Keep eye on tax issues, risk, inflation
By M. Diane McCormick, For The Patriot-News
December 20, 2009
"When managing assets in retirement, remember that retirement could cover many years or even decades," said Bradley R. Newman, a financial planner with Roof Advisory Group.
"Let's say you're 60 and planning to retire at 65," said Newman of the Harrisburg - based, fee-only advisory firm. "You don't have a five-year time horizon. You have a 35-year horizon."
Here, Newman answers investment questions for midstaters living in retirement.
Q: What tax issues should retirees watch out for?
A:There's a good-sized group of post-retirement personnel who don't need to take required minimum distributions from their investments. Everybody's familiar with the fact that at age 59 ˝, you're allowed to take out money without paying a 10 percent penalty. But then at 70 and a half, you're required to take a minimum distribution. Say you take out $30,000 from an account when your required minimum distribution is $50,000. That leaves a $20,000 deficiency. If you don't take it out the tax on the deficiency is 50 percent. For a retiree as you get older that's critical.
You can also roll over some of your IRA directly to charity and not treat it as a taxable distribution. That provision got extended to the end of 2009. It must be a transfer directly form the IRA to charity, and the account holder must be 70 ˝.
Most retirees have qualified accounts, like IRAs and 401(k) s, which are pre-tax money. Nonqualified are taxable. They pay capital gains and dividend tax every year. Ideally, you're going to have a relatively good mix of those type of assets, maybe 60-40 either way. It gives flexibility as you draw income and creates a low and relatively stable tax base.
Q: Do retirees still need growth vehicles in their portfolios?
A:You are still going to need some level of growth. You not only plan up to retirement, but through retirement, the impact of inflation is going to be significant.
Q: Haw do you create growth without too much risk?
A:The character of equities that make up a portfolio can really change the complexity of that portfolio. Instead of growth-oriented stacks, move to sectors with ongoing dividends, higher dividends, and lower price-to-earnings ratios. Some of those sectors might be utilities or energy.
Q: How often should retirees review their financial plans?
A:At minimum, annually, and any time there's a change to your financial situation-anything from income requirements to change in risk tolerance. It doesn't mean the plan has to be changed, but it should be reviewed.
Q: Is there risk in Treasury bills as the federal government deficit grows?
A:There was a bit of an issue with Treasuries, as everyone flocked to them last year for safety. The price really went down as the demand went up. For retirees, the bigger issue is with bonds in general.
Assuming you've got a diversified base, it's critical to use individual bonds rather then bond mutual funds. That way, you control maturity and income flow. By owning the individual securities, you knew as long as that underlying company was in business, you were going to get your full value back. You had an endpoint. With mutual funds, you don't own anything and have no endpoint.
Overall, the real goal should be that the portfolio generates income needed on a month-to -month and quarter-to-quarter basis without interrupting the portfolio. You should not go in to liquidate anything to meet income requirements unless a surprise comes up.
Q: Should the Financial plan account for changes that can happen as retirees age? Is it okay to front-end load travel, for instance?
A: That's absolutely appropriate because there is a tremendous difference between being able to take a European trip and being in a nursing home. Ultimately, those types of issues come back to the fact that you need to have a detailed, customized, personalized financial plan so you know how things will stand and how things will play out.
Regardless of income, every adult should have a will, experts say
By M. Diane McCormick, The Patriot-News
November 28, 2009
…As your life changes, so should the beneficiaries of your life insurance policies and 401(k)s, said Bradley R. Newman, a certified financial planner with Roof Advisory Group in Harrisburg. "They operate under contract law and trump what goes on in your will," he said. "People will get divorced, and the ex-spouse gets the 401(k) and life insurance policy." …
Area investment adviser awarded national ranking
By Lara Brenckle
November 16, 2009
Roof Advisory Group Inc., based in Harrisburg was awarded a national ranking in Financial Advisor magazine's fourth annual registered investment adviser survey and a spot in the Top 200 in Wealth Manager magazine's ninth annual top wealth manager's survey. Wealth Manager commended Roof for its ability to perform as well as larger firms. The magazine judged the company based on assets under management, resilience, growth, productivity and client size. Financial Advisory recognized Roof for the third time in a row for its growth in total assets under management and in assets under management per client. The magazine found that Roof's 2008 year-end client assets under management had increased nearly 12 percent, according to the company's news release.
