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An Update on the Coronavirus Situation

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

On Thursday, March 5, 2020, the Dow fell 969 points – just the latest in a week of wild swings.1  While monitoring the situation, a headline caught our eye: 

“Dow tumbles nearly 1,000 points again, because stocks can’t figure out coronavirus.”2  

To us, this headline illustrates what the media often gets wrong about investing.  But before we dive into that, let’s review how the coronavirus (COVID-19) is impacting the markets.  

A wild week

In terms of pure numbers, the first week of March has been one of the wildest in recent memory.  In fact, the Dow had two of its best days ever on March 2nd and 4th…but two of its worst days ever on March 3rd and 5th. 2  Writers have been comparing the stock market to a rollercoaster for decades, but this takes the analogy to a whole new level.  

It’s not hard to understand why.  The coronavirus outbreak – which as of this writing has spread to over 100,000 people, with over 3,400 fatalities – is putting a major crimp on business activities around the world.3  Global supply chains, which are the networks between a company and its suppliers, have been dramatically affected. As a result, some of the world’s largest corporations have warned shareholders that they may not be able to reach their quarterly profit estimates.  Industries like travel and transportation, which depend on the movement of people and goods, have seen business plummet.  This in turn has impacted the energy industry, as less travel and transportation mean less demand for oil.   

So.  Coronavirus is definitely taking a toll on global markets.  The question economists are struggling to answer is, “How will coronavirus affect the global economy?”  

Here in the United States, consumer spending is one of the main drivers of our economy.  There have been over two-hundred confirmed cases of COVID-19 thus far.  That’s a small number in the grand scheme of things.  Economists’ concern, though, is that the virus may spread, causing people to stay home and consumer spending to slow dramatically.  Nations with far more cases, like China, South Korea, and Italy, are already seeing slowdowns.  The worst-case scenario, according to some analysts, is that economic growth for 2020 could be cut in half if the virus continues to spread.4  Should that happen, some nations may well experience a recession.  

The Federal Reserve responds

For weeks, analysts expected the Federal Reserve would act at some point.  That’s exactly what they did on Tuesday, March 3rd, when the Fed announced they would cut interest rates by 0.5%.5  The Fed figured lower interest rates would prompt more spending and lending.  Think of it as giving the economy a dose of Vitamin C.  

But the markets fell anyway.  

There are a few reasons for this.  While a rate cut was expected, the Fed acted much sooner than many anticipated.  So, rather than prompt enthusiasm, it instead prompted concern.  “If the Fed feels like they have to cut rates to keep the economy going,” the thinking goes, “what does that say about the economy?”  

Then, too, there’s only so much that lower interest rates can actually do.  To be frank, the Fed has already spent most of its ammunition on this front.  Interest rates have been low for years and have only gotten lower lately.  Furthermore, interest rates can’t fix global supply chains, or replace lost business.  They won’t fill seats on airlines or keep the machinery running in hard-hit factories.  Nor can they stop coronavirus from spreading.  

Viruses are no respecter of borders or laws; they’re certainly no respecter of lower interest rates.

Headline-driven investing

Just typing those words makes us shudder!  Headlines are one of the last things that should drive investing, but that’s where we are right now.  The proof is in what happened on Wednesday, March 4th.  

The night before was Super Tuesday – when fourteen states held presidential primaries.  Joe Biden won most of these states, which buoyed investors, as Biden is seen as more centrist than his main opponent, Bernie Sanders.  

What connection does Joe Biden winning have on stocks?  None right now.  It doesn’t change anything about coronavirus.  It won’t magically increase economic activity.  The election itself isn’t for another eight months!  And yet, the markets rose over 1,000 points on the back of that headline…before giving most of it back the very next day when the headlines changed.6   

Which leads us back to the headline we showed you at the beginning of this article.  

“Dow tumbles nearly 1,000 points again, because stocks can’t figure out coronavirus.”  

Look at those words again: Stocks can’t figure out coronavirus.  Stocks don’t have minds of their own, of course, so my guess is the headline really meant investors can’t figure out coronavirus.  

But here’s the thing.  For investors, there’s not much to figure out.

Economists, analysts, and pundits try to divine how today’s news will affect tomorrow.  They create projections to help banks, businesses, and politicians make decisions.  It’s a hard job, there’s no denying.

But no investor can accurately predict how bad the virus will or won’t be.  We’ve seen some commentators make claims about vaccines, or how warm weather will stop the virus in its tracks, or any of a dozen other things.  It’s all speculation.  The fact is, no one knows how long this epidemic will last, or how far it will spread.  No one knows who will win the election in November.  No one knows the future!  We can make educated guesses, but we can’t know with any certainty.  So of course investors can’t “figure out” coronavirus.  

Even if we could, the situation would likely change the next day!  

To us, the problem with the headline above is that it implies investors should be trying to “figure it out.”  But if we could, there would never be any uncertainty.  Investing would become as predictable as grocery shopping.  But investing doesn’t work like that.  That’s why we don’t make investment decisions based on predictions.  It’s why, during times of market volatility, we don’t chase our own tail, trying to time the markets or make risky bets based on what we guess might happen.  

In other words, we don’t need to “figure out” coronavirus.  Let’s leave that to the scientists.  Instead, all we need to do is largely what we’ve already done!  And that is:

  1. Determine what kind of investment return you needto reach your goals, and then choose high-quality investments based on the principles of supply and demand.  When demand outpaces supply, buyers are in control, and prices are likely to move upward.  When supply is greater than demand, sellers are in control, and prices tend to go down.  That’s why we don’t buy or sell based on predictions or stories.  We look at what is actually happening by examining trends.  
  2. When the market is trending upward, we focus on growing your money.  When the market trends down, we focus on preserving it.  This is done by putting strict rules in place that govern your investments.  For example, if an investment moves below a predetermined exit point, we sell.  If necessary, we can move entirely to cash if that’s what it takes to preserve your principal.

In the short term, coronavirus will probably continue to impact the markets.  The global economy will continue having symptoms.  But we don’t need to guess what the effects will be anymore than we need to guess what the weather will be like ninety days from now.  Instead, we determine the rules we need to follow to help you reach your goals, and then follow those rules to the letter.  To us, it’s comforting to know that we don’t need a crystal ball to be successful long-term investors.  We don’t need to be virus experts.  All we need to be is disciplined, informed, and prudent.  

In the meantime, we expect volatility will continue.  By the time you read these words, the headlines will have changed again.  That means the markets will have probably swung again.  That’s okay.  Because while volatility is never fun, we don’t need to “figure it out.”  We’ve already done that.  

