Since most families are sheltering at home, this “spare time” represents an excellent opportunity to catch up on small and important financial matters: the type of tasks that are easy to neglect because we don’t have the time. This opportunity is interesting enough to catch the attention of our local CBS Station KPIX TV in San Francisco.

Please call us with any questions you may have on this or any other financial planning matters. We invite you to forward this message to friends, family, and colleagues who have expressed concerns about today’s economic and investing environment, and might want to talk about their questions. After all, there is no need for people you care about to walk through times like this alone.

These are challenging times, and this week may be the toughest as we wait for COVID-19 to reach its peak in the United States. As the war against COVID-19 wages on, we continue to be inspired by the tremendous bravery shown by healthcare workers on the front lines. Other heroes will likely emerge from a lab somewhere with a vaccine in the near future. In the meantime, we have important roles to play by maintaining quarantines and social distancing.

We anxiously wait for the day when this threat has passed, as life feels very different. Many of the things we enjoy most are not available right now, such as traveling, sporting events, shows, concerts, or just dinner out with family and friends. We’re video conferencing with our co-workers while children are going to school online, and we’re finding new ways to stay connected and entertain ourselves without leaving our homes. As a society, we’re finding forced isolation can be challenging.

As we adapt to these changes in our daily lives, the stock markets have had to adapt to the new economic realities as well. The longest economic expansion in our nation’s history has ended as the US economy has entered a recession. This economic contraction is quite unique—it’s the first one brought on mainly by governments, as they closed non-essential businesses and initiated social distancing restrictions to limit the spread of the virus. It also may prove to be unique by potentially being one of the shortest recessions in history, depending on how quickly the virus can be contained.

What is not unique is the challenge for investors in navigating the bear market that’s accompanying this recession. Historically, the best time for many investors to buy stocks has been at the trough, or low point, of a recession, although the trough usually has been evident only in hindsight. Since 1970, bear market low points have occurred within an average of three weeks of the biggest increase in weekly jobless claims, something that we hope came last week. In previous recessions since WWII, stocks bottomed an average of about five months before the end of the recession, as stocks sensed improved upcoming economic data (source: FactSet). No one knows for sure when stocks will bottom this time, but looking at these data points suggests we may be getting close.

We’ve received some better news in the battle against COVID-19 over the past few days. China has contained its outbreak, and its economy is restarting. In Wuhan, the epicenter of the China outbreak, the lockdown is being lifted. In Italy, the epicenter of the European outbreak, a peak in new cases likely was reached last week, and the government is starting to plan for a restart of its economy. The epicenter of the US outbreak, New York, is starting to see a slowdown in new cases. This fight isn’t over, and we cannot fully discount another wave of new cases, but the other side of this crisis is coming into view. The stock market also has started to sense that we’re nearing an inflection point.

This is one of the greatest challenges we as Americans have faced, but some light is starting to glimmer in the dark tunnel. We don’t really have a playbook for this human crisis, though we are encouraged that the measures being taken are having the desired effects. The playbook for investing in bear markets and recessions is clearer. It suggests that we stay the course, consider selectively taking advantage of emerging opportunities where appropriate, and focus on long-term investing objectives.

Please stay healthy, and don’t hesitate to contact me if you have any questions or concerns.

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of April 8, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Tracking # 1-979721

Thinking about young adults as they think about their careers, manage cash flow, decisions on spending and savings, Cornerstone would like to offer insight and tools to help you help them create the conditions for a promising financial future.

We often hear from clients in the planning process, “Wish we had started earlier.” Regardless of the forecast of their plan (ex. they will have to make adjustments to make their plan work. Or, their financial plan looks promising. A few changes will make it stronger). Regardless, many express regrets for not starting earlier, or wish for a do-over.

With many sheltered at home, this could be an excellent opportunity to help others by sharing perspective and resources.

Below you will find a narrative about saving early and letting time strengthen investments. Also attached, you will find two graphs that make a case for getting started by savings at a young age. To help you prepare for this conversation, we are happy to talk with you. And if you let us know what other types of financial discussions you would like to have with America’s youth, perhaps we have a chart or narrative that can help you.

