Blog - Page 20 of 71 - NorthStar Capital Advisors

Lowest Thanksgiving Dinner Cost in Five Years

This year’s turkey dinner will cost you 75 cents less or -1.5% compared to last year. The average cost of a classic Thanksgiving Dinner for 10 people is $49.12 according to the American Farm Bureau Federation’s survey. The mild decrease in the turkey index is somewhat at odds with the government’s Consumer Price Index for food eaten at home which increased 0.5% over the past year.

The bird soaks up the lion’s share of the budget at 46% of the meal’s cost. The 16-pound turkey came in at $22.38 this year or $1.40 per pound. The price of most ingredients was quite stable compared to last year. Biggest losers: turkey down $0.36 (-1.6%) and rolls down $0.20 (-8.1%). Biggest gainers: cube stuffing up $0.14 (5.2%), pumpkin pie mix up $0.08 (2.6%), and whipping cream up $0.08 (4.0%).

This is the second consecutive year that the average cost of a turkey dinner decreased and it’s the lowest cost in five years.

Happy Thanksgiving!

Source: AFBF

Investing Priorities

The general rule of thumb for investing priorities is:

Invest in your company 401(k) plan up to the match
Pay off short-term, non-tax-deductible debt (e.g., credit card, car loan)
Establish an emergency fund; 6-12 months of living expenses is a good guidepost
Put the maximum allowable amount in a Roth IRA (if eligible)
Put the maximum allowable amount in your company 401(k)
Invest the remainder in taxable accounts
Pay down tax-deductible debt (e.g., home mortgage)

Source: Vanguard

A to Z of Behavioral Bias

An A to Z list of common behavioral biases with brief descriptions, examples, causes, possible mitigations and suggested further reading courtesy the Psy-Fi Blog. Each of the links below takes you to the relevant post at Psy-Fi, so have fun and think about how they apply to your own investing habits:

A is for Anchoring

B is for Base Rate Neglect
C is for Confirmation Bias
D is for Disposition Effect
E is for Ego Depletion
F is for Framing
G is for Gambler’s Fallacy
H is for Hindsight Bias
I is for Illusion of Control
J is for January Effect
K is for Kruger-Dunning Effect
L is for Loss Aversion
M is for Mental Accounting
N is for Negativity Bias
O is for Overconfidence
P is for Priming
Q is for Quantification Fallacy
R is for Representative Heuristic
S is for Self-Enhancing Transmission Bias
T is for Texas Sharpshooter Effect
U is for Uncertainty
V is for Von Restorff Effect
W is for Winner’s Curse
X is for Xenophobia
Y is for Yawn Effect
Z is for Zero-Risk Bias

Source:

The A to Z of Behavioral Bias (Psy-Fi Blog)

Top 10 Mistakes Made with Beneficiary Designations

#1 — Not Naming a Beneficiary
By not naming a beneficiary you have most likely guaranteed that the asset will go through probate upon your death.

#2 — Not Designating Contingent Beneficiaries
If your primary beneficiary predeceases or dies at the same time as you, you’re subject to the same consequences as #1

#3 — Failing to Keep Beneficiary Designations Up-to-Date
If you get divorced, it’s essential you immediately review and update all beneficiary designations.

#4 — Naming Minors as Direct Beneficiaries
Trusts are often established to delay the time a survivor receives an asset until they are old enough to make good money decisions. However, if you designate a minor child as an account’s beneficiary and there’s also a testamentary trust, the designation trumps the trust and the child will receive the assets immediately.

#5 — Naming Special Needs Individuals as Direct Beneficiaries
Naming a “special needs” individual as the direct beneficiary could unintentionally disqualify that individual from receiving his or her valuable governmental benefits.

#6 — Naming Financially Irresponsible Beneficiaries
Often it’s better to create a lifetime “spendthrift trust” to hold the inheritance for the benefit of the individual for his or her lifetime while protecting the assets from creditors.

#7 — Naming Direct Beneficiaries on All Assets Other than Real Estate
Very often real estate will need to go through probate even if there’s a will in place. This process can take a year or longer during which the estate is responsible for paying for maintenance, taxes, etc. It’s generally advisable to allow your cash accounts and/or life insurance proceeds to go through probate so the estate will have sufficient funds to support the real estate during probate.

