SECURE ACT Update - Rights Can't Offset Wrongs

This is why Washington is broke but politicians aren't

Background

On the surface, changing IRS rules to delay required minimum distributions from 70 1/2 to 72 years old looks like a major win for older taxpayers. In fact, the SECURE Bill making it's way through Congress with bipartisan sponsorship would do this along with a few other attractive changes:
  • Repeals the maximum age of worker contributions to company sponsored retirement plans
  • Make it easier for small business owners to cooperatively offer retirement plan benefits to their workers
  • Require companies to open eligibility to non-seasonal, part time workers

These features of the bill are net savings for workers, so what's there to not like?

Lobbyist Step In

Currently, workers can comfortably contribute to their company retirement plans with the knowledge that their money is going into an account that is well-protected from financial thievery. IRS "safe harbor" rules require company plan sponsors to meet stringent rules that help keep costs in line and junk out of these retirement accounts. This is why you don't see annuity products in 401k plans. Insurance company products are notoriously expensive for consumers which, conversely, makes them very lucrative for insurance companies. Insurance companies know how to use their profits to buy influence in Washington. Purists call it lobbying, I call it what it is - bribery. 

Congressman Richard Neal (D-Mass), who co-sponsored the SECURE act, receives thousands of dollars from the insurance industry. In this bill those corporate donors are getting what they paid for from Neal. The SECURE ACT grants IRS safe harbor status to annuity products so they can be used to pilfer your retirement accounts through unnecessarily high fees and commissions. 

To make matters worse, an appealing amendment from Rep. Kevin Brady would have allowed home school families to tap into 529 education accounts to pay for education related expenses. This measure made it out of committee but was stripped out of the final bill before a vote. Who would be against this? 

The Bull Elephant in the Room

Here's where things get ironically interesting. Rep. Neal (who obviously feels zero compunction from taking money from insurance companies in exchange for favorable language in legislation that he drafted and co-sponsored) smugly invoked an arcane IRS regulation, to demand 6 years of Donald Trumps tax returns. Neal sent this letter on April 3rd the DAY AFTER his SECURE ACT passed in the house with bipartisan support. That tells us everything we need to know. 



This bill has merit for many taxpayers. Sadly, the eventual costs to worker's retirement plans from allowing annuity salesmen in don't offset these benefits. Another bill is working it's way through the US Senate. Let's hope it's better than this. 

Read more...

Lessons Learned from Warren Buffett's $377 Million Ponzi Scheme Loss

Imagine coming home from work and telling your spouse that you lost $377 million dollars in a Ponzi Scheme. Now imagine that you are legendary investment guru Warren Buffett and admitting this to shareholders in his company, Berkshire Hathaway. #BadDayAtWork.

Mr. Buffett has more investment wins than losses. That's why he's known as the Sage of Omaha and Berkshire's annual shareholder meeting looks like a cult meeting. Buffett and his 95 year old Vice Chairman, Charlie Munger have decades of wisdom, experience and a vast team of corporate talent that provides research. This gives Berkshire a massive advantage in weeding out good opportunities from bad ones.

None of that mattered in this loss. He got swindled out of $377 million dollars!

Here's the scene when it all fell apart:





We need to learn from his loss to hopefully avoid some of our own. Let's look at his potential mistakes.

Mistake #1- The investment was in a new company with little financial history. As I write this, Uber just priced their initial public offering. Customers know the company and enjoy the transportation benefits. Uber has a limited financial history which consists of losing money not earning profits. This type of "investment" is for speculators only. Stick to investments that have been making money for a decade or more. This alone will dramatically reduce the potential for fraudulent outcomes.  

Mistake #2- His solar investment thesis apparently focused on tax-related benefits more than investment activity returns. We invest our money to earn a return from the investment activity of the business. If the company's business turns a profit, you have a strong chance of earning a positive return. Real estate limited partnerships in the 70's and 80's relied on complicated tax benefits to entice wealthy investors into parting with their cash. With a simple IRS tax law change, these benefits were wiped away over night and so were most LP's. Nowadays, insurance products are often marketed as tax savvy "investments" but at the end of the day, it's an indemnity policy that should insure you against some sort of specific loss (life, income, health etc.) period.    

Mistake #3 - He didn't recognize the problem soon enough. Berkshire made investment in DC Solar from 2015 all the way through 2018. At LeConte, we tend to be deep value investors which means we like to buy cheap investments. The trick is to differentiate when something is cheap (for a reason) and when it is worthless. After 3 years, Berkshire should have realized their solar play had issues. 

Mistake #4 - Buffett was a victim of his own hubris. Over time investors can fall victim to attribute their success to skill rather than good fortune. The Good Book reminds us that Pride comes before a fall. Stay humble or markets will make you humble. 

