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Preparing Your Finances For 2022

December is the perfect time to identify some financial new year’s resolutions for the year 2022 that, while simple, may have a profound effect on your financial strategy and your ability to properly prepare yourself to enjoy your preferred retirement lifestyle.

You should look at the new year as a good time to turn the page on some of your past financial hiccups and strategy mistakes and start with a blank slate.

Build a budget

As is likely no surprise, the first resolution is to build a budget and stick to it.

It all starts with breaking down your income, expenses, and various assets. Does your income comfortably outpace your expenses? If not, changes may be in order.

Building a budget for the first time, or refining your current budget, is a good reason to meet with your financial services professional. And if you don’t already have one? Building a budget is a good reason to get one.

And don’t forget that a financial services professional will be able to show you how the budgeting you do today could make your life easier tomorrow. Ask yourself this: If you knew a couple of modest

sacrifices in your 30s, 40s, or 50s would mean you could retire when and how you wanted, would you make those sacrifices?

Saving is essential

The next important financial new year’s resolution for 2022 is to save something every month, even if it’s not a significant amount of money. Let’s say you’re able to save $100 a month. You may say to yourself, “what’s a measly $100 a month going to do for me?” But I’d encourage you to think about the bigger picture. $100 a month is $1,200 a year. And $100 a month over five years is $6,000.

And $100 a month right now doesn’t mean $100 a month forever. Maybe you’ll end up with a pay raise or maybe an asset will pay off, either of which would allow you to increase how much you’re saving. The point is to simply start saving some amount every month.

You should also note that some people have good luck with sites that take the spare change on each of your debit card and credit card purchases and funnels that money into a separate savings account. A lot of people may be genuinely surprised at how quickly all that spare change transforms into a fairly significant pile of money.

Don’t forget to pay yourself

The next prudent financial new year’s resolution for 2022 is to pay yourself first. Admittedly, this concept sounds a little confusing. But look at it this way: paying yourself first means paying your future self.

The easiest way to pay yourself first is to contribute to a retirement savings tool like a 401(k). Earmarking money for a retirement account is particularly important if your employer offers a financial match.

Remember, if you pay everything and everyone else first, the chances are pretty good you won’t pay your future self anything at all.

Setting aside 10 percent of your monthly income for future needs like retirement is a common savings goal. That sounds like a lot, but if your employer offers a match of up to four percent of your annual income, you’ll then only need to kick in six percent of your income to hit that 10 percent figure.

Much like budgeting, coming up with a clear and workable savings strategy is a great reason to work closely with a financial services professional.

Shop around for insurance

Analyzing your current insurance plans may be a smart addition to your list of financial new year’s resolutions. This also may be another step that you want to take with the assistance of your financial services professional.

In addition to closely examining your current health insurance during your open enrollment period, you may want to make sure both your homeowners’ insurance and auto insurance products are meeting your needs at a price that you think is reasonable. Remember, there’s no harm in shopping around for good homeowners’ and auto insurance at a better price.

https://money.usnews.com/money/personal-finance/saving-and-budgeting/slideshows/financial-new-years- resolutions

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Following the Inflation Debate

During the 12 months ending in June 2021, consumer prices shot up 5.4%, the highest inflation rate since 2008.¹ The annual increase in the Consumer Price Index for All Urban Consumers (CPI-U) — often called headline inflation — was due in part to the “base effect.” This statistical term means the 12-month comparison was based on an unusual low point for prices in the second quarter of 2020, when consumer demand and inflation dropped after the onset of the pandemic.

However, some obvious inflationary pressures entered the picture in the first half of 2021. As vaccination rates climbed, pent-up consumer demand for goods and services was unleashed, fueled by stimulus payments and healthy savings accounts built by those with little opportunity to spend their earnings. Many businesses that shut down or cut back when the economy was closed could not ramp up quickly enough to meet surging demand. Supply-chain bottlenecks, along with higher costs for raw materials, fuel, and labor, resulted in some troubling price spikes. ²

Monitoring Inflation

CPI-U measures the price of a fixed market basket of goods and services. As such, it is a good measure of the prices consumers pay if they buy the same items over time, but it does not reflect changes in consumer behavior and can be unduly influenced by extreme increases in one or more categories. In June 2021, for example, used-car prices increased 10.5% from the previous month and 45.2% year-over-year, accounting for more than one-third of the increase in CPI. Core CPI, which strips out volatile food and energy prices, rose 4.5% year-over-year. ³

In setting economic policy, the Federal Reserve prefers a different inflation measure called the Personal Consumption Expenditures (PCE) Price Index, which is even broader than the CPI and adjusts for changes in consumer behavior — i.e., when consumers shift to purchase a different item because the preferred item is too expensive. More specifically, the Fed looks at core PCE, which rose 3.5% through the 12 months ending in June 2021.⁴

Competing Viewpoints

The perspective held by many economic policymakers, including Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen, was that the spring rise in inflation was due primarily to base effects and temporary supply-and-demand mismatches, so the impact would be mostly

“transitory.” ⁵ Regardless, some prices won’t fall back to their former levels once they have risen, and even short-lived bursts of inflation can be painful for consumers.

