FINANCIAL FOCUS – The Right Insurance Can Meet Both Short- and Long-term Needs

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If you’re going to achieve your important financial goals, you’ll need to build an appropriate investment portfolio. But that’s only part of the story – because you also need to protect what you have, what you earn and what you’d like to leave behind. That’s why it’s a good idea to become familiar with the various types of insurance and how they can address short- and long-term needs.

For starters, consider life insurance. You may have important long-term goals, such as leaving an inheritance for your family and providing resources for your favorite charities. You may be able to fulfill some of these through the death benefit on your policy.

You can also purchase life insurance to help fill the gap between the amounts you have saved and what your family would need if you died unexpectedly. Thus, insurance can pay for liabilities (such as a mortgage, car payments, student loans and other debts), education expenses (such as college for your children) and final expenses associated with your passing.

Next, consider disability insurance. If you were injured or became ill and couldn’t work for a while, the loss of income could be a big problem for your family members – in fact, it could disrupt their entire lifestyle. Even a short-term disability could prove worrisome, while a long-term disability could be catastrophic. Your employer might offer short-term disability insurance, and that could be enough – but do you really want to take that chance? To protect your income if you were out of work for an extended period, you might need to supplement your employer’s coverage with your own long-term disability policy. Long-term disability insurance, which generally kicks in after you’ve used up your short-term benefits, may pay you for a designated time period (perhaps two to five years) or until your reach a certain age, such as 65. Long-term disability insurance likely won’t replace your entire income, but it can go a long way toward helping you stay “above water” until you recover.

You may also want to think about long-term care insurance. Despite its name, a long-term care policy could meet either short- or long-term needs. On the short-term end, you might need the services of a home health care aide to assist you in your recovery from an injury such as a broken hip. On the other end of the long-term care scale, you might someday need an extensive stay in a nursing home, which can be extremely expensive and which isn’t typically covered by Medicare. But in either case, you might be able to benefit from a long-term care insurance policy, or possibly a long-term care rider attached to a life insurance policy. And the earlier you take action, the better, because long-term care insurance, in particular, generally becomes more expensive the older you get.

This list of insurance policies, and the needs they can help meet, is certainly not exhaustive, but it should give you an idea of just how important the right insurance coverage can be for you – at almost any stage of your life.

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
www.edwardjones.com/marques-young
Member SIPC

 

FINANCIAL FOCUS – Market Outlook for 2019: Uncertainty is Certain

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To say the financial markets were a bit bumpy in 2018 may be an understatement.  The S&P 500 was down 6.2 percent for the year, the first time this key index fell since 2008, during the financial crisis. So what can you anticipate in 2019? And what investment moves should you make?

Let’s review the causes for last year’s market volatility. Generally speaking, uncertainty was a major culprit. Uncertainty about tariffs, uncertainty about the continued trade dispute with China, uncertainty about Brexit – they all combined to make the markets nervous. Furthermore, the Federal Reserve raised interest rates four times, and even though rates remain low by historical standards, the increases caused some concern, as higher borrowing costs can eventually crimp the growth prospects for businesses.

And now that we’re into 2019, these same uncertainties remain, so markets are likely to remain volatile. Although the Fed has indicated it may be more cautious with regard to new rate hikes, there are indications of slower growth ahead, particularly in China, the world’s second-largest economy. And after strong 2018 earnings growth, helped by the corporate tax cuts, corporate earnings may grow more slowly – and, as always, earnings are a key driver of stock prices.

Nonetheless, the U.S. economy is showing enough strength that a recession does not appear to be on the horizon, which is also likely to be the case globally – and that should be good news, because an extended “bear” market typically does need to be fueled by a recession. Ultimately, the projected continued growth of the U.S. economy and the possible resolution of some uncertainties could help markets rebound.

As investors, we cannot control the everyday ups and downs in the markets, but we can control our decisions, look for opportunities and keep a long-term perspective within our investment portfolios. Consider these actions for 2019:

  • Be prepared for volatility. As mentioned, many of the same factors that led to the market upheavals of 2018 are still with us, along with the impact of the partial government shutdown – so don’t be surprised to see continued volatility. The more you’re prepared for market turbulence, the less startled you’ll be when it arrives.
  • Stay diversified. At any given time, different financial assets may move in different directions: stocks up, bonds down, or vice versa. To help dilute risk and take advantage of different opportunities, you should maintain a broadly diversified portfolio containing stocks, international stocks, bonds, government securities and so on. You may need to rebalance your portfolio to maintain an appropriate proportion of each asset class, based on your risk tolerance and long-term goals. Keep in mind, though, that while diversification can reduce the effects of volatility on your portfolio, it can’t guarantee profits or protect against all losses.
  • Take a long-term perspective. It can be disconcerting to see several-hundred point drops in the stock market. But you can look past short-term events, especially if your most important financial target – a comfortable retirement – is still years or decades away. By keeping your focus on the long term, you can make investment decisions based on your objectives – not your emotions.

