Spring greetings, clients and friends!

We hope this finds you and your family in good health as Americans across the country carefully begin to venture out as warmer temperatures prevail and states take steps to reopen their economies. We want to acknowledge the human toll the COVID-19 pandemic has taken throughout our own communities in the United States, and throughout the world, and, most importantly, the impact on families who have endured the virus or tragically lost loved ones. What began as a health pandemic, has also created significant economic pain for millions, and is likely to create long-lasting changes in the way we live and work, and what the future of the workplace may look like.

Many Americans found themselves housebound in March and April, as businesses and schools closed. With many working or studying from home, Zoom video conferencing became a household name overnight. Companies implemented creative ways and procedures to help keep workers and customers safe, including ‘no touch” transactions, plexiglass dividers, and curbside pick-up, among many others. Frontline workers—those who do not have the luxury of working from home—were clearly revealed for the heroes they are. The monikers, “first responder” and “essential workers” broadened to encompass those stocking store shelves and warehouses, grocery store clerks, long-haul truckers and local delivery drivers, postal workers, pharmacists, and many more.

As states across the US now begin to allow businesses to reopen, relax stay-at-home orders, and ease travel restrictions, we acknowledge that another wave of new Covid-19 cases is possible. Should another wave hit—of course we certainly hope it doesn’t—we expect the healthcare system may be in a better position to handle it.

Given the pre-outbreak economic strength, the apparent transitory nature of the threat, and massive stimulus, we expect a recession to be short in duration, but likely deep. Even with the S&P 500 up so much from the March lows, we continue to like the opportunity for long-term investors and maintain our overweight equities recommendation for suitable investors.

To learn more about what you to expect in the weeks and months ahead, be sure to read our full Market & Economic Update below.

What’s in It for You?

At-a-glance guide to your 2nd Quarter 2020 Frank Talk newsletter:

• 2020 News & Events
  • PFS Offers Complimentary Second Opinion Service
  • Visit our new Getting Frank Blog
  • 12th Annual Cleveland Economic Summit Postponed Until September
    
•  Market & Economic Update

2020 News & Events

PFS Introduces New Complimentary Second Opinion Service

In April 2020, we introduced a new service, available exclusively to your friends, family members and associates. Our complimentary second opinion service provides the people you care about an opportunity to benefit from the same expertise and guidance that you have come to expect as a valued client of Planned Financial Services.

In many cases, a second opinion will simply provide confirmation, and the confidence that those you care about are on track to fulfill their values and achieve their goals with their current financial provider or strategy. However, if needed, we are happy to suggest ways in which we can help, including recommending another provider if we are not a good fit for their needs. Either way, following a Discovery Meeting and Strategic Review Meeting with our experienced team, they will receive a Total Client Profile and a Personalized Financial Assessment of their current situation. To learn more about the Planned Financial Services Second Opinion Service, click here to access or download a full description of this service and the benefits it offers to the people you care about most.

Visit our new Getting Frank Blog

If you haven’t already, we hope you’ll visit our new Getting Frank Blog at PlannedFinancial.com. You’ll find topical information and insights that inform your planning, including how individuals and businesses can benefit from the recent CARES Act legislation. Visit us weekly as we post new articles and opinions and be sure to join or follow PFS on Twitter, LinkedIn, Facebook and YouTube. Additionally, we invite you to ‘like’ Frank’s new Facebook business page at “Frank Fantozzi – Planned Financial Services.” Join the conversation on all platforms! We hope to see you there!

12^th Annual Cleveland Economic Summit Postponed

Due to current limitations on the number of attendees at events, we have decided to postpone our Annual Cleveland Economic Summit, which is usually held in the spring, until later this year.  The event has been rescheduled for September 9, 2020 at the Cleveland Botanical Garden from 4:00 – 6:30 pm. Stay tuned for further details and updates in the weeks and months to come.

Market & Economic Update

Source: https://lplresearch.com/2020/05/08/weekly-market-performance-may-8-2020-stocks-rebound-amidst-challenging-economic-data/

Stocks Rebound Amid Challenging Economic Data

Index Performance – Week ending 5/8/2020:

• S&P 500 Index:   3.50%
• Dow Jones Industrial Average:  2.56%
• Nasdaq Composite:   6.00%
  

Equities

US equities exhibited strength the first week of May, as the S&P 500 Index climbed higher and cut year-to-date losses to under 10%. The gains came despite the May 8th release of the April jobs report, which showed the unemployment rate rising to a level not previously seen in the post-war economy.

