"To conquer fear is the beginning of wisdom.”
Bertrand Russell
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- Letter from Bryan: The Limited Utility of Forecasts
- IRS Says You Can Return 2020 RMDs
- COVID-19 Status Reminder
- Fed Workers Should Review "Unpaid Comp" Form
- Reminder: Tax Returns (and Payments) Due July 15
- The Ruby Project: Year 2 1/2
- Fall HCC (Online) Courses
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The Limited Utility of Forecasts
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At this time of year when the temperature rises, so does my interest in the weather. Whenever an unexpected thunderstorm comes roaring through our town, I am reminded of nature's power and its inherent unpredictability. Sure, we can look at our iPhone or computer to see where the storm is heading in the next few minutes. I have found, however, that beyond 24-48 hours, the weather forecasts are inherently unreliable. But from a longer-term perspective, we can count on the comforting familiarity of seasonal cycles and plan around that. In other words, we do not know if it's going to rain next Tuesday afternoon. But we do know that it will (mostly) be colder in December than it is in July; thus, we can with some assurance put our heavy coats in storage this time of year, and dredge up our shorts from the bottom of the drawer.
It is good to keep these principles in mind both when figuring out what to wear and in making financial decisions. Rather than concentrating on what is basically unknowable—the weather next week—we should focus on the long-term climate. And in investing, we cannot know—no one knows—what will happen in the short term. But history provides a very good guide of the behavior of markets over the long term.
The weather-like unpredictability of the investment markets was never in greater display than in recent months. On February 19, the Standard & Poor's 500-Stock Index reached a new all time high. Over the next 16 weeks the market in the words of investment writer Nick Murray, was "gripped suddenly by the exogenous variable from hell--the COVID-19 virus." The market then proceeded to fall 34% in 33 days, the worst decline in that short a time frame in history. All of this was utterly unpredictable.
As was what followed. That nauseating decline was immediately followed by the best 50 days in the history of the American stock market.
Focusing on the short term investment news and forecasts—like getting addicted to the weather channel—is not a recipe for serenity or for making good long-term decisions. In light of the remarkable swings in the market, the fear created by the pandemic and its economic ramifications, and the many other variables that threaten to distract us from our long-term plans, this may be a good time to review some of our basic investment principles, namely:
- We believe that all lastingly successful investing is essentially goal-focused and planning-driven. All failed investing is market-focused and event-driven.
- Truly successful investors act continuously on a long-term plan. Every failed investor reacts to sudden and terrifying market shocks.
- Long-term investing success is only incidentally a function of the economy and the markets. It is a direct function of how the investor reacts--or, more properly, how he/she refuses to react.
- To be successful we must be long-term, goal-focused investors, acting on our plan with patience and discipline.
- I continue to believe that the markets can't be consistently forecast, much less timed, and that the best way of achieving our investment goals is to sit through the markets' occasionally steep but historically temporary declines.
In other areas of our financial life as well we cannot possibly know what will happen in the short term (a world-shaking pandemic?), but we can use basic principles to help protect us and our families from the unknown and unknowable. We must plan for good times and bad. That's one reason it makes sense, for example, to keep cash reserves for "a rainy day".
Whether it's sitting in our well-built, screened-in porch enjoying the refreshing mist from a violent storm, or sticking with our investment portfolio during a market downturn because we have planned properly, with a long-term focus we can ride out together even the roughest weather.
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IRS Says You Can Return 2020 RMDs
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As we've discussed previously, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, among other relief provisions, suspended Required Minimum Distributions ("RMDs") for 2020. Because the Act wasn't signed into law until March 27 of this year, however, some people had already taken RMDs before the CARES Act relief was available.
In some cases, individuals could put those RMDs back into their IRAs after the CARES Act was signed. But the rules are complicated and not all RMDs could have been returned. To remedy the situation, the IRS has issued Notice 2020-51, giving individuals until August 31, 2020 to return all of the RMDs back into their IRA or other retirement plan.
If you took an RMD this year and feel you don't need it it for cash flow purposes and would prefer not to pay the resulting taxes, contact your advisor or tax professional to discuss your options.
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The Kelly Group continues to work mainly from home, but maintains a bit of a "skeleton crew" at our 48 East Gordon Street location. We will continue to update you as matters progress. Please be aware that our primary concern will also be the health and safety of our clients and employees. Meanwhile, we are servicing our clients as thoroughly and diligently as ever and remain completely accessible through virtual means.
For now, as a reminder, the following conditions still apply:
- Client meetings by telephone/screen share. Until further notice, we are scheduling all meetings to be held remotely. For those clients with computers and access to internet, we will be able to share graphics and run through our financial planning software and other programs just as we do in person. Otherwise, we can simply talk by phone.
- Limited in-office staff. Our cloud-based platform and phone system allows us to safely access our database and to forward phone calls from our office to our home. We will continue to be reachable by our office phone—410-893-0560—and our usual email addresses.
- Electronic paperwork. Our current technology allows us to process most paperwork—including obtaining signatures—electronically. Paperwork that cannot be done electronically and is not urgent can be processed by snail mail.