One more thing, while we’re encouraging you to not stress over daily headlines or market swings, we understand that’s sometimes easier said than done.  After all, it’s your money!  So, if you have any questions or concerns about your portfolio, please let us know. We will always be here for you.  

Have a great week!   

1 “Stocks Close Sharply Lower as Anxiety About Virus Returns,” The Wall Street Journal, March 5, 2020.  https://www.wsj.com/articles/global-markets-follow-u-s-stocks-higher-11583376176

2 “Dow tumbles nearly 1,000 points again, because stocks can’t figure out coronavirus,” CNN Business, March 5, 2020.  https://www.cnn.com/2020/03/05/investing/dow-stock-market-today/index.html

3 “Tracking coronavirus,” BNO News, Last updated March 6, 2020.  https://bnonews.com/index.php/2020/02/the-latest-coronavirus-cases/

4 “Coronavirus is plunging the global economy into its worst crisis since 2009,” CNN Business, March 2, 2020.  https://www.cnn.com/2020/03/02/business/oecd-global-economy/index.html

5 “Federal Reserve Cuts Rates by Half Percentage Point to Combat Virus Fear,” The Wall Street Journal, March 3, 2020.  https://www.wsj.com/articles/federal-reserve-cuts-interest-rates-by-half-percentage-point-11583247606 

6 “Dow soars more than 1,100 points as market rallies off Biden win,” CNBC, March 3, 2020.  https://www.cnbc.com/2020/03/03/dow-futures-show-300-point-pop-as-early-super-tuesday-results-favor.html

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Twenty-Nine Things to Do on February 29th

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

It’s a leap year!  That means we have twenty-nine days to enjoy in February instead of the usual twenty-eight.  But the question is, what should we do with the extra day?  

Most people will probably treat the 29th like any other day.  But as financial advisors, we have a suggestion.  Why not use the extra day to do something that gets you closer to your financial goals?  

Need some ideas?  We’re happy to provide.  Here are twenty-nine things you can do on February 29th.  Of course, a few may not apply to you.  Some you may have already done.  But most are very simple, and all can make a difference in your financial health.  Our advice?  Pick just one or two of these and get them done.  You’ll be glad you did!

So, without further ado, here are:

Twenty-Nine Things to Do on February 29th

  1. Contribute to your IRA for 2019 if you haven’t already.  The maximum amount is $6,000, or $7,000 if you are over the age of 50.1
  2. Review your 401(k).  Are you contributing the full amount available – or at least enough to take advantage of any employer matching?  For 2020, the maximum contribution amount is $19,500.2
  3. Review the investments in your 401(k) account.  Read the prospectus for each fund if you haven’t already.  Ask yourself: Do you understand these investments?  Do you know why you’ve chosen them?  Are you certain they are right for you?
  4. Ask an outside professional for a second opinion on your 401(k).
  5. Ask a CPA to review whether you can make your 401(k) more tax efficient.  
  6. Review your monthly expenses.  Is there anything you can eliminate?  For example, do you really need Hulu and Netflix when you only use one?
  7. Review your New Year’s resolutions.  Are you doing what you need to do to achieve them?  
  8. Review your long-term goals.  Do you feel like you are on track to reaching them, or do they seem further away than ever?
  9. Review your various insurance policies.  Have any expired?  Are there gaps in your coverage?  
  10. Review your Will to make sure it’s up to date, especially in terms of who your beneficiaries are.  
  11. Name contingent beneficiaries on your Will if you haven’t done so already.  
  12. Review your Power of Attorney to make sure it is up to date.
  13. Review your Advanced Medical Directives to make sure they are up to date.  
  14. Conduct a household inventory.  Make a list of your possessions and document them with photos.  This can be invaluable if you ever need to file an insurance claim.  Keep one copy at home, and another in a separate, secure location, like a bank safety deposit box.  
  15. Make sure you know where each of the documents mentioned above are located.  Then, have a conversation with your family so that they know where to find them, too.
  16. Consider purchasing a high quality, fireproof safe to store your important documents in.
  17. Start a rainy-day fund for unexpected expenses or emergencies.  Ideally, your fund should have enough to cover three to six months’ worth of living expenses.  
  18. Consider signing up for an automatic savings plan, where a fixed amount of your income is automatically deposited into your account every month.
  19. Consider signing up for any automatic bill-pay and direct deposit services available to you.  They can make managing your cashflow much simpler and easier.  
  20. Balance your checkbook if you still write checks by hand!
  21. Create a Disaster Preparedness Kit for your home.*  While it may not seem like this has anything to do with finance, it does.  Should a natural disaster ever happen, the safer and more prepared you are, the less financially impacted you will be.  
  22. Create a plan for what to do in the event of a disaster and share it with your family.  
  23. Choose an out-of-town emergency contact.
  24. Share your emergency contact information with any financial professionals you work with, so they can always get in touch with you during a crisis.  
  25. If you haven’t already, get started on your taxes!  
  26. If you haven’t already, learn your Full Retirement Age.**  This is the age at which you can claim Social Security benefits without any reduction.
  27. Make a list of your top retirement concerns and questions.  Speak with a professional to get the answers and solutions you need.     
  28. Create or update your bucket list!  What do you dream of doing in life?  Where do you dream of going?  Write it all down, and then post it where you can see it every day.  Why?  Because a dream in your head is just a fantasy.  But a dream on paper is the beginning of a plan.
  29. As soon as you’re done with whatever you decided to do, go treat yourself.  It’s Saturday night!

*For more information on building a Disaster Preparedness Kit, visit www.ready.gov/kit

**To learn your Full Retirement Age, visit: https://www.ssa.gov/planners/retire/retirechart.html

1 “Traditional and Roth IRAs,” Internal Revenue Service, https://www.irs.gov/retirement-plans/traditional-and-roth-iras

2 “401(k) contribution limit increases,” Internal Revenue Service, https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

Coronavirus Market Drop

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

It started in China, then spread to South Korea and Japan.  Cruise ships have carried it; tourists have transported it.  Now it’s in Italy and Iran, Thailand and Taiwan, and more countries besides.  It has infected almost 80,000 people and been fatal to over 2,600.1  

We’re referring, of course, to the coronavirus.  

COVID-19, as scientists call it, is a new strain of respiratory virus that can cause severe pneumonia and even death.  What started as a local outbreak in the Chinese city of Wuhan has rapidly become much more, and the markets are beginning to take it seriously.  On February 24, the Dow dropped over 1,000 points, and the S&P 500 over 100, after news broke that cases have surged in Italy and South Korea.2  

Obviously, the human cost of an epidemic is more important than anything else.  But in addition to being a health crisis, COVID-19 also has the potential to create an economic crisis.  Viruses are small but insidious, and they can infect more than just people.  

