Is it right for you?
 
The COVID-19 pandemic has shaken up nearly every aspect of American life. To say it’s been a difficult time would be an understatement. 
 
However, difficult times may open doors to new possibilities. Businesses are changing their ways of operating, and individuals are exploring new avenues for investment. It may be time for you to consider some opportunities, as well.
 
What is a Roth Conversion? A Roth conversion refers to the transfer of an Individual Retirement Account (IRA), either Traditional, SIMPLE, or SEP-IRA, into a Roth IRA. With Roth IRAs, you pay tax on the money before it transfers into the account.
 
One benefit to having your money in the Roth IRA is that, unlike a Traditional IRA, you currently are not obligated to take Required Minimum Distributions (RMDs) after you reach age 72 (RMDs would be required to any non-spousal beneficiaries, however).
 
Another benefit is that since the money was taxed before going into the Roth IRA, any distributions are tax-free. Keep in mind that tax rules are constantly changing, and there is no guarantee that Roth IRA distributions will remain tax-free.1,2  
 
Why Go Roth in 2020? In the face of the market downturn after the COVID-19 outbreak, you may be in a unique financial situation. For example, suppose you have an IRA account that was worth $1 million before the downturn, but it’s currently worth $800,000.
 
Perhaps your income has also decreased, potentially putting you in a lower tax bracket. Maybe you own one or more businesses, such as restaurants, that have been closed. You may not yet know if these businesses will be opening again in 2020. Your income could hypothetically be considerably lower this year than last year.
 
But: this may present an opportunity. Less earned income may mean lower total taxes due on a Roth conversion, especially if the overall account value has dropped.
 
Keep in mind, this article is for information purposes only and is making an assumption on an IRA account’s value and applying a hypothetical drop in earned income. We recommend you contact your tax or legal professional before modifying your retirement investment strategy. 
 
No Turning Back. While this may be a good time for you to consider converting to a Roth IRA, remember that there’s no turning back once you do. The Tax Cuts and Jobs Act of 2017 decreed that Roth conversions could no longer be undone.3 
 
A Roth IRA conversion is a complicated process, and it’s wise to involve your trusted financial professional. Please feel free to reach out with any questions you have about your 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. 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. Tax-free and penalty-free withdrawal also can be taken under certain other circumstances, such as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.
 
Citations.
1 - Investopedia.com, November 26, 2019.
2 - Investopedia.com, January 17, 2020.
3 - Congress.gov, December 22, 2017.

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 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 greater 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 really 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.

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 - thebalance.com/compound-interest-4061154 [12/6/19]

What’s the difference? What do these terms mean for you?
 
The COVID-19 outbreak has put tremendous pressure on stock prices, prompting some investors to blindly and indiscriminately sell positions at a time when the entire market is trending lower. Worried investors believe "this time it's different." When the market drops, some investors lose perspective that downtrends – and uptrends – are part of the investing cycle. When stock prices break lower, it's a good time to review common terms that are used to describe the market's downward momentum.1,2
 
Pullbacks. A pullback represents the mildest form of a selloff in the markets. You might hear an investor or trader refer to a dip of 5% to 10% after a peak as a “pullback.”1
 
Corrections. The next degree in severity is a “correction.” If a market or markets retreats 10% to 20% after a peak, you’re in correction territory. At this point, you’re likely on guard for the next tier.1
 
Bear Market. In a bear market, the decline is 20% or more since the last peak.1
 
All this is normal. Pullbacks, corrections, and bear markets are a part of the investing cycle. When stock prices are trending lower, some investors can second-guess their risk tolerance. But periods of market volatility can be the worst time to consider portfolio decisions.
 
Pullbacks and corrections are relatively common and represent something that any investor may see in their financial life, from time to time – often, several times over the course of a decade. Bear markets are much rarer. What we are experiencing now represents the start of the ninth bear market since 1926. This bear market follows the longest bull market on record.1  
 
How is this bear market going to affect me? That’s a good question, but it’s something that you won’t fully understand in the here and now. The average bear market lasts 146 days for the Standard & Poor’s 500.2
 
A retirement strategy, formed with the help of a trusted financial professional, has market volatility factored in. As you continue your relationship with that professional, they will also be at your side to make any adjustments as needed and help you make any necessary decisions along the way. Their goal is to help you pursue your goals.
 
