Regret over Brexit?

In the aftermath of the United Kingdom’s decision to leave the European Union, financial commentators have predicted all kinds of fallout, including Scotland’s secession, generational disputes and uprisings, a cross-border exodus of worker talent and companies, economic recession, deficits in government budget and pension fund payouts and a real estate crisis.

Although there are benefits to living in an integrated global economy, a downside is when one nation experiences a drop in the markets, the consequences could spread far beyond its borders.1

Some of the U.K.’s problems could impact investors, including those all the way across the globe in America. We are watching how this situation unfolds, and in the meantime, if you have any financial concerns, we are here to help you address them.

Fortunately, the financial news isn’t all negative. University of Pennsylvania finance professor Jeremy Siegel believes Brexit will create plenty of buying opportunities for American investors, projecting U.S. stocks could rise 10 to 12 percent by the end of 2016.2 Other analysts were surprised there was less of an immediate sell-off due to Brexit than expected, particularly in the credit markets.3

Still others postulate whether the exit will actually happen, given the multitude of complex issues, the widely anticipated negative impacts and the fact that many British citizens now say they doubt the U.K. will leave the EU despite the referendum vote.4

It’s difficult to imagine a scenario in which a citizen vote of that magnitude would not be implemented. With a parallel to many of the current political and economic debates going on in the United States, immigration policies and trade agreements hang in the balance. As time passes, these issues will slowly be addressed by new leadership, but the effects could be extensive and long lasting. Should the negative economic impacts wear on the British populace, they may find themselves regretting their perceived independence.5

Only time will tell, but as some social media commenters have observed: You Brexit, you buy it.

Content prepared by Kara Stefan Communications.

1 Peter Vanham. Knowledge@Wharton. June 30, 2016. “The Case for ‘Regrexit’: Why Britain Won’t Really Leave the EU.” http://knowledge.wharton.upenn.edu/article/case-regrexit-britain-wont-really-leave-eu/. Accessed July 1, 2016.

2 Knowledge@Wharton. June 29, 2016. “Jeremy Siegel: The Impact of the Brexit Vote on Markets.” http://knowledge.wharton.upenn.edu/article/jeremy-siegel-the-impact-of-the-brexit-vote-on-markets/. Accessed July 1, 2016.

3 Katie Linsell. Bloomberg. July 1, 2016. “A Week Later, Credit Investors Are Shrugging Off Brexit Anxiety.” http://www.bloomberg.com/news/articles/2016-07-01/a-week-later-credit-investors-are-shrugging-off-brexit-anxiety. Accessed July 1, 2016.

4 BBC.com, July 1, 2016. “Brexit: ‘Most would not change’ vote on EU, poll suggests.” http://www.bbc.com/news/uk-politics-uk-leaves-the-eu-36689608. Accessed July 1, 2016.

5 Jacob Funk Kirkegaard. Peterson Institute for International Economics. June 27, 2016. “After Brexit: Chaos and Buyer’s Remorse?” https://piie.com/blogs/realtime-economic-issues-watch/after-brexit-chaos-and-buyers-remorse. Accessed July 1, 2016.

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

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

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Where Do We Stand as a Country?

263If there’s one phrase that’s entered the mainstream lexicon as the 2016 election approaches, it’s “Let’s make America great again!”1

Every president, regardless of party, vows to make the country better in some way, but as a whole, has America lost ground?2 Are we really not great anymore?

In the big picture, our country is still relatively new. Many world powers had been around for centuries before the U.S. was colonized. But to put the rapid growth we enjoyed in perspective, it may be easier to look at things on a smaller scale.

For example, you could say our nation’s history is similar to the booming start-up Birchbox. This company made great strides in its early years, with its clear business model catered to consumers’ discoveries of new beauty products. However, the challenge now is to sustain that growth once it hits its mid-life crisis in the business lifecycle.3

The same can be said for young athletes, particularly in individual sports like golf or tennis. A new talent arises, hungry and fearless. He or she may be able to compete at a high level and defeat far more experienced veterans. However, after spending more time on the professional tour, competitors will become more familiar with the strengths and weaknesses in his or her game.4

This creates an interesting parallel with individual investment strategies. Sometimes you may buy into an investment and the holding soars right out of the gate. But eventually its performance could be tempered by market and economic forces. This is natural; no investment is immune. One key criterion is how well your investment choices can weather the good and the bad times.5 That’s where we can offer assistance. We can help you stay focused on your long-term goals and work with you to design a specific plan using a variety of insurance and investment products that help you work toward your desired financial future.

