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Quarterly Letter – Fourth Quarter 2024

4th Quarter 2024 – Quarterly Letter [PDF]Download

INTRODUCTION

As we bid farewell to the first quarter of the 21stcentury, we stand at the crossroads of innovation and uncertainty, where the echoes of past challenges mingle with the whispers of future possibilities. In this letter, our CEO John Bird explores how perspectives of political events have shifted over time, challenging our understanding of economic decision-making. Our CIO Jason Ware remarks on the economics of 2024, setting the stage for an intriguing financial landscape in 2025.Then, Senior Wealth Advisor Anders Skagerberg, standing at the threshold of this new year with its opportunities and challenges, looks to turn your aspirations into achievable goals and navigate the evolving landscape of personal finance with confidence and clarity.

FROM JOHN BIRD’S DESK

While inauguration day is still several weeks away it’s clear President elect Trump is already having an impact on how we view policy and economics domestically and globally. Markets responded favorably to his propensity toward deregulation and lower taxes. Individual reactions to Trump’s statements vary wildly depending on preconceived notions of his policy and personal views of his character. This is normal. Yet for the better part of a century the field of economics treated human emotions as secondary. When and why did economics become a field viewing itself as distinct from politics specifically and the vagaries of the human condition writ large?

The study of political economy evolved in the sixteenth century as philosophers of the time worked to understand the interplay of government policy and household management. These early writers wanted to know how we as individuals made decisions and how
government policy choices impacted those decisions. Adam Smith is perhaps the best known visionary in this school of thought though there were several others influential at the time. An overriding thesis was the notion that allowing for individual incentives fostered greater creativity, effort, and wealth creation than dictates from on high.

Centuries later, toward the end of the eighteen hundreds physical sciences were expanding understanding of our natural world through the scientific method and increased use of mathematics. It was in this period that the term “economics” began to supplant “political economy” as the field worked to shift more toward mathematical modeling of economic decision making with less reliance on factoring in the human emotional element driving the course of our economic path.

In the twentieth century the study of economics was dominated by factors that could be quantified. Numbers ruled the roost. And this period gave us volumes of insights into the working of our economic system which continue to help guide policy and investment decisions today. Yet an awareness of the importance of human behavior in economics can scarcely be overstated. Many of us work to be logical in our decision-making. But when we pull the trigger, it is the emotion of the moment that compels us to act. As investors we ignore this reality at our peril.

The University of Michigan collects data on consumer sentiment based on political party and the insights are a striking example of how our worldview impacts our perceptions. The information highlights that when a democrat is elected to the oval office democratic consumer sentiment spikes upward while republican sentiment plummets. When a republican is elected the effect is inverted. These changes in sentiment are at best loosely correlated (and typically not correlated at all) to unemployment rates, income growth, interest rates or other quantifiable factors that impact aggregate financial well-being. Rather, it’s us as humans acting … human. Turns out how we feel about something has a big impact.

When we look at how we respond to various events – like elections – it’s clear that “political economy” is a better way of understanding our environment and our behaviors than economics alone. It’s also essential to note that while we may understand the why of the financial markets a bit better that doesn’t mean we should change our approach. We continue to invest in companies with competitive advantages that can be sustained for the foreseeable future. We continue to hold those companies regardless of the emotions of the moment. Sometimes in the face of emotional swings so common to our human condition our best course of action is to follow the advice of the white rabbit in Lewis Carrol’s Alice in Wonderland: “Don’t just do something, stand there.” As we enter 2025, we will keep the wise words of said rabbit in mind and keep a steady hand on the tiller of your investments. Thank you for your continued trust and confidence in the Albion team. We wish you a healthy and prosperous new year.

ECONOMY & MARKETS by Jason Ware

What a charmed time this has been for Wall Street! The economy and earnings are doing well. Inflation and interest rates are coming down. Shoppers are outshopping. The US dollar has rallied, and the incoming administration is assumed to be more business friendly. The stock market is in its happy place as evidenced by yet another +20% annual gain. As we close out the year, let us explore each.

The US economy is strong. The labor market is healthy, people are pending, we have a boom in technology capex(AI and Cloud), and there remains a sturdy pro-growth fiscal tailwind. Things look fine today (nothing in the data points to recession) and growth in the years ahead should be stronger than the decade pre-Covid … not by a lot, but better … on rising real incomes, sustained expansionary policies from the Beltway, strong spending and investment on infrastructure and technology, and enhanced productivity.

On prices, the 2021-23 inflation problem has been solved. Not in terms of price level, that’s not going back down (a good thing). But as it relates to price growth, we’re now far better off. While the Fed’s 2% target remains elusive, we are close. Our view holds (for a few reasons) that we can expect inflation roughly in the mid-2s … that 2% will be this cycle’s floor not its ceiling (like in the 2010s) … and that’s just fine. Anything under 3% should be constructive for the economy and financial markets.

Meanwhile, the Fed is now in an easing cycle with a goal to arrive at “neutral.” For those with better things to do than study magic numbers in economics, the neutral rate is essentially inflation plus what economists call “r-star” (r*)– a real rate of interest that’s said to balance the economy. Neutral policy is neither expansionary nor contractionary. Presently, we consider this level to be perhaps 3.5-4.0% (note: for its part, the Fed currently thinks it’s 3%). Meaning, if things go well, we can expect a couple more quarter-point cuts along this path. Now, it’s possible (probable?) this won’t go perfectly to plan without some hiccups, but it could. And if so, that’s conceptually the track forward.

Bond yields take their cues from this base rate math. If 3.5-4.0% represents neutral fed funds and a reasonable term premium for the 10-year Treasury is maybe 1.0% or so, then 4.5-5.0% would be structural equilibrium. On the investment grade corporate side, add about +0.75-1.0% in risk premium. Certainly, these things will move around based on factors like mood, geopolitics, prospects for growth, inflation, and government deficits, making real-time bond yields messier than this straight-forward theoretical exercise. Nevertheless, today is a pretty good time to lock in yields, where appropriate, for balanced accounts.

Over in equity land, unsurprisingly we remain long run bullish on US stocks. The American system endures as the most innovative, dynamic, nimble, and resourceful economy on the planet. The finest universities, brightest minds, and most cutting-edge companies all reside here, not to mention the deepest and most efficient capital markets around. Combined, this is what Buffett calls the “American tailwind” – a force the now 94-year-old sage still believes will propel us onward in the years and decades to come. We agree. Accordingly, our belief is that stock prices will continue to do what they’ve always done: track the general direction of workforce demographics, economic growth, innovation, and business profits, all of which move up over time taking with them the long-term oriented investor.

Speaking of corporate profits, the single biggest item that informs stock prices, they’re at record highs. It’s likely that the S&P 500 logged ~$240 in earnings-per share (EPS) in 2024. If the economy holds up (our base case) we could see ~$275 in 2025 and perhaps ~$300 in 2026! For perspective, EPS troughed at ~$138 during Covid and was ~$162 the year before the pandemic. US companies are quite skilled at making money. More importantly, our portfolio companies continue to shine on this front. We still skew positive for our outlook on corporate earnings. Naturally though, there are some warts. Notable is valuation as stocks aren’t cheap. However we don’t deem them as expensive as those who cite “24x”, CAPE, or whatever. Moreover, it depends on where one chooses to look. Are there expensive parts of the market? Absolutely. More attractive expanses? Totally. At the index level, the S&P 500 currently has a price-to-earnings ratio (P/E) of just over 24x 2024 EPS and 21x that of 2025. Again, not cheap, but not crazy either. It’s been higher at times, and P/E is a terrible timing tool (its best use is to gage expected returns over longer periods, like a decade) so we can’t glean much from these figures as to where the market goes short run. Resultantly, we judge valuation as OK especially if earnings are expanding, inflation is benign, and we’re in an easing cycle with sensible and stable(ish) long rates. Too, post-election, we believe that earnings over the next year or two might come in higher than existing estimates on the notion that less regulation, lower taxes, and increased buybacks could fuel even loftier figures. We’ll see.

Underneath the index level, technology, AI, and the ‘Mag 7’ do look richer relative to other areas, while most everything else is cheaper (S&P 500 is ~16x ex-tech). Spots like health care (and other “defensives”), industrials, REITs, small caps, mid-caps, international, all sport lower valuations – both on a relative and absolute basis. The practical application of this being that portfolio construction and investment tilts matter, while diversification is still the only “free lunch” when investing. If equities broaden out (in earnest) in 2025, it’ll be important to have suitable exposures while preserving deliberate tilts toward quality businesses in tech and growing consumer names. Adding up the puts and takes, we think it unlikely the S&P 500 will be driven by multiple expansion in the years to come. Rather, earnings growth may contribute the lion’s share of the return. But don’t let that get you down beat. If earnings compound at, say, +6-8% (utterly doable) while dividends and buybacks add another couple percent, then the S&P 500 as purely an “earnings growth and shareholder returns story” can be a good stock market indeed. Falling P/Es would be a head wind to this calculus, but for now that’s not our expectation.

As we look ahead to 2025 we are calling it “A Year of Three-Twos.” That is, a US economy firmly growing mid-2s; (core) US inflation settling into the mid-2s; and a Fed that maybe cuts 2 times. 222 … an “angel number” (let’s hope!). Of course, amid all these variables and moving parts we’ll continue to do our job as your investment manager in navigating the landscape for our companies / investments. Thanks for your continued trust in us, and Happy New Year!

