We hope you are well and staying healthy. Please know we are here to help.
We are open and happy to chat by phone or video or meet in person at our office under CDC guidelines.

  • Mid Year Outlook – Let’s hope the back half is less crazy…

    Dear Friends,

    As we approach the mid point of year 2020, it seems like we all need to catch our breath from the Covid nightmare. Unfortunately, I am not sure we’ll have that luxury given that this is in fact a Presidential election year (and the unemployment numbers still stink too!).

    If you missed our last client conference call a couple of weeks ago, this piece contains a lot of information that Marc Nabi, Portfolio Manager with American Funds, discussed on the call.

    In summary, always remember that recoveries last longer and produce much stronger results then downturns. And most importantly, the active management that occurs on a daily basis inside every fund that you own with us will be a key driver of your investment success over time. After any economic downturn there are always winners and losers among companies – business that emerge better positioned than their competitors. Selectivity will be key moving forward and that’s the kind of activity that occurs everyday with the portfolio managers who are making investment decisions inside each fund you own.

    Don’t ignore the potential for continued volatility – that is a part of it and the tougher the headlines the more that is a factor. Speaking of volatility, let’s not forget about that Presidential election. There is no discernable difference between parties and market direction. Let’s face it – the economy is far bigger than any one person or one political party. Pay particular attention to the headline events that occurred during each President’s time in office. We often forget these historical headlines that, at the time they are happening, feel like the worst case scenario.

    In a week or so you will receive your statements for the second quarter. The good news is that they will look much better than what you saw at the end of the first quarter. At the end of March, the markets were free falling due to the Covid shutdowns and in that first quarter were down about 20%. As of the date of this email, 6/25/2020, markets overall are down about 5% an upward shift of 15% since the end of March. This strong recovery in the second quarter makes the results for the year to date not too bad considering Covid.

    As we have mentioned in previous emails, the office is fully open for meetings either by phone, video or in person. Please know that we do adhere to a universal masking policy for in person meetings and try to have those in-person meetings outside if the weather permits. Who knew those oak trees I planted a decade ago would grow to make a shady outdoor meeting space that we would actually use!

    We hope you all are well. As always please let us know if we can be of any help and if we haven’t seen you in 2020 yet, we encourage you to contact us to set up a review.

     

  • Dear State of Florida Employee

    June 9, 2020

     

    Dear State of Florida Employee,

    2020 is certainly giving us some significant swings in the markets, the economy and our society. The Covid pandemic created the single biggest loss of jobs in history. In response, the markets achieved an incredibly high level of volatility.

    1. Market Commentary

    The volatility in the market created breathtaking swings in account values. At one point, markets were down 34% from the beginning of the year. As of the start of this week markets had shifted up 45% from this low point to be less than 7% from their all time peak in mid – February.

    There are three things that are helping the markets to hang in there despite the widespread Covid shut downs. First, don’t fight the Fed. This maxim has been around for decades and when the Federal Reserve is lowering interest rates and making borrowing easier the markets typically respond positively. Second, don’t fight city hall. When government leaders are providing significant cash relief to both individuals and businesses, the markets will respond positively as well. And third, tech rules the day. The Covid pandemic only accelerated the performance of industry leaders in the technology area and it is these companies that contribute significantly to market performance.

    That’s the good news – but there is always the rest of the story. And Covid is still very much with us and its spread may very well have been compounded by the current level of social unrest as well. In addition, the amount of Americans unemployed is still at a staggering level. Consequently, the markets may be getting somewhat ahead of themselves. Remember though, the best possible investment results are achieved over time by being consistent with one’s approach. If you have any questions about your overall financial picture or investment mix, we are available at any time for phone or video conversations along with on-site visits that follow CDC guidelines.

    1. Our Weekly Podcast & FRS Booklet

    Our weekly radio show/podcast network continues to expand. In addition to the Newsradio Orlando network of stations on 94.1 FM, 93.1 FM, and 540 AM, the live show “Dollar & Sense” that airs every Sunday morning from 9 – 10 AM can now be heard on the local sports network 96 Nine The Game (96.9 FM) which is home to the Orlando Magic and the Tampa Bay Buccaneers.

    To download or listen on-line, follow us on Facebook under Nelson Financial Planning. We are also on a variety of other platforms like Twitter, Itunes, Spotify and many others. Visit our website www.NelsonFinancialPlanning.com to find direct links to your favorite podcast format.

