kristie-cahill

3 Financial Developments to be Thankful for in 2020

Wed, 18 Nov 2020 17:59:23 GMT

This year has been a rollercoaster ride. COVID has dominated the headlines and impacted every aspect of our lives. It has shut down businesses, schools, and workplaces. It’s changed the way we interact and socialize. And of course, it has deeply impacted the economy and the financial markets.

It can be hard in 2020 to find the good news, but there actually are a few economic developments for which we can be grateful. There’s also quite a bit of uncertainty ahead of us. As we approach the end of 2020, now may be a good time to reflect on what has transpired over the past 11 months, and what steps you may need to take to prepare for what comes next.

Below are three positive developments that you may want to consider as you prepare for 2021:

The Markets Rebound

COVID ended the longest bull market and longest economic expansion in history. The previous bull market started in 2009 and lasted for nearly a decade before crashing in just a few short weeks over February and January of this year. ¹

Between February 19 and March 23, the S&P 500 fell 33.93%. Since that point, though, the markets have surged. From March 23 through October 29, the S&P 500 is up 47.94% and is nearly back to its pre-COVID levels. ²

As mentioned, though, there is still uncertainty ahead. The COVID pandemic is far from over. There’s also uncertainty about how the results of the election will impact the markets, the economy, and the country’s COVID response.

While the market's rebound is a fortunate turn of events, there’s no guarantee that it will continue. Now is a good time to evaluate your strategy and lock-in any gains before another potential downturn occurs. A financial professional can help you explore options.

GDP Surge

In the second quarter, GDP fell by 31.4%, the largest quarterly drop in history. In the third quarter, it rebounded by 33.1%, the largest quarterly gain in history. That number easily beat the previous record of 16.7% in the third quarter of 1950. ³

Much of the rebound was driven by the service industry and the reopening of much of the economy. Of course, the continuing rise in COVID cases may threaten the economic rebound. Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October. ⁴

CARES Act Financial Flexibility

The COVID pandemic and its economic fallout have created financial challenges for millions of Americans. While the government is still debating a second round of stimulus, the first round, known as the CARES Act, continues to provide financial flexibility for those facing difficulties.

As part of the CARES Act, you can withdraw up to $100,000 from your 401(k) or IRA without facing early distribution penalties. The taxes on the distribution can even be spread out over a three-year period. ⁵

Granted, withdrawing money from your 401(k) or IRA isn’t the best strategy for your retirement. However, it is an added measure of flexibility that didn’t exist prior to this year and it could be a blessing if you’re struggling due to the COVID pandemic.

The end of 2020 is approaching. It’s been a rollercoaster ride, but there have been some positive developments, especially in the second half of the year. Let’s talk about how to protect what you have and limit your exposure to future risk and uncertainty. Contact us today at The Haven Wealth and let’s start the conversation.

1 https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html

2 https://www.google.com/finance/quote/.INX:INDEXSP

3 https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html

4 https://www.cnn.com/2020/10/28/health/us-coronavirus-wednesday/index.html

5 https://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.

What Monsters are Lurking in Your Portfolio?

Tue, 13 Oct 2020 14:53:09 GMT

It’s the scariest time of the year. Halloween is here. It’s time for trick-or-treaters, haunted houses, spooky home decorations, and more.

This may be the scariest time of the year, but it only lasts a month. The truth is there could be gaps in your investment strategy that could come back to haunt you for years or even decades. Below are a few common retirement planning mistakes that can have frightening long-term consequences. If any of these sound familiar, it may be time to meet with a financial professional.

Wrong Risk Tolerance

Asset allocation is an important part of any retirement strategy. Your allocation influences your risk exposure and your potential return. Generally, risk and return go hand-in-hand. Assets that offer greater potential return usually also have higher levels of risk. You can use asset allocation to find the right mix of assets for your goals and risk tolerance.

Having the wrong allocation can be problematic. For example, many people have less tolerance for risk as they approach retirement. As you get closer to retirement, you have less time to recover from a loss and thus less tolerance for risk. However, if you don’t adjust your allocation, you could have more risk exposure than is appropriate. A downturn could substantially impact your nest egg.

How can you make sure your allocation aligns with your risk tolerance? A consultation with a financial professional is a good first step. They can analyze your risk tolerance and your portfolio and then suggest action that can eliminate gaps and minimize risk.

