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Gender Dynamics: Pre- and Post-Pandemic

In past recessions, industries like manufacturing and construction were often the hardest hit. For example, some economists referred to the Great Recession as a “man-cession” because at the outset, more men lost jobs than women. In some households, wives were able to find employment more often than men. The recovery, however, favored men, who regained 5.5 million jobs compared to 3.6 million jobs by women.1

Today’s pandemic-led economic crisis appears to be taking a different route: Women, to date, are taking on a larger financial toll. As society has progressed, ongoing gender inequities in income and opportunity are having a far more wide-reaching impact. That’s because today, 71% of American households with children rely on women’s income for their financial well-being.2

Going forward, it may be important for people to consider their work roles and how they might weather similar crises in the future. After all, just as we diversify our investment portfolios to help protect assets, households may need to consider alternative sources of income, such as passive income streams, either through assets or other income opportunities. Give us a call if you’d like to explore this further.

The social distancing mandates characterized by COVID-19 have resulted in higher levels of female unemployment due to their concentration in jobs that require close physical contact, such as dental and medical assistants, home health aides, hair stylists and manicurists. Women also tend to work more part-time jobs, which are often the first to be laid off, and may work jobs that do not offer paid vacation or paid sick leave. Even among women who continue to earn income during this difficult period, they are generally paid less. In aggregate, women earn 69 cents for every dollar men earn.3

With schools and daycare centers shuttered nationwide, many working mothers must stay home to care for their children — particularly since care normally provided by grandparents, friends or neighbors is discouraged or prevented by shelter-in-place orders. Among essential services workers expected to remain on the job, nine out of 10 nurses and nursing assistants are women, and more than two-thirds of workers at supermarkets and fast food chains are women — so their health (and that of their families when they return home) is at higher risk.4

Some of the problems women are facing right now go beyond the economic. With people spending more time at home, there are reports of increased domestic violence. Women also require more preventive health and reproductive care, so the suspension of regular doctor’s office and well-woman visits could lead to late diagnosis of health conditions and unmonitored pregnancies.5

Generation X women, ages 40 to 55, are particularly stretched and stressed out during this difficult time. That’s because many were already sandwiched between taking care of children at home and supporting their elderly parents. Now that they are sheltering in place while trying to juggle work and home schooling, coupled by the strain of not being able to interact socially with older parents, this is bound to take a huge toll both mentally and physically.6

On the other hand, sometimes out of the ashes of great loss rises a phoenix, and such an opportunity for women could exist in this circumstance. First is the recognition of how much women’s roles contribute to the fabric of society, in terms of income, consumerism, nurturing and vital jobs — now known as “essential services.” Many husbands at home with the kids may now be realizing the extent to which their wives juggle managing a job, raising children, taking care of elderly family members and most household duties. Hopefully this appreciation will extend beyond the pandemic and outside the household, leading to more equitable pay and policies.

And then there’s likely to be a global recognition of which countries responded best to the pandemic and prevented the most deaths and economic impact. Already, the leaders of Taiwan, Germany and New Zealand are being credited for the greatest success due to early, quick action. While only 7% of the world’s leaders are female, each of these countries is led by a woman.7

Content prepared by Kara Stefan Communications.

1Arne L. Kalleberg and Till M. Von Wachter. National Center for Biotechnology Information. April 2017. “The U.S. Labor Market During and After the Great Recession: Continuities and Transformations.” https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5959048/. Accessed April 27, 2020.

2 NBC News. March 23, 2020. “Gender economist Katica Roy: If we don’t act fast, women will bear the brunt of the financial crisis caused by coronavirus.” https://www.nbcnews.com/know-your-value/feature/gender-economist-katica-roy-if-we-don-t-act-fast-ncna1166771. Accessed April 27, 2020.

3 Ibid.

4 Knowledge@Wharton. April 21, 2020. “Why the U.S. Economic Downturn Could Hurt Women More.” https://knowledge.wharton.upenn.edu/article/economic-downturn-hurt-women/. Accessed April 27, 2020.

5 Julia Travers. Inside Philanthropy. April 28, 2020. “Women Face Amplified Risks in the Pandemic. Funders Are Responding.” https://www.insidephilanthropy.com/home/2020/4/28/women-face-multiple-challenges-in-the-pandemic-funders-are-responding. Accessed April 28, 2020.

6 S. Mitra Kalita. CNN. April 20, 2020. “Gen X women were already exhausted, then came a pandemic.” https://www.cnn.com/2020/04/20/health/generation-x-coronavirus-calhoun-kalita-wellness/index.html. Accessed April 27, 2020.

7 Leta Hong Fincher. CNN. April 16, 2020. “Women leaders are doing a disproportionately great job at handling the pandemic. So why aren’t there more of them?” https://www.cnn.com/2020/04/14/asia/women-government-leaders-coronavirus-hnk-intl/index.html. Accessed April 27, 2020.

