We certainly live in peculiar and complex times. Today’s column offers two money tips. One involves a huge consumer privacy breach and the other involves the inexplicable plunge in interest rates.

Remember the highly publicized Equifax privacy breach back in late 2017? Equifax failed to protect the personal data of nearly 150 million people. To put that into perspective, that represents about half of the population of the United States. For a credit bureau entrusted with personal data on almost every consumer around, it’s safe to say it was a big deal.

Now almost two years later, Equifax has reached a settlement with both the federal government and all 50 states. As part of the settlement, Equifax has agreed to provide multiple benefits to affected people.

The most attractive benefit of the settlement is the offer to provide – for free – up to 10 years of credit monitoring. This is equivalent to about $1,200 to $1,800 of value. The government forced Equifax to pay their competitor, Experian, to provide the monitoring service for the first four years. And, among other offered benefits, those affected by the breach will also qualify for free identity theft insurance protection of $1 million.

To find out if you are eligible, go to EquifaxBreachSettlement.com. It takes mere seconds to check and only a few more minutes to file a claim for your benefits.

Speaking of free money, this brings me to my second tip.

Have you noticed what has happened to interest rates lately? If you haven’t, now is the time to take notice of today’s rock bottom mortgage rates. It might make financial sense to consider refinancing. This is especially the case for those who bought their home around 2010, 2013 and even in late 2017 when mortgage rates were much higher.

Here’s an easy example of the possible merits of today’s refinancing opportunity. Imagine you originally took out a $200,000 mortgage back in 2010 with a 30-year fixed rate mortgage of 5%. In this case, your monthly principal and interest payment is about $1,075.

After diligently making the last 10 years of mortgage payments, you’d still owe about $165,000 with 20 years left to pay. That’s just the perverse math of a mortgage during the early years. Fortunately, the principal paydown really accelerates in the later years.

Now, with the very recent plunge in interest rates, today it’s possible you could be offered a new 20-year mortgage rate of close to 3.5%. At this lower level, you could reset your mortgage payment to around $950 per month and save about $1,500 per year.

Keep in mind that banks won’t refinance a mortgage for free. The closing costs need to be closely reviewed and evaluated against your expected savings. Of course, be sure to shop around. And, remember the longer you plan to stay in your home the more compelling a refinancing becomes.

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

It’s that time of year when students start to pack their bags and head back to college. I remember the feeling, even if only vaguely. What I don’t remember, however, is the cost of college being so prohibitive for so many. It’s become a financial epidemic.

I must admit, I was incredibly lucky to earn my degree without being saddled with debt. Today, about 50 million people owe a collective $1.5 trillion in student loans. To put this into perspective, approximately one in three between the ages of 25 and 35 are grappling with student debt. Predictably, student loan default rates are expected to rise as the problem has grown over the decades.

Student loan debt and the cost of college looks destined to be a top issue in the 2020 presidential campaign. Most Democratic contenders support some form of student debt relief, if not outright debt forgiveness. Similarly, the leading candidates are also in favor of more affordable, if not outright free, college.

Today, about 20 million people attend public colleges and universities. Very roughly, the average cost of tuition and books is around $8,000 to $10,000 per year. This brings our nation’s annual tuition bill to about $150 billion to $200 billion. After counting the tens of billions of dollars in tuition support already provided by federal grants and many state and local initiatives, the price tag of a national free college plan represents less than 5% of annual federal tax revenues.

Further, if the currently outstanding balance of $1.5 trillion in student debt were wiped away, the one-time cost would be equivalent to absorbing just 18 more months of our federal government’s deficit spending at the current rate.

However, even these estimates don’t paint an accurate financial picture. The negative economic impacts of the current student loan debt issue are meaningful and have been building over time. Statistics show that more young people now choose to delay marriage, delay starting a family and delay buying their first home. The ripple effects of the student debt crisis on economic growth have been consequential.

I suspect if one were to properly model the economic boost provided by both a student loan forgiveness plan and a free college plan, the overall cost would likely be far less than feared. According to the Census Bureau, over a full lifetime, people with a college degree earn about 1.6 times more than those with only a high school diploma. The lifetime boost in income tax receipts would lower the projected price tag of these plans, even after ignoring the clear benefits that result from a more highly-educated workforce and society.

As we listen over the coming months to politicians argue over the fiscal and political feasibility of their many plans, my hope as a voter is we rely on robust economic analysis when evaluating these proposals. And, perhaps more importantly, I hope we work to remember a time when college was far more financially accessible. Amazingly, it really wasn’t that long ago.

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

I grew up in a big family. As one of the middle children of six, there wasn’t a moment of quiet in my formative years, let alone clear memories of outright peace. Don’t get me wrong; it wasn’t war either. It felt more like a long-term truce.

Now as adults, my siblings and their families converge upon Traverse City each summer. My formerly big family has become huge. The original six have multiplied into 23. The complexity of it all seems exponential.

We’ve now got kids under five, all the way up to age 20. We’ve also got vegans and meat lovers, too. Just like my parents, my siblings were also cursed with a very opinionated lot. The many elements that determine the overall outcome of our reunions are incalculable. And, yet, the contained chaos works.

It reminds me of the way times have changed in financial markets. Information now flows faster and conflicting opinions pop up on our devices every second. Today, the opinions on the current state of the economy and the path of the markets are fast and furious.

Some are warning of an imminent recession and others call for continued growth even as we’ve reached one of the longest economic expansions in modern times. Bonds are clearly signaling a slowdown and stocks keep hitting all-time highs. Just like my family gatherings, the environment is a cacophony of conflicting opinions. You simply have to know what you can and cannot control.

When it comes to building and managing investment portfolios, there are three elements that matter most, in my view.

To start, you can control the asset allocation. That’s simply about finding the appropriate mix of stocks and bonds. Studies show that your portfolio’s asset allocation is the factor that most affects portfolio returns and overall risk.

Next, you can control the level of diversification inside your portfolios. Diversification is about finding the right mix within your asset allocation. As I remind new clients when setting our formal investment management guidelines, a portfolio with 60% in stocks isn’t balanced at all if that exposure is represented by just one stock. Sorry Warren Buffett, I really don’t care if it is Berkshire Hathaway. One stock simply isn’t enough for us mere mortals!

Last, we have control over our investment selection process. Whether it’s picking Visa over AT&T or choosing a low-cost index fund over an actively-managed mutual fund, the specific investments in a portfolio really do matter. For example, the rising tide of a bull market tends to lift all boats. However, in a recession, AT&T will likely provide portfolio protection that Visa will not.

Just like my family gatherings, both the speed and volume of market opinions has picked up exponentially. Today, the near-term outcome seems less predictable than usual. My advice is to focus on what can be controlled and what cannot is best handled with a healthy sense of acceptance. As I’ve learned at my family reunions, pouring yourself an extra glass of wine really can’t hurt either!

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Like the stock market, political partisanship is at an all-time high. Case in point; it recently took the Securities and Exchange Commission (SEC), our nation’s protector of investors, 1,363 pages to barely tweak the rules of the road for how financial professionals should treat their clients. That’s about the same length as War and Peace, folks!

After a decades-long industry battle, with one camp laser-focused on the goal of imposing a true fiduciary duty on all financial pros, of all stripes, to place their clients’ interests ahead of their own, the big brokerage firms successfully watered down the regulations. The SEC’s final rule is ironically called “Regulation Best Interest.” The result? Brokers and registered investment advisers will continue to operate under a different set of professional obligations to their clients. And, naturally, the general public will remain unlikely to spot the difference.

The new regulation represents the nail in the coffin for Obama’s high-risk strategy in early 2015 to require brokers to avoid and disclose all conflicts of interest and act as a fiduciary to their clients at all times. After all, registered investment advisers have long-practiced under those rules. Why did Obama try to push this through the Department of Labor and not the SEC? For years, Congress wouldn’t seat enough board members to the SEC, essentially creating complete institutional gridlock.

The epithet on Obama’s attempt was finally written just last month with a partisan vote to not impose an industry-wide, unified fiduciary standard of care. It only took about three years and heavy industry lobbying to quash his attempt.

What the new Regulation Best Interest means for clients is that consumer confusion will continue. Brokers will still be able to imperceptibly switch professional hats; on one hand acting as simple, middle men in a financial transaction and, on the other, acting as true fiduciaries to their clients. Rest assured, the color of their hats will be only shades apart.

Like a Facebook privacy policy consent button, consumers should also get ready for more financial industry disclosure forms with embedded website hyperlinks designed to obfuscate consumers’ true understanding of the nature of their relationship with their financial professional.

The SEC is even making registered investment advisers add two additional pages to their already 20+ page regulatory disclosures. It shouldn’t take 2 pages, let alone 1,363 pages, to state unequivocally that you have a legal fiduciary duty to always place your clients’ interests first. One short sentence will do.

Of course, just as transparency shines a light on the truth, opacity is the lifeblood of a complex sales process. In many ways, that’s precisely what the SEC was created to guard against. Their new Regulation Best Interest simply doesn’t get the job done. Political partisanship certainly did.

It’s once again time for registered investment advisers to take matters into their own hands and loudly beat the drum about their legal fiduciary duty to clients. Now, that is definitely in the public’s best interest!

In my humble opinion, the best-titled financial newsletter around is called “Things That Make You Go Hmmm” Lately, that catchy title has been banging around in my head. Let me just list the reasons, in no particular order of importance.

The Federal Reserve is openly talking about cutting interest rates after finally getting them up to a whopping 2% or so! Even more astonishing, like Pavlov’s dog, the mere mention of this move is causing stocks to once again reach all-time highs. Cutting rates, all-time highs? Hmmm.

We’re on the razor’s edge of taking military action in the ever-volatile Middle East, and investors are appearing to shrug their collective shoulders. Even more bizarre, our president is tweeting about his most inner thoughts on why he ordered strikes and abruptly reversed course in the span of a few minutes. The market’s reaction? Inaudible. Hmmm.

Speaking of tweets, in just the last month or so, a trade deal with China was nearly complete only to see talks suddenly fall apart. And, how did investors learn about it all? Twitter. Clearly believing this was an appropriate way to announce changes in our trade policies, we were soon greeted with deeply threatening tweets about massive tariffs with Mexico. And those threats weren’t even tied to our trade policies. Hmmm.

We’re now over 10 years into our economic expansion with our national unemployment rate near a record-low of about 3.5% and recent inflation readings are just below 2%. Yet our federal deficit is butting right up against $1 trillion. Not long ago, this type of fiscal policy would have sparked outrage, concern and political hand-wringing. Today? Nada. Hmmm.

Speaking of debt, with the recent collapse in interest rates, the global markets now offer over $13 trillion of government debt yielding negative interest. Yes, you did hear that right. Ironically, it makes our own skinny 2% bond yields the envy of the developed world. Hmmm.

As we all know too well, we’re about to embark on another presidential campaign. With now 25 Democrats vying for the presidency, the two leading candidates are soon to turn 77 and 78 years old. That fact actually makes people forget that Trump would be 75 only a few months after his re-election. With all due respect, I haven’t personally met any men well into their 70s who think they should be running a large country, let alone a small one. Hmmm.

This fall marks my 20th year in the investment business and, yes, I do still have plenty of hair on my head and chin to scratch. Let me be clear about one thing, at no time is the world totally orderly. And, rarely are financial markets free of true head scratchers. Still, these are most interesting times and, I must admit, they are making me go, hmmm, a little too often lately!

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

People are starting to worry about a recession. Based on the Federal Reserve’s reaction, they are too. Yet, recessions don’t just happen without warning and economic expansions don’t come with set expiration dates.

Still, recessions are natural. We tend to travel between emotional peaks of euphoria to depression and back again. But, along the way, the pace of economic activity experiences fits-and-starts and the data sends mixed or false signals. This adds to a sense of futility in trying to forecast economic turning points.

When recessions do occur, however, they have a big impact. Our last two recessions produced stock market losses between 50% and 60%. In comparison, the average decline during a recession has been above 30%. Whether severe or pedestrian, it highlights the importance of being both financially and emotionally prepared heading into a recession.

