Economic Updates & Financial Articles

Economic Updates & Financial Articles

Economic Updates:

Retirement in Sight Newsletter:

Financial Articles:

 


Weekly Economic Update for 6/1/2020

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THE WEEK ON WALL STREET

The shortened week, which began with a powerful two-day rally of trading, was enough to drive the markets into another week of solid gains.

The Dow Jones Industrial Average rose 3.75%, while the Standard & Poor’s 500 advanced 3.01%. The Nasdaq Composite Index climbed 1.77% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, gained 6.18%.1-3

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Eldercare Choices in the COVID-19 Era

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Given the threat of COVID-19, seniors today may be considering their extended care alternatives with extra caution.1

In addition to health factors, the cost can be an issue. According to Genworth’s 2020 Cost of Care Survey, the median annual cost of a semi-private room in a nursing home is now $90,000. A single-occupancy room may cost over $100,000 a year.1

While you could designate a portion of your retirement savings for possible extended care costs, there are other choices to consider as well.1

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Making a Charitable Contribution

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Why sell shares when you can gift them? If you have appreciated stocks in your portfolio, you might want to consider donating those shares to charity rather than selling them.

Why, exactly? Donating appreciated securities to a tax-exempt charity may allow you to manage your taxes and benefit the charity. If you have held the stock for more than a year, you may be able to deduct from your taxes the fair market value of the stock in the year that you donate. If the charity is tax-exempt, it may not face capital gains tax on the stock if it sells it in the future.1

Keep in mind this article is for informational purposes only. It's not a replacement for real-life advice. Make sure to consult your tax, legal, and accounting professional before modifying your gift-giving strategy.

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Weekly Economic Update for 5/25/2020

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THE WEEK ON WALL STREET

Upbeat comments by the Federal Reserve Chairman and more signs of an economic turnaround combined to help fuel a powerful rally in the stock market last week.

The Dow Jones Industrial Average rose 3.29%, while the Standard & Poor’s 500 advanced 3.20%. The Nasdaq Composite index climbed 3.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 3.87%.1-3

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“Backdoor” Roth IRAs

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You can sum up the appeal of a Roth IRA in three words: federal tax benefit. Potential earnings in a Roth IRA grow tax free as long as the owner abides by the Internal Revenue Service (I.R.S.) rules, and withdrawals are federally tax free once you reach age 59½ and have held the Roth IRA for at least five years.1

Unfortunately, some people make too much money to contribute to one. In 2020, joint filers with modified adjusted gross incomes (MAGI) of $206,000 or more and single filers with MAGI of $139,000 are not eligible for a ROTH IRA.

There is a way for high earners to bypass these limits, however: the “backdoor” Roth IRA strategy.2

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Weekly Economic Update for 5/18/2020

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THE WEEK ON WALL STREET

Stocks drifted lower last week, weighed down by Federal Reserve Chairman Jerome Powell’s unsettling comments on the economy and signs of renewed tensions with China.

The Dow Jones Industrial Average fell 2.65%, while the Standard & Poor’s 500 retreated 2.26%. The Nasdaq Composite Index slipped 1.17% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, slid 3.66%.1,2,3

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The Pros and Cons of Early Retirement Plan Rollovers

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Did you know you might be able to take some or all of the money in your 401(k), 403(b), or 457 plan and roll it over into another type of retirement account? Were you aware that you could do this while you are still working for your current employer – without any withholding or early withdrawal penalties?

Let’s look at how these rollovers can happen and the pros and cons of making them.  

Some 401(k), 403(b), and 457 plans offer this kind of flexibility. If your plan provides this choice, you must first pay attention to the rules.

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Retirement In Sight for May, 2020

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HOW SHOULD PRE-RETIREES VIEW ILLIQUID ASSETS?

Some people approach their retirement years owning illiquid assets worth more than their liquid ones. While long-held illiquid assets, such as a business or home, may become highly valued or appreciated over time, it can be wise to be frank and conservative when estimating their worth, especially if an owner wants to sell them to help fund their “second act.”

