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Oaktree Financial Advisors Blog

Eli Lilly Employee Voluntary Early Retirement Program (VERP) Decision

Written by Ed Snyder, CFP® on .

lilly building web

Many employees of Eli Lilly will consider a Voluntary Early Retirement Program (VERP) offer as Lilly looks to workforce reductions in an effort to improve its cost structure. Approximately 3,500 positions are expected to be impacted by the reductions.

VERP offers can be complicated. You should compare the value of the enhanced benefits being offered to retire early to what you would get if you continued to work. By continuing to work you would continue to contribute to the Lilly Savings Plan (401k), accrue additional pension benefits and earn credits towards retiree healthcare. You need to weigh if those benefits would be greater than the benefits offered in the VERP. Early retirement could impact your Social Security benefits, which are based on your average earnings over 35 years of work. And it's important to know that the one-time lump sum payment is taxed as ordinary income and will be reduced by applicable tax withholding.

Can I Afford to Retire?

Beyond the above analysis, any employee considering the VERP should have a thorough understanding of what their retirement would look like. This includes knowing what expected expenses would be, as well as sources of available income and their amounts. This is best accomplished through a comprehensive retirement income plan, not an online retirement calculator or "financial advisor" available via phone at a call center. Something as serious and intricate as your retirement deserves more than a one or two-time chat on the phone with an advisor with whom you'll have no ongoing relationship.

Oaktree Financial Advisors has developed the Independent Professional Retirement Overview (IPRO), a customized retirement analysis that takes into account your specific Lilly benefit programs. We can help you determine if you can maintain your lifestyle throughout retirement based on an early retirement, a full retirement, or anywhere in between.  There are many factors to consider. It includes evaluation of "what-if" scenarios so that you can make an informed decision about a VERP offer based on various scenarios.

Factors that often get overlooked or are misunderstood such as inflation, withdrawal rates from savings and healthcare costs, if not handled correctly, can have serious negative consequences on your retirement years. Many retirement decisions are irrevocable, so small mistakes now can have a lasting impact for years down the road.

If you would like to discuss this very important decision with one of our advisors, please click here, call us toll-free at 1-877-901-1631 or email us at Oaktree Financial Advisors can provide an Independent Professional Retirement Overview and help you evaluate "what-if" scenarios.

We have been advising our clients on this decision and we would be glad to assist you.

Oaktree Financial Advisors is neither endorsed by nor affiliated with Eli Lilly

Lilly HSA Plan Changes – Effective October 3, 2017

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Lilly has recently announced changes to the investment menu within the Health Savings Account (HSA). Effective October 3, 2017, all funds are moving from Class A to Institutional Class Shares. This will not be a change in the actual funds or underlying investments, but the fund ticker symbols will be different and fees will be lower. You will automatically be moved to the new investments on October 2. No action is required on your part.

If you have automated investing set up on your HSA, those instructions will automatically be transferred to the new Institutional Class shares of the same fund(s). No action is required on your part.

In addition, as of September 25, 2017, new investments into Dreyfus Premier Strategic Value (DAGVX.LW) and Dreyfus Appreciation Fund (DGAGX) will no longer be allowed. These funds are being eliminated from the HSA, however, if you currently invest in these funds, you may continue to hold the investments or move them to a new fund at any time.

Gabelli Asset Fund has a short-term trading fee. New investments in Class A shares will be blocked beginning September 22 to help participants avoid being subject to this fee. The Institutional Class Shares will re-open for new investments on October 3. Any automated investing scheduled during this blocked period will be executed on October 3.

Three new index funds will be added. Vanguard Mid Cap Index (VIMAX), Vanguard Total International Stock Index (VTIAX) and Vanguard Total Bond Market Index (VBTLX).

