Weekly Market Notes – October 22, 2018

Weekly_Market_Notes

For the Week of October 22, 2018

The Markets

Amid continued concerns over rising interest rates and trade tensions, stocks were mixed on Friday; the S&P and the NASDAQ dropped while the Dow Jones rose. For the week, the Dow rose 0.45 percent to close at 25,444.34. The S&P gained 0.05 percent to finish at 2,767.78, and the NASDAQ dropped 0.64 percent to end the week at 7,449.03.

Returns Through 10/19/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 0.45 4.76 12.36 16.73 13.27
NASDAQ Composite (PR) -0.64 7.90 12.78 14.94 13.73
S&P 500 (TR) 0.05 5.11 10.13 13.13 11.95
Barclays US Agg Bond (TR) -0.37 -2.46 -2.21 0.87 1.88
MSCI EAFE (TR) -0.07 -7.58 -5.25 4.62 2.41

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

Paying Most of the Bill — As of March 2018, employers in the private sector paid, on average, 67 percent of the health care premiums for their employees with families. State and local government employers paid, on average, 71 percent of the health care premiums for their employees with families (source: Department of Labor, BTN Research).

Up and Down — Congress has raised the top individual marginal tax rate seven times since 1950, most recently in 2013, when it raised the top rate from 35 percent to 39.6 percent. Congress has lowered the top individual marginal tax rate 13 times since 1950, most recently in 2018, when it dropped the top rate from 39.6 percent to 37 percent (source: IRS, BTN Research).

Get Ready — A 65-year old American male in 2018 is expected to live another 19.2 years (to 84.2 years old), an increase of five years in the last 40 years. A 65-year old American female in 2018 is expected to live another 21.6 years (to 86.6 years old), an increase of three years in the last 40 years (source: Social Security Administration, BTN Research).

 

WEEKLY FOCUS Are You Making the Most of Your Employment Benefits?

It’s no wonder a recent study found nearly six in 10 middle-income Americans feel more secure because of financial and insurance benefits received through their employer.1 According to U.S. labor statistics, the average amount employers spend on their employees’ benefits is $11.31 per hour – compared to $24.33 in hourly wages or salaries.2

The study also indicated only a quarter of employees are offered financial education or planning at work.3 Other research suggests this leaves many workers stressed about the choices they must make regarding their benefits. This is particularly true in the areas of health care and retirement plans – both crucial components of financial wellness.

Half of employees say making health insurance decisions is “very stressful.” Forty-one percent think the open-enrollment process at their company is “extremely confusing.” And 20 percent say they often regret the benefit choices they make.3 All too often, employees seem to be overwhelmed with plan descriptions that are difficult to understand and compare. That may be why statistics show 46 percent of Americans spend less than 30 minutes to make benefits decisions, and 89 percent of people default to the same plan as the year before.4

Difficult as they may be, choices regarding health insurance pale in comparison to the depth, breadth and potential impact of decisions related to company retirement plans. And compared to the popular defined-benefit pension plans of the past, which were often managed by hired professionals, workers are usually left to make their 401(k) plan decisions with minimal support.

In addition to traditional 401(k) plans, 70 percent of employers now offer Roth 401(k)s – requiring employees to decide whether tax breaks would benefit them more now or later. Participants who are overwhelmed by plans overstuffed with funds may defer to less diversified company stock options. Sponsors often push target-date funds that don’t address individual risk tolerances. Unless automatic rebalancing is available, the desired allocation percentages may change.

Need help choosing the best health care options for your family? Would you like assistance making 401(k) decisions? I’m happy to review these crucial elements of your financial plan with you.

1MassMutual Workplace Benefits Study, 2Employer Costs for Employee Compensation news release, 3MassMutual Workplace Benefits Study, 4Survey from IT firm Jellyvision

 

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright October 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#  2287587.1

Weekly Market Notes – October 15, 2018

Weekly_Market_Notes

For the Week of October 15, 2018

The Markets

Following a week of steep losses, stocks rose Friday. Although the technology and other growth sectors rose, advances were restrained by continued concerns over U.S. – China trade tensions and rising interest rates. For the week, the Dow fell 4.17 percent to close at 25,339.99. The S&P lost 4.07 percent to finish at 2,767.13, and the NASDAQ dropped 3.74 percent to end the week at 7,496.89.

