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Inheriting a 401(k) Plan

Within the scope of an investment portfolio, the commonplace
401(k) may seem to be a simplistic account. But it’s not, especially when it
comes to estate and legacy planning. The named beneficiary on the plan will inherit
your 401(k) regardless of your will’s instructions. And from there, a spectrum of
various choices emerge based on a plethora of different variables.

First off, you can’t name anyone other than your spouse as
the beneficiary unless you get your spouse to sign off on a form that says it’s
OK. This rule is designed to protect a spouse from a partner who is considering
a divorce and tries to put all of his or her financial accounts under his or
her own name before announcing this intention.1

If you inherit a 401(k) from your spouse, what you decide to
do with it and the subsequent tax impacts may depend largely on your age and
whether or not your spouse had started taking required minimum distributions (RMDs)
before he or she died. In general, you may (1) choose to leave the money in the
plan and take distributions; (2) transfer the funds to an inherited IRA; or (3)
transfer the money to your own IRA.2

If you are a non-spouse beneficiary of a 401(k) plan, the
rules have changed recently. In late 2019, Congress passed legislation that limited
a strategy called the “stretch IRA.” This strategy was particularly popular
among people who had saved a substantial amount of money in their retirement
accounts. It used to be that this type of beneficiary could potentially take
distributions from the account throughout decades, based on the beneficiary’s
age and life expectancy.3 This meant that those assets could
continue growing tax-deferred indefinitely.

Now, as a result of the SECURE Act, most new non-spouse
beneficiaries must fully distribute all the account’s inherited assets in 10 years
or fewer after the death of the original account holder. If an account owner
had previously set up a trust to be beneficiary of a qualified account prior to
the SECURE Act, the new rules could lead to undesirable results. If you have
such a trust as the account beneficiary, it’s important to have it reassessed
to make sure the language doesn’t negatively impact the trust’s beneficiaries
or create a tax disadvantage.4

There are more factors related to inheriting a 401(k) plan
than just the recent SECURE Act provisions, including whether or not the
account owner had reached the required date to start taking RMDs before death.
The exact date depends on whether the account owner was still working at the
company, had retired before age 70 ½ or was working at a different company.5

Suffice it to say that many things related to an inherited
401(k) are complex. And, while there are effective strategies, they can be complex,
too. For example, you could decide to take advantage of spousal beneficiary strategies
instead of naming a non-spouse. This might include the surviving spouse gifting
the residual RMDs to other heirs or contributing that income to a taxable
account and naming those heirs as beneficiaries upon her death, which may offer
a strategic tax advantage.6

In short, estate and legacy planning is complicated business
— even for something that seems straightforward, like a 401(k) plan. We can
work with your estate planning and tax professionals to help you address these
issues.

Content prepared by Kara Stefan
Communications.

1 Rebecca Lake. SmartAsset. Oct. 22, 2019. “A Guide to
Inheriting a 401(k).” https://smartasset.com/retirement/inherited-401k. Accessed Feb. 24, 2020.

2 Ibid.

3 Greg Iacurci. CNBC. Dec. 17, 2019. “Lawmakers are
killing this popular retirement tax break for the wealthy.” https://www.cnbc.com/2019/12/17/lawmakers-may-kill-this-popular-retirement-tax-break-for-the-wealthy.html. Accessed Feb. 24, 2020.

4 Alessandra Malito. MarketWatch. Jan. 9, 2020. “Inheriting
a parent’s IRA or 401(k)? Here’s how the Secure Act could create a disaster.” https://www.marketwatch.com/story/inheriting-a-parents-ira-or-401k-heres-how-the-secure-act-could-create-a-disaster-2019-12-26. Accessed Feb. 24, 2020.

5 Rachel L. Sheedy. Kiplinger. May 30, 2019. “Inherited
401(k)s: 6 Questions Heirs Need to Ask.” https://www.kiplinger.com/slideshow/retirement/T001-S004-inherited-401k-6-questions-heirs-need-to-ask/index.html. Accessed Feb. 24, 2020.

6 Rhian Horgan. Nasdaq. Jan. 30, 2020. “2 IRA Changes
to Consider Right Now, Thanks to the SECURE Act.” https://www.nasdaq.com/articles/2-ira-changes-to-consider-right-now-thanks-to-the-secure-act-2020-01-30. Accessed Feb. 24, 2020.

We are not permitted to offer, and no statement contained herein shall
constitute, tax or legal advice. Individuals are encouraged to consult with a
qualified professional before making any decisions about their personal
situation.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Your Vote, Your Investment

Here’s some food for thought regarding the aftermath of
Watergate: “The great paradox of one of the worst presidential scandals of the
20th century was that it forced candidates to stop attacking each other and
start persuading the nation that they could be trusted.”1

Wouldn’t it be nice if the 2020 elections followed this same
pattern? Yet even without Republican primaries, the spectrum of Democratic
candidates has demonstrated that competition can be cutthroat, no matter how
unified a political party.

