Category: Investment Decisions

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Financial Planning Investment Decisions

What is Financial Planning & How is it Different From Investment Management?

What is Difference Between Financial Planning & Investment Management
Difference Between Financial Planning and Investment Management

By Jon Powell, CFP®

Do you need financial planning or investment management? To answer that question, you need to have a grasp on your financial goals, and also understand that advisors have different specialities. 

In this article, we’ll define the differences between financial planning and investment management, as well as detail our process for helping you determine which approach is best.

Financial Planning vs. Investment Management

According to the CFP Board, financial planning is a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.

Essentially, it’s a holistic process that looks at all parts of a client’s financial situation to create a customized plan to achieve their financial goals. It includes the following subject areas:

  1. Retirement planning
  2. Education planning
  3. Tax planning
  4. Investment planning
  5. Estate planning
  6. Risk management and insurance planning

Investment management, on the other hand, aims to meet particular investment goals for the benefit of clients whose money a financial professional has the responsibility of overseeing.

It is a siloed service that does not necessarily incorporate the other aspects of a client’s unique financial situation. Financial planning usually includes investment management, but investment management does not automatically include financial planning.  

Our Financial Planning Process

At Ferguson Johnson Wealth Management, our team focuses on investment management and financial planning; we will be in your corner for the issues that inevitably come up.

We strive to work with clients whose goals and dreams are a fit with our expertise and background. To determine a fit and bring clients onboard we typically follow an established process:

  1. We’ll schedule a brief initial meeting, so you can meet our team and we can learn about you, your goals, and your hopes. After the initial meeting, you’re welcome to reach out again with follow-up questions. If you prefer, we’re comfortable meeting over the phone or virtually.
  2. If we agree to work together, we’ll ask you to complete enrollment documents, and discuss your financial situation and needs in greater depth to start building your financial plan. This process usually takes several weeks.
  3. Next, we’ll schedule a meeting to walk you through the initial draft of the financial plan we’ve developed. We’ll make any needed adjustments based on your feedback, and then put the plan into place.
  4. Once your plan is up and running, our work isn’t done. We’ll check in regularly with you to ensure your plan is on track and reflects your current circumstances. And remember that as a fiduciary, we’re always available to provide an update or to address any questions or concerns.

We pride ourselves on being a stabilizing influence when our clients face times of uncertainty, whether that be market volatility, family issues, or when they just need a sounding board.

Are You Looking for Comprehensive Financial Planning?

If you are looking for comprehensive financial planning that includes strategic investment management, we would love to hear from you.

At Ferguson Johnson Wealth Management, we work with pre-retirees, retirees, and government workers to create a financial plan or investment strategy tailored to your needs. To get started, reach out to us at 301-670-0994 or by email. 

Categories
Financial Planning Investment Decisions

How I Invest My Own Money

How I Invest My Own Money

By Jon Powell, CFP®

My clients always ask me how I manage my own money as if it’s a secret that I keep to myself. The thing about money management is that people often feel like no matter how much they learn about the latest techniques and trends, they’re never quite doing it right, that there’s always some better way to save or invest. 

Well, as a CERTIFIED FINANCIAL PLANNER™ professional who works with wealth management strategies every day, I’m here to tell you that the way I manage my own money is not all that different from how I manage my clients’ money. The first step is to start with the basics.

Basic Money Management & Investment Tips

Before developing and implementing an investment plan, it’s crucial to make sure all your other financial bases have been covered. Here are three tips to consider before we dive into my personal investment process.

Emergency Fund

One of the most important money management tips is to make sure you have an adequate emergency fund before investing. An emergency fund should consist of cash as well as access to capital and lines of credit. It is used to cover unexpected expenses or disruptions in cash flow, so that you won’t have to steal from your investment portfolio in the event of an emergency. 

If you haven’t already, start saving a portion of your income in highly liquid investments (savings accounts, money market accounts, certificates of deposit, etc.). Ideally, you should have 3-6 months’ worth of non-discretionary expenses saved before moving onto investment goals.

Net Cash Flow

After you’ve built an adequate emergency fund, it’s time to look at your net cash flow (income minus expenses). Since investments are just one component of a larger financial plan, this step is very important. It is your net cash flow that will act as the funding mechanism for your investment plan. For instance, if you are consistently spending more than you earn (deficit), there will be no extra funds to contribute to your portfolio. Consistent negative cash flows actually indicate a larger issue that will need to be addressed before a successful investment plan can be established. 

