When you turn on the evening news, every broadcast seems to bring more stories of tragedy, fighting, and petty politics.  But if we take the time to look a little closer, we often find that amidst the doom and gloom, people all around the world are constantly demonstrating courage, charity, and sacrifice.  So, over the next few months, we’d like to share some inspirational stories we’ve come across that show how even a little bit of kindness can make a big difference.  

To us, these stories show that there are still a lot of reasons to have…

Hope in Humanity
Story #2: Kids Today

“Kids today,” the saying goes.  It’s something every generation seems to say about the next one, usually with an accompanying eye-roll or sigh.  But in fact, kids often do as much good in this world as anyone.  As a great philanthropist once put it, “You don’t have to be a certain age to make a difference.”¹  

That philanthropist’s name is Ethan King, and when he said it, he was fourteen years old.  

Now twenty, Ethan is a college student from Michigan who likes to play soccer.  He’s also the founder of a global charity, who decided to ignore the fact that kids don’t normally found charities, and that people can’t singlehandedly fix the world.  Instead, he decided to focus on what he could do, what he could fix, and that the word normally means absolutely nothing.  

As Ethan himself tells it, it all started in 2009 in a village in Mozambique.²  Ethan had traveled to the southern African country with his Dad, who was working to repair water wells in the area.  Before the trip started, Ethan decided to bring a soccer ball along, thinking he might get the chance to play pick-up games with local kids.  

When he went out into the street, little did he know that a simple kick-about with a ball would lead to so much more.  

“When we arrived at the village,” Ethan says, “there were a few boys standing around, so I tossed them my ball.  In a matter of seconds, dozens of kids were playing and having a good time.”²  

Soccer is the most popular sport in the world, but the irony is that there are millions of children all over the globe who don’t get a chance to play it.  Kids in rural or impoverished countries often don’t have the access to real soccer balls, or the money to pay for them.  As a result, they’re forced to improvise.  

“I’ve discovered that many kids in poor countries want to play soccer,” Ethan explains, “but they can’t because they don’t have a ball.  If they do have a ball, it’s typically a bunch of plastic garbage bags wadded up and wrapped with twine and it doesn’t last very long.”  Even the legendary Pelé learned to play using a stock stuffed with newspaper, or by playing with a grapefruit.  (Yes, a grapefruit.)  

While playing with the local kids, Ethan noticed how delighted they were to play with a real ball.  When it was time to go, he decided to leave the ball with them.  “As I watched the kids play, it was hard for me to think that I would be heading back to the States where I had several soccer balls in my garage just sitting there.  These kids in the village had none.”  

So, Ethan decided to leave the ball as a gift.  

As he walked away, one of the boys took the ball and ran up to him, offering it back.  “I said to him, ‘No, this is yours.  I’ve given it to you.’  Immediately they ran, laughed, and cheered like they had just won the lottery!” Ethan recalls.²  The gift of a simple, actual ball was enough to bring joy to their lives.  

Then Ethan decided, why stop at one?  

When he returned home, he personally began to call up corporations, asking for donations.²  He spoke to other kids and parents while at soccer games.  His own organization, Charity Ball, was born.  Thanks to donations, Charity Ball delivers brand new soccer balls to kids around the world who can’t afford to buy any.  In the past four years, thousands of balls have been delivered in 45 countries.³  

When Ethan launched his charity, he was just ten years old.

Some people may ask, “Why start a charity based on delivering soccer balls when there are so many other causes that deserve attention?”  Simple – because it brings joy.  And joy is a commodity the world can never have too much of.  Furthermore, children in many countries must contend with disease, war, and other hardships.  While there are many charities helping to combat these miseries, not all provide an escape from them.  The simple act of playing soccer, of having fun, is that escape.  

Joy can’t remove hardship.  But sometimes, it can help people cope with hardship.  Sounds like a worthy cause to us.  

Not all of us will have the ability to start our own charity, but we can all follow this young man’s example.  Spreading joy is as valuable an endeavor as anything else we do in this life.  And as a wise philanthropist once said, “You don’t have to be a certain age to make a difference.”  

Kids today, right?

P.S.  If you would like to learn more about Ethan and his organization, visit www.charityball.org. 