During election years, voters are asked to donate money to
the political candidates they support. The candidates elected are often those
who raise the most money and can therefore reach more people with their message
and policy platform through advertising. In this way, donations are perhaps a
good investment for individual voters and corporations. In other words,
political contributions may yield a high return on investment that helps those
who donate increase their own fortunes.

This is one reason why it’s important to understand both the
short- and long-term ramifications of a candidate’s policy platform. Some
policies may seem beneficial out of the gate but potentially have negative
consequences for the long-term investor. If you’d like to discuss how the
current political climate and various political policies could impact your
portfolio, we’d be happy to have that discussion.

Main Street investors aren’t the only ones donating money to
support their portfolios. Since 2012, Wall Street brokerages, stockbrokers,
bond dealers, hedge funds and private investment firms have become the single
largest source of political contributions.2

Recent spending patterns may put more pressure on choosing
the most efficacious president in 2020. In the last three years, the current
administration’s policies have increased the national debt by $3 trillion. The Congressional
Budget Office predicts $1 trillion deficits annually over the next eight years
as a result of reduced tax revenues and higher spending during the Trump years.
Economists note that increased government spending is highly unusual during a
strong economy — the U.S. has never had a deficit this large relative to gross
domestic product (GDP) during a robust economy.3

According to the International Monetary Fund (IMF), U.S. growth is expected to
drop to 2% in 2020 and decline further to 1.7% in 2021.4 In lieu of
stronger economic performance, the federal government will likely need to both raise
revenues and reduce spending to reverse this trend.

President Trump’s 2021 budget proposal, while unlikely to
pass in its current form, does set the tone for his policy aspirations. The
budget aims to reduce spending on Social Security Disability Insurance and
Supplemental Security Income by $35 billion and Medicare by more than $500
billion throughout a decade. Although the cuts don’t directly affect retirement
participants’ benefits, provisions within the proposal could still negatively
impact beneficiaries. Perhaps most notably, the Medicare policy proposes
reduced payouts to doctors and hospitals, which could result in some providers no
longer participating in the Medicare program.5

Senate Leader Mitch McConnell and other GOP Congress members
also have expressed the desire to cut Social Security benefits to reduce the
deficit. Unfortunately, despite the robust economy and outperforming stock
market over the past 10 years, a full third of today’s retirees depend on
Social Security for 90% or more of their income; one in six depend on it for at
least half their income.6

On the other side of the aisle, Democrats have a long legacy
of advocating government spending to benefit low- and middle-income families.7
Therefore, the standard choice between spending versus austerity may once again
be decided by campaign contributions and, ultimately, at the polls in November.

Content prepared by Kara Stefan
Communications.

1 Sophie Gilbert. The Atlantic. June 9, 2019. “The Year
Political Advertising Turned Positive.” https://www.theatlantic.com/politics/archive/2015/06/the-year-political-advertising-turned-positive/395435/. Accessed Feb. 14, 2020.

2 The Center for Responsive Politics. 2020. “Securities
& Investment.” https://www.opensecrets.org/industries/indus.php?ind=f07. Accessed Feb. 14, 2020.

3 James Crowley. Newsweek. Jan. 23, 2020. “National
debt increased by $3 trillion during Donald Trump’s three years as president.” https://www.newsweek.com/donald-trump-national-debt-increase-3-trillion-first-three-years-presidency-1483660. Accessed Feb. 14, 2020.

4 International Monetary Fund. Jan. 2020. “World
Economic Outlook, January 2020: Tentative Stabilization, Sluggish Recovery?” https://www.imf.org/en/Publications/WEO/Issues/2020/01/20/weo-update-january2020. Accessed Feb. 14, 2020.

5 Allesandra Malito. MarketWatch. Feb. 12, 2020. “Trump’s
budget proposal probably won’t reduce your Social Security check, experts say,
but will it lower your quality of life and health care?” https://www.marketwatch.com/story/trumps-budget-proposal-wont-reduce-your-social-security-check-but-it-could-lower-your-quality-of-life-and-health-care-2020-02-11. Accessed Feb. 14, 2020.

6 Teresa Ghilarducci. Forbes. Aug. 23, 2019. “Trump’s
Second-Term Plan For Social Security: Starve The Beast.” https://www.forbes.com/sites/teresaghilarducci/2019/08/23/trumps-second-term-plan-for-social-security-starve-the-beast/#1b6916937949. Accessed Feb. 14, 2020.

7 Kimberly Amadeo. The Balance. June 25, 2019. “Democratic
Views on the Economy.” https://www.thebalance.com/democratic-economic-policies-4129140. Accessed Feb. 14, 2020.

Our firm is not
affiliated with or endorsed by the U.S. government or any governmental agency
and does not provide tax or legal advice.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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The Coronavirus and Other Oddball Risks

One of the reasons investing never gets boring is because it
is an ever-changing, never-sleeping industry that presents new opportunities — and
new risks — every day.

