Fresno Financial Consultant: December 2020 Highlights

Fresno Financial Advisor News: How to Pull Out of a Decline: Lessons From the Last Recession

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Overview

According to the National Bureau of Economic Research, the Great Recession that began at the end of 2007 was considered the worst in U.S. history since the 1930s. That is, until the coronavirus hit our shores.

Some academics claim that the 2008 recession would have been much worse had Congress, the U.S. Treasury and the Federal Reserve not conducted a series of proactive measures.1 Because the recent economic decline is still ongoing — with containment of the virus nowhere in sight — it remains to be seen whether government actions will be enough.

Stimulus Checks

In the immediate aftermath of the Great Recession, Congress passed several important pieces of legislation in an effort to alleviate financial strain and jumpstart the economy. The first was the 2008 Troubled Assets Relief Program (TARP), also known as a $700 billion bank bailout. In 2009, Congress followed up with the Economic Stimulus Act, which sent out $14.2 billion in the form of $250 stimulus checks sent to Social Security and Supplemental Security Income recipients, as well as veterans and railroad retirees. The idea was that the more than 52 million beneficiaries would immediately spend the money, which would help jump-start the economy.2

That was basically discretionary income for retirees, but it did little to help workers who lost their jobs, their health care and, for many, their homes because they could no longer pay the rent or mortgage. While the bailout in the financial sector helped stabilize banks so that depositors could withdraw money, it did not stop lending institutions from foreclosing on homeowners or penalizing borrowers who could no longer make their auto or credit card payments.

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Fresno Retirement Consultant News: Employers: Lessons From the Pandemic

We’ve learned a lot about infectious diseases this year, as well as how to adapt our lifestyles in response to a pandemic. It will be interesting to see if and how U.S. businesses adjust their operational models to account for the potential for future pandemics or other catastrophic events.

According to the employment-population ratio, nearly half of the U.S. population was out of work (which includes those no longer actively looking for work), with economists predicting 30 million jobs must be created to return the ratio to its 2000 peak.1

If your household has suffered a job loss or reduced income and you need assistance with creating a budget, or if you’re just not sure about your future retirement income and want to create an income plan, please contact us. We’re happy to evaluate your financial circumstances and provide guidance.

Work-life balance was a problem before the pandemic, but now that issue is being experienced in another context. Many employees have been able to migrate seamlessly to working from home using software to stay connected with colleagues and clients. However, with children home from school and now responsible for online learning, work-life balance can be even more difficult.

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Fresno Retirement Advisor News: Americans and Their 401(k)s

A recent survey found that working households experiencing financial strain due to the pandemic have not been inclined to make withdrawals from their 401(k)s to help make ends meet. In fact, the vast majority haven’t even changed their rate of contributions. Instead, these households are relying on the “old standbys” of surviving during economic decline: Reduced spending, using savings or an emergency fund, and maxing out credit cards.1

A reduction in spending shouldn’t be that difficult in the wake of today’s pandemic. After all, many people have cancelled vacations, no longer commute to work, and don’t spend nearly as much money going out to eat or for other entertainment activities. Some folks are even keeping their college students out of school for a semester or two, or at least taking the online route and saving on room and board. For those who remain employed, it’s actually a good time to increase savings.2

The coronavirus pandemic offers an ideal scenario to demonstrate the importance of diversifying retirement savings accounts. While some workers may defer as much salary as they can into a 401(k) to help reduce their current income taxes, others may spread those contributions over a work retirement plan and an IRA. There are a couple of strong reasons to consider including a Roth IRA in the mix. While Roth contributions do not offer a current tax deduction, remember that there are no tax consequences when you withdraw the money. Those funds have the opportunity to grow tax-free, and you’re free to tap your contributions without penalty when needed to supplement household income. However, keep in mind that you should consult with a qualified professional before taking any withdrawals from your retirement assets.

It’s also strategically key right now as income taxes are historically low. The income taxes you currently pay on Roth contributions now could be less than what you’ll have to pay on 401(k) distributions in the future. If you’d like to discuss ways to help maximize your retirement savings — including financial vehicles that allow for tax diversification and emergency funds for situations like pandemics — give us a call. We can tailor recommendations for your situation.

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Our firm is not affiliated with the U.S. government or any governmental agency.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc are not affiliated companies. California Insurance License # OK48173

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. Investing involves risk, including possible loss of principal. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Diversification cannot ensure a profit or guarantee against losses in a declining market. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 722736 – 9/20