Senior-Living Placement

Senior-Living Placement

How does someone without any assisted-living experience, 1) determine which senior living facilities are good, 2) match the needs of their loved one with the right facility and 3) not pay more than they need to? These are stressful and difficult questions that many of our clients have been faced with recently.

In our planning meetings with clients, we usually discuss the cost of long-term care, and how to cover those costs, but haven’t talked much about the practical steps to finding a home. Now we have a resource to help.

We were introduced to Jennifer Cook-Buman of Portland Senior Housing, who helps with Senior Placement. Calling Jennifer appears to be a good first step in the process of finding a facility. She provides a service designed to help families place their loved ones in the right home. Jennifer has extensive knowledge in our local area and has placed over 1,100 individuals. In addition, she comes highly recommended. 

I met with Jennifer a few months back and one question I had for her (my favorite question) was, “How do you get paid?” She explained, the facilities have agreements to pay her after the placement, similar to how a realtor gets paid after a sale.

This puts very little burden on the family which is nice, but it can also provide a conflict of interest if she only places individuals in the homes that pay her the most. She explained the details this way, “We all have our own contracts, many are percent based on the monthly rent, I differ in that my fees are a flat rate regardless of size of apartment, location in building, etc. They’re all the same – penthouse in Taj Mahal or studio at motel 6.” This is a great model because there’s no incentive to put a family in a higher priced home unnecessarily.

After hearing about her service, I decided to pass on Jennifer’s information to everyone just in case there are others going through this same process. Feel free to contact Jennifer if she can be a help to you. We get no benefit from any referrals.

Phone: (503) 487-7245  Email: Jenn@portlandseniorhousing.com

Financial Placement

Jennifer handles the people placement, but we help with the financial placement. We’ve been able to help a number of clients put their money in a policy, or investment, that will benefit them the most should they need care. Below are a few questions that should be asked as you consider your own situation.

More Oregon specific information can be found in a recent article here.

How likely am I to need care?

      • 70% of people over age 65 will require some care at some point.
      • A woman turning age 56 today can expect to live, on average, until age 86.6. About one out of every four 65-year-olds will live past age 90, and one out of 10 will live past 95.

How much will care cost?

      • $150,000 is the average cost for people needing care in Oregon. (The Mirabella facility in the South Waterfront of Portland is pictured above.
      • $709,647 is the projected average cost for three years of long-term care 30 years from now. 

How do people cover these costs?

1) Don’t buy insurance and self-insure. – Two-thirds of Americans do this. Most don’t have resources to self-insure.

2) Buy insurance using one of two ways – Pay as you go or Pay one time (details below).

3) Some combination of self-insure and insurance.

Pay as you go VS. Pay one time

Pay as you go – similar to car insurance, pay small monthly premiums and get paid ONLY when you need care.

Example: A couple of healthy 60-year-olds pay $280/mo and have $340,000 in benefits toward care.

Pay one time – Move a larger amount to the insurance co. and get paid one of these three ways:

1) death benefit at death,

2) benefits to help pay for care, or

3) take your premium back without interest.

Example: Someone in good health and in their early 60’s moves $50,000 to an insurance company and receives:

1) beneficiaries receive $100,000 in death benefit,

2) insured receives $100,000 in long-term care benefits, or

3) take the $50,000 back without interest.

Evaluate your own long-term care needs, or to download our 7 Deadly Sins PDF.

The 7 Deadly Sins of Retirement Planning

Credit or Blame

August 22 will mark the longest bull market (up market) in history unless the stock market drops more than 20% before then. It got us thinking, who deserves the credit for this? Trump helped push through the tax reform which resulted in our economy notching a 4%+ GDP growth figure in the second quarter of 2018. This is the most our economy has grown since 2014. So does Trump deserve credit for this economic growth? I Googled that question…the unhelpful results are below:

That got us thinking, should we be giving Presidents credit for economic growth? Should Coolidge get credit for the Roaring Twenties? Three months after he left, the bubble burst and Hoover took the blame for the worst performance ever. However, it sounds like the Smoot-Hawley Tariff Act he signed didn’t help matters.