Some economists fear that inflation may last longer, with more serious consequences, and could become difficult to control. This camp believes that loose monetary policies by the central bank and trillions

of dollars in government stimulus have pumped an excess supply of money into the economy. In this scenario, a booming economy and persistent and/or substantial inflation could result in a self-reinforcing feedback loop in which businesses, faced with less competition and expecting higher costs in the future, raise their prices preemptively, prompting workers to demand higher wages. ⁶

Source: U.S. Bureau of Labor Statistics, 2021

Until recently, inflation had consistently lagged the Fed’s 2% target, which it considers a healthy rate for a growing economy, for more than a decade. In August 2020, the Federal Open Market Committee (FOMC) announced that it would allow inflation to rise moderately above 2% for some time in order to create a 2% average rate over the longer term. This signaled that economists anticipated short-term price swings and assured investors that Fed officials would not overreact by raising interest rates before the economy has fully healed. ⁷

In mid-June 2021, the FOMC projected core PCE inflation to be 3.0% in 2021 and 2.1% in 2022. The benchmark federal funds range was expect-ed to remain at 0.0% to 0.25% until 2023.⁸ However, Fed officials have also said they are watching the data closely and could raise interest rates sooner, if needed, to cool the economy and curb inflation.

Projections are based on current conditions, are subject to change, and may not come to pass

1, 3) https://www.bls.gov/news.release/pdf/cpi.pdf

2) https://www.wsj.com/articles/supply-chain-issues-car-chip-shortage-covid-manufacturing-global- economy-11633713877

4) https://www.bea.gov/data/personal-consumption-expenditures-price-index-excluding-food-and-energy

5-6) https://www.bloomberg.com/news/articles/2021-05-02/biden-economic-adviser-says-inflation-pressures- transitory

7-8) https://www.federalreserve.gov/newsevents/speech/clarida20211108a.htm

The post Following the Inflation Debate appeared first on Great Lakes Investment Advisors.

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PROTECT YOURSELF — AND YOUR MONEY — FROM SCAMS

It seems like you can’t turn on the TV news or visit your favorite news website without seeing yet another story about financial scams. 

According to the FBI, seniors lose more than $3 billion every year to con artists.

Let’s examine some of the most common financial scams. 

IMPOSTOR SCAMS

The government impostor scam is probably the most common one around. In this one, the scammer calls their target and pretends to be from the IRS, Social Security Administration, Medicare, or something similar. 

They may tell you that you have unpaid taxes and will be arrested if you don’t pay up. Or they may suggest your Social Security or Medicare benefits are about to be cut off unless you provide personal information. 

Some fraudsters are so sophisticated they can even make the phone number they’re calling from appear to be the actual number of the agency they’re pretending to represent. 

THE GRANDPARENT SCAM

With the grandparent scam, the bad guy will call an older person and say, “hi grandpa, do you know who this is?” Once the grandpa throws out a name, the fraudster says “yes” and pretends to be that person. And from there, it’s off to the criminal races. 

The crook will request money for an unexpected expense like a car repair or overdue rent and they’ll ask the grandparent to promise they won’t tell anyone. And, because these scammers typically ask to be paid by wire transfer or gift cards, once the money is gone, it’s generally gone for good. 

MEDICARE SCAMS

Because every American 65 or older automatically receives Medicare, scammers already have an easy in to try their con. In this scam, the crook will typically pose as a Medicare representative requesting personal information like a Social Security number, date of birth, bank account, or something similar.  

But ask yourself why someone from Medicare would be calling you for your birthday or Social Security number. After all, if you’re already enrolled in Medicare, isn’t it obvious they already have your personal information? If something feels off during a conversation it probably means something really is off. 

COMPUTER SCAMS

With computer scams, the crook preys on the fact that some older folks feel intimidated by modern technology. When you’re working on your computer, a pop-up message or a black screen will suddenly appear telling you your device needs repair. When you call the number that’s given to you, the fraudster will either request remote access to your computer or will demand payment for a repair.

If you receive this message and aren’t comfortable dealing with it yourself, turn off your computer and ask a trusted family member or friend for help. You can also take it to a repair service like Geek Squad.

LOTTERY SCAMS 

Many people are familiar with lottery scams because they tend to get a fair amount of media attention. 

In this scheme, fraudsters tell their would-be victim that they’ve hit it big with a lottery or sweepstakes, but they need to make a payment to unlock the prize. Once that payment is made, it’s common for the victim to be sent a check that looks legit, but a few days after deposit, the check is revealed to be worthless. 

But guess what? The crooks have already made off with the money you paid them and you’re also on the hook for any fees that may come along with that bounced check. 

