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You spent decades building the "perfect" retirement plan, and you're all set to put that plan in motion. But as soon as you're ready to hand in your retirement letter of resignation , the market drops significantly. What happens next? Many people found themselves in situations like this over the last year, and didn't know what to do. Should they still retire? What do they risk? Will their savings still last the way they anticipate? Today, we'll review the pros and cons of retiring "on time" even if it's a down market. First, Reconnect With Your Retirement Goals You may be tempted to act purely out of reaction to seeing your account value drop, but don’t rush into anything. Before you make any decisions concerning your portfolio or retirement, return to your plan and remember why it was created. What goals did you set? What are you most excited about? Ask yourself if your feelings or priorities have changed. In other words, if it wasn’t for the market would you even be second-guessing it? If you’ve kept your plan up to date each year then the answer is likely not. That narrows it down to the timeline. For many people, the most important thing about retiring is doing it the way they want to and not necessarily about the timeline it takes to get there. If the markets have you worried or are putting pressure on your goals, perhaps all you need to do is wait a little longer. This may be all you need to give yourself a greater chance of living the life you spent years planning and saving for. What's A Down Market Anyway? Financial articles talk about down markets all the time but what does that even mean? Generally, there are three "stages" of a down market, and it’s important to understand what each of them means. Market downturns are sustained market declines that usually last for at least a year before turning around. You’ll also hear these referred to as “bear” markets. Market corrections occur when the market has fallen at least 10% from its most recent peak. The length of time it lasts isn’t so much of a factor and although they can last a while they are often very short-lived as well. Market crashes aren’t defined by either a specific percentage drop or duration, but instead when the market drops quickly by a significant percentage. Understanding the market characteristics may give you and your advisor a better sense of how your portfolio and goals will be impacted and what your best options are for withstanding it. The Pros of Retiring, Even When The Market Is Down While it's certainly something you shouldn’t ignore, a down market doesn’t always mean you need to change your planning horizon. For some, it may make sense to stick with their original retirement timeline. Some factors that may contribute to your choice to stay the course include: Secure avenues of fixed income that will cover your needs, and are enough to make you comfortable. These are things like your Social Security payments, pension income, an annuity, bond interest, or a sizable cash reserve. Since these don’t rely on market performance to fund your withdrawals then they offer protection from market volatility. If you're comfortable adjusting your withdrawal rate. Even with a significant portion of your investments exposed to the market, you can protect yourself by reducing your withdrawals when your balance falls too much. If you have additional tax savings opportunities. Taxes matter a lot in retirement and your tax bracket can be impacted drastically with retirement account withdrawals . The more tax-efficient you are, the less you have to withdraw. By proactively taking advantage of tax-saving opportunities you can reduce the strain on your investments. Important Cons To Consider Before Retiring In A Down Market There are also reasons that you may want to avoid retiring when the market is down. Primary risks are: The effect on portfolio longevity . The more you withdraw from your portfolio the faster it will be depleted. This effect is amplified if you start retirement in a bear market. If you plan to live well into your 90s, you need to be careful about how much you withdraw. Waiting is your best defense, but you may also want to reconsider your investment plan in light of starting distributions. Lack of income stability . Cutting off your income right as the market drops further amplifies the downside. Instead, your paycheck can cover your living costs and you can buffer some of your losses by continuing to contribute to your retirement accounts. Remember, the best market days tend to follow some of the worst. When you contribute during the down market you’ll buy cheaper shares and then create momentum for the rebound. Compromising on your lifestyle . Don’t forget the whole reason you are planning for retirement and remember what you want. If you retire in a down market, you may need to make necessary lifestyle trade-offs until the market recovers. Since we can’t know how long that will take it might be better to hang on a little longer rather than risk ruining your best decades. Which Is Right For You? Let's Run Some Projections With all of these options and considerations, how do you know which move to make, if any? You need a method for evaluating your options, and our preferred method is Monte Carlo analysis. A Monte Carlo analysis allows us to estimate as a simple-to-understand percentage the likelihood that any given scenario will be successful based on a wide range of potential investment outcomes. We can run these projections for you and help you make the most informed decision based on what the results show. Get Started Retirement doesn’t have to be a big guess. Download our master list of retirement goals to help you start thinking about your plan and contact us for a free consultation when you’re ready to start. Author: Mark Fonville, CFP® Mark is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors specializing in helping individuals aged 50 plus plan, invest, and enjoy retirement without the stress of money. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Request a Free Retirement Consultation Today Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Your financial advisor should be a trusted source of clarity and confidence in your financial future. But not all financial advisors will be the best fit for helping you achieve your specific goals . Here are seven tell-tale signs you may need a new financial advisor in 2023. →Free Download: 25 Questions to Ask a Financial Advisor Before You Hire 1. They Aren't Prepared For Your Meetings First and foremost, you want to work with a firm that genuinely cares about you and your goals -and knows what they are in advance of meeting with you so they can help you prepare! Your advisor needs to devote the proper amount of care and attention to helping you achieve them. One way to assess how attentive they are is by paying attention to the care they give to meeting with you. If they don't remember what's going on in your life or seem scattered during calls, they may have taken on too many clients or just don’t consider you a top client. This could be a sign that they aren't the right fit for you. 2. You Haven't Reviewed Tax Planning Strategies At Covenant Wealth Advisors, we're firm believers in the power of proactive tax planning, especially for those on the cusp of retirement. You and your advisor should build a tax plan and review it often to ensure you're making the most of the opportunities available to you. This may include Roth conversions, managing your tax bracket, withdrawal plans in retirement, maximizing credits and deductions, charitable giving, and ongoing investment efficiency. Refer back to point #1. Your advisor won’t know which strategies may apply to you if they don’t know you and your goals. A simple way to gauge this is to think about the last time they asked you for a tax return. 3. The Fee Structure Is Confusing At Best You should have a clear understanding of what you’re paying your advisor. The world of financial fees can be challenging to navigate, especially if you're working with an advisor who isn't upfront or transparent about their fees. That’s why we're committed to being honest and straightforward about our fee structure as it helps develop a foundation of trust. The way you pay matters just as much as how much you pay. Covenant Wealth is a fee-only independent firm, meaning we only receive payments from our clients and not from referrals, commissions, kickbacks, or other third-party sources. This structure minimizes conflicts of interest and helps us serve you best. →Free Download: 25 Questions to Ask a Financial Advisor Before You Hire 4. You Don't Know If They Operate In Your Best Interest This might seem obvious, but you can’t assume your advisor is putting you first. That’s why it’s important to work with a fiduciary. It's easy to cast off "fiduciary" as just another financial buzzword, but it carries significant weight and meaning, especially to us. Fiduciary status is a legally binding oath that signifies operating at the highest level of care, something we do daily. You should ask if your advisor is a fiduciary and have them sign a statement saying so. 5. Their Advice Doesn't Seem Comprehensive (And Custom) Any financial advisor will talk to you about your investments. Most will even help you understand the best investment strategies to meet your needs and discuss their investment philosophy and how it will help you. But a good financial advisor does so much more than investment management. They understand how investments support retirement income and how to piece it all together with other sources. This includes your Social Security benefits, pension, annuities, real estate, and any others you may have. You also want an advisor who looks beyond investments at your entire financial picture. This includes insurance, tax planning , estate planning, risk management, cash flow planning, and life transitions. You don’t have tunnel vision regarding your future, and your advisor shouldn’t have tunnel vision for how to support it. 6. You're Not Really Who They Want To Work With Financial planning isn’t a one-size-fits-all service. Money is complex and different at each stage of life, and many advisors have specialties that reflect that. For example, if you're a pre-retiree it might not make sense to work with a firm specializing in college planning. Look for advisors with qualifications