Returns Through 10/12/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -4.17 4.29 13.45 16.78 13.42
NASDAQ Composite (PR) -3.74 8.60 13.74 15.71 14.61
S&P 500 (TR) -4.07 5.07 10.58 13.42 12.48
Barclays US Agg Bond (TR) 0.44 -2.10 -1.83 1.12 2.06
MSCI EAFE (TR) -3.93 -7.52 -4.70 4.57 2.98

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

More Money — In the first quarter of 2018, 618 U.S. employers surveyed anticipated offering a starting base salary of $65,000 to college graduates with a bachelor’s degree, $85,000 to workers coming direct from industry and $105,000 to MBA graduates (source: Corporate Recruiters Survey Report 2018, BTN Research).

Healthy Returns — Six of the top 10 performing individual stocks within the S&P 500 during the third quarter of 2018 (i.e., trading from July 1, 2018, through Sept. 30, 2018) are in the health care sector (source: BTN Research).

Skittish — A greater percentage of millennials have all their pretax retirement money invested in cash and bonds (20 percent) than those who have all of their pretax retirement money invested in stocks (19 percent). 2,593 millennials (ages 20-36 in 2017) were surveyed in the fourth quarter of 2017 (source: Transamerica Retirement Survey, BTN Research).

 

WEEKLY FOCUS – When You Should Update Your Estate Plans and Will

Estate planning and wills are not a one-and-done affair. They aren’t documents you write, tuck away in your important papers, file and forget about. They are subject to inevitable life events and circumstances. Think of them as you would your car. It needs an oil change or maintenance every so often. So, too, your estate plans and will. When is the best time to think about reviewing? Here are some events that may necessitate an update:

  • Changes in state and federal laws: Has the state you live in enacted new laws which could impact your will and finances? Have you moved to another state? A new federal tax law doubles the threshold for estate taxes, raising the bar for estate taxes to exclude all but the nation’s richest households – those with estates that exceed $11.8 million per person or $22.36 million per couple. State tax laws vary.
  • Major life events such as the birth of a child or grandchild, an adoption, marriage, divorce or death all affect your will and estate.
  • In addition to events in your own life, consider events in the lives of your heirs, representatives, trustees or executors. Have your relationships with the people named in your will changed? Their circumstances may have also changed, which could also impact your estate planning and will.
  • A substantial increase or decrease in the value of your estate. Have you bought or sold a major asset? Have you started a new business?
  • You’re approaching your 70½ birthday and have an IRA, 401(k) or other qualified plan that requires you to begin taking distributions at that age.

These are just some of the things that could impact your future financial plans. But even if you’re not aware of anything that could trigger an automatic update, the passage of time alone would matter. You should review your will and estate planning documents every three to five years.

Don’t let life hand you unwanted surprises. Contact our office today. We can help you review your finances and determine if your plans need updating.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright October 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#2279010.1

Market Update – Perspective on the Recent Selloff

Corporate earnings have surged year over year. The stock market is near an all-time high. So too are political tensions in the US. The US  economic landscape appears strong. Yet, investors are extremely skeptical of financial markets.  What does all of this mean? Is it the beginning of a major correction or just a “buy the dip” kind of pullback? Large US equity market declines have almost exclusively occurred in and around economic slowdowns. That is not the case today. In my opinion, the declines are still within the context of a normal correction and I have highlighted on several occasions that we expected to see an increase in volatility ahead of the mid-term elections, which are now less than one month away.

History has repeatedly shown that weakness ahead of mid-term elections is a buying opportunity for those investors with a reasonable time horizon. The worst two quarters of the four-year Presidential Cycle are the second and third quarters of the mid-term year. Ironically, in 2018 both the second and third quarters were positive.