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Weekly Economic Update for 5/11/2020

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THE WEEK ON WALL STREET

Despite an historic downturn in employment, stocks managed to climb higher last week as investors were emboldened by the pace of economic re-openings here and abroad.

The Dow Jones Industrial Average gained 2.56%, while the Standard & Poor’s 500 advanced 3.50%. The Nasdaq Composite Index jumped 6.00% for the week. The MSCI EAFE Index, which tracks developed overseas stock markets, slipped 1.09%.1,2,3

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May Is Disability Insurance Awareness Month

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Did you know that May is Disability Insurance Awareness Month? First started in 2007, the month of May was the first time that information about disability insurance became more easily accessible to millions of Americans. Recently, Disability Insurance Awareness Month has become a time in which many insurance professionals come together in order to help educate the public on the importance of disability insurance.1

What is disability insurance? If you are unable to work due to illness or injury, disability insurance may help by replacing a portion of your regular income. This can be essential if you are burdened with medical expenses and unable to work.2

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Monthly Economic Update for May, 2020

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U.S. MARKETS

Stocks rebounded sharply in April, fueled by a flattening pandemic curve and positive results from a clinical trial investigating a treatment for COVID-19.

The Dow Jones Industrial Average, which dropped 14% in March, jumped 11.08%. The Standard & Poor’s 500 Index rose 12.68%, and the NASDAQ Composite surged 15.45%.1

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Weekly Economic Update for 5/4/2020

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THE WEEK ON WALL STREET

Stock prices ended the week slightly lower, despite news of positive results from a test trial of a COVID-19 drug treatment and several states easing their economic lockdowns.

The Dow Jones Industrial Average slipped 0.22%, while the Standard & Poor’s 500 lost 0.21%. The Nasdaq Composite Index dropped 0.34%. The MSCI EAFE Index, which tracks developed stock markets overseas, rose 4.34%.1,2,3

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Tax-Loss Harvesting

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Even though this may end up being a subpar year for stocks, you may realize capital gains, which is a taxable event. What can you do about them? You can do what some investors do – you could recognize investments with a loss and practice “tax-loss harvesting.” 

Keep in mind this article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your tax legal and accounting professional before modifying your investment strategy.

Selling losers to offset winners. Tax-loss harvesting means taking capital losses (you sell securities worth less than what you first paid for them) to help offset the capital gains you may have recognized. Keep in mind that the return and principal value of securities will fluctuate as market conditions change and past performance is no guarantee of future returns.1 

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Federal Student Loan Relief

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Are you or someone you know currently making federal student loan payments? In light of the COVID-19 pandemic, some welcome relief may be on the way.

Thanks to the recent passage of the CARES Act, the U.S. Department of Education will allow you to temporarily halt your federal student loan payments from March 13, 2020 until September 30, 2020.1

What should you do next?

At this time, no action is necessary. As part of this relief initiative, all federal student loans will be placed in an administrative forbearance and automatic payments will be paused from March 13 to September 30, 2020.

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FAQs About the 2020 Stimulus Checks

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The federal government is providing a little economic relief to many taxpayers. The Internal Revenue Service is sending millions of Economic Impact Payments – or as they are commonly called, stimulus checks – to households.

Here are some facts to know about these payments. Keep in mind: this article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your tax professional before modifying your strategy.

Who gets a check? If you have a Social Security Number and have not been claimed as a dependent on another taxpayer’s most recent federal tax return, you may be eligible for a stimulus payment of up to $1,200. Any money you get is tax free, and the payment will not be counted against a federal tax refund coming your way or federal benefits you currently receive.1

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Details on the Tax Deadline Extension

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The Internal Revenue Service knows that many taxpayers have had a stressful spring. So, it has reset the federal tax deadline. You now have until July 15 to file your 1040 form. July 15 is also the deadline to pay any federal taxes owed for 2019.1

Beyond these important details, there are others to note. Keep in mind: this article is for informational purposes only. It's not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your strategy. 

