How can you make things easier on them later in life?
 
​Worldwide, the number of people aged 60 and older is growing. By 2050, this demographic will be more than twice as large as it was in 2015.¹
  
Some of these seniors could face a financial test. Will they be able to look after their investments or financial matters at age 80 or 90 with the same level of scrutiny they exercised earlier in life?
 
Your parents may be facing such a challenge. If you sense that they are not quite up to it, then a conversation about financial issues could be in order.
 
If you need to have this kind of talk with your parents, it is best to proceed gently, while acknowledging some potential risks that may heighten if the status quo persists.
  
Start by talking about your own financial matters or investments. Ask your parents for their thoughts on this-or-that topic – an upcoming car purchase, a type of insurance coverage or investment, or their approach to saving or investing when they were your age. Start this conversation while you do something else together, something relaxed or pleasurable. A one-on-one conversation is best, with an informal tone. A formal discussion involving multiple family members might come across like some kind of financial intervention and may not be appreciated.   
 
Alternately, if you have made or updated a will or created a power of attorney, you can talk about your decision to do so and ask your parent if they have either of these items. That could lead to a conversation about family wealth or eldercare.
 
Helpful and gentle suggestions can follow. If your parents are neglecting to open account statements, you can offer help monitor their accounts by asking to register with the bank or investment custodian, so that you may receive copies of these documents. If you sense bills are past due, you can suggest setting up automated payments, referencing how useful they have been in your own financial life.
 
There can be resistance to such suggestions, of course. One possible way to counter that resistance is by expressing how much you care about their financial well-being, their wishes, and their quality of life. How would they feel, for example, if a financial error or oversight they made resulted in more income tax or a decline in the value of their accounts?
  
By treating your parent with love and respect and communicating openly, you can let them know that you are ready to provide the help needed during this time of life.

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If passed, it would change some long-established retirement account rules.
 
If you follow national news, you may have heard of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Although the SECURE Act has yet to clear the Senate, it saw broad, bipartisan support in the House of Representatives.
 
This legislation could make Individual Retirement Accounts (IRAs) a more attractive component of retirement strategies and create a path for more annuities to be offered in retirement plans – which could mean a lifetime income stream for retirees. However, it would also change the withdrawal rules on inherited “stretch IRAs,” which may impact retirement and estate strategies, nationwide.
 
Let’s dive in and take a closer look at the SECURE Act.
 
The SECURE Act’s potential consequences. Currently, traditional IRA owners must take annual withdrawals from their IRAs after age 70½. Once reaching that age, they can no longer contribute to these accounts. These mandatory age-linked withdrawals can make saving especially difficult for an older worker. However, if the SECURE Act passes the Senate and is signed into law, that cutoff will vanish, allowing people of any age to keep making contributions to traditional IRAs, provided they continue to earn income.
 
(A traditional IRA differs from a Roth IRA, which allows contributions at any age as long as your income is below a certain level: at present, less than $122,000 for single-filer households and less than $193,000 for married joint filers.)
 
If the SECURE Act becomes law, you won’t have to take Required Minimum Distributions (RMDs) from a traditional IRA until age 72. You could actually take an RMD from your traditional IRA and contribute to it in the same year after reaching age 70½.
 
The SECURE Act would also effectively close the door on “stretch” IRAs. Currently, non-spouse beneficiaries of IRAs and retirement plans may elect to “stretch” the required withdrawals from an inherited IRA or retirement plan – that is, instead of withdrawing the whole account balance at once, they can take gradual withdrawals over a period of time or even their entire lifetime. This strategy may help them manage the taxes linked to the inherited assets. If the SECURE Act becomes law, it would set a 10-year deadline for such asset distributions.
 
What’s next? The SECURE Act has now reached the Senate. This means it could move into committee for debate or it could end up attached to the next budget bill, as a way to circumvent further delays. Regardless, if the SECURE Act becomes law, it could change retirement goals for many, making this a great time to talk to a financial professional.

We’ve all heard it said: “Records are made to be broken.” We celebrate record-breaking winning streaks from our favorite teams. Conversely, we hope to avoid a long string of losses.

The bull market that began in 2009 is not the best performing since WWII. That title still resides with the long-running bull market of the 1990s. But it is the longest running since WWII (St. Louis Federal Reserve, Yahoo Finance, LPL Research–as measured by the S&P 500 Index).

In the same vein, the current economic expansion is poised to become the longest running expansion since WWII. For that matter, it’s about to become the longest on record.

​According to the National Bureau of Economic Research, which is considered the official arbiter of recessions and economic expansions, the current expansion began in July 2009. It has run exactly 10 years, or 120 months, matching the 1990s expansion–see Table 1.