and specializations that meet your needs. At a minimum, this means your advisor should be a CERTIFIED FINANCIAL PLANNER™ practitioner. If you’re nearing retirement look for specialized retirement credentials such as the CFP® and CPA designation. Partnering with financial advisors who have both of these designations can be tremendously helpful. This not only shows they have the expertise to help you but the desire. The last thing you want is an advisor who is only taking you because you are willing to pay them! 7. You Don't Align On Communication Styles Regardless of how good your advisor is and if they work with other people like you, it’s critical that you are on the same page regarding communication. Whether that’s in person, virtual, frequently, or just once a year is all a matter of preference. The important thing is that it’s effective. This includes when times are good and bad. How they treat you when times are rough is telling of a firm's character. Do you feel ignored or unheard? These things matter! Work With A Firm Who Wants To Serve You Best If you’re interested in working with a firm that puts you first and provides you with peace about your financial future, call us today. At Covenant Wealth, we specialize in helping individuals and families 50 and older achieve their retirement planning and investment goals and are ready to start working for you. Want to see how we can help? Request a free retirement consultation today! Author: Mark Fonville, CFP® Mark is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors specializing in helping individuals aged 50 plus plan, invest, and enjoy retirement without the stress of money. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Request a Free Retirement Consultation Today Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Last year was a rollercoaster for investors, as markets plummeted and inflation spiked. With the S&P 500, Dow and Nasdaq experiencing their worst performance since 2008 at 19.4%, 8.8% and 33.1% declines respectively - paired with wild swings in interest rates throughout the year - it can be said that 2022 tested even veteran market observers' knowledge of economics fundamentals like never before! Free Download: 15 Free Retirement Planning Checklists [New for 2023] The 10-year Treasury yield skyrocketed from 1.51% to 4.24%, while the Consumer Price Index surged to its highest level in four decades – topping out at 9%. To combat these trends, the Fed responded accordingly by raising rates seven consecutive times through December 2021 reaching an unprecedented high of 4.25%. Meanwhile various geopolitical factors such as Ukraine's war efforts or China’s “zero Covid" protocols compounded this movement leading both oil prices changes as well currency fluctuations which were felt worldwide. The past year has been a roller coaster ride for even the most adroit investors. The multitude of consequences from Covid-19, including economic distress and fiscal/monetary stimulus measures caused markets to oscillate wildly. Though these fluctuations often inflict short term harm on finances, they eventually subside as equilibrium is reestablished in the global economy. Despite these historic, tumultuous times in the market and economy over the past year, one thing remains consistent: there is no substitute for long-term investing. Remaining disciplined despite any short-term volatility seen across markets can be daunting; however through a diversified portfolio aimed at longer time horizons investors may stave off losses while positioning themselves to capture gains when opportunities arise - as we saw during March of 2020 prior to rapid recovery or even 2008 ahead of an exponential decade expansion. Now more than ever it's clear that staying focused on our goals should trump external factors when making investments decisions! Free Download: 15 Free Retirement Planning Checklists [New for 2023] As we look to 2023, investors should take the time to reflect on five key lessons from the year gone by. Doing so can help them keep their eyes firmly fixed on a long-term outlook and make sound financial decisions going forward. 1. The historic surge in interest rates impacted both stocks and bonds After four decades of decreasing interest rates, the tables have turned. The surge in inflation this past year acted as a catalyst for higher interest rates, leading to an unprecedented drop across numerous asset classes. This sudden shift has caused investors to rethink their strategies and explore new methods for long-term protection against market volatility. In spite of ongoing diversity challenges, there is cause for optimism in many global economies. Inflationary indicators have seen notable moderation and central bank rate hikes have been largely accounted-for by interest rates settling down again since last year. Economists are generally expecting the trend to remain steady over 2023 as opposed to 2022's volatile pattern - though uncertainty remains high. 2. The Fed raised rates at a historically fast pace The Fed has been resolute in its commitment to fighting inflation, as seen in their seven consecutive rate hikes over the course of 2022 and four 75 basis point increases back-to-back. As a result, rates are now at 4.25% to 4.50%, reaching heights not seen since before 2008's housing bubble crash - representing an ambitious bid for stability that looks set to continue strong into 2023 and beyond. The Fed is navigating a delicate balance between inflation and recession, with the current market-based measures pointing to policy rates of 5% in the middle of 2023. Though two quarters of negative GDP growth occurred early this year, many economists still don't classify it as an official downturn - instead predicting that we may experience one in '23, albeit shallowly. The slumping economy could mean that monetary policymakers pull back before reaching their target rate for next year's midpoint. Although markets welcomed the news of potential policy shifts from the Federal Reserve, leading to a robust rally in June-August and again October - November, 2022 proved that good news should be taken with caution. When investors' hopes for easing were met by an opposing reality, volatility ensued until year's end; serving as another reminder that data can inform market movements but must not replace rational thought processes. 3. Inflation reached 40-year highs but has improved The effects of the recent financial shocks may appear to be transient, but could still prove episodic. This is due to factors such as improved supply chains, lower energy prices and reduced rents now fading away; however wages remain in a tight market with potential for sustained inflation. With investors eagerly awaiting signs of recovery in inflationary measures, the focus has shifted to where prices will be heading rather than actual levels. Good news is already being priced into markets with expectations that 2023 may bring better results across both headline and core inflation numbers - an encouraging sign for many investors. 4. The rallies in tech, growth and pandemic-era stocks have reversed After a two year run of strong performance in tech, Growth style investing and pandemic-era stocks, the past year saw an impressive reversal. This resulted in Value outperforming Growth to mark the first time since prolonged market bull runs began several years ago. As economic growth decelerated and interest rates rose up again, investors were reminded that cautiousness does not have to mean missed opportunities for gains. Free Download: 15 Free Retirement Planning Checklists [New for 2023] Investors should always be mindful that portfolio diversification is a vital component of successful investing, especially across size categories (large and small caps), styles (Value and Growth) desirable sectors, geographies (U.S., developed markets and emerging markets). During periods characterized by high investor sentiment - known as "fear-of-missing out" , or FOMO - it's essential to remain disciplined in order to maintain an effective long term strategy. 5. History shows that bear markets eventually recover when it's least expected Even though the previous year dealt a heavy blow to investors, markets have repeatedly demonstrated their resilience when faced with unexpected challenges. While it can take time for bear markets to regain momentum, predicting precisely where and when that inflection point will happen is nearly impossible. Investing, like life itself, is a journey of twists and turns. The stock market often follows this pattern - long periods of growth followed by short bouts of turbulence that can quickly lead to flurries in investor sentiment. Though it may be tempting for some to try their hand at timing the markets during such times, history has shown us again and again that staying invested provides greater returns than attempting any drastic maneuvers mid-cycle. 2023 could well see yet another example unfold before our eyes; so buckle up! The past year was a turbulent one, yet by adhering to essential investment practices such as discipline, diversification and long-term focus investors can position themselves for success in the coming years. By committing to these strategies now they will be better able to realize their financial aspirations well into 2023 and beyond. Mark Fonville, CFP® Mark is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors and specializes in helping individuals aged 50 plus create, implement, and protect a personalized financial plan for retirement. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule a Free Consultation Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Over the past few decades, inflation has been relatively low. But the tide had no problem (drastically) changing in 2021, in no small part due to the pandemic. In December of 2021, the 12-month rate of inflation was 7.00%. Recent data from the Bureau of Labor Statistics revealed that the Consumer Price Index (the average change in prices of goods and services) rose 0.5% as of last December. That's when a lot of investors who are nearing retirement or currently retired started to think about how to invest to protect against inflation . It's a real problem. Download our free war chest of retirement checklists to help you retire without the stress of money - New for 2023. The current level of inflation has a real and significant impact on many people’s portfolios and, as such, continues to spike widespread concern. When inflation increases, your purchasing power decreases, making every dollar less valuable. This means that a dollar today purchases much less than a dollar did a year ago. As a result, inflation makes the cost of goods that you use every day more expensive. For example, in 1920 a quart of milk cost $0.17. By 2020, that same $0.17 only purchased 12 tablespoons of milk as illustrated in the chart below. When inflation rises, the Federal Reserve steps in and often implements economic changes to dampen the effects, like raising interest rates, slowing the economy, and limiting its balance sheet. High inflation, and rising prices, have many people looking for deliberate ways to make sure their investments, can keep up. The good news is that the right investment strategy may help you beat inflation (thought not guaranteed), and it may not be as difficult as you think to accomplish that goal. By building your portfolio with an asset allocation that prioritizes areas of the stock market with higher expected real returns—(in this case, real means the return you receive above and beyond the inflation rate)—you may have a stronger chance at outpacing inflation over the long-term of ten years or more. Keep in mind that higher returns can also mean higher risk, so you may want to make sure that you de-risk your portfolio in retirement as well. In this article, you'll learn the following: S tock Performance During High Inflation Years Treasury Inflation Protected Bonds and I Bonds Consider Real Estate as an Inflation Hedge Benefit of Social Security During High Inflation What Does Inflation Do To The Stock Market? Conclusion Here's how to invest to protect against inflation in retirement. 1. Stock Performance During High Inflation Years Stocks have historically had the highest long-term average returns of all standard asset classes, making them an excellent asset to hedge against inflationary periods over the long term. Taken as a whole, the US Equity Market has produced annualized real returns of just under 5% since 1927. This of course includes periods of low inflation, average inflation, and high inflation. But you can also consider how specific slices of stocks have performed compared to inflation. Asset classes that benefit from inflation include (1927-2020): U.S. Small-Cap Value: 11.95% U.S. Large-Cap Value: 8.13% U.S. Small-Cap Growth: 5.09% Sectors that benefit from inflation include (1927-2020): Energy Industry: 9.92% Business Equipment Industry: 7.23% Financial Services Industry: 6.52% From 1927-2020 the annualized real returns in years with above median US inflation for the best performing asset classes are shown in the chart below. Average Annual Real Returns in Years with Above-Median US Inflation, 1927-2020 While past performance can’t be assumed to reap future results, this data highlights the importance of maintaining enough equity exposure, even in retirement, and diversification among different types of asset classes, even in a high inflationary environment. Given its ability to outpace inflation, it makes sense why many retirees benefit from holding a portion of their portfolio in the stock market as part of their overall investment strategy. 2. Treasury Inflation Protected Bonds and I Bonds Government bonds are some of the most conservative investments you can own in a portfolio. Because of that relative safety, government bonds also typically provide lower yields than bonds issued by corporations. So why would you consider government bonds as a suitable investment for protection against inflation? First, understand that most government bonds have still provided average annual returns slightly above inflation over the long term. But, when we look to government bonds for inflation protection, we are thinking about two particular types. Treasury Inflation-Protected Securities - TIPS, as they are called, are bonds whose interest payments are directly tied to inflation. Every six months, the principal amount on which the interest payment is based is adjusted by the most recent inflation figures. That means the interest you receive on these treasury bonds will go up by the same amount as inflation. In effect, you lock in a real rate of interest. I Bonds - Series I Savings Bonds also have a built-in inflation adjustment. It works a little differently than TIPS, though. There are two components to an I Bonds interest rate. One is a fixed rate that remains constant for the life of the bond. The other is an inflation rate adjusted for inflation every six months. 3. Consider Rental Real Estate as an Inflation Hedge The value of holding real estate comes from two primary sources. The first is in the value of the property itself. If the price of your property appreciates over time, you may be able to sell it for more than you paid. That value is often correlated to inflation. As inflation rises, property values tend to increase as well. The second is from the rent you can collect on it. Rental payments can be a good source of income that is structured to be a natural inflation hedge. Since most lease terms are for one year, particularly on residential property, you can simply increase the rent by the rate of inflation when the annual lease term ends. Owning rental property can be more involved than you may like. There’s rent to collect, vacancies to fill, and damage to repair. Real estate investment trusts, or REITs, are securities that hold real estate portfolios, much like mutual funds and exchange-traded funds (ETFs) hold portfolios of stocks and bonds. You can include real estate in your portfolio through the use of REITs if direct ownership isn’t for you. For more information on the current state of the U.S. housing market, click here . 4. Your Social Security Benefits Account for Inflation Strictly speaking, Social Security isn’t an investment. But if you are thinking about what to invest in to protect against inflation, then you need to consider your Social Security benefits. Social Security is a great way to protect both you and your investments from inflation. That’s because the payments you receive from Social Security are directly adjusted for inflation. The greater the inflation rate, the greater the Social Security cost of living adjustment is. When you treat it like an investment and take proactive steps to maximize your Social Security, then you can increase your inflation-adjusted income and reduce the strain on your portfolio in retirement. Understanding the right time to start social security is important. You can claim Social Security benefits as early as 62, but you can also delay them to 70. The longer you wait, the greater your benefit becomes. It's paramount you get this part of your financial plan correct. Remember, too, that Social Security benefits get preferential tax treatment so that increased payout will adjust for inflation and not be fully taxable. It’s hard to beat that. How Do Stocks Hold Up During High Inflation? Inflation can be a problem when it comes to investing. Historically, nominal stock market returns may still be positive. However, real rates return suffer. Remember, nominal returns are the returns you receive including inflation. Real return is the return you get above inflation. For example, Mary's portfolio averaged 9% nominal return per year during her ten year investment period. During the same period, inflation was normal and averaged 3% per year. Mary's real rate of return is 9% - 3% = 6%. Unfortunately, during inflationary periods, we find that real rates of return within stock markets tend to fall vs. periods of average or low inflation. For example, John's portfolio averaged 9% per year during his ten year investment period. During the same period inflation was high and averaged 7% per year. John's real rate of return is 9% - 7% = 2%. That's why it's so important to remain disciplined with your investment approach. Most importantly, beating inflation takes a long-term approach to investing . For example, take a look at the chart below. We show returns for a hypothetical mix of indexes ( 60/40 portfolio ) and different stock and bond asset classes from 1973 to 1982. This was a period of time in the United States where inflation averaged 8.67% for 10 years.* Click here to see the full period . In 1973 and 1974, inflation topped the charts at 8.71% and 12.34%, respectively. During those same years the U.S. Total Stock Market was down -18.06% and -27.04%, respectively. (Source: Data disclosures and index data for full period 1973 to 2023 ) Can you imagine living during a period with inflation over 12% while also watching your investment portfolio tumble? That's not easy to stomach. Protecting against inflation takes discipline and a long-term mindset. But, at Covenant Wealth Advisors , we believe that the right mix of investments can give you the best chance at beating inflation long-term. For example, the hypothetical portfolio (notated by the white box in the chart above) consists of 60% stocks and 40% fixed income to simulate investment index returns vs. inflation from 1973 to 1982 (you can't invest directly in an index). The hypothetical 60% stocks and 40% fixed income portfolio looks like this when broken down into different asset classes: Before fees, the diversified portfolio's average annual return from 1973 to 1982 was +10.05% (white box below) vs. CPI for inflation (gray box below) of +8.67% for the ten year period.