PHISHING SCAMS

The next common scam — internet, email, and text message phishing scams — is a doozy because there are just so many different ways scammers can use it. Again, because some older folks aren’t entirely comfortable with technology, they’ve become common marks for this particular fraud. 

Email and text message phishing scams are particularly prevalent. Within this con, the scammer crafts a message that looks nearly exactly like something you’d receive from a company or business you trust requesting your personal information or asking you to update your credit card payment. 

If you get an email or text from what appears to be your bank or credit card company but something about it just doesn’t seem right, find their contact number and give them a call. In a matter of minutes, they’ll be able to tell you whether the message is on the level. 

Don’t forget that your bank, credit card companies, and other institutions work for you, you don’t work for them. The least they can do is answer your questions and address your concerns when you think somebody may be scamming you. 

REACH OUT FOR HELP 

If you work with a financial services professional, you should reach out to them immediately when you think someone is trying to scam you. When it comes to your money, your financial pro is going to be able to smell a rat from a mile away. 

SOURCE

https://www.ncoa.org/article/top-10-financial-scams-targeting-seniors

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Is it Time for a Value Play?

The transition from growth to value and back to growth stocks often accelerated during the pandemic. Growth-oriented stocks usually outperform when the economy is on the rise. Therefore, growth stocks took the path of the coronavirus: They tanked during the lockdown, they rose again when the economy reopened and then stumbled again until vaccines were introduced. Now that vaccination rates have stalled, and the delta variant of COVID-19 is running rampant, economists are once again pondering how growth stocks can keep up their pace.

According to the chief U.S. economist at Morgan Stanley, projections for third-quarter GDP have dropped from 6.5% to 2.9%. With this in mind, now may be a good time to work with your financial professional to use recent gains and rebalance an investment portfolio, evaluating whether to diversify with high-quality stocks in cyclical sectors. Morgan Stanley believes that a sector rotation may prompt outperformance by value stocks.1 If you’d like to discuss your current asset allocation and future growth opportunity, please give us a call.

Value investing is a strategy of choosing stocks that seem to be trading lower than their book value (as measured by company assets, revenue, dividends, earnings, and cash flows). The idea is to invest in them while the stock market is underestimating their value, on the premise that their prices will eventually increase to align with the true health and potential of the company. Note that value stocks are more appropriate for longer-term investors who have the time and discipline to wait for market recognition. Also, be aware that value stocks are more likely to pay out dividends than growth stocks.2

Warren Buffett, one of the world’s most successful investors, is considered an advocate of value stocks. That’s because rather than look for outright stock price increases and sector momentum, he views each company holistically, considering the current share price, historical company performance, debt, and profit margins.3

At this point, the growth versus value stock debate hinges largely on the direction of the pandemic. During the height of lockdowns in 2020, value stocks outperformed growth due to several factors, such as lower energy prices from reduced consumer demand. This fall, with the delta variant throwing the country back into a tailspin, it may once again be prudent to check out well-established companies, many of which have a long history of dividends and dividend growth, which may be underpriced for value.4

While value stocks are worth considering, it is more important to reiterate portfolio diversification during the pandemic, given its up-and-down effect on our economy. Diversifying across countries, industries, sectors, and investment strategies can help eliminate the follies of trying to predict the market throughout an unprecedented influence like the global pandemic.

Content prepared by Kara Stefan Communications.

1 Lisa Shalett. Morgan Stanley. Sept. 14, 2021. “Next Market Rotation Could See Value Stocks on Top.” https://www.morganstanley.com/ideas/market-rotation-value-stocks. Accessed Sept. 16, 2021.

2 Niladri Mukherjee. Merrill Lynch. Aug. 17, 2021. “What is a value stock?” https://www.merrilledge.com/ask/investing/what-is-a-value-stock. Accessed Sept. 16, 2021.

3 Investopedia. Dec. 22, 2020. “Warren Buffett: How He Does It.” https://www.investopedia.com/articles/01/071801.asp. Accessed Sept. 16, 2021.

4 Dan Rosenburg. TD Ameritrade. Aug. 11, 2021. “Growth vs. Value Stocks: What’s the Outlook Post Pandemic?” https://tickertape.tdameritrade.com/investing/growth-vs-value-stocks-post-covid-16743. Accessed Sept. 16, 2021.

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.

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Savings Strategies

Some people have no trouble saving money — they stash away any cash they don’t need, and their account grows and grows. These people usually aren’t very materialistic and don’t have a lot of goals that require money to fulfill. That’s a wonderful trait, in some ways.

However, there’s nothing wrong with setting up specific goals and saving money to achieve them. First of all, many of those goals, such as buying a home or giving your children a college education, are actually investments that can deliver much higher returns. Those returns can be monetary while still being emotionally and intellectually rewarding.

One way to reach those goals is to adopt the mindset of that first saver — the one who doesn’t really want much or feel the need to spend money precipitously. For many of us, that’s an elusive trait. However, those of us who aren’t like that can still reach savings goals by being organized, disciplined and vigilant.

