Economic Updates & Financial Articles

Economic Updates & Financial Articles

Economic Updates:

Retirement in Sight Newsletter:

Financial Articles:

 


Weekly Economic Update for 5/17/2021

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THE WEEK ON WALL STREET

A surge in consumer inflation unsettled investors, leading to a turbulent week of trading on Wall Street.

The Dow Jones Industrial Average slipped 1.14%, while the Standard & Poor’s 500 fell 1.39%. The Nasdaq Composite index dropped 2.34% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 3.02%.1,2,3

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Cyberattack, CPI Hit In the Wallet

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A cyberattack shut down a major gas and energy pipeline supplying the East Coast of the United States for several days. The actual pipelines themselves are still functional and have since started running again, but it’s led to long lines and closed gas stations in many regions.1,2

While this situation is alarming and has a number of short-term consequences, it’s important to remember that the attack has mainly affected the computer systems used to transport the fuel. The flow of gasoline will soon return to its normal rate.1

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Retirement In Sight for May, 2021

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PANDEMIC ECONOMY OR NOT, SOME ARE ASPIRING TO RETIRE EARLY

A new study from Hearts and Wallets, a research firm founded in 2010 to study American retirement saving and investing trends, hints that the dream of retiring in late middle age is alive and well, although perhaps in need of a reality check.

The survey results, culled from responses to questions posed to almost 6,000 U.S. households, suggest that baby boomers and members of Generation X are eager to move on from the office. Thirty-nine percent of all respondents aspired to retire before they reached age 65, and 18% said they wanted to retire before age 59. In addition, 38% of people polled who were younger than age 54 indicated that they would prefer to stop working full-time by age 55. The question is whether these pre-retirees can maintain financial stability across the rest of their lives if they retire so early. People are being encouraged to work well into their 60s for practical reasons: the chance to retire closer to age 70 to obtain greater monthly Social Security benefits, the opportunity to contribute longer to tax-advantaged retirement accounts, and the potential benefit of additional compounding of invested retirement assets.   

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Weekly Economic Update for 5/10/2021

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THE WEEK ON WALL STREET

Stocks closed mixed last week as signs of continued economic recovery and upbeat earnings helped some sectors while the struggles persisted for high-growth companies.

The Dow Jones Industrial Average gained 2.67%, while the Standard & Poor’s 500 rose 1.23%. But the Nasdaq Composite index, home for many high-growth companies, lost 1.51%. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 1.20%.1,2,3

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Baseball’s $300 Million Players

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The San Diego Padres signed infielder Fernando Tatis, Jr., to a 14-year, $340 million contract roughly one year after the Los Angeles Dodgers inked outfielder Mookie Betts to a 12-year, $365 million deal. That brings the total to 8 baseball players who have signed long-term, $300+ million contracts.1

From an estate strategy perspective, you might be surprised to hear that these baseball stars may face similar issues as other Americans as they prepare for the future.2

To begin with, all 8 will need to understand that the estate and gift tax exemptions are $11.7 million per person. But those exemptions are set to expire and revert back to $5 million in 2026. While those current limits only address a fraction of their net worth, they can start to explore other choices for the balance.2

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Buffett and Powell Talk Inflation

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What does it mean when two of the most powerful voices in American financial life seem to be saying two different things?

In one corner, we have the “Oracle of Omaha,” investor Warren Buffett. As one of the nation’s richest people and most frequently sought opinions on business matters, he’s a voice that gets a great deal of attention. He says that prices are going up.

“We are seeing very substantial inflation,” Buffett told his shareholders this weekend. “We are raising prices. People are raising prices to us and it’s being accepted.”1

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College Funding Choices

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How can you help cover your child’s future college costs? Saving early (and often) may be key for most families. Here are some college savings vehicles to consider.