PLANNERS CORNER by Anders Skagerberg

As we step into 2025, the planning team remains committed to guiding you to a lifetime of good decisions. 

The start of a new year is a chance to reflect, refocus, and take meaningful steps toward your financial goals. Whether you’re planning for a major milestone, fine-tuning your retirement plan, or simply looking to enhance your financial knowledge, we’re here to support you every step of the way.

Looking back, 2024 was a big year – markets were up, we had a presidential election, and so much more. As we look forward to the new year, no one knows for certain what it will hold, but we’re confident that with thoughtful planning and a focus on what truly matters, it can be a year of progress, opportunity, and positive change.

In this planner’s corner update, we will cover:

  1. How to Crush Your Financial Goals in 2025
    Practical tips and strategies to set meaningful goals, automate your success, and celebrate progress along the way.
  1. Key Updates for 2025
    A look at higher contribution limits, expanded gifting opportunities, Social Security adjustments, and new catch-up provisions for those nearing retirement. 
  1. What We’re Working on This Quarter
    An overview of our initiatives, from updating RMD calculations to integrating income and employer benefits changes into your financial plan.

Let’s make 2025 a year of financial progress and success. Together, we’ll navigate the opportunities and challenges ahead with confidence and clarity!

Next, How to Crush Your Financial Goals in 2025

As we kick off the new year, it’s the perfect moment to take a step back and think about what matters most to you—and how your finances can support that vision. 

Depending on your stage of life, your financial goals might be less about growing your wealth and more about maintaining it, simplifying your financial life, or finding ways to use your money to create lasting memories with those you love. 

Whatever your focus, the key is to make your goals clear and actionable.

Instead of aiming to “save more” or “spend less,” think about specifics. Maybe you want to fund a family trip, increase your charitable giving, or update your estate plan. Having a concrete goal gives you something to measure progress against—and makes it much easier to see the finish line.

Once you’ve clarified your goals, it’s time to focus on how to make them happen. One of the simplest ways to stay on track is to automate whenever possible. Automating your distributions, bill payments, or even charitable contributions ensures you’re consistent without having to think about it too much. Plus, it gives you more time and energy to focus on what really matters—whether that’s planning your next adventure, enjoying time with family, or pursuing a hobby you love.

Of course, flexibility is just as important as structure. Life has a way of throwing curveballs—unexpected expenses, changes in tax laws, or even an unexpected opportunity you want to pursue. Having some wiggle room in your financial plan can help you roll with the punches while staying on track. For some, that might mean keeping a healthy amount of cash on hand or simply revisiting their plan more regularly to make adjustments.

As you think about the year ahead, it’s also worth reflecting on the bigger picture. How does your financial plan fit into the legacy you’re building? Maybe it’s about leaving something meaningful for your loved ones or supporting causes you’re passionate about. Having a conversation with your family about your values, your estate plan, or even your charitable intentions can make all the difference in ensuring your vision is carried forward in the way you intend.

Finally, don’t forget to pause and appreciate the progress you’ve already made. Achieving your goals—big or small—is worth celebrating. 

Whether it’s checking off a bucket-list experience, reaching a financial milestone, or simply enjoying the peace of mind that comes with knowing you’re on track, these moments matter. They remind us that financial success isn’t just about the numbers; it’s about living the life you want and sharing it with the people you love.

Here’s to making 2025 a year full of progress, purpose, and the joy that comes from seeing your hard work pay off.

Next up, here are some key financial updates to be aware of for 2025.

Key Updates for 2025:
  • Higher Contribution Limits:

401(k)/Roth 401(k): Increased to $23,500, with a $7,500 catch-up for those aged 50+.

IRA/Roth IRA: Remains at $7,000 with an additional $1,000 catch-up if you’re 50+.

HSA: Increased to $4,300 for individuals and $8,550 for families, with a $1,000 catch-up for those aged 55+.

Qualified Charitable Distributions (QCDs): Increased to $108,000 for those over age 70.5. This can be a great way to support the charities you love while receiving valuable tax savings.

  • Social Security Benefits COLA Increase:

Social Security benefits will receive a 2.5% Cost-of-living increase for 2025.

  • Expanded Gifting Opportunities:

The annual gift tax exclusion has increased to $19,000, (up from $18,000) offering more opportunities for tax-efficient wealth transfers. This means that you can give $19,000 tax-free each year to any person. For a couple, that’s a combined $38,000 per year they can give to a single person.

  • NEW “Extra” Catch-Up Contributions for those age 60, 61, 62, and 63:

Larger catch-up contribution limits are now in place for those aged 60-63, making it easier to save more if you’re nearing retirement age. The limit is $11,250 instead of $7,500. This is a new change as of this year and is part of the Secure 2.0 Act passed in 2022.

  • Inherited IRA RMDs

If you inherited an IRA from someone other than your spouse after January 1, 2020, the SECURE Act introduced a 10-year rule requiring the account to be fully distributed by the end of the 10th year following the original owner’s death. For beneficiaries where the original account owner had already begun taking required minimum distributions (RMDs), the IRS requires annual RMDs in addition to the account being emptied by the end of the 10-year period.

However, due to clarifications and administrative challenges, the IRS waived the annual RMD requirement for 2020 through 2024. This means that even if you didn’t take any distributions during these years, you did not face penalties. Starting in 2025, the annual RMD requirement will resume, and beneficiaries must take these distributions or potentially face penalties. The 10-year deadline for fully depleting the account remains unchanged.

If you are interested in learning more about any of these updates or need additional clarification, as always, we are here to support you. 

Next up, here are some of the things we are working on this quarter as well as a few action items for you.

What We’re Working on This Quarter

The start of the year is always a busy time, and we’re focused on ensuring your financial plan is positioned for success. Here’s what the planning team is focused on:

  • Calculating Required Minimum Distributions (RMDs) for those who need them. For those who take monthly distributions to satisfy your RMD, we will be updating those amounts as well to reflect your new RMD for the year. 
  • Updating Payroll Information and Benefits: If you’ve had changes in pay or recently made benefits elections during open enrollment, we’re integrating those updates into your plan.
  • Annual Tax Packages: for those with taxable accounts (non-retirement accounts) you will be receiving your annual tax package that includes a summary of your portfolio income for 2024. Reminder: this is not a tax document, just a summary. Investment account tax documents will be available from custodians starting in mid-February.

Action Items for You:

  • If you’ve received a raise, send us your updated pay stub so we can adjust your financial plan accordingly.
  • If your employer has an open enrollment period, share your benefits details with us to ensure your elections align with your goals.

Of course, this list is just a glimpse of what we’re focusing on this quarter. As always, we’re here to handle the details so you can stay focused on what matters most.

Ultimately, we’re thrilled to kick off another year of partnering with you to make thoughtful, informed financial decisions. Here’s to a successful and prosperous 2025!

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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2024 Market Recap

Market Recap – 2024 [PDF]Download

2024 Recap:

Economy:

Even as growth slowed in Europe and China, the US economy remained strong in 2024. Unemployment is low and wage gains are solid, supporting continued growth in consumer spending. Regional Fed surveys suggest that domestic manufacturing is still in a slump, but services PMIs (representing the bulk of the US economy) are solidly in expansion territory. Fiscal policy continues to be an economic tailwind thanks to a 2024 federal budget deficit equal to nearly 7% of GDP according to CBO projections.

Inflation:

The disinflation trend continued in 2024, albeit at a slower pace than in 2023 when inflation fell rapidly from its mid-2022 peak. With one month of data (December) still to come, CPI inflation had fallen 60-70 basis points in 2024 to +2.7% (y/y) headline and +3.3% core, while PCE inflation was down a more modest 20-30 basis points to +2.4% (y/y) headline and +2.8% core. Progress on inflation appeared to stall in late 2024 as shelter costs showed early signs of reacceleration.

Monetary Policy:

The FOMC cut overnight interest rates at each of the last three meetings in 2024, by a total of 100 basis points (1%). Futures markets imply that one or two 25bp more cuts are likely to occur sometime in 2025, after a near term pause. The Fed’s updated Summary of Economic Projections (SEP) released at the December meeting also suggest a slower pace of rate cuts (2 instead of 4) in 2025 and a higher terminal rate (~3%) than was previously forecast by committee members.

Election:

After Donald Trump earned a second term as US president and the GOP took control of both houses of Congress, US stocks rallied on the prospect of lower corporate taxes and less regulation. Meanwhile, rates moved higher on the potential inflationary impact of tariffs and tight border controls, as well as concerns regarding future US federal budget deficits.

Bond Market:

Treasury yields moved higher for a 4th consecutive year, and the yield curve mostly reestablished an upward slope after a 2+ year period of inversion. Credit spreads gradually got tighter, reaching an all time tight of 74 basis points on the Bloomberg US Corporate Agg index shortly after the election. Mortgage rates for 30-year fixed were in the 6% to 7+% range all year, constraining transaction activity in the housing market.

Stock Market:

US stocks soared for a 2nd straight year, led once again by large cap technology companies. Financials also delivered strong returns, thanks in part to a steepening yield curve. Most other parts of the equity market posted smaller but still positive total returns, including cyclicals, defensives, small caps, and internationals.

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. S&P 500 earnings are on track for high single-digit y/y growth in 2024, with consensus calling for an acceleration to double-digit y/y growth in 2025.

Valuation

The S&P 500’s forward P/E of 22x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the mid single digits.

