 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.
Ready to protect your portfolio this election year? Let’s talk about it. Contact us at BAM Advisory Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1https://www.thebalance.com/presidential-elections-and-stock-market-returns-2388526 2https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html] 3https://www.marketwatch.com/story/americans-are-still-terrible-at-investing-annual-study-once-again-shows-2017-10-19 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.  It’s been a volatile few weeks in the financial markets. Up until late January, we were still enjoying the longest bull market in history. In three short weeks, the bull market has ended, and we’ve entered bear market territory. Between Friday, February 21 and Monday, March 16, the Dow Jones Industrial Average has dropped by 30.37%.1
The rapid decline has left many investors with two questions:
There’s no easy answer to the first question. If history is any guide, eventually the decline will stop, and the markets will recover. The average bear market lasts 13 months, followed by a 22-month recovery.2 However, it’s impossible to predict when that recovery might begin. The second question is even more difficult to answer. There are certainly protection options available, but not all options are right for all investors. Your strategy should be based on your unique needs, goals, and tolerance for risk. Below are a few options you have available: Shifting to a more conservative allocation. Changing your allocation to a more conservative strategy is always an option. Many people become more risk averse as they approach retirement. If you haven’t reviewed your allocation in years, this may be the right time to do so. Of course, a more conservative allocation could limit your participation in a recovery when it happens. Work with a financial professional to find an allocation that limits your exposure to further losses, but still gives you an opportunity to participate future upside. Staying the course. Another option is to stay the course and stay invested in your current allocation. Again, that may expose you to further losses, but it could also put you in a position to take advantage of a recovery when it does happen. Again, it’s impossible to predict when a recovery could happen, but history can provide some insight. The last bear market started in October 2007 and lasted until March 2009, spanning much of the financial crisis. The S&P 500 dropped 56.8%. However, the subsequent bull market (which just ended) lasted more than 10 years and saw the S&P 500 increase by more than 400%.3 The 2000 bear market was triggered by the tech bubble. It lasted nearly 30 months and saw a total decline of more than 49%. It was followed by a 60-month bull market with a return of more than 100%. The 1990 bear market lasted only three months and had a decline of 20% and it was followed by a 113-month bull market with a cumulative return of 417%.3 Bear markets are often followed by bull markets. The question is whether you can stick it out through further losses. Again, your financial professional can talk through your options with you and help you decide which path is right. Use risk-protection vehicles. Another option is to take advantage of market risk-protection vehicles like annuities. There is a wide range of different types of annuities that can limit your exposure to market risk and protect your future. For example, some guarantee your principal against loss, but also offer upside growth potential. Others guarantee your future retirement income, no matter how the market performs in the future. A financial professional can help you determine if an annuity or other risk-protection tool is right for you. Ready to protect your nest egg from the coronavirus? Let’s talk about it. Contact us today at BAM Advisory Group. We can help you analyze your investments and implement a strategy. Let’s connect soon and start the conversation. 1https://www.google.com/search?safe=off&sa=X&tbm=fin&sxsrf=ALeKk02Fk2yPH2_A7nU0wQGE5IUIixHyGQ:1584394531365&q=INDEXDJX:+.DJI&stick=H4sIAAAAAAAAAONgecRozC3w8sc9YSmtSWtOXmNU4eIKzsgvd80rySypFBLjYoOyeKS4uDj0c_UNkgsry3kWsfJ5-rm4Rrh4RVgp6Ll4eQIAqJT5uUkAAAA&ved=2ahUKEwiBmOfJ-Z_oAhWUW80KHc2dA3MQ3N8BMAJ6BAgCEAM#scso=_SfFvXsWJMJe1tAbX6pm4BQ1:0 27https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html 3https://www.cnbc.com/2020/03/14/a-look-at-bear-and-bull-markets-through-history.html Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19926 - 2020/3/17  The coronavirus is here. It’s impacted every corner of American life and is likely to continue to do so. Colleges have closed. States are closing schools and banning large gatherings. Businesses are closing or cutting hours. Consider some of the stunning developments from the past week:
Worldwide, as of Friday, March 13, there are more than 139,000 confirmed cases of COVID-19, which stands for coronavirus disease 2019. More than 1,800 of those cases are in the United States, with 135 new cases in the prior 24 hours.5 The pandemic has had a significant impact on the economy and the stock market. On Friday, February 21, the Dow Jones Industrial Average (DJIA) closed at 28,992. On Thursday, March 12, the DJIA closed at 21,200. That’s a decline of 7,792 points, or 26.87%, officially putting the stock market in bear market territory. What can you do to protect your nest egg from the coronavirus? There’s no way to predict the movement of the stock market, especially in the short-term. However, there are a few things you can do to minimize your exposure to risk. Don’t panic. It may be tempting to sell all your investments and look for safety. However, take some time to explore your options before you make an impulsive decision. Bear markets happen, but they’re temporary. The average bear market lasts 13 months and is followed by a 22-month recovery.7 However, not all bear markets last that long. The 1987 bear market that contained the famous “Black Monday” crash lasted only 3.3 months and was followed by a 30-month bull market. The 1990 bear market that was triggered by the Gulf War lasted 2.9 months and was followed by a 113-month bull market that saw the S&P 500 rise by 417%.8 Of course, there are longer bear markets as well. The 2007-2008 bear market that was triggered by the financial crisis lasted 17 months. It was followed by the bull market that just ended, which lasted nearly 11 years and saw a 400% increase in the S&P 500.8 It’s impossible to know how long this bear market will last or how far the markets will fall. However, if history is any guide, the bear market will end at some point and the markets will recover. If you pull completely out of your investments, you may miss the recovery and the beginning of the next bull market. Review your allocation. When’s the last time you adjusted your allocation? Many people become more risk averse as they become older, even without the threat of the coronavirus. You don’t have to sell all your investments to reduce your risk. You may be able to achieve that goal by making slight changes to your allocation. If you haven’t adjusted your allocation in years, now may be the time to do so. You may want to slightly adjust to assets that are historically less volatile. A financial professional can help you find the right allocation for your risk tolerance. Consider risk protection tools. There are some financial vehicles out there that are immune to the coronavirus, and all other forms of market risk for that matter. For example, there some types of fixed annuities that allow you to earn interest based on a stock market index’s performance. If the index performs well, you may earn more interest. If it performs poorly, you don’t lose money. Again, a financial professional can help you determine if these tools are right for you. Ready to protect your nest egg from the coronavirus? Let’s talk about it. Contact us today at BAM Advisory Group. We can help you analyze your investments and implement a strategy. Let’s connect soon and start the conversation. 1https://www.google.com/search?safe=off&tbm=fin&sxsrf=ALeKk000JGptVKZkoj4o7x5-9JnJ9uG0oQ:1582753229486&q=INDEXDJX:+.DJI&stick=H4sIAAAAAAAAAONgecRozC3w8sc9YSmtSWtOXmNU4eIKzsgvd80rySypFBLjYoOyeKS4uDj0c_UNkgsry3kWsfJ5-rm4Rrh4RVgp6Ll4eQIAqJT5uUkAAAA&sa=X&ved=2ahUKEwjzzIagl_DnAhVHaM0KHR-vA0YQlq4CMAB6BAgAEAE&biw=1366&bih=641&dpr=1#scso=_6OVWXrG8OdeqtQad9q_wAg1:0 2https://www.msn.com/en-us/money/markets/trump-reportedly-furious-about-stock-market-plunging-on-coronavirus-fears/ar-BB10o1pg 3https://www.marketwatch.com/story/why-a-supply-shock-is-biggest-stock-market-worry-as-viral-outbreak-continues-2020-02-25 Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values. Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is changed. 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. 19868 - 2020/3/2  Do you use a 401(k) or IRA to save for retirement? You’re not alone. These types of accounts are popular for many reasons, but one of the biggest is their tax treatment. As you may know, these accounts are tax-deferred. That means you don’t pay taxes on growth as long as the funds stay inside the account.