Please feel free to pass this along to anyone you think may find this helpful.

Rich Arzaga, CFP®

(Download) The Benefits of Saving and Investing Early Chart

(Download) Related: Investing in a Roth at different life stages Chart

Narrative: Saving Early & Letting Time Work for You

The earlier you start pursuing financial goals, the better your outcome may be.

As a young investor, you have a powerful ally on your side: time. When you start investing in your twenties or thirties for retirement, you can put it to work for you.

The effect of compounding is huge. Many people underestimate it, so it is worth illustrating. Let’s take a look using a hypothetical 5% rate of return.

How does it work?  A simplified example goes like this: Let’s take a look using a hypothetical $100 invested and a 5% rate of return. After a year, you earn 5% interest, or $5. Another year, another 5%, which adds $5.25 this time. In the third year, your 5% interest earned amounts to $5.51, bringing your balance to $115.76. The more money you deposit, the higher that 5% returns. So, if you were to deposit $100 every month into that same account, you’d make a hypothetical $836.63 in compound interest from $6,100 in deposits over five years. That compounding continues, even if you stop making deposits. All you need to do is let that money stay put.1

The earlier you start, the greater the compounding potential. If you start saving and investing for retirement in your twenties, you may gain an advantage over someone who waits to save and invest until his or her thirties.

Even if you start early & then stop, you may out-save those who begin later. What if you contribute $5,000 to a retirement account yearly starting at age 25 and then stop at age 35 – no new money going into the account for the next 30 years. That is hardly ideal. Yet, should it happen, you still might come out ahead of someone who begins saving for retirement later.

Are you wary of investing? If you were born in the late eighties to early nineties, you are old enough to remember the market volatility in the early 2000s and the credit crisis of 2007-09. Recent events, in the wake of the coronavirus, might bring back memories of that time. All this may have given you a negative view of equities, shaped during your formative years; these events are clear examples of how risk plays a part in this type of investment.

The reality, though, is that many people preparing for retirement need to build wealth in a way that has the potential to outpace inflation. You will retire on the compounded earnings those invested assets are positioned to achieve.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results, All indices are unmanaged and may not be I invested into directly.

Tracking# 1-976752

Scammers, fraudsters, and other criminals are taking advantage of rapidly changing data and facts associated with COVID-19, both in the workplace and in our homes. Government agencies, corporations, and news outlets continue to warn individuals to be mindful of increased fraudulent activities during these uncertain times.

These scams, which can be sent via email, text message, and social media claim to provide COVID-19 updates, sell products, ask for charitable donations, or reference government aid packages. These messages appear to be legitimate in nature but seek to fraudulently obtain personal information, financial gain, and create panic. Use these tips to identify and avoid scams:

  • Watch for emails claiming to be from the Centers for Disease Control and Prevention (CDC) or experts claiming to have inside information on the virus. There are currently no vaccines, potions, lozenges, or other prescriptions available online or in-store to treat or cure COVID-19.
  • Do your homework prior to donating to charities or crowdfunding sites. Confirm the validity of the organization as fraudsters are now advertising fake charities. Do not let anyone rush you into a donation, particularly those who ask for cash, gift cards, or wiring of funds.
  • Do not click on links or open attachments from sources you do not know. Cybercriminals are using the COVID-19 headline as a tactic to spread viruses and steal information. Do not provide personal information, payment information or sensitive workplace information via suspicious email addresses.
  • Be suspicious of urgent demands and emergency requests. The health and safety of you and your family is the top priority. Do not fall for scammers threatening fees or fines, cancelled deliveries, and health concerns in exchange for financial gain.
  • If it sounds too good to be true, it likely is. Many individuals have begun to receive robo-calls and social media requests for social security numbers, banking information, and gift cards. Scammers promise high paying work from home opportunities, free sanitation and cleaning, as well as COVID-19 protection in exchange for payment and sensitive information.
  • Be mindful of scammers using government aid packages for criminal gain. Lawmakers have announced plans to send Americans checks to assist with the financial burden of the virus, with details still in discussion. The government will not request payment, nor will anyone reach out requesting personally sensitive health or financial information in exchange for financial support.
  • Obtain your news from a trusted source. Be mindful of text message scams, social media polls and fraudulent email accounts sharing false information to create panic. Before acting on information, review its source and check a trusted news outlet to confirm its validity.

