Spring 2010 Quarterly Newsletter

(view as pdf)

THE PROACTIVE WEALTH MANAGEMENT PROCESS™

This quarter’s activity: Cash Flow and Retirement Planning takes some work! While we do the majority of the heavy lifting for the Proactive Wealth Management Process– this requires assistance from our clients, and they’ve done a great job! We review how much they’ll need to have for retirement and what they’ll need for their businesses in the upcoming year. We then create the cash flow analysis, update the Investor Roadmap, and we’ll also show them how much can safely be withdrawn from their portfolio when they do retire. We help them set aside cash for taxes and bonus/Profit Sharing payments as well!

Next Quarter: Estate & Legacy Review

OUR CLIENTS HAVE ENJOYED OUTPERFORMANCE IN GOOD TIMES AND BAD

How has your portfolio performed since the Bear Market hit?

To the left you’ll see our actual portfolios, starting in September of 2008 through 12/31/2009.

Beacon Hill Investment Advisory claims compliance with the Global Investment Performance Standards (GIPS®). Investment Results shown from 8/31/2008 to 12/31/2009 on an annualized basis. Beacon Hill Investment Advisory is an Registered Investment Advisor. Additional information regarding the firm’s procedures for calculating performance returns is available by calling 614-469-4685. “Our Portfolio” represents our Moderate composite and is for those portfolios with a moderate growth objective, with risk metrics comparable to the “Standard Benchmark” of 2% BarCap U.S. Treasury Bill 6-9 Month index, 40% BarCap U.S. Aggregate Bond index, and 48% Standard & Poor’s 500 index. All returns calculated in U.S. Dollars and net of all expenses. Beacon Hill’s Moderate portfolios were not charged fees for the period 8/31/2008-12/31/2008. Past performance is no guarantee of future results.

MARKET REVIEW: 2010 – FIRST QUARTER

Foreign markets, troubled with sovereign debt issues of the likes of the PIIGS (Greece, Portugal, Ireland, Italy, and Spain), got reassurance in March through the backing of the European Union, which fueled a 5.8% return during March to create a virtual breakeven for the quarter. The fixed income markets rewarded taking credit risk, and continued concerning those in long-term bonds as longer term rates moved up, solidifying our continued position not to reach into the longer term market for extra yield.

Barcap Aggregate Bond Index: 1.6%
Barcap High Yield Bond Index: 4.7%

BUSINESS WEALTH MANAGEMENT PROCESS™ : QUARTERLY REVIEW SCHEDULE
We think about these things so you don’t have to

1st Quarter: Cash Flow and Retirement

• Retirement and College Planning
• Liability Driven Investments (payroll, bonus payments, etc.)
• Corporate Retirement Plan

2nd Quarter: Estate and Legacy

• Succession Planning
• Key Person
• Estate Planning
• Family Council

3rd Quarter: Protection

• Life
• Disability/LTC
• Umbrella/Liability

4th Quarter: Tax Efficiency

• Tax Loss Harvesting
• Muni vs. Corporate – Bonds
• Strategic Tax
• Asset Location

STILL SITTING OUT OF THE MARKET?

What are you waiting for? You don’t have to jump in at once! We have portfolios set up for people to slowly get back into the market. First, let’s increase your yield beyond the 0.5% you’re getting in the bank. Our conservative income portfolios yield about 4%.

IS ROTH RIGHT?

Not sure if a Roth is right? If you have an IRA, SEP-IRA, or 401(k), we will provide a customized, confidential, side by side analysis for $399.

EVERYONE CAN MAKE AN IRA CONTRIBUTION THIS YEAR!

Typically, a couple that had over $166K in modified adjusted gross income and had a retirement plan with their company were limited in contributing to a Roth (89K begins limits for Traditional IRA). This year, that same couple could make a non-deductible contribution to a regular IRA and then convert it to a Roth IRA. While there are still income limitations on deductible contributions, there are no income limitations on conversions this year! In this manner, they have effectively contributed to a Roth IRA.

If they do this now for 2009 and 2010, they can put $24,000 away and never pay taxes on it again! Of course, there are a few wrinkles. The biggest issue is that the IRS thinks of all your IRA accounts as one pool of tax deferred assets. Therefore, they will want you to allocate basis to that portion you convert in a pro-rata form over all of your IRAs.

If you have no IRAs currently, this is a non-issue for you and it becomes a no-brainer to do this. If you do have IRAs, talk to your accountant about this strategy.

By way of example, if you already had an IRA worth $24,000, and you chose to open a new IRA for you and your spouse and contribute the maximum for each for 2009 and 2010 ($6,000/year if you’re over 50), you could put away another $24,000 IRA. Let’s call this second IRA “IRA #2”. You then convert IRA #2 to a Roth IRA. At this point, you will have to pay taxes on the portion of the IRA that you converted that was previously a deduction. The IRS assumes that you actually converted half of IRA #1 and half of IRA #2, therefore you will have income of $12,000 that you will pay. It will be offset, however, by a deduction when you begin to withdraw assets out of IRA #1. Previously, if you would have pulled all $24,000 out of IRA #1, you would have taken $24,000 as income. Now, you will only have to take $12,000 as income.

SEEN IN THE PRESS

“The Great Recession Creates a New Retirement Reality” by Amy Buttell,
The Journal of Financial Planning: Retirement Distribution Planning Supplement December 2009 Edition
(Clint Edgington, CFA)

“Five Ways to Handle a Tricky Market” by Roger Fillion,
Fidelity 10/29/09
(Clint Edgington, CFA)

“401(k) – When It Makes Sense to Rollover” by Mark Fissel, RFC,
Columbus Dispatch 10/4/09

B.O.S.S.™ (Business Owner Strategy Session) Working Lunch: Second Quarter Schedule

To RSVP, please call Mark at 614-469-4685. Please feel free to invite a business owner.

Due to the strong demand for these events, we must limit attendance to business owners only.

Succession Planning: April 22nd
Join Jane Higgins-Marx, Partner and Robert Barnett, Jr.,Managing Partner of Carlile Patchen & Murphy, LLP;

• Maximize your company’s value
• Structure deals in the best way

Business Sale Review: May 20th
Scott Chapman and Andy Hays, Partners and Co-Founders of Copper Run Capital

• Typical timeline, process and structures of sales
• How to find a buyer

Selling Your Business-Cleaning House: June 17th
Jim Balthaser, Partner of Thompson Hine

• Prepare for a sale
• Important factors in early planning

Clint Edgington, CFA Partner Beacon Hill Investment Adivsory	Mark Fissel, RFC Partner Beacon Hill Investment Adivsory