We are never too old (or too smart) to learn and improve. I suspect that Buffett will make adjustments after this loss. Don't feel sorry for him though. $377 million is a chunky loss but Berkshire has more than 100 Billion sitting in cash. Warren and Charlie will be fine. 

Read more...

Series: Essentially Essential – The Pay Stub: Why Understand It

It was all jacked up

Yes, my pay stub was all sorts of messed up and if I didn’t understand it, then the issue would have persisted.

True story. For months I had collected a paycheck only caring about the bottom-line number (Net Pay). Of course, I didn’t have any real reason to look at the pay stub because it would have only told me what I already knew – that I got paid! Also, I assumed payroll processors could never mess up an employee’s pay…

It was Friday afternoon (I had been working for the company for a little over a year), I received my pay stub and as I began to fold the pay stub to put it in my desk drawer as I did many times before - curiosity struck,

  • How do I even know if the amount I am taking home is correct?
  • Are my deductions correct - 401k, charitable contributions, withholdings?
  • Do I need to make any adjustments?

As I was prompted by these thoughts, I noticed something was off. The deductions – this was the part that was all jacked up…

Most likely, you don’t review your pay stub for two reasons:

  1. You know you got paid.

    You got paid, cool! But what if you could have taken home more or saved an issue from getting even larger? Your payroll processor is human just like you, which makes them susceptible to the same mistakes you make. Even the most well-intentioned person messes up.

  2. Education. You do not know all the terms or how it flows.

    Our educational system does not teach people to read a pay stub in school, so how do people learn? If you don’t understand what you are looking at, ask someone to walk you through it or keep reading. Remember, there is no shame in making sure you’re being compensated for the work you’ve performed. I guarantee you that you are not alone in not understanding a pay stub.

Below, I have covered the minimum of what every pay stub should include. Keep in mind that pay stubs vary in look and the type of deductions based on your situation.

The Basics:


  • What is a Pay stub?
    • The document that outlines detail about your compensation.
    • The first piece of information to take into consideration when forming a budget. Every number in a budget flows from the information contained on a pay stub. 
  • Employee Name
    •  This is YOU!  (Just wanted to make sure you’re still reading)
  • Current and YTD
    • Current is what you were paid for in the most recent pay period.
    • YTD (Year-To-Date) is the sum of how much you have earned in the current calendar year, thus far.
*You should see Current and YTD in each category on your pay stub.

Earnings

*This section may look different depending on the way an employee earns wages. If you are paid hourly, you will see the hours worked and the rate (how much earned per hour). If you are a salaried employee, you may only see a current and YTD number. You may also see other forms of compensation within this section.

  • Gross Pay
    • The amount before any taxes or deductions have been subtracted.
  • Net Pay
    • The amount after subtracting taxes and deductions from gross pay. Net pay is commonly referred to as “take home” pay.

Deductions

  • Taxes
    • Federal Income Tax
      • Depends on the number of exemptions you claimed when filling out the W-4 Form when you were first hired (it informs your employer on how much federal tax should be withheld).
    • FICA (Federal Insurance Contributions Act)
      •  Social Security Tax
        • For 2019, the tax rate is 6.2% (the employee and employer both pay this tax for a total for 12.4%). Any dollar earned over $132,900 is NOT subject to this tax.
      • Medicare Tax
        • For 2019, the tax rate is 1.45% (the employee and employer both pay this tax for a total for 2.9%). Every dollar earned is subject to this tax - Any wages earned over $200,000 have an additional 0.9% tax for the employee.
    • State Tax
      • Each state has different laws regarding state tax. For more information, consult your Human Resource Department.
        • For an example, see the sample paystub above under the taxes section – there is a withholding for the state of North Carolina.
*Employers have additional taxes they must pay because they have employees. These additional taxes do not impact your earnings in any way.
  • Pre-Tax (Before)
    • Deductions taken from your gross pay before taxes are withheld. Pre-tax deductions reduce your taxable income, which will more than likely result in paying less Federal Income and FICA tax.
    • Below are examples of Pre-Tax Deductions:
      • Certain Retirement Plans
      • Life Insurance
      • Health Insurance
      • Health Savings Accounts or Flexible Spending Accounts
*Though you save on taxes when this deduction occurs, you may owe taxes on the withheld money in the future.
  • Post-Tax (After)
    • Deductions taken from your gross pay after taxes are withheld. Post-tax deductions do not reduce your taxable income, but could be beneficial depending on how these deductions are used.
    • Below are examples of Post-Tax Deductions:
      • Certain Retirement Plans
      • Disability Insurance
      • Life Insurance
      • Garnishments
      • Charitable Contributions

…To conclude my story, the payroll department had mistakenly deducted the 401k match (Employer contribution to my 401k) from my earnings for more than a quarter of the year. Thus, resulting in my net pay being less than it should have been. So, if you don’t want your paycheck to be jacked up, get educated on how to read your pay stub and scan over it each pay period.
Read more...

