Seth and Rick discuss the new U.S. administration in this episode of Beyond Investments. Also, the market update and other fun facts! Enjoy your listen.
Preparing Your Taxes
Seth and Rick start the year with a discussion about things to think about when doing your taxes.
Year-End Financial Planning
In this episode of Beyond Investments, Seth and Rick give the weekly market update and discuss the impacts of COVID. In Part 2, they discuss year-end financial planning.
Markets and the Election
In this final episode before the general election, Seth and Rick talk about markets in relation to the election. They also give their weekly market update and some great conversation!
The Election and Taxes
In this episode of Beyond Investments, Seth and Rick discuss some financial history (like when Intel went public!) in Part 1. In Part 2, they discuss voting and the upcoming election, including financial topics related to the election such as tax policies.
IPOs
In this episode of Beyond Investments, Seth and Rick discuss the impacts of COVID-19 in Part 1, and start off Part 2 talking about IPOs.
The Benefits and Drawbacks of Annuities
By Frederick “Rick” Fisher, MS, CFP® | Download the PDF
The concept of an annuity has been around for centuries. Social Security is a form of an annuity. Most annuities are created and issued by insurance companies. These tax-deferred investments have grown increasingly complex over the last 30 years, and with that complexity sometimes comes misunderstanding. When used properly, annuities can be a way of creating a pension income for your life and potentially the life of your spouse. Proper due diligence is necessary since all annuities are not created equal.
To illustrate, let’s take the cases of two different investors. The first investor, Charlie, is 52 years old, and married with two children. He makes over $200k per year and maximizes his 401(k) contributions. He wants to save more for retirement in a tax efficient way. Since he does not have a traditional pension (except Social Security), he would like to create a larger cash flow in retirement that he and his wife cannot outlive. Having had to go through the market downturns of 2000 and 2008, he is concerned that another market downturn could happen when he is retired.
Charlie and his wife expect to live well into their eighties, so they are planning for a 20+ year retirement. In this case, a variable annuity may be a worthy option. Contributions to annuities grow tax deferred. Money inside the policy could be invested in equity and bond funds, and for an extra cost, could provide a feature that would guarantee a minimum income for both of their lives. These are a few of the good features available within annuities.
Some of the bad comes in the way of higher fees than other investment products and ordinary income tax treatment of gains when taking withdrawals, for both the account owner and future beneficiaries.
In Charlie’s case, the good outweighed the bad. After doing proper due diligence regarding company, product, features, and costs, he decided to invest in a variable annuity with a minimum income benefit rider that will pay him and his wife a set minimum monthly income for both of their lives.
Now let’s consider a second case: Michael, who is 82, is widowed and has one daughter. He is retired and lives on a modest income that consists of Social Security, a small company pension, and $240k Mutual Fund IRA from which he draws $1k a month. He owns his home, but still has a mortgage on it. He is finally comfortable, and his goal is to leave his modest estate to his only daughter.
In this case, an annuity would be of little value as he is no longer in accumulation mode and the goal for tax deferred investing is no longer a priority. Also, he has enough income from his social security and mutual fund, so a minimum income feature may not be worth the extra cost.
If you have been considering annuities or have one that you do not fully understand, call our office for a complimentary investment review, because part of being a successful investor starts by being well informed.
Frederick Fisher is a Registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial.
For questions or suggestions, contact Frederick at (530) 273-4425, or frederick.fisher@lpl.com, or visit ostrofefinancial.com. Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.
The opinions voided in this material are for general information only and are not intended to provide specific advice of recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. The case examples provided are hypothetical examples and are not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing. Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59-1/2 are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value. Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company.
What's In Your Financial Checklist?
By Frederick A. Fisher MS, CFP®
Rick Fisher, Ostrofe Financial Consultants
While many of us are spending more time at home due to COVID-19, this may be a good time to work on our personal finances. One way to start is to create a financial checklist to make sure we are addressing all important aspects of our financial lives. Though not in any order, the important thing is to address each item as appropriate.
A good place to start is with a budget. A realistic formalized budget can help build a solid financial foundation. This will help the household finances grow and keep financial goals on track. The key to an effective budget is ongoing monitoring and making realistic goals that can adapt to changing circumstances.
Next, have you set a goal for building an emergency fund? This fund can be used for unforeseen expenses. A reasonable goal is three to six months of basic living expenses. Depending on your budget, this may take a year or two to accumulate.
