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Pharmaceutical Roundup: Lawsuits, Legislation and Growth Opportunities

Drug manufacturers and
distributors have been in the news lately. Here’s a roundup of some of the
biggest headlines:

The Opioid Crisis

In October of this year, three of
the biggest U.S. drug distributors and a drug manufacturer reached a $260
million settlement with two counties in Ohio that had sued them over the opioid
crisis. The counties claimed the drug companies launched an aggressive marketing
campaign to promote the highly addictive medications without sounding satisfactory
warnings about the risks. The settlement by no means ends litigation over the
opioid crisis; nearly 3,000 lawsuits, filed by city, county and tribal
governments, are still active.1

Drug Prices

The cost of drugs continues to
soar in the U.S., with more than 3,400 medications experiencing price hikes
during the first half of 2019. About 40 of those drugs increased prices by more
than 100%, while certain others increased by substantially more — as much as
879%.2 Both President Donald Trump and lawmakers have been trying to
find ways to put a cap on drug spending growth but legislative efforts have
been hampered by the current political climate.3

Growth Opportunities

Big Pharma’s global market is
poised for growth as the population ages. In 2018, the pharmaceutical industry grew
to a market capitalization of $1.2 trillion — up $100 billion from 2017. By
2023, the market is projected to reach $1.3 trillion.4

The drug market typically
represents a long-term investment, given the time it takes to develop, test and
bring new drugs to the public. However, one perhaps underappreciated benefit is
that many well-established pharmaceutical companies have been known to pay out reliable
dividends. This may be attractive to investors who want income from their
retirement portfolio.5 However, it is important to understand
dividends are paid at the discretion of the board of directors and are not
guaranteed.

The China Market

China is the second-largest
pharmaceutical market in the world at $122.6 billion, and industry observers
expect that number to grow to as much as $175 billion by 2022. The country is
working to expand its presence in the sector and export more generic drugs as
part of its “Made in China 2025” plan.6

It’s up to each of us to create a strategy to help pay for potential
future health care expenses. If you are concerned about having enough income in
retirement for expenses like prescription drugs and other health care costs,
give us a call. We can help you consider your available options.

Content prepared by Kara Stefan Communications.

1  Brian
Mann and Colin Dwyer. NPR. Oct. 21, 2019. “Opioid Trial: 4 Companies Reach
Tentative Settlement With Ohio Counties.” https://www.npr.org/sections/health-shots/2019/10/21/771847539/opioid-trial-4-companies-reach-tentative-settlement-with-ohio-counties. Accessed Oct. 24, 2019.

2 Amy Baxter. HealthExec. July 3, 2019. “Drug prices are
soaring in 2019.” https://www.healthexec.com/topics/healthcare-economics/drug-prices-are-soaring-2019. Accessed Oct. 24, 2019.

3 Kate Patrick. Inside Sources. Sept. 25, 2019.
“Republicans Divided Over Drug Price Control Legislation.” https://www.insidesources.com/republicans-divided-over-drug-price-control-legislation/. Accessed Nov. 6, 2019.

4 Jocelyn Aspa. Investing News. Oct. 17, 2019. “Why
Consider Investing in Pharmaceutical Stocks?” https://investingnews.com/daily/life-science-investing/pharmaceutical-investing/investing-in-pharmaceutical-stocks/. Accessed Oct. 24, 2019.

5 Jeff Reeves. US News & World Report. May 16, 2019.
“9 of the Best Pharma Stocks to Buy for Income.” https://money.usnews.com/investing/dividends/slideshows/best-pharma-stocks-to-buy-for-income. Accessed Oct. 24, 2019.

6 Huileng Tan. CNBC. April 19, 2018. “China’s
pharmaceutical industry is poised for major growth.” https://www.cnbc.com/2018/04/19/chinas-pharmaceutical-industry-is-poised-for-major-growth.html. Accessed Nov. 6, 2019.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Retirement Planning During Changing Times

According to the United Nations, across
the globe, people older than 65 now outnumber children under five for the first
time in history. In 1960, the average woman gave birth to five children in her
lifetime; by 2017, that ratio had dropped to 2.4 children per woman. Meanwhile,
our life expectancy has increased around the world. In 1960, the average
lifespan was just over 52 years of age; in 2017 the life expectancy was 72.1

Today, more than 60 percent of
married households with children have two income earners.2 Yet many
still struggle to make ends meet. That makes it difficult to save for both the
exponentially rising cost of college and retirement. With fewer children in
subsequent generations to contribute to the economy and bolster Social Security
and Medicare programs, there may be fewer resources available to support the
number of older adults in the future.3

It’s worth remembering that 2019
began with the longest U.S. government shutdown in history.4 On top
of that challenging start to the year, some economists and media pundits have
been suggesting we may be headed for a recession in the future.5
It’s tough enough to plan for retirement during a robust economy, but to forge
ahead during uncertain times can be stressful. Do you reduce retirement plan contributions
to bolster an emergency savings fund? Do you reposition assets in your
investment portfolio? We believe these questions are best addressed in
consultation with an experienced financial advisor. If you’d like to discuss
your specific situation, please contact us.