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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How to Deal With Financial Stress

A recent survey by the National Endowment for Financial Education found that almost 90% of Americans were feeling anxious about their money situation.1

  • 39% were worried about job security
  • 48% worried about paying bills
  • 28% didn’t know if they could pay their utilities
  • 41% were worried about not having enough emergency savings
  • 23% were worried about having enough saved for retirement

Even before the COVID-19 pandemic, subsequent mass layoffs and other hardships, a U.S. Bureau of Labor Statistics study revealed that 40% of adults did not have enough cash on hand to cover an unexpected $400 expense.2

Obviously, a home foreclosure or auto repossession can generate a snowball economic effect on a household, but everything from medical expenses to utility bills to parking tickets can coalesce into a high degree of financial distress, causing mental and physical health problems.

If you find yourself in financial stress during this difficult time, there are a couple of ways we can help. First, we understand what you’re going through, so your problems are very real to us. Second, we have access to a variety of different financial vehicles that may help address your unique issues. Please contact us to learn more.

Even in normal situations, financial stress can take its toll on a marriage. A pair of recent studies suggests that partnerships best able to weather financial distress are those in which spouses make a proactive effort to practice “relationship maintenance behaviors,” such as respecting and showing love and affection for each other.3

If you find yourself succumbing to the rigors of financial stress, follow some of the widely touted tips to help — because they work. Better yet, many ways to manage stress are easy and free. For example:4

  • Get regular exercise, particularly in nature.
  • Learn and practice relaxation techniques, such as meditation or yoga.
  • Laugh — watch old movies or TV shows that make you laugh out loud.
  • Eat healthy, well-balanced meals on a regular basis.
  • Learn to manage your time effectively, making time for hobbies, interests and down time.
  • Set limits appropriately and say no to things that cause you stress.
  • Seek out social support and spend time with people who put you at ease.

Content prepared by Kara Stefan Communications.

1 Michelle Fox. CNBC. April 16, 2020. “Coronavirus is causing financial stress for nearly 9 in 10 Americans.” https://www.msn.com/en-us/money/personalfinance/coronavirus-is-causing-financial-stress-for-nearly-9-in-10-americans/ar-BB12J4J7?li=BBnbfcN. Accessed April 20, 2020.

2 Knowledge@Wharton. April 9, 2020. “What Contributes Most to Consumer Financial Distress?” https://knowledge.wharton.upenn.edu/article/what-contributes-most-to-consumer-financial-distress/. Accessed April 20, 2020.

3 University of Arizona. April 21, 2020. “What helps couples weather financial storms.” https://www.eurekalert.org/pub_releases/2020-04/uoa-whc042020.php. Accessed April 20, 2020.

4 WebMD. 2020. “Stress Management Tips.” https://www.webmd.com/balance/stress-management/stress-management. Accessed April 20, 2020.

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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Why Sequence of Returns is Important

The research firm Spectrem Group estimated that at the end of 2019 there were 11 million millionaires in the U.S. By the end of the first quarter in 2020, that number had dropped by at least half a million. Clearly, the recent stock market woes have taken a toll on everyone, not just the working class.1

As we learned after the last recession, recovery can take a while— it could be years, in fact. For those on the cusp of retirement, this could be a very real obstacle. Should they retire or keep working longer than planned? The latter offers three clear benefits:

  1. Allow investments time to recover
  2. Continue contributing money toward a nest egg
  3. Give Social Security time to build a larger benefit

In the future, could there be problems with that last benefit? Congress has long brushed aside the pending insolvency of Social Security. Now, the pandemic stimulus packages are poised to further contribute to federal budget problems. In fact, if no changes are made to the Social Security system, the program’s income and reserves won’t cover scheduled benefits within just 15 years. It is projected that by 2035, benefit levels will have to be reduced by 20 percent.2 Given current stock market losses, the uncertainty of employment opportunities following the COVID-19 crisis and the unresolved issues with Social Security, it may be time for individuals to seriously consider making changes to their financial strategies and portfolio allocations.

Sequence-of-returns (SOR) risk is the risk of what can happen if the market performs poorly in the years that correspond closely to your retirement date. Losses could lead you to withdraw more from your portfolio than you planned to cover lifestyle expenses. Ultimately, by taking more money from your principal investment, there’s less capital to earn the money you may need during later stages of retirement. In short, SOR risk could cause you to outlive your retirement savings.3

We believe individuals should carefully consider creating a liability-matching portfolio. In other words, you may be able to mitigate SOR risk by adding fixed-income assets and/or an annuity to reliably provide the amount of annual income you’ll need in retirement. In a liability-matching portfolio, your income production after taxes should match your liabilities (expenses).4

Retirees should allow for flexibility in their retirement expenditures to accommodate the possibility of poor market returns. However, did you know that some level of income can be insured? With an annuity, the insurance company guarantees to pay a certain level of income regardless of market losses, changes in Social Security benefits, or a global pandemic. A reliable stream of income can help mitigate the risk if one or more of the other sources of retirement income experiences a setback.  It’s important to keep in mind 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 your current investment portfolio, it’s a bit late for panic selling. Instead, you may want to consider what the U.S. and global economies will look like a year from now, and incorporate investments poised to benefit from lasting paradigm shifts. Some possibilities related to such a shift could include opportunities for working from home, localized and flexible supply-chain alternatives, social and event industry innovations, and a rise in certain demographics—possibly leading to another baby boom. To avoid selling, use retirement accounts to reallocate investments without tax implications and potentially rebalance asset allocations. While staying the course may be an appropriate strategy for long-term investors, be open to new opportunities as they arise.5

When managing sequence-of-returns risk, you may also want to consider maintaining a cash component in your portfolio moving forward. Today’s economic environment is a significant reminder of why it’s important to consider transferring assets to more conservative holdings as we edge closer to retirement.

