Financing Your Future – Excerpt From The Financial Shepherd

Because we are close to another election, we must address some common concerns people have about its impact on the market. People believe the market is at a crossroads during an election year for various reasons. Its final destination won’t be known until we know who will run the country. Given how much the media can fuel these concerns, it’s straightforward to get caught up in this narrative that there’s a potential collapse around the corner. As financial advisors, we see people make hasty decisions because of these emotions. 

We want you to understand how previous elections have impacted the market to give you peace of mind and clarity. We go through this every four years. Stop worrying about the future and rely on the past. Ask yourself whether history supports the notion that elections have significantly disrupted markets. 

Market Performance in Election Years

One of the most persistent myths is that the stock market performs poorly during election years. The assumption is that the uncertainty surrounding elections leads to weaker market returns. On the surface, it does make sense—which is why it is such an easy myth to get pulled into. However, historical data doesn’t back this. If you look at how the S&P 500 has performed since 1928, the average return during election years is 7.5%. 

The average return in non-election years is 8.0%. So, yes, there is a slight drop, but it does show that the dropoff isn’t as significant as people think. A closer look reveals that while volatility can be higher in election years, this volatility won’t necessarily lead to adverse outcomes if you invest over the long term.  

For example, while the average election year since 1980 has seen an intra-year drawdown of about 17%, markets have often recovered once election results are finalized. Additionally, economic fundamentals drive market returns, which remain stable or improve despite political uncertainty. This demonstrates that the stock market’s resilience often overrides the temporary fluctuations that might occur during an election year.

The Impact of Election Results on the Market

Another widespread belief is that markets will crash if a particular candidate wins. This idea is often fueled by the emotions and uncertainty that elections bring. However, historical trends show that the market’s response to election outcomes is unpredictable. Looking back at previous elections, market movements are more closely tied to the broader economic environment than to who wins the election. For example, during the 2008 election, the market was more influenced by the unfolding Global Financial Crisis than by the candidates’ policies.

Similarly, in 2020, the COVID-19 pandemic had a far more significant impact on the market than the election itself. The data does not support the belief that the Federal Reserve avoids changing monetary policy during election years. The Fed has historically adjusted interest rates based on economic needs, regardless of the political calendar. For instance, since the 1950s, only in 2012 did the Fed refrain from raising or lowering rates during an election year. This shows that economic conditions, not political considerations, guide monetary policy decisions. After election results are announced and uncertainty fades, markets often rally. This pattern has been observed in many election years, indicating that the fear of a market crash tied directly to election outcomes is largely unfounded.

Focus On the Long Term & Work With Us 

Worrying about market fluctuations in an election year is understandable, but history shows these concerns are often overblown. The market tends to remain stable, with performance more influenced by economic factors than the election. If you are concerned about how the upcoming election could impact your investments, schedule a meeting with our team at Worth Advisors. We can help you create a financial plan focusing on long-term goals rather than short-term election cycles.

Disclaimer: Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation to sell or purchase any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, which, when sold, may be worth less or more than their original cost.

When thinking about wealth, it’s natural to consider personal finance, investments, and retirement. But have you thought about the legacy you want to leave behind? What steps can you take to create and preserve wealth for your loved ones? According to Trust & Will, creating and preserving multigenerational family wealth involves careful planning and education. Legacy and family are inherent parts of wealth planning, and taking steps now can ensure your hard-earned wealth benefits future generations. Multigenerational wealth planning isn’t just about amassing wealth but sustaining it across generations.

According to Forbes, 90% of wealthy families lose their wealth within three generations. This loss often results from poor decisions by heirs and a lack of estate planning, which can lead to significant taxes and probate costs. Even if you successfully build wealth, maintaining it over generations is challenging. Protecting and preserving wealth is as important as creating it. Here’s how you can start planning for multigenerational wealth.

