Economic Updates & Financial Articles

Economic Updates & Financial Articles

Economic Updates:

Retirement in Sight Newsletter:

Financial Articles:

 


Weekly Economic Update for 1/11/2021

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THE WEEK ON WALL STREET

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

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

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2021 Opens With a Bang

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

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

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

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5 Highlights of the New Stimulus Package

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

Here’s a quick recap of five key highlights:

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

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Retirement In Sight for January, 2021

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TO RETIRE, OR NOT TO RETIRE?

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

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

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Monthly Economic Update for January, 2021

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U.S. Markets

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

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

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Quarterly Economic Update for 4Q 2020

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THE QUARTER IN BRIEF

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

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

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Weekly Economic Update for 1/4/2021

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THE WEEK ON WALL STREET

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

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

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IRA Deadlines Are Approaching

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

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

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

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What’s the Buzz with Bitcoin?

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

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

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

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Weekly Economic Update for 12/21/2020

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THE WEEK ON WALL STREET

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

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

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Distributions from Mutual Funds

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

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

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

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Weekly Economic Update for 12/14/2020

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THE WEEK ON WALL STREET

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

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

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New Distribution Period Tables

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

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

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

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Markets & Marriage

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

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

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Group Life for a Growing Business?

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

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

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

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Building a Healthy Financial Foundation

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

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

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

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Retirement Blindspots

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

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

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

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Weekly Economic Update for 12/7/2020

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THE WEEK ON WALL STREET

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

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

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Do Our Biases Affect Our Financial Choices?

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

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

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

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Cash Balance Plans

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

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

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

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Does Main Street Need a Wall Street Strategy?

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

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

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

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Retirement In Sight for December, 2020

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THIS YEAR, THERE IS MORE INCENTIVE TO GIVE

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

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

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Monthly Economic Update for December, 2020

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U.S. Markets

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

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

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Weekly Economic Update for 11/30/2020

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THE WEEK ON WALL STREET

Stocks surged last week, ignited by another COVID-19 vaccine announcement, encouraging economic data, and the easing of political uncertainty.

The Dow Jones Industrial Average rose 2.21%, while the Standard & Poor’s 500 added 2.27%. The Nasdaq Composite index, which has led all year, gained 2.96%. The MSCI EAFE index, which tracks developed overseas stock markets, climbed 1.54%.1,2,3

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Weekly Economic Update for 11/23/2020

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THE WEEK ON WALL STREET

Despite news of another COVID-19 vaccine candidate, stocks were mixed amid investor anxiety over an increase in new infections and economic lockdowns.

The Dow Jones Industrial Average fell 0.73%, while the Standard & Poor’s 500 declined 0.77%. The Nasdaq Composite index rose 0.22% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.42%.1,2,3

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Coronavirus Vaccines and the Economy

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As the United States sees a rise in cases of COVID-19 across the nation, news of two promising vaccines out of hundreds being tested has offered a ray of hope for a fatigued world.1

A positive reaction to these vaccines affects every aspect of human life, including the financial world. On Monday, November 16th, The Dow Jones Industrial Average rose 450 points on the news of a second effective vaccine, hitting a record high.2

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Speed Bumps & Headlines

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As an investor, it can be tempting to get caught up in daily news headlines. Consider how news about the election and COVID-19 vaccines have moved the markets over the past several weeks. But having a financial strategy can help you ignore short-term volatility and focus on your long-term vision.

As you know, investing is a process based on your goals, time horizon, and risk tolerance. Interestingly enough, it’s also a process that may help you prepare for life’s financial challenges.

For example, did you know that only 44 percent of workers have estimated how much income they would need in retirement? What’s more, only 36 percent have calculated how much money they would need to cover healthcare expenses.1

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Weekly Economic Update for 11/16/2020

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THE WEEK ON WALL STREET

News of a COVID-19 vaccine ignited a rally in economically sensitive stocks and a broad retreat in technology companies last week, though enthusiasm was tempered by reports of rising new infections and fresh lockdowns.