This recession is unique, but that might not be all bad news. We’ve had to flip a switch on the economy, essentially frontloading an entire recession’s worth of damage into a couple months, creating some all-time dismal data. But that means we’ll eventually be able to flip it back on, supporting a robust recovery.

The NASDAQ Composite, with its weighting in health care/biotech and technology names, led the market gains. The NASDAQ has so far enjoyed a massive comeback this year, erasing the more than 20% losses experienced during February and March and now sports a positive year-to-date return. Small caps outperformed on the week, but the Russell 2000 remains more than 20% below its February highs.

Growth stocks led value by a wide margin, though the leading sectors were energy and technology, which both gained approximately 6%. This also marked the third consecutive week of leadership for energy stocks. Utilities lagged and was the only sector lower on the week.

International Markets

The MSCI EAFE and the MSCI Emerging Markets both added very modest gains to close up more than a 1%, as concerns subsided over further tensions between Washington and Beijing. China reported that its dollar-denominated exports increased at its fastest pace in more than a year.

During the week, European shares were under pressure over a dismal gross domestic product (GDP) forecast for the European Union that belied optimism over a prompt economy recovery. Adding to pressure were concerns over future asset purchase programs by the European Central Bank (ECB) after a ruling by Germany’s highest court on Tuesday gave the ECB three months to justify its stimulus plans. Many Asian markets were partially closed due to the Golden Week holiday.

Fixed Income and Commodities

A choppy week of trading concluded for bonds, as investors continued to grapple with weak economic data and increasing discussion of reopening the economy. The yield curve steepened slightly as yields on the longer end of the curve rose slightly, while the 2-year Treasury yield fell to its lowest level ever, undercutting the previous record from 2011. Credit spreads tighten modestly in both the high-yield and investment-grade markets.

Oil prices rallied with June contracts for WTI crude posting a gain of approximately 20% last week, contributing to energy stocks leadership.

Closing Remarks

We will continue to monitor and adjust our portfolios as conditions change. If you, or someone you know, has questions or concerns about your personal investment strategy or business finances, please don’t hesitate to share information on our complimentary Second Opinion Service and reach out to your experienced team of wealth advisors at 440.740.0130.

We are always honored to help our clients’ friends and business associates take greater control of their future with guidance from the PFS team. We welcome and are grateful for the many introductions our clients continue to provide.

Don’t forget to join or follow us on Twitter, LinkedIn, Facebook and YouTube and visit our new Getting Frank Blog!

Real People. Real Answers. 

Health, Happiness, and Good Fortune,

Frank Fantozzi
CPA, MST, PFS, CDFA, AIF^®
President & Founder
Frank@PlannedFinancial.com

*IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

*Some research was provided by LPL Financial, LLC, May 2020. PFS nor LPL make no representation as to its completeness or accuracy.

Planned Financial Services and LPL Financial are separate, unaffiliated entities.

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.

Everyone should have an emergency fund. Regardless of your current income, you need to set aside some cash in a savings account or other liquid, low-risk investment. This fund can provide protection in the event of job loss, health problems, emergency home repairs, and other sudden fluctuations in income or expenses. With this cash on hand, you’re less likely to turn to high-interest credit cards or to sell assets that are hard to unload and that may trigger capital gains tax. Here’s how to determine how much you need to save and how to reach your goal.

Focus on expenses, not income

You’ve probably heard that you need to save enough to cover three to six months of living costs. But this rule isn’t as straightforward as it may sound. Some experts say you need to save enough to cover three to six months of expenses, while others believe you should save three to six months of take-home pay. And, depending on your family’s financial and other circumstances, you may need to save three months’ (or less) worth or aim for the six-months’ target.

Even though emergency fund savings targets are sometimes expressed in terms of take-home pay, most people are better off focusing on expenses, particularly nondiscretionary expenses. During an emergency — such as loss of a job — you can eliminate most discretionary spending on vacation travel, entertainment, dining out and nonessential shopping. Your emergency fund should be sufficient to cover nondiscretionary expenses, such as your mortgage and property taxes or rent, utility bills, car payments, food, health care, insurance, and credit card or other debt payments.

