The Most Important Organization

2019 Index Returns (Year-to-Date)

*Source: MSCI Net Returns, Barclays Capital

What is the most important organization in our lives? The companies where we work? The churches where we worship? The schools where our children learn? As important as all of these are, none compares to our fami-lies. It is the single most relevant, impactful and precious institution in society, and yet, as an organization it is largely ignored. Compared to the other organizations in our lives, we spend almost no time doing any formal planning or strategizing about how to run our fam-ilies. Even those of us who take part in strategic planning at work, school or church somehow feel content to live our home lives in a reactive, un-planned way. Exceptions to this include our finances, where we spend time thinking about savings, investments and budgets. But when it comes to the management of our daily lives, activities and priorities, we tend to wing it, reacting to issues and problems as they come up without any context or plan. And the cost of winging it is huge—chaos, stress, regret, missed opportunities, frayed relationships. All of these are byproducts of lives lived without context and clarity. Does that mean that families should, or can, completely eliminate stress and chaos from their lives? Absolutely not. Even if it were possible—and it isn't—part of the fun of living in a family is the joy of the unknown. To run a family like a well-oiled machine would be to drain the passion and adventure out of it all. But there is plenty a family can do to drastically reduce unwanted chaos and live with greater context, clarity and purpose. In fact, there are three basic questions that every family needs to answer. The Three Big Questions Question 1: What makes your family unique? Question 2: What is your family’s top priority—rallying cry—right now? Question 3: How are we going to talk about and use the answers to these questions? All of the above was inspired by an article and book written by Patrick Lencioni called The 3 Big Questions for a Frantic Family. We hired a consultant from Patrick’s company, The Table Group, to help us facilitate our group’s organizational health and more recently, we have started to transition those same principles into our families. If you are interested in improving the most important organization in your life, your family, please let us know and we will send you a copy of the “Frantic Family.” We love talking organizational health!

Major Stock Indices S&P 500

Dow Jones Industrial Ave MSCI EAFE

MSCI Emerging Markets

(As of 12/31/2019)* +31.49% +25.34% +20.84% +16.56%

Major Bond Indices U.S. Aggregate Bond Index U.S. High Yield Bond Index

U.S. Treasury: 20+ Year CPI—Headline

(As of 12/31/2019)* +8.80% +13.53% +15.99% +2.09%

Our Quarterly Report

“Humility will open more doors than arrogance ever will.”

Rewald, Sebranek, & Frawley An Independent Firm January 2020

Fair Isn’t Always Equal

Financial Planning with Terry Terry Sebranek, Financial Advisor

One planning piece our group routinely confronts is estate planning for multigenerational small businesses. Here are a few unique situations we have encountered:

• A family has three kids. The daughter has lived on the farm and ran the business for 25 years since Mom and Dad retired. The other two siblings moved away, have professional careers and only come back home for the holidays.

• A family has four kids. The sons work side by side with Dad in the business. The daughters are stay at home Moms and have no interest in the business. Even though Dad owns 100% of the busi-ness, the sons are the backbone of the business and have grown revenues substantially since they have come onboard.

• Mom passed away yet Dad in his early 70s still runs the day to day in the family business. The next generation is not interested in keeping the business going. However a grandchild in college has worked summers with Grandpa and has expressed interest in the family business.

• A small business owner has two kids however no grandchildren or close family. One of the kids works at the business but is not ownership/leadership material. The other kid is a “free spirit.” The owner has a non-blood related manager who is very vital to the business and the future of the company.

A client-friend once told us, without my son, this business would not be worth nearly half as much and if something happened to me, his two sisters would reap and benefit from his hard work and effort. The girls left the farm, got professional careers, 401ks, pensions, etc. My son on the other hand milked morning and night and was “on call” 24/7. My son would have to borrow money and go into debt to buy them out at my death.

Parents want to be fair but they struggle determining what is equitable. Blood, sweat and tears in a small busi-ness is hard to account for in an estate plan and splitting everything equally is not always fair. Estate planning for a multigenerational small family business is one of key cogs to RSF’s value proposition.

My wife Jenna left the Richland Medical Center at the end of August 2019 and after substantial deliberation, Jenna has decided to join the Mile Bluff Clinic at the Elroy, WI location. She started seeing patients for the first time, Monday, December 9th. Jenna will hold clinical hours three days a week. She no longer will be do-ing baby deliveries however she will continue to do pre and postnatal care as well as general family practice out of Elroy. For those not familiar, Elroy is approximately a 40 minute drive north of Richland Center.

