THE MONTH IN BRIEF
The S&P 500 rose 3.4% in November and attained a series of record closes in the process. Earnings results helped stocks, as did intermittent signals that the first stage of a U.S.-China trade agreement might be near at hand. Job creation improved, and consumer spending lived up to market expectations; consumer confidence and business activity, not so much. Housing indicators communicated good news, and the rally in stocks made the commodity sector look less attractive.

DOMESTIC ECONOMIC HEALTH
Were the U.S. and China close to signing off on the first phase of a new trade deal? According to officials from both countries, the answer was yes. When would this phase-one deal be finalized? No definite answer emerged. On November 8, President Donald Trump said that such an agreement was near, and six days later, White House economic advisor Larry Kudlow said that negotiators were “getting close” to an accord. On November 26, China’s commerce ministry announced that trade representatives had “reached a consensus” on remaining issues, and President Trump said that negotiators were in the “final throes of a very important deal.” Still, November ended without any announcement that a phase-one pact had been reached.

The Department of Labor’s latest employment report found that the economy generated 128,000 net new jobs in October. This was a surprise to the upside. Analysts surveyed by Bloomberg expected 85,000 new hires. Since more people looked for work in October than in September, the headline unemployment rate ticked up 0.1% to 3.6%. The U-6 rate, which encompasses both the unemployed and underemployed, also rose 0.1% to 7.0%.

Consumer spending rose 0.3% in October, representing the largest monthly gain since July. This happened even without a gain in consumer income. One prominent index of consumer confidence declined in November: the Conference Board’s consumer confidence gauge fell 0.6 points to 125.5. The University of Michigan’s Consumer Sentiment Index, however, rose to a final November mark of 96.8 from a 95.5 preliminary reading.

In the business sector, the Institute for Supply Management’s purchasing manager indices of manufacturing and non-manufacturing activity both rose. The ISM Manufacturing PMI came in half a point higher for October at 48.3; the Non-Manufacturing PMI was at 54.7, nearly two points higher. For economists worried about a downturn in the business cycle, these numbers were encouraging.

Retail sales were up 0.3% in October, and looking ahead, the National Retail Federation is forecasting a year-over-year gain of between 3.8% and 4.2% for holiday-season retail purchases. If its prediction comes true, the 2019 holiday shopping season could rank as one of the better ones seen this decade.

An October jump of 0.4% for the Consumer Price Index was noticed by economists, but it still left annualized inflation at a manageable 1.8%. The core CPI, which strips out volatile food and energy costs, was rising 2.3% year-over-year through October.

Minutes from the Federal Reserve’s October policy meeting were released on November 20, and they indicated that central bank officials were prepared to… stand pat, at least for a while. In October, most Fed officials believed the current monetary policy approach would prove adequate to guide the economy in the near term. If some event or trend prompted a “material reassessment” of the Fed’s economic outlook, then policy might shift.

​GLOBAL ECONOMIC HEALTH
The European Union scaled back its annual growth projections for 2020-21. Its latest economic forecast projects a 1.2% increase in gross domestic product for both years. This is about half the current pace of economic expansion in the United States. Inflation is projected to vary from 1.2% to 1.3%. E.U. economists believe the euro area will have a GDP of 1.1% for 2019.

With a general election coming up in the United Kingdom, Prime Minister Boris Johnson, a Tory, and his chief challenger, Jeremy Corbyn of the Labor Party, took different views of the Brexit. In November, Johnson vowed to meet the rescheduled January 31 Brexit deadline and arrange a new trade pact with the E.U. by December of next year. Corbyn claimed his party could negotiate a new Brexit deal with the E.U. before March, a deal that would be put before the electorate; voters could either approve or reject the terms of the deal and even the Brexit, itself.

In late November, key indicators suggested that China’s economy had slowed for a seventh consecutive month. (China’s third-quarter GDP reading was its poorest in nearly 30 years.) Through October, profits at Chinese industrial companies were down 9.9% year-over-year, a record annualized dip. An index of business confidence hit a 14-month low in October.
 