    One of our most recent videos addresses the topic of why you should still continue to contribute to your deferred compensation account despite the Covid pandemic. Be sure to subscribe to our Nelson Financial Planning Channel on Youtube for this and other timely updates on retirement matters.

    Our Booklet – The State of Your Retirement; The Essential Guide for all State of Florida Employees – continues to be the one source for state employees that describes all of the unique choices you face at retirement. The latest edition includes information about your eligibility for the Health Insurance Subsidy along with a chapter on the importance of Deferred Compensation Accounts. Please be sure to call (407-629-6477) or visit our website www.NelsonFinancialPlanning.com to get your free copy today.

    III. Investment Plan Fund Changes

    Last month FRS announced a change in its FRS Investment Plan Fund options. As of July 1, 2020, the FRS Large Cap Stock Fund and the FRS Small/Mid Cap Stock Fund will become the FRS U.S. Stock Fund. In addition, the FRS Investment Bond Fund will be merged into the FRS Core Plus Bond Fund and the FRS 2015 Retirement Plan Fund will be merged into the FRS Retirement Fund. These changes effectively reduce your investment options which unfortunately continues a trend within the FRS Investment Plan of offering less options. These reduced choices force employees to use more cookie cutter options that aren’t very finely tuned to one’s individual objectives. As for this change, we recommend that FRS Investment Plan participants who own these funds let them automatically transfer to the new funds as there really aren’t any other choices that represent similar investment objectives. Just one more reason why when you do retire from FRS you certainly want to explore your rollover options to an outside IRA in order to broaden your investment mix to more accurately reflect your retirement income needs.

    These investment changes do present an opportunity to review your overall investment mix in your FRS Investment Plan. However, as you approach retirement, you should enter into more of a growth and income approach.  Receiving income while maintaining some growth to cover that income becomes paramount in retirement.  This shift means that your investment mix needs to adjust as well.  We encourage those that are within 3-5 years of retirement to review their investment allocation.  As always, we are happy to provide free consultations to state employees who would like to review their investment allocation.  Simply contact the office at 407-629-6477 to schedule a conversation and be sure to have your login information handy.

    1. 2020 Legislative Update

    In our January letter, we mentioned some proposed legislation that would have increased the employer’s contribution rate to your retirement. This bill (SB 992) didn’t really go anywhere during the legislative session and wound up being withdrawn. However, the bill was far from perfect as it also forced state employees to increase their required contributions from 3% to 5% over the next few years. Perhaps in the next legislative session FRS employees will get some improvement in their benefits!

    1. Retirement Under the Florida Retirement System.

    There are many factors that go into properly planning your retirement.  The various types of FRS retirement accounts such as IRAs, FRS Investment Plan Accounts and Deferred Compensation Accounts are unique and have different tax consequences depending on your age.  These are very important and very complicated issues that require proper planning in order to have the most flexibility in retirement. If you are thinking of retiring or have recently done so, please contact us at 407-629-6477 to schedule an appointment to discuss planning your retirement in the most tax and cost efficient manner. THESE RETIREMENT PLANNING SESSIONS ARE ABSOLUTELY FREE NO OBLIGATION CONVERSATIONS THAT ANALYZE ALL YOUR RETIREMENT OPTIONS. 

     

    As always, stay well and please contact us with any questions on any financial matter.

     

    Sincerely,

    Joel Garris, JD, CFP, CFF

    Host, “Dollar & Sense”

  • A rapidly changing world….

    Dear Friends,

    We hope you are all in good health and these market swings over the evolving virus headlines aren’t creating an excessive amount of stress for you. Over the past month, the Dow Industrials has closed more than 1,000 points lower on six occasions and has rebounded at least 1,000 points four times. What started out as daily swings of 3% has now become daily swings of 10%!

    The problem that remains is uncertainty – nobody knows what this will look like in a couple of months, let alone next week – and markets HATE uncertainty. What we do know about uncertain times is that markets always price the worst-case scenario. When the actual data starts to become slightly clearer, markets respond positively with the same speed and vigor they had when reacting negatively to the uncertainty.

