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How the Pandemic Is Affecting the Real Estate Market

Research has found that over a 150-year period (1870 to 2015), owning a home has proved to be one of the most stable and secure holdings compared to other types of investments. While offering the added benefits of providing shelter and leaving it as a legacy, residential property is generally viewed as a financial asset able to withstand most crises — even a pandemic.1

For years, homeowners in many areas of the country have benefited from sustained high prices in the residential real estate market, largely due to the low sales inventory of existing homes. In early March, the housing market appeared poised for a solid spring, particularly in light of high demand and low mortgage rates.2

But all that quickly changed once the coronavirus broke out in the United States. In almost no time, the busy spring season for purchasing and selling homes was cut short by buyers hesitant to venture out — or risk their savings should they lose their jobs — and homeowners not wanting strangers traipsing through their homes. Open houses were canceled, and virtual tours became virtually the only way to check out an occupied property. Some in the industry expect this disruption and its subsequent impact on the economy to shift housing prices into a downward trend.3

For retirees, or workers planning for their retirement, owning your home can be an asset. You can sell it if you need the equity for retirement, assuming you find a cheaper place to live. Or you can draw from that equity if need be while remaining in your home. During this complex time, you have options, and it’s important that you consider all of them before taking any significant financial action.

One of the biggest problems brought on by the pandemic is that business closings, bankruptcies and job losses mean that millions of Americans do not have the money to pay their mortgage or rent. To help provide relief, some states including California, Texas, New York and Florida have temporarily banned evictions. On the federal level, a provision in the $2.2 trillion coronavirus relief package passed in March allows homeowners with government-backed mortgages to defer payments for up to a year.4

However, that doesn’t help the long-term plight of renters — or their landlords, for that matter. According to the National Apartment Association (NAA), the profit margin for many landlords is very thin, around 9 cents for every $1. Furthermore, about two-thirds of residential rental properties don’t qualify for the federal mortgage deferral because they were purchased outright or through private loans. If landlords can’t make their payments, they may lose the property and tenants could still get kicked out. And in the end, cities and counties lose property tax revenue.5

On the commercial side, the real estate market could be impacted by shelter-in-place workspaces. After all, even if things do return to normal, now that employers and employees have sampled remote work as a viable option, it could become more commonplace. This means companies may need less office space. Is it possible we could see a glut of empty office parks and skyscrapers in the future? The same could apply to brick-and-mortar retailers, as quarantining has exposed the value and convenience of online shopping to even the most diehard mall rat.

But, as usual, where there are holes in the market, there are opportunities for investors willing to take a risk. Well-capitalized commercial real estate owners may look to acquire some of these distressed buildings at bargain prices.6

Content prepared by Kara Stefan Communications.

1 Ivan Anz. Utah Business. May 4, 2020. “Here’s what real estate investors should expect after COVID-19.” https://www.utahbusiness.com/real-estate-investors-covid-19/. Accessed May 29, 2020.

2 Jacob Passy. MarketWatch. April 6, 2020. “America’s housing market is showing the first signs of trouble from the coronavirus pandemic.” https://www.marketwatch.com/story/americas-housing-market-is-showing-the-first-signs-of-trouble-because-of-the-coronavirus-pandemic-2020-04-02. Accessed June 2, 2020.

3 Ana Durrani. Realtor.com. April 29, 2020. “What Your Real Estate Agent Wants You To Know About the Housing Market Right Now.” https://www.realtor.com/advice/buy/real-estate-agent-wants-you-to-know-housing-market-coronavirus/. Accessed May 29, 2020.

4 Prashant Gopal and Oshrat Carmiel. Bloomberg. May 12, 2020. “If Landlords Get Wiped Out, Wall Street Wins, Not Renters.” https://www.bloomberg.com/news/articles/2020-05-12/if-landlords-get-wiped-out-wall-street-wins-not-renters. Accessed May 29, 2020.

5 Ibid.

6 Ariel Maidansky. MarketWatch. April 29, 2020. “The future of commercial real estate – the weak get shaken out and the strong take over whole new markets.” https://www.marketwatch.com/story/the-future-of-commercial-real-estate-the-weak-get-shaken-out-and-the-strong-take-over-whole-new-markets-2020-04-29. Accessed May 29, 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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What Might Be Next — Inflation or Deflation?