Fiscal Smarts In The New Economy
By Jessica M. Broughton
As 2009 draws to a close and 2010 approaches, many business owners are looking for a brighter tomorrow.
Never before in recent memory have people looked forward with less certainty and with more fear and trepidation. Not only is our economy struggling to pull itself out of a recession, but there is also a shake-up within our country's infrastructure as policies regarding taxation and healthcare are called into question and examined.
But even though there are many questions regarding the future operations of our economy, there is still hope for business owners. Financially speaking, there are many things that businesses can do to not only keep afloat but also thrive in this new economy, whatever political outcome occurs.
Jeff Roof, president and founder of Roof Advisory Group, Inc., has been working with businesses and managing their assets since 1982. He explained that the first step a business should take is to analyze their assets versus their liabilities. Assets that a business might own include any on-hand cash or other capital that can be converted to cash quickly, as well as any equipment that the business owns.
Depending on the business type and model, a business might also be invested in real estate, either as part of their business strategy or they might own the building out of which they operate. The biggest strategy a business can employ in this sluggish economy, Roof said, into be as liquid as possible. Once this analysis is complete, then work can start on crafting a strategy that will make the business as recession-proof as possible.
"We work with businesses to make sure that they have the liquidity and capital to sustain their own growth or for any other unexpected expenses without help from outside lenders," he said.
On a positive note, the recession has forced businesses and individuals to get Back to fiscal basics. Both businesses and individuals made it a point to live on borrowed funds without regard to how they would sustain themselves if their checks stopped coming.
On the flip side, lenders are stricter about whom they are willing to lend to, and sometimes businesses find themselves unable to secure financing. Even with a business plan, banks are being more selective and are not taking on loans that appear riskier.
Most businesses in the startup phase create a business plan that includes projections of the amount of money they need, and Roof suggests that new businesses begin by thinking bigger.
"There will always be unexpected things that will require more money. Startups need to be more liquid than other businesses at different stages, so we recommend that you take your initial cost projections and double them," said Roof. Angel investors and liberal lending practices are a thing of the past, and new ventures are increasingly forced to rely on cash on hand to get off the ground and sustain them through slow periods.
As a business grows and prospers, Roof suggests that businesses take time to assess their investment managers. "One of the worst things that a business can do in a down economy is to continue to operate as though nothing has changed," Roof said. He has seen businesses whose managers so grossly mismanaged their assets that by the time the owner realized something was wrong, the business was barely sustainable.
Investment managers have one main job and that is to increase the investments of the businesses for which they work. However, Roof cautioned that business owners can be just as much at fault for the mismanagement of their assets as an investment manager. Clear-cut performance goals, as well as an end goal, need to be agreed upon between the business owner and their investment manager. Reviewing these goals on a regular basis will then help both the business owner and the investment manager make course corrections along the way before a disaster strikes.
Text by Patti Boccassini
E. Jeffrey Roof
Debunking Market Myths
…It has been over a year since the overinflated credit bubble finally burst in September 2008, creating economic turmoil and a panic in the financial markets. One result of this upheaval and uncertainty was that investment securities prices dropped dramatically during the ensuing months. It was the second time in ten years that the markets corrected with a bang, again leaving many unfortunate investors bewildered and confused.
Hopefully, many investors will emerge from this recent market downturn smarter and savvier from lessons painfully learned. Here are a few examples of investment 'advice' often given by so-called experts that has again been debunked by the recent market moves.
"Just Ride It Out, Stocks Will Always Come Back."
While stocks always fluctuate in value and often demonstrate remarkable price resiliency over time, remaining fully invested in equities throughout a period of chaos and uncertainty such as the past twelve months is foolhardy for all but the youngest investor with little to lose. Protecting the degree of downside exposure in your portfolio is critical. Be aware that a portfolio invested in the S&P 500 equity index at the end of September 1999 would still be showing a slight loss ten years later on September 2009. That's not a ride most investors want to take.
