Tag Archives: Cahaba Wealth

Open Enrollment “Checklist”

By Charlotte Disley

As we approach year-end, benefit enrollment is at the top of many of our “to-do” lists. It is likely that employers have started sending reminders to enroll in benefits for 2024, and we wanted to provide a “checklist” for some things to be on the lookout for to ensure you and your family are appropriately covered going into a new plan year.

  1. Take note of whether or not you are required to take action during open enrollment

It is not uncommon for current benefit elections to roll over, however, companies often reevaluate their benefit options each year and there is a possibility that insurance carriers and/or plans could change. When this is the case, it is likely that you will need to actively elect the new plans being offered.

  1. Compare important plan information

For your healthcare benefits, take a look at deductibles (costs that you are responsible for before insurance kicks in), co-pays/coinsurance (the amount you pay versus the insurance carrier) and out of pocket maximums (the maximum amount you will pay in a given plan year). If your plan is changing, it is also a good idea to check that your current providers are “in-network” with your new insurance carrier – staying in network often helps to reduce your cost for services!

  1. Check your eligibility for certain savings or spending accounts, such as a Health Savings Account (HSA) or Flexible Spending Accounts (FSA) for healthcare and/or daycare

Be sure to understand how these accounts work, including any contribution limits and their tax benefits. Even if your elections do rollover from last year, contribution limits for HSAs have increased for 2024, so you may no longer “max out” this benefit and therefore need to take action.

  1. Evaluate if your current coverage levels for different benefits still make sense

Open enrollment is a great opportunity to reassess if your current benefits remain suitable, or fill any gaps where other coverage might be lacking. This not only applies to healthcare plan elections; it is also pertinent to coverage such as life insurance, long term disability, and any other supplemental benefits your company may offer. For certain benefits, such as disability pay or life insurance, your company may provide a set level of coverage that is employer paid. However, supplemental coverage above and beyond this could work out to be more or less expensive in the marketplace. This is an area we often discuss with clients to ensure they are appropriately covered for their needs, in the most cost effective manner.

  1. Compare your current coverage to what is being offered next year

Even if providers and benefits are staying the same, insurance costs typically rise year over year. Keep an eye out for increased cost per paycheck so you aren’t caught by surprise in January when your take home pay has changed.

  1. Make sure you complete all the steps for your elections and print a confirmation statement for your records.

Outside of open enrollment periods, there are only certain situations where benefit elections can be changed. This might include starting a new job at a different company, or experiencing a life event such as getting married or having a baby. This is why it is so important to pay attention during the open enrollment period. If you think you made a mistake or missed the deadline to submit your enrollment, reach out to the designated contact within your company (likely the HR or Benefits teams) to see if there is anything that can be done to get this corrected.

Benefits are of great importance when it comes to our financial world, and not being properly covered can become burdensome in the case of having to cover large unexpected healthcare costs, or not having the appropriate life/disability insurance in place. Be sure to take note of any deadlines for enrollment, and try not to wait until the last minute. As always, we are available to answer questions you may have!

Charlotte Disley is a financial planning analyst in the Atlanta office of Cahaba Wealth Management, www.cahabawealth.com.

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.

Life Insurance 101

By Josh Hegland, CFP®

Life insurance is an important component of a comprehensive financial plan that is often overlooked. While nobody likes to consider their own demise, the idea of a loved one struggling because you didn’t have sufficient coverage is unsettling.

Life insurance can be grouped into two categories: Term and Permanent. Term is the most straightforward and least expensive form of life insurance. It provides coverage to the insured for a specific period of time (usually 10, 20, or 30 years) with a specific premium. Once the period or “term” is over, the policy expires or can be extended for an increased premium. Since term insurance allows a person to only fund the years for which they have a true need for insurance, this type of policy provides a better death benefit for the premiums paid.

Permanent life insurance is designed to provide coverage for the policy holder’s entire life. While lifelong coverage may sound more appealing, these policies are extremely costly and often unnecessary. One example of permanent life insurance is whole life. Whole life insurance policies often carry a 50% minimum front load commission charge that goes directly to the agent. As discussed on our podcast, insurance agents do not have a fiduciary duty, and hence, they are not required to put a client’s interests first when recommending a policy. This can obviously create a conflict of interest, as agents are highly incentivized to sell whole life policies to clients.