They can also infect supply chains.  

This fact is what has investors – and even some of the world’s most powerful corporations – spooked.  As financial advisors, we’d like to explain why that is, as well as what we should do about it.  

The Global Economy

There’s nothing like a virus to remind us that we are all connected.  

To show what we mean, look at your phone for a moment.  In a sense, you’re holding a miniature version of the world.  The screen you’re looking at probably came from Japan.  Your phone’s accelerometer likely came from Germany; the gyroscope, from Belgium.  The wi-fi chip may have come from Mexico, or perhaps Brazil; the audio chip, from the United States.  

And your phone’s battery?  That probably came from China.3

For a company like Apple to sell you an iPhone, they rely on the work of millions of people based in dozens of countries.  That is a supply chain, one of thousands of arteries that keep the world’s economy beating.  

A chain is only as strong as its weakest link, though.  Imagine an epidemic breaks out near one link – a factory that produces widgets, for example.  Suddenly, people can’t go to work.  Manufacturing stops.  Fewer widgets are produced.  

Somewhere down the chain, another factory makes gizmos – but they need widgets to do it.  What happens when there aren’t enough widgets?  Soon, there won’t be enough gizmos, either.  

And at the end of the chain, the company that turns the widget-powered gizmos into gadgets has fewer of those to sell.  Which means they can’t reach their quarterly estimates, which means their stock price falls.  As do the stock prices of the widget and gizmo manufacturers.  

The result is a black day for the markets.  Like the one we had on February 24.  

This is exactly what’s happening right now.  With one of the world’s largest economies, China is at the center of many, many supply chains.  From electronics to blue jeans, the world relies on China for its resources and manpower.  But China is also at the center of the current outbreak, with over 77,000 confirmed cases and 2,500 deaths.1  This is why even companies like Apple and Adidas have recently admitted that COVID-19 will probably affect their bottom line.4&5 

But the story doesn’t end there.  

From Asia to Europe

The markets have long known about how the coronavirus could hamper global supply chains.  But as long as the virus seemed limited to China, investors largely shrugged it off.  That all started to change last week.           

Take South Korea – small in terms of size, but a giant in terms of industry.  On February 17, South Korea had 30 confirmed cases.6  Just one week later, there were over 800.1

Even more unnerving, to some analysists, is what’s going on in Northern Italy.  Last week, there were only a few reported cases.  As of this writing, there are over 200, mainly centered in Lombardy, where some of the world’s most important carmakers are located.1  Officials have closed schools and put multiple towns on lockdown to keep the virus from spreading, but the fact that COVID-19 is now established on an entirely different continent is what’s causing fear.  

Another cause of fear is that it’s not just supply chains and manufacturing being affected.  Tourism, airlines, energy –many industries have seen a drop in business due to the coronavirus.  And of course, the sheer fact that people have died is enough to make anyone wonder, “Should I be afraid, too?”  

Let’s answer that right now.  

Fear and financial decisions

Fear is at the heart of every market drop.  Usually, it’s fear of the unknown.  In this case, there are several unknowns for investors to contend with.  Why exactly is this virus spreading so fast?  How far will it spread?  How long will it last?  These are questions that no financial advisor can answer.

But fear, as we know, is a bad reason to make decisions.  Fear of missing out, for example, often makes us behave too rashly.  On the other side of the coin, fear of not getting out leads us to toss away opportunities or abandon the progress we’ve made to our goals.  

Fortunately, whenever we feel fear, there are two tools that we can use to steady ourselves.  

The first tool is history.  Past performance, as you may have heard, is no guarantee of future results.  But past is also prologue, which means history can give us a good idea of what to expect in the future.  For example, here is how the S&P 500 performed over a 6-month period after other recent epidemics.7 

Epidemic Month end 6-month % change of S&P
SARS April 2003 +14.59%
Swine flu April 2009 +18.72%
Cholera November 2010 +13.95%
MERS May 2013 +10.74%
Ebola March 2014 +5.34%
Zika January 2016 +12.03%

Now, these are all imperfect comparisons, as they dealt with different viruses, at different times, in different regions, in different contexts.  The point is that the markets, while occasionally impacted in the short term by epidemics, are rarely impacted over the long-term.  And as we are investing to help you achieve your long-term goals, it’s the long-term that we care about.  

The second tool, of course, is to have a strong investment strategy.  Here at Minich MacGregor Wealth Managment, we expect volatility to happen.  We can’t predict exactly when it will occur, nor always what will cause it.  But we know that it will, so our clients are prepared for it.  This particular bout of volatility is coming after months of astonishing growth, and a correction has always been bound to happen at some point.  If it’s not coronavirus, it could be the trade war, or the U.S. presidential elections, or any of a dozen other things.  

Over the coming weeks, you will probably see more scary-sounding headlines.  It’s possible that COVID-19 could spread, and further disrupt the world economy.  It’s possible that should these things happen, the markets will drop – and then climb again when more positive headlines emerge the next day.  Coronavirus is unquestionably a serious issue of global importance, but it’s not worth panicking over.  So, our advice is to not overreact to these day-to-day or even week-to-week swings.  To do that would be like playing whack-a-mole with your investments.  Instead, continue to take the long view.      

What we will do is keep a very close eye on how the coronavirus is spreading, as well as how the world is handling it.  If we ever feel that the long-term situation has changed, we may then make changes to our clients’ portfolios.     

Of course, if you ever have any questions or concerns, our door is always open.  We are always happy to help with both!