WORLD MARKETS
Outside America, October index performance was mixed. Several key benchmarks advanced. France’s CAC 40 and Germany’s DAX respectively rose 3.18% and 2.35%. Russia’s RTS index gained 1.01%. Australia’s All Ordinaries added 1.45%. Japan’s Nikkei 225 was up 1.39% for the month. Eyeing a macro view of global equities, the MSCI EAFE index (which measures performance across developed stock markets outside North America) improved 1.37%.

October descents to note: Indonesia’s Jakarta Composite pulled back 4.29%, Malaysia’s KLCI lost 1.02%, China’s Shanghai Composite slipped 2.78%, Hong Kong’s Hang Seng lost 1.64%, and Mexico’s Bolsa fell 1.52%.
 
COMMODITIES MARKETS
Coffee was hot in November, rising 14.77%. Two other crops also realized big gains: cocoa was up 9.31%; wheat, 7.57%. WTI crude oil added 2.36% across November; at the November 29 close on the New York Mercantile Exchange (NYMEX), a barrel was worth $58.14.

Oil was the only key energy commodity to advance in October. Natural gas slipped 12.32%. Smaller losses came for unleaded gasoline (1.48%) and heating oil (0.12%). While copper eked out a monthly gain of 0.09%, gold lost 3.25%; silver, 5.80%; platinum, 3.46%. Gold finished November at a NYMEX price of $1,470.10 an ounce; silver, at $17.10 an ounce. Corn fell 4.94%; soybeans, 4.36%. Cotton gained 2.13%; sugar, 2.48%. The U.S. Dollar Index improved 0.94% to 98.27.
 
REAL ESTATE
The pace of home buying accelerated during October. According to the National Association of Realtors, existing home sales advanced 1.9% in October, partly reversing a 2.5% September setback. New home sales, however, retreated 0.7% for October by Census Bureau calculations; they were up 4.5% in September.

Building permits were up 5.0% in the tenth month of 2019, housing starts 3.8%. The Census Bureau noted that single-family starts were up 3.2% across the 12 months ending in October, reaching a level unseen in 12 years.

Freddie Mac said that the average interest rate for a 30-year, fixed-rate home loan was 3.68% on November 27. That compares to 3.78% on Halloween and nearly 5% a year earlier. In Freddie’s November 27 Primary Mortgage Market Survey, the mean rate on a 15-year, fixed-rate home loan was 3.15%. Incidentally, home loan processing firm Ellie Mae said refinances accounted for 51% of U.S. mortgage activity in October. The last month that saw so many refis: March 2015.

30-year and 15-year fixed rate mortgages are conventional home loans generally featuring a limit of $484,350 ($726,525 in high-cost areas) that meet the lending requirements of Fannie Mae and Freddie Mac, but they are not mortgages guaranteed or insured by any government agency. Private mortgage insurance, or PMI, is required for any conventional loan with less than a 20% down payment.

LOOKING BACK, LOOKING FORWARD
The Dow Jones Industrial Average reached another milestone in November, topping 28,000. It settled at 28,051.41 on November 29; on the same day, the Nasdaq Composite closed at 8,665.47, and the S&P 500, at 3,140.98. All in all, November was the best month for U.S. stocks since June, with indices shattering historical highs.

​The short-term economic outlook has shifted to some degree; anxieties about a recession arriving in 2020 have lessened. There is still optimism that the U.S. and China may reach a phase-one trade agreement, and the Federal Reserve appears comfortable with its current monetary policy stance and seems to be watching the business cycle closely. 

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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Protecting yourself from potential calamity.
 
Cybercrime affects both large corporations and private individuals. You’ve likely read about the large data breaches in the business world. These crimes are both expensive and on the rise. The U.S. Identity Theft Resource Center says that these corporate data breaches reached a peak of 1,632 in 2017. The response to the growing need for data protection has been swift and powerful; venture capitalists have invested $5.3 billion into cybersecurity firms.1
 
That’s good news for the big companies, but what about for the individual at home? What can you do to protect data breaches to your personal accounts? 
 