¹ Sharon Cotliar, “Teen Gives 4,000 Soccer Balls to Kids Around the World,” People Magazine, March 13, 2014.  http://www.people.com/people/article/0,,20796491,00.html 

² “Charity Ball Founder, Ethan King.”  Accessed September 18, 2019.  https://charityball.org/about/charity-ball-founder/

³ “Recipient Map,” accessed September 18, 2019.  https://charityball.org/about/recipient-map/

Earlier this year, the House of Representatives passed a new bill called the Setting Every Community Up for Retirement Enhancement Act, aka the SECURE Act.  (Acronyms are kind of a thing in Congress.)  As the name implies, the bill has important ramifications for people’s retirement savings.  In this article, we want to give you a preview of what the bill is designed to do.

Now, before we do that, it’s important to note that the SECURE Act must first be passed by the Senate and then signed by the president before it actually goes into effect. Many things in the bill could change before that happens, though, so it’s impossible to know exactly what the final law will look like. And of course, it’s always possible the Senate could choose not to pass the bill or make so many changes that the House decides to rework their version.

That said, the SECURE Act enjoys bipartisan support. In fact, only three members of the House voted against it, with 417 members voting for.¹ So it’s expected the Act will become law sometime soon. As financial advisors, it’s our job to get familiar with the bill now so we can help you prepare for the changes it will bring.

What is the SECURE Act?

The SECURE Act does many things, but at its core, it’s designed to help more Americans save for retirement. Many of the bill’s provisions are designed specifically for businesses, which we won’t get into in this article. But there are also provisions that impact regular individuals, including pre-retirees, the recently retired, and even their children. None of these changes are particularly dramatic, but they are important nonetheless.

Changes to IRAs and 401(k)s²

One of the changes the bill makes is lengthening 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, called required minimum distributions. 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. 

Another change the bill makes is for new parents.  Under current law, you must be 59½ years old to make withdrawals from a traditional IRA or 401k. If you withdraw money earlier than that, you would have to pay a penalty of 10% on the amount you took out. There are a few exceptions, such as if you need the money to pay large medical bills, buy a home, or manage a disability. But, generally speaking, the government wants the money you contribute to your retirement accounts to be saved for retirement. 

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

Changes to inherited IRAs²

Another important change – especially from an estate planning perspective – regards inherited IRAs.

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

If the SECURE Act goes into law, this will no longer be possible.  Instead, the beneficiary must take out 100% of the IRA’s assets within 10 years of the original owner’s death.  As distributions are taxable income, this could have a major impact on the beneficiary’s tax situation.  

Planning ahead

As you’ve probably guessed, we are sending this article to all of our clients and friends.  Some are older, some younger; some nearing retirement, some far away; and some already there.  That’s because, while no single provision will affect everyone, almost everyone will be affected in some way.    

As we mentioned, the SECURE Act has not yet become law, and it’s uncertain when the Senate will vote on it.  That said, it’s important that we start planning ahead.  If you have any questions about the SECURE Act, please let us know.     

If any of the changes you just read about don’t affect you, but could affect someone you know, please share this article with them.  Or, please let us know so we can reach out to them if and when the bill becomes law.  As financial advisors, we want to ensure our clients are prepared for any changes coming down the pike – and we want to ensure your family is prepared, too.

In the meantime, our team will keep a close eye on Washington as this bill makes its way through Congress.  As soon as the situation is clearer, we will let you know.  As always, please let me know if there is ever anything we can do for you.          

¹ “Congressional Leaders Want SECURE Act Passage in 2019,” Plan Sponsor, October 7, 2019.  https://www.plansponsor.com/congressional-leaders-want-secure-act-passage-2019/

² “Text of H.R. 1994,” Congress.gov, 6/3/2019.  https://www.congress.gov/bill/116th-congress/house-bill/1994/text

 “Markets are flashing deep red as investors worry about the health of the economy”
– CNN Business

“S&P and Dow Slide as Evidence of Global Slowdown Mounts”
– The New York Times

“Stocks Drop on Worries About Growth”
– The Wall Street Journal

The markets hit turbulence last week, with the Dow dropping almost 500 points on Wednesday, October 2.¹  Since recent reports have stoked new fears of a coming recession, we decided to write down our thoughts about what’s happening and why.  

For over a year now, economists have fretted about the possibility of a recession.  The amount of evidence for one has waxed and waned, as good news and bad have jockeyed for attention.  But recently, the signs in favor of a coming recession have started to light up in neon.  

Before we get into that, though, it’s useful to remember what a recession actually is – and what it isn’t.  Since the media tends to report every bit of news with breathless urgency, it’s easy to let the word “recession” transform into a scary, supernatural boogie man come to gobble up our economy.  But what is a recession, really?