When you compare the U.S. in a historical sense, we’re really just starting to hit middle age. Of course we’re going to hit rough patches and lose ground according to some metrics; it’s only natural. Our older cities are now reaching the age where reinforcement and replacement of infrastructure is needed, and some of our policies may no longer be aligned with modern society.6 No matter who you vote for in November, there will be changes implemented that hopefully will keep the U.S. on an upward trajectory.

Content prepared by Kara Stefan Communications

1 Conor Friedersdorf. The Atlantic. June 15, 2016. “The Presidents Who Made America Great.” http://www.theatlantic.com/politics/archive/2016/06/where-donald-trump-fits-among-the-leaders-who-made-america-great/486890/. Accessed June 23, 2016.

2 Karsten Strauss. Forbes. May 30, 2016. “The World’s Most Competitive Countries 2016: U.S. No Longer No. 1.” http://www.forbes.com/sites/karstenstrauss/2016/05/30/the-worlds-most-competitive-countries-2016-u-s-no-longer-no-1/#3564677e3fea. Accessed June 23, 2016.

3 Ranjay Gulati and Alicia DeSantola. Harvard Business Review. March 2016. “Start-Ups That Last.” https://hbr.org/2016/03/start-ups-that-last. Accessed June 23, 2016.

4 ATPworldtour.org. June 18, 2016. “Zverev Dethrones Federer in Halle, Sets Mayer Final.” http://www.atpworldtour.com/en/news/halle-2016-saturday-federer-zverev. Accessed June 23, 2016.

5 Dmitriy Fomichenko. Los Angeles Times. June 19, 2016. “7 important financial steps to take in your 30s.” http://www.latimes.com/business/la-fi-retirement-savings-20160618-snap-story.html. Accessed June 23, 2016.

6 International Monetary Fund. June 22, 2016. “Article IV Consultation with the United States of America: Concluding Statement of the IMF Mission.” http://www.imf.org/external/np/ms/2016/062216.htm. Accessed June 23, 2016.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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

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Potential Models for Retirement Income

As important as it is to plan your retirement goals, you never know what variables could force you to change course. Fortunately, there are a variety of options that can keep speed bumps from running you off the road to retirement.

One of the most fluid aspects of retirement is the date. Some people have no choice but to enter retirement early as a result of a layoff, health problems or dependent care requirements. Others retire on schedule and then later decide to go back work. Still others transition into retirement slowly, cutting back on work hours or leaving a full-time job to take on part-time work.

These paradigms make the task of designing a retirement income plan more complex in some ways, but in other cases can remove some of the pressure of having to build a fully funded nest egg before retiring.

In recent years, nearly half of retirees’ income has come from a combination of Social Security and private- and public-sector pensions. The next largest resources are IRAs and tax-deferred retirement accounts.1

Whether your retirement is 15 years from now or right around the corner, there are a variety of strategies available to help put you on the path toward your retirement goals. One recent study found that retiree income security can be improved depending on the withdrawal strategy, or strategies, deployed.2

Kathy Kristof, a financial journalist, says one approach is to allocate reliable income sources, such as a pension, Social Security benefits and immediate annuities, to pay for fixed retirement expenses, while assigning other financial vehicles to discretionary expenses — a model she refers to as the “bucket” formula.3

Other strategies include withdrawing a set percentage from your retirement savings each year,4 building a well-diversified portfolio designed to deliver an acceptable range of returns to provide for long-term retirement needs and/or relegating a portion of your portfolio to assets that offer growth opportunity throughout retirement.

When you’re setting up an initial strategy, it’s also important to consider how and when you’ll  draw income once you’ve retired. The tax treatment of withdrawals can vary significantly in retirement and may be impacted by any current income you earn. Taxable accounts, tax-deferred retirement accounts, tax-exempt retirement accounts and even required minimum distributions should all be considered in determining the tax impact of retirement withdrawals.5 Individuals are encouraged to consult with a qualified tax professional before making any decisions about their personal situation.

Each of these retirement income models should be assessed in conjunction with your individual needs, tolerance for risk and time horizon. Remember that investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Please give us a call to discuss your unique situation and how we can design a specific plan of action that helps you work toward your financial independence.

Content prepared by Kara Stefan Communications.