When in doubt, ask a coworker, family member, or friend for their opinion. Two sets of eyes are better than one. If you believe you have fallen victim of a scam, call your local police at their non-emergency number and consider reporting to the FBI’s IC3 Internet Crime Database.

If you have any questions or concerns during this, please do not hesitate to reach out.

We continue to wish everyone good health as we all work to get through this challenging time.

Tracking # 1-969549

The following article is courtesy of the Wall Street Journal

By Jason Zweig

March 13, 2020

With U.S. stocks down—at their worst—around 27% in 16 trading days, investors need to get out of the prognostication business. Nobody—not epidemiologists, not government officials, not economists and certainly not market strategists—can say how large an impact the coronavirus will end up having. The optimists might be wrong; so, might the pessimists.

Investing, now more than ever, is about controlling the controllable. You can’t control the markets. You can’t control the coronavirus. You can control your own behavior, although that requires making accurate, honest predictions about yourself.

Controlling the controllable doesn’t just mean shrugging off whatever is out of your power. It also means putting some calm and serious thought into what is within your power. Your future success may depend less on what markets do—and more on spending a few quiet minutes figuring out who you are as an investor.

Years ago, the psychologist Daniel Kahneman told me that one of the keys to investing is having what he called “a well-calibrated sense of your future regret.” By that, he meant that you need to be able to tell, in advance, how bad you will feel if your decisions turn out to be wrong. As he warned with that word “well-calibrated,” it isn’t as easy as it sounds.

Investors are full of false bravado. It’s a cinch to say you’ll buy more stocks if the market goes down 10%. It isn’t even that hard not just to say it but to do it—a few times. Buying the dips is almost fun when the market goes down a little bit every once in a while.

But when stocks go down 7% or more in a day twice in a single week, the person you thought you were last Friday isn’t the person you are this weekend. A week ago, you thought you were ready for whatever the market could throw at you. Now, you’d flinch if a toddler tossed a marshmallow at you.

Will you be able to keep buying all the way down if the market goes down another 25%—or more? Will you even be able to hold on? Can you stand watching every dollar you had in stocks turn into 50 cents or less?

On the other hand, what if the panic subsides and stocks resume their climb—after you impulsively moved to the safety of cash and bonds that generate almost no income? How badly will you kick yourself over getting out of the market because of fears that didn’t fully materialize?

At the most basic level, those are the two potential regrets most investors face: the risk of losing massive amounts of money if the epidemic worsens, versus the risk of missing out on what could be a robust rebound if the virus abates.

You can minimize one risk, but not both. As the poet W.H. Auden wrote in 1936, you can only take one path at a time:

“Clear, unscaleable, ahead

Rise the Mountains of Instead

From whose cold, cascading streams

None may drink except in dreams.”

Only by creating a circle of calm around yourself can you honestly evaluate which type of regret is likely to bother you more down the road.

First, if you were investing back in 2008-09, go back and look at your actual account activity—not your warm and fuzzy memories of it—to see what you did the last time markets were in meltdown.

If you bought or stood pat as the U.S. stock market dropped more than 55% between October 2007 and March 2009, you’re a good candidate to be able to weather this downdraft, too, without panicking.

However, if you’re in or near retirement now, then the need to protect your capital from further sudden erosion could make you more conservative than you were back then. So, consider that now, when you can—rather than later, when you will have to.

Also, regrets tend to be hotter and more painful when an outcome appears to be caused by your own actions rather than circumstances that seem beyond your control. Regret is also more intense when you take an action that is an unusual departure from your normal pattern.

So, taking small actions over time, rather than making a big drastic decision all at once, should help reduce your future regrets regardless of what the markets do from here.

