Shortlink

2021 Outlook: Wealth Managers Weigh In

While challenges likely still lie ahead, there’s no denying we all weathered our fair share of storms in 2020. Now that the calendar has turned to a new year, we looked to wealth managers across the nation to find out what they’re expecting for 2021. As you’ll see, the answer often changes depending on where you look.

According to its latest 2021 economic outlook, UBS expects widescale availability of the COVID-19 vaccine will increase global output in 2021. The firm anticipates corporate earnings will return to pre-pandemic highs by the end of 2021 and recommends that investors diversify their portfolios by rebalancing out of U.S. large caps and global consumer staples and into global equities and cyclical stocks with catch-up potential.1

Merrill Lynch anticipates full recovery will take a bit longer. It doesn’t see a complete restoration of growth, innovation and stability until 2022. However, the firm predicts 2021 will see progress, particularly in industries that benefited from the pandemic. It also sees opportunities for sectors in which pent-up demand could soar, such as air travel and hospitality.2

Goldman Sachs has dubbed its projection for a V-shaped recovery the “Vaccine-Shaped Recovery,” reinforcing its outlook now that the vaccine is becoming available. The money manager anticipates economic activity will rebound by this summer, with a ramp-up in depressed sectors such as travel, accommodation and food services. Goldman projects the United States and Europe will end the year with a 2% jump in GDP, while most emerging economies will lag with a somewhat slower recovery.3

JP Morgan Asset Management also predicts a relatively fast rebound thanks to vaccine availability. It warns, however, that job recovery, GDP and inflation are more dependent on policies implemented by the Federal Reserve and the new presidential administration, so they may lag somewhat. Its analysts say U.S. equities already boast high valuations, so investors may find more growth opportunity in international stocks and alternative assets that offer both income and downside protection.4

Whether you’re bullish or bearish on the coming recovery, the U.S. economic prospects seem to look much better than they did six months ago. If you’d like a financial review to see if there are ways to better position your assets for the future, please give us a call.

Content prepared by Kara Stefan Communications.

1 UBS. 2020. “A Year of Renewal.” https://www.ubs.com/us/en/wealth-management/market-news/cio/insights-display-adp/global/en/wealth-management/chief-investment-office/market-insights/2021/year-ahead.html#livestream. Accessed Dec. 17, 2020.

2 Merrill Lynch. Dec. 17, 2020. “Outlook 2021: How to Prepare for the Year Ahead.” https://www.ml.com/articles/2021-market-outlook-portfolio-investments.html. Accessed Dec. 17, 2020.

3 Goldman Sachs. Nov. 7, 2020. “V(accine)-Shaped Recovery.” https://www.goldmansachs.com/insights/pages/gs-research/macro-outlook-2021/report.pdf. Accessed Dec. 17, 2020.

4 JP Morgan Asset Management. 2020. “The Investment Outlook for 2021.” https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/investment-outlook-2021-us.pdf. Accessed Dec. 17, 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.

12/20-1461346C

Shortlink

What Is “Stakeholder Capitalism”?

In its monthly Investment Insights publication, Merrill Lynch noted that while nationalism has been a strong trend throughout the past few years, globalism in the prior 30 years did much to reduce poverty worldwide. As trade agreements shifted many U.S. jobs and operations overseas, the average income of the lower 50% of global earners nearly double between 1980 and 2016. However, this came at a price, including the mass exodus of U.S. jobs and stagnant wages at the low-income scale.1 And yet, U.S. investors benefitted from higher corporate profit margins and subsequent higher stock prices.

In 2020, the COVID pandemic created yet another wealth imbalance. The combined net worth of American billionaires increased by 36% between mid-March and December, while nearly 50% of lower-income adults struggled to pay their bills during the same timeframe.2

Even the Federal Reserve contributed to this divide, albeit inadvertently. By pushing interest rates down and injecting more cash into the loan market, investor confidence received a boost and many transitioned their portfolio allocations to higher-risk, higher-performing investments, which in turn increased stock prices.3

Many factors contribute to stock market performance that are not necessarily tied to stronger company fundamentals. Perhaps in response to these recent market influences, there is an emerging trend in stock market investing. It’s not just about how well a stock performs, but how the company achieved that performance. Many wealth managers are seeing an economic shift toward “stakeholder capitalism,” basically a tighter focus on corporate enhancements that potentially benefit all stakeholders, including employees, customers and local communities, as well as shareholders.4

This approach represents a shift away from how company stocks have been evaluated in the past two decades, which often placed more emphasis on quarterly profits and less on five- to 10-year plans. Focusing on long-term results can help weather brief periods of volatility and disruption. Feel free to contact one of our advisors to discuss.