Content prepared by Kara Stefan Communications.

1 Ben Steverman. Bloomberg. March 26, 2020. “Coronavirus Shock Is Destroying Americans’ Retirement Dreams.” https://www.bloomberg.com/news/articles/2020-03-26/coronavirus-shock-is-destroying-americans-retirement-dreams. Accessed April 6, 2020.

2 Ibid.

3 Bev Bachel. Jackson National. July 16, 2019. “Order Matters in Retirement.” https://www.jackson.com/financialfreedomstudio/articles/2019/07/order-matters-in-retirement.html. Accessed April 6, 2020.

4 Raymond James. Jan. 31, 2020. “Don’t Let ‘Sequence of Returns’ Risk Ruin Your Plans.” https://www.raymondjames.com/roismandewaldgroup/resources/2020/01/31/dont-let-sequence-of-returns-risk-ruin-your-plans. Accessed April 6, 2020.

5 Stephen H. Dover. Franklin Templeton. March 18, 2020. “Quick Thoughts: Pessimists may miss the up market – don’t become one.” https://www.franklintempleton.com/content-common/market-perspective/en_US/quick-thoughts-pessimists-may-miss-the-up-market-dont-become-one-US.pdf. Accessed April 6, 2020.

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. Any references to reliable or guaranteed income generally refer to fixed insurance products, never securities or investment products. Annuity guarantees and protections are backed by the financial strength and claims-paying ability of the issuing insurance carrier.

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 Could National Stimulus Relief Mean for You?

On March 27, 2020, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a historic $2 trillion stimulus package designed to provide economic relief to Americans affected by the coronavirus pandemic, which by now includes every single person in the country, not to mention around the world.1

While everyone has been impacted in some way by the presence of this virus, there are those who may not benefit from this legislative relief. We’re happy to help you work with your current household income and expenses to establish a financial strategy designed to give you confidence in your financial future. Please contact us to schedule a consultation.

The CARES Act is scheduled to pay out stimulus income for eligible Americans. The amount will be based on several factors, much of which is determined by your most recent tax return. If you’ve already submitted a 2019 return, that will be the basis of the payment; if not, the government will determine your benefit from your 2018 tax return. Note that the CARES Act has scheduled only one stimulus payment per person, although the debate over future payments continues in Congress.2

  • The amount will be based on tax filing status and reported adjusted gross income (AGI):
    • Single filers with an AGI of $75K or less will receive $1,200; the amount will be reduced for those who earn more, phased out at $99K
    • Married joint filers with an AGI of $150K or less will receive $2,400; phased out at $198K
    • Heads of households with an AGI of $112.5K or less will receive $1,200
  • Those with qualifying children under age 17 will receive up to $500 for each child

Anyone claimed as a dependent by another taxpayer will not receive any stimulus money. Unfortunately, this criteria means young adults age 17 to 24 who have not earned enough money to file their own tax return in the past two years, and who can be claimed as a dependent on someone else’s tax return, will not receive a stimulus payout. Also, anyone who earned more than the thresholds on their last return but have since lost their job are not eligible for an immediate payout. They may, however, qualify for a rebate when filing their 2020 tax return.3

If you’ve previously provided the IRS your bank information for direct deposit, you don’t need to do anything to apply for the payout; payments are scheduled to be automatically deposited in late April.4

The CARES Act also enhanced unemployment insurance eligibility and payouts to include part-time and self-employed workers. The new legislation provides an extra $600 weekly payment (only through July 31, 2020), in addition to the weekly benefit amount eligible employees already receive under state law, and increases the maximum number of weeks individuals may receive benefits.5

The supplementary benefit is also available to people who were already receiving unemployment benefits. Qualified applicants include those who can’t work because of quarantine restrictions, whether voluntary or imposed. Note that employees who can work from home or are receiving employer-paid sick leave are not eligible for unemployment benefits.6

Federal student loan payments are automatically suspended for six months until September 2020 (private loans and FFEL loans excluded), although borrowers may continue making principal payments if they want. During this time, no interest will be charged on the loan balance.7

To give individuals the opportunity to recover from market losses, required minimum distributions from IRAs, 401(k)s, 403(b)s and other non-pension retirement plans are suspended for the whole of 2020.8

The new legislation established a charitable deduction of up to $300 for people who don’t itemize.9 The law also bans landlords who have a government-backed mortgage (e.g., Fannie Mae, Freddie Mac) from charging penalties or evicting tenants unable to pay rent during this period.10

Content prepared by Kara Stefan Communications.

1 Ashlyn Still, Heather Long and Kevin Uhrmacher. The Washington Post. March 27, 2020. “Calculate how much you’ll get from the $1,200 (or more) coronavirus checks.” https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/. Accessed March 30, 2020.