    Headline driven events like this virus come out of nowhere. To me, this feels like a combination of two headline driven events (as opposed to economic driven events like the dot com bubble of 1999 or the financial crises of 2008) that I experienced early in my career. The first one was the tied Presidential election in 2000 which resulted in a market drop of 25% in five weeks – nobody likes not knowing who the leader of the free world is after a completed election. The second was 9/11 – just a shocking turn of events that shut the markets down for a week. Coronavirus has the chaos factor, the emotional impact,  and the uncertainty of the future all rolled into one and we believe the markets have already priced a significant economic disruption into the markets.

    But this too shall pass – it always does – both the headline events and the economic events will fade away over time. The seeds of the next bull market are being planted today and our single biggest job is to make sure you stay invested to reap the benefits. Folks, this is where investing gets hard! If it were easy, then everybody would always love the market and never invest in anything else. I always talk about staying consistent as the best strategy that produces investment results over time. It seems like trite and too simplistic advice, but now we all should be feeling how difficult that simple advice is.

    The easy path is always to throw in the towel. Move out and wait as many investors are doing. Except the markets move all too quickly leaving folks out and waiting and undermining performance. If markets move further down, you won’t get in then because that means the headlines have gotten even worse and your nerves will be even more on edge. Your nerves will only calm down and allow you to make such a move once things have gotten better. Of course, the markets will lead the recovery as they always do and then you and your investments results will be left behind. Far too many studies on investor results versus market results over the years come to the same conclusion – investors who move their money in and out of the markets severely underperform over time.

    Clearly given the current state of affairs and governmental recommendations, our client meeting scheduled for March 26 will have a different format than gathering in a ballroom. We are looking into different video and audio options that will allow us to still connect on that day with the latest information so stay tuned on that.

    As for the office itself, we remain open. Our office design lends itself well to “social distancing” since we all have separate rooms and not shared cubicle space. We are wiping surfaces and door knobs down throughout the day and our daily staff meeting has been replaced with check ins by me at each individual room door. Some of you have switched to phone meetings which is a fine option as well, but we are also continuing with face to face meetings with our chairs pushed back a bit more than usual.  Remember the tax filing deadline of April 15 still remains despite suggestions to the contrary. So that means that this tax season has less than 30 days left so if you haven’t gotten us your tax info yet, please do so as soon as possible. Don’t forget, you now have the option to upload your tax documents – just provide us your email and we will send you a secure link to do that.

    As always, we are here to chat about the current environment so don’t hesitate to call us if you have any questions or concerns.

  • Shifting Sands for Current Employees – The Litany of Changes since 2008

    In 2011 with the inauguration of Rick Scott and a Republican Legislature, the Florida Retirement System started to change. These changes were predicated on the aftermath of 2008 on the state’s finances. The market decline during 2008 and 2009 dramatically reduced the value of the FRS Pension Plan assets from about $135 billion to under $100 billion. As a result, politicians embarked on a cost cutting spree that effectively reduced your retirement benefits. The effect of these changes on employees depended on whether they were in the Pension Plan, DROP or the Investment Plan. These changes still remain in place despite the improvement in state finances and the value of Pension Plan assets returning to over $160 billion as of June 30, 2018.

     

    The single biggest change was the requirement for all state employees to contribute 3% of their salary to the Florida Retirement System. For those in the Investment Plan, these monies go into their own account. For those in the Pension Plan, those monies go into the general fund of the Pension Plan. This required contribution did not apply to those employees who were currently on DROP. This required contribution continues to effectively act as a 3% reduction in one’s salary. For most employees that was particularly tough to take over the past few years given the absence of any salary increases.

     

     

    Meanwhile, the biggest change for those under the Pension Plan was the effective elimination of the Cost of Living (COLA) of 3% per year that is part of the calculation of one’s Pension Plan benefit.

     

    While the original legislation stipulated that this was a five year suspension ending in 2016, by requiring legislative action to bring the COLA back, it effectively served as an elimination of this benefit. To date, there has been no real movement by the Florida Legislative to reinstate the COLA for state employees.  Given that the value of the Pension Plan assets have returned to a value greater than what they were before the 2008-2009 financial crisis, the COLA benefit should arguably return.

     

    The effect of this change is to prorate an employee’s COLA benefit across their total number of service years.  For example, if you have 25 years of service as of July 1, 2011 and worked another 5 years, your COLA benefit under the FRS Pension Plan would decrease to about 2.5% per year from the current 3%.  Similarly, if you plan to retire in 2020 with 25 years of service, you would have 9 years at a COLA of 0% (the years since 2011) and 14 years at a COLA of 3%.  This would average out to produce a COLA of 1.7% on your pension in retirement.