Last September, the World Economic Forum’s International Business Council released standardized Stakeholder Capitalism Metrics (SCM). This is a measure of how companies treat their workers, their communities and the environment. The goal is to monitor these metrics with the idea of directing more capital to companies that deliver both positive returns and high satisfaction among all stakeholders.

Content prepared by Kara Stefan Communications.

1 Merrill Lynch. September 2020. “Investment Insights.” https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/ML_The_Great_Shift_3235536_v10.pdf. Accessed Dec. 11, 2020.

2 Juliana Kaplan. Business Insider. Dec. 12, 2020. “American billionaires’ net worths have grown to $4 trillion during the coronavirus pandemic.” https://www.businessinsider.com/billionaires-net-worths-have-grown-to-4-trillion-during-pandemic-2020-12. Accessed Dec. 12, 2020.

3 Sean Ross. Investopedia. Nov. 24, 2020. “How Quantitative Easing (QE) Affects the Stock Market.” https://www.investopedia.com/ask/answers/021015/how-does-quantitative-easing-us-affect-stock-market.asp. Accessed Dec. 11, 2020.

4 Doug Sundheim and Kate Starr. Harvard Business Review. Jan. 22, 2020. “Making Stakeholder Capitalism a Reality.” https://hbr.org/2020/01/making-stakeholder-capitalism-a-reality. Accessed Dec. 31, 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.

12/20-1458169C

Shortlink

What’s Ahead for the Stock Market?

In November, the Dow experienced its best month since 1987, while the S&P 500 and Nasdaq indexes enjoyed their best month since April of this year.1

With the election behind us and a vaccine on the horizon, the stock market has plenty to celebrate. Many consumers used the pandemic period to shore up their savings, which bodes well for their prosperity in the coming year. There is a low chance of increased taxes or massive reforms given the divide in Congress, and while interest rates remain low, the home-buying market is poised to soar on renewed consumer confidence. All of these factors may be historically good news for investment markets.2

The stock market increases 82% of the time in the first year of new presidential terms,3 and the S&P 500 has averaged 11.7% returns in the first year of every presidential term since the end of World War II, regardless of party affiliation. Furthermore, the S&P 500 has averaged 15.6% returns with Democratic presidents compared 10% with Republican presidents. Industries like technology, health care, financials and industrials tend to thrive under a Democratic president.4

Despite jobs and economic growth taking a hit in 2020, that fortunately wasn’t reflected in the stock market. For more insight on how to plan for the coming year, feel free to reach out to one of our financial advisors for a review.

Content prepared by Kara Stefan Communications.

1 Matt Egan. CNN. Nov. 30, 2020. “Trump said the stock market would crash if Biden won. The Dow just had its best month since 1987.” https://www.cnn.com/2020/11/30/business/stock-market-dow-jones-trump-biden/index.html. Accessed Nov. 30, 2020.

2 Jeremy Siegel. Knowledge@Wharton. Nov. 21, 2020. “Jeremy Siegel: What’s Ahead for the Stock Market?” https://knowledge.wharton.upenn.edu/article/siegel-markets-economy/. Accessed Nov. 30, 2020.

3 Mark Hulbert. Marketwatch. Nov. 28, 2020. “Opinion: Here are your odds that stock prices will be higher at the end of 2021.” https://www.marketwatch.com/story/here-are-your-odds-that-stock-prices-will-be-higher-at-the-end-of-2021-2020-11-24?mod=MW_section_top_stories. Accessed Nov. 30, 2020.

4 Savita Subramanian. Merrill Lynch. Oct. 8, 2020. “The Markets and Presidential Elections.” https://www.ml.com/articles/market-volatility-presidential-elections.html#financial-research-and-insights. Accessed Nov. 30, 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.

12/20-1440215C

Shortlink

The Effect of Debt on the Global Economy

The national debt is a measurement of how much the federal government owes creditors, most commonly depicted as a percentage of gross domestic product (GDP). A high debt-to-GDP ratio is considered viable when the economy is expanding, because that growth allows the government to generate higher tax revenues to help pay down the debt. However, it’s not good when the economy is in decline, which is the current status not only in the U.S., but in many countries throughout the world.1

For context, the stimulus efforts and tax cuts that allowed the U.S. to emerge from the Great Recession significantly increased the national public debt. In 2010, the debt ratio was 52% of GDP, but by the end of 2019, it had risen to 79%, the largest increase in any decade since the post-WWII 1940s.2 But now, according to the Congressional Budget Office, the U.S. debt ratio is estimated to reach 98% by the end of the year.3

Speaking of debt, how has your household fared in the wake of this year’s economic decline? Has your debt-to-income ratio increased substantially, or do you have it under control with plenty of income to cover your expenses? It can be a challenge to balance your need to pay off debt with your need to invest for the future. It’s a good idea to maintain a balance so you can continue reducing debt while saving for the long-term. It’s also important to regularly evaluate your financial strategy to ensure it reflects your current goals and objectives, so please keep us in mind any time you’re considering making changes to your strategy.