2 Ibid.

3 Terry Nguyen. Vox. April 15, 2020. “Why millions of college students and young adults won’t get a stimulus check.” https://www.vox.com/the-goods/2020/4/15/21222170/stimulus-checks-dependents-excluded. Accessed April 17, 2020.

4 Ashlyn Still, Heather Long and Kevin Uhrmacher. The Washington Post. March 27, 2020. “Calculate how much you’ll get from the $1,200 (or more) coronavirus checks.” https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/. Accessed March 30, 2020.

5 Evandro Gigante, et al. Proskauer. April 5, 2020. “CARES Act Expands Unemployment Insurance.”

https://www.lawandtheworkplace.com/2020/04/cares-act-expands-unemployment-insurance-benefits/. Accessed April 9, 2020.

6 Kevin Drum. Mother Jones. March 30, 2020. “Here’s a Quick Primer on the New, Expanded Unemployment Benefits.” https://www.motherjones.com/kevin-drum/2020/03/heres-a-quick-primer-on-the-new-expanded-unemployment-benefits/. Accessed March 30, 2020.

7 Zack Friedman. Forbes. March 28, 2020. “Federal Student Loan Payments Will Be Suspended Through September 30.” https://www.forbes.com/sites/zackfriedman/2020/03/28/student-loans-payments-suspended/#1c1958881b10. Accessed March 30, 2020.

8 Nelson Mullins Riley & Scarborough LLP. March 30, 2020. “CARES ACT– Impact on Tax-Qualified Retirement Plans.” https://www.jdsupra.com/legalnews/cares-act-impact-on-tax-qualified-36905/. Accessed March 30, 2020.

9 Leslie Albrecht. Marketwatch. March 30, 2020. “The $2 trillion coronavirus stimulus bill encourages Americans to donate to charity.” https://www.marketwatch.com/story/the-2-trillion-coronavirus-stimulus-bill-encourages-americans-to-donate-to-charity-2020-03-30. Accessed March 30, 2020.

10 National Housing Law Project. March 28, 2020. “Summary and Analysis of Federal CARES Act Eviction Moratorium.” https://www.nhlp.org/wp-content/uploads/2020.03.27-NHLP-CARES-Act-Eviction-Moratorium-Summary.pdf. Accessed March 30, 2020.

We are able to provide you with information but not guidance or advice related to state or federal benefits. Our firm is not affiliated with the U.S. government or any governmental agency and does not provide tax or legal advice.

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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Takeaways From Warren Buffett’s Annual Shareholders Letter

“When seeking directors, CEOs don’t look for pitbulls. It’s the cocker spaniel that gets taken home.”1

The above quote is one of the ideas Warren Buffett conveyed in his most recent Berkshire Hathaway annual letter to shareholders.1 Buffett drives home the point that people who serve on the boards of public companies are there to represent shareholders, not to blindly comply with company management initiatives. It is the scrutiny of board members that help drive shareholder value and prevent the company from stumbling due to poor management decisions.

Buffett makes the case for board members to be seasoned experts at running a business, particularly within the same industry.2 It’s important to seek input from someone who specializes in the topic at hand. The same applies to managing investments. No matter how skilled you are at your profession, it’s usually beneficial to work with someone who focuses solely on creating financial strategies.

As usual, one of the world’s most forthright and accessible billionaires offers a wealth of unique perspectives from his perch as chairman of Berkshire Hathaway. One such tidbit Buffett shared this year is that he favors companies that retain earnings to reinvest in the business rather than paying out a high share as dividends.3

Buffett continues to tout equities, despite the recent market downturn, for investors with a long-term perspective. In fact, he refers to the ideal equity investor as “the individual who does not use borrowed money and who can control his or her emotions.”4

Now that he’s working from home during the COVID-19 outbreak, Buffett reiterated one long-tendered recommendation. He said he’s drinking even more of his favorite beverage, Coca-Cola, of which he purchased more than $1 billion in stock back in 1988. Today, Coca-Cola remains one of his investment firm’s largest positions.5

The lesson? Acquire the stock of companies that produce products you believe in, and hold onto them for the long haul.

Content prepared by Kara Stefan Communications.

1 Warren Buffett. Berkshire Hathaway. Feb. 22, 2020. “To the Shareholders of Berkshire Hathaway Inc.” https://www.berkshirehathaway.com/letters/2019ltr.pdf?mod=article_inline. Accessed March 24, 2020.

2 Mitch Tuchman. Marketwatch. March 23, 2020. “Opinion: Warren Buffett’s latest advice could help you retire much richer.” https://www.marketwatch.com/story/warren-buffetts-latest-advice-could-help-you-retire-much-richer-2020-03-16?mod=home-page. Accessed March 24, 2020.

3 Will Ashworth. InvestorPlace. March 3, 2020. “10 Key Lessons Warren Buffett Shares in His Annual Shareholder Letter.” https://investorplace.com/2020/03/10-key-lessons-warren-buffett-shares-in-his-annual-shareholder-letter/. Accessed March 24, 2020.

4 Susan Dziubinski. Morningstar. Feb. 24, 2020. “4 Takeaways from Berkshire Hathaway’s Shareholder Letter.” https://www.morningstar.com/articles/968329/4-takeaways-from-berkshire-hathaways-shareholder-letter. Accessed March 24, 2020.