Similarly, a net cash flow of zero (spending as much as you earn) doesn’t allow for any leftover funds to be contributed to investments. It may not indicate systemic issues like a negative cash flow, but it does indicate that spending will need to be adjusted to meet investment goals.

A positive cash flow (surplus) is ideal when assessing how to fund an investment plan. To generate a surplus cash flow, you must spend less money than you earn. This can be accomplished through techniques such as budgeting and tracking expenses.

Don’t Time the Markets

Avoiding market timing is a money management technique that can improve your returns over time. You may have heard the saying “buy low, sell high,” but the fact of the matter is that trying to determine when an asset has reached its high or low is like trying to guess the winning lottery numbers: more often than not, it doesn’t work. 

There is no way to predict short-term fluctuations with enough accuracy that you can consistently make the right decision about when to buy and when to sell. Staying in the market, even through volatile times, is a much better choice when trying to build long-term wealth.

Historically, although it has had many ups and downs, the market has always rebounded over time. That’s why it’s so important to trust the market and avoid temptations to time it, instead letting time be your ally when growing your investments. 

How I Invest My Own Money

As a duty-bound fiduciary to my clients, I strive to handle their money as if it were my own, which is why the steps I take in my personal management and investment process mirror those I take with my clients. My personal investment policy involves several key points, including:

Active vs. Passive Investing

One of the most important aspects of my personal investment plan is the distinction between active and passive investing. At Ferguson Johnson Wealth Management, we focus on passive investing. Though there is no guarantee that one strategy will outperform another, passive management techniques have generally outperformed active management over the long term. (1)

Passive investing utilizes strategies like buy-and-hold or indexing, while active investing involves single-stock investing and frequent buying and selling in an attempt to beat the average returns of the market. As expected, active management comes with added expenses and no guarantees that the returns will be any better than a passively invested portfolio. In fact, active investing often results in worse returns when the increased costs are factored in. (2)

Trying to pick and choose individual stocks has proven to be a losing game many times,

and it’s something I try to avoid in both my own portfolio as well as my clients’.

Diversification

Next, diversification is a critical piece of any investment plan. It can be achieved through an asset allocation strategy that considers which components of your plan can move together and which can act as a hedge against downside risk. Diversification can’t guarantee a minimum level of return, but it will at least act as a buffer against the inherent volatility of the market. By investing across and within several different asset classes, you can reduce your overall exposure to risk. 

While it can be tempting to chase performance and overload a portfolio with the hottest asset class, I prefer to take a more balanced (and diversified) approach when investing my own money. This mindset aligns with how we manage our clients’ funds at Ferguson Johnson Wealth Management. Our portfolio options include diversified allocations in:

  • Large-cap growth
  • Large-cap value
  • Mid-cap 
  • Small-cap
  • Diversified international
  • Emerging market
  • Fixed income
  • Real estate through low-cost index funds

This provides broad exposure to several different industries, sectors, and asset classes across the market, ensuring that no single investment can drastically alter the returns of the whole portfolio. I personally focus on exchange-traded funds (ETFs) and mutual funds as a convenient way to increase diversification in my investment portfolio.

Not All Bonds Are Created Equal

Another important investment consideration is understanding the current bond environment and how to avoid exposing yourself to too much risk. Clients often don’t realize that traditional “safe” investments like bonds no longer provide the guarantees they used to 40 years ago. In 1982, you could achieve an average yield of 13.01% with a relatively low-risk investment in long-term bonds, but that is no longer the case. (3) As of July 7, 2022, the yield on a 10-year bond is only about 3.01%! (4)

Given the interest-rate environment we find ourselves in, not all bonds are created equal. The Federal Reserve has already raised interest rates three times and they are very likely to continue raising rates throughout the rest of 2022. (5) Because of this, we believe that short-term bond funds are a much better choice for the fixed-income portion of an investment portfolio as opposed to longer-term bonds. 

This is because interest rates are inversely related to bond prices, and the longer the bond’s maturity, the more intense this relationship is. So longer-term bonds will likely lose their value much more quickly and intensely as interest rates continue to rise. Paying attention to the duration of a fixed-income investment has never been more important than it is in today’s investment environment. As a firm, we have targeted shorter-duration bonds over the last 8-10 years in order to alleviate this issue.