1 Anna Madamba, Stephen Utkus and John Ameriks. Vanguard. May 2014. “Retirement income among wealthier retirees.” https://personal.vanguard.com/pdf/CRRRIP.pdf. Accessed June 17, 2016.

2 Marlene Y. Satter. BenefitsPro. June 13, 2016. “Retirement income security depends on goals, strategies.” http://www.benefitspro.com/2016/06/13/retirement-income-security-depends-on-goals-strate?slreturn=1466189057. Accessed June 17, 2016.

3 Kathy Kristof. Kiplinger. Feb. 2015. “How to Invest After You Retire.” http://www.kiplinger.com/article/investing/T052-C000-S002-how-to-invest-after-you-retire.html. Accessed June 17, 2016.

4 Walter Updegrave. Money. April 20, 2016. “3 Ways to Be Smarter About Drawing Retirement Income from Your Nest Egg.” http://time.com/money/4296814/smarter-retirement-withdrawal-strategy/. Accessed June 17, 2016.

5 Fidelity. April 27, 2016. “Four tax-efficient strategies in retirement.” https://www.fidelity.com/viewpoints/retirement/tax-savvy-withdrawals. Accessed June 17, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal.

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

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Some Ways to Account for Inherited Assets

As difficult as it is to lose a loved one, it would be nice if the financial situation sorted itself out after a death.

Unfortunately, receiving the assets of a deceased spouse or family member can be a complex process. Most people have their money stored in a variety of different financial vehicles — checking and savings bank accounts, CD and money market accounts, investment accounts, employer retirement plans and pensions, life insurance policies, annuities and even real property.

So, how do you claim assets that are passed on to you? And should you just leave it where it is or transfer it to an account or policy in your name?

In the case of bank accounts, it helps if the decedent had a “payable-on-death” (POD) beneficiary form on file with the bank. If not, those assets will have to go through probate before they can be released. If the bank accounts were held in a living trust, the funds will be transferred to the beneficiary named in the trust and will avoid probate.1

If you inherit an IRA account, options vary based on whether you’re the account owner’s spouse. If you are the spouse, you can assume the IRA as your own, inherit the IRA, or disclaim the IRA. If you are not the spouse, you may either disclaim the IRA or inherit the IRA in which you would be required to take a required minimum distribution (RMD).2

If you inherit a non-retirement investment account, you can either transfer the proceeds from the inherited account into a new account in your name, or you can disclaim it and it will then pass to the other primary beneficiaries or, if none exist, to any secondary beneficiaries. If you disclaim an account, you can’t change your mind later.3

If you inherit a house, you don’t have to pay income taxes on its value. However, if you decide to rent the house, you will have to report the rent payments you receive as part of your taxable income each year. Therefore, you must pay income tax on the payments you receive.4

To claim life insurance proceeds and annuity benefits, each beneficiary needs to complete the insurance company’s claim form and submit it with a certified copy of the death certificate.5 Interestingly, many life insurance proceeds are never paid out because the owner didn’t tell his or her beneficiaries about the policy before dying. If you suspect this may have happened, visit MissingMoney.com (a database of governmental unclaimed property records) to conduct a search.6

Everyone’s financial situation is unique, so you could face any number of scenarios when claiming assets following the death of a spouse or loved one. If you want to prepare in advance to help simplify the process for your beneficiaries down the road, feel free to give us a call to review your current financial vehicles to ensure a beneficiary is listed.

Content prepared by Kara Stefan Communications

1 Mary Randolph. Nolo.com. 2016. “What Happens to Bank Accounts at Your Death?” http://www.nolo.com/legal-encyclopedia/what-happens-bank-accounts-your-death.html. Accessed June 10, 2016.

2 Vanguard. 2016. “I’m inheriting an IRA.” https://investor.vanguard.com/inherit/ira. Accessed June 10, 2016.

3 Vanguard. 2016. “I’m inheriting an account that’s not an IRA.” https://investor.vanguard.com/inherit/nonretirement. Accessed June 10, 2016.

4 Mary Randolph. AllLaw.com. 2016. “Must You Pay Income Tax on Inherited Money?” http://www.alllaw.com/articles/nolo/wills-trusts/must-pay-income-tax-inherited-money.html. Accessed June 10, 2016.

5 Mary Randolph. Nolo.com. 2016. “How Beneficiaries Can Claim Life Insurance and Social Security Benefits.” http://www.nolo.com/legal-encyclopedia/beneficiaries-claim-life-insurance-32433.html. Accessed June 10, 2016.

