2024 1st quarter newsletter

LAKESHORE FINANCIAL PLANNING QUARTERLY NEWSLETTER

IN THIS ISSUE The Big Picture with Jeff Brayton

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Financial Planning with Mark Romin

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Book Recommendation

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Quote of the Quarter

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Office News and Events

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Team Updates

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Jeff Brayton-Senior Advisor Mark Romin, CFP®-Senior Advisor Pat Johnson-Chief Compliance Officer Tina Houle-Client Service Associate Sarah Rangstrom-Client Operations Associate

1st Quarter 2024

You’re Invited to An ECONOMIC UPDATE

Join us for a detailed discussion regarding current economic and market conditions, and the implications for your investments.

Date: Thursday, February 22nd 10:00-11:00am Zoom Call Instructions to follow 5:30-7:00pm Live Meeting Assumption Cultural Center 21800 Marter Rd.

St. Clair Shores, MI 48080 Please call Tina @ 586-498-0788 if you plan to attend our live session.

23201 Jefferson Avenue St. Clair Shores, MI 48080 (586) 498-0788 lakeshorefinancialplanning.com

THE BIG PICTURE WITH JEFF BRAYTON “Before you think about buying stocks, you ought to have made some basic decisions about the market, about how much you trust corporate America, about whether you are a short- or long-term investor, and about how you will react to sudden, unexpected, and severe drops in price. It’s best to define your objectives and clarify your attitudes (do you really think stocks are riskier than bonds?) beforehand, because if you are undecided and lack conviction, then you are a potential market victim, who abandons all hope and reason at the worst moment and sells out at a loss. It is personal preparation as much as knowledge and research that distinguishes the successful investor from the chronic loser. Ultimately it is neither the stock market nor even the companies themselves that determine an investor’s fate. It’s the investor.”

Peter Lynch Retired Portfolio Manager Fidelity Investments

I’ve lost track of how often I’ve used this Peter Lynch quote to open our first quarter newsletter. My best guess is at least 20 years, and I hope to use it for another 20. The longer I’m in this industry (30 years this year!), the more I realize how well Mr. Lynch captured the essence of successful investing in a single paragraph. He understood our human instincts work against us as investors, and without preparation and help, the majority of investors are likely to fail.

He was also famously skeptical of the value of economic and market forecasting. I think about this every January as the “experts” race to issue their forecasts for the year ahead.

Mark and I absorb a large amount of this material because we believe it’s important for us to stay well informed, and, on occasion, we find a nugget of useful information. Similar to the old prospectors, every year we sift through a lot of junk hoping to find even a small amount of gold.

I need to let you in on a secret that not many people in our industry are willing to share. None of us are very good at macroeconomic forecasting. Macro meaning big indicators like GDP growth, interest rates, and unemployment. Legendary and successful investors like Peter Lynch and Warren Buffett figured this out a long time ago. It isn’t that economists aren’t smart, even with their access to computing power and analytical tools unlike any time in the past. Yet, the results show that

forecasts of the economy and markets are getting worse, not better. Why is this the case?

The reason is the U.S. economy is immensely complex and becoming more so every year.

If you have any doubts, look no further than the Federal Reserve (Fed). At last count the Fed employs 400 PhD economists, actuaries, and highly trained financial analysts. This is one nerdy high-IQ crowd! They also have direct access to the best and most current economic data and information. Yet, despite all of this brain power, the Fed’s forecasts have been so bad for so long that last year Fed Chair Jerome Powell announced that the Fed was taking a “wait and see approach” and shifting to “data driven decisions” regarding its interest rate policy. Jerome Powell basically threw up his hands in frustration and admitted the Fed has no idea what direction the economy is headed.

I’m not exactly sure what this means for the job security of all the geniuses working at the Fed, but I do know this was a clear statement that the Fed is shifting away from the forecasting business. This must not have been easy for Mr. Powell and his all-knowing associates. Maybe he got a call or text from Warren Buffett! We think this is good news because bad forecasts can, and have, led to bad interest rate policies in the past. These policies in turn can have a negative impact on the economy and financial markets. It’s far too early to tell, but maybe this data dependent

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THE BIG PICTURE WITH JEFF BRAYTON approach adapted by the Fed is working. Our hope is that this will help the Fed orchestrate a soft landing for the U.S. economy.

This should help clarify why Mark and I don’t manage your investments based on forecasts. We make our decisions based on actual numbers, and we believe that you are better served having us plan and prepare rather than attempting to predict the future.