We are now in the part of the calendar where the presidential cycle’s seasonal trends have historically transitioned from its two worst quarters to its two best. Dating back to 1946, the S&P 500 has advanced by an average of 7.51% and 6.61% respectively during the fourth quarter of the mid-term year and the first quarter of the following year. (source: Clark Capital Management)

Ultimately, it is “time in the market” not “timing the market.  You may recall that the S&P 500 hit an all-time high on 1/26/18 only to tumble 10.2% by 2/8/18.  From that point the market regained all of the decline to reach a new all-time high on 9/20/18, some 2% higher than the previous all-time high.   By not over-reacting to that downturn, we allowed your portfolio to participate in the rebound.

As in the past, in the midst of this market volatility, we remain focused on your long-term goals and objectives.  We continue to focus on balancing the risk and return potential in your portfolio and will make any appropriate adjustments as conditions evolve.

Please call us if you have any questions or concerns.

MARKET_UPDATE_1

Putnam Investments

 

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.Market Update – Perspective on the recent selloff

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

Market Update – Early October Cross-Currents

Early October has seen volatility pick back up in the financial markets.  Ironically, it is some recent strong economic reports that are the primary cause.

The September 2018 jobs reports showed unemployment falling to 3.7%, a level not seen since December 1969.  The Institute of Supply Management non-manufacturing index hit a 20 year high.  Inflation remains low by historical standards.  This news that the US economy is firing on almost all cylinders, coupled with the Federal Reserve latest 0.25% increase in short-term interest rates, led to a swift uptick in longer-term interest rates as reflected by the US 10 year Treasury, which jumped from 3.06% on 10/2/18 to 3.23% as of 2:30pm on 10/8/18.

The speed of that move over the last 3 days has created a knock-on effect in equities.  The S&P 500 had just seen a new all-time high reached on 10/3/18 but is now on pace to decline for a 3rd straight day – something it hasn’t done since March 2018.  However, from the all-time high to the intra-day low (11:46am today) the S&P has only declined 2.6%.

While fast and sharp moves like the last 3 days can be concerning, I do not believe the underlying trends of positive economic growth and increasing corporate profits have changed.

We want you to know we are monitoring the situation closely and will take appropriate actions as necessary.  Please call us if you have any questions or concerns.

October 2018 Monthly Outlook – Bad Reputation

Financial Market Overview

October has a bad reputation for monumental crashes such as those in 1928, 1987 and 2008, but historical data indicate a push to new highs through the end of the year is likely.  October for the S&P 500, for the last 20 years, is actually the strongest month of the year. The S&P 500 has risen by an average 2.1% in October over the past 20 years. (source: LPL Financial)  Additionally,  going back to 1950, October is the strongest month during midterm election years. Since 1982, October in midterm years has only been down once.

source: CNBC.com

US equities continue to outperform International and likely will continue to do so.  In fixed income, interest rates rose across all time frames (short, medium and long) due to the Federal Reserve continuing to increase short-term rates and the strength of the US economy.  This has put downward pressure on fixed income security values.  We continue to favor equities over fixed income.

Economic Overview

The third reading for second quarter GDP growth reaffirmed what I have been saying – the US economy is growing solidly. Growth in the second quarter was 4.2%, up from 2.2% in Q1, and estimates are for it to remain north of 4% going into Q4. Unemployment remains historically low, inflation is tame, the housing market remains robust and the fiscal stimulus released by the tax reform act in 2017 is still feeding its way into the economy.

While the US economy is quite strong right now, I am anticipating a slow-down in growth (not a recession) in mid-to-late 2019, as the combined effects of the fiscal stimulus wearing off while the Federal Reserve is raising interest rates to act as brakes.

Overall, we have a positive outlook for the economy and financial market for the balance of 2018 and well into 2019.  We continue to invest accordingly while monitoring for any change to our outlook.

We hope you find this report informative.  Please share it with anyone who you feel would benefit from the information.

 

October Calendar of Events   (comments and additions for future months are always welcome)

  • October is Breast Cancer Awareness and Domestic Violence Awareness month.

