Economic Updates & Financial Articles

Economic Updates & Financial Articles

Economic Updates:

Retirement in Sight Newsletter:

Financial Articles:

 


Weekly Economic Update for 10/21/2019

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THE WEEK ON WALL STREET

Earnings helped give the Nasdaq Composite and S&P 500 a slight lift last week, offsetting investor disappointment over the small scope of the preliminary U.S.-China trade deal reached on October 11. Blue chips took a small weekly loss.  

The Nasdaq and S&P respectively gained 0.40% and 0.54% on the week. The Dow Jones Industrial Average retreated just 0.17%. Outdoing these three benchmarks, the MSCI EAFE index tracking stocks in developed overseas markets rose 1.35%.1,2

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Spotting Credit Trouble

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Americans aged 45 to 54, who have credit card balances, carry an average debt of $9,096 per individual.1

The wise use of credit is a critical skill in today’s world. Used unwisely, however, credit can rapidly turn from a useful tool to a crippling burden. There are several warning signs that you may be approaching credit problems:

Have you used one credit card to pay off another?

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End-Of-The-Year Money Moves - 2019

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What has changed for you in 2019? Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and 2020 begins.

Even if your 2019 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your tax bill and/or build a little more wealth. 

Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal and accounting professionals before modifying your tax strategy.

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Retirement In Sight for October, 2019

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GENERATING RETIREMENT INCOME

Each day, more than 10,000 Americans celebrate their 65th birthday. It’s a milestone, and for some, it signifies the beginning of retirement. Your friends, family, and coworkers may know you’re planning to retire. Some might even ask “When’s the big day?” If you have concerns about maintaining retirement income, you may not know whether you’re ready.1

While it’s ideal to have targets in mind when creating your retirement strategy, there is always the possibility for the unforeseen. If you believe you might come up short, there are some choices for closing the gap.

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Weekly Economic Update for 10/14/2019

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THE WEEK ON WALL STREET

Stock prices pushed higher last week, as investors remained hyper-focused on any new developments with the U.S. trade negotiations with China.

The Dow Jones Industrial Average picked up 0.91%, while the Standard & Poor’s 500 rose 0.62%. The Nasdaq Composite index gained 0.93% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 2.28%.1,2 

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Universal Life Insurance

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Universal life insurance is permanent life insurance – that is, it remains in force for your whole life as long as the premiums are paid. But universal life insurance has an important difference from other types of permanent insurance: it provides a flexible premium.

That means the policyholder decides how much to put in above a set minimum. By extension, the policyholder also determines the face amount of the policy.

Universal life insurance policies accumulate cash value – cash value that grows tax deferred. Guarantees are based on the claims-paying ability of the issuing company.

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The Sequence of Returns

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What exactly is the “sequence of returns”? The phrase describes the yearly variation in an investment portfolio’s rate of return. Across 20 or 30 years of saving and investing for the future, what kind of impact do these deviations from the average return have on a portfolio’s final value?

The answer: no impact at all.

Once an investor retires, however, these ups and downs can have an effect on portfolio value – and retirement income.

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Quarterly Economic Update for Q3, 2019

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THE QUARTER IN BRIEF

Summer doldrums? Not exactly. The third quarter brought a number of attention-getting events, and while investors took some cues from them in the short term, Wall Street’s confidence remained – the S&P 500 rose 1.19% in Q3. The abrupt devaluation of the Chinese yuan shocked traders, and shifting Treasury yields also made headlines. Trade negotiations between the U.S. and China broke down, but as the quarter ended, it looked like they would resume in the fall. Manufacturing was giving mixed signals, both here and abroad, breeding concerns about the health of the global economy. Both the Federal Reserve and the European Central Bank took steps to ease monetary policy.1

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Weekly Economic Update for 10/7/2019

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THE WEEK ON WALL STREET

The fourth quarter started with a mixed week for equities. A slip for an index of U.S. manufacturing activity proved to be a market mover, more so than the latest jobs report.

The Dow Jones Industrial Average lost 0.92% for the week; the S&P 500, 0.33%. In contrast, the Nasdaq Composite improved 0.54%. Overseas stocks pulled back: the MSCI EAFE index dipped 2.60%.1,2

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Monthly Economic Update for October, 2019

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THE MONTH IN BRIEF

September brought an economic event that was widely expected: a quarter-point cut in short-term interest rates by the Federal Reserve. It also brought an attack on two of the world’s largest oil fields that threatened to dent global crude output. A resumption of U.S.-China trade talks was scheduled for October, and White House officials decided to delay some planned tariff increases. Clear signals of an economic slowdown emerged from both the eurozone and China; some of the key U.S. economic indicators looked much better by comparison. While all these events transpired, the S&P 500 gained 1.72% for the month.1

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Raising Healthy Children

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One of the greatest legacies any parent can give a child is a framework for living an enduring, healthy lifestyle.

It is hard to underestimate the power that parents have on their children’s development, which is why parenting is such a profound responsibility.

The attitudes and habits formed in childhood can determine your child’s health in their adult years. Here are some ideas for parents who are looking to raise healthy children who grow up to be healthy adults.

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Weekly Economic Update for 9/30/2019

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THE WEEK ON WALL STREET

Stocks retreated last week. Traders worried that the formal impeachment inquiry of President Donald Trump might distract White House officials from their pursuit of a trade deal with China and shift the focus of Congress away from consideration of the United States-Mexico-Canada Agreement (USMCA). Also, news broke Friday that the White House was considering restricting levels of U.S. investment in Chinese firms.

The Dow Jones Industrial Average lost less than the Nasdaq Composite and S&P 500. Blue chips declined 0.43% week-over-week, while the S&P fell 1.01%, and the Nasdaq dipped 2.19%. The MSCI EAFE index, tracking developed overseas stock markets, lost 0.89%.1,2,3

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Overlooked Tax Deductions for Small Business Owners

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Being a small-business owner isn’t easy. After all, balancing payroll, managing employees, drawing up marketing plans, and handling the bookkeeping can be stressful! Luckily, the Internal Revenue Service (I.R.S.) allows small-business owners to take some surprising deductions, which may help come tax time. Read on to learn more.

Remember, the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult a professional with legal or tax expertise for specific information regarding your individual situation.

Employ your personal cell phone. The I.R.S. allows small-business owners to deduct the cost of the time spent on business calls made while using their personal mobile device. The key is to make sure you keep an itemized monthly phone bill for your records.1 Assuming an $80-per-month phone bill and a 50% deduction, you may be able to deduct $480 from your state and federal tax returns! The best way to track your business call time? Try a using separate number for your business, which automatically routes to your phone. This way, it will be easy to see your business versus personal phone usage. 

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Annual Financial To-Do List

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What financial, business, or life priorities do you need to address for the coming year? Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

Can you contribute more to your retirement plans this year? In 2020, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: singles and heads of household with MAGI above $139,000 and joint filers with MAGI above $206,000 cannot make 2020 Roth contributions.1 

Before making any changes, remember that withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½.

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Avoiding Large Losses in Your Portfolio

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Risk is a factor in any investment decision that you make. Your tolerance for risk is something that you will want to consider when you make decisions alongside your trusted financial professional. Your risk tolerance is balanced against your time horizon, meaning the time between now and your anticipated retirement date.

But is it possible to avoid a loss? No, not completely, but you can take steps to manage that risk when investing. This is where conversations about your risk tolerance are critical.

What would you rather have, $500 right now or a 50% chance at $2,000? Many people go for the $2,000 and rightfully so. Since you have a 50/50 chance, a decision tree shows the $2,000 answer carries a potential value of $1,000.

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Rebalancing Your Portfolio

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Everyone loves a winner. If an investment is successful, most people naturally want to stick with it. But is that the best approach?

It may sound counterintuitive, but it may be possible to have too much of a good thing. Over time, the performance of different investments can shift a portfolio’s intent as well as its risk profile. It’s a phenomenon sometimes referred to as “risk creep,” and it happens when a portfolio’s risk profile shifts over time.