#8 — Naming Multiple Beneficiaries on a Transfer on Death Deed
Avoid doing because all beneficiaries must agree on the realtor, sale price, and maintenance costs until the property is sold. Getting that type of agreement is very difficult.

#9 — Naming a Child as Co-Owner of a Deposit or Investment Account
Aging parents will sometimes add a trusted adult child as the co-owner of his or her bank account. Avoid this because it can create complicated issues around gifting, creditor issues, and final expenses.

#10 — Naming One Child as the Sole Beneficiary of a Life Insurance Policy or Deposit Account
A parent with multiple adult children should avoid doing this because it can create a situation very similar to #9.

Source: AAII

Asset Allocation in Thirty Seconds

If you’ve only got 30 seconds to understand asset allocation, spend those precious seconds staring at the table below. The main takeaway: stocks beat Treasury bonds and T-Bills on average. For example, over a 1-year period, stocks outperform 61.3% of the time during the last 210 years. Over a longer 30-year period (typical for retirement portfolios) stocks came out on top 91.2% of the time.

This table is from Jeremy Seigel’s book, Stocks for the Long Run.

7 Fatal Flaws in 401(k) Plans

Paul Merriman writes about seven fatal flaws in America’s 401(k) plans:

#1 Restricted Access
The first and biggest flaw in 401(k) plans is restricted access to the best investment choices

#2 Participation not required
I believe that many American households, with nothing saved for retirement, are headed by employed breadwinners who could participate in a 401(k) retirement plan

#3 Insufficient employer match
I also think employers should be required to match at least a quarter of what each employee contributes — after the waiting period, of course.

#4 Employees bear the costs
Many employers make their workers pay the costs of administering a 401(k) plan, which should be treated as an employee benefit that’s paid for by the company. In far too many cases, the costs paid by employees are hidden in the form of higher fees for investment funds.

#5 No Rollover IRA option
Federal law allows — but doesn’t require — employers to let employees move part or all of their 401(k) balances into a Rollover IRA while continuing to contribute to the company plan. All workers should have this option, which gives them access to virtually unlimited investment choices.

#6 Too much company stock
Corporate 401(K) plans often encourage participants to load up on company stock. There’s probably no way to stop this short of a federal law, because employers with publicly-traded stock love the steady market that’s created for their shares every payday.

#7 Default options are too safe
Too many plans steer contributions to low-performance investments. It’s bad enough that the employee’s default option in many plans is simply not to participate. But for those who do sign up, it’s equally wrong to have a default option of a stable value fund that virtually guarantees the employee will gradually lose some of the purchasing power of their savings.

Chasing Past Performance is Expensive

A rigorous study from Vanguard demonstrates that chasing the hot mutual fund is an inferior investing strategy compared to good, old-fashioned buy and hold.

Vanguard analyzed a decade of data ending December 31, 2013 across nine asset classes. In every case the investor would have been significantly better off just sticking with the index. On average the indexes generated 50% higher returns than the performance-chasing strategy!

Buy and hold may not be perfect, but it can be a lot better than flitting from mutual fund to mutual fund.

Regulators Urge Small Investors to Avoid Non-Traded REITs

REITs stands for Real Estate Investment Trusts. REITs sell like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.

Real Estate is historically a good performing asset class. Allocating approximately 10% of your stock portfolio is a generally prudent choice. However, state regulators are seeing more and more trouble with a certain type of real estate investment: non-traded REITs.

Non-Traded REITs
Unlike normal REITs, non-traded REITs do not trade on a securities exchange. They have several very significant issues:

1. Non-traded be can very illiquid.
2. They can be very difficult or impossible to price on a regular basis.
3. It can be difficult to exit the investment.

Front-end fees can be as much as 15% (much higher than traded REITs due to the limited secondary market)

Non-traded REITs buy office buildings, stores, and other properties. They are sold directly to private investors by financial advisors and brokers.

State Securities Regulators Worried
Regulators are concerned that small investors are not fully aware nor understand the risks associated with non-trade REITs. States are on the verge of adopting new restrictions to protect “mom and pop” investors including:

Limit how much an individual’s net worth could be put into any a single REIT
Limit the ability of REITs to pay dividends immediately after raising new money (to avoid a Ponzi-scheme like dynamic of paying old investors with new investors’ money)

The State of Massachusetts has brought enforcement actions against brokerages for improper sales of non-traded REITs including

LPL Financial
Ameriprise
Commonwealth Financial
Lincoln Financial

Source: WSJ

Equifax Data Breach: What You Need To Know

Late last week Equifax announced it was hacked and personal information for 143 million Americans was stolen. If you use credit of any kind (credit cards, home mortgages, student loans, etc.) as most people do, there’s a 50% chance your personal information is involved. Here’s a run down on what happened, the risks, and the options you should consider to mitigate the impact to your personal finances.

