To pull off the most valuable score, thieves once had to physically break into a brick-and-mortar building, and once inside, force open a locked safe. Back then, cash was criminals’ hottest commodity because it could be spent without having to find a buyer.

These days, consumer data is the most valuable stolen good. Cyberthieves can remotely “break in” to a company’s computer system from the comfort of their own home. They also have a ready market of buyers willing to pay for volumes of private information. It’s as easy as 1-2-3:

  1. Research. A cybercriminal scans the network security of various companies looking for a vulnerability that can be infiltrated.

  2. Attack. There are two ways a cyberthief can gain access:

    a. Network attack: The hacker uses infrastructure, system and application weaknesses to infiltrate an organization’s network.

    b. Social attack: The hacker tricks or baits employees into opening an email, clicking a link or an attachment that provides access to the company’s network, often by hacking the employee’s own computer for login credentials.

  3. Exfiltration. Once the hacker has access to a company network, private customer data and/or proprietary company information is extracted.

10 Largest Data Breaches

(as of December 2018)

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Type of Information Stolen

Targets vary based on the type of information hackers seek. In addition to customer data from businesses, breaches have occurred at medical/health care companies, government and military installations, banking/credit/financial organizations and educational institutions.

It’s remarkable how many different types of personal information that, in the hands of a fraudster, can be damaging to any one person — particularly with regard to finances. Even more concerning is the fact consumers have so freely provided this information to hundreds of companies and institutions while trusting the private data will be kept secure and confidential.

Here’s a sample of the most potentially damaging information consumers routinely give out or store on computers and cellphones:

  • Full legal name

  • Mailing and/or physical address

  • Telephone number

  • Email address n Date of birth

  • Social Security number

  • Driver’s license number

  • Member identification numbers

  • Financial account numbers

  • Insurance policy numbers

  • Personal medical information

  • Website passwords n Passport number

  • Personal photos and videos

Cyberthieves can use this data to duplicate credit cards, steal a person’s identity, make fraudulent charges, siphon money from accounts and even blackmail victims. Computer hackers don’t even need to commit subsequent frauds. They can sell consumer data individually or in bulk on the Dark Web, explained below.

What Happens To Stolen Data

To fully appreciate what can happen to stolen data, it’s important to understand the three basic layers of the internet.

  1. Surface Web — This is all of the accessible data we can reach by search engines such as Google and Bing. Plug in a search for your home address, and you may get a Google Map of its location and various real estate websites that provide a market value of your home. However, you won’t find information about how much you paid in property taxes on your home last year.

  2. Deep Web — This is information that is not organized, catalogued and searchable by a search engine. However, we can uncover it by visiting specific websites. Visit your local tax appraiser’s website, and you may be able to conduct a search for your property to find out how much you paid in property taxes.

  3. Dark Web — This is the hidden part of the internet that is not accessible by conventional means. People who use the Dark Web must download a different type of software to access websites with the .onion extension. Located on this layer of the web are specific marketplaces that buy unlawfully obtained information as well as other illicit goods and services. The Dark Web also provides communication vehicles for people who require complete secure and untraceable means, such as journalists and whistleblowers and citizens who live in oppressive regimes.

The Dark Web features a wide range of black-market websites and discussion forums, where stolen data is packaged, processed and sold in volume quantities — usually paid for in untraceable currencies such as bitcoin. One security firm estimates more than 24 billion credentials have been shared over the Dark Web.

The following are statistics that give you an idea of how stolen data is sold and used:

  • Hackers pair stolen data with personal photos to create fake IDs.

  • A comprehensive file for one individual — called a “fullz” — may include a victim’s date of birth, Social Security number, telephone number, driver’s license number and banking information. One fullz sells for about $100.

  • Data that offers access to at least $15,000 in a bank account sells for about $1,000.

  • SIM hijacking is when a criminal uses stolen data to convince a cellphone carrier they lost their phone and need a new SIM card. The new SIM card provides access to the victim’s phone number, which can be used to reset online passwords and drain financial accounts.

  • Login information for specific company email addresses sells for $400 to $500.

International Laws

Plenty of countries passed laws instructing how companies are to use and protect consumer data. The European Union, for example, enforces rules under the General Data Protection Regulation. Companies are required to communicate all the ways they plan to use collected data and must actively seek consent from customers to do so. The regulation also enables customers to formally request removal of their data, and organizations are required to inform users of any security breach within three days, with substantial fines for noncompliance.

The United States has yet to pass laws detailing how user data must be handled. There is a quagmire of industry-specific rules and regulations, such as those that apply to medical data, financial data or data related to minors. While some rules may limit what data an organization is permitted to gather and how it must be stored and accessed, there is no comprehensive set of rules and ramifications in place.

For example, a website may be required to publish a privacy policy, but even those commonly state the site shares collected consumer data with third parties. The requirement is simply to publish a policy concerning privacy; not that data is kept private.

“So much stolen data is available on the Dark Web, people shouldn’t worry whether their information has been swiped. Every American person should assume all of their data is out there.”

- Elvis Chan, FBI

Final Thoughts

If you wonder who on earth would actually bother to hack into your specific computer, the number is probably quite low. That’s because hackers seldom target one individual. They infiltrate large companies with sophisticated network security because they want to steal volumes of confidential data in one fell swoop.

Unfortunately, given the degree we share information like credit card numbers on a daily basis, it’s very likely that each of us will one day have our data breached and sold. Not everyone who has their private data pilfered ends up being impacted, but it still pays to protect yourself.

The following are some tips to help you prevent and/or respond proactively to a breach.

  • Contact your bank(s), including credit card issuers, if you’ve been breached. See if you can set up alerts for charges. Verify your current charges and change PIN codes.

  • Don’t click on suspicious-looking links or download files from unsolicited sources. This is especially true with a work email.

  • If you’ve been notified of a breach, contact the company and ask them to pay for you to enroll in a fraud victim assistance program.

  • Use two-factor authentication whenever it is offered, which typically involves receiving a code via text to input when you log into a website.

  • Create complex passwords, and use a password manager app to keep track of them.

  • Register for an account with the Internal Revenue Service and Social Security Administration. If you’re already registered, it’s more difficult for someone else to try to do so in your name.

  • Look into using a free credit freeze that you can turn on and off as necessary.



The Bureau of Labor Statistics (BLS) calculates the unemployment rate by dividing the number of people working by the number of people unemployed. Not everyone outside the working world is classified as “unemployed,” just those without a job who have been actively searching in the past four weeks.

That removes many groups from the equation, such as stay-home parents who have cursory thoughts about getting a job or those who searched for work before giving up a month ago. It also excludes people who quit their job to take a month (or longer) off work. For this reason, there is some debate about whether the “real” unemployment rate should be much higher.

The rate is updated by the BLS on the first Friday of each month, and it’s generally considered more meaningful to compare it to the same month from the previous year than monitoring differences month by month. That’s because seasonal factors impact employment levels, such as students working in the summer, or the holiday retail rush.

Unemployment Rates: 1980-2018

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Women in the Working World

The labor force participation rate is defined as the working-age population (16 and older) who are employed or actively looking for work. When broken down by demographics, this metric doesn’t instill the same level of optimism as the graph above.

For example, 77 percent of U.S. women were employed in 1997, but that percentage had dropped to 75 percent in 2017. The numbers continue to rise in other industrialized nations, like Canada, where 83 percent of women work.

Researchers concluded one reason women tend to leave the workforce is because the U.S. doesn’t require the generous parental leave policies seen in other countries. In addition to longer maternity leaves, some places incentivize women to return to their jobs by providing a source of income replacement, protecting their income level and allowing benefits to accrue during the absence.

One study determined the United States’ GDP would rise $2.1 trillion by 2025 if every state made the same improvement in gender parity as the top state did over the past decade.

Wages Not Keeping Pace

While employment is up, wages are still tepid relative to historical standards. According to Pew Research, today’s average wage adjusted for inflation has no more purchasing power than it did in 1978, and employees with the highest wage increases are in the upper echelon of the pay scale.

Despite the low inflation we’ve enjoyed for several years, wages are not keeping pace with the real costs of living. Housing prices have increased exponentially since the real estate market’s post-recession recovery, and the costs of health care, college tuition, food and transportation are all rising faster than worker income.

Unemployment’s Impact on the Market

Although unemployment levels are considered a measuring stick for the country’s economic state, they’re a “lagging indicator” because employers tend to procrastinate laying off workers when the economy begins to decline and delay new hiring when it starts to expand. In other words, it’s more of a confirmation that a recession is already underway or has entered recovery.

The Federal Reserve is concerned the tight job market may eventually lead to higher inflation. As of October 2018, there were 1 million more job openings nationwide than the number of unemployed workers.

A low unemployment rate is generally good news, but it does put pressure on the Federal Reserve to raise interest rates. With more people employed, consumer spending increases. This higher demand tends to reduce supplies, which can increase the prices of goods and generate higher inflation.

When setting monetary policy, the Fed’s objective is to maximize employment and keep inflation in check. When it raises rates, it costs companies more to borrow money for expansion and eventually impacts stock prices. Thus, there is a subsequent impact on stock market performance.

A study analyzing every month dating back to 1948 showed the 20 percent of months with the lowest unemployment rate were actually followed up with the lowest average returns in the S&P 500. Conversely, the 20 percent of months with the highest unemployment rates led to the highest average stock market returns. A sustained high unemployment rate usually prompts the Fed to take action to stimulate the economy.

“The bull market on Wall Street is vulnerable for a most unlikely reason: U.S. unemployment is particularly low.”

Final Thoughts

This is a classic good news/bad news scenario. Low unemployment and low inflation coupled with bull market performance can last only so long, and we may be headed toward the end of this positive economic cycle. This is an excellent time to review both your investment portfolio and your entire financial picture to evaluate if you are well-positioned to weather changes on the horizon.

As always, it’s a good idea to consult with your financial advisor before making any major adjustments to help ensure your strategy is aligned with your personal objectives and circumstances.



The result of the 2016 referendum was so unexpected that then-Prime Minister David Cameron opted to resign. His replacement, Theresa May, has yet to successfully pass a plan through Parliament that will help the country move forward with its newfound independence.

The uncertainty surrounding the split has been considerably disruptive — for the U.K. government, for businesses, for British citizens and immigrant residents. The country’s economy has suffered immensely in terms of lost investment and global influence. In less than three years, Great Britain has slipped from one of the fastest-growing G7 economies to one of the slowest.

Key Brexit Dates

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The country now faces three possible options moving forward:

  • A “soft” exit would keep key customs agreements intact and reduce the overall negative economic impact.

  • A “hard” exit would keep the U.K. “half and half” in the EU with a renegotiated trade deal.

  • A “no deal” Brexit means when Britain withdraws from the EU, it will have no trade or regulatory agreements. This option would place the greatest strain on Britain’s financial sector and stock market, disrupting contracts, international financial flows and deteriorate confidence in the global economy.

Financial Sector

If Britain works out trade agreements with EU countries by the March transition deadline (or conducts a second referendum vote resulting in Great Britain remaining a part of the EU), the continuity would be positive for global stock markets.

While leaving the EU without a transition plan would generate some volatility, there are actually some positive factors that may help mitigate the damage. First of all, the U.K. stock market is dominated by multinational corporations. Since approximately 70 percent of these companies receive their revenues from abroad, they are somewhat insulated from the worst impact of a market decline. Even if the British pound suffers a further decline in value, foreign-earned revenues will prove move valuable in the home currency. Second, London is largely considered the financial hub of the world, and almost 20 percent of the British stock market is comprised of financial securities.

While some banks have proactively initiated plans to expand branch operations in other major European cities, London’s widespread dominance will help cushion the impact of these moves. To date, JPMorgan, Goldman Sachs, Citigroup and Morgan Stanley have announced they will make their offices in Frankfurt, Germany, their mainstay hub in the EU. Bank of America/Merrill Lynch selected Paris as its EU hub, and HSBC is moving a handful of its subsidiaries and branches from London to France, but says it has no plans to move its headquarters out of London. Most bank moves are largely being made to accommodate EU customers, while London offices will remain in place for now.

Assuming negotiations improve as the transition date approaches, the markets could respond in the following ways:

  • If the value of the pound increases, this will likely drive down global large caps while supporting domestic mid caps.