     

    Employees who choose to go on DROP are also affected by these legislative changes as well. Prior to 2011, DROP monies earned a guaranteed rate of return of 6.5%. After 2011, this rate dropped dramatically to just 1.3%. Over the five year DROP period, this 5.2% annual differential has a dramatic effect on reducing DROP values.  In fact, employees should compare the impact of the additional years of service time on their pension with this more limited benefit of DROP.  In some cases, the additional years increase one’s pension benefit more significantly than the potential income from the lump sum DROP amount.  Remember, years spent on DROP don’t count towards calculating your pension benefit.

     

    Investment Plan members were able to escape the effect of the 2011 legislative changes but in 2012 politicians caught up with them. In 2012, House Bill 5005 reduced the contribution paid by employers into the Investment Plan by a huge margin.  Prior to July 1, 2012, the total contributions to one’s Investment Plan account was 22% for special risk employees and 9% for regular class employees. After July 1, 2012 those contribution rates declined to 13% and 6.3% respectively.   Since then, these contribution rates have increased only slightly to 15% for special rate employees.  Unfortunately, for regular class employees the contribution rate has further declined to 6%.  These rates include the mandatory 3% employee contribution.

     

    While billed as a necessary change to level the benefits between the Pension Plan and the Investment Plan, it served to disproportionately undermine the benefits of the Investment Plan. In addition, these changes in contribution rates were buried in legislation that was passed at the 11th hour and largely occurred without much discussion with the affected employees.

     

    Of course, the deal is also different for new State employees as well. For those entering FRS employment on or after July 1, 2011, the vesting under the FRS Pension Plan increased to 8 years from 6 years. Vesting under the FRS Investment Plan remains at one year. In addition, average final compensation under the FRS Pension Plan increased to the 8 highest years of service from the 5 highest years.

     

    The age eligibility for retirement increased from age 62 to age 65 for regular class and from age 55 to age 60 for special risk. The retirement eligibility based on years of creditable service increased from 30 years to 33 years for regular class and from 25 years to 30 years for special risk. New FRS employees will need to work longer in order to receive comparable benefits available to current FRS employees.

     

    In addition, new employees must make an election between the Pension Plan and the Investment Plan within eight months after their hire – otherwise the state will choose for them!  Effective January 1, 2018 if new employees do not make an election by the end of the election period of eight months, there will be a default membership.  Employees in classes other than the Special Risk Class will default to the Investment Plan and members in the Special Risk Class will default to the Pension Plan.  All members will continue to have a second election but employees should make their first election immediately after their hire.  Otherwise you may wind up using your second election to reverse a default decision that you didn’t intend to make.

     

     

     

    The bottom line on all these changes is that it affects your decision and timing on making any changes to your retirement. In the past, when employer contribution rates to the Investment Plan were 30% higher, the timing of any switch to the Investment Plan was somewhat immaterial. Now, the timing of the switch really matters. Over the years we have reviewed countless individual comparisons and while each situation is unique, based on these reviews, it seems that any move to the Investment Plan needs to be either at the inception of your career or at the end. This also preserves your second election to switch among the FRS options for future use as well.

     

    At the beginning of your FRS career you have time to generate a sufficient balance in your Investment Plan and can take advantage of its shorter vesting requirements. In fact, we have seen some scenarios of late where employees who had initially started with the Investment Plan had the opportunity after 10-15 years to buy back into the Pension Plan and retain a significant portion of their Investment Plan balance.

     

    In contrast, those that wait to switch at their 25th year of service (30 years if not special risk) experience the largest run up in their projected lump sum balance in the last five years of service. After hitting these full retirement service years, the projected balance rises at a rate similar to inflation. In those cases, it may make sense to make a move in that 25th (or 30th) year of service if an employee wants to go into the Investment Plan. The hardest scenarios are those with 15 years or so of service. For them, it probably makes sense to just wait things out before considering any move among the FRS options.

