Shortlink

Takeaways From Warren Buffett’s Annual Shareholders Letter

“When seeking directors, CEOs don’t look for pitbulls. It’s the cocker spaniel that gets taken home.”1

The above quote is one of the ideas Warren Buffett conveyed in his most recent Berkshire Hathaway annual letter to shareholders.1 Buffett drives home the point that people who serve on the boards of public companies are there to represent shareholders, not to blindly comply with company management initiatives. It is the scrutiny of board members that help drive shareholder value and prevent the company from stumbling due to poor management decisions.

Buffett makes the case for board members to be seasoned experts at running a business, particularly within the same industry.2 It’s important to seek input from someone who specializes in the topic at hand. The same applies to managing investments. No matter how skilled you are at your profession, it’s usually beneficial to work with someone who focuses solely on creating financial strategies.

As usual, one of the world’s most forthright and accessible billionaires offers a wealth of unique perspectives from his perch as chairman of Berkshire Hathaway. One such tidbit Buffett shared this year is that he favors companies that retain earnings to reinvest in the business rather than paying out a high share as dividends.3

Buffett continues to tout equities, despite the recent market downturn, for investors with a long-term perspective. In fact, he refers to the ideal equity investor as “the individual who does not use borrowed money and who can control his or her emotions.”4

Now that he’s working from home during the COVID-19 outbreak, Buffett reiterated one long-tendered recommendation. He said he’s drinking even more of his favorite beverage, Coca-Cola, of which he purchased more than $1 billion in stock back in 1988. Today, Coca-Cola remains one of his investment firm’s largest positions.5

The lesson? Acquire the stock of companies that produce products you believe in, and hold onto them for the long haul.

Content prepared by Kara Stefan Communications.

1 Warren Buffett. Berkshire Hathaway. Feb. 22, 2020. “To the Shareholders of Berkshire Hathaway Inc.” https://www.berkshirehathaway.com/letters/2019ltr.pdf?mod=article_inline. Accessed March 24, 2020.

2 Mitch Tuchman. Marketwatch. March 23, 2020. “Opinion: Warren Buffett’s latest advice could help you retire much richer.” https://www.marketwatch.com/story/warren-buffetts-latest-advice-could-help-you-retire-much-richer-2020-03-16?mod=home-page. Accessed March 24, 2020.

3 Will Ashworth. InvestorPlace. March 3, 2020. “10 Key Lessons Warren Buffett Shares in His Annual Shareholder Letter.” https://investorplace.com/2020/03/10-key-lessons-warren-buffett-shares-in-his-annual-shareholder-letter/. Accessed March 24, 2020.

4 Susan Dziubinski. Morningstar. Feb. 24, 2020. “4 Takeaways from Berkshire Hathaway’s Shareholder Letter.” https://www.morningstar.com/articles/968329/4-takeaways-from-berkshire-hathaways-shareholder-letter. Accessed March 24, 2020.

5 Tom Huddleston Jr. CNBC. March 17, 2020. “Warren Buffett is working from home and ‘drinking a little more Coca-Cola’ amid coronavirus restrictions.” https://www.cnbc.com/2020/03/17/warren-buffett-is-working-from-home-amid-coronavirus-restrictions.html. Accessed March 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.

1135754C

Shortlink

Contingency Plans Helpful to Weather the Unexpected

Financial advisors often tell clients to keep an emergency fund of liquid assets, with enough to cover three to six months of living expenses. It makes you wonder why America’s largest companies don’t maintain a similar practice, with three to six months of emergency savings to help keep workers on payroll during difficult times.

Unfortunately, it is common during economic downturns, including pandemics, for companies to reduce hours, send workers home without pay or lay off employees altogether.1 This is why it’s important for every household to have a contingency plan for when the unexpected happens.

If you don’t have a plan B for loss of income, savings or investment dividends — or if your plan B isn’t working and you need to come up with a plan C — we’re here for you. Give us a call to discuss ways to position assets to help establish greater financial confidence for your household moving forward.

Federal regulators recently announced that homeowners unable to pay their mortgage due to lost income from the COVID-19 pandemic may be eligible to reduce or suspend their mortgage payments for up to 12 months.2 Consider your options carefully, particularly if you have enough savings to cover these payments for the foreseeable future. Homeowners will have to work out a repayment plan with their lender, which could result in higher monthly payments or extending the term of the loan.

If you have any supplemental insurance policies, you may want to pull out those contracts and read about their coverages and exclusions. For example, critical illness insurance is not likely to cover COVID-19 because it’s not a specified illness on the policy.

Small businesses are generally advised to create a contingency plan, but this is usually comprised of things like capital and credit sources, supply chain alternatives, and even a public relations crisis management plan.3 While keeping home-bound workers on the payroll is an unusual tactic, small business owners may want to consider the alternative. When the economy recovers and jobs ramp back up, you’ll have to start the recruitment process all over again and may lose out on regaining your highly trained talent.