The Dow Jones Industrial Average surged 4.08%, while the Standard & Poor’s 500 rose 2.16%. The Nasdaq Composite index fell 0.55% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, jumped 4.01%.1,2,3

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What Do I Do With All of This Money?

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Here’s a scenario for you: You pick up what appears to be a lottery ticket. You check the numbers for a laugh and discover a winning combination, offering you millions of dollars in prize money. What are the chances of that?

The next day, you get a call from a lawyer. “Uh-oh,” you think. It turns out he works for your Aunt Gertrude’s estate. Just before her passing, she decided not to establish a charity for homeless cacti and other wayward succulents, and has instead left her vast estate in your hands. 

The day after that, you get a call from a Silicon Valley tech billionaire who wants to make an offer on your small startup company and all of its patents. The deal goes through. In a matter of days, you are wealthy beyond the dreams of King Midas himself.

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Interest Rates and Your Mortgage

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With the Federal Reserve keeping interest rates at or near zero, you may wonder about your mortgage. Is it a good time to refinance or even pay off the debt entirely? After all, your mortgage is one of the biggest expenses you may have in life, so why not rid yourself of that debt as soon as possible?1

Not so fast. There are many reasons why keeping your mortgage could be a better option than paying it off. Yes, you may eliminate one of the largest bills you have every month, but there are benefits to maintaining your mortgage as well.

1. Losing all your gains on your investments. Using funds from your investments to pay off your mortgage early may mean you lose out on potential gains. However, by keeping your portfolio untouched, you increase the chances of a return on your investment.2

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Retirement In Sight for November, 2020

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MOST AMERICANS THINK THEY WILL WORK IN RETIREMENT

A life of leisure? That may not be what retirement looks like for baby boomers and Gen Xers—and in fact, it may not be what they want their retirements to look like. Market research firm Ipsos surveyed more than 1,000 U.S. adults earlier this year, and found that 54% of participants believed they would work at least a little during their retirements.

Sixty percent of Gen Xers (those born during 1965-80) held this belief, along with 59% of boomers (those born during 1946-64). Forty-nine percent of millennials also held this perception (the survey defined millennials as Americans born during 1981-96). A significant percentage of those polled looked at the possibility of working in retirement as a plus, rather than a minus: 56% felt that it would be good for their mental well-being to keep working, and 40% believed the income could provide them with more household economic stability in case of volatile unexpected expenses or turbulence in the financial markets affecting their investments. The pollsters also asked which of two possibilities respondents would choose: being totally debt-free, or being able to save more for retirement while carrying some debts. Fifty-five percent of the respondents said they would take the second choice over the first.1,2

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Weekly Economic Update for 11/9/2020

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THE WEEK ON WALL STREET

Stocks soared last week as investors anticipated that a split Congress would raise legislative hurdles to changing corporate taxes and adjusting regulatory oversight of big technology companies.

The Dow Jones Industrial Average jumped 6.87%, while the Standard & Poor’s 500 tacked on 7.32%. The Nasdaq Composite index surged 9.01% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 7.65%.1,2,3

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Election 2020: Wall Street Reacts to Potentially Divided Government

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After many weeks of telegraphing a long and careful ballot count, this week’s election lived up to that prediction in races for the Senate, the House, and the presidency. While Americans voted Tuesday, Wall Street cast its ballot Wednesday.

The S&P 500 rose 2.2% on Wednesday, November 4, as it appeared a divided government would be the outcome of election 2020. The Nasdaq, which has led all year, picked up 3.9%.1

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Long-Term Rates Are Creeping Higher

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With all the election chatter and stock market volatility, it may have been easy to miss the ongoing uptrend in long-term interest rates.

