We have the resources and knowledge.
 What are the biggest expenses you’ll face in retirement? Healthcare? Housing? Travel? All of those costs could be significant, but one of the biggest could be taxes. That’s right. Just because you’re done working, doesn’t mean you’re done paying taxes.
Many sources of retirement income, like Social Security, pensions, and retirement account distributions, are taxable. That doesn’t even include the wide range of other taxes you could face, like property taxes, sales tax, and more. Taxes may be a part of life, but they can also be a drain on your retirement. Every dollar you pay in taxes is a dollar that can’t be used to support your lifestyle and fund your goals. Fortunately, you can take action to reduce your tax burden and maximize your retirement income. Below are five steps to consider as you approach retirement: 1) Use a Roth IRA. A traditional IRA is an effective savings vehicle for retirement. You get tax-deferred growth, and potentially tax deductions for your contributions. However, a traditional IRA can also create tax issues in retirement. Most distributions from a traditional IRA are taxed as income. If you use an IRA to accumulate a sizable nest egg, you could face taxes on much of your income in retirement. The alternative is a Roth IRA. In a Roth IRA, you don’t get tax deductions when you make a contribution. However, your distributions in retirement are tax-free, assuming you are at least age 59 ½ and you have held the Roth for at least five years. As a married couple, you cannot contribute to a Roth if your income is greater than $196,000 in 2020. For a single person, that limit is $124,000.1 Otherwise, you can contribute up to $6,000 this year, or up to $7,000 if you’re 50 or older.2 You can also convert your traditional IRA to a Roth. This means paying taxes on the traditional IRA amount. However, after the conversion, you can grow the remaining assets in the Roth on a tax-free basis and take tax-free distributions in retirement. 2) Be strategic about Social Security distributions. Social Security will likely play a role in your retirement income puzzle. However, taxes will impact the net amount you receive from Social Security. The extent that your Social Security benefit is taxed depends on a number called your “combined income.” Combined income is your adjusted gross income plus nontaxable interest plus half of your Social Security benefit.3 If you are single and your combined income is between $25,000 and $34,000, up to 50% of your benefits could be taxable. If you earn more than $34,000, up to 85% of your benefits could be taxable.3 For married couples, if your combined income is between $32,000 and $44,000, up to 50% of your benefits could be taxed. If you earn more than $44,000, up to 85% of your benefits could be taxed. The key to reducing your combined income is to reduce your adjusted gross income. Non-taxable income is not included in that number. So, for example, you could maximize your Roth IRA to minimize your adjusted gross income. You could also delay Social Security until age 70 to increase your benefit, and draw down your taxable accounts, like a traditional IRA, before Social Security starts. 3) Consider downsizing. Simply moving to a new home could reduce your taxes. Property taxes may be a major tax burden depending on your home. If you no longer need a large home, consider moving to something smaller that has a lower value and thus lower property taxes. You also may look at a neighboring community that has a lower property tax rate. 4) Relocate to a more tax-friendly state. Another option is to move to another state completely. Some states are more tax-friendly for retirees than others. For example, Alabama doesn’t tax Social Security benefits and has a relatively low sales tax rate.4 Florida is another option as it doesn’t have a state income tax.5 Do your research and you may find a new home that is appealing and saves you money. 5) Use an HSA to pay for medical costs. Fidelity estimates that the average 65-year-old couple will pay $285,000 out-of-pocket for health care expenses in retirement.6 If you’re using taxable distributions from an IRA or 401(k) to pay those costs, the impact on your savings could be even greater. One strategy to minimize the tax burden is to use a health savings account (HSA) to pay for healthcare costs. In 2020, individuals can contribute up to $3,550 to an HSA. Families can contribute up to $7,100.7 You can invest and allocate those funds to match your goals and risk tolerance. The assets grow on a tax-deferred basis as long as they stay in the account. When you’re ready to use the funds, you can take tax-free distributions to pay for qualified healthcare expenses like premiums, deductibles, copays, and more. By using a tax-free source to pay for healthcare costs, you reduce the amount you need to take from taxable accounts, like an IRA or 401(k). That, in turn, reduces your overall tax burden. A financial professional can help you determine if an HSA is right for you. Ready to develop your retirement tax strategy? Let’s talk about it. Contact us today at Coeus Financial. We can help you analyze your needs and develop a plan. 1https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020 2https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits 3https://www.ssa.gov/benefits/retirement/planner/taxes.html#:~:text=Learn%20Apply%20Manage-,Income%20Taxes%20And%20Your%20Social%20Security%20Benefit,on%20your%20Social%20Security%20benefits.&text=between%20%2425%2C000%20and%20%2434%2C000%2C%20you,your%20benefits%20may%20be%20taxable. 4https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=2 5https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=4 6https://www.cnbc.com/2019/04/02/health-care-costs-for-retirees-climb-to-285000.html 7https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-2020-hsa-contribution-limits.aspx The information contained herein is based on our understanding of current tax law. The tax and legislative information may be subject to change and different interpretations. We recommend that you seek professional legal advice for applicability to your personal situation. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20277 - 2020/7/20 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.
