Imber Wealth Advisors

Monday, August 24, 2020

Recovery: COVID-19 First, Then the Economy

The World Health Organization recently reported that while some countries have made effective inroads to contain COVID-19 within their borders, the pandemic is still well on the rise throughout the world.¹ Perhaps one of the most debilitating impacts of today’s global economy is that one country’s problem is now every country’s problem. Because business and personal travel is so pervasive today, it appears the only answer to economic recovery is to contain and eradicate the virus – everywhere.

Fortunately, the medical news on the COVID-19 front is starting to look up. In early June, the nation’s top infectious disease expert, Dr. Anthony Fauci, announced that the U.S. government was helping fund and conduct research for three different coronavirus vaccines and hopes to have at least one available early 2021. The World Health Organization reports that, globally, 10 vaccines are currently undergoing human trials with 126 others in development.²

Then later in June, researchers in the UK reported that a very common, affordable drug available worldwide has been found to be effective for hospitalized coronavirus patients on ventilators. Apparently, dexamethasone has no impact on milder symptoms of coronavirus, but it has been shown to help reduce mortality for some higher-risk patients.³

These recent advancements are a big step in the fight against the pandemic, but it’s important to realize that it will take time to get control of it. However, these words from Dr. Fauci may provide comfort, “Don’t despair. This will end, and we will get control over it.”⁴

In the meantime, it’s important that we each plan for a future in which medical conditions and economic downfalls are more common. If you’d like help to reassess your portfolio with the goal of generating a higher sense of financial confidence for the future, please give us a call.

It is understandable that long-term investors want to look beyond the pandemic for economic recovery and glean ideas on how to invest in the future. Clearly, one industry that’s hard at work is the health technology market. Digital health has taken off as a means of coping with patients who are better off staying at home, and health innovation funding is rapidly expanding.⁵

Bank of America Global Research, Israel anticipates several global megatrends that will have the greatest impact on the post-pandemic recovery. These include:⁶

A further shift away from reliance on Chinese manufacturing, particularly in the tech and pharma industries

A greater focus by consumers on technology and digital media – a lingering influence borne out of today’s stay-at-home recommendations

Bigger government influence at all levels, particularly in relation to tracking and preventing health crises, business models with a higher emphasis on worker benefits and more aggressive action for climate-friendly environmental initiatives

Speaking of the environment, some leaders are predicting that the pandemic may lead to more sustainable business practices. Initially, business owners are expected to be more focused on the short-term health and welfare of their businesses and employees. However, some industry leaders and policymakers insist that future investment should be channeled toward real change for a low-carbon, more sustainable future.⁷

At Imber Wealth Advisors, we help people in the Ann Arbor area plan for retirement. With a strong financial plan in place, we can help you prepare to leave the workforce and live comfortably. Take control of your financial future and give us a call at (734) 769-1719 today!

¹ Scott Neuman. NPR. June 29, 2020. “WHO Chief On COVID-19 Pandemic: ‘The Worst Is Yet To Come.’” https://www.npr.org/sections/coronavirus-live-updates/2020/06/29/885049691/who-chief-on-covid-19-pandemic-the-worst-is-yet-to-come. Accessed July 2, 2020.

² Jim Sciutto, Jamie Gumbrecht and Chandelis Duster. CNN. June 10, 2020. “US government to fund and conduct studies on three possible coronavirus vaccines, Fauci says.” https://www.cnn.com/2020/06/10/politics/vaccine-trials-funding/index.html. Accessed June 16, 2020.

³ Michelle Roberts. BBC. June 16, 2020. “Coronavirus: Dexamethasone proves first life-saving drug.” https://www.bbc.com/news/health-53061281. Accessed June 16, 2020.

⁴ Moira McCarthy. Healthline. June 8, 2020. “Dr. Anthony Fauci: COVID-19 Will End and We Will Get Control Over It.” https://www.healthline.com/health-news/dr-anthony-fauci-this-will-end-and-we-will-get-control-over-it#1. Accessed July 2, 2010.

⁵ Heather Landi. Fierce Healthcare. July 1, 2020. “Investors double down on health technology as funding reaches $9.1B in 2020.” https://www.fiercehealthcare.com/tech/investors-double-down-health-technology-as-funding-reaches-9-1b-2020. Accessed July 2, 2020.

