Economic Updates & Financial Articles

Economic Updates & Financial Articles

Economic Updates:

Retirement in Sight Newsletter:

Financial Articles:

 


Weekly Economic Update for 4/12/2021

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THE WEEK ON WALL STREET

Strong economic data and a resurgent technology sector propelled stocks to solid gains last week.

The Dow Jones Industrial Average advanced 1.95%, while the Standard & Poor’s 500 picked up 2.71%. The tech-heavy Nasdaq Composite index gained 3.12%. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.96%.1,2,3

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The Whims of Wall Street

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It can be exhausting trying to keep up with the whims of Wall Street.

Lately, the financial markets have been fixated on federal taxes and what may be proposed on Capitol Hill in the weeks and months ahead.

Wall Street’s focus on taxes closely follows its attention on the 10-year Treasury yield. And it wasn’t that long ago that the financial markets were influenced by reopening and vaccine distribution statistics.

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The Call for a Minimum Global Corporate Tax

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In a speech to the Chicago Council on Global Affairs, U.S. Treasury Secretary Janet Yellen has called for a minimum corporate income tax that would be shared by countries all over the world.1

The decrease of corporate tax rates around the world has led to what Yellen has described as a “30-year race to the bottom,” which has led to tax systems that have difficulty raising sufficient revenue. While low corporate tax rates might seem good for businesses, the other side of the coin is that countries with insufficient revenue are unable to make investments in important public needs. Some of those needs also serve the corporations, such as highways, rail, and ports needed to transport goods, to name but one example.1

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Paying for the Infrastructure Bill

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President Joe Biden introduced the much-anticipated American Jobs Plan, which outlines an approach to spend roughly $2.2 trillion on the nation's infrastructure and other projects.

As part of the legislative process, the Biden administration also laid out a proposal for paying for the domestic investment. The plan includes raising the corporate tax rate to 28% from 21%, cracking down on companies that use overseas operations to manage profits, and eliminating tax breaks for some industries.1

Right now, the proposal does not include any new taxes on individuals. It's only targeting corporations expecting that the 8-year plan would pay for itself in 15 years.2

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Monthly Economic Update for April, 2021

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U.S. Markets

Improved economic conditions and broadened vaccine programs ignited a broad stock market rally, though rising treasury yields dragged on technology and high-growth stocks.

The Dow Jones Industrial Average led, picking up 6.62 percent. The Standard & Poor’s 500 Index rose 4.24 percent while the tech-heavy Nasdaq Composite added 0.41 percent.1

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Weekly Economic Update for 4/5/2021

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THE WEEK ON WALL STREET

Overcoming a rocky start, stocks rallied into the close of a holiday-shortened week of trading as technology shares staged a powerful recovery and investors reacted positively to President Biden’s infrastructure spending proposal.

The Dow Jones Industrial Average gained 0.24%, while the Standard & Poor’s 500 picked up 1.14%. The tech-heavy Nasdaq Composite index rose 2.60%. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.43%.1,2,3

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IRA Deadlines Are Approaching

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Financially, many of us associate the spring with taxes – but we should also associate December with important IRA deadlines. This year, like 2020, will see a few changes and distinctions.

December 31, 2021, is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts.

May 17, 2021, is the deadline for making 2020 annual contributions to a traditional IRA, Roth IRA, and certain other retirement accounts. This extension from the traditional April 15 deadline follows an extension of the traditional tax deadlines.1

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The IRS Extends Additional Tax Deadlines for IRAs, HSAs, and More

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Previously, the Internal Revenue Service (IRS) announced that the federal income tax filing due date for individuals for the 2020 tax year had been automatically extended from April 15, 2021, to May 17, 2021.1

More time for all. However, the IRS has also settled on May 17, 2021 as the deadline for contributions to individual retirement arrangements (IRAs and Roth IRAs), health savings accounts (HSAs), and Coverdell education savings accounts (Coverdell ESAs).2

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Weekly Economic Update for 3/29/2021

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THE WEEK ON WALL STREET

A rocky week with wide price swings led to mixed results for stocks last week, as investors grappled with anxieties over economic growth and weakness in technology and other high-growth stocks.

The Dow Jones Industrial Average added 1.36%, while the Standard & Poor’s 500 gained 1.57%. The Nasdaq Composite index fell 0.58% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 1.67%.1,2,3

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Life Insurance with Extended-Care Riders

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The COVID-19 pandemic has changed extended-care policies. While the specific policy information varies from company to company, in general, the pandemic has made it more difficult to qualify for extended-care policies. This can be particularly challenging if you’re in a high-risk group.

Around 7 out of every 10 seniors are projected to need extended care during their lifetime, and many of these medical needs aren’t covered by Medicare, Medicaid, or standard health insurance. Unless you have made arrangements for extended care, you are choosing to self insure should you require this type of assistance.1

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Inflation Boogeyman

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Inflation has emerged as one of the top financial concerns for investors as they size up the economy for the rest of the year.

