It’s that time again. A new year is here, which means a volatile 2018 is in the rearview mirror. The markets suffered a steep drop at the end of last year after climbing steadily through the first three quarters. A number of factors contributed to the markets’ fourth-quarter tumble, including tariffs, interest rate hikes and trouble in the tech sector.
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A new year doesn’t mean those challenges are gone, but it does represent a fresh start. And if history is any guide, January can be a strong month for investors. According to a study from LPL Research, in the 68 years from 1950 through 2017, January has been a positive month for the S&P 500 41 times. It’s been negative 27 times.1

As any investor knows, history doesn’t guarantee future performance. However, there does seem to be a correlation between market performance in January and the rest of the year.

How do January returns impact the rest of the year?According to LPL Research, there’s a relationship between January returns and market returns over the remainder of the year. Its research showed that during years in which there was a positive January return, the market had an average return of 12.2 percent over the next 11 months. When the January return was negative, the S&P 500 returned only 1.2 percent the rest of the year.1

If January returns are more than 5 percent, the correlation is even more pronounced. In those years, the market had an average return of 15.8 percent over the next 11 months. In fact, when January has a return of more than 5 percent, the rest of the year is positive 91.7 percent of the time.1

What is the January effect?
Why has January been positive more often than not? And why does January’s return seem to impact the rest of the year? There are no definitive answers to these questions, but there are theories.

There’s an idea called the “January effect,” which suggests that January returns may be the product of tax strategy. Investors sell stocks in December to harvest tax losses before the end of the year. That depresses prices and creates a buying opportunity in January. Because investors sold at the end of the year, there’s cash on the table to buy in the beginning of the next year.

Of course, this is just a theory. There’s no way to conclusively prove whether the January effect is a real phenomenon. Even if it could be proved, it’s never wise to change your long-term investment strategy based on short-term opportunities.

If you’re concerned about the volatility in 2018 or the coming year, now is a great time to meet with a financial professional. They can help you review your strategy and possibly make changes that reduce your risk exposure and allow you to take advantage of opportunities.

Ready to evaluate your investment strategy? Let’s talk about it. Contact us today at Scott and Associates of Texas. We can help you analyze your needs and goals and implement a plan. Let’s connect soon and start the conversation.

1https://www.thestreet.com/story/14469889/1/stock-market-s-strong-january-performance-bodes-well-for-the-rest-of-the-year.html

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18345 – 2018/12/31

A new year is here, and with it comes a flood of year-end tax documents like W-2s, 1099s and others. Before you know it, the April 15 tax filing deadline will be upon us, and it will be time to submit your return.

It’s always wise to meet with your financial professional at the beginning of the year. It gives you an opportunity to discuss the past year, your goals for the coming year and your tax strategy. However, a consultation with your financial professional could be especially helpful this year.
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The Tax Cuts and Jobs Act was signed into law in late 2017 by President Trump. While some of its changes went into effect last year, 2018 was the first full calendar year under the new law. The return you file in April will likely be the first that reflects much of the law’s changes. Below are a few of the biggest changes and how they could affect your return:

Increased Standard Deduction
The new tax law impacted a wide range of credits and deductions, from the deduction of medical expenses to credits for child care. Those who itemize deductions may have felt the brunt of these changes.

However, the tax law significantly increased the standard deduction. In 2017 the standard deduction was $6,350 for single filers and $12,700 for married couples. The new law increased those numbers to $12,000 and $24,000, respectively.1

Given the changes to itemized deductions and the increased standard deduction, you may want to consult with a financial or tax professional before you file your return. If you’ve traditionally itemized deductions in the past, that may no longer make sense.

New Tax Brackets
The new tax law also made significant changes to the tax brackets. There are still seven different brackets, just as there were before the passage of the law. And the lowest rate is still 10 percent. The top income tax rate is down to 37 percent, however, from 39.6 percent.2 There are similar cuts throughout the rest of the brackets as well.