One of the most recent threats to the global business
economy, and therefore investors, is the coronavirus and its far-reaching
impact. China, home to much of the world’s manufacturing, has been hard hit by
the epidemic. In its wake, travel has been one of the first casualties. This is
bad news not just for tourists, but for the thousands of business
representatives who fly in and out of the country each day. The virus outbreak
among Chinese workers threatens business trade and supply chain production for
markets throughout the world.1

The outbreak of coronavirus is but one example of the types
of unexpected risks that can disrupt a wide variety of industries — and one
example of why financial advisors recommend diversification. While all
investments involve risks, there are additional risks associated with foreign
investing, such as currency fluctuations, economic instability and political
developments. Building an investment portfolio that includes uncorrelated asset
classes can help defend against the wide range of both anticipated and
unanticipated risks that investors face. We’re happy to review your portfolio
to assess how much market risk you might be exposed to; just give us a call.

If you don’t think the coronavirus has impacted U.S.
companies, think again. McDonald’s, Starbucks and H&M have all had to
shutter stores in China. Disney closed its Shanghai and Hong Kong theme parks.
The Marriott, Hyatt and Hilton hotel companies have suspended some operations
in areas most affected by the virus. Carnival and Royal Caribbean Cruises have
been forced to cancel scheduled voyages to help curb the spread from one
country to another.2

The problem isn’t isolated to retail stores, either. Technology
companies like Apple and Google have restricted employee travel either
completely or only for “business-critical situations.” Additionally, General
Motors, Honda and Nissan have suspended auto production.3

According to Wilbur Ross, the U.S. Secretary of Commerce,
there is perhaps a silver lining to the crisis. In a recent interview, he
intimated that if U.S. manufacturers returned many of their offshore operations
to America, they could better control such risks.4

However, risk is risk — and it takes on many different
guises, even domestically. Some investment analysts warn that political
campaigns heading toward the November elections may be a primary source of
market volatility throughout the year. The two major political parties appear
as divided as ever with policies that offer both positive and negative
components. Regardless of party affiliation, both offer platforms that seem
likely to increase spending and expand our nation’s debt.

This dynamic is likely to stretch U.S. Treasury valuations
even further, while the relationship between the Federal Reserve and the
investment markets may continue to be strained. While the Fed altered monetary
policy in 2019 to accommodate markets, there could be less wiggle room now to
combat any further risks to the economy such as rising asset price inflation.5

And then there’s the problem of trade wars promulgated by aggressive
140-character tweets — an approach that tends to pain Republicans and Democrats
alike, not to mention Wall Street.6

Content prepared by Kara Stefan
Communications.

1 Franklin Templeton. Jan. 24, 2020. “Monitoring
China’s Outbreak and Other Potential Market Shocks.” https://www.franklintempleton.ca/en-ca/investor/article?contentPath=html/ftthinks/common/blogs/monitoring-chinas-outbreak-and-other-potential-market-shocks.html. Accessed Feb. 5, 2020.

2 Sergei Klebnikov. Forbes. Jan. 28, 2020. “Coronavirus
Hits Big Business: These Companies Are Cutting Operations And Restricting
Travel To China As Disease Spreads. https://www.forbes.com/sites/sergeiklebnikov/2020/01/28/coronavirus-hits-big-business-these-companies-are-cutting-operations-and-restricting-travel-to-china-as-disease-spreads/#509d69381264. Accessed Feb. 5, 2020.

3 Megan Cerullo. CBS News. Jan. 30, 2020. “China
coronavirus causing chaos for U.S. companies.” https://www.cbsnews.com/news/coronavirus-brings-business-operations-in-china-to-standstill/. Accessed Feb. 5, 2020.

4 BBC News. Jan. 31, 2020. “Wilbur Ross says
Coronavirus could boost US jobs.” https://www.bbc.com/news/business-51276323. Accessed Feb. 5, 2020.

5 Sonal Desai. Franklin Templeton. Jan. 14, 2020. “On
My Mind: Will the US Survive the Politics in 2020?” https://www.franklintempletonnordic.com/investor/article?contentPath=html/ftthinks/common/cio-views/on-my-mind-will-the-us-economy-survive-the-politics-in-2020.html. Accessed Feb. 5, 2020.

6 Ibid.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Climate Change: A World of Opportunity

According to the National Oceanic and Atmospheric
Administration, the amount of heat stored in the upper levels of the ocean
reached an all-time high in 2019. This is a primary factor that contributes to
the rise in sea levels. Furthermore, the world’s five warmest years have all
occurred since 2015.1

On the heels of Davos — the annual meeting of the World
Economic Forum — attendees are charged with the responsibility of responding
quickly and effectively to a changing world. The good news is many of the participants
are people with the power to make those changes: prime ministers and
presidents, chief executive officers from around the world and heads of
nongovernmental organizations. The first priority of the Davos agenda this year
was mobilizing businesses to respond to the risks of climate change and protecting
forest floors and ocean beds.2

While addressing climate change has traditionally involved
imposing government regulations, there is a new perspective that looks at the
problem in terms of opportunities. Worldwide investment in renewable energy surpassed
$282 billion in 2019, which included wind, solar, waste-to-energy, geothermal, biofuels
and small hydro.3 These are all industries that will be developing,
investing and responding to demand for decades to come.