Barring an unforeseen event, the current period is headed for the record books.
While the economic recovery is about to enter a record-setting phase, it has been the slowest since at least WWII, according to data from the St. Louis Federal Reserve.

For example, starting in the second quarter of 1996, U.S. gross domestic product, the broadest measure of economic growth, exceeded an annualized pace of 3% for 14 of 15 quarters. It exceeded 4% in nine of those quarters (St. Louis Federal Reserve).
Growth was much more robust in the 1960s, and we experienced a strong recovery from the deep 1981-82 recession.

Yet, economic booms and long-running expansions can encourage risky behavior. People forget the lessons learned in prior recessions and overextend themselves.
Consumers can take on too much debt. Businesses may over-invest and build out too much capacity. We saw euphoria take hold in the stock market in the late 1990s and speculation run wild in housing not too long ago.
That brings us to the silver lining of the lazy pace of today’s economic environment.
Slow and steady has prevented speculative excesses from building up in much of the economy. In other words, a mistaken realization that the good times will last forever has not taken hold in today’s economic environment.

Causes of recessions
The long-running expansions of the 1960s, 1980s, and 1990s led to a mistaken belief that various policy tools could prevent a recession.
Yet, expansions don’t die of old age. A downturn can be triggered by various events. So, let’s look at the most common causes and see where we stand today.

1. Rising inflation leads to rising interest rates. In the early 1980s, the Federal Reserve pushed interest rates to historically high levels in order to snuff out inflation. The Fed’s policy prescription succeeded, but led to a deep and painful recession.
2. The Fed screws up. A policy mistake can be the trigger, for instance if the Fed raises interest rates too quickly and restricts business and consumer spending. This is a derivative of point number one.  There were fears the Fed was headed down this road late last year. Credit markets tightened, and investors revolted until the Fed reversed course.
3. A credit squeeze can snuff out growth. In 1980, the Fed temporarily implemented credit controls that briefly tipped the economy into a recession.
4. Asset bubbles burst. The 2001 and 2008 recessions were preceded by speculative excesses in stocks and housing.
5. Unexpected financial and economic shocks jar economic activity. The OPEC oil embargo in the 1970s exacerbated inflation and the 1974-75 recession. The tragedy of 9-11 jolted economic activity in 2001. Iraq’s invasion of Kuwait pushed oil up sharply, contributing to the 1990-91 recession. Such events don’t occur often, but their possibility should be acknowledged.

 
Where are we today?
Inflation is low, the Fed is signaling a possible rate cut, and credit conditions are easy as measured by various gauges of credit. For the most part, speculative excesses aren’t building to dangerous levels.
While stock prices are near records, valuations remain well below levels seen in the late 1990s (Using the forward price-earnings ratio for the S&P 500 as a guide). Besides, interest rates are much lower today, which lends support to richer valuations.

​Now, that’s not to say we can’t see market volatility. Stocks have a long-term upward bias, but the upward march has never been and never will be a straight line higher.
This is why we emphasize an investment process that is rooted in a personalized financial plan. A financial plan is designed, in part, to keep you grounded during the short periods when volatility may tempt you to make a decision based on emotions. Such reactions are rarely profitable.

A sneak peek at the rest of the year
The Conference Board’s Leading Economic Index, which has had a good record of predicting (if not timing) a recession, isn’t signaling a contraction through year end.
But one potential worry: a protracted trade war and its impact on the global/U.S. economy, business confidence, and business spending.

Exports account for almost 14% of U.S. GDP (U.S. BEA). It’s risen over the last 20 years, but we’ve never experienced a U.S. recession caused by global weakness.
By itself, trade barriers with China are unlikely to tip the economy into a recession. Per U.S. BEA and U.S. Census data, total exports to China account for just under 1% of U.S. GDP. Even with higher tariffs, exports to China won’t grind to a halt and erase 1% of GDP.

​What’s difficult to model is the impact on business confidence and business spending, which in turn could slow hiring, pressuring consumer confidence and consumer spending.
Simply put, there isn’t a modern historical precedent to construct a credible model. Hence, the heightened uncertainty we’ve seen among investors.

Is a recession inevitable? 
Earlier in June, the Wall Street Journal highlighted, “Australia is enjoying its 28th straight year of growth. Canada, the U.K., Spain and Sweden had expansions that reached 15 years and beyond between the early 1990s and 2008. Without the Sept. 11, 2001 terrorist attacks, the U.S. might have, too.”
If trade tensions begin to subside (still a big “if”) and if the fruits of deregulation and corporate tax reform kick in, we could see economic growth well into 2020 (and with some luck, into 2021 and beyond).
But, we caution, few have accurately and consistently called economic turning points.