No Risk Protection Tools

Asset allocation is one way to reduce risk, but it’s not the only way. You could also use tools that offer growth potential with limited downside exposure. For example, certain types of annuities offer potential growth with downside protection. You can participate in returns linked to the market without experiencing volatility and risk. Annuities aren’t right for everyone, however. Be sure to talk to a financial professional about whether they make sense for your strategy.

Impulsive Decisions

It’s natural to feel stress and anxiety when the market turns downward. Take the first quarter of 2020 for example. When the COVID pandemic began in late February, the S&P 500 declined by 33.93% in a month. You may have felt tempted to sell your investments and move to “safer” assets. However, had you done so, you may have missed out on the market’s bounce back. Since March 23, the S&P 500 has climbed 49.35%. ¹

The problem with impulsive decisions to move to safety is that they can often suppress your returns over time. From 1995 through 2015, the S&P 500 averaged a return of 9.85% per year. Over that same period, the average equity investor averaged a return of only 5.19%. ²

Why the discrepancy in returns? Investors often make decisions based on emotion rather than a long-term strategy. While those decisions may feel right in the moment, they could lead to lost opportunity as the investor misses out on a market recovery. A financial professional can help you focus on the long-term and avoid decisions that may do more harm than good.

Infrequent Reviews

When’s the last time you reviewed your investment strategy with a financial professional? If it’s been a while, now may be the time to do so. A lot can change in a few months or even a year. Your goals and needs may change. Your tolerance for risk could change. Your contributions to your retirement accounts may change. This is especially true during the COVID pandemic, when economic news seems to vary on a monthly basis.

Let’s schedule a review today and find the monsters hiding in your investment strategy. Contact us today at Haven Wealth Management. We welcome the opportunity to consult with you and help you implement the right strategy for your needs and goals. Let’s connect today and start the conversation.

1 https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_QQBhX8b3K5K-tQbo56XwCw7:0

2 https://www.thebalance.com/why-average-investors-earn-below-average-market-returns-2388519

The Problem With Robo-Advisors

Mon, 05 Oct 2020 18:25:26 GMT

Technology has revolutionized every aspect of our lives, so it shouldn’t come as a surprise that tech-based investment platforms, known as robo-advisors, are becoming more popular. Robo-advisors were created in the aftermath of the 2008 financial crisis, as an alternative to traditional financial advisors and investment managers. This year, robo-advisor platforms crossed the $1 trillion threshold in assets under management. ¹

These web- or app-based platforms usually use a survey to gather information about your goals, assets, and risk tolerance. Then, based on that information, the program automatically develops and implements an investment strategy. There is usually little or no interaction with an advisor, so everything is based on your answers to the survey questions.

Because there is no human interaction, the fees with robo-advisors are often lower than you might find with a traditional advisor or investment manager. However, cheaper isn’t necessarily better. There are many important functions that a robo-advisor can’t perform. Below are a few services you can’t get with a robo-advisor:

Financial Life Decisions

Your investment strategy is an important part of your financial life, but it’s just one piece of the puzzle. Many financial outcomes aren’t driven by your investment strategy, but rather the choices you make with your investments in life.

For example, how much should you contribute to your 401(k) each year? Is a traditional IRA or a Roth IRA right for you? What can you do to minimize your taxes each year? When’s the right time to file for Social Security?

A computer can’t answer these questions because it doesn’t understand your full financial picture. These questions and more are often very complex and require nuanced answers based on your unique needs and goals. Real human consultation with an experienced professional is often an effective way to find answers and develop a strategy.

Accurate Answers and Input

Like most technological strategies, a robo-advisor’s output is only as good as the input. These platforms rely on your initial answers to develop your strategy.

But what if your answers to the initial survey aren’t correct? While you may be asked about your goals or risk tolerance, it’s possible that you may not truly know the answers. Do you really know if you will retire at age 65? Do you know how you would react if the market declined by a certain percentage?

Again, a conversation with a professional can help you fully understand your goals and your feelings about risk. That way, your strategy can be based on what you truly need and desire rather than based on a quiz that took a few minutes to complete.

Protecting You from Yourself

When the COVID pandemic began in late February, the S&P 500 declined by 33.93% in a month. Did you feel tempted to sell your investments and move into cash or other less volatile assets? If so, you’re not alone. However, had you done so, you may have missed out on the market’s bounce back. Since March 23, the S&P 500 has climbed 49.35%. ²

It’s natural to feel anxious or unnerved by market declines, especially when it falls as rapidly as it did earlier this year. However, an advisor can help you look at the long-term strategy and help you determine if a change in allocation is actually warranted. A robo-advisor simply executes your order to sell without any consultation or advice. While that may be convenient, it may not be the best decision for your long-term goals.