The extended tax deadline still falls on October 15. This year, the 6-month extension is now a 3-month extension. If you owe federal taxes, you must still pay them by July 15.2

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A Stock Market Lesson to Remember

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Undeniably, spring 2020 has tried the patience of investors. An 11-year bull market ended. Key economic indicators went haywire. Household confidence was shaken. The Standard & Poor’s 500, the equity benchmark often used as shorthand for the broad stock market, settled at 2,237.40 on March 23, down 33.9% from a record close on February 19.1

On April 17, the S&P closed at 2,874.56. In less than a month, the index rallied 28.5% from its March 23 settlement. And while past performance does not guarantee future results, there is a lesson in numbers like these.1

In the stock market, confidence can quickly erode – but it can also quickly emerge. That should not be forgotten.

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Weekly Economic Update for 4/27/2020

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THE WEEK ON WALL STREET

Stock prices bounced around last week as investors reacted to wild swings in the price of oil and reports that called into question the efficacy of two potential virus treatments.

The Dow Jones Industrial Average retreated 1.93%, while the Standard & Poor’s 500 lost 1.32%. The Nasdaq Composite Index slipped 0.18%. The MSCI EAFE Index, which tracks developed stock markets overseas, declined 1.21%.1,2,3

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Weekly Economic Update for 4/20/2020

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THE WEEK ON WALL STREET

Stock prices pushed higher last week as news of a White House plan to reopen the economy and reports of a potential COVID-19 treatment helped the market overcome weak economic data and an ugly start to the corporate earnings season.

The Dow Jones Industrial Average rose 2.21%, while the Standard & Poor’s 500 advanced 3.04%. The Nasdaq Composite Index gained 6.09% for the week. The MSCI EAFE Index, which tracks developed overseas stock markets, slumped 1.75%.1,2,3

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The Federal Reserve’s Unprecedented Moves

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In response to the COVID-19 pandemic, almost every state in America is under some sort of stay-at-home order. This unprecedented time has also led many businesses, large and small, to downsize or close up shop entirely. In response to the drastic impact that COVID-19 has had on global and domestic concerns, the Federal Reserve Board has taken a multitude of measures to buttress the American economy.

A Reserve reminder. The Federal Reserve’s role is guided by its mandate from Congress to promote employment and stable prices. The Fed also is responsible for the stability of the financial system, including the safety and soundness of the nation’s banking structure. To pursue these goals, the Fed in recent weeks has been using its full range of authorities to provide support for the flow of credit to families and businesses.

Interest rate policy. Since March 3, the rate banks pay to borrow from each other has been cut to a range of zero to 0.25 percent. This lowers the cost of borrowing, in general, but it also reduces the amount of interest income many savers receive.1

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Retirement In Sight for April, 2020

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USING YOUR QUARANTINE AS A TRIAL RUN FOR RETIREMENT

Staying productive in the time of COVID-19 can be a challenge. Rather than pulling out the board games, you might want to use the opportunity to stress-test your plans for early retirement. Specifically, if you are preparing to retire soon, you might be able to examine a few aspects of your future life and look at ways to improve or rework them ahead of time.

If you are not working due to the quarantine, you have the opportunity to find your new place at home. Most retired people don’t spend all of their time at home, but you might find that “sheltering-in-place” may give you a taste of how you will cope without a job to go to every day. You might also have better ideas, being stuck at home, as to what might be a meaningful path for your life once you are retired. Make a list of ideas that come to you whether it might be for another business, volunteer work, or just pursuits that might suit you. If you are married, don’t forget that you will also be spending more time with your spouse. Now would be a good time to check in with your spouse and make sure that your retirement paths aren’t at cross purposes.1

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Weekly Economic Update for 4/13/2020

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THE WEEK ON WALL STREET

The stock market staged a broad rally this week, buoyed by the prospect that the COVID-19’s grip on the nation may be easing and news of another Federal Reserve program to help stabilize businesses.

The Dow Jones Industrial Average jumped 12.67%, while the Standard & Poor’s 500 climbed 12.10%. The Nasdaq Composite Index rose 10.59% for the week. The MSCI EAFE Index, which tracks developed overseas stock markets, advanced 6.32%.1,2,3

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Roth IRA Conversion in the Era of COVID-19

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The COVID-19 pandemic has shaken up nearly every aspect of American life. To say it’s been a difficult time would be an understatement. 