The Value of Nothing

In The Picture of Dorian Gray, novelist, Oscar Wilde wrote “Nowadays people know the price of everything and the value of nothing.” I am mindful of how applicable this quote is to investor behavior over the past few years. We have the price of everything available instantly on our mobile devices, but we’ve lost our curiosity about the true value of things. When this bull market ends, investors who have grown complacent in this area will pay a hefty financial price.

This is the lesson of market volatility. We have experienced nine years of consistent, increases in the broad stock market averages with little in the way of normal corrective price action along the way. There are sound arguments about the suspect nature of this low volatility bull market. Most of these observations cast a critical eye toward the powerful yet secretive Federal Reserve Bank system. The Federal Reserve’s unprecedented use of “creative” techniques after the housing bubble contributed to the bull market in ways that will take decades to understand. The deluge of stock buybacks which were often funded by corporations' ability to borrow money at near zero interest rates are one example of suspect behavior that the Fed's policies promoted.  

Long bull markets also tempt investors to consider two familiar forks in the behavioral road. Without the occasional price correction to jolt slumbering investors, they can drift into lazy thinking and numbly follow herd behavior. They forego the hard work of calculating the true value of their financial assets and simply trust in the masses. Other investors take the fork to blind hubris. They misinterpret market action as an affirmation of their intellect and ability to discern future price action. These investors adopt the mindset of short-term traders, churning through tweets, blog posts and charting software. They begin to trade higher risk instruments that they have little experience or understanding of but, as the bull rages, their risks pay off frequently enough to amplify their behavioral miscalculations.

We highlighted Tesla and Netflix in January as prime examples of the price/value conundrum. Netflix generates revenue but returns no money to shareholders. In fact, the company is burning through billions of dollars creating original shows with little expectation for how profitable the shows will be. The price of Netflix stock increased from $190 in January to $423 per share in June. Now (October 2018) it is on the verge of breaking $300.


This 122% jump followed by a 29% decline demonstrates the gap between the price of the company and the value of it’s shares. Placing a tangible value on Netflix requires making many unknowable assumptions about the future. Investors are left following a price trend that could reverse violently at any time.

I have a name for opportunities like Netflix and Tesla – uninvestable. There are other examples of companies whose stock price bears little resemblance to the intrinsic value of their products, services and financial assets. The Federal Reserve started reversing the housing crisis recovery experiments a couple of years ago. Stock investors were slow to understand the Fed’s persistence. Price volatility this year is an indication that investors are beginning to examine the price they have paid versus the value they bought. We have further to go before this price/value gap returns to historical norms.

Once they acknowledge the disconnect between prices and values in domestic stocks, investors can look at foreign markets where the price/value ratio is more favorable to long term appreciation. Pursuing value is our preferred path to build long term wealth.

via GIPHY

Read more...

Welcome Our Newest LeConte Team Member

LeConte Wealth Management, LLC, announced today that Alex Willard has joined the firm as a Planning Associate. In that role, he will support the firm’s financial planning and tax preparation services.   

      

A former LeConte intern, Alex joins the firm after graduating Magna Cum Laude from Maryville College with a degree in Finance and Accounting in 2017. While an undergraduate, he was recognized as the Maryville College Outstanding Senior, received the Judson B. Murphy Endowed Business Award and was a winner of the Maryville College Spirit of the Covenant Award.  He served as an RA during his four years on campus and was recognized for his leadership with the Resident Life Distinguished Service Award in 2017.  He played Wide Receiver for the Fighting Scots football team and served as Co-Chair of the Peer Mentor program.

“We are excited to have Alex as a full-time team member after his internship this past spring,” said Jon Dockery, Director of Financial Planning.  “His character and work ethic make him a perfect fit as we continue to expand our practice.  He was an integral part of our tax team during his internship, and we look forward to further involve him in supporting our clients.” A Clinton native, Alex resides in his hometown and enjoys spending time outdoors and spending time with his family.

Read more...

Join the LeConte Team



O̶p̶e̶n̶ ̶P̶o̶s̶i̶t̶i̶o̶n̶:̶ ̶P̶l̶a̶n̶n̶i̶n̶g̶ ̶A̶s̶s̶o̶c̶i̶a̶t̶e̶


Update

We have filled this position. Stay tuned to meet our new associate!