Interest Rates

After the “hawkish cut” at the December 2024 FOMC meeting, a near term pause on further rate cuts is likely, and the curve has mostly resumed its normal upward slope. Belly and long end rates in the 4% to 5% range may represent the “new normal” given solid economic growth, lingering inflation pressures, and large US fiscal deficits.

Inflation

After the disinflationary trend resumed in the summer of 2024, more recent inflation data has shown some renewed signs of stickiness. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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‘Tis the Season of Giving: How to Maximize the Impact of Your Gifts with Smart Financial Planning

As the year draws to a close, many people feel inspired to give back, whether to the causes they care about or to the people who mean the most to them. 

Whether you’re considering charitable donations or financial gifts for family members, understanding the financial implications of these gifts can make your generosity go further. 

Here’s a financial planning guide to charitable and family gifting to make this season even more impactful.

Giving to Charity

Charitable giving allows you to support the causes you’re passionate about, often with the added benefit of tax savings. Understanding specific strategies for charitable contributions can maximize your impact, ensuring more of your gift reaches the charity and less goes to taxes.

Tax Benefits: Understanding the Basics

Tax benefits for charitable donations are only available when donations are made to qualified organizations, such as 501(c)(3) nonprofits. Additionally, these benefits apply only if you itemize deductions rather than taking the standard deduction. Some people maximize tax savings through a “bunching” strategy, where they combine donations in one tax year to surpass the standard deduction threshold.

Qualified Charitable Distributions (QCDs)

Qualified Charitable Distributions (QCDs) offer an effective way for individuals 70½ or older to make charitable donations directly from their IRAs, potentially reducing taxable income. Here are the main considerations:

  • Eligibility: You don’t have to be taking required minimum distributions (RMDs) to use a QCD. As long as you’re 70½, you can make QCDs.
  • Limit for 2024: The QCD limit is $105,000 per individual, adjusted annually for inflation.
  • Reporting Requirements: The forms used to report IRA distributions don’t indicate if a QCD was made. To ensure this distribution is not taxed, communicate with your tax preparer and inform them of your QCD and the amount.

Donating Appreciated Stock

If you have stocks or other assets that have appreciated in value, donating them to charity can provide substantial tax savings:

  • Comparison: If you sell appreciated stock, you’ll owe capital gains tax before donating the proceeds, reducing the overall impact of your gift. Donating the stock itself avoids capital gains tax and provides a deduction based on the stock’s full market value.
  • Additional Benefit for Charities: Charities can sell the stock without any tax obligation, keeping the full value. This effectively removes taxes from the equation, maximizing funds for both you and the charity.
  • Use with Donor-Advised Funds (DAFs): Appreciated stock can also be contributed to a DAF, offering an immediate tax deduction while allowing you to decide which charities to support over time.

Donor-Advised Funds (DAFs)

DAFs allow you to contribute assets, claim an immediate tax deduction, and choose when and how to distribute funds to charities. This flexibility can be especially useful in years of unusually high income:

  • Tax Savings in High-Income Years: By contributing more to a DAF during high-income years, you can reduce the amount taxed in the highest bracket, often resulting in significant savings.

Giving to Family

In addition to supporting charities, many people choose to share financial gifts with family members. By planning these gifts carefully, you can help loved ones while minimizing tax implications.

Annual Gift Exclusion

The annual gift exclusion is a straightforward way to transfer wealth to family members without incurring gift tax. For 2024, you can give up to $18,000 per recipient, per year. Here’s how it works:

  • Gift Limit: Each individual can gift up to $18,000 per recipient annually without affecting their lifetime estate exemption. For instance, a couple could gift a combined $36,000 to each child without using any of their lifetime exemption.

Advanced Strategy: Annual Gifting through Irrevocable Trusts

For high-net-worth families, annual gifting can be elevated by establishing irrevocable trusts for grandchildren or other heirs. This strategy allows assets to grow over time on behalf of the beneficiaries while still taking advantage of the annual gift exclusion:

  • How It Works: By contributing the annual exclusion amount into an irrevocable trust each year, you can gift money that grows tax-free within the trust for the grandchild’s future needs, ensuring that the funds remain in the family’s financial plan.
  • Legal Considerations: To qualify the gift for the annual exclusion, specific rules must be followed to show that it’s a “present interest” gift. This often involves Crummey Powers, which give beneficiaries a temporary right to withdraw the funds, ensuring eligibility under IRS guidelines.
  • Importance of Expert Guidance: This strategy is complex and requires precision. An estate attorney can guide you through the rules, explain Crummey Powers, and ensure the trust meets legal standards for tax purposes.

Lifetime Exemption and Gift Tax Considerations

For gifts that exceed the annual exclusion, the excess amount counts toward the lifetime estate and gift tax exemption, which is $13.61 million per individual ($27.22 million per couple) in 2024. However, this amount is set to change:

  • Upcoming Reduction: Under the Tax Cuts and Jobs Act (TCJA), the lifetime exemption is scheduled to revert to around $6 million per individual when (or if) the act sunsets in 2026. Staying informed of these changes can help guide your long-term estate and gifting strategies.

Direct Payments for Medical or Education Expenses

There is an exception to gift tax rules for direct payments made to healthcare providers or educational institutions:

  • How It Works: Payments made directly to cover medical or educational expenses don’t count toward your annual gift exclusion or lifetime exemption.
  • Important Caveat: To qualify for this exemption, payments must be made directly to the provider or institution. If you give the money to a family member to pay the expenses, it will count toward the annual exclusion.

Gifting to 529 Plans

Helping a family member with future education costs is a meaningful way to support their goals. 529 college savings plans grow tax-free when used for qualified educational expenses.

  • Gift Acceleration: You can front-load 529 plan contributions by making five years’ worth of gifts at once—up to $180,000 for a couple—without using your lifetime exemption. However, only the account owner is eligible for any state tax benefits associated with contributions, so it may make sense to let the primary contributor (often a parent or grandparent) own the account.

The Importance of Planning Your Giving

Whether you’re supporting a meaningful cause, helping family members, or both, strategic planning can enhance your impact and ensure your gifts align with your financial objectives. The holiday season provides a perfect opportunity to reflect on these goals, making the most of your giving today and for future generations.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Conference Call Recording – November 12, 2024

Conference Call – Recorded November 12, 2024

In Albion’s November 2024 Conference Call, our panelists discussed the following topics:

  • Essential Year-End Planning Items
  • Macro-Economic Report
  • Wage Growth Relative to Inflation
  • Tariffs
  • Interest Rates & The Fed’s Posture
  • Mortgage Rates & Treasury Yields
  • Market Valuations
  • Mergers & Acquisitions and Initial Public Offerings in 2025
  • Stock Market Risks
  • Money Market and Cash Equivalent Yields
  • Geopolitical Concerns and Global Markets
  • AI Investments and Albion’s NVIDIA Acquisition
  • US Government Deficit
  • AI Infrastructure & Renewable Energy

Stream or download the audio recording of the call by clicking on this link.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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From Shirtsleeves to Success: Ensuring a Lasting Financial Legacy

Executive Summary: 

  • Creating a lasting financial legacy involves more than just wealth; it requires instilling values, open communication, and comprehensive planning to avoid the common “shirtsleeves to shirtsleeves in three generations” cycle.
  • Key strategies include early and frequent communication, recognizing that a legacy is more than money, establishing a robust estate plan, educating the next generation on financial literacy, and empowering rather than entitling heirs.
  • By focusing on these areas, families can ensure their wealth continues to benefit future generations while preserving the values that matter most.

After securing your own financial success, it’s natural to look to the next generation and consider the financial legacy you will leave behind.

And for most, that financial legacy is more than just money; it’s the impact they have, the opportunities they create, and the values they instill. 

But, unfortunately, while many hope their legacy and wealth will provide lasting benefits for generations to come, that’s rarely the case, writes Courtney Pullen, author of Intentional Wealth: How Families Build Legacies of Stewardship and Financial Health. Instead, Pullen writes that roughly 90% of affluent families lose their wealth by the end of the third generation—a phenomenon referred to as going from “shirtsleeves to shirtsleeves in three generations.” 

In his book, he attempts to answer the critical question: What are the other 10% doing? And more importantly, how can you apply this to your family? To that end, here are five essential strategies to prevent the shirtsleeves to shirtsleeves in three generations cycle that plagues many wealthy families.

Strategy #1: Communicate Early and Often

Communication is key, especially when it comes to your financial legacy.

Through open, honest, and clear communication, you can create an environment of understanding, clear expectations, and continuity between generations. Alternatively, without it, you can end up with confusion, unclear or unmet expectations, and worst of all, family members fighting amongst themselves over who gets what. 

But, as Pullen writes, good communication doesn’t mean you discuss everything and of course, no family is going to be perfect, but successful families practice what he calls skillful communication. That is: they talk about the issues that need to be talked about and they do so without putting each other down. 

To highlight the importance of communication, Pullen uses the example of The Mitchells, a couple in their 60s who owned a successful manufacturing business and consulted Pullen over concerns about their son. Ultimately, Pullen discovered that their son, who had started his own manufacturing business but was running it into bankruptcy, “hated the business”, but was in it because he felt it was “the only way to get his parent’s approval.” 

But, when Pullen discussed this with his parents, they replied, “We don’t care what business he’s in as long as he’s happy. In fact, we’d just as soon he tried some other field that’s less risky.” Ultimately, this knowledge led their son to sell his business, go back to school for an advanced degree in history, and pursue a rewarding career as a professor at a community college. 