SOURCES:

1 “Tracking coronavirus,” BNO News, last updated February 24, 2020.  https://bnonews.com/index.php/2020/02/the-latest-coronavirus-cases/

2 “Dow Industrials Close 1,000 Points Lower as Coronavirus Cases Mount,” The Wall Street Journal, February 24, 2020.  https://www.wsj.com/articles/stocks-fall-as-coronavirus-spread-accelerates-outside-china-11582533308?mod=hp_lead_pos1

3 “Where is the iPhone Made?” Lifewire, November 9, 2019.  https://www.lifewire.com/where-is-the-iphone-made-1999503

4 “Apple Signals Coronavirus’s Threat to Global Business,” The New York Times, February 17, 2020.  https://www.nytimes.com/2020/02/17/technology/apple-coronavirus-economy.html

5 “Adidas, Puma Warn of Coronavirus Blow,” The Wall Street Journal, February 19, 2020.  https://www.wsj.com/articles/puma-tops-hopes-but-warns-of-coronavirus-hit-11582106613

6 “S. Korea reports 1 more case of novel coronavirus, total now at 30,” Yonhaps News Agency, February 17, 2020.  https://en.yna.co.kr/view/AEN20200217002900320

7 “How the stock market has performed during past viral outbreaks,” MarketWatch, February 24, 2020.  https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22

Tax-Related Updates for 2020

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

CHANGES TO FEDERAL TAX BRACKETS1

As expected, the IRS has adjusted the 2020 tax brackets based on inflation.  They are as follows:

Tax RateSingleMarried, filing jointly Head of Household
10%0 to $9,8750 to $19,7500 to $14,100
12%$9,876 to $40,125$19,751 to $80,250$14,101 to $53,700
22%$40,126 to $85,525$80,251 to $171,050$53,701 to $85,500
24%$85,526 to $163,300$171,051 to $326,600$85,501 to $163,300
32%$163,301 to $207,350$326,601 to $414,700$163,301 to $207,350
35%$207,351 to $518,400$414,701 to $622,050$207,351 to $518,400
37%$518,401 and up$622,050 and up$518,401 and up

CHANGES TO DEDUCTIONS1

Per the IRS, the standard deduction is “a specific dollar amount that reduces the amount of income on which you’ve been taxed.”2 

The IRS has increased the standard deduction for 2020.  For singles, the standard deduction is now $12,400, up from $12,200.  For married couples filing jointly, it is $24,800, up from $24,400.  For heads of households, the standard deduction is $18,650, up from $18,350.

Remember, you can’t take the standard deduction if you also itemize deductions.  And for married couples filing separately, both spouses must take the same type of deduction. So, if one spouse chooses to itemize, the other spouse must as well.

CHANGES TO CAPITAL GAINS1

The income threshold for long-term capital gains rates has also gone up.  

Tax RateSingle Married, filing jointly Head of Household
0%0 to $40,0000 to $80,0000 to $53,600
15%$40,001 to $441,450$80,001 to $496,600$53,601 to $469,050
20%$441,451 and up$496,601 and up$469,051 and up

CHANGES TO 401(K)S3

For 401(k) and 403(b) plans , the maximum contribution limit for 2020 is now $19,500, up from $19,000 last year.  Those age 50 or older can also contribute an additional $6,500, using what’s known as a catch-up contribution.  That’s also up $500 from last year.   

CHANGES TO IRAS4

In December, Congress passed a new bill called the SECURE Act.  The bill, which went into effect on January 1, wasn’t about the tax code per se, but it did make some important tax-related changes to IRAs.  

Before the SECURE Act, owners of a traditional IRA would have to begin making withdrawals at age 70½.  (These are called required minimum distributions, or RMDs.)  Now, that age has increased to 72.  That means retirees have an additional 18 months to benefit from the tax advantages that come with IRAs.

Another change is for new parents.  Previously, a non-retired person had to be 59½ years old to make early withdrawals from a traditional IRA. If they withdrew money earlier than that, they would have to pay a penalty of 10% on the amount they took out, except in a few extraordinary circumstances.  

Under the SECURE Act, new parents can now withdraw funds penalty-free to help cover birth and adoption expenses.  This is especially helpful for younger parents who have high deductible insurance plans. There is a $5,000 cap on withdrawals, though, and they need to be made within one year of the birth or adoption.

By the way, if you haven’t already contributed to an IRA, there’s still time to do so.  Many people don’t know that the 2019 contribution deadline is actually April 15, 2020.5  However, if you do decide to contribute, you must designate the year you are contributing for.  (In this case, 2019.)  Your tax preparer should be able to help you fill out the necessary forms, but please feel free to contact me if you have any questions or need help.

For 2019, the maximum amount you can contribute is $6,000, or $7,000 if you’re over the age of 50.5  This applies to both traditional and Roth IRAs.  

If you have yet to set up an IRA for 2019, you can still do that.  The deadline to establish an IRA is also April 15th.  In other words, if you want to take advantage of the benefits an IRA has to offer, there’s still time to do so, either by contributing to an existing account or by establishing a new one.  

CHANGES TO 529 PLANS4

Another tax-related change is for parents and grandparents with 529 plans.

As you may know, any funds invested in a 529 plan can be used to help pay for college expenses, like lodging or tuition.  The best part is that the funds are exempt from federal taxes, and often state taxes, too, so long as they’re used solely for education expenses.  

Under the SECURE Act, parents with 529 plans can make a tax-free withdrawal of up to $10,000 to help pay off their child’s student loans.  This number is per person, not per plan, which means another $10,000 can be withdrawn to help pay the student debt for each of the plan beneficiary’s siblings!

CHANGES TO ESTATE TAXES1

For 2020, the estate tax exemption will be $11,580,000 per individual.  That’s up from $11.4 million in 2019.  That means any estates worth less than this amount will be exempt from paying the estate tax. 

***

We hope you found this information helpful.  Obviously, it’s not a completely exhaustive list of every tax change for 2020.  But it is an overview of some of the most important ones.  If you have any questions or concerns, please let us know.  

Sources

1 “Revenue Procedure 2019-44,” Internal Revenue Service,  HYPERLINK “https://www.irs.gov/pub/irs-drop/rp-19-44.pdf” https://www.irs.gov/pub/irs-drop/rp-19-44.pdf

2 “Standard Deduction,” Internal Revenue Service,  HYPERLINK “https://www.irs.gov/taxtopics/tc551” https://www.irs.gov/taxtopics/tc551

3 “401(k) contribution limit increases,” Internal Revenue Service,  HYPERLINK “https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500” https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

4 Text of “SETTING EVERY COMMUNITY UP FOR RETIREMENT ENHANCEMENT” (page 1532), Senate Appropriations Committee, December 16, 2019.   HYPERLINK “https://www.appropriations.senate.gov/imo/media/doc/H1865PLT_44.PDF” https://www.appropriations.senate.gov/imo/media/doc/H1865PLT_44.PDF

5 “IRA FAQs – Contributions,” Internal Revenue Service,  HYPERLINK “https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-contributions” https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-contributions

Operation Valentine

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

To some people, the practice of exchanging valentines is great for children in elementary school, but it’s hardly something for adults.  Right?