Last year this approach was more important than ever. I wish I would have saved some of the forecasts I read at the beginning of 2023. We were coming off of a terrible year for stocks and bonds in 2022. The vast majority of “experts” were predicting a U.S. economy recession, continued high inflation, and more losses for stocks and bonds.

The fund flow numbers, which we pay attention to, confirm that many investors saw these forecasts, or listened to advice, telling them to move money out of stocks and into “safer” investments. This may have been the right move for some individuals, but it was a big mistake for most. Every major U.S. stock and bond index moved higher in 2023. The U.S. economy continued to display its resiliency and again managed to avoid what Mark has been accurately calling, “The most talked about and anticipated recession in my career.” The downturn never arrived. The “experts” were wrong again. Investors who responded to these negative forecasts by selling their stocks lost out on very solid returns.

Mark and I remained more positive than most last year, but not because we have a crystal ball. We understand from experience that headlines, opinion, and emotion cause short-term market volatility. But ultimately, markets are driven by measurable underlying fundamentals like corporate earnings, economic growth, employment, interest rates, and inflation. These numbers in 2023 remained strong or at least improved.

We did adjust many portfolios, but these were not based on anyone’s forecasts or predictions. They were based on either

changes in your personal situation or changes in economic data. One example is last year’s sharply higher interest rate environment. In October of last year the yield on the 10-year 18,first 2019 U.S. Treasury Bond hit March 5% for the time in 15 years. This allowed us to take advantage of higher rates in the fixed income portion Lynch Martin & Marsha of many portfolios where appropriate.

43347 NebelWe Trl also adjusted for risk management purposes Clinton Twp MI 48038-246 by moving out of areas where the numbers told us stocks looked expensive by historical Dear Martin & Marsha: standards. Our risk management strategy is built around the idea that we are always willing to give up some upsideI potential for downside love sending WorthWhile protection. In other words, we aren’t swinging mix of cultural, financial an for home runs. We are happy with singles and latest(What edition ofour Raymond J doubles with less strikeouts. would newsletter be without at least one baseball analogy!)

The Spring edition takes us Now after spending guide nearly my forentire surviving in just a section of the newsletter trashing the planning. value of economic forecasting, I’m going to make a prediction for the coming year: The probability Many of myinfriends tell me of something unexpected happening the everyone, and have I believe the next year is 100%. By the way, it doesn’t to be bad. It could be something or you can. I a thoughtsgood, when even great. The world is far too complex for something unexpected to NOT happen. I’m Sincerely, equally comfortable predicting that no matter what happens, good or bad, we will be here to give you perspective and advice, and keep you on track to reach your financial goals.

Jeffrey Brayton Financial Advisor Branch Manager

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FINANCIAL PLANNING WITH MARK ROMIN

“We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life. But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age”.

Franklin D. Roosevelt

Maximizing Social Security Benefits

of approximately $1,100 for the remainder of their life. The same goes for waiting until age 70, where the monthly benefit would increase by about $900 vs. age 67, but you’d miss out on three years of payments totaling $131,508.

During retirement planning meetings with clients, Jeff and I are often asked when is the optimal time to take Social Security. It’s a tricky question, as so many individual variables come into play when making an informed decision.

However, this chart from J.P. Morgan is a useful visual framework for clients.

This leads to the question: How long do I need to live to break even, if I choose to wait to collect? The gray shading tells the story, and it really comes down to simple math.

If one waits until 67, instead of collecting at 62, you’ll need to live at least 10 years or to age 77 to breakeven. At that point you’ll have collected approximately $550,000 in total benefits. Waiting until 70 vs. collecting at 67, one must live to 81 to break even — you will have collected about $815,000 in total benefits.

Please note, even though the illustration uses a high-income earner, the breakeven math holds true across all income levels.

The age one claims Social Security will certainly affect the benefit amount. The earlier you collect, the less you receive. It amounts to a roughly 6% decrease each year you collect before Full Retirement Age (FRA) at 67, and an 8% increase each year after FRA up until 70, when you max out. The chart assumes a maximum benefit payment of $2,557 per month at 62 (earliest age to claim), $3,653 per month at 67, and $4,530 per month at 70. The monthly benefits are calculated using a high-income earner’s maximum social security benefit with an income of $160,200 in 2023.

Along the bottom of the page, the percentages show the probability that a man, woman or one member of a married couple (currently age 62) will live to the specified ages or beyond. If you compare these percentages against the breakeven ages of 77 and 81, it will help make an informed decision of when to claim Social

If one starts collecting benefits at age 62, they will receive payments for five years or $153,420 vs. waiting until FRA (age 67).

