Author: SynergiaFinancialGroup

With the election over, investors may be wondering about market volatility as we enter 2021. Regardless of politics, short-term stock market results can vary depending on factors, including gridlock in the House and Senate, and a newly elected future President Biden. Tracking trends like this in the stock market tends to be easier than understanding why they occur.  

After an 11-year bull run, we entered a bear market in 2020 amid the COVID-19 pandemic. Even today, it is uncertain how long the pandemic will last and how quickly we will have vaccines available. However, the stock market responds positively to the news that a vaccine will be available to the public in 2021.

Some stock market analysts view a Democratic President and a Republican-controlled U.S. Senate as the ‘best of both worlds’ when it comes to positive stock market performance:

The easing of trade wars.

Increasing global trade of U.S. products.

Pro-business policies.

Corporate taxes and capital gains taxes remain at current tax rates.

Often leading to post-election market volatility is what is known as The Presidential Election Theory, developed by stock market researcher Yale Hirsch. Hirsch’s theory suggests that stock markets perform weakest during the first two years of a presidential term when the president tends to work on the proposed policy reform that got them elected.

During the second half of their term, presidents shift their focus to improving the economy to be re-elected. As a result, many stock indices gain in value – and the results tend to be consistent regardless of whether the president is Democratic or Republican. Now, with COVID-19 cases increasing, the top priority for our newly elected future President Biden will be the pandemic first and his proposed policies secondary.

It is important to remember that time in the market beats timing the market. Stay focused on your long-term financial strategy for stable growth in your portfolio and discuss your concerns about market volatility with your financial professional.

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2020 has been unlike any other thanks to the COVID-19 pandemic, our strange stock market, and social unrest leading up to the Nov. 3rd Presidential Election. This recap is for you to see what we have already been through as we look toward a brighter future as we assess what we have learned from this year: 

January 2020

February

March

April

May

June

July

August

September

October

November

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The coronavirus pandemic has motivated financial professionals to take full advantage of technology. Many of them are pairing various tech solutions with their unique human touch to help clients improve their financial well-being. So how can you, as a client, use similar technology to make a positive difference in your finances? Keep reading to find out. 

Automation

If you are in search of a way to simplify your finances, automation is critical. Automation helps you pay your bills and credit cards quickly, send checks, and save a portion of your paycheck in an emergency fund and retirement account every month. 

To start automating, visit the company’s website you’d like to make payments to and set up a payment date that works for you each month. Once you do, payments will initiate automatically, so you never have to think about them. 

By automating your finances, you’ll be more likely to meet your savings goals and avoid the high costs of late fees, penalties, and interest charges. Just make sure you always have enough money to cover your automated payments.

Video Conferencing

Gone are the days when you have to leave your home and drive to your financial professional’s office to meet with them. Thanks to video conferencing tools like Zoom and GoToMeeting, you can get in touch with your financial professional from the comfort of your own home or office. Whether you’d like to go over your portfolio, ask a question, or discuss your future financial plans, you can do so via video conferencing. 

Financial Apps

There are countless financial apps on the market. While each one has its unique purpose, many of them are geared toward budgeting, debt management, coupon clipping, tracking receipts, and investing. It’s a good idea to do your research and find an app or two that meet your unique goals and needs. Here are a few to get you started:

Thanks to technology, you can connect to others who have similar financial goals, no matter where you live. Join social media groups or other online communities to gain new knowledge and learn from others. However, if you do, be sure to keep your financial details private by only sharing them with your financial professional who you know and trust. Secondly, be aware that advice from social media groups may not be accurate before acting on it. Consult your financial professional on any questions you may have regarding online information.

Investment Portfolio Portal Access

Your financial professional can provide you access to view your portfolio’s performance, assess contributions or distributions, retrieve statements, and more. When you have this information readily available to you, monitoring your goals and progress is simple.

The reality is that personal finance is far easier to control and manage with the help of technology. Remember, it takes hard work and persistence to meet your short and long-term financial goals.

Together we can achieve your goals with technology helping us monitor your financial progress. If you have questions regarding the technology I use or other platforms, feel free to reach out to our office at any time.

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As you get older, the question of when to collect Social Security retirement benefits will likely come to mind, particularly true if you plan to retire early. In a perfect world, there would be one age that would be ideal.  However, your unique circumstances and goals will dictate the best time for you to take Social Security retirement benefits. Let’s dive deeper into all the factors you should consider before making your decision. 