Some of the components that contribute to climate change can
be part of the solution. For example, wind speeds around the world had been declining
since the 1980s. However, recent changes in ocean and atmospheric circulation
patterns have actually served to reverse that trend. Today’s speedier winds
will boost the energy production of a single turbine by about 37%.4

Lobbyists for the traditional energy industry have launched
an initiative (Americans for Carbon Dividends) that promote a carbon tax on fossil
fuel companies for their carbon emissions in concert with the elimination of unnecessary
carbon regulations. The organization believes such a tax would cut U.S. carbon
emissions in half by 2035 while enabling those corporations to innovate for a
cleaner energy future.5

In 2018, California state lawmakers passed a bill mandating
100% climate-friendly electricity by 2045. Since then, investments have stepped
up for the development of more geothermal plants, an emissions-free, renewable
electricity source that uses naturally heated underground reservoirs to create
steam and turn turbines (around the clock, not just when the sun is out). Last
year, the Department of Energy reported that if technology improves, U.S.
geothermal capacity could grow exponentially, to the point of generating up to
16% of the nation’s electricity.6

Content prepared by Kara Stefan
Communications.

1 National Oceanic and Atmospheric Administration. Jan.
15, 2020. “2019 was 2nd hottest year on record for Earth say NOAA, NASA.” https://www.noaa.gov/news/2019-was-2nd-hottest-year-on-record-for-earth-say-noaa-nasa. Accessed Jan. 24, 2020.

2 Peter Coy. Bloomberg. Jan. 17, 2020. “A Sense of
Climate Urgency Takes Hold in Davos.” https://www.bloomberg.com/news/articles/2020-01-17/a-sense-of-climate-urgency-takes-hold-in-davos. Accessed Jan. 24, 2020.

3 BloombergNEF. Jan. 16, 2020. “Late Surge in Offshore
Wind Financings Helps 2019 Renewables Investment to Overtake 2018.” https://about.bnef.com/blog/late-surge-in-offshore-wind-financings-helps-2019-renewables-investment-to-overtake-2018/. Accessed Jan. 24, 2020.

4 Matt McGrath. BBC News. Nov. 18, 2019. “Renewable
energy: Rise in global wind speed to boost green power.” https://www.bbc.com/news/science-environment-50464551. Accessed Jan. 24, 2020.

5 Americans for Carbon Dividends. 2020. “The Solution.”
https://www.afcd.org/the-solution/. Accessed Jan. 24, 2020.

6 Sammy Roth. Los Angeles Times. Jan. 22, 2020. “California
needs clean energy after sundown. Is the answer under our feet?” https://www.latimes.com/environment/story/2020-01-22/california-needs-clean-energy-after-sundown-geothermal-could-be-the-answer. Accessed Jan. 24, 2020.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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2020 Market Update: Reversal of Sentiment

After making a bunch of gloom-and-doom predictions about the
markets in 2019, with fears of a pending recession, Wall Street money managers
have a considerably more brightened outlook for 2020. Indeed, recent indicators
have heightened expectations for U.S. economic growth this year.

For example, the Conference Board is predicting a 2.1% rise
in the gross domestic product (GDP) in 2020, commenting, “We believe the worst
of the slowdown is behind us.” 1 The real estate market also is showing
promise: Demand for homes is up, fueling growth in new construction, which
could boost home prices. 2

The markets appear to be agreeing with these forecasts, with
the Dow and the S&P 500 starting the new year with strong performances.
Some managers are projecting that the long-running bull market could take stock
prices even higher this year.3

With this in mind, don’t forget to take advantage of
increased retirement contribution limits for 401(k) plans, 403(b) plans, most
457 plans, Thrift Savings Plans, profit-sharing plans and cash balance pension
plans this year — up by another $500 to $19,500. For people over age 50, the
catch-up contribution for their 401(k) plans also increased by $500, which
means you can save up to $26,000 in your employer plan.4

Remember, too, that if you continue to work past traditional
retirement age, new legislation is designed to help you save and invest longer.
The new SECURE Act, passed at the end of last year, delays the age to start
drawing required minimum distributions (RMDs) from retirement accounts from 70 ½
to 72 for those who turn 70 ½ after 2019. Also, you may continue contributing
to a traditional IRA as long as you earn income, as the age cap has been
eliminated.5

These new changes could play a role in determining when you
want to set your retirement date. Some people who don’t need the money may want
to keep earning a paycheck, even on a part-time basis, just to keep
contributing to their investments. Also, if you delay starting Social Security
benefits until age 70, you can just about double the amount you draw compared
to starting them when you’re first eligible (age 62).6 If you’d like
to assess retirement planning strategies for this year, we’d be happy to discuss
your portfolio and financial strategy with you.

