Conrad Siegel’s Brooke Petersen, CFP®, ChFC® shares a brief overview of the tax proposals the Biden Administration had on the table as of late May 2021. More recent developments point to corporate tax increases being unlikely at this time. What we do know is discussions and negotiations are ongoing. As potential tax changes unfold, we will continue to explore what they may mean for investors.
Catherine Azeles, CFP®, RICP®, an Investment Consultant at Conrad Siegel has been named the winner of Central PA Leukemia and Lymphoma Society’s (LLS) 2021 Woman of the Year. During a 10 week campaign this spring, Catherine raised over $77,000 to help fund therapies that save the lives of blood cancer patients every day and research which has led to developments in all cancer treatments.
“Congratulations to our winners, and to all of our candidates and campaign team members who participated in this year’s Man & Woman of the Year campaign,” said Lauren Iannucci, LLS Regional Executive Director. “These exceptional volunteers are all passionate and determined individuals, and leaders in their communities. Together, we are getting closer to LLS’s goal of world without blood cancer.”
LLS is the world’s leading non-profit voluntary health organization dedicated to finding cures for blood cancers and ensuring that patients have access to lifesaving treatments. The funds raised through LLS’s Man & Woman of the Year are used for:
- Research to advance targeted therapies and immunotherapies that are saving thousands of lives;
- Blood cancer information, education and support for patients;
- Policies that ensure patients have access to blood cancer treatments
At Conrad Siegel, Azeles is committed to helping families achieve their financial dreams. She works holistically with each one of her clients to explore their current financial situation and, craft the process for them to reach their goals.
Outside of her work at Conrad Siegel and being a mother, Azeles stays involved and helps educate her community through her involvement with the United Way’s Women’s Leadership Network and Investment Committee for The Foundation for Enhancing Communities (TFEC). She has also been featured in the media on ABC27, FOX43, WITF, and Forbes.
This is a question we often hear people ask – is now a good time to invest? Sometimes it is asked after the market has had a good run and is sitting at an all-time high. Other times it comes up when the market has been through a significant downturn.
So, what’s the answer? If you are truly a long-term investor, it’s always a good time to invest. Should the market be higher in 10 years from now? Yes. What about 20 years from now? Absolutely. Let’s look at some data points that should be meaningful in understanding if now is a good time to invest.
When the stock market hits an all-time high, the media loves to talk about it and investors often feel like they will not have strong gains moving forward. However, the data says otherwise. The historical data indicates that over 1, 3 and 5 year periods after the market hits an all time high, the average subsequent performance is actually quite good. These are annualized (i.e. – average annual) returns and are quite strong.
Let’s also look at the average performance of the stock market after the market endures losses of 10, 15 or 20%. This study shows that US stocks have generally delivered strong returns over the following 1, 3 and 5 year time periods following a steep decline. In nearly all cases, the subsequent performance is above the long-term average annual return of equities.
So what have we learned? If currently invested, sticking with your plan helps put you in the best position to capture the recovery. If sitting in cash and waiting for the best time to invest, often we end up waiting well past the optimal point in an effort to capture perfect timing. Data suggests it’s impossible to time the market, so investing either via a lump-sum or gradual dollar cost averaging approach is often the most prudent strategy when investing a cash position.
There is a lot of talk about inflation these days. Indeed, there are many economists and policymakers who are on national TV or writing articles online about how they are forecasting higher inflation through the rest of the year. They argue that with interest rates being so low, so much Federal stimulus money flowing through the economy, and the economy emerging from a pandemic, prices will rise faster than many people expect. However, let’s take a step back and review what exactly inflation is, how it affects the economy, and what can be done about it.
Inflation is the general rise in prices in an economy. Its presence typically means that an economy is growing, especially when inflation is accompanied by rising wage growth. The 2% rise in milk prices when you go to the grocery store won’t matter as much to you if your wages have kept up. Supply and demand for goods and services are in relatively good equilibrium. An increase in inflation doesn’t mean that prices for all goods and services are rising in unison, just that a “basket” of these have shown price increases overall.