According to research by Deutsche Bank, Google searches for “inflation” are rising rapidly and recently hit a peak not seen since the tracking began 13 years ago.1

Fed Chair Jerome Powell has said that inflation is likely to pick up as the economy recovers from the pandemic, but he believes it will be temporary. Powell has also stated that the central bank plans to keep short-term rates anchored near zero through 2023.2

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Are Americans Saving Too Much?

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Among the many changes arising from the pandemic, one of the most noticeable was a change in American spending habits.

A survey released in March 2021 by Pew Research shows that Americans have increasingly chosen to put away what extra money they have rather than invest. It spreads across all income levels, with a 32% increase of wealthier Americans saving more, 17% more for those at lower incomes, and an overall increase of 23%. Studies show that the total may amount to $1.8 trillion, and is expected to increase to $2.5 trillion by the summer.1

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It’s All About Bonds

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There’s an old Wall Street maxim that says, “markets climb a wall of worry.” And these days, there’s plenty to worry about with the trend in long-term interest rates.

The 10-year Treasury yield in recent weeks moved above 1.75% (the highest in 14 months), and the 30-year Treasury topped 2.5% for the first time since August 2019.1

Long bond yields may increase for several reasons, some of which may be good—strong economic growth—and some concerning, a potential pick up in inflation.2

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Weekly Economic Update for 3/22/2021

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THE WEEK ON WALL STREET

Rising bond yields and improving economic conditions led to a choppy week of trading that ended in modest losses for investors.

The Dow Jones Industrial Average fell 0.46%, while the Standard & Poor’s 500 declined 0.77%. The Nasdaq Composite index lost 0.79% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.24%.1,2,3

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Investing During Periods of Inflation

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In August of 2020, the Fed announced that it is willing to allow inflation to run higher than normal in order to support the labor market and broader economy. This major policy shift allows inflation to run above the Fed’s 2% goal for some time before the Fed would consider increasing short-term interest rates in an attempt to combat higher prices.1

These robust changes to the Fed’s long-standing inflation policy further illustrates the importance of understanding how inflation is reported and how it can affect your investments.

What Is Inflation? Inflation is defined as an upward movement in the average level of prices. Each month, the Bureau of Labor Statistics releases a report called the Consumer Price Index (CPI) to track these fluctuations. It was developed from detailed expenditure information provided by families and individuals on purchases made in the following categories: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other groups and services.2

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The American Rescue Plan Makes FSAs a Little More Flexible

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For those with a Dependent Care Flexible Spending Account (FSA), there may be some good news on the horizon. The American Rescue Plan Act, signed into law by President Joe Biden, boosts the amount that companies can allow workers to deposit in their dependent-care FSAs for 2021. Here are some details to remember:

*Dependent Care Contributions: The limit on contributions to Dependent Care FSAs is now higher under the American Rescue Plan Act. For married couples filing jointly, the cap is $10,500, up from $5,000. For single filers, the limit is $5,250, up from $2,500.1

*Health FSA Contributions: Health FSA contributions are unaffected by the latest stimulus bill, meaning contributions to Health FSAs are still capped at $2,750.2

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Financial Strategies for Athletes

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Whether you are a professional athlete, a college amateur, or an aspiring Olympian, you probably know what success feels like. You also know a thing or two about being a good sport when things don’t go your way. Good news: this means you already have some of the basics needed to create a financial strategy.

Don’t think so? Building a strategy is all about having distinct goals, knowing the risks, and determining how much time you have ahead of you. It’s also about surrounding yourself with people who have your best interests in mind and share your goals.

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I.R.S. Delays Tax Filing, Payment Deadlines

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Less than one month ahead of the traditional date, the I.R.S. has delayed the deadline for filing and paying taxes. The new deadline is May 17, 2021.1,2,3

The delay follows continued disruption from the COVID-19 pandemic and a late start to the tax-filing season, which the I.R.S. delayed to start on February 12. It also follows the agency's decision to postpone the deadline to June 15 for the states of Louisiana, Oklahoma, and Texas, still recovering from disastrous winter storm activity. Other states may now extend their local filing and payment deadlines.1,3

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Qualified Charitable Distributions

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Do you have an I.R.A.? As you enter your 70s, you may start to look at that I.R.A. not only as an asset, but also as a problem. By law, you must take required minimum distributions (R.M.D.s) from a Traditional I.R.A. once you reach age 72; there are very few exceptions to this. The downside of these R.M.D.s? The entire distribution is taxable. (You never have to take R.M.D.s from a Roth I.R.A., provided you are its original owner.)1

While the income from the R.M.D. is nice, the linked taxes can be a headache. Relief for that headache might be available to you, though. Did you know that you can potentially satisfy some or all of your annual R.M.D. requirement in a way that can help you manage taxes and make a charitable impact?

Consider the Qualified Charitable Distribution, Q.C.D. This is a direct asset transfer from an I.R.A. to a charity or non-profit organization of your choice. The organization must be tax-exempt under Internal Revenue Section 501(c)(3).2

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The Shred Party

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If a shred party happens to spring up in your area, you may want to mark your calendar. For many years, shred parties, where a business or organization hosts clients or the public to the use of giant paper shredders, have presented a fun and easy way for folks to rid themselves of paper clutter. Sometimes, it’s more than just paper, as some industrial-sized shredders even have the ability to destroy hard drives and other electronic storage devices.

