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Tax Tips and Updates for the 2019 Filing Season

As we enter a new year, it’s time
to start thinking about smart tax moves to help minimize what you’ll owe Uncle
Sam on April 15, 2020. Given the fact that the 2017 Tax Cuts and Jobs Act went
into effect only last year, taxpayers are still learning the ins, outs and potential
undiscovered advantages of the plan. For example, if you did not itemize
deductions on your previous federal return, your state tax refund will be
tax-free.1

Bear in mind that other
clarifications have come to light since the law was passed, such as deducting
interest on a home equity line of credit. However, if you actually used the money
from a home equity loan to repair or renovate your home, the interest on that
loan is still deductible.2

We recognize that tax planning is
an onerous task, made more difficult by changes in tax law. If you are
wondering how any changes in your investment portfolio may affect your taxes,
please give us a call. If we don’t have the exact tax expertise you need, we
can help point you in the direction of someone who does.

In addition to doubling the
standard deduction, the Tax Cuts and Jobs Act reduced individual income tax
rates to between 12% and 37%. However, these cuts are scheduled to expire in
2026. In recent months, the Trump administration has proposed dropping the
marginal rate even lower for the current 22% income tax bracket, down to 15%.
While this appears to be a strong carrot entering the 2020 campaign year,
there’s been no clarification as to how this tax cut would be paid for and,
given that it would add roughly another trillion dollars or so to the federal
debt throughout the next decade, is not likely to gain traction in Congress.3

If you traditionally deducted
substantial mortgage interest as well as state and local real estate and income
taxes, you may have seen a noticeable difference in last year’s return. The Tax
Cuts and Jobs Act capped these federal deductions at $10,000, which some real
estate analysts say is responsible for lower home valuations in some parts of
the country.4

It’s also important to stay
abreast of the tax-related ins and outs of inherited IRAs. If you are the deceased
account owner’s spousal beneficiary, you have several options — one being that you
can basically treat the account as your own. However, if you’re a non-spouse
beneficiary, your options are limited. Currently, you can either take
distributions based on your own life expectancy — the “stretch option” — which
allows the funds to continue growing tax-deferred in the account; or, you must
liquidate the account within five years of the original owner’s death. Note
that as of 2019, Congress is currently considering legislation that would
eliminate the stretch option and require full liquidation within 10 years of
the account owner’s death.5

Content prepared by Kara Stefan
Communications.

1 Rocky Mengle and Kevin McCormally. Kiplinger. Dec. 2,
2019. “20 Most-Overlooked Tax Breaks and Deductions.” https://www.kiplinger.com/slideshow/taxes/T054-S001-most-overlooked-tax-deductions-breaks-2019/index.html. Accessed Dec. 5, 2019.

2 Andrew H. Friedman. Merrill Lynch. March 19, 2019. “Tax
Law Update: New Information on What’s Deductible – and What’s Not.” https://www.ml.com/bulletin/tax-update-the-irs-answers-frequently-asked-questions.recent.html. Accessed Dec. 5, 2019.

3 Knowledge@Wharton. Nov. 19, 2019. “A Middle-class Tax
Cut: Weighing the Costs and Benefits.” https://knowledge.wharton.upenn.edu/article/blouin-middle-class-tax-cut/. Accessed Dec. 5, 2019.

4 Knowledge@Wharton. Oct. 22, 2019. “Why Tax Changes
Are Hurting the Housing Market.” https://knowledge.wharton.upenn.edu/article/tax-changes-hurting-housing-market/. Accessed Dec. 5, 2019.

5 James Royal. Bankrate. Nov. 19, 2019. “7 inherited
IRA rules all beneficiaries must know.” https://www.bankrate.com/retirement/inherited-ira-rules/. Accessed Dec. 5, 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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Non-Cyclical Stocks and Their Relationship to the Economy

Three pivotal economic events of
2019 were: (1) the prolonged trade dispute between the U.S. and China; (2) the
series of three interest rate cuts by the Federal Reserve; and (3) chatter
about a possible 2020 recession.