Balancing. When deciding how to allocate investments, many begin by considering their time horizon, risk tolerance, and specific goals. Next, individual investments are selected that pursue the overall objective. If all the investments selected had the same return, that balance – that allocation – would remain steady for a time. But if the investments have varying returns, over time, the portfolio may bear little resemblance to its original allocation.1

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How Medigap Choices Are Changing

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Soon, two types of Medigap policies will no longer be sold. Seniors who enroll in Medicare in 2020 or later will be unable to buy Medigap Plan F or Plan C. These are the two Medicare Supplement policies that cover Medicare’s Part B deductible (currently $185).1,2

This change only impacts new Medicare enrollees. If you already receive Medicare and you already have Plan F or Plan C coverage, you can keep that coverage after 2019.1

What if you are eligible for Medicare before January 1, 2020, but not yet enrolled? If that is the case, then “you may be able to buy one of these plans,” according to Medicare.gov.1

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Systematic Withdrawal Strategies

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Some retirees wish they could simplify money management. Estimating investment income, annual retirement plan distributions, and quarterly taxes can be a chore. 

This is why some retirees choose to make systematic withdrawals. Just as they contributed a set amount per month to their retirement accounts while working, they now withdraw a set amount from their accounts each month, quarter, or year.

The simplicity of this may appeal to you. The potential drawback is that a systematic withdrawal strategy can risk oversimplifying the complex matter of retirement income distribution.

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The Solo 401(k)

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Do you work for yourself? Then take a look at 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

Imagine nearly tripling your retirement savings potential. With a solo 401(k), you have a chance to ramp up your retirement savings and reduce your tax bill at the same time. Here are the details:

*As an employee, you can defer up to $19,000 of your compensation into a solo 401(k). The yearly limit is $25,000 if you are 50 or older, for catch-up contributions are allowed for these plans. (Your annual employee contribution cannot surpass your earned income or salary.)1,2

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That First RMD From Your IRA

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When you reach age 70½, the Internal Revenue Service instructs you to start making withdrawals from your traditional IRA(s). These withdrawals are also called Required Minimum Distributions (RMDs). You will make them, annually, from now on.1

If you fail to take your annual RMD or take out less than the required amount, the I.R.S. will notice. You will not only owe income taxes on the amount not withdrawn, you will owe 50% more. (The 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

Many IRA owners have questions about the rules related to their initial RMDs, so let’s answer a few.

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Weekly Economic Update for 9/23/2019

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THE WEEK ON WALL STREET

Investors reacted to two major news items last week, one far more of a surprise than the other. The Federal Reserve did indeed make a rate cut, matching Wall Street expectations. Drone strikes on two of the world’s largest oil fields brought a shock to the global oil market.  

At Friday’s closing bell, stocks wound up with weekly losses after news broke that Chinese trade officials were heading home from the U.S. sooner than planned. The S&P 500 retreated 0.51% week-over-week; the Dow Jones Industrial Average lost 1.05%, and the Nasdaq Composite dipped 0.72%. In developed foreign markets, shares tracked by the MSCI EAFE index fell 0.31%.1,2,3

ANOTHER QUARTER-POINT CUT

Wednesday, the Federal Open Market Committee voted 7-3 to lower the benchmark interest rate by another 0.25%, to a range of 1.75% to 2.00%.

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Understanding the Alternate Valuation Date

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When an individual dies, the executor is faced with an important decision that has the potential to impact the taxes owed by the estate and its heirs. The executor will have the option of valuing the estate on the date of death, or on the six-month anniversary of death – the “Alternate Valuation Date.”1 

This situation assumes the deceased has a valid will and has named an executor, who is responsible for carrying out the directions of the will. If a person dies intestate, it means that a valid will has not been executed. Without a valid will, a person’s property will be distributed to the heirs as defined by the state law.

Pick a Date. It may seem like an obvious decision and simple choice, but it’s not. Here’s why.

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72t Distributions

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Do you need to access your retirement money early? Maybe you just want to retire before you turn 60 and plan a lifelong income stream from the money you have saved and invested. You may be surprised to know that the Internal Revenue Service allows you a way to do this, provided you do it carefully.

Usually, anyone who takes money out of an IRA or a retirement plan prior to age 59½ faces a 10% early withdrawal penalty on the distribution. That isn’t always the case, however. You may be able to avoid the requisite penalty by taking distributions compliant with Internal Revenue Code Section 72(t), section 2.1

While any money you take out of the plan will amount to taxable income, you can position yourself to avoid that extra 10% tax hit by breaking that early IRA or retirement plan distribution down into a series of substantially equal periodic payments (SEPPs). These periodic withdrawals must occur at least once a year, and they must continue for at least 5 full years or until you turn 59½, whichever period is longer. (Optionally, you can make SEPP withdrawals on a monthly basis.)1,2

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Drone Attacks Disrupt Saudi Oil Output

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Strikes hit Saudi oil fields. A coordinated series of drone strikes on Saturday morning set off explosions at two of the world’s biggest oil producing facilities in Saudi Arabia.1 

Oil prices spiked during Monday’s trading session. Brent crude futures, the international benchmark, surged a staggering 19.5% at the open of trading.2 Prices eased as the trading session progressed, however.

The Wall Street Journal says the damage from the strikes threatens to set back world oil output by about 5%. Saudi officials believe it will be weeks before these oil fields can resume producing at full capacity.1

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Weekly Economic Update for 9/16/2019

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THE WEEK ON WALL STREET

Stocks edged toward all-time peaks during a relatively calm week marked by easing trade tensions. Friday marked the eighth straight daily advance for the Dow Jones Industrial Average.1

Small-cap shares, as tracked by the Russell 2000 index, rose 4.85% in five days. The S&P 500 improved 0.96% for the week, while the Dow and Nasdaq Composite respectively advanced 1.57% and 0.91%. Foreign shares added 1.22%, according to the MSCI EAFE index.2-4

A DELAY FOR PLANNED OCTOBER TARIFF HIKES

Existing tariffs on $250 billion of Chinese imports were slated to rise from 25% to 30% on October 1, but the White House decided Thursday to postpone the increase until October 15, in a “gesture of good will” honoring a request from Chinese Vice Premier Liu He.

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Retirement Wellness

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How healthy a retirement do you think you will have? If you can stay active as a senior and curb or avoid certain habits, you could potentially reduce one type of retirement expense.

Each year, Fidelity Investments presents an analysis of retiree health care costs. In 2019, Fidelity projected that the average 65-year-old couple would spend around $285,000 on health care during retirement, including about $11,000 in the first year. Both projections took Medicare benefits into account.1,2

Could healthy behaviors help you save retirement dollars? Maybe. From another point of view, ceasing unhealthy habits certainly would. For example, the average pack of cigarettes now costs $6.28, according to the Centers for Disease Control. That adds up to $2,292 annually. A decade of pack-a-day smoking therefore projects to $22,920 in expenses (and that does not even consider inflation or the possibility of new state or local cigarette taxes). If you could invest $2,292 a year for 20 years and realize a 7% annual return on that money, your sustained investment would grow to more than $100,000.

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Types of Stock Market Analysis

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The majority of stock market analysis can be lumped into three broad groups: fundamental, technical, and sentimental. Here’s a closer look at each.

Fundamental Analysis. The goal of fundamental analysis is to determine whether a company’s future value is accurately reflected in its current stock price.

Fundamental analysis attempts to estimate the value of a stock based on a variety of factors, such as the current finances of the company and the prevailing economic environment. Fundamental analysis also may include speaking with a company’s management team and assessing how the company’s products are received in the marketplace.

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Retirement In Sight for September, 2019

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SUNNIER PROSPECTS FOR WORKING AS A SENIOR

In recent years, a steady stream of articles has appeared, questioning baby boomers’ hopes to keep working part time in their retirement years. These articles have tended to take a skeptical view of such ambitions. Well, maybe it is time to sweep some of the skepticism away.