     

    In addition, those retiring under the FRS Investment Plan need to be aware of the timing restraints that exist to access your money. Retirees must wait one full calendar month after the month in which they retire before they have an early access opportunity to draw funds from the FRS Investment Plan. In order to shorten this window, one should retire at the end of the month rather than the beginning of the month. For example, if you work a few days at the beginning of a month, you would have to wait the rest of the month plus all of the next month before getting any access to your FRS Investment Plan. This early access is also limited to just 10% of the balance and is available only to retirees who meet the normal age and years of service retirement parameters. In order to gain full access to their Investment Plan balance, retirees then have to wait another full two months after the early access period. Consequently, it often amounts to over three months before retirees can set up normal retirement income from their accounts. This is a significant issue with retiring under the FRS Investment Plan and retirees need to consider their timing restraints and plan their finances accordingly in order to have enough resources to bridge those first three months of retirement.

  • Halfway Through – Taking Stock!

    Dear Friends,

    As we start the second half of 2018, the U.S economy appears poised for continued growth. The tax cuts enacted at the end of 2017 and an increase in federal spending approved in February appear to be adding economic momentum. In fact, these policies are expected to add about $285 billion in fiscal stimulus to the U.S. economy this year.

    Meanwhile, corporate earnings are at new highs – up over 25% from a year ago for the average large blue-chip company. This represents the seventh straight quarter of profit growth and the strongest gains in many years. These same companies are now starting to spend money on factories, equipment and other capital goods. In the first quarter of this year, these capital expenditures totaled over $167 billion – the fastest pace in seven years.

    However, this continued growth does spark one area of potential economic concern. When increased spending occurs with very low unemployment, inflation starts to appear. In fact, one key inflation measure watched by the Federal Reserve hit the central bank’s target in May after running below it every month for six years. If inflation starts rising too fast, the Federal Reserve will be forced to raise rates at a much faster pace as well and this could lead to economic difficulties as borrowing money becomes more expensive.

    Headlines, of course, can also throw the markets and economies off. Chief among these is the current discussion about tariffs which could have a negative effect on the earnings of large multi-national companies. We suspect that this political discussion is just a very boisterous negotiating tactic given the current administration’s pattern of behavior but a protracted trade battle would certainly have negative economic consequences.

    These trade headline concerns have kept market returns somewhat muted so far this year. Your second quarter statements that you will get in the next week or two will show just slightly positive returns for the second quarter. For the year so far, overall returns are on the order of about 2-3%.

    Interestingly, these returns so far appear to be following the typical pattern of Presidential mid-term election years. In the months ahead, politics will certainly dominate the headlines. In the previous 14 mid-term election years (going back to 1962), the markets have experienced a sell-off early in the year and on average end the first three quarters essentially flat. However, as the election results become clearer, the markets rally in the fourth quarter – averaging an increase of 7.5% in the last quarter.

    Given the strength of current earnings and capital spending, we are optimistic that this pattern will repeat itself for 2018 and the year will end quite positive for investment results. Stay tuned! That is easier to do these days than ever before as we have dramatically expanded the platforms you can use to listen to our latest weekly broadcast. Our radio show “Dollars and Sense” provides an opportunity to hear our up-to-date thoughts and perspectives. The show is broadcast live on 102.5 FM/540 AM every Sunday at 9AM and then distributed out to various on-line platforms on Monday morning. Links to the most popular channels are below so be sure to subscribe to our channel on your favorite social media platform and you will be automatically notified of our new shows.

     

    iTunes  https://itunes.apple.com/us/podcast/dollars-sense-with-joel-garris-j-d-cfp/id1388059834?mt=2

    Google Play https://plus.google.com/+Nelsonfinancialplanning

    YouTube https://www.youtube.com/channel/UCMkUy7pgh5x0jzAYwdUx9og

    Facebook https://www.facebook.com/NelsonFinancialPlanning/

     

    If we have not yet visited with you in 2018, the summer time is a great opportunity so don’t hesitate to contact the office to schedule a conversation.

     

     

  • May Flowers and Volatility Showers Plus our 34th Anniversary

    Dear Friends,

    With a third of the year behind us, the calendar shifts to spring (well actually summer here in Florida). So far, 2018 has shown a NORMAL level of volatility.

    Is it really a NORMAL level of volatility? Well, consider this. In the first quarter of this year, the S&P500 experienced daily moves of more than 1% on 23 days. However, over the past 60 years, nine other years (or 15% of the time) experienced similar levels of daily volatility. If something happens 15% of the time, it certainly doesn’t make it abnormal . . .

    In those years where volatility was higher in the first quarter, the remaining three quarters also had higher volatility with their being an average total of 86 such 1% days for those years. However, the good news for those years was that the average total return was 9.6%! The current economic back drop appears poised to replicate a positive return as well, particularly with corporate earnings currently running at an 18% annual growth rate.