One strategy for retirement
planning during uncertain times is to create multiple income streams. For example,
you could purchase an annuity contract for an insurer-guaranteed stream of lifetime
income. In one recent report, several Brookings Institution fellows noted, “For
many people, acquiring an appropriately consumer protective and reasonably
priced income annuity with at least a portion of their savings will still be
the best choice for retirement income, and for many others it will play a key
role in a broader post-retirement financial strategy.”6

One reason an annuity can help address
uncertainty is because none of us knows how long we are going to live. Therefore,
it’s difficult to know how much money to save or how much you can afford to
spend each year in retirement. An annuity can help address these financial
uncertainties because it offers an option for income for life — as well as the
life of your spouse. It’s important to remember that annuities are insurance
contracts designed for retirement or other long-term needs. They provide
guarantees of principal and credited interest, subject to surrender charges.

As for how much income you’ll need
in retirement, be aware that it will likely change as you get older. According
to recent research from the National Bureau of Economic Research, people age 70
to 75 spend 10.17% of their household income on health care; after age 80, that
share rises to 15.25%. Money spent on domestic services increases from 1.28% to
5.22% during those same time periods.7

Content
prepared by Kara Stefan Communications.

1  Fernando Duarte. BBC. April 8, 2019. “Why
the world now has more grandparents than grandchildren.” https://www.bbc.com/worklife/article/20190405-why-the-world-now-has-more-grandparents-than-grandchildren.
Accessed Oct. 18, 2019.

2 U.S. Bureau of Labor Statistics. April 27, 2017. “Employment
in families with children in 2016.” https://www.bls.gov/opub/ted/2017/mobile/employment-in-families-with-children-in-2016.htm. Accessed Oct. 18, 2019.

3 Kathleen Romig, Matt Broaddus and Aviva Aron-Dine.
Center on Budget and Policy Priorities. April 22, 2019. “Financial Challenges
Facing Social Security and Medicare Largely Unchanged From Last Year, Except
for Improvement in Disability Insurance.” https://www.cbpp.org/research/social-security/financial-challenges-facing-social-security-and-medicare-largely-unchanged. Accessed Oct. 31, 2019.

4 Tobias Salinger. Financial Planning Magazine. Jan. 18,
2019. “How wealth management is stepping up to help during the shutdown.” https://www.financial-planning.com/news/financial-advisors-help-clients-through-government-shutdown. Accessed Oct. 18, 2019.

5 Reade Pickert, Yue Qiu and Alexander McIntyre.
Bloomberg. Nov. 6, 2019. “U.S. Recession Chances Inch Down to 26% Within Next
12 Months.” https://www.bloomberg.com/graphics/us-economic-recession-tracker/. Accessed Nov. 7, 2019.

6  David
John, William Gale, J. Mark Iwry and Aaron Krupkin. Brookings Institution. July
2019. “From saving to spending: A proposal to convert retirement account
balances into automatic and flexible income.” https://www.brookings.edu/wp-content/uploads/2019/07/ES_201907_JohnGaleIwryKrupkin.pdf. Accessed Oct. 18, 2019.

7 Retirement Income Journal. Oct. 18, 2019. “Differences
in Expenditures between Young and Old Adults.” https://retirementincomejournal.com/article/differences-in-expenditures-between-young-and-old-adults/. Accessed Oct. 18, 2019.

Guarantees and protections provided by annuities are backed
by the financial strength and claims-paying ability of the issuing insurer.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Year-End Tax Considerations

Now that we’re in the fourth
quarter, it’s time to think about what you can do to help minimize your liabilities
for the 2019 tax season and position finances for next year. The following is a
sample of the usual methods. However, if you’d like us to take a more personalized,
comprehensive approach, we’d be happy to review your financial portfolio with
your tax professional and make tailored recommendations for year-end planning.

First of all, don’t forget to take
your annual required minimum distributions (RMDs) from retirement accounts if you’re
over age 70 ½. You’ll need to take them by Dec. 31 to avoid a 50% penalty on required
amounts not taken. If you haven’t yet, consider automating your RMDs so they
are calculated and deposited into your bank account each year without you
having to do anything.1

If you are between ages 59 ½ and
70 ½ and already retired, one way to help reduce your future tax bill on
retirement accounts is to go ahead and start taking distributions. This is especially
advantageous if you’re in a lower tax bracket now than you will be when you begin
combining income from RMDs, Social Security benefits and other sources. Withdrawing
income from those accounts now may enable you to delay starting Social Security
so that benefit can accrue. By reducing your account balances, future RMDs may have
a lower impact on your taxes.2

If you’ve experienced any “paper
losses” in your investment portfolio this year, you may want to speak with your
registered representative and consider selling those securities before year-end
to harvest losses for tax purposes. The IRS allows taxpayers to deduct up to
$3,000 in losses from ordinary income and carry forward any unused loss amounts
to future-year tax returns.3

If you harvest any gains or losses
by year-end, you also may want to rebalance your portfolio to ensure it remains
aligned with your strategic asset allocation to help you achieve long-term
goals.

If you are planning to make
charitable contributions, you may want to “bunch” cash donations that you would
typically make over several years in order to qualify as a tax deduction in
2019. Remember that your donations will need to exceed your (now almost doubled)
standard deduction in order to qualify. Also, consider donating highly appreciated
securities or gifting your RMD as an alternative to cash contributions.4

Content prepared by Kara Stefan
Communications.

1  Raymond
James. Sept. 17, 2019. “Check This List – Twice – Before Year-End.” https://www.raymondjames.com/southsidebank/resources/2019/09/17/Check-This-List-Twice-Before-Year-End. Accessed Oct. 9, 2019.