However, they miss out on a monthly increase

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FINANCIAL PLANNING WITH MARK ROMIN Security, based on math alone. Considerations such as personal health, family longevity, and the need for income in retirement come into play.

Jeff and I enjoy conversations focused on when to take Social Security. If you find yourself approaching this major decision, please feel free to give us a call.

Quote of the Quarter

Book Recommendation

“The function of economic forecasting is to make astrology look respectable.”

“Superabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet”

By Marian L Tupy & Gale L. Pooley I recommended the book “Abundance” by Peter Diamandis and Steven Kotler a few years ago.

“Superabundance” updates and builds on the growing evidence that resource abundance actually grows faster than population growth.

John Kenneth Galbraith American Economist

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OFFICE & EVENTS UPDATE December is always a busy month at our office, and the highlight is our annual holiday party at Assumption Cultural Center. Just like every year, old friendships are rediscovered, and new friendships begin. Tony and his team at Marchiori Catering once again delivered great food and service. Special thanks to Tina and Sarah for all their hard work behind the scenes to create a well-organized and special event.

One of our core values is generosity.

Thanks to donations from wonderful clients, we were able to once again deliver a bumper crop of new toys for many local children in need at Christmas time.

Our team holiday lunch this year was at Mario’s Restaurant in Detroit. As an old timer, it was fun for me to introduce the team to this classic old-school restaurant and setting. The food did not disappoint.

We hope your new year is off to a good start. This past year was certainly an interesting one, and we have no doubt that 2024 will find its own unique way of surprising, disappointing, and delighting us. Our entire teams looks forward to experiencing and working together through whatever may come our way.

Thank you for taking the time to read our newsletter and for your continued trust and confidence.

Jeff & Mark

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TEAM UPDATES What is the best life advice you’ve ever been given? This question sparked not only a recent fun conversation at the office but also inspired me while writing the January 26 Market Commentary e-mail. Clients responded with many thoughtful and interesting responses. Below are the answers from our Lakeshore Financial Planning team.

Jeff Brayton

I’ve been given a ton of great advice over the years, but what helped me the most was given by example, not words. I grew up in a house full of books, and my mom constantly read. My parents never actually told me to read, but this atmosphere and their example led me to books. Reading continues to be a passion that influences me to this day.

Mark Romin

Pat Johnson

Tina Houle

My dad, circa 1984

The best advice I have received was from my mother, Irene. Many times, as a child, I would wish to be older for one reason or another, as most children do. My mom used to say: “You are wishing your life away, be happy right now.” I probably didn’t appreciate the advice then as much as I do now. I’ve passed along my Mom’s wisdom to my son Tim. Good advice, Mom!

Sarah Rangstrom

At our wedding, a family member asked the couple in attendance who had been married the longest to give us a word of advice. That couple, friends of my wife’s parents, had been married for 47 years. I’ll never forget his words: “Treat her like a queen, and she’ll treat you like a king.”

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I grew up watching my dad work very hard in a factory on the midnight shift for minimal pay. He told me countless times: “Don’t ever work in a factory!” At the time, I am not sure I realized it was life altering advice. When I applied for my first “grown up job” at a bank, my dad’s words always lingered in the back of my mind. My work ethic was rooted at an early age because of my dad, and I would like to think he is proud of my career path.

It’s human nature to want advice when entering a new situation or chapter in life. It can be overwhelming to listen to everyone’s opinions and decide what to take to heart or act upon. While I am unsure of the origin, my great grandfather would say: “Don’t take advice from someone whose life you wouldn’t live.” People give advice based on their own life experiences, hardships, fears, and passions.

Advice is often skewed to what they might do in a similar situation. At the end of the day, it’s your life, and only you can decide how to live it.

Pictured is my great grandfather posing for his wedding portrait.

Lakeshore Financial Planning 23201 Jefferson Ave St Clair Shores, MI 48080

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Content should not be construed as personalized investment advice or as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned. Content should not be regarded as a complete analysis of the subjects discussed. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Past performance may not be indicative of future results.

Charts and indices do not represent the performance of Lakeshore Financial Planning Inc. or any of its advisory clients. Historical performance results for investment indexes and/or categories, are provided for illustrative purposes only, and generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would decrease historical performance results. There are no assurances that an investor’s portfolio will match or outperform any particular benchmark.

Information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Expressions of opinions are as of this date and are subject to change without notice. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Please be certain to contact Lakeshore Financial Planning anytime there is a material change to your financial situation or investment objectives, or if you wish to impose any reasonable restrictions on the management of your portfolio.

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