It makes sense then that the amount and rate of change of inflation matters. When inflation is low and stable, wages have an easier time keeping up, and consumers can make adjustments to their budgets relatively easily to combat rising prices. The FED has come out in the last year saying that they are targeting an “average” of 2% inflation, meaning that continued they are okay if inflation runs higher for a time, just so the average is about 2%. This rate of inflation, in their eyes, means that the economy is in equilibrium, with prices rising just enough so that the economy can grow at a sustainable rate. However, this has been quite the difficult task over the last ten years:
As mentioned, rising inflation numbers are typically synonymous with a growing economy (if it’s not, it’s called stagflation, where there is inflation but no growth in the economy), and therefore are also synonymous with rising interest rates, mostly in the long-term end of the curve. When inflation expectations rise, longer-term yields typically rise along with them. This can play havoc in the bond market. Rising rates and inflation mean that the purchasing power of each coupon (interest) payment an investor receives has declined.
In addition, those with longer duration bonds in their portfolios will see larger price declines as rates rise. This is typically a short-term phenomenon though. Looking back over the last ten years, there have been two times when rates rose dramatically over a short period. Both times, the Barclays U.S. Aggregate Bond Index, a benchmark that tracks intermediate-term bonds, bounced back in the year after the dramatic rise ended:
This time around, the 10 year yield bottomed on August 4, 2020. Since then, the Barclays U.S. Aggregate Bond Index is down 3.47%.
With both inflation and inflation expectations rising, then, why is the FED sticking to the original script and forecasting no rate increases until 2023? The FED has a dual mandate of price stability and maximum sustainable employment. As mentioned, they came out last year with an updated inflation goal of an “average” of 2%. This means that they will allow inflation to run hot (over 2%) for a time before considering raising their benchmark rate. While current inflation is approaching this 2% target, they still are not worried. Why? There is still considerable slack in the jobs market despite the unemployment rate falling by over half since the pandemic started: The economy has yet to regain over 9 million jobs lost from the pandemic.
The FED sees this and thinks that with this much slack in the jobs market, price pressures due from rising demand may be transitory due to short-term stimulus from the Government. Inflation can be a good thing, especially when it’s not volatile and it’s expected. However, when inflation runs too high, or when there are unexpected shocks, that can cause mayhem in markets. The FED’s job is to manage this inflation risk, taking into account many different factors, hopefully smoothing out any volatility that could arise.
There is certainly some pain being felt in portions of the markets with rates rising. We have already seen bond funds posting negative returns due to the increase in rates and the low starting point. However, it is also not desirable for investors to earn close to a 1% nominal yield on their bonds in the long-run. Certain parts of the equity markets that increased dramatically on the backdrop of low interest rates have already started to see a pull back with rates moving north. However, this could be viewed as a healthy correction and other parts of the markets that did not have the same large rally in 2020 are showing some stronger performance. We don’t yet know the length and magnitude of this current rising rate environment, and inflation certainly can be problematic. However, it is important to know that higher rates and inflation expectations can be a good thing, especially when accompanied by strong economic growth, which is what we are seeing now as we emerge from this pandemic. A historic recession and unprecedented fiscal/monetary response is likely to result in a recovery that has its stressful and uncertain moments. But as always, we believe it is important to keep focused on a strategy that matches your time
Many investors are focused on the “when”, “where”, and “how much” questions when it comes to retirement. Much of financial planning is focused on these questions too. In this column, we focus on other important items to consider in the years before retirement. These strategies may make a positive difference as you embark on financial freedom and security.
If you die without proper estate planning, it could create unnecessary anxiety for those left behind and needlessly waste a portion of your assets on taxes, attorney, and probate fees. Have a lawyer review your will, account titling, powers of attorney, medical directives, and beneficiary designations to make sure everything is up-to-date and appropriate for your stage in life. You want to be certain that you and your beneficiaries are properly protected. Knowing that you are prepared should provide peace of mind.
Organize Necessary Documents
Now that your documents are up-to-date, do your loved ones a favor and organize it all in one place. Conrad Siegel has developed a Personal Roadmap to help with this task. Also, sharing a duplicate set of documents with a trusted family member or attorney is a good idea. Contact your Conrad Siegel Investment Consultant or e-mail firstname.lastname@example.org to request a copy of our Personal Roadmap document.