For most private individuals, the key idea is to both:
* Know what to do if you’ve had a data breach.
* Know what you can do that might help prevent a data breach.
 
Total cybersecurity for your financial matters isn’t something that can be strategized in a single short article like this one, but I would like to offer you two suggestions that can help you get started. Both can be done from home and represent reactive and preventative measures.
 
Credit Freeze. By reactive, I mean that a step that you can take after the fact. In many cases, a credit freeze might be a reaction to identity theft or a data breach. What it specifically does is restrict access to your credit report, which has information that could be used to open new lines of credit in your name. The freeze prevents this, but it will not prevent a criminal from, for instance, using an active credit card number, if they’ve discovered it. For that reason, you still have to monitor for unauthorized transactions during the freeze.2
 
While the freeze is in place, you can still get your free annual credit report. You also won’t have issues with credit background searches for job or renter’s applications or when you buy insurance – the freeze doesn’t affect those areas of your credit history. You can even apply for a new line of credit during a credit freeze, though that requires a temporary or permanent elimination of the freeze during the process. This can be done through either a call to the big three credit reporting agencies (Equifax, Experian, and Transunion) or a visit to their respective websites.2
 
Password Manager. This is a preventative measure. Yes, we all know the poor soul who uses “Password” as their password. While you are probably not that far gone, the truth is that there are many tricks that cybercrooks use to learn or intuit our passwords. In fact, 20% of Internet consumers have experienced some sort of account compromise. That comes at a time when about 70% of consumers operate 10 or more accounts. A few, against best practice, will use the same password across each of those accounts. A good security measure against that is password manager software – applications that allow us to keep all our numerous passwords encrypted in a vault and drop them into our browsers when requested. While yes, there are options to save these passwords, encrypted on most browsers, these security measures are limited. Password managers are focused solely on security and are more frequently updated than the browser security features might be. That attention might be difference between a criminal obtaining access to your sensitive personal information or being blocked in the attempt.3,4
 
While this is a very basic pair of tips, they are worth thinking about and may prove to be helpful in your efforts to prevent identity theft. There are, however, additional, more-advanced choices for you to explore. Talk with your trusted financial professional about other cybersecurity best practices that you might consider.

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 - forbes.com/sites/forbestechcouncil/2019/10/09/the-need-for-a-breakthrough-in-cybersecurity/ [10/9/19]
2 - consumer.ftc.gov/articles/0497-credit-freeze-faqs [9/2019]
3 - wired.com/story/best-password-managers/ [9/25/19]
4 - digitalguardian.com/blog/uncovering-password-habits-are-users-password-security-habits-improving-infographic [12/18/18]

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. 
 
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.
 
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.
 
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 homebased businesses.
  
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.
 
If you spend your HSA funds for non-medical 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.
 
Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. Before adjusting your asset allocation, 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 and 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 revoke 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 older than 70½, remember your year-end RMD. Retirees over age 70½ must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by 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.
  
Lastly, should you make 13 mortgage payments this year? If your house is underwater, this makes no sense – and you could argue that those dollars might be better off invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January 2020 mortgage payment in December 2019. If you have a fixed-rate loan, a lump-sum payment can reduce the principal and the total interest paid on it by that much more. 
 
If you’re considering making 13 payments, consider working with a tax, legal, or accounting professional who is familiar with your situation.
    
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. 

Helpful tips for tax time.
 
Being a small-business owner isn’t easy. After all, balancing payroll, managing employees, drawing up marketing plans, and handling the bookkeeping can be stressful! Luckily, the Internal Revenue Service (I.R.S.) allows small-business owners to take some surprising deductions, which may help come tax time. Read on to learn more.
 
Remember, the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult a professional with legal or tax expertise for specific information regarding your individual situation.
 
Employ your personal cell phone. The I.R.S. allows small-business owners to deduct the cost of the time spent on business calls made while using their personal mobile device. The key is to make sure you keep an itemized monthly phone bill for your records.1 Assuming an $80-per-month phone bill and a 50% deduction, you may be able to deduct $480 from your state and federal tax returns! The best way to track your business call time? Try a using separate number for your business, which automatically routes to your phone. This way, it will be easy to see your business versus personal phone usage. 
 