The law also made changes to the income levels for each bracket. Generally, the bracket levels were increased throughout the tax code, which means you have to earn more before moving into a higher bracket. Under the old tax code, for example, a married couple earning $250,000 would be in the 33 percent bracket. Under the new law, that same couple would be in the 24 percent bracket. A single individual earning $80,000 would be in the 28 percent bracket under the old law but is now in the 22 percent bracket.2

Itemized Deduction Changes
As mentioned, the new tax law increased the standard deduction amounts. However, those increases came at the expense of many itemized deductions. The new law eliminated or reduced many common deductions, including those for state and local taxes, real estate taxes, mortgage and home equity loan interest, and even fees to accountants and other advisers.

However, there could be other opportunities to boost your itemized deductions above the standard deduction level. Charitable donations are still deductible, as are medical expenses assuming they exceed the 7.5 percent threshold. If you’re a business owner, you can deduct many of your expenses, including up to 20 percent of your income assuming you meet earnings thresholds.3

Ready to develop your tax strategy? Let’s connect soon and talk about taxes and your entire financial picture. Contact us today at Scott and Associates of Texas. We can help you analyze your needs and goals and implement a plan.

1https://www.nerdwallet.com/blog/taxes/standard-deduction/
2https://www.hrblock.com/tax-center/irs/tax-reform/new-tax-brackets/
3https://money.usnews.com/investing/investing-101/articles/know-these-6-federal-tax-changes-to-avoid-a-surprise-in-2019

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18326 – 2018/12/26

Are you worried about saving for retirement? You’re not alone. According to a recent study from Gallup, retirement is America’s top financial worry. Nearly 60 percent of Americans are worried that they won’t have enough money to retire comfortably.1

However, a study from Wells Fargo found that the answer to your retirement concerns may be as simple as changing your mindset. The study found that those who have a “planning mindset” are 42 percent less likely than those who don’t have a planning mindset to have high levels of financial stress. They also have 3.1 times more in retirement savings.2

What is a planning mindset, and how do you develop one? Below are the four key criteria identified by the study as the characteristics of those with a planning mindset. If these characteristics don’t sound familiar to you, it might be time to reassess your financial mindset.

Set goals.
Individuals who have a planning mindset have set a financial goal at some point in the past six months. Do you fall into that group? Have you actively pursued those goals? Were you successful?

If the answer is no, you may want to start with a modest goal. Pick something that’s achievable but also meaningful. It may be making a regular contribution to a retirement account or paying off a small credit card balance. Once you achieve those small goals, you can move on to something bigger.

Work toward long-term objectives.
Short-term goals are important, but long-term goals are also critical. Individuals with a planning mindset work toward not only short-term goals but also long-term ones.

It’s helpful to make your long-term goals as specific as possible. Don’t just say you want to retire. Instead, try to retire with a certain amount of savings by a specific date. You can then work backward to develop a plan to reach that goal.

Feel positive about your immediate future.
Stress and anxiety about short-term financial challenges make it almost impossible to focus on long-term goals. You may feel more urgency to pay off your credit cards or student loans than save for retirement.

Individuals with a planning mindset are able to focus on the long term because they’re comfortable with their financial situation over the next few years. There are steps you can take to solidify your short-term future. Perhaps you need to bolster your emergency savings. You might also benefit from using a budget. Once you feel more comfortable in the short term, you can start focusing on large long-term objectives.

Save for retirement today.
Individuals with a planning mindset know there’s no time like the present to prepare for the future. You may not be able to afford to save a sizable amount for retirement, but even a modest contribution helps. Time is the most powerful tool at your disposal. If you contribute money now, you give those funds the opportunity to grow and compound over a long period of time, which can help you accumulate more assets before retirement.

Ready to adopt a planning mindset in 2019? Let’s talk about it. Contact us today at Scott and Associates of Texas. We can help you establish goals and develop an action plan. Let’s connect soon and start the conversation.

1https://news.gallup.com/poll/233642/paying-medical-crises-retirement-lead-financial-fears.aspx
2https://www.businesswire.com/news/home/20181114005575/en

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18280 – 2018/11/28

Are you planning on giving to your favorite charity this holiday season? The holidays are a popular time for charitable giving. In fact, 63 percent of Americans make some kind of charitable donation during the last two weeks of December.1 Many of those donations go to churches and charities related to poverty and children’s causes.

While seasonal giving is always helpful, you may be considering something that has a more lasting impact. Maybe you want to make a sizable gift that will benefit the charity and its recipients for years or even decades into the future. A sizable donation will obviously help the charity, but it can also provide you with important tax benefits.