If you feel you must sell stocks to calm yourself, do it gradually rather than in giant steps—ideally, by setting a new target level and then moving toward it over time in automatic fixed amounts or percentages that will take some emotion out of the decision.

Consider, also, that if you have tuition or another large bill coming due, you could pay with shares of stock or funds rather than cash. If you have shares that have fallen below your purchase price, you may be able to sell them to meet a large payment and then use up to $3,000 of the resulting loss to reduce your taxable income or to offset current or future gains. (Consult your accountant first!)

Conversely, if the market collapse makes you want to buy stocks, don’t do that impetuously either. Nibble in equal amounts over the course of weeks or months.

Above all, small steps are the best way to avoid big regrets.

What younger investors need to know.

The SECURE Act passed into law in late 2019 and changed several aspects of retirement investing. These modifications included modifying the ability to stretch an Individual Retirement Account (IRA) and changing the age when IRA holders must start taking requirement minimum distributions to 72-years-old.1,2

While those provisions grabbed the headlines, several other smaller parts of the SECURE Act have caught the attention of individuals who are raising families and paying off student loan debt. Here’s a look at a few.

Changes for college students. For those who have graduate funding, the SECURE Act allows students to use a portion of their income to start investing in retirement savings. The SECURE Act also contains a clause to include “aid in the pursuit of graduate or postdoctoral study.” A grant or fellowship would be considered income that the student could invest in a retirement vehicle.3

One other provision of The SECURE Act:  you can use your 529 Savings Plan to pay for up to $10,000 of student debt. Money in a 529 Plan can also be used to pay for costs associated with an apprenticeship.4

Funds for a growing family. Are you having a baby or adopting? Under the SECURE Act, you can withdraw up to $5,000 per individual, tax-free from your IRA to help cover costs associated with a birth or adoption. However, there are stipulations. The money must be withdrawn within the first year of this life change; otherwise, you may be open to the tax penalty.5

Annuities and your retirement plan. This might be the most complicated part of the SECURE Act. It’s now easier for your employer-sponsored retirement plans to have annuities added to their investment portfolio. This was accomplished by reducing the fiduciary responsibilities that a company may incur in the event the annuity provider goes bankrupt. The benefit is that annuities may provide retirees with guaranteed lifetime income. The downside, however, is that annuities are often the incorrect vehicle for investors just starting out or far from retirement age.6

The best course is to make sure that you review any investment decisions or potential early retirement withdrawals with your advisor.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – Under the SECURE Act, your required minimum distribution (RMD) must be distributed by the end of the 10th calendar year following the year of the Individual Retirement Account (IRA) owner’s death. A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and child of the IRA owner who has not reached the age of majority may have other minimum distribution requirements.

2 – Under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ under the SECURE Act as long as you meet the earned-income requirement.

3 – forbes.com/sites/simonmoore/2019/12/23/if-youre-a-graduate-student-the-secure-act-makes-easier-to-save-for-retirementheres-how/#207d85d322ef [12/23/2019]. A 529 plan is a college savings play that allows individuals to save for college on a tax-advantages basis. State tax treatment of 529 plans is only one factor to consider prior to committing to a savings plan. Also consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your state of residence. State tax laws and treatment may vary. State tax laws may be different than federal tax laws. Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax.

4 – forbes.com/sites/simonmoore/2019/12/21/who-benefit-from-the-recent-changes-to-us-savings-programs/#4b86e86f6432 [12/21/2019]

5 – congress.gov/bill/116th-congress/house-bill/1994/text#toc-HCF4CC8DCF6E14B28968474EB935AB36D [05/23/2019]

6 – marketwatch.com/story/will-the-secure-act-make-your-retirement-more-secure-2020-01-16 [01/16/2020]. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxes as ordinary income. If a withdrawals is made prior to age 59 ½, a 10% federal income tax penalty may apply (unless an exception applies).

One study asserts that these relationships can make a difference for investors.

What is a relationship with a financial advisor worth to an investor? A 2019 study by Vanguard, one of the world’s largest money managers, attempts to answer that question.