Economists define a recession in different ways, but here’s the simplest way to look at it: 

A recession is a significant decline in economic activity over an extended period of time.²

Let’s break that down with a little Recession 101.  

When economists refer to economic activity, they usually mean a country’s gross domestic product, or GDP.  This is a measure of the value of all goods and services a country produces every year.  When a nation produces less, or when the value of what it produces drops, so too does the GDP.  With that drop often comes a drop in employment, wages, corporate profits – and stock prices.  As a result, consumers tend to spend less, which means less business is being done, which means less economic activity is happening.  In other words, everything tends to slow down.  Spending, lending, selling, making, building, investing.  If this goes on for too long – usually at least two consecutive quarters – we’re in a recession.  Make sense?    

The tricky thing about recessions is that it’s almost impossible to know when they’ll occur until we’re already in one.  After all, GDP is a measure of what has been produced, not what will be produced.  That’s why we tend to get a lot of false alarms when it looks like a recession may happen – and little warning when one does happen.  

So.  That’s what a recession is.  But why are experts worried about one now?  

First, it has been a long time since the last recession.  In fact, it’s been over a decade!  Since then, we’ve enjoyed one of the longest bull markets in history.  Since the economy tends to move in cycles – a period of growth, followed by a period of stagnation, followed by a decline, rinse and repeat – many analysts have felt we’re long overdue for the next one.  

More important is the preponderance of data that suggests the economy is already slowing down.  For example, on Tuesday, October 1, a new report showed that American manufacturing had slowed down for the second month in a row, dropping to its lowest level since 2009.¹  Other reports suggest the economy is adding far fewer jobs than in previous years.  Combined with volatility in bonds, trade war uncertainty, and slower growth across the globe, and you can see why the horizon looks stormy.  

That said, we’ve heard these tunes before.  While parts of the economy are slowing, that doesn’t guarantee a recession is coming next month, next quarter, or even next year.  Consumer spending – perhaps the single biggest driver of the economy – has remained strong all year, and the unemployment rate remains very low.  

When it comes to fears of a recession, none of these signs are catastrophic on their own.  All these smaller issues just seem to be piling up on top of each other, enough to make everyone sit up and take notice.  Here’s how we look at it.  Imagine you’ve had a very nice, reliable car for a long time.  It’s been strong, steady, and always gets you where you want to go.  

Recently, though, you’ve noticed that the miles on your car are starting to show a bit.  Your odometer is now over 100,000, a reminder that you’ve had your car for a long time.  Furthermore, little problems are starting to pop up.  That check engine light keeps coming on, even though you’ve had a mechanic look at it.  The engine makes a funny noise whenever you turn the ignition, and is it just you, or are your brakes less responsive than usual?  

None of these problems, on their own, would make you think your car is anything less than reliable.  But put them all together…

That’s where we’re at with the economy.  We may yet be able to wring a few more family trips out of it – but it’s also time to start preparing for when it inevitably breaks down.  

The effects of a recession

For the sake of discussion, though, let’s say a recession is going to happen soon.  What does that mean?  How long do recessions last?  And how bad do they get?  

Every recession is different, but it’s important to remember that we’re not talking about another Great Depression here, or even another 2008-2009.  If a recession happens, it doesn’t mean everything will collapse.  And if it happens, it certainly won’t catch anyone unawares.  Remember, experts have been stressing about this for a while.  

Most recessions also tend to be mild in the grand scheme of things.  Since 1940, the average recession has lasted just under eleven months, with the shortest being six months and the longest, eighteen.³  On the other hand, make no mistake: Recessions can cause real economic pain for people.  A slower economy means less spending, which means less profits, which means lower stock prices, which means lower wages, and worst of all, lower employment.  And sometimes, even when a recession is technically over and the markets recover, it can take much longer for employment to get back to normal.   

So, if a recession is coming, what should we do to prepare?  

Great question!  We love the word “prepare.”  You know what the definition is, right?  

Prepare
verb
To make someone ready or able to do or deal with something.⁴

So, how do we make ourselves ready to deal with a possible recession?  

First, even the wealthiest of people should always have enough in emergency savings to cover at least six months’ worth of expenses.  This is also a good time to prioritize paying off short-term, high interest debts and evaluating your career security.  If you need help with any of these things, please let us know.  

Second, we need to remember that even though a recession will have an impact on the markets in the short term, we must always treat your portfolio for what it is: a long-term investment in your long-term future.  That means we must not start making panicked decisions because we’re afraid of short-term losses.  