Protection from identity theft. Of course, this is not just about clutter: old bills and financial documents are just the sorts of things that scammers and identity thieves want to get their hands on. The only way to be totally certain that you are safe is the total destruction of those documents and devices once their practical use has come to an end.

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The Economics of MLB Spring Training

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Major League Baseball scheduled Opening Day for April 1, but two states have already scored with spring training underway.

Every year, spring training divides the 30 MLB teams into two squads. Half of the teams travel to Florida as part of the Grapefruit League, while the other 15 teams play in Arizona as part of the Cactus League.1

Before the pandemic, the Cactus League would generate $644 million in revenue and create more than 6,000 jobs for the stadiums across central Arizona. Florida would see a comparable economic benefit.1,2

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Weekly Economic Update for 3/15/2021

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THE WEEK ON WALL STREET

Stocks touched new record highs last week as bond yields steadied, a fiscal relief bill was signed into law, and confidence in a strong economic recovery grew.

The Dow Jones Industrial Average gained 4.07%, while the Standard & Poor’s 500 tacked on 2.64%. The Nasdaq Composite index rose 3.09% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 3.01%.1,2,3

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COVID-19 Relief Bill Signed Into Law

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The House of Representatives passed a $1.9 trillion relief package focused on economic relief following the COVID-19 pandemic. The bill was signed into law at the White House on Thursday.1

Beyond the much-discussed $1,400 stimulus checks, the relief bill offers many levels of stimulus, including funds for vaccine distribution, expansions of tax credits, expanded unemployment payments, and aid to state and local governments.1

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Guarding Against Identity Theft

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America is enduring a data breach problem. As many workers traded in the office for remote work, data security has been a focus for the public and private sectors. Between robocalls pitching low-cost health insurance, pretending to be the I.R.S., or offering “work from home” opportunities, the pandemic has seen scammers getting more creative than they’ve ever been.1

Tax time is prime time for identity thieves. They would love to get their hands on your 1040 form, and they would also love to claim a phony refund using your personal information. You may realize you’ve been the victim of tax fraud if you can’t e-file your tax return because of a duplicate Social Security number or if you receive a notice from the I.R.S. that talks about owing taxes for a year you haven’t filed.2

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Weekly Economic Update for 3/8/2021

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THE WEEK ON WALL STREET

Stocks were mixed last week as rising bond yields and heightening inflation fears sent stocks on a wild ride, capped by a remarkable Friday afternoon rally.

The Dow Jones Industrial Average gained 1.82%, while the Standard & Poor’s 500 increased by 0.81%. The Nasdaq Composite index fell 2.06% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.76%.1,2,3

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Volatility Tests Your Mettle

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Most people understand that stock prices don't go straight up. But when market volatility increases, the price action can test the mettle of even the most seasoned investor.

In recent weeks, stock prices have trended lower with a few eye-popping, one-day rallies as the financial markets appear to adjust to higher interest rates on long-term Treasuries. Since the beginning of the year, we've seen a jump in the yield of the 10-year treasury.1

While investors recognize that economic strength may lead to higher bond yields, it's the speed at which bond yields increased that proven unsetting. Generally speaking, when yields rise, bond prices tend to fall.

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The Many Forms of Fixed Income

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You want to draw some income while preserving some of your capital. So, you decide to take a look at fixed-income investments. A little research shows you that 10-year Treasury notes haven’t yielded more than 2% since July 2019. One-year T-bills haven’t yielded 1% since February 2020. You shrug and think, “Ah, well, low-interest rates, what can you do.”1

Treasury bonds aren’t your only choice in the world of fixed-income investing. Far from it. There are various other vehicles you may want to consider as part of a fixed-income strategy, and some of them offer potentially higher yields than Treasuries. It comes down to how much risk you want to shoulder as a fixed-income investor.

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The Emergence of ESG Investing

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ESG: what does that acronym stand for? Those three letters stand for "Environmental, Social, and Governance" and signify an investment that has particular merit to investors of all ages. 

A recent Morgan Stanley Bank survey found that almost 90% of millennials would prefer to have investments that suit their values. With young adults, ESG investing could become more and more of an element in investing strategies.1

You may recall how the phrase “socially responsible investing” became part of the stock market vocabulary a generation ago. Socially responsible investing (SRI) was often about not investing in certain companies – businesses whose products or services seemed distasteful to this or that investor. ESG investing focuses more on corporate behavior. Is a corporation managing natural resources sustainably? Does it treat workers well? Is its culture inclusive and diverse?   

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A Look at SPACs

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What are SPACs, and why is Wall Street talking about them? Special interest acquisition companies (SPACs) are not new, but they are much more prevalent than they once were. In 2020, there were ten times more SPAC transactions than there were in 2016.1

SPACs are public companies created to buy private companies. They are usually formed by large investors who know a particular business sector well. These investors analyze and target privately held firms within that sector for acquisition.