Understanding the Basics

Before you figure out when to collect Social Security Retirement benefits, it’s essential to familiarize yourself with the basics. You can claim Social Security at age 62. The caveat here is that if you do so, your benefits will reduce permanently. 

If you wait until 66, full retirement age (which will continue increasing until age 67 for those born in 1960 or later), you can expect a larger payment based on your work history. Your benefits will continue to go up until age 70, so the longer you wait to start, the larger the monthly benefit. 

Think About Your Life Expectancy

Of course, there is no way to know your life expectancy. However, examining your health and family history can provide insight. If you believe you’ll live decades past retirement, it may be wise to postpone your benefits until a later age. 

If you turn 62 and not in the best health, you may want to take your Social Security retirement benefits at an earlier age. Note that the Social Security Administration has discovered that the average 65 years old will live to around 85 with women having a greater life expectancy than men. The life expectancy calculator is a great starting point for calculating your life expectancy. 

Consider Other Sources of Income

If you have not saved enough money for retirement, you may be more dependent on your Social Security retirement benefits and need to take them earlier. On the contrary, if you have substantial retirement savings or income from other sources, you may benefit by postponing your initial Social Security benefits starting date. 

Keep in mind that if you file for Social Security and continue to work before your full retirement age, your earnings will exceed certain limits, and a portion of benefit will withhold temporarily. 

Maximize Benefits with Your Spouse

If you are married, you and your spouse can maximize your lifetime benefits. The 62/70 split is a strategy in which the lower-earning spouse takes Social Security retirement benefits at an earlier age, such as 62, and the higher-earning spouse does not file until age 70. This scenario will allow you access to some Social Security retirement benefits now and a higher benefit amount down the road. 

If you and your spouse have earned close to the same salary over the years, both of you may want to delay filing until turning age 70. If only one spouse has been the breadwinner, it may make sense to postpone benefits until 70, leading to the highest possible monthly benefit amount. 

Consult Your Financial Professional 

Together we can review your financial situation and determine the best time to take your Social Security retirement benefits. Contact us to schedule your Social Security retirement benefits review. 

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COVID-19 is changing the way business is conducted, resulting in economic fallout, and stock market declines in many parts of the world. However, here in the U.S., while companies are closing, the stock market remains resilient in the middle of an economic crisis. Why does Wall Street appear to be disconnected from Main Street as businesses are permanently closing? The answer lies in the underlying economic fundamentals of our U.S. stock market system:

As one sector is experiencing profitability, another is declining, resulting in layoffs, reduced profits, and stock market valuations. For example, the travel industry has been hit hard since the onset of COVID-19. Airline travel, hotel stays, and car rentals are down not only in the U.S. but worldwide. However, the pharmaceutical and technology sectors are experiencing significant growth. The U.S. has more technology companies than other parts of the world, signaling profitability in this sector.

“The more economic fundamentals and market outcomes diverge, the deeper the mystery becomes, until one considers possible explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics. After all, stock-market movements are driven largely by investors’ assessments of other investors’ evolving reaction to the news, rather than the news itself.” –Robert J. Shiller. Understanding the Pandemic Stock Market, July 7, 2020, Project Syndicate.

Given that the stock market contains many sectors and companies, the specific mix of industries it represents has made it more resilient than the economy. Additionally, investor sentiment is pushing the valuations of some industries higher while other industry stocks are discounting. McKinsey and Company’s COVID tracker illustrates how the market valuation of sectors has changed from 2019 to October 12^th, 2020, among these North American sectors:

Globally, all sectors respond similarly, as production, economics and lifestyles change around the world. As industries continue to shift positively or negatively in their performance, human nature may be reactive to this short-term performance. As an investor, remember that time in the market beats timing the market, but strange times like this can create your portfolio opportunities.

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As 2020 comes to an end, more and more Americans are contemplating their decision to retire. Others are tapping their retirement savings, while some save more due to the economic fallout and impacts of COVID-19. A recent study by TD Ameritrade, the COVID-19 and Retirement Study conducted from April 24^th through May 4, 2020, reports that 41% of Boomers, 43% of Generation X, and 46% of Millennials indicate they are still recovering financially from The Great Recession. COVID-19 undoubtedly adds another layer of financial stress and the ability to save for retirement for many people. Other findings from the study include:

While some people have withdrawn from their retirement savings account or decreased their contributions, others are reacting to COVID-19 and preparing themselves by saving more:

Source: TD Ameritrade COVID-19 Retirement Study

Three quarters of the respondents in the study said that they plan to prioritize retirement savings post-COVID-19. For many, that includes saving more and considering part-time or full-time work in retirement or retiring later to make up the difference. Additionally, others indicate that they will consider living abroad in retirement in areas where the cost of living is less compared to the U.S.

