Quarterly Newsletter

in this issue

Around the Harbor

Employee Spotlight

Living Well

Investing Well

Planning Well

Milestones

around the harbor

FROM THE EXECUTIVE TEAM

MATTHEW DAVIS, CEO • RYAN HENDRICKSON, PRESIDENT
HALLIE HICKS, COO • SAMUEL CHAMBERLAIN, EVP • BRUCE TOBIN, EVP

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Blandit cursus risus at ultrices mi tempus imperdiet nulla. Enim sit amet venenatis urna cursus eget nunc. Venenatis urna cursus eget nunc. Nibh venenatis cras sed felis eget velit aliquet sagittis. Elit ut aliquam purus sit amet luctus venenatis lectus magna. Phasellus faucibus scelerisque eleifend donec pretium vulputate sapien nec sagittis. Dictum varius duis at consectetur lorem. Tincidunt nunc pulvinar sapien et ligula ullamcorper malesuada proin libero. Semper feugiat nibh sed pulvinar proin gravida hendrerit lectus a. Tristique senectus et netus et malesuada fames ac turpis. Massa id neque aliquam vestibulum morbi blandit cursus risus. In cursus turpis massa tincidunt dui ut. Sed enim ut sem viverra aliquet. Est sit amet facilisis magna etiam tempor orci eu.

Etiam sit amet nisl purus in mollis nunc. Egestas sed tempus urna et pharetra pharetra massa massa ultricies. Nunc id cursus metus aliquam eleifend mi in. Orci ac auctor augue mauris. Nec feugiat nisl pretium fusce id velit. Odio euismod lacinia at quis risus sed vulputate odio ut. Sed ullamcorper morbi tincidunt ornare massa eget egestas purus viverra. Odio eu feugiat pretium nibh. Nunc non blandit massa enim nec dui nunc mattis. Sodales ut eu sem integer vitae. Platea dictumst quisque sagittis purus sit amet volutpat consequat mauris. Et malesuada fames ac turpis egestas. Volutpat commodo sed egestas egestas fringilla phasellus faucibus scelerisque eleifend. ♦

employee spotlight

KELSEY KAPULKA • CLIENT SERVICE COORDINATOR • joined Boston Harbor in 2021

What does a typical day look like for you?

I like to think of each day as unique rather than typical. In my role, I directly support our Executive Vice Presidents, Bruce Tobin and Sam Chamberlain. This includes managing their calendars, preparing materials for client meetings, assisting with meeting follow up, and facilitating our client onboarding process, among many other responsibilities. I am our client’s first point of contact, which allows me to build lasting and meaningful relationships, one of my favorite parts of my position. I manage day-to-day requests for those clients I work directly with, such as scheduling, money movement, and life updates.

Professional development is also essential to me, and I appreciate the learning opportunities that Boston Harbor Wealth Advisors offers. Each day presents a new chance to broaden my skillset, whether that’s learning a new technique from my colleagues or through other resources available to us. It’s rewarding to be surrounded by a team that supports each other and aims to improve constantly.

What was one of your favorite days at Boston Harbor Wealth Advisors?

One of my favorite days at Boston Harbor Wealth Advisors was when our team reached a turning point during the pandemic. I specifically remember when we began meeting with our clients in person after what seemed like an eternity of being apart from others, as I’m sure many can relate.

Although we were able to adapt and adjust to the ever-changing situation through various forms of technology, it was refreshing when we were able to meet with our clients again. Nothing compares to the personal connection of meeting face-to-face, and it was great to see our clients and make closer connections through conversations where we learned more about them and their families.  

When you’re not working, what activities do you like to do?

I enjoy spending quality time with my family and friends when I’m not at work. Whether we are staying in and catching up over a home-cooked meal or going to the beach to soak up the sun, I always savor our time together. Making lifelong memories with my loved ones is my favorite way to spend time outside the office!

What is a key initiative you are working on right now?

I am currently working on a key initiative for our team centered around continuous improvement, efficiency, and the commitment to excellence in customer service. I consider myself an innovative and curious person who enjoys looking for new solutions, especially when those solutions mean helping our clients navigate the complex wealth management industry. I am using this curiosity to create solutions and build new processes and procedures for our team, resulting in higher-quality and more effective services for our clients.