Educating the Younger Generation

Financial education is crucial. According to NBC News, one in four U.S. adults says their parents didn’t teach them about money. Schools also lack financial literacy education, though some are starting to address this gap. Early on, teaching children about money management helps them develop strong financial habits. Discuss basic principles like giving, saving, and spending. This early education increases the likelihood that your heirs will manage their inheritances responsibly, protecting family wealth for years. There are several finance books that teenagers can use to help educate themselves about money:

• The Teen’s Guide to Personal Finance: Basic Concepts in Personal Finance that Every Teen Should Know by Joshua Holmberg and David Bruzzese
• I Want More Pizza: Real World Money Skills For High School, College, And Beyond by Steve Burkholder 
• Smart Money Smart Kids: Raising the Next Generation to Win with Money by Dave Ramsey and Rachel Cruze
• The 7 Habits of Highly Effective Teens by Sean Covey
• Rich Dad Poor Dad for Teens: The Secrets About Money – That You Don’t Learn in School! by Robert T. Kiyosaki –

Teaching children basic money principles in a safe environment helps them develop strong financial habits for adulthood. This practice enhances the likelihood of preserving your family’s wealth across generations. You can start by teaching your children about budgeting, saving, and the value of money. Including them in age-appropriate family financial discussions can provide practical learning experiences reinforcing these concepts.

Fostering Financial Transparency

Open discussions about money are essential. Many families avoid talking about finances, considering it taboo. This silence can be harmful because younger generations won’t understand the importance of financial planning. Hold family meetings to discuss financial values and estate plans. This transparency helps ensure everyone understands and supports the family’s financial goals.

Fostering financial transparency builds trust and ensures everyone is on the same page. Regular updates and open communication help keep all family members informed and aligned with the financial plan. By openly discussing financial matters, you can prevent misunderstandings and conflicts. This practice also prepares younger members to handle financial responsibilities confidently. Including all family members in financial planning discussions can make sure that the legacy you leave behind is honored and sustained.

Build & Shape A Legacy with Worth Advisors 

Planning for multigenerational wealth involves educating the younger generation and fostering open financial discussions. These steps help ensure your family’s wealth is preserved and responsibly managed across generations. Schedule a consultation with Worth Advisors today for personalized advice on creating a comprehensive wealth plan tailored to your family’s needs. Together, we can build a strategy that supports your family’s financial legacy.

Disclaimer: Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation to sell or purchase any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, which, when sold, may be worth less or more than their original cost.

Selecting suitable income sources to fund your retirement planning is paramount. With this in mind,  annuities are an option for many retirees. They offer consistent payments throughout your life, which leads to financial stability in retirement. Such features make annuities a valuable component of retirement planning. 

They provide predictable income, which can be customized to align with your specific retirement needs and objectives. Annuities also ensure income continuity for a surviving spouse, offering financial security beyond the retiree’s life. Typically, you fund these annuities well before retirement, either making a one-time lump sum payment or spreading your contributions over several years. While annuities are often viewed as having upfront costs and penalties for early withdrawal, they offer a secure income stream for retirement.

Understanding Annuities 

An annuity is a contractual agreement with an insurance provider. You commit capital upfront, either all at once or over time and in exchange, you start receiving regular financial disbursements at a predetermined future date. This setup is particularly effective in mitigating the risk of depleting your retirement funds prematurely. Annuities come in two primary forms: immediate and deferred. Immediate annuities begin disbursing funds shortly after the initial investment, making them ideal for retirees needing immediate income. In contrast, deferred annuities delay payments until a future date, offering an opportunity for your investment to accrue value. 

The latter could lead to higher payouts. Integrating annuities with other retirement income, like Social Security or pensions, is crucial for a well-rounded retirement plan. Though annuities might carry sizable initial costs and penalties for early access, they are instrumental in ensuring a reliable income stream in retirement. Immediate annuities provide a financial safety net shortly after investment, whereas deferred annuities are a long-term economic strategy, allowing your funds to grow.