Content prepared by Kara Stefan
Communications.

1 The Conference Board. Jan. 8, 2020. “The Conference
Board Economic Forecast for the U.S. Economy.” https://www.conference-board.org/data/usforecast.cfm. Accessed Jan. 29, 2020.

2 Michelle Meyer. Bank of America Global Research. Nov.
22, 2019. “U.S. Economic Forecast: Clouds, Sunshine or Showers?” https://mlaem.fs.ml.com/content/dam/ML/pdfs/Transcript_Meyer_Outlook_2020.pdf. Accessed Jan. 17, 2020.

3 Knowledge@Wharton. Jan. 7, 2020. “What Investors Need
to Watch for in 2020.” https://knowledge.wharton.upenn.edu/article/what-investors-need-to-watch-for-in-2020/. Accessed Jan. 17, 2020.

4 David Rae. Forbes. Nov. 20, 2019. “Great News From
The IRS For Retirement Savers.” https://www.forbes.com/sites/davidrae/2019/11/20/irs-retirement-savers/#7aa47397384a. Accessed Jan. 29, 2020.

5 Roger Young. T. Rowe Price. Dec. 24, 2019. “The
SECURE Act: What Investors Need to Know.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/retirement-planning/the-secure-act–what-investors-need-to-know.html. Accessed Jan. 17, 2020.

6 Judith Ward. T. Rowe Price. Jan. 7, 2020. “2020 Key
Financial Numbers.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/personal-finance/key-financial-numbers.html. Accessed Jan. 17, 2020.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Student Loan Debt Affects More Than Millennials

Common sense would suggest older workers have a much easier
time saving than young adults. They are more likely to have already purchased a
home, put kids through college and, by that point, are putting more money away
for retirement.

A recent study by the Transamerica Center for Retirement
Studies confirms this is true, but the difference isn’t as big as you might
expect. The report shows 78% of baby boomers are saving for retirement, compared
to 77% of Generation X and 71% of millennials. The numbers may be skewed by the
fact that some baby boomers have already retired, but a 70-plus percent savings
rate is pretty impressive for younger generations.1

The message appears to be getting through: Americans need to
save more for retirement. It’s heartening to see younger adults making this a
priority, especially since many are also saddled with college student loan payments.
Regardless of what life stage you’re in, saving regularly is an important
habit. If you’re wondering which types of savings or investment vehicles are
appropriate for your particular circumstances, we can help. Please give us a
call to schedule a consultation.

Another reason the millennial generation may be saving more
is that they’ve been squeezed out of the market for buying a house.2
Home values have increased significantly in certain areas of the country, giving
some potential first-time homebuyers time to focus their resources on getting
out of debt and saving and investing for retirement. This could be a silver
lining when you consider the advantages of compounding interest over many
decades.

However, millennials aren’t the only ones juggling debt. Americans
over age 60 have amassed a total debt of more than $3 trillion, mostly on
mortgages. But this generation also owes nearly $100 billion on student loans,3
suggesting people close to or in retirement are co-signing loans for children
or grandchildren, or even paying off loans on their own education later in life.

Note that one of the provisions included in the SECURE Act,
passed in late 2019, allows for withdrawals up to $10,000 from college savings 529
plans to help repay student loans.4

Content prepared by Kara Stefan
Communications.

1 Transamerica Center for Retirement Studies. Dec. 19,
2019. “19th Annual Transamerica Retirement Survey.” https://transamericacenter.org/retirement-research/19th-annual-retirement-survey#compendium. Accessed Jan. 9, 2020.

2 Lindsay Walker. Cronkite News. Jan. 8, 2020. “Despite
slight uptick, millennials still face homeownership challenges.” https://cronkitenews.azpbs.org/2020/01/08/despite-slight-uptick-millennials-still-face-homeownership-challenges/. Accessed Jan. 9, 2020.

3 Angela Antonelli. Dec. 26, 2019. “When it comes to
financial angst, boomers and millennials have more in common than they think.” https://www.marketwatch.com/story/when-it-comes-to-financial-angst-boomers-and-millennials-have-more-in-common-than-they-think-2019-12-24. Accessed Jan. 9, 2020.

4 Fidelity. Jan. 2, 2020. “The SECURE Act and you.” https://www.fidelity.com/learning-center/personal-finance/retirement/understanding-the-secure-act-and-retirement. Accessed Jan. 9, 2020.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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RMD Considerations

With people living longer and benefiting from the long-running
bull market, there are more factors to consider in taking required minimum
distributions (RMDs) from retirement accounts. The traditional IRA, SEP IRA and
401(k) plans offer tax deductions on contributions and tax-deferred growth on
earnings during the accumulation phase, but eventually the government wants you
to pay taxes on that money.