0 Comments
 We’re halfway through 2020, and the year has already been a rollercoaster. We’ve seen a global pandemic, record unemployment and racial protests across the country. And let’s not forget, there’s a presidential election campaign season in full swing. Of course, the events of this year have rocked the financial markets. Between February 19 and March 23, the S&P 500 fell 33.93%. Then, from March 23 to June 18, it rose 39.24%.1 The quick rebound is certainly good news. However, given the COVID-19 pandemic is still ongoing and the election lead-up is intensifying, there’s no guarantee that the markets will stay on a positive trajectory. In fact, it’s possible the next six months could be just as volatile as the last six months. Asset Class Winners and LosersBelieve it or not, there are some asset classes that have actually had positive returns through the first half of this year. Below are the major asset classes that have had positive returns from January 1 through May:2
Of course, many of those assets, like gold and cash, are traditionally assets that investors turn to during times of volatility. Other asset classes haven’t fared so well. Here are the asset classes that declined through May of this year:2
The Importance of DiversificationIt’s impossible to predict what each asset class will do in the short-term. That doesn’t stop people from trying though. Very often short-term predictions turn out to be inaccurate.
For example, at the beginning of 2020, one major investment company said it was bullish on stocks and bearish on gold, both of which turned out to be inaccurate predictions.3 Of course, they couldn’t predict the oncoming pandemic, but that’s just one example why it’s never wise to predict returns of certain asset classes. A more effective approach is to implement a diversified strategy that incorporates a wide range of asset classes. That way, you get positive returns from the winning asset classes to offset losses in other areas. We can help you find the right approach for your needs and risk tolerance. Contact us today at Coeus Financial. Let’s connect soon and start the conversation. 1https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_y6rwXoqdG8qStAaXrrz4DA1:0 2https://seekingalpha.com/article/4351432-major-asset-classes-may-2020-performance-review 3https://apinstitutional.invesco.com/home/2020-outlook-global-market-strategy-asset-class-outlooks Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20198 - 2020/6/22 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.  The first half of 2020 has been a rollercoaster ride. The COVID-19 pandemic completely altered our way of life and threw the economy into a tailspin. Most states have started the reopening process, but there is still significant uncertainty about the long-term impact of coronavirus and how long the pandemic will continue. Federal Reserve Chairman Jerome Powell recently said the economy faces a “long road” to recovery, and predicted the process may take through 2022.1 While the recovery may be a long-term journey, there have been some signs of hope in recent months: Stock Market ReturnsThe stock market had been enjoying the longest bull market in history before the coronavirus pandemic hit.2 The bull market came to an abrupt end starting in late February. On February 20, the S&P hit a high of 3373. From that point through March 23, the S&P fell to 2237, a decline of 33.7%.3 However, since that time, the market has increased to 3115 through June 18. That’s an increase of 39.25%. The S&P is nearly back to its pre-COVID levels.3 Of course, it’s impossible to predict the future direction of the markets. Just because the market has been on an upswing doesn’t mean it will continue. A spike in cases or a second round of shutdowns could send the markets back into a decline. UnemploymentThe pandemic has driven unemployment to record-high levels. Through mid-June, the country had 13 consecutive weeks with more than 1 million new jobless claims. Prior to the coronavirus pandemic, the record for a single week was 695,000 in May 1982.4 The good news is that jobless claims have been declining. At the beginning of the pandemic, weekly jobless claims exceeded 6 million. In fact, up until late-May, they exceeded 2 million. So while jobless claims remain at record highs, they are on the decline. The amount of continuing claims has also dropped from 25 million in early May to just over 20 million in early June.4 Consumer SpendingConsumer spending was impacted significantly by the COVID-19 pandemic. That’s not surprising, given most states were effectively shut down for two months. In April, consumer spending dropped by 16.4%, a record monthly decline.5
