Presidential Elections

(Real Quick: Just a reminder about upcoming 2023 tax deadlines.)

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The next presidential election is on Tuesday, November 5, 2024.

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Today, we’re encouraging you to:

-Stay the course during the upcoming presidential election, i.e., election year volatility often creates opportunities for long-term investors.

-Explore all options before buying or selling a home.

-Facilitate a (quick) life insurance review, especially if you’re nearing retirement.

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Presidential Elections, the Stock Market & Your Portfolio

It’s common for some to experience anxiety regarding their investment portfolio as we approach November’s presidential election.

To help ease financial trepidation, consider the following financial facts reported by the Capital Group:

-U.S. stocks have trended up regardless of whether a Republican or Democrat won the White House.

–Primary season tends to be volatile, but markets have bounced back strongly afterward. Stocks have returned 11.3% in the 12 months following primaries, compared to 5.7% in similar periods of non-election years.

-Investors often get nervous and move into cash during election years. For example, net asset flows into money market funds have been more than twice as high in election years as in the year after an election.

-Staying on the sidelines has rarely paid off. It’s time, not timing, that matters most. The S&P 500 Index had negative returns in only two of the last 20 election years (2000, 2008), and both declines were largely attributed to asset price bubbles rather than politics.

For Example:

A $1,000 investment in the S&P 500 Index when FDR became president in 1933 would have been worth over $21 million in 2023. During that time there have been seven Republican and eight Democratic presidents.

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Deep Dive: If you want an in-depth look at Investing in an Election Year, let me know. I’m happy to email you Capital Group’s detailed guide—it goes well beyond the above facts. Also, call anytime to discuss in detail.

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Housing Market & Your Home

Over the years, many of our clients approaching retirement have taken the equity out of their homes in order to downsize, move to a warmer climate or both.

Today, this life milestone is becoming more difficult to achieve, especially if your goal is to save money.

In general, if you’re living in New England, you have to move fairly south to begin seeing any real cost-of-living savings. What’s more, it’s common for large employers to pro-rate salaries based on where employees live.

Resource: The Missouri Economic Research and Information Center created a cost of living U.S. map. The most expensive states to live in are California, Massachusetts and Hawaii.

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Limited Housing Inventory

Candidly, it’s a fantastic time to sell.

Nevertheless, where will you go and are there any affordable and available homes?

According to the National Association of Realtors, the U.S. is experiencing a housing shortage of between 5.5 and 6.8 million units, with the gap between supply and demand widening every year.

There’s no single reason for the shortage, although some reasons include:

• Decline in construction
• Rising construction costs
• Regulatory barriers (zoning laws, building codes)
• Rate lock, i.e., homeowners with low mortgage rates who want to sell, but don’t because they’ll be faced with higher mortgage rates at their next home.

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Housing Recommendations

Buying and selling a home is a personal choice.

If you’re thinking of doing either, check in with us so we can help you run the numbers, avoid unintended consequences and expand your options through collaboration.

Also, don’t get discouraged by the high mortgage rates. It’s likely we’ll start to see rates fall later this year.

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When faced with a difficult situation, most of us look for two or three options. But there are at least five options in every situation. You may need to think creatively and even consider the kinds of things that would normally make you say, “I couldn’t do that!” But many options are there every time. Let your thinking stretch to accommodate them. – Thomas J. Leonard, Author of The Portable Coach

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Warning: Watch out for falling real estate prices in Florida. Overall, pricing is increasing. Yet, prices are falling significantly in parts of coastal Florida such as Cape Coral, because the risk of natural disasters is driving up the cost of home insurance.

Finally, when you find an appealing cost-of-living situation, remember to consider: crime levels, extreme weather trends, education/healthcare systems, public transportation, indoor/outdoor offerings and proximity to loved ones, i.e., forecast all future needs.

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Life Insurance Review

When approaching retirement, often you no longer need as much life insurance. When evaluating your life insurance, ask yourself these three key questions:

#1—What is your insurable need, e.g., paying off mortgage, college, etc.?

#2—What are you trying to prevent, e.g., spouse being unable to afford a home?

#3—Do these needs and preventions still exist?

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Here’s a brief life insurance review checklist:

Evaluate Dependents’ Needs: If you have dependents who rely on your income, assess whether they will still need financial support in your absence, e.g., an adult child with special care needs.

Review Policy Benefits: Understand your policy’s benefits, including any cash value, death benefit or additional riders.

Consider Health & Age Factors: Assess your current health condition and age.

Note: Some employer-sponsored life insurance plans allow you to increase your coverage annually without a physical exam.

Understand Tax Implications: Consider tax impacts associated with canceling your policy, especially the cash value component.

Compare Costs & Benefits: Compare the costs and benefits of maintaining the policy versus canceling it, taking into account premiums, potential future needs and the financial impact on beneficiaries.

Overall, if you’re questioning if you have enough or too much life insurance, or are considering canceling your policy—let’s talk, since changes you make could impact your financial future.

Rule-of-Thumb: A general guideline for life insurance needs is 10 times your annual salary.

Note: As a licensed fiduciary, we do not sell insurance or receive any form of referral payments. This said, life insurance is a key risk management tool and, therefore, we have established long-term relationships with experienced insurance consultants. If you need a referral or want to run some numbers with us to help isolate what your insurance needs may be, reach out anytime.

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Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

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