It remains to be seen whether a
recession is on the way, but if you’re concerned about market volatility,
schedule time to review your portfolio with one of our financial advisors to discuss
methods to potentially add more defense and security to your personalized
financial strategy,

As far as more general means of
adopting a more defensive portfolio posture, consider these guidelines:1

  • Seek out
    companies that are efficient, meaning they have a relatively high and
    consistent return on equity.
  • Focus on
    businesses you understand; the start of a new recession is no time to be
    speculative.
  • Check out a
    company’s historic average return on equity over at least a 10-year period.
  • Consider a
    company’s value. Certain stocks, categorized as “non-cyclical,” are largely
    unaffected by drops in the stock market because they hold value even in times
    of economic decline.

Companies that produce non-essential
products, also commonly known as consumer discretionary goods and services, are
a good example of cyclical stocks. Auto manufacturers are considered cyclical
because car sales tend to rise when consumers are gainfully employed and the
economy is growing.2

But no matter how far the economy
may decline, there’s never a complete standstill. People will always buy
necessities like toothpaste and toilet paper. The companies that make these
evergreen products are considered consumer staples and are an example of non-cyclical
stocks. Food and beverage, tobacco, household and personal product industries
all fall under this category.3 Another non-cyclical sector is
utilities. Utility companies are widely recognized for having a stable business
model and, as a result, tend to pay out higher dividends.4

Value stocks are back in vogue.
For years they have been eclipsed by growth stocks, but with market volatility possibly
on the horizon, it may be good for investors to consider securities the market
may have overlooked. Value stocks are those whose prices rather underestimate
the true health and potential of the company. They tend to be cheaper than their
competitors and may have a price-to-earnings ratio lower than the broader
market.5

After a decade of underperformance,
Bank of America market analysts say value stocks, as a category, have never
been this affordable. They point out that the last time their prices dropped
this low was back in 2003 and 2008. In both time periods, value stocks went on
to outperform momentum stocks by 22 and 69 percentage points, respectively,
over the following year.6

Content
prepared by Kara Stefan Communications.

4 Joseph Belmonte. Virginia Pilot. Nov. 11, 2019. “How
to play defense with your investment portfolio.” https://www.pilotonline.com/inside-business/vp-ib-expert-belmonte-1118-20191111-4tdifjm5xjge3c4yl5o7yamgfm-story.html. Accessed Nov. 29, 2019.

3 Ken Little. The Balance. Oct. 29, 2019. “Understanding
Cyclical and Non-Cyclical Stocks.” https://www.thebalance.com/understanding-cyclical-and-non-cyclical-stocks-3141363. Accessed Nov. 29, 2019.

1 Sweta Jaiswal. Yahoo! Finance. Nov. 16, 2019. “Here’s
Why Consumer Staples ETFs Are Rising This Year.” https://finance.yahoo.com/news/heres-why-consumer-staples-etfs-194407670.html. Accessed Nov. 29, 2019.

2 Timothy Smith. Investopedia. Nov. 7, 2019. “Lights
Out: 3 Expensive Utilities Stocks With Chart Tops.” https://www.investopedia.com/lights-out-3-expensive-utilities-stocks-with-chart-tops-4775538. Accessed Nov. 22, 2019.

5 Nick Giorgi. Merrill Lynch. July 1, 2019. “What is a
value stock?” https://www.merrilledge.com/ask/investing/what-is-a-value-stock. Accessed Nov. 29, 2019.

6 Yun Li. CNBC. Nov. 8, 2019. “Value stocks have ‘never
been this cheap,’ Bank of America says.” https://www.cnbc.com/2019/11/08/value-stocks-have-never-been-this-cheap-bank-of-america-says.html. Accessed Nov. 29, 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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The Future of Manufacturing

A concerted effort to draw
American manufacturing operations back to the U.S. over the past three years
has done little to move the needle. In fact, a recent report from the Department
of Commerce reveals that the manufacturing sector is at its lowest
representation of the national economy in 72 years — a mere 11% of gross
domestic product (GDP). That puts it below real estate (13.4%) and professional
and business services (12.8%).1

Furthermore, the factories that
operate here on home soil have another major problem: an aging workforce.
According to the National Association of Manufacturers, about one in five
factory workers are age 55 or older, which means that by 2035, there could be
as many as 2.4 million unfilled jobs in U.S. manufacturing.2

While the manufacturing sector has struggled in recent
years, today’s low interest rates offer the opportunity for expansion and
investment in domestic operations. In fact, merger and acquisition (M&A)
activity has soared in recent years. In the wake of uncertain trade agreements,
companies have been merging and buying out smaller competitors as a counter
strategy to building new factories.3

This new infusion of M&A activity, coupled with
innovation and new technology, positions the sector for growth in the future.
While the industry has produced mixed results, it’s important for manufacturing
investors to remain diversified to help manage risk while participating in the
future growth opportunities of this industry.