According to the Work Institute’s 2017 Retention Report, the replacement cost is $15,000 per employee earning $45,000 a year.4 If the current loss of business lasts three months, how does that compare to the cost of keeping already trained and productive workers on the payroll during the pandemic?

There’s a bigger picture, as well. Those who lose their jobs and income cease to be active consumers, which slows down the economy and makes it harder for small businesses to recover.

Content prepared by Kara Stefan Communications.

1 Carmen Reinicke. Business Insider. March 20, 2020. “The coronavirus outbreak is causing a historic spike in US layoffs. Here’s what 4 Wall Street experts are saying – and how much worse they think it can get.” https://markets.businessinsider.com/news/stocks/us-layoffs-spiking-coronavirus-expert-reaction-commentary-economy-unemployment-analyst-2020-3-1029016785. Accessed March 20, 2020.

2 Chris Arnold. NPR. March 19, 2020. “U.S. Orders Up To A Yearlong Break On Mortgage Payments.” https://www.npr.org/2020/03/19/818343720/homeowners-hurt-financially-by-the-coronavirus-may-get-a-mortgage-break. Accessed March 20, 2020.

3 Mike Fried. ROI. March 16, 2020. “Five considerations for pandemic event preparedness.” https://www.roi-nj.com/2020/03/16/opinion/five-considerations-for-pandemic-event-preparedness/. Accessed March 20, 2020.

4 Valerie Bolden-Barrett. HR Dive. Aug. 11, 2017. “Study: Turnover costs employers $15,000 per worker.” https://www.hrdive.com/news/study-turnover-costs-employers-15000-per-worker/449142/. Accessed March 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. 1131320C

Shortlink

Breaking Down the Recent Jargon of the Market

The Dow Jones Industrial Average (DJIA), the S&P 500 and the Nasdaq experienced quite a roller coaster ride in March. There are mixed opinions as to whether it was due to the global economic impact of the seemingly unstoppable new COVID-19 coronavirus or due to the federal government’s delayed response and tactical efforts to constrain the virus. Or, perhaps more likely, both.

Regardless of the reasons, they are largely out of the control of individual investors. So, what do you do? Much depends on your own individual circumstances. As we learn in Investing 101, it’s a matter of getting back to the basics. What are your financial goals? When do you need to achieve them? How much risk are you willing to take?

These three questions basically translate to: How much money do you need, how old are you and what keeps you up at night? If you are near or early in retirement, you may justifiably be losing sleep worrying about the current market volatility. We may be able to help. Feel free to schedule some time to speak with an experienced financial advisor to help you figure out if you should make any changes to your investment portfolio and, if so, what is an appropriate investment strategy for you.

Speaking of Investing 101, let’s break down some of the terms you may be hearing in the financial media to better define what they could mean for your situation.

Sequence of Returns

On the surface, “sequence of returns” means annual performance numbers throughout a period of time. It may just be one or two years, but if the investment markets perform poorly in the year or two before or after you retire, it could have a significant impact on how long your nest egg will last. Individuals who retire right around a significant and/or extended market decline could end up drawing income from their investment principal instead of investment earnings. In this situation, it may be worth considering other options, such as working longer so you can continue contributing to your investment accounts and allow time for recovery.1

Cash Reserves

This means you should have an emergency fund, preferably equal to six months of income —most likely in a bank account. Even if you have these liquid assets, it may be worth delaying projects such as home improvements, expensive travel plans, buying a second home or other major purchases until the markets have stabilized. Having such an emergency fund available can offer a sense of financial security that no amount of beach vacations can equal.2

Defensive Positions

Perhaps you want to stay fully invested in the market, but you’re concerned about losses. According to market analysts at Bank of America Securities, you may want to consider equities with a track record for providing higher yields during periods of volatility. Sectors more likely to thrive during a health pandemic include data centers, grocery-anchored strip malls, medical office buildings, self-storage centers and towers for wireless carriers.3

Wait and See

Not many investors have the stomach to invest more money during a flailing market. However, there may be opportunities to purchase “bargains” — such as airline securities — that are likely to be hit the hardest yet rebound quickly. After all, we will remain in a global economy, and business trips will resume after the pandemic has subsided.

Content prepared by Kara Stefan Communications.

1 Allessandra Malito. MarketWatch. March 15, 2020. “Retiring soon? Here’s how you should handle these crazy market drops.” https://www.marketwatch.com/story/retiring-soon-heres-how-you-should-handle-these-crazy-market-drops-2020-03-09?mod=home-page. Accessed March 24, 2020.

