5 Critical Facts You Need to Know About Bear Markets
The post-2009 bull market marks the longest one in U.S. history (by one definition). This amazing run started in March 2009 and lasted well over 3,600 days.1

​Of course, it's impossible to predict exactly when a bear market will happen or what will cause it. We do know that they are inevitable, and that they're a natural part of the market cycle.
​
Whether or not you've been an investor during a bear market in the past, the more you know about them and how people behave during them, the better prepared you'll be to successfully endure them.

Why do so many people choose them over traditional IRAs?
 
The IRA that changed the whole retirement savings perspective. Since the Roth IRA was introduced in 1998, its popularity has soared. It has become a fixture in many retirement planning strategies because it offers savers so many potential advantages.  
 
The key argument for going Roth can be summed up in a sentence: Paying taxes on your retirement contributions today may be better than paying taxes on your retirement savings tomorrow.1
 
Think about it. Would you rather pay taxes today or wait 10 years and see where the tax rates end up? With that in question in mind, here are some of the potential benefits associated with opening and contributing to a Roth IRA.
 
What you see is what you get. Roth IRA contributions are made with after-tax dollars, and any potential earnings on investments within a Roth IRA are not subject to income tax or included in the account owner's income. Instead, they accumulate on a tax-deferred basis and are tax-free when withdrawn from the Roth if the distribution is qualified.2
  
You can arrange tax-free retirement income. Roth IRA earnings can be withdrawn tax-free as long as you are 59½ or older and have owned the account for at least 5 years. The IRS calls such tax-free withdrawals qualified distributions.3
   
Withdrawals don’t affect taxation of Social Security benefits. If your provisional income is between $25,000 and $34,000 — or $32,000 and $44,000 for joint filers — then your Social Security benefits may be taxed if you take withdrawals before your full retirement age. Luckily, a qualified distribution from a Roth IRA doesn’t count as taxable income, which may be a means of avoiding taxation on your social security benefit.4,5  
 
You have until your tax-filing deadline to make a Roth IRA contribution for a given tax year. For example, IRA contributions for the 2019 tax year may be made up until April 15, 2020. While April 15 is the annual deadline, many IRA owners who make lump sum contributions for a given tax year make them as soon as that year begins, not in the following year. Making your Roth IRA contributions earlier gives the funds in the account more time to potentially grow. Remember, though that Roth IRA contributions cannot be made by taxpayers with high incomes. In 2019, the income phaseout limit was $137,000 for single filers and $203,000 for married couples who file jointly.6
 
Who can open a Roth IRA? Anyone with earned income (and that includes a minor).
 
How much can you contribute to a Roth IRA annually? The combined annual contribution limit to all of your traditional and Roth IRAs is $6,000 for 2019 and 2020 ($7,000 if you're age 50 or older), but income limits may reduce or eliminate your ability to contribute. To sweeten the deal even further, you can keep making annual Roth IRA contributions all your life.7
 
All this may have you thinking about opening up a Roth IRA. A chat with the financial professional you know and trust may help you evaluate whether a Roth IRA is right for you, given your particular tax situation and retirement horizon.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
 
Citations.
1 - https://www.irs.gov/retirement-plans/traditional-and-roth-iras [1/28/20]
2– https://www.irs.gov/retirement-plans/traditional-and-roth-iras [1/28/20]
3- https://www.kiplinger.com/slideshow/retirement/T055-S001-how-retirement-income-is-taxed/index.html [1/27/20]
4 - https://www.irs.gov/retirement-plans/traditional-and-roth-iras [1/28/20]
5 – https://www.morningstar.com/articles/852560/20-ira-mistakes-to-avoid [2/10/20]
6 – https://www.irs.gov/retirement-plans/traditional-and-roth-iras [1/28/20]

Are you aware of these potential tax breaks and tax-saving opportunities?
    
The federal government offers some major tax breaks for older Americans. Some of these perks deserve more publicity than they receive.
       
At age 65, the Internal Revenue Service gives you a larger standard deduction. For 2020, standard deductions look like this for taxpayers 65 and older: single filer or married filing separately, $14,050; head of household, $20,300; married filing jointly or qualifying widow(er), $26,100 (when one spouse is 65 or older) or $27,400 (when both spouses are 65 or older). The standard deductions for younger taxpayers range from $1,650-$2,600 less.1
 
There are two situations where your standard deduction may be limited at age 65 or older, or disappear entirely. One is when another taxpayer claims you as a dependent. The other is when you are married and filing separately, and your spouse itemizes deductions.1
    
You may be able to write off some medical costs. The I.R.S. will let you deduct qualifying medical expenses once they exceed 7.5% of your adjusted gross income (AGI). The list of eligible expenses is long. Beyond out-of-pocket costs paid to doctors and other health care professionals, it also includes things like insurance premiums for extended care coverage, travel costs linked to medical appointments, and payments for durable medical equipment, such as dentures and hearing aids.2
 