That said, if you are nearing the horizon on some of your long-term goals – like retirement, starting a business, building a house, whatever – then it may be prudent to start thinking more conservatively with your investments.  After all, no one wants to get knocked off track right before the finish line.  With 2019 winding down, it’s time for us to have a complete review of your portfolio and your goals so we can update your financial plan as appropriate.  

In other words, if a storm is coming, let’s determine whether you can weather it, or whether it’s time to “batten down the hatches.”  

Here’s what we want you to do.  If you have any questions or concerns about the markets, the economy, or a possible recession, please let us know!  We want to address them, so that you’ll continue to feel confident about working towards your goals.    

It’s impossible to know whether a recession is coming or not.  There are signs for, and there are signs against.  But regardless of when the next recession hits, let’s remember that it’s not a scary boogie man.  It’s a slowdown in the economy – and it’s not uncommon.  Most importantly, let’s remember that when it comes to the future, prediction is futile…but planning is not.  

Have a great October!    

¹ “U.S. Stocks Drop on Worries About Growth,” The Wall Street Journal, October 2, 2019.  https://www.wsj.com/articles/global-stocks-fall-amid-rising-fears-of-economic-slowdown-11570004904

² “Recession,” Investopedia.com, May 6, 2019.  https://www.investopedia.com/terms/r/recession.asp

³ “List of recessions in the United States,” Wikipedia.org, https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States#Great_Depression_onward

⁴ “Definition of prepare,” Lexico, https://www.lexico.com/en/definition/prepare

There are many possible life-changing events to look forward to.  Most are positive, some are negative.  Each can have a profound effect on your financial goals.  

There are eight types of events you should be particularly aware of.   To show you what these events are, and why they are so important, we’ve created a special infographic titled Eight Times You Should Never “Fly Blind” with Your Finances.  Please take a minute to look it over.  If any of these events ever occur in your life – and it’s a good bet at least some of them will – please let us know so we can plan accordingly!  Doing so can make the difference between flying straight or getting blown off course. 

We hope you find this infographic helpful.  Please contact us if you have any questions, or if there is any way we can serve you. 

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Recently, we decided to share some non-financial lessons we’ve learned in a series of articles called, “Things Most Advisors Don’t Tell You.”  You see, there are certain 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.    

That’s unfortunate, because applying these lessons makes working towards your goals both easier and more rewarding.  So, without further ado, here is:

Things Most Advisors Don’t Tell You #3:
The importance of prioritization

Once there was a farmer who woke up early to milk his cows.  On the way to the barn, he noticed his fence was broken.  So, he went to his shed to get his tools, only to find he was out of nails.  On the way to town to buy more, the fuel light in his truck came on.  As he filled up at the gas station, he noticed a shoe store across the street advertising a special on men’s work boots.  As his own were starting to wear down, he went to buy a pair.  Then, he went to the hardware store.  Once inside, he remembered his tractor needed a tune-up, so he bought the equipment he needed and drove home.  Upon arriving, the sound of clucking hens reminded him to collect their eggs.  After finishing that, he turned his attention to his tractor.  By the time he finished, the afternoon was making way for the evening.  “Still time to fix the fence,” he thought, when he realized he’d never actually bought the nails.  So, back to town he went to get more.  

The stars were out by the time he finally fixed the fence.  Exhausted, the farmer went inside and kicked off his boots.  But just as he sat down, his wife asked him why they had no fresh milk.  

Groaning, the farmer rubbed his eyes and wondered why there was never enough time in the day to do what needed doing.

***

This is an extreme example – and obviously no self-respecting farmer would work like this – but it illustrates an important point.  Too often, many people start the day – or the month, the year, or even an entire phase of their life – with a goal in mind, only to be distracted and side-tracked.  The result?  We fail to achieve what we originally set out to do.  We fail to realize our most cherished dreams.  

There are two main culprits behind this.  

1. We don’t plan ahead.

In the story above, the farmer probably would have felt a lot better about his day if he’d laid out a plan.  But instead, he started going around in circles, always making decisions based on what he saw right in front of him.

Many people to do this with their finances, too.  For instance, maybe you decide it’s time to pay off your debt.  But then you notice the roof needs repaired, so you pay for that.  Then you get frustrated because your personal computer is old and slow, so you buy a new one.  By that time, your money is running low, so you decide to just wait until your tax refund comes.  But when the refund comes, you’re burned out from work, so you go on vacation instead.  Meanwhile, your debt just grows and grows.  