However, difficult times may open doors to new possibilities. Businesses are changing their ways of operating, and individuals are exploring new avenues for investment. It may be time for you to consider some opportunities, as well.

What is a Roth Conversion? A Roth conversion refers to the transfer of an Individual Retirement Account (IRA), either Traditional, SIMPLE, or SEP-IRA, into a Roth IRA. With Roth IRAs, you pay tax on the money before it transfers into the account.

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What is an Annuity?

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Individuals hold about $2.2 trillion in annuity contracts; a tidy sum considering an estimated $9.2 trillion is held in all types of IRAs.1

Annuity contracts are purchased from an insurance company. In exchange, the insurance company makes regular payments to the buyer — either immediately or at some future date. These payments can be made monthly, quarterly, annually, or as a single lump sum. Annuity contract holders can opt to receive payments for the rest of their lives or a set number of years.

The money invested in an annuity grows, tax deferred. When the money is withdrawn, the amount contributed to the annuity will not be taxed, but earnings will be taxed as regular income. There is no contribution limit for an annuity.

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Quarterly Economic Update for Q1-2020

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THE QUARTER IN BRIEF

The spread of COVID-19 sent stocks tumbling in the first quarter, as health and economic costs of the pandemic began to mount. Stocks remained under pressure despite the Federal Reserve’s lowering of short-term interest rates and the government’s stimulus efforts through the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. The DJIA sank 23.2% and the S&P 500 dropped 20% on the quarter. The volatility following the novel coronavirus has left all but a handful of sectors in a prolonged period of uncertainty. With millions of Americans staying at home in an effort to “flatten the curve” of COVID-19’s impact on people, businesses are coping with closing for the duration, altering practices, or facing staffing issues.1

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Weekly Economic Update for 4/6/2020

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THE WEEK ON WALL STREET

Modest declines in stock prices this week masked the volatile inter- and intraday price swings as investors digested poor economic data and a warning from the President that the worst days of the COVID-19 pandemic may still lie ahead.

The Dow Jones Industrial Average slipped 2.70%, while the Standard & Poor’s 500 dropped 2.08%. The Nasdaq Composite Index declined 1.72%. The MSCI EAFE Index, which tracks developed overseas stock markets, slid 2.76%.1-3

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Monthly Economic Update for April, 2020

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THE MONTH IN BRIEF

The Coronavirus Aid, Relief, and Economic Security (CARES) Act has been signed into law, bringing relief to millions of Americans, most of whom are expected to be quarantined for at least another month. The White House has asked Americans to continue “socially distancing” during the month of April. Volatility continued in International markets, even as the COVID-19 (novel coronavirus) reached the United States. The Standard and Poor’s 500 (S&P 500) Index was down 12.51% for March.1

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Business Continuity Plans

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As a business owner, you’ve worked hard for your success. The long hours, the difficult decisions, and the sacrifices you have made have led to where you are today. The last thing you want is to suffer a disruption to your business. However, in the event that you do experience an unavoidable mishap­, it may be smart to have a Business Continuity Plan (BCP) in place.

What is a Business Continuity Plan (BCP)? A BCP is a document that maps out a business’ system of prevention and recovery from potential threats or disruptions. A sound BCP ensures that personnel and assets are protected and empowered to take quick action in the event of a disaster. It is important to remember that a BCP should be conceived in advance and may involve input from key stakeholders and personnel.1

What is considered a “business disruption”? In general, a “disruption” is anything that causes a business to suffer a loss due to unforeseen events, such as damage to one’s facility, the breakdown of essential machinery, a supplier failing to deliver essential goods, or a technology-related malfunction.2

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Key Provisions of the CARES Act

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Recently, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.1

To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis.1

The CARES Act has far-reaching implications for many. Here are the most important provisions to keep in mind:

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Weekly Economic Update for 3/30/2020

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THE WEEK ON WALL STREET

An open-ended commitment by the Federal Reserve to support American businesses and capital markets along with the passage of a $2 trillion aid package improved investor sentiment and drove a strong rally in stock prices.

