If you are retired and have reached your seventies, you may have the opportunity to draw a little less income from your retirement savings accounts in 2022. 
 
Next year, the Internal Revenue Service plans to update the life expectancy tables used for the calculation of required minimum distributions, or RMDs – the annual withdrawals you are asked to make from certain kinds of retirement plans.
  
The I.R.S. knows that on the whole, Americans are living longer than they used to, and therefore, their retirement savings need to last longer. In recognition of this, it is revising the tables used to figure RMDs for the first time since 2002.
 
Under the new life expectancy tables, RMD amounts are reduced a bit. Generally speaking, they shrink by several percentage points. 
 
For example, if you turn 72 in 2022 and take your first RMD from a traditional IRA (or other qualified retirement plan) by the end of 2022, that RMD will be 6.65% smaller than it would be according to the 2021 tables. (You do have the choice to delay your initial RMD into 2023, though if you do so, you will be asked to take two 2023 RMDs.)
 
To further illustrate this, we will switch over to dollars from percentage points. If you turn 72 in 2022 and decide to take your first RMD from a traditional IRA that has $3,000,000 in it by the end of 2022, your RMD is $109,489 by calculations using the 2022 tables. Using the current tables, that 2022 RMD would be $117,186.
 
Speaking of traditional IRAs, as a reminder, distributions from traditional IRAs must begin once you reach age 72. The money distributed to you is taxed as ordinary income. When such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty. You may keep contributing to a Traditional IRA past age 72, as long as you meet the earned-income requirement.
 
The reduction in RMDs may be a benefit. You might be wondering if you should offset it by withdrawing more than the RMD amount, but there could be a price to pay for that over time; drawing down your retirement savings too much can heighten the risk of outliving your money.   
  
Consider the upsides to smaller RMDs. A little more of your retirement money stays in the account, with further potential for tax-deferred growth. As RMDs represent taxable income, a marginally smaller RMD may leave you with slightly less income tax linked to the distribution.

​As much as you would like to, you cannot keep your money in your retirement account forever.
 
These investment vehicles include 401(k)s, IRAs, and similar retirement accounts.1  Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from your 401(k), IRAs, or other defined contribution plans in most circumstances. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
 
Another major change that occurred from the SECURE Act is the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you had to stop making contributions at age 70½. Now, you can continue to make contributions if you meet the earned-income requirement.
 
How do you determine how much your RMD needs to be? It depends on whether you are married, and if you are, if your spouse is the sole beneficiary of your IRA and less than 10 years younger than you are. For everyone else, the Uniform Lifetime Table can help.
 
Keep in mind that this article is for informational purposes only, and the table below is meant to provide some guidance. The table is neither a recommendation nor a replacement for real-life advice. Always contact your tax, legal, or financial professional before making any changes to your required minimum distributions.

You can use the following formula to calculate a rough estimate of your RMD:

1.  Determine the year-end balance of your account.
2. Find your age on the table and note the distribution period number.
3. Divide the total balance of your account by the distribution period. For example, say you are 72, and your account balance is $100,000. Your RMD may be about $3,906, based on the table.

Calculating your RMD is not tricky but understanding your RMD’s role in your overall retirement strategy can be complicated. It is important to note that penalties can apply if you do not follow the mandatory distribution guidelines. A financial professional is an excellent resource for guidance.

U.S. Markets
Stocks were mixed in January, giving up much of the month’s gains in the final days of trading, as unprecedented activity in a handful of companies roiled markets.

 The Dow Jones Industrial Average dropped 2.04 percent and the Standard & Poor’s 500 Index fell 1.11 percent. By contrast, the Nasdaq Composite gained 1.42 percent.1
 
Mixed Signals
The stock market stumbled at the start of the month, retreating amid the slow pace of vaccine distribution and concerns that the economic recovery might take longer than anticipated.

However, stocks regained some upside momentum on news of strong manufacturing data, firmer oil prices, and hopes for an additional fiscal stimulus.
 
“Act Big,” Says Yellen
After touching record highs, stocks drifted lower again, weighed down by rising interest rates, which caused some concerns over current stock valuations.