  • The U.K. continues to have the highest dividend yield among the world's largest markets.

  • A favorable trade agreement could improve European stocks prices by reducing their equity risk premium and attract more investment capital.

  • Note that while the U.K. lost about $8 billion in equity outflows over the past year, the U.S., Japanese and emerging-market stocks have benefitted with increased inflows. As such, U.K. stocks look cheap in comparison and would become extremely attractive to foreign investors should Britain pull out of the Brexit scenario with a positive outcome.


One reason the stock market is impacted by the ongoing uncertainty is British companies have the difficult task of trying to plan for the future. The lack of a three- to five-year spending and growth strategy has handicapped investments and reduced capital lending. Ongoing trade disputes make it difficult to plan for tariff and trade expenses, not just with European countries, but with the U.S. and other countries across the globe.

According to a midyear forecast by the Bank of England, GDP was expected to land at 1.4 percent in 2018 (down from 1.7 percent in 2017), with a pickup to 1.8 percent in 2019 — assuming a smooth exit from the EU.

Trade Agreements

In the past, American investment in the U.K. — valued at £487 billion in 2015 — has been largely predicated on the country’s EU membership and access to those countries as a single market. When Britain leaves the EU, expect that to change going forward.

While Britain would forge a trade deal directly with the United States, it will clearly be fraught with limitations that negatively impact the U.K. more than the U.S. With the Trump administration bearing down on all of its global trade agreements, Prime Minister May is already in a weak negotiating position, and loss of EU leverage does not bode well for the standalone nation.

The EU will likely remain the largest, wealthiest and most important foreign market to U.S. companies even without Great Britain. As such, the U.S. will benefit more from an aggressive trade agreement with the remaining EU, a prospect that has been met with some trepidation by EU leaders.

Brexit will also negatively impact U.S. businesses, at least initially, because Britain has traditionally been the principal gateway to Europe. In addition to language and cultural traditions familiar to the U.S., London serves as a geographical first air travel stop as well as guide for European public policy and business issues involving intelligence and security, trade, transportation, data connectivity and financial services.

“We’re concerned that a hard Brexit would have an immediate and significant impact on the global financial system, including U.S. banks, which account for between 40 to 60 percent of activity in the global derivatives markets.”

- J. Christopher Giancarlo, chairman of the U.S. Commodity Futures Trading Commission

Final Thoughts

Despite problems associated with Great Britain’s exit from the European Union, this does appear to be the course set for this spring. While some political leaders have called for a second referendum to let voters decide if leaving is still the right course, Prime Minister May indicated she won’t call for a second vote — as it is up to the government to honor the first vote regardless of the complexity of the ensuing process.

May has a draft agreement scheduled to be voted on by Parliament in January. This bridge agreement maintains the U.K. should remain part of EU's single market, subject to its laws and regulations, until the end of 2020.



The World Bank asserts that China manufactured the fastest sustained expansion by a major economy in history. Over nearly four decades, from 1979 to 2017, China’s real gross domestic product (GDP) grew at an average of 9.5 percent a year.

Presently, the Congressional Research Service describes China as:

  • The world’s largest economy (on a purchasing power parity basis)

  • The world’s largest manufacturer

  • The world’s largest merchandise trader

  • The world’s largest holder of foreign exchange reserves

  • The United States’ largest merchandise trading partner

  • The United States’ biggest source of imports

  • The third-largest U.S. export market

  • The largest foreign holder of U.S. Treasury securities

However, one of the drawbacks of a fast-maturing economy is that kind of growth is unsustainable. It’s comparable to how relatively quickly a child grows into a young adult, yet once fully matured, his or her growth is naturally curbed.

Hence, between 2007 and 2017, China’s growth rate slowed from 14.2 percent to 6.9 percent. The International Monetary Fund (IMF) projects this pace will fall ever further — to 5.8 percent by 2022.

Economic Stimulus

Its large-scale capital investment and rapid productivity growth are two reasons why China fared relatively well during the global recession. Another reason is because the government and banking system elected to use a different approach to drive economic stimulus.

The United States, Europe and other developed nations opted to use quantitative easing (QE) to stimulate their economies. QE is the practice of purchasing government securities and other securities in the market in order to increase the money supply and lower interest rates for banks to make loans and consumers to increase spending.

China, on the other hand, elected to invest nearly $600 billion in infrastructure projects and loosened monetary policies to increase bank lending. In fact, this strategy not only helped buttress China’s growth, but it also helped stabilize the overall global economy. However, while this action kept China’s relatively thriving economy afloat, it did not jumpstart a phase of growth as stimulus programs did for other economies. China’s stimulus package created asset bubbles and, over the first three quarters of 2018, the country’s deficit grew to $12.8 billion, down from a surplus of $102.6 billion during the same period the prior year.

Relative to the past, China’s growth pace is still waning. While other economies have tapered off or terminated their stimulus efforts, China continues to use many of the same strategies to drive growth. In recent months, the government introduced tax cuts and issued new bonds to fund more infrastructure projects. The country’s central bank, the People’s Bank of China (PBOC), also pumped $74 billion into the banking system.

The China Effect

China’s large population and weak currency trend created a perfect storm for manufacturing. Multinational corporations throughout the world, including those domiciled in the U.S., transferred much of their manufacturing operations to China to take advantage of cheaper raw materials and lower wages.

As a result, China has emerged as the world’s largest manufacturer (overtaking Japan) with gross valued-added manufacturing equal to 27.7 percent of its GDP. The accompanying chart illustrates its prolific growth in this area since 2006.

Gross Value-Added Manufacturing in China, the U.S. & Japan: 2006 and 2015 ($ billions)

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Trump Trade Deal

A weak currency is one that has decreased in value relative to other currencies. The more in demand it is, the higher the price. In China, the value of the renminbi (RMB), which also is referred to as the yuan (CNY), is assigned a daily exchange rate by China’s central bank based on the prices of other currencies. RMB trades against the U.S. dollar in a range that fluctuates by as much as 2 percent above or below that level.

China’s currency has been a point of contention with the Trump Administration. Ever since the campaign trail, candidate Donald Trump promised to label China as a currency manipulator, as have other U.S. presidents before him. This move, which could potentially trigger punitive actions, has not occurred since the early 1990s. Even as recently as the U.S. Treasury Department’s 2018 October internal report on foreign exchange rate practices, the U.S. has not named China as a currency manipulator — though it remains on the list to be closely monitored.

Presently, the dollar is very strong versus many other global currencies, but the yuan weakness is a particular irritant to the Trump Administration. That’s because it makes Chinese exports less expensive, which helps mitigate the impact of U.S. tariffs. The less drag Trump’s tariffs have on the Chinese economy, the less power the U.S. has to negotiate a more advantageous trade agreement. In fact, some analysts predict that future trade proceedings may well rest with China’s willingness to prop up the value of the RMB.

“With trade issues straining relations, there have been rising concerns that China is intentionally weakening its currency to deflect the impact of tariffs on its goods.”

Final Thoughts

The objective of government stimulus is to increase spending as a means to kickstart economic growth. To date, China has opted to take a different approach than other major economies, but then again, its accelerated path of development, manufacturing, trading and foreign investment is significantly different than other growth markets.

As we move forward, be aware that all countries are expecting the pace of economic growth to slow down relative to the past six or seven years. If you are concerned about your investments and what this might mean for your financial return opportunities, speak with your financial advisor.



The year started out on a high, as tax cuts were expected to fuel corporate capital spending and job expansion. While corporate profits increased, so did government spending – a bane that continues to increase the federal deficit.

As we turned the corner in autumn, October 2018 was much like many Octobers of the past. Stocks experienced a sharp drop, spurred by selloffs in the technology and energy sectors. Crude oil plunged precipitously. The Dow Jones Industrial Average (DJIA) experienced its biggest monthly drop since October 2008, and the S&P 500 marked its sharpest monthly descent since September 2011. During November, the volatility continued with stocks further losing ground.

The question now becomes: Is the United States in such an unsettled state that another economic crisis is now in our crosshairs?

Warning Signs

Most financial downturns are precipitated by warning signs. An economic crisis can be sparked by any one factor or a series of factors that contribute to a downfall. For example, the 2008 crisis was triggered by what has traditionally been considered a reliable, long-term growth asset: residential housing. However, the subprime mortgage debacle led to a variety of domino effects, from bank failures to corporate cutbacks to home foreclosures when residents could no longer pay their mortgages.

Historically, U.S. economic crises have been sparked by stock market crashes, spikes in inflation or unemployment, or a series of bank failures, which usually result in an economic contraction. To examine if we are currently poised for another recession, let’s review some of the current factors.

Reduced Bank Capital Requirements

Last May, President Trump signed bipartisan legislation that loosened parts of the Dodd-Frank Act, specifically for U.S. banks with less than $700 billion in assets. The move relieved smaller financial institutions from stricter federal oversight, leaving the capital requirements passed after the 2008 crisis for larger banks intact. However, a recent study from the Department of the Treasury reported that the U.S. financial system still would be in significant peril if one or more large banks fail.

Soaring Debt

As is human nature, once jobs returned and consumers got back on sounder financial footing, they began to spend money again — in many cases, money they didn’t have. Hence, over the last 10 years, credit card debt, subprime auto loans, loans that finance corporate leveraged buyouts, and general corporate debt have been on the rise. Worse yet, the new tax law and spending subsidies have ballooned the federal budget deficit.

A new component to this problem is massive student loan debt, now logged at $1.3 trillion. Much like what happened in the past with subprime mortgages, students have been awarded college education loans that they are unable to repay given the job market and stagnant wages upon graduation. In short, student loans are easy to get but hard to pay off.

The fallout has long-term consequences. Not only do young adults start out life under the weight of crushing debt, but many who would otherwise start their own businesses are less inclined or simply incapable of doing so.

The Federal Reserve

The Federal Reserve recently issued its inaugural financial stability report. In it, the Fed appears to be most concerned with corporate debt, which, relative to GDP, is historically high and marked by increased lending to higher-risk borrowers.

Despite these findings, the Fed recently voted on a proposal to further loosen liquid capital requirements among mid-sized banks. Specifically, firms in the $100 billion to $250 billion asset range would be subjected to stress-test requirements every two years instead of annually. They also would be exempt from holding a liquidity coverage ratio of high-grade assets that easily convert to cash.

The new oversight rules would divide U.S. banks into four tiers:

  • Globally systemically important banks (GSIB) — subject to the most strenuous stress-testing and capital holding requirements because they are considered “too big to fail”

  • Banks with more than $700 billion in assets

  • Banks with between $250 billion and $700 billion in assets

  • Banks with between $100 billion and $250 billion in assets

    The new Fed stance on stress-testing and capital requirements implies a higher degree of confidence in today’s financial system. The committee has further indicated:

  • The increase in household debt is generally aligned with the rise in household income

  • The nation’s largest banks are strongly capitalized with a high level of liquid assets

  • Leverage among broker-dealers is currently below pre-crisis levels

  • The nation’s insurers have strengthened their financial position

The Fed has indicated it is still on target to gradually increase interest rates in an effort to curb exuberant growth in exchange for long-term stability. However, if there is fear of a pending financial crisis, the alarm is not being set off by the Fed.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth.”

— Jerome Powell, Chairman of the Federal Reserve

Way to Prepare

The overall assessment appears to be that no one is pushing the panic button just yet. However, retirees and near-retirees tend to have a different set of concerns than younger investors. In short, they don’t have time to make up for any missteps.

Fortunately, much of the advice given to help prepare for a financial crisis is the same whether the economy is strong or weak. In fact, it is generally easier to deploy such recommendations during times of economic strength, so now would be a good time to get your financial ducks in a row.

The following are some tips worth considering:

  • Pay off all credit card debt.

  • Have up to three to six months’ worth of living expenses saved in a liquid account to help cushion the prospect of losing your job.

  • Consult with your advisor to see if your current plan is “stress-tested” to meet your specific financial needs, both now and in the future. This includes a diversified portfolio with a strategic asset allocation.

  • Remember to rebalance your allocation periodically to ensure that gains or losses do not tilt your portfolio to be too risky or too conservative for your long-term goals

  • Work with a financial advisor you trust for more preparations tailored to your unique situation.