* This means that the average rate of return above inflation was +1.38% during the period. But, the returns also came with some tough years in the market. Notice in the chart below the lowest historical performance for each asset class. U.S. Small Value's worst performance year was -27.25% from 1973 to 1982 even though it was the best performing asset class for the entire time frame. Ultimately, to get the returns you want, you must be able to endure the bad times too. Conclusion High inflation can be scary as you approach retirement. While nothing is guaranteed, history has shown that a well-diversified portfolio of stocks and bonds may be the best way to keep pace with inflation long-term. For more hands on investors, dipping your toe into rental real estate as a long-term investment may also be a great way to beat inflation. Knowing how to invest to beat inflation is just the first step. You also have to maintain discipline during volatile times, make smart tax decisions, and stick to your investment plan. That's not an easy task and most people fail to outperform the stock market according to Dalbar. You are going to encounter times when inflation is out of control and stocks go down at the same time. Times like this will test your ability to stick to your plan. The good news is that inflation doesn’t have to ruin your retirement. We believe the right investment portfolio can give you the best chance of long-term success. If you want our help managing your investment portfolio, contact us. We are passionate about helping people create diversified portfolios and personal financial plans built for the long haul. We’d love to help you create an investment plan that has the best chance at outpacing inflation and accomplishing your life goals. Set up a call today! About Mark Fonville, CFP® Mark is a personal financial advisor and the President of Covenant Wealth Advisors. He manages investment portfolio and provides retirement income planning for individuals age 50 plus who have over $1 million in investments. He has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule a call. Important Disclosures: Download hypothetical data disclosures for 1973 to 1982 here . Download hypothetical data disclosures for full period from 1972 to 2023 here . These are for illustrative purposes only and not intended to represent any particular investment(s). Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. We provide investment advisory, financial planning, and tax planning services to individuals. Investments involve risk and do not guarantee that investments will appreciate. Past performance is not indicative of future results. The returns for the Hypothetical Portfolio shown in this report are based on asset class returns and not reflective of any specific product. The asset class returns are constructed using index data and do not include any of the fees or expenses that would have been incurred when investing in a specific product. Investors cannot directly invest in an index and the actual returns of a specific product may have been more or less than the index returns used in this report. The index returns used in this report assume dividend and capital gain reinvestment. The returns shown in this report should not be considered a guarantee of future performance nor a guarantee of achieving overall financial objectives. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, nor any other financial institution. Asset allocation models may not be suitable for all investors. International markets and Emerging markets involve additional risks, including, but not limited to, currency fluctuation, political instability, foreign taxes, and different methods of accounting and financial reporting. Real estate securities funds are subject to changes in economic conditions, credit risk and interest rate fluctuations. Fixed income securities are subject to interest rate risk because the prices of fixed income securities tend to move in the opposite direction of interest rates. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Everyone has different income needs in retirement. Several factors influence your “retirement number,” including your age, where and when you hope to retire, and what you want to do in retirement. Someone with dreams of early retirement will likely need more saved up than someone who plans to work through their golden years. No matter what an ideal retirement looks like for you—an encore career or taking it easy—this article will help you sort through the many considerations on your plate and ensure you set yourself up for success. As you prepare for your retirement journey, be sure to snag our must-have retirement planning checklists . They are free and are built using the latest in retirement insights and strategies. So, if you are wondering: "how much retirement savings should I have?" , keep reading to find out. Create a List of Your Retirement Goals As you begin planning for retirement, the top question that likely percolates in your mind is, How much should you have saved for retirement? The short answer? It depends. Several variables work together to determine your personal savings goals, but there are good benchmarks to help zero in on the ideal amount you should target. To start, consider the following: How many years are you from retirement? Your retirement time horizon can help you take a more precise (and critical) look at how much you’ve saved. The closer you are, the more confident you’ll want to be that your savings can fully fund your retirement expenses. A 55-year-old who wants to retire may require a more aggressive plan than someone who wants to retire at 70, for example. If you still have a reasonable amount of time before you send in your retirement letter of resignation , you have time to make up for any gaps in your savings strategy. Are you hoping to move when you retire? More and more retirees are looking to relocate in retirement. In fact, 30% more retirees moved out of state in 2020 compared to 2019 (and Virginia was their top destination). If you are planning a move, define what it looks like. Are you planning to go somewhere more or less expensive than your current location (think about the cost of living, insurance, taxes, and more)? If you move somewhere less costly, you’ll not only have a reduced budget but may also be able to stash away some money when you sell your current house. Do you anticipate doing a lot of travel in retirement? 63% of Americans over 50 cited travel as an important retirement goal, according to an Ipsos poll . And, on average , retirees spend a little more than $11,000 per year on travel costs. Since travel is a common and costly goal, it’s critical to think through what your travel goals are. Do you hope to take a big trip every year? Are you hoping to leave money to children and/or grandchildren? Estate and legacy planning should play an essential role in your overall retirement plan. Your financial team can help you craft an estate plan that lets your legacy shine and pass your wealth to heirs efficiently and effectively. Are you in good health? Many pre-retirees underestimate healthcare costs in their golden years, but financially planning for health care is a must, since it could account for roughly 15% of your retirement budget. The specific answer to these questions is less important than whether you simply can answer them. In other words, it’s okay if you plan to travel more in retirement. It’s also okay if you don’t. The key here is to have a plan so that you know what your target is. Writing your retirement goals will help you adjust your savings strategy and ensure you’re on track to live the retirement lifestyle you desire, whatever that is for you. While you won’t have an exact answer for everything, and things won’t always go exactly as you plan (the pandemic certainly taught us all that hard lesson), anticipating how you will spend your retirement dollars puts you on a much stronger path. Calculate Your Current Savings and Expectations When thinking about how much you need to save for retirement, start with where you are right now. How much do you have saved in retirement-specific accounts (401k, individual retirement account (IRA), Roth IRA, etc.)? What do your savings look like in other investment accounts (brokerage account, real estate, etc.)? What sources of guaranteed income will be available to you? (pension, Social Security, annuity, etc.)? Knowing how much you currently have saved is critical to figuring out how far you have left to go and what adjustments you need to make to get there. How Much Retirement Savings Should I Have? There are several ways to calculate how much retirements savings you should have on hand. As a general rule of thumb, experts recommend having 6-8x your annual salary saved in your 50s and 8-10x saved in your 60s. Another way to look at it is being able to replace about 80-90% of your pre-retirement income. Using a multiple of 6-8x your annual salary is a good place to start. But, an even more precise way to calculate your savings need is to use the "4% rule". Here's how to do it: First, you'll want to calculate your social security benefit by logging in to ssa.gov and reviewing your social security statement. If you haven't reviewed your social security statement in awhile, it's a good idea to take a look to ensure your earnings history is accurate. The maximum social security benefit an individual retiree can get is $3,148 a month for someone who files in 2021 for social security at Full Retirement Age according to AARP . Now, let’s assume your social security benefit will equal the maximum benefit and that your spouse’s benefit will equal 50% of your benefit or $1,574/month. The combined social security benefit in this scenario will be $4,722/month or $56,664 per year. This means that if your lifestyle costs $100,000 per year, then you will have to create an additional $43,336 per year from your portfolio above and beyond social security! Income Need - Social Security Income = Supplemental Portfolio Income Needed $100,000 - $56,664 = $43,336 So, how much in savings will you need at age 65 to create $43,336 per year in income without running out of money? Let's find out using the 4% rule: Annual Income Need/.04 = Retirement Savings Needed $43,336 / 0.04 = $1,083,400 While nothing is guaranteed, the 4% rule of retirement income planning says that you’ll need $1,083,400 in retirement savings to supplement your social security income. This assumes that your investment portfolio is prudently managed taking into account risk, return, taxes, and annual income needs. But, what if you have a more extravagant lifestyle and you need $200,000 a year in income to maintain your lifestyle. We can calculate how much retirement savings you should have as follows: Total Annual Expenses - Combined Social Security Annual Benefit = Income needed $200,000 - $43,336 = $156,664 Then, apply the 4% rule to your annual income needs as follows... $156,664/.04 = $3,916,600 This means you may need approximately $3,916,600 in retirement savings to create enough income above and beyond social security for your lifestyle! Clearly, this is just an example and many variables could change the outcome. For example, do you have a pension? Do you plan on delaying social security? What about taxes? Do you have a comprehensive withdrawal plan (how to withdraw funds from personal savings)? Have you factored in other savings accounts