How We Can Help

Successful money management and investing don’t have to be shrouded in mystery. Our goal at Ferguson Johnson Wealth Management is to give our clients the tools and resources to feel confident in their financial plans. If you’d like to learn more about our investment philosophy and how it applies to your portfolio, reach out to us at 301-670-0994 or by email at djohnson@fjwealthmanagement.com.

About Jon

Jon Powell is a financial planner and portfolio manager at Ferguson Johnson Wealth Management, an independent, fee-only fiduciary firm that has been helping clients plan for and enjoy retirement for more than 40 years. With more than 10 years of experience, Jon is passionate about providing unbiased advice that puts his clients first. He considers it a privilege to carry some of the financial burden for his clients and educate them so they can make empowered decisions for their futures. Jon is also the primary author and curator of the Ferguson-Johnson Wealth Management blog. 

Jon graduated from Virginia Polytechnic Institute and State University with a bachelor’s degree in financial planning and holds the CERTIFIED FINANCIAL PLANNER™ certification. When he’s not serving his clients, you can find Jon spending time with his wife, Erica, and their pets, a black lab named Nugget and an orange tabby cat named Kiwi. He loves to play tennis and golf and won’t turn down a good board game. Jon is a diehard fan of D.C.-area sports teams; you might see him at a Washington Nationals game. To learn more about Jon, connect with him on LinkedIn.

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(1) https://www.forbes.com/advisor/investing/passive-investing-vs-active-investing/

(2) https://www.forbes.com/advisor/investing/passive-investing-vs-active-investing/

(3) https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

(4) https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart

(5) https://www.cnbc.com/2022/06/15/fed-hikes-its-benchmark-interest-rate-by-three-quarters-of-a-point-the-biggest-increase-since-1994.html

Categories
Investment Decisions Retirement Solutions Tax Efficiency

401(k)s and Pension Plans: What’s the Difference?

By Jon Powell, CFP®

With many kinds of retirement plans out there, it can be hard to tell the differences among them at first glance. Two of the most popular types of retirement plans offered by employers are the 401(k) plan and the pension plan. An employer typically provides one or the other, but not both. While it’s unlikely that you’ll have a choice between the two, you’ll probably come across one of these plans throughout your working years, so it’s essential to understand how they work and what they mean for your retirement. 

What Is a 401(k)?

A 401(k), or defined-contribution plan, is a common retirement plan offered by employers. With a 401(k), you elect to contribute part of your salary into a retirement account. You can choose from a range of investments such as index funds, mutual funds, and target-date funds. You also have the ability to change your investments, however, they are limited to the investments your employer offers. You can contribute up to $20,500 (as of 2022) each year, and if you are 50 years of age or older, an additional $6,500 catch-up contribution. (1) Your employer may also choose to match your contributions up to a certain amount. The total limit for employee and employer contributions is $61,000.

There are two types of 401(k) plans: a traditional 401(k) and a Roth 401(k). In a traditional 401(k), your contribution is taken from your salary pre-tax. Your traditional 401(k) grows tax-deferred, and you only pay taxes when you withdraw from the account in retirement. Because these contributions are tax-deferred, contributing to a traditional 401(k) means you lower your taxable income at the time you contribute. 

A Roth 401(k) is funded with money after you’ve already paid taxes on it. The money in your Roth 401(k) grows tax-free in your account, and since you’ve already paid taxes on your contributions, when you withdraw funds, you withdraw them tax-free. Thus, the key difference between the two boils down to when you pay taxes. If your employer offers both, you need to decide whether it makes sense for you to pay taxes now or when you retire. 401(k) plans are also generally subject to required minimum distributions, meaning you will need to begin withdrawing from your plan when you reach age 72. (2)

What Is a Pension Plan?

A pension plan, or a defined-benefit plan, is an employer-sponsored plan that guarantees an amount of income in retirement. The amount you receive in retirement is determined by a few factors, such as your length of employment, your salary, your age at retirement, and any other specifications set by the employer. 