Final Thoughts

The near-decade-long bull market has increased U.S. household wealth to historic highs. Fortunately, even with recent market turbulence, there appears to be a significant margin of cushion for many households that have diligently paid off debt, increased savings and resumed investments in the securities markets.

Continued vigilance and monitoring is perhaps the best way to pick up on warning signs and weather the next downturn, whether it comes in a year or further in the future.



Although women have made great strides in the workplace and politically, they still face economic challenges. While women-owned businesses account for nearly 40 percent of all privately held firms in the U.S., women hold only 10 percent of top executive positions (CEO, CFO and so on) in companies that compose the S&P 1500 stock index.

Starting in 2019, at least 128 women — a record number — will serve in Congress, including 23 senators and more than 100 in the House of Representatives. Their ranks represent only 23 percent of Congress’ members, despite the fact that women account for more than half (51 percent) of the U.S. population.

These statistics represent some of the accomplishments women have fought hard to earn as well as the challenges they still face as a demographic. However, it’s really at the individual level where the rubber meets the road, especially when it comes to managing money.

Income Challenges

Although income equality has improved in the last few years, women still earn an average of 20 percent less than men. Other than just not having as much disposable income as men, the detriment of lower earnings has a long-term impact. It means that women are less able to save and invest money for the future, and their Social Security benefits will be lower as well.

As they age, women also tend to see their income drop at a faster rate than men.

Age-Based Income Reduction Trend: Women vs. Men

(Average weekly earnings of full-time workers by age)

Lifestyle Challenges

Some of these income differentials are due to the fact that women frequently leave the workforce for extended periods of time to raise children. And while moms in the workplace often are viewed as having multiple priorities that can distract them from work, the perception of a family man tends to be more positive because he is viewed as steady and reliable — because he has a family to support.

“Some employers may view motherhood as a ‘signal of lower levels of commitment and professional competence.’ Working fathers, on the other hand, may be viewed as having ‘increased work commitment and stability.’ ”

Lifestyle Advantages

It all seems to add up to a negative scenario for women. However, it’s important to recognize the extraordinary advantages that women can rely on to help improve their financial independence.

First of all, women tend to be in charge of their household budget. This means they may control the purse strings and be in a position to know where and how to cut costs. In fact, when it comes to saving money, women consistently save a higher percentage of their income than men — at every salary level.

Third, women are less inclined to chase performance. Instead, they are more lifestyle oriented, focused on specific goals that their investment plan is designed to support.

Fourth, women tend to be more conservative when it comes to investing, but that’s not necessarily a bad thing. It’s not that they don’t want to invest for growth, it’s that they are more preservation minded; they prefer lower-risk, conservative growth. Think of it in terms of the fable about the hare and the tortoise, only women have an even greater advantage in the the race because it is actually longer for them. Because women tend to live longer than men, they have a longer investment horizon for assets to accumulate. They can invest aggressively and endure a higher risk of roller coaster-like returns, or slow and steady for the long game.

And despite this penchant for low-risk investing, research from Fidelity reveals that, on average, women’s investments have performed better than men’s by 0.4 percent, which can have a significant impact over time.

Final Thoughts

Women’s confidence as investors has not kept pace with their business acumen and influence despite their growing impact on the economy.11 However, they do control substantial assets, and the way they inherently approach financial matters can provide a strong, long-term advantage to money management.

By acknowledging their own growing economic power and recognizing their distinct financial planning needs, women are poised to achieve a high level of investment literacy and competency in the pursuit of financial independence.



The economic expansion over the past nine years is the second longest the U.S. has ever experienced. If it continues past July 2019, it will officially become the longest in U.S. history. However, many experts are starting to see warning signs of a slowdown.

Specifically, the real estate housing market appears to be at or near its peak. According to the National Association of Realtors, prices have increased exponentially in recent years due to low supply. It appears that lessons from the last recession have stuck with many homeowners, who appreciate the fact that they simply have a home they can afford and are less interested in trading up.

There are other factors to consider. A recent survey of real estate experts revealed that if the economy does experience a setback, it will likely be due to an increase in interest rates set by the Federal Reserve.

Over the last 10 years, interest rates have hovered at or just slightly above historic lows. The Fed typically increases interest rates when growth and employment levels trigger higher inflation. By raising rates, money becomes more expensive to borrow and consumption is reduced, tamping down rising prices. This year, in response the country’s continued economic growth, the Fed has raised interest rates three times and is expected to make one more hike by the end of the year.

“A combination of high home values and rising interest rates has sparked concerns that the housing market may be due for a slowdown.”

Mortgage Rates

The Federal Reserve began raising short-term interest rates in 2015. Despite this defensive move, long-term rates remained surprising low. It has been primarily during the last year that rates have increased significantly, currently posting a full percentage point higher than a year ago, at around 5 percent for a 30-year mortgage.

Higher mortgage rates may discourage new and younger homebuyers, which is likely to stall overheated home prices and leave more homes on the market longer. Overall, home sales this year are expected to be lower than 2017 numbers.

A lot of this may sound familiar, as if recent history is starting to repeat itself. We are only 10 years out from the last financial crisis, and wounds still run deep. In fact, mortgage values of more than 1 million American homes are still under water, and there are foreclosures from that period yet to be settled.

Investment Opportunities

Investors have several options even in the wake of a declining real estate market. Those with available capital can purchase rental properties. Rents have been on the rise for years, to the point of making home ownership a more viable option. Rising interest rates may keep more potential buyers out of the market, offering up lucrative rental opportunities.

Owning rental properties is a viable long-term investment that generally poses less volatility than stocks. However, they have less liquidity, and building equity can take many years. It’s important to invest in properties that generate enough income to cover taxes, insurance and maintenance so that investors aren’t forced to pay those expenses out-of-pocket.

Investors can step back a bit further and invest in real estate investment trusts (REITS). These are fixed-income investments that invest in residential or commercial properties, or mortgage-backed securities. REITs are publicly traded, so they are as liquid as stocks and bonds. Note that their value is tied to interest rates, so income may fall when rates increase.

Relaxed Lending Standards

Much of the rise and fall of the real estate market is tied to bank lending criteria. When standards are tight, only well-qualified borrowers can get capital, so there are fewer buyers in the market. During periods when lending criteria is less rigid, more people are able to buy homes. Unfortunately, it is during these more lax periods that more homeowners default on mortgage loans and foreclosures increase.

It’s worth noting that lending criteria became more stringent in the years following the Great Recession. However, in the summer of 2017, high home prices and fewer homebuyers led Fannie Mae to once again relax its lending standards for prime loans. This enabled homebuyers with higher debt and lower credit scores to obtain loans without requiring a large down payment or excess cash reserves, which significantly increased the number of approved mortgages. There is also a trend to provide mortgages to people with credit scores as low as 500. While featuring higher interest rates and higher down payments, these “nonprime” loans may be offered to borrowers with recent negative credit events, such as a foreclosure or bankruptcy.

These “covenant lite” loans are frequently securitized and packaged for sale to investors in the corporate bond market. Today, nearly 80 percent of newly issued loans are covenant lite, compared to fewer than 25 percent in 2006 and 2007. Many of America’s employees are already unwittingly invested in these higher risk corporate bonds through their employer pension funds.

Final Thoughts

There are several ways to view a real estate investment. If you’re a homeowner, rising values mean you build more equity and can sell your home for a higher price. However, if you don’t sell, higher values could trigger higher property taxes. After the last real estate decline, many experts encouraged home buyers to view their homes less as financial investments and more as components of their lifestyles. If you stay put, you are likely to build equity over time and, since you have to live somewhere, your home serves a dual purpose.

If you’re interested in buying and selling homes to accumulate assets, this strategy is reliant on timing within the real estate market and possibly contractor skills. Depending on your experience and savvy, flipping can be a high-risk investment strategy.

Then there are packaged real estate investments managed by professional money managers. It’s important to recognize that even the pros experience significant losses, because no one can actually control the direction of the markets.

If you’re looking to participate in the real estate market, consult with an experienced advisor who understands both the options available and your financial situation to help you choose the best scenario for your circumstances.



A correction is technically defined as when the market declines by 10 percent from a recent peak. It’s worth noting that corrections are a very normal part of the market life cycle. There has been at least one correction in each bull market of the last 40 years and a correction can occur in any asset class.

Investors should understand that corrections are unavoidable and to be expected. In a normal market, it is not unusual to experience at least one correction a year. However, recognize that the market hasn’t been very normal recently. There hasn’t been a correction in the S&P 500 index since early 2016. Prior to that, there had been nine market corrections between 2010 and 2015.

Whenever the market takes a precipitous drop, we often see emotional reactions such as fear, confusion, panic and loss of trust. Investors begin to second-guess their advisors. They make rash decisions. They might ask themselves:

  • “Do I hold the right investments?”

  • “Should I even be in the stock market at all?”

  • “Should I just convert my entire portfolio to gold and bury it in the backyard?”

Emotional Rollercoaster

Emotional effects tend to occur when people get fearful or greedy. Investors can even accelerate the movement of the market based on one of those two emotions. However, there may not be anything inherently wrong with the market; the crowd is just acting based on feelings. It’s important to be able to distinguish between how our investments are performing relative to our goals and how we feel about the market environment.

These are factors that generally cannot be controlled by investors or the entities in which they invest. That’s why it’s important to be guided by personal goals rather than chase performance. It’s important to be able to distinguish between what is a temporary setback and what is a market fundamental.

External Factors

Securities markets also may be impacted by external factors. These can include rising oil prices, a change in the direction of interest rates, political fallout, bad news affecting a major market player or industry, a global crisis or even a severe natural disaster.

These are factors that generally cannot be controlled by investors or the entities in which they invest. That’s why it’s important to be guided by personal goals rather than chase performance. It’s important to be able to distinguish between what is a temporary setback and what is a market fundamental.

Market Fundamentals

Corrections can occur when there are market fundamentals at play that affect the value of underlying investments. A classic example is the dot-com bubble of the early 2000s. At the time, investors began putting money into all types of tech companies — large, medium, small; growth, value and even start-up. They were seduced by the idea that tech companies were “the next big thing” and did not pay close attention to that market sector’s fundamentals.

Many of these venture-capital-funded entities increased exponentially in value, peaking at nearly 80 times their earnings. At the time, that was more than three times the valuation of the rest of the equity market.

An individual company’s fundamentals are typically measured by components such as its balance sheet, income statement, overall management and cash flow. Many of the tech companies of this period did not have the company fundamentals to support this level of valuation. Eventually, when investors realized this fundamental flaw in the market, they ran for the exit, which caused the market to collapse.

What Action Should You Take?

One of the first things investors tend to want to do after a market correction is take action. Sometimes this is appropriate; other times it may not be. The first task is to determine the cause of the downturn. Today, the economy is demonstrating many favorable characteristics, such as low unemployment and benign inflation.

Market fundamentals are also positive. Since the last recession, companies have reduced debt, increased profits and improved their overall balance sheets. These are all clues that indicate the market itself is in good shape.

Therefore, a downturn could result from either disruptive news or simply the natural course of the market life cycle. Neither of these events is likely to be long term. As such, investors should check their emotions at the door and review their portfolio from a fundamental point of view.

Consider Your Risk

A diversified portfolio balances financial vehicles that carry more risk, like stocks, with others that carry less risk, such as annuities. The question is whether you should adjust your asset allocation to reduce your risk of loss.

Consider that an investor who is behind in his savings efforts may be willing to trade higher risks for greater rewards. On the other hand, an investor who has a more balanced allocation, such as 50 percent in stocks and the rest in more conservative assets, will likely experience less loss due to market volatility, but he may not be well positioned to meet his longer-term financial goals.

Stick to Your Plan

This is where working with a financial advisor is key. Having assessed an investor’s objectives, timeline and tolerance for risk, an advisor should recommend a plan designed to meet those goals factoring in a variety of market conditions. It’s safe to assume the market will always be changing, but an investor’s plan for his or her money usually does not change very often, if at all. If the original asset allocation plan is sound, and a market correction is based on factors that are temporary or cyclical, sticking to the plan is often the best course of action.

Portfolio Tips: Discuss With Your Advisor

In the event of a market downturn, there are steps you can take to help ride out the storm — whether you’re caught in the middle of it or anticipate it on the horizon.