Jenna’s Career Transition

2020 Tax Numbers Update

Ordinary Income Tax Brackets & Rates

Single, Taxable Income Over

Married Individuals Filing Jointly, Taxable

Income Over

10% $0 $0

12% $9,875 $19,750

22% $40,125 $80,250

24% $85,525 $171,050

32% $163,300 $326,600

35% $207,350 $414,700

37% $518,400 $622,050

Standard Deduction

Filing Status Deduction Amount

Single $12,400

Married Filing Jointly $24,800

Additional amount for >age 65 or blind

* Single $1,300

* Married $1,650

Trusts & Estate Tax Brackets & Rates

10% $0

24% $2,600

35% $9,450

37% $12,950

Maximum Capital Gains & Qualified Dividend Tax Rates

Filing Status 0% Rate 15% Rate 20% Rate

Married Filing Jointly <$80,000 <$496,600 $496,600+

Single <$40,000 <$441,450 $441,450+

Trusts & Estates <$2,650 <$13,150 $13,150+

3.8% Medicare tax is applied on investment income over $200,000 for single filers, $250,000 married filing jointly and $12,750 of trusts and estates.

Qualified Business Income Deduction Thresholds

Single $163,600

Married Filing Jointly

$326,600

Estate & Gift Exemptions

Estate Exemption $11.58 million per person

Annual Gifting Limit

$15,000 per person

Retirement Plan Contribution Limits

Normal Catch-Up > Age 50

401k/403b $19,500 $6,500

SIMPLE IRA $13,500 $3,000

IRA & Roth IRA $6,000 $1,000

Health Savings Account Contribution Limits

Single $3,550

Family $7,100

Over Age 55 $1,000 per person

Medicare Part B & D Monthly Premiums

Adjusted Gross Income Part B Part D

Single Married

<$87,000 <$174,000

$144.60

Single Married

$87,001-$109,000 $174,001-$218,000

$202.40 $12.20

Single Married

$109,001-$136,000 $218,001-$272,000

$289.20 $31.50

Single Married

$136,001-$163,000 $272,001-$326,000

$376.00 $50.70

Single Married

$163,001-$499,999 $326,001-$749,999

$462.70 $70.00

Single Married

$500,000 or more $750,000 or more

$491.60 $76.40

Financial Planning with Terry Terry Sebranek, Financial Advisor

The Stock Market Game This past September marked the 12th anniversary of my arrival on Court Street with Joel and Terry. A lot of changes have occurred, trials come and gone and not to mention the metamorphosis from the 17 year old ver-sion of Kaleb to the nearly 30 year old one. Put simply, I have had the opportunity to be humbled many times.

I reflect back on my high school days and remember there was an Investing Club. My senior year in high school I decided to participate. Their main activity was “The Stock Market Game.” You would begin the school year with a hypothetical $100,000 and whoever had the most money at the end of the school year won. I remember looking at my Dad’s Edward Jones statement and investing the same way he did. A few months in I was significantly behind. As I looked at my other classmates holdings, my portfolio of mutual funds wasn’t anything compared to their penny stocks, tech companies and triple leveraged exchange traded funds. My tor-toise approach wasn't going to last long in this race so rather than compete with the hares, I quit.

The summer after my senior year in high school I had saved enough money to make my first Roth IRA contri-bution of $5,000. Let me remind you this was the summer of 2008. It wasn’t but six months later and I had wisely turned my $5,000 into less than $3,000. Thank you Great Recession/Financial Crisis. I can recall la-menting to my Dad about my loss. He wisely reminded me that I hadn’t “lost” anything, I still owned the same amount of shares. The value was still there but the price was on sale. Nonetheless I doubled down and bought more. Looking back, without my Dad’s influence, perhaps I would have shunned stock investing all together and missed out on what would become, and is, one of the greatest stock market decades in history.

At times, I have lost focus of the timeless, simple investing principles instilled to me by the likes of Dave Ramsey, Nick Murray and my 40+ year truck driving Dad. Even almost a decade later, I can vividly recall the bad investment decisions I made at such a young age however they provided me a much larger return on my learning, experience and humility. Put simply, my early errors and mistakes allowed my investing ego and ar-rogance to stay in check. As Paul “Bear” Bryant once stated “When you make a mistake, there are only three things you should ever do about it: admit it, learn from it, and don’t repeat it.”

Kaleb’s Corner Kaleb Frawley, Financial Advisor

SECURE Act On December 20, 2019, the SECURE Act was signed into law. The SECURE Act contains 29 provisions, en-compassing many aspects of financial planning and retirement saving. Once treasury regulations are released, nuances in interpreting this new law will become clearer. Until then, individuals are left to interpret the law’s effects based on the language of the law itself.

Key Provisions of the SECURE Act • Repeal the prohibition of retirement contributions after the account owner reaches age 70½. • Delay the age for required minimum distributions (RMDs) from 70½ to 72. • Eliminate the lifetime “stretch” IRA option, requiring nonspouse beneficiaries of IRAs to deplete the inher-

ited balance within 10 years of the decedent’s death (some exceptions apply). • Permit penalty-free withdrawals of up to $5,000 from retirement accounts to help pay for childbirth or

adoption expenses. • Expand permitted expenses for 529 college savings plans to include apprenticeships, as well as up to

$10,000 of qualified student loan repayments for the beneficiary and $10,000 for each of the beneficiary’s siblings (an aggregate lifetime limit, not an annual limit).