It looks to me that timing may have more to do with a President’s stock market record than the policy put in place. Clinton benefited from the internet boom and George W was saddled with the internet bust, the 2001 terrorist attacks, and the 2008 crisis. Trump has benefited from the momentum of this long recovery started under Obama, but Trump should get some credit for extending it. To be clear, he’ll also get the blame when things cool off, especially if the reason is because of his tariffs.

Best Presidents stock market performance:

1.     Calvin Coolidge 1923-1929:     26.1%/yr

2.    Donald Trump 2017- July 25, 2018:  16.2%/yr

3.   Bill Clinton 1993-2001:    15.2%/yr

4.   Barack Obama 2009 – 2017:   13.8%/yr

 Worst Presidents stock market performance:

1.     Herbert Hoover 1929-1933:   -30.8%/yr

2.     George W Bush 2001-2009:    -5.6%/yr

3.     Grover Cleveland 1893-1897:   -4.9%/yr

4.     Richard Nixon 1969-1974:       -3.9%/yr

Info from Kiplinger.com

In the meantime, stocks are steady and companies are reporting their earnings again. So far the news has been good (with the exception of Facebook falling over 20% tonight!), but everyone is still pointing to uncertainty surrounding the brewing trade drama. The meeting with the EU just today looks like that could be a bit of good news on the trade front.

Other economic indicators suggest the housing market may be peaking. In California, a leading indicator for the nation, June’s sales were down 11% from one year ago. Houses may now be priced too high and rising interest rates could be squeezing buyers.

The data for Portland is still good though. May saw sales slow, but June 2018 home sales beat June 2017 sales by 7.8%. There may be a slow down coming, but Portland doesn’t seem to care just yet.

Allevi-8 Book

Another item we wanted to mention is a retirement planning tool that we’re offering to our clients. We’ve had a few versions of these in the past: the When I’m Gone Book is what Bruce originally called them, then we had The Go-To Book. Now, we’re creating them here in the office and calling them the Allevi-8 Book.

These books are a place to put your important financial documents so your spouse or beneficiaries can easily find your insurance policies, investment accounts, will or trust, real estate info, important contacts and other details if/when something happens to you.

We’ve handed out 30 of these so far and we have another 20 that Jeremiah just put together. Please let us know if this is something you’d like to have, or if you have a friend or family member that could benefit from it. When we run out we’ll just make more!

Hope everyone is enjoying the summer. Call us with any questions or concerns.

-Tim Porter, CFP®

Pepper-ation for What’s Next

“Why would anyone in their right mind volunteer to be pepper sprayed?” This is the question I was asking myself after I was pepper sprayed and had to defend myself during my annual two weeks of training at the Yaquina Bay Coast Guard Station in Newport, OR. This is how it was described to me beforehand, “…it’s like dipping your face in a hot fryer, sticking needles your eyes and then you have to fight someone off.” It turns out that’s pretty accurate. The photo I took was over an hour later after I was feeling much better. They didn’t allow pictures before then.

Getting sprayed and then having to defend myself, along with rigorous physical training, law enforcement education, and firearms instruction was required to qualify as a boarding team member at the station. Other than being sprayed, it turned out to be a great experience and I can now be more useful during my time as a reservist in Newport and abroad.

It took about 24 hours to wear off, but I can now say I’m much more prepared to handle a situation involving pepper spray. That’s the reason the USCG mandates law enforcement personnel be sprayed – it’s a stress test to ensure the officers are prepared. A little less painful, but just as important, is the “pepper-ation” we go through to make sure accounts are in good shape to handle either the next downturn or uptrend, in the stock market. The last few weeks we’ve continued making changes across all accounts to prepare for this.

Moderate and Conservative Accounts

In our more conservative accounts, we’ve continued selling individual stocks and replacing them with funds to provide more diversification. This will eliminate the stock specific risks while also helping to participate better with the stock market when it goes higher.

With the cash we received from selling, we bought a bond fund called First Trust Enhanced Short Maturity FTSM. We also bought a 4-year individual Bank of America Bond paying 3%. These investments were bought to maintain stability in case the market goes down in response to the global trade drama.

We’ve also been taking advantage of the guarantees that a few insurance companies are offering. Some that we’ve been looking at go up with the stock market to some extent, but cannot go below 0%. These annuities are not products we’ve typically been encouraging people to invest in (in fact, we’ve felt strongly against annuities for some time), but they’re now becoming more attractive as an acceptable bond replacement due to rising interest rates. There’s quite a bit more detail on these. We can provide additional information if anyone has questions.