  • To keep retirement savings on track, continue to invest automatically, even during periods of declining prices

  • Remember, investing when prices drop means new contributions will buy more shares.

  • If you’re not comfortable continuing to invest when prices are declining, consider using excess cash to pay down debt, as this will help reduce your liabilities while waiting for your assets to recover. Once they do, your overall net worth may well increase despite the market correction.

  • Consider whether to rebalance your portfolio once the market has recovered.

“I will tell you how to become rich… Be fearful when others are greedy. Be greedy when others are fearful.” - Warren Buffett

Final Thoughts

Much like other aspects of financial planning, getting through a market correction is largely about sticking to fundamentals.

Try to avoid letting a market correction stoke your emotions. In the history of the securities markets, corrections are considered both normal and inevitable. In fact, they offer an opportunity to capitalize on low-priced investments.



To build a diversified portfolio, it is key to combine investments whose historical returns have not moved in lockstep together. For example, when stocks outperform, different types of bonds may underperform, and vice versa. This strategy helps provide the opportunity for continued growth in some portion of the portfolio with the goal of offsetting declines among other assets. If everything works according to plan, the total portfolio is less likely to suffer significant loss.

Diversification has long been recognized as a risk-management tactic for retirement portfolios. In fact, the Employee Retirement Income Security Act of 1974 mandates that fiduciaries who manage retirement assets diversify plan investments in order to minimize the risk of extensive losses.

Here are three reasons it is a wise idea to have a diversified portfolio:

1. Prudent, Balanced Approach

Diversification helps provide a more balanced approach to investing. Too often, investors seek to chase performance when prices are on the rise and retreat to lower-risk investments during a market downturn. This latter strategy can cause a drain on long-term investment performance for many reasons, such as:

  • No one is consistently successful at market timing

  • Buying high and selling low

  • Trading costs

  • Tax liabilities

By diversifying across a mix of both higher and lower-risk securities, portfolio performance is generally more restrained from both the highs and lows of market swings and may provide more consistent returns.

A study conducted by Morningstar revealed that, over time, the average performance of an investor prone to buy and sell based on market conditions tended to trail that of a well-balanced buy-and-hold investor.

“Well-diversified portfolios minimize ‘variance drain’ which contributes to less risk (less volatility) and more gain.”

2. Recovery: Pure Math

A second reason to invest in a diversified portfolio is to reduce the recovery time after a market downturn. After all, the worse the losses, the longer it takes a portfolio to recover. This can be illustrated through a simple mathematical calculation.

The accompanying bar chart shows how bigger losses require bigger gains to recover. In contrast, a diversified portfolio is likely to lose less ground and thus need less outperformance or time to rebound. Looking at this strictly from a loss perspective:

  • A portfolio that has decreased in value by 5% will have to post a 5.2% gain to recover its original value

  • A portfolio that has decreased in value by 20% will have to post a 25% gain to recover

  • A portfolio that has decreased in value by 35% needs to achieve a 54% gain to recover

  • A portfolio that has decreased in value by 50% needs to achieve a 100% gain to recover

    Gains Needed to Recover from a Market Decline

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3. How You Reach Your Goals Matters

A third reason advisors frequently recommend diversifying as an investment strategy is that, from a psychological point of few, the pain people feel when losing money is typically more pronounced than the joy they feel with portfolio gains. Even people who are comfortable investing aggressively are bound to be aggrieved by losses. Therefore, diversification is not just an investment strategy; it’s a way to help investors control mood swings that may parallel the direction of the markets.

In short, a diversified investor may feel more confident about his or her long-term prospects for meeting financial goals. For some folks, it’s not just about meeting their investment objectives — but doing so with less market-induced stress.

Final Thoughts

While spreading out investments across a wide selection of financial products offers the benefits of diversification, recognize that this is not a one-time event. You should monitor the progress of all of your financial assets to help ensure they stay on track to meet your goals. Because market returns often throw a prescribed asset allocation strategy out of whack, you should maintain the careful mix of asset class percentages aligned with your tolerance for risk, and don’t be afraid to periodically rebalance your assets (sell out-performers) to retain your strategy.

Also, you will want to assess your diversification strategy across all of your investment accounts (e.g., 401(k), IRA or investment portfolio, etc.) to ensure that many of your holdings do not overlap — which can negate the benefits of diversifying. It is generally a good idea to work with a financial advisor to help you keep track of all of the moving parts in your financial portfolio.



It’s no secret that Google’s search function yields a wealth of information associated with nearly every facet of finance. A search with the words “financial planning” will reveal more than a billion items to explore. While investors can immerse themselves in this sea of information, they may find that practical wisdom is in short supply.

The unfortunate reality of this information overload is that it is very difficult for the average person to decipher good information from bad. There are no disclaimers or flashing warning signs on web pages to let you know whether the authors are truly knowledgeable about their subject matter. Just as there is “fake news” on many Facebook feeds, there is plenty of bad financial advice shared all over the Internet.

While the effort to educate oneself on all things finance and investment related is applaudable, be aware that such activities can be plagued by inaccurate information, inappropriate applications and downright pitfalls that can lead to the loss of wealth.

The Cost of Bad Advice

Investment advisors must pass certain exams and meet criteria for both industry certification and state licensing requirements. Moreover, it takes years of experience to become a well-rounded, well-informed advisor. It usually helps to have lived (and invested) through some market downturns to truly understand the relationship between risk and reward.

Even with education and experience, investment advisors — and investors who make financial decisions on their own — can make miscalculations that put assets at unnecessary risk. Many a portfolio has been reduced as the result of expensive investment and/or administrative fees as well as tax and estate planning blunders.

“You must first focus on the return of your capital, and only second concern yourself with the return on your capital.”

Due Diligence

First and foremost, even if you choose an investment advisor based on a personal referral, it’s important to conduct your own due diligence to ensure he or she is licensed and knowledgeable and does not have a “checkered past.” To investigate a prospective advisor, consider tapping the following resources:

Evaluate Your Investment Decisions

Once you are confident in the knowledge, experience and trustworthiness of your financial advisor, your job is not over. Even if you don’t have time to learn all aspects of investing, it’s a good idea to evaluate the recommendations and strategies you and your advisor develop for your portfolio.

To help perform this evaluation, ask yourself the following questions.

1. Will this investment help me achieve my personal and portfolio objectives?

At the end of the day, portfolio strategy for many people isn’t about return of investment but rather meeting personal goals. For some, that’s about achieving the lifestyle they want and continuing it throughout their lifetime. For others, it’s about leaving a legacy. Every person is different. That’s why one of the first things a financial advisor will do is ask questions about your family, your finances and your goals for the future. Once your investment strategy is established, revisit these goals to evaluate if your chosen path is likely to get you there, if the path is likely to be smooth or bumpy and if you’re comfortable with that level of risk.

2. Does this investment option make business sense?

If it sounds too good to be true, it often is. This is a particularly important question if you’re inclined to act on a “hot tip” — be it from your broker or your golf partner. At any point, a stock tip might be a good idea, but there are lots of screens through which you should evaluate that investment. For example:

  • Do the company fundamentals (e.g., earnings, valuation) support it?

  • Is the overall industry or sector strong, or is this one investment an anomaly?

  • Does the level of risk of this investment complement the rest of your portfolio?

  • What is the likelihood of this investment meeting its projected performance within the current market and/or economic environment?

3. Is this investment aligned with my risk profile and timeline for meeting my objectives?

A wealth manager may attempt to quantify an investment strategy through a complex series of measures, such as the efficient frontier or modern portfolio theory. But for the layperson, consider whether an investment will reduce your portfolio’s risk or potentially raise its return. Ideally, it will do one or both.

4. How might I lose money with this investment?

It’s important to identify, from the outset, all the major risks associated with a particular investment or strategy. These may include market risk, credit risk, interest rate risk, inflation risk, foreign currency risk, foreign market risk (e.g., lack of regulation; social, political or economic instability) and liquidity risk.

Also evaluate your personal circumstances by determining how much money you can afford to lose. One way to manage your risks is to diversify investments and/or include financial products that provide guaranteed income.

5. What is my exit strategy?

Buy and hold is a tried-and-true strategy, but it should be periodically reviewed. Company management and fundamentals change. Industries change. The economic environment and market conditions change. Investor goals change. Once you establish specific objectives for your portfolio, it’s important to monitor performance against periodic benchmarks to gauge whether those investments are meeting them.

An exit strategy can be a minimum distribution plan, reverse dollar cost averaging, annuitizing, the outright sale of assets or transferring/rolling over to more conservative holdings. How you exit may depend upon your investment strategy, but it’s a good idea to consider how you plan to tap your investments once you reach your goals.

Final Thoughts

Many folks have expertise and knowledge in their respective fields, as well as plenty of life experience. The same can be said for most investment advisors. Often the best way to create an investment strategy is to combine professional financial advice with our personal understanding of what’s at stake and good old common sense.

It’s your money. If an investment recommendation triggers red flags that make you uncomfortable, ask your advisor to consider other options. There is a vast and complex world of investment advice out there; more than a billion sources to explore. You should feel confident that your advisor understands not just your investment goals but also your comfort level with the risks you take with your money.

The more you learn, the more confident you will be about your investment decisions.



While health insurance covers expenses related to acute care, like a trip to the hospital, it does not cover the cost of assistance over a long period of time — such as the rest of your life. Longer term care must be paid for out of pocket unless you qualify for government benefits or purchase some form of long-term care insurance.

While fees vary based on location and other criteria, long-term care can be pricey. To give you a general idea of the cost, the following are national medians for various types of long-term care services, according to Genworth’s 2017 Cost of Care Survey.

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Long-term care insurance can help protect a household’s assets so that the care of one family member does not devastate a lifetime of savings and the financial future of other members. The following is an overview of some of the options available to help pay for long-term care.

Medicaid and Medicare

Until recently, Medicaid was the only government-sponsored plan that paid for long-term care. It requires that beneficiaries first spend down their own assets to no more than $2,000 in order to qualify for coverage. Medicaid provides coverage only at traditional nursing homes, and not every facility accepts Medicaid patients.

Medicare, on the other hand, may pay for up to 100 days in a skilled nursing facility per benefit period and the first 20 days are paid up to 100%. Day 21-100 required a co-payment. However, in March of this year, the Centers for Medicare and Medicaid Services (CMS) issued a final rule giving Medicare Advantage (MA) plans the option to pay for certain long-term care services starting in 2019. Coverage specifics will be decided by individual insurers, but they may include home aides to help with daily living activities, including dressing, eating and other personal care needs, as deemed medically appropriate by a licensed health care provider. Note that this new rule pertains only to MA plans, not original Medicare.

“Medicare Advantage beneficiaries will have more supplemental benefits, making it easier for them to lead healthier, more independent lives.”

– CMS Administrator Seema Verma

Veterans Benefits

Veterans who served at least 90 days in the military during a time of war may qualify for long-term care benefits from the Veterans Aid and Attendance program. This lesser-known VA benefit provides up to $1,830 per month for long-term care assistance to a qualifying veteran and up to $1,176 for a surviving spouse. Note that the veteran must meet specific income and asset limit requirements.

Qualifying veterans who do not need daily assistance but have a permanent disability that leaves them mostly shut in at home may qualify for the Housebound benefit. This is an additional stipend paid to veterans who receive a monthly pension.

Long-Term Care Insurance

Long-term care (LTC) insurance generally pays for daily assistance due to chronic illness, disability or conditions associated with aging. Coverage is issued either as an indemnity policy — a fixed sum paid regularly for any use — or as a reimbursement policy for payments made to a long-term care facility, up to contractual limits.

The criteria that determines when a policy-owner qualifies for LTC benefits is based on specific “activities of daily living” (ADLs). To qualify, the policy-owner must need help with at least two of the following ADLs:

  • Personal hygiene — bathing, grooming, oral, nail and hair care

  • Continence management — physical ability to properly use the bathroom

  • Dressing — select and wear the proper clothes for different occasions

  • Feeding — food preparation and the ability to feed oneself

  • Mobility — the ability to transfer from one position to another and walk independently

An LTC policy typically pays a fixed per diem for a nursing home, assisted living facility, home health care or some combination thereof. It may feature a waiting period before coverage kicks in (e.g., 90 days), and there is generally a limit to how long coverage lasts (e.g., three years).

