Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

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Supreme Court Overturns Ban on Sports Gambling

Written by Lester Detterbeck.

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On Monday, the Supreme Court struck down the 1992 federal law that said states couldn’t “sponsor, advertise, promote, license or authorize” sports gambling. The ruling in Murphy vs. NCAA agreed with New Jersey that the law was an intrusion into states’ rights to regulate activity within their borders. NJ had waged a six-year battle against the NCAA, NBA, NFL, MLB and NHL to allow sports betting. NJ will now join Nevada as the two states with legalized gambling. More will certainly follow. Illinois and South Carolina have already introduced bills and are moving towards legalization.

The states, the leagues and lots of others are all licking their chops to participate. The American Gaming Association estimates that $150 billion is wagered every year on illegal bets. Now, sports gambling could become more widespread, more systematic with an even larger market. Mark Cuban, owner of the Dallas Mavericks, believes that the overall value of sports franchises has doubled overnight. “It will increase interest in the arena or stadium, it will increase the viewership for customers online, and help traditional television networks.”

The NBA has discussed with state officials what it calls an “integrity fee” of 1% on all betting. The integrity fee would be needed, in part, to pay for more assistance to league officials to keep the league honest, thus policing players and coaches so that games are not “thrown” to win bets. MLB has proposed a .25% integrity fee. Ted Leonsis, owner of both the Washington Capitals and Wizards, said that the sport franchises need to be paid “equitably” for the content and “intellectual property” they provide to television.

Pennsylvania last year passed legislation to allow sports betting, which included a 36% tax on sports betting revenue. Nevada’s rate is 6.75%. While some states may resist on moral grounds (Utah’s anti-gambling stance is written into its constitution), most will jump on the bandwagon as soon as possible. It has been estimated that $245 billion in legalized sports betting could generate $16 billion in additional state tax income.

Sports data companies, like Sportradar and gambling companies, like MGM and Caesars Entertainment, are hoping to cash in. The betting public can now come out of the “underground” market. Legal bookmakers should do well-Nevada sportsbooks haven’t had a losing month since 2013.

And what about the players and their salaries? If the NBA received a 1% fee, under the current union contract, half of that would be owed to the players. So, if $50 billion of NBA related sports betting produced a $500 million “bonus”, half of that would go to the players. And, this extra money might raise the salary cap and cause crazy gyrations with many top players changing teams.

However, there’s only so much money to go around. Last year, Nevada’s sportsbooks had a 5% profit margin, according to the state’s gaming board. A 1% “integrity fee” would represent 20% of the profit. With everyone fighting for their piece of the pie, legalized gambling may not take off as quickly as expected.

Joe Asher, chief executive of William Hill US, part of a major British sports betting operation, cautions that tax rates and league fees could add to the complexities: “It’s not going to be easy to move customers from the black market into the legal market.” Time will tell.

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The Money Talk

Written by Grant Maddox.

 

 

kidsmoney.jpgIt’s no secret that today’s standard high school and college curriculums are missing a few very important details. One of the most overlooked areas is basic financial education. Discussing finances with your children can be a difficult topic to broach, but it is critical to their success in the long run.

 

One common misconception of having “the money talk” is the idea that kids must be sheltered from financial issues. In some instances this is absolutely true, but having a basic discussion about finances and instilling good values in your children is important. “The money talk” shouldn’t be seen as taboo, but rather as an opportunity to guide your kids and help them navigate potentially tricky financial issues and decisions that arise.

 

Here are some tips to help as you approach “the money talk."

 

1.Be honest.

 

Chances are that at some point in your life, you’ve experienced highs and lows in your finances. No need to hide it! These experiences provide a learning opportunity for your kids and allow you to be open and frank about the reality of financial decisions—they can handle it.

If you ran up debts in your past and had difficulty paying these back, this serves as an excellent teaching moment. Learning from those you respect can be just as effective as learning the lesson on your own.

Also, this may go without saying, but be careful not to spread falsehoods about your current financial situation. Remember, your kids can handle it and will almost always know when you’re not being completely honest with them.

 

2. Talk in values, not figures.

 

If you’re hesitant to share your financial situation with your children, that is normal. You are certainly not alone on this, but it doesn’t have to be scary. The good news is your kids don’t always want to know (or need to know) every detail of your financial life. Don’t sweat the small stuff—instead, focus on teaching them the basics. Ask yourself, what do they need to know, and what is often missed in standard education? Children should have a solid understanding of concepts such as saving, budgeting, paying down debt, developing healthy spending habits, and compounding interest.

 

3. Use real-world experiences.

 

Life is full of sporadic but important financial lessons that can be found in everyday experiences. It’s up to you to look for these opportunities and expand on them with your children.

If you’re going to the bank, you may consider taking your children with you. This is a great time to demonstrate how transactions work and, if applicable, how an ATM works. To take it a step further, you may even begin the discussion on how money can generate interest.

 

When your children start their first jobs and start receiving paychecks, this is a convenient time to discuss the importance of budgeting, paying bills, and taxes. Talk through what their goals are for each paycheck and how much they may need to save in order to accomplish these goals.