A SPAC begins as a shell corporation. At the start, it has no business operations, and it stays mum about what firms it might want to acquire. The SPAC does announce an initial public offering (IPO) to raise up additional capital. Following the IPO, the SPAC targets private companies looking to sell. Then a reverse merger occurs – the deal that takes the private company public, with the SPAC continuing the acquired company’s operations.1,2

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Understanding Extended Care

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Addressing the potential threat of extended care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

The Administration for Community Living estimates that by 2060, 94.7 million Americans will be aged 65 and older. Of those, it’s estimated that someone who just turned 65 has an almost 70% chance of needing some type of extended care.1,2

What Is Extended Care? Extended care is not a single activity. It refers to a variety of medical and non-medical services needed by those who have a chronic illness or disability that is most commonly associated with aging.

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Spotlight Shifts to Bonds

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One time-tested principle of investing is, "when bond yields move higher, bond prices tend to move lower."

Investors are doing a "double take" on the 10-year Treasury yield, which recently topped 1.5% — its highest level in about a year. With the increase in yield comes a drop in price.1

For some, the first time they experience a change in bond prices is when they open their monthly statement and review their investments.

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Retirement In Sight for March, 2021

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NEED CASH? AVOID TAPPING YOUR RETIREMENT ACCOUNT

Imagine if your 35-year-old self magically appeared in front of you one day and asked for a percentage of your retirement savings or a bit of your retirement income. While this would never happen, something financially analogous happens in the lives of too many people. They withdraw assets from their retirement accounts in mid-life, which can hurt their lifetime retirement savings potential (and possibly, their retirement income potential as well). In effect, they borrow from their future selves when they take retirement plan distributions too early. 

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Monthly Economic Update for March, 2021

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U.S. Markets

Stocks notched a solid gain in February thanks to growing optimism surrounding the economic recovery and decreasing number of COVID-19 infections.

The Dow Jones Industrial Average led, picking up 3.17 percent. The Standard & Poor’s 500 Index rose 2.61 percent, while the Nasdaq Composite added 0.93 percent.1

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Weekly Economic Update for 3/1/2021

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THE WEEK ON WALL STREET

Stocks dropped amid rising long-term bond yields, with sharp declines in high-valuation growth stocks leading the overall market lower.

The Dow Jones Industrial Average slipped 1.78%, while the Standard & Poor’s 500 declined 2.45%. The Nasdaq Composite index, home to many high-valuation growth plays, fell 4.92% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged up 0.37%.1,2,3

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Changes to Paycheck Protection

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On Monday, Feb. 22, the White House announced several changes to the Paycheck Protection Program (PPP) that went into effect on Wednesday, Feb. 24. These changes are intended to further target “the smallest businesses and those that have been left behind in previous relief efforts.”1

If you’re a small business owner in need of financial assistance, you may find these changes helpful in securing a PPP loan:

Change #1: Two-Week Exclusive Application Period

Beginning Feb. 24, the PPP will only accept applications from businesses with 20 or fewer employees. According to the White House, approximately 98 percent of small businesses in America have fewer than 20 employees, yet these small businesses have found it difficult to compete with larger companies for PPP loan access. There will be a 14-day exclusive application period, which is designed to help lenders focus solely on serving these small businesses.1

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Tax Efficiency in Retirement

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Will you pay higher taxes in retirement? Do you have a 401(k) or a traditional IRA? If so, you will receive income from both after age 72. However, if you have saved and invested much of your life, you may also end up retiring at a higher marginal tax rate than your current one. In fact, the income alone resulting from a Required Minimum Distribution could push you into a higher tax bracket.

While retirees with lower incomes may rely on Social Security as their prime income source, they may pay comparatively less income tax than you in retirement; some, or even all, of their Social Security benefits may not be counted as taxable income.1

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The New Inherited IRA Rules

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New inherited I.R.A. rules took effect on January 1, 2020. The Setting Every Community Up for Retirement Enhancement (SECURE) Act became law on that day, altering the regulations on inherited Individual Retirement Account (I.R.A.) distributions.

The big change: the introduction of the 10-year rule for beneficiaries. Most people who inherit an I.R.A. now have to empty that I.R.A. of assets within ten years of the original owner's death. You can do this as you wish; you can withdraw the whole I.R.A. balance at once, or take incremental distributions on the way to meeting the 10-year deadline.1

Remember that tax rules constantly change. There is no guarantee that the tax treatment of Roth and Traditional I.R.A.s will remain what it is now. This article is for informational purposes only. If you have inherited or expect to inherit a traditional or Roth I.R.A., be sure to consult a financial professional for real-world advice.

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Countdown to College

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As a parent, of course you want to give your child the best opportunity for success, and for many, attending the “right” university or college is that opportunity. Unfortunately, being accepted to the college of one’s choice may not be as easy as it once was. Additionally, the earlier you consider how you expect to pay for college costs, the better. Today, the average college graduate owes $37,731 in debt, while the average salary for a recent graduate is $49,785.1

Preparing for college means setting goals, staying focused, and tackling a few key milestones along the way — starting in the first year of high school.

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Weekly Economic Update for 2/22/2021

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THE WEEK ON WALL STREET

Rising bond yields dampened investor enthusiasm for high-multiple growth companies last week, sending market averages mostly lower in a holiday-shortened week of trading.