In August, the LIMRA Secure Retirement Institute published a study on a group of Americans aged 55 to 71 who had either retired within the last two years or planned to retire in the next two years. Twenty-seven percent of pre-retirees thought they would keep working part time after their careers ended; 17% anticipated they would gradually phase out of working. These assumptions are not far off from reality: among the retirees surveyed, 19% were working part time, and 17% said that they were cutting down their work hours on their way to a traditional retirement. Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies, told PBS’ Next Avenue website in September that she was encouraged by the results, noting that “that the gap between pre-retirees’ vision of transitioning into retirement compared with the experience of recent retirees is finally starting to close.” She theorizes that the job market is becoming “more conducive to workers extending their working lives, and pre-retirees planning a transition to retirement.”1,2

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Weekly Economic Update for 9/9/2019

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THE WEEK ON WALL STREET

Stocks rose last week, with help from two developments: the announcement of further U.S.-China trade talks as well as August hiring and manufacturing numbers that seemed to bolster the argument for a rate cut by the Federal Reserve. 

The broad U.S. equity market, as represented by the S&P 500, added 1.79% during a 4-day trading week. The Dow Jones Industrial Average improved 1.49%; the Nasdaq Composite, 1.76%. Foreign shares tracked by the MSCI EAFE index gained 1.69%.1-3

TRADE TALKS POISED TO RESTART

Trade representatives from the U.S. and China are planning to head back to the negotiating table early next month. This news came Thursday from China’s ministry of commerce, which confirmed a verbal agreement among Secretary of the Treasury Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and Chinese Vice Premier Liu He. 

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Inventorying Your Possessions

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It’s great to have insurance against damage and loss, but if you can’t show proof of your possessions, it may result in a protracted settlement process with your insurance company.1

Four Tips for Creating an Inventory. Creating an inventory may take a bit of upfront work, but it can pay future benefits in smoothing the claims settlement process with your insurer as well as increase the potential of receiving the maximum payment possible.

Tip #1 – Make a Video of Your Possessions. A visual record of your possessions is the best proof of ownership. When videoing your home contents, make sure you are methodical and thorough in going through all your rooms and storage spaces. Speak while you are taping to describe each item; include any relevant information (e.g., “this is a signed first edition of “Moby Dick.”).

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Monthly Economic Update for September, 2019

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THE MONTH IN BRIEF

The stock market had a tumultuous August, reacting to the sudden devaluation of the Chinese yuan and the escalation of the trade dispute between the U.S. and China. Ultimately, investors seemed more interested in risk aversion: the S&P 500 lost 1.81% for the month. Demand for bonds helped to send Treasury yields lower; prices of precious metals climbed. Away from the markets, monthly personal spending and retail sales gains were strong.1

DOMESTIC ECONOMIC HEALTH

Tariffs and trade issues remained front and center in the Wall Street conversation. On August 1, the White House announced a 10% import tax on an additional $300 billion of Chinese goods coming to U.S. shores. (Most of these products are so-called “final” consumer goods, like clothing and shoes.) In a nod to importers and retailers, the White House stated on August 13 that this 10% tariff would be delayed until December 15 for certain products: toys, consumer electronics, and other items that are big sellers during the holiday shopping season. Effective December 15, tariffs will impact nearly all Chinese imports to the U.S.2

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Weekly Economic Update for 9/2/2019

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THE WEEK ON WALL STREET

Fears of an impasse in the U.S.-China trade dispute lessened last week. While additional U.S. tariffs on Chinese imports were scheduled to take effect on September 1, China’s government communicated that it would refrain from taking retaliatory measures for the moment.

U.S. stock benchmarks advanced during the week. The S&P 500 rose 2.79% across five trading days, and the Nasdaq Composite and Dow Jones Industrial Average respectively gained 2.72% and 3.02%. The MSCI EAFE international index added just 0.25%.1,2

POSITIVE NEWS IN THE TRADE DISPUTE

Thursday, a spokesman for China’s commerce ministry said that negotiations could resume this month, and that discussions need to focus on “removing the new tariffs to prevent escalation.” 

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Your Changing Definition of Risk in Retirement

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During your accumulation years, you may have categorized your risk as “conservative,” “moderate,” or “aggressive,” and that guided how your portfolio was built. Maybe you concerned yourself with finding the “best-performing funds,” even though you knew past performance does not guarantee future results.

What occurs with many retirees is a change in mindset – it’s less about finding the “best-performing fund” and more about consistent performance. It may be less about a risk continuum – that stretches from conservative to aggressive – and more about balancing the objectives of maximizing your income and sustaining it for a lifetime.

You may even find yourself willing to forgo return potential for steady income.

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Your Extended Care Strategy

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Do you have an extra $33,000 to $100,000 to spare this year? How about next year, and the year after that? Your answer to these questions is probably “no.”

What could possibly cost so much? Eldercare.  

According to the AARP Public Policy Institute, a year of in-home care for a senior costs roughly $33,000. A year at an assisted living facility? About $45,000. A year in a nursing home? Approximately $100,000.1

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Weekly Economic Update for 8/26/2019

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THE WEEK ON WALL STREET

Traders assumed that the week’s biggest news event would be Federal Reserve Chairman Jerome Powell’s speech at the annual Jackson Hole banking conference. Instead, China seized the headlines by announcing new tariffs on U.S. goods.

Domestic stocks ended up lower for the week. The Nasdaq Composite fell 1.83%; the S&P 500, 1.44%; the Dow Jones Industrial Average, 0.99%. International stocks posted a weekly gain: the MSCI EAFE benchmark rose 0.96%.1,2

BEIJING PLANS NEW TARIFFS

Friday morning, China’s finance ministry stated it would levy import taxes of 5-10% on an additional $75 billion of American imports. One set of tariffs is slated to start September 1, targeting U.S. crops, meats, and seafood. A second set, effective December 15, will put tariffs on U.S.-made cars and car parts. In total, these taxes are scheduled for more than 5,000 American products.

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Cash Balance Plans

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In corporate America, pension plans are fading away. Only 16% of Fortune 500 companies offered them to full-time employees in 2018, according to Willis Towers Watson research. 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 planning. Cash balance plans give them a chance to catch up. These defined benefit plans are age-weighted: the older you are, the more you can potentially sock away each year for retirement. In 2019, a 45-year-old can defer as much as $168,000 annually into a cash balance plan; a 55-year-old, as much as $255,000.2

These plans are not for every business as they demand consistent contributions from the plan sponsor. Even so, they offer significantly greater funding flexibility and employee benefits compared to a standard defined contribution plan, such as a 401(k).2

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Insurance Needs when Married with Children

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A growing family, by definition, means growing financial obligations – both in the present and in the future. Raising children can increase your insurance needs and heightens the urgency for being properly prepared.

Auto. When a child becomes a new driver, one option is to add the teenager to the parents' policy. You may want to discuss with your auto insurer ways to reduce the additional premium that accompanies a new driver.1

Home. You should periodically review your homeowners policy for three primary reasons.

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Weekly Economic Update for 8/19/2019

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THE WEEK ON WALL STREET

U.S. stock indices saw significant ups and downs last week, with traders looking for economic cues from Treasury yields and also developments in the tariff fight between the U.S. and China. 

The S&P 500 lost 1.03% on the week; the Dow Jones Industrial Average and Nasdaq Composite respectively declined 1.53% and 0.79%. Overseas shares also retreated: the MSCI EAFE index lost 2.34%.1,2

ATTENTION ON THE BOND MARKET

Wednesday, the yield of the 2-year Treasury bond briefly exceeded that of the 10-year Treasury bond. When this circumstance occurs, it signals that institutional investors are less confident about the near-term economy. That view is not uniform. Asked whether the U.S. was on the verge of an economic slowdown, former Federal Reserve Chair Janet Yellen told Fox Business “the answer is most likely no,” noting that the economy “has enough strength” to avoid one. 

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Global vs. International: What’s the Difference?

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For investors who are looking to diversify their portfolio with exposure to companies located outside the U.S., there exist two basic choices: a global mutual fund or an international mutual fund.

By definition, international funds invest in non-U.S. markets, while global funds may invest in U.S. stocks alongside non-U.S. stocks.

