A Cautionary Tale: Baby Boomers Want a Do-Over

A recent study by Annuity.com reported that if Baby Boomers could go back and make different choices, most would prioritize their health over their money.

Similarly, In a survey by the Nationwide Retirement Institute (Health and Wealth: A Strong Connection, 2019), it was found that 76% of Baby Boomers would prioritize their health over a larger retirement fund.

Take note, Gen X, Y, and Z’ers!

“I wish I had…”

As financial planners, we hear this phrase too often.

In the realm of money, we work to help people and families avoid this phrase. After all, that’s the purpose of a financial plan.

Working with a financial planner ensures that you are being proactive in anticipation of your future wants, needs, and unexpecteds (we may or may not have made that word up).

When it comes to retirement, we never want people to reach their golden years wishing they had done more to prepare.

The OTHER Asset You Need In Retirement

Our approach to financial planning acknowledges a very important detail – money is only one piece of the puzzle. Money, fundamentally, is a resource that helps you enjoy the people, places, and activities you love with more freedom. Without enough money, retirement would be stressful.

But there’s another asset that all of us need in retirement: health.

In fact, your health operates much like your finances:

  1. It’s much harder to start investing in your health at the last second.
  2. If you steadily invest in your health today, you’re less likely to need drastic action down the road.
  3. A baseline of “enough” health helps you recover faster from emergencies, just like a financial emergency fund.

While it’s important to work with a financial professional to create a financial plan for retirement, one must also make the other necessary investments to avoid arriving at their golden years having “underfunded” health.

“When health is absent… wealth becomes useless.”

Those are the evergreen words of the ancient Greek physician Herophilus.

Even if one does have enough money to live comfortably, money without health does not add up to an enjoyable retirement.

Poor health leads to problems like:

  1. Unexpected early retirement & shortened earning years
  2. Large emergency medical expenses that drain savings
  3. Lack of physical ability to enjoy the places and activities retirees enjoy most

Health + Wealth

Good health creates more financial security and can lead to a longer and more fulfilling retirement.

According to a study by the National Bureau of Economic Research (The Determinants of Happiness, 2017), retirees who prioritize their health have a higher quality of life and are more likely to engage in activities they enjoy.

CLIENTS: One Step You Can Take For Your Health

Expertise matters.

When it comes to financial planning, we’ve got you covered.

When it comes to your health and wellness, we’ve partnered with Stevyn Guinnip and her company, GrowWellthy.

Stevyn’s “Wellth Webinar” series are aimed at helping you, our clients, grasp the important relationship between your health and your wealth.

Stevyn will give you practical ideas you can take to begin steadily investing in your health and happiness right away.

NEXT WEBINAR:

Date: April 19th, 2023

Time: 4:00pm ET

Topics covered:

  • How to recognize a health tax & why it’s important
  • The four most common things taxing your health
  • What you can do to lower your health taxes today

:::EVENT CLOSED:::

FDIC Refresh: Are you covered?

While many were watching the Oscar’s, finance fans were watching the implosion of Silicon Valley Bank (SVB), the 16th largest bank in America.

For those interested, we wrote a brief, high-level summary of the collapse:

WTF, SVB?! A TL;DR

Naturally, this brings us to FDIC insurance.

FDIC insurance

Now’s probably a good time for a quick refresh:

  • If your federally insured bank fails, Federal Deposit Insurance Corp. insurance keeps your money safe.
  • The FDIC insures up to $250k per depositor, per institution and per ownership category.
  • FDIC insurance covers deposit accounts and other official items such as cashier’s checks and money orders.
  • If a bank is federally insured, it will have the FDIC insurance logo on its website.

Deposit accounts with FDIC insurance:

  • Checking
  • Savings
  • Money market accounts
  • CDs
  • Cashier’s checks & money orders
  • Negotiable order of withdrawal accounts

What isn’t protected by FDIC:

  • Annuities
  • Investments in stocks, bonds or mutual funds
  • Losses incurred from investments, even if purchased from an insured bank
  • Life insurance policies
  • Contents of a safe deposit box house at a bank
  • Municipal securities

Giannis knows about FDIC:

Giannis Antetokounmpo didn’t know much about investing, but he did put on one helluva MasterClass on FDIC Risk Management.

Unlike Giannis, most folks don’t need to spread their cash across 50 different bank accounts.

