General

At Wealth Management Resources, our concern and focus are on the health and safety of all our clients, their families and employees. We want to share with you the steps we are taking as a firm as part of our Business Continuity Plan in response to the current Covid-19 virus situation:

Steps we have implemented at the Firm:

1. In addition to monitoring the status of the COVID-19 on a daily basis, please be assured that we have a formal plan to ensure the continuity of our business and operations:
   • We have implemented necessary steps to manage the prevention of the virus in our office.
   • Our staff have been advised to take necessary precautions to protect themselves and their families from contracting the virus in line with CDC and local government recommendations including hand-washing and other applicable hygiene practices.All necessary steps are being taken at our office to keep it clean and virus-free.
2. We have provided guidelines to our employees to follow to help lessen the spread of illness:
   • Employees have been directed to stay home from work and seek immediate medical attention if they should exhibit symptoms or become ill.
   • We have secure systems in place to allow all employees to work from home as needed.As part of our BCP, we are fully prepared to continue all operations for events like this.

If you have any questions or concerns regarding our ability to continue to service you and your accounts through our Firm, please contact me directly. Thank you for your continued trust and confidence in our Firm.

Sincerely,Kevin R. Worthley, EVP & Co-Principal

Chief Compliance Officer

With the busy-ness of the holidays, you might not be aware of recent legislation that just passed both chambers of Congress and was signed into law by the President last month. The “Setting Every Community Up for Retirement Enhancement (SECURE)” Act was part of the annual US spending bill to keep the country funded for the next fiscal year to September.

The SECURE Act contains provisions that could affect retirement and tax planning for many people. Here are some details about major provisions;

1. For non-spouse beneficiaries of IRA’s whose owners pass away after January 1, 2020, the ability to “stretch” required minimum distributions (RMD’s) within an inherited IRA, over the life of the beneficiary recipient, will no longer be an option. (In other words, no more Stretch IRA’s.) Instead, the beneficiary will be required to completely empty the inherited IRA within 10 years after the original owner’s death. There appear to be no specific distribution requirements within the 10-year window, only that by the end of that window, all assets in the account must be distributed. Therefore, a beneficiary can take one lump-sum now/soon/years later, or periodic distributions, etc.

   Note however, that the new rule does NOT apply to beneficiaries currently taking inherited RMD’s before 01/01/2020: those currently taking required distributions are grandfathered under the prior inherited RMD law. This change could have income tax implications. Discussing strategic distributions of inherited IRA’s under this new law could be a beneficial idea. Finally, there are qualified exceptions to this new provision; the new law does not apply (but the old rules still do apply) to beneficiaries who are:

   1. Spouses of the original owners
   2. Disabled
   3. Chronically ill
   4. Less than 10 years younger than the decedent
   5. Minor children of the decedent, but ONLY until the minor reaches age of majority, (then the 10-year window starts).
2. For those who turn 70 ½ AFTER January 1, 2020, their first RMD’s are postponed until age 72. Thereafter, the same rules apply regarding distributions the first time (can defer until April 1 of the following year, then 12/31 for the second year and thereafter), as well as the annual RMD divisor calculation based upon age. Therefore, under this new rule, the first RMD calculation will be based upon the prior-year-end aggregate IRS value(s) and the divisor at age 72.
3. The SECURE Act allows an individual to withdraw up to $5000 penalty-free from their IRA within one year after either the birth of their child or date of adoption of a child. This applies to either/both parent(s) and is allowed “per child”. For Traditional IRA’s, applicable taxes would still apply to the distribution. This provision was established as a “financial assistance” idea in the Act to help new parents with added expenses of childbirth.
4. The Act eliminates the rule that prevents IRA owners from contributing to a Traditional IRA after age 70 ½. Now anyone with earned income of any age can make a tax-deductible contribution to a Traditional IRA (good for those over 70 ½ who still work P/T).
5. The Act allows for annuity options within qualified Employer-Sponsored Retirement Plans (such as 401k plans). There is also a “portability” provision for annuities within a 401k plan if that plan discontinues the annuity feature.The Act also contains changes regarding who provides fiduciary oversight of annuities within employer-sponsored retirement plans.
6. There are also many new provisions and incentives for small employer retirement plans, including larger tax credits for establishing plans (including SEP’s/SIMPLEs), including 401k plan auto-enrollment, higher auto-enrollment employee contribution limits and allowances for part-time workers to also enroll.
7. 529 plans – the Act will allow 529 college savings account owners to take qualified distributions for “qualified education loan repayments” up to $10K lifetime cap for the beneficiary of the 529 account. This limit is per person, so it’s possible an account owner (parent) may use the same account to help more than one of their children pay back student loans, (up to $10,000 per student). Apprenticeship programs are now also qualified expenses.
8. Kiddie Tax is back! The SECURE Act (Section 501) reverses the two-year-old rule (from December 2017) that made unearned income of a child taxable at Trust rates, rather than parents’ marginal rates. To further complicate things, taxpayers have the option of using either rule for tax year 2019 and 2018. For those who have children with significant unearned income, consulting with your tax advisor regarding the “kiddie tax” would be wise tax-planning.