Well, one of the toughest, most resilient men you’ll ever meet doesn’t think that valentines are silly.  And he should know – after all, he just received over 20,000 of them.1  

The Oldest Marine

Major Bill White is a 104-year-old veteran of World War II, and perhaps the oldest Marine alive.1  He’s a Purple Heart recipient who fought at Iwo Jima, and later served in the Korean War as well.  These days, Major White lives in an assisted care facility in California and spends much of his time collecting memorabilia of the incredible life he has lived.  

But as he looked over his collection, he decided there was something missing.  Something he dearly wanted to add.  

He wanted a valentine.  

So, another facility resident put a call out on social media.  Would anyone like to send this hero a card for Valentine’s Day?

Operation Valentine had begun.  

Within days, the responses started pouring in.  Blankets, quilts, candy, and of course, cards.  Many were homemade, with simple, heartfelt messages.  Some thanked Major White for his service.  Others described how their family members had served in the military, and why it meant the world to show their love for someone similar.  Some cards came from the elderly; others were sent by children.  At first, his facility hoped for a few thousand cards.  They were blown away when they received tens of thousands.   

Major White intends to save every single one.  

“I’ll save every one of them…and they’ll be a personal part of my history,” he explains.2  

When you look past the flower bouquets, candy hearts, and boxes of chocolate, I think this is what Valentine’s Day is really all about.  It’s a chance to tell someone, anyone, that they are loved, needed, and valued.  And while it’s true that we have 364 other days to do that, we all know busy life gets.  How demanding the world can be.  We all know how easy it is to let time go by.  

So, sometimes, it’s good to have a day on the calendar to remind ourselves to send someone a valentine.  It could be a spouse or partner.  It could be a neighbor, teacher, or a local policeman.  Or it could be the nearest 104-year-old Marine you can find.  Because when you think about it, what is a valentine, really?  It’s more than a heart cut out of construction paper.  It’s more than a card in an envelope.  

A valentine is love.  

As for Major Bill White, he remains as tough as ever.  He still wears the same uniform he’s had for over 60 years, and in his mind, he’s never stopped serving.  

“I’ve been a Marine for 85 years now,” he says.  “So, if they feel like it, they could call me back on active duty anytime.  I’m still on the list.”1  

On behalf of everyone at Minich MacGregor Wealth Management, we hope you have a wonderful Valentine’s Day!    

P.S.  If you want to send Major White a valentine, you can address it to:

Operation Valentine
ATTN: Hold for Maj Bill White, USMC (Ret)
The Oaks at Inglewood
6725 Inglewood Ave.
Stockton, CA 95207

1 “104-year-old WWII vet receives thousands of cards for Valentine’s Day,” USA Today, January 26, 2020.  https://www.usatoday.com/story/news/nation/2020/01/25/wwii-vet-california-receives-nearly-100-k-valentines-day-cards/4562457002/

2 “104-year-old Marine Corps veteran collecting Valentine’s Day cards,” Fox40, January 9, 2020.  https://fox40.com/2020/01/09/104-year-old-marine-corps-veteran-collecting-valentines-day-cards/

Coronavirus 2020

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

By now, you’ve probably heard about the coronavirus outbreak in the Chinese city of Wuhan.  As of this writing, there have been about 2,900 confirmed cases, with over 80 deaths.1  Most cases have been within China itself, but the virus has spread to a small number of individuals in over fifteen countries.  

As you can imagine, the outbreak has put global markets on edge.  On Monday, the Dow dropped over 450 points due to concerns about the virus’s spread.2  While there’s no reason to be alarmed, this is a good opportunity to remind ourselves why taking a longer view is so important.  We’ll explain what we mean with a brief Q&A:

Q: I’ve been ignoring the news.  Can you tell me what’s going on?

Quick recap.  Coronavirus is a group of viruses that cause respiratory infections.  For most people, these infections rarely amount to anything worse than a common cold.  But sometimes, certain strains can be either more virulent, more transmissible, or both.  Remember the SARS outbreak of 2003?  That was also a type of coronavirus.  

A new strain of coronavirus is behind the current outbreak.  First identified in Wuhan at the beginning of the year, the virus is transmittable from person to person and can cause severe pneumonia, especially in the elderly and people with weak immune systems.  The outbreak seems to have worsened in recent weeks, with travelers from China carrying the virus to multiple countries.  In response, Wuhan has gone into lockdown, and many countries have evacuated their citizens.  

Q: Okay, so why are the markets worried about this?  

The immediate concern is what the outbreak will do to China’s economy.  As the second largest in the world, whenever China sneezes, other economies feel the wind.  With a virus outbreak, analysts are worried about both slowing consumption and production, as well as dramatically reduced travel to and from China.  All these things could impact the bottom-line of those countries and corporations that do business with China.  (Which, of course, is most of them.)  

The other concern is what will happen if this outbreak turns into a worldwide pandemic.  We’re not scientists, but that seems more like a scenario for Hollywood screenwriters than investors.  On the other hand, China’s decision to put a city of 11 million people on lockdown is a good indicator that they are taking the problem seriously and don’t want it to get worse.  

As always, the real culprit here is uncertainty.  

No one knows for certain how long the outbreak will last, how bad it will get, how far it will spread, or how it will impact economic growth.  The natural instinct, then, is to shut the doors, draw the blinds, stick the money under the mattress, and wait for the storm to blow over.  That’s exactly what we’re seeing some investors do right now.  

Q: Is that what we should do?

No!  While natural instincts are great if you’re trying to avoid getting eaten by tigers, they’re not so helpful with making investment decisions.  

Make no mistake, viral outbreaks can have an impact on the global economy.  Certain sectors of the markets, like travel, energy, and retail, could be in for a few weeks – or months – of headaches.  For example, let’s go back to the SARS outbreak of 2003.  In that case, SARS is estimated to have cost the world economy $40 billion.3  The S&P 500 dropped 8.3% during that time, and many other stock markets suffered large losses, too.4  

But there are two things to remember here. 

First, the current outbreak is nowhere near what SARS was.  Back then, nearly 800 people died in 17 different countries, and over 8,000 people were infected.3  As of now, this virus is neither as widespread nor as deadly.  Furthermore, humanity’s ability to respond to it is much greater than it was 17 years ago.  The situation can change, of course, but until it does, it’s important we keep a sense of perspective.  

The second thing to remember is that the effect SARS had on the market was temporary.  After hitting its low in February of 2003, the S&P then went on a tear, finishing up 26% for the year.5  This is in keeping with how global events usually affect the markets: A short, sometimes steep slide as investors try to figure out what’s going on, followed by a longer climb.  Generally speaking, it takes long-term trends, or major changes to the economy’s fundamentals, to make long-term changes in the direction of the markets.  