Non-Traditional Insurance Options

Certain types of life insurance policies have evolved to include long-term care coverage options. LTC payouts may be available through a variety of plan models, such as:

  • Asset-based Long-Term Care: This type of insurance product combines a life insurance contract with a long-term care policy providing benefits for a long-term care need, and if not needed, then a death benefit will be paid out upon the insured's death.

  • Long-term-care rider: This may be added to a whole or universal life insurance policy for an additional fee and subject to separate underwriting. This coverage enables the policyholder to utilize the death benefit to help cover costs associated with long-term care should certain requirements be met.

  • Chronic Illness Rider: This coverage can be purchased as optional protection to provide additional coverage should a chronic/non-recoverable illness occur.

  • Terminal illness/Accelerated death benefits: These pay out a portion of the policy’s death if the policyholder is diagnosed with a terminal illness or cognitive impairment.

In all instances, the riders will reduce the death benefit, meaning that anything paid out for long-term care is deducted from the amount given to beneficiaries after the policyholder passes away. A rider for accelerated benefits generally adds five to 10 percent to the life insurance policy’s premium, although some insurers have begun to include this as a standard benefit. It is also important to note that most life insurance proceeds are paid out on an income tax-free basis. Please check individual carriers and policy for full details.

Annuity Options

Over the years, annuity contracts also have evolved to allow distributions to help with the expenses associated with long-term care, either from the cash account value or income account value benefits. Some may oer a provision referred to as a Long-Term Care Doubler or a Home Health Care Doubler. This feature permits the lifetime income benefit to be doubled and paid out for a limited time or for the duration of the long-term care stay.

Be aware that insurance policy guarantees are backed by the financial strength of the issuer. Life insurance and annuity contracts may include conditions and penalty fees, such as surrender charges, that can impact policy values. Also note that some insurance contracts may require medical underwriting for LTC benefits, possibly including but not limited to a health questionnaire and/or physical examination. To help stabilize prices, some insurers limit eligibility criteria to exclude people with multiple chronic health conditions or cognitive impairments.

Final Thoughts

The way we use a traditional long-term care insurance plan is similar to how we use auto insurance. You pay a premium and either use the coverage or not. If you don’t use it, that money is lost. If you do use it, you could save quite a bit of money.

Today, there are plans that combine insurance goals such as coverage for long-term care expenses, a steady stream of retirement income and/or a death benefit for heirs. Chances are good we’ll need one to all three benefits, so many people find there is less risk of paying for something you do not use. However, generally, the more benefits offered, the higher the cost, so it’s important to work with an experienced professional to select an affordable solution that meets your specific needs.



Congressional midterms tend to have lower voter turnout than presidential elections, but the current partisan nature of the electorate could have far-reaching repercussions, particularly in light of recent felony convictions of members of President Trump’s campaign and inner circle.

If Democrats take control of one of the lawmaking groups, the legislative branch will be divided, which puts things in a stalemate. Interestingly, this is generally good news for the investment markets. The markets hate uncertainty, and a stalemate helps ensure there will be no major legislation for the foreseeable future.

If Democrats take control of both sides of the legislature, it is likely significant changes could be made — including possible removal of the president and perhaps members of his Cabinet. Impeachment proceedings are likely to unsettle the market, at least temporarily. However, the first order of business is likely to be a restoration of many of the previous administration’s policies and an end to the current trade war. These are all known outcomes that are not likely to shake the investment markets significantly.

If the Republicans retain control of both houses in Congress, this will strengthen GOP resolve and likely lead to more changes in both social and economic policies moving forward. More tax cuts, a stronger stance on immigration and trade, and renewed confidence among the majority of Americans could propel the historically long bull market even further. However, these activities represent a significant departure from past administrations so, again, how the markets react to uncertainty remains uncertain.

“Although a Republican majority in Washington, D.C., historically has been accompanied by strong equity-market performance, a potential split in Congress is unlikely to derail the U.S. equity bull market (in our view).” – Wells Fargo Bank

Historical Perspective

Historically, the S&P 500 has experienced a correction averaging about 18 percent during mid-term election years. However, the markets tend to rally immediately after the election once clarity of leadership is re-established. As a result, every mid-term election year since the 1940s has yielded a positive return.


1930-2014: Midterm Election Outcomes and Stock Performance

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Presidential Election Cycle

Investment analysts have accrued data and made observations about patterns that tend to emerge during election years. One of the trends is termed the Presidential Election Cycle, which projects the following trends based on historical patterns:

  • Years 1 and 2 – Returns are lowest in the first half of a president’s term, based on the premise that a president moves quickly to implement new policies to make good on campaign promises and to front-load any negative repercussions so as not to impact his/the party’s chances for re-election. 
  • Years 3 and 4 – The stock market typically produces its best returns in response to those policies or in anticipation of replacing the president.

Halloween Indicator

This pattern is also known as “Sell in May and Go Away.” It purports that the stock market produces higher returns between Halloween and May — presumably when both companies and investors are more active and productive (whereas people tend to take their vacation time during summer months). This seasonal trend is usually more conspicuous during the winter of a president’s third year. For President Trump, the cycle would begin this November.


Some market analysts predict gridlock no matter how the midterm elections pan out, mainly because both the Republican and Democratic parties incorporate a significant range of policy stances. No matter which party takes the majority, the idea of heavy infighting actually favors market performance. Otherwise, consensus could trigger significant legislative changes, and Wall Street does not like change.

It is worth noting that the U.S. markets have not experienced a negative third year of a president’s term since 1939. In fact, with the exception of World War II, since the 1920s, stocks have risen 87 percent of the time in each of the three quarters that followed a midterm.

Risk Factors

While history can be a helpful guide in anticipating how the markets will react after the midterm elections, it is important to view the upcoming midterm elections in context of the current economic environment. Over the past six months, President Trump has embarked on highly unpopular trade tariffs that threaten potential corporate profitability in certain industries. Furthermore, continued low unemployment and the threat of rising inflation increases the likelihood of more Fed interest rate hikes.

Additional risk factors to market performance include:

  • The rising dollar poses a potentially negative environment for earnings
  • Geopolitical risks
  • Rising oil prices and a possible shortfall given U.S. sanctions on Iran
  • Consumer confidence could drop in the midst of a political crisis

Sector Strengths and Weaknesses

If Republicans retain their majority, the party is poised to support Trump’s effort to prop up the coal industry, with further gains likely in cyclically oriented sectors including consumer discretionary, financials and industrials.

If Democrats achieve a majority in both Houses, their focus is likely to be in the health care sector in an effort to improve upon the current Affordable Care Act. They also are likely to ramp up policies supporting alternative energy companies, while market under-performers would likely be in the financial, energy and defense sectors.

Final Thoughts

There are a couple of key points worth considering with this year’s midterm elections. First, this hasn’t been a normal, run-of-the-mill presidency, so country and party divisions point to a highly combative period of uncertainty. The second issue has to do with putting too much emphasis on historical applications in general, and cause and effect applications in particular.

In other words, just because two scenarios correlate doesn’t mean they are linked. One financial industry executive pointed out that “the annual number of people who drowned by falling into a swimming pool is highly correlated with the number of films Nicolas Cage appeared in during that year. ... One must remember that there is a dramatic difference between correlation and causality.”

With that said, one trend that does tend to be consistent is that political uncertainty leading up to a midterm election generally generates greater market volatility. If you have concerns, don’t hesitate to contact your financial advisor for specific advice. As for general recommendations, remember that past performance is not indicative of future results; periods of volatility often present good buying opportunities; and broad portfolio diversification can help mitigate temporary declines. In addition, since November signals the approach of year-end, a discussion with your advisor about rebalancing your portfolio to harvest gains and reposition some assets for better stability in the future may be worth considering.



Lifetime income sources generally provide minimum payouts to help cover everyday expenses. In most cases, these benefits are not impacted by fluctuations in the investment markets.

For example, Social Security benefits are based on one’s lifetime earnings, so they reflect a proportionate amount of income based on your assumed standard of living. To maximize benefits, it’s best to delay drawing them until full retirement age or later. It’s also important for married couples to strategize on the best way to maximize spousal benefits. In 2018, the highest Social Security benefit — based on earning the maximum-taxable earnings since age 22 and waiting until age 70 to draw benefits — is $3,698 a month ($44,376/year).

In post-World War II America, many employers began offering defined benefit pensions to workers at age 60 who had given at least 20 years of service. By 1960, approximately half of the private sector workforce had one.

Today, only 23 percent of private-sector, state and local government workers have pension plans. According to the Pension Rights Center, the following are annual median pension benefits (2016) for adults over age 65:

  • Federal government: $22,172
  • State and local government: $17,576
  • Private sector: $9,262

For those seeking a higher level of lifetime income throughout retirement, they may need to use their own savings and investments to create additional streams of income. Those who opt to supplement income from interest and dividends from their portfolio will need to accumulate significant assets to produce a high level of income. Even then, this income may be subject to market and economic factors that could cause those streams to fluctuate. This strategy also poses the risk of outliving assets.

Currently, the only other vehicle available to produce lifetime income during retirement is an annuity, which offers guarantees based on the financial strength of the insurer. Depending on the type of annuity contract purchased, the owner has options as to when and how much of the annuity value to convert into a lifetime income stream.

“A recent academic study — “Putting the Pension Back in 401(k) Plans” — shows how taking a piece of your nest egg and deferring it into a lifetime annuity is a cost-effective way to hedge longevity risk, and that overall it provides people with substantially higher consumption levels, particularly at older ages.”

Annuities for Lifetime Income

There are two main categories of annuities: fixed and variable. A fixed annuity earns a guaranteed rate of interest and, once income payments are started, guaranteed income amount for a certain time period or for life, depending on the options selected

A variable annuity provides income subject to underlying investment performance, so even though the interest credits may not be guaranteed during the accumulation phase, it does offer the potential for higher payouts over time. Once income payments start, they are guaranteed for either the time period or for life, depending on the options selected.

There are also annuities that offer both fixed and indexed interest crediting. For example, depending on the interest crediting options chosen, an indexed annuity provides a guaranteed interest crediting rate with the opportunity to enhance accumulation and therefore income payouts based on the performance of a market index, such as the S&P 500. If the S&P has a good year, the annuity owner will receive higher interest credits, up to a predetermined limit, based on a proportionate calculation of index earnings. If the S&P performs poorly, there will be no additional interest credit, but the annuity owner will continue to receive the guaranteed minimum benefit. Unlike variable annuities, fixed index annuities do not actually participate in the market; they only track the index as a means of determining interest credits.

It is important to note that all annuities offer the option of guaranteed payouts. The type of annuity chosen dictates the type of interest credits the account value will receive, and ultimately, the amount of interest credited combined with the underlying principal determines income payouts once income is elected.


Annuity Misperceptions

Opinions vary regarding annuities. For a long time, they were considered effective vehicles for only a select group of investors. Now, however, many retirement strategists are recommending them more widely to help retirees secure an additional stream of lifetime income.

Annuities have evolved over time to meet the needs of a broader population. As such, there are still some misperceptions about what they offer. Things that used to be true aren’t necessarily in force anymore, or only in limited circumstances

For example, there’s the practice of an insurance company keeping your money if you pass away before receiving a full return of premium via income payouts. First of all, this only happens if you “annuitize” your contract, which isn’t all that common. These days, many annuities offer a lifetime income rider (in some instances for an additional fee), which allows you to select a lifetime income payout option without giving up control of your account. In many cases, the annuity will offer a guaranteed death benefit to the contract beneficiary (which, in some cases, may be offered for an additional fee).

There is also a perception that the annuity owner may not make withdrawals from his annuity the way he can an investment or savings account. And while annuities do have surrender charges associated with them during an initial period, in most cases, the annuity merely caps the amount the owner can withdraw, such as no more than 10 percent a year. Bear in mind that withdrawals will impact the amount of benefit the annuity pays out at a later date.


Annuity Realities

One common perception is that annuities are difficult to understand. This, in fact, is true — largely because there are so many options available in today’s market. Bear in mind that annuity strategies are not designed to be one-size-fits-all; many offer a plethora of options and features to help individuals and couples tailor a retirement income plan suited for their specific needs. Because of this, it’s important to work with an experienced insurance professional to help navigate which type of annuity to choose and which options are most appropriate for your financial situation.