The Dow Jones Industrial Average jumped 12.84%, while the Standard & Poor 500 gained 10.26%. The Nasdaq Composite index rose 9.05% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 12.03%.1-3

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Pullbacks, Corrections, and Bear Markets

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The COVID-19 outbreak has put tremendous pressure on stock prices, prompting some investors to blindly and indiscriminately sell positions at a time when the entire market is trending lower. Worried investors believe "this time it's different." When the market drops, some investors lose perspective that downtrends – and uptrends – are part of the investing cycle. When stock prices break lower, it's a good time to review common terms that are used to describe the market's downward momentum.1,2

Pullbacks. A pullback represents the mildest form of a selloff in the markets. You might hear an investor or trader refer to a dip of 5% to 10% after a peak as a “pullback.”1

Corrections. The next degree in severity is a “correction.” If a market or markets retreats 10% to 20% after a peak, you’re in correction territory. At this point, you’re likely on guard for the next tier.1

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Saving Early & Letting Time Work For You

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As a young investor, you have a powerful ally on your side: time. When you start investing in your twenties or thirties for retirement, you can put it to work for you.  

The effect of compounding is huge. Many people underestimate it, so it is worth illustrating. Let's take a look using a hypothetical 7% rate of return.

How does it work?  A simplified example goes like this: Let's take a look using a hypothetical 7% rate of return. After a year, you earn 5% interest, or $5. Another year, another 5%, which adds $5.25 this time. In the third year, your 5% interest earned amounts to $5.51, bringing your balance to $115.76. The more money you deposit, the greater that 5% returns. So, if you were to deposit $100 every month into that same account, you’d make a hypothetical $836.63 in compound interest from $6,100 in deposits over five years. That compounding continues, even if you stop making deposits. All you really need to do is let that money stay put.1

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Weekly Economic Update for 3/23/2020

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THE WEEK ON WALL STREET

The stock market suffered through another volatile week as it wrestled with the health and economic fallout of the domestic spread of the coronavirus. Swift and decisive actions by the Federal Reserve and policy responses from the federal government did not keep stocks from recording losses for the week.

The Dow Jones Industrial Average slumped 17.3%, while the Standard & Poor 500 lost 14.98%. The Nasdaq Composite index declined 12.64% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 6.64%.1-3

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Traditional vs. Roth IRA

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Traditional Individual Retirement Accounts (IRA), which were created in 1974, are owned by roughly 33.2 million U.S. households. Roth IRAs, however, were created as part of the Taxpayer Relief Act in 1997, are owned by nearly 22.5 million households.1

Both are IRAs. And yet, each is quite different.

Know the limits. Up to certain limits, traditional IRAs allow individuals to make tax-deductible contributions into the account. Distributions from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10-percent federal income tax penalty. Remember, under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Additionally, you may continue to contribute to a Traditional IRA past age 70½, under the SECURE Act, as long as you meet the earned-income requirement.

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Weekly Economic Update for 3/16/2020

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THE WEEK ON WALL STREET

Markets remained exceptionally volatile, buffeted by the spreading impact of coronavirus, uncertain responses from federal policymakers, and the sudden drop in oil prices.

The Dow Jones Industrial Average fell 10.36%, while the S&P 500 declined 8.79%. The Nasdaq Composite index slid 8.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 17.75%.1,2

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Weekly Economic Update for 3/9/2020

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THE WEEK ON WALL STREET

Heightened coronavirus fears, falling yields, and Super Tuesday primary results sent stocks on a rollercoaster ride of sharp price swings, leaving stocks marginally higher for the week.

The Dow Jones Industrial Average improved 1.79%; the S&P 500, 0.61%; the Nasdaq Composite, 0.10%. Outside the U.S., developed equity markets tracked by the MSCI EAFE Index rose 2.60%.1,2

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What Women Shouldn't Retire Without (Updated March 2020)

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When our parents retired, living to 75 amounted to a nice long life, and Social Security was often supplemented by a pension. The Social Security Administration estimates that today’s average 65-year-old woman will live to age 86½. Given these projections, it appears that a retirement of 20 years or longer might be in your future.1,2 

Are you prepared for a 20-year retirement? How about a 30-year or even 40-year retirement? Don’t laugh; it could happen. The SSA projects that about 33% of today’s 65-year-olds will live past 90, with approximately 14% living to be older than 95.2

Start with good questions. How can you draw retirement income from what you’ve saved? How might you create other income streams to complement Social Security? And what are some ways you can protect your retirement savings and other financial assets?

