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River Wealth Advisors' Currents Newsletter

 

The advisors at River Wealth are committed to enriching investors by sharing their insights and understanding of the market by regularly publishing the quarterly Currents Newsletter.

FALL 2017 - INSIDE THIS ISSUE

Third Quarter Market Commentary
Tonya Andrews Joins As Portfolio Administrator

A Closer Look at the PA ABLE Savings Program
Year-End Financial Considerations
Client Portal Offers Secure Account Access


Third Quarter Market Commentary

Financial markets continued to climb higher during the third quarter as domestic equity markets found new highs and rapid growth in international markets endured. The underpinnings supporting equity markets include: solid domestic corporate earnings, low interest rates/stimulative central bank policies and signals of broad global economic expansion.  Recently, domestic markets got an additional boost from the beginning of discussions regarding tax reform/cuts. Nonetheless, there exists a number of global risks capable of derailing markets, and maintaining a long-term perspective and appropriate risk exposure is as important now as it is when markets are in correction.  

Global Economic Conditions

Global economic expansion continues to be a pillar of support for financial markets. Domestically, the economy has proceeded along its modest growth trajectory with strong employment activity, elevated consumer sentiment and the benefit of relatively low rates. Outside the U.S., financial market valuations have rapidly expanded, along with accelerating economic activity consistent with an early expansion cycle.

Corporate Earnings

In addition to improving economic conditions, domestic financial markets have benefited from a steady expansion of earnings. After bottoming most recently in the first quarter of 2016 along with oil prices, S&P 500 earnings have grown steadily along with profit margins. Analysts broadly expect this trend to persist through 2018.  

Domestic Policy Activity

Overt the past quarter, the situation in Washington D.C. hasn’t evolved much. The two most meaningful economic developments were the agreement to kick the debt ceiling discussion down the road and opening the debate over tax reform. Both topics have the potential to significantly impact markets going forward, and merit careful attention by investors.   

Central Bank Activity, Rates and Inflation

The FOMC maintained the fed funds rate at 1.25 percent at its September meeting. Also in September, the Fed announced that it will begin reducing its holdings of Treasury securities in October. It is widely expected that the Fed will increase rates again this year and continue, albeit at a slower pace, increasing rates in 2018.

Geopolitical Concerns

To repeat from last quarter’s note, in the shadow of strong financial market performance lays a sense of concern that some unpredictable policy situation could cause systematic problems. These concerns are primarily focused on foreign relations and trade policy where relationships are complicated, delicate, and sometimes tenuous. Investors should remain vigilant of these developments that could derail other economically positive policies.

As always, we remind investors to remain focused on long-term objectives. We regularly note that; maintaining a disciplined approach during spats of volatility opens investors to opportunities, and perhaps, more importantly, prevents costly mistakes. It should also be noted, particularly at time like these, that chasing returns in steadily growing markets may have similar pitfalls. 

 

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Tonya Andrews To Serve As Portfolio Administrator

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River Wealth Advisors announced that Tonya Andrews has joined the firm as Portfolio Administrator. In her new role with the financial advisory, Ms. Andrews will collaborate with the firm’s investment advisors to deliver exceptional client service, maintain investment objectives within portfolios and manage trades for individual accounts. A graduate of Allegheny College, Ms. Andrews comes to the firm with extensive financial experience and is a series 66 license holder.

“Tonya’s career includes extensive financial industry experience, coupled with a strong client service background. That combination is an exact fit for River Wealth Advisors client-focused approach,” said Robert Caplan, CEO of River Wealth Advisors. “Having Tonya on staff will help us continue to exceed our clients’ expectations.”


A Closer Look At The PA ABLE Savings Program

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Financial planning for families with special needs can be difficult. Recently, Pennsylvania launched their Achieving a Better Life Experience (PA ABLE) account to help family and friends save tax-free for an individual with qualified disabilities. Disabled individuals can benefit while still maintaining government benefits.

With a PA ABLE account, contributions and earnings from the account are tax-free. When withdrawals from the account are used for qualified expenses, the money is exempt from both federal and state income tax. Qualified expenses fall into categories such as education, housing and transportation, just to name a few.

To qualify for a PA ABLE account, an individual must be considered disabled prior to the age of twenty-six. However, each disabled person is only allowed a single PA ABLE account. A PA ABLE account can be opened by a disabled individual or for those who are unable to open one on their own, a parent, guardian or Power of Attorney can open the account.

Each PA ABLE account offers seven different investment options to choose from. Six of which are asset allocation options, which have varying blends of stocks, bonds and cash. The last option is a FDIC-insured bearing checking account with a debit card. The funds in a PA ABLE account can be allocated to any of the seven investment options. Already invested funds can be moved among different options twice a year.