At the recent Bloomberg New Economy Forum, there were calls for more government stimulus  support to boost consumer spending and keep the economy running, and not just in the U.S. Christine Lagarde, the president of the European Central Bank, warned that stimulus needs to continue playing a role until the virus is contained. Like many countries across the globe, Southeast Asia took a hit during the second quarter, rebounded in the third and has braced for increased outbreaks occurring in the final quarter of 2020.4

Wall Street analysts warn that it won’t take much for the U.S., Europe and Japan economies to contract again in the next two quarters, despite the bounce back last summer.5 Overall, economists expect the global economy to shrink by 5% in 2020, in part due to the 20% reduction in world trade.6

One idea to help rebuild economies is to retrain workers who have lost jobs during the pandemic in fields, such as cybersecurity, software programming and other technology positions.7

1 John Letzing. World Economic Forum. Nov. 5, 2020. “Countries are piling on record amounts of debt amid COVID-19. Here’s what that means.” https://www.weforum.org/agenda/2020/11/covid-19-has-countries-borrowing-money-just-about-as-quickly-as-they-can-print-it/. Accessed Nov. 24, 2020.

2 Peter G. Peterson Foundation. Dec. 19, 2019. “Nine trillion added to the national debt over the last decade.”; https://www.pgpf.org/blog/2019/12/9-trillion-added-to-the-national-debt-over-the-last-decade. Accessed Nov. 24, 2020.

3 Investopedia. Sept. 23, 2020. “The National Debt Explained”; https://www.investopedia.com/updates/usa-national-debt/. Accessed Nov. 24, 2020.

4 Bloomberg. Nov. 23, 2020. “World Leaders Urge Pressing the Pedal on Stimulus.” https://www.bloomberg.com/news/articles/2020-11-18/tokyo-bolsters-push-to-lure-business-from-hong-kong-nef-update. Accessed Nov. 24, 2020.

5 Enda Curran and Jeff Black. BloombergQuint. Nov. 17, 2020. “World Economy Teeters Near New Slump, Defying Vaccine Optimism.” https://www.bloombergquint.com/global-economics/world-economy-risks-buckling-into-2021-despite-vaccine-nearing. Accessed Nov. 24, 2020.

6 Dr. Dan Steinbock. The Street. Nov. 23, 2020. “World’s Largest Free-Trade Pact Inspiration for Global Recovery.” https://www.thestreet.com/economonitor/news/from-rcep-and-brics-to-apec-and-g20-summits-worlds-largest-free-trade-pact-inspiration-for-global-recovery. Accessed Nov. 24, 2020.

7 Rory Heilakka. World Economic Forum. Nov. 24, 2020. “How upskilling could help cities rebuild after Coronavirus.” https://www.weforum.org/agenda/2020/11/how-upskilling-could-help-cities-rebuild-after-coronavirus/. Accessed Nov. 24, 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.

12/20-1440204C

Shortlink

China’s Rebound

In mid-November, China signed an important and symbolic free-trade agreement with 14 countries, including Japan, South Korea, New Zealand and Australia. The deal, which represents 30% of the world’s population, eliminates tariffs and quotas on 65% of goods traded in the Asia-Pacific region. Global economists say the deal is further evidence of Asia’s growing power, particularly considering China’s feuding tariffs with the U.S. throughout the past four years.1

According to data from the International Monetary Fund, in 2019, China represented 40% of global economic growth – more than the global growth contributions of the U.S., Europe and Japan combined. This year, China’s economy has proven quite resilient, particularly when compared to other developed countries in the wake of the global financial crisis, Trump tariffs and even the coronavirus.2

How about you? Has your household proven to be as resilient in the wake of this global crisis as your friends, family and colleagues? If so, what was the key? Perhaps it is because you were able to maintain your level of income. What makes your job or source of income more reliable than others during an economic crisis that has affected so many industries? Consider whether your spending levels as the same as before. Perhaps not the same types of expenses, but has your solid financial status given you confidence to spend without interruption? It’s important to ask these questions because we don’t want our success to be a matter of haphazard good luck.

We should continue to engage in intentional, goal-driven financial planning to keep our household on track and secure. If you have survived the financial effects of the COVID outbreak to date, congratulations. Keep doing what you’re doing. If you’ve slipped a bit, assess your financial weaknesses and devise a plan to shore them up. As always, we are here to help enhance your portfolio, realize investment opportunities and secure your family’s financial future.