2  Miriam
Cross. Kiplinger. Oct. 3, 2019. “How to Downsize Your RMDs.” https://www.kiplinger.com/article/retirement/T045-C000-S002-how-to-downsize-your-rmds.html. Accessed Oct. 9, 2019.

3  Russ
Wiles. AZCentral. Sept. 29, 2019. “10 financial tips to follow as the calendar
turns to fall.” https://www.azcentral.com/story/money/business/consumers/2019/09/29/year-end-financial-planning-can-start-fall-here-10-tips/2429954001/. Accessed Oct. 9, 2019.

4  Kristin
McKenna. Forbes. Sept. 25, 2019. “It’s Time For Year-End Financial Planning.” https://www.forbes.com/sites/kristinmckenna/2019/09/25/its-time-for-year-end-financial-planning/#2db47d047783. Accessed Oct. 9, 2019.

This content is designed to provide general
information on the subjects covered. It is not, however, intended to provide
specific tax advice and cannot be used to avoid tax penalties or to promote,
market or recommend any tax plan or arrangement. You are encouraged to consult
your personal tax advisor.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Medicare Update

Some hard-working, taxpaying Americans get angry when they hear Social
Security called an entitlement program, perhaps because the word “entitlement”
has come to have a connotation with welfare programs. The reality is that
Social Security is, by definition, an entitlement program, along with Medicare,
unemployment insurance and worker’s compensation. These mandatory programs are
funded by people who work through their payroll taxes, so they are eligible for those benefits through
those tax contributions.1

These programs differ from the nation’s six major welfare programs:
Medicaid, Temporary Assistance for Needy Families, Supplemental Nutrition
Assistance Programs (SNAP), Supplemental Security Income, Earned Income Tax
Credit and Housing Assistance. These needs-based programs are funded by federal
revenues and administered at the state level.2

Federal government benefits for long-term care fall under
the welfare umbrella of Medicaid; beneficiaries must meet certain low-income
requirements. This leaves higher income retirees — who may have diligently
saved for their retirement needs —to have to pay for long-term care costs
because Medicare, in general, limits what it will cover.3 The odds are high that you or a loved
one will need long-term care; someone turning 65 today has almost a 70% chance
of needing some type of long-term care in their remaining years.4

This kind of care can be expensive: The median cost of a
private room in a nursing home is $102,200 a year.5 There are
insurance options to help pay for potential long-term care expenses; if you’re
interested in learning about these options, contact us for more information.

There’s good news for some Medicare beneficiaries who need
help caring for themselves at home: People who purchase a Medicare Advantage
(MA) plan now may have more options for household assistance benefits. In 2018,
Congress passed legislation that enabled MA plans to pay for some non-medical
services for chronically ill members, such as coverage for grocery delivery,
caregiver support and retrofitting homes with things like wheelchair ramps.6

The new legislation left it to
plan providers to decide what types of supplemental assistance benefits to
offer. Insurers have come up with some interesting offerings. For example,
Anthem offers Medicare Advantage plans with coverage options for quarterly pest
control, an allowance to help care for a service dog, access to acupuncture or
massages, sessions with a dietitian or up to 64 healthy food deliveries per
year.7

This year’s Medicare annual
enrollment period runs from Oct. 15 through Dec. 7. It’s a good idea to
comparison shop for plans with new options, or at least find out if anything
new is covered in your current plan.

Content prepared by Kara Stefan
Communications.

Kimberly
Amadeo. The Balance. Aug. 27, 2019. “US Welfare Programs, the Myths Versus the
Facts.” https://www.thebalance.com/welfare-programs-definition-and-list-3305759. Accessed Oct. 5, 2019.

2 Ibid.

3 LongTermCare.gov. U.S. Department of Health and Human
Services. “Who Pays for Long-Term Care?” 
https://longtermcare.acl.gov/the-basics/who-pays-for-long-term-care.html. Accessed Oct. 14, 2019.

4 LongTermCare.gov. U.S. Department of Health and Human
Services. “How Much Care Will You Need?” 
https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html. Accessed Oct. 14, 2019.

5 Genworth. “Cost of Care Survey 2019.” https://www.genworth.com/aging-and-you/finances/cost-of-care.html. Accessed Oct. 18, 2019.

Robert
Pear. The New York Times. June 24, 2018. “Medicare Allows More Benefits for
Chronically Ill, Aiming to Improve Care for Millions.” https://www.nytimes.com/2018/06/24/us/politics/medicare-chronic-illness-benefits.html?module=inline. Accessed Oct. 5, 2019.

Shelby
Livingston. Modern Healthcare. Oct. 4, 2019. “Medicare Advantage insurers tout
pest control, acupuncture among new 2020 benefits.” https://www.modernhealthcare.com/insurance/medicare-advantage-plans-get-creative-2020-benefits. Accessed Oct. 4, 2019.

Our firm is not affiliated with the U.S. government or any governmental
agency.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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The Economics of Immigration

The Wharton School of Business at the University of Pennsylvania has
conducted extensive studies on the effects of immigration on America’s economy.
In light of heightened policy debates in the U.S., some of the most critical
findings are:1

  • Increasing the number of legal immigrants with a college degree would
    have little impact on employment and slightly increase GDP.
  • Legalizing undocumented workers currently residing in the U.S. would
    slightly reduce employment and have a negligible impact on GDP.
  • Increasing deportations would substantially reduce both employment and
    GDP.
  • Increasing the net flow of immigrants would have the largest positive
    impact on growing both employment and GDP.

