“What’s Next Lecture Series” Event Sponsored by Pacific Mountain Advisors!

October 12, 2011

We would like to invite community members from the Santa Cruz Area to join us for a What’s Next Lecture Series Event to be held next Wednesday October 19 at 7:30 p.m. at the UCSC Music Center Recital Hall.

Pacific Mountain Advisors is sponsoring this lecture by Jacqueline Novogratz, author of The Blue Sweater: Bridging the Gap Between the Rich and the Poor in an Interconnected World.

We hope you can join us for what’s sure to be a thought provoking discussion. Make sure to save 45% by purchasing your tickets in advance here online.

We look forward to seeing everybody there!


Part Three: Retirement in Times of Uncertainty – Managing Retirement Income

July 8, 2010

For years, many retirees and people near retirement could bask in the near certainty that with sound asset allocation and a long term investing perspective, they could expect a steady and possibly even a growing stream of income during retirement.  Unfortunately, the recent global credit crises and ensuing recession has forced many investors to reevaluate their retirement income strategy.  Given that we are in a period of unprecedented uncertainty and global economic turmoil, what can be done to help provide a stress free retirement?

Clearly define your current and future income needs
The amount of income you require changes over time and is different for everyone but there are generally four phases that are relevant to most individuals.

  1. The Spending Spree: During the first phase, people tend to initially spend a bit more than they did while working because of pent-up demand for activities like traveling and remodeling.This phase typically last 2 to 4 years and spending tapers off over time.
  2. Reversion to the Mean: In the second phase, expenses tend to decline back to the pre-retirement level as the activities on people’s “want-to-do” list gets completed.
  3. The Golden Years: During the third phase, overall expenses usually decline even further as people settle into their golden years and become less active. However, a notable exception is that health care expenses generally rise during this stage and should be taken into account as part of any comprehensive financial plan.
  4. Accelerating Expenses: In the fourth phase, expenses can accelerate significantly due to the increased cost of health care and senior support services. Although this phase is typically the shortest, it tends to consume a relatively large portion of total retirement assets.

An understanding of these phases provides valuable insight into your potential  income needs and enables you to proactively plan for the future. It will also be helpful to consider both essential and discretionary income needs so that you can build some flexibility into your ultimate plan in order to respond to the many unanticipated future events that may occur.

Conservatively assess where you stand now
After projecting your future income requirements, the next step is assessing the likelihood that your resources will be adequate to meet these objectives. You should work with your financial advisor to establish reasonable assumptions for income growth, investment return, tax rates, inflation, etc. so that you will have a general idea regarding how close you will be to meeting (or exceeding) your goals. When making assumptions, it is best to use conservative estimates so that you won’t be taken by surprise by any unseen bumps in the road.

Create a strategy for success
After determining where you currently stand in relation to your goals, you can make adaptive choices to ensure success or you may decide that you don’t need a second vacation home and maybe your children can take on student loans or work part time to help cover education expenses. Delaying retirement, working part time and selling a primary residence are all common tactics for getting your financial plan back on track.

It’s also important to speak with your financial advisor about tactical distribution strategies such as whether to take distributions from your Roth or regular IRA first and what allocation of income versus growth investments is optimal.

Regularly review your strategy and progress
Life is an ongoing process of adapting to change and any retirement income strategy must be regularly reviewed and revised to ensure long term success. Changes to tax law, economic conditions, your personal life and health challenges are all things that could affect your strategy. Meeting with your financial advisor at least annually will help you stay informed and on track to meet your goals. Independent studies have shown that people who meet at least once a year with their financial advisor are more likely to feel confident about their future and to successfully achieve their retirement goals.

If you have any questions or concerns about your retirement strategy and progress, we would be happy to have a conversation with you so feel free to give us a call or send us an email.