like an emergency fund? How much money is in tax-free Roth IRA accounts vs. tax-deferred accounts like a 401 (k) or IRA? All of these factors play an important role in determining how much retirement savings you should have in your nest egg. Those are excellent places to start, but you’ll want to tailor those targets to fit your specific situation. To get an accurate estimate of the amount you’ll need to have at retirement, take variables such as your age, salary, general health and family history, and tax brackets into consideration. You have one chance to make your retirement savings last. If you need help, contact us for a free consultation. Be as honest and realistic as possible throughout your planning. You want to create a plan that’s sustainable and provides you with the quality of life you deserve throughout your golden years. Since the point of saving for retirement is to replace income when you stop working, convert your savings amount into annual earnings expectation for retirement. Does the outcome seem like it will be enough, or do you need to readjust your estimate? Once you’ve arrived at a good estimated savings target, ask yourself the following questions: Are you on track or off base? What needs to change for you to hit, and ideally exceed, those targets? Perhaps you need to max out your retirement accounts, concentrate on higher savings rates, redirect current spending, etc. Comprehensive retirement planning is all about driving action now to make sure you are meeting your future goals. Tips To Invest For Retirement More Intentionally Once you know your goals and what they cost, the next step is setting yourself up to reach them. One of the most essential ways to save is taking full advantage of your tax-advantaged retirement accounts. In 2021, you can stash away up to $19,500 in your 401(k). That contribution limit increases to $26,000 for those over 50. At this point in your career, you want to take full advantage of your employer match—in fact, it's likely you're saving well above the limit. If you can contribute more—don’t let those funds go to waste. Even a small savings difference of 1% can turn into tens of thousands of dollars over time. Remember, you’ll pull money out of these accounts slowly over time. The majority of your savings will continue to compound throughout retirement, so the more you can get in there the better off you’ll be. As you near retirement, you may also be able to divert money away from things you no longer save toward. For example, the money you were contributing annually to your children’s education? Put that same amount annually into retirement investments. You won’t notice it “missing” because you were spending it on education all those years. Now, you’re redirecting it toward your future. When making your estimations, don’t forget about taxes . If most of your savings are in traditional 401(k)s or IRAs, you will pay current tax rates on all distributions you take from your accounts. With that being the case, you also want to diversify your savings into other avenues that are taxed differently. This situation is where Roth conversions or holding some of your savings in taxable accounts can give you some tax diversity and flexibility in retirement. Conclusion By now, you know your goals and how much you should save—and how far off that goal you may be. It’s time to meet with a financial advisor to create a strategy for your savings and investments that will keep you on track for your retirement goals. Various factors can influence how much retirement savings you should have on hand. For example, how much and when will you file for social security? Will you have a pension? How much will you spend in retirement? Is most of your savings in tax-deferred accounts, like a 401 (k) or IRA, or in taxable accounts like a brokerage or trust account? The answers to these questions can result in vastly different retirement savings needs. Covenant Wealth Advisors is a fiduciary investment advisory and financial planning firm that specializes in retirement planning. We know how to structure a savings plan to make sure you can retire on your terms and pay as little in taxes as possible. Need help getting on track? Contact our team of financial planners today . We help individuals all across the United States. For more retirement reading, be sure to download our must-have retirement planning checklists . About Mark Fonville, CFP® Mark is a personal financial advisor and the President of Covenant Wealth Advisors. He manages investment portfolio and provides retirement income planning for individuals age 50 plus who have over $1 million in investments. He has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule a call. Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. We provide investment advisory, financial planning, and tax planning services to individuals. Investments involve risk and does not guarantee that investments will appreciate. Past performance is not indicative of future results. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Disclosures Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Healthcare benefits are an important part of your financial plan. Since medical costs can consume a significant amount of your savings, you should make sure you understand your health benefits to get the most value possible. At Ferguson, you have several healthcare benefits available to you. But, navigating the ins and outs of your Ferguson Healthcare Plan can be complicated. Let’s get started on helping you simplify your health benefits at Ferguson. Your medical coverage At Ferguson, you have a choice between a Consumer-Directed Health Plan (CDHP), or a Preferred Provider Organization (PPO). The CDHP is a flexible, high-deductible plan offered in combination with a Health Savings Account (HSA). The PPO provides flexibility as well and offers a lower rate for in-network services. Choosing the PPO coverage eliminates the ability to contribute to the HSA. It’s up to you which plan you participate in. You can choose, or change, your plan during the Annual Enrollment period each year. If you are currently enrolled in the PPO or CDHP, and you do not make any changes to your benefit elections during Annual Enrollment, you will continue on your current plan. As noted in this guide , there are new premiums and some plan changes in 2020. Specifically, there is a 3.7% rate increase across all salary bands and coverage tiers, and Live Health Online visits under the CDHP are now $59 before the deductible has been met. There are a few specific items to remember concerning your CDHP: If you are enrolled in the CDHP, you will pay the full cost of medical and prescription coverage until the plan deductible has been met. You may use your HSA debit card for health care expenses. After the deductible has been met, you are responsible for 20 percent of your in-network medical expenses and prescription costs (subject to minimum and maximum amounts) until you reach the out-of-pocket maximum. A comparison of the plan deductibles and out of pocket maximums are outlined below: PPO Deductible: In network, $1,000 single, $3,000 Family Out of network, $2,500 single, $6250 family CDHP Deductible: In network, $2,200 single, $5,400 family Out of network, $4,400 single or $10,800 family PPO Out of pocket maximum In network, $5,050 single, $10,100 family Out of network, $9,600 single, $19,200 family CDHP out of pocket maximum In network, $6,550 single, $13,100 family (includes prescriptions Out of network, $13,100 single, $26,200 family (includes prescriptions) Breaking down the Health Savings Account If you choose the CDHP as a first-time enrollee Ferguson will contribute $500 for an individual, and $1,000 for family coverage, into your HSA. If you are currently enrolled in the CDHP, you will receive an additional $500 regardless if you are enrolled in single or family coverage. You can contribute in addition to what Ferguson contributes, up to the annual HSA limit. For 2020, the limits are $3,550 for individuals and $7,100 for family coverage Individuals who are over age 55 may contribute an additional $1,000 Any contribution Ferguson makes to your HSA must be included in your annual limit If enrolled in the CDHP, you want to take advantage of this additional health savings vehicle. HSAs can play a vital role in your long-term savings efforts. With triple the tax benefits (tax-free contributions, growth, and distribution) and compound savings year to year, an HSA can present many long-term financial planning opportunities. Healthcare Flexible Spending Account You must re-enroll during Annual Enrollment if you wish to contribute to your FSA in 2020. Unlike the HSA, you are only permitted to roll over up to $500 of unused funds in your health care FSA account. Any remaining balance is forfeited. Terms stipulate that you have to re-enroll both the health and dependent care FSA each year, or you will not be able to participate in the program(s) for 2021. During 2020, you may use your FSA health care debit card for 2020 reimbursable expenses only like prescriptions, contacts, glasses, specialist needs, etc. After Dec. 31 do not use your debit card for any claims incurred. For reimbursement, submit claims in your online WageWorks platform. Please note that if you are switching from the PPO plan to the CDHP plan then you will need to use up all of your prior year FSA balance before becoming eligible to contribute to the HSA. Delta Dental Plan Details Have you scheduled your bi-annual cleaning yet? Now is the time to do so. Remember, you can use your FSA funds to help cover any additional costs. Ferguson uses Delta Dental as their insurance provider. Let’s take a look at the specifics of the plan. The calendar year deductible is $50 for individual or $150 for family and applies to both dental and orthodontic services. The maximum per person enrolled for calendar year dental is $1,500. That means that anything over that amount you are responsible for. There is also a lifetime orthodontics limit of $1,500. Blue View Vision Select You have two choices of vision plan at Ferguson: Gold or Silver. The gold plan offers more benefits, and fewer services require a copay compared to the Silver plan. It’s crucial to choose a plan that will work best for you. Those who just need a routine eye exam might not have the same needs as someone with a vision condition or ever-changing prescription needs, for