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Your Plan Account Statement Can Reveal Valuable Information

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Cropped shot of a man and woman completing paperwork together at a deskIt’s smart to make a point of reviewing your retirement plan account statement in detail at least once a year. You’ll want to ensure that the information in your statement is accurate and assess whether you should make any changes in your contribution level or investments going forward.

Ensure Personal Details Are Correct

To start your review, check the following for accuracy:

  • Personal information (e.g., name, address, phone, etc.)
  • Hire date (since it can affect vesting)
  • Contribution amounts (yours and your employer’s, if applicable)
  • Investment instructions
  • Beneficiary designation

Review Your Investments’ Performance

Any large change — up or down — in one investment market can impact your portfolio’s overall asset allocation.* Consider rebalancing** your portfolio at least once a year so that the percentages you have invested in stocks, bonds, and cash alternatives remain in line with your desired asset allocation.

As a retirement plan investor, your investment goals are typically long term. As such, you may decide to allocate a greater percentage of your portfolio to stock funds*** since a longer investing horizon gives your portfolio more time to recover from any short-term declines in the stock market. However, if there have been changes in your financial situation — for example, you have experienced a job loss, or you have had to deal with large, unexpected expenses — you may have less tolerance for investment risk than before. If that’s the case, you may choose to lower your exposure to higher risk investments in your portfolio.

One of the best ways to measure your portfolio’s performance is to compare your investments to benchmarks. Benchmarking helps put performance in perspective. For example, it can be disturbing when a fund you own has a negative return. However, it doesn’t seem so bad if the fund’s comparable index dropped by a similar percentage.

Likewise, if the overall market fell 10% while your fund only fell by 5%, you would understand that your fund did well in the circumstances. However, if your fund earned returns of 5% during a period when its benchmark rose by 15%, then you may want to examine whether continuing to hold that fund makes sense.

Portfolio Turnover Rate

The term portfolio turnover rate refers to the percentage of a mutual fund’s holdings that changes over a given period of time. Certain types of stock funds may have high turnover rates because they pursue aggressive or growth strategies. Other types — value funds, for example — may have lower turnover rates.

It can be a red flag if a fund’s portfolio turnover rate is much higher than that of other funds in the same style category and the fund consistently underperforms similar funds and its benchmark. Portfolio turnover rate is just one of the many factors investors should review when assessing funds in their portfolios.

Management Fees

Mutual funds charge management fees to help cover the expenses of operating the fund. Typically, management fees are used to compensate the investment managers who select and monitor the fund’s investments. Deciding whether to continue owning a mutual fund based on how much it charges in annual management fees is a subjective judgement. If the management fees are higher than those of other comparable funds and the fund’s performance demonstrates no appreciable difference, then it might be worth looking deeper into the issue.

Work With a Professional

Reviewing your retirement plan account statement can help identify strengths as well as deficiencies in your retirement planning and allow you to respond accordingly. Your financial professional can also be a valuable partner in ensuring that you are on the right track to a financially solid retirement.

And to My Executor, I Leave My Passwords

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A pleased young couple shaking hands with their financial advisorWhat would the consequences be if, after your death, no one could access the information you have stored electronically? If you’ve protected your accounts or files with passwords, it could easily happen.

Computers have changed the way we manage our personal and financial — and often, our professional — lives. And they’ve also created new challenges for estate planning. Consider, for example, an Internet business left in limbo because the owner made no provision for accessing accounts. Running the business — or even making customers and creditors aware of the situation — would be problematic without access to the owner’s digital records.

But business accounts and records aren’t the only potential casualties. Personal e-mail, address books, photo libraries, and financial information are also at risk of being lost if the decedent hasn’t shared passwords or designated someone in his or her will to have access to the records.

The legal treatment of digital assets remains a problem for the courts. Meanwhile, it’s important to revise your estate planning documents to include passwords and authorize access to your online and other protected computer data.

A Checklist for Your Digital Assets

  • Determine what and how valuable your digital assets are.
  • Give your executor or personal representative instructions for locating them.
  • Share your passwords with the person you’ve designated to have access, and/or include a list with your estate documents.
  • Instruct your representative to delete files containing sensitive information.
  • Make provisions to renew business URLs after your death, so they won’t be lost.
  • Plan for the disposal or transfer of digital assets just as you would for tangible assets.