If you have questions regarding how this new legislation may affect your financial plan or future objectives, give our office a call – we’d be glad to help.

It’s been well documented in the financial media that average “real” (meaning inflation-adjusted) wage growth has been anemic over the past couple decades (if not longer) except for higher-tier wage earners. This stagnation in real purchasing power over the years is starting to become a significant problem for many Americans and it can be argued that the lack of real wage growth for the average worker has been partly the fuel that’s lead to the partisanship and social divisions we see in our society today.

It’s also a significant contributor to the worrisome debt issues we see today, particularly in the credit card and education loan sectors, not to mention the struggles many households have in meeting medical expenses. Medical costs and college tuition expenses have both outpaced CPI inflation (and theoretically cost-of-living increases in wages) for over a decade. Since both are fairly important expenditures for nearly all households, it may not take much analysis to realize why households seem to be unable to save for the future and are falling further behind in debt and building their net worth.All of this continues to point to the need for every family/individual to strive for “financial efficiency” with their money matters. By efficiency, we mean more mindful approaches to how a family’s money is earned, saved, sheltered from taxes and grown for future objectives. While it may not be necessary to count every penny, adjusting money habits like; avoiding impulse purchases, delayed gratification, disciplined (automated) saving and avoiding consumer debt, may be even more crucial than ever before.As financial planners, we of course advocate for each household to have even a simple financial plan that addresses near-term and longer-term goals and objectives. But it may also benefit each family to have a more detailed ‘internal-household’ financial system (a.k.a. that dreaded “budget”!) where spending areas such as grocery-shopping, family entertainment, household maintenance, etc. have their own budgetary boundaries that help the larger-scope financial plan to stay on-track. It may not be that pleasant for everyone to micro-manage their money in this way, but we’ve seen where households that do, even with modest incomes, can achieve stunning results in their savings and toward reaching their goals, all seemingly without much sacrifice along the way. In short, it’s much about stretching every dollar earned a bit further over time. Even small steps in this direction can be beneficial to everyone.

You cannot predict with any certainty what the market is going to do – positively or negatively – based on the news-du-jour, or the myriad of year-end forecasts, soothsayers or technical indicators.

While both investors and their advisors had wished for a quiet market during the December holidays and the end of the year, this month was decidedly anything but. If you were lucky enough to be preoccupied with celebrating the holidays instead of watching CNBC over the past few weeks, (as you should have been), you might be surprised to learn about the wild, daily fluctuations in the stock market indices.  On certain days, indices such as the Nasdaq, the S&P 500 and the Dow Jones Industrial Average (Dow) rose and fell as much as 2-3% over the course of trading hours.  Reportedly, even seasoned traders on Wall Street were scratching their head trying to fathom the underlying reasons for such volatility.

There’s no forecasting what 2019 has in store for investors, but here are some bits of market wisdom to keep you centered and calm in case this type of volatility continues into the New Year:

1) Every past decline looks like a missed opportunity.  Every future decline will look scary and risky.
2) There are investments that never get “wild”.  They are called FDIC-insured savings accounts.  But reaching your future goals may be difficult, if not impossible, utilizing these ‘safe’ investments.  Volatility is the price we pay for the better returns we want over saving account interest.
3) The biggest factor in volatile markets is often ‘changes in emotion’ and ‘changes in the collective market perception’ of what’s good news and what’s bad news.  Over the course of our long collective experience, we’ve observed markets rise and fall dramatically based on the same news, just a contrasting perception of what the news may or may not mean.
4) Based on market history and economic cycles, we can expect some type of market decline and perhaps a recession every 5-6 years.  History and experience has also demonstrated that no one can predict either declines or recoveries with any accuracy.  Many claim they did, but far after the event occurred (in hindsight). The Market Gods delight in making market forecasters look bad every year.
5) If investing were about math, mathematicians would be rich.  If based on history, economic theory or psychology, then PhD’s in those disciplines would be rich.  In reality, even the brightest minds often do worse than the common investor who just asset-allocates, diversifies and invests consistently with discipline and stick to their plan.
6) Leverage, overconfidence, impatience and ego are the greatest dangers to your investments.  Humility, discipline, margins of safety and consistency are some of the greatest ingredients to success.
7) Your lifetime results as an investor will likely be mostly due to what you do (or don’t do) when markets are volatile and your account loses value during a period of time.  “Holding on” is difficult, but maintaining your calm when many others are losing theirs is often the difference between future success and failure.

If your December year-end statements give you pause and anxiety, give us a call so we can meet to review your investments and keep you on-course.