If 2019 continues to be volatile, you’ll need to stay prepared and make the right moves – so you can be confident that you did everything you could to keep moving toward your financial goals.

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
www.edwardjones.com/marques-young
Member SIPC

 

FINANCIAL FOCUS – Financial Gifts for Valentines…of All Ages

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Valentine’s Day is fast approaching. This year, consider going beyond the flowers and chocolates and think about providing financial-related gifts to your loved ones of all generations.

Here are some gift possibilities to consider:

  • For your spouse or partner – Your income – both today and in the future – may be essential to the ability of your spouse or partner to maintain his or her lifestyle and even to enjoy a comfortable retirement. Consequently, you need to protect that income and be prepared to replace it. So, why not use Valentine’s Day as an opportunity to review your disability and life insurance? Of course, you don’t have to evaluate your insurance needs and add new coverage all in one day, but the sooner you act, the more you can relax in the knowledge that you’ve helped give your spouse or partner a more secure future.
  • For your children or grandchildren – If you want your children or grandchildren to go to college, or to receive some type of technical education that can help them launch a good career, you may want to provide some type of financial assistance. And one education-funding vehicle you might want to consider is a 529 college savings plan, which offers tax advantages and high contribution limits. Plus, it gives you, as owner, considerable flexibility – you can always change beneficiaries if the child or grandchild you had in mind decides not to go to college or a technical school. (Be aware, though, that a 529 plan can have financial aid implications, so, at some point, you will want to discuss this issue with a financial aid counselor.)

Another financial “gift” you could give to your children is a bit more indirect, but possibly just as valuable, as a 529 plan – and that’s the gift of preserving your own financial independence throughout your life. If you were to someday need some type of long-term care, such as an extended nursing home stay or regular visits from a home health aide, you could find the costs extremely high. Medicare typically pays few of these costs, so you will likely need to come up with the funds on your own. You can go a long way toward protecting yourself from these expenses – and avoid having to burden your grown children – by purchasing long-term care insurance or some type of life insurance with a long-term care provision.

  • For your parents – One of the best gifts you can give to elderly parents is to help make sure their estate plans are in order. This is never an easy topic to bring up, but it’s essential that you know what responsibilities you might have, such as assuming power of attorney, to ensure that your parents’ plans are carried out, and their interests protected, in the way they’d want. Toward this end, you will need to communicate regularly with your parents – and if they haven’t drawn up estate plans yet, you could arrange for them to meet with the legal, tax and financial professionals necessary to help create these plans.

Just as the definition of “love” is broad enough to include all the people most important to you, so is the range of financial gifts you can give your loved ones. Start thinking about these gifts on Valentine’s Day – and beyond.

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
www.edwardjones.com/marques-young
Member SIPC

 

FINANCIAL FOCUS – What Can Investors Learn From “Big Game” Teams?

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In February, TV stations the world over will broadcast the most-watched U.S. football game of the year. But sports fans aren’t the only ones viewing this “big game,” held in Atlanta this year. The two teams competing are watched closely by the teams that didn’t qualify. That’s because these teams can learn a lot from the contenders. In fact, “big game” teams can teach some valuable lessons to many groups and individuals – including investors.

What investment insights can you gain from observing these teams? Here are a few to consider:

  • A good “offense” is important. “Big game” teams usually have the ability to score a lot of points. They can run the ball, pass the ball and move up the field quickly. As an investor, you also need to constantly seek gains – in other words, you need an “offense” in the form of an investment portfolio capable of producing long-term growth. Consequently, you will need a reasonable percentage of growth-oriented vehicles, such as stocks and stock-based mutual funds, in your holdings. Yes, these types of investments carry risk, including the potential loss of principal. But you can help reduce your risk level by holding investments for the long term – giving them time to possibly overcome the short-term drops that will inevitably occur – and by diversifying your overall portfolio with other types of investments, such as bonds and government securities, that will likely not fluctuate in value as much as stocks.
  • A strong “defense” is essential. In addition to having good offenses, “big game” teams are also typically strong on defense. They may give up yardage, and going against a strong offense, they will also give up points, but they still often stop their opponents from making the big, game-breaking plays. As someone with financial goals, such as protecting your family’s lifestyle and helping send your children to college, you, too, have much to defend – and one of the best defensive moves you can make is to maintain adequate life insurance. Also, to protect your own financial independence – and to defend against the possibility of becoming a burden to your adult children – you may want to explore some type of long-term care insurance, which can help pay for the extraordinarily high costs of an extended nursing home stay.
  • The ability to adjust a strategy is essential. If a “big game” team is trailing, it very well might decide to switch its game strategy – perhaps they tried to keep the ball on the ground but fell behind, requiring them to throw more passes to catch up. You also will need to evaluate your progress toward your goals to determine if you may need to adjust your strategy. To illustrate: If your current portfolio is not providing you with the returns you need to retire comfortably, you may well need to adjust your investment mix to provide more growth potential, but within the context of your risk tolerance and time horizon.

The “big game” is the culmination of a season of hard work by two teams that have achieved the highest level of success. And by applying the lessons you’ve learned from these teams, you can help contribute to your own success.

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
www.edwardjones.com/marques-young
Member SIPC

 

FINANCIAL FOCUS – Are You Prepared for a Natural Disaster?

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The year ahead offers new opportunities and experiences. But as you make plans throughout 2019, be mindful of the things that can derail those plans – such as the natural disasters that affected so many families in 2018. Every area around the country is subject to natural disasters, whether they’re wildfires, hurricanes or tornadoes. How can you prepare for them?

Here are a few suggestions:

  • Maintain adequate insurance. It’s a good idea to review your homeowners insurance at least annually to ensure it’s still providing the protection you need. And make sure you know exactly what your policy covers in terms of natural disasters. You’ll also want to review your life and disability insurance regularly. And, of course, you’ll want to stay current on your premiums for all your policies.
  • Keep a record of your possessions. The insurance claims process will be much easier if you take the time, before a natural disaster occurs, to photograph or videotape the contents of your home. You also might want to list the brands and serial numbers of appliances and electronics.
  • Know your passwords. It’s important to have ready access to the passwords for your financial accounts. You may be able to memorize them, but, if not, keep them somewhere – perhaps in your smartphone – that you can access anywhere. It’s always possible that a natural disaster will strike so quickly that you can’t even grab your phone, so, to be extra cautious, you might want to share your passwords with a trusted family member or friend. (Even then, though, you may want to change your passwords every so often.)
  • Build an emergency fund. During or following a natural disaster, you may need ready access to cash to cover some of the essentials of daily living, such as food and shelter. Keeping a lot of cash in your home may not be such a great plan, especially if you have to evacuate quickly. Consequently, you might want to create an emergency fund containing three to six months’ worth of living expenses, with the money kept in a low-risk, liquid and highly accessible account at a local bank or with your financial services provider.
  • Protect your documents. These days, many of your important financial materials, such as your investment statements, are available online, so they’re likely safe from any disaster. But you may still have some items, such as checkbooks, birth certificates, passports, Social Security cards, insurance policies and estate planning documents (i.e., will, living trust, etc.) on paper. Even if some or all of these things could eventually be replaced, it would take time and effort. You’re better off protecting them beforehand, possibly by keeping them in a safety deposit box at a local bank.
  • Save your receipts. You’ll want to save receipts for repairs and temporary lodging to submit to your insurance company. If you are not fully reimbursed for these expenses, they may be tax deductible, though you’ll need to consult with your tax advisor to be certain.

If you’re fortunate, you’ll never have to face a natural disaster that threatens your home and possessions. But it never hurts to be ready – just in case.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
www.edwardjones.com/marques-young
Member SIPC

 

FINANCIAL FOCUS – Review Your Fixed-Income Strategy as Interest Rates Rise

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When interest rates rise, the value of your fixed-income investments, such as bonds, will typically fall. If this happens, how should you respond?

First of all, it’s important to understand this inverse correlation between interest rates and bond prices. Essentially, when interest rates rise, investors won’t pay you full price for your bonds because they can purchase newly issued ones that pay higher rates. So, if you sell your bonds before they mature, you could lose some of the principal value.

You may be seeing a price drop among your bonds right now, because interest rates generally rose in 2018 and may continue to do so in 2019. While you might not like this decline, you don’t necessarily have to take any action, particularly if you’re planning to hold these bonds until maturity. Of course, you do have to consider credit risk – the chance that a portion of the principal and interest will not be paid back to investors – but unless the bond issuers default, which is usually unlikely, particularly with investment-grade bonds, you can expect to receive the same regular interest payments you always did, no matter where rates move.

