From rebate checks to small business support, there is quite a bit packed into the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law on Friday. The $2+ trillion emergency fiscal stimulus package is intended to mitigate some of the economic effects caused by the COVID-19 outbreak.

We have all been working to gain an understanding of the law so that we can act as a resource for our friends and family looking to take advantage of the applicable provisions. We have been reading numerous articles, participating in webcasts hosted by industry experts and large accounting firms, and talking with banks to understand the process for various provisions. New information is still coming out daily, but please do not hesitate to use us as a resource as we work through this pandemic.

Here is a look at some of the key provisions in the CARES Act that may be of interest to you:

1. A check – Based on income and family makeup, most Americans can expect to receive $1,200 individually ($2,400 for joint filers) and $500 per dependent. Amounts phase out for those who reported adjusted gross incomes over $75,000 for individuals and $150,000 for joint filers in 2018 or
2. A buffer – The CARES Act eliminates the 10% early withdrawal penalty for coronavirus-related distributions from retirement accounts. Withdrawn amounts can be repaid to the plan over the next three years. In addition, required minimum distributions (RMDs) are waived for 2020. Investors who have already taken an RMD for 2020 have options that may include returning the amount or rolling it over, as long as the distribution was not made from a beneficiary
3. Support for small businesses – In the form of more than $350 billion, including forgivable loans (up to $10 million) to help keep the business afloat, a paycheck protection plan and
4. Expanded unemployment benefits – Unlimited funding to provide workers laid off due to COVID-19 an additional $600 a week, in addition to state benefits for up to four months. This includes relief for self-employed individuals, furloughed employees and gig economy workers who have lost work during the
5. Fortified healthcare – $100 billion is allocated to hospitals and other health providers to help offset costs and provide relief. In addition, the legislation provides funding for numerous other areas including state and local COVID-19 response measures, an increase to the national stockpile for medicine, protective equipment, medical supplies and additional FEMA disaster relief
6. Enhanced education – $30 billion to bolster state education and school funding, as well as the deferral of federal student loan payments through the end of September.

What’s next? Treasury Secretary Steven Mnuchin has targeted early April to deliver the funds. Discussions are starting in D.C. around a possible next phase of economic relief, although it’s just talk for now.

We’ll continue to keep you updated with relevant and timely information. In the meantime, please don’t hesitate to reach out. These are difficult times in which we are living, but we are confident that we will get through them together.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Confluence Financial Partners is not a registered broker/dealer, and is independent of Raymond James Financial Services. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. Investing involves risk, and investors may incur a profit or a loss. Some expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance that any of the forecasts mentioned will occur. Economic and market conditions are subject to change.  Some of the material was prepared by Raymond James for use by its advisors.

We are happy to announce Confluence Financial Partners has been named as one of Pittsburgh’s Best Places to Work by The Pittsburgh Business Times.

Click Here to see article: Best Places to Work!

The 2019 Best Places to Work in Western Pennsylvania honors the region’s most outstanding workplaces. Winners are selected based on an online employee survey in June of this year and are honored at an event and in a special section of the paper. You must have at least 10 employees working in western Pennsylvania to participate. (Anyone with 5 percent or more ownership in the company may not participate in the survey and does not count toward the final employee total.) Companies do not have to be based in western Pennsylvania. Only employees working in the region are included in the survey and results.

Month in Review

• Major stock indices broke a two-month streak of gains, with all major indices finishing down for the month.
• Growth companies regained favor after two months of value and small cap companies leading the market.
• Bond prices declined due to rising interest rates.

Insight on Inflation

Despite the market volatility, evidence from July’s inflation report suggests progress towards a “soft landing” scenario, where inflation is gradually decreasing, and the economy avoids a recession. In July, headline inflation was at +3.3%, year-over-year, down from its peak of 9.1% in June 2022. Unlike June 2022, supply chains and goods have largely normalized, with wages and services being the key drivers of inflation today.

Source: BLS, FactSet, J.P. Morgan Asset Management. CPI used is CPI-U and values shown are % change vs. one year ago. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed-weight basket used in CPI calculations.  Guide to the Markets – U.S. Data are as of August 31, 2023.

Social Security, started in the 1930s as a part of FDR’s New Deal, has been under fire since I can remember. All the while, the program has been helping fund the retirement of some 47 million Americans, with another 19 million on survivor or disability benefits. What started out as a way to ensure elderly Americans had some form of income has turned into a major piece of the US economy.

As we help our younger clients plan for retirement, we often hear, “Let’s not plan on Social Security, I don’t think it will be there by the time I retire.” While we understand where this attitude is coming from, we don’t think it reflects reality.

Here’s why:

• Social Security is funded by a separate payroll tax (FICA) that comes out of paychecks up until an individual reaches $160,200 in earned income (2023). That means, that for the first $160,200 each earner makes, 6.2% goes to Social Security, with another 6.2% coming from the employer.
• That’s a total of $19,864 that goes to Social Security for someone who earns $160,200.
• These amounts are then paid out directly to retirees, survivors, and disabled individuals.