There are a number of reasons economists consider immigrants critical to
the future of America’s economy. For one thing, our population is aging and
immigrants tend to be young adults. About half the immigrants who come from
Latin America are between the ages of 18 and 35.Since the birthrate
among Americans is historically low, immigrants help contribute to the future population
and workforce.2

As such, many undocumented immigrants may spend the bulk of their careers
contributing payroll taxes to Medicare and Social Security, even though they
are not eligible for benefits. The net advantage, however, helps bolster
pending deficits and sustain those programs.3

If America continues on its path of reducing the number of legal
immigrants into the country, it could produce a massive labor shortage —
particularly in industries reliant on large numbers of human capital. Therefore,
investors considering the long-term implications of such a policy may want to give
thought to market sectors that would be less impacted. For example, this may
mean considering finance and technology over health care, construction and
manufacturing. If you’d like to discuss portfolio strategies, please give us a
call.

Since 2011, immigrants have accounted for two-thirds of America’s
economic growth. This demographic is responsible for establishing nearly a
third of U.S. firms, including more than half of startups valued at over $1
billion.4

Research shows a pattern of how migrant groups tend to cluster in a particular
area. Once there is a substantial community present, companies from their home
countries will often make capital investments in that area with factories,
retail stores and research centers. For every 1% of immigrant population growth
in a state, there’s a 50% greater chance that a foreign company will choose to
expand its operations there.5

The data shows that large pockets of immigrants throughout the country
have been instrumental in increasing jobs, tax revenues and revitalizing the
local infrastructure in these clustered areas.

In addition to creating new companies and jobs, immigrants also are
consumers. Recent studies of mass deportation impacts concluded that continuing
these policies would result in a $1.6 trillion GDP loss.6

Researchers say there’s little data to support the position that
immigrants are taking jobs away from U.S.-born citizens. This is because immigrants
tend to accept low-paying jobs that Americans often don’t want, such as
agriculture and building and grounds maintenance. In fact, the biggest
competition comes from other low-wage immigrants, which actually serves to
improve quality and productivity in those industries.7

In the growing home health aide and long-term care industry, immigrants
hold 27.5 percent of positions as direct care workers and 30 percent of nursing
home housekeeping and maintenance jobs. This is an industry that is expected to
need 3.5 million additional health care workers throughout the next decade, so
it’s worth noting that immigrants are helping to fill this gap. In fact, immigrant
health care workers tend to be more educated than U.S.-born health industry workers;
often working at lower professional levels because they lack U.S. certification
or licensure. They are helping supplement shortages in rural areas, and they tend
to work nontraditional shifts (nights and weekends) that are hard to fill.8

While the current debate about
immigration policy tends to focus on jobs and wages, some economists are urging
policy leaders to consider the broader economic picture. The reality is that
immigration may be a necessary ingredient to drive long-term economic growth
and financial sustainability of the nation’s entitlement programs.

Content prepared by Kara Stefan
Communications.

1 Knowledge@Wharton. Sept. 10, 2019. “Could Increased
Immigration Improve the U.S. Economy?” https://knowledge.wharton.upenn.edu/article/us-immigration-policy/. Accessed Sep. 30, 2019.

2 Daniel Kurt. Investopedia. July 30, 2019. “The Pros
& Cons of Immigration Reform.” https://www.investopedia.com/articles/investing/043015/pros-cons-immigration-reform.asp. Accessed Sept. 30, 2019.

3 Kimberly Amadeo. The Balance. June 25, 2019. “Immigration’s
Effect on the Economy and You.” https://www.thebalance.com/how-immigration-impacts-the-economy-4125413. Accessed Sept. 30, 2019.

4 Ibid.

5 Knowledge@Wharton. Aug. 21, 2018. “Where Immigrants
Go, Economic Growth Follows.” https://knowledge.wharton.upenn.edu/article/economic-debate-immigration-reform/. Accessed Sept. 30, 2019.

6 Daniel Kurt. Investopedia. July 30, 2019. “The Pros
& Cons of Immigration Reform.” https://www.investopedia.com/articles/investing/043015/pros-cons-immigration-reform.asp. Accessed Sept. 30, 2019.

7 Knowledge@Wharton. Aug. 21, 2018. “Where Immigrants
Go, Economic Growth Follows.” https://knowledge.wharton.upenn.edu/article/economic-debate-immigration-reform/. Accessed Sept. 30, 2019.

8 Leah Zallman, Karen E. Finnegan, David U. Himmelstein,
Sharon Touw and Steffie Woolhandler. Health Affairs. June 2019. “Care For
America’s Elderly And Disabled People Relies On Immigrant Labor.” https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2018.05514. Accessed Sept. 30, 2019.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Can Your Portfolio Weather an Economic Storm?

Let’s talk a little about famous last words. On Nov. 8, 2007, then-Federal
Reserve Chairman Ben Bernanke told lawmakers that the U.S. economy did not
appear headed for recession. One month later, the Great Recession of the 21st
century began.1

So, on Sept. 6 of this year, when Fed Chair Jerome Powell announced that
he didn’t “at all” expect the U.S. to enter a recession, it makes you wonder.2
The reality is that even the most experienced economists don’t always make accurate
predictions.