Holding some of your bonds – particularly your longer-term ones – until they mature may prove useful during a period of rising interest rates. Although long-term bond prices – the amount you could get if you were to sell these bonds tend to fall more significantly than short-term bond prices, the actual income that longer-term bonds provide may still be higher, because longer-term bonds typically pay higher interest rates than shorter-term ones.

To preserve this income and still take advantage of rising interest rates, you may want to construct a “bond ladder” consisting of short-, intermediate- and longer-term bonds. Because a ladder contains bonds with staggered maturity dates, some are maturing and can be reinvested – and in a rising-rate environment such as we’re currently experiencing, you would be replacing maturing bonds with higher-yielding ones. As is the case with all your investments, however, you must evaluate whether a bond ladder and the securities held within it are consistent with your objectives, risk tolerance and financial circumstances.

You can build a bond ladder with individual bonds, but you might find it easier, and perhaps more affordable, to own bond-based mutual funds and exchange-traded funds (ETFs) that invest in bonds. Many bond funds and ETFs own a portfolio of bonds of various maturities, so they’re already diversified.

Building a bond ladder can help you navigate the rising-rate environment. But you also have another incentive to continue investing in bonds, bond funds or ETFs – namely, they can help diversify a stock-heavy portfolio. If you only owned stocks, your investment statements would probably fluctuate greatly – it’s no secret that the stock market can go on some wild rides. But even in the face of escalating interest rates, bond prices generally don’t exhibit the same sharp swings as stocks, so owning an appropriate percentage of bonds based on your personal circumstances can help add some stability to your investment mix.

As an investor, you do need to be aware of rising interest rates, but as we’ve seen, they certainly don’t mean that you should lose your interest in bonds as a valuable part of your investment strategy.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
www.edwardjones.com/marques-young
Member SIPC

 

FINANCIAL FOCUS – Roth vs. Traditional 401(k): Which Is Right for You?

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For many years, employees of companies that offered 401(k) plans only faced a couple of key decisions – how much to contribute and how to allocate their dollars among the various investment options in their plan. But in recent years, a third choice has emerged: the traditional versus Roth 401(k). Which is right for you?

To begin with, you need to understand the key difference between the two types of 401(k) plans. When you invest in a traditional 401(k), you put in pre-tax dollars, so the more you contribute, the lower your taxable income. Your contributions and earnings grow tax-deferred until you begin taking withdrawals, which will be taxed at your ordinary tax rate. With a Roth 401(k), the situation is essentially reversed. You contribute after-tax dollars, so you won’t lower your taxable income, but withdrawals of contributions and earnings are tax-free at age 59-1/2, as long as you’ve held the account at least five years.

So, now that you’ve got the basics of the two types of 401(k) plans, which should you choose? There’s no one right answer for everyone. You essentially need to ask yourself these questions: When do you want to pay taxes? And what will your tax rate be in the future?

If you’re just starting out in your career, and you’re in a relatively low income tax bracket, but you think you might be in a higher one when you retire, you might want to consider the Roth 401(k). You’ll be paying taxes now on the money you earn and contribute to your Roth account, but you’ll avoid being taxed at the higher rate when you start taking withdrawals. Conversely, if you think your tax rate will be lower when you retire, you might be more inclined to go with the traditional 401(k), which allows you to avoid paying taxes on your contributions now, when your tax rate is high.

Of course, you can see the obvious problem with these choices – specifically, how can you know with any certainty if your tax bracket will be lower or higher when you retire? Many people automatically assume that once they stop working, their tax liabilities will drop, but that’s not always the case. Given their sources of retirement income from investment accounts and Social Security, many people see no drop in their tax bracket once they retire.

Since you can’t see into the future, your best move might be to split the difference, so to speak. Although not all businesses offer the Roth 401(k) option, many of those that do will allow employees to divide their contributions between the Roth and traditional accounts. If you chose this route, you could enjoy the benefits of both, but you still can’t exceed the total annual 401(k) contribution limit, which for 2019 is $19,000, or $25,000 if you’re 50 or older.

You may want to consult with your tax advisor before making any decisions about a Roth or traditional 401(k) – or Roth and traditional 401(k) – but in the final analysis, these are positive choices to make, because a 401(k), in whatever form, is a great way to save for retirement. Try to take full advantage of it.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
www.edwardjones.com/marques-young
Member SIPC