2 Knowledge@Wharton. Feb. 3, 2020. “How to Recession-proof Your Retirement.” https://knowledge.wharton.upenn.edu/article/how-to-recession-proof-your-retirement/. Accessed March 24, 2020.

3 Tomi Kilgore. MarketWatch. March 7, 2020. “These are the safest and highest dividend-yielding REITs as the coronavirus spreads, BofA says.” https://www.marketwatch.com/story/these-are-the-safest-and-highest-dividend-yielding-reits-as-the-coronavirus-spreads-bofa-says-2020-03-06?mod=home-page. Accessed March 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.

1123085C

Shortlink

Affordable Housing Crisis Challenges

There are several factors contributing to the current housing shortage in the U.S. For starters, low inventory of existing homes for sale has driven up the prices of available housing, leaving many first- and second-time homebuyers unable to afford to buy or trade up. Housing permits for new construction have risen throughout the past couple of years, but they haven’t kept pace with the formation of new households. And while the number of residential construction workers has increased to more than 800,000, the country is nearing full employment levels so contractors are finding it tough to add to their teams.1

Part of the employment problem is the slowdown in immigration due to the documentation and guest worker visa process, designed to permit only highly skilled legal immigrants into the country. As a result, both the construction and agricultural industries find themselves short-handed, further contributing to the housing crisis.2

Supply of available homes has been falling steadily in recent years. Some of the greatest hardships are found at the lower end of the market. The growing number of millennials who are looking for, and can afford, housing could lessen supply even more.3 The potential impact on renters is that a high percentage of their income is devoted to housing costs.4

Fortunately for retirees, more than 78 percent of households age 65 and older own their homes. Interestingly, after age 80 the home ownership rate drops and many become renters.5

The issue is so severe it has a line item among Democratic candidates vying for the presidential nomination this year. Bernie Sanders has proposed a $2.5 trillion initiative for the construction of affordable and mixed-income housing, as well as the preservation of existing housing. Joe Biden proposes investing $640 billion for housing throughout 10 years that would focus on strengthening existing programs.6

For budget hawks, Trump’s proposed 2021 budget, while unlikely to pass in its current form, calls for a 15 percent reduction in public housing. That would result in a total reduction of $8.6 billion from housing programs compared to current levels. The president’s plan includes stricter mandates for work requirements and a higher percentage of contributions toward rent for low-income program participants.7

Content prepared by Kara Stefan Communications.

1 Roger Zellerites. Urban Land. Feb. 26, 2020. “Closing the Efficiency Gap in the U.S. Housing Affordability Crisis https://urbanland.uli.org/development-business/the-efficiency-gap-and-the-u-s-housing-affordability-crisis/. Accessed March 2, 2020.

2 Rebecca Rainey. Politico. Feb. 21, 2020. “Mulvaney: U.S. ‘desperate’ for immigrants.” https://www.politico.com/newsletters/morning-shift/2020/02/21/mulvaney-us-desperate-for-immigrants-785576. Accessed March 2, 2020.

3 Diana Olick. CNBC.com. Dec. 4, 2019. “Next year will be hard on the housing market, especially in these big cities.’’ https://www.cnbc.com/2019/12/04/harsh-housing-forecast-for-2020-especially-in-these-big-cities.html. Accessed March 17, 2020.

4 Jacob Passy. MarketWatch. Feb. 4, 2020. “Even the middle class is having trouble paying rent now.’’ https://www.msn.com/en-us/money/realestate/even-the-middle-class-is-having-trouble-paying-rent-now/ar-BBZDVi9. Accessed March 17, 2020.

5 Linda Yang. Joint Center for Housing Studies at Harvard University. 2018. “Housing America’s Older Adults.” https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Housing_Americas_Older_Adults_2018_1.pdf. Accessed March 2, 2020.

6 Georgia Krameria. The Real Deal. March 2, 2020. “Here’s how Bernie, Biden and the remaining presidential candidates would tackle housing crisis.” https://therealdeal.com/2020/03/02/heres-how-bernie-biden-and-the-remaining-presidential-candidates-would-tackle-housing-crisis/. Accessed March 2, 2020.

7 Niv Elis. The Hill. Feb. 14, 2020. “Housing advocates decry Trump budget cuts.” https://thehill.com/policy/finance/housing/484132-housing-advocates-decry-trump-budget-cuts. Accessed March 2, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

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.

1115913B

Shortlink

Inheriting a 401(k) Plan

Within the scope of an investment portfolio, the commonplace
401(k) may seem to be a simplistic account. But it’s not, especially when it
comes to estate and legacy planning. The named beneficiary on the plan will inherit
your 401(k) regardless of your will’s instructions. And from there, a spectrum of
various choices emerge based on a plethora of different variables.

