemble their swings in pursuit of perfection.  It also happens when saving for retirement.  By utilizing the optimal mix of available investment vehicles, (401k, IRA, Roth IRA, brokerage accounts, CDs, etc.) a financial planner will add significant value to the final retirement picture.

Coaching applies to a much broader spectrum of life than just athletics, so consider adding a financial coach to your life!

Return to “Why Do I Need a Financial Advisor?”

This is a very common question, and rightly so.   In this series of blog posts, we will highlight four distinct areas where financial advisors add true value to clients.  After reading, hopefully you will be able to evaluate and recommend the benefits of a financial advisor with a new light.

Part 1: A Coach Can Take You Farther!

Part 2: I’m in a Life Transition – Now What?

Part 3: Can’t I Do This Myself?

Part 4: What Opportunities Have I Missed?

Human beings have an astounding facility for self-deception when it comes to our own money. We tend to rationalize our own fears.  So instead of just recognizing how we feel and reflecting on the thoughts that creates, we cut out the middle man and construct the façade of a logical-sounding argument over a vague feeling.  These arguments are often elaborate, short-term excuses that we use to justify behavior that runs counter to our own long-term interests.

Dimensional Fund Advisors, recently posted the “Top Ten Money Excuses” in their 4th quarter market review.  See if you fall victim to using any of these!

1) “I just want to wait till things become clearer.”
It’s understandable to feel unnerved by volatile markets. But waiting for volatility to “clear” before investing often results in missing the return that can accompany the risk.

2) “I just can’t take the risk anymore.”
By focusing exclusively on the risk of losing money and paying a premium for safety, we can end up with insufficient funds for retirement. Avoiding risk can also mean missing an upside.

3) “I want to live today. Tomorrow can look after itself.”
Often used to justify a reckless purchase, it’s not either/or. You can live today and mind your savings. You just need to keep to your budget.

4) “I don’t care about capital gain. I just need the income.”
Income is fine. But making income your sole focus can lead you down a dangerous road.  Just ask anyone who recently invested in collateralized debt obligations.

5) “I want to get some of those losses back.”
It’s human nature to be emotionally attached to past bets, even losing ones. But, as the song says, you have to know when to fold ’em.

6) “But this stock/fund/strategy has been good to me.”
We all have a tendency to hold on to winners too long. But without disciplined rebalancing, your portfolio can end up carrying much more risk than you bargained for.

7) “But the newspaper said…”
Investing by the headlines is like dressing based on yesterday’s weather report. The market has usually reacted already and moved on to worrying about something else.

8) “The guy at the bar/my uncle/my boss told me…”
The world is full of experts; many recycle stuff they’ve heard elsewhere. But even if their tips are right, this kind of advice rarely takes your circumstances into account.

9) “I just want certainty.”
Wanting confidence in your investments is fine. But certainty? You can spend a lot of money trying to insure yourself against every possible outcome. While it cannot guard against every risk, it’s cheaper to diversify your investments.

10) “I’m too busy to think about this.”
We often try to control things we can’t change—like market and media noise—and neglect areas where our actions can make a difference—like the costs of investments. That’s worth the effort.

Given how easy it is to pull the wool over our own eyes, it can pay to seek independent advice from someone who understands your needs and circumstances and who holds you to the promises you made to yourself in your most lucid moments.

Call it the “no more excuses” strategy.

Tara Siegel Bernard writes in the NY Times, “Most investors don’t realize that when they walk into a bank or brokerage firm branch, the representatives there are essentially free to emblazon their business cards with whatever titles they please — financial consultants, advisers, wealth managers, to name a few. But if you’re looking for someone who is qualified to give smart advice about all aspects of your financial life while keeping costs down, you may not be in the right place.”

She goes on to say, “Still, the biggest danger right now, experts say, goes back to the fact that most consumers don’t know who they are dealing with when they sit down with a broker.”  She quotes Arthur Laby, a professor at Rutgers School of Law-Camden, and a former assistant general counsel at the S.E.C. “The greatest risk the average investor runs is the risk of being misled into thinking that the broker is acting in the best interest of the client, as opposed to acting in the firm’s interest.”