In China, the coronavirus is largely under control. Consequently, the economic recovery has been V-shaped, led by strong domestic consumer demand. This trendline demonstrates a direct correlation between “flattening the curve” and economic recovery. Chinese revenues continue to trend upward in auto sales, residential real estate, and even restaurants and bars – although the latter are not fully restored to pre-pandemic levels due to continued caution with large indoor gatherings.3

The obvious lesson here is that containing COVID-19 is the key to any country’s economic recovery. The evidence doesn’t lie solely with China. Other countries that have successfully controlled the spread of the virus, such as Taiwan, South Korea and Lithuania, also experienced lessened economic effects.4

Like every other country in the world, the Chinese economy will not be able to recover completely until a safe and effective vaccine is widely available. However, because it acted quickly and aggressively to contain the virus within its boundaries, the country is expected to continue being a driver of global growth, even being called “the world’s best consumer story in 2021.”5

1 Jill Disis and Laura He. CNN. Nov. 17, 2020. “China signs huge Asia Pacific trade deal with 14 countries.” https://www.cnn.com/2020/11/16/economy/rcep-trade-agreement-intl-hnk/index.html. Accessed Nov. 17, 2020.

2 Andy Rothman. Matthews Asia. July 16, 2020. “China’s Economic resilience.” https://global.matthewsasia.com/resources/docs/global.matthewsasia.com/pdf/Sinology/071620-Sinology.pdf. Accessed Nov. 16, 2020.

3 Andy Rothman. Matthews Asia. Aug. 14, 2020. “Four China Trends.” https://global.matthewsasia.com/resources/docs/global.matthewsasia.com/pdf/Sinology/081420-Sinology.pdf. Accessed Nov. 16, 2020.

4 Joe Hasell. Our World in Data. Sept. 1, 2020. “Which countries have protected both health and the economy in the pandemic?” https://ourworldindata.org/covid-health-economy. Accessed Nov. 16, 2020.

5 Andy Rothman. Matthews Asia. Oct. 19, 2020. “China After COVID.” https://us.matthewsasia.com/perspectives-on-asia/sinology/default.fs. Accessed Nov. 16, 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.

The information contained in this material is provided by third parties and has been obtained from sources 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.

Shortlink

Open Enrollment: Health Care Insurance Takes Priority

The Patient Protection and Affordable Care Act (ACA) – passed in 2010 and known colloquially as “Obamacare” – has experienced quite a ride. Initially, it was embraced by millions of Americans for whom it afforded tax-subsidized health insurance without access to employer-sponsored coverage. At the same time, it was derided for increasing government sharing costs to provide that coverage.

However, throughout the years, the ACA has become more embraced by a wider audience. As workers lost jobs, they discovered an affordable insurance option and, today, most know someone who has benefited from health reform legislation. Perhaps the most popular benefit is banning insurance companies from declining coverage – or charging more – for pre-existing conditions.

One of the more challenging provisions has been the individual mandate that requires everyone to purchase health insurance or pay a penalty. This particular clause has been challenged all the way to the U.S. Supreme Court (SCOTUS) three times, most recently in November. Even if the mandate is found unconstitutional, it’s unlikely the Supreme Court will strike down the entire ACA.1

Regardless of the popularity or fate of Obamacare, it still doesn’t fully meet the nation’s needs. To date, 43.4% of the nation’s adults ages 19 to 64 are underinsured and 12.5% of adults remain altogether uninsured.2

This fall, Americans have engaged in yet another open enrollment period amid the backdrop of the SCOTUS hearing and the presidential election. For many, health care was a primary issue on the ballot. The enrollment period affects nearly everyone, including workers who select employer-sponsored insurance3, those in the individual market4, and individuals who can continue or change their Medicare plan.5 Health care insurance options can be confusing, mainly because they don’t always cover all of your needs. If you are looking for ways to help pay for possible uncovered health care expenses, we may be able to help. Some insurance products, such as life insurance and annuities, provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.

Because of the many jobs lost due to the coronavirus, employer-sponsored benefits are more appreciated than ever before. And because of the pandemic, benefits experts say employees are more aware of options they may not have paid attention to in the past – such as sufficient life and long-term disability insurance.6

With a new presidential administration taking office, it will be interesting to see how new health care reforms play out in Congress. According to a new report on the current state of our health care system, the numbers aren’t good. Presently:

  • Americans are living shorter lives than they did in 2014.
  • African-Americans are twice as likely as whites to die from treatable conditions.
  • Health coverage gains have stalled rather than increased.
  • Insurance coverage rates vary widely from state-to-state.
  • Health insurance affordability and out-of-pocket costs have gotten worse.

Another insight evidenced by the coronavirus is that the U.S. health care system is far less prepared than other wealthy nations to adequately deal with a pandemic situation.7

Content prepared by Kara Stefan Communications

1 Nina Totenburg. NPR. Nov. 10, 2020. “Will Supreme Court Invalidate Obamacare A Decade After It Was Enacted?” https://www.npr.org/2020/11/10/932441334/will-supreme-court-invalidate-obamacare-a-decade-after-it-was-enacted. Accessed Nov. 13, 2020.