Are you thinking about selling your home? Many retirees consider this. If you have lived in your current residence for at least two of the five years preceding a sale, you can exclude as much as $250,000 in gains from federal taxation (a married couple can shield up to $500,000). These limits, established in 1997, have never been indexed to inflation. This exclusion is only allowed once every two years.3 
 
Low-income seniors may qualify for the Credit for the Elderly or Disabled. This incentive, intended for people 65 and older, can be as large as $7,500 based on your filing status. You must have very low AGI and nontaxable income to claim it, though. It is basically designed for those living wholly or mostly on Social Security benefits.4
 
Affluent IRA owners may want to make a charitable IRA gift. Generally, once you reach age 72, you must begin taking required minimum distributions (RMDs) from a traditional IRA. You may not be looking forward to these annual withdrawals, especially if you are well off. You have another option: you can make a Qualified Charitable Distribution (QCD) using those traditional IRA assets.5
 
You can donate up to $100,000 of traditional IRA assets to a qualified charity in a single year this way, and the amount donated counts toward your required withdrawal. The amount of the QCD is excluded from your gross income for the year of the donation. Eligibility to make a QCD still begins at 70½, even though the Setting Every Community Up for Retirement Enhancement (SECURE) Act raised the starting age for annual traditional IRA distributions from 70½ to 72.5
 
It must be mentioned 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).
     
Of course, some states also give seniors tax breaks. For example, the following 11 states do not tax federal, state, or local pension income: Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, New York, and Pennsylvania. Twenty-eight states (and the District of Columbia) refrain from taxing Social Security income.6
   
Unfortunately, your Social Security benefits could be partly or fully taxable. They could be taxed at both the federal and state level, depending on how much you earn and where you happen to live. Whether you feel this is reasonable or not, you may have the potential to claim some of the tax breaks mentioned above as you pursue the goal of tax efficiency.7
   
Citations.
1 - efile.com/tax-deduction/federal-standard-deduction/ [1/20/20]
2 - thebalance.com/deducting-medical-expenses-retirement-2894613 [11/4/19]
3 - investopedia.com/ask/answers/06/capitalgainhomesale.asp [2/16/20]
4 - thebalance.com/tax-breaks-for-seniors-and-retirees-4148392 [1/14/20]
5 - giving.princeton.edu/giftplanning/current-ira-gifts [2/18/20]
6 - thebalance.com/state-income-taxes-in-retirement-3193297 [7/15/19]
7 - smartasset.com/retirement/is-social-security-income-taxable [1/16/20]

Focusing on Your Strategy During Turbulent Times.
 
​Investors are people, and people are often impatient. No one likes to wait in line or wait longer than they have to for something, especially today when so much is just a click or two away.
 
This impatience also manifests itself in the financial markets. When stocks slip, for example, some investors grow uneasy. Their impulse is to sell, get out, and get back in later. If they give in to that impulse, they may effectively pay a price.
 
Across the 30 years ended December 31, 2018, the Standard & Poor’s 500 posted averaged annual return of 10.0%. During the same period, the average mutual fund stock investor realized a yearly return of just 4.1%. Why the difference? It could partly stem from impatience.1
 
It’s important to remember that past performance does not guarantee future results. The return and principal value of stock prices will fluctuate over time as market conditions change. And shares, when sold, may be worth more or less than their original cost.
 
Investors can worry too much. In the long run, an investor who glances at a portfolio once per quarter may end up making more progress toward his or her goals than one who anxiously pores over financial websites each day.
 
Too many investors make quick, emotional moves when the market dips. Logic may go out the window when this happens, in addition to perspective.
 
Some long-term investors keep focus. Warren Buffett does. He has famously said that an investor should, “buy into a company because you want to own it, not because you want the stock to go up.2
 
Buffett often tries to invest in companies whose shares may perform well in both up and down markets. He also has famously stated, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”2
 
In contrast with Buffett’s patient long-term approach, investors who care too much about day-to-day market behavior may practice market timing, which is as much hope as strategy.
 
To make market timing work, an investor has to be right twice. The goal is to sell high, take profits, and buy back in just as the market begins to rally off a bottom. But there is volatility in financial markets and the sale at any point could result in a gain or loss.
 
 Even Wall Street professionals have a hard time predicting market tops and bottoms. Retail investors are notorious for buying high and selling low.
 
Investors who alter their strategy in response to the headlines may end up changing it again after further headlines. While they may expect to be on top of things by doing this, their returns may suffer from their emotional and impatient responses.
 
Nobel Laureate economist Gene Fama once commented: “Your money is like soap. The more you handle it, the less you’ll have.” Wisdom that may benefit your strategy, especially during periods of market volatililty.3
        
Citations.
1 - nytimes.com/2019/07/26/your-money/stock-bond-investing.html [7/26/19]
2 - fool.com/investing/best-warren-buffett-quotes.aspx [8/30/19]
3 - suredividend.com/best-investment-quotes/ [12/5/18]