Digital Assets and Baby Boomers

by | Apr 5, 2019 | Learning

How many password-protected accounts do you have?
Whether you keep them locked in the depths of your memory, use a password manager, or have a written record of your passwords (which is certainly not recommended), take a quick count. You are most likely to find you have some or all of these types of accounts:

  • Email accounts
  • Social media accounts
  • Online storage accounts
  • A domain name
  • Online bank accounts
  • Online brokerage accounts
  • A website or blog
  • Online shopping accounts
  • Online bill paying
  • Photo and video sharing accounts
  • Gaming accounts
  • Materials and coding that are copyrighted

These are all digital assets. They are part of your virtual life, as is any digital property you own, such as computers, external drives, storage devices, smart phones, digital cameras, e-readers, and other devices.

Digital assets should be part of your estate plan
Unless you live off the grid, it’s likely your digital life will outlive you and become a part of your legacy. Your digital assets may have significant financial or personal value for your heirs. Consequently, you should give some thought to how these assets should be managed after your death.1

The catch is digital estate planning can be tricky. Many digital accounts and assets cannot be transferred to a new owner because they are not your property. Assets that fall into this category are subject to contracts and licensing agreements established with a service provider.1

For example, if you’ve spent significant sums accumulating a virtual music library, you may not be able to pass it on through a will or another estate planning tool because you do not own the digital music files, according to Nolo.com. This may also be true with other types of accounts.1

“Social network accounts, domain name registrations, email accounts, and most other types of online accounts are ‘yours’ by license only. When you die, the contract is over and the business that administers the account controls what happens to it,” explained Betsy Simmons Hannibal on Nolo.com.1

This doesn’t mean you have no control over what happens to these accounts. Your estate can leave instructions about account management and should provide a complete record for your executor. Jeffrey Salas offered an opinion about best practices on LegalZoom.com. He recommended:2

  1. Checking the account providers’ Terms of Service/Terms of Use. Work with your estate planning attorney and the digital executor you’ve appointed to review requirements for different types of accounts. For example:
  • Leave usernames and passwords for any online financial accounts – banking, utilities, brokerage, mortgage, retirement plan, life insurance, tax preparation, or others – to the executor as they will need this information to pay bills, close accounts, and administer your estate.1
  • Social media companies have diverse policies regarding the management of digital assets upon the death of the user. Some delete or deactivate accounts after being notified of a death. Others put accounts into ‘memorial’ status.1
  • In general, companies will not know about the death until they’re notified. As a result, a digital executor who is armed with passwords may be able to access your account to post final updates, delete items (per estate instructions), or delete/deactivate accounts.1
  • Email accounts, online communities, and blog management may also be guided by provider agreements. However, your executor may be allowed to notify friends or followers of your death and then delete, print, or archive your communications.1
  • Digital photos that are stored online may be passed on through a will or another estate planning tool.1
  • If you have one or more websites, domain names may have value and they may be transferrable.1
  • If you have an online store, you may want to leave instructions about what should happen to the store, the items for sale, and any income or profits that may continue to arrive.

    2. Add language regarding digital assets to your will and/or trust. Currently, there is no uniform federal law to guide the management of digital assets.2 At the start of 2017, Kiplinger reported, “Federal law regulating access to digital property does not yet exist. At this time, 29 states have established legislation or laws to protect digital assets and to provide a deceased person’s family procedures and rights to manage those accounts and assets after death.”3  Regardless, it can still be a good idea to include language that specifies your wishes for the treatment of each of your digital accounts.2

     

    3. Check the law in your state. Talk with your attorney or advisor about whether any laws your state has that apply to digital assets, and make sure your estate plan is consistent with these laws.2

While estate and inheritance laws are behind the curve when it comes to digital assets, it is important to inventory your digital assets and decide how they should be managed upon your death. If you would like additional information about estate planning, please give us a call.

 

Sources:
1 https://www.nolo.com/legal-encyclopedia/a-plan-your-digital-legacy.html
2 https://www.legalzoom.com/articles/what-happens-to-your-digital-assets-when-you-die
3 https://www.kiplinger.com/article/retirement/T021-C032-S014-put-digital-assets-in-your-estate-plan.html

There’s Still Time to Contribute to an IRA

by | Mar 30, 2019 | Noteworthy

If you haven’t already contributed to an IRA (Individual Retirement Account), there’s still time to do so.  Many people don’t know that the 2018 contribution deadline is actually the 15th of April.  However, if you do decide to contribute, you must designate the year you are contributing for.  Your tax preparer should be able to help you fill out the necessary forms.