LeConte Wealth Management, LLC is a full-service wealth management firm located in Maryville, TN. We provide counsel that helps people make good choices with their financial resources to help them achieve financial independence and fulfillment. We rely on teamwork, technology and decades of experience to deliver results for our clients.

Status: Exempt, health insurance and profit sharing benefits available. Two weeks paid vacation after probationary period.

Reports to: Managing Partners, Director of Financial Planning
This is a summary outline of the responsibilities initially required of a Junior Planning Associate for LeConte Wealth Management.
Our Planning Associate is an integral part of our ensemble organization. With financial planning responsibility for the firm's clients, a Planning Associate learns to be an advisor-- first, by assisting in building the business while allowing the Lead Advisor to focus on advising the clients. A successful Planning Associate may then move up to advising clients, dependent on licensing, experience and expertise.

SUMMARY OF ESSENTIAL DUTIES

A Planning Associate supports the firm’s ensemble of advisors by aiding with a variety of tasks so the advisors are more efficient and focused on business development and professional responsibilities. They must be passionate about helping individuals achieve their goals by overcoming their financial and behavioral shortcomings. The candidate must enjoy working on a collaborative team to learn from other team members. Specific areas of responsibility include, but are not limited to:

PLANNING SUPPORT

  • Attend client meetings; take, assemble and transcribe notes relative to action items, tasks and decisions made during appointments.
  • Assist with signature collection from clients, copying of documents or other tasks required during client meetings
  • Monitor and follow up with all action items from client meetings
  • Monitor and follow up with all work-related notes with members of staff, reps or clients
  • Schedule client appointments according to work or Advisory Report mailings
  • Calendar, confirm and start appointment preparation for each client appointment set
  • Can maintain a flexible weekly work schedule, which will include working evenings as needed and may include an occasional weekend day.
  • Prepare and analyze personal and business tax returns (training provided)

ADVISORY OPERATIONS SUPPORT

  • Update asset values and run reports from database
  • Assist Operations Manager where needed, have a strong desire to learn the operations aspects of the organization

GENERAL SUPPORT

  • Assist with document scanning
  • Maintain client files in appropriate order
  • Respond to client inquiries and assist with client request to provide the highest level of client service
  • Maintain appointment calendar according to Planner’s protocol
  • Assist with answering telephones when needed
  • Assist Operations Manager when needed
  • Assist with answering client questions when needed
  • Assist with workshops, seminars and client educational events

MINIMUM REQUIREMENTS

  • Bachelor’s degree required
  • Series 65 or 66 (if not licensed, then desire to attain license within 120 days)
  • Insurance Certification preferred or a strong desire to obtain Insurance Certification
  • Licensed or enrolled in Certified Financial Planner® program a plus – if not licensed or enrolled, must want to become a Certified Financial Planner® in the future
  • Excellent written and verbal communications skills; strong typing and note taking skills, including being able to transcribe client meeting notes efficiently and accurately
  • Superior customer service skills
  • Advanced level computer skills; strong knowledge of Microsoft Office Suite
  • Exceptional organizational skills; ability to multi-task in dynamic environment
  • Comfort with being a "team player" and doing whatever is needed, big or small
  • Able to manage and get along with diverse personalities
  • Professional appearance and demeanor
  • Well-developed interpersonal skills
  • Attention to detail with a perfectionist’s eye
  • Successful sales experience a plus
  • A willingness to succeed!

ESSENTIAL MENTAL FUNCTIONS

  • Impeccable ability to maintain confidentiality and integrity
  • Exemplary planning and organizational skills; efficient multi-tasker
  • Effective follow-up, deadline focused
  • Ability to learn new computer programs quickly and embrace technology
  • Detail oriented with high degree of accuracy
  • Energetic, eager to learn, willing to cooperate
  • Self-motivated with ability to work independently as well as under direction
  • Positive, cooperative attitude is a must
  • Enjoy working in a calm, stress-free environment
  • Appreciate the values and appeal of East Tennessee, its residents and its culture.
  • Able to process constructive critiques to learn and grow professionally

ESSENTIAL PHYSICAL FUNCTIONS

All positions in our office require interaction with people and technology while either standing or sitting. To best service our customers, stores and vendors, all employees must be able to communicate face-to-face and on the phone with or without reasonable accommodation.

EQUIPMENT USED

Constant use of computer and telephone
Use of office equipment, including copier, fax, scanner, shredder, etc.

ADDITIONAL COMMENTS:

Nothing in this job description restricts management’s right to assign or reassign duties and responsibilities to this job at any time.

 

Submit your contact information and resume here:

      

Read more...
Subscribe to this RSS feed

Lets Get Started

Help us understand where you are and where you want to be

  

Upload Documents Securely

      

Talk to us

  • 1 865 379-8200