Remember that when industries
experience tough times, resilient companies often reinvent themselves and emerge
through innovation. The manufacturing industry is poised for such a transformation.
The next wave of factory innovation is being called the Fourth Industrial
Revolution, as companies seek to revive manufacturing productivity through
automation and robotics.4

However, rather than make human factory workers obsolete,
automation is expected to make the profession more highly skilled and engaged
in decision-making processes. New digital technology is expected to take over
jobs that involve repetitive tasks, leaving human jobs of the future to manage
cognitive, nonrepetitive tasks.5

Another innovation called augmented
reality (AR) enables the overlay of images and words on a physical piece of
equipment. This works much like virtual reality; you look at a machine through
an augmented reality device, which provides things like current output
statistics, temperature and repair instructions within view. This enables
quicker repairs and even training for new or inexperienced personnel — providing
instant and automatic expertise on the manufacturing floor.6

Content prepared by Kara Stefan
Communications.

1 Reade Pickert. Bloomberg. Oct. 29, 2019. “Manufacturing
Is Now Smallest Share of U.S. Economy in 72 Years.” https://www.bloomberg.com/news/articles/2019-10-29/manufacturing-is-now-smallest-share-of-u-s-economy-in-72-years. Accessed Nov. 22, 2019.

2 Stan Zaharewicz. Cleveland.com. Nov. 10, 2019. “Fuel
the future of U.S. manufacturing with an investment in talent.” https://www.cleveland.com/opinion/2019/11/fuel-the-future-of-us-manufacturing-with-an-investment-in-talent.html. Accessed Nov. 22, 2019.

3 Jim Vinoski. Forbes. Nov. 8, 2019. “U.S.
Manufacturing Appears To Be Cooling Off — But The Segment’s M&A Activity
Continues To Boom.” https://www.forbes.com/sites/jimvinoski/2019/11/08/us-manufacturing-appears-to-be-cooling-offbut-the-segments-ma-activity-continues-to-boom/#4c05bf777c6c. Accessed Nov. 22, 2019.

4 Paul Gosling. Financial Magazine. Oct. 8, 2018. “8
key features of the factory of the future.” https://www.fm-magazine.com/news/2018/oct/factory-of-the-future-201819820.html. Accessed Nov. 22, 2019.

5 Knowledge@Wharton. July 2, 2019. “Want a Job in the
Future? Be a Student for Life.” https://knowledge.wharton.upenn.edu/article/lifelong-learning-future-of-work/. Accessed Nov. 22, 2019.

6 Mark Howard. American Machinist. Nov. 21, 2019. “Can
Augmented Reality Improve Manufacturing?” https://www.americanmachinist.com/automation-and-robotics/can-augmented-reality-improve-manufacturing. Accessed Nov. 22, 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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Market Trends to Watch

The
investment world is like the weather: constantly changing. Financial vehicles
are tweaked and improved upon, particularly when there are changes to tax law
or compliance rules. The world of finance is fluid, and so are we. As our lives
evolve, it’s important to review and sometimes make adjustments to our
investment and insurance goals and strategies.

The
difficult part can be keeping up with all the changes. We believe one of the best
ways to do that is to work with a financial advisor and meet with him or her regularly.
At least once a year, it’s good to review your current situation, find out what
changes or new products are available, and determine if you should make any
alterations to your financial portfolio. Contact us if you are interested in
such a consultation.

Following
is a roundup of news and timely reminders from the investment industry.