Health Care Insurance
Medicare begins at age 65. If you plan to retire before 65, make sure you understand your health coverage options and costs. Even after Medicare begins, some costs are not covered. For that reason, you will want to investigate Medicare supplement plans that fill in the “gaps”. The Medicare program is complex. Applying late may cause delayed benefits or increased premiums. Make sure you know the rules for your situation. You may also want to consider long-term care insurance.
Take on debt while working
As a rule of thumb, large debts should be avoided for most retirees, but there are circumstances where new debt can make sense, such as financing a new home for retirement or an RV for traveling. Why now? The loan application and qualification process will be easier while you still have earned income. You may be able to negotiate lower interest rates and better terms if you have a solid credit score and low overall debt.
Use vacation time to “test drive” retirement
Make a list of the areas you might consider moving to during retirement and use your vacation time while you are still working to visit them. If you enjoyed it in the winter, go back in the summer as well. Who knows, it might end up becoming your future home.
If you plan to move or downsize in retirement, then get your home ready now. Clear the clutter, complete the repairs, and update whatever is necessary to tip the sales process to your advantage.
Retirement planning is not a DIY project
Planning for financial independence is not a do-it-yourself project. Work with your Conrad Siegel investment consultant to make sure your financial plan is up-to-date. You have saved your whole working career for retirement, you do not want to cut corners as you approach the home stretch.
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Conrad Siegel’s Pennsylvania offices were abruptly closed on March 19, 2020, under the order to close all non-life sustaining businesses in the state. A few days later, on the 23rd of March, the S&P 500 Index bottomed out after a devastatingly fast decline of 34% from its high in February. The world was in a state of disarray and nobody knew what tomorrow would bring.
A year later, restrictions are still in place but there is a renewed sense of hope that we will soon be able to put the fears of virus the behind us. That we will once again be able to spend time with family and friends without that worry that we may be contributing to the spread. That we can all return to work and those that lost jobs will soon find a promising opportunity. That small businesses will experience renewed foot traffic and not have to contemplate closing their doors.
As we all anticipate these things, the word “NORMAL” has been the most overused word of the past 12 months. We cannot help but look forward to better times. Financial markets, which are a forward-looking indicator, have recovered and surpassed even the most optimistic projections from a year ago. So, what lessons have we learned from the past year while seeking out the new normal?
Emergency funds: We should always be prepared for emergencies. Building an emergency fund is one of the first steps toward achieving financial success and stability. We typically recommend saving 3-6 months’ worth of expenditures in a money market account for quick and easy access. Encourage your loved ones to start saving, no matter how long it may take to build this fund, so they will be prepared for those times they don’t see coming.
Life insurance: Speaking of the unexpected, the pandemic is a good reminder that risk management is a pillar of financial planning. While death is not an easy topic to think about and plan for, the necessity of life insurance to provide for our family if the worst happens cannot be ignored. There are a lot of products out there and we typically recommend certain types over others, so reach out if this is a topic you would like to review or if you would like us to make an introduction to a trusted agent.
Estate planning: Piggybacking on the last topic, let’s not forget about the importance of having wills and estate planning documents in place and up-to-date. Procrastination is common in this ever important area. If you do not have a will, Power of Attorney, and health care directives, do not delay in setting up an appointment with an estate planning attorney. Once again, we are happy to provide referrals in this area. Finally, don’t forget to check your beneficiary designations.
Bear markets have always come to an end. But, knowing that does not make it any less frightening when watching markets drop. Recency bias causes humans to have an affinity with recent events over historic ones. When financial markets are tumbling, this bias causes us to believe the recent past will continue into the future as we hear calls that “this time is different.” Reacting to this fear and impulse in the early spring of last year could have caused you to miss out on the rapid ride up the markets experienced despite many predicting further turmoil.
Long-term investing takes discipline. We have all heard the stories of market-timing and stock-picking that promise a fantasy of riches. Speculation is not long-term investing, and often these stories do not end happily ever after. This is why Conrad Siegel believes in investing in a broadly diversified portfolio that you feel comfortable sticking with regardless of market conditions, what you read in the headlines, or hear in the news. Your strategic asset allocation, or mix of stocks and bonds, should be based on your risk tolerance levels and your financial goals to provide you with a level of comfort even when a global pandemic has been declared.
Please do not hesitate to reach out if you would like to review any of the financial planning aspects discussed above.
We want to make sure you are confident in your future, knowing that you planned for the unknowns ahead. Here’s to looking forward to normal!