Keep in mind that diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline. Also, international investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater price volatility.1

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A Bucket Plan to Go with Your Bucket List

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The baby boomers redefined everything they touched, from music to marriage to parenting and even what “old” means – 60 is the new 50! Longer, healthier living, however, can put greater stress on the sustainability of retirement assets.

There is no easy answer to this challenge, but let’s begin by discussing one idea – a bucket approach to building your retirement income plan.

The Bucket Strategy can take two forms.

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Weekly Economic Update for 8/12/2019

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THE WEEK ON WALL STREET

Stocks spent much of last week rebounding from a Monday drop that reflected nervousness about the U.S.-China trade fight. By Thursday’s closing bell, the S&P 500 had regained all its Monday losses, but it descended again on Friday.

The three big U.S. equity benchmarks finished the week lower: the S&P declined 0.46%; the Dow Jones Industrial Average, 0.75%; the Nasdaq Composite, 0.56%. A broad index of foreign shares, the MSCI EAFE, lost 0.95%.1,2

CHINA DEVALUES ITS CURRENCY

Last Monday, stocks fell 3% in reaction to the overnight weakening of the Chinese yuan. A weaker yuan makes Chinese exports cheaper for buyers who pay for them in dollars.

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Understanding Long-Term Care

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

The U.S. Department of Health and Human Services estimates that 69% of people over age 65 can expect to need extended care services at some point in their lives. So, understanding the various types of long-term care services – and what those services may cost – is critical as you consider your retirement approach.1

What Is Long-Term Care? Long-term 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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Your Diversified Portfolio vs. the S&P 500

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“Why is my portfolio underperforming the market?” This question may be on your mind. It is a question that investors sometimes ask after stocks shatter records or return exceptionally well in a quarter.

The short answer is that even when Wall Street rallies, international markets and intermediate and long-term bonds may underperform and exert a drag on overall portfolio performance. A little elaboration will help explain things further.

A diversified portfolio necessarily includes a range of asset classes. This will always be the case, and while investors may wish for an all-equities portfolio when stocks are surging, a 100% stock allocation is obviously fraught with risk.

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Retirement In Sight for August, 2019

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THINKING ABOUT LEAVING WORK A LITTLE EARLY?

The so-called “FIRE” movement (FIRE stands for financial independence, retire early) has garnered so much attention lately, even those who anticipate retiring in their sixties are wondering if they should make a sacrifice or two to exit their careers or businesses a bit earlier. A poll, commissioned by personal finance website FinanceBuzz, highlights what some pre-retirees would be willing to give up, so they could do just that – at least, in theory.

Thirty-six percent of the poll respondents indicated that they would cut household spending to the bone and buy only the most-essential consumer goods for as long as two years if it would hasten their retirement. Twelve percent said that they would refrain from starting a family if being child free would help them retire earlier, and 11% would avoid having a pet. Six percent said that they would live without a vehicle if that would contribute to their ability to retire sooner. Are measures like these really necessary? Perhaps not, for there are other ways to potentially arrange an earlier entry into retirement. A part-time business could be built from a hobby, pastime, or passion, and the income derived from such a business could possibly help your retirement savings grow. Also, living below your means during your working years may free up more cash to direct into your retirement savings, and that may help you reach your savings goals earlier in life.1

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Monthly Economic Update for August, 2019

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THE MONTH IN BRIEF

July was a positive month for stocks and a notable month for news impacting the financial markets. The S&P 500 topped the 3,000 level for the first time. The Federal Reserve cut the country’s benchmark interest rate. Consumer confidence remained strong. Trade representatives from China and the U.S. once again sat down at the negotiating table, as new data showed China’s economy lagging. In Europe, Brexit advocate Boris Johnson was elected as the new Prime Minister of the United Kingdom, and the European Central Bank indicated that it was open to using various options to stimulate economic activity.1

DOMESTIC ECONOMIC HEALTH

On July 31, the Federal Reserve cut interest rates for the first time in more than a decade. The Federal Open Market Committee approved a quarter-point reduction to the federal funds rate by a vote of 8-2. Typically, the central bank eases borrowing costs when it senses the business cycle is slowing. As the country has gone ten years without a recession, some analysts viewed this rate cut as a preventative measure. Speaking to the media, Fed Chairman Jerome Powell characterized the cut as a “mid-cycle adjustment.”2

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Weekly Economic Update for 8/5/2019

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THE WEEK ON WALL STREET

Last week, the Federal Reserve cut interest rates for the first time in more than a decade, in line with Wall Street’s expectations. Ironically, stocks had their worst week of 2019.

The S&P 500 finished the week 3.10% lower. The Dow Jones Industrial Average and the Nasdaq Composite also posted weekly losses; the blue chips fell 2.60%, while the premier tech benchmark slumped 3.92%. International stocks tracked by MSCI’s EAFE index dipped 1.06%.1-3

FED CUTS BENCHMARK INTEREST RATE

On Wednesday, the central bank reduced the federal funds rate by 0.25%. The latest Fed policy statement noted that “global developments” and “muted inflation” influenced the decision.

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A Retirement Fact Sheet

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Does your vision of retirement align with the facts? Here are some noteworthy financial and lifestyle facts about life after 50 that might surprise you. 

Up to 85% of a retiree’s Social Security income can be taxed. Some retirees are taken aback when they discover this. In addition to the Internal Revenue Service, 13 states levy taxes on some or all Social Security retirement benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. (It is worth mentioning that the I.R.S. offers free tax advice to people 60 and older through its Tax Counseling for the Elderly program.)1

Retirees get a slightly larger standard deduction on their federal taxes. Actually, this is true for all taxpayers aged 65 and older, whether they are retired or not. Right now, the standard deduction for an individual taxpayer in this age bracket is $13,500, compared to $12,200 for those 64 or younger.2

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A Bucket Plan to Go with Your Bucket List

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The baby boomers redefined everything they touched, from music to marriage to parenting and even what “old” means – 60 is the new 50! Longer, healthier living, however, can put greater stress on the sustainability of retirement assets.

There is no easy answer to this challenge, but let’s begin by discussing one idea – a bucket approach to building your retirement income plan.

The Bucket Strategy can take two forms.

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When Alzheimer's Disease Is Diagnosed

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Imagine the outlook for your life changing in minutes. A diagnosis of Alzheimer’s disease can be that stunning. If your parent is diagnosed with Alzheimer’s, how can you help them as they strive to make the most of the years ahead?

An Alzheimer’s diagnosis may bring stages of grief and anxiety – when and how should your parent share the diagnosis with loved ones, friends, and colleagues?

Sharing the news is part of coping with the news. If Mom or Dad tries to hide their Alzheimer’s from family members, friends, or even coworkers (if they are still working), it could inevitably lead to tension and stress. They may already have a diagnosis, or at the very least, be suspicious of one.

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Weekly Economic Update for 7/29/2019

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THE WEEK ON WALL STREET

Last week, investors assessed earnings and the initial estimate of second-quarter economic growth, while awaiting the Federal Reserve’s next announcement about interest rates.

Stocks rose for the week; particularly, tech shares. The S&P 500 gained 1.65%; the Nasdaq Composite, 2.26%. The Dow Jones Industrial Average lagged, adding just 0.14%. MSCI’s EAFE index, a gauge of equity performance in developed foreign markets, ticked up 0.01%.,1,2

ECONOMY GREW MODERATELY IN Q2

Analysts surveyed by Dow Jones Newswires had forecast 2.0% GDP for the second quarter. The actual estimate, announced Friday by the Bureau of Economic Analysis, was slightly better at 2.1%.3

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Should You Choose a Fixed or Variable?

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Buying a home is the single largest financial commitment most people ever make. And sorting through mortgages involves a lot of critical choices. One of these is choosing between a fixed- or variable-interest-rate mortgage.