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Retirement In Sight for March, 2020

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GOOD CAREER CHOICES MAY LEAD TO AN IMPROVED RETIREMENT

What is your most powerful tool for building retirement savings? Perhaps, your income. For that matter, the path of your career could influence when and how well your retirement begins. 

Is there merit in changing jobs (or even careers) with an eye toward what the move might do for your retirement? One job may offer you a better type of employer-sponsored retirement savings account than another. One employer may offer to match your retirement savings account contributions, but another may not. (Fidelity says that the average employer match reached an all-time high of 4.7% last year.) Perhaps one workplace will offer you dedicated accounts to save toward health expenses. Beyond these attractions, there is the potential of greater income, which not only boosts your retirement savings potential, but may also positively influence your Social Security benefit calculation. Social Security determines your benefit through a formula that calculates your average monthly income during your 35 highest-paid working years, so changing jobs for better pay can potentially have both an immediate and future impact on your income. If you want to stay where you are, then think about the positive effect a raise or a promotion might have on your present financial situation as well as your retirement prospects.1,2

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Monthly Economic Update for March, 2020

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THE MONTH IN BRIEF

In February, anxieties about the novel coronavirus (COVID-19) rippled through stock, bond, and commodity markets. Stories about the disease dominated the news cycle, and concerns that a pandemic might occur hurt equities. The S&P 500 slipped 8.41% for the month, and foreign stock markets also retreated. Oil tumbled below $50. Away from the trading floors, the latest fundamental economic indicators showed manufacturing and job creation strengthening and consumer confidence at high levels. Data on home sales were mixed; home loans grew less expensive.1

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Weekly Economic Update for 3/2/2020

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THE WEEK ON WALL STREET

Stocks fell sharply last week as Wall Street considered how the coronavirus outbreak might influence global business activity and household spending.

The selloff became a correction for the U.S. markets. The S&P 500 retreated 11.49%; the Dow Jones Industrial Average, 12.36%; the Nasdaq Composite, 10.54%. The MSCI EAFE, tracking developed stock markets outside North America, had fallen 6.75% week-over-week by Friday’s closing bell.

On Friday afternoon, Federal Reserve Chair Jerome Powell stated that central bank officials were willing to “use our tools and act as appropriate to support the economy.”1,2,3

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The Solo 401(k)

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Do you work for yourself? Then you may want to consider the solo 401(k), which marries a traditional employee retirement savings account to a small-business, profit-sharing plan. To have a solo 401(k), you must either be the lone worker at your business or its only full-time employee.1

Boost your retirement savings strategy. With a solo 401(k), you may be able to ramp up your retirement savings and manage your tax bill at the same time. Remember, distributions from 401(k) plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 72, you must begin taking distributions.

As an employee, you can defer up to $19,500 of your compensation into a solo 401(k) in 2020. Since catch-up contributions are allowed for the Solo 401(k), the yearly limit is $26,000 if you are 50 or older.2

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Weekly Economic Update for 2/24/2020

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THE WEEK ON WALL STREET

Traders paid close attention to coronavirus developments and earnings last week, while wondering how the former might eventually impact the latter. Concern over updated infection numbers moderated risk appetite.

A pair of key stock benchmarks posted similar weekly losses. In New York, the S&P 500 declined 1.25%; the MSCI EAFE index (of developed stock markets away from North America) lost 1.24%. The Dow Jones Industrial Average retreated 1.38% for the four-day trading week; the Nasdaq Composite, 1.59%.1,2

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Should You Care What the Market Does Each Day?

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Investors are people, and people are often impatient. No one likes to wait in line or wait longer than they have to for something, especially today when so much is just a click or two away.