KK
What is something that people would be surprised to know about you?

Some love the ever-changing weather of New England, but my preference is to be surrounded by palm trees in the warm sun! I love exploring new places and learning about their cultures, especially in tropical climates. The world is far too big and beautiful not to travel when you have the chance.

Lastly, what are your keys to success?

I believe many factors that play into success. I think it’s imperative to prioritize communication and to be willing to learn new strategies. Effective communication builds a clear foundation of expectations and reduces turnover rates significantly in a workplace. I’m also a firm believer that there are no limits to success if you are willing to adapt and learn new skills. I thrive in an environment that is dedicated to learning, and I always try to be a trusted resource for our team and clients. ♦

Five habits of 401(k) millionaires

Although a million dollars may seem like a daunting figure, especially if you haven’t been diligent about saving, there’s good news: you don’t have to make $1 million to save $1 million

401k

Many individuals who are saving for retirement aim to have at least $1 million in their retirement accounts when they exit the workforce. But retirement savings aren’t a one-size-fits-all matter. Instead, the amount you’ll need depends on a variety of factors, including your lifestyle, specific financial obligations, future plans and health needs.

According to a recent study, the number of 401(k) plans with a balance of $1 million or more hit 180,000 in the first quarter of 2019, marking a 35% increase from the end of 2018. While the circumstances of these 401(k) participants may have varied on the margins, all were average workers who followed a handful of basic principles that enabled them to help successfully prepare for retirement. Below, we explore five of these principles, including how you can apply them to your financial plan.

Start Early

A powerful tool when it comes to saving for retirement, compound interest refers to the interest you gain on a loan or deposit. And the best way to take advantage of compounding is by saving and investing early on. In fact, a recent study showed that the average 401(k) millionaire started saving early and remained invested for at least 30 years.

As you may have read in some of our other pieces, compounding in positive markets – even at a modest rate of return – can allow you to increase an initial investment over a period of time.

Maximize your Contributions

In 2022, employees can contribute a maximum of $20,500 to their 401(k) accounts, not counting any potential employer match. Depending on your income, maxing out your contributions may be more challenging earlier in your career. However, studies have found that the average 401(k) millionaire contributed a minimum of 10% to 15% of their income year after year.

Make the Most of Your Employer’s Match

Many employers offer to match their employees’ 401(k) contributions up to a certain percentage, and failing to meet this match is like leaving “free money” on the table. Even if you’re not in a position to max out your 401(k) contributions, you should consider contributing the minimum amount necessary to earn your employer’s match.

Not convinced? According to one study, 28% of contributions in the average account of 401(k) millionaires came from their employers. Each year, employer contributions increased the average 401(k) millionaire’s savings by almost $4,600.

Choose the Right Asset Allocation

A 2000 study by economists Roger Ibbotson and Paul Kaplan found that asset allocation accounted for more than 90% of the variation in a portfolio’s return over time. If you’re a long-term investor, you know that asset allocation has been one of the most important determinants of your investment earnings over time.

Investing in growth-oriented investments can help significantly boost your retirement savings through the years. While this strategy may not be appropriate for everyone, research has shown that the average 401(k) millionaire invested roughly 75% of their portfolio in growth-oriented investments such as equity mutual funds.

Avoid Cashing Out Early

As most 401(k) millionaires know, staying the course and maximizing your earnings are crucial in helping meet your long-term retirement goals. You should resist the urge to cash out early even if you change jobs. Instead, consider rolling your current 401(k) balance into your new employer’s 401(k) plan or another option. Early withdrawals come with tax consequences and other penalties. It’s also best to avoid abandoning your investment strategy in turbulent market conditions. Many investors who cashed out in a market downturn missed part or all of the subsequent recovery.

