For the Week of October 26, 2020

The Markets

Stocks ended a downbeat week mixed as investors followed officials’ comments on the status of another stimulus bill. Although unemployment benefits provided by the CARES Act ended July 31, the White House and lawmakers have not been able to agree on a new package. For the week, the Dow lost 0.90 percent to close at 28,335.57. The S&P dropped 0.51 percent to finish at 3,465.39, and the NASDAQ fell 1.06 percent to end the week at 11,548.28.

It’s About Time — Americans have reduced their outstanding balances on their revolving debt, e.g., credit card debt and home equity loans, from March through and including August (source: Federal Reserve, BTN Research).

More Than Twice as Large — The U.S. government had a record $3.13 trillion deficit during fiscal year 2020, smashing the previous record deficit of $1.41 trillion set 11 years ago during fiscal year 2009. The deficit was the difference between $3.42 trillion of tax receipts and $6.55 trillion of outlays (source: Treasury Department, BTN Research).

Cashing In — The median sales price of an existing home sold in the United States in August ($310,600) is the highest ever recorded and is up 11 percent in the last 12 months (source: National Association of Realtors, BTN Research).

WEEKLY FOCUS – Future Retirees Face New Challenges

Preparing for retirement is more complex than it used to be for obvious and not-so-obvious reasons. The most obvious is longer lifespans. Thanks to improved medical care, a person retiring today in their mid-60s may need their savings to last 30 years. The list of less-obvious challenges includes:

Less support from employers. More companies have replaced their pension plans with defined contribution plans – putting added responsibility on the employee. The rise of gig workers and entrepreneurs leaves many without access to an employer-sponsored plan.

Shrinking Social Security. Social Security’s annual cost of living adjustment (COLA) averaged 7.7 percent from 1975 to 1984 – a rate that was higher than inflation. In contrast, COLAs for the last nine years ranged from 0.0 percent to 2.8 percent.¹ COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which many note doesn’t adequately reflect the growth of some of the more costly expenses seniors encounter, such as health care, property taxes, home repairs, and homeowners insurance.

For example, the Social Security COLA for 2020 was 1.6 percent even though health insurance premiums were expected to go up by 5.6 percent in 2020.² And Medicare premiums often increase faster than Social Security. As a result, part or all of a year’s COLA may be consumed paying for a retiree’s premium increase.  

Rising health care costs. It’s no secret health care costs have risen drastically in recent years. And the later years in life often account for the highest expenditures. According to the Fidelity Retiree Health Care Cost Estimate, an average retired, 65-year-old couple in 2020 may need $295,000 (after tax) to cover health care expenses in retirement.

Low inflation. While low inflation rates sound positive for individuals on fixed incomes, they also provide low earnings on money in savings and conservative investments like bonds and CDs. Purchasing a fixed annuity or bond (except for a Treasury Inflation Protected Security) while inflation is low may result in losing value if inflation rises. Retirees may need to take on some risk to increase earnings.

Planning for and managing retirement is complicated in every economic environment. Whether your retirement is imminent or in the distant future, give us a call. We’d be happy to help you create a personalized plan designed to meet your needs.

¹https://www.ssa.gov/oact/cola/colaseries.html

²https://federalnewsnetwork.com/mike-causey-federal-report/2020/01/retiree-colas-vs-workers-pay-raise-why-the-difference/

For the Week of October 19, 2020

The Markets

Stocks were mixed on the final day of a volatile week. Encouraging reports on retail sales and consumer confidence lifted the major indices. The NASDAQ posted its fourth weekly gain. The S&P and Dow snapped three-day losing streaks to achieve their third positive weeks. For the week, the Dow rose 0.07 percent to close at 28,606.31. The S&P gained 0.21 percent to finish at 3,483.81, and the NASDAQ climbed 0.79 percent to end the week at 11,671.56.

Big Numbers — The NASDAQ Composite was up 25.3 percent YTD (total return) through the close of trading on Sept. 30. The NASDAQ Composite has gained at least 20 percent in four of the last 11 years, i.e., 2009-2019. (source: NASDAQ, BTN Research).

Can’t Spend What We Don’t Have — Personal income (all pretax income created from employment and investments), declined 2.7 percent on a month-over-month basis from July to August, its fourth down month in the last six months. Personal income had declined on a month-over-month basis only five times in the previous decade (source: Department of Commerce, BTN Research).

