Andre's Additions – NOT Your April Fool's Letter

In this Issue: Economy & Markets; Retirement Planning; Required Minimum Distributions; Long Term Care; Estate Planning; 2019 Income Tax.  (Est.4-6 min. read.)

ECONOMY AND MARKETS 

After the December Surprise which took the stock markets into significant losing territory for 2018, our evaluation was that the swoon was unjustified. Therefore, unless clients had asked us to be more conservative, we held onto our general allocations. And that was the right thing to do. Consider the following chart showing price changes from 1/1/2018 through 3/29/2019:

The black line represents Large Company Stocks (FNDX). The yellow line represents Small Company Stocks (IWM), the blue line International Stocks (EFA), and the red line the Aggregate Bond Market (AGG). As you can see, the December swoon was reversed dramatically in the first two months of 2019. Except for International, the markets were basically flat for five quarters. The near term upside is 5-6% to last year's highs.

What now? The biggest negative influences are geopolitical tensions along with generally dysfunctional political parties and fiscally irresponsible government that continues to expand the debt burden to dangerous levels. Valuations of many companies also tend toward the higher side historically. And we are always vulnerable to major shock events.  However, at least for the near future, there are significant positives. Companies are making money and the economy is growing with no recession in sight near term.  The employment situation is the best it has been in well over a decade, including the participation rate. Manufacturing numbers have been encouraging. Inflation remains relatively tame and interest rates accommodating. We are comfortable with allocations that for most part are near the center of our portfolio ranges, leaning a bit to the conservative side.

PLANNING ISSUES

Our clients have received a detailed Planning Checklist in our review meetings. Among key concerns:

Retirement Planning: My partner, Joe Rinaldi posted this on Facebook this morning: "I just heard on CNBC this morning that the average retirement account value for people over 60 is approximately $190,000. THIS IS NOT AN APRIL FOOLS JOKE. THIS ISN'T ENOUGH TO LIVE ON. A COUPLE NEEDS APPROX $500K . TRUST ME I DO THIS FOR A LIVING. FEEL FREE TO REACH OUT TO US FOR A FREE RETIREMENT FINANCIAL CHECK UP AND LEARN HOW YOU COULD DOUBLE YOUR MONEY IN 7 YRS. Our firm is promoting financial literacy and will donate $1000 to your nonprofit if you open an account with us, plus give out our book in one of 5 languages; English, Spanish, Chinese, Korean and Russian."  If you are young, know that it is never too early to be disciplined to save and invest. Think big, start small. 

Long term Care:  It's not just being able to have a good retirement. The biggest financial risk of retirees is long term care. According to multiple sources, over 50% of people over age 65 will need part-time or full time long term care services for an average of about 2 years at a cost of between $90,000 and $500,000. Of course longer periods cost more. We recommend a strategy that includes self-funding combined with insurance. Some people can completely self-fund. Others need to leverage potential cost with an insurance component. If you are over 50 and want to discuss strategies, please give me a call. 

Estate Planning: Everyone has a will. If you don't make one, the government has one by default. We recommend working with an attorney that is proficient in your state's laws and will help you do it as simply and effectively as possible and make sure your wishes are carried out. If you need an attorney, we can make a referral. 

Required Minimum Distributions (RMD): If you are age 70.5 or older, or you have inherited an IRA, you are required to take out a minimum amount each year based on life expectancy. Make sure you do it every year. The penalty is 50%. While it is not our responsibility to make sure you do it, our account custodians habitually notify you every year. Be on the lookout. If you are unsure of amounts, consult your accountant. If you want to do it yourself we can help or just go to one of our custodian web sites and use this calculator:  Schwab RMD Calculator. 

Income Taxes: Adjust withholding and estimated taxes to reflect new law. Consider increased contribution allowances to retirement plans. If available with your type of insurance, use an HSA (Health Savings Account).  If you are in a low bracket, consider converting a Traditional IRA to a Roth IRA. Consider Section 529 Education Savings Plans, which now include grades K-12 and offer significant tax benefits. There are many changes; therefore we recommend consulting your tax accountant about your planning for 2019. Finally, it is important for you to keep mutual fund and other statements to verify cost basis when you sell something. Mutual funds were only required to keep those records since 2012, so if your ownership goes back further, your records will be important. And make sure you keep records regarding inherited securities or ones transferred between brokerage firms. While we will help where we can, we do not keep all records for tax purposes.  If you don't have a tax accountant, we can refer you to one.

Other areas include education funding, special needs, small business plans, insurance and other specific goals you might have. We are here to help. If you would like the entire Checklist, please respond to this email with your request.  

So don't be an April Fool. Plan! 

If you would like to set up a meeting with me, you can respond to this email (include your phone number) or call.

Sincerely,

Andre Weisbrod

Quantum Financial Advisors, Inc

604 McKnight Park Dr

Pittsburgh, PA 15237

412-367-9076

www.QFAInc.com 

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