Q: So, what should we do about all this?

For the people directly affected by the outbreak, and for the heroic men and women combatting it, coronavirus is a serious issue.  For us, this is an opportunity to remember why we shouldn’t overreact to headlines.  While headlines can be unsettling, they very rarely require us to make changes to our investment strategy.  For that reason, the best thing we can do is to mentally prepare ourselves for more volatility should this outbreak worsen.  Of course, mental preparation and emotional discipline are two of the best things we can practice as investors, in rain or shine, in sickness and in health.  But in the meantime, for us here at Minich MacGregor Wealth Management, it’s business as usual.  We hope it is for you, too.  

As always, please contact us if you have any questions or concerns.  We’re always happy to be of service.  Have a great day!  

1 “Tracking coronavirus,” BNO News, https://bnonews.com/index.php/2020/01/the-latest-coronavirus-cases/

2 “Dow Drops Over 450 Points on Coronavirus Fears,” The Wall Street Journal, https://www.wsj.com/articles/global-stocks-slide-on-coronavirus-fears-11580119666?mod=hp_lead_pos2

3 “SARS wiped $40 billion off world markets,” NBC News, https://www.nbcnews.com/business/markets/sars-wiped-40-billion-world-markets-what-will-coronavirus-do-n1122151

4 “A History of Coronavirus Outbreaks and the Stock Market,” Yahoo Finance, https://finance.yahoo.com/news/history-coronavirus-outbreaks-stock-market-204520997.html

5 “S&P 500 Historical Annual Returns,” Macro Trends, https://www.macrotrends.net/2526/sp-500-historical-annual-returns

Aesop on Finance: A Dog and His Reflection

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

As you know, this is a time of year when many people make New Year’s resolutions.  Lose weight, stop smoking, save more, learn a new skill, get more sleep, visit a new place, get finances in order, etc.  You name it, chances are, someone has resolved to do it.

As financial advisors, people often come to us for help with any financial resolutions they have – or resolutions that require some change in their financial situation to achieve.  But often, people come onlyafter they have tried and failed to keep those same resolutions on their own.  

This got us thinking: Why are New Year’s resolutions so hard to keep?  In most cases, our resolutions are good for us.  We want to do them.  So why aren’t they easier?

There are many reasons for this, but one of the most important can be best explained by Aesop’s classic fable about…

A Dog and His Reflection

It happened that a Dog, after much hunger and long labor, had finally procured for himself a chunk of meat, and was carrying it home in his mouth to eat in peace.  On his way home, the Dog had to cross a fallen tree trunk lying across a running brook.  As he crossed, he looked down and saw his own reflection in the water beneath.  Thinking it was another dog with an equally large piece of meat, he made up his mind to have that also.  So, he snapped at the reflection in the water.  But as he opened his mouth, his own meat slipped out, fell into the brook, and was never seen by the Dog again.      

While some have interpreted this fable to be a warning against greed, we look at it a little differently.  Despite being halfway to his goal – enjoying a nice meal – the Dog became distracted by a different goal, and in pursuing that, lost sight of his own.  

In our experience, this happens to most of us every year.  We set a goal we want to achieve, something we truly care about.  But it takes time to accomplish our resolutions, and it’s very easy to get distracted by the newest, shiniest things.  For example, imagine someone resolves to save $200 per week, so that they can finally take that trip to the Caribbean they’ve always dreamed of.  But after doing this for three months, they see another person enjoying the latest iPhone that came out, so they decide to go for that instead.  After all, the Caribbean will always be there.  So, they spend all the money they’ve saved – and suddenly, they’ve sabotaged their own resolution.  

This happens on a larger scale, too.  We’ve seen people who dream of a retirement spent in the sun…only to go chasing shadows instead.  We’ve seen people with grand plans to start their own business one day…only to spend their time watching television.  

Of course, there’s nothing wrong with buying a new iPhone or relaxing in front of the TV.  But to truly change our lives for the better, we must learn discipline.  We must hold ourselves accountable.  We must keep our eye on what’s truly important, and not be distracted by reflections. 

There are several ways we can do that.  Here are a few we’ve found to be especially helpful:

  1. Be specific with your resolutions. People who set specific goals are more likely to achieve them.  For example, instead of resolving to save money, resolve to save $200 per week.  
  2. Put it in writing.  Write down your resolutions and post them in a place where you will see them every day.  This will help remind you of what you’re working towards, so you won’t end up like the Dog in the fable.  
  3. Set realistic goals.  Set goals that are within your reach, and don’t try to take on too much at once.  Be mindful of your finances and schedule.  Account for the fact that sometimes, you need to kick back and relax or spend money on a whim.  In addition, take your time.  There’s no prize for finishing first, and anyway, to quote another one of Aesop’s fables, slow and steady wins the race.  
  4. Develop a plan.  This is so important.  Create a timeline with steps toward your goal.  Set deadlines for each and cross them off as you go.  This will help you generate both the momentum and themotivation you need to continue.
  5. Ask for help.  Whether it’s with a financial professional or a life coach, if you find yourself struggling to reach your goals, don’t think you need to do it alone!  Find someone who can help keep you focused and accountable.
  6. Reward yourself.  Acknowledge even the smallest of achievements. Keeping resolutions is hard work, and you should be proud of everything you accomplish!  

Regardless of what you do, always remember The Dog and His Reflection.  It can make all the difference.  

Good luck and have a wonderful year!  

Nine Vince Lombardi Quotes

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

The new year is now underway. We hope 2020 is a great year for you, and the start of an even greater decade!  

Fifty years ago, Vince Lombardi coached his last football game.  Lombardi is universally recognized as one of the greatest coaches in football history, as well as a pioneering figure who helped break the sport’s color barrier.  These days, however, Lombardi is equally remembered for his famous aphorisms about winning, teamwork, and perseverance.  

For most of us, a New Year means new goals and resolutions.  That’s why we thought it would be interesting to look at some of Lombardi’s most famous maxims.1  As financial advisors, we find them both inspiring and educational, because many can be applied not just to football success, but financial success.  As you work towards the resolutions you set this year, keep these quotes in mind.  Applying them may just make the difference between a resolution kept and a resolution abandoned.  

So, without further ado, here are:

Nine Vince Lombardi Quotes

for goals, finances, life, and everything in between

  • “The only place success comes before work is in the dictionary.”  

When we think of all the people we’ve known who set ambitious goals and reachedthem, we’re amazed by their work ethic.  In many cases, the people who are most likely to reach their goals are the ones for whom the journey is the greatest reward.  