Vanguard’s whitepaper concludes that when an investor worked with an advisor and received professional investment advice, they saw a net portfolio return about 3% higher over time.1

How did this study arrive at that conclusion? By comparing self-directed investor accounts to an advisor model, Vanguard found that the potential return relative to the average investor experience was higher for individuals who had financial advisors.1

Vanguard analyzed three key services that an advisor may provide: portfolio construction, wealth management, and behavioral coaching. It estimated that portfolio construction advice (e.g., asset allocation, asset location) could have added up to 1.2% in additional return, while wealth management (e.g., rebalancing, drawdown strategies) may have contributed over 1% in additional return.1

The biggest opportunity to add value was in behavioral coaching, which was estimated to be worth about 1.5% in additional return. Financial advisors can use their insight to guide clients away from poor decisions, such as panic selling or accepting excessive risk in a portfolio. Indeed, the greatest value of a financial advisor may be in helping individuals adhere to an agreed-upon financial and investment strategy.1

This study provided feedback and estimates based on customer experience. The value of advice is not a guarantee of performance. Actual returns will fluctuate.

Of course, financial advisors can account for additional value not studied by Vanguard, such as helping clients implement wealth protection strategies, which protect against the financial consequences of loss of income, and coordinating with other financial professionals on tax management and estate planning.

You could argue that a financial advisor’s independence adds qualitative value. It should be noted that not all financial advisors are independent. Some are basically employees of brokerages, and they may be encouraged to promote and recommend certain investments of those brokerages to their clients.2

Both types of financial advisors may receive their compensation in two ways: through transaction fees and through ongoing fees. Financial advisory firms are required to disclose how their professionals are compensated with the Securities and Exchange Commission (SEC).2

After years of working with a financial advisor, the value of a relationship may be measured in both tangible and intangible ways. Many such investors are grateful they are not “going it alone.”

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf [2/19]

2 – cnbc.com/2019/10/23/guide-to-choosing-the-right-financial-professional-for-you.html [10/23/19]

Things you can do for your future as the year unfolds.

What financial, business, or life priorities do you need to address for the coming year? Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

Can you contribute more to your retirement plans this year? In 2020, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $6,000 ($7,000, for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: singles and heads of household with MAGI above $139,000 and joint filers with MAGI above $206,000 cannot make 2020 Roth contributions.1 

Before making any changes, remember that withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½.2

Make a charitable gift. You can claim the deduction on your tax return, provided you itemize your deductions with Schedule A. The paper trail is important here. If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the Internal Revenue Service (I.R.S.) does not equate a pledge with a donation. If you pledge $2,000 to a charity this year, but only end up gifting $500, you can only deduct $500.3

These are hypothetical examples and are not a replacement for real-life advice. Make certain to consult your tax, legal, or accounting professional before modifying your strategy.

See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to legitimately write off expenses linked to the portion of your home used to exclusively conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with home-based businesses.4

Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,550 contribution for 2020, if you are single; $7,100, if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55.5

If you spend your HSA funds for nonmedical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Pay attention to asset location. Tax-efficient asset location is an ignored fundamental of investing. Broadly speaking, your least tax-efficient securities should go in pretax accounts, and your most tax-efficient securities should be held in taxable accounts.

Before adjusting your asset, consider working with an investment professional who is familiar with tax rules and regulations.

Review your withholding status. Should it be adjusted due to any of the following factors?

* You tend to pay a great deal of income tax each year.
* You tend to get a big federal tax refund each year.
* You recently married or divorced.
* A family member recently passed away.
* You have a new job and you are earning much more than you previously did.
* You started a business venture or became self-employed.

These are general guidelines and are not a replacement for real-life advice. So, make certain to speak with a professional who understands your situation before making any changes.

Are you marrying in 2020? If so, why not review the beneficiaries of your retirement accounts and other assets? When considering your marriage, you may want to make changes to the relevant beneficiary forms. The same goes for your insurance coverage. If you will have a new last name in 2020, you will need a new Social Security card. Additionally, the two of you may have retirement accounts and investment strategies. Will they need to be revised or adjusted with marriage?