On the employment front, two leading indicators look sound, regardless of the weak jobs report for May. Initial claims for unemployment benefits are still very low and aren’t really moving demonstrably higher. The same steadiness can be seen in the average weekly hours worked by employees in manufacturing. Remember, these are jobs-related data points that tend to show weakness before the onset of a recession.

Next, the latest readings of an index that tracks the mood of the manufacturing sector are down from a year ago but still don’t point to a recession either. Another leading indicator, new orders for durable goods, have also barely seen a downtick. Finally, a measure of the delivery speed of suppliers has weakened slightly but also doesn’t reach recessionary-level readings.

Turning to the housing industry, the number of building permits for new homes has basically been flat for the last couple of years and it is only down a bit from last spring. Incidentally, the current number of building permits now sits at a little more than half the level seen before the financial crisis. So, the housing industry may not have quite the economic impact as it once did. In addition, mortgage rates have recently dropped, probably providing a backstop.

Consumer confidence readings are also still quite high. After the stock market downturn late last year, confidence did fall off some. However, up until the last couple of weeks, we’ve seen a rebound in consumer confidence surveys. It should be said that the tight correlation between consumer confidence surveys and the most recent performance of the stock market tends to make this a chicken-or-the-egg type of indicator.

With the fundamental economic indicators largely in the clear, what remains are the financial market-based indicators. Since these show up on your brokerage statements, they do tend to garner attention, especially in the media.

The most worrisome is the now-inverted yield curve. This just means that longer-term interest rates are now lower than short-term interest rates for government debt. While it is not a fool-proof signal, when a yield curve inversion occurs, the odds of an oncoming recession rise.

The Fed has certainly snapped to attention. It is now strongly signaling interest rate cuts, rather than hikes. Their about-face has been very sudden and this perhaps adds to general nervousness. To quell the impression of panic, the Fed is framing their reversal as simply taking out an “insurance policy” on the economic expansion. Of course, their justification for doing so goes well beyond the shape of the yield curve in the age of Trump tweets that threaten our relationships with our major trading partners.

As I mentioned in my most recent column, the uncertainty created by the threat of trade wars does matter. It is worthy of making some proactive, risk-management portfolio adjustments. Yet, as I read the key economic data that historically behave as leading indicators of an oncoming recession, I don’t currently see obvious red flags flying. My advice is likely as bland as it is wise; keep an eye on the hard data, know your portfolio risks, develop a reaction plan and, most of all, guard against making emotional moves.

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Q: It’s been quite a rebound since Christmas Eve, so what’s going on with the stock market, lately?

A: You are very right. The market’s bounce back over the last six weeks has been both sudden and strong. It hasn’t quite clawed back all of the big decline that began last September. But, generally-speaking, it’s more than halfway there.

I’d chalk up the rebound to four factors. First, when the mood gets as dark as it was, you can usually expect a bounce back. It’s pretty typical when markets get so “oversold.” Second, the fear of a looming recession has somewhat faded. Recent economic data have been better than expected, including yet another strong jobs report in January. Third, the potentially damaging trade war with Trump and China appears to have cooled off. Continued spasms should be expected until that issue is resolved, however. Finally, the Fed blinked as Wall Street’s loud whining got their attention.

Of course, none of these factors are irreversible and the concerns of the recent past were not entirely invalid. Given this, my suggestion is to take this rebound as an opportunity to now evaluate your overall portfolio risk. After this big rebound, it feels like a second chance.

Q: With the Federal Reserve having raised rates over the last couple years, what return should I expect on my cash?

A: Cash is no longer trash. But, you need to be vigilant to get the return you deserve. Banks and brokerage firms are perfectly happy paying you far too little. It’s not evil; it’s just economics.

For example, the default money market funds at most brokerage firms pay about 0.25% to 0.5% today. You can easily get more than 2% on your cash, even if it comes with some very minor inconveniences. This difference can add up.

My suggestion is to first review your cash holdings as a percent of your portfolio. If your portfolio has much more than 5% sitting in cash, talk to your adviser about shifting it into a “position-traded” money market fund rather than the default, “sweep” money market fund. Yes, when you need access to your cash, you’ll need to sell (for free) your money market fund, like you do with a normal mutual fund. But, it takes just one day of planning ahead in exchange for getting an extra 2% return on your cash. It’s an easy move!

Join us for our next Money Series presentation this upcoming Wednesday at 6:30pm in the McGuire Room of the Traverse Area District Library. This month’s talk is based on a thought-provoking academic study on the power of working longer to boost your retirement planning. To register, please visit MoneySeries.org or simply call (231) 668-6894. Front Street Foundation, through its commercial-free Money Series programs, is a non-profit committed to providing open-access to financial education, for all.

Financial markets were not friendly in 2018. Over the last few months, the markets were actually just plain mean.

For my clients, I’ve been sticking to a more conservative approach that helped to somewhat lessen the blow. That basically means I chose to invest less-heavily in stocks than I could have been. However, in all honesty, I didn’t position things conservatively enough. Hindsight always appears crystal clear!

I’ve been asked lately if we’re heading into a recession. Here’s why I feel it’s too early to tell.

There are two major types of recession indicators. The first is made up of “betting” indicators. They are a reflection of the shoot-first, question-later collective guesses made by the markets. The second type is comprised of “fundamental” indicators. These include both business and consumer surveys as well as economic releases.

The market-based indicators are often way out in front of the economy’s fundamentals; zigging and zagging and garnering alarming media headlines. Today, the financial markets are currently flashing red.

The stock market recently crossed over the official line that marks a bear market. And, both the yield curve and bond prices for lower-quality companies foreshadow a weakening economy. On the whole, these signs raise concern.

However, financial markets aren’t all-knowing. They often get it wrong. Since 1950, there have been 13 bear markets and nearly half of the time no recession followed. Markets can’t see the future, because (most) people can’t see the future!

The fundamental indicators currently offer a less-concerning picture. Most economist see slower economic and company earnings growth ahead. But, still, positive growth is expected this year. The Fed now appears ready to calm markets by slowing or even pausing its rate hiking plans. And, for different reasons, it’s conceivable that both Trump and China might blink on the trade spat. Overall, the best way to describe the fundamental indicators is they appear to be taking on an unattractive yellow-green tint.

The current split in the indicators forces me to avoid looking to the market to either validate or refute my current game plan.

At the highest level, I rest on the knowledge that my clients’ overall asset allocation is diversified, balanced and appropriate for them. Next, I’m focused on making sure the investments I’ve chosen are both sound and safe. Soundness places a premium on quality investments backed by financial strength. Safety emphasizes value, as measured by price relative to things like earnings or cash flow.

Beyond asset allocation, soundness and safety, the game plan has to remain flexible. To be sure, if the fundamental indicators begin to better align with the market’s signals, taking proactive steps to lower risk is in the cards.

As famed value investor, Ben Graham used to remind his students, including a young Warren Buffett, “Mr. Market” is a fickle man who is prone to bounce between elation and despair. In the face of his emotional roller-coaster, the wisest thing is to be prudent, stay rational, weigh the evidence and think independently. That’s just what I was hired to do!

The turn of a new calendar year holds special appeal. It’s a natural time to reflect. It’s also a moment to set a new course for your personal finances.

For some, seeking the help of a financial pro feels unnecessary. I know people who run circles around some financial advisors! But, most people aren’t comfortable going it alone and do want support.

As I get ready to celebrate my twentieth year in the industry, I’d like to offer up some guidance to help ensure you find a good fit with a financial advisor.

Find a good communicator. Like a good marriage or friendship, communication is number one.

Perhaps using overly-technical terms makes some advisors feel smart or we simply become a bit tone-deaf over the years. The fact is, industry-centric terms hold little meaning for regular people. Help us by asking us to use plain English!

Beyond actually understanding the advice you’re paying for, you should expect to always be kept informed along the way about your money.

Find a seasoned advisor. Like money, knowledge is accumulated over time.

Essentially, a financial advisor’s experience comes from two sources; education and years on the job. The first centers on credentials. And, on behalf of my entire industry, I deeply apologize for the alphabet of letters behind everyone’s names! Even I’ve lost track. To focus you, first look for the letters CFP (financial planning) or CFA (investment management.)

However, a professional designation doesn’t mean much if it’s not backed by years of relevant experience. I used to joke that investment advisors who cut their teeth during the long bull market in the ‘80s and ‘90s accumulated just a few good years of experience – over and over, again. Some stretches are like the movie, Groundhog’s Day. My suggestion is to seek someone who has operated through some market cycles and some volatility.

Find a financially- and ethically-aligned advisor. As the saying goes, form follows function.

Over the years, there’s been a clear movement away from advisors who sell financial products for a commission and toward advisors who provide investment management and planning on a recurring or one-time fee-basis. I feel strongly that a strictly fee-only arrangement ensures advisors will uphold their legal fiduciary duty to place your interests ahead of their own. But, these principles haven’t completely sunk in as evidenced by annuity sales people still offering free dinners just to hear their pitch!

Over the years, I’ve come to recognize that choosing a professional advisor is a daunting task. If the last few months of market turmoil is any indication, ensuring a good fit with your chosen financial advisor may become increasingly important.

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm, and the founder of the Money Series, a program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

“To every thing there is a season, and a time to every purpose under the heaven” – Ecclesiastes 3. Like our decade-long economic expansion, nothing lasts forever.

Recession is on the tips of many tongues today. Judging from recent increased market volatility, this possibility is being intensely pondered. What’s driving the conversation? The shape of the yield curve.

To begin, the level of interest you pay on a loan clearly depends on how long you intend to borrow money. Borrowing for just a few months? You’ll pay a different interest rate than if you wanted to borrow for a decade or more. The yield curve is simply a graphical representation of the different interest rates you’ll pay relative to the length of the loan.

In a healthy, growing economy the normal shape of the yield curve is upward sloping. Naturally, a shorter-term loan usually costs less than a longer-term loan.

However, the yield curve isn’t at all rigid. Like all things, it changes a little from day to day. Instead, think of the yield curve as more of a wet noodle. It can shift, twist flop and flip; changing its shape as millions of lenders and borrowers negotiate in real-time.

In early October, I was lucky enough to visit Ireland with my brothers. Even more fortunately, my brother-in-law from New Zealand knew how to drive on the “wrong” side of the road and expertly navigate roundabouts. It seems the Irish love their roundabouts as much as they do their beer! So, in the spirit of the Irish, please follow me (slowly) around my very own “yield curve” roundabout.

As you now know, yield curves are all about interest rates. And, of course, interest rates are all about borrowing and lending. Borrowing and lending activity supercharges our economic booms and busts. And, you guessed it, perceived changes in our economy drive investors to act ahead of the pack. So, coming full circle on my roundabout, the yield curve definitely impacts markets.

But why exactly are investors reacting to the yield curve today?

The once healthy-looking upward sloping yield curve has been slowly flattening for quite a while now. However, this past week, some longer-term interest rates are now actually slightly lower than some shorter-term rates. The shape of the curve has actually started to move from flat-looking to downward sloping. In financial lingo, the yield curve appears to be slowly “inverting.”

An inverted yield curve is an unnatural concept that signals a possible change in the economic cycle; from economic boom to bust. As a matter of fact, each of the past seven recessions were preceded by an inverted yield curve. So you see, the yield curve can strike fear in investors.

While we haven’t seen an officially inverted yield curve just yet, go tell that to those who write the computer algorithms that drive markets today. Based on last week’s wild ride, it’s clear the algorithms, unlike my Kiwi brother-in-law, simply aren’t programmed to drive carefully on the yield curve roundabout!

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a purely independent and strictly fee-only firm located in Traverse City. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

I’ve been a parent now for almost two decades and, yet, I still have a 10-year old daughter who periodically requires me to play act as a nurse. In her mind, I’m woefully deficient. When she’s sick, my wife is obviously her preferred caregiver. Who can blame her. Accurately diagnosing a fever in just seconds with the back of your hand is a true confidence builder!

This weekend, I read a book entitled, Mastering The Market Cycle, by Howard Marks. Mr. Marks is the co-founder of Oaktree Capital and his quarterly client letters are widely-followed by investment professionals. His latest book seemed especially appropriate to read given that we’re closing in on the ten year mark of our current bull market and economic expansion.