A retirement savings plan should also be toward the top of the list. This goal is more long-term than the emergency savings and will take decades to build. This will be vital for a comfortable retirement. Setting a realistic goal will depend on income, number of years till retirement, and expected cash flow at retirement. In order to achieve your emergency fund and retirement savings goals, it will be important to fund these as a non-discretionary expense, along with housing, food and transportation expenses.
One of the most neglected financial items on our checklist is life insurance on the wage earners. No one expects an untimely death but should a wage earner die it can leave a family financially and emotionally devastated. There are many tools to estimate how much is needed, and many types of insurance to fit almost any budget or goal.
Another often neglected item on a financial checklist is estate planning. Items like wills, trusts, and powers of attorneys are critical for proper financial management and protecting the family from unnecessary cost and delays in estate settlement. Using an attorney who specializes in estate planning is important; he or she will be able to recommend a plan that is appropriate and affordable.
The last item on our financial checklist is tax planning. Proper tax planning can save you money and prevent tax surprises, which can be costly and usually avoidable. From proper withholding, deduction tracking, and capital gains management, there are plenty of items that need to be monitored. This
financial checklist is just a start and can be expanded to include proper casualty insurance coverage as well.
Should you want more information on our financial checklist give us a call at 530-273-4425 and discover our beyond investments approach.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Frederick Fisher is a Registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial.
For questions or suggestions, contact Frederick at (530) 273-4425, or frederick.fisher@lpl.com, or visit ostrofefinancial.com. Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.
The Vital Role of Estate Planning
We hope you have enjoyed our episodes of Beyond Investments on KNCO! In this episode, Seth Leishman and Rick Fisher share how the market has been performing lately and what businesses are doing to open up again, and how consumers are responding.
In the second half, Seth Leishman and Rick Fisher discuss estate planning and how vital it is for every family.
Market Update and Long-term Care
In this episode of Beyond Investment, Seth Leishman and Rick Fisher give a market update, including how gold and silver are doing. They also share details about COVID-19 including number of cases reported and social distancing in Nevada County as businesses open up.
In the second half, Seth and Rick share a stat about the aging population, which introduces their discussion about long-term care.
The Value of Life Insurance
The host of Beyond Investments, Seth Leishman, is president of Ostrofe Financial Consultants, Inc. (OFC) In this episode, Seth discusses the market with Rick Fisher, financial advisor at OFC, after briefly reviewing how their Mothers Day weekend went with family.
Seth and Rick share a COVID-19 update and how the market has been affected. Then they move into the topic of life insurance. They discuss insurance as the transfer of risk to a third party and then move into a discussion about different types of insurance policies.
COVID-19 in the News (May 2020)
Read how the media is reporting during May on news related to COVID-19 (Coronavirus).
While cafes and restaurants are going back into business, not everyone is returning to work (Fox Business).
How do you pay off credit card debt during a global crisis? (Fox Business).
According to CNBC, online grocery shopping is now practiced by 10-15% of Americans.
Yahoo! Finance looks at the falling mortgage rate, a new record low for the U.S.
Our Post-Pandemic Community: The Little Engine That Could!
Sheltering at home gave Patty and Tim plenty of time to think about how our country is doing, what this post-pandemic world will look like. What changes should they make to adapt?
Read MoreThe Challenges and Opportunities of COVID-19
In this episode of the radio show Beyond Investments (which airs on KNCO every Friday at 2:30pm), Seth Leishman and Rick Fisher discuss how life has changed with the COVID-19 pandemic, and how life will be different going forward.
Quarterly Economic Update: A review of Q1 2020
In this Q1 recap: COVID-19 hits the United States, followed by heavy economic volatility, government stimulus, and an as-yet untold human cost.