Next Steps:

  • Assess your progress. If you haven’t checked your 401(k) balance in a while, now is a good time to do so. Understanding where you are can help you determine a sound strategy to attempt to reach $1 million in savings by retirement.
  • Revisit your investment strategy. Is your asset allocation consistent with your retirement savings goals? Your invest­ment mix should reflect your growth expectations and risk tolerance, as well as your time horizon until retirement.
  • Make necessary adjustments. Depending on how far you are from your retirement goals, you may need to increase your monthly contribution rate or adjust your investment mix. Working together, you and your financial advisor can navigate these decisions and help you work toward the retirement you envision. ♦

Sources: cnbc.comfidelity.com; Ibbotson, Roger G. and Kaplan, Paul D., Does Asset Allocation Policy Explain 40, 90, 100 Percent Of Performance? Financial Analysts Journal, Jan/Feb 2000, Vol. 56, No. 1. Available at SSRN: https://ssrn.com/abstract=279096

Investing involves risk and investors may incur a profit or a loss. Past performance may not be indicative of future results. Withdrawals from tax-deferred accounts may be subject to income taxes, and prior to age 59 ½ a 10% federal penalty tax may apply. Diversification and asset allocation do not ensure a profit or protect against a loss. Holding investments for the long term does not ensure a profitable outcome. The foregoing is not a recommendation to buy or sell any individual security or any combination of securities.

Investment Commentary

from our investment team

Introduction (from Larry Adam)

As Omicron subsided, there were smiles returning to the faces that are now mask-free. But as the unprovoked Russian invasion of Ukraine escalated, surging commodity prices pushed inflation even higher – with few consumers saying “it’s all right” as they eyed higher prices in stores and at gas stations. While we still hope that Russia will give peace a chance, we believe Western nations will continue to come together to punish Putin’s actions. But despite geopolitical hotspots, rising interest rates, higher commodity prices, and an uptick in volatility we still think there will be something in the way the economy and financial markets move in the months ahead.

 

Equities (From Nicholas Lacy)

Historically, the Fed has raised interest rates as a way to cut pricing pressures that could lead to higher inflation. In each instance in which the Fed raised rates in the last 40 years, inflation was moving to a higher point and unemployment was at, or below, the natural level of unemployment. On average, the unemployment rate has been 5.5% when the Fed started the rate hike cycle, with the 4.2% unemployment rate in 1999 being the lowest rate. When the Fed started raising rates in March of 2022, the unemployment rate was approximately 3.8% and below the 4.0% target the Fed set. The big difference in 2022 is the level of inflation which is the highest since 1982. How this impacts sector performance going forward compared to the past remains to be seen.

Sector performance varied from cycle to cycle but there were some constants. For example: most sectors were positive one and two years out from the first time the Fed started to hike the fed funds rate. The Information Technology, Energy and Industrials sectors have outperformed, on average, one year from the time the Fed starts hiking. At the same time, Communication Services, Consumer Discretionary and Consumer Staples have been the worst performing sectors. Many believe that financial stocks always perform well during rate hike cycles because banks benefit from higher rates. This may be true, yet historically other sectors have tended to perform better. The chart at the right shows the ranges of one-year returns from the point the Fed starts hiking rates as well as the average returns. Most sectors have seen at least one period of negative returns. Information Technology, Energy, and Health Care are exceptions.

Federal Reserve (From Scott Brown)

Historically, the Fed has raised interest rates as a way to cut pricing pressures that could lead to higher inflation. In each instance in which the Fed raised rates in the last 40 years, inflation was moving to a higher point and unemployment was at, or below, the natural level of unemployment. On average, the unemployment rate has been 5.5% when the Fed started the rate hike cycle, with the 4.2% unemployment rate in 1999 being the lowest rate. When the Fed started raising rates in March of 2022, the unemployment rate was approximately 3.8% and below the 4.0% target the Fed set. The big difference in 2022 is the level of inflation which is the highest since 1982. How this impacts sector performance going forward compared to the past remains to be seen.