The yield on the 10-year Treasury bond is sitting just below 1%. Just a few short months ago, the 10-year was yielding roughly 0.5%.1

What's fueling the rally? More demand for money, which is the result of a pickup in economic activity. When businesses see economic conditions improving, they look to expand their operations. When entrepreneurs see exciting new opportunities, they look to raise money to finance their projects.2

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Monthly Economic Update for November, 2020

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U.S. Markets

Inaction on a second American fiscal stimulus bill and a rise in global COVID-19 cases put pressure on stock prices in October.

The Dow Jones Industrial Average, which has lagged much of the year, dropped 4.61 percent. The Standard & Poor’s 500 Index lost 2.77 percent and the Nasdaq Composite slipped 2.29 percent.1

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Weekly Economic Update for 11/2/2020

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THE WEEK ON WALL STREET

Stock prices dropped last week as hopes for a fiscal stimulus bill faded and investors focused on rising COVID-19 infections, here and abroad.

The Dow Jones Industrial Average slid 6.47%, while the Standard & Poor’s 500 tumbled 5.64%. The Nasdaq Composite index lost 5.51% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 5.02%.1,2,3

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2021 Limits for IRAs, 401(k)s and More

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On October 26, the Treasury Department released the 2021 adjusted figures for retirement account savings. Although these adjustments won’t bring any major changes, there are some minor elements to note.

401(k)s. The salary deferral amount for 401(k)s remains the same at $19,500, while the catch-up amount of $6,500 also remains unchanged. However, the overall limit for these plans will increase from $57,000 to $58,000 in 2021.1

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How and When to Sign Up for Medicare

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Medicare enrollment is automatic for some. For those receiving Social Security benefits, the coverage starts on the first day of the month you turn 65.1

If you are not receiving Social Security benefits at 65, you may be delaying until you reach full retirement age, or until you reach 70. If you’re coming up on 65 and not receiving Social Security benefits, SSDI, or benefits from the Railroad Retirement Board, you can still apply for Medicare coverage. You can visit your local SSA office or visit www.socialsecurity.gov/medicareonly/ to determine your eligibility.1

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Managing Money as a Couple

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When you marry or simply share a household with someone, your financial life changes—and your approach to managing your money may change as well. The good news is that it is usually not so difficult.

At some point, you will have to ask yourselves some money questions—questions that pertain not only to your shared finances but also to your individual finances. Waiting too long to ask (or answer) those questions might carry a price. In the 2019 TD Bank Love & Money survey of consumers who said they were in relationships, 40% of younger couples described having weekly arguments about their finances.1

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Weekly Economic Update for 10/26/2020

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THE WEEK ON WALL STREET

The failure to reach an agreement on a new fiscal stimulus bill soured investor sentiment and sent stocks modestly lower for the week.

The Dow Jones Industrial Average fell 0.95%, while the Standard & Poor’s 500 lost 0.53%. The Nasdaq Composite index slipped 1.06% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.44%. 1,2,3

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Earnings Season: 3rd Quarter Results

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Earnings are coming in, reflecting the third quarter of 2020. However, it’s important not to jump to any conclusions about the state of the overall economy based on the results reported from a small handful of companies.

It’s easy to get excited—positively or negatively—about earnings reports. Perhaps you have a financial interest in a particular company. In practical terms, though, your overall financial strategy likely covers a wide variety of investments that can be influenced in different ways by different factors.

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Election 2020: A Dose of Patience

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The upcoming election is prompting some people to reconsider their investment strategy.

In fact, 45% of consumers with $100,000 or more investable assets expect to make changes to their portfolio due to the upcoming 2020 presidential election.1

But if history is any guide, patience may be the answer.

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Weekly Economic Update for 10/19/2020

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THE WEEK ON WALL STREET

Stocks treaded water last week amid fading prospects for a stimulus bill, fears of a second wave of COVID-19 cases, and increasing political and regulatory pressures on Big Tech companies.