To be organized, you should differentiate between long and short-term goals and determine which type of savings vehicle is most appropriate for each goal. To be disciplined, it’s a good idea to set up an automatic savings plan so that a fixed amount of money is transferred from your checking account to those individual savings accounts on a regular basis, much like paying a monthly bill. And to be vigilant, you should closely monitor both ongoing expenses and ad hoc spending to ensure that you have the assets available to fund those specific goals. These are all financial practices we can help you with, so don’t hesitate to call us.

When saving for a home, car, or other short-term goals, consider high-yield savings account separate from where you do your regular banking. This way, it’s not that quick or easy to transfer funds back to your checking account on a whim. Set it and forget it with automatic transfers so that your account balance continues to grow in the savings account, even if you start small.1 If this is your primary goal, think about putting at least half of any unexpected cash — such as work bonuses, tax refunds, inheritances, or other windfalls toward this savings account.

If your next goal is saving for college, it’s good to start young, and it’s fine to start small. One of the strongest components of saving is the simple discipline of the strategy — always be saving, even if you start with just $25 a month. There are a lot of scary articles and news reports about how much it costs to send a child to college (2020–2021 average: $26,820 in-state; $54,880 private), but the key to remember is that you don’t have to save enough to cover 100% of that cost. You will likely be able to combine current household income, scholarships, grants, and student and parent loans. For your savings efforts, a 529 plan offers both a tax-deferred investment option and a prepaid plan, depending on your circumstances. The savings portion is good for building an investment balance throughout time, while prepaid is a good option for windfalls — like an inheritance or proceeds from the sale of the property.2

Retirement savings are best achieved throughout the long haul. The earlier you start, the more the power of interest compounding works its magic. Most employers offer a 401(k) or similar plan to help you defer income from your paycheck to a retirement account each month. If your employer offers a match, be sure to defer at least enough to take full advantage of the match. This is a strategy even young adults can engage in with their first job. Remember, incorporate monthly saving as a discipline, and you’ll always be able to live on less than you earn.

If you are self-employed or your employer doesn’t offer a retirement plan, consider opening an IRA (or a solo 401(k) plan if/when you earn a substantial income because contribution limits are much higher). A traditional IRA offers a current income tax deduction, while a Roth IRA eliminates taxes when you withdraw assets. If you max out contributions with an employer plan, a Roth IRA is a good option to reduce your tax obligation during retirement. However, you can only contribute to a Roth if your modified adjusted gross income (MAGI) is less than $140,000 (single) or under $208,000 (married couples filing jointly) in 2021.3

Another aspect of retirement that many people do not plan for is retiree health care. Some studies report that a 65-year-old couple may need up to $400,000 to cover this cost in retirement. However, this goal is best treated like saving for college — save some now, but budget for some of that cost from your retirement income. According to an analysis from T. Rowe Price, about 50% of retirees with traditional Medicare (Parts A and B), a prescription drug plan (Part D) and Medigap will spend less than $1,200 a year on out-of-pocket expenses. In contrast, only 10% will spend more than $4,700 a year.4 If you fall into the former category, that $100 a month may be easily covered by your household retirement income. But it’s good to save for the latter scenario over time through some form of liquid savings account to meet those annual out-of-pocket costs.

Content prepared by Kara Stefan Communications.

1 Kendall Little and Raina He. Time. April 29, 2021. “How to Save For a Down Payment for a House.” https://time.com/nextadvisor/banking/savings/how-to-save-for-a-house/. Accessed Sept. 13, 2021.

2 T. Rowe Price. Fall 2021. “How to Save for College in Uncertain Times.” Page 4. https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-fall.pdf. Accessed Sept. 13, 2021.

3 T. Rowe Price. Fall 2021. “What’s Your Best Contribution Order?” Page 3. https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-fall.pdf. Accessed Sept. 13, 2021.

4 T. Rowe Price. Fall 2021. “The True Cost of Health Care in Retirement.” Page 6. https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-fall.pdf. Accessed Sept. 13, 2021.

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.

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How to Evaluate a Stock

There are moments in history when people have claimed investment choices don’t matter because if the market is up across the board, you cannot fail. That is not true. In fact, that should never be guiding financial advice. However, there is no doubt that the market has been up for many years — notwithstanding the market correction in March 2020, early in the pandemic. For 2021, year to date, the S&P 500 has climbed more than 20%, double the historical average return of about 10%.1

If security investing is appropriate for your portfolio, perhaps picking up more stocks is a good idea — but it is not a good idea to invest in just anything. It’s important to conduct due diligence to understand the fundamentals of a company’s financial situation and market prospects. Then decide if that play is appropriate for your asset allocation and whether to make it a short- or long-term situation. If you’d like help vetting a particular security or market sector, please feel free to contact us.

Public companies that trade on the stock market are required to file certain reports with the Securities and Exchange Commission. These include Form 10-K, an annual report with audited financial statements, and Form 10-Q, a quarterly update for operations and financial results.