Conrad Siegel’s Tracy Burke, CFP®, ChFC® and Catherine Azeles, CFP®, RICP® share an overview of what’s happening in the investment world. This short video reviews what’s currently driving the markets, what we can expect moving forward, and what it all means for you.
Nobody likes to think about death, but yet we all have to face it sooner or later. The grief that dominates us when a loved one passes away can be immensely overwhelming. Then to make matters worse, the survivors need to figure out how to best move forward and settle the estate and financial affairs. Below is a checklist of estate items that need to be taken care of after a loved one passes away. Many of these tasks need to be handled by the executor of the estate, which would be named in the deceased’s estate planning documents.
Hire an estate settlement attorney: This may be the estate planning attorney of the deceased or another law firm experienced in settling estates. This attorney should drive the process in many ways and help to install the executor.
Secure property: Make sure their home and vehicles are safe, secure and locked. Also arrange for anything that may need regular care around the home. Notify the police so they can help keep an eye on it.
Locate the original will and other estate planning documents: Depending on the nature of previous estate planning, you may need to take some documents to the city or county office to have it accepted for probate. Your estate attorney hopefully can help with this process. If a person has died intestate (without having made a valid last will), then the intestacy laws of the state where the person lived will determine who will inherit their property; probate is still typically required.
Locate important personal documents: These may include driver’s license, social security card, passport, birth certificate, divorce decree, marriage license, property deeds, contracts and military separation papers among others.
Access safe deposit boxes at the bank: While these are less common, some people still have these boxes. Contact the bank to gain access.
Contact financial advisors, primary bank, brokers, insurance agents and accountants: Rely on these professionals to help you through the process and make it as easy as possible to wind down the estate.
Order sufficient copies of the death certificate: You may need 10 or more certified copies, depending on their financial activities. The funeral director usually will take care of ordering these.
Notify the person’s employer (if applicable): Work with the employer about any pay owed, life insurance and other benefits (pensions, etc.).
Set-up an Estate Bank (Checking) Account at the bank: This will receive and distribute funds that flow through the estate and allow the executor to pay bills.
Have the post office forward the mail: This will help to identify bills that need to be paid and accounts that may need to be closed. Pay the bills on time.
Contact the Social Security office: Do this regardless if the person was already receiving benefits by calling 1-800-772-1213. There may be survivor benefits or possibly a small lump-sum benefit. If the person was receiving benefits, they will need to discontinue the monthly payments.
Look into veterans’ benefits (if applicable): Call the VA at 1-800-827-1000 or check out their website.
Notify all financial institutions and utility companies: This includes but is not limited to banks, investment companies, mortgage companies, credit card companies, and insurance companies in addition to all of the utility companies providing service. The estate settlement attorney will guide you on how to wrap up financial accounts. You may need to provide financial institutions with either an official death certificate or copy of one. Be sure to close outstanding credit cards. For financial accounts, you will need the date-of-death value and for taxable investment accounts, you will need to request a step up in basis to the date-of-death value.
Insurance policies: Find out if the deceased had any life insurance policies – work with the insurance agent or company to have these paid out. Cancel other insurance coverage – this may include health insurance, homeowners/renters insurance (after the property is sold) and car insurance among others. If on Medicare, the Social Security office should inform Medicare in regards to parts A and B. Contact the insurance company that provided any supplemental Medicare coverage to cancel.
Try to identify online accounts and activity: Closing these to prevent fraud or unauthorized activity is important. Don’t forget about social media accounts.
Cancel driver’s license: This can help to prevent identity theft.
Make sure final tax returns are prepared: A final income tax return as well as an estate return will need to be filed, usually by an accountant. Generally, the estate tax return is due 9 months after the date of death – a 6-month extension can be requested.
TIPS for surviving spouse
Don’t make emotional decisions: When under emotional stress, many people rush into rash decisions they later regret. Take your time and make sure all decisions are the best ones.
Ask for help: Rely on other family members or friends to help you through the process. Lean heavily on a trusted financial advisor, who can often help with tracking down financial institutions and coordination with the estate attorney.
Revisit your own estate planning: When a spouse passes away, your own estate planning will need to be updated to make sure your wishes for your own estate are eventually followed.