The Dow Jones Industrial Average added just 0.07% while the Standard & Poor’s 500 eked out a gain of 0.19%. The Nasdaq Composite index picked up 0.79% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slid 2.08%.1,2,3

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The Social Security Administration Announces 2021 COLA

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On October 13, 2020, the Social Security Administration (SSA) officially announced that Social Security recipients will receive a 1.3 percent cost-of-living adjustment (COLA) for 2021. This adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Additionally, increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2020.1

Is this a COLA lite? Many may be disappointed by this modest bump compared to the 1.6 percent increase beneficiaries saw in 2020 or the 2.8 percent boost in 2019. However, it’s important to remember that the Social Security Act ties the annual COLA to the increase in the Consumer Price Index (CPI). In broad terms, the CPI measures the price of consumer goods and how they're trending in to evaluate the economy. In short, lower inflation numbers usually equals a modest COLA.2

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How Medigap Choices Have Changed

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As many may recall, seniors who previously enrolled in Medicare are facing some changes. Medigap Plan F might not be sold after 2020 and Medigap Plan G will be undergoing some changes.1

These changes only impact new Medicare enrollees, however. If you enrolled in Medicare prior to 2020, and have Plan F or Plan G coverage, you can keep that coverage.2

Why do people like Plan F? Plan F is basically a “Cadillac plan”: it is not cheap, but it lets you see any doctor or hospital that accepts Medicare patients, and the upfront cost is the total cost. If you have Plan F coverage, it’s rare to be surprised by subsequent requests to pay a deductible, a copayment, or coinsurance.2

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Election 2020: Managing Your Emotions

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45% of consumers with $100,000 or more investable assets expect to make changes to their investments due to the upcoming 2020 presidential election.1

No matter how you look at it, that’s a startling statistic.

Second-guessing your investment strategy is natural, especially with an election on the horizon. Emotions are running high as many are divided about what may happen to the financial markets with the election just weeks away.

That makes this a great time to remember that investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. If you’re concerned that the upcoming election may change one of these key factors, perhaps it’s time to review your portfolio.

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Weekly Economic Update for 10/12/2020

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THE WEEK ON WALL STREET

Stocks staged a powerful rally last week, riding a wave of optimism over the prospect of the passage of a new fiscal stimulus bill.

The Dow Jones Industrial Average rose 3.27%, while the Standard & Poor’s 500 increased 3.84%. The Nasdaq Composite index gained 4.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.23%.1-3

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October Is Financial Planning Month

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When training to become a financial professional, much of our course work centers on the six critical areas of creating a financial strategy. Some recognize October as Financial Planning Month, so it's an excellent opportunity to review those six personal finance areas.1

Cash Management: This is a broad topic that can address many issues. One area is creating an emergency fund, which is money that's set aside for unplanned expenses. Cash management also can include looking at your "sources and uses" of money. Financial Planning Month focuses mainly on cash management and spending habits.1

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FAFSA Applications Are Now Open

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Applications for the Free Application for Federal Student Aid (FAFSA) are now open for the academic year 2021-22. Applying for the FAFSA allows you to qualify for grants, scholarships, and other federally-sourced aid, such as work-study or student loans. The applications opened on October 1, 2020, and will be accepted until the deadline, June 30, 2022.1

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Retirement In Sight for October, 2020

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ARE CAR OR TRUCK COSTS BLOCKING THE ROAD TO RETIREMENT?

On a purely logical level, investing tens of thousands of dollars toward retirement may make more sense than adding an equivalent consumer debt here and now. On a practical level, though, we need a good car or truck, and on an emotional level, we get a kick out of driving something new. So, we buy (and often finance) new vehicles.

While a car or truck can possibly help you make money, autos almost always depreciate. Factor in financing, licensing, repairs, and fuel, and the costs can add up. A 5-year auto loan on a new car or truck in the $50,000-$70,000 price range could mean a monthly payment of anywhere from $800-$1,300, depending on what you put down. If that same consumer buys a new or used vehicle with a price tag of about $20,000, the difference in monthly payments can give the person choices.1

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Monthly Economic Update for October, 2020

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U.S. Markets

Stocks dropped in September as investors worried about stalled fiscal stimulus talks in Washington, the upcoming election, and new coronavirus cases in Europe.

