COVER STORY – Expats, it’s time for a financial check-up!
CUENCA ISSUE ON-LINE 10
By Ed Lindquist
By Expats Magazines Group
“The times they are a-changin’.” What was predicted by these lyrics penned in the 1960’s is even more accurate today. Just think back over the last couple of years. And, even more significant changes are coming—to the economy and markets—and society at large.
Most expats in Ecuador still have assets in their home country. Like many of us, they have put these investments on auto-pilot: following the same “cookie-cutter” or “pie chart” financial advice for years.
Let’s look at a list of some of the items New Century Planning recommends reviewing periodically in retirement—and more urgently now:
- Do you have enough income? Do you have too much money in cash equivalents at very low yields? By the same token, do you have too much money in accounts or vehicles with suspiciously high yields? If so, be careful. There is no free lunch in the world of fixed income and yields. Unfortunately, in the US markets, over the past 12 years, “safe” has meant accepting terribly low yields, and “productive” has implied needing to accept the risks of the stock market. There are solutions to this situation.
- Tax planning—Consider ROTH conversions while tax rates are still at historically attractive rates, until 12/31/25. ROTH conversions can lead to significant tax-free income for life.
- Do you have too much money in the stock market—including mutual funds or ETFs? Should you reduce your risk levels with the US markets up near all-time highs? Can you get through a crash that can or may take 5 ̶ 10 years to recover.
The US markets have been artificially “stimulated” and supported over the past 10 ̶ 12 years by the Federal Reserve, and its near 0% interest rate policies. The markets have not suffered any serious or sustained corrections in over 12 years. This is neither normal nor healthy. While no one looks forward to a negative or down cycle, they are natural and necessary for future growth to occur, and we may be very overdue at this point.
- While inflation in Ecuador has actually been quite tame in recent years (up 1.47% year over year by October of ’21), it is accelerating noticeably in the United States, and expats who maintain homes or budgets stateside will certainly be feeling some of the effects of this higher inflation, even as their Ecuadorian budget may remain comfortable for now. More importantly, because Ecuador also uses the US dollar as its official currency, a significant loss of purchasing power tied to excessive money printing or raw material shortages or bottlenecks will affect expats as well. Social Security beneficiaries are about to receive the largest cost-of-living adjustment COLA) in nearly 40 years, at 5.9%, but the most recent annual inflation reading just came in at 6.2%, and Medicare Part B premiums are going up over 14% in 2022! Do you have non-correlated, or inflation hedge alternative assets in place?
- Have you taken any steps to protect your identity? Incredibly, in September of 2019, a database leak in Ecuador led to almost every citizen in the country having their personal data exposed online. Then, more recently, in mid-October of 2021, Banco Pinchincha, the largest bank in Ecuador, was hacked, and ATMs and online services were interrupted for a few days. It is imperative for all expats to have in place an identity theft plan that not only alerts them to potential breaches but which also offers professional restoration services that are guaranteed to bring the victim’s identity back to pre-breach status.
- Do you have proper and up-to-date estate planning documents in place? Depending on the country, expats need to be aware that their US documents may not be accepted or do what they want or need them to do in their chosen retirement country. New documents that comport with the governmental rules and regulations of that nation must be in place and integrated into the overall estate plan. While this might seem complicated, or like an unnecessary expense, it is highly recommended. Things do happen.
New Century Planning—Experienced, Capable and Caring
New Century Planning Associates is a full-service financial firm comprised of several experienced professionals who came together many years ago to work as a team. New Century Planning’s team of CPAs, CFPs, attorneys, insurance and investment pros are independent, and can therefore “shop the market” for their clients in order to provide first class, professional and comprehensive solutions across a wide array of financial planning needs. New Century Planning has a focus on education, communication and listening attentively to client needs and concerns.
An Ecuadorian Office Just for Expats
There are over nine million US citizens living overseas. Even though they are now “expats,” most still need sound financial advice that can maintain their income streams, manage their tax liabilities and address long-term care risks and legacy planning. Proper retirement and financial planning are even more necessary now with the complex and uncertain global geographical outlook and the record debt and money printing that is occurring.
To keep up with this US diaspora, New Century Planning has gone international. New Century’s first step in this strategy was to form its first international division: New Century Planning of Ecuador. Ecuador has long been rated as one of the best retirement destinations and is home to over 20,000 North American expats. Ecuador is the perfect size for New Century to test its various service offerings to meet the needs of an expat community, while at the same time looking for ways to serve the broader Ecuadorian community. In addition, Ecuador offers many potential investment opportunities that New Century can provide for its US clients.
“Before choosing Ecuador as our international first step,” explains Robert Ryerson, President of New Century, “we had been exploring the business opportunities there since 2015, making eight trips to the country. Already, this move is paying off. Not only do we have new expat clients, but also, we have a growing interest in our services from the broader Ecuadorian community. Also, we have discovered some attractive and potentially very profitable investment opportunities for our North American clients, including buying precious metals below spot prices, growing and exporting vanilla (world’s second most expensive spice), and seeing great prices for new beachfront condos. In addition, we have made many useful networking connections for the future within the expat and Ecuadoran business communities. We couldn’t be happier going international.”
“My mother tongue is Spanish,” adds New Century’s Vice president and Treasurer Louis Terrero, “and I have a great love for the people and culture of Latin America. We’re finding some of the services we offer our current clients translate easily to the needs of Ecuador. Expats and Ecuadorians alike need information on how to diversify and hedge their portfolios with precious metals, keeping up with new investment trends such as cryptocurrency, and of course, protecting themselves from identity theft—areas of expertise for us and our 35 years as certified financial professionals.”
Dr. Jose Julian Cao-Alvira, a recent addition to the New Century Team, and a Certified Financial Planner, added, “We are suggesting that all of our clients, including expats, get at least a small portion of their money out of the US dollar, and into attractive non-dollar inflation hedges, such as gold and silver, foreign bonds, and crypto-currencies. In addition to serving as much needed portfolio diversifiers, we believe that the precious metals and larger cryptos offer very significant upside potential, and may easily outpace stocks over the next 5-10 years or more.”
New Century’s longer-term international goal is to follow US citizens relocating to Latin America, and to offer them the same professional advice they were used to receiving back home. They will also offer these same services to the citizens of each country. After Ecuador, plans are to open offices in Mexico, Belize, Costa Rica, and Panama.
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Every Issue—Expats and Their Finances
Remember each month, New Century Planning provides expats with up to date information they need to know about their finances. Only found in Cuenca Expats Magazine. Look for “Expats and their Finances” in the next issue.
Ed. note: to read all the “Expats and Their Finances” articles and learn more about relocating to Ecuador, please go to our web site clicking the cover and our social media in FaceBook as Cuenca Expats Magazine