As long as there are people working in the United States, there will be money going into, and then out of Social Security.

“But what about the trust fund?”

• As discussed above, Social Security is funded directly from payroll taxes. Up until very recently, the ratio of working to non-working Americans had been high enough that Social Security benefits were fully funded each year.
• However, as Baby Boomers retire and birthrates continue to decline, this is changing. If payroll taxes are not enough to current obligations, the difference is paid by the asset reserves in the Social Security trust fund. As more and more workers retire, the trust fund is expected to be depleted.

By the most recent estimates, the trust fund assets will be spent down by 2034. At that point, Social Security would officially be insolvent.

“That’s what I mean! Once Social Security is insolvent, I won’t get any benefits!”

But what does insolvency actually mean?

• Assuming no legislation is passed to shore up the program, all benefits will be cut to about 79% of what they are today.
• 79% is not 0%. Far from it, in fact, 79% is still solid amount of guaranteed income that the younger generation can plan on as a piece of their overall retirement picture.

“That’s it? That doesn’t sound as bad as what I’ve read in the news.”

No, it doesn’t. For younger workers who have plenty of time to factor such a possibility in their long-term planning, the potential reduction would not be life changing. A relatively modest increase to retirement savings would make up for the potential shortfall.

In reality, Congress will be forced to act, there will likely be changes to Social Security at some point. These changes will probably make sure that current benefits are not cut, and that Americans with no time to adjust will not have the rug pulled out from under them. For younger Americans, the fact remains that as long as we have workers and payroll taxes, Social Security will be there in one way or another.

Disclaimer: This analysis could certainly change pending action by Congress. We are in no way trying to predict the future, but we believe this analysis is reasonable based on the current landscape.

Month in Review

• Stocks fell during the month of October, marking the third straight monthly decline for the S&P 500 Index.
• Bond markets also fell again during the month, the fifth straight monthly decline for the asset class.
• Concerns over US government funding helped keep interest rates higher in October, pressuring stock and bond markets again.
• US corporate earnings season is also in full swing, with over 50% of the S&P 500 having reported by the end of the month. Companies have thus far reported positive earnings growth with mixed outlooks.

If you were gone tomorrow, would your family be financially OK?

That is a jarring question, and one that most of us try to avoid.

As difficult as this scenario is to consider, however, we owe it to ourselves and our loved ones to be able to answer the question with certainty.

Below are some points to consider:

• Estate Plan
  • Do you have up to date wills, trusts, and other applicable documents? Have you gone through the documents in the past 5 years? What has changed since they were written? Is it time for an update?
  • Does your estate plan help and encourage family collaboration while safeguarding relationships? Many a family has been torn apart by disputes regarding an inheritance.
• Life Insurance
  • Do you have life insurance in place? Is it enough so that your spouse and children would not have to worry about money when you are gone?
  • We can’t control very much in this situation, but we can control the windfall that our dependents would receive if we die unexpectedly.
• Communication
  • Do your loved ones know the structure of your estate plan? Do they know what your expectations are for the money? If you have young children, this may be a conversation to have with your spouse and the person who would be the legal guardian for your children. If you have adult children, this could be a family meeting where the plan is fleshed out in more detail.
  • Studies show that aging parents have a difficult time bringing up finances with their children. This is understandable, but it needs to happen at some point. Your adult children can handle it, and the risks of them knowing how much money the family has pale in comparison to the burden that an unexpected inheritance can be.
• The Things No One Thinks About
  • Passwords, document locations, lock boxes, safe combinations, utilities, iPhone lock codes, and anything else that your loved ones would need.
  • If you knew you weren’t going to wake up tomorrow, what information would your loved ones need to handle everything? Consider a tool like everplans to help with this.
• Trusted Person
  • Is there someone in your life whom trust to be there for your family if something happens to you? We work with many clients who view us as that person who they trust to be across the table from their spouse should this situation arise. We are often one of the first calls that is made, because we know where everything is and we’ve helped clients through this before.

So, we ask again.

If you were gone tomorrow, would your family be financially ok?

If you aren’t sure, take time to reflect. We at Confluence Financial Partners have been helping clients answer that question in the affirmative for decades, and we would be honored to be able to help you as well. We know this isn’t a pleasant thing to work through, but it’s worth it, and you owe it to those you love.

As enthusiasts and collectors approach the later stages of their lives, the act of collecting takes on new dimensions. Some may be content to sell their collection and pass the proceeds on to heirs, but for others the treasures that have been amassed over the years are now an opportunity to leave a legacy that will continue to endure.

Here are four considerations to help navigate this phase of your collecting journey:

1. Legacy Planning and Succession Strategy

If you haven’t already, start to incorporate your collection into your broader estate plan. Decide how your treasures will be managed, preserved, or passed on. Engage with experts who specialize in collectibles and estate management, particularly those well-versed in the tax implications of transferring collections.

Consider which heirs will receive each item and why, taking into account their emotional significance and potential for instilling responsibility. If you aim to establish a philanthropic legacy, donating to a museum or organization aligned with your mission not only offers tax benefits but also ensures parts of your collection remain together.