"Investment Managers Rarely Outperform the Indexes."
This has definitely not been the case during the past twelve months when, based on Morningstar mutual fund data as of 9/30/2009, 78% of all large cap growth managers and 45% of all large cap value managers outperformed the S&P 500 equity index. Even on a ten year basis, 44% of large cap growth managers and nearly 95% of large cap value managers exceeded this commonly used benchmark.
"Bonds Always Provide a Safe Haven When the Stock Market Drops."
Absent a default, quality individual bonds will indeed mature at full face value. However, bond funds have no set maturity date and investors in many of these funds experienced price volatility during the latter part of 2008 that rivaled their equity fund counterparts. Even holders of several ultra short bond or money market funds that did not thoroughly research the underlying composition of their fixed income investments were unpleasantly surprised….
Banks pursue stock offerings
By David Dagan
October 1, 2009
…"The fear that had permeated the market as a whole from last year up through ... the first part of this year has diminished," said E. Jeffrey Roof, president of Roof Advisory Group Inc., an investment firm in Harrisburg. "Investors are now again looking for opportunities to redeploy their capital by buying more shares of an existing company."…
…"Sometimes, existing investors will snap up the new stock to preserve their positions,"
Roof said. …
Investment guru takes long view of U.S. recovery
by M. Diane McCormick, For The Patriot-News
September 28, 2009
"Despite the recession, Roof Advisory Group is growing," said E. Jeffrey Roof, president of the Harrisburg-based investment management firm.
He credits three factors: objective investment management from the fee-only firm, client referrals, and skillful management of client portfolios.
"It makes us feel good that we're doing the appropriate thing for our clients in the ability to grow our business," Roof said.
Roof, 54, was Fulton Bank's executive vice president when he founded his investment advisory firm in 1998. His wife, Susan, is director of product development for Significa Insurance Group in Lancaster.
They live in Hampden Twp. and have one son, a junior at Virginia Wesleyan College.
Q: Some analysts say the economy is improving. Do you agree?
A: There are some very consistent indicators that the economy is recovering. When it's all said and done, it will be determined the recession ended mid-summer. But it's going to be a long time. Unemployment will continue to lag into 2010 and maybe a little bit beyond.
Q: How do you reconcile continuing unemployment with a rebuilding economy?
A: The key thing is economic trends and momentum. There's been an uptick in manufacturing across a wide variety of industries. It's a foregone conclusion that the consumer will not be spending as much, nor should they, as they did when we had easy credit and highly inflated housing prices. But we are seeing the consumer starting to take a look, and we're seeing some pent-up demand.
Q: What's your advice on buying stock?
A: We're more highly weighted toward equities than the norm at present. This is something that started earlier this summer. One of the key questions we ask is the risk or potential return, and how that compares to the alternatives. In addition to the economy improving, there are other factors driving this market momentum. A lot of cash remains uninvested. That will provide some tailwind as the market looks to improve. Also, if you look at cash, money markets were paying 4 percent last year. Now, short-term interest rates may be 1 percent. You're really paying a price by being too heavily invested in cash.
Q: As the feds talk about regulatory changes, are there revisions you'd like to see?
A: We've been saying for years that increased disclosure is imperative, in mutual funds and other investment products like hedge funds. What is taking place inside the investment vehicle itself? Who is being compensated in what way for what is being done? What are the fees connected with any particular investment? Some of them are just outrageous.
Q: Is there a danger of over-regulation?
A: Some of the problems that occurred were not the result of regulations not being in place. They were the result of improper enforcement or inadequate enforcement, and the Bernie Madoff case just screams that. The number of times the SEC had been given a heads up and "investigated" and walked away with nothing -- obviously, their investigation was not adequate. Coming from the banking side of the industry, which is very, very highly regulated, it is almost inconceivable to me that the Madoff scam was not picked up sooner. We caution investors all the time that if it sounds too good to be true, it typically is.