First off, you can’t name anyone other than your spouse as
the beneficiary unless you get your spouse to sign off on a form that says it’s
OK. This rule is designed to protect a spouse from a partner who is considering
a divorce and tries to put all of his or her financial accounts under his or
her own name before announcing this intention.1

If you inherit a 401(k) from your spouse, what you decide to
do with it and the subsequent tax impacts may depend largely on your age and
whether or not your spouse had started taking required minimum distributions (RMDs)
before he or she died. In general, you may (1) choose to leave the money in the
plan and take distributions; (2) transfer the funds to an inherited IRA; or (3)
transfer the money to your own IRA.2

If you are a non-spouse beneficiary of a 401(k) plan, the
rules have changed recently. In late 2019, Congress passed legislation that limited
a strategy called the “stretch IRA.” This strategy was particularly popular
among people who had saved a substantial amount of money in their retirement
accounts. It used to be that this type of beneficiary could potentially take
distributions from the account throughout decades, based on the beneficiary’s
age and life expectancy.3 This meant that those assets could
continue growing tax-deferred indefinitely.

Now, as a result of the SECURE Act, most new non-spouse
beneficiaries must fully distribute all the account’s inherited assets in 10 years
or fewer after the death of the original account holder. If an account owner
had previously set up a trust to be beneficiary of a qualified account prior to
the SECURE Act, the new rules could lead to undesirable results. If you have
such a trust as the account beneficiary, it’s important to have it reassessed
to make sure the language doesn’t negatively impact the trust’s beneficiaries
or create a tax disadvantage.4

There are more factors related to inheriting a 401(k) plan
than just the recent SECURE Act provisions, including whether or not the
account owner had reached the required date to start taking RMDs before death.
The exact date depends on whether the account owner was still working at the
company, had retired before age 70 ½ or was working at a different company.5

Suffice it to say that many things related to an inherited
401(k) are complex. And, while there are effective strategies, they can be complex,
too. For example, you could decide to take advantage of spousal beneficiary strategies
instead of naming a non-spouse. This might include the surviving spouse gifting
the residual RMDs to other heirs or contributing that income to a taxable
account and naming those heirs as beneficiaries upon her death, which may offer
a strategic tax advantage.6

In short, estate and legacy planning is complicated business
— even for something that seems straightforward, like a 401(k) plan. We can
work with your estate planning and tax professionals to help you address these
issues.

Content prepared by Kara Stefan
Communications.

1 Rebecca Lake. SmartAsset. Oct. 22, 2019. “A Guide to
Inheriting a 401(k).” https://smartasset.com/retirement/inherited-401k. Accessed Feb. 24, 2020.

2 Ibid.

3 Greg Iacurci. CNBC. Dec. 17, 2019. “Lawmakers are
killing this popular retirement tax break for the wealthy.” https://www.cnbc.com/2019/12/17/lawmakers-may-kill-this-popular-retirement-tax-break-for-the-wealthy.html. Accessed Feb. 24, 2020.

4 Alessandra Malito. MarketWatch. Jan. 9, 2020. “Inheriting
a parent’s IRA or 401(k)? Here’s how the Secure Act could create a disaster.” https://www.marketwatch.com/story/inheriting-a-parents-ira-or-401k-heres-how-the-secure-act-could-create-a-disaster-2019-12-26. Accessed Feb. 24, 2020.

5 Rachel L. Sheedy. Kiplinger. May 30, 2019. “Inherited
401(k)s: 6 Questions Heirs Need to Ask.” https://www.kiplinger.com/slideshow/retirement/T001-S004-inherited-401k-6-questions-heirs-need-to-ask/index.html. Accessed Feb. 24, 2020.

6 Rhian Horgan. Nasdaq. Jan. 30, 2020. “2 IRA Changes
to Consider Right Now, Thanks to the SECURE Act.” https://www.nasdaq.com/articles/2-ira-changes-to-consider-right-now-thanks-to-the-secure-act-2020-01-30. Accessed Feb. 24, 2020.

We are not permitted to offer, and no statement contained herein shall
constitute, tax or legal advice. Individuals are encouraged to consult with a
qualified professional before making any decisions about their personal
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.

1108517C

Shortlink

Your Vote, Your Investment

Here’s some food for thought regarding the aftermath of
Watergate: “The great paradox of one of the worst presidential scandals of the
20th century was that it forced candidates to stop attacking each other and
start persuading the nation that they could be trusted.”1

Wouldn’t it be nice if the 2020 elections followed this same
pattern? Yet even without Republican primaries, the spectrum of Democratic
candidates has demonstrated that competition can be cutthroat, no matter how
unified a political party.

During election years, voters are asked to donate money to
the political candidates they support. The candidates elected are often those
who raise the most money and can therefore reach more people with their message
and policy platform through advertising. In this way, donations are perhaps a
good investment for individual voters and corporations. In other words,
political contributions may yield a high return on investment that helps those
who donate increase their own fortunes.