His book’s primary theme is to tilt against the crowd; to be the skeptic. For some, like me, this is a natural state of mind. For most, however, adopting this mindset is a challenge. Being agreeable is a social asset, after all. On the contrary, following the crowd doesn’t work that well in investing. Howard Marks actually argues for just the opposite; watch the crowd and act accordingly.

In his book, he referenced a checklist to help investors take the temperature of the markets. Like my wife’s trick with our daughter, it only takes a few seconds.

Marks asks readers to make a qualitative judgment for each item in the checklist; forcing a gut-level choice between an optimistic and a pessimistic descriptor. When your answers tilt heavily in either direction, his advice is to open your eyes for a market inflection point.

His checklist basically covers four main areas; the state of the economy, a review of general lending conditions, the overall market backdrop and a reading of the mindset of investors.

To give you a flavor of his checklist, here are some examples. On the economy; vibrant or sluggish. Its near-term outlook? Positive or negative. On lenders; eager and loose or reticent and tight? How about interest rates? Low or high, rising or falling? On investor attitude; aggressive and eager or cautious and distressed? On investor appetite; own the entire market or invest selectively?

So, you are likely wondering, what’s my back-of-the-hand temperature reading of today’s environment? Things are changing, especially compared to one year ago.

Unlike last year, with the tax cuts imminent, investors are openly nervous. In addition, interest rates have risen and lenders have grown more cautious. As a result, major industries, such as housing and autos, are feeling challenged. Further, while admittedly a recent phenomenon, the investor crowd is tilting toward conservative stocks and fleeing once-loved tech stocks. The broad stock market has completely given up its gains from this summer. And, after its total absence last year, volatility is firmly back.

For my daughter and, importantly, for your portfolio, taking an accurate temperature most certainly provides a confidence boost. However, it’s really just the first step in a true game plan. As a New Year’s resolution, I’d suggest taking a fresh look at your portfolio’s overall risk, be on alert for a sense of complacency and then, as Howard Marks suggests, act accordingly.

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a purely independent and strictly fee-only firm located in Traverse City. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Bonds are behaving badly. This year, the bond market has lost about 2.5%, after factoring in interest payments received and the downward shift in market value. For most investors, a loss is unusual in this typically steady part of their portfolio. Why is this happening?

To begin, visualize a teeter-totter. Like a teeter-totter, when interest rates drop, bond prices rise. This downward movement in interest rates has been the general trend since way back in Ronald Reagan’s first term. But, like a teeter-totter, it also works in reverse. When rates rise, bond prices fall.

Lately, interest rates are rising. I’m not talking short-term rates, though. Those are controlled by the Federal Reserve. Like a steady drumbeat, the Fed has raised rates three times this year, just as they did last year. But, short term rates really don’t directly affect bond prices much. I’m talking about long term rates. That’s where today’s losses in bonds come into play.

At the start of the year, the 10-year US Treasury rate was just under 2.5%. Today, this closely-watched “benchmark” rate is almost 3.2%. This has caused the teeter-totter to swing; rates up, prices down. An upward shift of almost 1% in long term rates is quite big. For those who are familiar with teeter-totters, it’s never fun when your partner jumps off!

With longer-term interest rates having reached a decades-long low not too long ago, the fear of rising rates has been palpable. Yet, it has largely been all bark and no bite. Lately, that fear has been validated.

With this, there are two burning questions. Why have rates risen? And, what should we expect now?

The typical explanation of why long-term rates rise is inflation. This makes sense. After all, when you lend money, you’d like to first keep up with inflation and also make some “real” money to boot.

When you look at investors’ inflation expectations, though, not a lot has changed since the start of the year. Future inflation expectations have held steady at around 2%. No, interest rates have risen because bond investors now demand more of a “real” return on their money. This often happens when the economy looks strong.

If the economy keeps wind in its sails, it’s not inconceivable to expect longer term rates to keep rising, perhaps up another 0.5% or so. If that happens, bonds face some more headwinds. However, I believe the bulk of the pain in bonds is likely over.

If, on the other hand, the economy’s sugar high from the recent tax cuts and deficit spending wears off, the teeter-totter just might swing back in bond investors’ favor again.

With the balance of risk about even, in my view, my generalized advice is to shift your bond portfolio into some shorter-term bonds. This analogous to scooting your bum a little closer to the center of that teeter-totter. If your partner keeps jumping off, the swings won’t be quite as jarring!

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. Comments welcomed by phone at (231) 947-3775, by email at Jason@FrontStreet.com or online at www.FrontStreet.com

At our upcoming Money Series at Traverse Area District Library, I will be speaking about a topic that I now believe is bordering on an obsession; the new tax law.

Perhaps that’s due to its important changes that affect charitable giving. Perhaps it’s due to how it affects families with younger children. Perhaps it’s due to the new law’s effect on business owners. Perhaps still, it may be due to how it has affected the stock market and the federal budget deficits for as far as the eye can see. The fact is, it’s a pretty big deal, worthy of a small professional obsession.

On the evening of November 14th, the Money Series will provide a sweeping overview of what’s changed in the world of taxes for individuals and couples. And, I’ll give proper focus to the wildly impactful and still-misunderstood small business deduction.

According to the Tax Foundation, about 90% of all tax filers will benefit by claiming what’s known as the “standard deduction.” This means most taxpayers will no longer have to gather piles of paperwork to hand to their tax preparer. No more property tax statements. No more investment fee statements. And, no more verification of the deductibility of charitable donations. Instead, the vast majority of people will rely entirely on the new, much higher standard deduction. It’s a big simplification for many.

However, as a result, many people will need to change their charitable habits in order to gain a tax benefit for their generosity. If you don’t, Uncle Sam will cease to be your “partner in giving.” After all, when the federal and state government reimburse you by lowering your tax bill after you donate money, it’s as if they picked up part of the tab.

My presentation will also provide a layman’s perspective on the very important small business tax deduction. Ironically, it’s the opposite of tax simplification. As a result, I expect it will occupy a good amount of time. If you know of anybody who owns a business, they need to know how Congress handed them a big bone and how to use it to their advantage.

I also suspect the Q&A segment will delve into the mind-boggling projections on the federal budget deficit. While I sense that today’s financial markets don’t foresee an issue with our profligate spending as a nation and, in the end, the US has an infinite printing press, Ernest Hemingway’s quote may someday carry the ring of truth, “How did you go bankrupt? Two ways. Gradually and then suddenly!”

Before the upcoming Nov 14th Money Series, there’s also a chance to catch attorney Diane Huff’s talk, “What the Heck is a Trust, Anyway”, to be held on Wed., Nov. 7 at 10:30am at the Senior Center. The Money Series is a program of the Front Street Foundation, a non-profit committed to providing open-access to financial education, for all. To register, go to MoneySeries.org or call (231) 714-6459.

Planning for the possibility of mental decline is not something any of us likes to consider. The fact is, however, it’s critically important. And, if it’s your own decline that requires such a plan, don’t you think you should be the one who develops it?

This reminds me of something I thought about in my early 20s. Back then, I watched Bill Clinton blow up his personal life – and almost his presidency – by having an affair with an intern. At that time, I remember noting how men in their 40s must be unavoidably prone to colossal mid-life crises.

I felt so certain of this that I once remarked to my wife that all of us really should designate another person – call it your “life proxy” – who would have ultimate veto power of all of your major life decisions during that dangerous life stage.

So, you want to quit being an attorney and become a musician? Call in your life proxy to decide! Really? You want to get a divorce and marry your long-lost college girlfriend? Proxy to the rescue!

While I haven’t followed the advice of my younger self, I still think naming a life proxy was a sound idea. The mid-40s is certainly a funny age. Heck, I ran for the school board and I’m quite certain my life proxy, if I had named one, would have likely vetoed my decision!

Yet, even if you missed your opportunity to hand over the keys to your life proxy in your mid-40s, you still have another chance to be proactive during your retirement years.

I have had a recent experience with a wonderful client and her caring children. Her mental faculties have slipped over the years and the decline has sadly accelerated over the past few months. She knew she never wanted to be in this state. Yet, now that she’s there, she predictably and sadly cannot recognize the depth of her decline. For her, and for many others, the time to plan was well before she crossed that blurry threshold of self-recognition.

Fortunately, official recognition of just how vulnerable seniors are to financial fraud has begun to take hold. For example, at the time of opening a new account, brokerage firms have now begun to ask for what’s called a “trusted contact.” A trusted contact is someone who you want notified if the suspicion of financial exploitation or self-harm arises.

As an investment advisor serving a generally older clientele, I am a proponent of this idea. In fact, my firm is going to soon begin to gather our clients’ trusted contacts.

Clearly, designating a trusted contact is a far cry from naming your all-powerful life proxy to make all of the big decisions in your life, but it’s a very good place to start your plan as you advance in your retirement years.

Speaking of life planning, attend our next Money Series presentation by attorney Diane Huff entitled, “What the Heck is a Trust, Anyway”, to be held on Wed., October 17 at 6:30pm in the McGuire Rm. of the Traverse Area District Library. The Money Series is a program of the Front Street Foundation, a non-profit committed to providing open-access to financial education, for all. To register, go to MoneySeries.org or call (231) 714-6459.

After eight months, the IRS finally clarified how the new small business deduction works for LLCs and S-Corporations. Given its complexity, it’s no great surprise it took 184 pages to explain.

Here’s why it’s so important to understand.

If you happen to have lots of kids or pay high property taxes or pay big state income taxes or took out a mortgage that funded something other than home improvements, you’ve likely lost a lot of tax deductions and exemptions. When all is said and done, the new law effectively subjects more of your income to taxation.

However, if you are fortunate enough to own your own business, Congress found a way to make it up to you. You may now qualify for the very large 20% small business income deduction under Section 199A.

Here’s how it works. But, remember, it only applies to pass-through businesses; LLCs or S-Corps. C-Corps got their own tax break, so don’t feel bad for them!

Section 199A’s very first eligibility test is based on your taxable income. If your taxable income is less than $315,000 as a married person (or $157,500, if filing single), you’ll get the tax break.

Importantly, below these income levels, you don’t need to have any employees to qualify for the deduction. And, despite what you may have read, this tax break applies to “service” businesses too. Below these income thresholds, it’s not just for “non-service” businesses. The IRS’ recent guidance made it clear that many service business owners will qualify for the 20% small business tax deduction.

Now, if you make more than $315,000 (or, again, more than half that level, if you’re single), the tax break fades away fast. To be clearer, it fades away fast for service businesses only.

Service businesses are defined as fields that look like paper-pushing, such as investment advisors, accountants, attorneys or catch-all “consultants”, as well as businesses providing health services, like physicians.

For these service businesses, as you make more than the taxable income limit, the deduction begins to decline. Once you reach $415,000, it totally disappears.

Interestingly, no matter how much the business owner makes, this big tax break is never gone for “non-service” businesses. Bizarrely, it also sticks around for certain carved-out paper-pushers; engineers, architects or real estate agents!

For “non-service” business owners, there’s a two-pronged test to determine the level of the small business deduction you’ll get. The tax deduction you’ll get is the smaller of two distinct calculations.

The first calculation is equal to 20% of your business income. The second calculation is the larger of (a) 50% of your employees’ total wages or (b) a combination of 25% of employee wages plus a factor of how much money you invested in your business.

Only Congress, in its infinite wisdom, would think all of this represents tax code simplification. They deserve stacks of love letters from CPAs across the country thanking them for their continued job security!

Speaking of the new tax rules, we’ll be discussing the possible benefits of Donor-Advised Funds at this season’s kick-off Money Series presentation on Wed., Sep. 26 at 3:30pm at the Traverse City Senior Center. Front Street Foundation is a local non-profit whose mission is to provide open-access to financial education, for all. To register, visit www.MoneySeries.org or call (231) 714-6459.

Q: I’ve heard a lot about index fund investing. The funny thing is, I don’t really even know what an index fund is! Can you explain the difference between index funds and regular mutual funds?