 

Growth Stock Account

In the more aggressive growth accounts, the mandate is less about reducing volatility, and more about capturing as much growth and we can. Stress testing these accounts means looking to see what stocks are underperforming and replacing them with companies that could grow more.

Because of this we’ve sold a salt-mining company that disappointed us, Compass Minerals CMP, and replaced it with a company we’re very familiar with Intuit INTU. Intuit is a software company behind the online tax preparation company Turbo Tax (I’m a customer), the small business bookkeeping program Quickbooks (we use this in the office), and the budgeting website and app Mint.com (I also use this). Intuit seems to have the market cornered in these areas and we expect big things from them moving forward.

We realize summer is not the most compelling time to be focused on your investment accounts, but in case anyone has any questions, please don’t hesitate to contact us.

Thanks for reading,

Tim Porter, CFP®

Managing Maddening Volatility

Well, here we are again. Another day of maddening volatility brought to us by another round of maddening tariffs. If it feels like the market’s as volatile as it’s been in a VERY long time, it’s because it is. If you need proof, just look at how much I’ve aged since the volatility began!

Actually, that’s a picture of Jack Bogle, the founder of Vanguard, an investment company that manages $5.1 Trillion. In an interview with CNBC yesterday, Bogle said he thinks the stock market is more volatile than at any other point in his extensive investing career.

He says, “Now that’s only 66 years, so I shouldn’t make too much about it, but you’re right: I’ve seen two 50 percent declines, I’ve seen a 25 percent decline in one day and I’ve never seen anything like this before.”

This remark was puzzling for us at first since the market is down far less this year compared with 2008. But when we did the research, we found the stock market has had 27 days that it’s moved over 1% since the beginning of the year. In all of 2017, the stock market had only 8 days that moved more than 1%. That means we’ve had more than 3 times the volatility and it’s only April 6th! No wonder I feel like I’ve aged so much this year.

Despite the drama, Bogle largely sees the turbulence as mere “noise.” “When all these people look at some future forecast — of, let’s say, interest rates or inflation — and sell, somebody else is buying.” Bogle quipped.

Bogle is using his 88 years of wisdom to caution us not to get wrapped up in short-term news and lose focus on the long-term. We must remember: volatility is not uncommon, but is actually quite normal in investing. The real challenge is managing emotions through the financial “noise” that’s vying for our attention.

Instead of letting emotions dictate our investing strategy, we expect cooler heads will prevail and a deal on trade will be hammered out…eventually. We’re also looking forward to what we hope will be better news next week.

Earnings Season

Although the major headline driving the market down this last month was tariff related, we are anxiously awaiting the beginning of earnings season next week. We believe companies will be reporting positive results stemming from the tax reform and that should help drown out trade war fears. If that happens, we should get some relief from the selling and be able to point to some much-needed gains.

Thanks for reading. Please call us if you have questions!

Tim Porter, CFP®

Moving to SMB Financial

Retirement Income Advisors SMB Logo
SMB Financial’s new logo.

After using the name Retirement Income Advisors for the last 5 years, we are now rebranding and moving all business under the SMB Financial umbrella. This does not represent a major change since Retirement Income Advisors has always been a division of SMB Financial.

SMB Financial Services is our Registered Investment Advisory firm that began in 2003 to help individuals and businesses alleviate anxieties surrounding financial matters. In an effort to simplify our message we will only be using the SMB Financial brand name moving forward. This website and all the blog posts and content, as well as new content, will be moved to our www.SMB.Financial website in the future.

We hope this doesn’t cause any confusion for our clients and followers. Please feel free to contact us with any questions or concerns.

-Tim Porter, CFP® President

Tariff Tantrum

Another doosey in the stock market yesterday. Trade war fears based on the steel and aluminum tariffs are creating anxiety in stocks. The Dow dropped 1100 points in two days and is now down over 10% from its highs.

The fear is tit-for-tat escalation between the two largest economies in the world – China and the US – will slow down a growing global economy. Barclays reports that a trade war will drown out the positive impact of the tax cuts coming this year. Others are optimistic that the tough stance on China will be watered down, similar to the way the tariffs were scaled back after they were announced.