For 2018, the maximum amount you can contribute is $5500 or $6500 if you’re over the age of 50.  This applies to both traditional and Roth IRAs. If you’re unsure whether to contribute or not, remember:

  • Contributions to traditional IRAs are often tax-deductible. While distributions from IRAs are taxed as income, your tax-rate after retirement could possibly be lower than it is now, lessening the
  • Contributions to a Roth IRA, on the other hand, are made with after-tax However, the advantage of a Roth IRA is that withdrawals are usually tax-free.
  • Whichever type you use, IRAs provide a great, tax-advantaged way to save for

If you have yet to set up an IRA for 2018, you can still do that. The deadline to establish an IRA is April 15th as well.  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.

If you have any questions about IRAs—whether it’s the right decision for you, how your IRA should be managed, or anything else—please give us a call at 301-294-7500. We would be happy to speak with you.

Market Commentary – March 25, 2019

by | Mar 25, 2019 | Weekly Stock Market Commentary

Wonder what the Federal Reserve’s 40-yard dash time is?
On Wednesday, the Fed juked like an NFL running back and left investors wondering whether they should buy or sell. Heather Long of The Washington Post reported the U.S. central bank:

  1. Lowered its 2019 estimate for U.S. economic growth to 2.1 percent
  2. Announced its intention not to raise rates in 2019
  3. Indicated it will stop shrinking its balance sheet in September

Fed Chair Jerome Powell explained, “My colleagues and I have one overarching goal: to sustain the economic expansion with a strong job market and stable prices for the benefit of the American people. The U.S. economy is in a good place and we will continue to use our monetary policy tools to keep it there…We continue to expect that the American economy will grow at solid pace in 2019, although slower than the very strong pace of 2018.”

The Fed’s decision to adopt a looser monetary policy was informed by a variety of factors, including slower economic growth in the United States, China, and Europe, as well as unresolved policy issues like Brexit and ongoing trade negotiations.

Investors weren’t sure what to make of the Fed’s moves. Initially, major U.S. stock indices trended higher as investors celebrated the benefits of accommodative monetary policy. By the end of the week, though, many investors had changed their minds and fled to ‘safe haven’ investments, pushing long-term Treasury rates lower. Alexandra Scaggs of Barron’s reported:  “When short-term yields rise above long-term yields, it’s known as an inverted yield curve, which is seen even by central bankers as a sign that an economic contraction could be on the way…Benchmark 10-year Treasuries rallied Friday morning, driving their yields below those of the three-month U.S. Treasury.”

So, is recession imminent in the United States? It’s possible but unlikely. According to a source cited by Barron’s, the last six times the yield curve inverted for 10 days or longer, recession occurred within the next two years.

No matter how the economy and/or markets perform, it may not be a good idea to make sudden portfolio changes. If you’re feeling uncertain, give us a call. We can discuss changes you may want to make to your portfolio.

Scandinavia sweeps again. The 2019 United Nation’s World Happiness Report was published last week. The Finns remain the happiest people in the world. In fact, happiness in Finland has been trending higher since 2014.

People in Denmark and Norway also are happier than they were previously. The average score for the Danes increased by more than the average score for the Norwegians, so Denmark is now second and Norway third.

The report’s authors explained, “…the top countries tend to have high values for most of the key variables that have been found to support well-being: income, healthy life expectancy, social support, freedom, trust, and generosity.”

The 10 happiest countries in the world, according to the report, which aggregated data on 156 countries from Gallup World Polls, are:

  1. Finland (7.769)
  2. Denmark (7.600)
  3. Norway (7.554)
  4. Iceland (7.494)
  5. Netherlands (7.488)
  6. Switzerland (7.480)
  7. Sweden (7.343)
  8. New Zealand (7.307)
  9. Canada (7.278)
  10. Austria (7.246)

Since the report began, happiness has increased most dramatically in Benin (#102), Nicaragua (#45), Bulgaria (#97), Latvia (#53), and Togo (#139).

The United States came in at #19. Overall, happiness levels in the U.S. have declined by almost 0.5 since the report was first issued. The report stated:  “Several credible explanations have been posited to explain the decline in happiness among adult Americans, including declines in social capital and social support (Sachs, 2017) and increases in obesity and substance abuse (Sachs, 2018)…I suggest another, complementary explanation: that Americans are less happy due to fundamental shifts in how they spend their leisure time…the way adolescents socialize has fundamentally shifted, moving toward online activities and away from face-to-face social interaction.”