It’s always a smart plan to do some learning before committing money! That advice applies to index fund investing too, despite its massive popularity. Since the start of this current bull market, low-cost index fund investing has become much more than just an investment philosophy. It’s almost become an investment religion.

To begin, index funds are types of mutual funds, just like apples and oranges are types of fruit. However, unlike a mutual fund managed by people doing financial research, an index fund’s only goal is to mimic the market.

The index could be designed to track the many hundreds of separate stocks that make up the S&P 500 or it could be made to track the performance of a short list of speculative marijuana companies. In the end, an index fund is nothing more than a low-cost, take-what-the-market-gives-you investment, for better or for worse. You just pick the index to track and the result is essentially written in the stars.

And, since the bull market began almost a decade ago, taking what the market gave you has been a fine result. My consistent advice, however, is for you to periodically assess your risk capacity and to rebalance your portfolio as necessary. There’s always another turn in the cycle.

Q: With interest rates going up, I’ve read that bonds won’t be the place to have my money. What do interest rates rising have to do with how badly or how well bonds will perform?

It always surprises me that investors feel they understand stocks much better than they do bonds. I suppose, like most things, it’s just a matter of familiarity and exposure.

For the record, though, bonds are much simpler than stocks. With stocks, you are a part-owner of a business and you only get what’s leftover after paying everybody else. On the other hand, with bonds, you are simply a lender of money and all that matters is whether or not your interest is paid on time and your principal is paid in full upon maturity.

Now, to visualize the effect that interest rates have on bonds, imagine a teeter-totter. On one side sits a man with a t-shirt labeled “Interest Rates.” On the other side is a woman wearing a shirt that says “Price.” When interest rates go up, the price of bonds swing down.

As it is with teeter-tottering, to lessen the risk of a jarring crash in bond prices if interest rates suddenly rise, the proactive move is to inch your bottom toward the middle! The closer you sit to the center of the teeter-totter – that is, you choose shorter-term bonds over longer-term bonds – the less you’ll experience the up and down swings in your bond portfolio as interest rates rise and fall.

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

As an investment advisor of nearly 20 years, my intuition increasingly acts as an analytical shortcut. While that’s to be expected as experience accumulates, it is always comforting to see that intuition validated. This recently happened after I reviewed an academic study on retirement and the amazing value of working longer.

The math at work behind the retirement decision really isn’t that complex. There are only a small number of levers to pull. First is your savings rate. Second is your investment return on those savings. Third is the proportion of your retirement lifestyle that your savings won’t need to cover after factoring in your Social Security and – if you are lucky – your pension income. And, the final lever to factor into the retirement equation is, of course, your life expectancy.

This final lever is a bit perverse. Strive to live longer and your retirement hurdle grows higher. Choose the opposite and your retirement challenge becomes a cake walk. In the end, however, this is nothing but a Hobson’s choice for most of us. As humans, we don’t really control this lever as our will for a long and healthy life is quite inherent.

Each of the controllable retirement levers have built in sensitivities. A way to measure these sensitivities is to see how much a slight tweak on each lever might affect the level of available financial resources in retirement.

For example, you could choose to save a little more and your sustainable retirement income will obviously go up. Or, you could work to lower the cost of your investment program – which directly boosts the investment returns you get to keep – and, naturally, your retirement resources would rise.

In fact, this academic study showed that a small boost of your annual savings rate by 1% more starting at age 36 might produce a 4% boost in your annual income during your retirement years. The longer you wait to increase your savings rate, the smaller your bang is for the buck. Like the classic advice on voting, you should save early and often!

Now, what happens if you could also get better returns on your savings? The study showed that if you were able to boost your investment returns by 0.5% per year during your working years, your sustainable retirement income might also increase by as similar 4% per year.

Doing both things – as easy as walking and chewing gum at the same time – could boost your retirement lifestyle by closer to 8% per year. Since percentages aren’t all that easy to visualize, let’s just say this would translate into a lot of nice experiences over your retirement years!

Importantly, these basic planning moves – moderately boosting your savings rate and your investment returns – are both time-tested and largely controllable.

But, what about simply working longer? How much longer would you need to keep working to equal the impact of saving 1% more of your income for your entire career and squeezing out 0.5% more return on your investments each and every year? Drumroll, please! The answer is you wouldn’t need to delay your retirement for even one full year!

So, here’s some truly intuitive advice. Be sure to save early and save often, and then, find work you enjoy, with people you enjoy, and keep at it for as long as you can.

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

A trillion dollars is not what it used to be! That impressive figure has revealed itself in two different ways over the past few weeks.

In the first case, it marks a measure of business success that is truly unparalleled in history. In the second case, it highlights a deep and growing concern about official economic policy.

Apple released their latest quarterly report and its stock rose to levels that helped the company pierce the trillion dollar mark.

Investors for many years have been doubting the resilience of Apple. The littered path of hardware makers is both long and storied. Just think of names such as Gateway, Blackberry or Nokia. The primary concern with hardware companies is the intense pace of change they face in both customer tastes, required successful innovation and the inevitability of commoditization. Few have ever navigated it successfully for too long.

Yet, the doubts have begun to fade into the background as Apple has shown itself to have two additional assets that pure hardware makers don’t usually possess.

With an installed base of iPhones and iPads of over 1 billion in use today, the business model of “planned obsolescence” has created a very predictable device upgrade cycle for Apple. Once you get hooked into the Apple-based user experience, few switch to an alternative. As a result, almost like clockwork, a new iPhone finds itself in your palm every two to three years.

And, with almost 25% of its revenues coming from services such as the App Store, Apple Music, Apple Pay and iCloud, Apple is building an enviable level of consumer stickiness; creating a virtuous cycle for future device upgrades. It’s little wonder Apple now sails in the unchartered waters of a trillion dollar company.

While not as celebratory as Apple’s, yet another trillion dollar milestone will soon be reached.

Despite entering our tenth year of an economic expansion, the latest projections from the nonpartisan Congressional Budget Office show soon-to-be $1 trillion deficits for as far as the eye can see. Not surprisingly, the surge in deficit projections has been fueled by a combination of large tax cuts and continued unconstrained federal spending.

What’s sparks my concern is the talk of a new wave of tax cuts to come. The most recent chatter focuses on making the cuts “permanent” and using inflation adjustments as a way to lower taxes on capital gains.

The stated goal, of course, for this unconventional policy – that is, boosting fiscal stimulus deep into an already long-in-the-tooth expansion – is to grow the economic pie. As the old business saying goes, I guess we’re going to try to make it up on volume!

Still, if one wanted to charge that this political agenda imprudently throws caution to the wind while unabashedly favoring the wealthiest among us, it wouldn’t be a totally unfair charge.

We do live in a time of economic and political wonder. All I can say with certainty is a trillion dollars just isn’t what it used to be!

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

With all that’s happening in our trade spat with China, the old saying, “An eye for an eye, a tooth for a tooth”, rings ever louder in my ears with each and every tweet.

To this point, the ongoing US – China trade dispute has not yet escalated to dangerous levels. With only $50 billion of mutual tariffs now in place, just a fraction of our hundreds of billions of dollars of trade with China are affected.

Still, from the standpoint of investors and business leaders, the threat of escalation into a full-blown trade war looms too large. Very few economists – operating outside the White House, that is – are proponents of tariffs. The well-established consensus view on tariffs is they work to raise prices on consumers and ultimately cost us jobs. Using tariffs to resolve disputes is almost indisputably seen as poor economic policy.

That isn’t to say that China is blameless. It’s clear that Chinese authorities do not properly protect the intellectual property of foreign companies. The lure of access to China’s massive market and our addiction to cheap imports literally blinds us to this uncomfortable fact. And, up until now, our response has basically been to turn the other cheek.

I’ve always found it odd that US companies wanting to gain access to China’s market are forced to enter into joint ventures with a domestic Chinese company. Through these mandatory arrangements, foreign companies willfully hand over their trade secrets and industry know-how to China with no legitimate recourse for protection. The short-term profit motive is apparently just too enticing.

In contrast, the US offers nearly unfettered access and full protections to our foreign counterparts. Given the surge in populist politics that propelled Trump into office, it comes as little surprise that his administration is pushing back hard against China. It should also come as little surprise that China will push back equally as hard.

Of course, China has been highly strategic in its responses to Trump’s aggressive statements, threats and trade actions. To begin, China has been extraordinarily careful to never be viewed as the party that initiates or escalates matters. It’s also smartly positioning itself with our major trading partners, such as the European Union, and working to fill the vacuum left behind in Asia by our abrupt withdrawal from negotiations of the Trans-Pacific Partnership. These are calculated and subtle countermoves by China in their long-term aim to gain greater global economic influence.

Not so subtle retaliations by China are possible if a legitimate trade war heats up. It’s always important to recognize that China, as a direct result of their large trade imbalance with the US, is our biggest lender. Selling their US Treasury holdings with indelicate speed could act as a shot across our bow. In other words, tariffs are not the only arrow in their quiver.

Since nobody wins in a brutal, tit-for-tat trade war, my hope is our leaders in Washington and Beijing are reminded of the wise words of Martin Luther King, “An eye for an eye leaves everyone blind!”

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Perhaps a little disturbingly, I’ve had a couple thoughts rattling around in my head and their common thread is none other than the Unabomber. No, I have not been reading his long-winded, half-crazed essay! Instead, I recently binge-watched the Netflix series on the long manhunt to catch him. It was a fascinating tale about both language and technology’s inevitable path.

Language tells us a lot. In the Unabomber’s case, his words acted as a dead giveaway. It was only through the linguistic clues left behind in his 35,000-word manifesto that he was successfully profiled. And, then, only after the Unabomber demanded his manifesto be widely-published did enough clues surface for his own relatives to recognize his ideas and turn him in.

In one particular episode in the series, I was fascinated by the use of linguistics and what it can tell about a person or group.

About 1500 years ago, apparently an ethnic group, known as the Slavs, just suddenly appeared throughout Europe. Historians debated for years about this group’s origins; a place referred to as the true Slavic Homeland.

Linguistic anthropologists finally noticed, through their study of the Slavic language, that they inexplicably didn’t have words for some very basic things all around them, like names for various common trees, plants or foods. Naturally, the Slavs just borrowed words from other languages to fill in their gaps.

This was the key insight in determining the location of their long-lost homeland. All that was required was to look for the only swaths of land that were devoid of these very same trees, plants and foods. It was a very elegant concept.

It made me think a bit about the financial services industry. A similar idea might help consumers discern the key differences among certain financial professionals. Like the ancient Slavs in Europe, there too are missing words in certain financial professionals’ vocabulary, such as fiduciary duty and strictly fee-only, that might offer insightful clues. The only difference between the Slavs and these professionals is they can’t (as easily) borrow these terms as their own.

On an entirely different track, I was also struck by how eerily relevant the Unabomber’s warnings were about society’s adoption of technology. His violent remedy to combat its advance was, of course, beyond perverse. That’s what made him wild-eyed crazy, after all. However, his generalized conclusion about how technology would lead to our loss of control, privacy, security and dignity now feels ahead of its time.

Robotics, automation and artificial intelligence are rapidly creeping into mainstream use. One could easily argue we’re experiencing an accelerating pace of change. No doubt, these technologies will produce amazing and magical things. But, without thinking ahead, it’s also clear it won’t all be for the good.

Capitalism, if allowed in its most unregulated form, will hungrily gobble up these tools and put them to use. Inevitably, however, we will also see a massive loss of many traditional jobs that depend on real people today.

If we simply hurl ourselves down technology’s inevitable path, without a real plan, we might deeply regret it. It certainly wouldn’t hurt to start thinking about it now.

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

As I write this, I’m enjoying a short, but stark, change of scenery. Without a doubt, there’s a serious contrast between the hustle and bustle of Brooklyn and Manhattan and the tranquility of Traverse City.

On one of our daily treks from our Airbnb to the nearest subway station, I overheard our 10-year old say to my wife that our hometown is far simpler. I totally agree. And, I must say, most of the time, simple is nice!

Unfortunately, I’d describe the backdrop of today’s financial markets as not so simple. Yes, stocks and bonds have been a bit boring this year in terms of investment returns. But, let’s not confuse boring with simple.