The PA ABLE savings program allows for $14,000 to be contributed to the account each year. However, the account has a lifetime maximum of $511,758. Once the maximum is reached, interest can still be earned, but no additional contributions may be made. To receive supplemental security income (SSI), an individual cannot own resources worth more than $2,000. A PA ABLE account differs since funds up to $100,000 are not counted towards the individual’s resources, therefore does not affect their SSI.

Special Needs Trust Vs. PA Able Savings Program

Before PA ABLE accounts, families usually put aside funds for a disabled relative through a special needs trust. When considering which option to choose, there are many factors to consider. Both options are designed to save money for beneficiaries with disabilities, without impacting their federal or state benefits. 

One benefit of a special needs trust is that an unlimited amount can be funded to a special needs trust without impacting government benefits. With a special needs trust, any income that is not paid out to beneficiaries within the accounting year is subject to trust taxes. In contrast, distributions from the PA ABLE account, including earnings, are entirely tax free, when used for qualified disability expenses. However, for either option, expenditures must be for qualified expenses, but a special needs trust has a broader group of qualified expenditures.

When the disabled individual dies, the amount that is left in a PA ABLE account can be used for any outstanding qualified disability expenses, as well as funeral and burial costs. The remaining balance then becomes part of the beneficiary’s estate, where only the growth of the account is subject to income tax. However, for a special needs trust, the assets at the time of death can be left to other beneficiaries. When comparing both accounts, a special needs trust can add a lot of complexity, whereas the PA ABLE accounts are more simple and do not require tax returns to be filed.

The addition of PA ABLE accounts provides another option for those who are saving for an individual with disabilities. A combination of both options can be used to maximize their benefits. The PA ABLE account allows for easy withdraws and low maintenance. Whereas special needs trusts have fewer restrictions on contributions and offer a wider range of qualified expenses. The decision of which plan may be right for you depends on each individual situation. For more information and guidance on what will be right for your family, please contact a River Wealth advisor.


Year-End Financial Considerations

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Whether you’re ready or not, the end of the year is quickly approaching.  Now is the perfect time for investors to review their portfolios to take care of any year end items and align investment goals with any upcoming life changes. 

The first thing you want to take a look at is to make sure that you have maximized contributions to your 401(k), IRA, Roth IRA, or other retirement plans. Even if you regularly contribute to your retirement plan, check to see if you will reach the maximum allowable amount by December 31st. Retirement plan contributions to tax-deferred accounts, help to reduce your taxable income. 

If you have a health savings account (HSA), make sure you are contributing the maximum allowable amount. HSAs offer three tax benefits. First, contributions are made pretax, so your taxable income is reduced. Secondly, earnings and withdrawals for qualified medical expenses are free of federal tax. Finally, funds in an HSA can be invested to help pay for future expenses.

You may want to also consider charitable giving. Donations benefit the causes that matter to you and can also offer tax advantages. An increasingly popular approach to giving involves donating stock that has appreciated in value, for a tax deduction equal to the whole donation and not just the stock’s gains. Taxpayers age 70½ and older can make qualified charitable donations (QCD) from their IRAs, effectively lowering adjusted gross income and meeting required minimum distribution. Be sure to record your donations to charities in all forms.

You should also determine if there are any adjustments that should be made to your investments that would provide a tax benefit. Tax loss harvesting—selling losing positions to realize losses for tax purposes—in taxable accounts is a good place to look at for a year-end review. Selling stocks, bonds, and funds that have lost value - and no longer make sense for your portfolio - helps to offset realized capital gains with realized capital losses.

The advisors at River Wealth are happy to meet with you to review your portfolio and make sure that your investments will serve you well in the new year.


Client Portal Offers Secure Account Access To Your Billing Statement

At River Wealth Advisors we are committed to providing an exceptional experience to our clients. Our secure online portal is the latest offering that enables clients to quickly access their account information. Eliminating mailed account statements allows you to get your account information more quickly, reduces the need for filing paper copies and also helps the environment by eliminating waste.

With a few clicks, the client portal provides a complete picture of your finances, including portfolio assets, 401(k) and other accounts. It also provides a secure, convenient and efficient way to provide financial files to your accountant or attorney. 

Effective March 15, 2018, you will start to receive electronic billing statements.

To receive electronic billing statements, you will need to have access setup to River Wealth’s secure client portal. If you have any questions or need to set up portal access for your account, contact Ali Bircher at ABircher@RiverWealthAdvisors.com or call us at (844) 784-7065.