Pullen goes on to explain that he’s seen many similar situations when working with wealthy families, especially when there’s a family-owned business involved, and often, he can trace the roots of these long-term challenges back to failed communication.  

To avoid this, here are some practical tips to consider:

Practical Tips:

  • Schedule Regular Family Meetings: Set up regular family meetings to discuss the family’s financial situation, goals, and plans. These meetings can be a platform for educating younger family members and addressing any concerns.
  • Encourage Questions: Foster an environment where family members feel comfortable asking questions and seeking clarity on financial matters. This builds their confidence and understanding over time.
  • Involve Multiple Generations in Planning: Include younger generations in financial discussions and legacy planning. This not only educates them about financial management but also ensures that they understand the values and intentions behind the legacy, leading to better stewardship in the future.

Strategy #2: Realize That Your Financial Legacy Is More Than Money

Next, it’s important to keep in mind that a financial legacy isn’t just about passing on money; it’s about passing on the core values and ethics that will guide how that money and opportunity are used. In other words, it’s about passing on what your family stands for.

But, before you can do that, families must first identify what they stand for.

And the beauty of this is that there is no one-size-fits-all for every family, every generation, or every individual. So, Pullen recommends that families first work to establish what is important to them and create their own family culture by defining their core values. 

Some examples of core values could include:

  • Intentionality: Making deliberate and thoughtful decisions about how wealth is managed and utilized.
  • Work Ethic: Valuing hard work and dedication as key components to sustaining and growing wealth.
  • Responsibility: Understanding the importance of stewardship and being accountable for financial decisions. 
  • Humility: Recognizing that wealth is a tool, not a measure of self-worth, and staying grounded in one’s values.
  • Philanthropy: Committing to using wealth to give back to the community and support causes that align with family values.

One of my favorite lines in Pullen’s book comes from a “second-generation owner of a flourishing family business” who said that one of their core family values is: “We don’t go around acting like rich folks.” To their family, being humble with their wealth was critical to their family identity.

Again, these are just examples, and it’s up to each family to identify the core values that are important to them to ensure they are part of their legacy. At the end of the day, the most lasting financial legacies are those that carry forward the values and beliefs that make your family unique, making sure that the money isn’t just preserved, but used in ways that matter to everyone involved.

Strategy #3: Establish a Comprehensive Estate Plan

Next, one of the most effective ways to preserve wealth across generations is with a well-structured estate plan. 

Done right, a comprehensive estate plan ensures your assets flow directly to who you want, when you want, according to your exact wishes. Alternatively, failing to create a comprehensive estate plan can lead to confusion, assets being distributed based on what the court decides, and even disagreements among family members about what your wishes may have been. 

Estate planning tools like wills, trusts, and powers of attorney are critical elements of your estate plan. These documents allow you to get very specific about who gets what, when they receive it, and any potential requirements or conditions they must meet to become eligible for an inheritance. 

Of course, the details of each plan will vary based on the specific circumstances of each family and their overall goals and desires with wealth, but the point is that these documents are the best way to ensure your wishes are carried out and avoid any confusion about how you want your wealth to be transferred to the next generation.

Practical Tips:

  • Professional Guidance: Work with a financial advisor and estate attorney to create or update your estate plan. These professionals can help you navigate the complexities of estate planning and ensure that your plan is tailored to your specific needs and goals.
  • Regular Reviews: Regularly review and adjust your estate plan as circumstances change, such as the birth of new family members, marriage or divorce, or shifts in financial goals. A good rule of thumb to consider is that if you’ve had a birthday that ends in a 5 or a 0, it’s a good time to review and potentially update your estate plan as needed. 
  • Discuss your Plan: Lastly, going back to the importance of communication – consider discussing your estate plan with the next generation. Of course, this doesn’t mean you need to share the details of who gets what or how much they get, but rather, this is an opportunity to explain why you’ve structured things the way you have, who will be in key roles, and any important decisions you’ve made. This can help avoid any confusion or conflicts down the line and ensure that your wishes are understood and respected.

By proactively establishing a comprehensive estate plan and regularly reviewing it, you can ensure your wealth is preserved and transferred according to your wishes, minimizing the risk of confusion or conflict among your heirs.

Strategy #4: Educate the Next Generation on Financial Literacy

Even with the best estate plan, generation wealth will not last if the next generation lacks the knowledge and skills to manage it effectively. That’s why financial literacy is a critical component of preserving and growing wealth across generations.

The Role of Education

Providing your heirs with a strong foundation in financial literacy equips them to make informed decisions and avoid common financial pitfalls. This education should go beyond the basics of saving and investing; it should include an understanding of the family’s financial goals, the responsibilities that come with wealth, and the tools available to manage it effectively.

For many affluent families, this expertise can be enhanced with the help of trusted financial professionals, like financial advisors, accountants, and attorneys. That said, it’s essential that each family member still have a baseline level of financial education, even if they work with trusted professionals. This ensures that they have the knowledge and skills to oversee their team of professionals and ensure their wealth is positioned to last for many generations to come. 

Practical Tips:

  • Formal Education: Consider providing formal financial education for your heirs, whether through courses, workshops, or seminars. This can help them build a solid understanding of financial concepts and strategies.
  • Practical Experience: Encourage your heirs to gain practical experience by managing smaller family funds, engaging in philanthropic activities, or overseeing specific investments. This hands-on experience can be invaluable in building their financial acumen.

By equipping the next generation with financial literacy and practical experience, you empower them to make informed decisions and maintain the family’s wealth for generations to come.

Strategy #5: Empower, Don’t Entitle

Last but not least, it’s critical to take steps to empower the next generation, not entitle them.

One of the interesting points that Pullen makes in his book is that it’s no surprise so many affluent families end up with an entitlement problem. In fact, he points out that entitlement is a pretty normal part of being human as he writes: “No matter what comforts, indulgences, or rewards we get, or whatever lifestyle we become accustomed to, it doesn’t take long for us to start assuming we’re entitled to that lifestyle and have a right to keep it.” 

The challenge is that those in affluent families typically don’t come up against many of the common financial limitations that others face as Pullen writes “money dissolves many limits.” As a result, Pullen explains that it’s common for kids in affluent families to grow up thinking things like: 

  • “I deserve it and I should have it.”
  • “I should always get everything I want.”
  • “My needs and wants should always come first.”

So how can you avoid this? Fortunately, Pullen highlights five key factors that successful families incorporate to shift from entitlement to empowerment:

  1. Be intentional: Accept the responsibility and advantages of wealth and create an intentional plan for how you will use your wealth.
  2. Focus on future generations: Educate the next generation on financial literacy. 
  3. Communicate Openly: Again, successful families talk about the issues that need to be talked about and do so without putting each other down.
  4. Create a family identity: Remember that financial legacy is more than just wealth and spend time discussing the core values that will make up your family identity. 
  5. Redefine success: Lastly, keep in mind that “success” will look different for each generation. For example, success for the first generation is often defined by the businesses they’ve built or the wealth they have created. But, for second and third generations, success could mean ensuring that the wealth is managed effectively and each member of the family is realizing their full potential. 

By focusing on intentionality, education, open communication, and a strong family identity, you can shift from entitlement to empowerment, ensuring that each generation is prepared to uphold and build upon the family legacy.

Conclusion: How to Build a Legacy That Lasts

In the end, creating a lasting financial legacy requires more than just accumulating wealth; it involves careful planning, open communication, and a commitment to instilling values and educating the next generation. By taking these steps, you can help ensure that your wealth not only endures but also continues to benefit your family for generations to come. 

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Third Quarter 2024 – Quarterly Letter

3rd Quarter 2024 – Quarterly Letter [PDF]Download

Introduction

As the leaves change color and fall, John Bird, our CEO, reflects on past lessons while eyeing the future. Then CIO Jason Ware notes the signs of post-pandemic normalization emerging, though challenges persist in fiscal policy and market uniformity. As investors navigate this evolving landscape, Financial Planner Anders Skagerberg describes practical measures that can safeguard financial identities. This autumn as nature changes, investors must be vigilant and adaptable in a dynamic financial ecosystem.

Beyond these informative articles, read through to the Community Update for information about our final Conference Call of the year and to meet the newest members of our growing team.

From John Bird’s Desk

When we started Albion in 1982, the era of the “Nifty Fifty” had drawn to a close and much ink was spilt describing their rise and…the several following years when they were just average. For those of you who may not have experienced it, the Nifty Fifty was a moniker for a group of large and fast-growing companies in the1960’s and into the 1970’s. Names included General Electric, IBM, Sears Roebuck, Xerox, Proctor and Gamble, and Coca-Cola. Many investors considered them one decision stocks – companies you could buy and own forever. Investors bought them by the truck load. By the end of 1972 the group as a whole had a price-earnings ratio of 43 while the S&P 500 as a whole had a ratio of 18. For those who are unfamiliar with a price-earnings ratio (PE ratio or just “PE”) it is the price you pay for a dollar of corporate earnings. A PE of 18 means you pay $18 for a dollar of corporate earnings while a PE of 43 means you pay $43 for a dollar of corporate earnings.

All things being equal we’d rather pay less for a dollar of corporate earnings. However rarely are things equal. In the five years leading up to the end of 1972 the Nifty Fifty stocks had as a group averaged 22% annual earnings growth (compared to 4% for the S&P 500) and 30% earnings growth in 1972 alone (13% for the S&P 500). Investors were willing to pay up for growth they expected to continue well into the future.