Put your home to work. If you use part of your home for business, you may be able to deduct those expenses. These can include a portion of your home as well as insurance and utilities. 
 
However, there are some conditions that must be met to claim these deductions. First, the portion of your home you claim for business use must be exclusively for your company. Second, the part of your home used by your company must be either your principal place of business, a place to meet with customers, or a separate structure used in connection with your business. 
 
Hold your meetings over a meal. If you and your employees have meetings, consider having them over a meal. As long as the dining expenses are reasonable and you’re eating with an employee to discuss business-related items, you are permitted to deduct 50% of the meal cost. 
 
This may seem like a small advantage, but consider this: if you manage to have a “business lunch” every day for $10, you can deduct $5 of that expense, which could amount to over $1,200 a year in claimable deductions!
 
Deduct and fly for free. Many small-business owners believe they can reduce travel costs by using the miles they earn through a qualifying credit card to pay for their next business flight. Since your travel costs for business may be fully deductible, however, why not put those miles to use in your personal life instead? 
 
Depending on your air-travel expenses, your income tax rate, and the number of miles you may be able to accrue in a year, this could save you thousands of dollars in expenses.

What you need to know.
 
 When you reach age 70½, the Internal Revenue Service instructs you to start making withdrawals from your traditional IRA(s). These withdrawals are also called Required Minimum Distributions (RMDs). You will make them, annually, from now on.
   
If you fail to take your annual RMD or take out less than the required amount, the I.R.S. will notice. You will not only owe income taxes on the amount not withdrawn, you will owe 50% more. (The 50% penalty can be waived if you can show the I.R.S. that the shortfall resulted from a “reasonable error” instead of negligence.)
   
Many IRA owners have questions about the rules related to their initial RMDs, so let’s answer a few.
   
How does the I.R.S. define age 70½? Its definition is pretty straightforward. If your 70th birthday occurs in the first half of a year, you turn 70½ within that calendar year. If your 70th birthday occurs in the second half of a year, you turn 70½ during the subsequent calendar year.
 
Your initial RMD has to be taken by April 1 of the year after you turn 70½. All the RMDs you take in subsequent years must be taken by December 31 of each year.
 
So, if you turned 70 during the first six months of 2020, then you will be 70½ by the end of 2020, and you must take your first RMD by April 1, 2021. If you turn 70 in the second half of 2020, then you will be 70½ in 2021, and you won’t need to take that initial RMD until April 1, 2022.
 
Is waiting until April 1 of the following year to take my first RMD a bad idea? The I.R.S. allows you three extra months to take your first RMD, but it isn’t necessarily doing you a favor. Your initial RMD is taxable in the year that it is taken. If you postpone it into the following year, then the taxable portions of both your first RMD and your second RMD must be reported as income on your federal tax return for that following year.  
 
An example: James and his wife Stephanie file jointly, and they earn $78,950 in 2019 (the upper limit of the 22% federal tax bracket). James turns 70½ in 2019, but he decides to put off his first RMD until April 1, 2020. Bad idea: this means that he will have to take two RMDs before 2020 ends. So, his taxable income jumps in 2020 as a result of the dual RMDs, and it pushes the pair into a higher tax bracket for 2020 as well. The lesson: if you will be 70½ by the time 2019 ends, take your initial RMD by the end of 2019 – it might save you thousands in taxes to do so.
 
How do I calculate my first RMD? I.R.S. Publication 590 is your resource. You calculate it using I.R.S. life expectancy tables and your IRA balance on December 31 of the previous year. For that matter, if you Google “how to calculate your RMD,” you will see links to RMD worksheets at irs.gov and a host of other free online RMD calculators.
 
If your spouse is more than 10 years younger than you and happens to be designated as the sole beneficiary for one or more of the traditional IRAs that you own, you should use the I.R.S. IRA Minimum Distribution Worksheet (downloadable as a PDF online) to help calculate your RMD.
    
If your IRA is held at one of the big investment firms, that firm may calculate your RMD for you and offer to route the amount into another account of your choice. It will give you and the I.R.S. a 1099-R form recording the income distribution and the amount of the distribution that is taxable.
    
When I take my RMD, do I have to withdraw the whole amount? No. You can also take it in smaller, successive withdrawals. Your IRA custodian may be able to schedule them for you.
         
What if I have more than one traditional IRA? You then figure out your total RMD by calculating the RMD for each traditional IRA you own, using the IRA balances on the prior December 31. This total is the basis for the RMD calculation. You can take your RMD from a single traditional IRA or multiple traditional IRAs.
 
What if I have a Roth IRA? If you are the original owner of that Roth IRA, you don’t have to take any RMDs. Only inherited Roth IRAs require RMDs.
  
Be proactive when it comes to your first RMD. Putting off the initial RMD until the first quarter of next year could mean higher-than-normal income taxes for the year ahead.

​Is it appropriate for your estate?
 
When an individual dies, the executor is faced with an important decision that has the potential to impact the taxes owed by the estate and its heirs. The executor will have the option of valuing the estate on the date of death, or on the six-month anniversary of death – the “Alternate Valuation Date.”
This situation assumes the deceased has a valid will and has named an executor, who is responsible for carrying out the directions of the will. If a person dies intestate, it means that a valid will has not been executed. Without a valid will, a person’s property will be distributed to the heirs as defined by the state law.
Pick a Date. It may seem like an obvious decision and simple choice, but it’s not. Here’s why.
For estates with substantial holdings in stocks, the use of the Alternate Valuation Date may be an appropriate approach if the executor believes stock prices will be lower than they were on the date of death.
When heirs inherit assets, such as stocks, they may receive a step-up in the cost basis if the value of the asset is higher than it was when the original owner acquired it. The heir’s valuation is reset to either the value on the date of the owner's death – or the value on the Alternate Valuation Date – whichever is chosen by the executor.
Market Moves. Let’s take a look at a hypothetical example. Say Dad bought Out-of-Date Technologies at $10 per share several years ago. At his death, the stock was worth $35. The executor used the Alternate Valuation Date and six months later, due to market movements, the stock was worth $28.
His heir, Julie, will inherit this asset and receive a step-up in the cost basis to $28, the value declared by the estate. Let’s now assume that Julie sells the stock a short-time later at $35.
If the estate had used the value on the date of death – $35 – she might not have owed capital gains tax, since she would have been selling the stock at the same price as her cost basis. But since she received the stock with the lower cost basis – $28 – because the executor chose the Alternate Valuation Date, capital gains tax on the $7 per share gain may be due.
This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.
In this example, the estate saved money by electing the Alternate Valuation Date, but the heir was exposed to a lower cost basis and the prospect of paying higher capital gains tax in the future.
Consider & Balance. As the executor thinks through this balancing act, they should consider the relative prevailing tax rates for the estate and for the heirs to ascertain what approach may result in the most efficient transfer, net of taxes, to the heirs.
Keep in mind the information in this article is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

Staying healthy could save you some money.
 
How healthy a retirement do you think you will have? If you can stay active as a senior and curb or avoid certain habits, you could potentially reduce one type of retirement expense.
   
Each year, Fidelity Investments presents an analysis of retiree health care costs. In 2019, Fidelity projected that the average 65-year-old couple would spend around $285,000 on health care during retirement, including about $11,000 in the first year. Both projections took Medicare benefits into account.
    
Could healthy behaviors help you save retirement dollars? Maybe. From another point of view, ceasing unhealthy habits certainly would. For example, the average pack of cigarettes now costs $6.28, according to the Centers for Disease Control. That adds up to $2,292 annually. A decade of pack-a-day smoking therefore projects to $22,920 in expenses (and that does not even consider inflation or the possibility of new state or local cigarette taxes). If you could invest $2,292 a year for 20 years and realize a 7% annual return on that money, your sustained investment would grow to more than $100,000.
 
Think about joining a senior wellness program. Some communities offer classes developed through the National Council on Aging’s Center for Healthy Aging. (NCOA is a nonprofit senior advocacy organization founded in the 1950s.) These physical activity programs are evidence based; the exercise curriculum has been shown to provide discernible health benefits to their participants. Often, they are low cost or free and low impact as well.
 
Be sure to use your Medicare benefits. Medicare entitles you to an annual free wellness visit with a primary care physician. In this visit, you can have your blood pressure, weight, and overall health checked, and the doctor can also run a check for the possibility of dementia. You can also get free screening for diabetes, certain kinds of cancers, hepatitis B and C, and heart disease under Medicare if your physician classifies you as “at risk” for these conditions. Medicare may even pick up the tab for smoking cessation counseling and obesity counseling for certain people.
   
If you stay fairly healthy well into your retirement, there could be a nice financial side effect: an exemption, for the present, from expenses that some of your peers could be dealing with. 

Sometimes you can take penalty-free early withdrawals from retirement accounts.
 
Do you need to access your retirement money early? Maybe you just want to retire before you turn 60 and plan a lifelong income stream from the money you have saved and invested. You may be surprised to know that the Internal Revenue Service allows you a way to do this, provided you do it carefully.
 
Usually, anyone who takes money out of an IRA or a retirement plan prior to age 59½ faces a 10% early withdrawal penalty on the distribution. That isn’t always the case, however. You may be able to avoid the requisite penalty by taking distributions compliant with Internal Revenue Code Section 72(t), section 2.
   
While any money you take out of the plan will amount to taxable income, you can position yourself to avoid that extra 10% tax hit by breaking that early IRA or retirement plan distribution down into a series of substantially equal periodic payments (SEPPs). These periodic withdrawals must occur at least once a year, and they must continue for at least 5 full years or until you turn 59½, whichever period is longer. (Optionally, you can make SEPP withdrawals on a monthly basis.)
   
How do you figure out the SEPPs? They must be calculated before you can take them, using one of three I.R.S. methods. Some people assume they can just divide the balance of their IRA or 401(k) by five and withdraw that amount per year, but that is not the way to determine them.
   
It is wise to calculate your potential SEPPs by each of these three methods. When the math is complete, you can schedule your SEPPs in the way that makes the most sense for you.
   
The Required Minimum Distribution (RMD) method calculates the SEPP amount by dividing your IRA or retirement plan balance at the end of the previous year by the life expectancy factor from the I.R.S. single life expectancy table, joint life and last survivor expectancy table, or uniform life table.
   
The Fixed Amortization method amortizes your retirement account balance into SEPPs based on your life expectancy. A variation on this, the Fixed Annuitization method, calculates SEPPs using your current age and the mortality table in Appendix B of Rev. Ruling 2002-62.
  
If you use the Fixed Amortization or Fixed Annuitization method, you are also required to use a reasonable interest rate in calculating the withdrawals. That interest rate can’t exceed more than 120% of the federal midterm rate announced periodically by the I.R.S.
    
A lot to absorb? It certainly is. The financial professional you know can help you figure all this out, and online calculators also come in handy. Bankrate.com, in fact, offers you a free 72(t) distribution calculator.
   
There are some common blunders that can wreck a 72(t) distribution. You should be aware of them if you want to schedule SEPPs.
    
If you are taking SEPPs from a qualified workplace retirement plan instead of an IRA, you must generally separate from service (that is, quit working for that employer) before you take them. If you are 51 when you quit and start taking SEPPs from your retirement plan, and you change your mind at 53 and decide you want to keep working, you still have this retirement account that you are obligated to draw down through age 56 – not a good scenario.
     
Once you start taking SEPPs, you are locked into them for five consecutive years or until you reach age 59½. If you break that commitment or deviate from the SEPP schedule or calculation method you have set, then the I.R.S. applies a 10% early withdrawal penalty to all the SEPPs you have already made, plus interest.
   
The I.R.S. does permit you to make a one-time change to your distribution method without penalty: if you start with the Fixed Amortization or Fixed Annuitization method, you can opt to switch to the RMD method. You can’t switch out of the RMD method to either the Fixed Amortization or Fixed Annuitization methods, however.
    
If you want or need to take 72(t) distributions, ask for help. A financial professional can help you plan to do it right.

Are you prepared for the possibility – and expense – of eldercare?
 
 Do you have an extra $33,000 to $100,000 to spare this year? How about next year, and the year after that? Your answer to these questions is probably “no.”
  
What could possibly cost so much? Eldercare.  
  
According to the AARP Public Policy Institute, a year of in-home care for a senior costs roughly $33,000. A year at an assisted living facility? About $45,000. A year in a nursing home? Approximately $100,000.
  
Medicare has limitations. Generally speaking, it will pay for no more than 35 hours per week of home health care and only up to 100 days of nursing home care, following a hospitalization. It may pay for up to six months of hospice care. If you or someone you love happens to develop Alzheimer’s disease or another form of dementia, Medicare will not pay for any degree of room and board for them at an assisted living facility.
  
Medicaid is another resource entirely. For seniors who are eligible, Medicaid can pick up assisted living facility or nursing home expenses, and even in-home eldercare, in some instances. Qualifying for Medicaid is the hard part. Normally, you only qualify for it when you have spent down your assets to the point where you can no longer pay for eldercare out of pocket or with insurance.
  
An extended care strategy may factor into a thoughtful retirement strategy. After all, your retirement may be lengthy, and you may need such care. The Social Security Administration projects that a quarter of today’s 65-year-olds will live past age 90, with a tenth making it to age 100.
   
Insurance companies have modified extended care policies over the years. Some have chosen to bundle extended care features into other policies, which can make the product more accessible. An insurance professional familiar with industry trends may be able to provide you more information about policies and policy choices. 
   
Waiting for federal or state lawmakers to pass a new program to help with the costs of eldercare is not much of a strategy. It is up to you, the individual, to determine how to face this potential financial challenge.
  
If you lead a healthy and active life, you may need such care only at the very end. Assuming you do require it at some point, you may consider living in an area where you can join a continuing-care-at-home program (there are currently more than 30 of these, essentially operating as remote care programs of assisted living communities) or a “village network” that offers you some in-home help (not skilled nursing care, however).
   
Those rare and nice options aside, retirement saving also needs to be about saving for potential extended care expenses. If insurance addressing extended care is not easy to obtain, then a Health Savings Account (HSA) might be an option. These accounts have emerged as another solution to extended care needs. An HSA is not a form of insurance, but it does provide a tax-advantaged savings account to which you (and potentially, your employer) can make contributions. You can use these funds to pay for most medical expenses, including prescription drugs, dental care, and vision care. You can look into this choice right away, to take advantage of savings over time.
  
Once you reach age 65, you are required to stop making contributions to an HSA. Remember, if you withdraw money from your HSA for a nonmedical reason, that money becomes taxable income, and you face an additional 20% penalty. After age 65, you can take money out without the 20% penalty, but it still becomes taxable income.
   
An HSA works a bit like your workplace retirement account. Your employer can make contributions alongside you. However, the money that you contribute comes from your pretax income and can be invested for you over time, so it may grow as your contributions accumulate.
 
There are also some HSA rules and limitations to consider. You are limited to a $3,500 contribution for 2019, if you are single; $7,000, 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. Your employer can contribute, but the ceiling is cumulative between your contributions and theirs. For example, say you are lucky enough to have your employer put a hypothetical $1,000 into your account in 2019; you may only contribute as much as the rest of your limit, minus that $1,000. If you go over that limit, you will incur a 6% tax penalty, so it is smart to watch how much you contribute.
  
Alternately, you could do without an HSA and simply earmark a portion of your retirement savings for possible extended care costs.
  
One thing is for certain: any retiree or retirement saver needs to keep the possibility of extended care expenses in mind. Today is not too soon to explore the financial options to try and meet this challenge.