Looking for custom advice and strategy to help you reach your biggest financial goals? Let’s talk about it. Contact us today at Haven Wealth Management. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.

1 https://www.tradersmagazine.com/news/robo-advisors-to-become-1-4t-industry-this-year/

2 https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_QQBhX8b3K5K-tQbo56XwCw7:0

Is a resurgence threatening our recovery?

Sat, 15 Aug 2020 07:00:00 GMT

The United States set a somber record on Thursday, July 16, 2020, with more than 75,000 new COVID-19 cases. In fact, the U.S. set new single-day COVID-19 records 11 times between June 17 and July 16. Dr. Anthony Fauci predicts the country will soon top over 100,000 new cases each day. 1

COVID-related deaths are also increasing in some states. Florida set its single day record for COVID deaths on July 16, with 156. Nine other states also set single-day death records the same week. 1

The resurgence in coronavirus cases has led some states to enact new measures. More than half of all states now have some kind of mask mandate. California has even rolled back its reopening, closing bars, indoor dining, gyms, and more. 2

What does this mean for the economic recovery? And what does it mean for your financial future? It’s impossible to predict what will happen in the short-term, but knowing where things stand today may help you make important decisions with your strategy.

Stock Market

The stock market continues to rally in spite of the increasing COVID numbers and the return of restrictions. As of July 16, the S&P 500 is nearly back to even for the year. In fact, it’s up 43.71% since hitting a low 2237 on March 23. 3 NASDAQ set a record-high on July 9 when it reached 10,617. 4

The continued gains are good news for investors, especially after the sharp decline in March. However, that decline also shows us just how quickly the market can turn, especially if state governments introduce new orders that close businesses.

If you’re concerned about another potential downturn or future risk, this could be the right time to explore risk-protection strategies. For example, products like fixed annuities allow you to participate in a portion of the market upside but also protect you against losses. A financial professional can help you determine which risk-management strategy is right for you.

Unemployment

While the number of new unemployment claims has declined for 15 consecutive weeks, unemployment numbers are still much higher than they were pre-COVID. In February, there were approximately 200,000 new unemployment claims each week. That number exploded to 6.867 million new claims in one week in late March. While new claims have declined since that point, they’re still more than double their level during the height of the Great Recession in 2009. 5

Stimulus

In March, the government passed the CARES Act, which, among other things, provided direct stimulus payments to many Americans. A recent study found that 74% of recipients had used all of their stimulus payments within four weeks. 6

As the coronavirus pandemic continues to impact Americans, Congress is considering a second round of stimulus payments. In May, the House of Representatives passed the $3 trillion HEROES Act to provide a second round of direct stimulus payments. 6

In an interview in mid-July, Treasury Secretary Steve Mnuchin indicated that a second round of stimulus payments was a possibility, even if it doesn’t align exactly with the HEROES Act. Senate Leader Mitch McConnell and President Trump have also recently expressed their willingness to negotiate a second stimulus package.

While stimulus payments may provide a nice boost, they’re not a replacement for long-term strategy. At Haven Wealth Management we can help you analyze your needs and goals and implement strategies to limit your risk exposure. Let’s connect soon and start the conversation.

Can You Count on Social Security to Fund Your Retirement?

Mon, 03 Aug 2020 19:55:00 GMT

Social Security is a critical piece of the income puzzle for most retirees. In fact, half of married retirees and nearly 70% of unmarried retirees rely on Social Security for more than 50% of their retirement income. 1

Your Social Security benefit amount is based on a few factors, including your career earnings and your age at the time you file for benefits. However, your benefit amount isn’t locked-in forever. It often increases each year because of something called COLA. 2

COLA stands for “cost-of-living adjustment.” It’s an annual increase in the benefit amount to help recipients cover increases in their cost of living. In 2020, COLA was 1.6%, down from a 2.8% increase in 2019. 2

Since 2000, Social Security benefits have increased by a cumulative 53% because of COLA. The problem? Retiree spending has increased by more than 99%.2 While COLA can be helpful, it often isn’t enough to match inflation. In fact, since 2009, COLA has averaged only 1.4% annually. 2

Fortunately, you can implement other strategies to protect your spending power and combat inflation. Below are a few ideas to consider:

Rely on other sources to cover healthcare costs.