Are you coming home from active duty? If so, go ahead and check the status of your credit as well as the state of any tax and legal proceedings that might have been preempted by your orders. Make sure any employee health insurance is still there and consider revoking any power of attorney you may have granted to another person.

Consider the tax impact of any upcoming transactions. Are you planning to sell any real estate this year? Are you starting a business? Do you think you might exercise a stock option? Might any large commissions or bonuses come your way in 2020? Do you anticipate selling an investment that is held outside of a tax-deferred account?

If you are retired, and in your seventies, remember your RMDs. In other words, Required Minimum Distributions (RMDs) from traditional retirement accounts. There is a new development to report on this, as the Setting Every Community Up for Retirement Enhancement (SECURE) Act just altered a key rule pertaining to these mandatory withdrawals. Under the SECURE ACT, in most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts. The previous “starting age” was 70½.6

This new RMD rule applies only to those who will turn 70½ in 2020 or later. If you were 70½ when 2019 ended, you must take your initial RMD(s) by April 1, 2020, at the latest.6

If you have already begun taking RMDs, your annual deadline for them becomes December 31 of each year. The I.R.S. penalty for failing to take an RMD can be as much as 50% of the RMD amount that is not withdrawn.6

Vow to focus on being healthy and wealthy in 2020. And don’t be afraid to ask for help from professionals who understand your individual situation.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – thefinancebuff.com/401k-403b-ira-contribution-limits.html [7/16/19]
2 – kiplinger.com/article/retirement/T032-C000-S000-how-much-can-you-contribute-traditional-ira-2020.html [1/10/20]
3 – irs.gov/newsroom/charitable-contributions [6/28/19]
4 – nerdwallet.com/blog/taxes/home-office-tax-deductions-small-business/ [1/22/19]
5 – cnbc.com/2019/06/03/these-are-the-new-hsa-limits-for-2020.html [6/4/19]
6 – thestreet.com/retirement/secure-retirement-act-makes-big-changes-to-how-you-save [12/21/19]

By Rich Arzaga, CFP®

A conversation with mom and dad about personal and financial matters is not easy for many families. But as parents get older, especially those in their 70s and 80s, we found with our clients that many parents appreciate the assistance of adult children. If this might be the case for you, the next question becomes, what type of support should you consider offering.

Estate Planning Documents

In general, fifty percent (50%) of all families do not have an estate plan. If you are receiving this message, you (and likely your friends and family) probably have complicated enough assets to qualify for needing an estate plan. Further, of the approximate fifty percent (50%) who do have an estate plan, about one-half of those plans are outdated or incorrect, and may likely cause challenges when executing. In short, there is a seventy-five percent (75%) chance your parents’ estate plan is out-of-sorts. Maintaining proper estate planning done is table stakes. You can help by encouraging parents, aunts, and uncles to visit an estate planning attorney. If you need a recommendation, we’re happy to offer you a few names to consider.

Identity Protection

Older Americans are subject to identity theft and could use your help. Consider the following:

  • Credit freeze. Credit bureaus offer this service. Creating a freeze is no charge. The cost for “Lifting” a freeze for specific credit inquiries is nominal – about $10 per service. My family has employed a credit freeze since this option became available in 2003-2004 and has gladly paid for the Lifts as needed. The credit freeze has been our family’s best approach to help prevent credit fraud. It gives me peace of mind that I have control of legitimate credit queries and new accounts.
  • Credit Reports. Review your parent’s credit reports with them to make sure all reported creditors are correct, and to update any other personal information. More importantly, resolve listings of creditors that are incorrect, and consider closing credit that is no longer needed.
  • Personal Information. Drivers licenses, State Identification Cards, Passports, and Social Security Cards. Consider securing in one place items that not regularly used. And ask to make copies for your records, then scan and secure these copies with an encrypted electronic service. For our clients, we offer an electronic vault called WealthVision that features encryption standards that exceed those of many banks. If you don’t work with us, ask your advisor if they offer a similar service.

