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The weekly email that keeps you up to date on exciting Retirement topics in an enjoyable, entertaining way for free.

Special Announcement

Novus Financial Group is in the process of scheduling its first seminar of 2024. The topic of the seminar is Estate Planning and our special guest speaker is Lori Posani of the Posani Law Office (https://www.posanilawoffice.com). The seminar will be held in Columbus, OH. Stay tuned for more information on the agenda and how you can reserve your seat(s). Dates will be announced soon!

Exposing the Fed & Its Use of Shadow Banks

by Mark McCanney

Amid the intricate web of the financial industry, a growing pool of capital is quietly amassing beyond the watchful eyes of conventional regulatory frameworks. Recent findings by the Federal Reserve have brought to light a fascinating phenomenon: as of January's end, banks within the United States have propelled over $1 trillion in loans towards the increasingly influential sector known as “shadow banking”.

Delving into the Shadows of Finance

Shadow banking refers to the array of non-traditional financing entities that operate outside the stringent regulatory landscape that governs classic banking institutions. This sector comprises a varied collection of players including hedge funds, fintech organizations, prominent investment firms such as Goldman Sachs, and even specialized divisions within traditional banks. Contrary to regular banks that draw their funds from customer deposits, shadow banks source their capital through investments or loans, devoid of the federal insurance safety blanket. They serve as crucial intermediaries, linking conventional banks with investments or loans viewed as too risky, including startup ventures and high-risk mortgage loans.

Leading banks perceive involvement with shadow banks not as a gamble but as a strategic maneuver. A prime example is Citibank’s significant move of extending a $310 million loan to Sunbit, a buy-now, pay-later service, marking its grandest deal to date. Additionally, Wells Fargo has forged alliances with Centerbridge, a powerhouse in private asset management, by injecting billions into the commencement of Overland Advisor, a new business development venture. For Wells Fargo's CEO, Charlie Scharf, such partnerships underscore the bank's dedication to unparalleled client service.

The Escalating Worries

However, the swelling tide of loans from traditional banking institutions to their shadow counterparts is sparking worry, underlining potential forthcoming risks:

The past year witnessed these loans balloon by roughly 12%, significantly dwarfing the overall loan growth rate of a mere 2%. By the conclusion of 2021, shadow banks were at the helm of managing close to 14% of the global financial assets.

Regulatory voices, including that of Treasury Secretary Janet Yellen, have begun ringing alarm bells. Addressing the Senate Banking Committee, Yellen emphasized the fragile nature of shadow banks, particularly their dependency on short-term financing, which might falter under market duress. The concern is that a crisis could trigger a hasty retraction of credit lines, possibly triggering a shadow banking entity's downfall.

Shedding Light on Shadow Banking's Enigma

In a bid to mitigate these shadows, regulatory authorities are pushing for enhanced clarity within the transactions bridging commercial and shadow banks. Presently grouped under the vague umbrella of "non-depository financial institutions," there's advocacy led by the Federal Deposit Insurance Corporation for more nuanced categorization. This includes distinct tags for private equity firms and credit funds. While this strategy may not directly impede the capital inflow to shadow banks, its goal is to foster transparency. It endeavors to offer a crystal-clear insight into this shadowy financial dominion, thereby enabling more judicious decision-making processes.

The trajectory of shadow banking is an intriguing aspect of the financial universe, often hidden from plain view. By exposing its mechanisms and understanding why it draws significant interest from traditional banking sectors, stakeholders can navigate this dimly lit landscape with greater foresight and caution. In doing so, the financial industry at large can work towards a future where growth is balanced with stability, ensuring the shadows do not engulf the light of economic prosperity.

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TIP OF THE WEEK

Smart Retirement Strategies: How to Make Your Money Last as Long as You Do! Part III of IV

by Eric Seyboldt 

In Part III of this series, let's discuss establishing your Retirement Paycheck.

Navigating retirement withdrawals can be a tad overwhelming, but fear not! Let's dive into how you can enjoy your hard-earned nest egg without the fear of running through it too quickly.

1. The Magic of the 4% Rule: Imagine if there were a magic number to help guide your retirement withdrawals. Well, say hello to the 4% rule. This handy guideline suggests withdrawing 4% of your retirement savings in the first year of retirement, then adjusting that amount for inflation each year after. This has become the commonly accepted roadmap for your retirement income, but remember, it's not one-size-fits-all. Your personal journey might need some tweaking to this rule to perfectly fit your lifestyle and goals.

2. Customize Your Strategy: Your retirement is as unique as you are. That means your withdrawal strategy should be tailored and customized to suit your individual needs, tax rates, life expectancy, and the market's ups and downs. It’s okay to start with the 4% rule as a baseline, but let's fine-tune it together to ensure it aligns with your dreams and circumstances. With strategic planning, can we get it to 7% or 8%? Imagine how that could improve your standard of living!

3. Review and Adjust Regularly: Think of your retirement strategy as a living, breathing plan. It needs check-ups and adjustments, just like a garden needs tending. Life throws curveballs, markets fluctuate, and personal needs change. Regular reviews of your withdrawal rate can help you stay on track and adapt as needed, ensuring your retirement funds continue to support you through the years.

Creating a sustainable withdrawal strategy doesn't have to be a solo journey. In fact, it shouldn't be. With expert guidance, you can navigate the intricacies of retirement income with confidence and peace of mind.

Feeling a bit overwhelmed? Curious about how to tailor the 4% rule to your situation? Or maybe you’re wondering how to adjust your strategy in response to market changes? We're here to help!