Healthcare is one of the biggest drivers of inflation for retirees. In the past 20 years, Medicare Part B premiums have jumped 218%. Out-of-pocket prescription drug costs for retirees have increased 252%. Social Security benefits increased only 53% over the same period. 2

If the past 20 years are any indication, you can’t count on Social Security adjustments to offset increases in healthcare spending. You may want to consider using alternate strategies, like funding a health savings account (HSA) that you can use in retirement for out-of-pocket costs.

You also may want to explore various Medicare Advantage policies. These are Medicare policies offered through private insurers. They often cover the same services as traditional Medicare, plus enhanced services. They also may reduce your out-of-pocket costs. A financial professional can help you determine which policy is right for you.

Continue to grow your assets.

You may be tempted to become more conservative in retirement. After all, you don’t want to lose what you worked so hard to accumulate over several decades. Adjusting to a more conservative allocation may be the right move for your needs and risk tolerance. However, it’s also important to continue to grow your assets.

Growth can help you increase your income over time and keep up with inflation. You can give yourself a personal COLA with increased distributions from your retirement accounts. There are a wide range of strategies you can use to potentially grow your assets, but also minimize your exposure to risk. Again, a financial professional can help you implement the right strategy for you.

Is it time for an economic recovery?

Wed, 01 Jul 2020 21:39:00 GMT

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 Returns

The 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.

Unemployment

The 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 Spending

Consumer 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 Haven Wealth Management, we can help you develop and implement a strategy. Contact us today and let’s start the conversation.

What's Next for a COVID-19 Economy?

Tue, 09 Jun 2020 21:27:00 GMT

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 Contact us today at Haven Wealth Management. We can help you analyze your goals and needs and implement a strategy. Let’s connect today and start the conversation.

What Do Zero-Percent Interest Rates Mean for You?

Thu, 16 Apr 2020 07:00:00 GMT

The coronavirus pandemic has launched the country, and the world, into uncharted territory. In much of the world, society is essentially shut down. Schools and large events are closed. People are staying in their homes. Businesses have effectively closed across the country.

The economy has felt the impact of the pandemic. Stocks have declined significantly, and unemployment has surged. On March 3, the Federal Reserve took action by cutting the fed funds rate to 0%. The Fed expects to maintain this rate until “it is confident that the economy has weathered recent events.” 1

Given the unpredictability of the current pandemic, it’s hard to say how long rates might be at zero or how the economy may change in the future. However, changes to the fed’s benchmark rate often have ripple effects throughout the economy. Below are some things you may want to consider as we navigate a zero-rate environment for the near future:

Debt

Many common types of debt are tied to the prime rate. For instance, if you have a credit card with a variable interest rate, it could fall soon. If so, this may be a good time to get that balance paid off. You also may see lower rates on things like car loans and mortgages. This could be a good time to rate shop, especially if you have good credit. Even if you don’t want to transfer a credit card balance or refinance a home, the prospect of doing so could be enough to convince your lender to reduce your rate.

Student loan rates could also be impacted. Rates for new federal student loans are adjusted every year. The rate for 2019-20 is already set, but the rate for next year could drop significantly if rates stay low for some time. Private student loan rates could be fixed or variable. It depends on the terms of your loan agreement.

Savings

Savers have unfortunately been used to low-interest rates for some time. Interest rates on savings accounts had started to climb, but after the Fed’s cut, the average FDIC rate is now down to 0.09%. While CDs may offer higher rates, they also come with less liquidity.

It’s always advisable to have liquid savings available to cover emergencies and unexpected costs. However, it may be difficult to find interest-bearing accounts for those savings at this time. We can help you explore all your options and develop a liquidity strategy that’s right for your needs and goals.

Investments

There’s a misconception that a Federal Reserve rate cut always leads to gains in the stock market. One need looks no further than the most recent cut to see that it’s not true. When the Fed cut rates on March 3, the Dow Jones Industrial Average fell nearly 800 points. 2

These are unprecedented times and it’s impossible to predict when the pandemic will end or how it will fully impact investors. While interest rates are a factor, there are many others to consider. Your retirement income strategy should be based on your unique needs and goals.

Now could be the right time to review your strategy and make adjustments. A change in allocation could be appropriate. You also may want to take advantage of financial vehicles that limit your exposure to risk. A financial professional can help you find the right strategy for your needs.

1 https://www.usatoday.com/story/money/2020/03/03/coronavirus-dow-jones-stocks-react-after-fed-cuts-interest-rates/4938447002/

2 https://www.usatoday.com/story/money/2020/03/03/coronavirus-dow-jones-stocks-react-after-fed-cuts-interest-rates/4938447002/

What Does the 2020 Election Mean for Your Portfolio?