    For some additional perspective, please review the attached article from American Funds. “Investing through Adversity” contains some valuable perspective and statistics. Please pay particular attention to the third page which helps to put bull and bear markets into perspective.

    34 years ago today, Jack Nelson started this company. Certainly a lot of headlines and markets ups and downs have occurred over that time period! For reference though, the DOW was at 1186 on May 1, 1984. The fundamentals of investing like diversification and consistency remain as true today as they were in 1984. It has been a privilege to help so many achieve their hopes and dreams and we look forward to many more years to come.

    Our client appreciation events are coming up in the next two weeks. The May 15 event still has space available so if you have not yet sent in your RSVP please contact the office today as we need to set a guaranteed number by tomorrow.  We are currently in the process of securing dates for our 3rd & 4th quarter client meetings so stay tuned for those exact meeting dates.

    With tax season behind us, there are plenty of opportunities to schedule a conversation so give us a call to schedule something particularly if we have not visited yet in 2018.

  • Market Update

    Dear Friends,

    As President Trump marks his 100 th day in office tomorrow, we thought it would be a good time to take stock of where the markets, economy and headlines are.

    2017 is clearly off to a great start for the markets. So far, U.S. markets are up over 6% and non-U.S. markets are up over 8%. We believe that much of this movement is simply a catch up to the economic improvement in the second half of 2016. This better economic data had generally been underappreciated and underpriced by equity markets. The election, in and of itself, simply provided the resolution of some uncertainty that gave the markets an opportunity to focus on the better economic conditions at hand.

    Currently, we believe the markets are pricing in the expectation of additional economic growth. This expectation is predicated on a combination of diminished regulatory burdens on the private sector; lower personal and corporate tax rates; and fiscal stimulus in the form of infrastructure spending. Unfortunately, these pro-growth policies have been delayed by political wrangling. We are optimistic that these policies will take effect in the near term, but any further delays in implementation could splash some cold water on the markets.

    Despite this political uncertainty, the greater trend towards optimism cannot be ignored. Consumer and business confidence numbers are both at levels not seen for well over a decade. Of course, optimism can be fickle particularly if headline events like North Korea take a disastrous turn. Absent that type of event (which is always a risk in today’s world), we continue to expect that this optimism will lead to tangible effects like greater spending by households and greater hiring by corporations.

    Stock Market Growth Here at the office, another tax season has come and gone. If we have not yet visited with you personally in 2017, now is a perfect time to come in to the office for a general conversation. In other news, Nelson Financial Planning was recently ranked by AdvisoryHQ News as a top-rated financial advisory firm in Orlando, FL. We have attached their review to this email for your reference and to share with your friends.

    We are getting ready for our upcoming client appreciation event at Enzo’s on your choice of May 11 or May 16. We thank you for your timely response and selection of food and dates. We are very excited that the response to this event has been so strong. Both dates are currently on a wait list due to venue size restrictions so please let us know if your plans change.

    As always, for our latest thoughts, tune in to our weekly radio show “Dollars and Sense” at 9AM on Sunday at 540 AM/102.5 FM. The show is also available the following day on our website www.NelsonFinancialPlanning. com or on Facebook or Twitter under Nelson Financial Planning and Linked In under Joel Garris.

    Look forward to seeing you on either May 11 or May 16!

  • 3rd Quarter Commentary

    Dear Friends,

    We trust you all survived Hurricane Irma last week. The office was out of power for a day before resuming normal operations. It is so sad to see the pictures and hear the stories about the devastation in the Keys and the Caribbean. The forces of nature are powerful indeed!

    Meanwhile, the markets continue to shrug off any negative news and move higher. Your third quarter statements which you will get in a couple of weeks are on pace to show another 2-3% increase for the most recent three month period. For the year so far, domestic equity funds are up over 12% while international funds are up over 20%.

    Calculating Personal Finances There are some real economic fundamentals that are helping to drive this upward trend and provide the basis for our continued optimism. First, the major economies of the world are expanding in unison for the first time since the 2008 financial crisis. Second, inflation remains subdued keeping both the Federal Reserve and the European Central Bank on the sidelines to leave interest rates unchanged. Third, the U.S. economy is not over leveraged as there has been minimal credit growth over the past 10 years; and the U.S. financial system is better capitalized than it has been in years. Fourth, the stock market is not being driven upward by investor euphoria as $737 billion has been pulled out of equity strategies since the 2008 financial crisis.