To see the full article go to:

“The interests of the client continue to be sidelined in the way the firm operates and thinks about money.”  This is a direct quotation from Greg Smith’s recent op-ed that he penned after stepping down as a senior executive of Goldman Sachs.  Holding himself up as a man of integrity, Mr. Smith couldn’t stand working there any longer because “the environment now is as toxic and destructive as I have ever seen it,” and he no longer had personal beliefs that aligned with the firm he had once so passionately supported.

However, this news should not come as a big shock to everyone.  Goldman Sachs, Bear Sterns, Merrill Lynch, Wells Fargo and the many other large financial institutions alike have a priority to their shareholders, and that is to make a profit.  Greg Smith stated “if you make enough money for the firm you will be promoted to a position of influence” and later went on to add that the most common question he received from junior analysts was, “how much money did we make off the client?”  Mr. Smith claims that clients are referred to as “muppets” by senior staff, suggesting that those clients are oblivious to their sole purpose of providing profit for the firm!

According to a study by Harvard and MIT economists, many financial advisors are often more likely to give advice that will lead to higher fees for them than higher returns for their customers.  These economists sent hundreds of actors to financial advisory firms and found that in many cases those advisors steered their clients away from a logical investment and instead into one that produced more fees.

Former Bear Stearns CEO Alan Greenberg once said that he would not hold an M.B.A. against prospective hires, but that he much preferred job candidates with a P.S.D. – his term, which is short for Poor, Smart, with a Desire to be rich.  After graduating from Cornell University with a degree in Economics, I was eager to put my newfound love for finance to the test in my first job with a well-known national investment firm.  However, much to my surprise, the three-week training that came with the position was spent solely on sales techniques.  A few weeks later, after bringing in several clients, I then realized that I had no clue what to do next in regards to investing their money!

So what can individual investors do to avoid being a “muppet” for the firm they decide to work with?

Here are a few qualities to seek:

Fiduciary.  They act only in your best interest; a fiduciary relationship means we’re legally obligated to do so.  Registered Investment Advisory firms are held to a fiduciary standard.  This is not the case with others such as insurance companies or broker/dealers.

Fee-only.  Their compensation is fully disclosed, fairly priced, and paid strictly by you, their client.  Fee-only advisors accept no commissions or other types of incentives from outside sources to distract them from serving as your fiduciary.

Having worked at a brokerage firm prior to my time here at Rockbridge, I personally understand Mr. Smith’s frustration.  This is one of the reasons that I am so passionate about our firm’s investment philosophy and the fiduciary standard that we hold ourselves to as fee only investment advisors.  At Rockbridge, we have a strong desire to do right by our clients and carry forward the belief that the “Golden Rule” applies to all that we do, including financial planning!

I haven’t come across many new issues this tax season, but, as usual, a few surprises have popped up.

Make Work Pay Credit Gone
Many are disappointed with the amount of refund or amount owed compared to last year, primarily due to the elimination of the Make Work Pay credit that could be as great as $800 for a couple.  A credit is almost always better than a deduction because it is subtracted directly from the tax, whereas a deduction is subtracted from taxable income prior to the tax calculation.

Residential Energy Credits
As usual, many are confused about the Residential Energy Credit.  Homeowners have new windows, insulation, furnaces, etc. installed by suppliers and contractors with the expectation that their taxes will be greatly decreased, a convenient sales tool.  Actually, not all of the labor and materials qualify for the credit, and then the credit is only a small percentage of the cost, usually 10%, with dollar limits on specific items and with a maximum accumulative limit of $500 over the past five years.  I had a salesman tell me about the credit while presenting his replacement windows for my seasonal lake property.  What he didn’t say, or probably know, was that the credit is only for a primary residence.  When challenged on this aspect, he moved on to the next selling point.

New York State Changes
NY State has added a new e-file requirement for individual taxpayers.  Individual taxpayers who file their own returns using tax software are generally required to file electronically.  A taxpayer who is required to e-file and fails to do so will be subject to a penalty and will not be eligible to receive interest on any overpayment until the return is filed electronically.  They say that if your software supports the e-filing of your return, you must e-file, and if you are required to e-file but you file on paper instead, you may be subject to a $25 penalty.  Looks like NY State is serious about automation and reducing paperwork.  Why then have they discontinued the Form IT-150 short form (two pages), and now require the four-page Form IT-201 for full-year residents?  Why not just reform the tax system and reduce the amount of paperwork that way?