In addition to a death benefit, permanent life policies (such as whole life) can offer a savings component. This portion, known as the cash value, typically has a guaranteed return of 2% per year and projected returns of 4-5% over the life of the policy. The word “guarantee” often perks up investor ears. However, keep in mind that historical data1 shows us that a low-cost diversified investment portfolio can provide investors a much higher yield. Over a lifetime, it is highly likely that the investor choosing a well-diversified portfolio will yield more than a life insurance investor. As our core values state, our goal at Cahaba is to always “keep the main thing the main thing”. To that end, we believe insurance should be used for insuring, and investments should be used for investing.

With a few exceptions, we at Cahaba generally prefer the more appropriate term life policies vs. permanent/whole life products when viewing insurance.  We acknowledge that there are situations where a permanent policy might be needed, such as for funding an irrevocable trust for estate planning needs or a buy/sell agreement for business owners. However, these situations are an anomaly. Bottom line, it is important you fully understand what you are buying and how the policy is fulfilling your coverage needs.

With these different types of insurance in mind, we are then left to wonder: how much coverage and what type of policy do I need? In truth, there is no one size fits all answer here, as the “right” amount depends on a number of factors. Do your loved ones depend on your income? How much outstanding debt would need to be retired? What amount of Social Security benefits will your family receive at death? These are all questions we ask our clients during our financial plan construction. Based on your specific situation, we are able to evaluate your needs to ensure your loved ones will be taken care of when you’re gone.

As always, do not hesitate to reach out if you have any questions!

Note: At Cahaba Wealth Management, we do not sell life insurance policies themselves, but we can make recommendations on coverage and types. We can also help you prepare to meet with an insurance agent. 

Josh Hegland, CFP® is an associate advisor in the Atlanta office of Cahaba Wealth Management, www.cahabawealth.com.

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.

1 Source: https://advisors.vanguard.com/VGApp/iip/advisor/csa/analysisTools/portfolioAnalytics/historicalRiskReturn

Silicon Valley Bank Collapse

By Brian O’Neill CFP®

Friday (3/10/2023) saw the precipitous collapse of Silicon Valley Bank (SVB), making it the second largest US bank failure, only topped by that of Washington Mutual at the peak of the 2008/2009 financial crisis. On Sunday (3/12/2023), New York-based Signature Bank followed suit, marking the third largest US bank failure in history. This obviously led to questions about the health of the US financial industry, and worries about echoes from that turbulent time. With nerves understandably on edge, we thought it would be a good time to share some calming thoughts.

On Sunday evening, the Treasury Department, Federal Reserve, and FDIC issued a joint statement laying out decisive actions that will be taken to strengthen confidence in the banking system. In short, all depositors at these banks will be made whole, even those who maintained accounts larger than the FDIC insurable limit of $250,000. While these emergency measures were necessary for depositor protection and for companies to make payroll this week, shareholders and unsecured debt holders of these banks will not be bailed out.

The Fall of SVB

Primarily, the failure of SVB was specific to both the clientele of the bank, and what can only be termed loose risk controls that management put in place. SVB served the start-up community and venture capital backed companies, mostly in the San Francisco region. The bank’s deposits ballooned during the pandemic, as new money from Initial Public Offerings and Special Purpose Acquisition Vehicles soared. The bank then chose to invest the proceeds of these significant deposits into long-dated US Treasuries, rather than choosing to make riskier loans. While that feels safe, the reality of long-dated bonds is that when interest rates rose in 2022, the value of these bonds fell, and in some cases, fell dramatically. 

Even in the backdrop of falling bond prices, the bank remained solvent, as most of their customers were required to continue to bank with them. This meant deposits remained…until last week. As the economy has softened, many of these startup companies began withdrawing cash to sustain operations – easy money was no longer available, and they had to use their funds in the bank. This initially forced SVB to sell some of these “safe” securities they had purchased, and in their 8-K filing on March 8th, they disclosed they did this at a loss of $1.8 billion. With this 8-K filing, an old fashioned bank run started, and within 3 days, the bank was insolvent, and taken over by the FDIC.

Longer Term Implications

Should we worry about other banks? Our belief is that this is fairly focused on SVB and Signature, and possibly other smaller banks intertwined with the startup and crypto communities. Most banks do not have deposits that are significantly over these FDIC insured limits, as most banks work with individual clients like you and me. Additionally, bank regulators placed much more significant controls on capital and lending requirements. While it appears regulators missed the specific issues at SVB, the overall banking system in America is much healthier than it was prior to 2008/2009, and we do not believe these issues exist on most bank balance sheets.

We will need to monitor the fallout of these failures, so this story is not completely told, but we see no reason to hit any panic buttons due to our financial system. 

As always, we welcome any questions.

Brian O’Neill, CFP®, is president and a financial advisor in the Atlanta office of Cahaba Wealth Management, www.cahabawealth.com.

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.