The Week on Wall Street
The failure to reach an agreement on a new fiscal stimulus bill soured investor sentiment and sent stocks modestly lower for the week.
FACT OF THE WEEK
National Pumpkin Day falls on October 26. Pumpkin Day celebrates this noble member of the guard family and a native squash of North America. Its history goes back 5,000 years, and its traditions tied up in their iconic orangeness. The Halloween "jack-o'-lantern" first appeared in 1837, while the idea of a carved pumpkin, specifically, originated in 1866.
MARKET MINUTE
The Dow Jones Industrial Average fell 0.95%, while the S&P 500 lost 0.53%. The Nasdaq Composite index slipped 1.06% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.44%.
Markets Disappointed with Stimulus Impasse
Stock prices ebbed and flowed all week, pulled by the gravity of fiscal stimulus talks in Washington, D.C. As investors saw improving prospects for a new fiscal stimulus bill, stocks rose. As prospects dimmed, stocks turned lower. Hopes for striking a deal were raised late in the week as comments from a key negotiator suggested that a deal might be getting closer to fruition.
The week ended, however, without an agreement, cementing a disappointing week of performance. Market sentiment was further weighed down by the continued rise in COVID-19 cases in the U.S. and Europe. However, anxieties were tempered by the belief that a full economic lockdown was unlikely.
New Jobless Claims Fall
Markets have been focused on weekly initial jobless claims as an essential input into the state of economic recovery. After weeks of 800,000+ new jobless claims, last week’s report reflected an improving labor market, as new jobless claims rose by 787,000, below consensus estimates of 875,000. In contrast, continuing jobless claims fell by more than one million.
The report wasn’t entirely positive; however, as more than 500,000 individuals were added to the emergency assistance program that extends unemployment benefits to those who have run out of state unemployment benefits.
FINANCIAL STRATEGY OF THE WEEK
It's Open Enrollment: Are You Making the Most of Your Employee Benefits?
As we approach Open Enrollment, we encourage you to take the time to review your choices carefully. Employee benefits are always a significant part of your financial life. As millions of Americans face a year full of health and economic challenges as a result of the COVID pandemic, they may well be more important than ever. So don't just assume that what worked in the past is the best for you now. Open Enrollment is a great opportunity to thoughtfully evaluate your options with a few key points to remember:
• Employee benefits are an essential part of your total compensation.
• From health to life to disability insurance and a whole lot more, use Open Enrollment to make sure you understand and take advantage of current offers.
• A benefits tune-up this fall can be the best foundation for your finances all year round.
While we're discussing Open Enrollment, an excellent reminder to individuals with Medicare that October 15 to December 7, 2020, is your window of opportunity to make changes to Medicare Advantage and prescription drug plans.
Health insurance: One of the most important to review yearly
You never want to be complacent about health insurance, but especially not in the middle of a pandemic. If your health insurance is through your employer, make sure you're getting the most comprehensive coverage you can afford. For instance, do you have a choice between a Preferred Provider Organization (PPO) and a Health Maintenance Organization (HMO)? A PPO usually offers more flexibility, while an HMO may have lower monthly premiums and additional benefits in exchange for getting healthcare services within a plan's provider network.
It's worthwhile to make a thorough cost comparison of each, including premiums, deductibles, copayments, coinsurance, and out-of-pocket maximums. If you have a high-deductible health plan (HDHP) ($1,400 for an individual, $2,800 for a family in both 2020 and 2021), look into getting a health savings account (HSA). An HSA operates somewhat like an IRA for medical expenses.
For 2021, the annual limit on tax-deductible contributions is $7,200 for a family and $3,600 for individuals with self-only coverage, with a $1,000 catch-up contribution for age 55 plus.In addition to the upfront tax deduction, HSA is eligible for tax-free withdrawals for qualified medical expenses, including deductibles, copayments, prescriptions, and fees for medical services. Plus, there's no "use-it-or-lose-it" annual catch as there is with a flexible spending account (FSA).
FSA plans have specific payment allowances for certain medical or dependent care expenses with pre-tax dollars. Unused money in an HSA can continue to grow tax-deferred for health care costs in the future, and you'll often have several investment choices to help your money grow and keep up with the rising cost of health care.
As you review your choices, be sure to coordinate with your spouse or partner. If you have different options between employer plans, choose carefully. You might even be able to mix and match. For instance, one plan may offer low-cost vision or dental coverage that the other doesn't. All this research takes some effort, but it's worth it.
Life insurance: The good, the bad, and the difficult
Group term life insurance is a good news/bad news story. On the plus side, employees are often offered some basic coverage level either for free or at a reduced cost, and you're not required to undergo a physical exam to qualify. On the downside, the basic coverage may not be sufficient, especially if you have a partner or young children who depend on you financially. In that case, consider a supplemental group policy or an individual policy.
Individual life insurance coverage can be more cost-effective if you're above-average health, and it's often customizable to fit unique needs. If you're in poor health, be aware that it may be challenging to qualify for private coverage. But don't stop there. Speak to an insurance specialist for more assistance and figure out what amount and type of life insurance coverage make the most sense. If you go with a group policy, find out if you can take the policy with you should you leave your job. While group policies are generally portable, there's usually a short window of opportunity to keep it, as well as other restrictions.
Disability insurance: Dealing with the odds
Disability is more likely than death. An estimated 1 in 4 of today's 20-year-olds will become disabled before they retire. What will you do if you can't work?
First, check to see if your company offers disability insurance and what kind. You may have just short-term coverage (up to two years). Even if you have long-term coverage, it may not be enough. Plus, disability insurance through your employer is generally not portable and will lapse when you leave the company. But don't let that stop you. By all means, take your company's policy, especially if it's free. Then, as an extra precaution, consider purchasing a private disability policy to cover at least 55 percent of your salary for 12 months.
Don't overlook retirement.
Annual Enrollment is a great time to check in with your retirement goals. Are you on track? Contributing to a 401(k) up to the employer match is essential and the minimum you should do. The annual 401(k) contribution limit for 2020 and 2021 is $19,500, with a $6,500 catch-up for age 50 and over. Use this time to increase your contribution as much as you can and to check if your company package includes:
A Dependent Care FSA. This lets you set aside pre-tax dollars up to a maximum of $5,000 per year per family as long as both spouses work, are looking for work, or are full-time students.
Partner benefits. Some companies offer health insurance to domestic partners.
Long-term care insurance. If offered, the most cost-effective time to purchase a policy is between ages 50 and 65.
Group legal services. An employer may also offer basic legal services for a low monthly cost.
For many, when it comes time to review your benefits, it can quickly become an overwhelming process. It's important to try and remember that the pros will outweigh any possible negatives. A benefits tune-up this fall can be the best foundation for your finances all year round.
As always, please contact my office with any questions or financial concerns you may have.