Estate Planning is about more than the preparation of vital documents:
- Durable Power of Attorney
- Healthcare Proxy/Power of Attorney
- Beneficiary Statements
These documents may not always feel like pressing needs or be particularly fun to think about, but for the sake of your loved ones, it’s important to be prepared.
We tend to put these items off in light of more immediate concerns or expenses, but life events are unpredictable. This is a case of “hope for the best, plan for the worst.” Take the extra time and resources now to avoid complications later.
In addition to the legal documents, we encourage clients to consider the bigger picture.
Talk with your family about the critical issues of aging when you are still healthy. Too often families wait for a crisis before they talk, then it might be too late. Opening the lines of communication when everyone is healthy can help assure a smooth transition between the generations, preserving the family’s legacy, protecting the family’s assets, and maintaining family unity.
Questions to consider
- Would your loved ones benefit from a “family meeting” where everything is explained?
- Does your family know your funeral wishes?
- Have you made introductions to your trusted advisors (attorney, CPA, investment advisor)?
- Does your executor/executrix know about your plans and wishes? If they are a family member, do they want the job? Do they have the time and skills to manage the estate or would a corporate entity be a better choice?
- Does your Durable Power of Attorney understand your finances and the investment philosophy? Do they have easy access to your accounts and statements?
- Lastly, are there up-to-date records of usernames and passwords? Have you considered digital assets like your email account, Facebook, LinkedIn, Twitter, iTunes, etc.?
Health Care Wishes
Perhaps you feel like your finances are in order, but you don’t know where to start with health care.
Where would you like to receive care:
- In your home for as long as possible
- Skilled care facility – How will this be paid for?
3 resources to help get you started
- Five Wishes® is a document that has been created to help people more effectively communicate their intentions when they get seriously ill. Please request a copy from your Conrad Siegel consultant
- The Conversation Project also explores end of life planning, helping to organize one’s thoughts about their needs and wishes. Please request a copy from your consultant
- “File of Life” is a tool to establish one central location to maintain all your important medical data and emergency contacts. http://www.folife.org/
Medicare is a health insurance program operated by the federal government and benefits are available to qualifying individuals 65 or older.
Parts of Medicare
Deductible, coinsurance and copayments may apply to all of the below.
- Covers inpatient hospital stays, some skilled nursing facility, hospice and eligible home health care.
- No premium if you qualified for enough credits via the FICA Medicare payroll tax you paid during your working career!
- Helps pay for some services and products not covered by Part A, generally on an outpatient basis.
- Monthly premium is based on income.
Medicare Advantage Plans
- Variety of supplemental plans to Parts A & B offered through Medicare contracted private insurance.
- Separate monthly premium.
Prescription drug plans
- Helps pay for prescription drug costs.
- Separate monthly premium.
- Private supplemental policy that fills the “gaps” within the Medicare Part A & B coverage, including some of the deductible and coinsurance expenses.
- Separate monthly premium.
If Still working and can still receive medical insurance via employer:
Employer has fewer than 20 employees:
- Medicare is the primary provider
- Sign up for Medicare up to 3 months prior to turning age 65 at medicare.gov
Employer has 20 or more employees:
- Employer plan is the primary provider if IRS defined group health plan.
- Can sign up for Part A (premium-free) when you turn age 65.
- If you are on spouse’s employer plan, ask employer if non-working spouses can remain on plan after eligibility for Medicare.
- Because Medicare Part B requires a monthly premium, you may choose to delay enrollment in this plan while you still are covered under you or your spouse’s employer’s plan as an active employee.
- If you retire past the age of 65 and are coming off your employer’s group health plan, you have an 8-month special enrollment window in which you can sign up for Medicare Part B. If you do not enroll during this window, you may have to wait for coverage and will be subject to a penalty for late enrollment.
If Retired and Medicare will be the primary medical insurance:
For those already receiving Social Security retirement benefits
- You’ll automatically get Part A & B starting the first day of the month you turn 65. You’ll receive your Medicare card in the mail about 3 months before your 65th birthday. If you don’t want one or both parts, contact Medicare.
- Make decisions on other health coverage (Parts C, D, Medigap, or Supplemental
For those not receiving Social Security retirement benefits
- Sign up for Medicare up to 3 months prior to turning age 65 at medicare.gov