For the Week of August 26, 2019

The Markets

Stocks tumbled Friday after the President tweeted orders for all U.S. manufacturers to find alternatives to their operations in China. China also announced it would impose tariffs on more American goods in response to the Trump administration’s levies scheduled to go into effect Sept. 1. For the week, the Dow fell 0.98 percent to close at 25,628.90. The S&P lost 1.42 percent to finish at 2,847.11, and the NASDAQ dropped 1.83 percent to end the week at 7.751.77.

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.

Not a Penny — 44.4 percent of U.S. individual tax filers (76.4 million out of 172.0 million) did not pay any federal income tax in tax year 2018, i.e., four out of every nine tax units in the United States (source: Tax Policy Center, BTN Research).

Not the U.S.A. — There are 10 countries in the world that maintain the top credit rating from each of the three major credit rating agencies, including Canada, Germany and Sweden (source: Trading Economics, BTN Research).

Up the Cost — China has increased the tariff applied to imports coming into its country from the U.S. by an average of 12.4 percent since May 2018 (source: Peterson Institute, BTN Research).

WEEKLY FOCUS – When You Inherit a 401(k)

Today’s article looks at actions you can take when you inherit a 401(k) besides taking a lump sum and paying taxes on the full amount.

If you were married to the deceased, you have the option to roll your late spouse’s 401(k) into your own 401(k) – if your plan allows you to. As long as you’re working, you won’t have to take required minimum distributions (RMDs) from your 401(k). You can also roll it into your existing IRA account. If you are younger than 70½, you won’t need to take RMDs on the inherited funds in your IRA even if your spouse was over 70½. But if you are under 59½, any early withdrawals you take will incur a 10 percent penalty tax.

In either case, ask your spouse’s employer to transfer the funds directly. If you receive a check instead, your spouse’s employer will withhold 20 percent of the balance for the IRS. And if you don’t deposit the check in your IRA or 401(k) within 60 days, the whole amount will be taxed.

Regardless of your relationship to the deceased, you may be able to leave the funds in their employer’s plan, which may offer lower-cost investment options. Some plans even allow periodic payments, especially if the account holder was receiving such payments. Each 401(k) plan has its own rules. To limit administrative resources, many plans require a lump-sum distribution or limit the amount of time you can keep funds in a deceased family member’s plan. RMDs must continue if the deceased had started taking them or must start the year the employee would have turned 70½.

The other option is to roll the funds into an Inherited IRA (keeping it separate from any other IRA). If the account holder was over 70½, you can take annual distributions over your lifetime starting by Dec. 31^st of the year following the deceased’s death. If they were under 70½, you can choose lifetime withdrawals or a five-year withdrawal. If the SECURE Act (a retirement bill currently in the Senate) passes, non-spouse beneficiaries will need to withdraw money from an inherited retirement account within 10 years.

The rules concerning 401(k)s, IRAs and rollovers are complicated. We can work with your trusted advisors to help you make wise decisions regarding an inherited retirement account or make sure your own estate plan thoughtfully addresses your retirement accounts. Consult your tax advisor regarding your own unique situation.

* 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 August 2019. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#2701862.1

For the Week of August 19, 2019

The Markets

Major indexes rallied on the final day of a volatile week on Wall Street. Contributing to the optimism were a rise in bond yields from historic lows on Thursday, a rally in bank stocks and news of a potential economic stimulus in Germany. Still, the three major averages posted their third week of losses. For the week, the Dow fell 1.40 percent to close at 25,886.01. The S&P lost 0.94 percent to finish at 2,888.68, and the NASDAQ dropped 0.79 percent to end the week at 7,895.99.

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.

I’m All Done With My Work – The average American worker has increased their productivity by 97 percent in the last 35 years, i.e., an average worker can complete in one hour as of Dec. 31, 2018, the same amount of work that it took them two hours to finish as of Dec. 31, 1983 (source: Department of Labor, BTN Research).

Big Numbers — The total net worth of Americans as of March 31, 2019, was $108.6 trillion, including $29.1 trillion (27 percent of the overall net worth total) in retirement accounts (source: Investment Company Institute, BTN Research).