The fundamentals do look reasonably sound. Corporate earnings are growing nicely; largely boosted by the significant corporate tax cut this year. Job growth has been remarkably steady; in line with what we’ve seen for many years now. And, consumer spending has been consistent and inflation remains tame.

When viewed over time, rather than quarter to quarter, there doesn’t appear to be a noticeable acceleration n the growth rate of the economy. We’ve basically been living in a 2% economy, give or take, along with sub-2% inflation. Not too hot, not too cold.

The Fed also sees this Goldilocks backdrop and considers it an open window to methodically raise interest rates. They’ve long-desired a pathway out of their decade long zero interest rate policy. They’re getting awfully lucky and they aren’t squandering their chance.

The Fed has now raised interest rates twice this year and has raised rates seven times since late 2015. If things go as investors expect, we’ll likely see two more hikes before the end of the year. That would bring us closer to a 2.25% to 2.5% yield on money market funds. With each hike, cash and shorter-term bonds are becoming increasingly more competitive. For investors, things aren’t quite as simple as when cash paid zero.

In addition, the departure from simple might leave early if Trump and his advisors continue to play hardball with our major trading partners. These partners would include our allies to our north, to our south, to our east and to our west. As you can see, the implications for the global economy are unusually large!

While one could wisely adopt the sanguine view of Warren Buffett that we would never be so reckless as to start a full-blown trade war, what we’ve heard from official sources – a.k.a., Twitter – must give one serious pause before quickly discounting less-optimistic scenarios.

For now, despite the lack of simplicity all around us – and that also applies to our last few subway rides – the only rational response for a thoughtful investor is to manage risk through prudent asset allocation, to diversify properly, to remain price conscious and to tilt toward owning high-quality companies. Sounds pretty simple, doesn’t it?

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

If even one person is persuaded to call their insurance agent as a result of this column, it’ll be a big success! To help accomplish this, I encourage you to discuss this topic with your loved ones as soon as possible.

Life insurance is designed to fill an economic shortfall. As a young person with financial responsibilities, your untimely exit may leave a very, very large hole. Doing an insurance review is imperative.

The first step in this review is to imagine the unpleasantly unimaginable; your own death. You need to honestly ask yourself a simple question, what am I leaving behind for others to shoulder?

For example, if you have children, the cost of their higher education is substantial. A four-year, in-state college education could run about $100,000. Multiply that by two or three kids and it adds up.

Next, if you have a mortgage, imagine your spouse facing an income cut of 50% or more and struggling to keep the house. Remember, too, beyond the mortgage, utilities, property taxes, hazard insurance and upkeep costs will also continue unabated.

Lastly, don’t forget that your complete 40 to 50 year work life is needed to fund your 20 to 30 years in retirement. If your life is cut short, so too is your surviving spouse’s retirement plan!

My default advice is to buy low-cost, term life insurance. It’s made to last for a set period of time. After the term expires, the insurance coverage and its cost ends. For those in their 20s, 30s and 40s, it’s dirt cheap. In fact, it’s so affordable – and so important – no legitimate excuse holds up under scrutiny.

Let’s say you are a married 37 year old with two kids. Your youngest is 2 years old and your oldest is 6. You own a home with an outstanding mortgage of around $200,000. Finally, you and your husband depend on each other, have similar paying jobs and you hope to save enough to retire together at age 67.

Without getting into the detailed math, let’s just assume you’d have no chance to build your retirement savings in the event of either of your deaths. Let’s further assume no college savings would happen either. And, yes, the weight of the house, with its mortgage payment and more, would feel much heavier too. The three economic holes become pretty obvious.

In this example, I’d want to see two term life policies – one for each spouse – to fund the kids’ college and to eliminate the mortgage. I’d also like to see enough to replace a good amount of the lost income and to ensure the lost retirement savings. While an insurance benefit of $1 million might seem like a large amount, it would roughly cover what’s been lost.

Trust me, when you are healthy and young, the peace of mind you’ll gain by making the call to your insurance agent will feel like a true bargain. So, dump your cable and cook an extra meal at home each month and call an insurance agent today!

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Watch Jason P. Tank, CFA, contributing speaker for the Front Street Foundation’s Money Series, to learn about the factors that affect your withdrawal strategy in retirement.

Many readers have spent decades socking away money for retirement. Naturally, the accumulation phase is very familiar ground. However, it is during the second phase, better known as the distribution phase, where the process becomes a bit unfamiliar.

Based on my experience, there are three primary concerns most people have as they near the transition from accumulation to distribution.

First, people want to know how much is safe to spend annually from their nest egg.

The number of rules of thumb promoted out there most certainly outnumber the number of thumbs at my disposal! The most famous guide is known simply as the 4% rule.

Based on the level of today’s stock market – high – and the level of interest rates – low – I tend to err on the side of conservatism. For those who know me best, that’s not a big surprise! Given today’s market setup, my comfort zone is to limit your annual draw to around 3% to 4%.

Yet, we all know life is never as simple as a rule of thumb. Overall objectives and personal circumstances will definitely influence the level of spending in retirement that is both sustainable and safe.

For example, if a retiree is determined to die broke, it leads to advice that differs greatly from the advice given to a retiree who is committed to leaving behind a big inheritance to their children. Another factor that influences the sustainable draw rate is simply time. For those facing the possibility of a 25 to 30 year retirement period, expecting the unexpected is wise.

Once the level of sustainable spending is set, the next concern often centers on taxes.

For many, there are three pots of money with differing levels of tax obligations attached. There are yet-to-be taxed IRAs an 401(k)s. There are never-to-be taxed Roth IRAs. And, finally, there are always-taxed pots of money such as investment and savings accounts.

Tax minimization is a complex and important part of the retirement income game, for sure. Take Social Security, long-term capital gains and dividend income as examples. Depending on the size of your other sources of income, either some or none of this income is taxed.

Related to tax planning, the last concern is deciding which of the above-mentioned pots of money should be tapped and in what order.

For those who have most of their savings in yet-to-be taxed retirement vehicles, like IRAs and 401(k)s, there is not really much choice. But, for those who have spread their retirement resources among the three tax-buckets above, the planning options open up. This is especially the case before you reach the magical age of 70 ½!

We’ll be discussing in more detail the considerations and process of creating your own withdrawal strategy in retirement at the next Money Series on Wed., April 18 in the McGuire Rm. at the Traverse Area District Library. Front Street Foundation is a local non-profit whose mission is to provide open-access to financial education, for all. To register, visit www.FrontStreetFoundation.org or call (231) 714-6459.

Your tax world has officially changed. Here are some of the new things you’ll see – and old things you won’t see – on your 2018 tax return.

First, if your itemized deductions don’t add up to exceed the new, doubled standard deduction, your tax life will get simpler. For single filers, the new standard deduction threshold is $12,000. For married filers, it’s now $24,000.

Notably, investment fees and tax prep fees are no longer deductible. Also, the deductible portion of your combined property taxes and state income taxes is now capped at $10,000. Due to these changes, like 90% of all taxpayers, you’ll probably opt to use the new standard deduction. If so, you’ll have far fewer records to gather next year.

Second, personal exemptions no longer exist on your federal tax return. This is an especially huge loss of deductions for larger families.

However, with simplification as a big goal, what the government “taketh” away in deductions and exemptions, they “giveth” back with the doubling of the standard deduction.

Whether this tradeoff makes you a winner or a loser is an open question. On a national scale, though, it results in what tax geeks call a “broadening” or “widening” of the tax base. The bottom line is more income is now subject to federal tax.

Of course, this was officially named the Tax Cut and Jobs Act for a reason. Some major changes were included to combat this broadening of the tax base.

To start, the new law generally lowers tax rates by about 3% across the board. For example, the old 15% bracket is now 12%. The old 25% bracket is now 22%. The old 28% bracket is now 24%. You get the drift.

For lower income couples with kids, these lower tax rates may not fully offset that broadening of your personal tax base. However, the doubling of your child tax credit to $2,000 may more than make up for it. A tax cut is very likely in the cards for you.

For upper income filers, with or without kids, the lower tax rates are also more than likely to make up for the widening of your tax base. It should be said the Alternative Minimum Tax or AMT is essentially a thing of the past.

No summary of the new tax law would be complete without mentioning the major break given to many small business owners. What resulted was a highly complex business deduction of up to 20% of your business income.

Now, when I say it’s complex, I’m not exaggerating. It’s fair to say that, where the small business tax changes massively whiffed on the goal of simplicity, it doubled down on the goal of cutting taxes for many business owners!

Once again, please join us at the next Money Series on Wed., Feb 7 at 6:30pm in the McGuire Rm at the Traverse Area District Library where attorney Diane Kuhn Huff will discuss estate planning. The Money Series’ non-profit mission is to provide open-access to financial education, for all. Register at FrontStreetFoundation.org or call (231) 714-6459.

In case you haven’t been paying attention, the new tax law has dramatically lowered corporate tax rates. It could be argued that corporations were the primary beneficiaries politicians had in mind.

Wisely, rather than highlighting the billions slashed from their future corporate tax bills, the headline grabbing figure most often cited by companies has been $1,000. That’s the level of bonus that company after company has settled on sharing with their workers. It was clearly viewed by executives and board members as a nice, round figure, full of sound and fury and signifying (nearly) nothing.

The partial list of companies announcing one-time, $1,000 bonuses includes Disney, Home Depot, AT&T, American Airlines, Bank of America, Fifth Third Bank, Comcast, Jet Blue, Southwest Airlines, US Bank and Walmart.

Looking beyond the obvious PR benefits, and without completely discounting the value $1,000 is to many strapped workers, two things about it all strike me as fascinating.

First, it’s nearly impossible not to notice the “follow the leader” mindset at work in today’s executive suite. I suspect many of them went to the same business school or are members of the same social clubs. Certainly, they all watch CNBC and read the Wall Street Journal. To so quickly parrot one another, as if $1,000 was derived with forethought and analysis, is a little comical.

Second, it’s also impossible not to notice the lack of workers’ bargaining power in today’s economy. In the absence of labor unions, most workers are an outgunned and outmanned one man army.

Notably, Larry Fink, CEO of one of the largest investment managers in the world, recently sent an open letter to the leaders of today’s major corporations. Departing from the clubby world in which he no doubt lives, he courageously implored companies to act beyond their profit motives and embrace their greater “social purpose.”

He cited a “paradox” in today’s economy where companies and their investors are enjoying “high returns” and rank-and-file workers are experiencing “high anxiety.”

Regardless of the specifics of Fink’s letter, the lasting impression of his letter for me was just how far the pendulum has swung in the direction of corporate interests when an insider feels the need to send that message at all.

To close with a burning question, when corporations start getting asked to fulfill a greater social purpose, is it appropriate for us to ask if our elected officials have lost
sight of their own?

It all reminds me of my kids’ pre-school days in response to them always wanting a little more; “You get what you get and you don’t get upset!”

Speaking of fulfilling a greater social purpose, you are invited to the upcoming Money Series presentation by local attorney, Diane Kuhn Huff, where she’ll provide an invaluable (and free) lesson on estate planning on Wed.,February 7 at 6:30pm in the McGuire Rm. at the Traverse Area District Library. To register, visit www.FrontStreetFoundation.org or
call (231) 714-6459.

Have you ever dreamed of being a half-millionaire? It’s got a nice ring to it, doesn’t it? Well, the fact is, if you are retired or are nearing retirement, thanks to Social Security, you can probably make this claim!

Social Security is just like – actually, even better than – having a pension or owning a private annuity. For a retiree to receive an inflation-indexed monthly benefit of $2,000 it would require an investment of about $500,000. Knowing that, people receiving Social Security benefits of that size can rightfully declare themselves to be a half-millionaire.

For millions of our oldest citizens, Social Security literally secures their financial independence and helps to keep them out of poverty. Given its importance, understanding your filing options, the program’s features, rules and quirks is a wise move.

As a small preview into what’s quickly becoming a perennial topic of the Front Street Foundation’s Money Series, here are just two features of Social Security we’ll discuss at our next program on Wednesday, January 10th.