  • “Inches make champions.”  

This is so true.  When we commit ourselves to do just a little bit extra, when we never settle for eleven inches when twelve is what we want, those inches compound on themselves, and we can accomplish so much more.   

  • “Once you learn to quit, it becomes a habit.”
  • “Winning is a habit.  Watch your thoughts, they become your beliefs.  Watch your beliefs, they become your words.  Watch your words, they become your actions.  Watch your actions, they become your habits.  Watch your habits, they become your character.”

The historian Will Durant once wrote, “We are what we repeatedly do.  Excellence is not an act, but a habit.”  As we pursue our goals in 2020 and beyond, it’s often best to focus on progressing just a littleeach day rather than trying to do too much, too quickly.  The former is sustainable.  The latter isn’t.  

  • “The measure of who we are is what we do with what we have.”
  • “The quality of a person’s life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor.”  

Just as none of us have the same goals in life, none of us have the same path to those goals.  Some people begin the journey with more or less than others.  Some people have more or less support than others.  Some people set ambitious goals; others set more modest ones.  But what truly matters, in the end, is not how much money we’ve earned or how many accolades we’ve gained.  What matters is how well we spent the time given to us.  

Life is an investment.  If you put in all you have, you’ll take out even more.  

  • “People who work together will win, whether it be against complex football defenses, or the problems of modern society.”

Another truth.  Just as no one is an island, no one, not even the most self-reliant, achieves their goals entirely on their own.  We all need a team to support and be supported by.  Sometimes that team is our own family.  Sometimes it’s the professionals we choose to partner with.  Whoever it is, when we surround ourselves with honest, caring, and hard-working people, it becomes so much easier to be all those things, too.   

  • “It’s not whether you get knocked down.  It’s whether you get back up.”

Probably Lombardi’s most famous quotation, and for good reason.  Whether it’s a New Year’s Resolution or a life-long goal, every single one of us will face setbacks.  Every single one of us will fail – often more than once.  But life is like football in a sense.  We always have the opportunity to take the field again.  Those who do will triumph in the end.  

  • “If you’ll not settle for anything less than your best, you will be amazed at what you can accomplish in your life.”

Our favorite quote of all.  As you set new goals and resolutions, always lift your eyes to your highest dream.  Believe us, it’s within your reach.  

It’s always been within your reach.   

We hope you have a Happy New Year – and an even happier new decade!  Please let us know if there is ever anything more we can do to help you work towards your goals and resolutions.  

1 “Famous Quotes by Vince Lombardi,” http://www.vincelombardi.com/quotes.html

Breaking Down the Secure Act

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News, Uncategorized.

Important Provisions of the SECURE Act

Before we dive in, understand, that the SECURE Act is over 20,000 words long.  (And in fact, the Senate had to tuck it away in a much, much larger appropriations bill to pass it.)  That means there isn’t room to cover every provision of the new law, and many won’t apply to you anyway.  So, what follows is a brief overview of the major changes that could affect your finances.

Are you ready?  Then take a deep breath as we go over…     

Changes to the IRA “stretch” provisions2

For years, one of the most popular estate planning strategies was the use of Stretch IRAs.  When a parent or grandparent dies, they can leave their IRA to their children, grandchildren, or other heirs.  Under the old rules, these beneficiaries could take distributions from their inherited IRA based on their official life expectancy.  This allowed them to “stretch out” the value of the IRA – and the tax advantages that come with it – for a longer period.  For example, if a 50-year old with a life expectancy of 85 inherited her mother’s IRA, she could stretch out her distributions over the next 35 years.  

Now, non-spousal beneficiaries who inherit an IRA in 2020 or beyond can no longer do this.  Instead, inherited IRAs fall under the new “10-Year Rule”.  This means that all the money in the IRA must be withdrawn by the end of the 10th year following the year of inheritance.  At that point, the beneficiary must pay taxes on that money.

Note that the rule does not require the beneficiary to take withdrawals during the 10-year period if he or she doesn’t want to.  That’s important!  Deciding when to take withdrawals should be based on several factors, including the beneficiary’s current financial situation, how close they are to retirement, and when they plan on taking Social Security benefits.  

Something else to note: The new 10-Year Rule does not apply to spouses, disabled and chronically ill beneficiaries, and minors.  For the last group, the exception lasts until the child reaches the “age of majority”, which is 18 to 21 depending on the state.  Once they reach that age, the 10-Year Rule kicks in.  

Make no mistake: This new rule will have a profound impact on beneficiaries, especially those who are younger and could otherwise have waited decades before making withdrawals (and paying taxes on those withdrawals).  For this reason, if you are either planning to bequeath an IRA to your beneficiaries, or are expecting to inherit one yourself, we should have a conversation about your options.  We want to do everything we can to help you and your heirs maximize your retirement savings while minimizing your tax burden.   

Changes to Required Minimum Distributions for IRAs2

Speaking of maximizing your retirement savings…

Another change the bill makes is to lengthen the time people can contribute to their IRAs. Currently, retirees can only contribute to an IRA up to age 70½.  Once they hit this milestone, they are required to begin making withdrawals. (These are called required minimum distributions, or RMDs.) Under the SECURE Act, that age would increase to 72. That means retirees have an additional 18 months to benefit from the tax advantages that come with IRAs. 

Note: This change only applies to those who turn 70½ in 2020 or later.  Even people who turned 70½ in December of 2019 would still have to take an RMD for 2020.

That’s it for this provision.  See?  We told you some of the changes were simple.  

Other IRA Changes2

Here’s another simple change.  Under the old rules, contributions to a traditional IRA were prohibited once a person reached the year they turned 70½.  No longer.  Now, anyone, even those older than 70½, can keep contributing to their IRA so long as they continue to work.  

Here’s an example.  Jane turns 70½ in 2020 but decides she wants to continue working.  So rather than withdraw money from her IRA, she decides to make a tax-deductible contribution to it instead.  While Jane must still take RMDs once she turns 72, she decides to keep making contributions every year until she actually retires, as the math still works in her favor.  

Obviously, this change only benefits those who continue working into their seventies.  And even then, it may not always make sense to keep contributing to your IRA.  But it’s always nice to have options!    

Another change is for new parents.  Under current law, a person must be 59½ years old to make withdrawals from a traditional IRA. If they withdraw money earlier than that, they must pay a penalty of 10% on the amount you took out. There are a few exceptions, such as if they need the money to pay large medical bills, buy a home, or manage a disability. But, generally speaking, the government wants the money inside a retirement account to be saved for retirement. 