This impatience also manifests itself in the financial markets. When stocks slip, for example, some investors grow uneasy. Their impulse is to sell, get out, and get back in later. If they give in to that impulse, they may effectively pay a price.

Across the 30 years ended December 31, 2018, the Standard & Poor’s 500 posted averaged annual return of 10.0%. During the same period, the average mutual fund stock investor realized a yearly return of just 4.1%. Why the difference? It could partly stem from impatience.1

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Approaches to Business Valuation

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In the third quarter of 2019, more than 2,400 small businesses were sold. The median sale price was roughly $278,000, up 3.3% from 2018.1

As a business owner, ascertaining the value of your business is essential for a variety of reasons, including business succession, estate tax estimates, or qualifying for a loan.

There are several valuation techniques, ranging from the simple to the very complex. Outlined below are three different approaches to valuing a business.

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Coronavirus & More

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In recent weeks, we’ve seen several major stories in the news. On the political front, in addition to the arrival of the presidential election through the 2020 caucuses and primaries, we have just experienced the third presidential impeachment in American history. In international news, the latest coronavirus outbreak has hit China, now referred to as COVID-19, leading to closed borders and heightened screening at hospitals worldwide.1

It’s not so much the facts of what’s going on that are unusual – none of these matters are unprecedented – but the way that they are reported in the media can be alarming. Even frightening.

How might this affect me? When major events make headlines, it’s easy to put yourself in the picture. Knowing, as well, how such events might affect the financial markets, it’s also easy to wonder how your investments and retirement strategy might fare.

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A Roth IRA’s Many Benefits

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The IRA that changed the whole retirement savings perspective. Since the Roth IRA was introduced in 1998, its popularity has soared. It has become a fixture in many retirement planning strategies because it offers savers so many potential advantages.  

The key argument for going Roth can be summed up in a sentence: Paying taxes on your retirement contributions today is better than paying taxes on your retirement savings tomorrow.1

Think about it. Would you rather pay taxes today or wait 10 years and see where the tax rates end up? With that in question in mind, here are some of the potential benefits associated with opening and contributing to a Roth IRA.

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Tax Considerations for Retirees

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The federal government offers some major tax breaks for older Americans. Some of these perks deserve more publicity than they receive.

At age 65, the Internal Revenue Service gives you a larger standard deduction. For 2020, standard deductions look like this for taxpayers 65 and older: single filer or married filing separately, $14,050; head of household, $20,300; married filing jointly or qualifying widow(er), $26,100 (when one spouse is 65 or older) or $27,400 (when both spouses are 65 or older). The standard deductions for younger taxpayers range from $1,650-$2,600 less.1

There are two situations where your standard deduction may be limited at age 65 or older, or disappear entirely. One is when another taxpayer claims you as a dependent. The other is when you are married and filing separately, and your spouse itemizes deductions.1

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When a Windfall Comes Your Way

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Getting rich quick can be liberating, but it can also be frustrating. Sudden wealth can help you address retirement saving or college funding anxieties, and it may also allow you to live and work on your terms. On the other hand, you’ll pay more taxes, attract more attention, and maybe even contend with jealousy or envy. You may also deal with grief or stress, as a lump sum may be linked to a death, a divorce, or a pension payout decision.

Windfalls don’t always lead to happy endings. Take the example of Alex and Rhoda Toth, a Florida couple down to their last $25 who hit a lottery jackpot of roughly $13 million in the 1990s. Their feel-good story ended badly: by 2006, they were bankrupt and facing tax fraud charges. Or Janite Lee, who won $18 million in the Illinois Lottery. Just eight years later, she filed for Chapter 7 bankruptcy; she had $700 to her name and owed $2.5 million to creditors.1

Windfalls don’t necessarily breed “old money” either. Without a long-range vision, one generation’s wealth may not transfer to the next. As Fast Company notes, the wealth built by one generation fails to migrate to the next 70% of the time, and two generations later, it is gone 90% of the time.2

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Weekly Economic Update for 2/17/2020

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THE WEEK ON WALL STREET

Daily headlines about the coronavirus had little impact on stock market averages last week. Earnings and mergers had more influence.