True to its name, fixed-rate mortgage interest is fixed throughout the life of the loan. In contrast, the interest rate on a variable-interest-rate loan can change over time. The mortgage interest rate charged by a variable loan is usually based on an index, which means payments could move up or down depending on prevailing interest rates.1

Fixed-rate mortgages have advantages and disadvantages. For example, rates and payments remain constant despite the interest-rate climate. But fixed-rate loans generally have higher initial interest rates than variable-rate mortgages; the financial institution may charge more because if rates go higher, it may lose out.

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Weekly Economic Update for 7/22/2019

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THE WEEK ON WALL STREET

Stock benchmarks retreated during the first week of the second-quarter earnings season. As some big names shared quarterly results, investors seemed more interested in what might happen at the Federal Reserve’s upcoming policy meeting.

For the week, the S&P 500 declined 1.23%. The Dow Jones Industrial Average lost 0.65%, and the Nasdaq Composite, 1.18%. International stocks, measured by the week-over-week performance of the MSCI EAFE index, were down 0.79%.1-2

HOUSEHOLDS BOUGHT MORE LAST MONTH

Retail sales were up 0.4% in June, according to the Department of Commerce. Consumer purchases account for more than two-thirds of America’s gross domestic product, and data like this may rebut some assertions that the economy is losing steam.3

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Put it in a Letter

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Actor Lee Marvin once said, “As soon as people see my face on a movie screen, they [know] two things: first, I’m not going to get the girl, and second, I’ll get a cheap funeral before the picture is over.”1

Most people don’t spend too much time thinking about their own funeral, and yet, many of us have a vision about our memorial service or the handling of our remains. A letter of instruction can help you accomplish that goal.

A letter of instruction is not a legal document; it’s a letter written by you that provides additional, more personal information regarding your estate. It can be addressed to whomever you choose, but typically, letters of instruction are directed to the executor, family members, or beneficiaries.

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Retirement In Sight for July, 2019

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HOW RETIREMENT SAVING RELATES TO RETIREMENT SPENDING

Sometimes an article will present a generic retirement forecast, stating that the average person may need “X” dollars in savings to retire confidently. Stories like these appear every so often on financial websites, and they must be taken with a grain of salt. These articles imply that a pre-retiree household must amass a certain amount of savings or face a financially pressured future – but the forecasts they present may not apply to you.

In reality, saving and investing for retirement is not strictly about reaching a numeric goal, with your investments or your net worth. Just as there is no one-size-fits-all retirement strategy, there is no “average” retirement savings number that applies for every individual or couple. New retirees may want to leave work and enjoy a similar quality of life, and that relates to retirement income and retirement spending. So, a key goal of any retirement strategy is saving enough, so that you can potentially retire with enough income to support your lifestyle. This is why it is crucial to periodically review a retirement strategy, especially after age 50. While a pre-retiree cannot know exactly what they spend once retired, the degree of saving and investing may increase – or decrease – in view of possible future income needs.1

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Weekly Economic Update for 7/15/2019

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THE WEEK ON WALL STREET

Friday, the S&P 500 settled above 3,000 for the first time, after rising 0.78% for the week. The Dow Jones Industrial Average chalked up a milestone of its own: the blue chips ended the week above 27,000, gaining 1.52% on the way. Additionally, the Nasdaq Composite wrapped up the week 1.01% higher. The MSCI EAFE index, a gauge of overseas developed markets, fell 0.65%.1-3

Stocks rallied at mid-week with help from Federal Reserve Chairman Jerome Powell’s congressional testimony on monetary policy, plus the latest Fed meeting minutes.

JEROME POWELL'S STATEMENTS

Wednesday, Chairman Powell told Capitol Hill lawmakers that “uncertainties around global growth and trade continue to weigh on the outlook” of the Federal Open Market Committee. He also noted that “manufacturing, trade, and investment are weak all around the world.”4

On the same day, the Fed presented the minutes of its June policy meeting. The record shared the belief of some Fed officials that "a near-term cut in the target range for the federal funds rate could help cushion the effects of possible future adverse shocks to the economy.”4

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Protection Against Uninsured Drivers

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About 13 percent of all motorists, or one-in-eight drivers, do not have automobile insurance.1

Having the misfortune of getting into an accident with an uninsured motorist may have serious financial consequences depending upon the state in which you reside and whether it is a “no-fault” or “tort” state.

In no-fault states, the law does not assign blame for an accident. As a result, each driver is reimbursed by their insurance company for any damages. In a “tort” state, insurance companies pay out claims based upon the percentage of fault assigned to each driver.

Any accident with an uninsured driver means no insurance reimbursement payment for their apportioned share of the damage. This can leave you holding the financial bag.

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401(k) Loan Repayment

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The conventional wisdom about taking a loan from your 401(k) plan is often boiled down to: not unless absolutely necessary. That said, it isn’t always avoidable for everyone or in every situation. In a true emergency, if you had no alternative, the rules do allow for a loan, but they also require a fast repayment if your employment were to end. Recent changes have changed that deadline, offering some flexibility to those taking the loan. (Distributions from 401(k) plans and most other employer-sponsored retirement 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 70½, you must begin taking required minimum distributions.)

The new rules. Time was, the requirement for repaying a loan taken from your 401(k)-retirement account after leaving a job was 60 days or else pay the piper when you file your income taxes. The 2017 Tax Cuts and Jobs Act changed that rule – now, the penalty only applies when you file taxes in the year that you leave your job. This also factors in extensions.1

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Weekly Economic Update for 7/8/2019

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THE WEEK ON WALL STREET

U.S. stock benchmarks opened a new quarter positively. The S&P 500 gained 1.65% in the opening week of July; the Dow Jones Industrial Average, 1.21%; the Nasdaq Composite, 1.94%. Overseas, stocks in developed markets, tracked by MSCI’s EAFE index, rose 1.43%.1-4

On July 3, the S&P posted its latest record close: 2,995.82. On July 5, stocks fell, slightly, after the Department of Labor released its June employment report.5

JOBS REPORT BEATS EXPECTATIONS

Analysts polled by Bloomberg thought the economy would add 160,000 net new jobs in June. Instead, the number was 224,000. The headline unemployment rate ticked up 0.1% to 3.7%; the U-6 rate, including the underemployed, also rose 0.1% to 7.2%.6

Before the large June gain was announced, traders were confident that the Federal Reserve would adjust interest rates this summer. This latest hiring data called that confidence into question. 

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Eight Mistakes That Can Upend Your Retirement

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Pursuing your retirement dreams is challenging enough without making some common, and very avoidable, mistakes. Here are eight big mistakes to steer clear of, if possible.

No Strategy. Yes, the biggest mistake is having no strategy at all. Without a strategy, you may have no goals, leaving you no way of knowing how you’ll get there – and if you’ve even arrived. Creating a strategy may increase your potential for success, both before and after retirement.

Frequent Trading. Chasing “hot” investments often leads to despair. Create an asset allocation strategy that is properly diversified to reflect your objectives, risk tolerance, and time horizon; then, make adjustments based on changes in your personal situation, not due to market ups and downs. (The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification are approaches to help manage investment risk. Asset allocation and diversification do not guarantee against investment loss. Past performance does not guarantee future results.)

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How Medigap Choices Are Changing

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Soon, two types of Medigap policies will no longer be sold. Seniors who enroll in Medicare in 2020 or later will be unable to buy Medigap Plan F or Plan C. These are the two Medicare Supplement policies that cover Medicare’s Part B deductible (currently $185).1,2

This change impacts new Medicare enrollees. If you already receive Medicare and you already have Plan F or Plan C coverage, you can keep that coverage after 2019.1

What if you are eligible for Medicare before January 1, 2020, but not yet enrolled? If that is the case, then “you may be able to buy one of these plans,” according to Medicare.gov.1

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Will You Avoid These Estate Planning Mistakes?

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Many people plan their estates diligently, with input from legal, tax, and financial professionals. Others plan earnestly but make mistakes that can potentially affect both the transfer and destiny of family wealth. Here are some common and not-so-common errors to avoid.