2. Balancing Emotional and Financial Value

While financial considerations have likely played a role in your collecting journey, the emotional value of your treasures becomes increasingly significant as you near this phase. Embrace the joy and memories your collection evokes. If the next chapter is one that doesn’t fetch your estate the highest possible payout or the most optimal tax deduction, that can be OK if the destination fulfills your wishes and maximizes the emotional component of the transition.

3. Philanthropy & Impact

Consider the broader impact your collection can have. Some individuals opt for philanthropic endeavors that align with the themes of their collection. For example, a collector of classic cars may choose to donate his or her collection to an automobile museum that will display the vehicles and allow them to continue to provide joy for many. Donating items, contributing proceeds to charitable causes, or establishing cultural endowments can solidify your legacy as one that extends beyond material possessions.

4. Don’t Forget Logistics

Once you’ve established a robust plan for your collection, it’s crucial to have capable individuals ready to carry it out. For vehicles, consider arranging for an appraisal in advance or identify a trusted appraiser to guide those handling your estate. If you anticipate liquidating a coin collection after your passing, take the initiative to identify a reputable precious metals dealer beforehand. By personally selecting the third parties involved, you can alleviate the executor’s potential challenges in managing and distributing your collection.

As your collecting journey matures, it evolves into a narrative of legacy and stewardship. It’s important to recognize that your collection signifies not just an investment, but a testament to the diverse experiences of your life. Take the necessary time and consider that at Confluence Financial Partners, we’re here to help. Collaborating with the right professionals can help ease the burden and ensure both your life and legacy are maximized.

Month in Review

• Stock and bond markets extended their rally in December, capping off a strong fourth quarter with broad-based gains. Value stocks and US small cap stocks led equity markets higher during the month.
• Major US bond markets finished in positive territory, preventing what would have been a record-breaking third consecutive calendar year loss.
• The continued decline in inflationary data and increased likelihood of a rate cut by the Federal Reserve were key catalysts for markets during the month.

Narrow Market Leadership

The S&P 500 and growth stocks benefitted from continued strong results from technology companies during 2023. The outsized results of these companies pushed their valuations even higher, with Apple finishing the year as roughly 7% of the S&P 500’s value. This is the largest single weighting in the last 30-years and follows three previous years where Apple represented at least 6% of the S&P 500’s market capitalization. While Apple and six other companies were responsible for the lion’s share of the US stock market’s results in 2023, there are opportunities for broader participation as we head into 2024.

Source: FactSet and Goldman Sachs Asset Management. As of December 31, 2023.

$96 Trillion is going to pass from one generation to the next over the coming 30 years.

This is either going to go smoothly or poorly, and much of that answer will come down to estate planning.

Your estate plan is a crucial aspect of securing your family’s future, and communicating this wealth plan effectively to your children is perhaps even more important.

Here are 4 key strategies to help ensure your heirs are ready:

1. Talk About It

This might seem basic, but start the conversation early. Don’t wait for a crisis to discuss your estate plan. Start the conversation with your children while everyone is in good health and spirits. Choose a suitable time and place for the discussion, ensuring minimal distractions. This will allow your children to focus on the important matters at hand without feeling rushed or pressured.

• Clarify Roles and Responsibilities

Clearly communicate who will be responsible for executing your wishes and managing your affairs if you are unable to do so. If your adult children will be filling these roles, tell them. Don’t assume that your oldest child will understand why you made your middle child the executor. Explain your decisions and choices so that when the time comes there won’t be any confusion or hurt feelings.  

• Educate Your Heirs on the Structure of Your Estate Plan

You don’t have to share all of the details right away, but make a plan for bringing in the next generation into your financial picture. These discussions are difficult to begin in most households, but at some point you should consider letting your adult children know what you have and how all of it will be transferred. Eventually you should share detailed information about your assets, including properties, investments, and savings. Do you have a financial plan with your financial advisor? It would be wise to share it with your children.

When in doubt, over communicate. You would be amazed at the disagreements that will come up after you are gone, many of which are due to a lack of direction and clarity on your part. Don’t assume your children will know what to do. Spell it out for them.

• Address Potential Concerns and Questions

You don’t have to share all of the details right away, but make a plan for bringing in the next generation into your financial picture. These discussions are difficult to begin in most households, but at some point you should consider letting your adult children know what you have and how all of it will be transferred. Eventually you should share detailed information about your assets, including properties, investments, and savings. Do you have a financial plan with your financial advisor? It would be wise to share it with your children.

When in doubt, over communicate. You would be amazed at the disagreements that will come up after you are gone, many of which are due to a lack of direction and clarity on your part. Don’t assume your children will know what to do. Spell it out for them.

Nobody likes to have these conversations, but they are important. We often talk at Confluence about helping our clients maximize their legacies, and typically children are the most important part of a legacy. We are here to help you facilitate meaningful conversations with the next generation that help you ensure your wealth impacts future generations positively. Don’t wait, the time to communicate is now.