First, waiting to collect can pay dividends. While the earliest you can file is age 62, for each year you delay in filing, you get a lifetime benefit boost of 8%. That annual boost can build all the way until age 70. The benefit difference between a person filing at age 62 and age 70 is huge.

A sad reality is that a large proportion of Social Security beneficiaries file at the earliest possible moment. That decision results in 32% less each month compared to filing at age 66, the current official full retirement age.

Of course, don’t forget, if you don’t think you will survive for at least 12 more years – and your spouse won’t either, if you’re married – giving up a year’s worth of Social Security benefits won’t pay off.

For example, if you are 65 and decide to wait another year to file, that 8% benefit boost will finally make up for your one year’s worth of forgone benefits by the time you reach your upper 70s. While that’s a pretty solid bet for many readers, it is certainly not a sure bet for everyone.

Second, an old trick that couples use to maximize their combined Social Security benefits is slowly expiring. If you are age 64 or older at the start of 2018, when you file at your official full retirement age you are still allowed to restrict your filing to receive just your spousal benefit. This restricted application allows your own benefit – the one based on your own life’s work – to remain untapped and growing. If you happen to be under age 64 at the start of 2018, the trick is long gone.

To learn more about Social Security, listen to Jason P. Tank, CFA present and answer questions for the non-profit Money Series on Wed., January 10th at 6:30pm in the McGuire Rm. at the Traverse Area District Library. To register, visit www.FrontStreetFoundation.org or call (231) 714-6459.

Register

With year-end tax planning underway, now is the perfect time to bring up a perennial tax trick; making a charitable donation directly from your IRA. This is known as a qualified charitable distribution.

Perhaps you’ve already received that annual letter from your favorite charity where it says you can support your cause while simultaneously satisfying your required minimum distribution from your IRA. Better yet, you can pull off this feat and lower your tax bill!

To begin to understand this pitch, we need to first quickly review what a required minimum distribution is and how it typically affects your tax bill.

When you reach the magical age of 70.5, the IRS expects you to start paying some taxes on your tax-deferred accounts. These include all of your IRAs, 401(k) accounts and any other accounts that were funded with pre-tax earnings.

For example, if you’ve saved $500,000 across all of your tax-deferred accounts, at age 70.5 the government expects you to distribute a minimum of close to $20,000 that very first year. It’s normally considered taxable income to you.

Now, when you make a donation to a qualified charity directly out of your IRA, the government says it’s okay to count it against your required minimum distribution and it’s also okay to not count it as taxable income. It’s as if the IRS officially turns a blind eye to the whole transaction. None of that IRA distribution has to be reported by you as income and, of course, no charitable deduction will be allowed by you either. It looks like a wash.

This begs the question, how can making the donation from your IRA be better than simply writing a normal check to your charity and taking the normal charitable deduction on your tax return? The short answer is, it may or may not. It depends on your tax situation.

There are two primary deductions on your tax return that are affected by your level of income, including IRA distribution income. They both reside on Schedule A, where you itemize your various deductible expenses.

First, you can deduct your out-of-pocket medical and dental expenses. However, only the amount that exceeds 10% of your income is deductible. Second, you can similarly deduct various miscellaneous expenses, such as the fees you pay your accountant and investment adviser. That deductible threshold is 2% of your income.

Naturally, if you make a donation directly from your IRA, being able to ignore that income on your tax return lowers those thresholds and allows an incrementally greater amount of your medical expenses and professional fees to qualify as deductible. Alas, you see a lower tax bill, however slight it might be.

But, what if your typical income is already so high – even before considering the income from your IRA distributions – that you aren’t allowed to deduct any of your medical expenses and professional fees anyway?

If this is your situation, going through the hassle of making a charitable donation directly from your IRA is no better than writing a check. If this is still confusing to you, just ask your investment adviser or tax preparer. Beware, they might charge you a fee, non-deductible, of course!

Any program impacting over 55 million people is worth reviewing at least once a year. This is so obvious that even our divided government officials can agree!

With its annual open enrollment deadline fast approaching, your window to learn about your choices in Medicare coverage is closing quickly.

In total, Medicare costs around $700 billion a year and it’s growing. Together with Social Security’s greater than $900 billion in annual distributions, these two critical social safety nets make up a whopping 40% of our federal budget. This is one reason the Front Street Foundation’s Money Series is holding educational programs on each topic over the next few months.

To kick it off, Fred Goldenberg of Senior Benefit Solutions will be discussing all facets of Medicare. This will include the specifics of Medicare’s coverages, its costs and how to handle your out-of-pocket responsibilities.

Medicare and the choices you face unfortunately sound like a bland bowl of alphabet soup. For example, within basic Medicare, there is Part A for hospital services, Part B for medical services, like doctor visits, and Part D for prescription drug coverage.

However, you should know that Medicare leaves you with a gap of financial risk because it will only pays for 80% of your service costs. Without the protective layer of a private Medigap policy, it’s possible unreimbursed medical expenses could eat up a big chunk of your life savings. In his upcoming presentation, Mr. Goldenberg will discuss the options you have to help protect your nest egg.

Predictably, this means you have more letters to consider! Medigap policies come in the enticing government-standardized flavors of Plan A to Plan N. Don’t ask about the missing letters, E, H, I and J!

Curiously, despite their standardization, monthly premium levels for Medigap policies do vary from insurance company to insurance company. As always, shopping around is important. However, switching around can get complicated. While you can always renew your current Medigap policy, there’s no guarantee you’ll pass the medical underwriting standards of a new insurer.

To simplify things, among other reasons, the government created Medicare Part C. This allows for a bundled package of the basic parts of Medicare along with the standardized elements of a Medigap policy and more. Part C is better known as a Medicare Advantage plan. Take note, it’s the only thing named with some marketing flair behind it.

Like anything else, choosing the one-stop shopping experience of a Medicare Advantage plan does minimize the number of moving parts. On the flip side, given the fact that bundled products do create less transparency, it does require a little more thought.

The good thing is the annual enrollment period for Medicare opened only two short weeks ago. This still provides you enough time to learn more by attending the upcoming Money Series presentation on Thursday, Nov. 9 at 6:30pm in the McGuire Rm of the Traverse Area District Library. To register, visit FrontStreetFoundation.org or call (231) 714-6459.

With trillions of dollars of collective wealth embedded in the value of their homes, it’s no wonder people ask about how they might someday access their real estate to help support their retirement years. This question often leads to a conversation about a little understood product, the reverse mortgage.

Reverse mortgages are somewhat complex and definitely counterintuitive. As opposed to the traditional “forward” mortgage, where you borrow money and then slowly pay back the loan, a “reverse” mortgage is an entirely different beast.

With a reverse mortgage, you borrow against your home’s value with no scheduled repayment. You either start out a reverse mortgage by receiving a lump sum, getting a monthly check, opening a line of credit or choosing a combination of these options.

Unlike a typical mortgage where each monthly payment you make builds equity in your home, a reverse mortgage produces just the opposite; a drawing down of the equity you have in your home. Your net worth literally heads in reverse.

Your reverse mortgage’s growing debt load – invisible, almost, with no payment obligation – will only come due when you move out of your home and it’s eventually sold. Your move may be by choice, by necessity or by death. At least one of those triggers is under your control!

Let’s dig further into the growing and invisible nature of the loan. With each check sent to you by your reverse mortgage, your principal and interest piles up. And, with each passing month, your new borrowing plus your unpaid interest speeds up your debt accumulation. It’s all by design, of course.

HUD, the government agency, closely regulates how much equity a person can tap with a reverse mortgage. Depending on your age and various other factors, only about 50% to 75% of your home’s equity is initially available to you. The reason for the limit is crystal clear.

If your debt pile grows to exceed your home’s value, the federal government is stuck with any shortfall after your home is sold. In fact, HUD’s current shortfall with reverse mortgages recently prompted them to increase the fees they charge borrowers in order to protect the government against future losses.

To get a sense of the fees involved with reverse mortgages, imagine your home is worth $250,000, you’ve reached age 62 – the youngest age allowed – and you currently have no mortgage. If you chose to borrow your initial maximum of around $125,000, your startup loan fees would likely exceed $10,000. This helps to explain why HUD requires all would-be borrowers to complete financial counseling before getting a reverse mortgage.

Join Jason P. Tank, CFA for the Money Series’ season opening presentation on reverse mortgages to be held on Wed., September 13 at 6:30pm in the McGuire Rm. at the Traverse Area District Library. To see the Money Series’ season lineup, visit www.MoneySeries.org

We certainly live in a brave new world. Welcome to the age of passive investing where almost half of all dollars are now invested in index fund strategies with the singular goal of “tracking the market.” That is double the level seen a decade ago and quadruple the level seen only two decades ago.

And, most actively-managed mutual funds – those run by human beings making decisions – are tightly hugging as close as possible to their market-based yardstick. This practice is known as “closet indexing.” Their marketing departments basically demand this lemming-like behavior.

For all intents and purposes, this means the vast majority of money is blindly following, not leading. The question is, to where is it leading?

Let’s examine what a typical balanced portfolio made up of index funds really looks like for the average passive investor.

Within the stock segment, a conventional approach would call for you to own a big dollop of large company stocks along with smaller helpings of mid- and small-sized companies and some international stocks. Within the bond portfolio, a conventional approach would lead you to own a mixture of risk-free government-backed bonds, corporate bonds and some mortgage-backed bonds.

Using the index funds created by Vanguard – the North Star of the indexing movement – the following is precisely what you’d actually own as an investor.

You’d own truly tiny pieces in 506 large companies, 348 mid-sized companies, 1,438 smaller companies and minute slices of 6,176 international companies. On top of that, you’d also own infinitesimally small pieces of 8,174 bonds. Together, you’d own 16,642 individual stocks and bonds.

Viewed another way, for a hypothetical $500,000 balanced portfolio, your biggest stock holdings would be in Apple, Microsoft, Facebook and Amazon and these big bets would represent only about $3,000 each. In addition to these well-known success stories, you’d also have thousands of other investments with an average size of $50 each.

As absurd as this portfolio diversification sounds, it’s important to highlight the primary benefit of the passive, index fund approach. Since no single human being is expending any thought on the investments being made or the risks being taken, the cost of investing in index funds is basically zero. Think about it, you get to invest in over 16,000 securities and it costs you nearly nothing.

Let’s now examine the state of the investment markets. Our current bull market phase is now in its ninth year. Stock prices are at levels only seen at market peaks. Bond yields rest at near-historic lows. And, we live in a world that’s increasingly drawn to artificial intelligence and automation, including entrusting it to manage a person’s life savings. Hmm…

We do live in a brave new world.

As this year has unfolded, investors have been treated to a highly unusual level of financial market calm amidst an equally unusual stretch of political volatility. It’s been eerily calm, in fact.

To put this in perspective, on only two trading days this year has the stock market ended up or down over 1%. In comparison, the number of such wide swings averaged nearly 40 trading days over the past nine years.

Predictably, investors now appear to expect continued calm. One common way of measuring their expectations is through a volatility index, known as the VIX. Today, the VIX index has touched 15-year lows on seven days in the past six weeks alone.

Prior to this, the VIX has only seen readings this low on four occasions, dating all the way back to another very calm period in late 2006 to early 2007. While not predictive, that prior period preceded extreme market volatility and the onset of a both a recession and a bear market.

It almost goes without saying that this lack of volatility has been surprising given the unpredictable political backdrop, a Federal Reserve that has now raised interest rates three times since last December and a US economy that has generally been disappointing relative to the high hopes at the start the year.

Within all of this calm, the first half of 2017 still produced continued gains for investors. Broadly speaking, the US stock market produced a first half return of roughly 6% to 8%. Broken down, the S&P 500 index (big company stocks) rose about 9% and the Russell 2000 index (smaller company stocks) provided a first-half return of about 5%.

Given that most investors are balanced to some degree, it’s important to note that the bond market’s year-to-date total return was about 2%.

Viewing stocks and bonds together, balanced investors willing to simply accept the gyrations of both good markets as well as bad markets experienced returns of about 4% to 6% for the first half of 2017. It’s fair to describe the year so far as a slow-and-calm upward grind.

