What Matters Most: Change is Great! (or as Dylan says, The Times They are a-Changin’)

Both SECURE and RESA Bills Make Progress

In our book, 10 Truths: How To Create Financial Independence, we talk about how the days of corporate pensions are all but over. In the past, retirement income was created using three sources: Pensions, Social Security and Retirement Savings. Today, for the most part, pensions are gone.

Education is needed at every level to better prepare individuals for their own retirement. Whether you are just entering the work force from college, or in the middle of your career, the need to start saving for retirement has never been greater.

Consequently, there are some legislative initiatives that seem to be making headway through the political system. The SECURE ACT (Setting Every Community Up for Retirement Enhancement Act) is expected to make it through the Senate during this current term. There is also a similar bill before the Senate, RESA (Retirement Enhancement Securities Act). While neither of these bills have officially passed, it is the first time we have seen new retirement legislation since 2006. It is anticipated that one, or the other, or combination thereof, will probably make it into law.

Here are just a few of the highlights:

1)      Increase Small Employer Access to Retirement Plans – It would essentially allow small employers to come together to set up and offer 401(k) plans with less fiduciary liability concern and less cost than exists today. The goal here is to try to expand small employers’ capability to offer some form of retirement savings to employees.

2)      Increase the Age for Required Minimum Distributions (RMD) – Under current rules, most of our clients are required to take RMDs at age 70½. The SECURE Act would delay this requirement to age 72, while the RESA Act seeks to extend the age to 75U Many of our clients would benefit greatly from the extension of time.

3)      Removal of Age Limitation on IRA Contributions – Under the current rules, contributions for individuals working beyond 70½ are not allowed. The SECURE Act would remove the age limitation allowing individuals to contribute to IRAs after the age of 70½.

4)      Tax Credit for Automatic Enrollment – Under the SECURE Act, a new credit of $500 to help smaller employers encourage automatic enrollment into their retirement plans will be introduced. This will help offset some of the costs for employers when starting up retirement plans.

5)      Penalty-Free Distributions for Birth of Child or Adoption – The new rule found in the SECURE Act would allow an aggregate amount of $5,000 to be distributed from a retirement account without the 10% penalty in the event of a qualified birth or adoption. The distribution would need to occur within one year of the adoption becoming final or the child being born.

6)      Removal of “Stretch” Inherited IRA Provisions – The Secure Act would make significant changes to inherited retirement plans like 401(k)s, traditional IRAs and Roth IRAs. In the past, beneficiaries of these accounts have been able to spread the RMDs over their own life expectancies. However, the new bill includes a tax generating provision that would require most beneficiaries to distribute the account over a ten year period. This change will radically accelerate the depletion of inherited retirement accounts.

We will continue to look for more information relating to SECURE and RESA. As mentioned earlier, neither bill has passed, but we want to keep you informed as to the potential changes that may be forthcoming.

KFM Update

This has been the quarter of transition and change. It’s been a tremendous amount of work but ultimately a lot of fun! With your help, we have created a direct relationship with your custodian, eliminating Loring Ward as our back office provider. While there were some nights that caused the question “why are we doing this?”, the majority of the time we’ve asked “why didn’t we do this sooner?” While we know the answers to both, we are excited to be on this side of the transition.

The transition has taken on multiple forms of efforts. Over 25 years of historical data had to be moved from one platform to another. Our trading platform has been customized for each client’s personal situation. Our quarterly performance report and billing needed to be created, tested, tested, tested and tested again. Our client portal also needed to be created. While the client portal will constantly be a work in progress, we are excited to make this a more regular feature of your interface with Kemp Financial Management. We are most hopeful the client portal will simplify your need for information relating to your personal financial affairs. Lastly, thank you, our client, for signing the necessary documents to effect this change.

The KFM Team (Rob, Otto, Wyatt, Lissa, and Patrick in front) taking a break from all the hard work to have an impromptu ice cream party.

The KFM Team (Rob, Otto, Wyatt, Lissa, and Patrick in front) taking a break from all the hard work to have an impromptu ice cream party.

We hired a summer intern, Otto Kemp. Otto is in between his freshman and sophomore year at Point Loma Nazarene University in San Diego. Otto’s current major is Exercise and Sports Science and we hope his internship changes his major back to Business. Otto currently plays baseball for the Sea Lions. Otto will be training his replacement when he returns to Point Loma in the fall. So be on the lookout for a new addition to KFM in September.

Patrick Joyce officially joined our firm in May coming from Reliance Standard as a senior sales consultant. Prior to working for Reliance, Patrick worked in operations at Taylor Made. Patrick holds a Masters in International Studies emphasizing in business and education. Patrick is an avid golfer, married to Gina and has three children ages two to seven.

If you have not logged on to our Client Portal, we encourage you to contact Otto, Patrick, or Wyatt to assist you with access.

Capital Markets

When Patrick came on board in May, we joked with him “the worst thing that can happen is a major market decline.” What a great way to start your new role as a financial advisor! While we did not have a major market decline, there were not very many positive market days throughout the month of May. We joked with Patrick that it was all his fault.

In our attempt at finding humor, we did “steal” a line that I’ve heard often, and that is: “We are one tweet away from a rally!” While we still think this is funny, in reality it’s actually a sad commentary to the times we were in and what can potentially move markets.

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Information, data or “noise”, however you want to deem it, is more rapid, immediate, rampant, accessible and disseminated like never before. 32 years ago it was discussed Reuters put out 30,000 pages of financial information per minute. Think about how much information comes out now, per minute. It’s a mind bender.

But, what’s the source? Is it true or false? This is not meant to be an attack on “fake news”, it’s just simply the reality that information is flowing ever so quickly. It is a sign of the times that likely is only going to get worse.

The source of which it comes from seems to have no apparent bearing on its truth or legitimacy. This is not a political statement, nor is it an admonishment. It is simply just the reality of the times we live in. The fact is, it’s only going to become more pervasive.

Thankfully, being a long-term investor allows you to NOT trade on the news.  For KFM, we reference Truth #9 all the time: “Listening to the media causes unnecessary stress.” It’s true.

Imagine if we called you on May 3rd and said, “The news is not good. It’s time for us to get out. We don’t think things will improve until a trade deal is completed with China.” Had we done that, imagine the calls that we would have received in June asking, “when are we getting back in?” The news is not any better than it was on May 3rd, but the capital markets sure are.

We know we preach to the choir. We know you get it. But we also know, it’s not easy to stay away from the “noise”. So, be careful what you listen to, watch or follow. Our suggestion:  listen, watch and follow things that you enjoy add value to your life. Our continued encouragement is to pursue with passion, what matters most in your life.

We look forward to meeting with you in the upcoming quarter. With the new Client Portal, we have another avenue to use for “virtual meetings”. While in person meetings are always the most enjoyable, with the help of technology, we can also accomplish the next best option of being together in our KFM Family Room through “virtual meetings”. Lastly, a thank you for your continued recommendations to our firm. We are greatly encouraged with the number of people we met for the first-time last quarter. Thanks again for your continued trust and confidence in KFM.

Save the Date for Kemp Financial’s Annual Ladies Night Out!

We are very excited to hold our 11th Annual What Matters Most: Ladies Night Out once again at Cal State Fullerton’s Concert under the Stars. This year’s event will take place on the evening of Saturday, September 21st so please mark your calendars. More details to follow soon.