In May, consumer spending set another record—this time for biggest monthly increase. The figure rose by 17.7%, driven by large increases in clothing (188%), furniture (+90%), sporting goods (+88%), and electronics (+55).5 Consumer spending by itself doesn’t mean the economy is on the path to recovery. There are still plenty of uncertainties in the economy. However, it is a good sign that consumer spending is nearly back to its pre-pandemic levels. This is uncharted territory for all of us. The situation and data changes so fast that it’s impossible to project where the economy may be headed. A comprehensive strategy that aligns with your goals and risk-tolerance can keep you on track to meet your long-term objectives. Let’s connect today and talk about your concerns, questions and challenges. At Coeus Financial, we can help you develop and implement a strategy. Contact us today and let’s start the conversation. 1https://www.marketwatch.com/story/fed-sees-rates-near-zero-through-2022-says-asset-purchases-will-continue-2020-06-10 2https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html 3https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_hL3sXpOQHsnWtAal04OQCA1:0 4https://www.cnbc.com/2020/06/18/weekly-jobless-claims.html 5https://finance.yahoo.com/news/consumer-spending-comes-back-with-a-vengeance-in-may-morning-brief-100600715.html Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20195 - 2020/6/22 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.  It’s hard to find good news in today’s economic environment. COVID-19 single-handedly brought an end to the longest bull market in history and ushered in record-setting unemployment. If you’re like millions of others in the country, you’ve lost income or possibly even your job. You also may have lost savings due to market volatility. Given that the coronavirus pandemic is still ongoing, there’s no telling how the economy or the financial markets may respond through the rest of the year. Even in down years, there are still opportunities to improve your financial future. Below are three such moves to consider in your strategy: Fund a Roth IRA.In 2020, you can contribute up to $6,000 to a Roth IRA, or up to $7,000 if you are 50 or older.1 A Roth can be helpful because you can take tax-free withdrawals from it after age 59 ½, assuming you’ve held the account for at least five years. Not everyone can use a Roth. If you’re a married couple making more than $206,000 or a single person making more than $139,000, you can’t contribute to a Roth IRA.2 However, if a pay cut has pushed you below the income limits, you could use this time to open a Roth. Convert your IRA to a Roth.Another option is a Roth conversion. This is a process that converts a traditional IRA into a Roth. You pay taxes on your IRA balance and then the net amount is deposited into a new Roth IRA. You face a current tax liability, but you get potentially tax-free income in retirement. It may make sense to do a Roth conversion during a down year, when your income is reduced. You may be in a lower tax bracket and will thus face a lower tax bill on the conversion. A financial professional can help you explore this option. Dollar-cost average.Dollar-cost averaging is a strategy that can be helpful at all times, but especially during volatile periods. You contribute the same amount of money at regular intervals, like once per month. That money is then invested in a predetermined strategy.
The benefit of this is that you buy more shares when prices are low and fewer shares when prices are high. This reduces your overall cost, which increases your potential for growth. Again, a financial professional can help you implement a dollar-cost averaging strategy. We can help you determine the right strategy in this volatile time. Contact us today at Coeus Financial so we can help you develop a plan. Let’s connect soon and start the conversation. 1https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits#:~:text=For%202020%2C%20your%20total%20contributions,less%20than%20this%20dollar%20limit. 2https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020 Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20199 - 2020/6/22 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.  On March 27, the government passed the Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act. The Act had a wide range of provisions to provide Americans and small businesses with economic support during the coronavirus pandemic. The bill provided stimulus payments, enhanced unemployment, and various forms of business loans.