Health Insurance — For workers who access their health insurance through an employer, the average annual cost for health insurance coverage for a family plan in 2020 is $20,514, with the employer paying 67 percent of the total ($13,717) and the employee paying 33 percent ($6,797) (source: U.S. Bureau of Labor Statistics, BTN Research).

WEEKLY FOCUS – National Estate Planning Awareness Week

October 19-25 has been named National Estate Planning Awareness Week, an observance that reminds the public how important estate planning is to financial wellness. Unfortunately, common myths convince many people they don’t need to create or update an estate plan, such as:

Only wealthy people need a plan. Without a will, state succession laws and the probate process decide who serves as the estate representative and where assets go. The probate process is publicand can take anywhere from a few months to a year or multiple years.

Proper estate planning considers tax liabilities. Yes, the federal estate tax exemption in 2020 is $11.58 million, thanks to the Tax Cuts and Jobs Act. However, the exemption is set to expire at the end of 2025.And despite this generous federal exemption, around a dozen states levy their own estate taxes (with a lower exemption than the federal), and six states collect an inheritance tax. The highest top rate among state estate taxes is 20 percent; the highest top rate among state inheritance taxes is 18 percent.

I already have a will. Estate plans are not meant to be “one-and-done” documents. They should be reviewed biennially, if not annually, and updated following a major life event (e.g., a birth, death, marriage, divorce, or move to another state). Beneficiary designations trump wills and should be revisited regularly. A complete plan should include a current list of all digital accounts with usernames, passwords, and security questions.

A will is enough. A thorough estate plan includes components designed to protect your income if you become disabled during your working years and protect your assets if you require costly long-term care as you age.It should also provide direction in the event you become unable to make decisions regarding your health and finances. Minimum documents include a Health Care Proxy (designates an individual to make decisions regarding medical treatments), an Advanced Care Directive (provides treatment instructions regarding prolonging life), and a Power of Attorney (names the person you wish to make financial decisions).

Estate planning can be complex. With so much at stake, it’s crucial to get it right. We are happy to work with you, your attorney, and tax professional to secure and make the most of your legacy. Securities America and its representatives do not provide legal or tax advice; consult with an attorney or accountant regarding your specific situation. 

For the Week of October 12, 2020

The Markets

U.S. stocks rose Friday amid renewed optimism over another stimulus package because of talks between House Democrats and the Trump administration. The S&P and NASDAQ had their best week since early July; the Dow had its best weekly gain since August. For the week, the Dow rose 3.31 percent to close at 28,586.90. The S&P gained 3.89 percent to finish at 3,477.14, and the NASDAQ climbed 4.57 percent to end the week at 11,579.94.

Being Careful — Since the beginning of 2020, the size of the money market fund industry in the U.S. (both taxable and tax-free) has grown from $3.63 trillion as of Jan. 1 to $4.40 trillion as of Sept. 30, a YTD increase of $770 billion or $20 billion a week (source: Investment Company Institute, BTN Research).

Maybe Never — 31 percent of 1,018 American workers surveyed in January anticipate they will retire at age 70 or later (source: Employee Benefit Research Institute – 2020 Retirement Confidence Survey, BTN Research).

Simpler — As a result of the expansion in the size of the standard deduction that was part of the 2017 Tax Cuts and Jobs Act, only 10 percent of tax filers itemized in 2018, down from 30 percent in 2017 (source: Tax Foundation, BTN Research).

WEEKLY FOCUS – Medicare Open Enrollment

Medicare’s annual open enrollment period begins October 15 and ends December 7. During this time, Medicare beneficiaries can change their drug plan or Advantage plan for the next calendar year. Supplemental Medigap plans, which have federally standardized benefits that don’t change from year to year, are not included in the fall enrollment.

Medicare Advantage Plans: Medicare Advantage Plans replace Original Medicare with HMO- or PPO-like plans. Because these plans are allowed to refile with Medicare each year, benefits and premiums can change from year to year.

Shortly before open enrollment begins, Advantage policy holders should receive an Annual Notice of Change (ANOC) from their provider. They should review the document carefully for changes to coverage, costs, or service area. Policy holders should also check to see if their preferred doctors, hospitals, pharmacies, or other providers are still in their plan. During Open Enrollment, beneficiaries may: change from Original Medicare (Parts A and B) to a Medicare Advantage plan or vice versa,* or switch to a different Medicare Advantage plan.  