Telemarketers

  • If not already set up, consider caller-ID for your parent’s home phone. Encourage your parents to let all calls they don’t recognize go to voice mail. This small idea should significantly reduce the risk of telephone scams. This same principal should apply to their cell phones.
  • Add a call blocking tool to the home phone. I don’t know of any service that is full-proof, but having something is a step in the right direction. I’m not entirely delighted with ours, so I if you come across one you have had success with, please let me know.
  • Your parents need to know the difference between someone they call and someone who call them. If they make the call, they know who that other person is. A person calling them with an emergency should be viewed as suspicious. If this happens, encourage your parents to call you or other family members to confirm or for help. Assure them that asking for a number to call back and waiting to confirm is prudent and safer for all family members. If the incoming caller insists and will not leave their name and number, then ask your parents to encourage them to call 911. And tell your parents about the call my mother-in-law received from a kid who started the call with “Grandma?” My mother-in-law filled in the blank and responded by using my daughter’s name, asking if this was her. Fortunately, she knew my daughter’s voice well enough to hang up. Very upsetting for everyone, but it could have been worse.

Technology

  • Cell phones, laptops, iPads. Check them all for updates and patches.
  • Passwords. Consider strengthening passwords and using a password manager to help your parents manage this. If a password manager becomes problematic (they often duplicate entries and cause confusion), using a password that is a combination of things in their life might be the solution. Example: first house address numbers + second home street name + current home city abbreviation + children’s birth years + the number of grandchildren or pets minus the number of previous marriages!
  • Social media. Ask your parents to list for you their various social media accounts and passwords. This idea becomes especially useful as they get too old or unable to use.

Be their advocate. This can include adding yourself to

  • conversations with vendors solving problems.
  • discussions with caregivers. Make sure to take notes.
  • visits with financial advisors. Our most rewarding meeting is with older clients who include their adult children. The synergy can be more productive than a meeting with the parents alone.
  • Ask to be listed as a contingent contact on financial accounts. This option is relatively new and required by financial institutions to be offered. Take advantage of it.

If there is any part of this you would like to explore, feel free to contact Cornerstone Wealth Management at 925-824-2880. We are happy to help if we can.

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Financial technology companies start to cater to older people and their adult children

Note from Cornerstone:

The following article ran on wsj.com in May 2019.

Working on the frontlines with elderly clients, adult children, and their advisors, the risks outlined are real. Challenges protecting elder wealth is not limited to predators. As clients get older, some lose the ability to protect themselves from their own mistakes: Unneeded or unplanned purchases, inadvertent duplicate donations to charity, and over or underpaying bills represent some of the challenges.

The technology and resources outlined in the article sounds promising. Our own firm and our broker dealer LPL Financial has put technology and policies in place to help as much as we can from the advisor side.

I hope this article can help provide a little insight to the two-sided problem of protecting elderly from financial misdeeds.

Rich Arzaga, CFP®

Article written by Yuka Hayashi, The Wall Street Journal

A small but growing crop of financial-technology companies are offering online tools meant to help adult children manage and monitor their parents’ finances and well-being.

The rise of these services comes as financial companies look to technology to cater to the changing needs of an aging population. A bonus for such companies is the opportunity to develop relationships with adult children who are likely to be beneficiaries of a large wealth transfer in coming years from their parents.

The new tools often leverage forms of artificial intelligence to help users perform a range of tasks, from paying bills to monitoring financial accounts for suspicious activities. The services also can assist in curbing exploitation by unscrupulous caregivers or help family members restrict spendthrift behavior by parents in cognitive decline.

So far, the market for these services is in its infancy as most fintech products have been aimed at millennials. That is likely to change, though, given the wealth accumulated by retiring baby boomers.

“It’s terribly shortsighted,” said Theodora Lau, a former AARP executive who now runs a fintech consulting firm, referring to companies’ slow entry.  “There is so much they can do with the people who have money right now.”

An average of 10,000 Americans turn 65 every day, according to the U.S. Census Bureau. The average net worth of families headed by those aged 65 to 74 was $1.07 million in 2016, including primary residences, compared with $692,100 for all households, according to the Federal Reserve.