2 Sara R. Collins, Munira Z. Gunja, and Gabriella N. Aboulafia. Commonwealth Fund. Aug. 19, 2020. “U.S. Health Insurance Coverage in 2020: A Looming Crisis in Affordability.” https://www.commonwealthfund.org/publications/issue-briefs/2020/aug/looming-crisis-health-coverage-2020-biennial. Accessed Nov. 13, 2020.

3 Maggie Germano. Forbes. Nov. 13, 2020. “Half Of Employees Believe Open Enrollment Is More Important In 2020 Than It Was In 2019.” https://www.forbes.com/sites/maggiegermano/2020/11/13/half-of-employees-believe-open-enrollment-is-more-important-in-2020-than-it-was-in-2019/?sh=21b01f6e74d5. Accessed Nov. 13, 2020.

4 Julie Appleby. NPR. Oct. 20, 2020. “The Affordable Care Act’s Fate Is In Flux But 2021 Health Plan Prices Are Stable.” https://www.npr.org/sections/health-shots/2020/10/20/925596125/the-affordable-care-acts-fate-is-in-flux-but-2021-health-plan-prices-are-stable. Accessed Nov. 13, 2020.

5 Sarah O’Brien. CNBC. Nov. 4, 2020. “Here are tips for getting your 2021 Medicare drug coverage right during open enrollment.” https://www.cnbc.com/2020/11/04/here-are-tips-for-getting-your-2021-medicare-drug-coverage-right-.html. Accessed Nov. 3, 2020.

6 Jessica Dickler. CNBC. Nov. 2, 2020. “Open enrollment is underway — here are 5 tips for maximizing your benefits during a public health crisis.” https://www.cnbc.com/2020/11/02/5-things-to-watch-out-for-during-open-enrollment-amid-coronavirus.html. Accessed Nov. 13, 2020.

7 Dan Cook. BenefitsPro. Sept. 12, 2020. “U.S. health care system on life support, say test results from new study.” https://www.benefitspro.com/2020/09/14/u-s-health-care-system-on-life-support-say-test-results-from-new-study/. Accessed Nov. 13, 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.

12/20 1424414

Shortlink

Advantages of Gender-Lens Investing

Gender-lens investing is the tactic of screening companies through female-centric filters. According to analysis by the Wharton School of Business, these filters include:

  • Advancing women in finance
  • Advancing women in leadership
  • Advancing products and services that improve the lives of women
  • Advancing companies that have a positive effect on their female employees
  • Advancing companies that improve the lives of women in their ecosystem (e.g., suppliers, distributors, customers)

While female business founders currently receive less than 3% of all venture capital in the U.S., there has been a significant rise in gender-lens investing throughout the past few years.1

Some people make detached and largely performance-based investment decisions. They seek returns to help them meet their financial goals, wanting only the best opportunities to meet that objective. But for others, investing can be more personal. After all, they give companies money and trust that those organizations will pursue best practices in terms of corporate governance, growth and expansion, as well environmental and employment responsibility.

Gender-lens investing helps promote gender equality and can help level the playing field when it comes to compensation, business funding and management practices — factors known to improve overall economic growth.2 Whatever your investment philosophy and financial goals, we want to help you achieve them.

Part of this trend has to do with the stronger role women have taken in managing their own money — a wave energized by young adults. A recent study by Merrill Lynch found that more women today enter marriage with their own money and manage their investments separately from their spouse. Also, younger married women are more than twice as likely to claim the role of primary decision maker than older married women. In fact, 75% of women under age 45 manage their own finances, compared to 50% of those over age 55.3

Some economists have estimated the gap caused by gender-based inequality costs the economy about 15% of GDP. Companies with high levels of employment and leadership opportunities for women have been found to have higher organizational effectiveness and growth.4 Moreover, those that enforce policies promoting gender equality may provide better returns and less risk for investors.5

Social justice and gender equality filters have been embraced by many female investors — who are projected to control about two-thirds of all wealth within the next decade. Venture capital is a particular focus for infusing gender-lens investments. On average, female CEOs are generating more revenue per dollar invested and delivering investor returns faster than their all-male counterparts.6

Content prepared by Kara Stefan Communications.

1 Knowledge@Wharton. Oct. 2, 2020. “How Gender Lens Investing Is Gaining Ground.” https://knowledge.wharton.upenn.edu/article/how-gender-lens-investing-is-gaining-ground/. Accessed Nov. 3, 2020.