5 Tom Huddleston Jr. CNBC. March 17, 2020. “Warren Buffett is working from home and ‘drinking a little more Coca-Cola’ amid coronavirus restrictions.” https://www.cnbc.com/2020/03/17/warren-buffett-is-working-from-home-amid-coronavirus-restrictions.html. Accessed March 24, 2020.

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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Contingency Plans Helpful to Weather the Unexpected

Financial advisors often tell clients to keep an emergency fund of liquid assets, with enough to cover three to six months of living expenses. It makes you wonder why America’s largest companies don’t maintain a similar practice, with three to six months of emergency savings to help keep workers on payroll during difficult times.

Unfortunately, it is common during economic downturns, including pandemics, for companies to reduce hours, send workers home without pay or lay off employees altogether.1 This is why it’s important for every household to have a contingency plan for when the unexpected happens.

If you don’t have a plan B for loss of income, savings or investment dividends — or if your plan B isn’t working and you need to come up with a plan C — we’re here for you. Give us a call to discuss ways to position assets to help establish greater financial confidence for your household moving forward.

Federal regulators recently announced that homeowners unable to pay their mortgage due to lost income from the COVID-19 pandemic may be eligible to reduce or suspend their mortgage payments for up to 12 months.2 Consider your options carefully, particularly if you have enough savings to cover these payments for the foreseeable future. Homeowners will have to work out a repayment plan with their lender, which could result in higher monthly payments or extending the term of the loan.

If you have any supplemental insurance policies, you may want to pull out those contracts and read about their coverages and exclusions. For example, critical illness insurance is not likely to cover COVID-19 because it’s not a specified illness on the policy.

Small businesses are generally advised to create a contingency plan, but this is usually comprised of things like capital and credit sources, supply chain alternatives, and even a public relations crisis management plan.3 While keeping home-bound workers on the payroll is an unusual tactic, small business owners may want to consider the alternative. When the economy recovers and jobs ramp back up, you’ll have to start the recruitment process all over again and may lose out on regaining your highly trained talent.

According to the Work Institute’s 2017 Retention Report, the replacement cost is $15,000 per employee earning $45,000 a year.4 If the current loss of business lasts three months, how does that compare to the cost of keeping already trained and productive workers on the payroll during the pandemic?

There’s a bigger picture, as well. Those who lose their jobs and income cease to be active consumers, which slows down the economy and makes it harder for small businesses to recover.

Content prepared by Kara Stefan Communications.

1 Carmen Reinicke. Business Insider. March 20, 2020. “The coronavirus outbreak is causing a historic spike in US layoffs. Here’s what 4 Wall Street experts are saying – and how much worse they think it can get.” https://markets.businessinsider.com/news/stocks/us-layoffs-spiking-coronavirus-expert-reaction-commentary-economy-unemployment-analyst-2020-3-1029016785. Accessed March 20, 2020.

2 Chris Arnold. NPR. March 19, 2020. “U.S. Orders Up To A Yearlong Break On Mortgage Payments.” https://www.npr.org/2020/03/19/818343720/homeowners-hurt-financially-by-the-coronavirus-may-get-a-mortgage-break. Accessed March 20, 2020.

3 Mike Fried. ROI. March 16, 2020. “Five considerations for pandemic event preparedness.” https://www.roi-nj.com/2020/03/16/opinion/five-considerations-for-pandemic-event-preparedness/. Accessed March 20, 2020.

4 Valerie Bolden-Barrett. HR Dive. Aug. 11, 2017. “Study: Turnover costs employers $15,000 per worker.” https://www.hrdive.com/news/study-turnover-costs-employers-15000-per-worker/449142/. Accessed March 20, 2020.

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. 1131320C

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Breaking Down the Recent Jargon of the Market

The Dow Jones Industrial Average (DJIA), the S&P 500 and the Nasdaq experienced quite a roller coaster ride in March. There are mixed opinions as to whether it was due to the global economic impact of the seemingly unstoppable new COVID-19 coronavirus or due to the federal government’s delayed response and tactical efforts to constrain the virus. Or, perhaps more likely, both.

Regardless of the reasons, they are largely out of the control of individual investors. So, what do you do? Much depends on your own individual circumstances. As we learn in Investing 101, it’s a matter of getting back to the basics. What are your financial goals? When do you need to achieve them? How much risk are you willing to take?

These three questions basically translate to: How much money do you need, how old are you and what keeps you up at night? If you are near or early in retirement, you may justifiably be losing sleep worrying about the current market volatility. We may be able to help. Feel free to schedule some time to speak with an experienced financial advisor to help you figure out if you should make any changes to your investment portfolio and, if so, what is an appropriate investment strategy for you.

Speaking of Investing 101, let’s break down some of the terms you may be hearing in the financial media to better define what they could mean for your situation.