In the face of these surprisingly solid results for passive investors, my advice is to not let this quiet calm breed an imprudent complacency in your portfolio.

With the Fed hell-bent on raising interest rates in the face of still-low inflation and still-tepid economic growth, with near-peak employment and near-peak auto production, with an historically high-priced stock market relative to company earnings and, finally, with our politicians soon shifting into full-campaign mode with little legislative action to accelerate their big plans for growth, I believe a very discriminating portfolio strategy continues to be both prudent and justified.

If history holds any predictive power – and it only loosely does! – we may average 1% daily swings in stock prices every few trading days before 2017 comes to a close. Now, that would make for one interesting ride, I must say!

It is my belief that honesty is always the best policy. Given that, I am happy to pass along some recent news from the world of finance that helps to tilt things in your favor.

This past Friday, the long-awaited Department of Labor “fiduciary duty” rule finally sprang to life. Despite the Trump administration’s immediate executive order to delay the Obama-era rule (a move with the likely aim to later squash it entirely), the wait is over.

In a nutshell, essentially all financial advisers must now place your interests above their own.

While it may sound like a common sense requirement, you’d be surprised at how pitched the battle has been to impose a robust and uniform fiduciary duty standard across the entire investment industry.

As a result of the new rule, all advisers who choose to provide advice on retirement plans, such as 401(k) accounts and, more expansively, all IRA accounts, now legally owe their clients a duty of good faith, honesty and trustworthy conduct.

It should be noted that this fiduciary duty certainly isn’t new to all types of financial advisers. Registered investment advisers who are strictly compensated on a fee-only basis have always operated as legal fiduciaries to their clients.

However, for professionals who sell financial products on a commissioned basis, such as annuities, insurance or some mutual funds, the new code of conduct now applies. Life just got a big tougher for them and a bit easier for the public.

As a key part of this new, uniform fiduciary duty rule, financial professionals must now operate by what’s known as an “Impartial Conduct Standard.” This standard has three parts that deserve mention.

First, financial advisers must now provide advice that reflects their clients’ personal circumstances, is prudent in its implementation and consistently reflects their underlying duty of loyalty to their clients. As part of their duty of loyalty, any advice they provide must also openly disclose any professional conflicts of interest that might exist.

Next, advisers must receive no more than “reasonable compensation” for the services they provide. Despite the clearly subjective nature of the word, reasonable, in my opinion its inclusion helps to impose a healthy gut-check on overall fee levels in our industry. This is a very good development, especially in a relationship where technical knowledge is so clearly in the hands of the professional.

Finally, to fulfill their duty, financial advisers must also avoid making misleading statements to their clients. While this is obviously a base-level expectation of all clients, it spotlights honesty as the cornerstone of any client-adviser relationship. After all, acting with professional integrity is essentially what it means to have a fiduciary duty.

Unsurprisingly, it likely took many hundreds of pages of government rule-making to codify what we’ve always known; honesty is the best policy. Nevertheless, I am quite pleased it is now the law of the land for many more financial professionals. The public will be better served as a result.

Note: This post was originally published on Frontstreetfoundation.org

It is my professional opinion that today’s stock market and bond market are both generally overpriced. If I am correct, future returns for passive investors will be lower than hoped-for and the implications will be quite large.

The US is facing a substantial pile of age-related liabilities. I am not talking about the tens of trillions in federal government debt. I am also not talking about the many trillions more in mortgage, auto, student loan and credit card debts either.

Instead, I am talking about the very real funding shortfalls in government, corporate pension plans and the critically thin level of household retirement savings we see across the nation.

According to one study by the Economic Policy Institute and another by the Government Accountability Office, retirement readiness for most pre-retiree households in the US is downright alarming.

For the cohort of people age 55-64, the average retirement savings is about $100,000. However, this doesn’t paint the whole picture. To provide further perspective on a widening wealth gap, about 10% of this age group have retirement savings of at least $500,000, while nearly half have zero saved for retirement. The situation is clearly about the few haves and the many have-nots.

Further, at the corporate pension plan level, a glance at these plans’ funding status shows a shortfall totaling hundreds of billions of dollars.

In addition, layering on the officially estimated shortfalls in both state and local government pension plans, their funding deficits alone add up to yet another $1.5 trillion.

Everywhere you look, our increasingly aging population appears poised to expose what has been decades of looming financial issues.

What do these trillions of dollars have to do with the stock and bond market? Plenty.

Using the longer term measure of the stock market’s price level today relative to companies capacity to earn profits – measured by the Shiller Price-to-Earnings ratio, among multiple other reputable, value yardsticks – today’s stock market ranks in history as one of the most expensive ever.

The same can be said about most forms of bonds as well. Interest rates around the globe are hovering at rock bottom low levels. This means bond prices are likewise hovering near all-time highs.

A truism of investing is the higher price you pay today, the lower your returns will be over time. Price acts like gravity; silently pulling down future returns.

Given this, it’s nerve-racking to realize that the trillions of funding deficits across government, corporate and private households widely use the assumption of future investment returns in the range of 7% to 8% per year. Let me non-eloquently say, fat chance!

In contrast, it’s much safer to assume that passive stock market investors will earn, at best, low single digit annual returns over the next decade. Of course, with currently very low interest rates and some irrefutable math, bonds are slated to do no better.

As a result, the longer-term implications are big and our retirement system’s dependency on high returns grows ever larger. We certainly do live in interesting times!

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Retirement is a process, not a single point in time. Clearly, it’s one that’s best navigated only once.

Reading the key signposts of success along the way will certainly help keep you on the path to a fulfilling retirement. These include aligning your career choice and earnings potential with your natural-born talents and having the discipline to right-size the cost of your lifestyle with that of your income. These are simple, but tough, things.

Beyond strictly financial-related signposts, there are also qualitative pitfalls to avoid. These may include the personal choices you make to avoid a costly divorce or even actions you take to strengthen your biggest asset, your own health.

At the upcoming Front Street Foundation Money Series presentation on Wednesday, May 17th, we’ll work to guide attendees along the pathway of what I call, The Big Transition, and highlight some tangible planning tools for success before and after retirement.

As a preview, I remember a key investing lesson of Warren Buffett’s that I think is worthy of deeper thought for both near- and current-retirees. As many know, Buffett is famous for loving to buy stocks when the market falls. The reason, he explains, is that he’s always a “net buyer” of stocks over time. In other words, he’s always got new money to invest.

His advice for investors is very logical. When you’re constantly investing your savings – like a person does in a 401(k) plan – it’s great to see bargain stock prices. Counterintuitively, bad news is good news.

However, it’s important to note that Buffett’s publicly-stated “long run” is, as he repeatedly says, forever. In this way, his advice is clearly best suited for the younger investor still early on their path to retirement.

What about for the not-so-young? Those nearing or already in retirement inherently know they are not quite like Warren Buffett. And, I’m not talking about relative intellect here.

Those approaching the end of their wealth accumulation phase and pondering the distribution phase may need to rethink some of Buffett’s universal nuggets of investing wisdom.

As you transition between these phases, your years of methodically investing new dollars in the stock market are steadily shrinking. Simultaneously, your years of consistently drawing from your life savings is ever approaching. Like your body, your recovery time for market losses just isn’t the same!

Your likely transition in thinking ironically reminds me of wisdom handed down by Buffett’s not-as-famous, but equally fascinating investor sidekick, Charlie Munger. His advice, when faced with a vexing problem, is to turn an especially tough question on its ear, “Invert, always invert!”

When you apply this advice to your own possibly vexing transition toward retirement, some new thoughts are bound to emerge.

Join Jason P. Tank, CFA for his Money Series presentation on “The Big Transition Toward Retirement” held on Wed., May 17 at 6:30pm in the McGuire Room at the Traverse Area District Library. Register at frontstreetfoundation.org or call (231) 714-6459.

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Attention to all parents and grandparents of a college-bound high school student: our next Front Street Foundation Money Series event will provide your young loved ones with financial lessons that are certain to save them emotional anguish and money for years to come!

That’s quite a claim, but I’ll stand behind it. In fact, for the most enterprising high school students with a willingness to learn from the mistakes of others, we’ll put some money on it.

For the first fifteen students who attend our April 19th event, whether you drag them to it or not, we’ll award a $10 gift card to Brew located in downtown Traverse City.

Our upcoming Money Series presenter, Pam Boyce, is both my colleague and a former MSU instructor of personal finance for over fifteen years. She will share her financial survival tips for college students gleaned from the personal insights and experiences of her many former students.

With the cost of college rising unabated, with student loan debt hitting record levels and with the growing need for a college degree in an increasingly competitive economy, today’s students simply need more personal finance know-how than any previous generation. The stakes are higher than they’ve ever been.

Understanding the benefits and pitfalls of credit is a prime example. Without the ability to borrow money and manage debt responsibly, many doors in life remain closed or only open up much later in life. The lessons of debt often start with the funding of a college education.

Given this, establishing a sound credit rating from the get-go is important. For many, that process starts in college when many students are issued their first credit card. If used wisely, it can be a benefit later in life. If used unwisely, as far too many do, it can lead to serious financial hardship.

Student loans are a particularly complex form of credit that deserves thoughtful consideration from students.

I remember reading an astounding statistic during the Great Recession of ‘07-’09. When the nation’s official jobless rate peaked at 10% – matching the unemployment rate of those with only a high school diploma – college educated workers were less than half as likely to be jobless.

This proved definitively that not only does a college degree allow for significantly greater earnings over a lifetime, importantly it also increases the stability of those earnings during the tougher times.

However, borrowing significant sums to get that valuable college degree – without regard for the type of job you are seeking, without consideration of the lower cost routes available and without establishing basic budgeting habits while in college – can often lead to decades of financial struggle.

In fact, stretching too far financially for your degree or unconsciously burning through borrowed money during those college years can cause serious delays in many of life’s natural milestones; getting married, buying a home, starting a business or even starting a family.

Pam Boyce’s upcoming Money Series presentation is designed to speak directly to high school students; admittedly a demographic that’s less-than-likely to actually read this column!

Do your part by taking your child or grandchild out on a rare date on Wednesday, April 19th at 6:30pm to the McGuire Room at the Traverse Area District Library. They might even thank you by treating you to a cup of coffee at Brew! Register at frontstreetfoundation.org or call (231) 714-6459.

With the Federal Reserve starting in earnest to raise interest rates, it’s all the rage to worry about bonds. Why all the hand-wringing? It boils down to a tendency to over simplify the math.

To start, bond investors expect two things; getting their money back at some known point in the future and receiving interest income while they twiddle their thumbs.

Investors are imprinted at birth with the notion that rising interest rates are bad news for bonds, and vice versa. Like a teeter-totter; on one end sits bond prices, and on the other end sit interest rates. When rates rise, bonds fall in value. When rates fall, bond prices rise.

Of course, this basic math of bonds isn’t all there is to know. Let me necessarily complicate the matter.

The first thing to know is that maturity matters. I’m talking about the length of time a bond investor agrees to wait to get their money back. The shorter they agree to wait, the less worried they should be about rising interest rates.

The closer to maturity, the smaller the ups-and-downs they’ll feel. Think of it as “scooching” closer to the center of that teeter-totter. In fact, if you scooch in really close, the ride can get awfully boring, no matter how many headlines Janet Yellen and the Fed are making.

The second thing to know is interest rates come in many flavors. There are interest rates for bond investors who don’t want to wait long for their money. And, there are interest rates for the very patient bond investor. And, of course, there’s a full spectrum of rates in between. This spectrum is known as the “yield-curve.”

It’s the changing shape of the yield curve that really matters. The short, middle and the long-end of the yield-curve might behave very differently. As a bond investor, there are lots of teeter-totters on the playground to hop on. Some are slow and some are fast. Some produce a wild ride. Others are boring.

The third thing to know is not all bonds carry the same risks. You might choose to lend to a sure-bet borrower or to a dead-beat debtor. The sure-bet naturally pays less interest and the dead-beat pays more.

