ABLE Accounts for Loved Ones with Disabilities and Stocks & Presidential Elections and The Value of Insuring Against Life's Risks

by rwilczek on Jan 22, 2019

insurance, disability income, ABLE accounts, ABLE, markets and elections, elections, stocks and elections

Wishing you a peaceful holiday season with time to rest and enjoy family and friends.

Sincerely,

Rita

The Value of Insuring Against Life’s Risks
Building wealth requires protection from the forces of wealth destruction.

Provided by Rita Wilczek

When you are planning for your future, what do you think about? You may think about your retirement, enjoying having the time and money to take trips and pursue your interests. Maybe you think about your home and enjoying the feeling of stability that can come with home ownership. In making these plans, people often find that their long-term view involves money, in some fashion.

That said, life also involves risk as well as unforeseen events that can change our plans in an instant. As an example, sudden injury or disability could leave you in a financial bind, unable to work for an extended period of time, or ever again. For this reason, among others, insurance is an important tool in allowing you to build and maintain your wealth, as well as protecting it from unanticipated and destructive forces.

Did you know:

* Sixty-eight percent of American workers have no long-term disability income protection.¹

* Roughly 70 million Americans aged 18-38 have no life insurance.²

* About one driver in eight is uninsured?³

If you ask a homeowner, replacing a roof is probably the least satisfying expense they will ever face. While the value of such an investment is obvious, it doesn’t quite provide the satisfaction of new landscaping. Yet, when a heavy rain comes, ask that same owner if they would have preferred the nice flowers or a sturdy roof.

Insurance is a lot like that roof. It's not a terribly gratifying expenditure, but it may offer protection against the myriad of potential financial storms that can touch down in your life.

The uncertainties of life are wide ranging, and many of them can threaten the financial security of you and your family. We understand most of these risks; for example, a home destroyed by a fire and a car accident are just two common risks that could subject you to outsized financial loss.

Similarly, your resulting inability to earn a living to support yourself and your family due to death or disability can wreak long-term financial havoc on those closest to you. Insurance exists to protect you from these forms of wealth destruction.

Some insurance (e.g., home or car) may be required, but when it isn’t mandatory (e.g., life or disability), individuals are tempted to avoid the certain financial “loss” associated with insurance premiums, while simultaneously, assuming the risk of much larger losses, which are less likely to happen.

But insurance premiums aren't a financial “loss” – they are designed to help protect you and your family as you build personal wealth. Keep that in mind as you consider your coverage options and make decisions about your future; you could be making a decision that could affect the rest of your life.

Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net

www.ritawilczek.com

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 - ssa.gov/news/press/factsheets/basicfact-alt.pdf [2018]
2 - ajc.com/business/personal-finance/free-term-life-insurance-yep-thing-and-here-how-you-can-get/zzoBg0QQqRgjoBMAN1QfWM/ [12/3/2018]
3 - insurancejournal.com/news/national/2018/03/15/483414.htm [3/15/2017]

Stocks & Presidential Elections

What does history tell us – and should we value it?

Provided by Rita Wilczek

As an investor, you know that past performance is no guarantee of future success. Expanding that truth, history has no bearing on the future of Wall Street.

That said, stock market historians have repeatedly analyzed market behavior in presidential election years, and what stocks do when different parties hold the reins of power in Washington. They have noticed some interesting patterns through the years, which may or may not prove true for 2020 or for any other election year down the line.

Do stocks really go through an “election cycle” every four years? The numbers really do not point to any kind of pattern. If you examine the S&P index going back the last 21 election cycles, all the way back to 1928, there were only three years with an overall negative return. That may sound great, but you also have to consider that not every pattern we find necessarily demonstrates that one factor (e.g. a Presidential election) directly affects another (such as market returns).¹

For instance, it is also a fact that every year of the twentieth century ending with the number “5” (1905, 1915, 1925, and so on) turned a profit. That might be true, but it is not useful information when making financial decisions.¹

It is also worthwhile to keep in mind that as consequential as presidential politics may be, there may be other, larger factors looming. The S&P 500 returns dipped 37% in 2008. While that was a presidential election year, that was also in the wake of a major financial crisis. It can be important to keep that bigger picture in mind.

What about midterm elections? Do the congressional elections, which come at roughly the midway point in a president’s four-year term, have any relevance? As with presidential election years, it can depend on the year.

Over the last five midterms, the S&P dropped an average of 18%. The year 2002, however, saw a much larger drop of 34.5%. This past year has also seen some declining numbers, in the form of two periods where the S&P 500 dropped more than 11%.¹

Investing with a long-term view in mind. These numbers are interesting and may give you a great deal to think about in the short term. That said, if you are taking a longer view with your investment, you may see the markets rise and fall a number of times, for any number of reasons. History can be informative and give you an idea of what might be possible, but it cannot tell you with any certainty what is coming next.