Economic growth rises and declines just like market volatility, inflation
and interest rates. It’s difficult for anyone to predict these things with any
accuracy because the economy is cyclical and moves on its own timeframe. The ups
drive growth, and the downs spur companies and the government to make effective
decisions that will eventually drive up growth again.

When it comes to investment planning, you should plan on ups and downs. It
can keep you up at night if your portfolio is reliant on day-to-day market
moves and economic cycles. If you have long-term goals, it’s best to align your
investment allocation to help you reach those goals and try not to worry too
much about temporary declines.

That said, if you’re concerned that your financial strategy or investment
portfolio might be vulnerable to a possible economic recession, talk to us. We
have some ideas to help you weather the storm.

And speaking of a possible economic storm, it’s a lot like watching
predictions of those named weather events that form in the Atlantic Ocean. One
day it’s a tropical storm, the next day it’s a hurricane — it’s fast moving;
then it’s stalled. There’s just no predicting its next move. But we can pick up
on the signals, much as we watch for signs of a recession. And lately, there
have been a few.

For example, the Trump administration’s ongoing trade war with China is
causing problems for U.S. manufacturers, farmers and even consumers. Moody’s
Analytics reports that the U.S. has lost approximately 300,000 jobs and 0.3% in
GDP since the trade war began. If trade escalations continue, the firm predicts
the nation could lose up to 800,000 jobs and the economy could plunge into a
recession.3

The economic effects don’t end there. Because China and the U.S. are the
world’s top two economies, the trade war is affecting other countries, as well.
The Organisation for Economic Co-operation and Development (OECD) reduced this
year’s forecast for global growth from 3.2% to 2.9%. The U.S. economy is
expected to grow by only 2.4% in 2019, compared to 2.9% last year. Next year,
it’s predicted to drop to 2.0%.4

We’ve also seen a recent drop in CEO confidence, meaning they are less
likely to invest in expansion, and fewer jobs may be on the horizon.5
Another possible indication is that ultra-high-net-worth investors have been
transitioning parts of their investment portfolios into private ventures,
alternative investments and cash in anticipation of a recession in 2020.6

Content prepared by Kara Stefan
Communications.

1 Mark Felsenthal. Reuters. Nov. 8, 2007. “Economy faces
risks, not recession: Bernanke.” https://www.reuters.com/article/us-usa-bernanke/economy-faces-risks-not-recession-bernanke-idUSWBT00789120071108. Accessed Sept. 25, 2019.

2 Paul Davidson. USA Today. Sept. 9, 2019. “Powell: Fed
is not ‘at all’ expecting a recession, saying economy continues to ‘perform
well.’” https://www.usatoday.com/story/money/2019/09/06/fed-chair-jerome-powell-no-recession-expected-at-all-u-s/2232221001/. Accessed Sept. 25, 2019.

3 Shane Croucher. Newsweek. Sept. 11, 2019. “If Donald
Trump’s China Trade War Escalates, the US Could Lose 800,000 Jobs and Plunge
into a Deep Recession: Economists.” https://www.newsweek.com/trump-trade-war-escalates-jobs-deep-recession-moodys-1458706. Accessed Sept. 25, 2019.

4 Antonio Rodriguez and Richard Lein. International
Business Times. Sept. 19, 2019. “Trade Tensions Slam Brakes On Global Economy:
OECD.” https://www.ibtimes.com/trade-tensions-slam-brakes-global-economy-oecd-2829329. Accessed Sept. 25, 2019.

5 Business Roundtable. 2019. “Business Roundtable CEO
Economic Outlook Index Decreases in Q3.” https://www.businessroundtable.org/media/ceo-economic-outlook-index/ceo-economic-outlook-index-q3-2019.
Accessed Oct. 10, 2019.  

6 Suzanne Woolley and Benjamin Stupples. Bloomberg. Sept.
23, 2019. “The World’s Wealthiest Families Are Stockpiling Cash as Recession
Fears Grow.” https://www.bloomberg.com/news/articles/2019-09-23/world-s-wealthiest-families-stockpiling-cash-on-recession-fears. Accessed Sept. 25, 2019.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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What’s New in Indexing?

Index mutual funds are investment vehicles comprising stocks from a wide
variety of companies and track the performance of a specific index, such as the
Dow Jones Industrial Average. Investors are able to spread their assets across
many different investments with the convenience of one fund, which can help
protect them from market volatility. Index funds also tend to be relatively
inexpensive, with annual costs ranging from 0.03% to 0.40% of assets compared
to actively managed funds, which can have annual costs of 0.85% or higher.1

The first index fund was founded in 1975 by The Vanguard Group. Today it
is known as the Vanguard 500 Index Fund, but there are many others on the
market now. In fact, their prevalence has prompted some cause for concern. In a
2018 Wall Street Journaleditorial, Vanguard founder John Bogle sounded
the alarm that today’s index fund investments are largely managed by three
firms — Vanguard, State Street and Black Rock. His concern was that these
money managers are now the majority shareholders for more than 80 of the largest
companies in the United States. 2 That’s a lot of concentrated power
and influence.