You may want to consult with a financial professional before you write a check, though. There are many different ways to give to charity. Not all methods are right for all people. Your approach should be based on your specific needs and goals.

Annual Gifting
The simplest approach to gifting may be simply to write a check once a year to the charity of your choice. It’s straightforward and simple, and it gets funds to the charity quickly. You also may be able to deduct your donation from your taxes.

There are some considerations with this approach, though. Charitable deductions have caps, so you may not be able to deduct the full amount. There can also be complicated rules with regard to the gifting of securities, property or other assets besides cash.

You also may want to consider whether you’ll need the resources in the future. You may feel like you have plenty of assets today. As you get older, however, you may become more vulnerable to a wide range of health issues. It’s possible that you could need costly medical treatment or even long-term care. Make sure you can overcome these challenges before you gift assets to charity.

Life Insurance Benefit
If you’re like many retirees, you may have life insurance policies that you bought long ago but no longer need. You may be tempted to stop paying the premiums and simply surrender the policy. In fact, doing so may deliver a sizable cash value distribution.

However, you could also donate your policy to charity. You simply transfer ownership of the policy to the charity. Upon your death, the death benefit is paid to the charitable organization. The policy also continues to build tax-deferred cash value.

When you make the charity the new owner of the policy, you may be able to deduct your previous premium payments from your taxes. You also may be able to deduct any future premium payments that you make. You get a current tax benefit, and the charity gets a sizable donation in the future.

An alternative is to simply make the charity the beneficiary on the policy. You retain ownership and control of the policy, but the charity gets the death benefit when you pass away. There are no tax benefits from this approach, but it may be a simpler strategy.

Charitable Trust
You could also set up a charitable trust to transfer a large portion of your estate to charity after your death. You create the trust document and then make the trust the owner of the assets. The trust then manages those assets and possibly even sells them for diversification purposes. Because the trust is meant for charity, you avoid any taxes related to gains.

The trust invests the assets to generate income, which it pays to you for the remainder of your life. When you pass away, the trust distributes the assets to the charity according to your instructions. A charitable trust can be a powerful gifting tool, but it can also be complex. A financial professional can help you determine if it’s right for you.

Ready to develop your gifting strategy? Let’s talk about it. Contact us today at Scott and Associates of Texas. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

1https://www.worldvision.org/about-us/media-center/survey-majority-americans-donate-charity-end-december

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18276 – 2018/11/27

What risks are you worried about facing in retirement? Are you concerned about outliving your savings? Maybe you’re worried about a market downturn impacting your income. Perhaps you’re concerned about health care costs or the need for long-term care.
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The truth is that a wide range of risks could threaten your retirement. Risk management is at the core of any solid retirement strategy. You have to identify potential threats and then develop tools and tactics to minimize their impact or their likelihood of happening.

You also have a wide range of tools at your disposal. One of the most effective and versatile is an annuity. Annuities are insurance products that offer a variety of different features and benefits to meet an assortment of needs.

Below are three financial challenges that concern many retirees. They can all be addressed with an annuity. If you’re approaching retirement and haven’t considered an annuity as part of your strategy, now may be the time to do so. A financial professional can help you analyze your needs and determine whether an annuity is right for you.

Lifetime Income

Many retirees worry that they’ll outlive their retirement assets. There was a time when retirees could enjoy guaranteed* lifetime income from Social Security and an employer pension. Today’s retirees don’t have that luxury. Social Security usually isn’t sufficient to fully fund a retirement, and pensions have long been in decline.

If you’re like most retirees, you’ll have to generate much of your income from your personal savings and investments. If you spend too much too quickly, or if your values decline, you may not have enough income to last for life.

You can use an annuity to create your own personal guaranteed* income stream. A single premium immediate annuity (SPIA) allows you to convert a portion of your assets into a lifetime income stream that’s guaranteed* regardless of what happens in the markets.

Another option is a variable annuity or fixed indexed annuity with a guaranteed* income benefit. You have the potential to increase your assets, but you can also take withdrawals that are guaranteed* for life. A guaranteed* flow of income could provide you with more financial certainty and stability in retirement.