    Our client meeting next week will focus on the overall economic picture and discuss the importance of the active investment management that happens in each fund you own with us. Our typical client portfolio consisting of 8-10 funds which hold about 1,200-1,500 different publicly traded companies. During the course of the year approximately 300-400 of those companies will be sold and other companies bought. This very active investment approach generates superior long-term results.

    Brad Rutan of MFS Investments will be our guest speaker at the event on Wednesday, September 27. As usual, the event starts at 5:30 at the Country Club of Orlando (1601 Country Club Drive, Orlando, FL) and features dinner and drinks. If you have not yet reserved your space at this meeting or would like to bring a friend, please call the office at 407-629-6477 or reply to this email.

    On another note, many of you have asked us how to respond to the widely reported data breach by Equifax, one of the three credit monitoring agencies. We discussed this topic this past Sunday on the radio show (“Dollars & Sense” Sundays 9-10 AM on 102.5 FM/540 AM) and you can listen to the show on Facebook via this link https://www.facebook.com/NelsonFinancialPlanning/posts/1944460429170427 . You can also refer to the information put out by the Federal Trade Commission at https://www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do .

    I followed the steps outlined by the FTC to find out that I may have been affected by the data breach at Equifax so I subscribed to the free credit monitoring service. Another option is to place a credit freeze or fraud alert on your credit. The fraud alert is not quite as cumbersome as the freeze when seeking credit in the future so I prefer the fraud alert unless there has been a specific incidence of identity theft. Protecting your information is of the utmost priority here at the office and we recently upgraded our firewall to the best available option on the market. We certainly live in a different and vastly electronic era these days!

    If you have not been in to see us lately, please call the office to arrange a review. Thank you as always for your continued confidence and the referral of your friends to us! Look forward to seeing you on the 27 th .

  • The State of Your Retirement Intro & Chapter 1: The FRS Pension Plan – The Guaranteed Check a Month Club

    It is surprising to me how often state employees are not given all the information necessary to make an informed decision about their retirement. This series will feature seven chapters covering, among other topics, the Pension Plan, DROP, the Investment Plan, the litany of changes since 2008 and some successful retirement income strategies that reduce your taxes and provide flexibility in retirement.

    If you are a member of the Florida Retirement System (FRS), you have seen a lot of changes to your retirement options over the past few years. The state of your retirement has changed dramatically and what made sense in the past often does not make sense today. We regularly meet with state employees to help them figure out these ever changing options. These meetings generally focus on reviewing the pros and cons of your retirement choices to help you make an informed decision and are done as a free service to you.

    While you are working, we keep you informed on a continuous basis by mailing FRS Update letters every few months or so. We do not charge for this ongoing service. Simply put, keeping you informed about the latest legislative changes and market performance while you are still working is somewhat straightforward. It also gives you an opportunity to try us out before you’ll really need us in retirement.

    Couple having a walk at beach As a current employee, your options have changed a lot since 2008. These changes fundamentally shift your retirement options.

    Once you retire, things get a lot more complicated. Our focus shifts to providing personalized retirement income strategies to meet your unique retirement expenses and tax liabilities. These income needs are ever changing and the tax implications in retirement are very important. There are a variety of accounts available as a state employee and each has different tax implications depending on your age and job. Your investment focus also shifts to a more growth and income oriented mix which is very different from the approach used while working. Simply put things get a lot more complicated in retirement and that’s when our customized advice applies.

    The FRS Pension Plan — The Guaranteed Check a Month Club
    The oldest retirement option within the FRS is the Pension Plan. The Pension Plan is a defined benefit plan where your benefit of a monthly retirement check is defined by law. The amount of this check is determined by your years of service, your creditable service percentage and your average final compensation. In addition, you select from among four different options for your retirement income. The two most popular options are Options 1 and 3. Option 1 generates the most amount of income but ends when you die and Option 3 generates income for you and then your spouse when you die but with a reduction in income over Option 1 of typically 15-20% depending upon the age of your spouse.

    This retirement income amount is annually supplemented in retirement by the application of a cost of living adjustment (COLA). However, the COLA has been suspended effective July 1, 2011 which results in a reduction of the prior COLA benefit of 3% per year. Despite better finances in Tallahassee, there has been no suggestion about reinstating this COLA in the future. Consequently, the COLA continues at 0% for all years of services after 2011.