One provision that flew under the radar was the ability for qualified individuals to take distributions from their 401(k) plans and IRAs without paying early distributions penalties. Normally, you face a 10% early distribution penalty if you take a withdrawal from these accounts before age 59 ½.1 However, under the CARES Act you can take up to $100,000 as a penalty-free distribution from your qualified accounts, assuming you are a qualified individual.2 Are you qualified? And even if you can take a distribution, is it wise to do so? CARES Act Qualified Plan Distributions Under the CARES Act, you can take up to $100,000 in qualified plan distributions if you are a qualified individual. Who is qualified? Anyone who meets the following criteria:
If you meet any of these criteria and you decide to take a distribution, you won’t have to pay the 10% early distribution penalty, even if you are under age 59 ½. However, you will still have to pay income taxes on the distribution. You can spread the taxes out over a three-year period, but you still have to pay them.2 Should you take a CARES Act distribution? A CARES Act distribution may be the right strategy if you are in a financial crisis and have limited avenues available for relief. However, just because the distribution is “penalty-free” doesn’t mean it comes without consequences. In addition to paying taxes on the distribution, you’ll also forego any future growth on the assets you withdraw. Tax-deferred growth is one of the biggest advantages of a qualified account. However, if you pull out funds, you lose all future tax-deferred growth on that amount. That could lead to a substantial reduction in your future assets at retirement. Instead of dipping into your 401(k) or IRA, consider what other options you may have available. For instance, perhaps you could tighten your budget. Maybe you could refinance mortgages or other loans, or even renegotiate new payment terms. You may even consider picking up additional work until the crisis passes. It may be tempting to take an IRA distribution, but you’re only taking money from your future self. Let’s talk about strategies to help you get through this period. Contact us today at Coeus Financial. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1https://www.irs.gov/newsroom/what-if-i-withdraw-money-from-my-ira 2https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20100 - 2020/5/20 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.  Saving for retirement can often feel like climbing a mountain. It takes immense planning and discipline to reach the summit - the moment when you can finally retire and leave the working world behind.
Much like climbing a mountain, though, the summit isn’t the end of the story. You still have to get back down the mountain. Often, climbing down the mountain can be more dangerous than the ascent. It requires just as much planning and focus. The same is true of continuing to grow your savings after retirement. Technically, you’ve reached the summit and retired, but you still have a long way to go. According to the Society of Actuaries, a 65-year-old man has a 50% chance of living to 87 and a 25% chance of living to 93. For a woman, those ages are 89 and 95.1 If you retire in your mid-60s, it’s very possible that you will live another 20 to 30 years. How do you make your savings and income last for that period of time? Your strategy should be based on your unique needs and goals, but there are a few good practices to keep in mind. Below are a few tips to keep in mind: Be mindful of inflation. Inflation is the increase in prices of goods and services. Annual inflation is usually modest. In fact, it hasn’t exceeded 5% since the 1980s.2 Even modest inflation can impact your strategy over the long-term, though. Consider an average 3% inflation rate. Over 24 years, that means a doubling in prices. Could you afford to see your expenses double throughout retirement? A strategy that leaves room for growth potential can help offset the effects of inflation. As your assets grow, you may be able to take increased income to cover the increase in prices. Many retirees opt for strategies that have little risk exposure. However, it may be wise to allocate some portion of your savings to assets that offer growth potential so you can keep up with inflation. A financial professional can help you find the right mix. Take the “Goldilocks” approach. Do you remember the story of Goldilocks, the girl who finds her way into the home of a family of bears? She tries their porridge, their chairs, and even their beds until she finds the one that is just right. A “Goldilocks” approach to growing your savings may not be a bad idea, especially after retirement. Don’t look for the portfolio that offers the most return or the least risk. Rather, look for the mix that is “just right” for your needs and goals. For instance, it may be that your “just right” strategy is one that limits risk but also offers growth potential and consistent income. A financial professional can help you find your “just right” strategy. Have a withdrawal strategy. If you’re