All the best,
Pacific Mountain Advisors Team

Part Two: Investing in Times of Uncertainty – Low Risk and High Yield Strategies

March 26, 2010

In our previous post we emphasized the importance of having a comprehensive financial planning review as way to manage uncertainty and the never ending process of change. An important fundamental aspect of any personal financial planning review should include an analysis of your investment portfolio strategy. An investment strategy review enables you to incorporate new research and adapt to actual and probable changes in the global macro-economic landscape as well as your personal financial situation.

Since October 2007, we have seen the S&P 500 move from 1,565 down to 666 and then back up to 1,180. During that time, economic analysts made a wide range of predictions including a “small correction in housing” to a complete collapse of the financial markets leading to a second depression. Even now, there is nothing close to consensus on where the economy and market are heading due to pervasive and unprecedented systematic uncertainty. On one end of the spectrum, we have analysts forecasting a 1937 style double dip recession arising from sovereign defaults, deterioration in the commercial real estate market and a prolonged period of above normal joblessness which will eat away at consumer spending. However, there are analysts on the other side of the spectrum predicting a very robust recovery due to pent-up consumer demand supported by the expanding middle class in emerging markets.

The uncertainty arising from these widely disparate outlooks can make investment decisions all the more challenging. Fortunately, the ability to predict the future is not a requirement for successful investment management. At Pacific Mountain Advisors, we have observed over recent years that there is a suprisingly small correlation between performance metrics such as earnings/GDP growth and the prices of stocks. For example, the S&P 500 had one of its best performing years in 2009, even though unemployment was rising and GDP was contracting. Markets initially recovered last year as investors cheered that we had avoided a total global economic collapse, however, the subsequent stages of the rally took place because investors began speculating that economic conditions would dramatically improve resulting in the much ballyhooed V-shaped recovery. Although we would like to believe that the speculators are correct, we feel that it is wise to remain cautious and flexible until economic facts support this belief.

It’s easy to get caught up in the black and white hype of boom or bust, however reality is much more colorful and digging your heels in with either camp forces you into a situation where heads, you win – tails, you lose.  By remaining flexible and diversified we are better able to better manage volatility, reduce risk and benefit from the widest possible range of outcomes. For these reasons, we continue to be rooted in the core fundamentals of our value oriented  investment methodology such as diversification, cash flow and tactical asset allocation/rebalancing.

Since the founding of Pacific Mountain Advisors, our focus on intrinsic value, demand-based fundamentals and portfolio cash flow has helped us to substantially outperform the overall stock market on a risk adjusted basis. Although some aspects of our proprietary methodology have changed, our overarching principles remain untouched. We seek out investments that  A.) Are more conservatively valued relative to the overall market, B.) Have a history of paying substantial dividends that are growing (historically, reinvested dividends have accounted for over 40% of the stock market’s total returns), and C.) Stand to benefit from secular or demand driven growth trends such as clean energy or emerging economies. This low-valuation and high dividend approach enhances long term investment returns while also providing shorter term price support.

It is generally believed that nobody can reliably predict the future, however, not only is that technically untrue (you can predict that the world will continue to change and will be much different ten years from now), it also completely fails to address the real issue that you do not need to predict the future in order to effectively manage investments. Time spent trying to see into a crystal ball will surely be less productive than working with your financial advisor to  implement a diversified investment strategy customized to your individual situation and reviewing it on a regular basis. This will help ensure better outcomes by keeping your portfolio up-to-date with the constantly evolving markets as well as changes in your investment goals and preferences.

“I don’t look to jump over seven foot bars; I look for one foot bars that I can step over”.
– Warren Buffet

All the best,
Pacific Mountain Advisors Team

Part One: Planning in Times of Uncertainty – Review, Revise, Repeat

March 11, 2010

This may sound a bit like a Zen koan but if you are certain that uncertainty will continue and even increase then at least you are certain about that. Greek philosopher, Heraclitus first expressed this concept thousands of years ago with his observation that “the only thing that is constant is change“.