All three Wall Street benchmarks improved. The Nasdaq Composite rose 2.21%, outpacing the S&P 500, up 1.58%, and the Dow Jones Industrial Average, up 1.02%. The MSCI EAFE index, which tracks developed overseas equity markets, added 0.17%.1,2

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Lesser Known Provisions of the SECURE Act

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The SECURE Act passed into law in late 2019 and changed several aspects of retirement investing. These modifications included modifying the ability to stretch an Individual Retirement Account (IRA) and changing the age when IRA holders must start taking requirement minimum distributions to 72-years-old.1,2

While those provisions grabbed the headlines, several other smaller parts of the SECURE Act have caught the attention of individuals who are raising families and paying off student loan debt. Here's a look at a few.

Changes for college students. For those who have graduate funding, the SECURE Act allows students to use a portion of their income to start investing in retirement savings. The SECURE Act also contains a clause to include “aid in the pursuit of graduate or postdoctoral study.” A grant or fellowship would be considered income that the student could invest in a retirement vehicle.3

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That First Distribution from Your IRA

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When you are in your seventies, Internal Revenue Service rules say that you must start making withdrawals from your traditional IRA(s). In I.R.S. terminology, these withdrawals are called Required Minimum Distributions (RMDs).1

Generally, these distributions from traditional IRAs must begin once you reach age 72. The money distributed to you is taxed as ordinary income. (When such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty.)1

If you fail to make these withdrawals or take out less than the required amount, the I.R.S. will notice. In addition to owing income taxes on the undistributed amount, you will owe 50% more. (This 50% penalty can be waived if you can show the I.R.S. that the shortfall resulted from a “reasonable error” instead of negligence.)1

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Retirement In Sight for February, 2020

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WHAT MATTERS MORE IN RETIREMENT: INCOME, OR SAVINGS?

Retirement saving is not just about accumulating assets. It is also about laying the groundwork for retirement spending. Any retirement strategy has a core goal: the goal of helping an individual or couple pursue their retirement dreams once their careers have concluded. So, from that perspective, the amount that needs to be saved directly relates to the amount a retiree household may need to spend. To live your best retirement, your degree of retirement savings needs to be great enough to try and correspond to that vision.

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Weekly Economic Update for 2/10/2020

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THE WEEK ON WALL STREET

Stocks advanced four days out of five during the past market week, erasing the losses of the week before.

The Nasdaq Composite surged 4.04%, the S&P 500 3.17%, and the Dow Jones Industrial Average 3.00%. Foreign stocks also rallied: the MSCI EAFE index added 2.21%.1,2

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Retirement Is a Beginning

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How do you know you are psychologically ready to retire? As a start, ask yourself four questions.

One, is your work meaningful? If it is emotionally and psychologically fulfilling, if it gives you a strong sense of purpose and identity, there may be a voice inside your head telling you not to retire yet. You may want to listen to it.

It can be tempting to see retirement as a “finish line”: no more long workdays, long commutes, or stressful deadlines. But it is really a starting line: the start of a new phase of life. Ideally, you cross the “finish line” knowing what comes next, what will be important to you in the future.

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Monthly Economic Update for February, 2020

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THE MONTH IN BRIEF

Early January gains gave way to late January losses as the coronavirus emerged as a global health concern, and correspondingly, a concern for the investment markets. The S&P 500 ended up retreating 0.16% for the month. The coronavirus outbreak was just one of the big stories in January: President Trump signed one trade deal while Congress approved another, Brexit occurred, oil prices temporarily jumped as tensions between America and Iran heightened, and stocks hit record highs again.1

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Weekly Economic Update for 2/3/2020

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THE WEEK ON WALL STREET

Stock benchmarks declined for a second straight week as coronavirus news tempered risk appetite.

The S&P 500 fell 2.14% on the week. The Nasdaq Composite dipped 1.76%, and the Dow Jones Industrial Average, 2.55%. Away from North America, developed markets slumped 2.24%, according to MSCI’s EAFE index.1,2

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