Consumer prices fell by 0.8% on a seasonally adjusted basis in April, the biggest drop in more than a dozen years, the Bureau of Labor Statistics reported. Conversely, prices for grocery items jumped 2.6%, the highest one-month increase in 46 years, with eggs rising by 16%.1

What’s going on here? Well, the devil is in the details, an important lesson to learn about interpreting data. It’s true that supermarket prices are rising, mainly because of two factors: The coronavirus pandemic has disrupted supply lines, and more Americans are eating at home and buying more groceries. Together, these factors have contributed to the tight food supply, and per the economic theory of supply and demand, when supply is low and demand is high, prices rise.2

As for the drop in consumer prices, that’s the other side of the coin. With the nationwide efforts to close businesses and shelter in place, people are simply buying less. They may be out of a job or worrying about that prospect, so they’ve been hanging onto every last dollar — buying only the necessities.

The thing about falling demand is that it requires retailers and manufacturers to drop prices to entice sales. If they can’t sell what they are producing, then they cut back production, and people lose jobs. It’s a vicious circle, and one that can lead to deflation.3

Let’s face it, both inflation and deflation can have negative effects on investment portfolios, so it’s important to take steps to help protect against those risks.4 We have strategies that can help mitigate the effects of volatility on your retirement plan. Give us a call, and we’ll help tailor a plan for your personal circumstances.

Inflation usually gets top billing when discussing the economy because rising prices over the long term cut down on how much a dollar can buy. However, a little inflation, around 2% to 3%, isn’t a bad thing. It’s usually an indicator that people have jobs, spending demand is high and companies can afford to raise prices. Deflation, in contrast, can be more concerning, as it can lead to an economic recession or depression.5

The Federal Reserve, as part of its efforts to shore up the economy during the pandemic, appears just as intent on mitigating deflation as it is inflation. In early May, Fed Chair Jerome Powell said, “As long as inflation expectations remain anchored, then we shouldn’t see deflation. Needless to say, we’ll be keeping very close track of that.”6

Content prepared by Kara Stefan Communications.

1 Anneken Tappe. CNN Business. May 12, 2020. “Prices are tumbling at an alarming rate.” https://www.cnn.com/2020/05/12/economy/consumer-prices-april/index.html. Accessed May 21, 2020.

2 David Goldman. CNN Business. May 14, 2020. “Grocery prices are soaring. Here’s what’s getting more expensive.” https://www.cnn.com/2020/05/13/business/grocery-prices/index.html#:~:text=That%20was%20the%20biggest%20increase,demand%20for%20groceries%20shot%20up%20. Accessed June 5, 2020.

3 Anneken Tappe. CNN Business. May 12, 2020. “Prices are tumbling at an alarming rate.” https://www.cnn.com/2020/05/12/economy/consumer-prices-april/index.html. Accessed May 21, 2020.

4 Paulina Likos. U.S. News & World Report. May 14, 2020. “How Inflation and Deflation Impact Your Investments.” https://money.usnews.com/investing/investing-101/articles/how-inflation-and-deflation-impact-your-investments. Accessed May 21, 2020.

5 Troy Segal. Investopedia. March 25, 2020. “Inflation vs. Deflation: What’s the Difference?” https://www.investopedia.com/ask/answers/111414/what-difference-between-inflation-and-deflation.asp. Accessed May 21, 2020.

6 Paul Davidson. USA Today. May 3, 2020. “Besides millions of layoffs and plunging GDP, here’s another worry for economy: Falling prices.” https://www.usatoday.com/story/money/2020/05/03/coronavirus-us-deflation-falling-prices-new-economic-risk/3070084001/. Accessed June 5, 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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The Pandemic’s Financial Toll on Women

In April alone, the U.S. lost more than 20 million jobs — increasing the unemployment rate to 14.7%. Researchers say one of the demographics hit hardest during the pandemic is women workers. Women tend to hold a disproportionate number of jobs in industries such as hospitality, health care and education. Consequently, the unemployment rate for women jumped to 15.5%.1

The loss of one income in a two-income household is hard enough, but if a sole provider loses their income, things are even more difficult. If this happens to you, your first consideration should be to pursue any unemployment insurance options available to you. Also know that we are available to discuss your current situation and its potential impact on your long-term financial plans. Don’t hesitate to call for guidance.

For those who have remained fully employed by working at home, many have discovered a new, unexpected dynamic: working longer hours. Studies show the American workday has now increased by nearly three hours. On top of longer work hours, an in-home office may also mean juggling the roles of elementary school teacher and all-day caretaker. While this a relatively familiar issue for some families, the inability to separate work from home life is taking a higher toll on women. A recent survey found 14% of women are considering quitting their jobs due to COVID-19-related work and family conflicts.2

Despite these challenges, women have become a powerful economic force. They control nearly a third (32%) of the world’s wealth and are increasing their wealth by $5 trillion every year. While this wealth and power is clearly not universally spread across the gender, those who have accumulated significant assets are expected to weather any short-term impacts due to the current economic decline, and rise to $93 trillion by 2023.3

Content prepared by Kara Stefan Communications.