If you have questions regarding how these changes may affect your HSA portfolio, please do not hesitate to contact Oaktree toll-free at 877-901-1631 or

Oaktree Financial Advisors is neither endorsed by or affiliated with Eli Lilly. The information contained herein is provided for informational purposes only and is based upon sources believed to be reliable. No guarantee is made to the completeness or accuracy of the information. This content should not be construed as investment advice, a solicitation, or recommendation to buy any security or investment product. Contact your financial professional regarding your specific circumstances.

Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the mutual fund, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Where to Invest Money You Need in the Next Five Years

Written by Ed Snyder on .


An issue that has come up frequently the last several years is when people have money in savings that they don't need right now but they need it in a year or two for some specific goal like a vacation or a down payment on a house. Savings accounts are paying less than one percent so people want an alternative with a higher interest rate but want a stable return. Sometimes people ask if they should invest it in the stock market so they can get a better return. If you need the money within five years don't invest it in the stock market – save it in more conservative fixed rate investments. The reason I say that is because in a period less than five years, your money invested in the stock market could be worth less than you initially invested by the time you are ready to use it. There is no magic to the five year recommendation but historically the market has had positive returns 87% of the time over five year periods.[1] So you can see that even five years is no guarantee that your investment would be worth more than you originally invested, but once you get to five years the probability that you'll have a positive return is pretty good. But when you need the money before five years stick with fixed-rate investments because the last thing you want when saving money for a short-term goal is to have a return that fluctuates and goes negative.

So if we're trying to do better than a savings account but don't want the risk of the market, where do you go? Here are three suggestions.

  1. Online savings accounts. Savings accounts or money market accounts that you open online often pay more interest than those of the bank in your neighborhood. All you need to do is Google a term like "online savings account" and you'll get all the information you need to see what's available. Rates are ranging from 1.15% to 1.25%[2], most with no minimum balance required. You won't be able to go to the drive through window and make a withdrawal when you need your money but you can request the money electronically and have it deposited to your checking account within a few days.
  2. CDs. My recent search online shows rates from 1.40% for a one year CD to 2.25% for a five year CD.[3] In return for the higher rates you give up a little bit of flexibility in that you have to leave the money deposited for the period of the CD or be subject to penalties if you withdraw it early. But if you're sure you won't need the money during that time period, a CD could be a good solution.
  3. Short-term bond funds. Unlike savings accounts or CDs, short term bond funds do not guarantee an interest rate. Because of that they are a little riskier. You may get a little higher return than a savings account or CD but it may be lower too. Because these investments can fluctuate, you don't know ahead of time. With that being said, they are still conservative investments. If you want absolutely no fluctuation in return, then one of the other options is better suited for you.

While the low interest rate environment we're in can be great for those borrowing money since they are able to borrow at lower interest rates, it can be tough for savers trying to earn decent interest on their short-term investments. The suggestions above should help you earn a little more than you can get at the bank.




How Investing Should Be Like Summer

Written by Ed Snyder on .

chairs poolside blog

Ahh summer. The time when it seems like we all relax a little bit more and life is a little more simple. The kids don't have to be up and out the door for school before the sun's up. No school lunches to be prepared or field trip permission slips to remember to sign and turn in. No homework to do or after-school sports practice or band practice or whatever other number of extracurricular activities your kids may be involved in.

With this being said, if you're like my family, summer is anything but laid back. Although the routine is different from the school year, it's still not activity-free. There are swimming lessons, camps, off-season sports workouts, gymnastics, and on and on. Even though it's still busy, summer just has a bit more leisurely feeling than the school year. We don't have to pay attention to all the details every day like preparing school lunches for the kids every morning or being in the carpool line at the same time every day. We can sleep a little later, the kids can play outside until it's dark and stay up later because they don't have to be up at 6 the next morning to get ready for school. Overall, summer is just a little more laid back than other times of the year.

Your investing should be more like that. It should be more like summer. A little more laid back. In my experience, too many people think investing is about things like picking the right sector to be invested in NOW or figuring out what the market is going to do because ______________ (fill in the blank).