Sector performance varied from cycle to cycle but there were some constants. For example: most sectors were positive one and two years out from the first time the Fed started to hike the fed funds rate. The Information Technology, Energy and Industrials sectors have outperformed, on average, one year from the time the Fed starts hiking. At the same time, Communication Services, Consumer Discretionary and Consumer Staples have been the worst performing sectors. Many believe that financial stocks always perform well during rate hike cycles because banks benefit from higher rates. This may be true, yet historically other sectors have tended to perform better. The chart at the right shows the ranges of one-year returns from the point the Fed starts hiking rates as well as the average returns. Most sectors have seen at least one period of negative returns. Information Technology, Energy, and Health Care are exceptions.

The Federal Reserve is firmly committed to achieving the goals that Congress has given it. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures. On March 16, the FOMC raised the federal funds target range by 25 basis points (to 0.25-0.50%) and signaled a more aggressive outlook on rate hikes into 2023. Of the 16 senior Fed officials, 12 anticipated raising the federal funds target range by an additional 150 basis points or more by the end of this year, and most expect another 75 basis points or so in 2023. However, none of this is written in stone. In his press conference following the FOMC meeting, Chair Powell admitted that, in hindsight, the Fed should have begun tightening policy sooner. Powell indicated that the FOMC could raise rates more quickly if appropriate. If inflation fails to moderate as the Fed anticipates, we could see much tighter monetary policy in the months ahead.

The oil shocks of the 1970s and early 1980s are associated with recession as well as higher inflation. While higher oil prices do not cause recessions, in the past, the Fed reacted to higher oil prices by raising interest rates and tighter monetary policy led to recession. Fed policymakers now know that the central bank should not respond to temporary supply shocks. However, because monetary policy affects the economy with a lag, there is a chance of overdoing it and raising rates too much, possibly leading to a recession in 2023, but the odds of that are still relatively low. In the early 1980s, the Volcker-led Fed purposely steered the economy into a recession to reduce inflation. A similar outcome may be possible in the current situation, but inflation was much higher in the early 1980s and long-term inflation expectations have remained well anchored.

Economy (From Scott Brown)

The US economy entered 2022 with good momentum. The outlook remains positive, but uncertainty has increased. Job growth has remained strong. Inflation has remained elevated, and price increases have further broadened across sectors. The Federal Reserve (Fed) has begun raising short-term interest rates and is now signaling a more aggressive outlook for rate increases in the quarters ahead, but will be nimble. Russia’s invasion of Ukraine has uncertain implications for the US economy, but will likely weigh against growth and add to inflation pressures in the near term.

Conclusion

Investor euphoria was quite high at the end of 2021, which has now resided substantially with the bumpy start to 2022. We continue too volatility in all segments of the market, but small surprises within geopolitical or economical data can quickly change the trend of the market. This is what makes a disciplined investment process and plan so important. As we move through this new phase within the economic cycle, it will be easy to become distracted by all the noise. Remember, every household has unique and different circumstances, which is why our financial planning process is created specifically to you. We continue to believe that remaining disciplined to the investment plan recommended to you is crucial to the success of your goals. If you feel uncertain as to what steps to take with your portfolio, consult with one of our financial advisors who will ensure you receive a truly customized financial plan that will make simplicity out of the complexity.  ♦

Raising smart spenders and savers

Key financial lessons to teach your children as they grow.

Talking to kids about money can be awkward, but it’s important. That’s the takeaway from a recent T. Rowe Price survey, which showed that parents consider topics like death and politics easier to discuss with kids than saving for a goal. A full 85% wanted to avoid the issue by signing their kid up for a personal finance course.

Though a class might help – and your advisor can be a valuable teacher’s aide – your kids are still taking their cues from you.

“Parents are the number one influence on their children’s financial behaviors,” Beth Kobliner, author of “Make Your Kid a Money Genius,” told Forbes. “It’s up to us to raise a generation of mindful consumers, investors, savers and givers.”

Here we offer essential financial lessons to teach your kids at each age and stage.

Ages 3-6

Don’t underestimate them – at 3, your kids can grasp basic financial concepts, and by age 7, they have already formed money habits, according to a Cambridge University study. Start with the basics, including the idea that you work to earn money in order to pay for what you want and need – and help your kids understand the difference.