It is widely understood that the pace of change on the planet is accelerating and dramatic shifts in economic, social and political realms will occur with greater frequency. Unexpected and potentially disruptive events will continue to influence and shape our world during this period of transition as we move forward into the this next millennia. I’m hopeful about the long-term prospects for the economy but pragmatic regarding the shorter term effects that this increased volatility will have on individual lives and communities. However, expecting the unexpected allows you to broaden your perspective about what is possible and to position yourself with a strategy that will provide you with greater flexibility for responding to these issues.  Risk is always present, but at least we can manage our exposure to it. This awareness informs how we approach both portfolio management and financial planning for our clients.

Having an up-to-date comprehensive financial planning strategy that reflects changes in the global  investment landscape as well as any changes or probable changes to your financial situation and goals will help you make more coherent decisions and better navigate through these uncertain times. We have recently revised our fee and service model to incorporate comprehensive planning reviews for most of our clients. Below, are some of the areas of interest our clients have expressed, which serve to underscore the need for a regular planning review.

  • Retirement Planning: Recent studies indicate that retirement planning is one of the most significant concerns of U.S. workers and also one of the most neglected issues. Many Americans do not even have a financial plan and those that do have had to revisit their assumptions due to a change in employment, household income and in the value of their real estate and/or investment portfolio. The past few years have underscored the importance and value of regularly reviewing your retirement plan, investment assumptions and implementation strategies. People should assess the changes in their lives on a regular basis and incorporate the new assumptions into their overarching financial plan to reflect current realities and achieve the best possible outcome.
  • Monthly Cash Flow Analysis: Furloughs, lay-offs and declining revenues for the self-employed have put pressure on many household budgets, emphasizing the importance of reviewing your budget regularly and making revisions to ensure your financial flexibility.
  • Education Funding: Many college funding plans have been damaged by the market over the past few years. Coupled with the continued rise in education costs, these plans need to be reviewed and revised to reflect the current reality. Some may add more funds to make up the gap, alter investment parameters for a larger return, or simply delay withdrawal until Junior or Senior year.
  • Mortgage Management Strategies: Current mortgage rates are at historically low levels and the interest income that can be made on deposits are minuscule. For people in a position to refinance, it may make sense to pay off the balance and become debt free.

The most valuable aspect of the planning review is the dialogue that takes place during the review process. The facts inform the discussion but the iterative process of sorting through various options and concerns provides the insight one needs to make intelligent, informed decisions.

“Planning is bringing the future into the present so that you can do something about it now.”
– Alan Lakein

All the best,
Pacific Mountain Advisors Team

Beyond the Season of Giving: Tax Deductible Gifting

January 1, 2010

We hope everyone had a great holiday season and are enjoying 2010. The season of giving is behind us again and Pacific Mountain Advisors would like share with you an opportunity to give within our community while promoting financial literacy and economic justice at the same time.

Santa Cruz Community Ventures (SCCV) is non-profit (501(c)3) arm of the Santa Cruz Community Credit Union that teaches financial literacy and provides secondary education matching funds for financially distressed foster-youths in their teens. Under the Individual Development Account (IDA) program at SCCV, each young person in the program is required to save $500 from their part-time jobs while they finish high school, and SCCV will provide financial education and a 2-1 match of their savings  for a total of $1,000 (more information here).

At Pacific Mountain Advisors we value financial literacy and believe that an incentive program such as this is an excellent way to educate and promote positive behavior. We want to encourage your support of this excellent program and will offer a matching contribution for the first $500 contributed by clients and friends. Please help us promote financial literacy in our community by making a donation to Santa Cruz Community Ventures and the IDA program. You can donate online Here or write checks payable to “Santa Cruz Community Ventures IDA Program” and send them to:

Santa Cruz Community Ventures
IDA Program
Attn: Ellen Murtha
324 Front St.
Santa Cruz, CA 95060

Please feel free to give us a call with any questions that you may have regarding charitable donations and their tax benefits.