As you contemplate your retirement and look toward the future, having a financial plan reflects where you are now and how your retirement plans may have changed. Even though COVID-19 may change your perspective on retiring, planning for your future should still take precedence.

If you need assistance to borrow from your retirement savings accounts penalty-free through the CARES Act, increase your retirement savings, or redo your financial plan, right now is an excellent time for us to meet.

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Socializing is critical for mental health, and people who associate with others live longer. Research also concludes that isolation can often lead to loneliness, depression, and other health problems. Especially now, during COVID-19, our desire to connect with others is heightened. Before the fall season changes to winter and cold weather arrives, get out and enjoy the season- but do so safely. Here is a list of ideas to safely enjoy fall until we experience brighter days ahead in a post-COVID-19 world:

Head Outside- COVID-19 does not mean you need to confine to your home; you can still enjoy the outdoors’ natural beauty. Just remember to practice social distancing while walking, biking, or while attending outdoor fall events. Remember that even a walk around your neighborhood with a friend is an easy way to get a little sunshine, exercise, and socially distanced socialization.

Be Neighborly- While a cup of coffee or hot cider indoors with your neighbor or at a cafe may not be an option, have it outside while distancing at least 6-8 feet apart. Bringing cider or coffee and blankets to a local park provides an additional canvas for enjoying time with others.

Attend a Fall Farmer’s Market- Farmer’s markets are open in many states and may require ‘masking up,’ washing hands, moving one direction through the market, and socially distancing. You may be limited in handling the product or other items and required to pay with cards versus cash. Check your local area and experience a pumpkin patch for an added outdoor experience.

Fall Football- If fall sports occur in your community, sit on the sidelines out of the grandstands unless the seating is limiting. While outside, limit your exposure by avoiding contact with others.

While we still do not know everything about COVID-19, the CDC has established guidelines to help reduce the virus’s spread that can be found here. Isolation and socially distancing isn’t going to last forever. While it not yet safe to return to the way our lives were before COVID-19, there are ways to safely socialize in person versus through a screen or phone call.

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If you are not contributing to your health savings account (HSA), you miss out on a great way to save for health care expenses now and during retirement. HSAs allow you to save money tax-free through payroll deduction. Like traditional investments, some HSAs provide fund choices to increase accumulations

With health care costs continuing to grow year over year, saving into an HSA plan makes sense.

Benefits of HSAs include:

HSA qualified expenses include co-insurance, dental, vision, prescriptions, insurance plan deductibles, and other costs not covered by your health insurance. If you have questions about what your HSA plan covers or how much you can contribute to your HSA each year, contact your HSA provider.

As you change jobs during your working years, your employers may have different health savings account plans.  When you leave an employer, the HSA funds left over are yours and should be rolled over into your new employer’s plan. HSAs can only roll-over into your new employer HSA, unlike a 401(K) that roll-over into an IRA. As you change employers throughout your career, you do not want to have multiple HSA accounts left at former employers, so move them into your current employer’s HSA plan.

You can move funds from an IRA into your HSA, but only if you are eligible to contribute to your HSA. Additionally, you need to do the transfer while covered by a high-deductible health plan. The IRA-to-HSA rollover includes a “testing period” that requires you to remain eligible for your HSA for twelve months following the transfer. Additionally, you must stay in your high deductible health plan until the testing period expires or face a 10% IRS penalty. Furthermore, you are only eligible for an IRA-to-HSA rollover once in your lifetime.

When you retire, HSAs can pay for things that are not covered by Medicare. Currently, Medicare’s cost is deducted from beneficiary Social Security payments for doctor appointments and hospitalization but has limited coverage.

Retirees still need to carry supplemental insurance for dental, vision, prescriptions, and many other things that Medicare does not cover. Start saving into an HSA now to cover the supplemental insurances you will still need to purchase. The only exception to this is that once you enroll in Medicare, you cannot contribute to a health saving account even if still employed.

Financial planning involves planning for health-related expenses and making sure you prepare for any unforeseen financial impact through insurance coverage. If you have any questions regarding HSA accounts or other employment benefits such as your retirement account, contact our office anytime. 

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October is the Financial planning month and a great time to meet with your financial professional to ask questions, review policy and portfolio performance, and make decisions that keep you on track with your goals. Regardless of your age, it would be best of you planned for your financial future.