1 Charisse Jones. USA Today. May 8, 2020. “Historic layoffs take biggest toll on Blacks, Latinos, women and the young.” https://www.usatoday.com/story/money/2020/05/08/covid-19-layoffs-take-toll-women-people-color-and-young/3094964001/. Accessed May 12, 2020.

2 Joan C. Williams. Harvard Business Review. May 11, 2020. “The Pandemic Has Exposed the Fallacy of the ‘Ideal Worker.’” https://hbr.org/2020/05/the-pandemic-has-exposed-the-fallacy-of-the-ideal-worker. Accessed May 12, 2020.

3 Anna Zakrzewski, Kedra Newsom, Michael Kahlich, Maximilian Klein, Andrea Real Mattar and Stephan Knobel. Boston Consulting Group. April 9, 2020. “Managing the Next Decade of Women’s Wealth.” https://www.bcg.com/publications/2020/managing-next-decade-women-wealth.aspx. Accessed May 12, 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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Are the Stock Market and the Economy Out of Sync?

In normal times, the stock market is often a reflection of the economy. But these are not normal times. Even though April was marked by a global shutdown of businesses, rampant unemployment and low economic growth, the S&P 500 Index ended the month up 12.9%. This represented the highest one-month gain since 1987 and posted the fastest recovery of the fastest bear-market decline in 90 years.1

It’s been a difficult time for investors, faced with the question of whether they should sell or “stay the course.” A lot depends on where you are in your timeline for achieving financial goals. You may have lost money and then regained it. You may have lost money and chose to sell. If you are near or in retirement, and unsure what you should do now, give us a call. We have many different options available to help you pursue your goals, and will help you create a financial strategy designed for your individual situation.

While the stock market and economy have an enormous influence on each other, it’s important to recognize stock prices often are driven by irrational emotions. Moreover, stock prices are forward looking, meaning they bet on future corporate profits, which do not necessarily take into account a correlation with organic growth. A good example of this was demonstrated by the 2017 corporate tax cut. Many companies used the increase in corporate earnings to buy back stocks and/or pay out dividends rather than invest in growth or worker income.

Recent volatility in the stock market is largely a result of investor optimism that the economy will survive the pandemic, followed by pessimism that it may take longer than hoped. Much of this is driven by government actions, such as the unprecedented consumer stimulus and small business “grants,” as well as the various closing and reopening phases of economies on a state-by-state basis.2

Stimulus actions may provide short-term relief, but also present a long-term drag on the economy. Reduced demand of common products and services may help ward off inflation, but the risk of deflation is just as damaging. Deflation is caused by a sustained period of falling prices, in which lower spending causes businesses to reduce staff and wages — as if that isn’t already a problem. Since consumer spending is one of the key drivers of the U.S. economy, this could lead to a long road to recovery.3

This brings us back to the stock market, with its eccentric performance that appears driven more by investor superstition, optimism and uncertainty rather than actual fundamentals. Longer term, asset prices will presumably begin to reflect the future fortunes (or losses) of corporations. It’s hard to see a scenario in which a wide swath of companies will thrive in the near term, with certain exceptions (like whichever pharmaceutical companies develop a COVID-19 vaccine).

For now, it’s important to view your portfolio within the scope of your financial goals and timeline for achieving them, as well as your risk tolerance. It’s easy to fall under the spell that a high-performing stock market will continue despite occasional blips, or that we’re in for negative returns for the foreseeable future. Regardless of which side of investor sentiment you fall on, stock market data is the same for everyone. The only differentiation is your own personal view of what will happen next.4

Meanwhile, health experts warn of a potential ramp up of contagion in states that reopen too quickly and/or in the fall when flu season commences. Given this possibility, any moves you take right now may be short-term; your view may change again if and when this actually happens. It’s possible we could have a short-term recovery, and long-term investors may want to stay in the market for exposure to that. But no one can accurately predict when the stock market could drop precipitously again, so bear that in mind.5

Content prepared by Kara Stefan Communications.

1 John Persinos. Investing Daily. May 4, 2020. “Economy Down, Stocks Up: Why The Disconnect?” https://www.investingdaily.com/55655/economy-down-stocks-up-why-the-disconnect/. Accessed May 5, 2020.