The Dow Jones Industrial Average gained 0.11% for the week. But the Standard & Poor’s 500 fell 0.71% and the Nasdaq Composite index slid 1.57%. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.26%.1,2,3

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Retirement Seen Through Your Eyes

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How do you picture your future? If you are like many contemplating retirement, your view is likely pragmatic compared to that of your parents. That doesn’t mean you must have a “plain vanilla” tomorrow. Even if your retirement savings are not as great as you would prefer, you still have great potential to design the life you want.

With that in mind, here are some things to think about.

What do you absolutely need to accomplish? If you could only get four or five things done in retirement, what would they be? Answering this question might lead you to compile a “short list” of life goals, and while they may have nothing to do with money, the financial decisions you make may be integral to achieving them.

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Oil Prices on the Move

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At this time last year, it was still unknown that a deadly global pandemic was on the rise, eventually stalling economic growth and sending crude oil prices into negative territory. But recently, oil prices have surged, with crude hitting highs not seen since before the pandemic.

A hopeful sign. Recent production cuts and a belief in the potential for underlying economic growth are spurring a rally. Although the demand for oil is still lower than normal, many investment professionals harbor hopes of a speedier than expected economic recovery thanks to the ongoing global vaccination effort.1

Oil prices and the economy. The price of oil can often influence the costs of other production and manufacturing across the United States. For example, there is a direct correlation between the cost of gasoline or airplane fuel to the price of transporting goods and people. A drop in fuel prices means lower transport costs and cheaper airline tickets.2

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Economic Predictions: What Lies Ahead?

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It can be easy to overlook the nation’s solid economic fundamentals when the financial media splashes stories every day about an army of amateur traders, short-selling mania, and initial public offerings (IPOs) that double in price on the first day of trading.

But a recent survey by The Wall Street Journal showed just how upbeat economists are about 2021.1

Here’s a quick summary of the highlights.

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Weekly Economic Update for 2/15/2021

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THE WEEK ON WALL STREET

Stock prices inched higher last week amid declining COVID-19 cases, a pick-up in vaccinations, and progress on a fiscal relief bill.

The Dow Jones Industrial Average gained 1.00%, while the Standard & Poor’s 500 rose 1.23%. The Nasdaq Composite index climbed 1.73% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 1.80%.1,2,3

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How Soon Might the Stimulus Arrive?

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While many in the United States are beginning to receive vaccinations and people are starting to foresee a life after COVID-19, it remains clear that things aren’t yet back to normal. As a result, there has been a great deal of speculation about Congress putting forward an economic stimulus, covering the needs of both individuals and businesses.

While some businesses are opening in a limited capacity, it doesn’t make ends meet for both small businesses who have been forced to close for extended periods, nor their employees, who are about to see the end of another wave of enhanced federal unemployment benefits. That aid is set to expire on March 14, a date that is expected by some to serve as an overall deadline for economic assistance.1

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Retirement Questions That Have Nothing to Do With Money

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Retirement planning is not entirely financial. Your degree of happiness in your “second act” may depend on some factors that don’t come with an obvious price tag. Here are some non-monetary factors to consider as you plan your retirement.

What will you do with your time? Too many people retire without any idea of what their retirement will look like. They leave work, and they cannot figure out what to do with themselves, so they grow restless. It’s important to identify what you want your retirement to look like and what you see yourself doing. Maybe you love your career, and can’t imagine not working during your retirement. There’s no hard and fast rule to your dream retirement, so it's important to be honest with yourself. An EBRI retirement confidence survey shows that almost 74% of retirees plan to work for pay, whereas just 27% of retirees report that they’ve actually worked for pay.1

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Should You Consider Refinancing Your Mortgage?

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Are you considering refinancing your mortgage? Perhaps you want to shorten the term of your home loan. Maybe you have an adjustable-rate mortgage now and want to refi into a fixed rate. Or maybe you want to tap into home equity or consolidate debt. Whatever your reason(s), you must weigh two questions. One, how long do you want to stay in your home? Two, how much money are you expected to save?

Refinances break down into three types: rate-and-term, cash-out, and cash-in. Rate-and-term refinances (also known as refis) simply adjust the term and/or the interest rate of your existing loan. Even though interest rates are rising now, they still make up the bulk of refinances. The no-cash-out variety adds closing costs to the loan balance, relieving you from having to pay those costs out of pocket.

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Retirement In Sight for February, 2021

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EVALUATING AN OPPORTUNITY FOR AN EARLY RETIREMENT

The pandemic has hastened the retirement of some baby boomers, and the linked furloughs and layoffs in many industries have led others to wonder if a retirement transition might come sooner than they think. Buyouts became common last year as businesses cut costs. What if you receive one this year? 

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Weekly Economic Update for 2/8/2021

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THE WEEK ON WALL STREET

Stocks notched strong gains last week, paced by a string of solid economic reports and consensus-beating corporate earnings.

The Dow Jones Industrial Average gained 3.89%, while the Standard & Poor’s 500 advanced 4.65%. The Nasdaq Composite index jumped 6.01% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, climbed 1.96%.1,2,3

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Will Updated I.R.S. Tables Create an Opportunity for Retirees?