⁶ Merrill/Bank of America Global Research. May 22, 2020. “5 Trends That Could Define Our Post-Coronavirus Lives.” https://www.ml.com/articles/post-coronavirus-life-investing-opportunities-5-trends.html. Accessed June 16, 2020.

⁷ Knowledge@Wharton. June 8, 2020. “How the Pandemic Can Lead to a More Sustainable Future.” https://knowledge.wharton.upenn.edu/article/how-the-pandemic-can-lead-to-a-more-sustainable-future/. Accessed June 16, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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, August 21, 2020

What the Pay Disparity Means for America

Women remain behind the curve compared to men when it comes to equal pay. With the surge of unemployment caused by the pandemic, this situation appears to have worsened. More women than men have lost their jobs in recent months. The unemployment rate for black women is higher than that of white women, black men and white men. Unfortunately, the longer the pandemic continues, the greater the damage will be to women’s careers. Moms are often responsible for childcare and home-schooling duties when classrooms shut down.¹

Women currently earn an estimated 82 cents for every $1 earned by men.² Compare the average earnings of men and women by specific age groups:³

25 to 34 years: Men, $50,076 vs. women $45,084
35 to 44 years: Men, $64,428 vs. women, $52,572
45 to 54 years: Men, $66,092 vs. women, $52,260
55 to 64 years: Men, $63,440 vs. women, $50,544

The average income for women starts to decrease after age 45, and after age 55 for men.

A two-income couple has become the norm. Many younger couples have relied on this income model to establish their housing budget, education aspirations for their children and their overall lifestyle. Having to curb that budget now, even in the short-term, may cause financial hardship. It can also be tough for middle-aged households who are actively planning for retirement. If you’re concerned about the pandemic’s possible impact on your future retirement income, we may be able to help. Feel free to contact us to discuss creating retirement strategies through the use of insurance products that can help you work toward your long-term retirement income goals.

The economic and pay disparity for women extends into retirement. According to the National Institute on Retirement Security, the median retirement income for women aged 65 and up is $47,244, whereas it is $57,144 for men — nearly a $10,000 difference annually.⁴ Women tend to outlive their husbands, so it’s important to consider the possibility of living alone for a number of years. If a wife outlives her husband for 30 years, her retirement income would be $300,000 less than if her husband outlived her for the same timeframe.

As evidenced by the disparity in retirement income, it’s clear gender pay disparity goes far beyond not earning the same amount of money as a male colleague. The largest percentage of a worker’s salary tends to go necessary household expenses, such as food, housing, utilities and transportation. Therefore, the less a person makes, the less he or she has left to save for retirement. Thus, while women may make 82 cents of every $1 earned by men, they actually own only 32 cents on the dollar. The situation is far more dire for women of color, as they own mere pennies on the dollar in terms of asset wealth relative to both white women and men.⁵

As much as the pandemic has suppressed women’s opportunities in the job market, the nation’s economic recovery will largely depend on women getting back into the workforce and improving their financial footing. According to the Institute for Women’s Policy Research, closing the gender pay gap could add $512.6 billion to America’s economy moving forward.⁶

Improving financial prospects for people of color could add even more to that economic growth. Following on the heels of recent protests calling for systemic reform of racial disparities in the U.S., one banker suggests that increasing mortgages and small-business loans to people of color would help them build equity, start new businesses and contribute to the growth of capital markets.⁷

¹ Julia Boorstin and Harriet Taylor. CNBC. July 15, 2020. “How coronavirus could do real, long-term damage to women’s careers.” https://www.cnbc.com/2020/07/14/how-coronavirus-could-do-long-term-damage-to-womens-careers.html. Accessed July 20, 2020.

² Robin Bleiweis. Center For American Progress. March 24, 2020. “Quick Facts About the Gender Wage Gap.” https://www.americanprogress.org/issues/women/reports/2020/03/24/482141/quick-facts-gender-wage-gap/. Accessed July 20, 2020.

³ Kathleen Elkins. CNBC. July 18, 2020. “Here’s how much men and women earn at every age.” https://www.cnbc.com/2020/07/18/heres-how-much-men-and-women-earn-at-every-age.html. Accessed July 20, 2020.