The Dow Jones Industrial Average, which lagged this year slipped 2.28 percent. The Standard & Poor’s 500 Index lost 3.92 percent and the Nasdaq Composite declined 5.16 percent.1

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Weekly Economic Update for 10/5/2020

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THE WEEK ON WALL STREET

Stocks advanced last week, propelled by hopes that legislators may reach an agreement for a new fiscal stimulus package and optimism generated by a few corporate deal announcements and initial public offerings.

The Dow Jones Industrial Average rose 1.87%, while the Standard & Poor’s 500 increased 1.52%. The Nasdaq Composite index gained 1.48% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 1.56%.1,2,3

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Election 2020: Economic Issues in the Crosshairs

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It should come as no surprise to hear the economy is the top issue for voters in the 2020 election. Nearly 8 in ten voters say that the economy will be very important to them when they cast their votes.1

But when voters say “economy,” what do they really mean? Is it a catch-all phrase for personal finances? Not exactly. Here’s a breakdown of voters’ top three economic concerns and what each candidate has said about the issues.1

Questions about trade. Questions remain about what will develop between the U.S. and China following the election. President Trump has worked to revise the U.S.-China trade agreements, while former Vice President Joe Biden has indicated he may move towards a more open trade policy.2

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End-Of-The-Year Money Moves - 2020

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What has changed for you in 2020? For many, this year has been as complicated as learning a new dance. Did you start a new job or leave a job behind? That’s one step. Did you retire? There’s another step. Did you start a family? That’s practically a pirouette. If notable changes occurred in your personal or professional life, then you may want to review your finances before this year ends and 2021 begins. Proving that you have all of the right moves in 2020 might put you in a better position to tango with 2021.

Even if your 2020 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your overall personal finances. 

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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Ouch! September’s Market Correction Hurt

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In theory, investors understand that stock market corrections are part of the investing process. But experiencing a setback—like the one we’ve witnessed in the past four weeks—can raise a lot of shoulda, woulda, coulda questions.

From its intraday high on September 2 to its intraday low September 23, the Standard & Poor’s 500 Index dropped more than 10%. The Nasdaq Composite dropped as much as 14% as technology stocks bore the brunt of the selling.1

Should I have done something differently? Would I do it again? Could I avoid this part of the investing process?

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Quarterly Economic Update 3Q-2020

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THE QUARTER IN BRIEF

The summer brought an economic rebound and a continuation of the stock market rally that began in spring. In late September, the Federal Reserve Bank of Atlanta's GDPNow tracker estimated real Gross Domestic Product (GDP) growth of 32.0% for the third quarter. All three of the major Wall Street benchmarks advanced in Q3; the S&P 500 added nearly 8%, ending the quarter up about 4% for the year. Even so, U.S. equities slumped in September as traders worried that the stock market might be getting ahead of the economy.1,2

In Washington, the Federal Reserve altered its monetary policy stance and forecast low-interest rates for the near future. Hopes for another economic stimulus dimmed in Congress. On Main Street, the coronavirus pandemic remained top of mind, but improvements in hiring, consumer confidence, and retail sales were evident.

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Weekly Economic Update for 9/28/2020

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THE WEEK ON WALL STREET

Stocks were mixed last week as worries that stretched from Washington D.C., where prospects of a new fiscal stimulus bill dimmed, to Europe, which saw an increase of new COVID-19 cases.

The Dow Jones Industrial Average declined 1.75%, while the Standard & Poor’s 500 fell 0.63%. The Nasdaq Composite index gained 1.11% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 4.20%.1-3

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Year-End Estate Strategies

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With one year ending and a new one on the cusp of starting, many people will consider their resolutions—not their estate strategy. But the end of the year is a great time to sit down and review your preparations, especially when you're spending more time with your loved ones; even more important if you have a complicated estate that may need to get managed after you're gone.