Thu, 26 Mar 2020 11:05:00 GMT

The 2020 election cycle is in full swing. It’s primary season, which means the general election is right around the corner. Before you know it, the two major parties will have their conventions and we’ll be heading to the ballot box.

Of course, you may already have election fatigue. From the local level all the way up to national races, candidates are already flooding television with political ads.

As is the case in most presidential elections, candidates are also talking about the economy. They may make claims about what will happen in the economy if they’re elected or that the markets might decline if their opponent is elected.

That kind of rhetoric is common during elections, but is it accurate? Will the outcome of the election impact your portfolio? Should you worry about the election? Or perhaps even change your allocation to protect yourself. Below are a few tips to keep in mind through the rest of the election year:

Keep history in perspective.

Often when there is one issue or story dominating the news, like the presidential election, it’s easy to focus solely on that story. It’s in the news and on social media so much that it feels like it’s the most important issue in the world.

However, the truth is that this country and the stock market have been through many presidential elections. In fact, in most of those years, the markets performed positively. In fact, since 1928, there have been 23 presidential elections. In 19 of those years, the S&P 500 had a positive return. 1

In fact, in the four instances when the markets did have negative returns, there were also economic events happening that may have driven the performance. In 1932, the country was in the midst of the Great Depression. In 1940, the country was entering World War II.

The markets declined in 2000, which was the year George W. Bush ran against Al Gore. However, the bursting tech bubble in Silicon Valley may have had more influence on the markets than the election. Finally, in 2008, the S&P 500 also declined, but that was the year of the financial crisis.

The takeaway is that market declines can happen in any year. The fact that it’s an election year may cause news stories and rhetoric, but the market is likely driven by investor concerns and economic conditions.

Focus on the long-term.

Your investment strategy was likely designed for the long-term. Perhaps you’re saving for retirement or some other goal that is years or possibly even decades in the future. Over that period, you’ll likely see times of market volatility.

Whether it’s an election year or not, it’s always helpful to focus on the long-term during challenging periods. Market downturns happen, but they are always temporary.

There are two common types of downturns: corrections and bear markets. Corrections are losses of 10% or more. Bear markets are losses of 20% or more. As you can see in the chart below, the average correction loses around 13% and the average bear market sees a loss of around 30%. 2

However, the duration of each is also important. A correction, on average, lasts around four months. After that period, there is an average four-month recovery period to recoup the losses. Bear markets last longer. They have an average duration of 13 months with a 22-month recovery period. 2

Market downturns are never pleasant, but they are temporary. Keep an eye on the long-term and stick to your strategy.

Don’t make gut decisions.

It can be easy to make a gut, impulse decision when you hear and see stressful news on a regular basis. It might be tempting to sell your investments and move to asset classes that have less risk and volatility.

However, a move to perceived safety could do more harm than good. The chart below shows how the average equity investor has fared compared the S&P 500 over different periods of time. As you can see, the index always wins, sometimes by a wide margin. 3

Why does this happen? Primarily because the index stays invested at all times, while the average investor is constantly moving in and out of the market based on gut decisions or attempts to avoid loss. While investors may miss some declines with this strategy, they also miss out on gains. Staying invested usually leads to better long-term performance.

1 https://www.thebalance.com/presidential-elections-and-stock-market-returns-2388526
2 https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html]

3 https://www.marketwatch.com/story/americans-are-still-terrible-at-investing-annual-study-once-again-shows-2017-10-19

Investment Advisory services offered through ChangePath, LLC a Registered Investment Adviser. ChangePath, LLC and Haven Wealth Management are unaffiliated entities.

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.

How Can You Improve Your Retirement Strategy?

Fri, 28 Feb 2020 15:44:00 GMT

It may be the end of February but it’s not too late to make a few resolutions for the new year and the new decade. Take a look at a few of the weirder resolutions we’ve heard…

In 1669, author Jonathan Swift made a resolution to “not be fond of children.” Mathematician Godrey Hardy made a resolution in the 1930s to be the first man to climb Mt. Everest and to become the combined president of the USSR, Germany, and Great Britain. That would have been quite the year! 2

Of course, not all resolutions are optimistic. In 1984, The Times asked author Samuel Beckett about his resolutions for the upcoming year. He answered that he had no resolutions because he had no hopes. 2

Some of the more common resolutions are things like losing weight or dropping a bad habit. If you stick with your resolution, it can have a profound impact on your future. That’s especially true with financial resolutions. Below are a few financial resolutions that could significantly improve your retirement strategy:

Increase your retirement contributions.