Qualified accounts may also offer upfront tax benefits for your contributions. Contributions to your 401(k) come out on a pre-tax basis. That reduces your taxable income, which in turn reduces your taxes. Contributions to an IRA.may also be tax-deductible, depending on your income level. Qualified accounts aren’t completely tax-free, however. While you may get a deduction upfront and taxes may be deferred over time, eventually, you do have to pay taxes on these assets. That time is usually when you take withdrawals in retirement. Most distributions from qualified accounts are taxed as income. That could be problematic if you plan on using your 401(k) or IRA to generate most of your retirement income. You could create high levels of taxable income that may create a significant tax liability, which could reduce your net income and your ability to live a comfortable lifestyle. Fortunately, you can minimize your tax burden by planning ahead. Every situation is unique, so there’s no universal strategy that is right for everyone. However, the following three-step process can help you project your tax liability in retirement and take steps to control it. List all your sources of retirement income. The first step in managing your retirement taxes is to project just exactly where your income will come from. In fact, this isn’t just useful for tax planning; it’s important for your entire retirement strategy. Make a list of all your potential income sources. The list could include things like:
Categorize them by tax treatment. Once you have your list, you can start to categorize your income sources according to how they are taxed. Some income sources will likely be taxable, like:
Other types of income may be tax-free, such as:
And finally, there could be some sources of income that simply require more research. They may be taxable, but also may not be. It could depend on your total taxable income or perhaps other factors. These types of income could include:
Meet with a professional and develop a tax strategy. The final step is to work with a professional to create a detailed projection of your potential income and tax liability in retirement. They can estimate your income and your possible taxes each year. They can then work with you to develop a strategy that minimizes tax payments. For example, they might recommend the use of tax-free income from municipal bonds or a Roth IRA. They could suggest the use of life insurance to create tax-free income. They may recommend that you delay Social Security or choose a different pension benefit to reduce your taxable income. A financial professional can help you find the strategy that is best for your needs. Ready to develop your retirement tax strategy? Let’s talk about it. Contact us at BAM Advisory Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 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. 19662 - 2020/1/16  For decades, some of the world’s largest institutional investors have used one tool to guide their decision-making. Mutual funds, educational endowments, defined benefit pensions, and more all use this document to focus on their long-term goals and select only the investments that meet their specific criteria. It’s an investment policy statement (IPS).
An IPS isn’t just for institutional investors though. Individuals are now often using their own IPS to set long-term strategy and develop a formal process for choosing investments. While the format of an IPS can vary, most involve the following elements:1
Do you need an IPS? It could be a valuable tool to help you maintain a long-term strategy and stick with a consistent investment approach. Below are a few ways in which you might benefit from an IPS: It helps you avoid emotional decisions. The average equity investor routinely underperforms the S&P 500 index. In fact, over the past 30 years, the average investor has had a 3.98% average annual return. The S&P 500 has averaged more than 10% annually over that same period.2 Why do investors underperform the market? There are many reasons but one of the biggest is that investors change their strategy based on emotional decisions and short-term impulses. For example, you may get out of the equity markets if they take a downward turn. However, by the time the market has improved, you’ve already missed much of the recovery. These kinds of decisions cost investors return over the long-term. An IPS helps you avoid short-term impulse decisions because all of your actions are guided by the document. If a change or adjustment isn’t specified in the IPS, you don’t make it. In many ways, an IPS protects you from yourself. It clarifies risk. What is your risk tolerance? Don’t know? You’re not alone. Unfortunately, many investors jump right into their strategy without considering their own tolerance for risk. That often leads to an allocation that isn’t right for their needs and goals. Risk tolerance is an important component in IPS. Before you can establish your long-term strategy, you have to define the specific levels of risk that are or are not acceptable to you. You then develop an allocation that aligns with your acceptable level of risk. Without an IPS, you might choose an allocation that has far more potential for risk than is right for you. Ready to create your own IPS? We can help. Contact us today at BAM Advisory Group. We can help you document your goals, clarify your risk tolerance, and create a comprehensive policy that keeps you focused on the long-term. 1https://www.morningstar.com/articles/808692/how-to-create-an-investment-policy-statement 2https://www.marketwatch.com/story/americans-are-still-terrible-at-investing-annual-study-once-again-shows-2017-10-19 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. 19564 - 2019/12/16  There’s a growing trend among new retirees. With increasing frequency, Americans are choosing to leave their retirement savings. According to data from Fidelity, 55% of workers leave their retirement savings in their former employer’s 401(k) plan for a full year after retirement. That’s up from 45% just four years ago.1