In looking through history we’ve found examples of numerous tariffs enacted and removed a short time later. To the right is a picture of Senators announcing the Smoot-Hawley Tariff Act of 1930, which added tariffs to 20,000 imported goods. Historians believe these exacerbated the Great Depression. These tariffs were repealed in 1934. In 2002 President Bush enacted a tariff of up to 30% on certain steel products and then abandoned the tariffs a year later in 2003.

Smoot Hawley

We believe these stock movements are short term and the tariffs will either be scaled back or eliminated when Trump leaves office, if not before. So then once again, this is time for action, not anxiety.

Thursday we took advantage of this drop by buying Anthem ANTM, a heath provider serving 40 million clients in the growth accounts. Friday, we bought for the moderate clients the SPDR Portfolio Stock Market ETF SPTM. This fund approximates the S&P 500 and will benefit when the emotion dies down in the market.

Income Portfolio – Funds vs Individual Positions

Over the last few years we’ve wanted to sell some individual positions – like stocks and bonds – and move into more funds in the Income Portfolio. We’ve wanted to do this to increase diversification and participate in more growth. We’ve taken a gradual approach to this only adding a few funds, however, now that the Dow is down now over 10% from its highs, it’s a better time to make the switch.

Below is what we consider to be the Pros and Con of adding funds to that portfolio.

Pros:

Increased Diversification

Better Growth Potential

Simplification – 15 Funds vs 30 Individual Positions

Managers With Economies of Scale

Fewer Positions Means Less Trading Costs

Con:

Adding Small Internal Fund Cost

 

 

As you may have noticed in your mailbox, the trading has already begun. We anticipate more trades over the next weeks and months to finish making the transition. Once we finish this move, we should be in a better position to capitalize on future growth while also keeping volatility down with a larger fixed-income bond allocation.

Thanks for reading. Please call us if you’re having anxiety about the accounts and need a pep talk.

-Tim Porter, CFP®

Office Space Available

Looking to lease the last 2 offices in our Tigard building.

Financial services firm owns and occupies most the space. 

Plenty of parking, easy access off of I-5 and Haines St exit, restaurants nearby, newly updated with carpet, paint, lighting… and friendly office mates that will be barbecuing out front as weather permits!

Rent is all inclusive including the receptionist. Call or email Tim with questions: 503.387.3222 / tim@smb.financial

Ste E – 155sqft – $650/mo
Ste F – 155sqft – $650/mo

 

Entry Lobby Facing Out Suite E2 11535 front IMG_1911

Unpleasant, Not Unexpected

February was a month to forget in the investment world. Volatility finally returned and clients may want to hold their nose when they open their next statements. It was the worst month for the stock market in 2 years and our accounts were not spared unfortunately. The news that generated this bumpy month was growing inflation and higher interest rate concerns.

This was unpleasant, but not all that unexpected. Rates have been low and the market has been up for so long that eventually something’s got to give.

Growth Portfolio

Our Growth Portfolio, which is led by Matthew Coffina, CFA at Morningstar’s Stock Investor, continues to outperform. Even though it’s a more aggressive portfolio, it logged a smaller decline than the market in February of approximately 3% (depending on portfolio) to follow a great one-year performance.

We tried to make quite a few buys for those with cash as there were opportunities in the midst of the volatility. One sale was made to free up cash after the stock AmerisourceBergen ABC jumped on merger news. Future buys we’re considering from Morningstar’s list are Starbucks SBUX, Anthem ANTM and Enbridge Energy ENB. We’ll be looking to add those the next time the market has a pull back.

Moderate Income Portfolio

The less aggressive Moderate Income Portfolio, which is modeled after Morningstar’s Dividend Investor, continues to underperform due to the rate rise. Morningstar’s portfolio was down 6.5% and ours down closer to 5% in February. I believe it’s been almost 5 years since we’ve seen this kind of movement in this portfolio.

Our big problem with higher interest rates is not that they slow down home buying and the economy. Our problem is higher rates have adverse affects on bonds and the stocks of the more essential service industries like real estate, utilities, and telecom. These investments struggle with higher rates and they just happen to be the bread and butter of any income portfolio.