Saving more money for retirement is always a good idea. A qualified retirement account like your 401(k) or IRA could be an effective vehicle for those savings. Qualified accounts are tax-deferred. That means you don’t pay taxes on growth as long as the money stays in the plan. That tax-deferral could help your assets compound at a faster rate than they would in a comparable taxable vehicle.

In 2020, you can contribute up to $19,500 to a 401(k) plan, plus an additional $6,500 if you are 50 or older. You can also contribute up to $6,000 to an IRA, plus an additional $1,000 if you are 50 or older. 3

Of course, you may not be able to afford to contribute $19,500 to your 401(k). Instead, make gradual increases over time. In 2020, try raising your contribution by 1%. That likely won’t put a dent in your budget, but it could have a big impact over time. You could even set your contributions to automatically increase by 1% at regular intervals, perhaps every January 1. Before you know it, you’ll be contributing the maximum amount.

Reduce your risk exposure.

Do you get more anxious than you used to when the market experiences volatility? Are you more concerned with risk and loss than you were in your younger days? That’s natural. Many people become more risk-averse as they approach retirement.

When’s the last time you actually reviewed your investments to make sure they align with your current risk tolerance? Many people set their 401(k) or IRA allocation and forget it. The result is that it never changes over time and becomes out of alignment with their goals and needs.

Take some time in 2020 to review your approach. It may be time for you to move to a more conservative allocation with less risk exposure. Or you may benefit from retirement vehicles like fixed or fixed indexed annuities that don’t have downside market risk exposure.

Work with a professional.

Are you a do-it-yourselfer when it comes to saving for retirement? There is no shortage of apps, tools, and technology to help you manage your retirement income without the help of a professional.

However, there are still important benefits to working with a professional. An experienced financial and/or retirement professional can help you prioritize your goals and identify gaps in your plan. They can recommend strategies and implement a plan to help you achieve your biggest financial and retirement income goals.

What will the economy look like in 2020?

Thu, 13 Feb 2020 18:53:00 GMT

It’s the second month of a new year, which means it’s time for everyone to make predictions about what’s in store over the next 10 months. Clearly, it’s impossible to predict the future. However, that doesn’t stop analysts and so-called experts from making their best guess.

That’s just a small selection of “expert” predictions. As you can see, they’re all over the map. What do you do with such conflicting information? How do you prepare for the future if you don’t know what the future will be?

The simple answer is you don’t. You can’t base your strategy or your decisions off short-term predictions because many of those predictions will prove to be incorrect. Of course, that doesn’t mean you shouldn’t plan either. It’s always wise to reassess your strategy and make changes as needed. Below are some tips on how to do that in 2020:

Focus on the long-term.

It’s natural to feel anxious because of negative predictions or volatile financial news. However, it’s always important to remember that downturns are temporary.

There are two types of market downturns: a correction and a bear market. Corrections are downturns with losses of 10% or more. Bear markets are downturns with losses of 20% or more.

The average correction has a loss of 13% and lasts only 4 months. On average the market recovers from a correction after 4 months. Bear markets generally last longer and have steeper declines. They have an average loss of 30% and last for 13.2 months. However, the market usually does recover, and does so on average in about 22 months. 5

We can’t predict when a bear market will begin or end. That also means we can’t predict when the recovery from a bear market will start. If you take impulsive action because there’s a prediction that the market may trend down, you could miss the bear market, but also the recovery. Or the prediction could be wrong, and you could miss out on continued growth. Instead, focus on the long-term and avoid emotional decisions based on short-term predictions.

Reduce your exposure to risk.

If you’re like many people nearing retirement, you’re not as comfortable with risk as you once were. Many people become more risk-averse as they approach retirement. After all, you don’t have as much time as you once did to recover from a market loss.

While no one can predict when a downturn may occur, you can take steps to make your strategy aligned with your more conservative risk tolerance. For example, you could shift your strategy to more conservative assets that have less exposure to risk and volatility. You could also utilize retirement income vehicles that offer growth potential without the chance of downside loss. A financial professional can help you identify strategies that can reduce your risk exposure.

Guarantee* your retirement income.

Are you approaching retirement? If so, you could take steps today to protect your income from short-term volatility and market downturns. One way to do this is by creating guaranteed* income from your retirement savings. There is an insurance product available that you can use to convert a portion of your retirement savings into income that is guaranteed* for life, regardless of what happens in the market or how long you live.

What Does the SECURE Act Mean for Your Retirement?