Cost Basis Reporting – Valuable, But Not Entirely Accurate
We are hearing lots of talk about the new cost basis reporting by custodians, and confusion for taxpayers.  The Form 1099Bs that are used for reporting security sales now include the original cost of the security or cost basis for the security sold (stock, bond, mutual fund, etc.).  New legislation that took effect January 1, 2011, now requires the custodian to report this information to the IRS.  This cost basis information is quite valuable for the taxpayer preparing income taxes because it eliminates the need to go back over months and years of statements showing when and for how much the security was purchased and reinvested capital gains and dividends, all of which go into the cost basis.

My first experience was enlightening.  The cost basis for several mutual funds sold was accurate.  They were purchased four years ago and reinvested all dividends and capital gain distributions.  The US Treasury note that matured in 2011 at $18,000 was purchased in 2008 at a premium of about $19,300 because it carried an annual interest rate of almost 5%.  The custodian showed a cost basis of $18,000.

Although the custodian included a notice that cost basis is furnished to the IRS, these securities I mentioned actually were not furnished to the IRS.  Cost basis reporting is only for “taxable” (non-retirement) accounts.  Cost basis is required for:

  1. Stocks acquired on or after January 1, 2011 and
  2. Mutual funds and some other less common security types acquired on or after January 1, 2012.

The cost basis information is valuable for the taxpayer, but not entirely reliable.  The custodian has no knowledge of the cost basis of securities purchased through one custodian and transferred to another custodian.  The responsibility for cost basis lies with the owner of the securities.  Rockbridge Investment Management has historic cost information available for our clients upon request.

This year the filing deadline is April 17, 2012.  Be sure to file by that date, or file a request for extension if your actual return is not ready.  Be sure to estimate any amount owed and include it with the extension request.  At least you will still have another six months to get your act together and get the proper return filed.

Medicare Advantage, Medicare Supplement, Medigap.   Let’s get specific about which coverage to choose. 

Medical insurance is not like any other insurance you have.  Some common insurances, like home owners and auto, may be required by lenders and or state authorities, but you hope you never have to use it. You really have little choice on how much coverage or how much to pay.  Medical, however, is much more personal in that most of us have a pretty good idea of what medical services we will need from year to year.  Of course there will be unexpected illnesses or accidents from time to time.  But overall, we can estimate our medical needs and how much they may cost.

So, we base our coverage on what premium we can afford, how many doctor visits we expect, what drugs we need, and how much risk we are willing to take with major medical expenses.  High costs of health care pretty much dictate that we must have at least some protection against doctor and hospital visits that could lead to financial ruin. For example, my heart cath last year was expensed at $16,000.  How would I have paid for that without insurance coverage?  What if I had been diagnosed with a blockage that needed surgery?  My out-of-pocket amount was $150.  I can handle that, but not $16,000.

There are many, many questions you need to ask yourself and the insurer when deciding on what coverage type and coverage plan is right for you.  Here are a few to get you started.

How much insurance do I need?

You may know the number of primary care and specialist visits, what prescriptions, and what lab tests you will have in a year’s time, and what they may cost.  If you don’t know, you better find out so you can decide if extra insurance is worth the premium.  Why pay a monthly premium of up to $200 per person, in addition to standard Medicare, if you don’t expect that there will be claims?

What is my basic health status?

A person with a history of heart problems, diabetes, back pain, eye problems, or any other regularly occurring health issues requiring hospitalization or specialist care can expect the possibility of them recurring during the year.

Which type of additional insurance should I get?

Medicare is standard and (somewhat) understandable.  The Medicare Advantage and Medigap plans require lots more analysis to understand their options and coverages.  They all are unique as to costs, restrictions, claims processing, etc.  Learn as much as you can about how each would work for you.  Don’t assume that the highest premium plan would be best for you.

What is a Medicare Advantage Plan (MA Plan)?  Is it Medicare?

MA Plans are a form of Medicare administrated by private companies approved by Medicare.  They must cover all of the services of Medicare (except Hospice) but can charge different out-of-pocket costs and have different rules for referrals, doctors, facilities or suppliers.  For instance, a recent visit to an urgent care facility cost me $35 under my MA Plan, where original Medicare would have been $0.  All MA Plans are not the same as to premiums and coverage, so they must be examined to determine how they work for your individual situation.  You must still carry and pay the premium for Medicare Parts A & B.  MA Plans are not Supplemental Plans.