Many of the provisions adopted into the Internal Revenue Code as part of the SECURE Act allow individuals more time for tax-deferred savings and growth before distributions are required. The provisions deemed ad-vantageous to individuals and businesses may result in less tax revenue to the government, however. So, the SECURE Act also includes requirements designed to account for this loss of revenue by accelerating the with-drawal and taxation of inherited retirement accounts.

Tax Changes Are Coming We are less than one year away from the 2020 Presidential election. Questions abound—Will Trump get im-peached? If Trump survives, will he win a second term? Who will be the nominee for the Democratic party? What we can conclude though is significant changes are coming in the years ahead regardless of the President.

In early November, I attended a continuing education tax workshop in Oshkosh sponsored by Iowa State Uni-versity. The presenters and many of the tax preparers I spoke with don’t know how long this favorable tax en-vironment will last. For many, these are the lowest federal income tax rates they have ever seen. All one has to do is look at the significantly underfunded government programs like Medicare and Social Security, the $23 trillion national debt, annual budget deficits of $1 trillion and campaign promises such as “Medicare for all,” “student loan forgiveness,” or “pension bailouts” and conclude “this just isn’t sustainable.”

Here are a few scenarios:

• In the year 2000, the federal estate tax exemption was $675,000 per person. Today, it is nearly $11.6 mil-lion per person.

• Today, a married couple with no children can earn $190,000 and have an effective federal tax rate of <15%.

• Today, a married couple with no children can earn $100,000 and have an effective federal tax rate of <9%.

• A person bought a rental property 30 years ago for $100,000. The entire cost of the property has been de-preciated. Today it is worth $500,000. If the individual were to pass away, his heirs would receive a “step up in basis” and be able to sell the property tax-free. This example could also be a farmer or perhaps some-one who has owned a highly appreciated stock for many decades.

After reading those scenarios above and putting our government’s finances and political environment in per-spective, what are the odds in the future those individuals above will be paying lower income taxes? Our gut tells us it’s rather slim.

One candidate has proposed eliminating the step-up basis in capital gains. According to the Joint Committee on Taxation, not taxing gains at death results in a loss of about $40 billion each year. Part of the reason why there is such a strong incentive to defer the tax on capital gains is that if an individual defers long enough, the tax on the asset will eventually be forgiven (i.e. death).

Another candidate has proposed reducing the estate exemption to $3.5 million and taxing estates as follows:

Finally another candidate has proposed raising the capital gains tax rates to match the tax rates for ordinary income/wages. Take a look at Terry’s page to see how those tax rates differ today.

Most candidates are in favor of reversing the 2017 Tax Cuts and Jobs Act. Let’s assume federal tax rates go back to Obama-era levels in 2016. The married couple previously mentioned earning $100,000 with no kids, would now have an effective federal tax rate of approximately 11.4%. The $190,000 couple, an effective fed-eral tax rate of approximately 18.1%. Meaning those couples would hypothetically face 20%+ tax increases.

Please know this isn’t a recommendation of who you should vote for. We see flaws in nearly all political can-didates and parties and think to ourselves “Where did the long lost days of bipartisanship go?” Rather, as you sit down with your tax preparer, estate attorney and financial planner in the months ahead to prepare for 2020, please ask the questions—Am I (or my heirs) going to be in a lower or higher income tax bracket in the fu-ture? Should I really take the tax deduction today and defer the taxation or pay the income taxes now (i.e. pre-tax retirement contribution versus Roth to the depreciation of a piece of equipment or building)?

Kaleb’s Corner Kaleb Frawley, Financial Advisor

• $3.5 million to $10 million: 45% • $10 million to $50 million: 50%

• $50 million to $1 billion: 55% • $1 billion and more: 77%

The Fish Parable

Reminiscing With Rewald Joel Rewald, Financial Advisor

One of our favorite economic parables is the Fish Story, from Paul Zane Pilzer’s 1990 book, “Unlimited Wealth.” It is an excellent tool for think-ing about wealth creation, inequality and redistribu-tion.

Imagine 10 people live on an island. Each day they wake up, catch two fish, eat them, and go back to bed. It’s subsistence living at the most basic level. There are no savings – no stored or saved wealth. If someone gets sick and can’t fish, there’s no way to help them. No one has any extra.

Now imagine two of these people dream up a boat and a net. They spend six days catching one fish per day, slowly starving, but they make the boat and net. On the 7th day, they go out into the ocean and catch 20 fish in the net – it worked!!!!

