- In sharp contrast to last year, U.S. equities triumphed in 2019, with the S&P 500® up 31%, its biggest annual gain since 2013. Easing trade tensions and Fed accommodation renewed optimism about the economic outlook. Mega-caps dominated as gains for the S&P MidCap 400® and the S&P SmallCap 600®, 26% and 23% respectively, lagged the S&P 500.
- International markets also gained, with the S&P Developed Ex-U.S BMI up 23% and the S&P Emerging BMI up 20%.
- High Beta was the best performing factor, followed by Quality; not unrelatedly, Information Technology was the best performing sector, up a remarkable 50%. Meanwhile, Value outperformed Growth for the first time in three years.
Amid optimism that U.S.-China trade issues will be resolved amicably, U.S. equities showed strength in November. The S&P 500® was up 4%, its biggest monthly gain since June, while the S&P SmallCap 600® and the S&P MidCap 400® gained 3%.
International markets also gained, with the S&P Developed Ex-U.S BMI up 1%.
The resurgence in Value continued, as Enhanced Value was the best performing factor. Year-to-date, Quality was the top performing factor index, up an impressive 29%; not unrelatedly, Information Technology was the best performing sector.
How much retirement income can YOUR portfolio support? Have you considered interest rate and inflation risk? Focusing on a final number doesn’t tell the whole story. It’s important to have discussions with a financial planner about income streams and cost of living in your retirement years.
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Solo 401ks are cost-effective, powerful retirement vehicles. They are designed for self-employed workers who have no employees other than a spouse. They allow small-business owners to stash away much more for retirement than they could stash in a traditional IRA or a SEP IRA, while avoiding the expense and paperwork of setting up a full traditional 401(k) plan.
1) Generous Contribution Limits
For the plan year 2019, a participant under the age of 50 can make a maximum employee deferral in the amount of $19,000. This is also called an “employee” contribution. Age 50+ can contribute up to $25,000.
2) Ability to Self-Direct
With a Solo 401k, you can act as your own trustee. This eliminates the need for a bank or trust company to serve as a trustee. The plan participant (you) is in control of the plan.
We have established many Solo 401k’s for individuals in our firm. Charles Schwab’s user friendly platform makes it easy to save aggressively.
3) Profit Sharing Provision
On top of the allowed employee deferral, the participant can also contribute up to 25 percent of total compensation to a profit-sharing component of the plan. This is often called an “employer” contribution.
Total combined plan contributions (employer and employee) cannot exceed the lower of $57,000 or 100 percent of compensation (plus any catch-up contributions if over the age of 50).
4) Contributions are Elective
Contributions to a solo 401k plan are entirely discretionary. A participant has the option of contributing to the plan and can reduce or even suspend plan contributions as necessary.
5) Ability to Take Out a Loan
A solo 401k allows participants to borrow up to $50,000 or 50% of their vested account value (whichever is lower). This loan can be made for any purpose with a payback period of up to 5 years.
This offers significant flexibility and provides flexibility against having to take a withdrawal that would be subject to a tax penalty. This flexibility is in contrast to an IRA that offers no participant loan feature.
6) Minimal Tax Filing Requirements
There are no annual filing requirements unless the solo 401k plan exceeds $250,000 in assets. The Solo 401k is extremely easy to administer.
7) Roth Contributions
Solo 401ks can include a Roth component. Just like Roth IRA contributions, Roth 401k contributions are made on an after-tax basis. Unlike a pre-tax contribution, there is no upfront tax deduction. However, a distribution of Roth 401k contributions (along with earnings) is tax-free.
Individual taxpayers are disallowed from contributing to a Roth IRA based on income restrictions. These same restrictions do not apply to Roth 401k contributions. A Roth 401k contribution has the same limitation as an employee deferral of $19,000. This is substantially more than the limit of a Roth IRA.
8) Rollover Provision
One key advantage is rollover flexibility. A solo 401k can accept rollovers from other retirement accounts, such as an IRA, a SEP, or a 401k from a prior employer. However, Roth IRAs cannot be rolled into a solo 401k.
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When planning for retirement, it’s important to keep in mind how much spending your savings can support. The decisions you make today can help improve your retirement readiness.
Beyond determining how much money to save, it’s useful to think about retirement in terms of how much income you’ll need after you stop working. Dimensional’s My Retirement Income Calculator can help give you a sense of how much income your savings could provide in retirement.
Enjoy our Retirement Readiness series to help you set and achieve your retirement goals.
The impact of missing just a few of the market’s best days can be profound, as this look at a hypothetical investment in the stocks that make up the S&P 500 Index shows. A hypothetical $1,000 turns into $138,908 from 1970 through the end of August 2019. Miss the S&P 500’s five best days and that’s $90,171. Miss the 25 best days and the return dwindles to $32,763. There’s no proven way to time the market—targeting the best days or moving to the sidelines to avoid the worst—so history argues for staying put through good times and bad. Investing for the long term helps to ensure that you’re in the position to capture what the market has to offer.
U.S. equities posted gains in October, bolstered by optimism around trade talks with China, strong earnings, and easing from the Fed, although Chairman Powell signaled a likely pause on future rate cuts. The S&P 500® and the S&P SmallCap 600® both gained 2%, while the S&P MidCap 400® gained 1%.
International markets also gained, with the S&P Developed Ex-U.S. and the S&P Emerging BMI both up 4%.
Enhanced Value continued to outperform in October, and Value again outperformed Growth. Year-to-date, Low Volatility remains the top performing factor index, up an impressive 26%.
This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.
The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.
Click HERE to download this quarter’s breakdown!
In spite of slowing economic growth, ongoing trade tensions and a presidential impeachment inquiry, U.S. equities recovered in September to end the third quarter on a positive note. Year-to-date, large-caps outperformed mid- and small-caps, with the S&P 500® up 21%, while the S&P MidCap 400® and S&P SmallCap 600® gained 18% and 13%, respectively.
Despite gains in September, international markets ended the quarter with losses while holding on to year-to-date gains, with the S&P Developed Ex-U.S. and the S&P Emerging BMI up 13% and 8%, respectively.
Enhanced Value outperformed its factor peers in September, and Value outperformed Growth, but time will tell whether this reversal continues. Year-to-date, Low Volatility remains the top performing factor index, up a remarkable 26%.
It’s open enrollment in the American workplace every fall, and employers will begin to pass out packets, forms, memos, hold meetings and launch apps for the benefits enrollment season. Navigating your benefits package can be overwhelming, and has a direct effect on your long-term savings. WE WANT TO HELP!
Below is your quick guide to navigating your benefits booklet from start to finish:
Health Insurance – pay close attention to the following variables to the health insurance options:
- Coverage – compare what’s covered to your anticipated needs, i.e. maternity?
- Co-payments and Prescriptions – if you go to the doctor often, or have a recurring prescription to fill, evaluate these fees closely.
- Deductibles – the amount you have to pay out of your pocket before coverage begins. A high deductible plan typically means lower premiums, but participants pay more out of pocket if an unexpected illness occurs.
- Premiums – the monthly fee for coverage. A higher premium usually means lower deductibles, co-pays and more coverage. But that’s not always the best financial choice.
Tax advantaged accounts – beyond health coverage, these accounts allow you to save pre-tax dollars for ancillary health and other expenses.
- FSA (Flexible Savings Account) – similar in tax savings, a FSA allows you to use the funds for medical and child care services. There are limits to contributions and to carry over funds.
- HSA (Health Savings Account) – contribute to this account to help cover medical expenses you are paying out of pocket. Choosing a high deductible plan warrants opening an HSA due to the anticipated higher out of pocket costs. These funds roll over from year-to-year.
Vision and Dental – Simply put…
- Dental care is expensive. Insurance doesn’t cover a lot, but what it does cover usually outweighs the cost of the dental care without it.
- Vision care is inexpensive, but sometimes unnecessary. If you have healthy eyes you need a checkup only every 2 years, so vision premiums may not be worth it.
Life and Disability – Important Voluntary Benefits!!!
- Short-term Disability – are you covered for a short-term illness or injury?
- Long-term Disability – if you are unable to work for an extended period of time, how will you pay your bills?
- Life Insurance – How much should you leave your family if something happens to you?
401(k) – the likely #1 source of retirement savings, this benefit is the major player in your ability to retire.
- Make a goal to increase your contributions every year
- Take full advantage of your employer’s match
- Make catch-up contributions if you are eligible
- Evaluate the need to defer some of your funds to a Roth 401(k) to provide future tax diversification.
- Evaluate your risk tolerance and allocate appropriately
- Choose low-cost funds
The best way to make the most of open enrollment is to simply set aside adequate time to review all your options carefully and ask any questions you may have. Consult with your financial advisor, as these benefits choices will affect your long-term savings. To make the most of open enrollment, read the fine print, consider your family’s needs and make an educated, rather than a rash, decision. We are here to help you navigate these important choices. Please let us know if you would like a more detailed COMPLIMENTARY REVIEW of your benefits booklet!