Reach out to us for a complimentary, 10-minute consultation call. Let's explore together how we can help you maximize your income in retirement, ensuring your golden years are as fulfilling and worry-free as you’ve always imagined. Email us or give us a call today to schedule your consultation. Let's make your retirement dreams a reality!

Client Q & A of the Week - Pay Uncle Sam Now, or Pay Him Later?

Client: Eric, should I bite the bullet and convert my pre-tax accounts (IRAs, 401ks, etc) to after-tax or tax-free accounts by paying taxes now?

Eric: I would re-phrase the question and say “Should I pay taxes on the mountain or the molehill?”

In the financial landscape, aligning your retirement strategy with the optimal tax advantages is akin to securing a smooth sail toward financial freedom.

Transitioning your traditional IRA funds into an after-tax or tax-free account is a strategic move akin to settling your coffee tab at the order counter and then savoring each sip with absolute peace of mind. If you listened to our radio show then you may have heard us refer to a strategy that we often use with our clients that we call the “All-In-One” plan or the “Roth On Steroids” plan. Here, you address the tax obligations upfront, thereby dispensing with concerns about future tax on withdrawals. You also leverage the after-tax dollars to incorporate other important benefits for your retirement plan like long-term care coverage and/or life insurance. This makes every dollar work as hard as possible for you.

The foresight in managing taxes underscores a proactive approach to securing the unfettered enjoyment of retirement savings, a testament to the freedom and certainty that a Roth IRA affords retirees.

The Tale of Embracing Tax Freedom: A Personal Insight

Let's delve into the narrative of a retiree, affectionately dubbed Tara for this discussion, who opted to convert a portion of her retirement nest egg into a Roth On Steroids account. Years down the lane, her decision bore the fruit of sheer contentment. In her retirement years, Tara reveled in the fruitage of her savings, unencumbered by the gnawing worries of tax deductions. The crux of her satisfaction wasn't merely anchored in the tax savings but was significantly buoyed by the overarching freedom and certainty that her choice ushered in for her sunset years. In addition, when she was ready to move into an assisted living facility, her account provided her with a huge bucket of funds to pay for years at the best home she could find without worry of depleting her investments.

The Alternative Route: Deferred Tax Payments and Its Uncertainties

Conversely, let's scrutinize the traditional route of deferring tax payments via instruments like traditional IRAs or 401(k) plans. This approach, characterized by contributions that potentially trim your current taxable income, might seem alluring, especially for those nestled in higher tax brackets. It's a strategy underscored by the principle of delayed gratification; letting your investments burgeon untaxed until you're poised to make withdrawals. Nonetheless, this pathway is fraught with uncertainties, chiefly pertaining to future tax rates and your financial vista at the time of withdrawal, making it a speculative venture at best.

The Strategy of Diversification: Beyond Investment Portfolios

The strategy of diversifying isn't confined to investment portfolios but extends to the crucial aspect of managing potential tax implications. By harmonizing taxable and tax-advantaged accounts within your retirement blueprint, you garner the flexibility to craft a retirement saga marked by minimized tax liabilities and maximized income, a veritable strategy for navigating the retirement years with acumen.

Embarking on the journey of retirement planning necessitates a thoughtful consideration of your current financial stance, your aspirational financial future, and the level of risk you're inclined to embrace concerning speculative future tax rates. Mirroring the prudent choice made by Tara, aligning your retirement strategy with your unique personal and financial objectives is the cornerstone of a retirement phase replete with security and fulfillment.

The advantages of a Roth On Steroids, characterized by tax-free withdrawals and the peace of mind it brings, positions it as a formidable ally in your quest for a truly liberated and fulfilling retirement.

Please feel free to email Eric at [email protected] if you’d like to ask any questions or request information on retirement topics that are on your mind.

REAL ASSETS, Invest Like the Ultra-Wealthy 

Is the US Dollar going to have much value in the future?

Are you seeking guidance on how to safeguard your retirement savings amid the ongoing economic turmoil? Concerned that the recent downturns in your 401k or IRAs might force you to extend your working years by a decade to recoup your losses? In the last couple of years, increased government expenditure has led to a 25% reduction in the value of retirement portfolios, and pension schemes have suffered a staggering loss of over $3 trillion just in 2023. 

Allocating funds into the asset class known as “Real Assets” may be a strategy that you should consider.

Ask us how to Rollover a portion of Your IRA or 401k To A GOLD IRA (link below) or a BOURBON IRA (www.bourbon.fund/how-it-works/) and:

• Safeguard your assets from the collapsing dollar

• Incorporate the ‘REAL ASSET’ class into your portfolio like the ultra-wealthy

• Hedge against the current high-inflation conditions

• Protect your retirement assets against economic crises

Just get in touch. We make it easier than ever.

Feedback or Questions?

You’re invited to get in touch with us if you’d like to find out how the Novus Financial Group can help you on your journey to a happy, fulfilling life in Retirement. 

We have a lot of great information, as well as podcasts from our radio show ‘The Financial Insider’, and tools on our website - www.novusfg.com.

[email protected] www.novusfg.com [email protected]

Office: 614-943-2265

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Investment advisory services offered by duly registered individuals on behalf of CreativeOne Wealth, LLC a Registered Investment Adviser. CreativeOne Wealth, LLC and Novus Financial Group are unaffiliated entities.

The content we provide here isn’t financial advice and cannot be taken as such. Please speak to your financial advisor before making any investment decision. Also, note that every investment comes with its own risks and drawbacks. Lastly, we would like to remind you that past results cannot guarantee future returns.

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