Proposals concentrate on investor protection
By Joel Berg
September 25, 2009
…But a standard designed to incorporate broker/dealers threatens to dilute the current standard applied only to registered investment advisers, said Bradley R. Newman, a certified financial planner with Roof Advisory Group Inc., a registered investment advisory firm in Harrisburg.
"Some uniformity in our industry would be welcome," Newman said. "The problem is, you don't want to see things watered down to the lowest level to encompass everybody."…
Behind the list with E. Jeffrey Roof
By Jessica Bair
September 25, 2009
Nautical items throughout the Harrisburg riverfront office of E. Jeffrey Roof reflect his passion for sailing. Roof is president of Roof Advisory Group Inc., a Dauphin County-based investment advisory and financial planning firm.
E. Jeffrey Roof is president of Roof Advisory Group Inc.
Q: What are the biggest challenges your business is facing right now and why?
A: Our biggest current challenge is managing the ongoing growth that is an essential part of the firm's continued success while also continually expanding the expertise and high-touch, professional service that is so important to our clientele. So far, I think we have successfully maintained the proper focus on each, but it is a balance we diligently manage.
Q: How has your company had to adjust to accommodate the recession?
A: We have been very fortunate in having experienced continued strong corporate growth throughout this recession. Obviously, the tumultuous investment markets of the past 12 months directly influences a business like ours, and most of the adjustments we made involved increasing certain key activities in response to almost daily market change and uncertainty, such as portfolio repositioning and proactive client communication, as opposed to making any budgetary modifications. Our staff recognized the necessity of these adjustments and did an excellent job in servicing our clients through a very challenging period.
Q: What is the biggest challenge your company will face next year?
A: Most likely it will be some variation of the challenge I mentioned previously. Our corporate objective is to stay ahead of the curve in a very dynamic and competitive business environment while continuing to provide our investment-management and financial-planning clients with the top-tier professional expertise and service they've come to expect and trust.
Q: What do you consider to be the most important traits of the most successful business executives you deal with?
A: The majority of our clientele are very successful professionals, executives, business owners, etc. They all have unique qualities, unique talents, unique backgrounds and unique styles. But the two traits I'd say are most common among all the successful individuals we work with are persistence and focus. Sometimes these traits are easily observed; sometimes they are a bit more subdued, but they tend to go handin-hand with success in any endeavor. The ability to adapt to change and think strategically would also rank near the top.
Q: What's your best piece of management advice?
A: That's a tough one because I think what defines effective management varies with the situation. However, one overriding constant would be to know your mission (and make) sure everyone else in your organization understands it, as well, and is on board with the objectives. When that common purpose is in place, it is easier for all to assess whether a particular activity, behavior, expenditure, etc., contributes to or detracts from accomplishing the goal.
Stock ascent doesn't sway analysts
Monday, June 08, 2009
By Lara Brenckle
...E. Jeffrey Roof, president of the Roof Advisory Group, said that the loan could provide additional flexibility, but cautioned the company is still highly leveraged.
Rite Aid has about $6 billion in debts, according to the company's annually reported federal filings. "[Being highly leveraged] is obviously not a good thing in a credit environment that is focused on quality," Roof said. "But, the new financing would provide breathing room."
Roof said the company may also be seeing a lift from price-conscious consumers, who are still spending, but just not in amounts seen previously -- a bottle of nail polish and a manicure set from Rite Aid instead of a salon manicure, for example. ...
Reverse Mortgages Gain Ground
By Joel Berg
April 9, 2009
...For starters, they can cost thousands of dollars in upfront fees and charges. Homeowners should turn to the product only as a last resort, said Bradley R. Newman, a financial planner with Harrisburg-based Roof Advisory Group Inc.
"It would be akin to 'do you tap your 401(k)?'" Newman said. …
Stock analysts, financial planners bet on oil and nuclear power
by M. Diane McCormick, For The Patriot-News
Sunday March 22, 2009
...Nuclear's share of energy generation could rise because it satisfies the dual emphasis on ending America's foreign-oil dependence and reducing carbon emissions, said Jeffrey Roof, president of Roof Advisory Group, Harrisburg. ...