Doing it all yourself. While you could write your own will or create a will, it can be risky to do so. Sometimes simplicity has a price. Look at the example of Aretha Franklin. The “Queen of Soul’s” estate, valued at $80 million, may be divided under a handwritten or “holographic” will. Her wills were discovered among her personal effects. Provided that the will can be authenticated, it will be probated under Michigan law, but such unwitnessed documents are not necessarily legally binding.1

Failing to update your will or trust after a life event. Relatively few estate plans are reviewed over time. Any major life event should prompt you to review your will, trust, or other estate planning documents. So should a major life event that affects one of your beneficiaries.  

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Monthly Economic Update for July, 2019

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THE MONTH IN BRIEF

You could say June was a month of highs. The S&P 500 hit another record peak, oil prices reached year-to-date highs, and gold became more valuable than it had been in six years. (There was also a notable low during the month: the yield of the 10-year Treasury fell below 2%.) Also, a door opened to further trade talks with China, and the latest monetary policy statement from the Federal Reserve hinted at the possibility of easing. For most investors, there was much to appreciate.1 

DOMESTIC ECONOMIC HEALTH

On June 29, President Trump told reporters, gathered at the latest Group of 20 summit, that he and Chinese President Xi Jinping were planning a resumption of formal trade negotiations between their respective nations. Additionally, President Trump said that the U.S. would refrain from imposing tariffs on an additional $300 billion of Chinese goods for the “time being.” A six-week stalemate in trade talks had weighed on U.S. and foreign stock, bond, and commodities markets in May and June.2

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Quarterly Economic Update for 2Q-2019

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THE QUARTER IN BRIEF

The S&P 500 certainly rollercoastered during the second quarter of 2019, but it also gained 3.8% across those three months. U.S.-China trade negotiations unwound, but as the quarter ended, they showed signs of resuming. The Federal Reserve grew dovish. Yields on longer-term Treasury notes dipped and so did mortgage rates. Consumers were confident, and consumer spending stayed strong. Mixed data emerged from the housing sector. Gold outperformed oil as well as many other commodities. The Brexit was delayed, and central banks in other countries elected to lower benchmark interest rates.1

DOMESTIC ECONOMIC HEALTH

On May 5, President Trump announced that U.S. tariffs of 10% on $200 billion of Chinese products would rise to 25% and that virtually all other imports coming to the U.S. from China would “shortly” face tariffs. China retaliated, declaring that it would hike tariffs already imposed on $60 billion worth of American products effective June 1. The trade talks between officials from the world’s two largest economies then hit a six-week standstill. On June 29, however, President Trump announced at the Group of 20 summit in Japan that formal bilateral trade negotiations would soon resume and that the U.S. would hold off on tariffs slated for another $300 billion in Chinese goods.2,3

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Weekly Economic Update for 7/1/2019

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THE WEEK ON WALL STREET

A month of gains for stocks ended with a weekly retreat. The S&P 500 lost 0.30%; the Nasdaq Composite, 0.32%; the Dow Jones Industrial Average, 0.45%. In contrast, overseas shares, tracked by the MSCI EAFE index, advanced 0.14%.1-2

Last month was the best June for the blue chips since 1938, the best month for the S&P since 1955. The Dow gained 6.9% in June; the S&P, 6.2%.3

TRADE TALKS COULD SOON RESTART

All week, investors had one eye on Saturday’s Group of 20 summit in Japan, where President Trump and Chinese President Xi Jinping were slated to meet. This weekend, President Trump announced that he and President Xi had agreed to a resumption of trade talks between the U.S. and China. As part of that agreement, the U.S. is holding off on placing tariffs on an additional $300 billion of Chinese goods.4

While trade tensions certainly remain between both countries, the news that formal discussions could resume may renew investor optimism about progress toward a trade pact. 

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What the SECURE Act Could Mean for Retirement Plans

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If you follow national news, you may have heard of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Although the SECURE Act has yet to clear the Senate, it saw broad, bipartisan support in the House of Representatives.

This legislation could make Individual Retirement Accounts (IRAs) a more attractive component of retirement strategies and create a path for more annuities to be offered in retirement plans – which could mean a lifetime income stream for retirees. However, it would also change the withdrawal rules on inherited “stretch IRAs,” which may impact retirement and estate strategies, nationwide.1

Let’s dive in and take a closer look at the SECURE Act.

The SECURE Act’s potential consequences. Currently, traditional IRA owners must take annual withdrawals from their IRAs after age 70½. Once reaching that age, they can no longer contribute to these accounts. These mandatory age-linked withdrawals can make saving especially difficult for an older worker. However, if the SECURE Act passes the Senate and is signed into law, that cutoff will vanish, allowing people of any age to keep making contributions to traditional IRAs, provided they continue to earn income.1

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Getting a Head Start on College Savings

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The American family with a child born today can expect to spend about $233,610 to raise that child to the age of 18. And if you’ve already traded that supercharged convertible dream for a minivan, you can expect your little one’s college education to cost as much as $198,000.1,2

But before you throw your hands up in the air and send junior out looking for a job, you might consider a few strategies to help you prepare for the cost of higher education.

First, take advantage of time. The time value of money is the concept that the money in your pocket today is worth more than that same amount will be worth tomorrow because it has more earning potential. If you put $100 a month toward your child’s college education, after 17 years’ time, you would have saved $20,400. But that same $100 a month would be worth over $32,000 if it had generated a hypothetical 5% annual rate of return. (The rate of return on investments will vary over time, particularly for longer-term investments. Investments that offer the potential for higher returns also carry a higher degree of risk. Actual results will fluctuate. Past performance does not guarantee future results) The bottom line is, the earlier you start, the more time you give your money to grow.

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Weekly Economic Update for 6/24/2019

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THE WEEK ON WALL STREET

The S&P 500 hit an all-time peak of 2,964.03, in intraday trading Friday, while improving 2.20% across five market days. The Dow Jones Industrial Average and Nasdaq Composite posted respective, 5-day advances of 2.41% and 3.01%. In addition, the MSCI EAFE benchmark of overseas stocks rose 2.58%.1-3

A White House tweet and the latest monetary policy outlook from the Federal Reserve sent the bulls running. These were the top two financial news items in an eventful week – a week in which the value of West Texas Intermediate crude rose 9.4%, the price of gold went above $1,400 for the first time in six years, and the 10-year Treasury yield fell below 2%. (Treasury yields fall when their prices rise, and vice versa.)1

THE FED’S JUNE POLICY STATEMENT

The central bank stood pat on interest rates this month, but the expectations of some of its policymakers changed. About half the 17 Fed officials who have a say in monetary policy now project either one or two quarter-point rate cuts by the end of the year. As recently as March, no Fed official saw grounds for a 2019 cut.4

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Diversification, Patience, and Consistency

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Regardless of how the markets may perform, consider making the following part of your investment philosophy:

Diversification. The saying “don’t put all your eggs in one basket” has real value when it comes to investing. In a bear or bull market, certain asset classes may perform better than others. If your assets are mostly held in one kind of investment (say, mostly in mutual funds or mostly in CDs or money market accounts), you could be hit hard by stock market losses, or alternately, lose out on potential gains that other kinds of investments may be experiencing. There is an opportunity cost as well as risk.1

Asset allocation strategies are used in portfolio management. A financial professional can ask you about your goals, tolerance for risk, and assign percentages of your assets to different classes of investments. This diversification is designed to suit your preferred investment style and your objectives.

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Trends in Charitable Giving

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According to Giving USA 2018, Americans gave an estimated $410.02 billion to charity in 2017. That’s the first time that the amount has totaled more that $400 billion in the history of the report.1

Americans give to charity for two main reasons: to support a cause or organization they care about or to leave a legacy through their support.

