For the Week of May 29, 2018

The Markets

Trading volume was light going into the holiday weekend. The S&P and the Dow fell Friday amid a steep drop in oil prices, continued trade tensions with China and uncertainty over talks with North Korea. The three main indexes still posted weekly gains. For the week, the Dow rose 0.18 percent to close at 24,753.09. The S&P gained 0.33 percent to finish at 2,721.33, and the NASDAQ climbed 0.70 percent to end the week at 7,433.85.

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.

Big Surprise — Seventeen percent of 1,040 retirees surveyed in January 2018 say their health care expenditures in retirement are “much higher than expected” (source: EBRI Retirement Confidence Survey).

Many Years, No Change — The Social Security payroll tax rate paid by employees has been 6.2 percent since 1990 except for a 2 percent reduction in the rate during the two years of 2011-12 (source: Social Security, BTN Research).

Lengthy — The USA’s current economic expansion (in its 107th month) is the nation’s second longest expansion based upon data that has been tracked since 1854, i.e., for 164 years (source: National Bureau of Economic Research, BTN Research).

WEEKLY FOCUS – Today Is National 529 College Savings Plan Day

If you’re concerned about funding your child’s or grandchild’s education, here are some things to know about tax-advantaged 529 College Savings Plans:

Advantages: These low maintenance plans let donors control the account and change investments twice a year. While the initial contribution is made with post-tax dollars, the account’s earnings are federal tax-free with qualified distributions. What’s more, over 30 states currently add a full or partial state tax deduction on contributions. Unlike Coverdell Education Savings Accounts and Roth IRAs, 529s aren’t subject to income, age or yearly contribution limits. However, only contributions up to $15,000 per individual per year will be considered gifts for tax purposes.

New this year: Thanks to last year’s Tax Cut and Jobs Act, qualified withdrawals up to $10,000 for tuition to K-12 schools can now be made for each beneficiary per year. Although every state makes qualified withdrawals for higher education tax-free, not all do for K-12 expenses. Even those that do may later reconsider since shorter holding periods could make it difficult to predict state tax revenues and may increase costs to providers. The tax act also allows account holders to roll the annual gift limit amount from an existing 529 education account to an ABLE (Achieving a Better Life Experience) account for a beneficiary who was disabled after the account was funded.

Other useful facts: Plan assets owned by a dependent student or a parent count on the Free Application for Federal Student Aid (FAFSA), but both are considered parental assets. The first $20,000 of parental assets aren’t counted in the Expected Family Contribution calculation; beyond that, up to 5.64 percent are factored (compared to 20 percent of students’ assets). Eligible expenses for higher education include: tuition, fees, books, supplies, computers and room and board. Transportation costs, health insurance and student loan repayments are excluded.

Donors will not lose account funds if a beneficiary doesn’t need them for educational purposes but will incur tax consequences for non-education distributions – unless the beneficiary: receives a tax-free scholarship, attends a U.S. Military Academy or dies or becomes disabled. Donors can also change an account’s beneficiary to another family member or make themselves a beneficiary to further their own education without tax consequences.

Need help determining if a 529 plan is right for you or choosing the right 529 plan? We can answer your questions and guide you through the financial planning process.

* 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 May 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2133953.1

For the Week of May 21, 2018

The Markets

Stocks closed mixed on Friday as investors wrestled with uncertain trade negotiations between China and the U.S. and bond yields reached their highest level since 2011. The Dow was the only major index to finish in the black on Friday.  For the week, the Dow fell 0.36 percent to close at 24,715.09. The S&P lost 0.47 percent to finish at 2,712.97, and the NASDAQ dropped 0.66 percent to end the week at 7,354.34.

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.

Nervous Folks — Only 37 percent of American adults under the age of 35 are invested in the stock market today, down from 55 percent in 2002 (source: Gallup).

Borrow — The Treasury Department auctioned off $17 billion of 30-year bonds with a 3.125 percent coupon on Thursday, May 10. The new bonds mature on May 15, 2048. The government has auctioned off 30-year bonds since 1977. The lowest yield ever on 30-year paper was 2.1 percent on July 8, 2016 (source: Treasury Department, BTN Research).

Rare — Only six months in the last 40 years have produced an unemployment rate of 3.9 percent or less, including the April 2018 jobless rate of 3.9 percent. Six months out of 40 years represents just 1.25 percent of the months over the four decades or equal to one out of every 80 months (source: Department of Labor, BTN Research).

WEEKLY FOCUS – Why You May Want to Delay Retirement

According to some market analysts, those considering retiring this year may want to hold off due to sequence of returns risk. If you’re not familiar with this term, it means performance in the years directly preceding and following retirement can have a dramatic effect on financial security throughout retirement.

At this time, investors typically have the most money in play – and more to lose. (Compare 20 percent drops in a 35-year-old’s $50,000 portfolio and a 65-year-old’s $1,000,000 portfolio.) Such a drop in a pre- or new retiree’s portfolio means less assets to grow throughout their remaining retirement. Plus, they have fewer years to recover losses and are likely withdrawing funds at the same time.