Market sentiment improved after testimony from incoming Treasury Secretary Janet Yellen to the Senate Finance Committee that lawmakers needed to “act big” on fiscal stimulus, thereby raising hopes for substantial federal spending.
​
Earnings Season
Investor enthusiasm was further supported by a strong start to the fourth-quarter earnings season. With 37 percent of the S&P 500 index companies reporting at month-end, 82 percent reported a positive earnings surprise.
 
Nonetheless, quarterly reports haven't always translated into higher stock prices. In fact, the share prices of the companies that reported positive earnings surprises fell an average of 1.2 percent in the two days preceding and following the earnings release.2,3,4
 
Lesson in Short Selling
Stocks closed the month on a volatile note as many retail investors were introduced to the concept of short selling and how it can influence a stock’s price. This unexpected buying activity roiled markets and fueled a sharp rise in several stocks.
 
To sell short, investors are required to open a margin account. Selling short is not suitable for everyone, as margin trading entails greater risk, including the risk of unlimited losses in a position and the incurrence of margin interest debt. You should consider your financial situation and risk tolerance before trading on margin.
 
Sector Scorecard
Sectors were also mixed, with Energy (+3.75 percent), Health Care (+1.4 percent), Consumer Discretionary (+0.77 percent) and Real Estate (+0.55 percent) posting gains. Consumer Staples (-4.98 percent), Industrials (-4.27 percent), Materials (-2.42 percent), Communication Services (-0.89 percent), Financials (-1.8 percent), Technology (-0.84 percent), and Utilities (-0.88 percent) closed lower.5

What Investors May Be Talking About in February
In the month ahead, expect President Biden to continue outlining his agenda. A newly elected president’s first 100 days often set the tone for the next four years.
​
Investors will be looking at his initial priorities as well as how he and Congress will work together. Policy changes can sometimes introduce uncertainty into the markets even as companies wait to learn of new businesses and investment incentives.

World Markets
​Overseas markets were mixed at the start of the year, with the MSCI-EAFE Index gaining 0.56 percent.6
In Europe, France lost 2.74 percent while the United Kingdom slipped 0.82 percent. Germany provided a spark, picking up 5.21 percent.7

The Pacific Rim markets performed better. Hong Kong gained 3.87 percent and Japan added 0.80 percent. Australia tacked on 0.31 percent.8

Indicators

Gross Domestic Product: The nation’s economy grew by 4.0 percent in the fourth quarter. For the full year, GDP dropped 3.5 percent.9

Employment: Total nonfarm payrolls declined by 140,000, led by losses in the hospitality and leisure sectors. The unemployment rate remained steady at 6.7 percent.10

Retail Sales: Retail sales fell 0.7 percent. Excluding motor vehicles and gasoline, consumer purchases fell a more substantial 2.1 percent.11

Industrial Production: Industrial production jumped 1.6 percent, well ahead of consensus estimates of a 0.5 percent increase.12

Housing: Housing starts increased by 5.8 percent, powered by a 12.0 percent jump in single-family homes.13

Existing-home sales reached their highest level in 14 years, with an increase of 0.7 percent in December. Sales were 22 percent higher than in December 2019.14

New home sales rose by 1.6 percent as the median price of new homes surged by 8.0 percent from a year ago.15

Consumer Price Index: Consumer prices rose 0.4 percent in December, driven by an 8.4 percent jump in gasoline prices. The inflation rate for 2020 came in at 1.4 percent.16

Durable Goods Orders:  New orders for long-lasting goods increased 0.2 percent. Although it was the eighth straight month of gains, the figure was below expectations, reflecting the general economic softness in December.17

The Fed
Fed officials believe that economic weakening due to the resurgence of COVID-19 cases is temporary. They also noted that despite the hiccups in the vaccine distribution, they would wait and see how the rollout proceeds in the weeks ahead before considering any actions.18
​
“The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals,” Fed officials said in a prepared statement at the conclusion of their two-day meeting on January 27, 2021.19

Gary G. Blom CRPC | Financial Advisor
Michael Howell MBA | Financial Advisor
Address: 3340 Tully Rd. Ste B4, Modesto, CA 95350
Website: www.blomandhowell.com
Office: (209) 857-5207 | Fax: (209) 857-5098

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Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