Your employer is responsible for contributing to the plan and all the investment risk is on them as well. However, you may need to work several years at the organization before you are eligible for a pension plan. Additionally, with a pension plan you have no control over how it’s invested. Depending on the plan, you may be allowed to contribute part of your salary as well. You are also guaranteed regular payments for the rest of your life, though the plan might offer you the choice of a lump-sum payment.

Which Plan Is Better: 401(k) or Pension Plan?

Both plans have their advantages and disadvantages. Pension plans have been around longer, however, 401(k) plans are much more common today. In fact, as of March 2021, 52% of employees had access to a defined-contribution plan such as a 401(k), while only 3% had access to only a pension plan (12% had access to both). (3) If you have a 401(k), it is up to you to save for your retirement. You have more control but more responsibility as well. With a pension plan, your employer is responsible for funding the plan. If you like knowing you will have a guaranteed income in retirement and prefer not having to contribute any of your own money, a pension plan will be more attractive to you. If you’d rather have more control over how much you put toward retirement, a 401(k) may be a better fit for you. 

Setting Yourself Up for Success

Planning for retirement can feel daunting—but you don’t have to figure it out all by yourself. Choosing the right partner as you plan for the future can help you set yourself up for success in retirement. And finding a financial advisor that understands your unique situation and goals doesn’t have to be difficult. At Ferguson Johnson Wealth Management, our mission is to simplify navigating the complexities of retirement, helping you plan wisely so you can live fully. We understand that retirement plans are not one size fits all. That’s why we work with you to develop a plan tailored to your needs. Reach out to us at 301-670-0994 or by email at djohnson@fjwealthmanagement.com to set up an appointment today.

About Jon

Jon Powell is a financial planner and portfolio manager at Ferguson Johnson Wealth Management, an independent, fee-only fiduciary firm that has been helping clients plan for and enjoy retirement for more than 40 years. With more than 10 years of experience, Jon is passionate about providing unbiased advice that puts his clients first. He considers it a privilege to carry some of the financial burden for his clients and educate them so they can make empowered decisions for their futures. Jon is also the primary author and curator of the Ferguson-Johnson Wealth Management blog. 

Jon graduated from Virginia Polytechnic Institute and State University with a bachelor’s degree in financial planning and holds the CERTIFIED FINANCIAL PLANNER™ certification. When he’s not serving his clients, you can find Jon spending time with his wife, Erica, and their pets, a black lab named Nugget and an orange tabby cat named Kiwi. He loves to play tennis and golf and won’t turn down a good board game. Jon is a diehard fan of D.C.-area sports teams; you might see him at a Washington Nationals game. To learn more about Jon, connect with him on LinkedIn.

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(1) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits

(2) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

(3) https://www.bls.gov/opub/ted/2021/67-percent-of-private-industry-workers-had-access-to-retirement-plans-in-2020.htm#:~:text=Bureau%20of%20Labor%20Statistics,-The%20Economics%20Daily&text=Sixty%2Dseven%20percent%20of%20private,to%20defined%20contribution%20retirement%20plans.

Categories
Current Events Investment Decisions Uncategorized

All-Time Highs & The Lows That Sometimes Follow

Investing in the Stock Market at All-Time Highs

“Every past decline looks like an opportunity; every future decline looks like a risk.”

-Morgan Housel

As we close the book on 2021, another year of generally excellent investment returns, we revisit the recurring anxiety of “what if this is the peak?”

It’s certainly not an uncommon feeling. Many investors may think a market high is a signal that stocks are overvalued or have reached a ceiling. However, they may be surprised to find that the average returns one, three, and five years after a new month-end market high are similar to the average returns over any one-, three-, or five-year period:

 

Performance after a New Stock Market All-time high

Source: Dimensional Fund Advisors, S&P 500 Index Returns 1916-2021.

Reaching a new high doesn’t mean the market is destined to retreat. Stocks are priced to deliver a positive expected return for investors, so reaching record highs regularly is the outcome one would expect. New highs are necessary for long-term investors to make money in the markets.

As such, it’s a good thing that markets have been constantly achieving new highs. Here’s the number of new all-time highs that were hit per year over the past decade:

Year # of New Closing Record Highs
2012 0
2013 45
2014 53
2015 10
2016 18
2017 62
2018 19
2019 36
2020 33
2021 70

Source: Morningstar S&P 500, 1/1/2012 – 12/31/2021.