Sequence of Returns

On the surface, “sequence of returns” means annual performance numbers throughout a period of time. It may just be one or two years, but if the investment markets perform poorly in the year or two before or after you retire, it could have a significant impact on how long your nest egg will last. Individuals who retire right around a significant and/or extended market decline could end up drawing income from their investment principal instead of investment earnings. In this situation, it may be worth considering other options, such as working longer so you can continue contributing to your investment accounts and allow time for recovery.1

Cash Reserves

This means you should have an emergency fund, preferably equal to six months of income —most likely in a bank account. Even if you have these liquid assets, it may be worth delaying projects such as home improvements, expensive travel plans, buying a second home or other major purchases until the markets have stabilized. Having such an emergency fund available can offer a sense of financial security that no amount of beach vacations can equal.2

Defensive Positions

Perhaps you want to stay fully invested in the market, but you’re concerned about losses. According to market analysts at Bank of America Securities, you may want to consider equities with a track record for providing higher yields during periods of volatility. Sectors more likely to thrive during a health pandemic include data centers, grocery-anchored strip malls, medical office buildings, self-storage centers and towers for wireless carriers.3

Wait and See

Not many investors have the stomach to invest more money during a flailing market. However, there may be opportunities to purchase “bargains” — such as airline securities — that are likely to be hit the hardest yet rebound quickly. After all, we will remain in a global economy, and business trips will resume after the pandemic has subsided.

Content prepared by Kara Stefan Communications.

1 Allessandra Malito. MarketWatch. March 15, 2020. “Retiring soon? Here’s how you should handle these crazy market drops.” https://www.marketwatch.com/story/retiring-soon-heres-how-you-should-handle-these-crazy-market-drops-2020-03-09?mod=home-page. Accessed March 24, 2020.

2 Knowledge@Wharton. Feb. 3, 2020. “How to Recession-proof Your Retirement.” https://knowledge.wharton.upenn.edu/article/how-to-recession-proof-your-retirement/. Accessed March 24, 2020.

3 Tomi Kilgore. MarketWatch. March 7, 2020. “These are the safest and highest dividend-yielding REITs as the coronavirus spreads, BofA says.” https://www.marketwatch.com/story/these-are-the-safest-and-highest-dividend-yielding-reits-as-the-coronavirus-spreads-bofa-says-2020-03-06?mod=home-page. Accessed March 24, 2020.

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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Affordable Housing Crisis Challenges

There are several factors contributing to the current housing shortage in the U.S. For starters, low inventory of existing homes for sale has driven up the prices of available housing, leaving many first- and second-time homebuyers unable to afford to buy or trade up. Housing permits for new construction have risen throughout the past couple of years, but they haven’t kept pace with the formation of new households. And while the number of residential construction workers has increased to more than 800,000, the country is nearing full employment levels so contractors are finding it tough to add to their teams.1

Part of the employment problem is the slowdown in immigration due to the documentation and guest worker visa process, designed to permit only highly skilled legal immigrants into the country. As a result, both the construction and agricultural industries find themselves short-handed, further contributing to the housing crisis.2

Supply of available homes has been falling steadily in recent years. Some of the greatest hardships are found at the lower end of the market. The growing number of millennials who are looking for, and can afford, housing could lessen supply even more.3 The potential impact on renters is that a high percentage of their income is devoted to housing costs.4

Fortunately for retirees, more than 78 percent of households age 65 and older own their homes. Interestingly, after age 80 the home ownership rate drops and many become renters.5

The issue is so severe it has a line item among Democratic candidates vying for the presidential nomination this year. Bernie Sanders has proposed a $2.5 trillion initiative for the construction of affordable and mixed-income housing, as well as the preservation of existing housing. Joe Biden proposes investing $640 billion for housing throughout 10 years that would focus on strengthening existing programs.6

For budget hawks, Trump’s proposed 2021 budget, while unlikely to pass in its current form, calls for a 15 percent reduction in public housing. That would result in a total reduction of $8.6 billion from housing programs compared to current levels. The president’s plan includes stricter mandates for work requirements and a higher percentage of contributions toward rent for low-income program participants.7

Content prepared by Kara Stefan Communications.

1 Roger Zellerites. Urban Land. Feb. 26, 2020. “Closing the Efficiency Gap in the U.S. Housing Affordability Crisis https://urbanland.uli.org/development-business/the-efficiency-gap-and-the-u-s-housing-affordability-crisis/. Accessed March 2, 2020.

2 Rebecca Rainey. Politico. Feb. 21, 2020. “Mulvaney: U.S. ‘desperate’ for immigrants.” https://www.politico.com/newsletters/morning-shift/2020/02/21/mulvaney-us-desperate-for-immigrants-785576. Accessed March 2, 2020.

3 Diana Olick. CNBC.com. Dec. 4, 2019. “Next year will be hard on the housing market, especially in these big cities.’’ https://www.cnbc.com/2019/12/04/harsh-housing-forecast-for-2020-especially-in-these-big-cities.html. Accessed March 17, 2020.

4 Jacob Passy. MarketWatch. Feb. 4, 2020. “Even the middle class is having trouble paying rent now.’’ https://www.msn.com/en-us/money/realestate/even-the-middle-class-is-having-trouble-paying-rent-now/ar-BBZDVi9. Accessed March 17, 2020.

5 Linda Yang. Joint Center for Housing Studies at Harvard University. 2018. “Housing America’s Older Adults.” https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Housing_Americas_Older_Adults_2018_1.pdf. Accessed March 2, 2020.