Meanwhile, we are finding there are advantages of working from home, such as spending more time with our family members, including those with four legs. For example, Jodi Davis and her husband Mark are experiencing the joys (and occasional distractions) of two new miniature dachshund puppies. The 10-week old sisters pictured here are Sophie (the flying dog) and Sadie.
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If you have any questions regarding our current logistics, or how Sadie and Sophie are getting along, please let us know. Be Healthy and Safe. And continue to remember that, with help from our furry friends, we will get to the other side of this!
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Fed Workers Should Review "Unpaid Comp" Form
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An important part of any estate plan is an annual review of beneficiary designations. Changes in family circumstances can make some designations no longer appropriate. In this regard, we have run into situations with federal employees regarding a form signed when they first come on board that is often forgotten. This is Form SF-1152, which designates the beneficiary for "unpaid compensation." That is, if the federal employee dies while still employed, the form designates who receives such benefits as final pay and accrued annual leave. If the federal employee after filling out the form experienced a change in circumstances, such as a new marriage or divorce, it is imperative that the designation be reviewed. For questions about this form or other issues regarding federal employee benefits, please contact The Kelly Group.
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Reminder: Tax Returns (and Payments) Due July 15
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Due to the COVID-19 pandemic, the IRS in March extended the filing deadline for 2019 federal personal income tax returns from April 15 to July 15. In addition, the deadlines for payment of tax due and estimated payments for the first and second quarters of 2020 were extended to July 15. As a reminder, if you took advantage of that relief, make sure you comply with the new deadline. For questions, consult your tax professional.
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The Ruby Project: Year 2
1/2
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By Chad Arrington
Staying at home during this pandemic has its ups and downs, but I have found that this situation has provided much time to reflect on what is most important to me and my family and what I am most thankful for.
From the time Ruby was born on Oct. 10, 2017, Bryan has asked me to provide in some of our client communications a periodic "progress report". I guess "The Ruby Project" helps embody the importance we all place on our children, our family, and the role each of us serves in mentoring our community's future leaders. With twins Harper and Ava (14 months) having joined Ruby, this 'project" is the epitome of a "labor of love".
And it's certainly the best thing about working from home. With the quality time I'm spending with my wife, Daria, and our little girls, I realize how fortunate I am to have them in my life. In addition, Daria and I have more opportunity to serve as good role models for Ruby, Harper, and Ava. In fact, we find that we need to be very careful in setting an example because they take in everything and repeat what we do and say!
I'm also finding other upsides to working from home, such as:
- Spending more time outside and enjoying the simple things such as nature.
- More FaceTime/video chat with family and friends to stay in touch and allow our girls to interact with other people. I wish we would have done this more before the pandemic, but we are very grateful for modern technology during this time. We also try to reach out to friends and loved ones who may appreciate hearing a friendly voice.
- Staying at home more helps me realize what things I have taken for granted all along, or what activities and hobbies I miss the most.
- Taking time to reflect on my personal financial planning and taking time to talk with my wife about it. This includes:
- Revisiting and re-prioritizing short, intermediate, and long-term goals. Thinking about what we want to do once it is safe to do so (e.g. visit family, vacation, etc.).
- Reviewing our current expenses and prioritizing which expenses to continue paying vs. expenses that can be reduced or eliminated. Also, making the most of dollars that are not being spent on travel or other typical expenses due to staying at home to go toward emergency cash savings, paying down debt, or funding other planned expenses.
- Reviewing our finances and understanding if I have enough life insurance and disability insurance to protect my family if something happens to me.
- Making sure our Wills, Financial Powers of Attorney, and Advance Medical Directives accurately reflect our wishes if something happens to Daria, me, or both.
- Revisiting and focusing on my business and career goals, and how that ties into my family and personal goals.
The Kelly Group works with our clients to help them review these items and strategize in the event of changes in circumstances, job loss, reductions of income, etc. Their goals and needs drive our financial planning and/or investment advice. And of course, the focal point of much of our planning is the family, including our clients' own Rubys.
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Fall HCC (Online!) Courses
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Harford Community College plans to offer online-only instruction for the fall 2020 semester. As a result, The Kelly Group's initial plan to offer as many as five courses in the fall has been scaled back to a two course slate. Charlie Wolpoff is scheduled to teach (virtually) Medicare Planning for Baby Boomers (September 16) and The Family Love Letter for Baby Boomers (September 23). Please note these dates are different from the original schedule. Both courses are planned for 6:30-8:30 p.m.
Social Security Strategies for Baby Boomers, to be taught by Jodi Davis, and Retirement Strategies for Federal Employees, to be co-taught by Jodi and Charlie, have been postponed until spring 2021.
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Check Out Our Facebook Page!
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The Kelly Group Facebook page is a great way to keep up with our many Kelly Group Happenings as well as events and causes we support and promote. You can see our page by following the link below, or simply type "The Kelly Group" into the Facebook search bar and look for our leaf logo.
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We Want to Hear From You
Let us know what topics you would like us to discuss in our newsletter. Send your suggestions to cwolpoff@kellygrouponline.com.
Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisor, Inc., a Registered Investment Advisor.
The Kelly Group
and Cambridge are not affiliated. Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. "IRA Contribution Deadline" article, used with permission, was prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.
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Copyright © 2020. All Rights Reserved.
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