There are currently about 5,000 U.S. indexes. The most commonly known are
the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite
Index. Monitoring various buckets of investments that represent different asset
categories and/or sectors is a critical measure for market analysts, as they
provide keen insights into the economy and investment trends.3

Indexing may be an appropriate
strategy for risk-averse, long-haul wealth accumulation, as well as a strong
component in a retirement portfolio. Index funds can offer a way to consolidate
aggressive investments into a diversified vehicle offering growth potential to
help offset long-term inflation. In fact, annuities that credit interest based
on the performance of a specific index may give retirees the ability to combine
growth opportunity with guaranteed income (guaranteed by the insurer). If you’d
like to learn more, just give us a call.

There are other aspects to the
indexing strategy that have come into play in recent months. In August, for
example, President Trump pitched the idea of reducing the capital gains tax by
indexing it to the rate of inflation. This would lower tax bills for investors.4

However, despite the administration’s
claims, the nonpartisan Tax Foundation asserted that indexing capital gains
taxes would have very little effect in stimulating economic growth. Furthermore,
the tax cut would benefit only the top 1 percent of taxpayers and was projected
to reduce federal tax revenues by nearly $178 billion over the next 10 years.5
Trump has since backed off the proposal.6

In related news, JPMorgan has
introduced a new index called the “Volfefe Index.” The Volfefe is designed to
monitor how President Trump’s messages on Twitter affect Treasury market yields.
Volfefe was named after one of Trump’s 2017 tweets featuring the undefined word
“covfefe.” Given that one in ten of the president’s tweets relate to U.S. investment
markets, JPMorgan’s index tracks the rolling one month probability that each message
initiates market-moving volatility (based on the status of Treasury yields five
minutes following a Trump tweet). The Volfefe Index indicates that a wide range
of stocks have been impacted by Trump tweets, especially in recent weeks.7

Content prepared by Kara Stefan
Communications.

1 Daniel Kern. ThinkAdvisor. July 3, 2017. “How ETFs and
Indexing Took Over Active Management.” https://www.thinkadvisor.com/2017/07/03/how-etfs-and-indexing-took-over-active-management/. Accessed Sept. 9, 2019.

2 Meghna Chakrabarti. WBUR. Dec. 12, 2018. “Stock Market
Distress Signal: How Low-Cost Index Funds Are Taking Over.” https://www.wbur.org/onpoint/2018/12/12/stock-market-index-funds-john-bogle. Accessed Sept. 9, 2019.

3 Caroline Banton. Investopedia. June 25, 2019. “An
Introduction to U.S. Stock Market Indexes.” https://www.investopedia.com/insights/introduction-to-stock-market-indices/. Accessed Sept. 9, 2019.

4 Caitlin Oprysko and Arren Kimbel-Sannit. Politico.
Aug. 30, 2019. “Trump again flirts with easing capital gains taxes.” www.politico.com/story/2019/08/30/trump-capital-gains-taxes-1478882. Accessed Sept. 26, 2019.

5 Daren Fonda. Barron’s. Aug. 3, 2019. “Indexing Capital
Gains to Inflation Would Be Great for the Rich. There’s No Economic Rationale.”
https://www.barrons.com/articles/indexing-capital-gains-to-inflation-makes-no-economic-sense-51564833600. Accessed Sept. 9, 2019.

6 Jacob Pramuk. CNBC. Sept. 11, 2019. “Trump rules out
for now cutting capital-gains taxes.” www.cnbc.com/2019/09/11/trump-white-house-mulls-indexing-capital-gains-to-inflation-tax-plan.html.

Accessed Sept. 26, 2019.

7 Tracy Alloway. Bloomberg. Sept. 8, 2019. “JPMorgan
Creates ‘Volfefe’ Index to Track Trump Tweet Impact.” https://www.bloomberg.com/news/articles/2019-09-09/jpmorgan-creates-volfefe-index-to-track-trump-tweet-impact. Accessed Sept. 9, 2019.

We are an independent
firm helping individuals create retirement strategies using a variety of
insurance and investment products to custom suit their needs and objectives.
This material is intended to provide general information to help you understand
 a variety of financial vehicles and
should not be construed as financial advice. Investing involves risk, including
the potential loss of principal. Any references to protection and lifetime
income generally refer to fixed insurance products, never securities or
investment products. Insurance and annuity product guarantees are backed by the
financial strength and claims-paying ability of the issuing insurance company.

The information
contained in this material is believed to be reliable, but accuracy and
completeness cannot be guaranteed; it is not intended to be used as the sole
basis for financial decisions. If you are unable to access any of the news
articles and sources through the links provided in this text, please contact us
to request a copy of the desired reference.

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What’s New in Banking

Nearly a quarter of the adult U.S. population is “underbanked.” This
means they don’t regularly use a bank (or a bank’s mobile/online capabilities)
to deposit checks and pay bills. That’s about 55 million people ostensibly
living from cashed paycheck to cashed paycheck.1

When these underbanked people cash their paychecks for immediate funds to
buy groceries and pay rent, they are more likely to use the services of a check-cashing
business. These services often charge a flat fee or take a percentage cut for
cashing checks, and that can add up. For example, some payday lenders take as
much as a 10% cut for cashing a check. That means if you’re cashing a $500
check, you could pay $50 for the service.2

There’s also such a thing as being “overbanked,” meaning that by
spreading your assets over a multitude of different accounts, you may be paying
more in fees than is necessary. Especially as you approach retirement, it may
be worth considering consolidating accounts for ease of cash management and
investment oversight. We can also conduct a fee analysis of your portfolio; if you’re
interested, please give us a call.