529 college savings plans. Offered by states and some educational institutions, these plans allow you to save up to $15,000 per year for your child’s college costs without having to file an I.R.S. gift tax return. A married couple can contribute up to $30,000 per year. However, an individual or couple’s annual contribution to a 529 plan cannot exceed the yearly gift tax exclusion set by the Internal Revenue Service. You may be able to front-load a 529 plan with up to $75,000 in initial contributions per plan beneficiary—up to five years of gifts in one year—without triggering gift taxes.1,2

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Monthly Economic Update for May, 2021

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U.S. Markets

A succession of robust economic reports and a healthy start to the corporate earnings season helped spark an April rally on Wall Street.

The Dow Jones Industrial Average gained 2.71 percent while the Standard & Poor’s (S&P) 500 Index picked up 5.24 percent. The Nasdaq Composite led, climbing 5.40 percent.1

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Weekly Economic Update for 5/3/2021

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THE WEEK ON WALL STREET

Stocks meandered around a flatline in a busy week of corporate earnings, ending the trading week slightly lower.

The Dow Jones Industrial Average slid 0.50%, while the Standard & Poor’s 500 was flat (+0.02%). The Nasdaq Composite index surrendered 0.39%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.18%.1,2,3

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2021 Retirement Confidence Survey

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Will your retirement dreams match your reality?

That's perhaps the most critical question to ask people who are currently retired. Was your retirement what you expected, or was it something else?

For more than 30 years, the Employee Benefit Research Institute (EBRI) has conducted the Retirement Confidence Survey, which gauges the views and attitudes of working-age and retired Americans regarding retirement and their preparations for retirement.1

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Investor Sentiment Is Shifting

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A recent survey shows that 63% of investors are more interested in protecting their financial assets and planning for uncertainty in the future than anything else.1

There are many reasons for this change, but here are a few of the most impactful to keep in mind. 

Pandemic worries. One reason for this shift is directly related to life prior to COVID-19. Nearly two-thirds of those surveyed believe protecting their financial assets and preparing for uncertainty are more important to them now than before the pandemic. Additionally, roughly 45% of those surveyed believe the shift in priorities will last beyond the pandemic.2

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Debate Starts on Capital Gains Tax

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Now and again, the price action on Wall Street can surprise even the most seasoned investors.

Look no further than when President Biden in late April proposed an increase in the tax on capital gains to 39.6% from 20% for those Americans who earn more than $1 million.1

Stocks dropped on the news, with the Standard & Poor’s 500 index down nearly 1% for the day.2

The “sell first, analyze later” reaction was curious since both Main Street and Wall Street largely expected the proposal. Several times on the campaign trail Biden said he wanted America’s wealthiest households to contribute more as a percentage of their income.3

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Weekly Economic Update for 4/26/2021

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THE WEEK ON WALL STREET

The crosscurrents of strong corporate earnings, rising global cases of COVID-19, and the specter of higher capital gains taxes led to a choppy week of trading that left stock prices slightly lower for the week.

The Dow Jones Industrial Average lost 0.46%, while the Standard & Poor’s 500 slipped 0.13%. The Nasdaq Composite index fell 0.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 0.47%.1,2,3

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What in the World Are NFTs?

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Non-fungible tokens, or NFTs, have been the recipient of the latest buzz. NFTs are digital files attached to blockchain codes. If you know anything about digital currencies, you’re probably aware that these blockchain codes are what identifies a digital “coin” and makes it tradeable to those who accept that sort of payment. In this case, the code identifies the digital file as a unique item. This may be any sort of digital file from an image or a cartoon to a music or video file; even an email message like this one could be made into an NFT.1

This is the difference between “fungible” and “non-fungible.” If you trade one digital currency “coin” with another, they have the same value (despite having different blockchain codes). The same goes for regular currency. A dollar bill is worth the same as another dollar bill. That’s “fungible.” A “non-fungible” item would be a unique or rare item, which may have a different value. The difference would be akin to an original Picasso and a painting you bought at a thrift store; one is worth more than the other, and they both have values, but one painting does not have the same monetary value as the other painting where the art market is concerned. That’s a “non-fungible” value.1

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Weekly Economic Update for 4/19/2021

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THE WEEK ON WALL STREET

Stocks reached record highs last week, riding the tailwind of improving economic data and a strong start to the earnings season.