 

October 7th        2nd anniversary of purchasing our office building – we’d love to have you come for a visit   – 141 W Main Street Rockaway

October 8th        Columbus Day

October 15th  Medicare open enrollment    thru 12/7/18 – you can switch from original Medicare to Medicare Advantage, or vice versa. You can also switch from one Medicare Advantage plan to another, or from one Medicare Part D (prescription drug) plan to another, or drop your Medicare Part D coverage altogether. Please call us if you have any questions about your options.

 

October 22nd   National Nut Day – only in America can you have a day to celebrate nuts.  Ps: peanuts are legumes, not nuts!

October 31st    Halloween

 

Sources:  CNBC.com, LPL Financial, Nottingham Advisors

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

Weekly Market Notes – September 24, 2018

Weekly_Market_Notes

For the Week of September 24, 2018

The Markets

Despite trade chatter following Monday’s announcement the White House planned to impose a 10 percent tariff on $200 billion worth of Chinese imports, the Dow Jones and S&P 500 hit record highs Friday and achieved weekly gains. For the week, the Dow rose 2.25 percent to close at 26,743.50. The S&P gained 0.86 percent to finish at 2,929.67, and the NASDAQ fell 0.29 percent to end the week at 7,986.96.

Returns Through 9/21/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 2.25 10.01 22.32 20.37 14.34
NASDAQ Composite (PR) -0.29 15.70 24.36 18.26 16.17
S&P 500 (TR) 0.86 11.13 19.44 16.58 13.69
Barclays US Agg Bond (TR) -0.26 -1.76 -1.39 1.43 2.23
MSCI EAFE (TR) 2.90 -0.55 4.07 8.43 4.43

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

Declining Bond Debt — There is less outstanding municipal bond debt today ($3.8 trillion) than there was in 2010 ($4 trillion). Over the same time period, outstanding Treasury debt has increased 69 percent to $14.9 trillion (source: SIFMA, BTN Research).

Gradual Increases — Between June 2004 and June 2006, the Fed met and raised short-term interest rates by a quarter of 1 percent at 17 consecutive Fed meetings. Since Dec. 14, 2016, the Fed has met and raised short-term interest rates by a quarter of 1 percent at six of the last 14 Fed meetings (source: Federal Reserve, BTN Research).

None — As of the end of 2017, 19 percent of millennials and 12 percent of baby boomers had no money (either pre-tax or post-tax) invested in the stock market. Millennials were born between 1981-97 and were ages 20-36 in 2017, while the baby boomers were born between 1946-64 and were ages 53-71 in 2017 (source: Vanguard, BTN Research).

 

WEEKLY FOCUS – How Different Assets Affect College Financial Aid

The best time to start preparing for your child’s or grandchild’s education is before they head off to grade school. But saving early is only part of the equation. Planning to secure the best financial aid package is another. Understanding what assets are factored to calculate the Expected Family Contribution (EFC), which is subtracted from the student’s estimated costs to determine the amount of federal aid awarded, can help.

Most colleges and universities solely use the Free Application for Federal Student Aid (the FAFSA) to calculate the EFC based on students’ and their families’ assets and income for the prior-prior year. So for the 2018-2019 school year, the EFC will be determined based on 2016.

Student income and assets factor more heavily into the EFC formula than their parents’. Twenty percent of the student’s savings, investments, business interests and real estate count, while no more than 5.64 percent of their parents’ assets count. Similarly, 50 percent of student income above $6,570 counts versus 22 to 47 percent of parental income above $25,040. (The exact percentage is based on income.) Here are a few other things to keep in mind:

Financial gifts count as income. So if a student’s income exceeds $6,570, 50 percent of a grandparent’s gift will raise the student’s EFC. To avoid this, grandparents can wait until the student’s junior year to help out. Thanks to the prior-prior year accounting, their gift will no longer apply.

Because Coverdell Educational Savings Accounts and 529 College Savings Plans are considered parental assets, they are factored at the lower percentage. Since Uniform Gift to Minors Act accounts are in the child’s name, 20 percent of those assets count toward the EFC.