example. Remember, if your vision needs change, you can update your converge during the open enrollment period. Participate in the Wellness Program Ferguson has a wellness program that encourages healthy living and activities. This system is completely optional and open to those who are enrolled in a medical plan or not. Through the wellness program, you can earn rewards by completing certain health and fitness-related activities. If you are enrolled in a medical plan, you can earn rewards by getting a routine physical, completing a maternity program, or going through a smoking cessation program, for example. When you complete a task or challenge, you earn rewards. It could be in the form of a company step challenge or active minutes or even mindfulness. There are many challenges and activities that you can check out designed to keep you moving and healthy. The bottom line Your Ferguson Healthcare benefits are extensive. While we have discussed a comprehensive overview today, you must take some time to review your benefits packet this year. That way, you’ll have a deeper understanding of what is offered and how to choose the right plan for you. If you’d like help maximizing your Ferguson benefits and developing a personalized financial plan for retirement, give our team a call and we’ll be happy to help. Mark Fonville, CFP® Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors , an award winning wealth management firm in Richmond and Williamsburg, VA. Schedule a free intro call with Mark Disclaimer: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Covenant Wealth Advisors is not affiliated with Ferguson. Ferguson benefits may change. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

401(k) plans are one of the most popular employer-sponsored retirement plans available. Alongside a reliable means of saving, they also allow for employer matching contributions and introduce a variety of tax-planning strategies. Download our essential retirement checklist for more helpful tips and considerations to retire with confidence. For many, a 401(k) plan is the most important tool to build retirement savings and support lifestyle needs in retirement, making it essential to understand your Huntington Ingalls 401(k). Although there are commonalities among 401(k) plans, each employer has leeway in what they offer. In this article, we will look at the fundamental elements of the Huntington Ingalls 401(k) plan, and how to take full advantage of the plan features. What is a 401(k) and How Does it Work? A 401(k) is a tax-advantaged defined-contribution plan sponsored by your employer to facilitate saving and investing for retirement. Upon its conception, Internal Revenue Code Section 401(k) was enacted to allow deferral of compensation for stock options and bonuses. By the early 1980s, the plans opened up to salary reductions, and companies started to favor 401(k) plans over traditional pensions. Between cheaper maintenance and less company investment risk, 401(k) plans rapidly replaced their defined-benefit predecessors. Your contributions to the Huntington Ingalls 401(k) are made by salary reduction, also known as elective deferral, which simply means you direct a portion of your salary to the plan instead of receiving it in your paycheck. Generally speaking, elective deferrals can be made on a pre-tax, after-tax, or Roth basis. It’s up to each plan to decide what they offer, and not all options have to be represented. The mechanics of elective deferral work in your favor. Since contributions are automatically deducted, you don’t have to actively think about them or plan for it. Investing at regular intervals when you get paid is a healthy practice too because the money is immediately invested in the funds you choose, instead of sitting in cash until you decide to contribute. Over several years, compounding returns have the potential to make a significant difference. Huntington Ingalls 401(k) Your Huntington Ingalls plan offers each type of contribution, up to 75% of your compensation. Let’s see how it works. Pre-tax 401(k) contributions. Contributions are deducted from your current-year income, up to the annual limit. For 2020, that limit is $19,500 plus an additional $6,500 for people 50 and over. Contributions and earnings are taxed at withdrawal. Roth 401(k) contributions . Same limits as pre-tax contributions, but taxed differently. Roth contributions are not deducted from current-year income, but contributions and earnings are not taxed as they grow and can be withdrawn tax-free upon retirement. After-tax 401(k) contributions . Not deducted from current-year income. Contributions are withdrawn tax-free, but earnings are taxed at withdrawal. The limit works differently for after-tax contributions and is based on total contributions to the plan from all sources. For 2020, all contributions to the plan cannot exceed $63,500 for people 50 and older. Because of the contribution choices possible in the Huntington Ingalls plan, you have several ways to save and take advantage of tax-planning opportunities . These strategies aren’t trivial and can make a meaningful difference in the amount of disposable income you have in retirement. You need to decide how you want to treat your contributions carefully. Consider your current and future tax rates, other sources of retirement income, and how much you can or need to save . Build Tax Free Income with an In-Service Distribution Rollover Everyone wants tax-free income in retirement. For many Americans, this can be achieved by contributing to a Roth IRA. Unfortunately, Huntington Ingalls executives and high income earners make too much money to qualify for contributing directly to a Roth IRA. So, what can you do? Known loosely as a "Mega Back-door Roth IRA", the Huntington Ingalls 401(k) offers the ability to sidestep Traditional Roth IRA income and contribution limitations. By taking the after-tax contribution feature one step further, Huntington Ingalls employees who are age 59 1/2 have the ability to complete an in-service distribution rollover from the 401(k) plan into a Roth IRA and Traditional IRA. The main benefit here is the ability to move the after-tax dollars into a Roth IRA and thus receive tax-free growth. The back-door Roth IRA strategy is available regardless of your income level. Keep in mind that the gains from the after-tax dollars will have to be placed in a Traditional IRA to continue to receive tax-deferred growth. Also note that not placing the in-service distribution funds into another retirement account (e.g. Traditional IRA & Roth IRA) could result in the distribution being taxable. Matching 401(k) Contributions Huntington Ingalls matches your 401(k) contributions depending on your business unit. There are also various sub-plans with unique matching structures. Sub-Plan A: 100% of the first 2%, 50% of next 2%, and 25% of the next 4% of contributions Sub-Plan CC: 100% of the first 2% and 50% of the next 2% of contributions Sub-Plan D: No company match Sub-Plan GG: 100% of the first 1% and 50% of the next 2% of contributions Sub-Plan AMSEC: 45% of tax-deferred contributions, up to a maximum annual match of $2,500 (2020) Sub-Plan CM: 100% of the first 2% and 50% of the next 2% of tax-deferred contributions Sub-Plan SN3: 100% of the first 2%, 50% of the next 2%, and 25% of the 4% of tax-deferred contributions Sub-Plan UPI: 100% of the first 2%, 50% of the next 2%, and 25% of the 4% of tax-deferred contributions Why Should You Care About a Huntington Ingalls Match? Your employer match is just about the easiest money you will ever make. Think of the match program as an instant return on your investment. You’ll have very few opportunities outside of 401(k) matching contributions to instantly earn a 100% return! You should take full advantage of any match. Just like your own contributions, employer contributions earn compound returns over time, which makes a significant difference in your total balance at retirement. Huntington Ingalls matching contributions vest at the end of three years, so they belong to you as long you have worked there for at least three years when you leave or retire. Investment Options The Huntington Ingalls 401(k) has plenty of low-cost index funds available to build a portfolio that helps you meet your retirement goals. We are huge fans of index funds because they are generally well-diversified, low-cost, and managers of the funds don’t try to time or predict the stock market. Instead, index funds focus on a buy and hold approach to investing. While no investment is guaranteed, we like that Huntington Ingalls provides these cost-effective investment options. If you aren’t interested in choosing your funds, you also have several target-date funds available. Download our essential retirement checklist for more helpful tips and considerations to retire with confidence. Your Retirement, Your Way Your Huntington Ingalls retirement plan provides you with many opportunities to set yourself up for a healthy retirement . But, a secure retirement won't happen on it's own. It's important that you start implementing key strategies early. Be sure you take full advantage of the generous benefits you have available and get advice early. We’ve helped many employees at Huntington Ingalls prepare for and enjoy retirement. If you are in your 50s or 60s, c ontact us and get objective advice on how to integrate your Huntington Ingalls 401(k) plan with your overall retirement plan. We'll help you clarify your goals, provide powerful insights to help achieve them, and partner with you long-term to keep you on track. From growing your wealth, to reducing taxes, to making smart decisions with your money, we can help. Ready to learn more about how we can help you retire? Schedule a call today ! Mark Fonville, CFP® Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors , and award winning wealth management firm in Richmond and Williamsburg, VA. Schedule a free intro call with Mark Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Covenant Wealth Advisors is not affiliated with Huntington Ingalls. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like accounting, tax or legal advice, you should consult with your own accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Information contained in this article were retrieved from sources that are deemed to be reliable. Registration of an investment advisor does not imply a certain level of skill or training.