To bond investors, everything is a game of comparison. The difference in the interest you’ll earn by lending to the highest quality borrower – the US Treasury with its power to tax and to print money – and to the mere mortal borrowers, are known as the “credit spread.” Credit spreads pay you for taking a risk.

The level of credit spreads changes with the ebb-and-flow of investor confidence. On one hand, “wide” credit spreads can protect investors like an airbag when the teeter-totter hurls you downward. On the other hand, “tight” credit spreads can lead to a sore rear-end or worse.

Yes, it’s true the Fed appears hell-bent on raising short-term interest rates. But, clearly there’s more to know than just that fact alone. Your choice of maturity, your assessment of the shape of the yield-curve and your focus on the level of credit spreads will all play a factor in how your bond portfolio will perform. Be sure to pick your teeter-totter wisely.

The more things change, the more they stay the same. That was never more true than with the recent unveiling of the Republicans’ long-awaited “Repeal and Replace” plan, called the American Health Care Act (AHCA). To the surprise of many, under their plan large swaths of the existing Affordable Care Act (ACA) would remain.

Given the likely continuity of key provisions of the Affordable Care Act, the upcoming Money Series presentation by Laverna Witkop of Ford Insurance Agency couldn’t be better timing. For those interested in learning more about ways to access today’s health insurance market, Laverna’s grasp of both the current ACA’s rules as well as her knowledge of the Republicans’ proposed changes under AHCA will be on full display.

To begin, let’s first describe a few major similarities between the proposed AHCA and the existing ACA.

The ban on denying insurance coverage for those with pre-existing conditions will remain unchanged. In addition, the rule allowing young adults to stay on their parents’ health insurance policy until age 26 would also remain. And, perhaps most controversially for some GOP members, the AHCA maintains the granting of health insurance premium subsidies through tax credits.

Of course, there are also major differences between the ACA and the proposed AHCA.

Where the ACA provides premium subsidies based solely on income, the Republican’s AHCA instead bases its subsidies on age alone. This change favors those with greater income and those who are older. Additionally, health savings account contribution limits would also rise substantially, a change that mostly benefits those with higher incomes.

Further, many of the new taxes created under ACA would disappear under AHCA. Among others, gone are the taxes on some medical devices and the extra tax applied to investment income for very high income households. Finally, penalties imposed on certain employers for failing to offer “affordable” insurance plans are eliminated too.

Aside from the loud critique that the proposed AHCA simply looks too much like the existing ACA, the new plan’s decision to maintain many of the same benefits along with the repeal of taxes may have created a tall political hurdle for certain Republicans; a possible widening budget deficit.

Leaping this hurdle may prove difficult and might add some political intrigue. Passing the law may require the Republican leadership to either make the new AHCA more palatable to the conservative wing or require them to convince enough Democrats to vote for it. Democrats might pragmatically view the new AHCA as just close enough to the old ACA. After all, their acronyms alone look awfully similar! That’s politics for you.

Moving beyond the politics and into the realm of financial education, join Laverna Witkop at the Front Street Foundation’s Money Series on March 22 at 6:30pm in the McGuire Room of the Traverse Area District Library where she’ll speak about the nuances of the Affordable Care Act and your health insurance choices. Register at frontstreetfoundation.org or call (231) 714-6459.

Not too long ago, retirement planning was built on the concept of a three-legged stool. One, a pension, negotiated by you and promised by your employer. Two, your own investments, saved by you and supported by an ever-growing economy. Three, Social Security, provided by you and your employer and mandated by your government.

With this secure and sturdy stool in place, a solid retirement plan was once likely, if not probable. For many today, retirement security is based not on a concept of a stool, but rather a pogo stick, where Social Security plays a huge role for those who struggle to save and invest.

Given its importance, the next Money Series event will delve into Social Security; how the program works and the rules you should understand to get the most out of it.

To highlight Social Security’s impact on our lives, a few facts speak volumes.

Approximately 60 million people receive almost $1 trillion in benefits every year. On average, the program provides about one third of household income for the elderly. Yet, even those statistics don’t properly paint the full picture.

Digging deeper, about half of all retired married couples and three out of four retired single people receive more than half of their income from Social Security. Shockingly, almost half of retired singles rely on Social Security for over 90% of their income.

Social Security is a big deal. Even so, its various rules and options remain a mystery to most. It literally pays to know them better.

Far too many fail to realize the advantages of simply waiting to file for benefits. As a result, millions leave billions of dollars on the table by choosing to file at their earliest possible age of eligibility. In fact, just less than half file for benefits at age 62. Astonishingly, waiting until age 70 to file for benefits results in nearly 80% more per month.

In an age of constant medical advancements, longevity can be both a friend and foe. Earning Social Security’s delayed-retirement credits, earned by waiting to file for as long as possible, is just one tool tilting things in your favor.

For married couples, it’s important to understand that lower-earning spouses may be entitled to receive additional benefits – called, spousal benefits – in exchange for supporting the careers of their higher-earning spouse and/or choosing to raise the children.

Many people also fail to understand that even after a divorce or the death of a spouse they are entitled to benefits connected to their former married status. Spousal benefits for divorced retirees and survivor benefits are yet another wrinkle that deserves a deeper education.

Finally, since April is just around the corner, it’s also important to understand how your Social Security benefits are taxed. From the limits on what you are allowed to earn when you are under age 66 to the amount of income allowed before Social Security starts to tax away your benefits, various strategies do exist to help you minimize the taxman’s bite.

To hear more on Social Security’s rules and options, join me on Wednesday, Feb 15th at 6:30pm for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Visit MoneySeries.org

A client of mine, but more importantly a family friend of four decades, recently passed away. As I sat down with her loved ones, I immediately recognized the gift she provided them. Her gift was the overall simplicity of her estate plan. It’s something everyone should strive to leave behind. It all starts with a purposeful conversation.

While it’s true the duties assumed by an estate’s personal representative or a trustee still require time – often spent in the midst of grieving – your thoughtful planning can ease their workload considerably.

Upon reflection, I view my client’s well-organized affairs as a model to follow. So much so, I now consider it one of my professional New Year’s resolutions to help all of my clients review their plans. I strongly suggest readers do the same.

To help spur your own review, attorney Diane Kuhn Huff of Stephen & Anderson will be speaking this month on estate planning at the Front Street Foundation’s Money Series. Her goal is to help you begin your own meaningful conversation on a topic too many neglect.

Her presentation will help uncover and better define your wishes about the type of health care you really want, where and in what manner you’d like to live your later years and the various resources you’d like to provide your chosen personal representatives to help fulfill your life plan.

In my client’s case, she had expressed a deep desire to remain at home in the final months of her life. The steps she took in her planning – through a combination of her financial set up and open conversations with her family members – allowed her to access the support she needed to achieve that goal.

Your own conversation might begin with a review of the choices you can make now to either remain at home or to gradually transition to other living environments with built-in levels of support. Your conversation might also enhance your understanding of the complex eligibility rules for Medicaid or VA benefits and how you can plan accordingly. In addition, you could discuss the trade-offs created by strategic asset transfers to your spouse or your heirs.

To close, I’d like to add a special note: As is often the case during difficult moments in life, positive things emerge. For my client’s family, a lasting impact was made by the wonderful care provided by the people at Hospice of Michigan. We are very fortunate to have available such high quality resources in our community.

To learn more, join Diane Kuhn Huff on Wednesday, January 18 at 6:30pm for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library.

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Sentiment is a peculiar thing. It can turn on a dime. Recently, those dimes have piled up quickly. Since early November, significant new paper wealth has been created from rising stock prices.

The big shift in investor sentiment over the past eight weeks undoubtedly centers around Trump’s victory and the anticipation of Republican control of all three levers of the federal government.

Since the election, the broad stock market has leapt about 7% and stock indexes of smaller, domestic companies have popped about 15%. Is this supportable?

Perhaps it’s true plans for fewer regulations and coming tax cuts may explain some of it. Possibly it’s true that plans for increased infrastructure spending has had some effect. Maybe it’s also true the president-elect’s cabinet appointments foreshadow even more pro-business policies to come.

Yet, these factors alone are difficult for me to explain such a sudden mood shift. Change often happens slowly and, as a result, markets often overshoot expectations.

Here are a few things that concern me with investors’ recent – almost instant – positive reaction to the election.

First, tax cuts aren’t all created the same. Much depends on who receives the tax cuts and what they choose to do with the extra money.

When tax cuts accrue to the wealthiest households, they tend to spend less of their windfall than do the poor. The Bush tax cuts – also heavily weighted to the wealthy – were an example of a lower “multiplier” effect on economic growth. Similarly, if the currently anticipated tax cuts end up sitting in the bank, the effect on the economy may be far smaller than many now anticipate.

While it’s true some will invest back in the economy, that decision will be driven only by a clear-eyed assessment of unmet demand for goods and services. Absent that new demand, many businesses may choose to instead increase dividends, buy back their own stock, or pay down debt. These actions aren’t nearly as impactful on growth as hiring new workers, investing in research and development, building new factories or even raising wages for workers.

Second, given the importance of global trade, it’s troubling to hear the chatter of imposing tariffs, watch the strengthening of the US dollar or read threatening tweets about trade wars. The notion that it’s all just tough talk may be unwise to assume. In response, large multinational corporations will flex their well developed lobbying muscles. But, it may prove quite difficult to put the protectionist genie back in the bottle.

Finally, stocks are trading at all-time highs. Reputable measures of the stock market’s value, such as the Shiller Price-Earnings metric, should not be waived off so readily. An immutable law of finance is the higher price you pay, the lower your future return.

The past two months of 2016 reminds me of something Warren Buffett once said, “Investors pay a very high price in the stock market for a cheery consensus.” If today’s sentiment on Wall Street can be described in a single word, cheery, most certainly fits the bill.

While the end of the year is admittedly busy, I feel compelled to add to your to-do list!

I was recently reminded of a clever habit of one of my newer clients who hold their very own financial “State of the Union” around their kitchen table each year. For them, this serves as a structured time for them to reflect on the past year and to help them financially plan forward.

In preparing for our upcoming Money Series joint presentation, where we will each share tips regarding year-end financial planning ideas, local attorney Greg Luyt of Bowerman, Bowden, Ford, Clulo & Luyt introduced me to an expanded and robust version of this same disciplined habit.

For those who have been left behind to piece together the puzzle of another person’s life, being handed a cheat sheet is truly welcome. Mr. Luyt’s important idea is to encourage you to create what he calls a Family Guidebook to make things much easier for your loved ones after you are gone.

This essentially entails the creation of a set of communications that may encompass an inventory of – among other important items – your various financial accounts, the location and your intentions for your cherished personal belongings and even a narrative reflecting your final wishes with regard to your funeral arrangements.

Luyt stresses that, regardless of your financial means, your Family Guidebook can cost you next to nothing to create. All it takes is your time to reflect, review and routinely renew your intentions. Add this one to your list of soon-to-be-successful New Year’s resolutions.

Now, I’ll move on to time-sensitive things that you probably shouldn’t put off until next year. As I mentioned a couple weeks ago, it might actually save you money.

If we assume the nearly identical tax plans of the House Republicans and President-elect Trump will actually be implemented, your ability to deduct charitable donations, property taxes, state income taxes, and in most cases, even your mortgage interest, may be long gone.

Even if the contemplated changes fail to materialize, we absolutely know we can still deduct these expenses in 2016. So, your proactive planning has no downside.

To ensure your ability to deduct these expenses, consider paying early your winter property tax bill, your next estimated state income tax payment and even your January mortgage payment before the end of the year. Under most scenarios, and for most taxpayers, this will result in lower taxes.

Importantly, for those with charitable intent, talk to your adviser soon about storing up multiple years of your charitable donations by opening a “donor-advised” fund. It’s extraordinarily easy, anyone can do it and there’s still time. To add to your pressure, there are only twenty six days left to plan. Start now!

For more tips on year-end financial planning, join Jason P. Tank, CFA and local attorney, Greg Luyt, on Wednesday, December 14 at 6:30pm for their joint presentation for the Front Street Foundation’s Money Series held in the McGuire Room at the Traverse Area District Library. Visit FrontStreetFoundation.org or call (231) 714-6459 to register.

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