Be aware that you can find highlights of this information on various financial news websites. The following can give you an idea of which metrics to look for and what they mean:2

  • 52-week high or low – the year-long price range showing how a stock is trading relative to its most-recent history
  • Dividend yield – calculated by dividing the annual dividend rate per share by the stock price; compare the company’s dividend rate to its peers, the rest of stock market and the 10-year Treasury note yield
  • Gross profit margin – this is calculated by dividing gross income by sales revenues; compare it to competitors as a measure of the company’s profitability over the long term
  • Price-to-earnings (P/E) ratio – this is the price of the stock divided by earnings per share, which shows how much the investor pays for each $1 of the company’s bottom line; compare that cost over time and against competitor P/E ratios

While many websites provide this type of information, it’s important not to focus on any one single measurement. These ratios, combined with other fundamentals (e.g., management experience and track record, market potential, product diversification) can offer a more complete picture of the stock’s long-term viability and upward potential.3

But don’t forget the other, perhaps more important, factor: determining if a particular stock is appropriate for your portfolio. Not just which stock, but how much to buy and at what price, because these decisions will determine what percentage of your portfolio will be represented by that stock. Too much of any one allocation can move overall performance in one direction or the other, which is why it is important to diversify securities. If you believe a certain sector is well-positioned to rise, you might consider investing in several different competitors to take advantage of the rising tide.

There is one other factor you may want to consider, long touted by famed investor Warren Buffett. He recommends that an investor buys into a company because he or she wants to own it, not because he or she wants the stock to go up. In other words, if you like the product, believe it has mass-market appeal, and wish you’d thought of it yourself, those are good criteria for purchasing the company’s stock.4

Content prepared by Kara Stefan Communications.

1 Jeff Remsburg. Nasdaq. Sept. 3, 2021. “Are Stock Prices Too High?” https://www.nasdaq.com/articles/are-stock-prices-too-high-2021-09-03. Accessed Sept. 6, 2021.

2 Tomi Kilgore. Marketwatch. Sept. 4, 2021. “These are the most important things to check on a stock’s quote page before deciding whether to buy or sell.” https://www.marketwatch.com/story/these-are-the-most-important-things-to-check-on-a-stocks-quote-page-before-deciding-whether-to-buy-or-sell-11630783155?mod=home-page. Accessed Sept. 6, 2021.

3 Andrew Beattie. Investopedia. Jan. 10, 2021. “The 4 Basic Elements of Stock Value.” https://www.investopedia.com/articles/fundamental-analysis/09/elements-stock-value.asp. Accessed Sept. 6, 2021.

4 Dayana Yochim. NerdWallet. Aug. 18, 2021. “How to Research Stocks.” https://www.nerdwallet.com/article/investing/how-to-research-stocks. Accessed Sept. 6, 2021.

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.

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How Inflation Risk Can Affect You

Inflation is a steady rise in the price of goods and services over time and actually signals both good and bad economic conditions. On one hand, as prices rise, someone living on a fixed income cannot purchase the same amount of goods, so they tend to reduce spending or buy cheaper alternatives. On the other hand, when inflation rises, the Federal Reserve tends to reduce interest rates, making it cheaper to borrow money — so spending picks up.1

This cycle of inflation tends to go round and round. Many factors can cause inflation — including a growing economy — but there are monetary policies that help drop the inflation rate in time. Likewise, each of us needs to be able to manage how inflation affects our household finances throughout these cycles, and those management strategies differ based on your situation.

For example, someone working full time may be able to adjust spending based on fluctuating prices. However, many retirees live on a fixed income and have fixed expenses, so when prices increase that can squeeze the household budget. If you’d like to learn about ways to position assets so that you can increase income when needed without threatening your financial security, please give us a call.

Inflation can actually be positive for stock investments, as a company’s revenues and earnings tend to move in tandem with higher prices. Interestingly, the stock market has held remarkably well even in the low inflationary environment the U.S. has experienced throughout the past two decades. The fact that inflation is rising now isn’t necessarily a negative for investors; the traditional theory is that stock prices should increase alongside prices of consumer goods.2

At present, the Fed expects the economy to continue growing despite the ongoing coronavirus. In fact, the agency projects inflation-adjusted GDP growth of 7% for this year and 3.3% in 2022. If this projection holds, interest rates are likely to stay in their current low range until at least 2023.3

Investors worried about rising prices impacting their portfolio may want to consider one or more inflation-mitigation strategies. For example, allocate more assets to sectors that tend to increase along with inflation, such as the energy, materials, technology and financial sectors.4 Other asset classes that tend to move with accelerating inflation include commodities, real estate, and industrial and precious metals.5 Fixed income investors may want to take a look at Treasury Inflation-Protected Securities (TIPS), a type of U.S. Treasury security whose principal amount is adjusted to reflect the inflation rate.6

Content prepared by Kara Stefan Communications.