Advisory services offered through Blom & Howell Financial Planning, Inc.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalization in the FTSE Developed Europe Index. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprising 50 companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. 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.
CITATIONS:
1. The Wall Street Journal, January 31, 2021
2. FactSet Research, January 22, 2021. “Earnings Insights.”
3. FactSet Research, January 29, 2021
4. FactSet Research, January 25, 2021
5. FactSet Research, January 31, 2021
6. MSCI.com, January 31, 2020
7. MSCI.com, January 31, 2020
8. MSCI.com, January 31, 2020
9. The Wall Street Journal, January 28, 2021
10. BLS.gov, January 8, 2021
11. The Wall Street Journal, January 15, 2021
12. The Wall Street Journal, January 15, 2021
13. CNBC.com, January 21, 2021
14. The Wall Street Journal, January 22, 2021
15. Reuters.com, January 28, 2021
16. The Wall Street Journal, January 13, 2021
17. The Wall Street Journal, January 27, 2021
18. The Wall Street Journal, January 27, 2021
19. FederalReserve.gov, January 27, 2021

Some life and financial factors that can sometimes be overlooked.
 
We all have our “blue sky” visions of the way retirement should be, yet our futures may unfold in ways we do not predict. So, as you think about your “second act,” you may want to consider some life and financial factors that can suddenly arise.
 
You may end up retiring earlier than you expect. If you leave the workforce at “full” retirement age (FRA), which is 67 for those born in 1960 and later, you may be eligible to claim “full” Social Security benefits. Working until 67 may be worthwhile because it will reduce your monthly Social Security benefits if you claim them between age 62 and your FRA.
 
Now, do most Americans retire at 67? Not according to the annual survey from the Employee Benefit Research Institute (EBRI).
 
In EBRI’s 2020 Retirement Confidence Survey, 16% of pre-retirees expected to retire between ages 66-69, and 31% thought they would retire at age 70 or later. The reality is different. In surveying current retirees, EBRI found that only 6% had worked into their seventies. In fact, 70% percent of them had left work before age 65, and 33% had retired before age 60.
 
You may see retirement as an extension of the present rather than the future. This is only natural, as we all live in the present – but the future will arrive. The costs you have to shoulder later in retirement may exceed those at the start of retirement. As you may be retired for 20 or 30 years, it is wise to take a long-term view of things.
 
You may have a health insurance gap. If you retire before age 65, what do you do about health coverage? You may shoulder 100% of the cost.
 
Looking forward, you may need extended care, and it seems to get more expensive each year. Wealthy households may be able to “self-insure” against extended care, but many other households struggle. In Genworth’s 2020 Cost of Care Survey, the median monthly cost of a semi-private room in a nursing home is $7,738. In California, it is $9,023; in Florida, $8,803.
 
Suppose you become disabled or seriously ill, and working is out of the question. How do you make ends meet?
 
Age may catch up to you sooner rather than later. You may stay fit, active, and mentally sharp for decades to come, but if you become mentally or physically infirm, you need to find people to trust to manage your finances.
 
You could be alone one day. As anyone who has ever lived alone realizes, a single person does not simply live on 50% of a couple's income. Keeping up a house, or even a condo, can be tough when you are elderly. Driving can be a concern. If your spouse or partner is absent, will there be someone to help you in the future?
    
These are some of the blind spots that can surprise us in retirement. They may quickly affect our money and quality of life. If you age with an awareness of them, you may have the opportunity to manage the outcome better.

​Focus on your overall approach during times of short-term volatility.
 
As an investor, it can be tempting to get caught up in daily news headlines. Consider how news about the election and COVID-19 vaccines have moved the markets over the past several weeks. But having a financial strategy can help you ignore short-term volatility and focus on your long-term vision.
 
As you know, investing is a process based on your goals, time horizon, and risk tolerance. Interestingly enough, it’s also a process that may help you prepare for life’s financial challenges.
 
For example, did you know that only 44 percent of workers have estimated how much income they would need in retirement? What is more, only 36 percent have calculated how much money they would need to cover healthcare expenses.
 
Creating a financial strategy means thinking about the bigger picture, including a variety of issues like monthly income needs, handling unexpected expenses, and preparing for healthcare costs. People who take a “do-it-yourself” approach can quickly find themselves overwhelmed by all the variables they need to consider.
 
If a current event or headline has caused you to reconsider your financial strategy, please give us a call. Sometimes, a newsworthy event can require a new approach. But many times, it may just be a “speed bump,” a momentary blip that is already factored into your long-term vision.