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If you are retired and have reached your seventies, you may have the opportunity to draw a little less income from your retirement savings accounts in 2022. 

Next year, the Internal Revenue Service plans to update the life expectancy tables used for the calculation of required minimum distributions, or RMDs – the annual withdrawals you are asked to make from certain kinds of retirement plans.1

The I.R.S. knows that on the whole, Americans are living longer than they used to, and therefore, their retirement savings need to last longer. In recognition of this, it is revising the tables used to figure RMDs for the first time since 2002.1

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Monthly Economic Update for February, 2021

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U.S. Markets

Stocks were mixed in January, giving up much of the month’s gains in the final days of trading, as unprecedented activity in a handful of companies roiled markets.

 The Dow Jones Industrial Average dropped 2.04 percent and the Standard & Poor’s 500 Index fell 1.11 percent. By contrast, the Nasdaq Composite gained 1.42 percent.1

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Weekly Economic Update for 2/1/2021

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THE WEEK ON WALL STREET

Despite strong corporate earnings, stock prices closed lower after a volatile week of trading triggered by unprecedented activity in a handful of companies.

The Dow Jones Industrial Average lost 3.27%, while the Standard & Poor’s 500 fell 3.31%. The Nasdaq Composite index dropped 3.49% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 1.83%.1,2,3

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Earnings Season Gets Underway

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Every few months, you may hear the phrase “earnings season” as you listen to financial news.

But what exactly is “earnings season,” and why is it important to Wall Street?

Earnings season is the time when a majority of publicly traded companies release their quarterly financial reports. Companies often go into great detail about their business, and some may guide what lies ahead.

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Weekly Economic Update for 1/25/2021

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THE WEEK ON WALL STREET

Anticipation of a new fiscal stimulus and improved vaccine distribution powered stocks to fresh record highs last week with technology stocks leading the way.

The Dow Jones Industrial Average gained 0.59%, while the Standard & Poor’s 500 picked up 1.94%. The Nasdaq Composite index led, gaining 4.19% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose by 1.15%.1,2,3

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Tax Filing Season Is a Little Later This Year

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Recently, the Internal Revenue Service (I.R.S.) announced that tax season will start a little later than usual. This year the I.R.S. will begin accepting and processing 2020 tax returns on Friday, February 12, 2021.1

In light of the December 27 tax law changes which brought a second round of Economic Impact Payments and other benefits to many, the I.R.S. will use this additional time to update, program, and test their systems.1

However, if you intend to work with a tax professional or use tax software, there's no need to wait. If you prepare your return now, not only will you have your taxes done and out of the way, but your filings will be transmitted to the I.R.S. starting February 12.1

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1099 Forms

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What is a 1099 form? This is a record of payment from an individual or entity, showing a payment, generated for your records. The individual/entity sends a copy to both the payee as well as the I.R.S.1

Who might be sending 1099s? Clients send their contractors 1099s, recording work performed. Banks send 1099s to reflect interest from a savings account. A state may send a 1099 for a tax refund. If the financial institution who handles your retirement account writes you a check, they will also send you a 1099.1

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Outlook 2021: Bond Prices

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The 10-year Treasury yield has climbed higher since the New Year, which means that some bond prices are dropping. You may have seen the headlines that say, “10-Year Yields Over 1%.”

For some, the first time they experience a change in bond prices is when they open their monthly statement and review their investments.

But before you check your January statement, here is some background that may help put the most recent move in rates in perspective.

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Weekly Economic Update for 1/18/2021

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THE WEEK ON WALL STREET

Markets drifted lower last week as uninspired investors digested mixed news on the economic front.

The Dow Jones Industrial Average lost 0.91% while the Standard & Poor’s 500 slid 1.48%. The Nasdaq Composite index stumbled 1.54% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.26%.1,2,3

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Weekly Economic Update for 1/11/2021

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THE WEEK ON WALL STREET

Shrugging off COVID-19 infections and the disruption at the Capitol on January 6, stocks powered higher to kick off a new year of trading.

The Dow Jones Industrial Average gained 1.61%, while the Standard & Poor’s 500 increased by 1.83%. The Nasdaq Composite index, which led throughout 2020, picked up 2.43%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.45%.1,2,3

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2021 Opens With a Bang

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The first week of 2021 has already had many ups and downs. Just because it’s a new year doesn’t mean that the 2020 issues go away, and so far, 2021 has been no exception to this rule.

The markets opened on January 4 and traded lower out of the gate, with the S&P 500 dropping 1.5%. The last time the market opened lower was in 2016, when the S&P 500, the Dow Jones, and the Nasdaq Composite all dropped on the first trading day of the new year.1,2

The stock market’s first hurdle of the New Year was to assess the runoff elections happening for the two Senate seats in Georgia. A special election has only happened three other times in our nation’s history, so the market appeared anxious about the process.3,4

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5 Highlights of the New Stimulus Package

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After a bit of political posturing in December, the $900 billion Consolidated Appropriations Act of 2021 (2021 CAA) was signed into law by President Trump as the COVID-19 pandemic continues to impact employers and employees.