The Dow Jones Industrial Average rose 1.18%, while the Standard & Poor’s 500 gained 1.37%. The Nasdaq Composite index added 1.09%. The MSCI EAFE index, which tracks developed overseas stock markets, climbed 1.00%.1,2,3

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“Green Shoots” in the Economy

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Investors looking for "green shoots" to confirm that the economy is on the mend have seen plenty of examples in recent weeks.

Retail sales rose 9.8% in March, the largest monthly gain since May 2020. It's important to remember that purchases at stores, restaurants, and online are among the biggest drivers of overall economic activity. The gain coincides with the government distributing hundreds of billions of dollars in stimulus funds to households.1

New jobless claims came in at 576,000 for the week ended April 10—the lowest level since March 14, 2020, and continuing unemployment claims were at their lowest four-week moving average since March 28, 2020.2

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What Forces Are Driving the Housing Market?

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Recently, you may have seen reports that a record-low number of homes are available for sale—roughly 1.03 million nationwide. If you compare that to the average number of homes for sale during the past 10 years, it's no surprise that many hopeful homebuyers are having issues securing a home.1

Lack of inventory. There are a few major differences between 2007 and now, however, but the biggest difference? What we’re seeing now isn’t a bubble; it's simply a lack of inventory.

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Retirement In Sight for April, 2021

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ARE YOUR FEDERAL INCOME TAXES DUE IN MAY? MAYBE, MAYBE NOT

In March, the Internal Revenue Service announced that it was pushing the deadline for 2020 federal tax returns ahead to Monday, May 17. This extended due date does not apply to all individual taxpayers, though. For example, if you live in Texas, Oklahoma, or Louisiana, you could have the opportunity to file as late as June.

The deadline for first-quarter 2021 estimated tax payments still falls on Thursday, April 15, and it applies to taxpayers in 47 states and the District of Columbia. If you’re retired and are taking distributions from retirement accounts and have other investments, you may need to heed this April 15 estimated tax deadline. If you already pay estimated tax because you are self-employed and/or own a business, you may have made that Q1 estimated tax payment already. If not, remember that any loans received through the Paycheck Protection Program (PPP) or grant programs may need to be factored into the calculations. Last year, the I.R.S. extended the deadline for Q1 estimated taxes from April 15 to July 15, but that has not happened this year. Individual income taxes and Q1 estimated taxes are not due for taxpayers and businesses in Texas, Oklahoma, or Louisiana until June 15; the I.R.S. is granting these taxpayers additional time in view of the rough winter storms that hit these states.1

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Quarterly Economic Update for 1Q-2021

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THE QUARTER IN BRIEF

The first quarter started on a bumpy note as investors grappled with a slow national vaccination rollout, political uncertainty, and worries that the economic recovery may take longer than anticipated. Sentiment turned more positive, however, as a stream of positive economic data and solid fourth quarter corporate reports powered U.S equities to strong gains in the first quarter of 2021.

With 99% of the companies in the S&P 500 index reporting, 79% reported a positive earnings surprise, with just 17% reporting earnings below consensus estimates.1

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Weekly Economic Update for 4/12/2021

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THE WEEK ON WALL STREET

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

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

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The Whims of Wall Street

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

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

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

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The Call for a Minimum Global Corporate Tax

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

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

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Paying for the Infrastructure Bill

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

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

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

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Monthly Economic Update for April, 2021

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U.S. Markets

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

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

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Weekly Economic Update for 4/5/2021

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THE WEEK ON WALL STREET

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

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

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IRA Deadlines Are Approaching

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

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

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

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

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

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

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Weekly Economic Update for 3/29/2021

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THE WEEK ON WALL STREET

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

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

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Life Insurance with Extended-Care Riders

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

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

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Inflation Boogeyman

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

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

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

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Are Americans Saving Too Much?