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 - kiplinger.com/slideshow/investing/T018-S001-25-dividend-stocks-analysts-love-the-most-2019/index.html [3/10/2020]
2 - marketwatch.com/story/the-dow-just-tumbled-into-a-bear-market-ending-the-longest-bull-market-run-in-historyheres-how-those-downturns-last-on-average-2020-03-11 [3/14/2020]

THE MONTH IN BRIEF
The Coronavirus Aid, Relief, and Economic Security (CARES) Act has been signed into law, bringing relief to millions of Americans, most of whom are expected to be quarantined for at least another month. The White House has asked Americans to continue “socially distancing” during the month of April. Volatility continued in International markets, even as the COVID-19 (novel coronavirus) reached the United States. The Standard and Poor’s 500 (S&P 500) Index was down 12.51% for March.1

DOMESTIC ECONOMIC HEALTH
At the end of March, the CARES Act was signed into law, releasing $2 trillion in relief to millions of Americans and U.S. businesses. This includes $1,200 checks to American taxpayers ($2,400 to married couples) and four months of additional $600 payments to those claiming unemployment.2,3
February’s unemployment rate rose a point to 5.6% (U-6 Unemployment rose to 7%), prior to the St. Louis Fed’s declaration that unemployment could jump to 32.1%, post-coronavirus. The 47 million out-of-work Americans would be the highest number seen since 1948. Michigan consumer sentiment numbers dropped to 89.1 for March, while February’s consumer spending stayed at 0.2%. February retail sales dropped to -0.5% from the previous month’s 0.6%. The ISM Purchasing Managers Index (PMI) dropped to 50.1 for February with new orders sinking to 45.9. The ISM Non-Manufacturing PMI rose to 57.3.4,5,6
​
GLOBAL ECONOMIC HEALTH
China, where the first widespread outbreak of COVID-19 was reported, has reported a considerable drop in cases (though, it is difficult to verify their numbers). However, the loss of workers due to illness and the changes in demand worldwide may have a long-term effect on China’s gross domestic product (GDP). The overall drop of 3.7% in GDP, crossed with an upswing in China’s manufacturing PMI to a score of 52, indicate a country that has come back to work.7,8,9
Europe and the United Kingdom have also been hit heavily by COVID-19, with Italy and Spain seeing a large number of cases. Aggressive actions to subsidize employment in Europe are projected to stem unemployment claims to some degree. Meanwhile, inflation in the 19-country euro area has dropped to 0.7%.10,11

WORLD MARKETS
There were several markets sinking in March, including the U.K.’s FTSE 100 (-13.81%), the German Dax (-16.44%), the French CAC 40 (-17.21%), Japan’s Nikkei 225 (-10.53%), Australia’s All-Ordinaries (-21.51), Brazil’s Bovespa (-29.90), Mexico’s Bolsa (-16.38%), Hong Kong’s Hang Seng (-9.67), China’s Shanghai Composite (-4.51), Malaysia’s KLCI (-8.89), South Korea’s Kospi Composite (-11.69), and Russia’s RTS (-21.95).12,13
The MSCI EAFE Index (which measures performance across developed stock markets outside North America) took a 14.77% fall.14

​COMMODITIES MARKETS
Energy commodities fell in March, including light crude (-55.17%), heating oil (-33.10%), natural gas (-3.12%), and unleaded gas (-59.45%). The drop in oil prices was attributed to Saudi Arabia and Russia, who show no signs of compromising in their standoff over oil supply.15
Meanwhile, other commodities stepped into negative territory in March, such as corn (-6.75%), cocoa (-18.88%), cotton (-16.65%), and sugar (-25.80%). The exceptions for March were soybeans (+0.11%), wheat (+7.38%), and coffee (+7.41%).15
Metals also had a difficult month, with March numbers diminishing for gold (-0.74%), silver (-14.75%), platinum (-17.13%), and copper (-12.96%). The U.S. Dollar Index closed at 98.95, up 1.62%.15,16

REAL ESTATE
Freddy Mac’s Primary Mortgage Market Survey for March 26 revealed the mean interest rate on a 30-year home loan as 3.5%, up 0.05% since the end of February. The 15-year home loan sank 0.03% to 2.92%.17
Existing home sales rose to 6.5% for February, with 5.77 million homes available. New home sales fell back 4.4% for February, with 765,000 houses on the market. Housing starts also pulled back 1.5%. Building permits stepped back 5.5%.4

Anyone who starts a business needs an operational strategy. A good one includes metrics, a day-to-day plan detailing who will do what, and an assessment of external and internal risks.