⁴ Tyler Bond, Joelle Saad-Lessler and Christian E. Weller. National Institute on Retirement Security. May 2020. “Still Shortchanged.” https://www.nirsonline.org/wp-content/uploads/2020/04/Still-Shortchanged-Final.pdf. Accessed July 20, 2020.

⁵ Jessica Stender. Ms Magazine. July 19, 2020. “How Salary History Bans Help Combat the Race and Gender Pay Gap.” https://msmagazine.com/2020/07/19/salary-history-bans-help-combat-the-race-and-gender-pay-gap/. Accessed July 20, 2020.

⁶ Elizabeth Schulze. CNBC. March 8, 2018. “Closing the gender pay gap could have big economic benefits.” https://www.cnbc.com/2018/03/08/closing-the-gender-pay-gap-could-have-big-economic-benefits.html. Accessed July 20, 2020.

⁷ Allissa Kline. American Banker. July 12, 2020. “How banks aim to close racial wealth gap: More minorities in leadership.” https://www.americanbanker.com/news/how-banks-aim-to-close-racial-wealth-gap-more-minorities-in-leadership. Accessed July 20, 2020.

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.

Thursday, July 23, 2020

Rerouting Your Summer Vacation

All is not lost. If you planned a multicity tour across Europe or Asia this summer, you’ve probably already rethought those plans. But that doesn’t mean you have to abandon the idea of a vacation altogether. Perhaps a domestic destination, a little ingenuity and a lot of family unity are just what you need.

As far as COVID-19 restrictions go, federal guidelines still do not recommend travel, especially internationally. The CDC advises that if you decide to travel domestically, be sure to take precautions against catching the virus, including washing hands often, socially distancing and wearing a mask.¹

In addition, tourism experts recommend avoiding large crowds and choosing outdoor destinations. The key may be to find destinations that fewer people know about.²

Before you go too far down the road, decide how much you can spend. If previous travel plans have been canceled, consider whether you want to use a voucher to rebook in the future or be reimbursed now.³ If you choose the latter option, you might be sitting on cash you are itching to spend. But before you do, it’s a good idea to research where the U.S. is in terms of “flattening the curve” and what the economy — and your job situation — could potentially look like in the future. Many economists are concerned about the effects a possible second wave of COVID-19 infections could have on the economy, so consider whether it’s smart to hold back some that cash you haven’t spent yet.⁴

If you are concerned about the effects of the coronavirus pandemic on your retirement income, we may be able to help. Please feel free to contact us to discuss creating retirement strategies through the use of insurance products that can help you work toward your retirement income goals.

If you are up for rerouting your vacation plans, consider these ideas. On the high end of travel, an upscale hotelier, Auberge Resorts Collection, and a luxury travel company, Black Tomato, have partnered to host “Take the Open Road with Auberge and Black Tomato.” Packages offer the use of a Mercedes-Benz to take you on multiple destinations with unique experiences in a particular area, with options ranging from lobster fishing in Kennebunk, Maine, to hiking, horseback riding and fly fishing in Park City, Utah. All packages feature award-winning hotel accommodations.⁵

A more budget-friendly option could be a vacation rental. To minimize your risk of exposure to coronavirus, consider renting an all-in-one party house, complete with swimming pool and other kid-friendly accommodations. The extra expense of renting may be offset by preparing meals at home and limiting other excursions. Research to make sure that you don’t choose a “hotspot” experiencing a COVID-19 outbreak and that you’ll have access to stores, restaurants and any other venues you plan to visit.⁶

¹ David Oliver. USA Today. May 20, 2020. “Weighing whether to travel this summer during the coronavirus pandemic? What to consider.” https://www.usatoday.com/story/travel/news/2020/05/20/coronavirus-travel-summer-vacation-what-cdc-state-department-say/5198927002/. Accessed June 9, 2020.

² Ibid.

³ Lisa Milbrand. Real Simple. May 14, 2020. “How to Handle Vacation Plans (Including Your Summer Vacation) During COVID-19.” https://www.realsimple.com/work-life/travel/travel-planning/travel-vacation-planning-covid-coronavirus. Accessed June 9, 2020.