  What is a Supplemental Plan?  (Also called Medigap)

This is insurance that can help pay some of the health care costs not covered by Medicare, like copayments, coinsurance, and deductibles.  They are standardized policies, but different insurance companies may charge different premiums for the same exact policy.

 Do my doctors participate with this plan?  Some plans provide “in network” and out of network coverage, with a different co-pay for each.  Using the latter usually means you pay more and have more paperwork to complete a claim.  Ask your doctors if they “participate” with any plan you choose.

How much will I pay for prescription drugs?    Are they covered under this plan?

Medicare A & B does not include coverage for prescription drugs.  One recent mailing from a private insurer showed a monthly Rx premium of either $40.30 or $89.70 for the same coverage I now get for $0 premium.  One friend of mine has the same plan as I and doesn’t even think he has drug coverage.  He does, but hasn’t needed to use it.

Additional Questions:

 What if I travel, go south for the winter?

What kind of plan should I get just to make sure I would not suffer financially if I had a serious illness or operation?

What would Medicare have paid if I didn’t have Medicare Advantage or a Medigap plan?

How do I access details on line?

What if I have other company retiree coverage?  Should I keep it or change?

The questions and personal issues go on and on.  By now it should be obvious that this is a very complex area and the best way to address it is to go to the seminars put on by most, if not all, of the insurance companies.  Bring your “Medicare & You” booklet.   Be an informed consumer!


In the world we live in today, we are constantly reminded not to sweat the small stuff.  We are told to not let the little things get in the way of living our lives and pursuing our dreams!  That is so true and why we shouldn’t worry about the gossip being spread around at work, what our neighbor might think if we can’t get to mowing our lawn today, those stubborn few pounds we just can’t seem to lose, and what outfit we should wear to the company’s holiday party this year.  All of these things clutter our mind on a daily basis and keep us from focusing on what’s truly important.  What about the costs associated with your investment portfolio?  Your advisor may try to categorize these as “small stuff” as well, but should they?

Rockbridge Investment Management is a firm that prides itself on controlling the controllable when it comes to investing, thus addressing the issue of investment costs is something we don’t take lightly.  The average cost to invest in mutual funds with the typical brokerage firm is 1.5%, while here at Rockbridge the typical client pays around 0.25%.  Are we just sweating the small stuff? Let’s find out!

Let’s take a look at an American family with a combined income of $75,000 who is saving 10% a year for forty years and is getting a fixed rate of return.  Can an extra 1.25% in expenses make that much difference in their standard of living during retirement?  The graph below shows the impact that fees can have on a portfolio – the results are staggering!  The family with the low cost portfolio retired with over $2,000,000, which should allow them to comfortably draw around $100,000 from their portfolio each year during retirement!  On the other hand, the couple who had higher portfolio expenses only accumulated $1,500,000 at retirement, giving them only a $55,000 draw from their account on an annual basis, after taking into account the lower balance and the higher continuing expenses.









(Assumptions:  A couple saving $7,500 annually for 40 years with an 8% fixed rate of return.  To make withdrawal rates equal in retirement, I used a 5% withdrawal rate for the low cost portfolio and reduced the other portfolio’s rate by the difference in fees.)

The notion of not sweating the small stuff is very important; it helps cancel out the everyday noise in our lives, allowing us to focus on living and pursuing our dreams.  However, most of our dreams include a comfortable and fulfilling retirement, and a nearly fifty percent reduction in retirement spending may be a factor in that dream being reached.  But I will let you be the judge of that!

Most successful investors start out as diligent savers.  Saving is the tried and true path to reach your financial goals.  For young people, the goal may be a car, a trip or an education.  As we get older our goals expand to include buying a home, starting a family, paying for a child’s education and saving for retirement.  Achievement of any savings goal is dependent on your ability and willingness to spend less than you make.

After my first full time job in 1990, I had to take responsibility for managing my own finances.  My first budget was quite easy to write since I made very little income and had very few expenses.  However, the act of writing down my goals was profound.  As life got more complicated I continually searched for easier ways to keep track of my income, expenses and savings goals.  Early spreadsheets led to the personal finance software Microsoft Money.  Soon, Microsoft and its main rival Quicken dominated the personal finance software market.  I spent many hours entering my growing number of transactions.  The software became increasingly complex by adding features that I rarely needed or used.  Ease of use was not a top priority for either company.