Last year, the unexpected bear market in bonds threw markets into turmoil and raised questions about fixed income's role as a bulwark against volatile stock prices. After 40 years of falling inflation leading to lower interest rates and ever-growing bond values, it can be difficult for investors to reconcile this new reality with their long term investment strategies. The outlook for bonds in 2023 is on top of many investor's minds. Should you keep bonds and fixed income in your portfolio? Are bonds still a good way to diversify? While temporary downturns may cause uncertainty around your bond strategy today, maintaining a patient outlook is paramount - especially when managing portfolios over multiple cycles. Free Download: 15 Free Retirement Planning Checklists [New for 2023] It is too early to make any definitive predictions, however this year the trend in bond interest rates has been significantly different from last. Rather than continuing an upwards trajectory like in past year, after reaching its peak of 4.2% at the end of October 2022, 10-year Treasury yields have begun to fall - something economists and investors had not anticipated. Last week's Consumer Price Index data indicated that overall inflation had decreased in December for the first time since June, with core inflation still rising but at a slower rate than before. Prices of new and used vehicles have dropped significantly, providing some relief to consumers; additionally landlords may be offering more favorable rates on leases as they roll over which could further reduce shelter costs. Bond Returns are Positive Year-to-Date The rising cost of living is often an intimidating force for consumers, but recent news about inflation should bring a glimmer of hope. After reaching 6.5% higher compared to the year prior, Treasury Inflation-Protected Securities (TIPS) are now priced with expectations that annual inflation will be only 2.2%. With easing interest rates and the hopes of Fed rate hikes being paused this year, it appears there may soon be some relief from climbing prices - creating optimism in economic outlooks across the nation! Free Download: 15 Free Retirement Planning Checklists [New for 2023] Last year's decline in bond prices has presented the perfect opportunity for long-term investors to maximize their expected returns going forward - with bond yields now significantly more appealing. This phenomenon can be attributed to the relationship between interest rates and bond prices: when one rises, the other one falls. In 2022, bond prices declined thus leading to increased interest rates. Bonds Are Yielding More Than They Have in 14 Years Bond yields are now at their highest levels in more than a decade, presenting investors with the unique opportunity to purchase fixed income securities that offer higher returns and increased diversification within their portfolios. With an average yield of 3.9%, investment grade Treasuries have yielded significantly above its 1.7% since 2009 while corporate bonds generate 5% and high-yield bonds 8%. These substantial gains stand as a stark contrast compared to just 14 years ago when investors had little other option but take on more risk for comparable rates of return. Corporate bond yields and credit spreads Are Improving Despite the possibility of an economic slowdown, credit outlook remains optimistic - with market expectations pointing towards a mild recession and companies well-positioned to repay debts. Recent months have seen improved spreads on credits as positive figures for the job market continue, along with signs that Federal Reserve tightening could be slowing down. Despite positive momentum early this year, investors must be aware of potential surprises on the horizon. A standoff in Washington could have negative repercussions for bond markets. Surprises often occur as you may recall when Standard & Poor's downgraded U.S debt back in 2011. That hurt bond markets in the short-term. Additionally, commodity prices and supply chains may suffer if geopolitical tensions worsen or credit default rates rise with a worse-than-anticipated slowdown domestically or abroad respectively. Free Download: 15 Free Retirement Planning Checklists [New for 2023] Investing in bonds now can be intimidating based on recent events over the past 18 months. But, it also presents an opportunity now that bond yields are higher. With the right approach and steady commitment to long-term planning, investors have an opportunity to position their portfolios for success over years and decades! So, what's the bottom line? Despite potential bumpy roads ahead, keeping a balanced portfolio with bonds can help offset the risk of stocks. Interest rates may be rocky at times but if investors stay consistent and stick it out long-term, maintaining the right allocation to bonds in your portfolio is still a prudent approach to investing. Schedule a free retirement consultation with Covenant Wealth Advisors today! Mark Fonville, CFP® Mark is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors specializing in helping individuals aged 50 plus plan, invest, and enjoy retirement without the stress of money. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule a Free Consultation Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

A Roth conversion in retirement can provide you with several benefits like lower taxes, reduced RMDs, and greater flexibility. But is a Roth conversion in retirement the right strategy for you? We walk you through some points to consider in this article and have an easy-to-follow guide you can use as well. The Fundamental Difference Between Roth and Traditional Accounts (And Why It Matters So Much) The key to understanding the benefits of a Roth conversion in retirement is knowing how each account type’s withdrawals are taxed. Taxing Traditional IRA Accounts In general, you can deduct contributions to a traditional or tax-deferred retirement account on the front end, assuming you meet certain income limitations. Keep in mind that you may be unable to make deductible contributions to a traditional individual retirement account (IRA) if you’re covered by a workplace retirement plan or if your gross income exceeds certain limits. The IRS doesn't tax the growth of the money until you withdraw the funds after age 59 ½, at which point you'll pay income tax on the distribution. If your entire retirement savings is in tax-deferred accounts, all of your income will be taxable. Want a comprehensive guide on determining if a Roth Conversion is right for you? Download our Roth conversion workflow here . Taxing Roth Accounts Roth IRA contributions, unlike IRAs and 401ks, do not receive an up-front tax deduction. However, you don’t owe any taxes on qualified distributions when you withdraw the funds in retirement. That includes withdrawals of any investment gains over the years. Tax-free withdrawals bring much more flexibility to your retirement income plan. Tips On Where To Save Deciding whether to invest in a traditional or Roth account depends on your tax bracket. You’ll evaluate your tax rate now compared to what it likely will be in retirement. If you anticipate your tax rate will be higher in retirement, it’s often in your best interest to pay the taxes now so that you can withdraw funds tax-free in retirement. In other words, a Roth makes sense. But what if you already have tax-deferred savings? Here’s where a Roth conversion comes in. What’s a Roth IRA Conversion? A Roth conversion allows you to convert money from a traditional account into a Roth account. By initiating a conversion (or Roth rollover), you’ll owe income taxes on the amount you convert in the current year, but that money enjoys the benefit of tax-free growth and withdrawals in the future. You can even take advantage of this backdoor Roth strategy if you are already retired, although there are some things to watch out for that we will talk about in a minute. Be aware, though, that if you are subject to current required minimum distributions (RMDs), you still have to take your RMD for the year before a conversion. RMDs themselves cannot be converted. So as you're planning for your retirement, how can you know if a Roth conversion is the right move for you? How to Tell if a Roth Conversion In Retirement is Right For You A Roth conversion can be the right move for many reasons. Any one or a combination of the following can mean a conversion is a good choice for you. You presume taxes will be higher in the future . It’s a fact that our current tax brackets are historically low. Given the sizeable national debt (Close to $29 trillion in 2021!), many believe that those rates will go back up at some point. If that’s the case, then converting and paying tax now would save you money in the long run, even if your current tax bill is a little higher. You will be in a higher tax bracket in retirement . If you can clearly see that with your current savings you’ll be pushed into a higher tax bracket in the future, converting may allow you to avoid that higher bracket. Yes, your taxes will go up now, but it may save you even more throughout retirement, a time where being tax conscious can have a significant impact on your lifestyle and legacy. You had a low-income year and are in a lower tax bracket than typical . Maybe you were laid off or are a business owner, and things were slow. If your taxable income is lower than average, you could take advantage of that by converting some of your savings. You are concerned about passing money to your heirs . The SECURE Act eliminated the “stretch provision” for inherited IRAs, meaning most non-spouse beneficiaries have to withdraw all the funds within ten years. Getting rid of this rule could mean more taxes for your heirs. But Roth IRAs are not subject to RMDs, so you can let that money grow and pass it on as part of your estate plan. Tax diversification . Things change over time, and taxes are no different. Having savings that are treated differently for tax purposes provides you with the flexibility to adapt to changing circumstances and tax laws. When A Roth Conversion Might Not Be The Right Move Despite the potential benefits, a Roth conversion in retirement is not always the best option. A Roth conversion may not benefit you if: You are in or near retirement and will need to draw a significant amount of income from your traditional account . Adding a conversion on top of that withdrawal could drive your taxes up even more than you’ll be able to reduce in the future. You may not have time to recoup the tax hit by the time you need to withdraw from the Roth accounts. Your Social Security and Medicare are affected by your taxable income in retirement. Depending on your income, either none, half, or 85% of your Social Security benefits are taxable . A Roth conversion could push you over the line for hitting the next level. Your Medicare Part B premium also includes an adjustment based on your income (IRMMA). The amount could be up to several hundred dollars a month, so make sure to consider those tax implications. If you plan to donate to charities with your traditional IRA assets, the Roth conversion is not the best way to approach this goal. There’s no reason to convert and pay taxes when a Qualified Charitable Distribution (QCD) would allow you to avoid taxes on the gift anyway. Painting a clear picture of your tax liability is a critical component of your financial plan. At Covenant, we have in-house financial planners and tax professionals to help you create a comprehensive plan that meets your needs. Contact us for a free, no-obligation consultation to see if we can help you with Roth conversions and dozens of powerful retirement strategies. Disclosures Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Covenant Wealth Advisors is excited to announce that our firm was recently identified as one of the best financial advisors in Williamsburg, VA by Expertise.com for 2021. Expertise.com identifies the best financial advisors in Williamsburg, VA by implementing a thorough selection process including five main criteria. Availability Qualifications Reputation Experience Professionalism Expertise.com goes even farther by mystery shopping the companies they select. This means they have mystery shoppers call each company, identifying themselves as potential clients, to gauge knowledgeability, friendliness, and professionalism. Congratulations to our great team of financial advisors for always putting client interests first. Registration of an investment advisor does not imply a certain level of skill or training.