Fri, 24 Jan 2020 18:57:00 GMT

The government passed a year-end spending bill in December, and it included one piece of legislation that could have a big impact on retirees. It’s called the SECURE Act. The bill’s name is an acronym for Setting Every Community Up for Retirement Enhancement.

The legislation is aimed at helping Americans save more for retirement. While many of the changes will certainly be helpful, they may also require you to revisit your retirement strategy. The SECURE Act affects many different areas, from your 401(k) plan to your IRA to even how you take withdrawals in the later stages of retirement.

Elimination of” Stretch” IRA

The biggest change in the SECURE Act may not impact you but rather your IRA beneficiaries. The SECURE Act eliminates the ability to “stretch” an IRA, which was a strategy commonly used by non-spousal beneficiaries to reduce their tax burden and continue to grow the account.

Under a stretch IRA concept, your non-spousal beneficiary, like a grown child for example, could simply withdraw your RMDs on annual basis from the IRA after you pass away. Because they are taking the minimum amount from the IRA, they reduce their annual tax obligation. They also leave assets in the IRA to continue growing on a tax-deferred basis.

The stretch IRA is no longer an option, however. Under the SECURE Act, all non-spousal beneficiaries must take the full IRA balance within 10 years. The only exceptions are minor children and handicapped individuals. If you plan on leaving your IRA to someone other than a spouse, you may want to review their options.

RMD Age

Most qualified accounts like IRAs and 401(k) plans have something called required minimum distributions, or RMDs. These are withdrawals that you are required to take each year once you hit a certain age.

Traditionally, RMDs have started at age 70½. However, the SECURE Act pushes the RMD start age back to 72 (only applicable to those who reach age 70 ½ after January 1, 2020). That means you’ll have eighteen additional months of tax-deferred growth in your 401(k) or IRA before you have to start taking taxable withdrawals. 1

Traditional IRA Contributions

RMDs aren’t the only reason why 70½ has historically been an important age. That’s also the age at which point you could no longer make contributions to a traditional IRA. Until now.

The SECURE Act eliminates the age limit on traditional IRA contributions. That means you can continue making contributions well past 70½. That could be especially helpful if you plan on working in retirement and want to continue to bolster your savings. 1

401(k) Plans for Part-Time Employees and Small Businesses

The SECURE Act has also made 401(k) plans more accessible for part-time employees and employees at small businesses. In the past, 401(k) plans were usually reserved for full-time employees. However, under the SECURE Act, companies are required to offer 401(k) eligibility to any employee who works 1,000 hours in one year or 500 hours in three consecutive years. 1

It’s also been difficult for many small businesses to offer 401(k) plans. These plans often have high startup and administrative costs that can be burdensome for small businesses with a tight budget.

The SECURE Act aims to resolve that problem. The new law offers up to $5,000 in tax credits to offset 401(k) plan startup costs for small businesses. It also allows small businesses to pool together to offer 401(k) plans to their employees.

401(k) Plan Income Strategies

The SECURE Act also focuses on how 401(k) plans can generate income for participants. Plans must now deliver “lifetime income disclosure statements” each year. This document will show you exactly how much income your plan could generate for life if you used the balance to purchase an annuity.

The law has also made it easier for 401(k) plan participants to access annuities with guaranteed lifetime income features. The SECURE Act eliminated some regulatory issues that had prevented annuities from being common strategy options in 401(k) plans. With those issues resolved, participants can now use their 401(k) funds to create guaranteed lifetime income through the use of an annuity.

What Should I Do?

These are some of the biggest changes to retirement plans in decades and it would be wise to re-evaluate your retirement plan. By meeting with a financial professional, we can help you evaluate your current plan and how you may want to adjust based on these recent changes. There are certain things you may want to look at differently, including some sophisticated tax planning opportunities, that only a professional can truly help you understand.

Ready to review your retirement strategy to see how it is impacted by the SECURE Act? Let’s talk about it. Contact us at 415.878.1866 today so we can help you analyze your current plan and develop a winning strategy. Don’t wait, the sooner we can help you evaluate your needs, the sooner you can feel confident about the plan you have in place. Let’s connect soon and start the conversation!

1 https://www.fidelity.com/learning-center/personal-finance/retirement/understanding-the-secure-act-and-retirement

Licensed Insurance Professional. We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. 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.
19636 - 2020/1/13

Nearing Retirement? Give Yourself This Gift This Holiday Season

Mon, 23 Dec 2019 15:34:00 GMT

It’s that time of year again. Time to buy gifts for spouses, children, and all the other friends and family who play a meaningful role in your life. Have you finished your Christmas shopping?