My frustrations were shared by a young engineer from Duke University named Aaron Patzer.  In 2005 Patzer was inspired to create as an alternative to the frustrating and difficult Quicken product.

Patzer created a simple and easy to use online interface for keeping track of financial transactions.  His timing was perfect as online banking had exploded across the country.  Patzer leveraged the availability of all that online data to bring the consumer a free resource that could easily and intuitively track all of your transactions electronically.  By 2009, the company had 1.6 million users and was quickly bought by Quicken for $170MM.  Today, boasts about 5 million users.  Some of the most impressive features of are:

Tracking expenses – When you log onto all of your transactions from your various accounts are immediately imported into your account.  The transactions are categorized for you automatically or you can enter your own categories which will be recognized going forward for future similar transactions.

Overview page – Once your accounts are synced online, you have a quick look at the current balances of all your accounts on one page.  Scroll down to see the sum of all your assets, your current liabilities and net worth.

Budgeting – You can create your own budget or let do it for you by tracking your expenses over time.  It uses inertia in your favor by building a budget based on spending history.

Goal setting – You can set your own savings goals. has 10 savings goals that span a saver’s life cycle.  Use the ones that most interest you and ignore the others.

There are a few drawbacks to consider.  The business model for relies heavily on advertising and promotional offers from various sponsors.  For example, if records a transaction fee in your checking account you may see an ad for a “free checking” account from XYZ Bank.  It’s not clear that such a business model is sustainable, but Quicken clearly saw the future of personal finance being on the web.

I am currently a devoted user of  At first I was apprehensive about this online startup having access to my online banking, credit and investment information.  I tested the waters with one checking account.  Slowly I began to see the power of consolidating all of my accounts in one easy to use online location.   My account now keeps track of 2 checking accounts, a health savings account, 3 credit cards, a mortgage, a brokerage account and several IRA accounts at Charles Schwab.

I do not believe anything can be 100% secure online, but does boast bank level encryption to secure your information.  It’s a “need only” connection, meaning they cannot access your accounts online to perform actions such as an unauthorized withdrawal or transfer.

I would highly recommend for anyone who wants to track their expenses or transition from one of the PC based software options like Quicken.

Please note that Rockbridge Investment Management has no affiliation with or financial interest in and accepts no liability arising from the use of their services.

half full or half emtpy?

One of the many benefits of owning an iPhone is free subscriptions to interesting podcasts.  Recently, I listened to Matt Ridley give a talk at the Long Now Foundation’s Seminar of Long Term Thinking called “Deep Optimism”.  Ridley is the author of The Rational Optimist. In his book he argues that we all collectively prosper through trade and that we only productively trade with those we trust.

In his talk on “Deep Optimism”, Ridley presented a well-researched and documented case for progress in all areas of our lives. In one very illuminating example, Ridley showed how it takes less time each year to work for a constant benefit, say an hour of artificial light at night.

  • In 1800 it took six hours of typical labor to purchase an hour’s worth of candles, so few working people did.
  • In 1880 it took fifteen minutes of work to purchase an hour’s worth of kerosene for a lamp.
  • In 1950 it took eight seconds of work to pay for an hour’s electricity for a light bulb.
  • In 1997, it took only half a second of work to light a compact fluorescent bulb for an hour.

Ridley proclaims “we are becoming healthier, cleaner, smarter, kinder, happier, and more peaceful.”  He argues that the root cause of global prosperity is the exchange of ideas and specialization.  And, more importantly, our progress is real, enduring, and for the near future unlimited.  That’s a lot of optimism in the face of the pessimism that’s peddled in our daily news.

To me, Mr. Ridley’s optimism is based on exchange leads inevitably to market efficiency.  In a free market there are willing buyers and willing sellers.  Both are motivated to exchange based on their ideas or expectations of future returns.  This belief in market efficiency greatly simplifies the investing process.  It allows us to focus on what’s important in the process:

  1. Understanding risk –  How much risk are you willing, able or
    need to take
  2. Diversification –         Globally diversifying across various asset classes
  3. Control Costs –         Lowest cost to gain exposure to an asset class

As an investment advisor, my job is to deliver a well-diversified portfolio based on my clients’ risk tolerance and goals.  I continually focus on controlling costs and measuring results.  Those are all very valuable services but there is something more valuable I offer clients.  Recently, during the interview process, a prospective client asked me what my greatest value was.  I don’t think anyone had specifically asked me that question before, but I had given it thought, especially after my experience during market meltdowns, most recently in 2008.  My greatest value as an advisor is to keep my clients from making disastrous emotional mistakes in times of turmoil or deep pessimism.   Investing is not an easy task especially undertaken on one’s own.  While there is a cost to advice, it’s often worth the price to have someone optimistic by your side.