A review of Q1 2020, Presented by Seth Leishman
THE QUARTER IN BRIEF
The spread of COVID-19 sent stocks tumbling in the first quarter, as health and economic costs of the pandemic began to mount. Stocks remained under pressure despite the Federal Reserve’s lowering of short-term interest rates and the government’s stimulus efforts through the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. The DJIA sank 23.2% and the S&P 500 dropped 20% on the quarter. The volatility following the novel coronavirus has left all but a handful of sectors in a prolonged period of uncertainty. With millions of Americans staying at home in an effort to “flatten the curve” of COVID-19’s impact on people, businesses are coping with closing for the duration, altering practices, or facing staffing issues.1
DOMESTIC ECONOMIC HEALTH
The Federal Reserve cut interest rates to zero on March 15 and announced several monetary actions designed to support households and businesses. However, markets were unfazed by the Fed’s aggressive move, electing to instead focus on the contraction of economic growth that many are expecting. Millions of Americans have applied for unemployment, with a spike of 3.3 million seen in March. Layoffs and furloughs are foreseen throughout early Q2.2,3
The Consumer Price Index (CPI) registered an annualized advance of 2.4% in February, ahead of the COVID-19 volatility in the United States. Inflation was ahead 0.1% in the same period. Consumer spending was at 0.2% in the middle of the quarter, with the University of Michigan’s Consumer Sentiment Index at 101.0. Retail sales were at 4.35%, annualized. The Institute of Supply Management (ISM) Purchasing Managers Index (PMI) up nearly two points to 57.3, mid-quarter. All these figures may be revised dramatically in the second quarter as more data is compiled about the economic cost of the pandemic.4,5
GLOBAL ECONOMIC HEALTH
The main story in China for the first quarter of 2020, affecting nearly every aspect of the Chinese economy, has been the COVID-19 outbreak. Anticipating the rough road ahead, a number of international financial institutions have revised their growth estimates for China downward, leaving some to predict the worst year in decades. Despite this, the Caixin/Markit Manufacturing PMI came in at 50.1 in March, just within the realm indicating growth, and up from February’s 40.3. As the quarter came to a close, U.S. lawmakers were questioning the accuracy of China’s reported number of COVID-19 cases as the U.S. grappled with the pandemic.6,7
European countries are also facing hardship, with Italy and Spain seeing a higher-than-average number of cases. The European Commission predicts a recession, with the overall gross domestic product (GDP) sinking 1% for 2020. This follows 1% of growth for the GDP in the final quarter of 2019. Facing heavy unemployment, the European Commission set up a 100 billion euros ($110 million in U.S. dollars) program to help keep workers employed, while also pledging to purchase as much as 750 billion euros to keep markets at ease through the purchase of financial assets.8,9,10
WORLD MARKETS
The arrival of COVID-19 signaled volatility around the globe. The numbers at the end of the quarter include: the U.K.’s FTSE 100 (-13.81%), the German Dax (-16.44%), the French CAC 40 (-17.21%), Japan’s Nikkei 225 (-10.53%), Australia’s All-Ordinaries (-21.51), Mexico’s Bolsa (-16.38%), Brazil’s Bovespa (-29.90), China’s Shanghai Composite (-4.51), Hong Kong’s Hang Seng (-9.67), South Korea’s Kospi Composite (-11.69), and Russia’s RTS (-21.95).11,12
The MSCI EAFE Index (which measures performance across developed stock markets outside North America) took a 14.77% fall at the end of Q1.13
COMMODITIES MARKETS
The oil market dominated the commodities headlines during the first quarter. The failure of Russia to join Saudi Arabia in supporting lower oil production targets left Saudi Arabia fuming and responding with an announcement of its intention to raise oil output. Oil prices plummeted on the news, contributing to the stock market’s woes. While lower oil prices represent a boon to consumers in the form of lower gasoline prices and a relief to companies with high energy consumption (e.g., airlines, chemical), they also pose a risk to the American energy industry.
Should low oil prices persist, it may lead to lower capital expenditures, labor force reductions, and troubles in the credit markets as less-capitalized companies struggle to meet their debt obligations. As the quarter came to a close, there was some speculation that President Trump would take a larger role in working with Russia and Saudi Arabia on production targets.
Elsewhere, WTI crude closed out the quarter at $20.34 a barrel. Gold finished the quarter at $1,572 an ounce on the NYMEX; silver, at $13.98 an ounce.14,15
REAL ESTATE
Across the first quarter, new home sales moved from -0.4% for December to 7.9% in January and down again to -4.4% in February. Existing home sales for February rose 6.5%, compared to a 1.3% decrease for January and a 3.6% increase in December 2019. Housing starts declined over Q1 starting at 16.9% for December, -3.6% for January, and -1.5% for February.4
Mortgage rates started the first quarter (January 2) at 3.72% for 30-year mortgages, 3.16% for 15-year mortgages, and 3.46% for 5/1-year mortgages. At the end of the quarter (March 26), the 30-year mortgages were at 3.5%, 2.92% for 15-year mortgages, and 3.34% for 5/1-year mortgages.16
30-year and 15-year, fixed-rate mortgages are conventional home loans, generally featuring a limit of $484,350 ($726,525 in high-cost areas) that meet the lending requirements of Fannie Mae and Freddie Mac, but they are not mortgages guaranteed or insured by any government agency. Private mortgage insurance, or PMI, is required for any conventional loan with less than a 20% down payment.