Reviewing your insurance policies and portfolio during the final quarter of the year is essential for many reasons. Fall tends to be when many people think about next year and what they want to accomplish financially in the future. With the disruptions that 2020 brought to our lives, there is no better time than now to review, update, and make changes, so you are ready for 2021. Have you checked the following with your financial professional?

Life Insurance Policies:

Beneficiaries- Has anyone in your family married, divorced, or changed their name? Was there a new family member born this year?  Update beneficiary names and include social security numbers for each to ensure the death benefit pays quickly to your beneficiaries.

Death Benefit Amount- Have you acquired more debt, retired, or had assets increase in value? Review each policy to ensure it will provide enough death benefits to cover all your beneficiaries’ financial needs. If you have a large estate, ensure the death benefit will offset estate taxes.

Additional Policies- Was there a new family member born or families combine this year? Life Insurance can benefit your new family member in future years. Consult your insurance professional to determine allowable coverage and if there are stipulations if you are not the custodian of the minor child you wish to insure.

Retirement Portfolio:

Allocations- Is your portfolio too heavy in one asset class? With today’s volatility, rebalancing and adding another asset class like annuities may help to balance portfolio allocations to align with your goals. Work with your financial professional to determine if annuities are a suitable investment for you.

Risk Tolerance- Are you taking too much risk or not enough? Changing jobs, being furloughed, or contemplating early retirement can affect your risk tolerance.

Performance– Reviewing your fund, stock, and cash performance during 2020 can help determine a future strategy. Although future performance cannot be determined, you and your advisor can plan for any market condition.

Taxes– Your tax professional and financial professional may suggest extra contributions or other tax-savings strategies for lowering your taxable income for 2020 after your fall review.   

Make your Bonus a Bonus- Fourth quarter is when many companies announce an end of year bonus. If you anticipate a bonus, request it deposit into your pre-tax retirement savings account. 

Plan for Next Year– Start the New Year with a financial plan. Those with a written financial plan are more likely to succeed when they work with their financial professional throughout the year.

2020 has not been ordinary and has taught us to prepare for anything. Your financial future starts by reviewing where you are today and initiating a step by step plan to get you to where you want to be. Contact our office today to schedule your fall review.

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Federal and state governments face sizable budget deficits due to the COVID-19 pandemic and a rocky political climate. With restrictions still in place as the pandemic continues to spread in the U.S., states are coming up short on two valuable revenue sources: income taxes and sales taxes.

In addition to state deficits, the total U.S national debt was $26 trillion as of July 25, 2020¹ and federal taxes may rise to pay back the money spent in stimulus aid.

And taxes aren’t all that is impacting– the price of necessities are increasing, particularly gas and food. Gas is recovering from early 2020 declines, and food prices—particularly meat— have proliferated rapidly amid COVID-19 outbreaks at processing plants. 

No matter how far off retirement is, keep these three tax and income strategies in mind:

Convert your traditional IRA to a Roth IRA.
Converting your traditional IRA to a Roth IRA before the Dec. 31, 2020 deadline will help you stay within a desirable tax bracket. After this year, taxes could rise, so it may be an excellent time to take advantage of reduced share prices and pay the taxes now. The account will grow tax-free after the conversion. However, it is recommended that you consult your tax professional to evaluate how state and federal taxes may impact your conversion.

The added benefit of converting to a Roth is that inheritance from the account can continue to grow for ten years before distribution is required. This benefit is a bonus for beneficiaries who will not have to pay taxes on the income they inherit through the account.

Use permanent life insurance for retirement income.
If you are retired, consider using permanent life insurance for income in an unfavorable tax environment. Withdrawals from the cash value of a permanent policy are tax-free and can help you avoid withdrawing income from taxable accounts such as 401(k)s and traditional IRAs. Note that withdrawals will reduce the death benefit.

Donate to charity before the end of 2020.
Depending on the results of the presidential election, 2020 may be the last year that qualified charitable contributions up to 100% of adjusted gross income (AGI) are deductible. If this is the case, investors should consider two methods for charitable donations:

Make a sizable contribution to a donor-advised fund or foundation and deduct the full amount on 2020 taxes.

Make a qualified charitable contribution from a traditional IRA (up to $100,000) if you need to take required minimum distributions.

Are you concerned about taxes and inflation in the future?

Talk to your financial professional about smart tax moves you can make today to help reduce your tax bill and preserve your investments’ value. 

¹ TreasuryDirect.gov. “The Debt to the Penny and Who Holds It.” Accessed July 25, 2020.

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