If you’re approaching retirement, you may want to give yourself a gift this year. No, not an expensive gadget or vacation. Rather, use this holiday season to give yourself the gift of a financially stable retirement.

The new year will be here before you know it. Take some time now to review your retirement strategy so you can take action and start 2020 on the right foot. Below are a few tips to get you started:

Increase your retirement contributions.

Do you make retirement contributions to a 401(k), IRA, or another qualified retirement plan? These types of accounts are powerful retirement savings tools because of their tax-deferred status. You don’t pay taxes on growth as long as the funds stay inside the account. That may help your qualified savings compound at a faster rate than they would in a taxable account.

Consider increasing your contributions to your 401(k) or IRA in 2020. You can contribute up to $19,500 to a 401(k) in 2020 if you are under age 50. That number increases to $26,000 if you are age 50 or older. You can also contribute up to $6,500 to an IRA, or up to $7,000 if you are 50 or older. 1

Of course, it may not be possible for you to increase your contribution to the maximum level without busting your budget. Any increase in contributions is helpful. One effective strategy is to gradually increase your contributions over time. For example, you could set up your 401(k) contribution to increase 1% every year or even every six months.

Reduce your exposure to risk.

If you’re like many people nearing retirement, you’re not as comfortable with risk as you once were. That’s natural. Many people become more risk-averse as they approach retirement. After all, you don’t have as much time as you once did to recover from a market loss.

There are a few steps you can take to reduce your exposure to risk. One is to review your allocation and risk tolerance and make sure they’re aligned. Your risk tolerance is your specific comfort level with market volatility. It’s based on your unique needs, goals, and time horizon.

As you get older, your risk tolerance may change, so it’s important that your strategy changes along with it. You could shift your strategy to more conservative assets that have less exposure to risk and volatility. You could also utilize financial vehicles that offer growth potential without the chance of downside loss. A financial professional can help you identify strategies that can reduce your risk exposure.

Guarantee* your retirement income.

Are you approaching retirement? If so, this may be the time to start thinking about your retirement income. You’ll likely receive income from Social Security. Maybe you’ll even receive a defined benefit pension. However, you also may need to take distributions from your 401(k), IRA, or other retirement savings.

Often those withdrawals aren’t guaranteed. A market downturn could limit your ability to take retirement income. Or if you withdraw too much in the early years of retirement, you may not have assets left in the later years.

Fortunately, you minimize these risks by creating guaranteed* income from your retirement savings. There is a wide range of retirement vehicles available that you can use to convert a portion of your retirement savings into income that is guaranteed* for life, regardless of what happens in the market or how long you live.

Ready to give yourself the gift of financial stability? Let’s talk about it. Contact us today at Haven Wealth Management. We can help you implement a strategy. Let’s connect soon and start the conversation.

1 h ttps://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

*Guarantees provided by annuities, 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

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.
19524 - 2019/12/3

kristie-cahill

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GDP Surge

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Wrong Risk Tolerance

No Risk Protection Tools

Impulsive Decisions

Infrequent Reviews

The Problem With Robo-Advisors

Financial Life Decisions

Accurate Answers and Input

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Is a resurgence threatening our recovery?

Stock Market

Unemployment

Stimulus

Can You Count on Social Security to Fund Your Retirement?

Rely on other sources to cover healthcare costs.

Continue to grow your assets.

Is it time for an economic recovery?

Stock Market Returns

Unemployment

Consumer Spending

What's Next for a COVID-19 Economy?

Stock Market Performance

Economic News

What Do Zero-Percent Interest Rates Mean for You?

Debt

Savings

Investments

What Does the 2020 Election Mean for Your Portfolio?

Keep history in perspective.

Focus on the long-term.

Don’t make gut decisions.

How Can You Improve Your Retirement Strategy?

Increase your retirement contributions.

Reduce your risk exposure.

Work with a professional.

What will the economy look like in 2020?

Focus on the long-term.

Reduce your exposure to risk.

Guarantee* your retirement income.

What Does the SECURE Act Mean for Your Retirement?

Elimination of” Stretch” IRA

RMD Age

Traditional IRA Contributions

401(k) Plans for Part-Time Employees and Small Businesses

401(k) Plan Income Strategies

What Should I Do?

Nearing Retirement? Give Yourself This Gift This Holiday Season

Increase your retirement contributions.

Reduce your exposure to risk.

Guarantee* your retirement income.

The Markets Rebound