Impact
Investing

What
may have started as an environmentalist movement to effect change by tapping
invested assets, the sustainable investment industry has grown into a
mainstream strategy. The share of assets invested in funds focused on
environmental, social and governance (ESG) issues increased 40% from 2000 to
2017.1

This
is no longer simply a “do-gooder” motivation. Studies have revealed that
companies focused on environmental efficiency — meaning they minimize the use
of natural resources and generate less production waste — tend to enjoy economic
advantages over less environmentally sensitive competitors. These advantages can
include lower costs; higher flexibility and efficiency in their supply chains;
increased productivity; reduced regulatory risk; and fewer costly fines,
recalls or mitigation requirements. As a result, recent studies found, the
stocks of these companies tended to be less volatile — particularly in
manufacturing and other resource-intensive industries.2

E-Commerce
Update

Online
sales are starting to have a more profound effect in some sectors of the investment
market. For example, in 2018, Amazon surpassed Walmart as the top apparel
retailer in the United States, claiming more than 9% of the market. But not all
traditional retailers have been hit as hard by e-commerce; for example, some
investment analysts say retailers like QVC and those in the
business‑to‑business e-commerce market — notably in the home improvement and
auto parts industries — remain competitive because they are more insulated
from Amazon or other online competitors. 3

And
there’s another angle to consider with e-commerce. While we normally associate
online retailers with low overhead, overall the industry requires three times
the warehouse space of primarily brick‑and‑mortar retailers. In turn, this has
created opportunities in the Real Estate Investment Trust (REIT) market that
focuses on commercial properties.4

Investment
trends

According
to Bank of America, some of the economic and societal changes to watch over the
next 10 years include:5

  1. More
    disruptions in the global flow of goods, ultimately leading to a rebalancing
    that will increase productivity and lead to a more sustainable global economy
  2. A
    focus on high-quality companies in sectors with low political risk, such as
    utilities, national defense, waste management, data processing and payments,
    and global beverages
  3. Markets
    responding to demographic shifts, such as the rise of the middle class in
    emerging market countries and millennials’ preference for tech compatibility
    and sustainability
  4. Continued
    growth of energy-efficient, renewable, sustainable and green initiatives

Content prepared by Kara Stefan
Communications.

Merrill Lynch. Sept. 10, 2019. “Can You Do
Well by Investing in What’s Good for the World?” https://www.ml.com/bulletin/can-you-do-well-by-investing-in-whats-good-for-the-world.recent.html. Accessed Nov. 13,
2019.

Merrill Lynch. June 2019. “Investing in a
Low Carbon Economy.” https://mlaem.fs.ml.com/content/dam/ML/bulletin/can-you-do-well-by-investing-in-whats-good-for-the-world/ml_investing-in-a-low-carbon-economy.pdf. Accessed Nov. 13,
2019.

T. Rowe Price. Oct. 4, 2019. “E-commerce
Disrupts Retail-Related Bonds.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/investments/fixed-income/e-commerce-disrupts-retail-related-bonds.html. Accessed Nov. 13,
2019.

4
Ibid.

5
 
Pippa Stevens. CNBC. Nov. 11, 2019.
“Here are Bank of America’s top 10 investing themes to watch over the next
decade.” https://www.cnbc.com/2019/11/11/bofa-says-these-are-the-10-biggest-investing-themes-for-the-next-decade.html. Accessed Nov. 13,
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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The Importance of Women Achieving Financial Confidence

Married or single, women are
finding that taking an active role in their financial futures is critical. About
80% of married women outlive their husbands, and nearly half of all widows say
they wish they’d been more involved in managing their finances when their
spouse was alive.1

Whether you have a career or rely
on someone else for income, are retired or still dreaming of retirement, don’t
take your financial future for granted. It takes work. We can help. Schedule
time with us to review your situation and create a financial strategy you can
feel confident about — whether you have a partner or not.

The reality is women, on average,
earn less than men over their lifetime and spend more time out of the workforce,
often caring for children or aging parents. They therefore tend to save less,
invest less and receive a lower Social Security benefit, putting women more at
risk of outliving their money in retirement.2 However, over the long
term, women who invest earn a higher rate of return than men, on average.3

Several studies have shown women’s
portfolios outperformed men’s by an average of 0.4% to 1.8% annually.4
Industry watchers have theorized several factors that could account for this
boost:5

  • Women generally
    are patient, choosing long-term, buy-and-hold strategies versus reactive moves.
  • Women often take
    a balanced investing approach, diversifying their assets across varied
    financial products and risk levels.
  • Women are
    information-seekers, researching their options beforehand and looking for guidance
    from financial professionals.
  • Women often have
    more time to invest, because they live longer than men, on average.

Make your longevity an advantage.
Start today to work toward the retirement you’ve envisioned. We’d love to help.