...Renewables "will reduce dependency, but I don't see it as replacing our need for having some type of fuel generation from what you might call the more traditional sources," he said.
Roof called investments in renewables "a step in the right direction" but still in the speculative realm.
"Not to say that it's not a valid area to continue to grow and explore, but to have right now wind or solar generation being able to provide a significant amount of energy output, I just don't see that happening in the foreseeable future," he said....
The New Retirement
By Beth Fantaskey Kaszuba
...Our hypothetical couple has set aside money for their kids' higher education, but suddenly they're worried about their own survival in retirement. What strategies might help them still contribute to their children's education costs, without jeopardizing their own futures?
Newman: That's a common scenario. There's give and take between funding retirement, children's college and other priorities, too. The key is to get a handle on those priorities. One of the things we discuss with clients is, there are no scholarships, grants and loans for retirement. You have to make sure you are sufficiently funded for your retirement. And even if there's adequate funding, we rarely recommend setting aside 100 percent of what a child will need, because there will be other options. We try to build in flexibility.
...Is it too late to move money out of the stock market? Is there a better chance the market might rebound within five years- or would you suggest they cut their losses and move into safer investments?
Roof: It's very difficult to give a general scenario, but you want to keep in mind that you want your money to work for you not just to retirement, but through retirement. At first blush, this couple might look to have a five-year time frame until retirement- but they probably really have 20 or so years during which they're retired. It's always important to regularly assess and adjust your portfolio- the allocation in stocks versus bonds, for example. But exiting the stock market entirely at this time is not something we would recommend unless a client was just driven by capital preservation alone.
...The couple is considering supplementing their income with part-time jobs. Is this necessarily a good idea? Do the costs (taxes, transportation) ever outweigh the benefits?
Roof: Surprisingly enough, our firm has done in-depth retirement planning for over 10 years, and I can't think of one couple that's said, "We're not going to do anything in retirement." They all want some type of employment, engagement. The reality is, many people look at retirement not as an end, but a transition. It's not really about the money, although some people do pursue interests that also happen to generate an income stream.
...Everyone's talking about the hits their 401(k)s have taken, but might this be a good time to INCREASE investment in a 401(k)? Or with a goal of retiring in five or six years, is it just too risky?
Newman: In general, it's always appropriate to increase your regular savings level. For example, every year when you get a raise, you should allocate a portion of it to savings. And most importantly, people should sit down at least annually and ask themselves, "Do I need to make a change in allocation, based on changes to my situation or my risk tolerance?" We see people with the same allocation they had 25 years ago, when they started working. It often seems people will spend more time planning for a two-week vacation than they do retirement. It is imperative to reassess your goals and strategies as circumstances change.
Keep 401(k), don't panic, experts say
Sunday, February 8, 2009
By M. Diane McCormick
Go The Distance
...Investment portfolios should las well beyond the target retirement date.
"You need to plan not just to retirement, but through retirement," said Bradley R. Newman, a certified financial planner with Roof Advisory Group Inc., Harrisburg.
"If you've got somebody 50 or 55 years old and retirement is 10 or 15 years away, they shouldn't just be thinking about a 10- or 15-year time horizon. They're going to be a retiree for another 20 or 25 years, so now you're talking about a 30- to 35-year time horizon."
Economic - Relief terms could reduce tax bills
Sunday, January 25, 2009
By M. Diane McCormick
"If 2009 yields another stimulus payment, as a tax credit or check, taxpayers should do what suits their needs, whether it's starting a rainy day fund or beginning home improvements" said Bradley R. Newman, certified financial planner with Roof Advisory Group, Inc., Harrisburg.
As value of 529 savings plans plummets, parents ponder their next move
Friday, January 2, 2009
By Joel Berg
Delaying college or going first to a community college rather than a four-year institution could be among those choices, planners said.
But while the recession and bear market have persuaded some people to put off retirement, it may be tougher to put off education, said Bradley R. Newman, a certified financial planner at Roof Advisory Group, Inc., Harrisburg.
"Psychologically, I think, that's a different decision," he said.