When giving to charitable organizations, some people elect to support through cash donations. Others, however, understand that supporting an organization may generate tax benefits. They may opt to follow techniques that can maximize both the gift and the potential tax benefit. Here’s a quick review of a few charitable choices:

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Tax Efficiency

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The after-tax return vs. the pretax return. Everyone wants their investments to perform well. But for many investors it’s their after-tax return that may make all the difference. After all, even if your portfolio is earning double-digit returns, it may not matter if you’re also losing a percent of those earnings to taxes.1

Holding onto assets. One method that may increase tax efficiency is to simply minimize buying and selling in order to manage your capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions. In the words of Warren Buffett, “Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.”2

Remember, before making any financial decision speaking with a financial or tax professional is a great idea. A financial professional can help you formulate a strategy that incorporates your long-term goals and risk tolerance.

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Tax Moves to Consider in Summer

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Consider making tax moves earlier rather than later. If you own a business, earn significant investment income, are recently married or divorced, or have a Flexible Savings Account (FSA), you may want to work on your income tax strategy now rather than in December or April.

Do you need to pay estimated income tax? If you are newly retired or newly self-employed, you will want to be familiar with Form 1040-ES and the quarterly deadlines. Each year, estimated tax payments to the Internal Revenue Service are due on or before the following dates: January 15, April 15, June 15, and September 15. (These deadlines are adjusted to the next available workday if a due date falls on a weekend or holiday.)1

Ideally, you would just make four equal payments per year – but if you are a small business owner, your business income could vary per quarter or per season. The risk here is that you will underpay and set yourself up for a tax penalty. Confer with your tax professional to see if you should adjust your estimated tax payments for this or that quarter.1

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The High Cost of Health Care

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One of the most ubiquitous aspects of social media in recent years has been the arrival of Americans crowdfunding around a major health issue. While America has a level of health care available that rivals the rest of the world, there is no denying that some treatments can be notably expensive. GoFundMe, a crowdfunding website, has raised over $5 billion since 2010; their CEO, Rob Solomon, says that a third of their campaigns fund health care costs and that this category gets more donations than any other.1

You may know someone who has been forced to seek out the generosity of their own network in order to cover the costs of health care, medicine, or treatments. It may put you in mind of your own immediate or extended family and how you or they might deal with such a situation.

Coverage may not cover everything. Sophia Nelson runs a business, has authored books, and describes herself as “doing well.” But in a recent piece in USA TODAY she revealed, “[My] medical emergency devastated me financially. Unable to work as hard as I was used to […] I had to start over in my mid-40s. It took me five years just to recover.” The idea of “doing well” is subjective, but it doesn’t take much to imagine a health crisis taking a major bite out of anyone’s savings, or worse yet, wiping them out entirely.2

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The SECURE Act and Traditional IRA Changes

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If you follow national news, you may have heard of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Although the SECURE Act has yet to clear the Senate, it saw broad, bipartisan support in the House of Representatives and could make IRAs a more attractive component of your retirement strategy. However, it also changes the withdrawal rules on inherited “stretch IRAs,” which may impact retirement and estate strategies, nationwide. Let’s dive in and take a closer look.1

Secure Act Consequences. Currently, those older than 70 ½ must take withdrawals and can no longer contribute to their traditional IRA. This differs from a Roth IRA, which allows contributions at any age, as long as your income is below a certain level: less than $122,000 for single filing households and less than $193,000 for those who are married and jointly file. This can make saving especially difficult for an older worker. However, if the SECURE Act passes the Senate and is signed into law, that cutoff will vanish, allowing workers of any age to continue making contributions to traditional IRAs.2

The age at which you must take your Required Minimum Distributions (RMDs) would also change. Currently, if you have a traditional IRA, you must start taking the RMD when you reach age 70 ½.  Under the new law, you wouldn’t need to start taking the RMD until age 72, increasing the potential to further grow your retirement vehicle.3

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Weekly Economic Update for 6/17/2019

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THE WEEK ON WALL STREET

Stocks advanced for a second straight week. The S&P 500 benchmark rose 0.47%; the Nasdaq Composite, 0.70%; the Dow Jones Industrial Average, 0.41%. Overseas shares, as tracked by the MSCI EAFE developed markets index, added 0.20%.1-2

The market seemed to put its recent preoccupation with trade issues aside, with attention shifting to this week’s Federal Reserve monetary policy meeting. Traders in futures markets now believe the Fed will make a rate cut in July, so its June policy statement will be of great interest.3

OIL PRICES ROLLERCOASTER

Attacks on vessels in the Strait of Hormuz, the busy oil shipping channel, helped to push the price of West Texas Intermediate crude 2.2% higher Thursday, just a day after a 4% fall. Even so, WTI crude lost 2.7% in five days, closing Friday at $52.51 on the New York Mercantile Exchange. 

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A Decision Not Made is Still a Decision

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Investment inaction is played out in many ways, often silently, invisibly, and with potential consequence to an individual’s future financial security.

Let’s review some of the forms this takes.

Your workplace retirement plan. The worst non-decision is the failure to enroll. Not only do non-participants sacrifice one of the best ways to save for their eventual retirement, but they also forfeit the money from any matching contributions their employer may offer. Not participating may be one of the most costly non-decisions one can make.

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Retirement In Sight for June, 2019

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CAN YOU STAY ON A COMPANY HEALTH PLAN AFTER AGE 65?

Generally, Medicare is available for people age 65 or older; this is well-known. What is less well-known is the fact that some companies can legally cancel group health insurance for a worker reaching this milestone. Baby boomers who aspire to keep working into their mid-sixties may want to take note of this.

The key factor here is the size of the workplace. A business with fewer than 20 employees can either choose to stop group health coverage for a worker at age 65, or let the employee stay on the plan with the recognition that his or her Medicare benefits will take precedence over the group coverage. When a company has 20 or more employees, it has a legal responsibility to offer the same group health insurance to all of its workers, regardless of how old or young they are. That said, the employer may require an employee to work a certain number of hours per week to maintain his or her group health benefits; if the employee cannot meet that criterion, then eligibility for group health coverage may be lost.1

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Weekly Economic Update for 6/10/2019

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THE WEEK ON WALL STREET

Stocks rallied during a week in which Wall Street was buffeted by headlines. The S&P 500 rose 4.41%. The Nasdaq Composite and Dow Jones Industrial Average respectively added 3.88% and 4.71%. The MSCI EAFE index of overseas stocks improved 2.02% across five days.1-2  

Following a mixed Monday, the market jumped Tuesday after dovish remarks from Federal Reserve Chairman Jerome Powell. Breaking out of a 6-week losing streak, the Dow had its best week since November.3

JEROME POWELL’S COMMENTS

Speaking at the Federal Reserve Bank of Chicago, the Fed chair stated that central bank officials “will act as appropriate to sustain the expansion” of the economy in the face of “recent developments involving trade negotiations and other matters.”4

The next 2-day Fed policy meeting ends on June 19, with a press conference to follow.5 

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The FIRE Movement

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Retire before 50 and live your best life. That is the message of the FIRE (Financial Independence, Retire Early) movement, which is drawing interest worldwide.

Adherents of the FIRE movement contend that many young adults can pursue financial freedom and retire in their 40s (or 30s) through sufficient commitment, investment, and resourcefulness. Detractors think this idea is not only radical, but also radically unrealistic for many.

Is it really possible to retire so young? Actually, yes – there are people who have done it, and their stories often appear on financial websites. These early retirees tend to have some things in common. 

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The Gift Tax

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I’d like for you to meet my friend, Hugh. He’s a retired film stuntman who, after a long career, is enjoying his retirement. Some of what he’s enjoying about his retirement is sharing part of his accumulated wealth with his family, specifically his wife and two sons. Like many Americans, Hugh likes to make sure that, when he’s sharing that wealth, he isn’t giving the I.R.S. any overtime.

Hugh knows about the gift tax and knows how to make those gifts without running headlong into a taxable situation. This is Hugh’s responsibility because the I.R.S. puts the onus on the giver. If the gift is a taxable event and Hugh doesn’t pay up, then the responsibility falls to the beneficiaries after he passes in the form of estate taxes. These rules are in place so that Hugh can’t simply, say, give his entire fortune to his sons before he dies.