What Is Your Most Valuable Asset?

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Shot of a young female designer working in her officeYour most valuable asset isn’t your real estate or the tech stocks you bought in the 90s that have done well. It isn’t even your business per se. Your most valuable asset is you — specifically your ability to run a profitable company and make money.

Are you protecting that asset from the risk that a disabling illness or accident might prevent you from working? If you don’t have disability income insurance, you’re not protected.

What Are the Odds?

People generally think the odds of becoming disabled are low. But the numbers say otherwise: More than one in four 20-year-old workers become disabled before reaching retirement age. Here’s another reality check: Serious accidents are not the leading cause of long-term disability; chronic conditions are. Muscle and bone disorders (such as a back disorder or joint or muscle pain) are responsible for more than one in four disabilities.

How Long Could You Go Without an Income?

Even a short period of disability could be devastating. The average group long-term disability claim lasts 2.6 years. Even if you have reserves you 3 could tap, your personal finances would take a hit. If and when you were able to start earning an income again, you might have to start all over.

What Would Happen to Your Business?

Your involvement is vital to your company’s financial success. If you’re unable to work, you might have to hire someone to take your place and borrow money to pay the bills until you’re back on the job. Bottom line? If you’re sidelined by a long disability, it could jeopardize the success or even the survival of your business.

What Can You Do?

Call your financial professional to review and discuss this important issue.

Keeping It SIMPLE

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Hand holding drawing virtual lightbulb with brain on bokeh background for creative and smart thinking idea concepA SIMPLE IRA is an option for small business owners who do not currently have a retirement plan in place but would like to have one. This particular type of retirement plan has several attractive features that deliver significant benefits to both employers and their employees.

What It Is

The Savings Incentive Match Plan for Employees (SIMPLE) is a retirement savings plan targeted at employers with 100 or fewer employees who earn $5,000 or more in compensation. With fewer reporting and administrative requirements than other retirement plans, the SIMPLE plan is designed to appeal to employers with limited resources and personnel to handle benefit administration and compliance issues.

With a SIMPLE IRA, employees may make tax-deferred contributions through payroll deduction to traditional individual retirement accounts set up under the plan. In 2023, the contribution limit is $15,500 ($19,000 if age 50 or over). All account earnings are tax deferred until the plan participant begins withdrawals. Withdrawals from a SIMPLE IRA are taxed at regular income tax rates.

Employers appreciate the fact that a SIMPLE IRA is relatively easy to set up and operate. An annual report is not required, although certain documents must be distributed to inform employees about the plan.

Employers are required to contribute to the plan, either by matching employee contributions up to 3% of pay or by contributing 2% of each eligible employee’s compensation. The matching percentage may be lowered in some years.

Plan Benefits

  • Employee contributions are tax deferred
  • Employer contributions to employees’ SIMPLE IRAs are tax deductible
  • Account earnings are tax deferred
  • No annual filing requirement or discrimination testing

Potential Drawbacks

  • Employer contributions are required
  • No Roth contributions are permitted
  • Full immediate vesting (employee has ownership of all SIMPLE IRA money)
  • No loans permitted

Your financial and tax professionals can help you assess your retirement plan options

Charting a Long-Term Course

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Long term investing or savings for retirement fund, compound interest or investment growth, tax time reminder concept, businessman on alarm clock put more dollar coin money to increase his savings.Stock market volatility can be a wild ride. If you follow the daily price movements of a stock market index, it’s enough to make you dizzy at times. If you watch the same index’s performance over longer periods, however, you may notice that things tend to smooth out.

Unless you’re close to retiring and will need to tap your assets soon, taking the long-term view probably makes sense. Rather than making investment decisions based on day-to-day or even quarter-to-quarter performance, step back and look at how your investments are doing over longer periods.

Stocks Over the Long Term

Of the three major investment types — stocks, bonds, and cash alternatives — stocks are attractive to long-term investors because they have 1 historically provided the best opportunity for growth and the highest relative return over the long term. However, stocks have more short-term volatility than the other two investment types, so they carry more risk.