This is one reason why it’s important to understand both the
short- and long-term ramifications of a candidate’s policy platform. Some
policies may seem beneficial out of the gate but potentially have negative
consequences for the long-term investor. If you’d like to discuss how the
current political climate and various political policies could impact your
portfolio, we’d be happy to have that discussion.

Main Street investors aren’t the only ones donating money to
support their portfolios. Since 2012, Wall Street brokerages, stockbrokers,
bond dealers, hedge funds and private investment firms have become the single
largest source of political contributions.2

Recent spending patterns may put more pressure on choosing
the most efficacious president in 2020. In the last three years, the current
administration’s policies have increased the national debt by $3 trillion. The Congressional
Budget Office predicts $1 trillion deficits annually over the next eight years
as a result of reduced tax revenues and higher spending during the Trump years.
Economists note that increased government spending is highly unusual during a
strong economy — the U.S. has never had a deficit this large relative to gross
domestic product (GDP) during a robust economy.3

According to the International Monetary Fund (IMF), U.S. growth is expected to
drop to 2% in 2020 and decline further to 1.7% in 2021.4 In lieu of
stronger economic performance, the federal government will likely need to both raise
revenues and reduce spending to reverse this trend.

President Trump’s 2021 budget proposal, while unlikely to
pass in its current form, does set the tone for his policy aspirations. The
budget aims to reduce spending on Social Security Disability Insurance and
Supplemental Security Income by $35 billion and Medicare by more than $500
billion throughout a decade. Although the cuts don’t directly affect retirement
participants’ benefits, provisions within the proposal could still negatively
impact beneficiaries. Perhaps most notably, the Medicare policy proposes
reduced payouts to doctors and hospitals, which could result in some providers no
longer participating in the Medicare program.5

Senate Leader Mitch McConnell and other GOP Congress members
also have expressed the desire to cut Social Security benefits to reduce the
deficit. Unfortunately, despite the robust economy and outperforming stock
market over the past 10 years, a full third of today’s retirees depend on
Social Security for 90% or more of their income; one in six depend on it for at
least half their income.6

On the other side of the aisle, Democrats have a long legacy
of advocating government spending to benefit low- and middle-income families.7
Therefore, the standard choice between spending versus austerity may once again
be decided by campaign contributions and, ultimately, at the polls in November.

Content prepared by Kara Stefan
Communications.

1 Sophie Gilbert. The Atlantic. June 9, 2019. “The Year
Political Advertising Turned Positive.” https://www.theatlantic.com/politics/archive/2015/06/the-year-political-advertising-turned-positive/395435/. Accessed Feb. 14, 2020.

2 The Center for Responsive Politics. 2020. “Securities
& Investment.” https://www.opensecrets.org/industries/indus.php?ind=f07. Accessed Feb. 14, 2020.

3 James Crowley. Newsweek. Jan. 23, 2020. “National
debt increased by $3 trillion during Donald Trump’s three years as president.” https://www.newsweek.com/donald-trump-national-debt-increase-3-trillion-first-three-years-presidency-1483660. Accessed Feb. 14, 2020.

4 International Monetary Fund. Jan. 2020. “World
Economic Outlook, January 2020: Tentative Stabilization, Sluggish Recovery?” https://www.imf.org/en/Publications/WEO/Issues/2020/01/20/weo-update-january2020. Accessed Feb. 14, 2020.

5 Allesandra Malito. MarketWatch. Feb. 12, 2020. “Trump’s
budget proposal probably won’t reduce your Social Security check, experts say,
but will it lower your quality of life and health care?” https://www.marketwatch.com/story/trumps-budget-proposal-wont-reduce-your-social-security-check-but-it-could-lower-your-quality-of-life-and-health-care-2020-02-11. Accessed Feb. 14, 2020.

6 Teresa Ghilarducci. Forbes. Aug. 23, 2019. “Trump’s
Second-Term Plan For Social Security: Starve The Beast.” https://www.forbes.com/sites/teresaghilarducci/2019/08/23/trumps-second-term-plan-for-social-security-starve-the-beast/#1b6916937949. Accessed Feb. 14, 2020.

7 Kimberly Amadeo. The Balance. June 25, 2019. “Democratic
Views on the Economy.” https://www.thebalance.com/democratic-economic-policies-4129140. Accessed Feb. 14, 2020.

Our firm is not
affiliated with or endorsed by 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.

1098496C

Shortlink

The Coronavirus and Other Oddball Risks

One of the reasons investing never gets boring is because it
is an ever-changing, never-sleeping industry that presents new opportunities — and
new risks — every day.