Be aware that the IRS has proposed a new update to the life
expectancy tables used to calculate annual RMDs for the first time since 2002.
The proposed changes, which are not expected to go into effect until 2021,
would likely reduce the RMD amount for many retirees, based on today’s longer
life expectancies.1

Some retirees who have saved and invested well may find they
do not need these distributions for their day-to-day expenses. Therefore, it’s
a good idea to have a strategy for where to allocate these funds based on your
longer-term goals, such as plans for beneficiaries, charitable giving or to
have them available for medical or caregiving expenses down the road. Please
give us a call if you’d like to discuss strategies for your RMDs moving
forward.

How you handle RMDs can be especially important for your
spouse. You may want to consider reinvesting a portion of your withdrawals for
growth opportunity if there is a significant age difference between you and
your spouse.

In late December, President Donald Trump signed into law the
Setting Every Community Up for Retirement Enhancement (SECURE) Act. Among its many
provisions is the ability for retirees to delay taking RMDs until age 72 (up
from the current age of 70½). Be aware that this change applies only to people
who turn 70½ after Dec. 31, 2019.2

Once you begin taking RMDs, please know that you have
options; you don’t just have to convert long-time investments into cash.
Strategic alternatives include:3

  • Making a
    qualified charitable donation (up to $100,000 a year) directly from your IRA to
    a charity.
  • Paying taxes on
    the RMD and then putting those funds into a Roth IRA, which continues to grow
    tax-free and can be inherited free of inheritance tax. There are also no RMDs
    for a Roth. Note that you must be eligible for a Roth based on your income.
  • Contributing the
    funds to a grandchild’s education via a 529 college savings plan, where
    earnings are tax-free as long as they’re used for qualified education expenses
    (you may even be able to deduct contributions on your state tax return).

Another option is to reposition assets before RMDs kick in
to purchase a qualified longevity annuity contract (QLAC). This strategy allows
you to defer your RMDs until you need the income (up to age 85), at which point
you can receive guaranteed monthly payments for the rest of your life. The IRS
limits the total contribution to 25 percent of the assets in the IRA, up to a
maximum of $130,000.4

Content prepared by Kara Stefan
Communications.

1 Jeffrey Levine. Nerd’s Eye View. Nov. 13, 2019. “IRS
Proposes New RMD Life Expectancy Tables To Begin In 2021.” https://www.kitces.com/blog/irs-proposes-new-rmd-life-expectancy-tables-to-begin-in-2021/. Accessed Jan. 3, 2019.

2 Stephen Miller. Society for Human Resource Management.
Dec. 20, 2019. “SECURE Act Alters 401(k) Compliance Landscape.” https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/SECURE-Act-alters-401k-compliance-landscape.aspx. Accessed Jan. 3, 2019.

3 RBC Wealth Management. “Five strategies for taking
your required minimum distributions.” https://www.rbcwealthmanagement.com/us/en/research-insights/five-strategies-for-taking-your-required-minimum-distributions/detail/?utm_id=wm1552523589020191. Accessed Jan. 3, 2019.

4 Ibid.

Neither the firm nor its agents or representatives may give tax advice.
Individuals should consult with a qualified professional for guidance before making
any purchasing decisions.

Guarantees and protections
provided by insurance products including annuities are backed by the financial
strength and claims-paying ability of the issuing insurer.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Assessing the Role of Government

Recently, President Trump bemoaned
the inconveniences of low-flow toilets, showers, dishwashers and
energy-efficient lightbulbs – all implemented in the wake of government
regulation aimed toward conservation efforts.1

One issue in the political divide
between parties is disagreement about the role of government in the economy. When
Congress passes legislation or the administration’s Cabinet departments impose
new rules and regulations, that, in turn, can cost American businesses money in
their efforts to comply. This, in turn, may reduce profits, threaten the growth
of jobs and expansion, and may reduce shareholder value.

However, the opposite side of the
debate is that without government oversight, corporations may run afoul of
consumer, employee or shareholder rights – not to mention the environment. In
these instances, the government often steps in to pass legislation or adjust
policies to restrict detrimental behavior or activities that impact people or
the economy as a whole.

Our political system is designed
such that neither political party holds control for very long, which serves as
a check and balance for political ideas and policies. Keep this in mind when
managing your own portfolio – particularly as we enter campaign season and
approach November elections. It’s usually not a good idea to make alterations
based on which political party is in power. We are here to help evaluate your
options; give us a call if you’d like to sit down and discuss your financial
outlook.