The banking industry is highly competitive, and as such, it changes fast
and offers new features all the time. One of the biggest challenges, however,
is protecting account data. More government and industry initiatives now
promote increased transparency as to how consumer data is gathered, shared and
used by third parties.3

The bigger banks, like JPMorgan
Chase, Bank of America and Wells Fargo, have the advantage of capital to
explore new technologies in an effort to offer more features. You may have
recently seen ads that let consumers place their own temporary hold on a credit
card, view recurring charges so they can cancel them more easily or access
their accounts through fingerprint scans. But most people still like to deposit
checks at a physical bank, rather than doing so digitally; a recent survey by
Fiserv found that 53% of customers who visit a branch do so to deposit a check.4

Mobile banking has found
acceptance among all generations, but millennials, unsurprisingly, have
embraced it the most. A 2018 study by Business Insider revealed 97% of
millennials use mobile banking, followed by 91% of Generation X and 79% of baby
boomers.5

Expect more innovations like this
as banks continue to evolve their services to attract and keep their
tech-friendly customers happy.

Content prepared by Kara Stefan
Communications.

1 Knowledge@Wharton. Aug. 27, 2019. “How Fintech Can
Make Banking More Inclusive – and Empowering.” https://knowledge.wharton.upenn.edu/article/fintech-can-make-banking-inclusive-empowering-consumers/. Accessed Sept. 3, 2019.

2 Margarette Burnette. NerdWallet. Sept. 28, 2018. “How
to Cash a Check Without Huge Fees.” https://www.nerdwallet.com/blog/banking/cash-check-paying-high-fees/. Accessed Sept. 13, 2019.

3 Knowledge@Wharton. Jan. 16, 2019. “Why Open Banking
Represents a Seismic Shift for Fintech.” https://knowledge.wharton.upenn.edu/article/open-banking-represents-seismic-shift-fintech/. Accessed Sept. 3, 2019.

4 Andrew Meola. Business Insider. Aug. 8, 2019. “The
digital trends disrupting the banking industry in 2019.” https://www.businessinsider.com/banking-industry-trends. Accessed Sept. 3, 2019.

5 Ibid.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Fingerprint, Retina Scans Not Just for James Bond Anymore

Most people using the internet to shop, conduct financial transactions or
read firewall-protected content are likely familiar with the aggravation of
maintaining passwords. Worse yet, tech experts now say conventional password
security is only a marginal defense against hacking.1

We are now entering a new age in
electronic security for the average user — one that more closely resembles James
Bond movies featuring high-tech gadgetry. Biometric coding uses unique physical
traits — such as fingerprints and retina images — to permit access to certain
devices. You may already use FaceID or fingerprint technology to unlock your
smartphone.2

Behavioral biometrics recognizes
unique traits such as your voice, the way you swipe a pen or press a keyboard,
your gait, common gestures, your foot/pressure movement when you drive a car,
etc.3

Biometrics may be easier than
remembering passwords. However, the technology is not without challenges.
Unlike passwords, biometrics are unchangeable. This data is stored for
accessibility, and if hackers breach a cloud storage system that includes
biometric data, they could hack into user accounts.4

In this era of rapidly changing
consumer technology, it’s important to stay on top of your financial data. It
may not be possible to prevent someone from hacking into the company websites
that host your accounts, but you may be able to detect fraudulent acts before they
cause too much damage by regularly checking your account activity.

Here are some of the common ways
fraudsters can hack accounts:

  • A brute force
    attack is when a hacker guesses at possible credentials using a trial-and-error
    system. This can take time, but less so if the hacker has some inkling of your
    data (such as your email address) or personal information (such as the names of
    your children).5
  • A credential
    stuffing attack is when the hacker already has a set of your credentials,
    having purchased or breached a system (hotel or store database) to obtain them.
    Using this data, he or she may be able to hack into other accounts you use,
    such as your bank account.6
  • A dictionary
    attack uses a systematic approach of testing each word in the dictionary as a
    potential password to hack into an account or system.7

In the movie “Skyfall,” James Bond
is tasked with hunting down a genius hacker bent on terrorizing MI6
headquarters. Hollywood’s depictions of cyber hacks are rarely limited by minutiae
such as science and technology — only by the imagination of writers and
directors. In fact, movies often give would-be hackers ideas on how to
infiltrate security systems, which can then lead to life-imitating-art events
in which security technology is beefed up in response to creative breaches.
Films like “Eagle Eye,” “Snowden” and “The Circle” also demonstrate
possibilities associated with artificial intelligence, social media and mass
surveillance.8

Content prepared by Kara Stefan Communications.

1 Kelly Lappin. Security Intelligence. Feb. 18, 2019. “Are
Passwords Killing Your Customer Experience? Try Passwordless Authentication.” https://securityintelligence.com/are-passwords-killing-your-customer-experience-try-passwordless-authentication/. Accessed Aug. 29, 2019,

2 Sam Rutherford. Gizmodo. Aug. 5, 2019. “Touch ID Will
Reportedly Return to iPhones in 2021 With Apple’s New In-Screen Fingerprint
Sensor.” https://gizmodo.com/touch-id-will-reportedly-return-to-iphones-in-2021-with-1836973588. Accessed Aug. 29, 2019.

