Month: February 2020

Twenty-Nine Things to Do on February 29th

Written by Minich MacGregor Wealth Management on February 26, 2020. 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 29^th 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 29^th. 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 29^th

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
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
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?
Ask an outside professional for a second opinion on your 401(k).
Ask a CPA to review whether you can make your 401(k) more tax efficient.
Review your monthly expenses. Is there anything you can eliminate? For example, do you really need Hulu and Netflix when you only use one?
Review your New Year’s resolutions. Are you doing what you need to do to achieve them?
Review your long-term goals. Do you feel like you are on track to reaching them, or do they seem further away than ever?
Review your various insurance policies. Have any expired? Are there gaps in your coverage?
Review your Will to make sure it’s up to date, especially in terms of who your beneficiaries are.
Name contingent beneficiaries on your Will if you haven’t done so already.
Review your Power of Attorney to make sure it is up to date.
Review your Advanced Medical Directives to make sure they are up to date.
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.
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.
Consider purchasing a high quality, fireproof safe to store your important documents in.
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.
Consider signing up for an automatic savings plan, where a fixed amount of your income is automatically deposited into your account every month.
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.
Balance your checkbook if you still write checks by hand!
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.
Create a plan for what to do in the event of a disaster and share it with your family.
Choose an out-of-town emergency contact.
Share your emergency contact information with any financial professionals you work with, so they can always get in touch with you during a crisis.
If you haven’t already, get started on your taxes!
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.
Make a list of your top retirement concerns and questions. Speak with a professional to get the answers and solutions you need.
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.
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 February 25, 2020. 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 February 18, 2020. 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 Rate	Single	Married, filing jointly	Head of Household
10%	0 to $9,875	0 to $19,750	0 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 Rate	Single	Married, filing jointly	Head of Household
0%	0 to $40,000	0 to $80,000	0 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 15^th. 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 February 12, 2020. 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/