Our Wealth Services Advisors and Personal Insurance Experts provide insights about topics and trends that could impact your financial and personal goals.
PERSONAL FINANCE QUARTERLY SUMMER 2022 Our Wealth Services Advisors and Personal Insurance Experts provide insights about topics and trends that could impact your financial and personal goals.
Assess Life Insurance Needs
The first step is to add up needs and obligations. Short-Term Needs. Which funds will need to be available for final expenses? These may include costs of a funeral, final medical bills, and any outstanding debts, such as credit cards or personal loans. How much to make available for short-term needs will depend on your individual situation. Long-Term Needs. How much will it cost to maintain your family’s standard of living? How much is spent on necessities, like housing, food, and clothing? Also, consider factoring in expenses, such as travel and entertainment. Ask yourself, “what would it cost per year to maintain this current lifestyle?” New Obligations. What additional expenses may arise in the future? What family considerations will need to be addressed, especially if there are young children? Will aging parents need some kind of support? How about college costs? Factoring in potential new obligations allows for a more Liquid Assets. Any assets that can be redeemed quickly and for a predictable price are considered liquid. Generally, houses and cars are not considered liquid assets since time may be required to sell them. Also, remember that selling a home may adjust a family’s current standard of living. Needs and obligations – minus liquid assets – can help you get a better idea of the amount of life insurance coverage you may need. While this exercise is a good start to understanding your insurance needs, a more detailed review may be necessary to better assess your situation. accurate picture of ongoing financial needs. Next, subtract all current assets available. 1. LIMRA.com, 2021 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. “Alera Group Wealth Services” is a brand name utilized by Alera Group, Inc. and certain subsidiaries and affiliates (collectively “Alera”). Advisory Services offered through Alera Investment Advisors, LLC. Securities offered through Triad Advisors, LLC, Member FINRA/SIPC. Triad Advisors LLC is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad Advisors. Information provided by Alera should not be considered tax or legal advice. Should you require tax or legal information, please consult your tax advisor or attorney.
If your family relies on your income, it’s critical to consider having enough life insurance to provide for them after you pass away. But too often, life insurance is an overlooked aspect of personal finances. In fact, according to a 2021 study conducted by Life Happens and LIMRA, which closely follows life insurance trends, nearly 50 percent of Americans say that they have no life insurance coverage at all, even though 59% of people without life insurance recognize the need to obtain it. 1
Role of Life Insurance. Realizing the role life insurance can play in your family’s finances is an important first step. A critical second step is determining how much life insurance you may need. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments. Rule of Thumb. One widely followed rule of thumb for estimating a person’s insurance needs is based on income. One broad guide suggests a person may need a life insurance policy valued at five times their annual income. Others recommend up to ten times one’s annual income. If you are looking for a more accurate estimate, consider completing a “DNA test.” A DNA test, or Detailed Needs Analysis, takes into account a wide range of financial commitments to help better estimate insurance needs.
Personal Finance Quarterly | Summer 2022
Insuring a Second Home
Renting Out Your Home to Others? Whether your second property is an apartment unit or a family home, if you’re renting the property, you will have little control over the physical damage that can occur in or on it. To mitigate your risks, tenant-occupied dwelling insurance will cover the costs incurred by damage, including fire, storms, burglary and vandalism. However, it doesn’t cover your tenant’s personal property. Renting your property furnished or unfurnished also has insurance coverage implications. If you are renting your property furnished, make sure to let us know. We can advise you on the best coverage options and whether you need to consider requiring longer-term tenants to carry additional renters insurance. As with all homeowners insurance, it’s important to be sure that there is enough coverage to protect all of your property values and assets when purchasing coverage. If you have questions about insuring a second home, request a time to chat with our team by clicking here.