 

If you are planning a family trip, consider letting them in on the budgeting. Showing them your budget, planning activities you want to accomplish with this budget, and building a trip around this information will help make financial planning seem tangible to them. This may also be a good time to remind your kids that goals often require sacrifice, and not every trip activity will be accomplished.

 

Try giving your kids an allowance and taking them to the grocery store. The grocery store can be a clear example of “needs” vs. “wants.” Your children need nutrients but most certainly would like to have a few candies as well. However, with a set allowance, they won’t be able to afford them all!

 

In closing, whether you realize it or not, you play an important role in your children’s financial future. In their early years, they rely heavily on you for financial advice to help them form healthy financial habits (and the occasional $20 bill for the movies). At DWM, we feel it is essential to educate your children about finances early on, so they can be better prepared for the future. That’s why we created our new Emerging Investor program to help younger folks invest early on and get started on the path to financial freedom! To learn more about this exciting new program, check out the full description here: http://dwmgmt.com/blogs/123-2017-11-29-20-49-47.html.

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Put Longevity into Your Planning

Written by Les Detterbeck.

 

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We’re living longer. Back in 1935, when Social Security was started, there were 8 million Americans 65 or older. Today, there are 50 million and by 2060 there will be 100 million 65 and older. It is projected that in 2033, the population of 65 and older will, for the first time, outnumber those under 18.

In addition, there is a better than average chance that 65 year old investors with at least $1 million of investable assets will reach age 100. These folks not only have enough money to cover rising costs, they are also generally more physically fit, healthier and engaged. BTW- May is Older Americans Month, with a theme of “Engage at Every Age.”

Longevity is having and will have a huge impact not only on social security but also on long-term financial planning. The trust fund for social security retirement benefits is expected to be depleted by 2034. After that, the program is projected to pay out about 75% of benefits. At that time, the ratio of workers paying into Social Security, as compared to those receiving benefits, is projected to drop from 2.8 now to 2.1 then. Last month, Ginny provided information on social security including possible fixes http://www.dwmgmt.com/blogs/142-happy-national-social-security-month-.html. We hope Washington will enact some appropriate changes soon, though we can’t control that process.

We can, however, control our own financial planning. Here are some general tips on incorporating longevity into your planning

1.Plan based on living longer. For those of you in great health, use an eventual age past the actuarial age, perhaps even age 100. Your plan may end sooner, but let’s make sure the plan is designed for you to have sufficient funds during your life time.

2.Plan on your normal retirement expenses continuing until at least age 90. Most older Americans we know are engaged. They are working and volunteering, traveling, mentoring, learning, and participating in activities that enrich their physical, mental and emotional well-being. Don’t expect your normal expenses to start declining before age 90.

3.Plan on health care costs escalating faster than inflation. Investors worldwide agree that health expenses are their biggest financial concern related to longevity. This worry is most acute in the U.S. with 69% listing it as their number one worry, versus 52% globally. We are currently using 6% as the estimated annual increase in health care costs in our planning for clients.

4.Review your long-term care strategy early. Long-term care costs can be huge. On the other hand, your plan might “end” without you ever needing long-term care. What would be the cost and best way to insure? Should you self-insure? Should you keep your current policy? Should you modify it? Every financial plan needs to address long-term care and develop an appropriate strategy.

5.Use an ample estimate for inflation. Inflation can have a huge impact on expenses over a long period of time. You should stress test the plan at inflation rates above 2%, such as 3% or higher.

6.Use a realistic real return for investments. The real return for your investments is defined as your total return (which is the price change over the period + dividends/interest) less inflation. From 1950 to 2009, the real return was 7%; composed of an 11% total return less 4% inflation. Of course, the 50s, 80s and 90s all had double digit real returns. Today, it’s a good idea for you to stress test your plan projections using lower real return assumptions like 2.5% to 4%, depending on your time horizon and asset allocation.

7.Consider separating travel goals into two parts. When you are retired and mobile, your travel will likely be primarily for you (and your significant other) and may include your children and/or grandchildren. As you get older and can’t travel easily yourself, you might still provide a second travel goal to cover transportation of the kids and grandkids to come visit you.

8.Don’t count on too much from Social Security. We work with successful people of all ages. We think that long-term social security benefits may be subject in the future to some “means test,” perhaps the same way that Medicare Part B premium costs are tied to taxable income. The younger you are now and more financially successful you are in your life will likely reduce the amount of social security you will eventually receive. If you are not starting social security soon, consider using discounted values of future social security benefits in your planning.

9.Work to have a planning graph that doesn’t go “downhill.” Our financial goal plans show a graph of portfolio value over time, beginning now until your plan ends. If expenses and taxes exceed income and investment earnings in any year, then the portfolio declines. If that situation continues, then the graph looks as if it is heading “downhill.” A solid plan results in the graph moving uphill over time or at least staying level. A solid plan therefore reduces anxiety about longevity as, year by year, the portfolio value stays “solid” without diminishing.

Just like possible changes in social security, none of us can control our future health or when our plan will end. We can however, develop, monitor and maintain a long-term financial plan that will provide us with the best chances for financial success by recognizing the possibilities of longevity and incorporating it into all aspects of our planning. We can also adopt and/or confirm an objective to “Engage at Every Age” for our own well-being, as well as making a difference in other’s lives. If you have any questions, please give us a call.

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