As I’m sure you’re aware, January has been anything but kind to investors, so far – seemingly refuting the evidence laid out above. But, we know when investing in financial markets that drawdowns are a possibility. Much like the regularity of new market highs above, we see regularity with market drawdowns, as well.A new all-time high isn’t a unique occurrence or uncharted territory – it’s kind of the norm.

Going back to 1950, we have seen a drawdown of at least 5% in nearly every year. Even declines of greater than 10% have been observed in most calendar years.

Magnitude of Decline Frequency
5% or more 96% of years
10% or more 62% of years
20% or more 25% of years
30% or more 10% of years
40% or more 4% of years

Source: Morningstar S&P 500, 1/3/1950 – 12/31/2021

There’s a lot weighing on markets: Will inflation continue? Will the Federal Reserve tighten monetary policy, raising interest rates? Will new tax legislation ever happen? What about COVID? Climate change? China? Tensions around Russia and Ukraine? Cryptocurrencies? Meme stocks? SPACs?

I get it – It’s a lot. But, it’s always a lot. Remembering the Morgan Housel quote at the top: “Every past decline looks like an opportunity; every future decline looks like a risk.”

Less than two years ago, we were in the early days of the COVID-19 Pandemic. People were afraid to leave their house. We left packages by the front door for several days to “disinfect”. We stood around in socially-distanced circles with neighbors for “happy hour” on Friday evenings (I kind of miss that part of it, actually). Anyway, the S&P 500 fell 34% in the span of a month. Since then, the index had gained 114% to the most recent high that was hit on January 3rd1. Unintuitively, it turned out to be a marvelous investment opportunity, but it certainly didn’t feel that way in the moment.

The markets today may seem scary. The truth is the magnitude of a correction, when it will occur, and how long it will last is unknown. Have we already taken the first steps toward a depression? Or will we be achieving new highs again in February or March? I can’t say. I’m pretty confident that however things play out, we will look back on this period with the same attitude of “well, that ended up being a good investment opportunity.”

We allocate the investment portfolios we build based on the capacity each individual client has to bear risk. Those portfolios are built with the expectation of declines. The financial plans are built with the expectation of declines. The retirements we forecast are not an elaborate house of cards that fold as soon as the wind changes direction. If the anxiety and worry become too much to handle, then let’s explore what it really means for you.

1 Source: Morningstar. Data from 2/19/2020 to 12/31/2021.

Categories
Financial Planning Investment Decisions

We’re Never Too Busy to Help Someone You Care About

By Jon Powell, CFP®

What’s your top priority right now? I bet it feels impossible to pick just one, right? We’re all juggling countless priorities, but only a select few make it to the top of the list. Is it family? Or maybe health or a sense of purpose? Money might not top your list, but don’t underestimate its importance.

It’s been said that money isn’t everything, but everything needs money, and it’s true: money affects every part of your life and can give you the security and stability that positively impacts the things that matter most. Due to its far-reaching impact, managing money often leads to stress and worry. That’s why a financial advisor plays one of the most prominent roles in a person’s life, forming a long-lasting relationship and providing objective counsel.  

But how do you find an advisor you can trust and with whom you’ll want to work for the long haul? We at Ferguson Johnson Wealth Management understand this can be an overwhelming and intimidating process. Trusting someone with your hard-earned money is not a decision you take lightly. Knowing this, we are honored to have the opportunity to continue serving more and more families and individuals who conscientiously choose to let us in on their financial journey. 

We place the utmost value on our clients, and we greatly appreciate the opportunity to serve the important people in their lives as well. We gladly welcome the chance to connect and get to know new clients who may benefit from the services we provide. As an integral part of our continued growth, your referrals are the highest compliment.