If you’re investing in a second home, we’ve gathered some insurance basics that will help you make the best buying decision when it comes to determining insurability and estimating your ongoing cost of ownership. Coverage Options At a minimum, your lender will require that you carry hazard insurance to protect your property against damage from theft, fire, flooding and windstorms. It’s also a good idea to add liability insurance—which covers you and members of your household for accidental injuries to your visitors. For an extra layer of protection, a personal umbrella liability policy extends your liability coverage for properties named in the policy. Dwelling Fire Insurance Since most homeowner policies require occupancy as a condition of insurance, the fact that you visit infrequently may preclude you from obtaining full homeowners coverage. Dwelling fire insurance is an alternate coverage option utilized in insuring residential rental or non-owner occupancy property, including vacant property. A dwelling fire policy continues to offer coverage for a home and other structures (e.g., detached sheds or garages) for perils named in the policy. Named perils listed in a typical dwelling fire policy protect against damage caused by fire, collapse, lightning, wind, hail,
explosion and smoke. For more coverage, consider adding personal property protection and liability. Top Ways To Save If your second home is typically unoccupied for periods of time, it’s worth investing in items that create insurance discounts to offset the cost of your premium. This includes smoke detectors, fire extinguishers, deadbolts and a central alarm system for burglaries and fire that contacts an outside service. Cost Considerations Second homes generally cost more to insure. This is because premiums are based on a variety of factors such as the amount of time that it will be unoccupied, its location and the liability from renting the property. Often the qualities that attracted you to your second home—such as its location—are the same ones that can make insuring it more costly. Depending on the location and features of a second home, the risk of natural disaster, or even the presence of a pool, you may find coverage difficult to obtain. If you’re considering the purchase of a second home, contact us to learn more about the cost of insuring the property.
Disclaimer: This article is provided for informational purposes only. The information provided herein is not intended to be exhaustive, nor should it be construed as advice regarding coverage. Eligibility for coverage is not guaranteed and all coverages are limited to the terms and conditions contained in the applicable policy. © 2008, 20132016 Zywave, Inc. All rights reserved.
Personal Finance Quarterly | Summer 2022
InvestingThrough a Bear Market
experienced one of the deepest plunges in history, with almost twenty-two million people laid off. The significant government stimulus packages have contributed to one of the fastest job recoveries, but may also have significantly contributed to the excess liquidity and strong consumer demand. This along with wage growth pressures are adding to the burden that the Federal Reserve now faces to get inflation back under control. The Federal Reserve Open Market Committee (FOMC) has begun the arduous process of raising the short-term Fed Funds interest rate to slow the current economy without stalling it. Some would say the FOMC is already late and perhaps should have been raising interest rates during 2021, following the historic lows in interest rates during 2020. Since that time, the bond market has been raising rates across the yield curve. The bellwether 10-year Treasury yield, which briefly hit 0.50% in August of 2020, is now hovering around 3% and has recently been as high as 3.5%. After their first two meetings of the FOMC this year, the Fed Funds rate has been increased by 1.00%. The FOMC is now forecasting that they will continue to be aggressively raising this rate, with a target of 3.5% by the end the year. Investors looking for the contrary indicators in this information should focus on the fact that the bond market had already anticipated that the FOMC was going to be more aggressive then the FOMC had earlier projected. The markets had already factored this into bond prices which is why some rates along the yield curve fell slightly on the news of the FOMC’s more aggressive stance. In addition, the bond market is also projecting that inflation is likely to become tamer in the near future. If bond investors were concerned about inflation for an extended period, interest rates
would not be hovering around 3% when inflation is currently above 8%. For bond investors concerned about the impact of inflation and rising interest rates on the economy, they should consider increasing their exposure to higher quality bonds and shortening the average maturity (duration) of their bond portfolio. For investors in the stock market, the valuation correction has hit the previously high-flying growth stocks quite hard, as their future cash flows are discounted back to current values using higher interest rates which equate to lower current prices. Generally ignored for the past dozen years, value stocks may offer better exposure to defensive sectors like consumer durables, energy, health care, and dividend paying stocks which may be less susceptible to a slowing economy and rising interest rates. Successful long-term investors have learned through the many cycles of the markets and the economy that the best strategy is to remain invested. They review their risk profile and confirm that their current allocation aligns with their long- term investment objectives. They also look to take advantage of the markets when they are trading at lower prices by rebalancing and putting to work any cash that remains on the sidelines. The best way forward may be straight through the bear market. Talk to your advisor if you have any questions.