2 Adi Gaskell. Forbes. May 14, 2020. “How Workplace Equality Can Drive The Economy (With A Little Help From AI).” https://www.forbes.com/sites/adigaskell/2020/05/14/how-workplace-equality-can-drive-the-economy-with-a-little-help-from-ai/?sh=2e2cda662c35. Accessed Nov. 3, 2020.

3 Merrill Lynch. Aug. 21, 2020. “Creating a better financial future for women.” https://www.ml.com/women-research.html. Accessed Nov. 3, 2020.

4 UN Women. July 2018. “Facts and Figures: Economic Empowerment.” https://www.unwomen.org/en/what-we-do/economic-empowerment/facts-and-figures. Accessed Nov. 3, 2020.

5 Kristen Beckman. BenefitsPro. Oct. 16, 2020. “Gender lens investing highlights corporate progress, challenges.” https://www.benefitspro.com/2020/10/16/gender-lens-investing-highlights-corporate-progress-challenges/. Accessed Nov. 3, 2020.

6 Jenny Abramson. CIO Review. 2020. “What Does RGB’s Death Mean for the Investing World?” https://tech-startup.cioreview.com/cxoinsight/what-does-rbgs-death-mean-for-the-investing-world-nid-32220-cid-213.html. Accessed Nov. 3, 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.

11/20-1416296C

Shortlink

Social Security Updates

The Social Security Administration (SSA) recently announced a new cost-of-living adjustment (COLA) starting in 2021. Beneficiaries can expect a 1.3% increase in their income payouts next year, which is actually smaller than the COLA increase was for this year.1 For single households, that’s an average increase of about $20 a month; $33 for married retirees.2

Among older Americans who work and also have begun drawing Social Security benefits, the earnings limit for those younger than full retirement age will increase to $18,960, which means the SSA will deduct $1 from benefits for every $2 earned above that amount. For those who will reach full retirement age during 2021, their earnings limit increases to $50,520. For this group, on earned income that exceeds the $50,520 threshold, the SSA will deduct $1 from benefits for every $3 earned (until the month the worker turns full retirement age). Once you’ve reached full retirement age — which is based on your birthdate — there is no limit; you can earn as much as you like without it impacting your Social Security benefits.3

If you believe your future retirement income won’t be enough to meet your needs, give us a call. We can help identify potential retirement income gaps and create a financial strategy using a variety of insurance and investment products to help you work toward your long-term goals.

Unfortunately, more than 40% of retirees depend on Social Security benefits as their sole source of income. Without it, the number of elderly poor would increase by more than 200%. Furthermore, according to a study by the National Institute on Retirement Security, the program reduces other public assistance costs by $10 billion in a single year.4

Among the nation’s population of more than 328 million, 48 million receive Social Security retirement benefits. That number that will continue to grow in the coming years as the large baby boomer population retires from the workforce.5

While the SSA has warned for many years that Congress must act to make changes to the program before the Social Security Trust Fund is projected to be depleted (in 15 years),6 this is a sensitive issue often avoided during election years, which come around every two years. While some conservative politicians have expressed the need to reduce benefits to reduce the nation’s deficit, that’s not a popular stance. Other proposals include increasing the maximum income subject to FICA taxes, which fund Social Security benefits; raising the retirement age; or paying benefits only to lower-income retirees.7

Content prepared by Kara Stefan Communications.

1 Social Security Administration. Oct. 13, 2020. “Cost-of-Living Adjustment (COLA) Information for 2021.” https://www.ssa.gov/cola/. Accessed Oct. 29, 2020.

2 CBS News. Oct. 13, 2020. “Social Security to pay extra $20 a month on average in 2021, one of smallest hikes ever.” https://www.cbsnews.com/news/social-security-2021-cola-retirees-to-get-extra-20-a-month-on-average-in-2021/. Accessed Oct. 29, 2020.

3 Social Security Administration. Oct. 13, 2020. “Cost-of-Living Adjustment (COLA) Information for 2021.” https://www.ssa.gov/cola/. Accessed Oct. 29, 2020.

4 Marlene Satter. BenefitsPro. Jan. 23, 2020. “Social Security is the sole retirement plan of 40 percent of older Americans.” https://www.benefitspro.com/2020/01/23/social-security-is-the-sole-retirement-plan-of-40-percent-of-older-americans/. Accessed Oct. 29, 2020.

5 Nichole Morford. BenefitsPro. Aug. 28, 2019. “10 ‘must know’ FAQs on Social Security.” https://www.benefitspro.com/2019/08/28/10-must-know-faqs-on-social-security-412-86573/. Accessed Oct. 29, 2020.

6 Kathleen Romig. Center on Budget and Policy Priorities. May 13, 2020. “What the 2020 Trustees’ Report Shows About Social Security.” https://www.cbpp.org/research/social-security/what-the-2020-trustees-report-shows-about-social-security. Accessed Nov. 18, 2020.  