U.S. Markets
A tumultuous year ended on a positive note as stocks rose in December, spurred by the rollout of multiple COVID-19 vaccines and the signing of a new fiscal relief bill.
The Dow Jones Industrial Average, which lagged all year, picked up 3.27 percent. The Standard & Poor’s 500 Index gained 3.71 percent, and the Nasdaq Composite tacked on 5.65 percent.1
 
Vaccines Take Center Stage
Investors were buffeted by news of rising infections and new lockdowns even as they kept a close eye on the start of vaccine distribution in the U.K., which some observers referred to as “the beginning of the end” of the coronavirus pandemic.
 
Boost from the Stimulus Package  
Much like November, stocks rallied when Congress made progress on the new fiscal stimulus bill but pulled back as talks seemed to stall. After some posturing, President Trump signed the new law, which helped stocks surge in the final week of trading.

All Eyes on the Election
As investors grappled with these headline issues, markets also saw several new and secondary equity offerings, including two high-profile technology initial public offerings (IPOs) during the month. This year, companies raised over $167 billion in IPOs, blowing past the record of $107.9 billion set in 1999.2
 
Sector Scorecard
The majority of industry sectors posted gains in December, including Communication Services (+2.35 percent), Consumer Discretionary (+2.18 percent), Consumer Staples (+0.10 percent), Energy (+3.97 percent), Financials (+4.45 percent), Health Care (+2.30 percent), Industrials (+0.12 percent), Materials (+1.58 percent), and Technology (+5.14 percent). The Real Estate (-1.04 percent) and Utilities (-1.69 percent) sectors lost ground.3
 
What Investors May Be Talking About in January
After the November election, markets rallied due to initial tallies that seemed to point to a potentially divided government, which historically has been a positive for the equity markets.4

However, Georgia’s two Senate seats remain undecided and will go to a special election this month.
Ultimately, this runoff will determine which party controls the Senate and may give insight into the future legislative agenda of the incoming Biden administration.​

​
World Markets
International stocks enjoyed a strong month of performance, with the MSCI EAFE Index gaining 5.24 percent.5
Vaccine optimism and an exit agreement between the European Union and the U.K. helped power the markets.
Germany gained 3.22 percent while the United Kingdom picked up 3.10 percent. France lagged a bit, tacking on 0.60 percent.6
​
Pacific Rim markets also enjoyed a solid month. The Hang Seng Index rose 3.38 percent and the Nikkei tacked on 3.82 percent.7

Indicators

Gross Domestic Product: The final read on third quarter GDP was revised higher, from 33.1 percent to 33.4 percent.8

Employment: Nonfarm payrolls rose by a disappointing 245,000 in November. The unemployment rate ticked lower, falling from 6.9 percent to 6.7 percent. The labor-force participation rate was 61.5 percent, which is an improvement from April’s low but remains at a historically low level.9

Retail Sales: Retail sales fell 1.1 percent in November, showing a slowdown in consumer spending amid economic lockdowns and continued uncertainty. October’s retail sales number was revised downward, from an increase of 0.3 percent to a decline of 0.1 percent.10

Industrial Production: Rising for the seventh consecutive month, industrial output picked up 0.4 percent in November, powered by a 0.8 percent leap in manufacturing.11

Housing: Housing starts reached a nine-month high, rising 1.2 percent in November.12 Existing home sales declined 2.5 percent in November. It was the first decline in six months.13 New home sales slumped 11.0 percent compared to last month, but were 20.8 percent higher than in November 2019.14

Consumer Price Index: Prices of consumer goods and services rose by 0.2 percent in November, leaving the year-over-year inflation rate at 1.2 percent.15

Durable Goods Orders:  Durable goods orders rose by 0.9 percent, marking the seventh consecutive month of gains.16

The Fed
In its last meeting of 2020, the Federal Open Market Committee (FOMC) detailed its plan to continue purchasing $120 billion in Treasury and mortgage-backed securities.17

Fed officials said that they will continue the program until they see substantial progress toward meeting its inflation and employment goals. Officials at the Fed have indicated that achieving such goals may not happen for years.17

Gary G. Blom CRPC | Financial Advisor
Michael Howell MBA | Financial Advisor
Address: 3340 Tully Rd. Ste B4, Modesto, CA 95350
Website: www.blomandhowell.com
Office: (209) 857-5207 | Fax: (209) 857-5098