The FJ Wealth Management Difference

We’ve been fortunate to work with a wide range of clients who refer their colleagues, friends, and family members to us. We believe so many people have referred others to us for a few different reasons:

  1. A personalized real-world approach. No two individuals’ financial service needs will be the same, which is why we create a plan focused on your financial goals. We take the time to outline a tailored strategy based on your specific needs, goals, and circumstances. 
  2. Strong relationships. We prioritize a hands-on client-centered approach, which has led us to build long-lasting relationships with so many of our clients. We’re proud to serve as a go-to resource and support system when someone faces a tough decision or goes through a life transition.
  3. A long-term commitment. We recognize that financial planning and investing is not a static process since life changes happen and investment objectives can shift over time. That’s why we provide ongoing guidance and support. Whether it’s saving for your children’s college education, planning for retirement, or preserving assets for future generations, we seek to provide the financial service resources and continuous management necessary to keep you working toward your goals.
  4. A dedicated team. With a diverse team of seasoned professionals who maintain a high-touch and personalized experience, we strive to help our clients simplify complex decisions about their money. We hope you feel more confident as you navigate life’s challenges and planning opportunities with a dedicated team on your side.

The People We Serve Best

We at Ferguson Johnson Wealth Management desire to partner with you and help carry your financial burden, aiming to make your wealth work for you, not the other way around. Because we like to form trusted and close relationships with our clients, we strive to work with people whom we believe we can best serve, from working professionals, government workers, and executives to business owners and retirees. While they come from a variety of backgrounds and professions, they want to delegate their financial matters to a trusted professional who offers stewardship and guidance so they’re free to focus on what’s important. 

Do You Know Someone Who Could Benefit From Our Services?

Our goal is to help our clients plan wisely, so they can live fully. This means we don’t just want to take financial matters off already full plates, but we also value providing personalized attention and care to each of our clients—as well as their loved ones. In fact, this is one of the reasons we work with a select number of clients! We’re here to help answer questions about your portfolio or strategies, walk you through a new life milestone, and help build your dream retirement. Do you know someone who needs answers to their questions or unbiased advice? We’re never too busy to help!

If you’re a client with our firm and you’ve enjoyed working with us, we hope you’ll refer a friend, colleague, or family member who may benefit from our services. Consider sending this article to them, and if they’re interested in partnering with us, they can schedule their complimentary introductory meeting by calling 301-670-0994 or emailing djohnson@fjwealthmanagement.com. 

About Jon

Jon Powell is a financial planner and portfolio manager at Ferguson Johnson Wealth Management, an independent, fee-only fiduciary firm that has been helping clients plan for and enjoy retirement for more than 40 years. With more than 10 years of experience, Jon is passionate about providing unbiased advice that puts his clients first. He considers it a privilege to carry some of the financial burden for his clients and educate them so they can make empowered decisions for their futures. Jon is also the primary author and curator of the Ferguson-Johnson Wealth Management blog. 

Jon graduated from Virginia Polytechnic Institute and State University with a bachelor’s degree in financial planning and holds the CERTIFIED FINANCIAL PLANNER™ certification. When he’s not serving his clients, you can find Jon spending time with his wife, Erica, and their pets, a black lab named Nugget and an orange tabby cat named Kiwi. He loves to play tennis and golf and won’t turn down a good board game. Jon is a diehard fan of D.C.-area sports teams; you might see him at a Washington Nationals game. To learn more about Jon, connect with him on LinkedIn.

Categories
Investment Decisions Retirement Solutions Tax Efficiency

Annual Enrollment for Government Employees

By Jon Powell, CFP®

It’s that time of year again when you start getting notices about open season and all the changes coming to your employee benefits. Even though you’d probably rather turn a blind eye and keep going on with your life, too many people set their benefits and forget them and miss out on opportunities to update their coverage. 

The open enrollment period for your 2022 coverage is fast approaching, beginning on November 8th and going until December 13th. This is your chance to review your benefits, learn about any coverage or cost changes, and make some decisions. 

Here’s what you need to know about the 2021 annual enrollment period for government employees.

Does Open Season Apply to Me?

If you are enrolled in the Federal Employees Health Benefits (FEHB) program, the Federal Employees Dental and Vision Insurance Program (FEDVIP), or you take advantage of the Federal Flexible Spending Account Program (FSAFEDS), you should pay attention to this annual enrollment period. The life insurance and long-term care insurance programs are not included during this time. 

What Can I Do During Open Season?

For both the FEHB and FEDVIP programs, federal employees can enroll, change their plan, make adjustments to their plan options, update enrollment type if your family’s coverage needs have changed, or cancel your plan. If you choose to do nothing, your plans will automatically continue.

That is not the case with the various federal FSA programs. If you do not re-enroll during open season, your FSA will lapse. Even if you don’t want to contribute for 2022, keep in mind that any unused funds from 2021 will not carry over if you don’t re-enroll.