7 Josie Albertson-Grove. New Hampshire Union Leader. Oct 24, 2020. “Candidates differ on how to preserve Social Security trust fund.” https://www.unionleader.com/news/politics/voters/voters_guide/candidates-differ-on-how-to-preserve-social-security-trust-fund/article_3e2ceb26-83b8-5574-8970-bd88d7e887dc.html. Accessed Oct. 29, 2020.

Our firm is not affiliated with the U.S. government or any governmental agency.

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.

11/20-1409299C

Shortlink

Let’s Talk About … the 401(k)

The 401(k) originally began as a company profit-sharing plan. Companies had been funding defined benefit pensions for years, but as their annual profits and stock prices experienced volatility, they looked for ways to share that burden with employees. Through profit sharing, workers made money when the company did and made less during down years. While the actual section 401(k) tax law provision came later, this plan allowed employees to defer salary contributions into a retirement account before deducting taxes and established rules to ensure the plan was available to all employees, not just executives.1

Once the 401(k)-style plan was established, it could be used to invest in more than just company stock. Instead, it was a way to put investment control into workers’ hands without limiting their retirement income prospects based on their company’s performance. By contributing to their retirement portfolio and customizing how it was invested, employees had the opportunity to out-earn previous pension benefit levels and live a fuller retirement lifestyle.2

That hasn’t proven to be the case for many workers. The shift to personal savings and investment money management hasn’t led to high levels of reliable income as pensions did.3 After all, your average worker doesn’t have in-depth investment knowledge or the time to follow the markets closely. And, unless they were willing to pay an advisor for advice, they wouldn’t get much help in this area.

This is one reason to work with a financial advisor who is willing to help you manage your entire financial picture. It’s important to ensure that any individual investment portfolio doesn’t overlap too much with 401(k) holdings so you stay properly diversified. By the same token, you should consider all of your holdings when establishing an asset allocation to help you meet your financial goals. We’re happy to evaluate your portfolio, including your 401(k) investment options. Just give us a call.

In recent years, more employers have started offering “financial wellness benefits” to help employees manage their 401(k) investments. These may involve online resources or actual advisors with whom you can consult regarding your 401(k) plan.4 However, your employer-sponsored advisor may not be able to advise you on your entire investment portfolio.

Employers used to absorb the cost of managing a pension fund, but today employees have to pay individual fees for a wealth manager to manage their 401(k), and it’s not cheap. The average fee to manage a 401(k) account is around 0.5 percent a year. Over a 40-year time span, those fees can really add up and impact total earnings.5

Despite any drawbacks, 401(k) plans often offer a benefit unlike no other investment: free money. Many employers will match worker contributions up to a certain percentage. This allows them to still contribute to their employees’ retirement savings even though they are not providing a pension plan. Recently, the IRS announced 401(k) plan contribution limits for next year. While the salary deferral amount remains the same at $19,500 ($6,500 catch-up for age 50-plus), it raised the overall contribution limit from $57,000 to $58,000 in 2021. This helps if your employer plan permits special after-tax salary deferrals, and it can benefit self-employed workers who have a solo or individual 401(k) or SEP retirement plan.6

Content prepared by Kara Stefan Communications.

1 Elizabeth Bauer. Forbes. March 7, 2020. “Fact Check: Were 401(k)s Really An ‘Accident Of History’?” https://www.forbes.com/sites/ebauer/2020/03/07/fact-check-were-401ks-really-an-accident-of-history/#7f70362f6110. Accessed Oct. 28, 2020.

2 Maryalene LaPonsie. U.S. News & World Report. July 22, 2020. “What’s the Difference Between a Pension Plan and a 401(k)?” https://money.usnews.com/money/retirement/401ks/articles/pension-vs-401-k. Accessed Oct. 28, 2020.

3 Monique Morrissey. Economic Policy Institute. Dec. 10, 2019. “The State of American Retirement Savings.” https://www.epi.org/publication/the-state-of-american-retirement-savings/. Accessed Oct. 28, 2020.

4 James Mahaney. Pension Research Council. Feb. 20, 2020. “What’s Behind the Growth of Financial Wellness Programs.” https://pensionresearchcouncil.wharton.upenn.edu/blog/whats-behind-the-growth-of-financial-wellness-programs/. Accessed Oct. 28, 2020.

5 Ethan Schwartz. Bloomberg. Oct. 8, 2020. “401(k) Fees Are Eating Your Retirement Savings.” https://www.bloomberg.com/opinion/articles/2020-10-08/401-k-fees-are-eating-your-retirement-savings. Accessed Oct. 28, 2020.