  • The market is so high right now
  • The new president
  • What the Fed might do with interest rates
  • I just have a feeling

Contributing to this, or perhaps the very cause of it, is the financial media's relentless spouting of market predictions. If you look at different stories from newspapers, magazines, social media, cable networks and the internet you would think that it's necessary to know where the market is headed and why so that you can invest accordingly. It's not hard to find these stories. Quite the opposite, they are the predominant type of story in the media. Look at some of the headlines I quickly found today.

Track the Markets: Winners and Losers – This was a listing of year-to-date performance of different stock and bond indexes from around the world. You don't really need to know that. Are you going to go change your 401(k) investments tomorrow because of what you see in a listing like this? You may. And if you do, it will likely be to your detriment.

5 Hot Consumer Stocks to Buy – Beyond Amazon – This article profiled 5 consumer stocks that have done well so far this year and, according to the article, "continue to hold promise for the rest of 2017".

Here's a Case for Bailing on Stocks as Warning Signs Stack Up – This details multiple reasons to be worried, from peak auto sales, contracting consumer credit to a lack of progress in Washington.

Global Stocks Post Strongest First Half in Years, Worrying Investors – So this one starts out positive but then leaves the reader thinking, should I be worried?

If you want to read things like this, I guess, go ahead. I don't understand what you get out of it. It definitely should not influence your investing. To make your investing more laid back, like summer, you should own a portfolio of investments in multiple asset classes, both foreign and domestic, while minimizing taxes, trading fees and other costs. Ideally, your investing is informed by your financial plan. Your financial plan details your different financial goals – things like money for retirement, college expenses, replacing income if a spouse dies. If you have a financial plan you can invest accordingly based on each of those goals.

Your investment strategy is part of that financial plan. Your investment strategy should include things like:

  • A target percentage that will be invested in stocks vs. bonds
  • A target percentage to be invested in each different asset class, like large cap value, real estate, international, etc.
  • A tolerance range for how much you want to allow an asset class to vary from those targets before you make changes to bring it back to the target amount.

If you decide these things up front as part of your investment strategy you don't make changes to your allocation because you read an article where some guy thought small growth stocks were going to out-perform. You only change based on evidence. What do I mean, evidence? If small growth is to be 8.75% of my portfolio and it's been decided that I'll allow it to deviate from that by 20% either up or down, then that means if the small growth part of my portfolio drops below 7% or goes above 10.50% then I will make changes when that happens. If small growth does well and grows to be more than my 10.50% target then I would sell enough of it to get it back to 8.75% of my portfolio. If it came to make up only 7% of my portfolio then the evidence would be there for me to buy more of it to get it to the 8.75% target. That article you saw where the guy said small cap growth stocks would out-perform – that's not evidence. When your investment strategy is evidence based you are making changes when the evidence presents itself. It's binary – like my example above, it's either within its tolerance range or it's not.

When you invest like this you can stop trying to figure out where the market is going. You can stop worrying about the daily fluctuations and watching the headlines and so-called experts. If you're a long-term investor none of that stuff matters. Investing doesn't have to be complicated. It should be simple. Do the work up front. Get a good financial plan and a well-thought-out investment strategy in place. Then treat your investments like your summer break – chill out and be more laid back!

Financial Media is Perpetually Pessimistic and Often Wrong. Ignore It.

Written by Ed Snyder on .


The Dow Jones Industrial Average finished down 237.85 points or 1.14% yesterday. This is no big deal. In fact, the market has declined 5% or more every 5 months on average since 1946*. That's 183 times. Dare I say it's normal. Here's an excerpt from an excellent article that appeared at, written by Charles Lieberman about the media's nearly constant shouting at us about the doom and gloom to come.

Volatility has declined very sharply, so quite naturally, pundits suggest that investors are complacent and conditions are ripe for a nasty surprise. Such warnings deserve harsh criticism.