Alas parties all must eventually end. By 2001 only one Nifty Fifty company – Walmart – had continued to outperform the S&P 500. Another item of note is how the composition of the stock market has changed over time. The following graph shows market sectors from 1807 through 2017.

There are several takeaways from this including the observation that the best performing sector in the future may not yet exist. It’s also worth noting that none of the sectors wholly disappeared. In fact all sectors continued to grow. For most sectors their representation on the graph shrunk because they grew far slower than other sectors and thus represent a smaller percentage of the overall economy.

This graph shows the evolution off the 12 sectors that make up the American economy over the past 200 years. The graph illustrates the capitalization of each sector based upon stocks included in the U.S. Stocks Database.

These days we hear about the magnificent seven – seven companies that have grown far faster than the S&P 500. We note that in 2023 these magnificent seven delivered as a group 101% returns while the equal weighted S&P 500 index delivered 2.5%. Meaning the average stock in the S&P 500 returned 2.5%. There is logic to this. The hardware, software, energy and intellectual property investment required to make Artificial Intelligence and Large Language Models favors those companies with the ability to raise enormous amounts of capital and effectively put that capital to work. The magnificent seven have those resources.

Note that this concentration – where a handful of companies have an outsized influence on market index returns – has a precedent. The following graph shows the weight of the ten largest stocks in the S&P 500 – currently around 32%. While high it’s not record setting. Prior to 1973 the Nifty Fifty had more concentration in the top ten companies than we see today.

The weight of the 10 largest S&P 500 stocks is now 33.1% of the total $SPX, the highest level in almost 5 decades.

It’s weak comfort knowing concentration among a few names has been greater in the past than it is today given that following peak concentration the Nifty Fifty trailed the broader market. We are well aware of this. We are also aware of the reality that much of technology today requires vast investments to remain at the leading edge and the companies that have so far succeeded in staying out front have a significant advantage. The depth and breadth of their existing capacity and the free cash flow they generate gives them the position and the resources to reinvest and stay in the drivers seat.

We will ride our winners, trim them from time to time to avoid being over exposed, and carefully study market dynamics to increase the odds that we will have even further reduced our exposure to highfliers before they fly too close to the sun. Because there is no such thing as a one decision stock.

Economy & Markets by Jason Ware

For over three years in these pages (and elsewhere) we’ve spoke of “normalization” both economic and social. Normalization is the process of, well, getting back to normal. Across so many areas – GDP growth, consumer spending (the how and how much), supply chains, inflation, jobs, corporate earnings, oh, and the vaccines that gave us our lives back – this has happened. Now it’s interest rates. With the Fed’s -0.50% “jumbo cut” on September 18th a new easing cycle is underway. And with it, an oxymoronic feeling that perhaps somehow we’re now reaching … er … “peak normalization.” Wait, is that possible? Can that even be a thing? We’ll leave that philosophical question for another day. What seems quite clear is that there are few major chiropractic adjustments left on the post-pandemic economy. Normal is good, yet there are other areas where stuff is out of whack. The big ones being a more uniform equity market and fiscal policy. More on these in a moment. For now, let us review where things currently stand.

Our economic outlook has been uncharacteristically cautious for several quarters. A host of troubling leading indicators, Volcker-esque Fed tightening, shrinking money supply, a massive inflation surge, and downbeat consumer attitudes informed this view. Recession risks were high, have since diminished, but remain elevated. Through it all the US economy has stayed on a growth course, running a gauntlet that would make Churchill proud (“if you’re going through hell, keep going”). Total output (GDP) paced at roughly +2.25% in the first half of the year and is presently running about +3% for the third quarter. This stride may slow as we exit the year, though probably not to recessionary levels. The expansionary impact of large fiscal spending, abundant real wage growth, impressive business profits, and colossal capital formation (i.e., spending and investment) on AI has offset headwinds. As we opined in our last quarterly epistle, it’s a “growth at all costs” backdrop paired with an animal spirits redux in technology driving the business cycle. The fabled “soft landing” is possible; we all hope it occurs.


On the inflation front, an area of focus since 2022 and one where we’ve consistently offered an out of consensus sanguine view (don’t fret, it’ll sort itself out), it seems that Jerome Powell finally feels content giving the nod that it’s successfully been whipped. “WIN” buttons back into the drawer! To be fair, when assessing all manner of inflation details swirling about it is sensible to conclude that price stability has been achieved and underlying pressures have quieted. Still we reason that structural inflation falling much further is unlikely. Prior to the pandemic core inflation reliably ran at 1-2%. For many reasons, today and over the next few years it’ll probably run between 2-3%. Framed another way, from 2008-2021 the Fed’s 2% target was a ceiling; in the 2020s it will probably be a floor. This isn’t a bad thing. The economy and financial markets can do well in a 2-3% inflation regime.


Speaking of financial markets, US stocks continue apace. It’s been a fruitful year. One item that has changed since our last letter, albeit it’s early days, is the character of those returns. It’s no secret that a small group of lopsided winners account for the lion’s share of gains in this bull market. It’s been a “skinny bull” as we’ve coined it, but that might be shifting. The third quarter was the first time in the contemporary bull run where growth stocks, especially of the mega cap variety, did not lead the way. Instead, other areas like value, cyclicals, defensives, and small caps (eureka!) logged superior advances when compared to their big siblings. At last, Nvidia and AI wasn’t the only story worth discussing. On Wall Street it’s said that “trees don’t grow to the sky.” Translation: nothing lasts forever, future returns get pulled forward, analysts catch up to the story, and lofty expectations become harder to beat. The notion of a resilient economy coupled with Fed rate cuts is just what the doctor ordered for other parts of the equity market that aren’t the “Mag 7.” Finally, it’s been the “493’s” (500 S&P stocks minus 7) day in the sun as participation broadens out. This is a positive development for both your well diversified portfolio and the overall health of the bull market. To be clear, we expect good results from the mega cap stocks going forward. A more uniform market doesn’t have to mean they falter. Rather, we suppose a truly rising tide can lift more boats and the once yawning performance gap enjoyed by the few will better include the many. Stay tuned.


OK, “big fiscal” was cited as the other area that has evaded normalization’s grasp. Out of respect for our collective blood pressure we’ll skip the details. Deficits continue to run at ~6% of GDP, a high spot outside of war, crisis, or economic slump. Full employment and giant deficits are, historically speaking, strange bedfellows. What’s more, interest costs are now larger than total military spending. Just about everyone (including your humble wealth manager) agrees something must be done while simultaneously acknowledging the discouraging political realities in the Beltway. Forecasts from CBO, GAO, and professional economists alike aren’t uplifting. Sigh. But it isn’t all dire. Interest expense aside, much of the current outsized spending is flowing to productive uses, like the
first true “US industrial policy” in decades. We’re investing in our future and putting money to work on our own soil bestowing an assortment of longer run economic and national security benefits.


Bigger picture, the American system endures as the most innovative, dynamic, nimble, and resourceful economy on the planet. The finest universities, brightest minds, and most cutting-edge companies all reside here, not to mention the deepest and most efficient capital markets around. Combined, this is what Buffett calls the “American tailwind” – a force the now 94-year-old sage still believes will propel us onward in the generations to come. We concur. Although improved fiscal restraint is needed, an exercise with observable levers we can pull, forecasting any such fiscal normalization is difficult (too grand an ask for this author). Importantly, the path between here and there doesn’t have to be, and shouldn’t be, calamitous. And so our belief is that stock prices will continue to do what they’ve always done – track the general path of labor force demographics, economic growth, and business profits, all of which move up over time taking with them the enterprising long-term oriented investor.

Thanks for your continued trust in us.

Planners Corner by Anders Skagerberg

Should You Freeze Your Credit? A Simple Guide to Protecting Your Identity and Your Wealth

At a time when data breaches feel common, it’s natural to wonder if there’s anything you should do to protect your personal information and your hard-earned wealth. If you’ve ever heard about freezing your credit, you’re not alone—many people are asking whether it’s a good idea, especially with the recent data breach that may have included the personal records (names, addresses, Social Security numbers, and more) of up to 2.9 billion people.


So, if you’re wondering whether you should freeze your credit or not, read on to decide if it’s the right move for you.

But First, What Does Freezing Your Credit Mean?


Freezing your credit means putting a lock on your credit reports.

This stops identity thieves from opening new accounts in your name because creditors can’t check your credit report unless you “unfreeze” it. It’s like putting a padlock on a file—someone might try to access it, but unless they have the key, they won’t succeed.

Next, here are some of the key benefits to consider when freezing your credit:

The Upsides of Freezing Your Credit

  1. A Strong Defense Against Fraud: If your credit is frozen, thieves can’t open new credit lines, loans, or credit cards under your name.
  2. Peace of Mind: Knowing your credit is locked up can help you sleep better at night, especially if you’re already concerned about your financial security.
  3. No Harm to Your Credit Score: Freezing your credit doesn’t affect your score, so it’s a no-strings-attached way to add a layer of protection.
  4. Easy and Free: It’s free to freeze and unfreeze your credit with all three major bureaus—Equifax, Experian, and TransUnion. And doing so is relatively simple and can be done online.

While freezing your credit offers a solid defense against fraud, peace of mind without harming your score, and is both easy and free, it’s important to consider the potential downsides.

The Downsides of Freezing Your Credit

  1. A Bit of a Hassle: If you’re planning on taking out a loan, mortgage, or even a new credit card, you’ll need to lift the freeze temporarily. It’s not hard, but it is one more thing to think about.
  2. Can Slow Down Some Transactions: Some things like getting utilities set up may require a credit check, so you’ll need to remember to unfreeze your credit for those too.
  3. Not a Cure-All: A credit freeze doesn’t stop all types of identity theft. It’s great for blocking new lines of credit but won’t protect you from other issues like tax fraud or someone getting into your existing
    accounts.

So, while freezing your credit is a proactive step to protect against identity theft, it can be somewhat inconvenient, may slow down certain transactions, and does not guard against all forms of fraud.

So, Should You Freeze Your Credit?


Ultimately, whether or not you should freeze your credit depends on your financial situation, your personal risk tolerance, and whether or not you’ve been involved in a security breach. Here are some questions to consider:

Have you been involved in a security breach?


If Not: Freezing your credit may not be a top priority. That said, even if you aren’t aware of a security breach involving your personal information, that doesn’t mean it hasn’t happened.


If Yes: Freezing your credit can be a great step to help protect you from identity thieves.


Are You Applying for New Credit?


If Not: Freezing your credit might be a smart move, especially if you don’t foresee needing a new loan or credit card anytime soon.


If Yes: You’ll want to consider the hassle factor, especially if you’re in the middle of a major financial move like buying a new home.


What Other Protections Do You Have?


If you already have identity theft insurance or monitoring (or both) then freezing your credit can either be a great addition to your existing protection, or, you may decide it’s unnecessary, depending on your situation.


How Much Protection Do You Want?


Just like investing, everyone has a different comfort level with risk. That comfort level will guide your decision on whether to freeze your credit. But unlike investing, there’s really no advantage to taking extra risk by leaving your credit unlocked. Since freezing your credit is simple and comes with no downside, it’s often a smart move to just take the time and lock things down for peace of mind.


Part of a Bigger Picture


At Albion Financial Group, we believe that making smart decisions over time is key to securing your financial future. Freezing your credit can be one of those good decisions, but it should fit into a broader plan that includes monitoring your accounts, maintaining solid cybersecurity habits, and keeping tabs on your bigger financial picture, either on your own, or with the help of a trusted advisor.

Now, if you’ve decided that freezing your credit is the right choice, here’s what you need to do:

Meet the Three Major Credit Bureaus

When you decide to freeze your credit, you’ll need to do it with the three main credit bureaus:

  1. Equifax: One of the oldest and most recognized credit reporting agencies. Freezing your credit with Equifax is simple and can be done online.
  2. Experian: Known for their credit monitoring services, Experian also allows easy credit freezes. Their website walks you through the process stepby-step.
  3. TransUnion: Like the others, TransUnion’s freeze can be done quickly online.

Once you’ve got your credit freezes in place, just remember that you’ll need to unfreeze your credit when applying for any new loans, and then you can always refreeze it when you’re finished.


Important note: Freezing your credit with just one or two bureaus won’t fully protect you, as lenders can check any of the three major bureaus when reviewing credit applications. For complete protection, you should freeze your credit with all three agencies. In addition, while smaller agencies like Innovis, ChexSystems, and NCTUE may also hold some of your information, the majority of credit applications are processed through the three main bureaus, so freezing your credit with them will cover most scenarios.


Wrapping It All Up


In the end, deciding whether to freeze your credit is like deciding whether to put extra locks on your doors. It’s not necessary for everyone, but for those who want that extra peace of mind—especially with the recent data breach—it can be a wise choice.

ALBION COMMUNITY UPDATE



Conference Call: Scheduled for Tuesday, November 12th at 10 AM MT. Our expert panelists from the Advisor and Investment teams will discuss key issues and provide insights on the current economic and market landscape.


We highly value these moments to connect and share ideas with you. We encourage your participation and welcome any questions you may have—either live during the call or in advance by sending us an email. A recording
of the call will be available on our blog and YouTube channel afterwards, and a copy will be emailed to you. We hope you can join us. www.albionfinancial.com/events


New Faces

We are delighted to announce that Briana Mofhitz-Faieta and Leticia Chetty have both joined the firm as Associate Wealth Advisors. Both of them will be working closely with Liz Bernhard and Patrick Lundergan.


Briana is an alumna of the University of Oregon, while Leticia has degrees from both Brigham Young University – Hawaii and from Utah Valley University.


Also joining the Albion family, as a Financial Planner, is Heath Heavy. Heath is a graduate of Western Michigan University (Go Broncos!) and is a CFP®.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Transferring Wealth: The Pros and Cons of Giving While You’re Alive vs After You’re Gone

Executive Summary

  • When transferring wealth, there are pros and cons to giving while you’re alive versus after you’ve passed.
  • For starters, transferring wealth after death ensures control during your lifetime and potential tax benefits after death, but may come too late to be truly impactful for your heirs.
  • Alternatively, gifting wealth during your lifetime allows you to see the positive effects and provides immediate support for your beneficiaries but could risk your financial security and possibly create financial dependence.
  • In the end, balancing these approaches involves considering tax implications, family dynamics, and your own financial security.

When it comes to transferring wealth, the default approach for most is to pass along an inheritance after you die, or give with a “cold hand.” And this makes sense in many ways, not only because of the tax benefits involved (your heirs can receive a favorable “step-up” in cost basis for certain assets) but also because it ensures that you still have access to your wealth while you’re alive—a key concern for many as people are living longer and medical costs are rising.

However, some financial experts argue that inheritances often come too late to be truly beneficial. Bill Perkins, author of “Die with Zero,” suggests that gifting money earlier, when it’s the most needed, can be a wise decision. He believes that waiting until after death to transfer wealth means missing the opportunity to see the positive impact your gifts can have and possibly delaying support until a time when it is less meaningful. 

In his book, Bill tells the story of a woman who had recently gone through a divorce and was struggling to make ends meet as a single mom. Decades later, after her financial situation had stabilized, she inherited a significant sum from her parents. Reflecting on that experience, Bill writes that she would have much rather received even a fraction of the money decades earlier when it would have had a major impact on her ability to make ends meet at a critical time. This example highlights the importance of timing and not waiting until it is too late to make a difference.

In this article, we will explore the pros and cons of giving with a “warm hand” and a “cold hand”. By considering different factors such as tax implications, family dynamics, timing, and your own financial security, our goal is to help you make an informed decision that aligns with your unique values, goals, and personal situation.

Giving With a Cold Hand

Simply put, giving with a cold hand means waiting to transfer your wealth until after you die.

First, let’s explore some of the benefits to this approach:

Pros of Giving with a Cold Hand

Here are some of the key benefits of waiting until after death to transfer your wealth:

Tax Benefits: One of the main advantages of waiting to transfer wealth until after your death is the potential for significant tax savings. Your heirs may benefit from a “step-up” in cost basis for certain assets, which can reduce capital gains taxes if they decide to sell the inherited assets. For example, if you bought stock for $20/share but it is now worth $100/share, typically if you sold the stock you would have to pay taxes on the gain of $80. But, if your heirs inherit the stock when it’s worth $100/share, the cost basis (the amount you paid for it) then shifts from $20 to the current market value of $100/share. The result is that if your heirs sold the stock immediately when they inherited it, there would be no taxable gain. 

Control and Security: By retaining your assets during your lifetime, you maintain total control over your wealth. This can provide peace of mind, knowing you have the necessary funds for any unexpected expenses or long-term care needs.

Legacy Planning: Waiting until after death to distribute your wealth can also allow for a more structured and planned approach. This can include setting up trusts with specific instructions to ensure your wealth is used and distributed for generations to come, according to your wishes.

Ultimately, there are some key benefits to giving after death as it can provide tax benefits for your heirs, allow for more control and security during your lifetime, and enable you to create a lasting legacy. 

Cons of Giving with a Cold Hand

Alternatively, here are some of the cons of giving with a cold hand:

No Immediate Benefit: First, a major drawback to this approach is that you won’t be able to witness the positive impact your wealth can have on your heirs right now, reducing the satisfaction you can get when transferring wealth.

Potential for Higher Taxes: Also, despite the tax benefits that can come from passing on assets after death, depending on the size of your estate and the current estate tax laws, your heirs might face significant estate taxes, which could reduce the amount of wealth they ultimately receive. Currently, with the lifetime exemption amount hovering around $13.61M per person (the amount you can transfer to your heirs free of estate taxes) this is not a huge consideration for many. That said, the current amount is set to expire on December 31st, 2025, and will be reduced to $5.6M per person if Congress does not extend the current laws. This is where smart financial planning can be critical as you navigate the complexities of estate taxes.

Family Disputes: Delaying the distribution of your wealth until after your death can sometimes lead to family disputes or conflicts over the inheritance, particularly if there are disagreements about your intentions or the terms of your will. Alternatively, by making gifts while you’re alive, your heirs can rest assured that your wishes are being carried out as you intended. 

Less Impactful Timing: As Perkins highlights, inheritances often come when recipients are already financially stable. On average, people receive inheritances around the age of 50, a time when many are already financially secure. Alternatively, many could have used the funds in their 30s or 40s as they were starting families, buying homes, and often paying off student loan debt.

In summary, while giving with a cold hand allows for tax benefits, control, and security during your lifetime, it means you won’t see the positive impact on your heirs and could lead to less impactful timing of the inheritance. Next, let’s explore “giving with a warm hand,” which involves making gifts during your lifetime to ensure your wealth benefits your loved ones when they need it most.