Create a wants vs. needs collage: divide a sheet of paper in half and have your child cut and paste photos from magazines into the two categories.

Other money milestones mapped out by the experts at the Consumer Financial Protection Bureau include the ability to focus and persist through tasks. Saving for retirement takes large amounts of patience and self-control, so we might as well start teaching them early.

Recognizing tradeoffs is another important early milestone. Try thinking aloud when you’re grocery shopping about the amount of money you’re exchanging for a product, or have them help you compare the unit price of similar goods. Whether a trade involves money, treats or time, discuss with your child how every decision has consequences.

Around age 5, it’s important to give kids some cash to manage. A regular allowance allows them to start thinking in terms of financial tradeoffs, and you can offer them a three-part piggy bank (save, spend and share) so they begin to understand the different functions of money.

By age 6, your child should be able to focus on completing small chores to earn money and understand the value of different coins and bills well enough to sort and count them.

Ages 7-12

As your child grows, help them develop values such as empathy and gratitude. Knowing that some families live in poverty and need assistance is part of financial literacy. Using a site like Dollar Street that shows photos of different families around the world living on a variety of incomes can help. So can letting your child have a say in where the family’s charitable dollars will go.

It’s also a good idea to pass down family stories to the next generation – how your parents pitched in to help you build your business, your first big purchase, or how spending habits helped you weather the ups and downs of life. These tales can help them understand their place in the world and develop perspective on what has value in life.

These years are also a good time to have your child open a bank account, which can help them claim the identity as a “saver” and associate positive emotions with it. You should also help them track what they are earning in interest. “There’s nothing like receiving an interest payment (even if it is a few cents) in your name for the first time,” Asheesh Advani, CEO of Junior Achievement Worldwide, told Inc. magazine.

Ages 13-18+

Credit cards, investing, taxes: As your child becomes a young adult, it’s time to step up your game to help them with these complex topics and more. You can help them get started with the SIFMA Foundation’s annual Stock Market Game simulation, let them take control of buying their school supplies on a budget, or help them calculate credit card interest.

Before your teen racks up any credit card debt of their own, consider adding them as an authorized user on your card. Show them that interest accrues unless the balance is paid off – and that any late payment hurts your credit score.

Talk about which data sources can be trusted. Share how you vet financial decisions, and urge your teen to keep digging if what they’re being told doesn’t add up. For example, if your child is researching colleges, encourage them to do research beyond reading a school’s brochure.

Many successful people trace their money skills back to a formative moment: getting a job as a teen. There’s no better way to experience firsthand the effect of taxes, having a boss, being part of a team and managing your time to fit in schoolwork. A seasonal job during school holidays or a part-time gig could help your teen better grasp the working world – and how they picture themselves in it.

Finally, come up with a savings plan for long-term goals, like a car or college tuition. You can use a budgeting app (try Goalsetter or Mint) that helps them visualize their progress, keeps spending in check and gives them a sense of ownership and confidence in their future.

Start the conversation

Whether your kid is 7 or 17, they are ready to hear money talk from their parents and grandparents. After all, financial literacy is not just about dollars and cents. You’re really showing them how to think for themselves, develop values and make sound decisions. In the space of a few teachable moments, you can empower them to take control of their future – a worthy investment.

Sources: T. Rowe Price 2019 Parents, Kids & Money Survey; Forbes; Inc. magazine; CNBC Millionaire Survey; U.S. Consumer Financial Protection Bureau; Sallie Mae’s 2019 Majoring in Money report; mtmfec.org

milestones

our team’s latest accomplishments

Chris

Chris Bryant

 Chris recently completed his first 5k road race with his girlfriend, her friend, and his sister.  

Angela Casasanto

Angela’s two sons, Dominic and Luca made a donation to the Charlton police K9 program and made the paper/Facebook for it!

Kelsey Kapulka

Kelsey celebrated her Boston Harbor Wealth Advisors’ one-year anniversary on April 26th. We are so happy she joined the BHWA team.

Kelsey Kapulka

Kelsey celebrated her Boston Harbor Wealth Advisors’ one-year anniversary on April 26th. We are so happy she joined the BHWA team.