⁴ Carmen Reinicke. Business Insider. June 8, 2020. “A 2nd wave of COVID-19 infections poses the biggest threat to the US economy this year, economist survey shows.” https://www.businessinsider.com/economy-biggest-threat-second-wave-coronavirus-infections-us-covid19-survey-2020-6. Accessed June 9, 2020.

⁵ Lauren Mowery. Forbes. June 9, 2020. “Four Ways You Should Hit America’s Roads This Summer With Black Tomato.” https://www.forbes.com/sites/lmowery/2020/06/09/four-road-trips-with-auberge-mercedes-and-black-tomato/#66e874be71f3. Accessed June 9, 2020.

⁶ Claire Ballentine. Bloomberg. May 21, 2020. “Considering a Vacation Rental? Here’s What to Know Before You Travel.” https://www.bloomberg.com/news/articles/2020-05-21/considering-a-vacation-rental-what-to-know-before-covid-travel. Accessed June 9, 2020.

Monday, July 20, 2020

How Might the Economic Downturn Affect Dividends?

If a large allocation of your retirement portfolio is invested in dividend-paying stocks, you might see your household income reduced this year. During the Great Recession, dividend payouts dropped by 25% and didn’t fully recover for at least four years. Today’s financial crisis brought on by the worldwide COVID-19 outbreak has once again created a potential reduction in some dividend payments.¹

U.S. dividend payers are in a sticky situation. Banks and other lending institutions saw profits drop by 50% by the end of March. These losses are expected to continue as millions of Americans continue to lose jobs and struggle to make rent, mortgage and credit card payments. Other reliable dividend payers include airlines, auto manufacturers and large retailers — also companies that have been hammered by drastically reduced consumer demand. The Chicago Mercantile Exchange recently predicted that S&P 500 index dividends will fall from 2019’s $58.24 to $47.55 this year, and even further ($42.05) in 2021. The impact on retirees could be a 27% reduction in income.²

Dividend payments — or the lack of them — may have an impact on how a company is viewed by investors. Historically, a company that paid out dividends has been considered financially stable with management that was confident about future earnings.³ Conversely, investors may interpret a reduction or halt in dividend payouts as a sign that a company is in trouble.⁴

Given that it took four years for dividend stocks to recover from the last recession, current retirees may want to start looking at alternative income stream ideas. However, traditional alternatives may also have drawbacks in the current economy. For example, investors may consider turning to master limited partnerships (MLPs). An MLP is a company organized as a publicly traded partnership in the natural resources or real estate sector. Historically, MLPs have been considered low-risk, long-term investments that provide a steady stream of tax-sheltered distributions to investors.⁵ However, the combination of falling oil prices and falling transportation demand due to the COVID-19 pandemic has put many MLPs under financial stress.⁶

Today’s crisis has demonstrated that some traditional sources of retirement income are vulnerable to disruption. Now more than ever, it’s important that retirees and pre-retirees develop a financial plan that takes into account their need for asset preservation strategies, growth and reliable income. If you have any questions or concerns about your own financial plan, give us a call. We’ll be happy to talk.

¹ William Baldwin. Forbes. April 16, 2020. “How Much Will Your Dividends Get Cut?” https://www.forbes.com/sites/baldwin/2020/04/16/how-much-will-your-dividends-get-cut/#17263d3319cf. Accessed June 9, 2020.

² Ibid.

³ Amy Fontinelle. Investopedia. May 15, 2020. “Companies That Pay Dividends — And Those That Don’t.” https://www.investopedia.com/ask/answers/12/why-do-some-companies-pay-a-dividend.asp. Accessed June 9, 2020.

⁴ Chad Langager. Investopedia. June 4, 2020. “Why Would a Company Drastically Cut Its Dividend?” https://www.investopedia.com/ask/answers/06/dividendpaymentcut.asp. Accessed June 22, 2020.

⁵ James Chen. Investopedia. Aug. 28, 2019. “Master Limited Partnership – MLP.” https://www.investopedia.com/terms/m/mlp.asp. Accessed June 9, 2020.

⁶ Pensions & Investments. March 24, 2020. “Pipeline funds imperiled with end of MLPs in sight.” https://www.pionline.com/private-equity/pipeline-funds-imperiled-end-mlps-sight. Accessed June 9, 2020.