6 Georgia Krameria. The Real Deal. March 2, 2020. “Here’s how Bernie, Biden and the remaining presidential candidates would tackle housing crisis.” https://therealdeal.com/2020/03/02/heres-how-bernie-biden-and-the-remaining-presidential-candidates-would-tackle-housing-crisis/. Accessed March 2, 2020.

7 Niv Elis. The Hill. Feb. 14, 2020. “Housing advocates decry Trump budget cuts.” https://thehill.com/policy/finance/housing/484132-housing-advocates-decry-trump-budget-cuts. Accessed March 2, 2020.

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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Inheriting a 401(k) Plan

Within the scope of an investment portfolio, the commonplace
401(k) may seem to be a simplistic account. But it’s not, especially when it
comes to estate and legacy planning. The named beneficiary on the plan will inherit
your 401(k) regardless of your will’s instructions. And from there, a spectrum of
various choices emerge based on a plethora of different variables.

First off, you can’t name anyone other than your spouse as
the beneficiary unless you get your spouse to sign off on a form that says it’s
OK. This rule is designed to protect a spouse from a partner who is considering
a divorce and tries to put all of his or her financial accounts under his or
her own name before announcing this intention.1

If you inherit a 401(k) from your spouse, what you decide to
do with it and the subsequent tax impacts may depend largely on your age and
whether or not your spouse had started taking required minimum distributions (RMDs)
before he or she died. In general, you may (1) choose to leave the money in the
plan and take distributions; (2) transfer the funds to an inherited IRA; or (3)
transfer the money to your own IRA.2

If you are a non-spouse beneficiary of a 401(k) plan, the
rules have changed recently. In late 2019, Congress passed legislation that limited
a strategy called the “stretch IRA.” This strategy was particularly popular
among people who had saved a substantial amount of money in their retirement
accounts. It used to be that this type of beneficiary could potentially take
distributions from the account throughout decades, based on the beneficiary’s
age and life expectancy.3 This meant that those assets could
continue growing tax-deferred indefinitely.

Now, as a result of the SECURE Act, most new non-spouse
beneficiaries must fully distribute all the account’s inherited assets in 10 years
or fewer after the death of the original account holder. If an account owner
had previously set up a trust to be beneficiary of a qualified account prior to
the SECURE Act, the new rules could lead to undesirable results. If you have
such a trust as the account beneficiary, it’s important to have it reassessed
to make sure the language doesn’t negatively impact the trust’s beneficiaries
or create a tax disadvantage.4

There are more factors related to inheriting a 401(k) plan
than just the recent SECURE Act provisions, including whether or not the
account owner had reached the required date to start taking RMDs before death.
The exact date depends on whether the account owner was still working at the
company, had retired before age 70 ½ or was working at a different company.5

Suffice it to say that many things related to an inherited
401(k) are complex. And, while there are effective strategies, they can be complex,
too. For example, you could decide to take advantage of spousal beneficiary strategies
instead of naming a non-spouse. This might include the surviving spouse gifting
the residual RMDs to other heirs or contributing that income to a taxable
account and naming those heirs as beneficiaries upon her death, which may offer
a strategic tax advantage.6

In short, estate and legacy planning is complicated business
— even for something that seems straightforward, like a 401(k) plan. We can
work with your estate planning and tax professionals to help you address these
issues.

Content prepared by Kara Stefan
Communications.

1 Rebecca Lake. SmartAsset. Oct. 22, 2019. “A Guide to
Inheriting a 401(k).” https://smartasset.com/retirement/inherited-401k. Accessed Feb. 24, 2020.

2 Ibid.

3 Greg Iacurci. CNBC. Dec. 17, 2019. “Lawmakers are
killing this popular retirement tax break for the wealthy.” https://www.cnbc.com/2019/12/17/lawmakers-may-kill-this-popular-retirement-tax-break-for-the-wealthy.html. Accessed Feb. 24, 2020.

4 Alessandra Malito. MarketWatch. Jan. 9, 2020. “Inheriting
a parent’s IRA or 401(k)? Here’s how the Secure Act could create a disaster.” https://www.marketwatch.com/story/inheriting-a-parents-ira-or-401k-heres-how-the-secure-act-could-create-a-disaster-2019-12-26. Accessed Feb. 24, 2020.

5 Rachel L. Sheedy. Kiplinger. May 30, 2019. “Inherited
401(k)s: 6 Questions Heirs Need to Ask.” https://www.kiplinger.com/slideshow/retirement/T001-S004-inherited-401k-6-questions-heirs-need-to-ask/index.html. Accessed Feb. 24, 2020.

6 Rhian Horgan. Nasdaq. Jan. 30, 2020. “2 IRA Changes
to Consider Right Now, Thanks to the SECURE Act.” https://www.nasdaq.com/articles/2-ira-changes-to-consider-right-now-thanks-to-the-secure-act-2020-01-30. Accessed Feb. 24, 2020.

We are not permitted to offer, and no statement contained herein shall
constitute, tax or legal advice. Individuals are encouraged to consult with a
qualified professional before making any decisions about their personal
situation.