Call a family meeting. Many people don't let their family know their wishes or who is appointed to handle the estate. While two-thirds of Americans say that the pandemic has brought them closer to their family, only 28% of those 65 and older have started discussing their estate strategy with their families.1,2

You may be able to get ahead of any potential family issues down the line by discussing your wishes, what needs to be handled by your estate, and reviewing what you have in place. No one wants to think about their family members passing away, but an awkward conversation now may mitigate future problems.

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Managing Drug Costs

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Are prescription drug costs burdening your finances? Some people find it a challenge to manage the cost of prescription drugs. Americans pay an average of $1,200 per year for medicine. For those facing greater and more dangerous ailments, some drugs can cost $10,000 per month or even lump sums in excess of $80,000 for certain drug therapies. Yes, health insurance and Medicare Part D can help you, but not everyone has access to Medicare, and not every insurance company has the same formulary. This means that your coverage may fall short—not something you want to hear when wrestling with a major diagnosis.1

How can a household try to manage drug costs? There are some approaches that may help.

Shop around & compare Part D plans annually. As you shop, keep in mind that plans with smaller premiums may have higher out-of-pocket costs. Some plans also limit monthly doses of certain drugs in their coverage or request patients to try less costly drugs before branded drugs can be prescribed.

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Mergers, Acquisitions, & the Markets

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There hasn’t been much merger and acquisition activity through 2020. This diminished activity comes despite low interest rates, which may help companies manage the cost of borrowing for a purchase. Some of this makes sense, in light of the COVID-19 pandemic leading to widespread economic uncertainty.

Through August, mergers and acquisitions came to a relative halt, with activity falling to an 18-year low.1,2,3

Will it pick up next year? It’s difficult to see companies not taking advantage of this fact sooner, rather than later. Some companies have used the low-rate environment of the past several months to “bolster their balance sheet” to put them in a stronger financial position for the years ahead. How do they do it? In some instances, by paying down certain debt and issuing new debt at more favorable rates.

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Budgeting for Beginners

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Budgeting towards needs and goals. One of the objectives of creating a household budget is that, as time moves on and the various household members advance in their careers, they are likely to make more money. Knowing where that money goes can help direct that money to not only meet your day-to-day needs but also to potentially realize your financial goals. Rent payments may become mortgage payments, and socking away a few bucks into your savings each payday could change into an effective financial strategy involving various investment tools.1

Remember that investing involves risk, and the return and principal value of investments will fluctuate as market conditions change. Investment opportunities should take into consideration your goals, time horizon, and risk tolerance. When sold, investments may be worth more or less than their original cost. Past performance does not guarantee future results.

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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 an excellent 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 2021, the contribution limit for a Roth or traditional individual retirement account (IRA) is expected to remain 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. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible.1

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Election 2020

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As the U.S. presidential election draws near, expect to see more and more headlines that propose, "What will happen next if this person is elected?" or, "What policy changes to prepare for in the next four years?"

In reality, however, it isn't easy to anticipate what may happen with the financial markets after the November elections. An ambitious investor would have to forecast the election results, evaluate which policies may become law, estimate a potential economic impact, and assess how the financial markets might react. That's a tall order.1

Remember, in addition to the presidency, a total of 35 Senate seats and 435 Congressional seats will be on the ballot. The makeup of the country's executive and legislative branches may look much different—or very similar—in 2021.2,3

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Weekly Economic Update for 9/21/2020

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THE WEEK ON WALL STREET

Stocks slipped as the technology sector remained under pressure and a mid-week announcement by the Federal Reserve failed to inspire investors.