Time Makes the Difference

It’s never good when prices drop and your stock investments lose value. It’s particularly bad news if you’re going to need your money soon. But when you have time on your side, you can focus on an investment’s long-term performance numbers (and the stock market’s overall long-term performance) instead of its day-to-day ups and downs.

Although past performance is no guarantee of future returns, and it has sometimes taken years, the stock market has always bounced back following periods of price drops. When you have time to wait, the stock investments you hold could rebound following any future market dips.

Your situation is unique, so be sure to consult a professional before taking action.

Intellectual Property: Patents, Trademarks, and Copyrights

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Sending and Receiving Payment using Electronic Invoice. Person preparing Invoice on laptop. Financial accounting ReportMany businesses are founded on an original idea or design. Consider Xerox or IBM. Or look at products like Coke or popular published works such as the Harry Potter books. Where would they all be today if their idea or work had not been protected by intellectual property laws? For a growing business, securing the rights to an idea, products, or an identity can be a critical step in staving off the competition and in locking in future revenues.

Patents, trademarks, and copyrights collectively make up the backbone of intellectual property rights. Which may apply to your business depends on the nature of your product or service and what specifically you are looking to protect.

Patents

Patents are used for gaining rights to an invention — which can be a machine, process, design, or even a new type of plant. A patent grants the holder “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States. Patents are issued by the United States Patent and Trademark Office, generally for an initial term of 20 years. Once a patent is issued, it is the responsibility of the holder, or patentee, to enforce the patent.

There are three basic types of patents: utility patents, design patents, and plant patents. Utility patents relate to processes, machines, and other manufactured items, substances, or any improvements thereto. Design patents pertain to design for an article of manufacture. Plant patents relate to distinct and new varieties of plants. For all three types, the invention must be “new and original.”Therefore, the application process necessarily involves a patent search.

While there are numerous online patent search engines, most serious applicants consult a patent attorney, as the cost and consequences of using an already patented idea can be significant. Filing fees can run from as much as $600 to $1,000 or more without legal fees, and approval can take time. If you are considering applying for a patent, ask yourself whether the idea you are applying for is even patentable and whether the idea’s long-term potential outweighs the time and cost of applying for a patent.

Trademarks

In contrast to patents, trademarks protect words, names, symbols, designs, or even sounds and colors that distinguish a product or business. A service mark is the same as a trademark, except that it relates to service rather than a product. Unlike patents, trademarks and service marks can be renewed forever as long as they are actively used in a business.

To claim rights to a trademark, you need only place the “TM” or “SM” next to the trademarked material. However, you must first check to see that it is not already trademarked by someone else. Using a trademark that is already registered can land you in an expensive law suit. So you’ll probably need to do a trademark search — which generally involves engaging a trademark lawyer.

A registered trademark (®) goes a step further and requires registration with the Trademark office of the U.S. Patent and Trademark Office. Although it is not required to register a trademark, it does provide some advantages, most notably, greater legal precedent in the event it is challenged and the ability to bring action in a federal court. Trademark registration also is a prerequisite for registration in foreign countries.

What should you trademark and when should you use it? Consider trademarking any material that is integral to your business — its name, a product name, or logo — anything that connotes the business and factors into its marketability. Make sure to include the mark on packaging, displays, and sales literature, as well as any advertising.

Copyrights

Copyrights relate to “original works of authorship” such as articles, books and other writings, music, and works of art — both published and unpublished. A copyright gives owners the exclusive right to reproduce, distribute, publicly perform, and display their work. Legal protection is extended automatically, as soon as the work is created, though registration provides the copyright owner with the advantage of establishing public awareness of its use. The Library of Congress registers copyrights, which last for the life of the author plus 70 years.

Legal Matters

Intellectual law can be very complex. Identifying the subtle differences between one trademark and another, defining what constitutes patent infringement or what level of “copying” is acceptable over the Internet — are all issues that are regularly debated by lawyers and judges across the country. There’s also a matter of international intellectual property rights; U.S. trademarks and patent grants are effective only within the United States and every country has its own laws. If you are to successfully navigate the complicated world of intellectual property rights, you should consult a legal professional — preferably one familiar with your specific business. Not only can qualified counsel aid with patent or trademark searches, but they can give you direction on what intellectual property needs registering and help you through the application process.