like many retirees, you’ll receive Social Security and possibly even a defined benefit pension in retirement. But you also may need to take withdrawals from your savings to supplement those income sources. What’s the right amount of income to take? If you take too little, you may not live the type of lifestyle you desire. Take too much and you could drain your savings. Before you enter retirement, you may want to plan your income strategy. Determine the right level to take without draining your savings. Also develop backup plans. For example, how will you adjust your income if your investments decline? What if you have a costly emergency? How will you cover that expense? Should you look at tools to guarantee* your income? Again, a financial professional can help you answer these questions. Ready to develop your post-retirement strategy? Let’s talk about it. Contact us today at Coeus Financial. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1https://www.fidelity.com/viewpoints/retirement/longevity 2https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 20113 - 2020/5/26 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.  The economic fallout from the coronavirus pandemic continues, even as states start to reopen restaurants, retail stores, and other businesses. The crisis brought an end to the bull market that started in 2009 and threatens to usher in a recession.1
What does the future hold for the stock market and the economy? When will the economy recover? And how will this crisis impact your retirement and your financial future? It’s impossible to definitively answer those questions. In many ways, this event is unprecedented. We don’t know how long the virus will present a threat, so it’s impossible to predict how or when the economy may recover. However, it is possible to make adjustments to your strategy to minimize risk and take advantage of potential opportunities. It’s also helpful to keep in mind the long-term nature of the economy and the financial markets. Nothing lasts forever, including recessions and bear markets. Stock Market Performance The financial markets have been a rollercoaster since the onset of the pandemic. On February 19, the S&P 500 closed at 3386. On March 23, it closed at 2237, a drop of 33.93%. Since that time, the market S&P has climbed to 2863 as of May 15.2 It’s important to remember that the stock market isn’t the same as the economy. A drop in the stock market doesn’t necessarily signal a recession, just like a rise doesn’t necessarily spell an economic recovery. It’s also helpful to remember that bear markets are a natural part of investing. They aren’t always caused by global pandemics, but they do happen. There have been 16 bear markets since 1926. On average, they last 22 months and are followed by a 47% gain in the year following the market’s lowpoint.3 We can’t predict when the market will hit its low point, or if it already has, but if history is any guide, the market will recover at some point. Economic News While the stock market has bounced back somewhat since its March decline, the overall economic news continues to be negative. More than 36 million people have filed for unemployment since late March. In 11 states, more than a quarter of the workforce is unemployed.4 In the first quarter, the economy contracted for the first time since the 2008 financial crisis. GDP declined by an annualized rate of 4.8%. That’s not as steep as the GDP decline of 8.4% annualized decline in 2008. However, it’s possible the economy could face a greater decline in the second quarter. Consumer spending, which accounts for 70% of GDP, fell by an annualized rate of 7.6% in the first quarter. That’s the steepest drop for that metric since 1980.5 While states may be starting the reopen process, there is still significant uncertainty surrounding the crisis and the economy’s future. The good news is you can take action to minimize risk. Contact us today at Coeus Financial. We can help you analyze your goals and needs and implement a strategy. Let’s connect today and start the conversation. 1https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html 2https://www.google.com/search?safe=off&tbm=fin&sxsrf=ALeKk01UjyvpIcf62vDAgyulZ3dZuL1GWg:1589832165005&q=INDEXSP:+.INX&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyevq5uEYEB1gp6Hn6RQAAItD1MEkAAAA&sa=X&ved=2ahUKEwikycWrmr7pAhWWU80KHfhUBrcQlq4CMAB6BAgBEAE&biw=1536&bih=754&dpr=1.25#scso=_JerCXv0o9o70_A-NwLLYBg1:0 3https://www.fidelity.com/viewpoints/market-and-economic-insights/bear-markets-the-business-cycle-explained 4https://www.nytimes.com/2020/05/14/business/economy/coronavirus-unemployment-claims.html 5https://www.npr.org/sections/coronavirus-live-updates/2020/04/29/847468328/tip-of-the-iceberg-economy-likely-shrank-but-worst-to-come Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20093 - 2020/5/19 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.  It seems like the entire world has revolved around the coronavirus for the past two months. It has changed our way of life, the way we work, and even the way we interact with friends and family.