Tax preparation gives interesting insight about personal financial situations.  Here are some examples.

Last year an elderly lady brought her tax documents to the AARP Volunteer Tax Service for preparation.  Her 1099s, etc. were not well organized, but appeared to be adequate.  She, herself, was a little disorganized, and not entirely comfortable with what she needed.  For example, she didn’t have her prior year return, one item that we specifically request.

One item was a 1099 for an IRA distribution of about $150,000, from which there was federal withholding of 10%, no NY withholding.  I immediately thought that she would be grossly underwithheld unless there were huge deductions or unless some of it had been rolled over to another IRA.  I asked about it and she told me she took it all out and bought gold.  Alarm bells automatically went off in my head.  I asked who her advisor was, or what firm had done this transaction for her:  her response was that she did it herself and bought the gold from the guy on the late-night talk radio program, Coast-to-Coast.  I finished the tax return and explained that she would owe over $20,000 to the IRS and over $6,000 to New York State.

She told me she would sell the gold to get the cash to pay IRS.  When asked how that would work, she told me that she had not yet received the gold, and that she had bought it back in the fall of the previous year.  I fear that she will never see the gold, or proof that she owns it.  With any luck, she has the gold or certificate of ownership, but she did just about everything wrong to get it.  This transaction may work out for her but is full of questions that should have been addressed by an advisor with fiduciary responsibility prior to the initial IRA distribution.

Another return this year points out just how important it is to plan for your retirement.  A few years ago I met with a couple who planned to retire early at age 62.  They had company 401k plans and would begin to collect Social Security at age 62.  Presently they were covered by a subsidized company health plan at a total monthly cost to them of $400.  Fast forward to a return I just did for a single individual age 60 who paid $1,300 monthly for health insurance, and another $2,000 for co-pays and deductibles in 2010.

Imagine the shock for this couple when they factor this kind of expense into their retirement cash flow budget.  Their monthly medical costs will have gone from$400 to $2,800. They would need another $100,000 in assets just to pay for health care costs to get them to age 65, at which time they would be eligible for Medicare coverage at a lower cost (assuming it still exists at today’s premiums and coverages).  They had budgeted and saved for years for this early retirement goal, but the single most critical factor in their decision to retire early is this important, necessary expense.  Of course, they could self-insure and take the risk of not needing health insurance for three years, but I don’t recommend it for anyone with today’s costs of health care.

A realistic plan for retirement is important, as well as a regular periodic review of your financial status once retired.  Lots of things change, some of which we as retirees can’t control.  Your investment advisor can help develop and monitor a retirement plan for you.

We’re only two weeks into the tax season and already the stories of woe surface.  As usual, our politicians have added complexity to the tax code and we have a new set of filing requirements:  new forms, tax rates, credits, challenges, etc.

For the fourth year I am volunteering as a Tax Aide with AARP helping others prepare and file their 2010 returns.  This is a service for anyone, not just retirees, to have their tax returns prepared and filed by a trained tax preparer for free. This is done across the country.  Check your local area for a schedule.  In the Syracuse area there are about 40 volunteers with schedules at libraries and community centers.

In the first three days of my volunteering this year, here are some interesting experiences:  One told me of the largest paid preparer (rhymes with clock) quoting them $85 for a simple 30-minute tax return, with no itemized deductions.

Another told me it cost them about $100 to do their own tax on line, a fee for federal, one for state, one for efiling, and one for direct deposit.  Not bad for a return that would have otherwise cost $200-$250 by a paid tax preparer.

One lady had a Form 1099 distribution for about $97,000.  I asked what it was and she told me her “financial advisor” had changed companies and transferred her annuity to the new company, but that it was not taxable to her.  She was right about the taxability, but didn’t realize that there would be a nice commission for her financial advisor and probably a new redemption fee schedule imposed on any withdrawals, typically for 5-10 years.