Under the SECURE Act, new parents can now withdraw funds penalty-free to help cover birth and adoption expenses.  This is especially helpful for younger parents who have high deductible insurance plans. There is a $5,000 cap on withdrawals, though, and they need to be made within one year of the birth or adoption.

Changes to 401(k)s2

The SECURE Act brings many changes to 401(k)s, but most are for businesses to worry about.  There is one change you should know about, though, and it involves annuities.  

A type of insurance product, many annuities offer a monthly stream of income, sometimes for life.  This can make them attractive for retirees.  Historically, few 401(k)s contained annuities.  The SECURE Act makes it easier for employers to offer this as an option.    

The reason we mention this is because you should talk to us before putting your money in an annuity.  Choosing the right annuity can be difficult, as there are many types and features, and some annuities come with high costs.  So, while an annuity may be right for some people, that doesn’t necessarily mean it’s right for you.  

If you have questions about this, let’s chat!

Changes 529 Plans2

For many Americans, paying off student loans is a difficult financial burden.

To help pay for their loved ones’ higher education, some parents and grandparents use 529 plans.  Any funds invested in a 529 plan can be used to help pay for college expenses, like room and board or tuition.  The best part is that the funds are exempt from federal taxes, and often state taxes, too, so long as they’re used solely for education expenses.  

Under the SECURE Act, parents with 529 plans can make a tax-free withdrawal of up to $10,000 to help pay off their child’s student loans.  This $10,000 limit is per person, not per plan, which means another $10,000 can be withdrawn to help pay the student debt for each of a 529 plan beneficiary’s siblings.

If you have invested in a 529 plan for a child or grandchild with lots of student debt to pay off, let’s talk to see if it makes sense to take advantage of this.    

Conclusion

As you can see, the SECURE Act is loaded with changes and provisions for those saving for retirement.  So, again, if you have any questions or concerns, please don’t hesitate to contact us!  

In the meantime, remember that we’re here to help you work toward your financial goals.  Please let us know if there’s ever anything we can do – in 2020 and beyond.

Happy New Year!  

Sources

1 Anne Tergesen, “Congress Passes Sweeping Overhaul of Retirement System,” The Wall Street Journal, December 19, 2019.  https://www.wsj.com/articles/senate-spending-bill-includes-significant-changes-to-u-s-retirement-system-11576780736

2 Text of “SETTING EVERY COMMUNITY UP FOR RETIREMENT ENHANCEMENT” (page 1532), Senate Appropriations Committee, December 16, 2019.  https://www.appropriations.senate.gov/imo/media/doc/H1865PLT_44.PDF

Things Most Advisors Don’t Tell You #6:
 The Importance of Gratitude

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

We have been sharing some non-financial lessons we’ve learned in a series of articles called, “Things Most Advisors Don’t Tell You.”  There are many habits and behaviors that, while not directly related to finance, can spell the difference between reaching your goals or not.  But in our experience, people rarely hear about these things from their financial advisor.    

Let’s look at:

Things Most Advisors Don’t Tell You #6:
The Importance of Gratitude

When it comes to achieving success in life, our actions are not the only thing that matters.  Equally important is our attitude.  

Everyone knows how powerful a “can-do” attitude can be.  And we’re all familiar with how far a “never quit” attitude will take us.  A positive attitude is usually necessary just for basic happiness.  But in order to reach our goals and achieve a rich, fulfilling life, perhaps the most important attitude we can have is an attitude of gratitude.  

Science itself has proven how important gratitude is.  For example, here are the results of one study that we think is particularly enlightening.1

  1. Those who kept gratitude journals on a weekly basis exercised more regularly, reported fewer physical symptoms, felt better about their lives as a whole, and were more optimistic about the upcoming week compared to those who recorded hassles or neutral life events.
  2. Participants who kept gratitude lists were more likely to have made progress toward important personal goals (academic, interpersonal, and health-based) over a two-month period compared to subjects keeping the other kinds of lists.
  3. Participants in a daily self-guided exercise focusing on gratitude, compared to those who focused on hassles or on ways they were better off than others, were more likely to report having helped someone with a personal problem or having offered emotional support to another.
  4. In a sample of adults with neuromuscular disease, a 21-day gratitude intervention resulted in greater amounts of high-energy positive moods, a greater sense of feeling connected to others, more optimistic ratings of one’s life, and better sleep duration and sleep quality, relative to a control group.

Another study found that having an attitude of gratitude can help us make better financial decisions as well.2  

In [a] study, 75 participants were assigned to one of three groups: The first was asked to spend five minutes writing about an experience that made them feel grateful, the second was tasked with writing about something that left them feeling happy, and the third was asked to focus on the events of a typical day.

Next, they were asked to make a series of choices that would either result in receiving an amount of cash immediately or a greater sum in the future.

Those in a happy or neutral mood opted for instant gratification: On average, they required $55 up front to forgo receiving $85 in three months. However, the grateful group exhibited significantly more patience and self-control, needing $63 to give up future gain—a 12% difference over the other groups.2

In essence, people who focused on gratitude showed more patience and foresight than those who did not.  

Our own experience as financial advisors have confirmed this.  Throughout our careers, the people we’ve worked with who focused on being thankful, giving back, and counting their blessings over simply counting their money were far more likely to reach their financial goals.  We think the reason for this is that an attitude of gratitude helps us feel better about ourselves, our situation, and our future.  That, in turn, makes us more likely to do the things we already know lead to success: 

  • Asking for help when we need it
  • Creating financial harmony in our homes
  • Managing our time more effectively
  • Managing stress and avoiding burnout

As we already mentioned, an attitude of gratitude also helps us have more patience and foresight.  It helps us “see the big picture.”  It helps us know what’s truly important – which means we can focus on working towards what we want most as opposed to what we only want right now.  

Most advisors won’t tell you this, but it’s true: Gratitude for what we have is one of the best ways to achieve what we want.  

We hope you’ve enjoyed our thoughts on the habits and behaviors that can help us achieve our financial goals.  We wish you nothing but success in pursuing yours!      

1 Robert A. Emmons & Michael E. McCullough, “Highlights from the Research Project on Gratitude and Thankfulness:  Dimensions and Perspective of Gratitude,” http://local.psy.miami.edu/faculty/mmccullough/Gratitude-Related%20Stuff/highlights_fall_2003.pdf

2 Molly Triffin, “How Practicing Gratitude Can Transform Your Finances,” Forbes, https://www.forbes.com/sites/learnvest/2014/11/25/how-practicing-gratitude-can-transform-your-finances/#7b50b357397f

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