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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Your Vote, Your Investment

Here’s some food for thought regarding the aftermath of
Watergate: “The great paradox of one of the worst presidential scandals of the
20th century was that it forced candidates to stop attacking each other and
start persuading the nation that they could be trusted.”1

Wouldn’t it be nice if the 2020 elections followed this same
pattern? Yet even without Republican primaries, the spectrum of Democratic
candidates has demonstrated that competition can be cutthroat, no matter how
unified a political party.

During election years, voters are asked to donate money to
the political candidates they support. The candidates elected are often those
who raise the most money and can therefore reach more people with their message
and policy platform through advertising. In this way, donations are perhaps a
good investment for individual voters and corporations. In other words,
political contributions may yield a high return on investment that helps those
who donate increase their own fortunes.

This is one reason why it’s important to understand both the
short- and long-term ramifications of a candidate’s policy platform. Some
policies may seem beneficial out of the gate but potentially have negative
consequences for the long-term investor. If you’d like to discuss how the
current political climate and various political policies could impact your
portfolio, we’d be happy to have that discussion.

Main Street investors aren’t the only ones donating money to
support their portfolios. Since 2012, Wall Street brokerages, stockbrokers,
bond dealers, hedge funds and private investment firms have become the single
largest source of political contributions.2

Recent spending patterns may put more pressure on choosing
the most efficacious president in 2020. In the last three years, the current
administration’s policies have increased the national debt by $3 trillion. The Congressional
Budget Office predicts $1 trillion deficits annually over the next eight years
as a result of reduced tax revenues and higher spending during the Trump years.
Economists note that increased government spending is highly unusual during a
strong economy — the U.S. has never had a deficit this large relative to gross
domestic product (GDP) during a robust economy.3

According to the International Monetary Fund (IMF), U.S. growth is expected to
drop to 2% in 2020 and decline further to 1.7% in 2021.4 In lieu of
stronger economic performance, the federal government will likely need to both raise
revenues and reduce spending to reverse this trend.

President Trump’s 2021 budget proposal, while unlikely to
pass in its current form, does set the tone for his policy aspirations. The
budget aims to reduce spending on Social Security Disability Insurance and
Supplemental Security Income by $35 billion and Medicare by more than $500
billion throughout a decade. Although the cuts don’t directly affect retirement
participants’ benefits, provisions within the proposal could still negatively
impact beneficiaries. Perhaps most notably, the Medicare policy proposes
reduced payouts to doctors and hospitals, which could result in some providers no
longer participating in the Medicare program.5

Senate Leader Mitch McConnell and other GOP Congress members
also have expressed the desire to cut Social Security benefits to reduce the
deficit. Unfortunately, despite the robust economy and outperforming stock
market over the past 10 years, a full third of today’s retirees depend on
Social Security for 90% or more of their income; one in six depend on it for at
least half their income.6

On the other side of the aisle, Democrats have a long legacy
of advocating government spending to benefit low- and middle-income families.7
Therefore, the standard choice between spending versus austerity may once again
be decided by campaign contributions and, ultimately, at the polls in November.

Content prepared by Kara Stefan
Communications.

1 Sophie Gilbert. The Atlantic. June 9, 2019. “The Year
Political Advertising Turned Positive.” https://www.theatlantic.com/politics/archive/2015/06/the-year-political-advertising-turned-positive/395435/. Accessed Feb. 14, 2020.

2 The Center for Responsive Politics. 2020. “Securities
& Investment.” https://www.opensecrets.org/industries/indus.php?ind=f07. Accessed Feb. 14, 2020.

3 James Crowley. Newsweek. Jan. 23, 2020. “National
debt increased by $3 trillion during Donald Trump’s three years as president.” https://www.newsweek.com/donald-trump-national-debt-increase-3-trillion-first-three-years-presidency-1483660. Accessed Feb. 14, 2020.

4 International Monetary Fund. Jan. 2020. “World
Economic Outlook, January 2020: Tentative Stabilization, Sluggish Recovery?” https://www.imf.org/en/Publications/WEO/Issues/2020/01/20/weo-update-january2020. Accessed Feb. 14, 2020.

5 Allesandra Malito. MarketWatch. Feb. 12, 2020. “Trump’s
budget proposal probably won’t reduce your Social Security check, experts say,
but will it lower your quality of life and health care?” https://www.marketwatch.com/story/trumps-budget-proposal-wont-reduce-your-social-security-check-but-it-could-lower-your-quality-of-life-and-health-care-2020-02-11. Accessed Feb. 14, 2020.

6 Teresa Ghilarducci. Forbes. Aug. 23, 2019. “Trump’s
Second-Term Plan For Social Security: Starve The Beast.” https://www.forbes.com/sites/teresaghilarducci/2019/08/23/trumps-second-term-plan-for-social-security-starve-the-beast/#1b6916937949. Accessed Feb. 14, 2020.

7 Kimberly Amadeo. The Balance. June 25, 2019. “Democratic
Views on the Economy.” https://www.thebalance.com/democratic-economic-policies-4129140. Accessed Feb. 14, 2020.

Our firm is not
affiliated with or endorsed by the U.S. government or any governmental agency
and does not provide tax or legal advice.

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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