1 David Floyd. Investopedia. May 17, 2021. “9 Common Effects of Inflation.” https://www.investopedia.com/articles/insights/122016/9-common-effects-inflation.asp. Accessed Aug. 26, 2021.

2 US Bank. Aug. 6, 2021. “Effects of inflation on investments.” https://www.usbank.com/financialiq/invest-your-money/investment-strategies/effects-of-inflation-on-investments.html. Accessed Aug. 26, 2021.

3 Taylor Tepper. Forbes. Aug. 25, 2021. “Who Should Worry About Inflation—And Who Shouldn’t.” https://www.forbes.com/advisor/investing/inflation-worries-2021/. Accessed Aug. 26, 2021.

4 Scot Landborg. Kiplinger. Aug. 20, 2021. “8 Ways to Insulate Yourself from Inflation.” https://www.kiplinger.com/personal-finance/603306/8-ways-to-insulate-yourself-from-inflation. Accessed Aug. 26, 2021.

5 US Bank. Aug. 6, 2021. “Effects of inflation on investments.” https://www.usbank.com/financialiq/invest-your-money/investment-strategies/effects-of-inflation-on-investments.html. Accessed Aug. 26, 2021.

6 Collin Martin. Charles Schwab. June 24, 2021. “Treasury Inflation-Protected Securities: FAQs about TIPS.” https://www.schwab.com/resource-center/insights/content/treasury-inflation-protected-securities-faqs-about-tips. Accessed Aug. 26, 2021.

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.

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Sustainably Investing in Our Future

While extreme weather events typically affect only certain parts of the country, there is increasing concern that climate change will affect the overall economy – including our investment portfolios.

For this reason, the federal government is making composition changes to the Thrift Savings Plan (TSP), the retirement plan for federal employees. The TSP currently holds more than $762 billion in assets, making it the world’s largest defined contribution plan. Starting in 2022, the plan will offer participants the opportunity to customize their individual portfolios by choosing from more than 5,000 funds, which may include environmental, social, and corporate governance (ESG) options.1

Other developed countries are ahead of the U.S. when it comes to promoting ESG options among federal pension funds. A recent report from Europe found that participants who invest their federal pension money in environmentally conscious companies are at least 20 times more effective at removing carbon compounds from the environment than those who take other actions, such as reducing their airline flights and using alternative energy. In the past, the choice to invest in green companies generally meant a trade-off for lower returns. Now, repositioning assets to support ESG companies is taking precedence to greatly reduce the world’s carbon footprint at a faster pace.

In the U.S., some economists believe that the combination of long unsolved problems — such as the pending insolvency of Social Security — coupled with climate change and the recent economic damage created by the pandemic, is going to generate long-term income issues for retirees.

Olivia Mitchell, a Wharton School professor who specializes in retirement income research, had this advice for retirees. “People are just going to have to work longer if they possibly can. And if they can’t, they’d better start looking to move where they’re not subject to drought, fires, floods, hurricanes and all the other things that climate change brings with it,” Mitchell said. She also emphasized that those nearing retirement age should consider downsizing their homes, buying an electric car or growing a vegetable garden “because we’re going to need to be more self-reliant in this new world.”2

When it comes to retirement planning, self-reliance may not always be your best option. That’s our business, so please contact us to help you devise a multi-faceted income plan for the future.

Farmers also are looking for ways to create more sustainable crop generation for the future. The traditional blueprint is to clear trees for vast spaces of land to raise livestock and plant rows of single crops, which are called monocultures. At present, about half of all habitable land is used for growing food, and the globe is running out of room to meet this demand. A new trend in farming is called agroforestry, which is the blending of trees, crops and livestock to create more sustainable yields. In fact, certain trees feed nitrogen into the soil, which eliminates the need for excessive fertilization. In some areas, the mix has produced up to 40% more than same-crop monocultures. Today, less than 2% of U.S. farmers practice agroforestry. There is enormous potential to deploy this farming technique to better protect farmland from the ravages of climate change while at the same time generating higher crop yields.3

According to Morgan Stanley, one overlooked investment sector is the electrical industry. It has recently been overshadowed by high-profile investment themes such as electric vehicles, grid modernization and distributed power. However, these innovations are all electrical equipment, a long-standing, lower-risk investment sector with explosive growth potential for the future industrial economy. Market analysts at Morgan Stanley project that the “electrification” theme could produce 6% compound annual growth throughout the next two decades.4

These investment opportunities are key to boosting both the future of the United States and our individual financial viability. Fortunately, the largely bipartisan infrastructure bill currently under consideration in Congress can further support these goals. As the largest federal allocation to infrastructure projects since the Great Recession, the investment gives a nod to the saying “you have to spend money to make money.” While it is expected to contribute to growing government debt, analysis by the Penn Wharton Budget Model refers to the investment as “productive assets” that will not only produce jobs and yield a higher income tax base but also generate improved transportation to help private firms get goods to market at a lower cost.5

Content prepared by Kara Stefan Communications.