Weekly Focus – Think About It
“The human race has only one really effective weapon and that is laughter.”
–Mark Twain, American author

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

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* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

 

Sources:
https://www.washingtonpost.com/business/2019/03/20/federal-reserve-cuts-growth-forecast-predicts-no-more-rate-hikes/?utm_term=.3ead92852b27
https://www.federalreserve.gov/newsevents.htm (Video timestamp 0:15 to 3:00 minutes)
https://finance.yahoo.com/quote/^DJI?p=^DJI&.tsrc=fin-srch (5-day chart or historical pricing)
https://finance.yahoo.com/quote/^IXIC?p=^IXIC (5-day chart or historical pricing)
https://finance.yahoo.com/quote/%5EGSPC?p=%5EGSPC (5-day chart or historical pricing)
https://www.barrons.com/articles/the-yield-curve-just-inverted-that-doesnt-mean-sell-stocks-51553267161?mod=hp_BRIEF&mod=article_inline (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-25-19_Barrons-The_Yield_Curve_Just_Inverterted-Thats_Not_as_Scary_as_You_Think-Footnote_6.pdf)
https://s3.amazonaws.com/happiness-report/2019/WHR19.pdf (Pages 22-27, 34-37, and 88-89)
https://www.goodreads.com/search?page=5&q=twain&search%5Bsource%5D=goodreads&search_type=quotes&tab=quotes

The 7 Rules of Investing

by | Mar 21, 2019 | Noteworthy

From someone who is considered one of the greatest investors of all time

During the past century, many of the world’s leading economists have studied the science – or art – of investing. A large number of investing systems, models, and theories have been created, most of them requiring a PhD to understand. But when it comes to learning how to invest, sometimes it’s best to turn to the people who actually do it for a living.

Case in point, take Peter Lynch.

From 1977 through 1990, Lynch ran one of the most successful mutual funds ever, posting an average annual return of 29%. Over his career, Lynch espoused many investing principles, but there are seven in particular that I think all investors should keep in mind.1 So without further ado, here are:

Peter Lynch’s 7 Rules of Investing
1. KNOW WHAT YOU OWN. Invest in companies, industries, and funds you understand well. What do they do? Who uses their goods or services? Is it a company you would want to do business with yourself?
2. PREDICTION IS FUTILE. No one can predict where the markets will go or what the economy will do, so don’t even try. Instead, focus on what you can control, like the types of companies or funds you invest in, how much you save, etc.
3. BEFORE YOU BUY, BE ABLE TO EXPLAIN. Before investing, can you explain to a family member what you’re buying and why? Can you describe how that company or fund works? If not, take your time and do more research.
4. AVOID LONG SHOTS. Investing isn’t gambling, either. While we have no control over the markets, we do have control over how much risk we take on. Your portfolio isn’t the place for speculation or bets. For that, head to Vegas.
5. BUY GOOD COMPANIES. Invest in companies that have proven management, a strong business model, and that sell things people actually use. Otherwise, you’re investing in companies you guess might prove popular…and that’s just another form of gambling.
6. LEARN FROM YOUR MISTAKES. Even the greatest investors sometimes get things wrong. When that happens, accept it humbly and try to determine how you can improve.
7. TAKE YOUR TIME. Investing isn’t a race. You have plenty of time to do your research and find outstanding companies to invest in. Follow the tortoise’s example, not the hare’s.

Ultimately, all investing comes with risk, and there is no strategy or rule that guarantees success. But there are solid “rules of thumb” you can follow to make smart, simple investment decisions. And best of all, you don’t need a PhD to understand them!

1 “The Greatest Investors: Peter Lynch” https://www.investopedia.com/university/greatest/peterlynch.asp

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Market Commentary – March 11, 2019

by | Mar 11, 2019 | Weekly Stock Market Commentary

Markets were rattled last week.
The market hates surprises, especially when the surprise comes from a central bank. Last week, the European Central Bank (ECB) unexpectedly reversed course and took a more accommodative stance on monetary policy in an effort to encourage stronger European economic growth. Tom Fairless of Barron’s explained:

“Officials are seeking to shore up an economy that has been rattled by shocks ranging from a slowdown in China to mass protests in France and bottlenecks in Germany’s crucial auto industry. They are threading a careful path between providing sufficient support for the region’s softening economy while avoiding any appearance of panic, which could ricochet through financial markets.”