Wishing you all the best,
Pacific Mountain Advisors Team

What’s in it for You? – American Recovery and Reinvestment Act of 2009

October 13, 2009

I know that many of you may have heard about the American Recovery and Reinvestment Act of 2009, but I wanted to bring everyone’s attention to a document that goes into some major points of the legislation.  The document can be accessed Here.

The following are some key highlights from the document along with their corresponding page numbers:

  • Alternative Minimum Tax (AMT) Relief – Page one
  • Computers purchases qualify as 529 eligible expense – Page two
  • Education tax credit for couples with joint average gross income of less than $160,000 – Page two
  • Up to $1,500 tax credit for expenditures which improve home energy efficiency – Page twelve
  • Capital gains exclusion for the sale of a small business – Page five
  • Various other provisions which benefit small businesses – Beginning on page three

You may also want to check out this Financial Soccer Game created by Practical Money Skills for Life, a financial education program of Visa. Their website is one of the best financial literacy sites I have seen and is well organized with lots of interesting facts and tips.

I encourage all of you to share these websites and the information regarding the American Recovery and Reinvestment Act with all of your friends and family.

All the best,


Is the 2010 Roth IRA Conversion Right for You?

October 9, 2009

There is an important change in Federal law taking place in 2010 that will allow a one year window for anybody (regardless of income) to convert from a Traditional IRA into a Roth IRA. The details of this change are fairly complicated so I will break it down into the key need-to-know elements.

IRA’s provide tax breaks either up front or when money is withdrawn from the account; money grows tax-free while in both types of accounts. Traditional IRA’s allow you to take an immediate tax deduction on contributions, but you must pay taxes when money is withdrawn. Contributions are not tax deductible with Roth IRA’s but the money can be withdrawn later without paying any taxes on your gain.

Up until this change in law you could only convert an existing IRA into a Roth IRA if you met adjusted gross annual income limitations. Now that the government legislators have temporarily removed these constraints and offered us all the “privilege” of making a Roth Conversion, but does that mean we should take them up on it?

Reasons to Convert

  • You expect Federal tax rates to be higher than they are currently when you will be withdrawing from your account in the future.
  • You expect to be in a higher marginal tax bracket during the years in which you are withdrawing money than you are currently in.

Reasons to Not Convert

  • You expect Federal tax rates to be lower than the current levels when you will be withdrawing from the account. (This is very unlikely considering the dire fiscal situation of the U.S. Government. Taxes are more likely to increase than decrease.)
  • You expect to be in a lower marginal tax bracket during the years in which you are withdrawing money than you are currently in.

Important Issues to Consider

  • If you convert in 2010, you have the option to pay the taxes immediately in 2010, or split the payment of taxes  over 2011 and 2012. However you would be required to pay whatever the current rate is, which may be higher if congress raises taxes. Depending on the size of any tax increase, this may cancel out any positive effect of converting and may cause you to pay more taxes than necessary.
  • If you earn more in the future and end up in a higher tax bracket during the time you will be withdrawing money, you may have been better off not converting.

Due to uncertainty regarding future Federal tax policies, converting to a Roth IRA is likely to be less beneficial for most people than it would seem on the surface.  In general, a Roth conversion makes the most sense for:

  • Young individuals in low tax brackets who are beginning their careers
  • Semi-retired or retired individuals who will not be withdrawing from their accounts who currently qualify as low income
  • High net worth individuals that would be subject to estate taxes.

For people converting, t would also be advisable to pay all taxes in 2010 rather than deferring them because of the likely possibility that the government will raise tax rates for 2011 and 2012.

It is very likely that the Feds are simply using this change to try accelerating tax revenues, however, there are still some cases where a conversion makes sense. If you think a conversion might make sense for you, please feel free to give me a call or send an email with any questions you may have about your specific situation.

All the best,