Lifetime Guarantee

Another reality is that despite an annuity’s guarantee, it is possible to miss out on lifetime income. This feature is determined by actuarial calculations based on the amount of money initially used to purchase the contract. Therefore, if the owner violates any of the withdrawal limits or other contract rules, it could result in a reduction of benefits or even void the guarantee altogether. This is another reason to work with a qualified advisor and read the policy literature to understand the features, risks, charges and expenses — including the tax status for when you receive distributions.

Also be aware that all annuity guarantees are subject to the claims-paying ability of the issuing company.



There is also the perception that annuities are expensive. In reality, there are low-cost annuities and others with more expensive bells and whistles. In many cases, an annuity can be tailored so you pay only for features and benefits that match your needs.



This is one of the areas where annuities shine. Unlike 401(k) plans and IRAs, the IRS does not impose contribution limits on a non-qualified annuity (although some insurers may require pre-approval for extremely high purchase premiums). This means you can maximize post-tax income contributions to grow tax-deferred until you are ready to withdraw income. And although Social Security and pension payouts are capped, an annuity can help you develop a higher stream of guaranteed income using personal assets.


Final Thoughts

Lifetime income is not an easy thing to provide. In recent years, there has been increasing concern about the ability for both underfunded pension plans and Social Security to provide guaranteed lifetime income at their current levels. People looking for more predictability during retirement may need to be proactive about developing their own stream of guaranteed income using a portion of their savings and/or invested assets.

Annuities offer important retirement planning features such as tax-deferred growth opportunity, guaranteed income riders and a death benefit for beneficiaries — but it’s important to choose the appropriate type of annuity for your situation. For many people, designing a personally funded plan for guaranteed lifetime income is certainly worth exploring.



At the heart of President Trump’s policy is his conviction that China has used predatory tactics to challenge American technological dominance. He has accused the country of obliging U.S. corporations to trade technology for access to the Chinese market, as well as outright cybertheft.

Initially, the Trump administration placed tariffs on industrial products so that American consumers would not be impacted. However, the list of Chinese imports has subsequently expanded to a wide range of household products, from electric lamps to fish sticks.

Note that import tariffs affect entire supply chains in addition to the specific goods taxed. Ultimately, this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products.

“Although tariffs could cause prices for consumer products ranging from cars to washing machines to rise, ‘the U.S. does not need China as much as China needs the U.S.’”

— Barry Bannister, head of institutional equity strategy at Stifel

Hardball Strategy With China

It is fortunate for the current administration that the U.S. economy is performing extremely well. Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year, yielding the best consecutive performance since 2010. Unemployment is at an 18-year low, and wages are starting to pick up. GDP growth hit 4.1 percent for the second quarter of 2018, reflecting the fastest pace in four years. All of this gives Trump the advantage to negotiate with other nations from a position of strength.

On the other side of the bargaining table, China, Europe and Japan are all experiencing slowing growth. China is particularly vulnerable because the country exports three times more goods to the U.S. than the U.S. sends to China (measured in dollars). Given its $280 billion trade surplus with the U.S., China has much more to lose in the current trade dispute.

While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide, many Wall Street analysts believe that Trump’s tariff strategy to position the U.S. ahead of trade deficits will be successful.

Global Trade Response

Although China may be the primary trade partner in Trump’s crosshairs, his initial proposal called for global tariffs across the board pending new agreements negotiated with individual trade partners. While the knee-jerk reaction by some countries has been to retaliate with their own import tariffs, this may not be the most prudent response from both a political and financial perspective. In fact, smaller countries are likely to feel the most impact, as they lack the bargaining power of, for example, 500 million consumers in the European Union (EU).

To wit, President Trump and European Commission chief Jean-Claude Juncker announced an agreement to stay tariffs until they negotiate a more mutually amenable trade agreement. This follows a heated exchange over Trump’s initial steel and aluminum tariffs and the EU’s threat for subsequent countermeasures.

Although Canada is one of the more vulnerable smaller economies, it has already responded with 25 percent tariffs on $12 billion in U.S. imports. One analyst has suggested that Canada could take the extreme step of barring trade in banking and insurance services, restricting foreign investments or energy exports, or denying U.S. patent protection for intellectual property.

Mexico is actually in a stronger walk-away position than Canada, as its foreign investment is growing due to separate trade deals with countries that have expanded export markets in recent years.

South Korea has already accepted restricted import quotas in order to avoid steel tariffs and modified its bilateral trade deal with U.S.-placed quotas on Korean cars.

Several emerging-market countries play an active role in global supply chains and are most impacted by the tariffs on imports from China. Consequently, collective export volumes year-to-date are down by about 6 percent from a year ago.

Impact on Investment Markets

Despite turbulence in the global trade market, U.S. stocks have remained resilient. There is currently $3.4 trillion invested in S&P 500 index funds across a myriad of 401(k) plans, IRAs, mutual funds and ETFs.

Should Trump’s trade gambit prove successful, especially with China and/or the EU, enhanced trade agreements would be a boon for the already booming health of U.S. companies, with residual benefits for investors. In the meantime, much of U.S. growth is driven by sectors such as health care, which are less impacted by trade disputes.

Final Thoughts

Trade wars involving significant tariffs can produce several trickle impacts. First, higher costs are passed on to consumers, which can cause higher overall inflation. Higher prices also can bring about reduced demand for goods, which can lead to lower production and job losses. Ultimately, higher tariffs on U.S. imports and retaliatory tariffs on exports could slow global growth.

However, that’s a worst-case scenario. Trump is using America’s economic dominance as a tool to threaten tariffs in order to negotiate trade agreements that position the U.S. for more expansive growth in the future. Should his strategy pay off, U.S. investors are well-positioned to benefit.



Life insurance policies fall under two broad categories: term and permanent. With a term policy, you purchase a death benefit amount and determine how long you want to hold the policy; it pays out a death benefit if the owner passes away during the specified term. Permanent insurance policies, in addition to providing a death benefit, feature a cash value account that, over time, builds up a balance you can access.

While a term life policy offers a death benefit only during the selected term, a permanent life policy provides a death benefit that covers your entire life, as long as you keep paying the premiums. Neither term nor permanent life insurance death proceeds are subject to the beneficiary’s income tax, but they may be subject to federal estate taxes.

It’s worth mentioning that older life policies, generally prior to 2001, may actually mature when the policy owner turns 100 and will pay out the face value of the policy — which is taxable to the extent it exceeds the sum of after-tax premiums paid into the policy — while he or she is still alive. Newer policies, generally after 2001, extend to a maximum age of 121.

“What type of life insurance is best for you depends on a variety of factors, including how long you want the policy to last and how much you want to pay.”

Term Insurance

Term insurance is a temporary policy, generally sold in durations of five, 10, 15, 20, 25 or 30 years. Once the period ends, premiums end as does the death benefit.

Term life insurance is suitable for most people looking to help provide financial protection to loved ones should they pass away. As a general rule, it is easier to understand and tends to be a less expensive form of life insurance. However, it’s important to point out that you can outlive your policy. If you still need to provide financial protection after the term expires, you’ll need to purchase a new policy. Since premiums are based on age, health and competitive rates at the time, it’s very likely you will pay more for a new policy purchased later.

Term life insurance is sold by what’s called the “face value,” which is how much the policy will pay out upon your death. Policies can vary dramatically in face value coverage, from less than $50,000 into the millions.

“Level premium” term life insurance policies offer fixed payments, meaning you’ll pay the same premium amount throughout the term. The premium will not increase. You may have the option to renew or extend the policy term, but the premium amount is no longer locked in at that point.

Permanent Insurance

Permanent insurance remains in force until the policy owner either dies, cancels the policy or allows it to lapse by no longer paying premiums. Because this type of policy is designed for a longer time horizon and potential cash value accumulation, this type of policy generally costs more than a term policy.

There are several types of permanent life insurance. Below is a brief synopsis of each type and the benefits provided.

Whole Life Insurance

Whole Life insurance (WL) provides permanent coverage that is guaranteed to remain in force for the policy owner’s lifetime, provided premiums are paid, or to the maturity date. Premium payments are fixed, based on the policy owner’s age at issuance, and usually do not increase with age. In addition to providing a death benefit, whole life policies build cash value that grows on a tax-deferred basis and can be accessed during your lifetime. Policy loans accrue interest, and policy loans may reduce the available cash value and death benefit.

Universal Life Insurance

Universal life insurance (UL) is a form of permanent coverage with more flexibility than regular whole life. The policy owner can choose to increase (or reduce) the death benefit and even the amount and frequency of premium payments, subject to policy limits. A portion of the premium is allocated for tax-deferred growth and credited to the policy as cash value. You can use this accumulated cash value to pay premiums or to take out a loan. With this type of policy, it is important to make sure the policy is funded correctly and to review your annual statements to make sure the product is performing as intended; if not, evaluate your options with your financial professional.

Variable Life Insurance

Variable life insurance (VL) is a permanent life insurance policy with an investment component that features premium payment flexibility. The cash value portion of the premium payment can be invested in a range of options (e.g., fixed-income investments, stocks, mutual funds, bonds, money market funds, etc.). The cash value and death benefit can fluctuate based on performance of the investment portfolio. Some policies offer a guaranteed death benefit, which will not fall below a minimum amount, for an additional premium. Similar to other permanent life insurance policies, your accumulated cash value grows on a tax-deferred basis and can be borrowed against, however there may be some restrictions due to market volatility.

Variable Universal Life Insurance

Variable universal life insurance (VUL) combines the premium payment and death benefit flexibility of universal life with the cash account investment growth options of variable life.

Indexed Universal Life Insurance

An indexed universal life insurance (IUL) policy is a permanent life insurance policy that features a cash value account, which is linked to a stock market index like the Standard & Poor’s 500. The cash account grows in step with the market index and accrues a portion of its gains, without the risk of loss of premium due to market downturns or fluctuation. If the linked index declines in any given year, the cash value does not drop. In some policies, the insurer offers a low guaranteed interest rate to ensure there is always some growth.

An IUL offers the potential for the cash value to grow significantly over time. The policy owner can access the cash for his or her own needs and even use it to cover premiums.

This type of policy features significant flexibility, as the cash value enables the owner to reduce or even skip a premium payment. Some policies allow the owner to adjust the death benefit, as well, when family needs change.

Compare Benefits

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Final Thoughts

Both term and permanent life insurance options have their advantages, and depending on your situation you may benefit from one or the other.

If you’re looking to minimize your spending and cover yourself when you need it most, a term insurance policy could be a good option. This tends to be a better option for younger people who may not want to be locked in to premium payments for 60 or 70 years.

On the other hand, if you’re looking to make a long-term investment and guarantee that your beneficiaries will receive a legacy after you die, a permanent insurance policy might make more sense.



Basically, life insurance is there in case you ever are not. In exchange for a one-time or ongoing premium, a beneficiary(s) receives proceeds upon the death of the policy owner. This money can be used in any way the recipient sees fit. For the policy owner, life insurance can provide a sense of confidence that his or her loved ones will be financially provided for should something happen to him or her. Although life insurance can be used to address a wide variety of financial issues, family financial well-being is generally its most important feature.

When determining whether you should purchase life insurance to replace income, ask yourself this question: “Does anyone rely on me financially?” If the answer is yes, then you should own life insurance. If the answer is no, then you don’t necessarily need life insurance for this purpose.

When you purchase life insurance, you are essentially making a deal with an insurance company to trade payment — known as a premium — for the guarantee that it will pay your beneficiaries a set amount upon your passing. This is known as the death benefit, and all guarantees are based on the claims-paying ability of the insurer.

One of the primary questions a buyer should address is how much life insurance to purchase. The best way to determine this is to work with a qualified insurance professional. If your goal is long-term financial well-being for your loved ones, be sure to consider leaving enough money for them to:

  • Maintain their current lifestyle
  • Pay off debt, such as the mortgage
  • Attend college
  • Have a retirement nest egg

Every situation is different. Working with a licensed insurance professional is the best way we know of to balance the coverage you need at a cost that you can afford.