What’s Changing?

Every year there are typically some increases in premium costs and individual plans may change their option. The U.S. Office of Personnel Management (OPM) will announce specific details and the new 2022 premium rates on their website closer to the start of open season. You will also be able to compare plans and find information applicable to your job or status (active employee or retired).

Start preparing now by thinking about the health needs you experienced this year and whether or not your health insurance met those needs. Then think ahead to next year. Are there any life changes coming your way? Will you be getting married? Adding to your family? Do you take new medications now? If so, consider increasing your coverage or adding coverage for your spouse.

The Takeaway 

In the midst of what sometimes feels like a world gone mad, take some time to prioritize your employee benefits. The government provides these as a thank-you for your hard work, so make sure you maximize them and use your open enrollment period to make decisions that align with your life. 

And if you haven’t heard anything about open enrollment, reach out to the human resources department at your work to find out if there is a scheduled meeting or webinar to highlight this year’s benefits. Remember, your HR department is there to walk you through these decisions and answer any questions. 

At Ferguson Johnson Wealth Management, we specialize in helping government employees manage their finances and prepare for retirement. If you have questions about your government benefits or have yet to start planning for your future, we’d love to help. Please don’t hesitate to call our office at 301-670-0994 or email us at djohnson@fjwealthmanagement.com. 

About Jon

Jon Powell is a financial planner and portfolio manager at Ferguson Johnson Wealth Management, an independent, fee-only fiduciary firm that has been helping clients plan for and enjoy retirement for more than 40 years. With more than 10 years of experience, Jon is passionate about providing unbiased advice that puts his clients first. He considers it a privilege to carry some of the financial burden for his clients and educate them so they can make empowered decisions for their futures. Jon is also the primary author and curator of the Ferguson-Johnson Wealth Management blog. 

Jon graduated from Virginia Polytechnic Institute and State University with a bachelor’s degree in financial planning and holds the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation. When he’s not serving his clients, you can find Jon spending time with his wife, Erica, and their pets, a black lab named Nugget and an orange tabby cat named Kiwi. He loves to play tennis and golf and won’t turn down a good board game. Jon is a diehard fan of D.C.-area sports teams; you might see him at a Washington Nationals game. To learn more about Jon, connect with him on LinkedIn.

Categories
Investment Decisions

Why Aren’t Stocks Down More?

One question that seems to be popping a lot is “Why aren’t stocks down more?” After all, we’re in the midst of what I hope will be the worst economic calamity of this generation and equity losses are only moderate as we sit here today.

Continue reading “Why Aren’t Stocks Down More?”
Categories
Investment Decisions Uncategorized

The Coronavirus & Your Investments

You may have already heard, but Coronavirus is sweeping the globe. As of Monday, according to the World Health Organization, there have been just under 80,000 confirmed cases of COVID-19 (approximately 77,000 of which are in China) and around 2,500 deaths attributed to the virus.

Airlines are canceling flights, the US is issuing travel advisories, and there’s even talk of calling off the Summer Olympics, set to take place in Japan in a few months. It is certainly a scary time to have access to up-to-the-minute news.

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Budgeting Financial Planning Investment Decisions Tax Efficiency

Best Practices Savings Guide

Coffee cup and notebook with to do list, savings guide and tax planning concept
savings guide for 2024 covering HSA,IRA, 401(k), emergency funds

In most lines of work, you read about “best practices”. Well, let’s take a moment to apply best practices to your finances. You may be just beginning your financial journey, fresh out of college. You may have children or grandchildren that are starting their first real job. Perhaps, you just want to get serious about your finances. This savings guide is designed to help organize cash flows, so that money is being used in the most efficient manner possible.

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Investment Decisions Uncategorized

Explaining Diversification and Why We Do It

Explaining Diversification and Why We Do It
Explaining Diversification and Why We Do It

Diversification is hailed as “the only free lunch on Wall Street”, based on the famous quote by Harry Markowitz. Some of us accept this as a fact and take a diversified approach to our portfolios.

Then, a stock our buddy picked quadruples its value or the S&P 500 outperforms other asset classes over a multi-year period (as we’ve seen in the last few years). In times like these, it is easy to lose sight of why diversification is so important.

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