The Dow Jones Industrial Average declined 0.03%, while the Standard & Poor’s 500 fell 0.64%. The Nasdaq Composite index dropped 0.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.75%.1,2,3

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Facts About Medicare Open Enrollment

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Medicare’s open enrollment period runs from October 15 to December 7. If you are enrolling in Medicare for the first time, give yourself plenty of time. You may discover that it is much more complex than an employer-sponsored group health plan.1

When you enroll in Medicare, you pay multiple premiums for multiple types of coverage (Parts A and B, as well as the Part D prescription drug plan). Unlike a group health plan, there are no caps on out-of-pocket costs and a risk that you might have to pay a hospital insurance deductible more than once per year. Original Medicare also does not cover some costs that many seniors would like to cover, such as dental and vision care expenses.2

This is why so many retirees decide to buy Medigap policies or enroll in comprehensive Medicare Advantage (Part C) plans—they recognize the shortcomings of original Medicare. The downside of Part C plans is that you are restricted to the doctors in their networks. Original Medicare allows you to choose any doctor that accepts Medicare (though it is smart to have a Medigap policy as well).

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Extraordinary Times Mean Extra Federal Debt

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America’s debt is now nearly as large as its economy. On September 2, the Congressional Budget Office announced that by the end of the 2020 fiscal year (September 30), the federal government is projected to owe debt equaling 98% of the nation’s gross domestic product.1

The CBO also projects that the country’s debt is expected to be greater than its GDP by 2023. Federal debt last exceeded GDP in 1946, the year after World War 2 ended.1

Some analysts thought federal debt would reach these levels by 2030. They did not see this happening now. Then again, who could have foreseen the sudden arrival of COVID-19, let alone its economic impact? This spring brought the nation’s worst quarterly GDP contraction in almost 75 years. The CBO says federal income tax revenues are expected to fall by $280 billion this fiscal year ended September 30, leading the federal government to borrow heavily as it launched its economic stimulus program for businesses and households.1,2

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Home Improvements Trending Higher

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Due to COVID-19, Americans are spending more time at home than ever before, leading to a record amount of spending on home improvement.1

It’s not that big of a surprise since many Americans now find their homes are doing triple duty as a place to live, work, and learn. Homeowners are funneling more money into their homes than ever thanks to a surplus of cash they would typically spend in other ways. However, what is surprising is the amount being spent on home improvement projects.1

The average homeowner has spent around $17,140 during the pandemic to make their homes more enjoyable while sheltering in place. This increase is substantial compared to the 2019 State of Home Spending Report, where it showed the average spending on home improvement was $7,560. Additionally, studies show that 79% of homeowners begin their home improvement projects without a budget. This is an increase from 2019, where 75% of homeowners didn’t have a budget.2,3,4

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TIPS for Inflation

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This summer, the Federal Reserve made a key policy shift. It announced that it would focus on promoting job creation and tolerate a little more inflation along the way for the near future.

Fed Chairman Jerome Powell stated on August 27 that the central bank plans to now “seek to achieve inflation that averages 2 percent over time,” rather than proactively adjust short-term interest rates when inflation approaches that established target. So in the near term, 2% inflation may or may not compel the Fed to hike.1

Powell called this a “robust updating” of Fed strategy. Historically speaking, it is. As his predecessor, Janet Yellen, told The New York Times, “most of the Fed’s history has revolved around keeping inflation under control. This really does reflect a decisive recognition that we’re in a very different environment.”1

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Race for a Vaccine

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A U.S. drug company recently said that it’s in late-stage trials for its coronavirus vaccine and reported that it could be given to Americans as early as the end of the year.1

Great news. But it seems like every few days there’s a new update on a clinical trial for COVID-19. So we took the opportunity to check out the overall status for the development of a vaccine.

Much to our surprise, we learned that more than 150 vaccines are in development across the world. Hopes are high that at least one of these vaccines can be brought to market in record time to help manage the global crisis.2

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Retirement In Sight for September, 2020

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COULD YOU RETIRE AT 55?

Suppose you suddenly had to, or the opportunity presented itself. This prospect would not call for disregarding your carefully considered retirement strategy, but it would create some challenges.