Another similar situation with less favorable consequences for the tax payer was a lady with six distributions from her IRA.  The total of the distributions was over $60,000, one in the amount of $33,000.  She didn’t remember taking all of them.  She also told her consultant she wanted enough withholding so that she didn’t owe taxes at year end.  No NY State withholding was taken on any, and no federal withholding was taken from distributions of $10,000 and $9,600.  As a result of all of the distributions, she ended up in a higher tax bracket, her income was high enough as to make most of her Social Security (for which there was no withholding) also taxable, and she would owe $6,000 for federal and $3,000 for NY State.

She told me her financial advisor also changed companies, that he calls her regularly to buy or sell investment products, that she doesn’t remember all of the distributions, and that she doesn’t know how she will come up with the $9,000 tax payments in April.  I suggested she call her consultant to see if it would be possible to reverse any distributions that were made within the last 60 days, avoiding the tax on those amounts.  Sadly, there are many issues here to be resolved, perhaps even legal issues.

In my many years as an advisor I have processed  thousands of IRA rollovers, transfers, distributions, etc.   As a fee-only investment advisor with Rockbridge, I have a fiduciary duty to act in the best interest of my clients.  Unfortunately most people don’t understand that financial advisors and brokers who accept commissions do NOT have a fiduciary duty.  I wish more people understood the difference between a fee-only advisor and an advisor who gets paid to sell products.

If you are planning or expecting any distributions from your IRA accounts, call your advisor to discuss the tax implications.  You may not be able to avoid the taxes, but at least you will be prepared.

It’s only the middle of February and already I have had my share of tax-related situations.  One thing for sure, it is a great way of helping people through the maze of income taxes.  The AARP program is not for business returns, high income taxpayers, or for those with complex returns, but we can prepare returns with itemized deductions and most tax credits.

Most investors track the direction of the financial market by checking where the S&P 500 or Dow Jones Industrial Average finishes on a daily basis in their local paper.

Some days they were pleased with what they saw and others not, but as a whole 2010 left most investors optimistic about the direction of their retirement portfolios.  However, most people forget to check how their portfolio returns did relative to these numbers, and if they had, might think of changing advisors as a New Year’s resolution as well.

In 2010, a mere 25% of active managers beat their respective benchmarks, with many active managers calling it the “toughest year on record.”  High correlations between stocks, low spreads on returns, and tough economic times were their reasons for underperformance.  Nowhere did they mention that either high costs or lack of ability could have played into their lacking returns.  Better yet, only two-thirds of active managers plan to beat the S&P 500 next year, which leaves me wondering what the other third plan on getting paid for while going to work each day?

Upton Sinclair once said that “it’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it,” and this seems to be the case with active management as well.  The latest data from Standard and Poor’s shows that active managers continue to underperform and at a rate that is far worse than chance.

This underperformance by active managers is not unique to 2010, yet instead, it only gets worse when you look at it over the long run.  For the five years ending September 2010, only 4.1% of large-cap funds, 3.8% of mid-cap funds, and 4.6% of small-cap funds maintained a top-half ranking over five consecutive 12-month periods.  Statistically, 6.25% of funds would fit this criteria, assuming a 50% chance of falling into the top half each year.

This shows that not only have active managers underperformed their respective benchmarks in 2010, but that you have a better chance of picking which one will outperform its peers over a five-year period by blindly drawing a name from a hat!

So as you look back over 2010 and plan for another year, do yourself a favor and review your retirement portfolio.  It’s more important than you might think and can make a drastic impact on the way you spend your retirement years.  No individual wants to pay a premium for the likelihood of underperforming market returns, yet a majority of the populations does.

Take a moment this New Year and make sure you are not just following the crowd.  Though, for current Rockbridge clients, you can cross this one off and move to the next thing on your list of resolutions!

With interest rates near historical lows, some investors may be anxious about a possible rate climb and its potential impact on their fixed income investments.  Read more

Meeting new people or reconnecting with acquaintances often leads to the question of where I’m working these days.  I reply, “I work for Rockbridge Investment Management, which is a ‘Registered Investment Advisor’ (RIA).”  With that response I usually get a nod and a change of subjects.  Read more

Like most things in life, the simple approach to doing something almost always tends to be the best.  This theory holds true when it comes to investing and is one of the cornerstones behind our investment philosophy.

“Gross return in the financial markets, minus the cost of financial intermediation, equals the net return actually delivered to investors.”
– John Bogle

Read more