Why are retirees leaving their assets in their old 401(k) rather than rolling those funds to an IRA? There could be a variety of reasons. Workers may be happy with the plan’s investment options and administration. They may feel comfortable with the plan’s online access and other management tools. They might not need the money immediately, so they don’t have urgency to do anything with it. It’s also possible that some retirees may not be aware that they can roll their funds into an IRA tax-free. While there are certainly benefits to keeping your assets in your employer’s 401(k), there are also good reasons to roll the assets into an IRA. If you’re approaching retirement, now is the time to consider your options for your 401(k), which may be your largest retirement asset. Below are a few factors to consider: Investment Options If you’ve been in your 401(k) plan for a significant amount of time, you are likely familiar with the plan’s investment options. You may feel comfortable with your allocation and perhaps you even like the plan’s fee structure and performance. However, your goals and risk tolerance won’t always be the same as they are today. Just as your investment strategy has evolved through your career, it will likely continue to evolve through retirement. What you’re comfortable with today may not be something you’re comfortable with in the future. Generally, IRAs offer significantly more investment options than most 401(k) plans. That’s not necessarily true with every IRA and 401(k), but it is often the case. While a 401(k) plan may offer dozens of options from select providers, an IRA will often allow you to choose from a wide universe of stocks, bonds, mutual funds, ETFs, annuities, and more. That greater diversity of options can help you develop an allocation that is just right for your goals and risk tolerance, no matter how it changes in the future. Management and Administration You also may be comfortable with your 401(k) plan’s management and administration tools. Perhaps the website is easy to use. Maybe you have a dedicated support person within the plan administrator’s office. You know how to make changes and review your account, and you may not want to make changes at this time. Again, though, consider whether it will still be convenient in the future to keep your assets in your old 401(k). If you’re like many retirees, you may have multiple 401(k) plans from old employers. You also might have IRAs and other investment accounts. It’s difficult to manage and adjust your strategy when you have accounts spread across multiple custodians and institutions. You could simplify the process by consolidating your qualified retirement assets into one IRA. Also, when you reach 72, you’ll have to take required minimum distributions (RMDs) from your 401(k) and IRA. Again, that process may be inconvenient if you have to pull distributions from multiple accounts. If you consolidate your qualified assets into one IRA, you simply have to make withdrawals from one account to satisfy your RMD each year. Income Protection While you may not need to tap into your 401(k) assets today, it’s possible that at some point in the future you will need to take withdrawals from your retirement savings. Of course, it’s difficult to know how much you can safely take in a withdrawal each year. What if you live longer than you anticipate? What if the market takes a downward turn? How can you be sure your assets and income will last for life? In most IRAs, you can use financial vehicles like annuities to convert a portion of your savings into guaranteed* income. You receive a regular consistent check that is guaranteed* for life, no matter how long you live or how the markets perform. Historically, annuities with guaranteed income benefits have been more available in IRAs than in 401(k) plans. However, the passage of a new law, called the SECURE Act, creates the possibility for 401(k) plans to start offering these vehicles. Whether it’s through your IRA or 401(k), guaranteed income could give you a base level of financial stability confidence in retirement. Ready to implement a plan for your 401(k) assets? Let’s talk about it. Contact us today at BAM Advisory Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1https://www.marketwatch.com/story/more-americans-are-leaving-their-money-in-401k-plans-after-retirement-should-you-2019-10-31 *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 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. 19563 - 2019/12/16  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.