One of the most recent threats to the global business
economy, and therefore investors, is the coronavirus and its far-reaching
impact. China, home to much of the world’s manufacturing, has been hard hit by
the epidemic. In its wake, travel has been one of the first casualties. This is
bad news not just for tourists, but for the thousands of business
representatives who fly in and out of the country each day. The virus outbreak
among Chinese workers threatens business trade and supply chain production for
markets throughout the world.1

The outbreak of coronavirus is but one example of the types
of unexpected risks that can disrupt a wide variety of industries — and one
example of why financial advisors recommend diversification. While all
investments involve risks, there are additional risks associated with foreign
investing, such as currency fluctuations, economic instability and political
developments. Building an investment portfolio that includes uncorrelated asset
classes can help defend against the wide range of both anticipated and
unanticipated risks that investors face. We’re happy to review your portfolio
to assess how much market risk you might be exposed to; just give us a call.

If you don’t think the coronavirus has impacted U.S.
companies, think again. McDonald’s, Starbucks and H&M have all had to
shutter stores in China. Disney closed its Shanghai and Hong Kong theme parks.
The Marriott, Hyatt and Hilton hotel companies have suspended some operations
in areas most affected by the virus. Carnival and Royal Caribbean Cruises have
been forced to cancel scheduled voyages to help curb the spread from one
country to another.2

The problem isn’t isolated to retail stores, either. Technology
companies like Apple and Google have restricted employee travel either
completely or only for “business-critical situations.” Additionally, General
Motors, Honda and Nissan have suspended auto production.3

According to Wilbur Ross, the U.S. Secretary of Commerce,
there is perhaps a silver lining to the crisis. In a recent interview, he
intimated that if U.S. manufacturers returned many of their offshore operations
to America, they could better control such risks.4

However, risk is risk — and it takes on many different
guises, even domestically. Some investment analysts warn that political
campaigns heading toward the November elections may be a primary source of
market volatility throughout the year. The two major political parties appear
as divided as ever with policies that offer both positive and negative
components. Regardless of party affiliation, both offer platforms that seem
likely to increase spending and expand our nation’s debt.

This dynamic is likely to stretch U.S. Treasury valuations
even further, while the relationship between the Federal Reserve and the
investment markets may continue to be strained. While the Fed altered monetary
policy in 2019 to accommodate markets, there could be less wiggle room now to
combat any further risks to the economy such as rising asset price inflation.5

And then there’s the problem of trade wars promulgated by aggressive
140-character tweets — an approach that tends to pain Republicans and Democrats
alike, not to mention Wall Street.6

Content prepared by Kara Stefan
Communications.

1 Franklin Templeton. Jan. 24, 2020. “Monitoring
China’s Outbreak and Other Potential Market Shocks.” https://www.franklintempleton.ca/en-ca/investor/article?contentPath=html/ftthinks/common/blogs/monitoring-chinas-outbreak-and-other-potential-market-shocks.html. Accessed Feb. 5, 2020.

2 Sergei Klebnikov. Forbes. Jan. 28, 2020. “Coronavirus
Hits Big Business: These Companies Are Cutting Operations And Restricting
Travel To China As Disease Spreads. https://www.forbes.com/sites/sergeiklebnikov/2020/01/28/coronavirus-hits-big-business-these-companies-are-cutting-operations-and-restricting-travel-to-china-as-disease-spreads/#509d69381264. Accessed Feb. 5, 2020.

3 Megan Cerullo. CBS News. Jan. 30, 2020. “China
coronavirus causing chaos for U.S. companies.” https://www.cbsnews.com/news/coronavirus-brings-business-operations-in-china-to-standstill/. Accessed Feb. 5, 2020.

4 BBC News. Jan. 31, 2020. “Wilbur Ross says
Coronavirus could boost US jobs.” https://www.bbc.com/news/business-51276323. Accessed Feb. 5, 2020.

5 Sonal Desai. Franklin Templeton. Jan. 14, 2020. “On
My Mind: Will the US Survive the Politics in 2020?” https://www.franklintempletonnordic.com/investor/article?contentPath=html/ftthinks/common/cio-views/on-my-mind-will-the-us-economy-survive-the-politics-in-2020.html. Accessed Feb. 5, 2020.

6 Ibid.

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.

1092657C

Shortlink

Climate Change: A World of Opportunity

According to the National Oceanic and Atmospheric
Administration, the amount of heat stored in the upper levels of the ocean
reached an all-time high in 2019. This is a primary factor that contributes to
the rise in sea levels. Furthermore, the world’s five warmest years have all
occurred since 2015.1

On the heels of Davos — the annual meeting of the World
Economic Forum — attendees are charged with the responsibility of responding
quickly and effectively to a changing world. The good news is many of the participants
are people with the power to make those changes: prime ministers and
presidents, chief executive officers from around the world and heads of
nongovernmental organizations. The first priority of the Davos agenda this year
was mobilizing businesses to respond to the risks of climate change and protecting
forest floors and ocean beds.2

While addressing climate change has traditionally involved
imposing government regulations, there is a new perspective that looks at the
problem in terms of opportunities. Worldwide investment in renewable energy surpassed
$282 billion in 2019, which included wind, solar, waste-to-energy, geothermal, biofuels
and small hydro.3 These are all industries that will be developing,
investing and responding to demand for decades to come.