2 Barbara Kollmeyer. Marketwatch. May 5, 2020. “This is the trap awaiting the stock market ahead of a grim summer, warns Nomura strategist.” https://www.marketwatch.com/story/this-is-the-trap-awaiting-the-stock-market-ahead-of-a-grim-summer-warns-nomura-strategist-2020-05-05. Accessed May 5, 2020.

3 Paul Davidson. USA Today. May 3, 2020. “Besides millions of layoffs and plunging GDP, here’s another worry for economy: Falling prices.” https://www.usatoday.com/story/money/2020/05/03/coronavirus-us-deflation-falling-prices-new-economic-risk/3070084001/. Accessed May 5, 2020.

4 Knowledge@Wharton. Jan. 14, 2020. “How Superstition Triggers Stock Price Volatility.” https://knowledge.wharton.upenn.edu/article/wachter-superstitious-investors-research/. Accessed May 5, 2020.

5 Matt Egan. CNN. April 16, 2020. “The stock market is acting like a rapid recovery is a slam dunk. It’s not.” https://www.cnn.com/2020/04/16/investing/stock-market-dow-jones-recession/index.html. Accessed May 5, 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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The Perks and Pitfalls of Self-Employment

Sole proprietors in the U.S. caught a huge break in April. The Paycheck Protection Program, borne out of the economic hardship caused by the COVID-19 pandemic, became available to solo entrepreneurs and independent contractors on April 10, 2020.1

According to a 2017 survey, 36% of U.S. workers are part of the gig economy.2 With so many sole proprietors contributing to today’s economy, it stands to reason that the federal government would recognize these contributions through the Coronavirus Aid, Relief and Economic Security (CARES) Act’s small-business loans and unemployment insurance provisions.

Retirement planning can be difficult when you work for yourself, especially when it comes to navigating the various retirement plan options. If you’d like help creating a strategy for income in retirement, please give us a call. We’ll work with you to craft a plan that is designed to match both your needs and business model.

One of the silver linings of the recent crisis may be a greater focus on the needs of independent workers. Following the lead of recent federal government legislation, individual states are getting in on the act. California, New York and Washington already offer paid family and medical leave benefit programs in which the self-employed can participate. Meanwhile, Massachusetts, Connecticut, Oregon and the District of Columbia also are working to establish family and medical leave programs.3

Given the recent rise in unemployment numbers, it would be no surprise to see more people consider self-employment once the economy recovers. Many people don’t like having to rely on government benefits to see them through hard times, but recent experiences have shown that traditional employment may not always be reliable either. However, there are a mountain of considerations when it comes to becoming a full-time sole proprietor.

For example, it takes a broader set of business skills. Not only do you provide the product or service that you’re good at, but you also have to learn to manage the administrative functions of your business, including accounting, marketing and sales. Some of the sad truths of self-reliance are that there are often no financial safety nets, you might work long hours — even if you are sick or caring for a sick family member — and may not be able to enjoy vacations since you are “on call” nearly 24/7, 365 days a year.4

There are perks to being self-employed, however, such as the opportunity to earn unlimited income. There are also tax deductions that self-employed individuals may qualify for and potential household budget savings on things like professional business clothes and commuting expenses.5

Content prepared by Kara Stefan Communications.

1 Elaine Pofeldt. CNBC. April 10, 2020. “Paycheck Protection Program aid opens for sole proprietorships and independent contractors.” https://www.cnbc.com/2020/04/10/paycheck-protection-program-opens-for-sole-proprietorships.html. Accessed April 30, 2020.

2 Lisa Hogan. Bloomberg Law. Sept. 17, 2019. “The Gig Economy Could Change How Employers Gear for Next Recession.” https://news.bloomberglaw.com/us-law-week/insight-the-gig-economy-could-change-how-employers-gear-for-next-recession. Accessed April 30, 2020.

3 Michelle Andrews. Kaiser Health News. March 19, 2020. “Gig Economy Workers Hurt By Coronavirus Eye New Federal Funds For Relief.” https://khn.org/news/gig-economy-workers-hurt-by-coronavirus-eye-new-federal-funds-for-relief/. Accessed April 30, 2020.

4 Holly Johnson. The Simple Dollar. April 8, 2020. “Seven Truths About Self-Employment.” https://www.thesimpledollar.com/make-money/seven-truths-about-self-employment/. Accessed April 30, 2020.

5 Greg Johnson. Dough Roller. Dec. 2, 2019. “11 Financial Benefits of Being Self-Employed.” https://www.doughroller.net/small-business/11-financial-benefits-self-employed/. Accessed April 30, 2020.

Neither our firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique 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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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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