The Fed to the rescue
Rising major market indexes for much of the year can be traced to positive U.S.-China trade headlines (at least through early May), a pivot by the Fed, and general economic growth at home.
We witnessed a modest pullback in May after trade negotiations with China hit a snag. The threat of tariffs against Mexico added to the uncertain mood until June 4th, when Fed Chief Jerome Powell signaled the Fed would consider cutting interest rates to counter any negative economic headwinds.
While Powell’s not promising to deliver any rate cuts, one key gauge from the CME Group that measures fed funds probabilities puts odds of a rate cut at the July 31st meeting at 100% (as of June 28 – probabilities subject to change).

We'll keep it simple and spare you the academic theory explaining why lower interest rates are often a tailwind for stocks. In a nutshell, stocks face less competition from interest-bearing assets such as bonds.
But let’s add one more wrinkle–economic growth.
Falling rates in 2001 and 2008 failed to stem the outflow out of stocks as economic growth faltered. And, rising rates between late 2015 and September 2018 didn’t squash the bull market.
During the mid-1980s, mid-1990s, and late 1990s, rate cuts by the Fed, coupled with economic growth, fueled market gains.

It’s not a coincidence that bear markets coincide with recessions and the bulls are inspired by economic expansions. Ultimately, steady economic growth has historically been an important ingredient for stock market gains.

Your financial future is up to you and no one else.
 
What will be your future? You know that solid retirement strategy takes your time horizon, an often unpredictable factor, into consideration. Your thinking must include an awareness of how long you must save for and what sort of expenditures may be ahead.
 
The most recent findings from the Centers for Disease Control and Prevention indicate that the average American male lives to age 76, while a female may live to 81. The numbers also take the quality of life into account, putting male and female Americans at “full health” for 67 and 70 years, respectively.
 
What do these numbers tell us? Women live longer, for one. Based on your age and the age of your spouse, you can make estimates; you may live longer or less, but averages offer us a window that can be used to plot that retirement strategy. One reality unnoticed in these numbers is that some women may live on their own for many years; if a woman has spent many years as part of a household, living alone shifts the responsibility from two people to one, removing any extra income their partner or spouse contributed.
 
According to the Social Security Administration, single women aged 65 and up (including both the unmarried and the widowed) rely on Social Security payments for 45% of their total income. This compares to 33% for single men of a similar age and 28% for the married couples in that bracket.
 
What does that come to in dollars and cents, per year? The most recent tally, based on a 2018 fact sheet, is $13,891. (Men: $17,663.) These are today’s numbers, but they underscore the importance for a retirement strategy that looks at your specific needs and goals – an approach that considers your future health expenses, your day-to-day expenses, as well as the things you want to do for enjoyment in retirement (travel, pastimes, family experiences, and more).
 
How do you create a strategy that can adapt to life's events? While your future may be unknown, working closely with your advisor may help you to create an approach that's based on your unique goals, risk tolerance and take into account your ever-changing time horizon. Follow up by meeting with a financial professional who can help you put a strategy into action.

Two recent court rulings may make you want to double-check.
 
How often do retirement plan sponsors check up on 401(k)s? Some small businesses may not be prepared to benchmark processes and continuously look for and reject unacceptable investments.
 
Do you have high-quality investment choices in your plan? While larger plan sponsors have more “pull” with plan providers, this does not relegate a small company sponsoring a 401(k) to a substandard investment selection. Employees are smart and will ask questions sooner or later. “Why does this 401(k) have only one bond fund?” “Where are the target-date funds?” “I went to Morningstar, and some of these funds have so-so ratings.” Questions and comments like these are reasonable and surface when a plan’s roster of investments is too short.
 
Are your plan’s investment fees reasonable? Employees can deduce this without checking up on the Form 5500 you file – there are websites that offer some general information as to what is and what is not acceptable. Most retirement savers read up on this with time, and most know (or will know) that a plan with administrative fees pushing 1% is less than ideal.
 
Are you using institutional share classes in your 401(k)? This was the key issue brought to light by the plan participants in Tibble v. Edison International. The Supreme Court noted that while Edison International’s investment committee and third-party advisors had offered a variety of mutual funds, the plans offered higher-priced options and didn’t offer plans that were similar, yet of a lower cost.  The court ruled that “a trustee has a continuing duty—separate and apart from the duty to exercise prudence in selecting investments at the outset—to monitor, and remove imprudent, trust investments. So long as a plaintiff’s claim alleging breach of the continuing duty of prudence occurred within six years of suit, the claim is timely.”
 
Institutional share classes commonly have lower fees than retail share classes. To some observers, the difference in fees may seem trivial – but the impact on retirement savings over time may be significant.
  
When was the last time you reviewed your 401(k)-fund selection & share class? Was it a few years ago? Has it been longer than that? Why not review this today? Call in a financial professional to help you review your plan’s investment offering and investment fees.