After the severe impact of the outlier
economic downturn dubbed the Great Recession, in 2007 through 2009, Congress
passed regulatory reforms designed to enhance the resilience of America’s
financial system and make it less vulnerable to another crisis.2
However, since the recovery and ensuing strong economic growth, some of those “lender
stress tests” have been relaxed both in the United States and abroad. Opinion
columnist Elisa Martinuzzi, former managing editor for European finance at
Bloomberg News, says that could be putting the world economy once again at
risk.3

In recent months, the Federal
Reserve has pumped more money into the U.S. banking system via interest rate
cuts and the purchase of $60 billion in Treasury bills each month through
spring 2020 to bolster its shrinking balance sheet. The Fed’s infusion of money
is credited with juicing the stock market and sending investor portfolios
soaring back to record gains.4

However, some people believe that the real market mover and
shaker may be the American people. Whether by vote or consumer decisions about
what to buy/view/support, the government and corporations are inevitably
policed by the people, for the people – and how they choose to spend their
money.5

Content prepared by Kara Stefan
Communications.

1 Tamara Keith. NPR. Dec. 27, 2019. “Trump Vs. Toilets
(And Showers, Dishwashers And Lightbulbs).” https://www.npr.org/2019/12/27/791707318/trump-vs-toilets-and-showers-dishwashers-and-light-bulbs. Accessed Dec. 30, 2019.

2 Knowledge@Wharton. Sept. 11, 2018. “A Decade After
the Great Recession, Is the Global Financial System Safer?” https://knowledge.wharton.upenn.edu/article/ten-years-great-recession-global-financial-system-safer/.  Accessed Dec.
30, 2019.

3 Elisa Martinuzzi. Bloomberg. Dec. 16, 2019. “Bankers
Are Playing With Fire, Once Again.” https://www.bloomberg.com/opinion/articles/2019-12-16/why-fake-finance-is-not-yesterday-s-news. Accessed Dec. 30, 2019.

4 Matt Egan. CNN. Nov. 22, 2019. “The $4 trillion force
propelling US stocks to record highs.” https://www.cnn.com/2019/11/22/investing/stocks-market-fed-overnight-lending-rescue/index.html. Accessed Dec. 30, 2019.

5 Antony Davies and James R. Harrigan. US News. Jan. 3,
2018. “A Better Kind of Regulation.” https://www.usnews.com/opinion/economic-intelligence/articles/2018-01-03/true-regulatory-power-resides-with-consumers-not-the-government. Accessed Dec. 30, 2019.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links
provided in this text, please contact us to request a copy of the desired
reference.

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Financial Tips For 2020

The U.S. has enjoyed 10 years of a
booming stock market and a growing economy. It’s too early to tell how 2020 will
look, but there are some signs that it doesn’t look quite as promising. Between
warnings of a possible economic pullback and a contentious presidential
election year, investors may want to consider financial moves designed to help protect
gains and optimize future opportunities.

For example, while domestic
securities were global leaders in 2019, Morgan Stanley believes U.S. stocks and
bonds will underperform other developed countries in 2020. The wealth manager
predicts the S&P 500 Index will have a small decline to 3,000 points by the
end of the year as the dollar weakens, corporate earnings edge downward and “unique”
political risks are expected in the run-up to Election Day.1

We recommend that individuals take a long view when it comes
to investing, particularly in relation to retirement planning. However, as we
approach this new decade, it may be important to review your portfolio’s
overall asset allocation, not just within the context of 2020, but for your
long-term financial objectives. Please give us a call if we can help you make
this assessment.

As for retirement planning, be aware of three changes scheduled to impact
Social Security benefits in 2020: 2

  1. The earnings limit subject to FICA payroll taxes is
    scheduled to increase by $4,800, to $137,700. This means employees who earn at
    or above that threshold will pay an additional $367 in payroll taxes during
    2020.
  2. Retirees received a 1.6 percent boost in Social
    Security benefits, which translates to roughly $288 (on average) more for the
    year.
  3. Social Security recipients who haven’t reached full
    retirement age can earn $600 more in 2020 without a benefits reduction — up to
    $18,240. Beyond that limit, every $2 in earnings will result in $1 withheld in
    benefits.

It’s a good idea to consider your income tax status early in
the year. A lot of people did not expect the Tax Cuts and Jobs Act to
negatively impact their taxes and received an unpleasant surprise when they
filed returns last year. You can help prevent having to owe additional taxes on
filing day by adjusting your Form W-4 exemptions with your employer so that
more income is withheld throughout the year.3

Also consider making your 2020 contributions to
tax-advantaged accounts as early in the year as you can. That’s because any
contributions you make to accounts such as IRAs, 529s and workplace retirement
plans will have more time to take advantage of tax-deferred compounding growth.4

Content prepared by Kara Stefan
Communications.

1 Joanna Ossinger. Bloomberg. Nov. 17, 2019. “Morgan
Stanley Sees U.S. as a Laggard in 2020 Across Markets.” https://www.bloomberg.com/news/articles/2019-11-18/morgan-stanley-sees-u-s-underperforming-in-2020-across-markets. Accessed Dec. 18, 2019.

2 Kenneth Terrell. Oct. 28, 2019. “What to Know About
Social Security Changes for 2020.” https://www.aarp.org/retirement/social-security/info-2019/social-security-changes-look-ahead.html. Accessed Jan. 15, 2020.