Giving with a Warm Hand

Giving with a warm hand is the concept of transferring wealth to your heirs while you are still alive.

This approach to estate planning goes against the traditional notion of passing down assets after death and instead focuses on sharing your wealth with loved ones during your lifetime. By giving with a warm hand, you can witness the impact of your generosity and ensure that your loved ones are financially secure and supported while you are still here. In some ways, it can also allow for more control over how your wealth is distributed today and can help minimize potential conflicts among heirs. 

Ultimately, for some, giving with a warm hand can allow for a more personal and fulfilling way of passing down wealth to future generations.

Pros of Giving with a Warm Hand

Immediate Impact: By gifting your wealth during your lifetime, you can see firsthand how your generosity benefits your heirs. This can be especially rewarding if the funds are used for meaningful purposes such as education, starting a business, or buying a home.

Tax Benefits: There are also certain tax advantages to gifting during your lifetime. For example, you can take advantage of the annual gift tax exclusion ($18,000 per person per year for 2024) and potentially reduce the size of your taxable estate, which could lower total estate taxes upon your death.

Strengthened Relationships: Providing financial support while you’re alive could also strengthen family bonds and foster a sense of gratitude and responsibility among your heirs. It also allows you to offer guidance and support in managing their inheritance.

More Meaningful Timing: As mentioned, by giving to your heirs in their 30s and 40s, you may be able to give financial support when they need it most – when starting a business, buying a home, or raising a family. This can make your gift even more meaningful and impactful for both you and your heirs.

Cons of Giving with a Warm Hand

While giving with a warm hand has many benefits, there are also potential drawbacks to consider:

Reduced Financial Security: Gifting substantial amounts of wealth during your lifetime can potentially compromise your financial security, especially if unexpected expenses arise or if you live longer than anticipated. That’s why it is critical to understand how much you need to sustain yourself throughout the rest of your life, build in a very conservative and healthy buffer, and ensure that you have adequate resources to cover yourself before giving away large sums of money.

Complexity: Lifetime gifting can also add complexity to your financial plan, especially when gifting different amounts to different beneficiaries over time, which may ultimately affect how you want the remainder of your wealth transferred after you pass. 

Dependency Risks: Of course, each situation is unique, but there’s a risk that your heirs may also become overly reliant on, or have an ongoing expectation of your financial support, which could hinder their ability to manage their own finances independently. 

In the end, giving with a warm hand involves transferring wealth to your heirs while you are still alive, allowing you to witness the positive impact and provide support when it is most needed. Though it can foster stronger family bonds and offer tax benefits, it requires careful planning to avoid compromising your financial security and creating dependency among your heirs.

Deciding Which Approach is Right for You


Ultimately, understanding your family’s dynamics and financial needs is crucial when deciding how and when to transfer your wealth. Remember, personal finance is personal, and there’s no one-size-fits-all approach.

Fortunately, open communication with your heirs about your intentions and their needs can help prevent misunderstandings and conflicts. Additionally, consulting with a trusted professional is essential to navigate the complex tax landscape associated with transferring your wealth, both before and after death. They can help you understand the tax benefits and drawbacks of both lifetime gifting and bequests. 

And of course, ensuring your own financial security should be a top priority, so working with a wealth advisor to create a comprehensive plan that helps you understand how much money you need to be secure is essential. 

Finally, remember that there are benefits to both approaches, and for some, it may be best to do a little bit of both, rather than focusing exclusively on one approach or the other. As an example, this could mean making annual tax-free gifts to your heirs during your lifetime while still transferring a larger sum after you pass.

In The End

In the end, whether you choose to give with a ‘warm hand’ or a ‘cold hand,’ thoughtful planning, open communication, and professional advice are key. 

By carefully considering the pros and cons, as well as the unique needs of your family, you can create a wealth transfer strategy that provides meaningful support to your heirs while ensuring your own financial security. 

Ultimately, the best approach is the one that aligns with your values and helps you achieve your unique financial goals.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Understanding Employee Stock Options

Executive Summary:

  • Employee stock options allow employees to purchase company stock at a fixed price, offering potential gains if the stock price goes up.
  • There are two main types of stock options: Incentive Stock Options (ISOs) with favorable tax treatment and Non-Qualified Stock Options (NQSOs) with more flexibility but less favorable tax treatment.
  • Key considerations for managing stock options include understanding the vesting schedule, timing of exercise, tax implications, concentration risk, market conditions, and aligning with your financial goals.
  • Lastly, consulting with trusted advisors is critical to making informed decisions and maximizing the benefits of your stock options.

Employee stock options are a powerful tool used by many companies to attract, retain, and motivate employees. 

At a high level, they provide employees with the opportunity to purchase company stock at a fixed price, potentially leading to big gains if the stock price goes up. Many well-known companies, like Apple, Google, Microsoft, Amazon, and Tesla, use stock options, including both Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQSOs), to align employee interests with company performance. 

But, it’s not just large publicly traded companies that offer stock options. Many startups and small businesses use stock options as an attractive alternative to high salaries to conserve cash and reward early employees.

If you have stock options, understanding how they work and how to manage them effectively can help you make smart decisions and maximize the benefits they can provide.

First, What are Employee Stock Options?

Employee stock options are contracts that grant employees the right to buy a specific number of shares of the company’s stock at a predetermined price, known as the exercise or strike price, after a certain period known as the vesting period. These options typically have an expiration date, by which time they must be exercised or they will expire. Stock options provide employees with the potential to become shareholders in the company and benefit from its success.

Stock Option Example: 

As an example, a typical stock option might give an employee the right to purchase 1,000 shares of the company’s stock at a strike price of $50 per share. If the stock price rises above $50, the employee can exercise their options and buy 1,000 shares at that lower price, effectively making a profit. Then, employees can decide whether to hold onto the stock or sell it for a profit.

Alternatively, if the stock price drops below $50, the employee can simply choose to wait, either until the price goes up beyond the strike price, or until the options expire, avoiding any potential loss.

Two Main Types of Employee Stock Options

When it comes to stock options, there are two main types: Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQSOs).

What are Incentive Stock Options (ISOs)?

Incentive stock options are company stock options granted to employees that may provide tax benefits if certain conditions are met.

  • Tax Advantages: ISOs offer favorable tax treatment if certain conditions are met. When employees exercise ISOs, they do not have to pay regular income tax on the difference between the exercise price and the fair market value of the stock. Instead, this difference, known as the “bargain element,” is subject to Alternative Minimum Tax (AMT). Then, if the shares are held for at least one year after exercise and two years after the grant date, any gain on the sale of the shares is taxed at the more favorable long-term capital gains rate.
  • Eligibility: ISOs can only be granted to employees (not to directors, contractors, or consultants).

Ultimately, ISOs can be a valuable tool for both employers and employees. They can serve as a way to incentivize and reward top-performing employees, while also providing tax benefits for both parties. But, because there’s a layer of complexity involved in receiving favorable tax treatment, it’s essential to consult with a trusted advisor before executing your options.

What are Non-Qualified Stock Options (NQSOs)?

Non-qualified stock options are a type of employee stock option that allows employees to purchase company stock at a fixed price, with fewer restrictions and no special tax benefits compared to incentive stock options.

  • Tax Treatment: NQSOs do not qualify for special tax treatments. When employees exercise NQSOs, the difference between the exercise price and the fair market value of the stock is taxed as ordinary income at their highest marginal rate. This amount is also subject to payroll taxes. Then, any subsequent gain or loss upon selling the stock is treated as capital gain or loss.
  • Flexibility: NQSOs can be granted to employees, directors, contractors, and others, providing greater flexibility for the company.

Ultimately, NQSOs can be a valuable tool for companies looking to attract and retain top talent, even without the same tax benefits as ISOs. By offering employees the opportunity to purchase company stock at a discounted price, NQSOs can act as a powerful incentive for them to perform well and contribute to the company’s success.

Key Considerations for Managing Stock Options

When it comes to your stock options, planning is key. Here are some important considerations to keep in mind when managing your stock options:

  1. Vesting Schedule: Understand the vesting schedule of your options. Vesting determines when you can exercise your options and purchase the shares. Options typically vest over a period of time, such as four years, with a portion of the options vesting each year.
  1. Exercise Timing: Deciding when to exercise your options can have significant implications. For example, when exercising ISOs, many try to avoid exercising during a year with high income to minimize the alternative minimum tax (AMT) implications. In addition, there are certain rules to consider, such as not exercising more than $100,000 in ISOs in a given year AND the 10-year time limit to exercise your options from the grant date.
  1. Tax Implications: Consult a tax advisor to understand the tax consequences of exercising and selling stock options. The timing of your exercise and sale, as well as the type of option (ISO or NQSO), can significantly impact your tax liability.
  1. Concentration Risk: While stock options can provide substantial financial rewards, they also carry risk. Relying too heavily on company stock (when you already rely on them for a paycheck) can expose you to significant financial risk if the company’s stock price falls or the business falters. Diversifying your investment portfolio is crucial to managing this risk.
  1. Market Conditions: Consider the current market conditions and the performance of your company when deciding to exercise and sell your options. While no one knows what the future holds, it’s wise to weigh everything you know about the company with what you know about the current state of the market as market volatility can affect the value of your stock options.
  1. Financial Goals: Align your stock option strategy with your overall financial goals. Whether you plan to use the proceeds for retirement, buying a home, or other financial objectives, having a clear plan can guide your decisions.