Among the pioneers in fintech services for older people are companies such as EverSafe, an account-monitoring tool aiming to fight financial exploitation, and True Link Financial Inc., which offers a prepaid debit card that can be customized to limit both how much money a cardholder can spend and where the cardholder can spend it.

Everplans provides an online archive for financial documents and wills, and Golden Corp. analyzes accounts to eliminate unnecessary expenses and helps with bill paying.

Wealthcare Planning LLC offers a tool that assesses older people’s financial decision-making capabilities and suggests specific steps for families to prepare for future challenges facing aging family members.

This new breed of fintech companies are, as of yet, largely untested in terms of effectiveness or safety, and will need to overcome skepticism to succeed.

“Anybody entering this field with software has got to figure out a way to make it extremely convincing that they are not in any way going to misuse personal information, or accidentally, enable misuse,” said Laurie Orlov, founder of Aging in Place Technology Watch, a research service.

Yet, there is a market need. The Consumer Financial Protection Bureau estimates that in 2017 seniors experienced 3.5 million incidents of financial exploitation, including fraud perpetrated by strangers or theft by caregivers and family members. Adults ages 70 to 79 are estimated to have lost an average of $43,300 in each reported case of financial abuse.

Most fintech tools for older people are targeted at their adult children. Many in the so-called “caregiver generation,” those caring for parents as well as their own children, are already familiar with online banking tools and are willing to try new services that might save them time.

“People don’t live with their parents anymore,” said Evin Ollinger, founder of Golden. “How do you take care of your parents when you live 3,000 miles away? You do it online, on your phone, and you are alerted when you need to help them out.”

In order for adult children to access their parents’ financial accounts, they must have the parents’ permission or power of attorney.

Mr. Ollinger, a 62-year-old tech entrepreneur in the Bay Area, came up with the idea for Golden after a bank alerted him that his 84-year-old father had missed his mortgage payment three months in a row. Going over his father’s bank and credit-card statements for the first time, Mr. Ollinger realized that while his father was otherwise independent, he needed help managing his money.

Mr. Ollinger shaved over $18,000 from his father’s annual expenses by canceling a 427-channel cable contract and subscriptions to professional magazines he no longer read. He also signed his father up for benefits from the Department of Veterans Affairs and negotiated to lower his mortgage rate.

As a lawyer for a company operating senior-living facilities, Andrea Teichman said she diligently monitored bank and credit-card statements and paid bills for her parents, who were both in their 90s and had dementia. So, when her mother died last summer, it came as a surprise to find a lien on her estate due to a credit-card debt.

Ms. Teichman, a 59-year-old resident of Medfield, Mass., then signed up with EverSafe, the account-monitoring service that her employer offered to its senior living residents as a benefit.  Through its credit-check function, it alerted her that 13 credit card accounts had been opened using her parents’ names and social-security numbers. Ms. Teichman learned the accounts were opened, in her parents’ names, by a home caregiver.

It took her family nine months to close the accounts and cancel the debts, which totaled nearly $90,000.

Fintech won’t address all the challenges of aging parents. “It doesn’t replace having conversations and going to their house and making sure you feel good about things,” Ms. Teichman said. “But sometimes, going to the house and doing the personal check is not foolproof.”

EverSafe was started in 2016 by Howard Tischler, a technology industry executive, and Liz Loewy, a former prosecutor who headed the elder abuse unit in the Manhattan District Attorney’s Office.  “It was my feeling that not enough was being done within banks, investment firms and credit unions to address this issue,” Ms. Loewy said.

EverSafe is available to some customers of Fidelity Investments and Raymond James Financial Inc., as well as through a direct online channel.

Recent regulatory changes are giving a boost to some of these new services by making it easier for financial institutions to contact family members of older customers and suggest optional online protection tools. The Financial Industry Regulatory Authority, or Finra, adopted a new rule in 2018 requiring securities firms to make “reasonable efforts” to obtain contact information for a person trusted by the account holder.

Write to Yuka Hayashi at yuka.hayashi@wsj.com

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