Here’s a quick recap of five key highlights:

Stimulus Checks: The new law authorized a second round of $600 checks for people with income that meets the criteria. The checks start to phase out for individuals who earned at least $75,000 in 2019 and $150,000 for joint filers.1

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Retirement In Sight for January, 2021

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TO RETIRE, OR NOT TO RETIRE?

For some of us, the coronavirus pandemic has complicated the question. As Yahoo! Finance reports, a Harris Poll study conducted this past summer found that 25% of Gen Xers and 14% of baby boomers think they will retire later than they planned, because of the pandemic's financial impact on their lives.   

Will this perception be fleeting? Forty-nine percent of respondents cited the current state of the economy as the biggest obstacle to realizing their retirement goals, but the economy frequently changes course. Long-term retirement strategies consider potential short-term economic ups and downs. 

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Monthly Economic Update for January, 2021

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U.S. Markets

A tumultuous year ended on a positive note as stocks rose in December, spurred by the rollout of multiple COVID-19 vaccines and the signing of a new fiscal relief bill.

The Dow Jones Industrial Average, which lagged all year, picked up 3.27 percent. The Standard & Poor’s 500 Index gained 3.71 percent, and the Nasdaq Composite tacked on 5.65 percent.1

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Quarterly Economic Update for 4Q 2020

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THE QUARTER IN BRIEF

On Wall Street, the fourth quarter's biggest development had everything to do with science and medicine. In November, news that two vaccines had been highly effective against COVID-19 in clinical trials strengthened Wall Street's fall rally. The Food and Drug Administration (FDA) authorized both vaccines for emergency use weeks later.

Two important deals were struck after much negotiation. In the nation's capital, Congress approved a second economic stimulus in response to the pandemic. Overseas, the United Kingdom and the European Union met the deadline to forge a post-Brexit trade agreement.

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Weekly Economic Update for 1/4/2021

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THE WEEK ON WALL STREET

Stocks moved higher during a holiday-shortened week of trading, capping off a turbulent, but otherwise strong year for equity investors.

The Dow Jones Industrial Average gained 1.35%, while the Standard & Poor’s 500 increased by 1.43%. The Nasdaq Composite index, which led all year, added 0.65%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.02%.1,2,3

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IRA Deadlines Are Approaching

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Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines.

April 15, 2021 is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts.

Keep in mind that withdrawals from traditional, SIMPLE, and SEP-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.

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What’s the Buzz with Bitcoin?

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Hardly a day goes by that the topic of bitcoin or other cryptocurrency assets doesn’t come up in meetings with clients and prospects or from friends and relatives who want to know, “what all the buzz is about?”

The message is the same, regardless of who’s asking. Cryptocurrency is not a currency at all. It’s a speculative asset class that is not appropriate for everyone. Only people with a high-risk tolerance should consider cryptocurrency assets.

Like other alternative assets, cryptocurrency can be illiquid at times, and its current values may fluctuate from the purchase price. Cryptocurrency assets can be significantly affected by a variety of forces, including economic conditions and simple supply and demand.

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Weekly Economic Update for 12/21/2020

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THE WEEK ON WALL STREET

Stocks climbed higher amid the COVID-19 vaccine rollout and an improving outlook for a fiscal stimulus bill.

The Dow Jones Industrial Average, which has lagged all year, gained 0.44%. The Standard & Poor’s 500 picked up 1.25% while the Nasdaq Composite index surged 3.05%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.44%.1,2,3

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Distributions from Mutual Funds

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This time of year, you might glance at an account statement and see there has been an adjustment. But there may not be any cause for concern.

Many mutual funds in December pay shareholders capital gains distributions that they have accumulated throughout the year.1

Typically, mutual fund companies start making estimates about distributions as early as November and most finalize the payment by mid-December.1

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Weekly Economic Update for 12/14/2020

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THE WEEK ON WALL STREET

Stocks retreated last week on rising COVID-19 infections and slow progress on an economic relief bill.

The Dow Jones Industrial Average dipped 0.57%, while the Standard & Poor’s 500 dropped 0.96%. The Nasdaq Composite index fell 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.05%.1,2,3

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New Distribution Period Tables

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As much as you would like to, you can’t keep your money in your retirement account forever.

These investment vehicles include 401(k)s, IRAs, and similar retirement accounts.1  Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from your 401(k), IRAs, or other defined contribution plans in most circumstances. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

Another major change that occurred from the SECURE Act is the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you had to stop making contributions at age 70½. Now, you can continue to make contributions as long as you meet the earned-income requirement.2

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Markets & Marriage

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Your investment strategy is a lot like a marriage. One day you may feel like everything’s going swimmingly. The next day, there might be an argument over who forgot to load the dishwasher. And even the best marriages and partnerships have moments where one or both partners look around and go, “Is this as good as it gets?”

The stock market, much like a marriage, has days of ups and downs. Just look at what happened within the last few weeks. During the first week of December, the stock market jumped 200 points, only for that gain to disappear a week later.1,2

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Group Life for a Growing Business?

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As companies grow and add employees, they also add employee benefits. Retirement and medical plans can be provided, but what about group life insurance? 