How much weight does history ultimately hold? Not as much as you may expect. It is intriguing, and some analysts would instruct you to pay more attention to it rather than less. Historical “norms” are easily upended, however. Working with a financial professional may offer perspective on major events and allow you to think less in terms of the next few years and more toward your ultimate future.

Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net

www.ritawilczek.com

Citations.

1 - thebalance.com/presidential-elections-and-stock-market-returns-2388526 [8/24/18]

2 - marketwatch.com/story/stocks-historically-have-rallied-37-after-midterm-elections-will-it-happen-again-2018-11-08 [11/9/18]

ABLE Accounts for Loved Ones with Disabilities

More families should know about these tax-advantaged savings vehicles.

Provided by Rita Wilczek

Families with special needs children have a new tax-deferred savings option. The ABLE account, also called a 529A savings account, is patterned after the popular 529 savings plan created to help parents save for a child’s higher education. Like 529 plans, they are run by states rather than the federal government.¹

ABLE accounts address an underpublicized financial need. While some families open college savings accounts, very few start discrete savings accounts or trusts for children with disabilities. That difference may be partly due to the presumption that “the money will be there” when a disabled child becomes an adult.

The money may not be there; at least, not as much of it as many families hope. Increasingly, state agencies and non-profit groups helping the disabled face funding challenges and pressure to limit the “entitlements” they distribute. Social Security, which provides Supplemental Security Income (SSI) to millions of disabled adults, faces its own set of pressures.

Financially and legally, what changes when a special needs child turns 18? As an adult, a disabled person becomes eligible for Medicaid and monthly SSI payments, provided he or she meets the financial requirements, typically only available to those with $2,000 or less in assets. Some special needs adults have more than $2,000 in assets in their name by age 18. Savings accumulate, family gifts and investments are made on behalf of the child, and suddenly, that young person is ineligible for fundamental health care and income benefits.²

ABLE accounts nicely address this dilemma. Money accumulated in a tax-advantaged ABLE account does not count toward that $2,000 total. Even if funds in the account reach or exceed $100,000, the account beneficiary will still be eligible for Medicaid (albeit ineligible for SSI).³

How much can you save using an ABLE account? The limit varies per state. ABLE accounts are allowed to contain as much as $300,000 in some states.^1,3

More than 30 states have enacted ABLE accounts. If your state is not among them, you can go ahead and open an ABLE account through another state’s program.^1,3

ABLE accountholders have some new options, thanks to federal tax reform. The Tax Cuts and Jobs Act of 2017 brought three notable changes for these accounts. While the basic annual ABLE account contribution limit is currently $15,000 for an individual, working individuals may now contribute employment income to their accounts in excess of that threshold, up to the individual federal poverty level set for the preceding calendar year. In addition, some ABLE account beneficiaries may be eligible for the Saver’s Credit, a sizable federal tax break.¹

You may now roll over up to $15,000 from a standard 529 plan into an ABLE account. One key condition must be met: the beneficiary of the standard 529 plan must either be the same person who is the beneficiary of the ABLE account or a member of the same family as the ABLE account holder.¹

ABLE accounts are becoming an important component of special needs planning. An account containing $300,000 (or less) probably will not be adequate to cover lifetime care expenses for most disabled adults, even if replenished. An ABLE account is usually not a financial “answer” for families with mentally or physically challenged children, but a part of a greater financial strategy that might include a supplemental needs trust or other savings vehicles.³

These accounts do have their shortcomings. The biggest drawback of ABLE accounts is that they do nothing for people who become disabled after age 26. One cannot be opened for a disabled person older than 26, unless the individual became disabled prior to that age. Another little-known demerit: states sponsoring ABLE accounts can seek repayment from those accounts for the cost of care covered by Medicaid if the beneficiary dies.⁴

ABLE account contributions are not tax deductible. That trade-off is made in exchange for tax-deferred earnings and tax-free withdrawals. Withdrawals go untaxed, so long as the money is spent on “qualified disability expenses,” which can range from education, housing, and transportation costs to job training and health care. Non-qualified withdrawals are subject to ordinary income tax and a 10% I.R.S. penalty. Only one 529A account is allowed per disabled individual.⁴

The bottom line? ABLE accounts give families with children who have special needs a new way to save and invest for future needs and expenses.

Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net

www.ritawilczek.com

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 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 - finra.org/investors/able-accounts-529-savings-plans [8/6/18]

2 - mn.db101.org/mn/situations/youthanddisability/benefitsforyoungpeople/program2c.htm [10/31/18]

3 - forbes.com/sites/katiepf/2018/02/06/should-you-open-an-able-account-for-a-child-with-a-disability [2/6/18]

4 - fidelity.com/viewpoints/personal-finance/special-needs-savings [1/30/18]