Part D Plans: The company that provides a beneficiary’s current drug coverage will also send an ANOC, so beneficiaries can ensure all their medications are still covered by the plan. During Open Enrollment, beneficiaries may switch to a different Part D plan or enroll in Part D if they didn’t sign up during their general open enrollment period (a late enrollment fee may apply).

Also before Open Enrollment begins, insurers will provide an Evidence of Coverage (EOC), a comprehensive document explaining how the plan works and describing benefits, cost-sharing expenses, and what the plan pays. In addition to reviewing the ANOC or EOC, it is wise to compare other plans each year to see if another plan has become a better fit. The Medicare Plan Finder at medicare.gov/plan-compare/ is a convenient tool to use.     

Health care decisions can be complicated. If you need help evaluating your options or determining how health care costs may impact your retirement, please call our office.

*NOTE: A beneficiary who drops an Advantage plan to return to Original Medicare may be subject to underwriting if  they want to add a Medigap plan once they are past their original enrollment window or have been enrolled in Medicare Advantage for more than a year.

For the Week of October 5, 2020

The Markets

On Friday, the markets reacted negatively to the news that President Trump tested positive for the coronavirus, adding more uncertainty to the upcoming election. The major indices recovered some of the day’s losses after House Speaker Nancy Pelosi’s encouraging remarks about a potential agreement for another stimulus bill. For the week, the Dow rose 1.88 percent to close at 27,682.81. The S&P gained 1.54 percent to finish at 3,348.42, and the NASDAQ climbed 1.50 percent to end at 11,075.02.

Debt Limit — Legislation signed by President Trump in July 2019 suspended our country’s debt ceiling limit until July 31, 2021, so there is no statutory limit on our nation’s borrowing for the next 10 months. The debt ceiling has been raised, temporarily extended, or suspended 87 times since 1960 (source: Treasury Department, BTN Research).

Lots of People — 22 percent of Americans (74 million people) are on Medicaid, the nation’s health care program for low-income Americans that is jointly funded by the federal government and all 50 states (source: Medicaid, BTN Research).

Should We Get a Bite to Eat? — 12 percent of the sit-down restaurant chains (not fast food), that were in business before the COVID-19 pandemic hit the United States in February, are now out of business and have closed for good (source: Black Box Intelligence, BTN Research).

WEEKLY FOCUS – It’s Cybersecurity Awareness Month

The pandemic has made many of us especially grateful for the internet, which makes it possible to work from home, shop online, attend religious services virtually, and stay connected with family and friends. Unfortunately, enjoying all those conveniences is not without risks. Realizing Americans are distracted by the pandemic, the upcoming election, and social unrest, cyber criminals are upping their game. Here are a few ways we can protect ourselves from hacks, scams, and malware.

Look twice before you click. Crooks and spammers will try to get you to act quickly and automatically. Instead, pause to consider before opening any unexpected email attachment. And most importantly, NEVER click on a link in an email asking you to enter your password or change your password. Always go directly to the site you use to enter your password or call the company directly if there appears to be an actual problem.

Use strong passwords. Strong passwords are fairly long and use a combination of upper- and lower-case letters, numbers, and special characters. Using the first letters of an original phrase can make a password difficult for thieves to guess. Don’t keep a list of passwords anywhere near your device. If you keep a list, don’t spell out your phrase or word. Instead, record a hint, followed by the numbers and symbols in the password, ideally unique to each site. Another option is to consider purchasing a password managing system.

Add a second step. For sensitive sites, such as financial accounts, add two-factor identification. After signing in, the institution will either text, call, or email a one-time code.

Stay current. Google your name and delete old, unused accounts that come up. Clear your browser history periodically. Delete apps you no longer use. Use the latest security software, web browser, and operating systems. Regularly check for updates, or better yet, sign up for automatic updates when you can. Back up your data to the cloud.

Stay independent. When signing up for a new service or app, pass up the offer to sign in using Facebook or your Google account, which exposes the data in your accounts.

It is important to stay vigilant about securing your financial and personal information. We can help you develop a strategy to keep this information as secure as possible. Call us to discuss this or any other financial concerns you have.