Wednesday, July 15, 2020

Social Security Woes

In 2000, actors Helen Hunt and Kevin Spacey starred in “Pay It Forward.” The premise of the film is that a person repays a favor by offering small acts of kindness to more people. This concept of paying it forward leads to an exponential movement of goodwill.

Social Security works a bit like that. In other words, FICA payroll taxes collected from today’s workers are used to pay Social Security and Medicare benefits for retirees. When workers retire, their benefits will be paid by tomorrow’s workforce, and so on.¹

Investing works a little like that as well. You invest money as you work and hope that the stock market will grow to produce a larger nest egg in the future. However, the stock market can be volatile, so sometimes you can lose the gains you earn and even the principal you invested. There are other ways to pay yourself forward. Call us to inquire how an annuity can provide a guaranteed stream of income during retirement. That way you can be sure that the money you pay forward definitely comes back to you in retirement.

Unfortunately, there are problems with the pay-it-forward strategy used for Social Security. One glaring issue has become evident in the wake of the pandemic. With more than 40 million people out of work, there were less FICA tax revenues paying into the Social Security system. This means that, according to some estimates, the program could be insolvent by 2030.²

Then there is the issue of sustained low inflation due to the current lack of consumer demand for goods. For most people, low inflation is a good thing. However, Social Security beneficiaries receive a cost-of-living increase only when there is a correlating jump in inflation, as measured by the Consumer Price Index (CPI). Preliminary estimates for a 2021 adjustment is little to none, given today’s current environment. This situation is exacerbated by the fact that things retirees tend to spend a greater portion of their income on, such as health and long-term care, grow much faster than the rate of inflation. Since 2000, the inflation adjustment for Social Security benefits has increased by 53%, but the cost of items purchased by retirees has nearly doubled (99%).³

Then again, we have even bigger problems than benefits not keeping up with inflation. Thanks to the $2.4 trillion (so far) stimulus passed by Congress to help offset the economic impact of COVID-19, America’s debt has risen higher than ever. While it may be necessary to provide funds for individuals, small businesses, large industries and unemployment benefits to help kickstart the economy, that debt creates a long-term challenge for the federal government.⁴

To reduce debt, fiscal policies will need to be changed to either raise taxes, reduce spending or both. While Social Security is funded by a separate (FICA) payroll tax, legislators may look to cut benefits in the future to reallocate more money to pay down the national debt. Recent proposals to help make the Social Security more viable include reducing disability benefits, increasing full retirement age and/or raising the payroll tax cap, currently at $137,700.⁵

¹ Jean Folger. Investopedia. April 27, 2020. “Why Is Social Security Running Out of Money?” https://www.investopedia.com/ask/answers/071514/why-social-security-running-out-money.asp. Accessed June 1, 2020.

² Caitlin Emma. Politico. May 19, 2020. “Coronavirus could push Social Security to insolvency before 2030.” https://www.politico.com/news/2020/05/17/coronavirus-social-security-2030-261207. Accessed June 1, 2020.

³ Alessandra Malito. MarketWatch, Inc. May 30, 2020. “Social Security recipients may be in for a rude awakening later this year.” https://www.marketwatch.com/story/social-security-recipients-may-be-in-for-a-rude-awakening-later-this-year-2020-05-12?mod=retirement. Accessed June 1, 2020.

⁴ Jim Sergent, Ledyard King and Michael Collins. USA Today. May 8, 2020. “4 coronavirus stimulus packages. $2.4 trillion in funding. See what that means to the national debt.” https://www.usatoday.com/in-depth/news/2020/05/08/national-debt-how-much-could-coronavirus-cost-america/3051559001. Accessed June 1, 2020.

⁵ Aimee Picchi. USA Today. Feb. 12, 2020. “Social Security: Here’s what Trump’s proposed budget could mean for your benefits.” https://www.usatoday.com/story/money/2020/02/12/social-security-trump-budget-aims-cuts-disabled-workers-program/4738795002/. Accessed June 1, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. Or firm is not affiliated with the U.S. government or any governmental agency. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. Investing involves risk, including the potential loss of principal. Any references to protection of benefits, safety, security, or guaranteed lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.