T I P O F T H E Q U A R T E R
Online tax calculators are handy, but keep in mind that they typically only calculate your federal tax rate. Most don’t take state or FICA taxes into account. Also, calculators are not designed to be a replacement for real-life advice, so make sure to consult your tax, legal, or accounting professional before modifying your tax strategy.
LOOKING BACK, LOOKING FORWARD
This first quarter of 2020 was one of the worst for stocks in U.S. history. The Dow Jones Industrial Average (DJIA) closed at 21,917.16 for the quarter. The Standard and Poor’s 500 (S&P 500) ended Q1 at 2,584.59, while the NASDAQ Composite Index closed at 7,700.10.17
Sources: barchart.com, wsj.com, bigcharts.com, treasury.gov - 3/31/20
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
It is difficult to see, in the middle of the COVID-19 epidemic, exactly what the full impact will be. Suffice it to say, the cost in human terms has been staggering so far and seems certain to affect at least part of the coming quarter. As people and businesses adapt to extended periods of quarantine, the only thing that seems clear is that no aspect of American life will be unchanged. CARES Act stimulus checks are on the way for millions of Americans. The Federal Reserve has lowered interest rates. Further measures are being considered at the state and federal level. The only two things that seem truly certain are that action is being taken and that we’ll all breathe a sigh of relief once this crisis subsides.
Q U O T E O F T H E Q U A R T E R
“If we are to learn to improve the quality of the decisions we make, we need to accept the mysterious nature of our snap judgments.”
MALCOLM GLADWELL
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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.
All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.
MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
CITATIONS:
1 - CNN.com, March 31, 2020. 2 - Reuters, March 31, 2020. 3 - MarketWatch, April 1, 2020. 4 - Investing.com, April 1, 2020. 5 - MarketWatch, April 1, 2020. 6 - CNN.com, April 1, 2020. 7 - MarketWatch, March 31, 2020. 8 - Bloomberg, March 13, 2020. 9 - CNBC.com, April 1, 2020. 10 - New York Times, April 2, 2020. 11 - New York Times, March 31, 2020. 12 - Barchart.com, March 31, 2020. 13 - MarketWatch.com, March 31, 2020. 14 - Barchart.com, April 2, 2020. 15 - BusinessInsider.com, April 2, 2020. 16 - FreddyMac.com, April 2, 2020. 17 - Bloomberg.com, March 31, 2020.
COVID-19 in the News (April 2020)
Here are some interesting articles in the news that we have been reading to bring you up to date on what is happening with businesses and communities in relation to the challenges caused by COVID-19.
CNBC asks, How will families celebrate Easter during the quarantine?
CNN reports that the U.S. lost 701,000 jobs in March, worst month since 2009.
Entrepreneur asks if losses related to COVID-19 are covered by your business insurance.
USA Today covers how to host a virtual Passover seder.
Forbes examines purchasing life insurance coverage during the COVID-19 crisis.
CNBC examines how the post-coronavirus economic downturn compares to earlier examples.
Follow us on Facebook to see news like this in your personal Facebook feed.
“Where is my stimulus check?” NBC News covers the process.
Will the custom of shaking hands continue after COVID-19? Fox News takes a look.
CNBC reports that U.S. jobless claims have risen by 6.6 million. This eliminates 10% of the U.S. workforce.
Techspot takes a look at delivery apps and whether or not they are actually helping restaurants.
How Has the New “SECURE Act” Changed Your Retirement and Estate Planning?
By Allen Ostrofe | Download PDF
We received a call from Tom & Siobhan from Walnut Creek, California. They asked how the “Setting Every Community Up for Retirement Enhancement (SECURE) Act”, signed on December 20, 2019, might impact their retirement/estate planning. Both are employees, 69 years old, and charitably inclined. Both did not want to start taking required minimum distributions from their retirement at age 70.5 years. Instead, they both wished to extend the distributions of their IRAs, after their deaths, to their grandchildren ages 10 and up, for the duration of their grandchildren’s lifetimes. This example is called a “Stretch IRA”. The new Tax Act has changed their plan!