Downside Risk

It’s natural to become more conservative as you approach and enter retirement. After all, you’ve worked hard to accumulate your retirement assets. The last thing you want is to lose them in a market downturn.

However, you will likely still need some growth. Fortunately, you can use an annuity to earn some return on your assets without downside market risk. Fixed deferred annuities offer a fixed interest rate over a set period of time. Since they don’t have market exposure, your premium is guaranteed*.

You could also consider a fixed indexed annuity, in which your interest rate is linked to a market index. The better the index performs, the higher the interest rate. However, you can’t lose money. If the index declines in value, you simply earn less interest. Again, most of these annuities have a premium guarantee*.

Taxes

Taxes are a challenge for many retirees. They can take a bite out of everything from Social Security benefits to investment distributions to pension payouts. If you fail to budget accordingly, taxes could limit your income and your ability to support your lifestyle.

Annuities are tax-deferred vehicles. That means you don’t pay taxes on growth inside the annuity, no matter your age or the amount of money in the policy. Assuming the annuity isn’t held inside a traditional IRA, you can leave the funds in the policy to grow tax-deferred as long as you like. You pay taxes when you take a distribution.

Ready to see if an annuity fits into your retirement strategy? Let’s talk about it. Contact us at Scott & Associates of Texas. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18210 – 2018/10/31

According to the U.S. Department of Health and Human Services, today’s retirees have a nearly 70 percent chance of needing long-term care at some point in their lives.1 Long-term care is often needed because of cognitive diseases such as Alzheimer’s or Parkinson’s, but it can also be needed for a wide range of other issues related to stroke, cancer, heart disease and more.
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Many people think of long-term care as the kind that’s provided in a nursing home. However, long-term care is a much broader term that refers to a wide range of support. For example, it may consist of skilled nursing care, but it also could consist of custodial services like bathing, cleaning and meal preparation.

It’s impossible to predict what kind of care you might need. However, the likelihood that you will need care is so high that the risk can’t be ignored. If you haven’t planned for long-term care, now may be the time to do so. Below are a few questions to ask yourself to get started:

Who can you rely on for support?
Long-term care often begins gradually with assistance from friends and family. It could start with someone helping you run errands or doing chores around the house. You may need assistance with mobility. Perhaps you’ll need help getting to and from doctor’s appointments.  Consider which friends and family or what services are available to help with these needs.

Also consider that as your needs progress, however, your family may not be able to help with everything. They likely have their own needs and responsibilities and may not be able to spend significant amounts of time assisting you. It’s also possible that your spouse or other loved ones may have their own health challenges. For example, they may not have the strength to help you from a bed into a wheelchair or out of the shower.

Many people transition from family assistance to professional care over time. While you may be able to count on family and friends in the early stages of long-term care, you’ll likely have to pay for care eventually.

Do you want to stay in your home or move to a facility?
Long-term care is usually provided either in the home or in an assisted living facility. Of course, many seniors prefer to receive care in their home as long as possible. If you want to stay in your home, it’s important to plan in advance. Your home may require modifications for safety and medical equipment, like a hospital bed or grab bars in the bathroom. You also may need to hire a health aide on a full-time or part-time basis.

It’s important to note that Medicare and Medicaid usually don’t cover in-home care services. If you don’t have the ability to pay for care, you may be forced to use Medicaid, in which case you may have no choice but to move into a Medicaid-eligible facility. Planning and preparation can help you stay in your home longer.

How will you pay for care?
This is the biggest question every senior faces. No matter where care is provided, it’s usually costly. According to a 2018 study from Genworth, full-time care provided in the home or in an assisted living facility costs an average of $4,000 per month. A room in a nursing home can cost more than $7,000 per month.2

Many seniors need care for several months or even years. Consider how those costs may add up over a long period of time. It’s easy to see why so many retirees struggle to afford care.
You may want to consider long-term care insurance as a funding strategy. You pay premiums today in exchange for future coverage for long-term care costs. Most policies cover care either in the home or in a facility. Some will even cover home modifications or reimbursements to family members for care services. A financial professional can help you find the right policy for your needs and budget.
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Ready to plan your long-term care funding strategy? Let’s talk about it. Contact us today at Scott & Associates of Texas. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
2https://www.genworth.com/aging-and-you/finances/cost-of-care.html

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
​18148 – 2018/10/17