Content prepared by Kara Stefan
Communications.

1  Jean
Chatzky. The Balance. March 14, 2019. “How Women Can Plan for Outliving Their
Husbands.” https://www.thebalance.com/retirement-plan-for-women-outliving-husbands-4139845. Accessed Nov. 7, 2019.

2 Merrill Lynch. April 22, 2019. “Women’s Guide to
Social Security.” https://www.ml.com/bulletin/womens-guide-to-social-security.recent.html. Accessed Nov. 7, 2019.

3  Merrill
Lynch. Sept. 27, 2019. “What We All Can Learn from Women Investors.” https://www.ml.com/bulletin/learning-from-women-investors.recent.html. Accessed Nov. 7, 2019.

4 Ibid.

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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Tax Updates and Reminders

As we head toward the end of the year, consider maxing out
your contributions on tax-advantaged accounts to help manage your 2019 return.
While some accounts, such as an IRA or Health Savings Account (HSA), allow you
to continue making contributions up until April 15, 2020, most
payroll-deduction plans such as a 401(k) will stop at year end (for 2019
contributions). Employees can contact their plan administrator to learn how
they might make additional contributions above what is automatically deferred
from their paycheck.1

This may also be a good time to strategize your retirement
plan contributions for next year. If you’d like to discuss strategies for any
employer, retirement, college or health savings account contributions, please
let us know.

The 2019 contribution limit for 401(k) plans is $19,000, up $500
from last year. Taxpayers age 50 and older can contribute an additional catch-up
contribution of $6,000.2  

If you haven’t maxed out your Individual Retirement Accounts
(IRAs), you may contribute up to $6,000 in 2019. Be aware that’s the total
amount that can be contributed to all the IRAs you own, including Traditional
and Roth. People age 50 and older can add another $1,000 to their IRA accounts
in 2019.3

HSA contribution limits for 2019 have increased to $3,500
for individuals and $7,000 for a family, when accompanying a high-deductible
health plan. The catch-up contribution isn’t available until age 55 and older, for
an extra $1,000.4 An HSA can be used as an emergency savings account
for any reason, as long as you follow the rules. You can pay some of your qualifying
health care expenses out of pocket, but be sure to keep the receipts. Should
you need additional funds, you can pull amounts up to the paid receipts from
your HSA without incurring any tax liability.5

If you don’t need the money for immediate expenses, consider
using those reimbursed funds as contributions to your HSA for the next year,
which offers the advantage of being tax deductible once again. Even if your
regular contributions are made by payroll deductions through your employer, you
can make direct contributions from your personal checking account, and then
deduct that additional amount on your personal income tax return.6
Just don’t exceed the annual contribution limit.

Content prepared by Kara Stefan Communications.

1 Sandra Block. Kiplinger. Oct. 31, 2019. “10 Year-End
Moves to Lower Your 2019 Tax Bill.” https://www.kiplinger.com/slideshow/taxes/T055-S003-10-year-end-moves-to-lower-your-2019-tax-bill/index.html. Accessed Oct. 31, 2019.

Julia
Kagan. Investopedia. June 19, 2019. “401(k) Contribution Limits for 2019.” https://www.investopedia.com/retirement/401k-contribution-limits/. Accessed Oct. 31, 2019.

3  Eric
Reed. Smart Asset. July 17, 2019. “IRA Contribution Deadlines for 2018 and 2019.”
https://smartasset.com/retirement/ira-contribution-deadline. Accessed Oct. 31, 2019.

4 Kathryn Mayer. Employee Benefit News. 2019. “From HSA
contributions to 401(k) limits, 11 numbers to know for 2019.” https://www.benefitnews.com/list/from-hsa-to-401-k-contribution-limits-11-numbers-to-know-for-2019. Accessed Oct. 31, 2019.

5 HASstore. Louise Norris. “Compound It! How to use your
HAS as an emergency fund.” https://hsastore.com/learn/basics/hsa-emergency-fund. Accessed Nov. 20, 2019.

6 National Benefit Services. “HSA Frequently Asked
Questions.” https://www.nbsbenefits.com/hsa-frequently-asked-questions/. Accessed Oct. 31, 2019.

This content is designed to provide general
information on the subjects covered. It is not, however, intended to provide
specific legal or 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 or attorney.

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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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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