When we plan ahead, we can determine what we want to accomplish, what steps it will take to get there, and when and in what order we execute those steps.  Done correctly, this ensures we do more of what we actually want to do.  

2. We don’t prioritize.

This is the culprit many advisors don’t talk about.  

Let’s take the farmer again.  Obviously, everything he did needed to get done – but some things were probably more important than others.  The fence, maybe, could have waited.  Buying new boots could have waited.  Or perhaps he could have made a list of everything he could do without going into town, and a list of everything that required going into town.  Then, he could have prioritized which tasks to do first, and in doing so, gotten a lot more done with a lot less effort.  

Taking time to prioritize our goals, needs, and short-term wants has a similar effect.  It ensures that we allocate our time andour money as effectively as possible.  For instance, some people may find that investing their money for retirement is a lower priority than starting a rainy-day fund.  Others, meanwhile, may get the most bang for their buck if they prioritize minimizing their taxes over, say, earning more money.  

Life is hectic, and it seems like we always have a million-and-one things to do.  Thankfully, the solution doesn’t always require beating our heads against the wall because we’re trying to “work harder.”  Sometimes, the solution is to work smarter – by planning and prioritizing how we spend our time and money.

In our next article, we’ll move on to a topic you’ll rarely hear a financial advisor talk about: Achieving financial harmony in the home. 

You probably remember that back in 2017, Equifax announced a data breach that exposed the personal information of 147 million people.  As one of the three largest credit reporting companies in the United States, it remains one of the most significant and far-reaching cyber attacks in history, putting millions of names, addresses, birthdates, Social Security numbers, drivers’ license numbers, and even some credit card numbers at risk.  

In this day and age of hacking, scamming, and phishing, it’s more important than ever that you take steps to safeguard your identity and your finances.  Fortunately, we have some good news.  Last month, Equifax finally agreed to a settlement with the Federal Trade Commission (FTC).  The settlement includes up to $425 million to help people affected by the data breach.

How do you know whether you are one of the people affected?  Simple: visit https://eligibility.equifaxbreachsettlement.com/en/eligibility and type in your last name and the last six digits of your Social Security number.  Then, this special website – which is operated by the settlement administrator, not Equifax – will tell you if you were impacted by the data breach.  

Go ahead and do it right now.  Then, come back to this article if you were one of the people affected.  We’ll wait. 

***

Still here?  Okay.  Just because you were one of the 147 million people we mentioned, does not necessarily mean your identity was stolen or your finances compromised.  It simply means that you need to take some simple precautions.  

As part of the settlement, you can now file a claim for FREE credit monitoring and identity theft protection services.  By filing a claim, you will receive up to 10 years of free credit monitoring. The free credit monitoring includes:

• At least four years of free monitoring of your credit report at all three credit bureaus (Equifax, Experian, and TransUnion) and $1,000,000 of identity theft insurance.
• Up to six more years of free monitoring of your Equifax credit report.

Now, you may have heard in the news that you could claim a $125 cash payment instead of free credit monitoring.  That is no longer the case.  Because so many people filed a claim, there just aren’t enough funds available for people to receive a cash payment.  But that’s okay, because, quite frankly, credit monitoring and identity theft protection is MUCH more important and valuable.  Want to know what you can do with $125?  Buy some top-of-the-line basketball shoes or fill up your car with gas once or twice.  Want to know what you can do with good credit and financial security?  

A lot more.

If, on the other hand, you actually did have your identity stolen or your finances affected in some way, you can file a claim for a cash payment of up to $20,000.  Again, note that this is limited only to people for people who lost money or suffered identity theft, fraud, or some other harm from the breach.  

In any event, as financial advisors, we strongly recommend you take sixty seconds to visit https://eligibility.equifaxbreachsettlement.com/en/eligibility and then file a claim for free credit monitoring if necessary.  

In the meantime, if you’d like more information about the data breach, the settlement, or how to file a claim, you can visit this handy website set up by the FTC: https://www.ftc.gov/enforcement/cases-proceedings/refunds/equifax-data-breach-settlement.  

When it comes to reaching your financial goals, protecting your identity is just as important as saving and investing.  Fortunately, even a few simple precautions can make a big difference.  Please follow the instructions above and let me know if you have any questions or concerns about the security of your finances.  We are always here for you.     

P.S. If you have any friends or family who you know should look into their own identity protection, please feel free to share this with them.  Thanks!  

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