These are just a few of the key considerations to keep in mind when it comes to managing your stock options. As always, it is important to consult with a trusted professional for personalized advice based on your unique situation.

Remember that stock options can be a valuable asset but also come with potential risks and complexities. By understanding the basics and carefully considering your options, you can make informed decisions that align with your financial goals.

Conclusion

In the end, employee stock options can be a valuable component of your compensation that can lead to significant gains if managed wisely. Understanding the different types of options, their tax implications, and the strategies for exercising and selling them is essential. By considering these factors and consulting with trusted advisors, you can make informed decisions that align with your unique goals and risk tolerance.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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How to Make the Most of Your Golden Years

Understanding and Navigating the 4 Phases of Retirement from Dr. Riley Moynes

Executive Summary:

  • Retirement involves significant financial and emotional transitions, impacting routines, identity, and purpose.
  • Dr. Riley Moynes’ framework of four phases helps retirees navigate these changes: the vacation phase, the loss and lost phase, the trial and error phase, and the reinvent and rewire phase.
  • Addressing emotional challenges is crucial to avoid depression and find fulfillment in retirement.
  • Engaging in meaningful activities and serving others can lead to a rewarding and purpose-driven retirement.
  • Lastly, understanding these phases and staying proactive ensures retirees can make the most of their golden years.

Retirement is one of the biggest financial transitions of your life, so many prepare for years or even decades in advance. 

From maximizing workplace retirement plans to optimizing Social Security benefits timing, retirees-to-be invest significant time understanding the financial nuances and tradeoffs needed for a secure and lasting retirement.

But, while many prepare financially, few consider the non-financial side of retirement, specifically, the emotional and psychological transition they will experience in retirement. 

And that can be hard, because the reality is that leaving behind your career, whether you were financially ready or not, can create significant challenges, ultimately leading to higher rates of divorce and depression among retirees.

Fortunately, just like you can prepare for the financial aspects of retirement, there are things you can do to smooth out the emotional and psychological ride into retirement, helping you to “squeeze all the juice out of retirement.” 

In his book, “The Four Phases of Retirement: What to Expect When You’re Retiring” and viral Ted Talk, Dr. Riley Moynes presents a framework to help retirees understand and navigate this significant life event through the 4 Phases of Retirement, which we will explore below.

The 4 Phases of Retirement from Dr. Riley Moynes

Phase 1: The Vacation Phase

The first phase of retirement is the vacation phase – a time when you enjoy your newfound freedom.

Just like being on vacation, you can wake up whenever you want and spend your time however you want – pure bliss, right? Well, just like being on vacation, there often comes a point where you’re ready to go back home, settle into your routines, and “sleep in your own bed again.”

In other words, the new, fun, and exciting feeling of being able to do anything at any time wears off, and you’re left to wonder: is this all there is? 

According to Dr. Riley Moynes, the vacation phase of retirement typically lasts a year before it starts to lose its luster. He says that once you find yourself questioning if this is all there is, you have officially moved on to phase 2. 

Phase 2: Loss and Lost

As the name implies, phase 2 is not a fun place to be, and in his Ted Talk, Dr. Moynes describes it for many as “feeling like getting hit by a bus.”

In this phase, retirees can experience 5 major losses:

The 5 Major Losses in Retirement

  1. Loss of Routine: While work provides structure and routine, the newfound freedom of retirement can be unsettling for many.
  1. Loss of Identity: Many people intertwine their identity with their work, often defining themselves by their job (e.g., “I am a doctor” or “I am an accountant”).
  1. Loss of Relationships: Strong career relationships built over decades can suffer as you no longer interact with colleagues daily.
  1. Loss of Purpose: Many derive their sense of purpose from their work, especially those who feel they are doing their life’s work.
  1. Loss of Power: Retirees often lose the power and influence they once had as key decision-makers in their careers.

Ultimately, these major losses can lead to what Dr. Moynes refers to as the 3 D’s: depression, divorce, and cognitive decline. This period can be incredibly challenging as retirees struggle to find a new sense of purpose and direction without the familiar structure of their careers. Many may feel isolated and uncertain about how to move forward, which can exacerbate these feelings of loss.

Fortunately, by the time retirees decide they can’t go on like this, they have officially entered phase 3: trial and error.

Phase 3: Trial & Error

Phase 3 is all about throwing things at the wall to see what sticks.

It’s a time when retirees ask themselves a couple of powerful questions: 

  1. How can I make my life meaningful again?
  2. How can I contribute?

Dr. Moyne’s advice is simple: do more of the things you love and the things you’re good at. 

And he says if you are having trouble figuring out what that is, start with some reflection. Ask yourself: a) what are some of your greatest accomplishments and b) what do you love doing? 

Where those two things overlap is where you should focus your time. 

Remember, this phase is all about experimenting and finding what brings you joy and fulfillment. Interested in volunteering at your local community garden or library? Go ahead and give it a try. 

And if you’re struggling to come up with ideas, here are ten activities to consider during retirement:

10 Ideas to Find Purpose in Retirement

  1. Volunteering: Engage in volunteer work at local non-profits, schools, hospitals, or community gardens. Volunteering allows you to give back to the community, meet new people, and find a sense of fulfillment.
  1. Mentorship: Offer your expertise and experience to mentor younger professionals in your previous field or other areas of interest. This can be done through formal programs or informal networks.
  1. Lifelong Learning: Enroll in classes at local community colleges or online platforms. You can study subjects that interest you, ranging from history and literature to science and technology.
  1. Hobbies and Crafts: Dive deeper into hobbies you’ve always enjoyed or pick up new ones. Whether it’s painting, woodworking, gardening, or cooking, engaging in creative activities can be very fulfilling.
  1. Fitness and Wellness: Focus on maintaining your physical health through activities like yoga, swimming, hiking, or joining a fitness group. This can also include mental wellness practices like meditation or mindfulness.
  1. Travel and Exploration: If you enjoy traveling, consider planning trips to places you’ve always wanted to visit. Travel can broaden your horizons and provide new experiences and memories.
  1. Writing and Blogging: Share your life experiences, knowledge, or interests through writing. Start a blog, write a memoir, or even work on a novel. This can be a great outlet for self-expression.
  1. Part-Time Work: Find part-time work or freelance opportunities in areas you’re passionate about. This can help maintain a sense of structure and purpose while allowing you to use your skills.
  1. Community Involvement: Get involved in local community groups or organizations. This can include joining clubs, attending town meetings, or participating in community events.
  1. Family and Friends: Spend quality time with family and friends. Strengthen your relationships by organizing regular get-togethers, outings, or family vacations. Being an active part of your loved ones’ lives can bring immense joy and fulfillment.

Phase 3 is all about experimenting with different activities until you find what brings you joy. Remember, this process is unique for everyone—there is no right or wrong—and it can continue to evolve throughout retirement

Last but not least, on to Phase 4: Reinvent and Rewire.

Phase 4: Reinvent & Rewire

In phase 4, retirees find answers to the most important question of them all: what’s the point?

But, in Dr. Moynes’ experience, not everyone makes it to phase 4, with some retirees bouncing back and forth between phases 2 and 3. But, for those that do, he finds that it almost always involves service to others, in some capacity. 

This could involve giving back to your community through volunteer work or mentorship. In his TED Talk, Dr. Moynes mentions a retiree who found joy in delivering “piping hot pizzas to hungry humans” part-time, not for the money, but for the satisfaction of serving others.”

For Dr. Moynes, success in phase 4 came through a friendship he formed that evolved into community classes teaching other friends how to use their iPhones and iPads. He joked that it all started because he and his fellow retirees were all given various Apple products for Christmas from their kids, but half of them could barely figure out how to turn them on, let alone use them. So, he and a friend taught a class on how to use their devices that snowballed into hundreds of classes on a variety of subjects over the years: from how to repair bikes, to learning different languages. 

The best part of all? Dr. Moynes has found that through Phase 4, retirees can recover many of the losses from Phase 2: routine, identity, relationships, purpose, and power. This phase not only helps retirees regain a sense of stability but can also bring renewed meaning and satisfaction to their lives.

So, knowing what you know now, where do you go from here? 

Dr. Moynes’ advice is simple:

Here Are 4 Steps You Can Take to “Squeeze the Most Juice” out of Retirement

  1. Enjoy the vacation in phase 1.
  2. Be prepared for the losses in phase 2.
  3. Try as many different things as possible in phase 3.
  4. And lastly, squeeze all the juice out of retirement in phase 4. 

In the end, with 10,000 people hitting retirement age every day and retirement potentially lasting a third of their life: a) you are not alone and b) this is a problem worth solving. 

By understanding and embracing these four phases, you can turn the challenges of retirement into opportunities for growth, fulfillment, and happiness. Whether you are just beginning your retirement journey or are already navigating its complexities, remember that each phase is a step towards a richer, more rewarding life. The key is to stay open, flexible, and proactive in finding what makes your retirement truly golden.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Conference Call Recording – July 2024

Albion Financial Group – July 2024 Conference Call Video Recording

In our July 2024 conference call our panelists discussed the following topics:

  • General views on the economy
  • Current state of inflation and our outlook
  • The jobs market and recent trends
  • The Fed, interest rates, and bond yields
  • Present conditions in the stock market, including the concentration of returns
  • 2024 presidential election and its potential impact on markets
  • Sunsetting tax laws
  • Social Security planning considerations
  • Downsizing during retirement
  • Portfolio management concepts and asset allocation

Stream the audio of yesterday’s conference call at this link.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.