Some of the components that contribute to climate change can
be part of the solution. For example, wind speeds around the world had been declining
since the 1980s. However, recent changes in ocean and atmospheric circulation
patterns have actually served to reverse that trend. Today’s speedier winds
will boost the energy production of a single turbine by about 37%.4

Lobbyists for the traditional energy industry have launched
an initiative (Americans for Carbon Dividends) that promote a carbon tax on fossil
fuel companies for their carbon emissions in concert with the elimination of unnecessary
carbon regulations. The organization believes such a tax would cut U.S. carbon
emissions in half by 2035 while enabling those corporations to innovate for a
cleaner energy future.5

In 2018, California state lawmakers passed a bill mandating
100% climate-friendly electricity by 2045. Since then, investments have stepped
up for the development of more geothermal plants, an emissions-free, renewable
electricity source that uses naturally heated underground reservoirs to create
steam and turn turbines (around the clock, not just when the sun is out). Last
year, the Department of Energy reported that if technology improves, U.S.
geothermal capacity could grow exponentially, to the point of generating up to
16% of the nation’s electricity.6

Content prepared by Kara Stefan
Communications.

1 National Oceanic and Atmospheric Administration. Jan.
15, 2020. “2019 was 2nd hottest year on record for Earth say NOAA, NASA.” https://www.noaa.gov/news/2019-was-2nd-hottest-year-on-record-for-earth-say-noaa-nasa. Accessed Jan. 24, 2020.

2 Peter Coy. Bloomberg. Jan. 17, 2020. “A Sense of
Climate Urgency Takes Hold in Davos.” https://www.bloomberg.com/news/articles/2020-01-17/a-sense-of-climate-urgency-takes-hold-in-davos. Accessed Jan. 24, 2020.

3 BloombergNEF. Jan. 16, 2020. “Late Surge in Offshore
Wind Financings Helps 2019 Renewables Investment to Overtake 2018.” https://about.bnef.com/blog/late-surge-in-offshore-wind-financings-helps-2019-renewables-investment-to-overtake-2018/. Accessed Jan. 24, 2020.

4 Matt McGrath. BBC News. Nov. 18, 2019. “Renewable
energy: Rise in global wind speed to boost green power.” https://www.bbc.com/news/science-environment-50464551. Accessed Jan. 24, 2020.

5 Americans for Carbon Dividends. 2020. “The Solution.”
https://www.afcd.org/the-solution/. Accessed Jan. 24, 2020.

6 Sammy Roth. Los Angeles Times. Jan. 22, 2020. “California
needs clean energy after sundown. Is the answer under our feet?” https://www.latimes.com/environment/story/2020-01-22/california-needs-clean-energy-after-sundown-geothermal-could-be-the-answer. Accessed Jan. 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.

1085722C

Shortlink

2020 Market Update: Reversal of Sentiment

After making a bunch of gloom-and-doom predictions about the
markets in 2019, with fears of a pending recession, Wall Street money managers
have a considerably more brightened outlook for 2020. Indeed, recent indicators
have heightened expectations for U.S. economic growth this year.

For example, the Conference Board is predicting a 2.1% rise
in the gross domestic product (GDP) in 2020, commenting, “We believe the worst
of the slowdown is behind us.” 1 The real estate market also is showing
promise: Demand for homes is up, fueling growth in new construction, which
could boost home prices. 2

The markets appear to be agreeing with these forecasts, with
the Dow and the S&P 500 starting the new year with strong performances.
Some managers are projecting that the long-running bull market could take stock
prices even higher this year.3

With this in mind, don’t forget to take advantage of
increased retirement contribution limits for 401(k) plans, 403(b) plans, most
457 plans, Thrift Savings Plans, profit-sharing plans and cash balance pension
plans this year — up by another $500 to $19,500. For people over age 50, the
catch-up contribution for their 401(k) plans also increased by $500, which
means you can save up to $26,000 in your employer plan.4

Remember, too, that if you continue to work past traditional
retirement age, new legislation is designed to help you save and invest longer.
The new SECURE Act, passed at the end of last year, delays the age to start
drawing required minimum distributions (RMDs) from retirement accounts from 70 ½
to 72 for those who turn 70 ½ after 2019. Also, you may continue contributing
to a traditional IRA as long as you earn income, as the age cap has been
eliminated.5

These new changes could play a role in determining when you
want to set your retirement date. Some people who don’t need the money may want
to keep earning a paycheck, even on a part-time basis, just to keep
contributing to their investments. Also, if you delay starting Social Security
benefits until age 70, you can just about double the amount you draw compared
to starting them when you’re first eligible (age 62).6 If you’d like
to assess retirement planning strategies for this year, we’d be happy to discuss
your portfolio and financial strategy with you.