Transcript: Hello everyone and welcome to the third quarter Quarterly Market Perspectives. My name is Broderick Mullins and I am the Portfolio Manager at Covenant Wealth Advisors. I’ll be your host for this presentation. As was the case last quarter, this presentation has been revised to provide a better discussion of quarterly equity and fixed income performance along the framework of absolute returns, relative returns, and future expectations for market performance. We begin our discussion with a high-level look at a collection of major asset classes. As we can see from the illustration, U.S., international and emerging markets stocks were all lower during the third quarter, with Emerging Markets experiencing the largest decline of 7.4 percent for the quarter. Returns for U.S. and global bonds on the other hand were positive. Next, I’ll draw your attention to the upper right hand portion of the graphic. The US Dollar was up 4.8% for the quarter and up 0.4% over the last 12 months. Interesting to note, the movement of the US dollar matters because a strengthening US dollar can hurt your international stock performance and a weakening US dollar can improve your international stock performance. Now, Let’s look a little deeper at what was driving the returns of stocks and bonds. We’ll start by taking a look at how global markets performed for the quarter, and we’ll isolate the performance between U.S. stocks and developed international stocks. The two charts show the performance of different investment styles between the U.S. and international stocks. The bright blue bars represent the performance of different investment styles, and the dark blue bars represent the total market performance for the region. U.S. returns are measured with the Russell indexes, and international market returns are measured with the MSCI World xUS index series, which represents global developed market performance, excluding the United States. As we can see from the dark blue line on the chart located on the left, the U.S. market was down 0.1 percent in the third quarter, compared to down 0.4 percent for developed international markets depicted on right side of the page. Continuing the trend from the second quarter in the U.S., large growth was the dominant style. However, we saw small cap stocks of all styles outperform their large cap counterparts internationally. It’s important to remember that the performance of one quarter is filled with statistical noise that is difficult to make sense of in such a short time frame. Now we take a longer view to see how different investment styles have performed for standard periods ending September 30, 2021. Looking at annualized returns in the U.S., we can see extraordinary returns for the one year as the recent performance still shows the effects from coming out of the COVID market downturn. Small value performance far exceeded the general market over the last year, returning more than 63 percent compared to nearly 32 percent in the U.S. However, we see that small value has underperformed most other styles at the 3, 5, and 10 year investment horizons. Consequently, we expect that portfolios that have a small value tilt, such as those that we typically design for clients, will have underperformed portfolios that are market-cap weighted or tilted to large growth stocks at these longer investment horizons. It is important to recognize, however, that despite the under performance, small value has still returned a formidable 13.2 percent per year in the U.S. for the last ten years. Turning to international markets, we see small cap value has led the pack over the one year period albeit at a lower total return compared to the U.S.. At the longer time horizons, we see small caps, particularly neutral and growth stocks, offering the highest returns over the 10 year period at 10 percent and 11.1 percent respectively. Relating the prior slides, we see that international markets have under performed the U.S. market at every horizon, with the 3 year performance trailing by nearly 8 percent per year and the 5 and 10 year performance trailing by 7.8 and 8.4 percent per year respectively. Given the higher U.S. return, we expect portfolios concentrated in U.S. stocks to outperform a globally diversified portfolio. However, as we’ll see in the next slide, these relative performance numbers aren’t reason enough to abandon international stocks. Thus far, we’ve discussed quarterly performance on a relative and absolute basis. Now, let’s take a look at current stock market valuations and how they relate to future expectations of market performance. The charts on this slide show how expensive stocks are by measure of the price-to-earnings ratio, a very common metric used to value equities. The higher the ratio is, the more expensive the asset class is overall. Thought of another way, these values depict how expensive one dollar of earnings are. For example, as we can see in the chart on the top left, the average dollar of earnings for the total U.S. stock market costs roughly $24. Internationally, as we can see in the chart on the top right, earnings are cheaper at roughly $17 per dollar of earnings on average. The values represented here used historical fund and ETFs to establish the price ratios, and the average P/E is reflected by the dotted line on the chart. These averages start in the first quarter of 2004 for U.S. measures, and in the 4th quarter of 2006 for international stocks. So the average is roughly 18 years in the US and 15 years internationally. In addition to identifying relatively cheap segments of equity markets, these ratios also help set the table of forming expectations about the future. Although we like to say our crystal ball is always cloudy, there tends to be an inverse relationship between current equity valuations and future performance. Generally, investors will bid up the price of certain stocks in expectation of higher future earnings. Therefore, as a particular group of stocks becomes more expensive, their expectations for future earnings growth are lessened because investors are less willing to pay an ever-growing premium for those expected earnings, especially when earnings can be bought elsewhere for less. I’ll emphasize that this is a long-term relationship, and as we’ve already seen on previous slides, there’s a wide range of possible short-term outcomes. Here we have the same analysis but isolating US equities so we can see how valuations compare across different styles. Recalling the annualized performance slides, we know that large cap growth has had an exceptional 10 year period. We can see that the growth in prices has exceeded the growth in earnings as the P/E ratio has climbed to 35.3 to close the quarter. Small cap value, on the other hand, even with the rebound in the year, still has a P/E ratio under 13 and under the average of the last 18 years. Although many investors may be interested in chasing the returns of large cap growth companies, we would point to these valuation charts as one reason to stay the course in a diversified portfolio tilted to smaller, distressed companies. Next we’ll take a look at fixed income performance, the shape of the current yield curve, and how the market is currently pricing inflation. The charts on the screen show the average performance of different bond maturities and the segments of the fixed income market that we commonly track. We typically prefer investing in bonds that are shorter maturity and higher quality compared to the broader market. In the chart on the left side, we see short-to-intermediate term bonds posted generally flat performance. The 3-7 year maturities lost 0.1 percent for the quarter, but were outperformed by longer dated bonds as the longer end of the yield curve fell. It’s worth noting that the extreme price fluctuations that we tend to see in the 10-20 year bonds are why we like to keep maturities short to intermediate. Although it was a tail wind this quarter, we’ve seen plenty of quarters historically where the yield curve has moved against us. The chart on the right shows the performance of different intermediate maturity credit quality bonds. We see that inflation protected bonds have continued to be bid up as more investors seek to hedge their exposure to inflation. Treasuries had flat performance for the quarter, while corporate and municipal bonds returned 0.1 and -0.2 percent respectively, indicating tightening credit spreads and investors showing a slight preference for corporate debt as opposed to municipal debt during the third quarter. Next we’ll look at the treasury yield curve and what it means for returns going forward. Here we plot the yield curve to show us the current yields for treasury bond investments at different maturities. The bright blue line represents current rates, the dark blue line represents interest rates at the end of 2020, and the gold line represents rates one year ago. In short, the early part of the curve is steeper and is elevated overall compared to the end of 2020 and to one year ago. Practically, this means that expected returns on fixed income are higher, but that treasury returns would have been negative year to date and over the one year period. It’s worth noting that most of the yield curve changes year to date happened in the first quarter, and that rates continued to rise slightly between the end of the second quarter and the end of the third quarter, which is why we saw generally flat performance from bonds in the third quarter despite seeing higher yields compared to the first part of the year. Finally, we plot the markets’ forecast of inflation by taking the difference in yields between U.S. Treasury bonds and TIPS at different maturity levels. Like the last chart, the bright blue line represents current inflation expectations, the dark blue line represents inflation expectations at the end of last year, and the gold line at the end of the third quarter last year. Consistent with what many are expecting and what we’re hearing in the media, inflation expectations are higher compared to this time last year or even compared to the end of 2020. It is important to remember that these levels of inflation are baked into prices today: the markets are pricing an average inflation rate of 2.5 percent per year for the next five years, and the market collectively expects inflation to exceed the Fed’s 2 percent target over the next 30 years. Not only are these expectations baked into bond prices, but they’re also baked into equity prices. Making a bet on ‘higher’ inflation would mean that we expect inflation to exceed the current forecast – the market already expects inflation to be higher than what was previously expected over the last year. And with that, we’ve reached the conclusion of the presentation. As always, I hope you learned something new and if you are an existing client, thanks for your trust. Registration of an investment advisor does not imply a certain level of skill or training.