Social Security, Medicare, and popular retirement accounts were all created with the assumption that Americans would need retirement benefits and sources of retirement income, sometime in their 60s. A typical 55-year-old has ten years to wait to enroll in Medicare and is seven years away from the chance to claim Social Security. Withdrawing money from a qualified retirement plan before age 59½ often triggers a 10% early-withdrawal penalty. (The CARES Act waives the 10% penalty in 2020 in certain situations.) So, one challenge is to generate income in your 50s from sources apart from retirement plan distributions and Social Security, perhaps using accounts that allow you penalty-free access to assets. There is also a big-picture consideration that comes into play regarding your income if you retire before 60. It means you will have saved for retirement for comparatively fewer years than some of your peers have, and you may end up paying for more years of retirement than they will. The other big challenge is to stay healthy and find and sustain health insurance coverage (remember, COBRA coverage usually lasts no more than 18 months if you retire early). Should you retire at 55 by choice or chance, the circumstance calls for discussion, and a review of your income and insurance options.1

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Weekly Economic Update for 9/14/2020

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THE WEEK ON WALL STREET

Stocks traveled a volatile path last week as investors appeared concerned about the upcoming elections, an uncertain economy, and more delays with additional fiscal stimulus.

The Dow Jones Industrial Average slid 1.66%, while the Standard & Poor’s 500 slumped 2.51%. The Nasdaq Composite index plummeted 4.06% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.44%.1,2,3

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Football Is Back

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Football is back, which means Summer is coming to a close, days will get shorter, and sweaters will soon be in play.

This year, there was no pre-season, so professional football started in September, which coincidentally, is a perennial month for stock market volatility.1

Football follows Major League Baseball, the National Basketball Association, and the National Hockey League, in which each organization started seasons (some abbreviated) in the past few months. Some colleges are playing fall sports, while others have postponed a part of their seasons.

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Weekly Economic Update for 9/7/2020

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THE WEEK ON WALL STREET

A late week sell-off sent stocks broadly lower as investors took some profits after stocks reached all-time highs earlier in the week.

The Dow Jones Industrial Average slid 1.82%, while the Standard & Poor’s 500 slumped 2.31%. The Nasdaq Composite index dropped 3.27% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.62%.1-3

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When the Fed Talks Inflation, Bond Investors Listen

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Most recently, you may have read that Federal Reserve Chair Jerome Powell announced a change in how the Fed views inflation. In the past, the Fed said it would consider adjusting short-term rates when inflation approached 2 percent. But in light of 2020’s many challenges, the Fed’s new policy may allow inflation to run above 2 percent for a period of time before any shift in monetary policy is considered.1

For many, bonds are a critical component of their overall investment strategy. So any change in Fed policy regarding inflation may influence a portfolio. That's why It’s so important to understand that the market value of a bond will fluctuate with changes in interest rates. In other words, when interest rates rise, the value of existing bonds will typically fall.2

There’s no doubt this will be a subtle change for many. But for bond investors, the policy shift may indicate that the Fed has given itself more flexibility in the future.

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Dow 30 Changes Its Starting Lineup

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The Dow Jones Industrial Average (DJIA), one of the most widely followed stock market indices, has made some key changes to its starting lineup.

Salesforce.com, Amgen Inc., and Honeywell International Inc. have replaced Exxon Mobil Corp., Pfizer Inc., and Raytheon Technologies Corp. The change went into effect before the market opened on Monday, August 31.1

It’s important for investors to know that the changes took effect so they have a better understanding of the financial markets. But it’s also important to note that the DJIA has made several adjustments since it was first published in 1896, so a change to the Dow 30 lineup is nothing new.2

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Monthly Economic Update for September, 2020

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U.S. Markets

Stock prices surged in August as investors cheered positive news of a potential COVID-19 treatment and welcomed a month-long succession of upbeat economic data.

The Dow Jones Industrial Average rose 7.57 percent, the Standard & Poor’s 500 Index climbed 7.01 percent, and the Nasdaq Composite soared 9.59 percent.1

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