Content prepared by Kara Stefan
Communications.

1 The Conference Board. Jan. 8, 2020. “The Conference
Board Economic Forecast for the U.S. Economy.” https://www.conference-board.org/data/usforecast.cfm. Accessed Jan. 29, 2020.

2 Michelle Meyer. Bank of America Global Research. Nov.
22, 2019. “U.S. Economic Forecast: Clouds, Sunshine or Showers?” https://mlaem.fs.ml.com/content/dam/ML/pdfs/Transcript_Meyer_Outlook_2020.pdf. Accessed Jan. 17, 2020.

3 Knowledge@Wharton. Jan. 7, 2020. “What Investors Need
to Watch for in 2020.” https://knowledge.wharton.upenn.edu/article/what-investors-need-to-watch-for-in-2020/. Accessed Jan. 17, 2020.

4 David Rae. Forbes. Nov. 20, 2019. “Great News From
The IRS For Retirement Savers.” https://www.forbes.com/sites/davidrae/2019/11/20/irs-retirement-savers/#7aa47397384a. Accessed Jan. 29, 2020.

5 Roger Young. T. Rowe Price. Dec. 24, 2019. “The
SECURE Act: What Investors Need to Know.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/retirement-planning/the-secure-act–what-investors-need-to-know.html. Accessed Jan. 17, 2020.

6 Judith Ward. T. Rowe Price. Jan. 7, 2020. “2020 Key
Financial Numbers.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/personal-finance/key-financial-numbers.html. Accessed Jan. 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.

1083889C

Shortlink

Student Loan Debt Affects More Than Millennials

Common sense would suggest older workers have a much easier
time saving than young adults. They are more likely to have already purchased a
home, put kids through college and, by that point, are putting more money away
for retirement.

A recent study by the Transamerica Center for Retirement
Studies confirms this is true, but the difference isn’t as big as you might
expect. The report shows 78% of baby boomers are saving for retirement, compared
to 77% of Generation X and 71% of millennials. The numbers may be skewed by the
fact that some baby boomers have already retired, but a 70-plus percent savings
rate is pretty impressive for younger generations.1

The message appears to be getting through: Americans need to
save more for retirement. It’s heartening to see younger adults making this a
priority, especially since many are also saddled with college student loan payments.
Regardless of what life stage you’re in, saving regularly is an important
habit. If you’re wondering which types of savings or investment vehicles are
appropriate for your particular circumstances, we can help. Please give us a
call to schedule a consultation.

Another reason the millennial generation may be saving more
is that they’ve been squeezed out of the market for buying a house.2
Home values have increased significantly in certain areas of the country, giving
some potential first-time homebuyers time to focus their resources on getting
out of debt and saving and investing for retirement. This could be a silver
lining when you consider the advantages of compounding interest over many
decades.

However, millennials aren’t the only ones juggling debt. Americans
over age 60 have amassed a total debt of more than $3 trillion, mostly on
mortgages. But this generation also owes nearly $100 billion on student loans,3
suggesting people close to or in retirement are co-signing loans for children
or grandchildren, or even paying off loans on their own education later in life.

Note that one of the provisions included in the SECURE Act,
passed in late 2019, allows for withdrawals up to $10,000 from college savings 529
plans to help repay student loans.4

Content prepared by Kara Stefan
Communications.

1 Transamerica Center for Retirement Studies. Dec. 19,
2019. “19th Annual Transamerica Retirement Survey.” https://transamericacenter.org/retirement-research/19th-annual-retirement-survey#compendium. Accessed Jan. 9, 2020.

2 Lindsay Walker. Cronkite News. Jan. 8, 2020. “Despite
slight uptick, millennials still face homeownership challenges.” https://cronkitenews.azpbs.org/2020/01/08/despite-slight-uptick-millennials-still-face-homeownership-challenges/. Accessed Jan. 9, 2020.

3 Angela Antonelli. Dec. 26, 2019. “When it comes to
financial angst, boomers and millennials have more in common than they think.” https://www.marketwatch.com/story/when-it-comes-to-financial-angst-boomers-and-millennials-have-more-in-common-than-they-think-2019-12-24. Accessed Jan. 9, 2020.

4 Fidelity. Jan. 2, 2020. “The SECURE Act and you.” https://www.fidelity.com/learning-center/personal-finance/retirement/understanding-the-secure-act-and-retirement. Accessed Jan. 9, 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.

1063805C