Current market conditions may amplify these risks. Although stocks dropped last week, stock valuations were near record highs recently while bond yields were historically low. On average, bear markets occur every four years. Our last bear ended in March of 2009, so we’re overdue. It’s probably not a question of if we’ll see a plunge – but rather when and for how long. Even in early retirement, a brief bear market may not be too damaging. An extended one could be a different story. When approaching an imminent retirement, it’s best to plan for the worst and hope for the best with steps to reduce sequence of returns risk.

In a market that’s due to drop, consider postponing retirement or working part-time. If stocks do drop, continuing to work could delay withdrawals to give your nest egg a chance to rebound or allow you to purchase additional shares.

Decrease risks by diversifying your portfolio with a combination of stocks, bonds, annuities and life insurance. Within the equities portion, avoid over-concentration. Some advisors say no single stock should make up more than five percent of a portfolio. Invest across sectors and markets, nationally and internationally. Mutual or exchange-traded funds make it easy to buy a variety of stocks with lower overall cost. Rebalance your portfolio when stocks rise to keep investment percentages proportionate.

Avoid selling at a loss to cover living expenses in a down market by segmenting your investments, keeping an adequate portion liquid. A traditional rule recommends subtracting your age from 100 to find the right percentage of stocks. With today’s longer life expectancies, some suggest subtracting from 110 or 120.

Whether you’re already retired, approaching retirement or viewing it from afar, we can help you create a strategy to help you safeguard your future.

* 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 May 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2127295.1

For the Week of May 14, 2018

The Markets

Wall Street rose after President Trump addressed America’s high drug prices but avoided taking aggressive measures against drug companies. Oil prices, which surged after the President pulled the United States out of the Iran nuclear deal, boosted energy stocks. The Dow achieved a seven-day winning streak and its biggest weekly gain since March. For the week, the Dow gained 2.51 percent to close at 24,831.17. The S&P rose 2.49 percent to finish at 2,727.72, and the NASDAQ climbed 2.67 percent to end the week at 7,402.88.

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.

Rapid City or Jacksonville? — The top three states for retirement in 2018 are Florida, Colorado and South Dakota. This subjective evaluation was based on 41 metrics that assessed affordability, health care, quality of life, crime, weather and the state’s tax environment (source: WalletHub, BTN Research).

Owe Nothing — Sixty-four percent of the 120 million households in the United States are homeowners, a total of 77 million households. Thirty-four percent of the 77 million homeowners (26 million households) are mortgage debt-free (source: ATTOM, BTN Research).

Worker Cost — The average employer in the private sector pays 44 cents in benefits (e.g., Social Security, Medicare, unemployment insurance, workers’ compensation, life and health insurance, paid leave, retirement plans) for every $1 paid in salary (source: Department of Labor).

WEEKLY FOCUS – Protecting Your Most Important Asset

When asked about our most valuable asset, many of us would list our savings, home or car. But unless we’re nearing or in retirement, it’s probably our ability to earn a living. Imagine a 25-year-old with a $50,000 annual salary who suffers a permanent disability and becomes unable to work. Without accounting for wage increases, they could lose over $2,000,000 in lifetime earnings. Yet disability is often the last insurance people consider.

The Council for Disability Awareness and the insurance industry have named May Disability Insurance Awareness Month to increase disability awareness. Here are some of the types of facts they share.

People think disability is usually caused by an accident. But the most common causes are serious illnesses, such as cancer, or musculoskeletal disorders. Perhaps that’s why disability is far more common than people realize. According to the Centers for Disease Control and Prevention, one in five American adults lives with at least one kind of disability. Studies show one in four 20-year-old workers will be unable to work for at least a year before reaching full retirement age. The average disability claim lasts nearly three years.

If disability strikes, those who rely solely on Social Security Disability Insurance may be disappointed. Strict guidelines make qualifying a difficult and frequently lengthy process. Over half of initial applications are denied. Among those approved, the average monthly benefit for 2018 is $1,197.

According to a survey by OneAmerica and the Harris Poll, only 34 percent of all workers have private disability insurance. The majority of them receive it through their employer. Company-provided disability insurance typically covers 40 to 50 percent of workers’ income, but some employers allow employees to pay in to increase benefits.

Other individuals secure disability insurance through professional associations or buy it themselves. There are benefits to buying your own. You won’t lose it if you change jobs or professions, and any benefits you draw will be tax-free. You may be able to extend your policy if you’re still working 30 or more hours per week beyond your full retirement age. Downsides are you will need to qualify and private policies usually cost more. Increasing the waiting period, buying less coverage, shortening your benefit period or buying with another person can cut costs.

We can help you determine how much disability coverage you may need to maintain your lifestyle and protect your retirement. Call today to schedule an appointment.

* 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 May 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#  2120430.1