1 Knowledge@Wharton. August 16, 2021. “Should the Federal Government ‘Green’ Its Pension Plan?” http://www3.weforum.org/docs/WEF_Davos_Lab_Youth_Recovery_Plan_2021.pdf. Accessed Aug. 20, 2021.

2 Ibid.

3 Johnathan Lambert. Science News. July 14, 2021. “Mixing trees and crops can help both farmers and the climate.” https://www.sciencenews.org/article/trees-crops-agroforestry-climate-biodiversity. Accessed Aug. 20, 2021.

4 Morgan Stanley. July 29, 2021. “Plugging into the Electrification Supercycle.” https://www.morganstanley.com/ideas/electrification-grid-energy-transition-opportunities. Accessed Aug. 20, 2021.

5 Knowledge@Wharton. August 16, 2021. “How the $1 Trillion Infrastructure Bill Would Impact the Economy.” https://knowledge.wharton.upenn.edu/article/how-will-the-1-trillion-infrastructure-bill-impact-the-economy/. Accessed Aug. 20, 2021.

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.

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Status Update: Young Adults in America

Over the past 20 years, America’s young adults have experienced significant unemployment, massive student debt, extreme weather events, a global pandemic, a contentious political environment and dramatic socio-economic turmoil. Not that these things didn’t happen in previous generations, but today’s young adult is far more involved and aware due to the 24-hour news cycle and their constant companion — the smartphone.

Even with the advantages of today’s technology, there is a sense that the issues facing subsequent generations tend to be getting worse. It is no longer a given that children will be better off in income, education and opportunities than their parents.1

If you feel your financial portfolio would benefit from a review to help make meaningful contributions to your children’s lives or better position your legacy, please give us a call.

If there is a silver lining to the COVID-19 crisis, it’s that the country must address significant structural changes to improve the lives of all Americans in every facet of the country. Regardless of where we stand on the political spectrum, issues like extreme weather, our ability to respond to pandemic-level health crises, our education system, infrastructure in rural and metropolitan areas, and responsibly harnessing technology and energy to sustain our way of living affects us all. We are all stakeholders and drivers in creating a strong society for the future.

Ultimately, our young people are best positioned to lead the transformation into a stronger America. But let’s consider for a moment some of the challenges they will face as adults.

Longer Life Expectancy

One thing hasn’t changed — each new generation is expected to live longer than the last. The current data suggests that half of the children born in the United States in the year 2000 could live to be 105 years old. On the surface, living longer may sound like a positive, but bear in mind that living longer doesn’t necessarily mean enjoying health or independence in old age. Research shows that people who live longer and have a fulfilling retirement tend to have strong personal relationships and social support systems, eat a healthy diet, maintain better physical health, and remain intellectually active.2 In other words, it’s not just about better, life-prolonging drugs.

Working From Home

Moving forward, the reality is that more generations will be working from home. However, if you think back to some of the apartments you may have had in your early adult years, that might not be much of a perk, especially if you have to share an apartment with roommates also working from home. One challenge that remains to be seen is how workers will be compensated for setting up their own home office. After all, if the work-from-home (WFH) staffing model reduces overhead expenses, surely employers will provide a stipend for home office expenses — ranging from computers and office furniture to broadband and utility bills. Or will they?

Who Pays for College?

Now that college has become so expensive, some young adults are opting not to go. This could lead to a less qualified workforce and a smaller talent pool. In response to the recent labor shortage, some companies are offering to pay for college. Target, Walmart, Chipotle and Starbucks have all introduced programs to help employees pay for college.3

Expensive Lifestyle

One of the perks of today’s generation of young adults is that many were raised under some pretty affluent circumstances. Baby Boomers broke ground in a lot of areas, from women breaking the glass ceiling to improving higher education rates to massive participation in a growing investment market. Unfortunately, lifestyles have become so upscale that it may now be too expensive to have it all. The average middle-class family can’t afford for both spouses not to work, and some young couples are even opting not to have children at all. Between 1950 and 2021, the birth rate in the U.S. declined by 50%. And while 38.3% of women had completed four years of college or more by 2020 (up from 5.2% in 1950), much of the hesitance in starting a family remains financial. Today, economists estimate that it costs an average of almost $250,000 to raise a child to the age of 18.4

Meanwhile, declining fertility rates threaten a “demographic cliff” for the future economy. Legislators and the education industry may have to contend with a lower tax base, school closings and declining college enrollment.5

Content prepared by Kara Stefan Communications.

1 Klaus Schwab. World Economic Forum. August 2021. “Davos Lab: Youth Recovery Plan.” http://www3.weforum.org/docs/WEF_Davos_Lab_Youth_Recovery_Plan_2021.pdf. Accessed Aug. 15, 2021.

2 Sofiat Akinola. World Economic Forum. Aug. 12, 2021. “Here’s what young people think is key to a long and fulfilled life.” https://www.weforum.org/agenda/2021/08/heres-what-young-people-think-is-key-to-a-long-and-fulfilled-life/. Accessed Aug. 15, 2021.