Fixed vs. Variable Annuities

Deciding between fixed and variable annuities depends on your financial goals and risk tolerance. Fixed annuities guarantee a specific payment amount, providing a dependable income stream and reducing uncertainty in your financial planning.

Conversely, variable annuities tie your returns to the performance of chosen investment options, such as stocks or bonds, which introduces a higher degree of risk but also a chance for increased gains. These are particularly useful in managing the impact of inflation. You should be familiar with the terms associated with your annuity, including any fees and potential charges for accessing funds prematurely. 

While fixed annuities appeal to those seeking financial stability, variable annuities might suit those willing to take on more risk for greater returns. Fees related to annuities can be significant, and they are an essential factor to consider when evaluating the suitability of this investment. Moreover, timing the annuity payouts to coordinate with your retirement plan ensures they meet your living expenses when needed. Fixed annuities provide security with known returns, while variable annuities offer growth potential tied to market performance. Navigating these options requires careful consideration of long-term financial goals and current market conditions.

Let Us Serve You

Planning for retirement involves comprehensive strategies and understanding all available financial instruments. Annuities, while complex, offer a structured way to secure a reliable income throughout retirement. If you’re contemplating including an annuity in your retirement portfolio, assessing how it fits your broader financial goals is vital.

Financial advisors provide tailored strategies to your unique situation. At Worth Advisors, we guide you through complex retirement planning choices, focusing on securing a prosperous and stable future. Contact us so we can help you build a resilient financial retirement plan.

Disclaimer: Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation to sell or purchase any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, which, when sold, may be worth less or more than their original cost.

Saving for your child’s education is more than just a financial goal; it’s about ensuring a bright and secure future for them. Education opens doors and opportunities; your role is to give your child the tools to succeed. However, with the rising cost of education, starting early and planning wisely has never been more important.

Ways to Fund Your Children’s Education 

It begins with understanding the options available for education funding. Savings accounts dedicated to education, such as the 529 plan, offer a way to invest in your child’s future. These plans are beneficial because they grow tax-free if the funds are used for qualified educational expenses. Starting early takes advantage of the power of compounding, allowing small, regular contributions to develop into a significant educational fund over time. 

Involving family members in contributing to these funds can bolster the savings, giving your child a robust financial start when they reach college age. Investing in a dedicated account from an early age supports your child’s educational aspirations and demonstrates the importance of planning and saving. Additionally, this approach allows for adjusting your financial strategies over time, ensuring you can react to changes in your financial situation or educational costs. Engaging in this planning process early on sets a solid foundation for your child’s future. You’re giving them a chance to have an education without the financial burdens that come with it.

The Added Benefits of Planning

A crucial benefit of early education planning is reducing the future financial burden on your child. The reality is that higher education comes with high costs, which often leads students to take on loans. The average current costs range from $10,000-$40,000 a year. (The lower end is for in-state public schools, and the higher number is for private schools.) Student loans burden your child with debt for many years after graduation. Early planning and saving minimizes or eliminates the need for such loans, freeing your child from the stress and financial strain of debt. You also teach your child valuable financial lessons by saving for their education. They learn the importance of saving, investing, and planning for the future. 

These lessons in financial responsibility and the value of education inspire them to work hard and achieve their dreams. A plan helps your child focus on their studies and career goals, knowing their educational expenses are covered. Planning and saving for education instills a sense of responsibility and appreciation for the value of education in your child, encouraging them to make the most of the opportunities it provides. It also allows them to enter adulthood with fewer financial burdens, giving them greater freedom in their career choices and future financial decisions. This thoughtful approach to education funding has a lasting impact, influencing their financial habits and decisions for the better.

You Deserve to Be Supported Too

We understand the importance of this journey and are here to guide you. Scheduling a consultation with us can give you the insights and strategies to make informed decisions about funding your child’s education. 

Disclaimer: Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, which, when sold, may be worth less or more than their original cost.