The Eurozone isn’t the only region feeling the pinch of weaker economic growth. China’s exports were down more than 20 percent in February, reported Investing.com. Analysts had expected a decline of about 5 percent. Concerns about the health of China’s economy have been growing since the publication of ‘A Forensic Examination of China’s National Accounts’ by the Brookings Institute. The authors concluded:

“First, nominal GDP [gross domestic product*] growth after 2008 and particularly after 2013 is lower than suggested by the official statistics. Second, the savings rate has declined by 10 percentage points between 2008 and 2016. The official statistics suggest the savings rate only declined by 3 percentage points between these two years. Third, our statistics suggest that the investment rate has [fallen] by about 3 percent of GDP between 2008 and 2016. Official statistics suggest that the investment rate has increased over this period.”

*Gross domestic product is the monetary measure of the market value of all goods and services produced annually in the country.

As if that weren’t enough, the U.S. jobs report for February reported far fewer jobs had been created than was expected. It will come as little surprise to learn that major U.S. stock indices moved lower last week.

How do you reconcile the beige book and the labor report?
If you have never heard of the Beige Book, it’s a scintillating tale of business and economics published by the Federal Reserve. Okay, maybe it’s not scintillating, but it has some pretty interesting stories.

The March 2019 installation – it’s published eight times a year – includes real world stories about businesses and workers gathered by Federal Reserve Banks across the nation. For instance, the St. Louis Federal Reserve reported their contacts in higher education reported falling enrollment. It seems more potential college and post-graduate students have been choosing to go straight into the workforce.

The Beige Book reported, across the nation, “Labor markets remained tight for all skill levels, including notable worker shortages for positions relating to information technology, manufacturing, trucking, restaurants, and construction. Contacts reported labor shortages were restricting employment growth in some areas.”

Of course, labor is easier to come by in some districts than in others. The Boston Federal Reserve reported contacts in its district have a hard time finding skilled workers in fields like information technology, but retail businesses are having no trouble filling jobs.

Wages have been going up in the Cleveland Federal Reserve’s district. “Bankers raised wages both for low-wage and for high-wage positions, citing competitive labor markets. A couple of construction companies granted large retention-focused merit increases to office staff, but other companies mentioned that they tended to grant raises during busier seasons.”

Hiring was up in the San Francisco Federal Reserve’s territory. “Employment at a large San Francisco software and consulting company grew notably as demand for its services increased. A cattle ranching company in Arizona also increased employment to meet growing demand. In the Mountain West, a regional bank noted that its hiring was limited only by a shortage of qualified labor.”

In light of last week’s incredibly weak jobs report, the Beige Book’s findings seem odd that companies are having trouble hiring enough workers and are raising wages to attract them. How can so few jobs have been created when there is high demand for labor? (Economists’ rule of thumb is 100,000 jobs are needed to accommodate people entering the labor force each month, according to MarketWatch.)

An economist cited by MarketWatch commented, “One poor report should not set off alarm bells, but given that the labor market is the linchpin for the entire economy, it does add to existing concerns and raises the stakes for next month’s report.”

Weekly Focus – Think About It
“Hard work spotlights the character of people: some turn up their sleeves, some turn up their noses, and some don’t turn up at all.”
–Sam Ewing, Professional baseball player

Best regards,

John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

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* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
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Sources:
https://www.barrons.com/articles/european-central-bank-stimulus-51551967979 (or go to https://drive.google.com/file/d/1jDwICeYbsalcb3ZVb5CKf7mVjlvC-N97/view?usp=sharing)
https://www.investing.com/news/economic-indicators/china-exports-tumble-in-february-1801611
https://www.brookings.edu/wp-content/uploads/2019/03/BPEA-2019-Forensic-Analysis-China.pdf (Page 25)
https://www.marketwatch.com/story/us-stock-futures-drop-as-gloomy-china-trade-report-adds-to-global-growth-fears-2019-03-08
https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm
https://www.federalreserve.gov/monetarypolicy/beigebook201903.htm
https://www.marketwatch.com/story/us-adds-meager-20000-jobs-in-february-to-mark-smallest-increase-in-17-months-2019-03-08
https://www.brainyquote.com/quotes/sam_ewing_104937

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