    Effective for new employees after July 1, 2011, retirement eligibility has increased to age 65 or 33 years for regular class and age 60 or 30 years for special risk class. Previously, normal retirement was age 62 or 30 years for regular class and age 55 or 25 years of service for special risk class. The vesting period for the Pension Plan has also increased from six to eight years for new employees hired after July 1, 2011. In addition, a 3% employee contribution is required that goes into the general Florida Retirement System.

    For a more complete description of the FRS Pension Plan, please refer to the Frequently Asked Questions about the Pension Plan and the Pension Plan Summary prepared by the State of Florida Division of Retirement. Both of these documents can be found within www.myfrs.com .

    In summary, the FRS Pension Plan is a traditional check a month retirement plan. This check is guaranteed by the state to last for your lifetime or, with a reduction in income, for a set period of time or the life of another like your spouse. There is never any ability to utilize lump sum amounts from the Pension Plan nor leave a legacy to your beneficiaries. For some, this is the appeal of the Deferred Retirement Option Program (DROP).

    Where indicated, market data and performance represents past performance which is no guarantee of future results. Individual results may vary and values do fluctuate in any investment. This booklet contains our most current understanding of the Florida Retirement System and U.S. tax laws as of October, 2016. This booklet is intended to detail complicated retirement topics but is not a complete discussion as each individual’s situation is different and various exceptions exist. Nelson Financial Planning offers securities through Nelson Ivest Brokerage Services, Inc., a member of FINRA/SIPC. Please note that the information provided in this document has not been approved or endorsed by the State of Florida or the Florida Retirement System.

  • What Makes Nelson Financial Planning Different?

    1. Expert Tax Advice You Can Actually Rely On. You hear a lot of conversations about saving for retirement but not much about planning your retirement income. The biggest reason for this is that most financial firms don’t or won’t give tax advice. Check out their websites. If the fine print says the firm you are using does not provide tax advice and you should consult your own tax advisor, how good is the tax advice you are getting? Our firm employs a full time IRS Enrolled Agent as a member of our financial planning team. We also have a tax preparation service for our retirees that includes a CPA and we stand behind our tax advice.
    1. Expertise and Unbiased Advice of a Certified Financial Planner TM . In the financial services industry, credentials matter. Being a Certified Financial Planner TM , means that the advisor has completed extensive training and experience requirements and is held to a rigorous ethical standard. According to the Certified Financial Planning Board, certificants “understand all the financial complexities of the changing financial climate and will make recommendations in your best interest”. If the firm you are using does not employ Certified Financial Planners TM , how “expert” and “unbiased” is their financial advice?

    Nelson Financial Planning Logo

    1. Only Recommend Investments that We Own Personally. Our most important policy is that we only recommend to our clients investments that we personally own. In the financial industry, few firms can make that claim of their financial planners. Jack Nelson started that commitment when he began the firm in 1984. While Jack has since passed, this bedrock principle continues today. Don’t you want to be dealing with somebody that truly has a vested personal interest in how your investments perform?
    1. Central Florida’s longest running Radio Show – 31 Years and Counting! Many firms do radio shows for certain periods of time but ours is the longest running in Central Florida. We view the radio show more as an opportunity to speak to our followers every week with fresh ideas and perspectives on the most current events of the day. Our radio show “Dollars and Sense” is heard live every Sunday at 9AM on Newsradio 102.5 WFLA and is simulcast on 540AM as well. If you miss the show on Sunday, it is always available on any of our social media sites – Facebook, Twitter, Soundcloud, Google or Linked IN – or at www.NelsonFinancialPlanning.com. Unlike other shows that constantly tell you to call the office now, ours does not because its purpose is to educate, inform and hopefully entertain the listening audience.

     

Formerly Nelson Investment Planning Services (NIPS)

Nelson Financial Planning Inc. offers securities through Nelson Ivest Brokerage Services Inc., a member of FINRA and SIPC.

407.629.6477

Additional information about FINRA membership may be obtained at www.finra.org or calling 301-590-6500

Additional information about SIPC membership may be obtained at www.sipc.org or calling 202-371-8300

  • Nelson Financial Planning
    407.629.6477
    Local Financial Planning Service in the Orlando Area
    423 Country Club Drive, Winter Park, FL 32789
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