“We love our spouses, we love our children, we love our grandchildren, so obviously we should care about what happens to them if we die.”

How Life Insurance Needs Can Change Over Time

Here Are Three Reasons to Own Life Insurance:

Here Are Three Reasons to Own Life Insurance:

Here Are Three Reasons to Own Life Insurance:

No. 1: Replace Lost Income in the Future

As much as we’d like to believe life is invaluable, it is possible — and prudent — to attach an economic value to our lives — both breadwinners and caregivers. The term “economic lifetime value” (ELV) refers to the lifetime sum of earned income you would receive if you do not pass away before retirement. Replacing lost future income is probably the No. 1 reason someone would consider buying life insurance.

For example, if you make $60,000 a year and plan to work for another 30 years, your base ELV is $60,000 x 30 years, which equals $1.8 million. While that level of earned income is a base ELV, you may have more expenses to consider. To get an accurate idea of the amount of life insurance coverage you may need, consider additional variables such as long-term inflation, future raises and other available assets you may have.

No. 2: Pay Off Expenses

The next reason to consider purchasing life insurance is to pay o liabilities after you pass away. Initially, you should have enough coverage to pay for final expenses. Funeral arrangements can easily run to $11,000 or more, so life insurance can leave your heirs with a hefty sum to handle those expenses and more.

Besides final expenses, you may wish for your beneficiary to pay off the mortgage or fund the purchase of a home. Maybe you’d like to pay for college tuition for your children or grandchildren. Perhaps you had always planned to pay for your daughter’s wedding — or your four daughters’ weddings. Calculate the sum of all of these extra costs to determine the face value of your life insurance policy.

Another common scenario is for business owners to use life insurance to pay off business debts in the event of their passing. Business partners will often create what’s called a buy-sell agreement. This agreement simply asserts that if one partner were to pass away, the other one would buy the deceased’s portion so that the business can remain viable.

By using a life insurance policy to facilitate that transaction, not only can the surviving partner continue to earn a living, but proceeds from the sale go to the deceased’s loved ones to help secure their financial future. It also avoids the situation of the partner trying to co-manage the business with the deceased’s family.


No. 3: Asset Management Tool

A third reason to purchase life insurance is one of the most overlooked and lesser-known uses. Life insurance can be used as an asset management tool as part of your savings or investment portfolio.

When most people think of accumulating wealth, they think of stocks, bonds, mutual funds, ETFs, etc., but life insurance can be used to enhance wealth as well. Here is a hypothetical example in which a 65-year old woman uses a life insurance policy to augment her financial portfolio.

Let’s say she has accumulated roughly $1 million in her investment portfolio. She decides to withdraw $15,000 a year to pay annual premiums toward a $1 million life insurance policy.

Imagine this woman lives for another 20 years and therefore pays a total of $300,000 in premiums ($15,000 x 20). Bear in mind that when she passes away after 20 years, her beneficiaries will receive $1 million from this policy alone.

If it seems questionable to withdraw that much money over 20 years, consider what she might have otherwise done with the money. In fact, had she contributed the $15,000 every year into a traditional investment, she would have needed about an 11 percent annualized rate of return to reach $1 million after 20 years. To reach that sum after taxes and fees, she would need to earn an even higher rate of return.

First of all, while possible, that’s not an entirely realistic rate of return. Historically speaking, rolling 20-year returns of the S&P Index from January 1979 to December 2016 ranged from 6.4 percent to 18 percent a year.

Second, her investment performance is by no means guaranteed. Not only are life insurance proceeds not subject to income taxes (although they may be included as part of the policy owner’s estate for estate tax purposes) but they also are guaranteed by the insurance company.

So as you can see, life insurance can be leveraged to expand the return on an investment portfolio. This strategy is best utilized by people with excess wealth who would like to increase the value of their estate or increase the amount of money they can pass on to heirs.


Concerns and Caveats

When it comes to purchasing life insurance, there are caveats. The older you are, the more expensive the premiums. Life insurance also requires medical underwriting, so people who suer from certain health conditions may be denied coverage. Premium rates are determined by the applicant's age, lifestyle and current health status. For permanent life insurance policies, there could be penalties should you need to withdraw or access the funds prior to beneficiaries receiving the death benefit. Withdrawals or surrenders made during a surrender charge period may be subject to surrender charges and may reduce the ultimate death benefit and cash value.

Many employers offer life insurance coverage, generally at competitive group rates. However, the coverage is typically limited to one to three times the employee’s annual salary. Therefore, it is recommended that most households purchase an additional policy separate from work. This also is a good idea because employer coverage almost always terminates when you leave your job.


Final Thoughts

If you do not currently own life insurance, consider the many reasons why it may be a good idea for your situation. If you do have a policy, recognize that this is a complex financial tool that should be monitored and potentially adjusted periodically to reflect your changing life circumstances and objectives.

Consult with an experienced life insurance professional for advice and recommendations. It is critical not only to identify any gaps in your coverage, but also to discover ways different forms of life insurance could potentially help increase your family’s financial well-being — both now and in the future.



Things to Consider About Mutual Funds

American capitalism boomed in the early part of the 20th century. The nation was smack dab in the middle of the Industrial Revolution, ordinary citizens enjoyed newfound wealth and the stock market soared. Everyone wanted a piece of the action.

There was just one problem though: Investing wasn’t that accessible. Online brokerage companies like E-Trade didn’t exist in the 1920s. Good money managers were hard to find and typically had high account minimums. Trading took place on the floors of stock exchanges, and big-ticket orders went to the top of the stack. So, the ordinary investor had very few options.

This changed in 1924, when Massachusetts Investment Trust had an idea for normal investors to “mutually” pool their money together in a common “fund.” Collective buying power meant they could hire a top-notch money management team and get stock traders to take them seriously.

Voila! Just like that, the first mutual fund was born.

Today, mutual funds are one of the most widely held investment vehicles in the world. In the U.S. alone, over $18 trillion is held in mutual fund accounts. As with any investment, there are pros and cons to mutual funds.

The Good

1. You Get Help

If you are not sure what investments you want to buy or sell, or when to buy or sell them, there is help. A mutual fund comes with a seasoned team of analysts, traders and money managers to guide those decisions on your behalf. Sure, they charge a fee for this service, but it is usually charged as a percentage of assets, so smaller investors can get on board without some of the excessive fixed costs.

2. Investment Boundaries

Mutual funds all come with a clear directive the management team must follow while running the fund. For example, one fund might have a directive to find the best U.S. large company stocks. Another might only invest in short-term government bonds. This gives the investor a level of comfort surrounding the decisions made on behalf of his or her money. For example, conservative investors might feel more comfortable with a government bond fund manager who can’t buy risky stocks.

3. Quick Access to Cash

It’s important to be able to turn your investments back into cash when you need the money. Some investments can be easily sold, and others are tougher to liquidate. Mutual funds are highly liquid and can provide daily access from the mutual fund parent company. However, for all the great aspects of mutual funds, there is a downside filled with hidden costs and potential conflicts of interest.

The Bad

1. Closet Indexers

There are two primary types of mutual funds: indexed and active. Indexed funds are built to mimic a major market index like the S&P 500 or the DOW. They don’t bet on individual investments — they just follow the index.

The internal fees are generally low, as the management team doesn’t have to do much when they take this passive approach. The majority of mutual funds, however, are “active,” meaning the team is actively looking for investments that have the opportunity to beat their corresponding index. Logically, these funds should have a higher fee to cover the cost of these additional efforts.

Here’s the problem. Many of the active mutual funds on the market today are really just “closet indexers,” meaning you are overpaying for what is essentially an index fund. How can you tell if this is happening to you? Ask to see the “tracking error and ”active share of your mutual fund. The higher these numbers are, the more active the management. Our investment monitoring process is always mindful of these numbers to help ensure active funds stay active.

2. Hidden Fees

You might assume that all the costs of owning a mutual fund are fully disclosed. After all, that’s what the fund management fee is, right? Well, it isn’t quite that simple. Mutual funds are legally allowed to charge expenses to the fund over and above the standard expense ratio. The fees must be disclosed in the prospectus, but to the average investor, it could be difficult to pinpoint all the associated fees.

One such expense is the cost of trading securities inside the fund. Research by the University of California, Davis showed the average fund on the market has 1.44 percent of additional trading costs on top of the standard management fee. This is significant. As an investor, you might think you are only paying .5 percent to a fund when in fact you are paying nearly four times this amount.

Part of our due diligence process is to combine what we believe to be the best funds moving forward at the absolute best cost available.

3. Share Classes

This is one commonly misunderstood aspect of mutual funds. Each individual fund can be packaged up into different “share classes.” It is the same fund, just packaged multiple different ways. Imagine a 12-ounce can of Coca-Cola. It could be packaged in a standard can, a Christmas collection can, an Elvis memorabilia can, etc., but, regardless of its packaging, it’s still a Coke.

Mutual funds work in a similar way and can have a significant expense to the investor. Take, for example, the American Funds Growth Fund of America. It is offered in 17 different share classes, at a wide variety of costs. Remember, this is the same fund, with the same investments, with the same management team. So, why would you pay more? A common answer is because you didn’t know any different, and someone told you it was the best thing since salted pretzels.

An important item to consider is that each class will have different services, distribution arrangements, fees and expenses, which will result in different performance results. Our investment management team is always focused on accessing the best share class available for our investors. There is no reason to overpay for nearly the exact same service.

Final Thoughts

Knowing how to identify these potential issues may help you benefit from the good funds while avoiding the bad ones. It will help you know where to look in order to make sure that your interests are best represented at all times.



Every investor has an asset allocation within his or her investment portfolio, whether intentional or not. This basically describes how the invested funds are divided among various asset classes — broadly, stocks, bonds and cash. An investor’s asset allocation is designed to help manage risk and work toward certain performance goals.

A sample allocation might be a 50/50 allocation: 50 percent invested in stocks and 50 percent invested in bonds. Within this allocation, funds may be categorized into domestic or international stocks, and subdivided further into large, medium or small capitalization companies, or growth and value-oriented equities. The following pie chart illustrates how a sample strategic asset allocation might break down.


Traditional Recommendation

Because stocks tend to be more volatile, the typical advice in the past was to move money predominantly into cash and fixed income holdings as an investor approached retirement.

In fact, one potential recommendation would be to determine an investor’s asset allocation by his or her age. Specifically, subtract the investor’s age from 100 to determine the percentage of his or her portfolio that should be invested in stocks. For example, under this scenario, a 30-year-old would invest 70 percent of his or her portfolio in stocks. By the time the investor turned age 70, the stock allocation would be reduced to 30 percent.

Today’s Challenges

However, today’s investors face a different set of circumstances from previous generations. There is the concern that Social Security will become underfunded in the future and forced to reduce benefits. Furthermore, fewer companies offer pension plans to retirees, so workers must diligently save on their own to provide retirement income.

Perhaps the biggest threat to income security during retirement is that people are living longer than ever. This means they may need to adjust their asset allocation more slowly than in the past. Instead of moving assets to more conservative holdings before or at retirement, they may want to keep a substantial allocation in equities throughout their 60s and even 70s. After all, if an investor (and/or spouse) lives to 90 and beyond, he or she may need this portfolio to continue growing to provide income throughout his or her lifetime.

In addition, the impact of inflation over three decades of retirement can create a higher cost of living. And finally, people who live longer may incur more health care expenses, so their income needs to stretch even further to help cover these costs.

“It’s good to use 30 years of retirement as a general guideline. And when you are making projections, you should always err on the conservative side — maybe even going all the way to 100 or 110.”

Reliability Allocation

While investors may spend most of their time thinking about performance returns, retirees are generally more focused on income. Stock market returns are prone to move up and down, but that’s the last thing retirees want to experience with their household budget.

That’s why it may be important for retirees to consider different ways to diversify their asset allocation to include growth opportunity, steady sources of regular income and even the potential for income growth among those payout streams.

To help minimize volatility within a portfolio, it may be worth considering investments that provide income regardless of share price fluctuation, such as dividend stocks. These stocks are generally offered by well-established companies in low-growth sectors such as utilities, energy, telecom and real estate. Dividend stocks typically offer reasonably high yields and tend to increase shareholder payouts over time.