6 Annie Shalvey. WPRI-12. May 16, 2016. “RI treasurer’s office: Thousands owed life insurance benefits.” http://wpri.com/2016/05/16/ri-treasurers-office-thousands-owed-life-insurance-benefits/. Accessed June 10, 2016.

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

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal.

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

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Boomer Boom or Boomer Bust?

The phrase “boom or bust” refers to a scenario of great prosperity or economic growth followed suddenly by a period of decline. Some economists suspect the aptly termed “baby boomers” could potentially create just such a phenomenon during their twilight years.

As the largest demographic group in history, baby boomers have been an important economic force over the past 70 years. Their influences include the suburbanization of cities, women breaking into corporate America and an overall prosperous period of consumer demand yielding great leaps in technology, health care and education — all of which also have impacted the securities markets. Now, with this massive population in or approaching retirement, will the drop off in the workforce and drain of public entitlement programs create additional challenges?

Putting aside the generational impact of baby boomers for a moment, we are interested in the financial health and well-being of our individual clients. If we can help you create a retirement income strategy you can feel confident about, please give us a call.

Presently, baby boomers hold the highest percentage of net worth among Americans and account for 40 percent of consumer demand.1 This fact, coupled with trends for a more active lifestyle and longer lifespan, means that baby boomers will continue driving demand in consumer markets, particularly with regard to discretionary spending. Naturally, the health care and long-term-care industries are likely to continue benefiting from this generation as well.

Some analysts see value stocks on track for significant growth due to boomer demand for conservative capital appreciation. Value stocks have begun to outperform this year due to relatively low prices (compared to growth stocks) and a better global outlook than in recent years.

According to analysts at Merrill Lynch, value stocks typically perform best when expectations for economic growth are on the rise and there is less fear of recession. The wealth manager observed that for value stocks to continue to outperform, corporate profitability needs to improve, particularly return-on-equity at value firms.2

Other investments that appear to benefit from boomers’ desire for conservative growth include low-volatility ETFs, which have substantially increased assets under management this year.3

Another theory posits that, as boomers retire and start taking distributions from their portfolios, market valuations will shrink. The concern is that the Gen X population — born after the baby boomers — is not large enough or wealthy enough to absorb the sell-off, which will drive down the value of those investment shares.4

Nor are succeeding generations plentiful enough to purchase the 5.5 million small businesses owned by baby boomers, currently valued at $10 to $15 trillion. Without buyers, a boomer relying on the sale of his or her business to fund retirement could experience a rude awakening.5

Baby boomers also continue to impact residential real estate. One strong trend is that empty nesters ae migrating back to the metro areas they abandoned for the suburbs 40 years ago. Boomers are now finding the restaurants, shops and cultural venues of walkable cities and college towns as appealing for their retirement years as the mainstay southern climates.6

Content prepared by Kara Stefan Communications

1 Jeff Reeves. USA Today. April 2, 2016. “The best investment for Baby Boomers may be in themselves.” http://www.usatoday.com/story/money/personalfinance/2016/03/30/best-investment-baby-boomers-may-themselves/81986134/. Accessed June 3, 2016.

2 Dennis Stattman. Merrill Lynch. April 2016. “The Monthly Letter.” https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/GWIM-CIO-Monthly-Letter-April-2016.pdf. Accessed June 3, 2016.

3 Yakob Peterseil. Bloomberg. May 31, 2016. “Boomers Fueling a Boom In Low-Volatility ETFs.” http://www.bloomberg.com/news/articles/2016-05-31/boomers-fueling-a-boom-in-low-volatility-etfs. Accessed June 3, 2016.

4 Lawrence Hamtil. ValueWalk. May 15, 2016. “Will Aging Baby Boomers Doom the Stock Market?” http://valuewalkposts.tumblr.com/post/144395831485/baby-boombers-stock-market. Accessed June 3, 2016.

5 Donald Feldman. Business2Business Magazines. April 1, 2016. “Boomer Bust: Why exit planning is becoming more critical than ever.” http://www.business2businessonline.com/Article/1689. Accessed June 3, 2016.

6 Clare Trapasso. Realtor.com. May 17, 2016. “Reverse Migration: How Baby Boomers Are Transforming City Living.” http://www.realtor.com/news/trends/why-more-baby-boomers-are-moving-back-to-cities/. Accessed June 3, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal.

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

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