3 Kiplinger. Oct. 29, 2019. “27 Money Moves to Make Now
to Prepare for 2020.” https://www.kiplinger.com/slideshow/saving/T023-S002-money-moves-to-make-now-to-prepare-for-2020/index.html. Accessed Dec. 18, 2019.

4 Business Wire. Dec. 16, 2019. “20 Financial
Resolutions for 2020 from the AICPA.” https://www.businesswire.com/news/home/20191216005073/en/20-Financial-Resolutions-2020-AICPA. Accessed Dec. 18, 2019.

Our firm is not affiliated with or endorsed by the U.S.
government or any governmental agency and does not provide tax advice.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not intended
to be used as the sole basis for financial decisions. If you are unable to
access any of the news articles and sources through the links provided in this
text, please contact us to request a copy of the desired reference.

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Two Retirement Planning Approaches: Safety vs. Probability

According to Merrill, four of the
most common risks to your retirement strategy are:1

  • A significant
    market drop shortly before or early in your retirement
  • Inflation
    reducing your spending power over time
  • Unexpected
    medical and/or long-term care expenses
  • Outliving your
    assets

If you are nearing retirement, it
might be time to review your current financial strategy and make adjustments,
if necessary. It’s important that you make any adjustments based on your
personal circumstances. If we can help you align your retirement assets with
your objectives and timeline, please give us a call.

Retirement income analyst,
professor and author Wade Pfau defines two schools of thought when it comes to
managing money in retirement. The first is the “probability-based approach,” in
which an individual is comfortable holding equities for growth opportunities
over the long haul. The second approach focuses on “safety first,” which also
utilizes insurance-based contracts, such as life insurance or annuities, that
spread risk across an insurance pool. This strategy basically gambles that some
people will die early while others live longer — but that risk is managed by the
insurer instead of the contract owner.2

However, retirees don’t have to
select just one approach; it may make sense to diversify between the two. With
a probability-based approach, consider investments that are designed to
generate retirement income, such as investment-grade bonds or
high-dividend-paying stocks. However, keep in mind that all investing involves
risk.

The “safety” approach is a good
strategy for helping to cover unexpected expenses, such as long-term care. Not
everyone ends up needing such care, but people who do can deplete their
retirement savings quickly if they choose to self-fund this expense. One way to
combine this coverage with your legacy planning goals is through a life
insurance policy that offers a long-term care benefits rider. This type of
strategy leverages a portion of your current assets to provide a substantially
higher death benefit for beneficiaries. However, you can draw from the contract’s
death benefit if you do need to pay for long-term care. That way you don’t pay
for coverage you don’t need, but it’s there to assist with the costs if you do.3
It’s important to keep in mind that life insurance policies and long-term care
riders are subject to medical underwriting and riders may require an additional
fee.

A good place to start your retirement planning is to check your
Social Security benefit estimate.

The Social Security Administration mails written statements to
people age 60 or older who are eligible for benefits. However, anyone at any
age can check out their statement by registering at the Social Security website
www.ssa.gov/myaccount/ — for a “my
Social Security” account. Once you have signed up for an account online, you’ll
stop receiving estimates by mail. However, you can check updated estimates online
at any time. Double-check that your earnings history is accurate because that’s
what determines the amount of benefits you’ll receive.4

Once you have a good idea of what to expect in Social
Security, you can start to consider other income streams. Work with an experienced
financial advisor to help you determine the appropriate retirement planning approach
for you.

Content prepared by Kara Stefan
Communications.

1 Merrill. 2019. “4 Big Retirement Risks — and How to
Prepare for Them.” https://www.ml.com/articles/big-retirement-risks-and-how-to-prepare-for-them.html. Accessed Dec. 15, 2019.

2 Knowledge@Wharton. Dec. 10, 2019. “What Will You Need
to Retire with Safety and Security?” https://knowledge.wharton.upenn.edu/article/what-will-you-need-to-retire-with-safety-and-security-lanning/. Accessed Dec. 15, 2019.

3 Merrill. Oct. 25, 2019. “Will You Be Prepared to
Cover the Costs of Long Term Care?” https://www.ml.com/bulletin/will-you-be-prepared-if-you-need-long-term-care.html. Accessed Dec. 15, 2019.

4 Bob Carlson. Forbes. Dec. 15, 2019. “How to Read
Social Security Benefit Estimates.” https://www.forbes.com/sites/bobcarlson/2019/12/15/how-to-read-social-security-benefit-estimates/. Accessed Dec. 15, 2019.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. Any references
to protection benefits and safety generally refer to fixed insurance products,
never securities or investment products. Insurance and annuity product
guarantees are backed by the financial strength and claims-paying ability of
the issuing insurance company.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
unable to access any of the news articles and sources through the links provided
in this text, please contact us to request a copy of the desired reference.

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