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

​CITATIONS:
1. The Wall Street Journal, December 31, 2020
2. The Wall Street Journal, December 30, 2020
3. FactSet Research, December 31, 2020
4. HartfordFunds.com, October 2020. “The Election and Your Portfolio.”
5. MSCI.com, December 31, 2020
6. MSCI.com, December 31, 2020
7. MSCI.com, December 31, 2020
8. CNBC.com, December 22, 2020
9. CNBC.com, December 4, 2020
10. TheNewYorkTimes.com, December 16, 2020
11. FederalReserve.gov, December 15, 2020
12. CNBC.com, December 17, 2020
13. CNBC.com, December 22, 2020
14. Census.gov, December 23, 2020
15. BureauOfLaborStatistics.gov, December 10, 2020
16. AdvisorPerspectives.com, December 24, 2020
17. CNBC.com, December 11, 2020

Breaking down the enrollment periods and eligibility.
 
Medicare enrollment is automatic for some. For those receiving Social Security benefits, the coverage starts on the first day of the month you turn 65.
 
If you are not receiving Social Security benefits at 65, you may be delaying until you reach full retirement age, or until you reach 70. If you’re coming up on 65 and not receiving Social Security benefits, SSDI, or benefits from the Railroad Retirement Board, you can still apply for Medicare coverage. You can visit your local SSA office or visit www.socialsecurity.gov/medicareonly/ to determine your eligibility.
 
If you’re getting Social Security checks and approaching age 65, you’ll get a Medicare card in the mail three months before your 65th birthday. If you are getting SSDI (Social Security Disability Insurance; regardless of your age), the card is scheduled to arrive coincidental with your 25th month of disability. You must be a U.S. citizen or a permanent legal resident of this country. If so, you or your spouse must have earned sufficient credits to be eligible for Medicare, typically earned over 10 years.
 
When can you add or drop forms of Medicare coverage? Medicare has enrollment periods that allow you to do this.
 
*The initial enrollment period is seven months long. It starts three months before the month in which you turn 65 and ends three months after that month. You can enroll in any type of Medicare coverage within this seven-month window – Part A, Part B, Part C (Medicare Advantage Plan), and Part D (prescription drug coverage). As it happens, if you don’t sign up for some of this coverage during the initial enrollment period, it may cost you more to add it later.
 
*Once you are enrolled in Medicare, you can only make changes in coverage during certain periods of time. For example, the open enrollment period for Part D is October 15-December 7, with Part D coverage starting January 1.
 
Do you have questions about eligibility or the eligibility of your parents? Your first stop should be the Social Security Administration (see the contact information in the second paragraph above). You can also visit www.medicare.gov and www.cms.gov.

What are the keys to prepare to grow wealthy together?
 
When you marry or simply share a household with someone, your financial life changes—and your approach to managing your money may change as well. The good news is that it is usually not so difficult.
 
At some point, you will have to ask yourselves some money questions—questions that pertain not only to your shared finances but also to your individual finances. Waiting too long to ask (or answer) those questions might carry a price. In the 2019 TD Bank Love & Money survey of consumers who said they were in relationships, 40% of younger couples described having weekly arguments about their finances.
 
First off, how will you set priorities? One of your first priorities should be simply setting aside money that may help you build an emergency fund. But there are other questions to ask. Should you open joint accounts? Should you jointly title assets?
 
How much will you spend & save? Budgeting can help you arrive at your answer. A simple budget, an elaborate budget, or any attempt at a budget can prove more informative than none at all. A thorough, line-item budget may seem a little over the top, but what you learn from it may be truly eye-opening.
 
How often will you check up on your financial progress? When finances affect two people rather than one, credit card statements and bank balances become more important. Checking in on these details once a month (or at least once a quarter) can keep you both informed, so that neither one of you have misconceptions about household finances or assets. Arguments can start when money misunderstandings are upended by reality. 
   
What degree of independence do you want to maintain? Do you want to keep some money separate? Some spouses need individual financial “space” of their own. There is nothing wrong with this approach.      
     
Can you be businesslike about your finances? Spouses who are inattentive or nonchalant about financial matters may encounter more financial trouble than they anticipate. So, watch where your money goes, and think about ways to pay yourselves first rather than your creditors. Set shared short-term, medium-term, and long-term objectives, and strive to attain them.
   