Retirement accounts aren’t calculated in the EFC. However, contributions and distributions made in the base year count as parental income. Similarly, cash value in life insurance policies doesn’t count, but distributions do. Home equity doesn’t apply. So families with large non-retirement account savings may consider paying their mortgage down.

Around 200 private colleges and universities award their own grants, loans and scholarships based on the College Scholarship Service (CSS) PROFILE, which differs from the FAFSA in many areas. If you have financial questions about a child’s or grandchild’s move to college, please feel free to call our office. We’re happy to help with money issues affecting multiple generations of your family.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright September 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2252891.1

Weekly Market Notes – September 17, 2018

Weekly_Market_Notes

For the Week of September 17, 2018

The Markets

Stocks were largely flat Friday. Bond yields helped financials rise. However, news that President Trump wants to impose tariffs on $200 billion of Chinese goods – despite the Treasury Secretary’s attempts to restart talks with Beijing – limited gains. For the week, the Dow rose 0.94 percent to close at 26,154.67. The S&P climbed 1.21 percent to finish at 2,904.98, and the NASDAQ gained 1.36 percent to end the week at 8,010.04.

Returns Through 9/14/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 0.94 7.59 20.70 19.65 13.93
NASDAQ Composite (PR) 1.36 16.03 23.94 18.41 16.56
S&P 500 (TR) 1.21 10.18 18.54 16.36 13.79
Barclays US Agg Bond (TR) -0.11 -1.51 -1.33 1.50 2.48
MSCI EAFE (TR) 1.78 -3.36 1.37 7.28 4.41

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

How Did You Do? — An average single-family home in America increased in value by 6.5 percent over the one-year period from June 30, 2017, to June 30, 2018 (source: Federal Housing Finance Administration, BTN Research).

This Year and Last Year — Through Friday, Sept. 7, 2018, the S&P 500 was up 8.9 percent YTD (total return). Through Sept. 7, 2017, the S&P 500 was up 11.7 percent YTD (total return), on its way to a full-year gain of 21.8 percent (source: BTN Research).

They Already Exist — Sixty-five percent of the goods imported into the United States in 2016 were subject to a tariff imposed by the U.S.A. The average tariff on all imported goods was just 1.73 percent on a dollar-weighted basis. The largest tariffs were 33 percent levied on imported tobacco and 16 percent on imported sugar (source: Federal Reserve Bank of St. Louis, BTN Research).

 

WEEKLY FOCUS – Preparing for the Unimaginable – the Death of a Spouse

There are some things we don’t like to think about, much less prepare for. The biggest one of all is the eventual death of a spouse or partner. While it might seem unimaginable, it is inevitable. That certainty makes it a vital part of retirement income planning.

Losing a spouse can result in decreased income, which could greatly impact the surviving spouse’s lifestyle. But planning can help diminish the impact. When preparing for the possibility of losing a spouse, here are a couple things to consider.

Upon the death of a spouse, the Social Security Administration reviews benefits that were available to both spouses. The survivor receives the larger of the two benefits – not both. While a spousal death before retirement might not affect survivor benefits, if either or both of you plan to retire early, it probably will. Taking an early retirement will reduce monthly benefits by at least 25 percent. Keep in mind that waiting to retire until age 70 ensures the surviving spouse will receive the maximum amount of benefits.

If you or your spouse have pension benefits, the choice of pension distribution can help protect the surviving spouse. While a life-only distribution provides a larger monthly benefit, payments cease entirely when the pension recipient dies. But a survivorship distribution ensures at least a reduced benefit to the surviving spouse.

Losing a spouse is difficult and trying. But retirement income planning that includes options in the event of losing a spouse can help alleviate the financial stress on the survivor and protect their retirement income. Both partners should be aware of the options available.

The first step in the planning process is to set aside time to talk. Don’t let it become the elephant in the room no one acknowledges or discusses. It will happen. Failure to talk and/or plan for this eventuality could pack a hard financial punch to the surviving spouse. The time to talk or think about it isn’t later. It’s now.

Call our office today. We know it’s not easy, but we can help you and your spouse or partner discuss how to prepare financially for being a widow or widower.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright September 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2245073.1