3 Melissa Repko. CNBC. Aug. 5, 2021. “Target to pay 100% of college tuition and textbooks in bid to attract workers.” https://www.cnbc.com/2021/08/04/target-rolls-out-debt-free-college-degrees-to-woo-retail-workers.html. Accessed Aug. 15, 2021.

4 Ann M. Oberhauser. World Economic Forum. July 9, 20201. “Women in the U.S. are having fewer babies. What’s driving this trend?” https://www.weforum.org/agenda/2021/07/declining-fertility-rates-research/. Accessed Aug. 15, 2021.

5 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.

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Market Thoughts: Looking Ahead and Abroad

The mid-year U.S. economic recovery numbers look strong. On Wall Street, analysts predict that our economy will expand by trillions of dollars and create 2 million good-paying jobs throughout the next 10 years. However, despite nearly 1 million jobs reported in July alone, the White House cautioned that the resurgence in COVID-19 cases among unvaccinated Americans could set us up for an economic relapse in the remainder of the year.1

While the U.S. lags in vaccination numbers, other countries are starting to pick up the pace. This could mean that our foreign competitors excel for the rest of the year while the U.S. plateaus. Overall, experts say the world economy is nearly restored to its pre-pandemic size, showing remarkable resistance in the wake of the first global pandemic in memory. Unfortunately, the International Monetary Fund (IMF) reports that the recovery is lopsided due to the rate of vaccinations. At the end of July, 40% of the population in advanced economies had been fully vaccinated whereas only 11% of emerging market (EM) economies could say the same.2

We can view this lopsided recovery in two ways. One is to be cautiously optimistic and invest in well-established performing securities that have weathered difficult events in the past. The other is to look at weak areas of the market as investment opportunities. When you believe a company, industry, or geographic region is well-poised to eventually recover, buying shares now at a bargain price could prove rewarding for those with a long-term outlook. However, your investment style is as unique as your financial circumstances, so it’s best to consult with an investment advisor to help you determine appropriate strategies for your situation. Contact us for advice today.

The market analysts at T. Rowe Price appear bullish on China, which currently has more than 5,200 public companies listed on the country’s exchanges — more than in the U.S. Despite the economic fallout from the pandemic, nearly 900 Chinese companies launched initial public offerings (IPOs) between the end of 2018 and June of this year.3

According to Merrill Lynch, consumer spending in developing countries will be a tremendous market influence once we’re on the other side of this pandemic. The United Nations reports that the developing world now constitutes about 41% of global personal consumption expenditures. This is the reason the wealth manager believes growth investors should allocate some portion of assets to EM equities.4

The United Kingdom had to initiate multiple lockdown restrictions starting last spring but was able to reopen its economy by the end of July thanks to higher vaccination rates. And yet, as of early August, there were six countries in the European Union that had actually exceeded the U.K.’s vaccinated population levels: Malta, Belgium, Spain, Portugal, Denmark, and Ireland. In recent months, the vaccine rate in France nearly doubled after their president imposed rules that banned citizens without proof of vaccination or a negative test from visiting restaurants, movie theaters, museums or travel on long-distance train routes. Denmark, Italy, Greece, and Germany have all adopted similar penalty-based vaccination plans.5

Interestingly, the U.S. has now entered an economic phase for which consumers are likely to be the greatest influence on our growth prospects in the near term. That’s a rather unique phenomenon — and an opportunity to yield control over our own destiny.

Content prepared by Kara Stefan Communications.

1 Christina Wilkie. CNBC. Aug. 6, 2021. “Biden skips victory lap after strong July jobs report warns of economic peril from rising Covid cases.” https://www.cnbc.com/2021/08/06/biden-warns-of-economic-peril-from-covid-despite-july-job-gains.html. Accessed Aug. 6, 2021.

2 Tom Fairless, Stella Yifan Xie and Aaisha Dadi Patel. The Wall Street Journal. July 30, 2021. “World Economy Caps Extraordinary Return From Covid-19 Collapse.” https://www.wsj.com/articles/world-economy-caps-extraordinary-return-from-covid-19-collapse-11627643509. Accessed Aug. 6, 2021.

3 T. Rowe Price. June 2021. “Positioning for a New Economic Landscape.” https://www.troweprice.com/content/dam/iinvestor/resources/insights/pdfs/positioning-for-new-economic-landscape.pdf. Accessed Aug. 6, 2021.

4 Merrill Lynch. July 2021. “Whispering Winds.” https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Viewpoint_July_2021_Merrill.pdf. Accessed Aug. 6, 2021.

5 Jon Henley. The Guardian. Aug. 6, 2021. “Six EU states overtake UK Covid vaccination rates as Britain’s rollout slows.” https://www.theguardian.com/world/2021/aug/06/six-eu-states-overtake-uk-covid-vaccination-britain-rollout-slows. Accessed Aug. 6, 2021.

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

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