Should We Buy Today — In June, 70 percent of Americans surveyed thought it was a good time to buy a house. That percentage was as high as 83 percent in December 2014 and has been as low as 57 percent in October 2008 (source: University of Michigan Surveys of Consumers, BTN Research).

WEEKLY FOCUS – When It’s Time to Review Your Estate Plans

Estate plans aren’t static documents. You don’t just write them, tuck them away in your important papers file and forget about them. Life is filled with unforeseen changes and challenges. Think of your estate plan like you would your car. Both need periodic check-ups and tune-ups. The difference is that your car manual clearly lays out when they’re needed. But what about your estate plan? Here are some events that may call for a review and revision:

• Entering a New Relationship. For example, in many areas, marriage cancels any will prepared by either spouse prior to the union, unless the will is made in contemplation of marriage. Even if you aren’t formalizing the union with marriage vows, you may want to name a common-law partner beneficiary of your estate.
• Changes in State and Federal Laws. Has the state you live in enacted new laws that could impact your will and finances? Have you moved to another state? It’s not just personal life changes that may affect your estate plans.
• Major Life Events. The birth of a child or grandchild, an adoption, marriage, divorce or death all affect your will and estate.
• Disability of a Beneficiary or Dependent. 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 changed, which could also impact your estate planning and will.
• Starting, Buying or Selling a Business. If you sell a business included in your will, you need to update it. The same goes if you are buying or starting a business.
• Mid-Life, Peak Earning Years or Changes to Your Financial Situation. Mid-life is a good time to revisit your estate plan. Think about how your family would carry on financially if you suddenly passed away. If you’ve changed your financial position, the same goes for your estate.

Even if you haven’t experienced any major life or financial challenges, the passage of time itself can impact your estate plans. A periodic review of every 3-5 years is a good rule of thumb to follow. Call our office today. We can review your plans with you and your estate planner to ensure they are up-to-date and encompass any changes that need to be made. Securities America and its representatives do not provide tax advice; coordinate with your tax advisor regarding your specific situation.

* 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 August 2019. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2692905.1

For the Week of August 12, 2019

The Markets

Wall Street closed a volatile week with stocks dropping Friday. A contributing factor was a remark made by President Trump that diminished hopes of a U.S. – China trade deal in the near future. The President indicated talks scheduled for September may not take place. For the week, the Dow fell 0.61 percent to close at 26,287.44. The S&P lost 0.40 percent to finish at 2,918.65, and the NASDAQ dropped 0.56 percent to end the week at 7,959.14.

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.

Buying From America — The top five countries purchasing American exports in 2018 were Canada, Mexico, China, Japan and the United Kingdom (source: Commerce Department, BTN Research).

Not Now — The last year when the highest close during the year for the S&P 500 occurred during August was in 1987. Since 1987, the high close for the index has occurred in December 17 times (source: BTN Research).

Bonds — The bond market was up 6.3 percent YTD (total return) through July 31. The last time the bond market had a calendar year performance better than 6.3 percent was in 2011 when bonds gained 7.8 percent. The Bloomberg Barclays Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds with an average maturity of five years, was used as the bond measurement (source: BTN Research).

WEEKLY FOCUS – When You Are the Beneficiary of an IRA

Immediately after the loss of a family member, deciding what to do with the deceased’s IRA may not seem important. Still, if you’re the beneficiary, it’s imperative to make a good decision to avoid paying penalties and extra taxes. As a beneficiary of an IRA or employer-sponsored plan, you can open an inherited IRA account after the original owner dies. If you want the funds to keep growing tax-deferred, your options vary depending on your relationship to the deceased.

If you’re a surviving spouse, you’ll have the most options. You can treat the funds as your own, even adding them to an IRA you already have. However, if your deceased spouse was 70½ or older, their annual required minimum distribution (RMD) must be subtracted – if it hasn’t been – before rolling the assets into your account. A transfer made within 60 days of your spouse’s death is not taxed as a distribution, so the money can continue to grow tax-deferred. But you won’t be able to use the money transferred without paying a penalty if you have not reached 59½.