So, if rates are on the rise – for real this time – we need to position the Moderate Portfolio to weather the storm better (the Growth Portfolio is less affected). Below are three steps to help us do this:

  1. Move away from interest rate sensitivity – We’ve already begun selling some of the low yielding positions and moving the cash into Wisdom Tree’s Growing Dividend Fund DGRW. It has a dividend of just under 2%, but it’s less interest rate sensitive and captured all the growth of the stock market last year. We will continue to do this as we see opportunities.
  1. Allocate more to Growth – We’ve already moved a portion of some clients’ portfolio into the Growth Portfolio, but we want to discuss this with all the moderately risky clients as we make our upcoming calls.
  2. Exchange bonds for guarantees – The last step is moving bond positions into a fixed account. One bright side to higher rates is we can now get 3.1% per year for 5 years guaranteed. The downside is it’s more paperwork and less liquid. We think it’s worth considering moving some, or all, of the bond portion of client’s accounts to protect against higher interest rates.

The net result of these changes will be no additional risk, but a better return over our 10-year analysis. This will reduce income from dividends but should help us offset the share price loss while rates are on the rise. When rates are back to normal – back above 4% on the 10-year treasury – we would look to maximize dividends once again.

Other News

Picture1

Last weekend, I (Tim) got the chance to head to Seattle to be nominated for Reserve Enlisted Person of the for the Coast Guard. To my shock, they chose me to win the award for District 13 (Pacific NW) for my work as a Coxswain (boat driver), my work in leadership, volunteer work and education. It was an honor just to be nominated and even more of an honor to win. I’m now entered to win the award for the entire Coast Guard with the other 8 winners from around the country. I don’t know the exact details of when that will be decided, but I’ll be sure to pass along the results when I hear.

Picture2

 

 

 

Finally, we had a great time at our open house last Wednesday. All of us at SMB want to thank everybody who came out and made it festive! We look forward to having the rest of you out to see the new space at our next meeting.

We’ll be working through our call list to try and talk with every client before tax time. We look forward to talking with you, but if something comes up before then, please don’t hesitate to contact us.

-Tim Porter, CFP®

False Alarm

One year ago my wife and I (Tim) were fed up with the dreary winter and decided to put a sunny vacation on the calendar. We settled on the island of Oahu to enjoy the beaches and give me a chance to visit Pearl Harbor. After an endless 300+ day countdown we finally took the family on the trip last month. We had an absolutely incredible time, except for one little hiccup. Five days into our trip, eleven stories up in the Hale Koa Hotel, we got an alert on our phones – BALLISTIC MISSILE THREAT INBOUND…!! (See the screenshot of my wife’s phone below.)

As I tried to evaluate where the safest place to handle a nuclear missile would be, I came to the conclusion there’s probably no safe place (or at least very few) on such a small island. So instead, we pulled up some national news outlets, but there was no mention of the threat. Not one word.

AlertFive stressful minutes later I found one random person on Twitter who said it was an error, and then 38 more stressful minutes later it was confirmed …False Alarm. Thank God!

The alert was a mistake, but it got my wife and I talking about what we should do in a real event. I still don’t know exactly what I should do with an inbound ballistic missile threat, but investment threats I’m much more comfortable with.

New Threat

In just the last few days we’ve seen a significant threat to the stock market. Higher interest rates, which slow the economy, were initially to blame for a wild few days, and then programmed trading and frazzled nerves seemed to make it worse. Stocks on Monday, Feb 5th logged the 99th worst day for the stock market ever in percentage terms (Wall Street Jounal), down 4%. The DOW is now down 7.5% from its high it notched just a week ago. Is this the end of the long up (or bull) market or just another false alarm?

If we look into the details, we are now in the fifth longest bull market in history (according to the First Trust chart below), which will turn nine years old March 9th. It turns out the average bull market is nine years old, so if we’re not at the end we’re at least getting close. This is likely making some investors nervous. Could the economy actually continue to grow with the tax reform that was passed last year? Or will the long anticipated rise in interest rates and political discord finally bring the good years to an end?

BullBear

We, of course, have no way of knowing. Actually I can make the case for both the market falling and growing. Instead, we try to prepare clients for any economic situation using the British Army adage: Prior Proper Planning Prevents Pretty* Poor Performance (* a mild expletive was replaced to protect the innocent).