Believe it or not, there have been other new developments in 2020 besides coronavirus. One of those new developments could have a big impact on your retirement. It’s the Setting Every Community Up for Retirement Act, also known as the SECURE Act. It was signed in December 2019 and became effective as a law on January 1, 2020.1 The SECURE Act makes big changes to many areas of retirement planning, including IRA contributions, 401(k) investment options, and even things like required minimum distributions (RMDs). It is likely to impact all retirees, but it could have significant benefits for women. Below are three ways in which the SECURE Act could help women in their retirement planning: Delayed RMDs One of the biggest changes in the SECURE Act is the adjustment of the RMD age from 70 ½ to 72.1 RMDs are mandatory withdrawals you must take from your 401(k), IRA, and other qualified accounts. The withdrawals are taxable, and there’s a steep penalty if you fail to take an RMD. The RMD amount is based on life expectancy and your account balance. Generally, as you get older, your RMD increases. The same life expectancy formula is applied to both men and women, even though women generally live longer than men. According to the Social Security Administration, the average 65-year-old man will live to 84 while the average woman will live to 86.5.2 The SECURE Act doesn’t change the life expectancy formula, but it does reduce the amount of time that an individual will be forced to take RMDs. Retirees can start taking these distributions later, which could be especially helpful if your goal is to leave assets behind for your loved ones. Guaranteed Income Options in 401(k) Plans Another big change in the SECURE Act is the way it impacts investment options in 401(k) plans. The law makes it easier for 401(k) plans to offer annuities that provide guaranteed* lifetime income. The guarantees* vary by product. However, the general idea is that the funds allocated to the annuity option are used to create a guaranteed* income stream when you retire. You get the income for life, no matter how long you live. Again, this could be beneficial for women because of their longer life expectancy. One of the biggest challenges in retirement planning is generating income that will last for life, especially if you live into your 90s or beyond. This option could provide you with certainty and a predictable income, no matter how long you live. 401(k) Access for Part-Time Employees The SECURE Act also made 401(k) plans more accessible for part-time employees. Under the old rules, an employee needed to work 1,000 hours in a year to be eligible for 401(k) participation. Under the SECURE Act, an employee can be eligible by either working 1,000 hours in one year or 500 hours in three consecutive years.1 For a variety of reasons, more women work part-time than men. According to the Bureau of Labor Statistics, only 12.4% of male workers in the United States were part-time in 2016. More than 25% of female workers were part-time over that same period.3 This change in rules now allows those part-time workers to use a 401(k) to save for retirement. Ready to see how the SECURE Act impacts your plans for retirement? Let’s talk about it. Contact us today at Coeus Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1https://money.usnews.com/money/retirement/iras/articles/what-is-the-secure-act 2https://www.ssa.gov/planners/lifeexpectancy.html 3https://www.bls.gov/opub/ted/2017/percentage-of-employed-women-working-full-time-little-changed-over-past-5-decades.htm Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. *Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged. .. 20043 - 2020/4/28  Are you one of the more than 58 million Americans who use a 401(k) plan to save for retirement? As of the end of 2019, 401(k) plans held more than $6.2 trillion, which accounts for nearly 20% of all retirement assets in the United States.1
A 401(k) can be an effective savings vehicle for a few reasons. First, all growth is tax deferred. You don’t pay taxes on your gains until you start taking distributions from the account. You also may receive employer contributions, which could significantly increase your savings. While a 401(k) can be an effective savings vehicle, you may need other options in your strategy. In 2020, you can contribute up to $19,500 to a 401(k). That number is increased to $26,000 if you’re age 50 or older.2 If you hit the contribution limit and still want to contribute more money for retirement, you may need to find another vehicle to do so. Below are three savings vehicles that could be good options if you hit the max on your 401(k) this year: Individual Retirement Accounts (IRA) In addition to your 401(k), you can also contribute up to $6,000 to an IRA in 2020. If you are 50 or older, you can contribute an additional $1,000 to an IRA, bringing your total potential contribution to $7,000.3. There are a few different types of IRAs, but the two most popular are the traditional and the Roth. In a traditional IRA, you make upfront contributions that are potentially tax-deductible. Your assets can then grow on a tax-deferred basis, just as they would in a 401(k). All future withdrawals are taxed as income. In a Roth, your contributions aren’t deductible, but your withdrawals in the future are potentially tax-free. Unfortunately, not everyone can contribute to a Roth IRA. If you are single and your income is more than $139,000 or a joint-filing couple with income of more than $206,000, you cannot contribute to a Roth IRA.3 A financial professional can help you determine which type of IRA is right for you. Brokerage Account Another option is to simply open a taxable brokerage account. With these, you don’t get tax-deferred growth, deductible contributions, or any of the other tax benefits you might find with an IRA or a 401(k). However, you do get a great deal of flexibility. In most qualified accounts, you can’t take a withdrawal before age 59 ½ without facing an early-distribution penalty. That’s not the case with a brokerage account. You can take withdrawals anytime you like, which could come in handy if you’re forced to retire early or have a costly emergency. Again, a financial professional can help you determine if this is the right path for you and help you implement an investment strategy. Insurance-Based Vehicles Insurance may not be the first thing that comes to mind when you think about saving for retirement. However, there are insurance-based vehicles that can make effective retirement savings tools. Annuities are insurance-based products that allow you the opportunity for growth while also benefiting from some risk-protection features. Some annuities offer guaranteed* minimum values, so you won’t lose money due to market declines. Others offer guarantees* of future income, so you can protect your cash flow in retirement. Ready to compliment your 401(k) with other savings vehicles? Let’s talk about it. Contact us today at Coeus Financial. We can help you develop and implement a strategy. Let’s connect soon and start the conversation. 1https://www.ici.org/faqs/faq/401k/faqs_401k 2https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500 3https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only. *Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged. The information contained herein is based on our understanding of current tax law. The tax and legislative information may be subject to change and different interpretations. We recommend that you seek professional legal advice for applicability to your personal situation. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20040 - 2020/4/28  The stock market crash of 1987. The tech bubble in the early-2000s. The financial crisis of 2008. And now, the coronavirus pandemic.