If you open an inherited IRA, you can take distributions over five years OR choose lifetime distributions. Lifetime distributions from an inherited IRA must begin by Dec. 31^st of the year your spouse would have turned 70½ or Dec. 31^st of the year following their death – whichever is later.

If you’re not a spouse, you will need to create a new inherited IRA account and transfer the funds. You won’t be allowed to make new contributions to the account. You will have a few choices for distributions without an early withdrawal penalty.  You can withdraw the money within five years or take annual distributions over your lifetime. Lifetime withdrawals must start by Dec. 31^st of the year following the account holder’s death. This will change if the SECURE Act (a retirement bill currently in the Senate) passes; non-spouse beneficiaries will need to withdraw money from an inherited IRA within 10 years.

There are many more things to consider with inherited IRAs, with different focuses for post-tax traditional IRAs and Roth IRAs. We can work with you, your attorney and your accountant to guide you through the important rules about required minimum distributions and how they’re taxed. Call our office to schedule an appointment with us and your other trusted advisors. Consult your tax advisor regarding your own unique situation.

* 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 August 2019. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2678539.1

For the Week of August 5, 2019

The Markets

Stocks dropped Friday amid renewed trade fears. On Thursday, President Trump announced he would impose a 10 percent tariff on $300 billion worth of Chinese imports not currently subject to duties beginning Sept. 1. The S&P 500 and the NASDAQ saw their biggest weekly drops for the year, and the Dow had its second-worst week of 2019. For the week, the Dow fell 2.59 percent to close at 26,485.01. The S&P lost 3.07 percent to finish at 2,932.05, and the NASDAQ dropped 3.92 percent to end the week at 8,004.07.

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.

Home Price — The median sales price of existing homes sold in the U.S. in June 2019 was $285,700, a record price. However, the median sales price of existing homes sold in July 2006 ($230,200) is equal to $289,750 in today’s dollars, a record price on an inflation-adjusted basis (source: National Association of Realtors, BTN Research).

Very Different Periods — In the last 25 years, the U.S. suffered just two recessions. In the 25 years before that, the country suffered five recessions (source: National Bureau of Economic Research, BTN Research).

World’s Biggest — As of March 31, the U.S. economy was $21 trillion in size. Fifty years ago, on March 31, 1969, the U.S. economy was $1 trillion in size (source: Commerce Department, BTN Research).

WEEKLY FOCUS – Communicate and Plan to Protect Financial Legacy

If you’re like many parents and grandparents, you want to leave a financial legacy to your children and grandchildren. It’s estimated about $30 trillion in assets will be transferred from baby boomers to the next generations over the upcoming decades. Unfortunately, research suggests 70 percent of family fortunes will be gone after just three generations. To help ensure your assets live on, there are several steps you should take long before your wealth changes hands.

Communicate carefully: It’s never too early to talk to children and grandchildren about wise spending and saving habits. It’s good to pay kids an allowance, teach them to save a portion of their earnings and let them spend some of what they earn. But make sure they understand the difference between wants and needs and the importance of saving for a big purchase.

When age-appropriate, introduce them to financial literacy classes and materials that will teach them the importance of saving and investing. Remember, the best financial lessons go beyond wise use of money. They also include talks about the family values, such as giving to charity, that you would like to continue.

Develop a long-term plan: When your kids or grandkids are old enough, introduce them to your financial advisor and have your advisor assess their financial literacy level. If they uncover concerns, you’ll still have time to address them before your heirs take control of your assets.

To further protect your assets once they’ve changed hands, consider developing a trust with detailed provisions outlining how and when the funds will be distributed and what they can be used for. You can also use a trust to delay the transfer of funds until the recipient reaches a specified age or for specified needs, such as health and education. Even if you don’t establish a trust, it’s important to put your intentions down on paper, so your heirs will have a detailed plan to stick to after you’re gone.

Make sure all your estate planning documents are complete and up-to-date. If you pass away with inaccurate or out-of-date estate documents, your plan may not come to fruition. You’ve worked hard to build a financial legacy that you can share with your children and grandchildren. To start building a plan that fits your family, give us a call today.

* 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 August 2019. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2669317.1