At this point, the island can go one of two ways. First, since two people now produce what previously took ten, resources are freed up to do other things. Farming corn, picking coconuts, cleaning fish, cook-ing, repairing the boat and net, the possibilities are endless. The island ends up with more (and better!) food, new technologies, higher standards of living, more assets, more wealth, and they can now afford to take care of their sick and vulnerable!

Or…the eight people who don’t have a boat and net could become envious. Two now produce ten fish per day, while everyone else can only produce two. Income inequality now exists: it’s no longer 1:1, it’s 5:1. So, they devise a plan to tax 80% of the income of the boaters (16 fish) and redistribute two fish to each of the other inhabitants.

If the second plan is adopted, no one is better off. Each inhabitant still only has two fish. Moreover, the entrepreneurs have no incentive to fix their boat and net. The island will eventually revert to subsistence.

This is the problem with taxation for redistribution: it robs the economy of the benefits of new technology. Certainly, some of our brothers and sisters need help, sometimes permanently; sometimes temporarily. However, taxation for redistribution doesn’t make the economy stronger; redistribution hurts growth.

Everyone on the island is better off because of the boat and the net. Taxing the inventors’ wealth or in-come and redistributing it removes resources from a highly productive new technology. Moreover, the in-come inequality that exists on the island is a sign of more opportunity, not less.

There are things the government can do that add to productivity – police and fire protection, national de-fense, enforcing the rule of law and protecting private property – but once government goes beyond this, it begins to undermine growth.

Today, 17% of all personal income is redistributed by government, while around 40% of all income is taxed and spent by the federal, state and local governments, combined. This is the reason the US economy has not attained 4% real GDP growth. European economies tax and spend even more and this is why they have grown slower than the US in recent decades.

In the meantime, government leaders around the world blame slow growth on a lack of investment by compa-nies and attempt unsuccessfully to use negative inter-est rates to stimulate lending and investment. They also propose even more government spending and re-distribution to help those that big government is hold-ing back.

These policies won’t boost growth, and proposals to tax wealth and income because of the perceived prob-lem of income inequality will ultimately reduce living standards. Increasing living standards requires less government, not more.

Almost five years ago we were first introduced to this story by First Trust economist Brian Wesbury. In early November, he revisited this topic again in his Monday Morning Outlook. We find it to be a very timely piece as we enter the 2020 political environment. Don’t ever forget, we invest in companies versus governments. The real innovation comes from the former.

Income Inequality, Taxation, and Redistribution

“For a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

- Winston Churchill

1Password

Jesse & Joe’s Dispatch

Do you have trouble recalling usernames and passwords—credit cards, banking, Amazon, Netflix, emails and everything else? Some need special characters, oth-ers capital letters or institutions require you to change your password every 90 days. As a result, your login information is constantly changing.

I personally use 1Password. With 1Pass-word you only ever need to memorize one password. All your other passwords and important information are protected by your Master Password, which only you know. If you are interested in this feature, Jesse/I am the most well versed user in our office.

Real ID Deadline Approaching—October 1, 2020 Beginning October 1, 2020, every state and territory resident will need to present a REAL ID compliant li-cense/ID, or another acceptable form of identification, for accessing Federal facilities, entering nuclear power plants, and boarding commercial aircraft. The card, itself, must be REAL ID compliant unless the resident is using an alternative acceptable document such as a passport or passport card, or state-issued Enhanced Driv-er’s License. Travelers who do not present a REAL ID-compliant license or acceptable alternative will not be permitted through the security checkpoint. REAL ID-compliant cards will have of one of the following mark-ings on the upper top portion of the card. If the card does not have one of these markings, it is not REAL ID-compliant and won’t be accepted as proof of identity in order to board commercial aircraft.

New Addition Coming Spring 2020!!

The Brown family is thrilled to share that the RSF family is growing once again! In April, Joe and Karia will add their fourth child. While Ellyn and

the boys debate the preferred gender, Mom and Dad are praying for a healthy baby and a safe delivery.

Psalms 127: 3-5 NIV

Children are a heritage from the LORD, offspring a reward from him. Like arrows in the hands of a warrior are children born in one’s youth. Blessed is the man whose quiver is full of them. They will not be put to

shame when they contend with their opponents in court.

159 East Court St., P.O. BOX 420

Richland Center, WI 53581

(877) 647-3745

Securities and advisory services offered through Commonwealth Financial

Network®, member FINRA/SIPC, a Registered Investment Adviser.

This material is intended for informational/educational purposes only. Contact your financial professional for more information specific to your situation.

Can you recall what your 2019 New Year’s resolutions were? Did you accomplish?

U.S. News & World Report states the failure rate for New Year’s resolutions is about 80% and most lose their resolve by mid-February. What are you going to do differently in 2020 so you are not one of the 80%?