3 Gemalto. Aug. 22, 2019. “Biometrics: authentication
and identification (definition, trends, use cases, news) – 2019 review.” https://www.gemalto.com/govt/inspired/biometrics. Accessed Aug. 29, 2019.

4 Ibid.

5 Mike Greene. Bank Info Security. Aug 19, 2019. “Credential
Stuffing Attacks vs. Brute Force Attacks.” https://www.bankinfosecurity.com/blogs/credential-stuffing-attacks-vs-brute-force-attacks-p-2767. Accessed Aug. 29, 2019.

6 Ibid.

7 Techopedia. “Dictionary Attack.” https://www.techopedia.com/definition/1774/dictionary-attack. Accessed Aug. 29, 2019.

8 John William. CPO Magazine. Aug. 29, 2019. “Movies
That Can Help You Understand Data Privacy and Hacking.” https://www.cpomagazine.com/cyber-security/movies-that-can-help-you-understand-data-privacy-and-hacking/. Accessed Aug. 29, 2019.

We are an independent
firm helping individuals create retirement strategies using a variety of
insurance products to custom suit their needs and objectives. This material is
intended to provide general information to help you understand basic retirement
income strategies and should not be construed as financial advice.

The information
contained in this material is believed to be reliable, but accuracy and
completeness cannot be guaranteed; it is not intended to be used as the sole
basis for financial decisions. If you are unable to access any of the news
articles and sources through the links provided in this text, please contact us
to request a copy of the desired reference.

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What’s Up With the Markets?

Anyone who followed the often-used
investment adage, “Sell in May and go away,” is likely pleased with
their decision after the markets struggled in the month of August.1

While recent market events may
seem dramatic, August is historically the weakest month of the year for U.S. equities.2
By mid-August this year, both the Dow and S&P 500 experienced the greatest
sell-offs of 2019. Meanwhile, the 30-year Treasury bond rate dropped to the
lowest on record, and the 10-year Treasury yield fell below the two-year rate
for the first time since 2007.3

Lately, concerns regarding a
potential recession have increased. If you’re questioning your investment
portfolio, we’re happy to help ensure it’s designed to weather economic
turbulence and aligned with your financial goals. Give us a call to schedule an
appointment.

Market analysts point to three
factors that have increased the chances of the U.S. falling into decline in the
next year or two:4

  1. The inverted
    yield curve — When the yield on longer-term Treasuries is lower than the yield
    on shorter-term Treasuries, it creates an inverted yield curve, which has historically
    been an indicator of a pending recession.
  2. Interest rates — While
    the Federal Reserve recently lowered interest rates, more cuts may be necessary
    to avoid an earnings recession, which is when there are two consecutive
    quarters of reduced corporate profitability.
  3. Trade — President
    Donald Trump initially announced, and later backed off, more trade tariffs on
    Chinese imports. However, the constant and prolonged trade uncertainty tends to
    shake up the markets and could even be the trigger for a recession.

While the August shake-up may be
only temporary, some of these underlying factors could be a harbinger for more
serious economic issues. For example, the continuing trade spat with China is
sinking U.S. companies further when it comes to competing on a global scale.
According to the IMD World Competitiveness Center, the U.S. is no longer the
world’s most competitive economy. Asian-Pacific countries, particularly Indonesia
and Thailand, showed significant improvement in the rankings. Meanwhile,
several Middle Eastern nations — namely Saudi Arabia and Qatar — have also made
significant progress.5

This year, the U.S. slipped from
first to third in global competitiveness, falling behind Singapore and Hong
Kong. While the U.S. ranked first in the categories of domestic economic
strength and delivering on business needs, it didn’t make the top five in effective
government policies on competitiveness or business efficiency.6

Content prepared by Kara Stefan
Communications.

1 Troy Segal. Investopedia. May 1, 2019. “Sell in May and
Go Away Definition.” https://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp. Accessed Aug. 19, 2019.

2 Jacob Sonenshine. The Street. Aug. 5, 2019. “August Is
S&P 500’s Worst Month – Especially When Stocks See Strong Year.” https://www.thestreet.com/markets/august-one-of-s-p-500-worst-month–15045736. Accessed Aug. 19, 2019.

3 Jeremy Herron and Sarah Ponczek. Bloomberg. Aug. 14,
2019. “U.S. Stocks Tumble as Economic Worries Mount: Markets Wrap.” https://www.bloomberg.com/news/articles/2019-08-13/stocks-to-rally-in-asia-on-tariff-delay-relief-markets-wrap?srnd=markets-vp. Accessed Aug. 19, 2019.

4 Anna-Louise Jackson. Acorns. Aug. 14, 2019. “Why
August has been such a wild ride for the US stock market.” https://grow.acorns.com/why-the-stock-market-has-been-bumpy-so-far-this-august/. Accessed Aug. 19, 2019.

5 Daniel Moritz-Rabsen. Newsweek. May 30, 2019. “U.S. Economy
Slips From First to Third Place in Global Competitiveness Ranking Amid Trump’s
Tariffs.” https://www.newsweek.com/us-economy-slips-first-third-place-global-competitiveness-ranking-1439659. Accessed Aug. 19, 2019.

6 IMD. May 2019. “Singapore topples United States as
world’s most competitive economy.” https://www.imd.org/news/updates/singapore-topples-united-states-as-worlds-most-competitive-economy/. Accessed Aug. 19, 2019.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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