Exemptions for family and friends. It would be different for Hugh’s wife, Barbara. The unlimited marital deduction means that gifts that Hugh gives to Barbara (or vice versa) never incur the gift tax. There’s one exception, though. Maybe Barbara is a non-U.S. citizen. If so, there’s a limit to what Hugh can offer her, up to $155,000 per year. (This is the limit for 2019; it’s pegged to inflation.) 1,2

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Money Tips for Newlyweds

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In a recent study, 35% of married couples described money issues as their primary source of stress. While there are many potential causes of such financial stress, in some cases the root may begin with habits formed early in the marriage.1

Fortunately, couples may be able to head off many of the problems money can cause in a marriage.

10 Tips for Newly Married Couples

Communication. Couples should consider talking about their financial goals, memories, and habits because each person may come into the marriage with fundamental differences in experiences and outlook that may drive their behaviors.

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Value of Key Employee Insurance

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What kind of financial loss would your business face without its key employees? They are worth more than their salaries – their performance, professionalism, and character make your company what it is and provide the stability and predictability you need to realize a profit.

Because of this reality, wise business owners may take a look at key employee insurance. 

Aren’t the premiums for key employee insurance sizable? Not necessarily. In fact, they may seem profoundly insignificant compared to the financial hit your company could take without a key worker.

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Helping Your Parents Manage Financial Tasks

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Worldwide, the number of people aged 60 and older is growing. By 2050, this demographic will be more than twice as large as it was in 2015.1

Some of these seniors could face a financial test. Will they be able to look after their investments or financial matters at age 80 or 90 with the same level of scrutiny they exercised earlier in life?

Your parents may be facing such a challenge. If you sense that they are not quite up to it, then a conversation about financial issues could be in order.

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Smart Financial Moves in Your 20s, 30s, 40s & 50s

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Have you ever mapped out your financial timeline? If you’re like many Americans, it may have been more difficult than anticipated. One of the most helpful ways to achieve your financial goals is to break it down by your age. After all, depending where you are on life’s journey, certain financial moves make more sense than others. Read on to learn more.

What might you want to do in your twenties? First and foremost, you should start saving for retirement – preferably using tax-advantaged retirement accounts that let you direct money into equities. Through equity investing, your money may grow and compound profoundly with time – and you have time on your side.

Aside from equity investment, you will want to try and build your savings. A good place to start is an emergency fund equal to six months of your salary. That may seem unnecessarily large, but it is worth pursuing, especially if you have loved ones depending on you. Accidents do happen, and you could suffer an illness or injury that might prevent you from earning income. About 25% of people will contend with such an episode during their working lives, and less than 5% of disabling illnesses and accidents are job related, so workers compensation insurance will not cover them.1

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Monthly Economic Update for June, 2019

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THE MONTH IN BRIEF

Hopes for a quick resolution to the U.S.-China trade dispute faded in May as discussions broke down and rhetoric from both sides turned tough again. The disappointment lingered on Wall Street: the month saw losses for stocks. On Main Street, consumer confidence was strong and inflation tame. Mortgage rates reached year-to-date lows, but the latest data on home sales showed weak spring buying. The price of crude oil fell significantly, and so did the yield on the 10-year Treasury.1

DOMESTIC ECONOMIC HEALTH

Last month, trade was the story, and tariffs were on the minds of market participants. On May 5, President Trump announced that U.S. import taxes levied on $200 billion of Chinese products would soon rise from 10% to 25% and that virtually all other goods arriving from China would “shortly” face a 25% tariff. China retaliated, declaring that it would hike tariffs already imposed on $60 billion worth of American products, effective June 1. More tariff developments followed. On May 17, President Trump opted to delay levies planned for imported autos until later in 2019, and he removed tariffs on metals arriving from Canada and Mexico.2,3

Late May brought more attention-getting headlines. On May 29, China’s state media suggested that its government might consider banning rare-earth mineral exports to America. (China mines or produces about 80% of the world’s rare earths.) On May 30, President Trump announced that all of Mexico’s exports to the U.S. would face 5% tariffs starting on June 10; these taxes could rise to as high as 25% by October.4,5

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Weekly Economic Update for 6/3/2019

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THE WEEK ON WALL STREET

Stocks struggled during a 4-day market week as the U.S.-China trade standoff continued to weigh on the minds of market participants. From the Friday, May 24 close to the Friday, May 31 close, the S&P 500 retreated 2.62%; the Nasdaq Composite, 2.41%; the Dow Jones Industrial Average, 3.01%. The MSCI EAFE index of overseas stocks dipped just 1.47% in a week.1,2

Trade is dominating the conversation in the financial markets, with developments steadily unfolding. Wednesday, China’s state media suggested that the country could soon cut off exports of rare earths to the U.S. Late Thursday, the Trump administration announced 5% tariffs on all imports from Mexico, effective June 10; these taxes could rise in the coming months.3,4

MEANWHILE, ON MAIN STREET…

The Conference Board’s consumer confidence index soared to 134.1 in May, its highest reading since November; the consumer view of present economic conditions was the best since the end of 2000. Additionally, the University of Michigan’s consumer sentiment index ended May at 100.00, near the 15-year peak of 102.4 seen earlier in the month.5,6

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Retiring Single

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About 6% of Americans 65 and older have never married. That statistic comes from a 2018 Census Bureau report, which also found that 22% of Americans aged 65-74 live alone.1

If you think you will retire alone and unmarried, you will want to pay special attention to both your financial and social qualities of life. Whether you perceive a solo retirement as liberating or challenging, it helps to be aware of how your future might differ from your present.1

Be aware that your retirement income needs may change. They can be affected by unplanned events and changes in your outlook or goals. Perhaps, a new dream or ambition emerges; you decide you want to start a business, or maybe, see more of the world. You could also end up retiring sooner than you anticipated. Developments like these could alter the “big picture” of your retirement distributions.

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Coping with an Inheritance

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Inheriting wealth can be a burden and a blessing. Even if you have an inclination that a family member may remember you in their last will and testament, there are many facets to the process of inheritance that you may not have considered. Here are some things you may want to keep in mind if it comes to pass.

Take your time. If someone cared about you enough to leave you a sizable inheritance, then you will likely need time to grieve and cope with their loss. This is important, and many of the more major decisions about your inheritance can likely wait. And consider, too – when you’re dealing with so much already, you may be too overwhelmed to give your options the careful consideration they need and deserve. You may be able to make more rational decisions once some time has passed.

Don’t go it alone. There are so many laws, options, and potential pitfalls – the knowledge an experienced professional can provide on this subject may prove to be vitally important. Unless you happen to have uncommon knowledge on the subject, seek help.

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Insurance When You're Newly Married

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Marriage changes everything, including insurance needs. Newly married couples should consider a comprehensive review of their current, individual insurance coverage to determine if any changes are in order as well as consider new insurance coverage appropriate to their new life stage.

Auto. The good news is that married drivers may be eligible for lower rates than single drivers. Since most couples come into their marriage with two separate auto policies, you should review your existing policies and contact your respective insurance companies to obtain competitive quotes on a new, combined policy.

Home. Newly married couples may start out as renters, but they often look to own a home or condo as a first step in building a life together. The purchase of homeowners insurance or condo insurance is required by the lender. While these policies have important differences, they do share the same purpose – to protect your home, your personal property, and your assets against any personal liability.

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The Financial Realities of Longevity

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What will be your future? You know that solid retirement strategy takes your time horizon, an often unpredictable factor, into consideration. Your thinking must include an awareness of how long you must save for and what sort of expenditures may be ahead.

The most recent findings from the Centers for Disease Control and Prevention indicate that the average American male lives to age 76, while a female may live to 81. The numbers also take the quality of life into account, putting male and female Americans at “full health” for 67 and 70 years, respectively.1

What do these numbers tell us? Women live longer, for one. Based on your age and the age of your spouse, you can make estimates; you may live longer or less, but averages offer us a window that can be used to plot that retirement strategy. One reality unnoticed in these numbers is that some women may live on their own for many years; if a woman has spent many years as part of a household, living alone shifts the responsibility from two people to one, removing any extra income their partner or spouse contributed.

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