Written and prepared by: Robert Janson, CIMA®, AIF® Senior Vice President, Senior Portfolio Manager, Wealth Services
Now that the S&P 500 Index has dropped more than 20% from its recent high point on January 3rd, the stock market has entered bear market territory. What makes this year especially difficult is that the bond market is having its worst downturn since at least 1976. During most drops in the stock market, the bond market usually provides some measure of stability. For only the third time since World War II, the stock and the bond market are both falling at the same time. The primary cause for this double hit is the same – rising interest rates. The cause for rising interest rates is the persistent inflation. For long-term investors, there are few safe havens from the current volatility. As successful investors have learned over the years, the best way forward may be straight through the bear market. There have been fourteen bear markets since World War II. The most severe was the Great Financial Crisis in 2008-2009 and the fastest bear market was the downturn in 2020 during the Covid-19 shutdown. The average bear market lasts about 15 months and average decline is about 32%. All bear markets are financially painful to experience and can be difficult to maneuver without a good strategy in place. The most important thing to remember about bear markets is that they eventually turn into bull markets again. Bull markets last much
longer than bear markets and have always resulted in long-term growth for investors who can withstand the short-term volatility. The start of the next bull market usually occurs when the current bear market conditions look the worst and the prospects for recovery appear the bleakest. One potential indicator of a contrary bullish signal for the markets is the Consumer Sentiment Index. This Index is a product of the monthly survey of consumers conducted by the University of Michigan since 1970. Currently, the level of this index is at its all-time low. Every other time this index hit an intra-cycle low, the stock market was higher by a minimum of 14% and an average of 24% over the next 12 months. Obviously, past performance is no guarantee of future results. The biggest factor contributing to the current negative consumer sentiment is the persistent inflation. Initially, the run-up of inflation was caused by the rapid recovery following the Covid-19 shutdown when consumer demand outstripped the ability for manufacturers to keep up with supply. The supply issues have continued with the Russian invasion of Ukraine and the Covid-Zero policy in China. However, the primary catalyst for the current inflation challenge turning from a “transitory” issue to a persistent one has been the very tight labor markets. Recently, the number of jobs available was almost double the number of people actively looking for a job. During the Covid-19 shutdown in 2020, job market had
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Personal Finance Quarterly | Summer 2022
Seasonal Spotlight
Vegetable-based protein options Everyone has different dietary restrictions and preferences, including meat consumption. A great way to ensure that everyone is guests are happy at the BBQ this summer is to consider adding some plant- based proteins to your menu. Not only will this add some variety, but meat alternatives can be just as delicious as traditional meat options—and healthier, too! A few recipe suggestions include: Veggies hot dogs/ sausages, grilled eggplant, portobello mushroom sliders, and grilled There’s nothing better on a hot summer day than a glass of something chilled and refreshing. A nice way to switch up your beverage options is to make infused water. There are countless flavors and combinations that you could infuse your water with, but here are a few ideas to get the ball rolling: Grapefruit and rosemary; strawberry and orange; blueberry, mint, and lemon; and lime, strawberry, and cucumber Switch up what’s on the grill There are a few staples that always seem to make their way onto the grill at most summer BBQ’s, like hamburgers, hotdogs, and ribs. However, it’s nice to switch things up every once in a while! Here are a few options to consider next time you light up the grill: Shrimp skewers, chicken wings, salmon, rack of lamb, lobster tail, pork belly, or even grilled pizza. Choose a theme halloumi kebabs. Infused Water Theming your summer BBQ is a great way to make the occasion a little more special and provides a base for your menu choices and whatever décor you decide to use. It doesn’t need to be over the top – think about choosing a specific color, season, or country for your chosen cuisine and add small décor touches. Happy socializing! Sources: https://www.wholefoodsmarket.com/tips-and-ideas/summer/summer-produce-guide; https://www.everydayhealth.com/diet-nutrition/faux- meat-bbq-recipes-for-your-plant-based-diet/; https://littlespicejar.com/5-infused-waters/; https://sharpaspirant.com/summer-bbq-recipes/
Not Your Average Summer BBQ
When you think of a summer BBQ, a couple of things immediately come to mind: hot dogs, corn on the cob, backyard games, etc. While loved by many, these elements can get a little redundant, and there’s no shame in admitting that it’d be nice to add some variety to the classic BBQ lineup. Whether you find yourself in the position of hosting or attending, as we head into the summer of 2022, let’s step up our summer BBQ game. Here are a few tips and ideas to spice things up at the next summer BBQ. Take advantage of in-season produce There are a number of benefits to highlighting in- season produce in your recipes, namely that they are fresher and tastier. When fruits and vegetables are naturally harvested at the right time, they are also more nutritious. A quick tip is to check out your local farmers’ market. This is a great way to find a wide selection of in- season produce! Here are some fruits and vegetables that are in- season during the summer months: Berries, cherries, summer squashes, corn, cantaloupe and honeydew melons, stone fruits, tomatoes, watermelons, and okra.
Personal Finance Quarterly | Summer 2022
DISCLOSURE:
Investing Through a Bear Market 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.
“Alera Group Wealth Services” is a brand name utilized by Alera Group, Inc and certain subsidiaries and affiliates (collectively “Alera”).
Advisory Services offered through Alera Investment Advisors, LLC. Information provided by Alera should not be considered tax or legal advice. Should you require tax or legal information, please consult your tax advisor or attorney.
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