As we start the year, our proper planning includes looking backwards to see what we can do differently to improve our product and our process. In 2018 we believe one way we can do that is by spreading out into a more diversified group of products.

Moderate Portfolio

Some clients have already begun to do this. Our moderate (or medium) risk takers have little exposure to growth to keep volatility low. However, lower risk means lower returns as well. To help with that, we’ve been adding growth stocks to some of our client’s accounts who’ve expressed the desire to take on more risk and participate with the stock market. For those that don’t want to increase their risk level, we can now offset the additional risk by adding a guaranteed 3% option in the portfolio, thanks to rising interest rates.

Pie

A simplified version of our new Moderate Portfolio would look something like the pie chart shown. This will allow moderate risk takers to benefit from growth and be protected at the same time, while leaving most of the account in the consistent dividend-paying stocks that have done well over the long run. 

Growth Portfolio

Matthew Coffina, CFA at Morningstar, the predominant mind behind the Growth Portfolio, has done a great job keeping up and actually surpassing the stock market’s growth. Between him, Motley Fool, and a few other experts’ analysis, the more aggressive portfolio has been in good shape. The only changes we intend to make this year is to have cash ready to continue to buy if/when the pull back continues.

Conclusion

The most important thing we can do is be prepared emotionally for an eventual bad year. We thought we were due for one the last few years, but the market continues to defy our logic. With this latest selloff it feels like this could be the year. Regardless of how we feel though, the biggest mistake we can make is to become an emotional investor based on short-term news. Long-term investors need to be able to handle the bumps and we will do our best to help everyone through them whenever the false alarms prove real.

Other SMB News

  • We are always trying to grow the number of advisors at our firm. We currently have eight advisors and have been in talks with multiple people who may want to join us. We look forward to adding another face in the office soon.
  • The new building is coming along great and we plan to have an open house February 28th between 1pm – 6pm. Please feel free to come by, have some food, drinks, and check out the new digs. Another invitation closer to the day of will be sent out with directions and times.
  • Our firm broke through $100 Million in assets under management (AUM) this year. That’s a very big deal for us and has been our goal since we left Principal Financial Group in 2010 with $20 Million in AUM. Bruce and I are so thrilled to have such wonderful advisors, employees and of course our clients/friends to work with. We feel incredibly fortunate to work with such great people and look forward to many more years working together.

We’ll be working through our call list to try and talk with every client before tax time. We look forward to talking with you, but if something comes up before then, please don’t hesitate to contact us.

-Tim Porter, CFP®

New Space

The last few months have been a whirlwind. After paying Lake Oswego rents and struggling to find parking for seven years, we finally found a better situation. In August we discovered an outdated building for sale in Tigard with more space and better parking. On October 25th myself (Tim), Bruce, and Jim Flad, a CPA who’s part of our firm, closed on the building. Since then we’ve been splitting our time demo-ing the 1980’s out of the building and coordinating sub contractors and employees to help us put it back together.

FullSizeRender-1

So far we’ve installed new lights, built new walls, added fresh paint, new windows, new doors, new carpet and this week a new reception desk. Before year-end we hope to have the ceilings finished up and new furniture in the waiting area.

On December 5th all eight of us moved from the Lake Oswego location and we’re now open for business in the new Tigard location. There’ll still be three offices left over which will be great for future expansion, but for now we’ll try and lease them to other small businesses.

It’ll take us some time to finish everything up, but we hope to have an open house some time after the New Year to show it off. Stay tuned for that invitation.

Growth Portfolio Changes

In the meantime, we’ve made some changes to the growth portfolio; selling one out-performer O’Reilly’s Auto Parts ORLY, which gained approximately 31% in the five months we owned it, and sold Express Scripts ESRX, a pharmaceutical processing company. We replaced the two with Disney DIS, a company that most are familiar with and a company we’re very excited to own with the news of the Disney-Fox merger, and United Health, a health insurance company that Morningstar thinks will have better growth prospects than Express Scripts had.

We’re finishing up the year working to make sure our over 70.5 year-old clients have their required minimum distributions taken out of their IRAs.  However, we’re always available to take any calls and answer any questions you might have as we wrap up the year. Please note our phone number is staying the same but the address is changing:

11535 SW 67th Ave Tigard, OR 97223

Merry Christmas and a Happy New Year!

-Tim Porter, CFP®