Who is Equifax?
Equifax is one of the big three credit reporting agencies in the United States. It collects large amounts of personal information about anyone who has received credit through credit cards, mortgages, car loans, and student loans. Companies use credit reports from Equifax (plus TransUnion and Experian) to extend credit to consumers and conduct background checks for employment and housing.

What happened?
Hackers broke into Equifax’s database and stole personal information for 143 million people. The breach lasted from mid-May through July 2017. Equifax revealed the data breach publicly on September 7, 2017. Stolen information includes people’s names, Social Security numbers, birth dates, addresses and, in some cases, driver’s license numbers. Hackers also accessed credit card numbers for some 209,000 people and dispute resolution communications for about 182,000 people.

How could you be at risk?
Hackers have or will very likely sell this personal information to criminals who can then perpetrate identity theft. With that information, they can open bank accounts, new credit cards, or even drivers’ licenses in your name. Criminals could also file fraudulent claims for your tax refund or your Social Security benefits.

What steps should you consider?
Remember there’s a good chance that you’ve been exposed. To mitigate the potential damage, the Federal Trade Commission recommends you take immediate steps to protect your information from being misused:

Visit Equifax’s website, www.equifaxsecurity2017.com
Find out if your information was exposed. Click on the “Potential Impact” tab and enter your last name and the last six digits of your Social Security number. Your Social Security number is sensitive information, so make sure you’re on a secure computer and an encrypted network connection any time you enter it. The site will tell you if you’ve been affected by this breach.
Whether or not your information was exposed, U.S. consumers can get a year of free credit monitoring and other services. The site will give you a date when you can come back to enroll. Write down the date and come back to the site and click “Enroll” on that date. You have until November 21, 2017 to enroll.
You also can access frequently asked questions at the site.

Here are some other steps to take to help protect yourself after a data breach:

Check your credit reports from Equifax, Experian, and TransUnion — for free — by visiting annualcreditreport.com. Accounts or activity that you don’t recognize could indicate identity theft. Visit IdentityTheft.gov to find out what to do.
Consider placing a credit freeze on your files. A credit freeze makes it harder for someone to open a new account in your name. Keep in mind that a credit freeze won’t prevent a thief from making charges to your existing accounts.
Monitor your existing credit card and bank accounts closely for charges you don’t recognize.
If you decide against a credit freeze, consider placing a fraud alert on your files.A fraud alert warns creditors that you may be an identity theft victim and that they should verify that anyone seeking credit in your name really is you.
File your taxes early — as soon as you have the tax information you need, before a scammer can. Tax identity theft happens when someone uses your Social Security number to get a tax refund or a job. Respond right away to letters from the IRS.

Our CEO Chris Mullis visited Equifax’s website to determine if his family’s information was exposed. His information is not involved, but unfortunately his wife is not so lucky. Equifax immediately allowed Chris’ wife to enroll in its TrustedID Premier monitoring program. Their personal experience just underscores the fact that basically one of every two Americans is likely impacted by the Equifax data breach.

Please take steps to protect yourself from this data breach and share this alert with family and friends.

If you have any questions or need any help, please give us a call.

Student Debt Linked to Worse Health and Less Wealth

The negative effects of student debt are significant and persistent according to a Gallop poll. Those who borrowed more than $25,000 are less likely to enjoy work and are less financially and physically fit than their debt-free peers even 24 years after graduation.

Gallop examined five elements of well-being:

Purpose: liking what you do each day and being motivated to achieve your goals
Social: having supportive relationships and love in your life
Financial: managing your economic life to reduce stress and increase security
Community: liking where you live, feeling safe, and having pride in your community
Physical: having good health and enough energy to get things done daily

Financial and physical well-being show the strongest relationship with student debt. Conversely, social well-being appears to have the weakest debt link.

“These results offer a new dimension of how college debt affects the rest of your life and it gives us more cause for concern,” said Brandon Busteed, executive director of Gallup Education.

Source: Gallup

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