As you can imagine, the economic predictions for 2020 are all over the map. Below is a sampling:
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. Ready to develop your 2020 investing strategy? Let’s talk about it. Contact us today at BAM Advisory Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1https://www.thestreet.com/markets/2020-stock-market-predictions 2https://www.nasdaq.com/articles/5-bold-predictions-for-the-stock-market-in-2020-2019-12-09 3https://markets.businessinsider.com/news/stocks/goldman-sachs-us-economy-2020-predictions-growth-jobs-recession-risk-2019-11-1028724040#the-risk-of-a-recession-is-set-to-drop4 4https://www.cnbc.com/2019/09/18/fed-ups-its-gdp-forecast-for-2019-slightly-to-2point2percent.html 5https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 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. 19537 - 2019/12/10  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. Below are some of the biggest changes in the SECURE Act: 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. 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 303.531.5055 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! 1https://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  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. That number increases to $25,500 if you are age 50 or older. You can also contribute up to $6,000 to an IRA, or up to $7,000 if you are 50 or older.1 Of course, it may not 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 BAM Advisory Group. We can help you implement a strategy. Let’s connect soon and start the conversation. 1https://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  Another year is in the books. It’s almost time to turn the calendar to 2020. For many investors, this is the time to look back on the past year and make adjustments for the upcoming year.
The performance of your portfolio in 2019 depends on your allocation and your specific investments. However, generally speaking, investors enjoyed positive returns in 2019. Through November 22, the top market indexes had the following returns: S&P 500: 24.60%1 DJIA: 19.88%2 NASDAQ: 29.41%3 Those positive returns haven’t come without a few bumps in the road though. The markets experienced a few sharp downturns in 2019, especially through the summer. Issues like the trade war between the United States and China have created uncertainty among some investors. 4 However, other developments, like interest rate cuts and strong corporate earnings, have helped extend the longest bull market in history.4 What’s in store for 2020? When it comes to investing, it’s impossible to predict the future, especially in the short-term. However, if you are concerned about market volatility, there are steps you can take to minimize your exposure to risk. Below are a few action items to consider as we head into the new year: Review your risk tolerance. Is your allocation aligned with your risk tolerance? If you’re like many investors, you may not actually know what your risk tolerance is. Risk tolerance is your specific ability to withstand volatility in your investments. Risk tolerance is unique for each person and is based on a wide range of factors, including your time horizon, your comfort level with risk, and your financial goals and needs. Risk tolerance also changes over time. If you’re approaching retirement, you may not have the same tolerance you had when you were younger. Often, people who have decades until retirement have significantly more tolerance for risk because they have more time to recover from a loss. If you’re a few years away from retirement, you may be much more sensitive to a market downturn. Now is a good time to review your risk tolerance and make sure your allocation is appropriate. A financial professional can use a variety of tools and methods to accurately gauge your tolerance for risk. He or she can then recommend specific allocation changes that may be more appropriate than your current investment approach. Use risk protection tools. Changing your allocation is one way to reduce your potential risk levels. It’s not the only option though. You could also incorporate into your strategy retirement vehicles like fixed indexed annuities that reduce or eliminate market risk. For example, there are a wide range of vehicles that allow for growth and interest accumulation based on market index returns, but without exposure to downside risk. You could use this option to eliminate risk on a portion of your allocation, thus reducing your overall risk and volatility exposure. Ready to develop your 2020 investing strategy? Let’s talk about it. Contact us today at BAM Advisory Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1https://www.marketwatch.com/investing/index/spx 2https://www.marketwatch.com/investing/index/djia 3https://www.marketwatch.com/investing/index/comp 4https://www.cnbc.com/2019/12/02/in-2019-almost-every-investment-worked.html Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19523 - 2019/12/3 |
David AfraimiPrincipal of BAM Advisory Group Archives
March 2020
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