However, considering that FDIC protection is a little more complex than a straight $250,000 limit, we’ve provided some examples that hopefully give you a clearer understanding:

Example 1 – You’re single, do your banking in one place and you have:

  • $50,000 in a checking account
  • $100,000 in a savings account
  • $200,000 in certificates of deposit

That’s a total of $350,000 deposited in one bank as one depositor (you), at one institution (your bank) and in one ownership category (single). If your bank were to fail, you’d could lose $100,000 because the FDIC would cover only up to $250,000.

Example 2 – You’re single but you do your banking at two banks, and you have:

  • $50,000 in a checking account at Bank 1
  • $200,000 in a savings account at Bank 1
  • $250,000 in certificates of deposit at Bank 2

That’s a total of $500,000 deposited as one depositor (you) at two institutions (two banks) and in one ownership category (single). Since you have $250,000 at one bank and $250,000 at another bank, all of your money is protected.

Example 3 – You’re married, you both do your banking at the same place and together you have:

  • $500,000 in a joint savings account shared with your spouse
  • $250,000 in a certificate of deposit in just your name

That’s a total of $750,000. All of this money is protected. The joint savings account is one ownership category (joint), where both you and your spouse are covered up to $250,000 each since you are two different depositors. The certificate of deposit is in a second ownership category (single), so the depositor (you) is covered up to $250,000 for that account.

ANNOUNCEMENT FOR CLIENTS: FLOURISH CASH

Over the course of the past month wHealth Advisors has (somewhat serendipitously) partnered with Flourish.

What is Flourish?

Flourish is an online platform that allows customers to:

  • earn a competitive APY
    • 4.55% on first $500k for an individual account & $1M for joint, 3.00% on all balances above
  • have increased FDIC coverage 
    • $1.5M FDIC coverage for individual accts
    • $3M for joint

How do they do this?

Flourish sweeps customer cash into their FDIC-member program banks (they partner with 11 different banks).

  • No minimums.
  • No fees.
  • Full liquidity (like a traditional savings account).

Accessible to wHealth Advisor clients only:

Flourish is not accessible to retail clients.

Clients: If you’d like to learn more, reach out to your advisor with questions, clarifications, or to request an invitation.

* Stated rates as of 5/11/2023

WTF, SVB?! A TL;DR

Silicon Valley Bank

While many were watching the Oscar’s, finance fans were watching the implosion of Silicon Valley Bank (SVB), the 16th largest bank in America.

Our TL;DR on what happened to SVB:

  • SVB’s primary customer base was the startup community. They were not very profitable for SVB (not big borrowers i.e. few mortgages and business loans).
  • 2020/2021: Low-interest rates + easy money environment allows startups to raise massive capital. SVB receives massive deposits (deposits grew from $74B in June 2020 to $212B in December 2022).
  • SVB customers still didn’t need loans, but SVB wanted to make some money… so they invested in longer-duration bonds with an average yield of 1.60%.
  • Enter 2022: Interest rates begin increasing.
  • Money no longer flowing as it once did, SVB startup customers start feeling pressure. Deposits slow, withdrawals increase.
  • Wednesday (3/8): SVB frees up money in their bond portfolio for customer withdrawals. They sell $21B of those longer-duration bonds for a $1.8B loss.
  • Perception: SVB looks financially shaky.
  • Thursday (3/9): Bank run begins. Customers request $42B of withdrawals.
  • Friday (3/10): SVB stops withdrawals, doesn’t open for business.
  • Sat/Sun (3/11-12): SVB customers with account balances > FDIC insurance limits fear they’ll lose their money.
  • Monday (3/13): US Government expresses that banking is a “system of confidence” and promises to make customers whole.

Who’s at fault?

Some blame the depositors for perpetuating their own bank’s demise.

Some blame regulators for missing SVB’s (now) obvious excessive risks.

Some blame the Fed for hiking rates so quickly.

While all of the above certainly didn’t help, it seems clear that SVB’s managers, supervisors, and leadership bear the burden of responsibility.

They miscalculated their risk.

Namely, they took duration risk on their bonds while also having extremely rate-sensitive, quick-moving, well-informed customers.

Conclusion:

While depositors with balances exceeding FDIC-insured limits seem to be in the clear this go-round, the failure of Silicon Valley Bank should be a cautionary warning to everyone.