Another option may be to reposition a portion of assets to provide a guaranteed stream of income by purchasing an income annuity. There are a wide variety of annuity types depending on investor need, and all guarantees are backed by the issuing company. In fact, indexed and variable annuities are two types that provide the opportunity for income growth throughout retirement.

Tax Allocation

Another consideration for retirement allocations is the mix of taxable, tax-deferred and tax-free investments. It may be a good idea to diversify portfolio allocations across these options so that all of your retirement income is not taxable, which could push you into a higher tax bracket.

Bear in mind that although a general portfolio of stocks and bonds is taxable, investments made through a traditional IRA or employer-sponsored retirement plan are tax-deferred. Both of these allocations will contribute to your tax bill when you withdraw funds during retirement. Even if you don’t need the money, tax-deferred accounts will require you to withdraw a certain minimum amount each year after age 70½, and those distributions will be taxable.

Therefore, it may be worth considering placing some of your retirement assets in tax-free accounts. One such investment is the Roth IRA, in which withdrawals, including earnings, are generally tax-free in retirement.

Another option is to maximize contributions to a Health Savings Account (HSA) if one is available as part of your health insurance options while you’re still working. Interest on money within an HSA grows tax-free. Withdrawals made to pay for qualified medical expenses are tax-free, and after age 65, withdrawals made for any reason other than medical expenses — even just regular household income — will not incur a 20 percent penalty tax but will still be considered taxable income. And unlike a tax-deferred account, there are no required minimum distributions as you age, so interest can continue compounding tax-free.

By diversifying your retirement asset allocation across a variety of accounts, you can optimize the tax efficiency of your overall portfolio. According to an analysis conducted by Morningstar, a well-executed tax allocation strategy can boost your bottom line each year by as much as a half-percent. In dollar terms, that’s $500 a year for every $100,000 invested.

Strategic Allocation Adjustments

Some people follow the traditional advice and transfer investments to more conservative holdings when they retire. Others don’t bother; they maintain the same equity-rich allocation throughout retirement in hopes of ramping up gains, making up for previous losses, or maybe they just don’t bother to make changes at all.

Given the challenges of today’s longer-living seniors, it’s a good idea to work with a financial advisor to develop a pre-retirement asset allocation strategy. But the work doesn’t end there. Once you retire, you should continue to monitor your portfolio’s performance and adjust the allocation periodically to reflect your age, health status and income needs.

Over time, you may want to transfer investments to a more conservative allocation. However, it’s important to do this strategically. For example, use periodic rebalancing opportunities to evolve your allocation.

Final Thoughts

One reason it may be helpful to make these allocation decisions with a financial advisor is that there may come a time when you are less interested in your portfolio and/or incapable of making allocation decisions on your own. If you are the primary investment manager in your household, these may not be decisions your spouse can take over. It’s important to appoint someone fairly early in the process to be your proxy in this situation, whether it’s your trusted investment advisor or perhaps an informed family member.

The key is to make this decision while you still can, for the sake of loved ones and maintaining the household income. After all, when we get to the point where we’re no longer able to make investment allocation decisions, we may be at the point that we don’t even realize it.



The Trump Administration is poised to reimpose sanctions on Iran six months from its May decision to withdraw from the Iran nuclear deal. The agreement stated that Tehran would curb its nuclear activities in exchange for removing previous sanctions by the U.S. and Europe. Once the U.S. sanctions are back in play, they have the potential to disrupt oil shipments from Iran by as much as 1 million barrels a day.

This constraint in oil supply will likely send prices even higher. In fact, some analysts are predicting prices could rise as high as $100 a barrel — nearly a 300 percent increase from $26 a barrel just two years ago.

“Europe and China will not fight against the U.S. sanctions. They will grumble and accept it. There is no one who will realistically choose Iran over the U.S.”


Iran currently produces about 4 percent of global oil supplies. Although the U.S. sanctions have a 180-day grace period, the Department of the Treasury predicts other countries will begin reducing their Iranian oil purchases sooner, as this will increase their chances of obtaining a waiver from U.S. sanctions. The present assumption is that the U.S. will try to isolate Iran from global oil sales by potentially hundreds of thousands of barrels per day.


The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of 14 nations founded in 1960. As of May 2018, OPEC member nations were Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, Angola, Gabon and Equatorial Guinea.

OPEC’s objectives are to: 

  • Coordinate and unify petroleum policies among member countries
  • Secure fair and stable prices for petroleum producers
  • Provide an efficient, economic and reliable supply of petroleum to consuming nations
  • Offer a profitable return to investors who help support the oil industry

Note that the intent of the OPEC agreement is to not have any one country dominate the market, controlling both prices and output. Should any one OPEC member step up its current distribution to replace all of the oil that Iran currently supplies, it would likely violate the spirit of the pact.


The key to maintaining lower oil prices is to replace the Iranian supply line. There are several nations poised to do this. For example, the United States is now considered the fastest-growing energy superpower, largely due to the prevalence of the fracking process used to drill for oil domestically. In fact, the U.S. Energy Information Administration (EIA) recently raised its forecast for U.S. production to 12 million barrels per day by late next year. This level of output would catapult the United States to becoming the world’s largest producer, ahead of both Russia and Saudi Arabia.

However, the United States is not likely to bear the brunt of replacing Iranian oil supplies.

Russia and Saudi Arabia

Russia is the No. 1 producer of oil in the world, and it also stands poised to benefit from increased oil prices. Together, Russia and Saudi Arabia have been working to tighten the oil market for the express purpose of increasing prices.

In fact, the biggest beneficiary of Trump’s decision could be Saudi Arabia, which has the largest capability to meet demand once Iran’s oil is out of the market. Supplementing the market will help reduce the chance of further price hikes. Regardless, prices are expected to increase to some extent, and those countries picking up the slack in oil production will realize the most benefit.

Saudi Arabia is in favor of higher oil prices to help its flailing economy, with rumors circulating that it is targeting $80 to $100 per barrel. However, some analysts believe that the U.S. abandoned the Iran deal in an arrangement with Saudi Arabia to step up its volume of oil distribution but keep prices restrained.

Consumer Impact

As a general rule, consumers end up paying higher prices at the pump and for air travel, cruises, etc. when oil prices rise. However, thanks to the increase in U.S. oil production in recent years, we have become less reliant on petroleum imports. As a result, higher oil prices aren’t likely to have as significant an impact on the U.S. economy as in the past.

Unfortunately, Americans who’ve experienced little wage growth and maintain high debt may find even a marginal increase in gas prices hard to manage. According to AAA, the national average in May was about $2.81 a gallon, up from $2.34 a year ago. The Oil Price Information Service predicts that the typical American family will spend about $200 more on gas this summer. While this is a jump from what we’ve been paying over the last couple of years, so far no one is predicting the $3.50-gallon range from six or seven years ago.

Another caveat is that when a higher portion of the household budget is spent at the gas pump, less money is spent elsewhere. This lower consumer spending can have an impact on the country’s overall economic growth.

Investor Impact

On the flip side, higher gas prices tend to benefit oil producers, distributors, equipment manufacturers and related companies in the supply chain. Investments in big oil stocks have ramped up in expectation of higher profits and bigger share buybacks. In May, the price of oil reached $70 per barrel, leading the stock market to its best week in two months.

Both in the U.S. and all over the globe, higher oil prices are a positive for the highly volatile oil industry and its millions of workers.

Final Thoughts

Investors interested in the oil industry should recognize that it can be both lucrative and volatile. It is one of those sectors in which high risk teeters with the opportunity for high reward — but it’s difficult to capture that balance.

It’s important to work with an experienced financial advisor to find appropriate ways to invest in oil stocks, often by taking a balanced approach and diversifying appropriately across a wide range of assets — international and domestic — to help offset risk.

As always, consider your tolerance for high-risk volatility, your investment timeline and your ultimate financial objectives.



In the U.S., interest rates have remained relatively low for about a decade — since the Great Recession. Low rates are a problem for conservative bonds, traditionally a preferred investment for retirees. Because of low income yields, retirees have sought supplementary income from more aggressive holdings. One such security is the dividend stock.

The typical profile for a dividend stock investor is someone seeking income payouts over the long term, with principal preservation and modest growth.

On the scale of risk, dividend stocks rank pretty low for equities. They tend to be offered by well-established companies in low-growth sectors such as utilities, energy, telecom real estate. They feature relatively high yields and a general increase in shareholder payouts over time. This has enabled income-seeking retirees to have a means to keep pace with long-term inflation.

“Although retirees should have less exposure to equities than, say, a 35-year-old, stocks are an important component of a well-rounded portfolio for investors of any age.”

Principal Preservation

There are two main advantages to investing in dividend stocks: principal preservation and current income. However, dividend stocks may represent a high-risk allocation for a retirement portfolio and should be carefully considered as part of a well-diversified strategy.

When evaluating specific dividend stocks, check out their long-term track record for dividend growth in addition to the quality of the issue and current price. Companies that issue dividend stocks tend to be more focused on providing long-term shareholder value than growth and expansion.

Passive Income

The primary goal of dividend stocks is current income; equity growth is secondary. Therefore, one of the key components to measure is the stock’s track record for dividend growth.

  • First, see if the stock has a strong track record for issuing payouts.
  • Next, evaluate whether the stock’s current yield is “timely” — paying out income that is meaningfully above its five-year average.
  • Finally, assess if the company itself is positioned for long-term growth.

When a dividend stock meets these three criteria, it may be a good candidate to provide passive income in a retirement portfolio.

Capital Appreciation

Companies that issue high-dividend stocks tend to be well-established and more value than growth oriented. As a result, they tend to sell at a discount compared to other stocks. Generally speaking, when an investor purchases the stock and holds on to it for the long-term, he has a better chance of building up price equity.

It’s important to remember, however, that the true measure of performance includes both capital appreciation and income payouts to gauge total return. Also, be aware that dividend stocks are just as likely to experience periodic fluctuations as more growth-oriented securities.

DRIP Strategy

More than 650 companies offer their current investors a Dividend Reinvestment Plan (DRIP). This plan enables dividends to be automatically reinvested instead of distributed to the investor. The investor can then continue building his or her stock position in the company without having to invest new money. The DRIP program automatically purchases fractional or additional shares of the same stock with little to no trading fees. This strategy offers the potential to generate higher dividend payouts in the future, as well as greater capital appreciation.

Once the investor retires, he or she can stop the DRIP program and begin taking dividend payouts as retirement income.

Hypothetical Long-Term Investment Example

Let’s say Karen is 28 years old with a high-paying job and low cost of living. She is able to invest $20,000 a year in dividend-paying stocks that yield 5 percent annually and grow by the same amount each year. However, instead of taking this income, she reinvests all of her dividends back into those same stocks. Assuming a 4 percent average annual return and an average inflation rate of 3.2 percent, she will have nearly $1.7 million by age 60. (Note that this illustration does not factor in capital gains taxes).

Interest Rates

Given increasing economic growth and consistently low unemployment levels, the Federal Reserve is anticipating higher levels of inflation in the near future. As such, committee members have already voted for one interest rate hike this year and are projecting at least two more incremental increases in 2018 and three in 2019.

It’s important to consider current and future dividend stock investments as they relate to a rising interest rate environment. Higher interest rates tend to increase the yield on new bond issues, which in turn makes bonds more appealing. Both government and corporate bonds tend to be less risky than stock holdings and traditionally have been considered more appropriate for a retirement portfolio. Thus, retirees may wish to reconsider their asset mix in the wake of higher bond yields going forward.

Bear in mind that a changing interest rate environment is a good time to consider rebalancing your portfolio. If, in search of income over the last decade, your investment portfolio has become more heavily tilted toward equities than may be appropriate for your age and timeline, it could be a good time to sell and rebalance with a heavier bond allocation.

However, before making any changes to portfolio composition, consider a couple different factors. First, consider whether your personal financial goals have changed. Second, consider whether your current allocation strategy is providing the income you need at the level of risk with which you are comfortable. If both of these objectives are being met, it may not be necessary to make any changes, particularly if your retirement portfolio is well diversified.

Final Thoughts

As always, it’s best to consult with an experienced financial advisor who is familiar with your personal situation. Remember that dividend stocks are typically very stable income providers, with long-term potential for income growth. They may well be appropriate for retirees who continue to need a growth component in addition to income.