6 Ashlea Ebeling. Forbes. Oct. 26, 2020. “IRS Announces 2021 Retirement Plan Contribution Limits For 401(k)s And More.” https://www.forbes.com/sites/ashleaebeling/2020/10/26/irs-announces-2021-retirement-plan-contribution-limits-for-401ks-and-more/#76dc757f215f. Accessed Oct. 28, 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.

11/20-1396861C

Shortlink

America’s Need for Better “Infloodstructure”

In February, Spirit Airlines decided to transfer a portion of its operations from Miramar, Florida, to Nashville, Tennessee. The key driver of this decision was recurring hurricane and tropical storm risk. This means a loss of 240 jobs for the Panhandle area.1

By mid-September of the 2020 hurricane season, mainland U.S. had already been hit by nine named storms — the most on record since 1916. Meteorologists say that record could be broken by the end of the 2020 season.2

Have you experienced damage in recent years due to extreme weather conditions? In many cases, homeowners can purchase other types of insurance to supplement gaps in a homeowner’s policy. These may include flood insurance, a personal umbrella policy and special riders for things like valuables (jewelry, furs, fine arts, musical instruments, silver), antique and collector cars, watercraft/yachts or ATVs. If you’re interested in having a household budget review to see where you stand financially and discuss insurance options to help shore up any gaps, please contact us.

While nearly every area of the country experiences some type of natural disaster — from earthquakes to crippling snowstorms to wildfires — there are ways to mitigate some of the adverse effects. For example, greater investment in infrastructure can help prevent damages caused by storm surges and flooding. According to the National Oceanic and Atmospheric Administration, our most prevalent and expensive natural disasters involve flooding, with losses totaling well over $750 billion since the turn of this century. Experts say that the damage caused by inland flooding is generally compounded by the nation’s widespread outdated infrastructure.3

In September of this year, the House of Representatives introduced new legislation designed to adopt design and building codes based on current flood risks for all major construction of facilities and infrastructure. Legislators believe that investing in new and upgraded flood mitigation projects involving roads, bridges and railways, water and wastewater facilities, and electric and telecommunications substations would be cost-effective. In other words, investing in new infrastructure would be cheaper than paying for the fallout and economic losses due to disruption (e.g., closed schools, shuttered businesses and blocked access to medical facilities).4

The economic piece of this is important. While cities and towns may receive federal funding to rebuild after flood damage, the financial toll on individual households can be devastating. This is particularly true in flood-prone rural areas such as Lake Charles, Louisiana. Low-income parts of the country tend to be disproportionately affected and the slowest to recover.5 Because they were already poor before the disaster, they often lack insurance, access to credit and/or the resources necessary to apply for government aid — such as a computer or a car.

Some of the nation’s water and wastewater infrastructure is more than 100 years old, and much of it is near the end of its effective service life. The American Water Works Association estimates that the country needs to invest about $1 trillion in upgrades, repair and addition of new pipelines to meet the demand for drinking water service alone throughout the next 25 years.6

Content prepared by Kara Stefan Communications.

1 David Lyon. South Florida SunSentinel. Feb. 14, 2020. “Spirit Airlines has seen enough hurricanes; it’s moving https://www.sun-sentinel.com/business/fl-bz-spirit-moving-operations-center-20200214-puggqeofnneqxks7ici5y4pnny-story.html. Accessed Oct. 21, 2020.

2 Kathryn Prociv and Phil Helsel. NBC News. Sept. 21, 2020. “Beta becomes 9th landfall storm of 2020 in a record-shattering season.” https://www.nbcnews.com/news/weather/beta-be-9th-landfall-storm-2020-record-shattering-season-n1240603. Accessed Oct. 21, 2020.

3 Laura Lightbody The Pew Charitable Trusts. Jan. 2018. “Modern, Flood-Ready Approach Needed for Building and Rebuilding.” https://www.pewtrusts.org/en/research-and-analysis/articles/2018/01/modern-flood-ready-approach-needed-for-building-and-rebuilding. Accessed Oct. 21, 2020.

4 Laura Lightbody. The Pew Charitable Trusts. Sept. 30, 2020. “New Bill Aims to Make Communities and Infrastructure More Flood-Ready.” https://www.pewtrusts.org/en/research-and-analysis/articles/2020/09/30/new-bill-aims-to-make-communities-and-infrastructure-more-flood-ready. Accessed Oct. 21, 2020.

5 Knowledge@Wharton. Oct. 5, 2020. “Disaster Relief: Why the Poor Need Higher Priority.” https://knowledge.wharton.upenn.edu/article/disaster-relief-why-the-poor-need-higher-priority/. Accessed Oct. 21, 2020.

6 Zacks Equity Research. Oct. 21, 2020. “American Water’s Unit to Invest $4.1M to Replace Water Mains.” https://finance.yahoo.com/news/american-waters-unit-invest-4-114111403.html. Accessed Oct. 21, 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.

11/20-1394937C