What do all of these things have in common? They all involve sharp market downturns that end a bull market and trigger a bear market. For many investors, these events create anxiety and worry about the long-term ramifications. These events all share something else in common. They offer potential opportunities. In a difficult time like this, it can be hard to see opportunities, but they do exist. Of course, not all opportunities are right for everyone. Your strategy and decisions should be based on your specific needs, goals, and risks. However, it’s possible that you could take action today to improve your financial future. Below are three examples of potential opportunities. A financial professional can help you determine the right course of action for your long-term strategy. Tax-Loss Harvesting If you have seen your portfolio suffer since late February, you are not alone. As recently as early February, we were still enjoying a strong economy. Between Friday, February 21, and Tuesday, March 16, the Dow Jones Industrial Average (DJIA) dropped by 35.87%. Since that low point, the market has recovered somewhat. However, the DJIA is still down 16.4% year-to-date.¹ If you are considering a change in strategy, you also may be able to take advantage of a potential tax deduction. A change in allocation may require you to sell assets that have declined in value. While realizing a loss is never a good outcome, you could qualify for a tax-loss deduction. Of course, this doesn’t mean you should realize losses simply for the tax deduction. Your decision should be guided by your long-term goals. A financial professional can help you determine how best to move forward. Roth IRA Conversion Do you hold a significant amount of retirement assets in a traditional IRA? One of the benefits of a traditional IRA is that you realize an upfront deduction for contributions. However, that also means that your future distributions are taxable as income. You may prefer to use a Roth IRA, which allows you to take tax-free withdrawals in retirement, assuming you are 59 ½ or older, and the account is at least five years old. You can convert your traditional IRA into a Roth, and now could be the time to do so. When you convert a traditional IRA to a Roth, you pay income taxes on the converted amount. If you have seen a decline in your IRA over the past couple of months, you now have a reduced balance. That means the tax exposure from conversion would be lower today than it was two months ago. It’s also possible that, like millions of Americans, you have been laid off, furloughed, or that you have accepted a pay cut. It’s possible that your income for 2020 will be lower than it has been in years past, which means you may be in a lower tax rate. Again, this could reduce your tax exposure in a Roth conversion. Roth conversions aren’t right for everyone. However, if you have been considering one, this may be the right time. Investing at Discounted Prices It’s never a good idea to try and predict the market’s direction, especially in the short-term. Investment decisions should always be guided by long-term strategy and specific goals and needs. However, there is no denying the fact that many assets are currently trading at prices substantially reduced from two months ago. If you have cash available to invest and have the risk tolerance to withstand potential volatility, this could be a good time to revisit your strategy. It’s always wise to hold six to twelve months in liquid, risk-free emergency reserves, even if those accounts pay very little in interest. However, if you have other funds that aren’t needed for emergency reserves, you may want to consider how best to use them in the long-term. Investing at discounted prices may allow you to more fully participate in a future recovery. As always, your decisions should be based on your unique needs, not generalized advice. Let’s talk about it and implement the right strategy for your goals. Contact us today at Coeus Financial. We can help you analyze your needs and goals and find the right opportunities. Let’s connect soon and start the conversation. 1https://www.google.com/search?safe=off&tbm=fin&sxsrf=ALeKk006ktaTHRuJ1MB-WYLuWkeqF7PpWw:1588177817109&q=INDEXSP:+.INX&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyevq5uEYEB1gp6Hn6RQAAItD1MEkAAAA&sa=X&ved=2ahUKEwjPyP-0h47pAhXIWM0KHR3mBUQQlq4CMAB6BAgBEAE&biw=1536&bih=754&dpr=1.25#scso=_N6ypXpKOEYu2tAbp-I-oAQ1:0 Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20050 - 2020/4/29 |
Archives
November 2020
Categories
All
|
RSS Feed