LOOKING BACK, LOOKING FORWARD
March saw the end of the worst quarter for stocks in U.S. history. The Dow Jones Industrial Average (DJIA) closed at 21,917.16. The Standard and Poor’s 500 (S&P 500) ended the month at 2,584.59, while the NASDAQ Composite Index closed at 7,700.10.18

​Amid so much uncertainty about the duration and impact of the COVID-19 coronavirus, it’s difficult to say how much volatility might be ahead. The arrival of CARES Act checks and other stimulus measures should be a welcome relief to households and businesses. While it’s far too early to understand the full economic impact of what’s to come, the news that this ordeal has passed will be very welcome.

UPCOMING RELEASES
Here are some of the economic news items for investors to consider in April: the March Institute for Supply Management Non-Manufacturing Index (4/3), March’s Consumer Price Index (4/10), March’s Producer Price Index (4/9), the initial April Consumer Sentiment Index from the University of Michigan (4/9), March retail sales (4/15), March housing construction activity (4/16), March existing home sales (4/21), March new home sales (4/23), March durable goods orders (4/24), March personal spending and income and the final April University of Michigan Consumer Sentiment Index (4/24), the estimate of first-quarter gross domestic product from the Bureau of Economic Analysis (4/29), and then the Conference Board’s March Consumer Confidence Index and the latest S&P/Case-Shiller Home Price Index (4/28). NOTE: Some releases may be delayed or rescheduled in the wake of the COVID-19 epidemic.

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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Distributions can be waived in 2020 for Inherited Accounts, 401(k)s, and IRAs.
 
Recently, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.1
 
To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis.1
 
The CARES Act has far-reaching implications for many. Here are the most important provisions to keep in mind:
 
Stimulus Check Details. Americans can expect a one-time direct payment of up to $1,200 for individuals (or $2,400 for married couples) with an additional $500 per child under age 17. These payments are based on the 2019 tax returns for those who have filed them and 2018 information if they have not. The amount is reduced if an individual makes more than $75,000 or a couple makes more than $150,000. Those who make more than $99,000 as an individual (or $198,000 as a couple) will not receive a payment.1
 
Business Owner Relief. The act also allocates $500 billion for loans, loan guarantees, or investments to businesses, states, and municipalities.1
 
Your Inherited 401(k)s. People who have inherited 401(k)s or Individual Retirement Accounts can suspend distributions in 2020. Required distributions don’t apply to people with Roth IRAs; although, they do apply to investors who inherit Roth accounts.2
 
RMDs Suspended. The CARES Act suspends the minimum required distributions most people must take from 401(k)s and IRAs in 2020. In 2009, Congress passed a similar rule, which gave retirees some flexibility when considering distributions.2,3
 
Withdrawal Penalties. Account owners can take a distribution of up to $100,000 from their retirement plan or IRA in 2020, without the 10-percent early withdrawal penalty that normally applies to money taken out before age 59½. But remember, you still owe the tax.4
 
Many businesses and individuals are struggling with the realities that COVID-19 has brought to our communities. The CARES Act, however, may provide some much-needed relief. Contact your financial professional today to see if these special 2020 distribution rules are appropriate for your 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.
 
Under the CARES act, an accountholder who already took a 2020 distribution has up to 60 days to return the distribution without owing taxes on it. This material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. 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. Penalties may occur for missed RMDs. Any RMDs due for the original owner must be taken by their deadlines to avoid penalties. 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 children of the IRA owner who have not reached the age of majority may have other minimum distribution requirements.
 
Under the CARES act, an accountholder who already took a 2020 distribution has up to 60 days to return the distribution without owing taxes on it. This material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. 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.
 
Accountholders can always withdraw more. But if they take less than the minimum required, they could be subject to a 50% penalty on the amount they should have withdrawn – except for 2020.
 
Citations.
1 - CNBC.com, March 25, 2020.
2 - The Wall Street Journal, March 25, 2020.
3 - The Wall Street Journal, March 25, 2020.
4 - The Wall Street Journal, March 25, 2020.