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

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

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It’s All About Bonds

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

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

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

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Weekly Economic Update for 3/22/2021

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THE WEEK ON WALL STREET

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

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

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Investing During Periods of Inflation

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

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

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

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The American Rescue Plan Makes FSAs a Little More Flexible

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

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

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

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Financial Strategies for Athletes

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

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

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

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

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

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Qualified Charitable Distributions

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

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

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

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The Shred Party

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

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

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The Economics of MLB Spring Training

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

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

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

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Weekly Economic Update for 3/15/2021

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THE WEEK ON WALL STREET

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

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

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COVID-19 Relief Bill Signed Into Law

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

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

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Guarding Against Identity Theft

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

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

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Weekly Economic Update for 3/8/2021

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THE WEEK ON WALL STREET

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

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

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Volatility Tests Your Mettle

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

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

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

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The Many Forms of Fixed Income

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

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

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The Emergence of ESG Investing

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

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

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

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A Look at SPACs

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

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

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

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Understanding Extended Care

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

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

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

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Spotlight Shifts to Bonds

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

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

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

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Retirement In Sight for March, 2021

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NEED CASH? AVOID TAPPING YOUR RETIREMENT ACCOUNT

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

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Monthly Economic Update for March, 2021

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U.S. Markets

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

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

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Weekly Economic Update for 3/1/2021

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THE WEEK ON WALL STREET

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

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

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Changes to Paycheck Protection

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

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

Change #1: Two-Week Exclusive Application Period

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

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Tax Efficiency in Retirement

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

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

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The New Inherited IRA Rules

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

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

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

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Countdown to College

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

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

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Weekly Economic Update for 2/22/2021

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THE WEEK ON WALL STREET

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

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

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Retirement Seen Through Your Eyes

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

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

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

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Oil Prices on the Move

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

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

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

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Economic Predictions: What Lies Ahead?

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

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

Here’s a quick summary of the highlights.

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Weekly Economic Update for 2/15/2021

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THE WEEK ON WALL STREET

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

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

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How Soon Might the Stimulus Arrive?

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

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

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Retirement Questions That Have Nothing to Do With Money

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

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

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Should You Consider Refinancing Your Mortgage?

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

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

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Retirement In Sight for February, 2021

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EVALUATING AN OPPORTUNITY FOR AN EARLY RETIREMENT

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

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Weekly Economic Update for 2/8/2021

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THE WEEK ON WALL STREET

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

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

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

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

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

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

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Monthly Economic Update for February, 2021

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U.S. Markets

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

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

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Weekly Economic Update for 2/1/2021

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THE WEEK ON WALL STREET

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

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

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Earnings Season Gets Underway

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

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

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

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Weekly Economic Update for 1/25/2021

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THE WEEK ON WALL STREET

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

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

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Tax Filing Season Is a Little Later This Year

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

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

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

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1099 Forms

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

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

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Outlook 2021: Bond Prices

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

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

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

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Weekly Economic Update for 1/18/2021

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THE WEEK ON WALL STREET

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

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

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Weekly Economic Update for 1/11/2021

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THE WEEK ON WALL STREET

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

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

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2021 Opens With a Bang

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

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

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

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5 Highlights of the New Stimulus Package

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

Here’s a quick recap of five key highlights:

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

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Retirement In Sight for January, 2021

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TO RETIRE, OR NOT TO RETIRE?

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

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

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Monthly Economic Update for January, 2021

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U.S. Markets

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

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

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Quarterly Economic Update for 4Q 2020

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THE QUARTER IN BRIEF

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

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

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Weekly Economic Update for 1/4/2021

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THE WEEK ON WALL STREET

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

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

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IRA Deadlines Are Approaching

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

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

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

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What’s the Buzz with Bitcoin?

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

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

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

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