Communication is key to all this. Watching your progress together may well have benefits beyond the financial, so a regular conversation should be a goal.

If an investor chooses a non-human financial advisor, what price could they end up paying?
 
Investors have a choice today that they did not have a decade ago. They can seek investing and retirement guidance from a human financial professional or put their invested assets in the hands of a robo-advisor.
   
What exactly is a robo-advisor? Robo-advisors are a class of financial advisors that provide financial advice or investment management online with moderate to minimal human intervention. They offer digital financial advice based on mathematical rules or algorithms. Signing up walks the user through a series of questions, and based on their responses, creates portfolio choices for the investor.
 
Which begs the question: why would you trust your finances to a robo-advisor?
 
Robo-advisors are an attractive option for those just starting out investing. Some robo-advisor accounts offer very low minimums and fees and can be a solution for younger investors who want to "set it and forget it."
 
Even so, less than 8% of investors responding to a survey from data analytics firm Hearts & Wallets said they had used a robo-advisor. Out of the $43 trillion in the North American wealth management market, an estimated $410 billion is invested with robo-advisors. That number may grow to $830 billion by 2024.
 
The inherent problem is robo-advisors lack the human element to ask questions and dig deeper. Investors in all life stages appreciate when a financial professional takes time to understand them and their situation. A software program struggles to gain that understanding, even with input from a questionnaire.
   
The closer you get to retirement age, the more challenges you may face with a robo-advisor. The software continues to evolve and understand retirement investing. After 50, people have financial concerns far beyond investment yields. Investment management does not equal retirement preparation, estate strategies, or risk management.
 
Many investors are taking advantage of a hybrid model that has emerged. Per the Hearts & Wallets research study, more than half of investors use robo-advisors only as an extension of their existing wealth manager. Once their balance reaches a certain threshold, investors may transition to working with an actual financial professional.

It appears the traditional approach of working with a human financial professional may be hard to disrupt. The opportunity to draw on experience by having a conversation with a professional who has seen his or her clients go through the whole arc of retirement is essential.
 
These responses point to uncertainty about the process of financial and retirement strategies. The process is quite worthwhile, quite illuminating, and quite helpful. It is not just about improving "the numbers," it is also about discovering ways to sustain and enhance your quality of life.

Here are some things you might consider before saying goodbye to 2020.
 
What has changed for you in 2020? For many, this year has been as complicated as learning a new dance. Did you start a new job or leave a job behind? That is one step. Did you retire? There is another step. Did you start a family? That is practically a pirouette. If notable changes occurred in your personal or professional life, then you may want to review your finances before this year ends and 2021 begins. Proving that you have all the right moves in 2020 might put you in a better position to tango with 2021.
   
Even if your 2020 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your overall personal finances. 
 
Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal, and accounting professionals before modifying your tax strategy.
  
Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. You might want to consider this move, but it should be made with the guidance of a financial professional you trust.1  
  
In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that amount can be carried forward to offset capital gains in upcoming years.1
  
Do you want to itemize deductions? You may just want to take the standard deduction for the 2020 tax year, which has risen to $12,400 for single filers and $24,800 for joint. If you do think it might be better for you to itemize, now would be a good time to get the receipts and assorted paperwork together.2,3
   
Could you ramp up your retirement plan contributions? Contribution to these retirement plans may lower your yearly gross income. If you lower your gross income enough, you might be able to qualify for other tax credits or breaks available to those under certain income limits.4
  
Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2020 ends? Your gift may qualify as a tax deduction. For some gifts, you may be required to itemize deductions using Schedule A.4
 
While we are on the topic of year-end moves, why not take a moment to review a portion of your estate strategy. Specifically, take a look at your beneficiary designations. If you have not reviewed them for some time, double-check to see that these assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up to date.  
  
Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form so far, you may need to adjust your withholding before the year ends.
  
What can you do before ringing in the New Year? New Year’s Eve may put you in a dancing move, eager to say goodbye to the old year and welcome 2021. Before you put on your dancing shoes, consider speaking with a financial or tax professional. Do it now, rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial 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.  Investopedia.com, April 18, 2020
2.  NerdWallet.com, July 17, 2020
3.  Investopedia.com, May 22, 2020
4.  Investopedia.com, July 14, 2020