First, volatility should be down, given the performance of the economy and markets. Second, focusing on volatility encourages short-term thinking, which is extremely harmful to investors trying to achieve their long term goals. Third, it is entirely useless to warn against a potential market decline when the warning is provided without any kind of time framework.

High volatility is a normally occurring, yet unpredictable, event, at least insofar as timing is concerned. Market declines of 10 percent occur almost annually, and even multiple times within a calendar year. This is simply within the normal range of historical volatility. Yet when it happens, some pundits go wild, suggesting the drop is just the first leg down of a much larger decline. In fact, several such declines have occurred since March 2009, yet the market has risen more than 200 percent off that low. When the decline proves to be temporary, such negative market commentary disappears temporarily, waiting for the next opportunity to warn of another bout of market volatility. Or, they forecast that the decline in volatility demonstrates that investors have become complacent and vulnerable.

Why shouldn't the markets be complacent right now? Economic growth has been on an incredibly consistent, yet moderate 2 percent trajectory for some years. Unemployment is less than 5 percent, down from 10 percent in 2009. Corporate profits are rising again, after faltering due to a large slowdown in the oil patch following the big drop in crude prices. That took inflation close to zero, which some pundits suggested would start a problematic bout of deflation. Instead, it proved to be just a temporary interlude before prices converged to the higher "core", which declined only slightly. Now, both are reverting to 2 percent, which has enabled the Fed to start gradually normalizing interest rates.

I would care little about these Chicken Littles and their desire to instill fear in the hearts of investors for their purposes, except that they inflict enormous harm on individual investors. How often do retail investors read such warnings and decide that to be safe, they should reduce their exposure to the market? Some pull out entirely. It happens far too frequently. I know of one individual, a close friend of a client, who converted his entire portfolio into cash late in 2008 and has been unable to bring himself to buy back in to this very day! For years now, he thinks he's missed the recovery, because he's read warnings that stock prices are high and vulnerable.

I'm back. I said above that a 5% decline happens about twice a year on average. It was off 1% yesterday. I don't know how often that happens, but obviously much more often than twice a year. If it's normal to have a 5% or more decline a couple times a year then it stands to reason that it's also normal to have a 1%-plus decline several times a year, on average. But no one has told the media. They must not realize how normal it is. Look at some of the headlines after the market close.

Not only do they not realize how normal it is, they insist on tying a reason, or multiple reasons or causes to the market's pullback – or as one headline put it "came to a screeching halt." One article stated "The catalyst for Tuesday's slump wasn't definitive." How about, sometimes the market just goes down. However, that same article went on to say "some market participants attributed the slump in equities to fears that Trump's legislative agenda as it pertains to Wall Street would face delays as the GOP-led health-care overhaul plans appeared set to struggle on congress". And "Perhaps factoring in the decline for financials was a slide in Treasurys..." You can see it in the headline above, "Trump honeymoon over: Markets are now scared his policy promises won't come true."

The truth is that the events of the day and the fact that the market was down are independent of one another, for the most part. I mean, sure, there are factors that can drive the market down but no one can pinpoint the timing of those factors or the degree to which they impact the market. Just look at the election as an example. Everyone and their brother said that if Trump was elected the market would hate it. All of the so-called experts couldn't have been more wrong. I feel sorry for the people that made any investment decisions based on those predictions! The Dow is up over 12% and more than 2,300 points since the election.

If they keep predicting bad things long enough they will eventually be right. As Paul Samuelson is famous for saying, "Wall Street indices predicted nine out of the last five recessions."

Ignore the headlines. It's just noise. Focus on the long term. (this is a 10 year chart)

Not the short term. (this is a one day chart)

And for crying out loud keep a positive outlook and attitude.  With that in mind, I'll leave you with this from Barry Ritholtz - "The data strongly suggest that very good years in the U.S. stock market are followed by more good years." 

* American Funds - Long-Term Investors Can Weather Market Declines

Headlines from of CNBC, CNN, MSN.

Charts: From showing Dow Jones Industrial Average

All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results. Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Dow: A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange.