Imber Wealth Advisors: February 2021

Sunday, February 28, 2021

How Year-End Legislation May Affect Tax Season

In late 2020, Congress passed the Consolidated Appropriations Act, which included many tax provisions and extenders as well as additional COVID-19 stimulus relief.

For example, the ability to deduct up to $300 in charitable contributions if the taxpayer doesn’t itemize has been extended for an additional year. The business meal deduction has been increased from 50% to 100% through the end of 2022. The act also extended the repayment period through Dec. 31, 2021, for employers that opted to defer employee payroll taxes in the latter part of 2020.¹

As we approach tax season, it could be beneficial to get up-to-date on provisions that may apply to your filing this year. We’re noting just a few here. We recommend you work with a qualified tax professional to understand the opportunities that may benefit you and ensure your taxes are filed accurately and on time. If you would like to learn how insurance products may help you create tax-efficient strategies moving forward, please feel free to reach out to our office.

One of the tax provisions the appropriations bill made permanent was the lower medical expense deduction floor. This means taxpayers may deduct unreimbursed medical expenses that exceed 7.5% of adjusted gross income — down from 10%. However, the bill also extended some tax provisions for another two years, including the residential energy efficient property credit.²

Speaking of energy efficiency, other credits extended for one year include the qualified fuel cell rules for alternative motor vehicles, the alternative fuel refueling property credit and the credit for two-wheeled plug-in electric vehicles.³

Penalty-free distributions from qualified retirement plans for COVID-related reasons expired at the end of 2020. However, the act offers a similar option for non-coronavirus-related disasters, such as wildfires and hurricanes. If a taxpayer is affected by any type of federally declared disaster, he may withdraw up to $100,000 from a qualified plan or IRA through June 25, 2021. Similar to the COVID-related withdrawal rules, disaster-related distributions are exempt from the 10% early withdrawal penalty that normally applies but are subject to ordinary income tax treatment. Taxpayers can repay the distribution over a three-year period with no tax implications.⁴

Note that individual COVID relief payments paid out by the Treasury are not taxable. However, eligible taxpayers who did not receive the full amount of last year’s two distributions can claim the missing amount as a Recovery Rebate Credit when they file their 2020 taxes this year.⁵

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you!

¹ Gordon Gray. American Action Forum. Dec. 22, 2020. “Major Tax Policy Changes in the Consolidated Appropriations Act.” https://www.americanactionforum.org/insight/major-tax-policy-changes-in-the-consolidated-appropriations-act/. Accessed Feb. 4, 2021.

² Alistair M. Nevius. Journal of Accountancy. Dec. 27, 2020. “Many tax provisions appear in year-end coronavirus relief bill.” https://www.journalofaccountancy.com/news/2020/dec/tax-provisions-in-covid-19-relief-bill-ppp-and-business-meal-deductibility.html. Accessed Feb. 4, 2021.

³ KPMG. Dec. 29, 2020. “United States – President Signs COVID-19 Relief Legislation, Tax Provisions Enacted.” https://home.kpmg/xx/en/home/insights/2020/12/flash-alert-2020-514.html. Accessed Feb. 4, 2021.

⁴ Robert Bloink and William H. Byrnes. ThinkAdvisor. February 02, 2021. “Year-End Stimulus: What Changed for Retirement Plan Participants.” https://www.thinkadvisor.com/2021/02/02/year-end-stimulus-what-changed-for-retirement-plan-participants/. Accessed Feb. 4, 2021.

⁵ IRS. Jan. 12, 2021. “IRS ready for the upcoming tax season; last-minute changes to tax laws included in IRS forms and instructions.” https://www.irs.gov/newsroom/irs-ready-for-the-upcoming-tax-season-last-minute-changes-to-tax-laws-included-in-irs-forms-and-instructions. Accessed Feb. 4, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

Friday, February 26, 2021

Pandemic Highlights the Difference Between Economics & Finance

One of the more glaring lessons of the 2020 pandemic was that the economy and the stock market are not the same thing, nor do they necessarily move in lockstep. They are measurements of two different things, often indicating how the other will react. However, as we saw last year, the economy is a greater indicator of how Main Street is doing while the stock market is more a reflection of Wall Street.

The day-to-day performance of major stock indices, such as the S&P 500 and the Dow Jones Industrial Average, is not usually an accurate account of what’s happening in the lives of most Americans.¹

As a general rule, economics is more of a social science. It conveys a picture that captures the interplay between real resources and human behavior. Finance, on the other hand, is a proactive measure. Its focus is on the tools and techniques of managing money.

We hear these two terms used interchangeably all the time, though, and that’s because they often do move in the same direction. That’s not what happened last year. While millions of Americans lost jobs and other sources of earned income, after an initial drop in the stock market, many investors saw their portfolios make ample gains. This was a good demonstration of how your money in the market could be working as another source of income. It’s another way of diversifying your assets, so that your investments can keeping earning money even if you can’t. Remember, we’re here to help you put your assets to work, so call on us if you need guidance.

Economics covers the production, consumption and distribution of goods and services and how people interact with them — through buying, selling, or working to buy or sell them — and how they react to price changes driven by supply, demand and inflation. It is, after all, people who drive economic activity and ultimately growth. There are two main branches of economics: macroeconomics and microeconomics.²

Macroeconomics measures the overall economy through factors such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP) and changes in employment levels.³Microeconomics tracks specific factors within the economy, largely the choices made by people, households and industries. It is a study of the incentives behind those decisions and how they affect the use and distribution of resources.⁴

Finance, on the other hand, deals specifically with the use and distribution of money. As a discipline, it comprises three basic categories: public finance, corporate finance and personal finance. Within those realms, we often talk about the difference between Main Street and Wall Street. Main Street describes the average American investor as well as small independent businesses, while Wall Street consists of high-net-worth investors, large global corporations and the high finance capital markets.

There are inevitable conflicts between these two sectors. For example, government regulations frequently are designed to protect individual investors and/or small businesses, but they can pose a detriment to Wall Street profitability. The opposite can also be true, where benefits for large corporations can hurt small businesses, local jobs and small investors.⁵

Early on, the Federal Reserve and other central banks stepped up to infuse the economy with capital, thus stemming the tide of the economic decline. While these moves helped bolster the stock market, they did not prevent the loss of hundreds of thousands of jobs or stimulate consumerism. In other words, policy and even legislative intervention may have helped Wall Street, but it didn’t do that much to encourage economic growth or job creation.⁶

¹ Clark Merrefield. Journalist Resource. Jan. 11, 2021. “The stock market is not the economy. Right? Here’s what the research says.” https://journalistsresource.org/studies/economics/stock-market-not-economy/. Accessed Feb. 4, 2021.

² Stephen D. Simpson. Investopedia. Nov. 2, 2020. “Finance vs. Economics: What’s the Difference?” https://www.investopedia.com/articles/economics/11/difference-between-finance-and-economics.asp. Accessed Feb. 4, 2021.

³ Investopedia. Dec. 29, 2020. “Macroeconomics.” https://www.investopedia.com/terms/m/macroeconomics.asp. Accessed Feb. 4, 2021.

⁴ Investopedia. Nov. 2, 2020. “Microeconomics.” https://www.investopedia.com/terms/m/microeconomics.asp. Accessed Feb. 4, 2021.

⁵ Corporate Finance Institute. 2021. “What is Main Street vs Wall Street?” https://corporatefinanceinstitute.com/resources/knowledge/finance/main-street-vs-wall-street/. Accessed Feb. 4, 2021.

⁶ Shyam Sunder. Yale Insights. June 17, 2020. “Liquidity Injections May Have Driven the Stock Market Recovery.” https://insights.som.yale.edu/insights/liquidity-injections-may-have-driven-the-stock-market-recovery#gref. Accessed Feb. 15, 2021.

Tuesday, February 23, 2021

How Do Demographics Affect the Economy?

Back in 2019, economists claimed that the large population of older Americans, dubbed the “silver tsunami,” was creating a drag on the economy. The fear was that Americans were aging toward retirement at a faster rate than young adults were entering the workforce. Not only does this put a strain on our finance-as-we-go Social Security and Medicare programs, but a smaller workforce is less able to drive economic growth in the future.¹

Then the COVID-19 outbreak descended in 2020, which could result in a dramatic shift in our demographic mix. While Americans 65 and older account for 16% of the population, they represent 80% of people who are dying of the coronavirus. In just the first five months of the pandemic, the 65-and-up cohort represented between 70% and 94% of COVID-19 deaths, with variance by state. People age 85 and older accounted for 33% of those deaths.²

These numbers don’t just change the demographic picture, they also represent a transition in wealth. While estimates in wealth transfer from baby boomers to younger generations have been projected as high as $70 trillion over the next few decades, that timeline could move up. Because people age 65 and older are more vulnerable to the severe complications of COVID-19, some of those windfalls could be occurring sooner. That means family members will have to figure out the best way to handle an unexpected inheritance ahead of schedule.³

If you are looking at an inherited windfall, we can help guide you with strategies for your unique situation. There are numerous new laws and rules associated with things like inherited IRAs, as well as strategies you can take advantage of to position yourself for both investment growth and a reliable stream of income during your retirement. Please contact us to discuss.

Meanwhile, Americans are having fewer babies. Because many of today’s young adults entered the job market when the country was in a severe economic recession, it has taken longer for many to get a foothold in their career and build up a financial war chest. To do this, many have delayed buying a home and starting a family. In fact, between the start of the financial crisis in 2007 and 2018, the total fertility rate in the U.S. fell by 23%, from 2.12 children per woman to 1.73.⁴

As such, our population is growing at the slowest rate since the 1930s. The pandemic has not helped that statistic. Between July 2019 and July 2020, the nation grew at the lowest yearly rate since at least 1900 as a result of reduced immigration and birth rates.⁵

The Economic Innovation Group, using July 2020 data from the U.S. Census Bureau, shows that population growth is uneven across states. While the population has declined in California, Illinois and New York in the past few years, states with the highest rates of population growth since 2010 include:⁶

· Utah (17.1%)

· Idaho (16.3%)

· Texas (16.3%)

· Nevada (16.1%)

· Arizona (15.8%)

Much of that migration could be due to baby boomers moving to warmer climates as they retire. However, recent trends also suggest that younger adults with their newfound ability to work remotely will be inclined to move out of highly populated cities to more affordable areas of the country.

¹ Chris Farrell. Forbes. Aug. 25, 2019. “Is An Aging Population Hurting The U.S. Economy?” https://www.forbes.com/sites/nextavenue/2019/08/25/is-an-aging-population-hurting-the-u-s-economy/?sh=7a208e4d3aa1. Accessed Jan. 25, 2021.

² Meredith Freed, Juliette Cubanski, Tricia Neuman, Jennifer Kates and Josh Michaud. Kaiser Family Foundation. July 24, 2020. “What Share of People Who Have Died of COVID-19 Are 65 and Older – and How Does It Vary By State?” https://www.kff.org/coronavirus-covid-19/issue-brief/what-share-of-people-who-have-died-of-covid-19-are-65-and-older-and-how-does-it-vary-by-state/. Accessed Jan. 25, 2021.

³ Kristen Beckman. BenefitsPro. Nov. 19, 2020. “The great wealth transfer: What boomers and their families need to know.” https://www.benefitspro.com/2020/11/19/the-great-wealth-transfer-what-boomers-and-their-families-need-to-know/. Accessed Jan. 25, 2021.

⁴ Gilles Pison. World Economic Forum. Jan. 13, 2021. “People have more children in the north of Europe than the south. Here’s why.” https://www.weforum.org/agenda/2021/01/children-europe-eu-north-south-divide-childcare-social-policy-children-mothers/. Accessed Jan. 25, 2021.

⁵ Stef W. Kight. Axios. Jan. 11, 2021. “America’s population growth is slowing down.” https://www.axios.com/america-losing-population-growth-census-data-0342f3b6-8e98-41a9-92de-209f823d0d63.html. Accessed Jan. 25, 2021.

⁶Kaia Hubbard. U.S. News & World Report. Jan. 13, 2021. “Population Growth Rates Are Highest in These States.” https://www.usnews.com/news/best-states/articles/2021-01-13/us-population-growth-rate-slowed-in-past-decade-report-shows. Accessed Jan. 25, 2021.

Saturday, February 20, 2021

Vaccines & the Stock Market

If there’s one thing that can move the economy and stock market forward, it’s hope. This year, that hope is being presented in the form of COVID-19 vaccines. Economists and Wall Street analysts have long proclaimed that comprehensive economic recovery is not possible until we have contained the virus. The prospect of wide distribution of effective vaccines and herd immunity by the end of the year has put recovery in our crosshairs.¹

What does this mean for investors? Review your investment portfolio and get your financial house in order. If we are due for improvement, it could be beneficial to get into the market when prices are low, rebalance often and take advantage of market dips for additional investment opportunities. As always, we are here to help guide on the best way to meet your financial goals.

This hopeful sentiment was echoed by CNBC’s ever-enthusiastic “Mad Money” host, Jim Cramer. He recently proclaimed that the U.S. stock market will be poised for even greater heights if President Biden is successful in forging a plan to quickly and widely distribute the COVID vaccinations.²

Phil Orlando, Federated Hermes’ chief equity market strategist and one of Wall Street’s bullish market analysts, advocates a combination of vaccine rollout and additional fiscal stimulus. He believes one of the surefire ways to boost economic growth is to help lower-skilled unemployed people find work. He predicted that by July 4, the U.S. will be coronavirus-free, setting the stage for a “monster market year.”³

Unfortunately, European stocks continue to struggle despite market exuberance in the U.S. over a new presidential administration. Part of this concern may be that many EU countries have suffered setbacks due to subsequent and more virulent strains of the coronavirus. As before, the U.S. continues to lag on the worst of the effects of the virus as they occur.⁴ This foreshadowing makes it all the more important that vaccines get into as many arms as possible in the next few months.

Market sectors that have suffered terribly from calls for lockdowns and social distancing are likely to benefit the most from widespread distribution of the COVID-19 vaccine. This includes the aviation and hospitality sectors, as well as the office and retail property market in Europe and the U.S. Of course, the opposite could be true: Pandemic beneficiaries could see a loss in revenues once people get out and about — for example, Amazon, Netflix and Zoom Video.⁵

¹ Robin Wigglesworth. Financial Times. Dec. 2, 2020. “The ‘everything rally’: vaccines prompt wave of market exuberance.” https://www.ft.com/content/d785632d-d9a0-45ae-ae57-7b98bb2fb8d6. Accessed Jan. 25, 2021.

² Kevin Stankiewicz. CNBC. Jan. 20, 2021. “Jim Cramer says the stock market could ‘explode’ if Biden improves Covid vaccine rollout.” https://www.cnbc.com/2021/01/20/jim-cramer-stocks-could-explode-if-biden-improves-covid-vaccine-rollout.html?recirc=taboolainternal. Accessed Jan. 25, 2021.

³ Stephanie Landsman. CNBC. Jan. 20, 2021. “Covid-19 vaccines will end pandemic in U.S. by early summer, Federated Hermes’ chief equity market strategist predicts.” https://www.cnbc.com/2021/01/20/covid-19-vaccines-will-end-pandemic-in-us-by-early-summer-federated.html. Accessed Jan. 25, 2021.

⁴ Jim Armitage. Evening Standard. Jan. 25, 2021. “FTSE 100 rises slightly as investors balance surging Wall Street with Covid worries.” https://www.standard.co.uk/business/ftse-100-rises-covid-joe-biden-quarantine-b900967.html. Accessed Jan. 25, 2021.

⁵ Sumathi Bala. CNBC. Nov. 23, 2020. “Hopes for a coronavirus vaccine are creating market winners – and losers.” https://www.cnbc.com/2020/11/23/investing-coronavirus-vaccine-creates-market-winners-and-losers-.html. Accessed Jan. 25, 2021.

Wednesday, February 17, 2021

Preparing for a Loved One's Death

America began 2021 experiencing the worst days of the COVID-19 pandemic. As of Feb. 1, case numbers continued to rise, with recorded deaths since January 2020 ranging from 413,196¹ to 441,409², depending on sources used (CDC provisional count waits for a death certificate, which can cause up to a two-week delay). Fox News reports that funeral homes in some areas of the country are swamped with new business. Services at some homes have increased from an average of 35 to 50 funerals a month to 100 to 150 in a single month.³

In response to the increase in funerals and efforts to contain further spread of the coronavirus, the CDC offers funeral guidance on how to plan and hold funeral services and visitations during the COVID-19 pandemic.⁴ However, when it comes to figuring out how to pay for burial and funeral services, most families are on their own. Social Security, Medicare and Medicaid do not reimburse these expenses, and only under the most dire circumstances do local government programs cover the cost of an “indigent” burial or cremation.⁵

If your circumstances are not dire, be aware that the cost of burial and funeral services can run quite high. With the exception of a house or a car, they may well be the biggest expense many families incur in a lifetime. One way to pay for funeral expenses is to purchase some form of life insurance. Please let us know if you’d like recommendations based on your circumstances.

The most recent statistics put the average cost of a funeral between $7,000 and $12,000, which generally includes viewing and burial, basic service fees, transporting remains to a funeral home, a casket, embalming and other preparation. Be aware that while there are regulations related to preserving remains prior to burial or cremation, embalming is not required and is one way to save money if you opt for a direct funeral. Also note that embalming can be avoided through cremation, which runs the gamut from $1,000 to $8,000, depending on options selected.⁶

It’s also important to know that none of these estimates include the cost of a cemetery plot, monument, marker or flowers. If you are aware of an impending death, you can shop for things like a casket and liner at other places than the selected funeral home.

There are two ways you can “prepay” for your own funeral. One is through a prepaid plan with a funeral home, wherein you select your options ahead of time and pay a fixed cost via lump sum or installments over time. The other is to earmark money for your survivors to use for funeral costs. This can be through a bank account with a designated beneficiary authorized for a “transfer on death” (TOD) distribution after submitting a death certificate.⁷ Or, it can be through some form of life insurance paid out to the beneficiary who will handle your funeral arrangements.

It’s a good idea to both discuss these arrangements ahead of time and leave written instructions for your loved ones. It is very difficult to plan a funeral when grieving, so written directions of both your preferences and how to pay for them are very helpful during this time. Be aware that if you do not make some type of arrangement for payment ahead of time, and your family cannot decide how to pay, the decision may be left up to the probate judge who handles your estate. In this case, the person(s) most likely assigned the cost will be the closest relative(s) by blood or marriage (e.g., spouse, parents, children, siblings).⁸

¹ Centers for Disease Control and Prevention. Feb. 1, 2021. “Daily Updates of Totals by Week and State.” https://www.cdc.gov/nchs/nvss/vsrr/COVID19/index.htm. Accessed Feb. 1, 2021.

² Johns Hopkins University & Medicine. Feb. 1, 2021. “Coronavirus Resource Center/New Cases as of February 01, 2021.” https://coronavirus.jhu.edu. Accessed Feb. 1, 2021.

³ Hunter Davis. Fox News. Jan. 18, 2021. “Coronavirus surge increases strain on funeral homes: ‘Our morgues are too full’.” https://www.foxnews.com/us/coronavirus-funeral-homes-morgues. Accessed Jan. 26, 2021.

⁴ Centers for Disease Control and Prevention. Dec. 28, 2020. “Funeral Guidance for Individuals and Families.” https://www.cdc.gov/coronavirus/2019-ncov/daily-life-coping/funeral-guidance.html. Accessed Feb. 1, 2021.

⁵ Nolo. 2021. “Who Pays for Funeral Costs?” https://www.nolo.com/legal-encyclopedia/who-pays-for-funeral-costs.html. Accessed Jan. 26, 2021.

⁶ Lincoln Heritage Funeral Advantage. 2021. “How Much Does a Funeral Cost?” https://www.lhlic.com/consumer-resources/average-funeral-cost/. Accessed Jan. 26, 2021.

⁷ Eric Reed. SmartAsset. Aug. 21, 2019. “Transfer on Death (TOD) Accounts for Estate Planning.” https://smartasset.com/estate-planning/tod-account. Accessed Jan. 26, 2021.

⁸ Nolo. 2021. “Who Pays for Funeral Costs?” https://www.nolo.com/legal-encyclopedia/who-pays-for-funeral-costs.html. Accessed Jan. 26, 2021.