1. Why a Tax Law Change?
The answer depends upon whom you ask. Our Congressmen and Senators state that 700,000 more Americans will have access to retirement plans (source: American Council of Life Insurers). Small businesses are being offered tax credits from $500 to $5000 to start a new plan. However, those of us who frustratingly watch our government’s “deficit spending” believe it helps offset the government’s tax revenue loss from too much deferring of our required minimum distributions (RMD’s). One Certified Financial Planner (CFP®)—those who are held to the highest “Fiduciary Standard”—states: “From an advisor standpoint, I’m more than happy to trade off the loss of the stretch IRA to postpone the RMD age a bit longer, and be able to contribute longer! 10-years of deferring taxable income (instead of over the beneficiary’s lifetime) is still financially favorable!”
2. How Will the Change for the Start of RMDs affect Tom and Siobhan?
Will the change from 70.5-Years (or April 1st of the following year) to age 72 improve Tom and Siobhan’s distribution plan? Since Tom and Siobhan have no plans to retire soon, and they do not own more than 5% of their company, this is a windfall. They gain up to two years tax-deferred compounding of their untouched retirement funds, and they can still contribute more! They still have the option at age 70.5 years to make tax-free contributions to qualified charities (501c[3]) of their choice from their IRA, up to $100,000 per year. This strategy avoids taxes completely, while benefitting cash-strapped non-profit organizations.
3. What Amendments Will Tom and Siobhan Need to Make to Their “Stretch IRA” Strategy Due to the New Tax Law?
Under the old law, designated beneficiaries of an inherited IRA, ROTH, 401k, or 403(b) had the ability to “stretch” the distributions over their life expectancy. The SECURE Act reduces the maximum distribution period from these accounts (any owner who died after December 31, 2019) to 10 years. There are no requirements that payments be taken every year, just that the account must be fully liquidated by the end of 10 years. There are exceptions to the 10-year rule for surviving spouses, disabled individuals, beneficiaries less than 10 years younger than the account owner, and minor children of the account owner. These individuals will still be allowed to take a life-expectancy payout. We suggest scheduling a meeting with both a Certified Financial Planner (CFP®) and an estate planning attorney to develop an alternative strategy to ensure “income for life” for individuals not exempted from this new law, like older grandchildren.
4. What Else Should I Be Reviewing Now?
The beneficiaries of your IRAs, ROTH IRAs, 401k’s, and 403b’s generally are controlled neither by your will nor your trust. Review with your CFP® to make sure that your current beneficiaries are accurate for every single retirement (or insurance) plan. Make certain that you have named “contingent beneficiaries”. Review to make certain you have named “real people” as beneficiaries or ask your advisor whether it is prudent to name a trust as beneficiary or contingent beneficiary. One downside of some trusts as beneficiary, is that the trust may be forced to liquidate over a 5-year, not 10- year period. Check that you have included “Per Stirpes” next to those beneficiaries where you wish their kids subsequentially included.
Tom and Siobhan have made necessary changes in the retirement and estate planning. How about you? And, if you know of someone who is over 70.5 years and still working, they might consider continuing to contribute to their IRA.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The content provided herein is based on our interpretation of the SECURE Act and is not intended to be legal advice or provide a tax opinion. This information is a summary only and not meant to represent all provisions within the SECURE Act. Please consult your financial advisor regarding your specific situation.
Allen Ostrofe, MBA, CFP®, is President Emeritus of Ostrofe Financial Consultants, Inc., with clients in 32 states and is a registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial. For questions or suggestions, visit ostrofefinancial.com. Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.
Beyond Investments (with Rick Fisher)
In this episode of Beyond Investments, Seth Leishman talks with Rick Fisher.
This information is not intended to be a substitute for specific individualized tax or legal advice. We
suggest that you discuss your specific situation with a qualified tax or legal advisor.
Beyond Investments (with Rick Fisher)
Enjoy this new episode of Beyond Investments with Seth Leishman and Rick Fisher!
1. All performance referenced is historical and is no guarantee of future results. All indices are
unmanaged and may not be invested into directly.
2. All investing involves risk including loss of principal. No strategy assures success or protects against
loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified
portfolio. Diversification does not protect against market risk.
3. The economic forecasts set forth in this material may not develop as predicted and there can be no
guarantee that strategies promoted will be successful.
January's Most Important Financial Resolutions for Employers and Employees
Unlike many resolutions that require consistent motivation and effort, financial resolutions might only require an initial commitment and a phone call. The commitment is to start, increase, and possibly maximize your retirement plan contributions.
Read More