Group life on the menu? Owner-operators know that group life coverage can help attract excellent workers, but some are anxious about the cost and suspect they are just “small fish” to insurers. In reality, coverage may be very affordable and include a variety of policy choices. 

Several factors will affect the cost and availability of life insurance, including the number of eligible workers, their ages and genders, the nature of your business, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. You should consider determining whether your company wants to expand its benefits package before implementing a strategy involving life insurance.  Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

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Building a Healthy Financial Foundation

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When you read about money matters, you will sometimes see the phrase, “getting your financial house in order.” What exactly does that mean? 

When your financial “house is in order,” it means it is built on a solid foundation. It means that you have six fundamental “pillars” in place that are either crucial for sustaining your financial well-being or creating wealth. 

#1: A savings account. This is your Fort Knox: the place where you store and build the cash you may someday use for your biggest purchases. Savings accounts pay a modest interest rate. You should still consider having a savings account, even in today’s low-interest rate environment. Banks and credit unions often limit the number and amount of withdrawals you can make from savings accounts per month.       

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Retirement Blindspots

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We all have our “blue sky” visions of the way retirement should be, yet our futures may unfold in ways we do not predict. So, as you think about your “second act,” you may want to consider some life and financial factors that can suddenly arise.

You may end up retiring earlier than you expect. If you leave the workforce at “full” retirement age (FRA), which is 67 for those born in 1960 and later, you may be eligible to claim “full” Social Security benefits. Working until 67 may be worthwhile because it will reduce your monthly Social Security benefits if you claim them between age 62 and your FRA.1

Now, do most Americans retire at 67? Not according to the annual survey from the Employee Benefit Research Institute (EBRI).

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Weekly Economic Update for 12/7/2020

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THE WEEK ON WALL STREET

Stocks marched higher last week on an improving outlook for the passage of a fiscal stimulus package.

The Dow Jones Industrial Average rose 1.03%, while the Standard & Poor’s 500 tacked on 1.67%. The Nasdaq Composite index gained 2.12% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.78%.1,2,3

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Do Our Biases Affect Our Financial Choices?

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Investors are routinely warned about allowing their emotions to influence their decisions. However, they are less routinely cautioned about their preconceptions and biases that may color their financial choices.

In a battle between the facts & biases, our biases may win. If we acknowledge this tendency, we may be able to avoid some unexamined choices when it comes to personal finance. It may actually "pay" to recognize blind spots and biases with investing. Here are some common examples of bias creeping into our financial lives.

Letting emotions run the show. An investor thinks, "I got a great return from that decision," instead of thinking, "that was a good decision because ______."1

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Cash Balance Plans

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In corporate America, pension plans may be fading away. Only 14% of Fortune 500 companies offered them to full-time employees in 2019. In contrast, legal, medical, accounting, and engineering firms are keeping the spirit of the traditional pension plan alive by adopting cash balance plans.1

Owners and partners of these highly profitable businesses sometimes get a late start on retirement. Cash balance plans give them a chance to catch up since these defined benefit plans are age-weighted: the older you are, the more that can sock away each year, up to $336,000, depending on your age.2

How does a cash balance plan differ from a traditional pension plan? In a cash balance plan, a business or professional practice maintains an account for each employee with a hypothetical “balance” of pay credits (i.e., employer contributions) plus interest credits. The plan’s objective is to pay out a pension-style monthly income stream to the participant at retirement – either a set dollar amount or a percentage of compensation. Lump-sum payouts are also a choice. Another important factor to keep in mind is that cash balance plans are commonly portable: the vested portion of the account balance can be paid out if an employee leaves before a retirement date.3

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Does Main Street Need a Wall Street Strategy?

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As Wall Street pushes higher, a pandemic-weary Main Street is relearning how to manage cash flow with the hope of keeping its retirement dreams alive.

Self-employed Americans, and the people working for them, account for roughly 30 percent of the nation’s workforce.1

In the best of times, putting aside money for retirement was a challenge for this group. Before the pandemic, just 13 percent of people who run a single-person business set aside money in a workplace retirement plan. By comparison, 72 percent of people in large companies participate in retirement plans.2

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Retirement In Sight for December, 2020

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THIS YEAR, THERE IS MORE INCENTIVE TO GIVE

When the Coronavirus Aid, Relief, and Economic Security (CARES) Act became law in March, it broadened charitable tax deduction opportunities. These special 2020 tax provisions are worth reviewing before they expire on December 31, 2020.

First and foremost, the CARES Act allows individuals and couples taking the standard federal income tax deduction to claim an additional charitable federal tax deduction of up to $300 in cash gifts made to charities. This charitable deduction can be taken even if you don't itemize, and the limit increases to $600 for married couples. (This deduction is "above-the-line," which means that the deducted amount is simply subtracted from your 2020 gross income.)

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Monthly Economic Update for December, 2020

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U.S. Markets

Stock prices powered higher and emboldened investors in November thanks to a series of positive news events.

The Dow Jones Industrial Average, which has lagged much of the year, led the rally, jumping 11.84 percent. The Standard & Poor’s 500 Index tacked on 10.75 percent while the Nasdaq Composite rose 11.80 percent.1

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