Set a goal

Determine the target size of your emergency fund by totaling nondiscretionary expenses over the time period you anticipate it would take to find a new job. Be sure to subtract any other income sources, such as your spouse’s salary or rental property income over the same period. It’s also a good idea to build some cushion into your fund to cover additional time or emergencies other than job loss, such as unexpected medical expenses or home repairs following a severe storm.

Keep in mind that reasonably foreseeable expenses aren’t emergencies and should be saved for separately. For example, you may know you’ll need to replace your roof in two years at a cost of $15,000. Or you may be planning an elective medical procedure in the near future. Don’t dip into emergency funds for these planned events.

Avoid overfunding

It’s important to have an emergency cushion — even to be conservative in estimating your financial requirements. However, avoid saving too much. If you save substantially more than you’ll reasonably need in a low-interest savings account, you may actually lose money to inflation over time. Plus, you might miss out on opportunities to invest those funds in tax-advantaged retirement accounts or in other assets.

Rather than blindly following a rule of thumb, tailor your emergency savings to your particular financial situation. A smaller emergency fund may suffice if, for example, your spouse has a secure job, you have relatives who can provide financial assistance in an emergency or you have reason to believe that you would be able to find other work quickly should you lose your job. Conversely, if you’re the sole breadwinner or you simply have a low tolerance for risk, a bigger emergency fund may be called for.

Depending on your circumstances, you may find that substantially less than three to six months of take-home pay will suffice. According to an October 2019 study by J.P. Morgan Chase, on average “families need roughly six weeks of take-home income in liquid assets to weather a simultaneous income dip and expenditure spike.” Chase based its conclusion on an analysis of millions of its customers’ checking accounts.

Start saving now

If you don’t have an emergency fund, you’re not alone. According to the Chase study, 65% of families don’t have enough cash to cover six weeks of take-home pay. Start building your fund by determining how much you need, choosing a target date for reaching that amount and setting aside a portion of your income each month designed to achieve that goal.

You might also consider strategies for building your fund more quickly, such as reducing certain expenses temporarily or “rightsizing” your tax withholdings. (See “Are you withholding too much tax?”)

Evaluate your finances

Your financial advisor can help evaluate your situation and map a savings plan. This usually starts with a budget, because, unless you know your actual income and expenses, you can’t accurately assess the impact of an emergency.

Sidebar: Are you withholding too much tax?

If you normally receive large federal and state tax refunds every spring, consider “rightsizing” your withholdings — that is, reducing them so that you send the government just enough to cover your expected tax liability. This can help you kill two birds with one stone: You can avoid making an interest-free loan to the government and you can automatically transfer excess withholdings to a savings account earmarked for emergencies.

Coincidentally, according to a March 2019 study by J.P. Morgan Chase, most families receive tax refunds averaging around six weeks’ income. This is the same amount the financial services company says most families need to save to protect themselves from a simultaneous decrease in income and increase in expenses.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

According to a University of Pennsylvania report, approximately 37% of Americans have “advance directives,” which include living wills and power-of-attorney designations. These documents specify what should occur and who should make medical decisions should someone become seriously ill and unable to make these decisions for him- or herself.

If you belong to the other 63% or so of Americans who haven’t made such arrangements, put it at the top of your to-do list. Your peace of mind — and that of your family — depend on it.

Differentiate between documents

Many people confuse a living will with a last will and testament, but they aren’t the same. These separate documents serve different, but vital, purposes.

A last will and testament is what you probably think of when you hear the term “will.” This document details how your assets will be distributed when you die. A living will (or health care directive) details how life-sustaining medical treatment decisions would be made if you were to become incapacitated and unable to communicate them yourself.

The thought of becoming terminally ill or entering a coma isn’t pleasant, which is one reason many people put off creating a living will. However, it’s important to think through what you’d like to happen should this ever occur. A living will can help ensure your wishes are carried out and provide guidance and reassurance to family members at a time they’re likely to be emotionally distressed.

Say, for example, you’re in a permanent vegetative state as a result of an auto accident and have no medical chance of coming out of the coma. Would you want your life to be artificially prolonged by machines and feeding tubes? You are the one who should make this decision, not your grief-stricken spouse, parents or other loved ones who may not be sure what your wishes would be — or who might not abide by them.

Provide power of attorney

Often, a living will is drafted in conjunction with two other documents: a durable power of attorney for property and a health care power of attorney.

The durable power of attorney identifies someone who can handle your financial affairs, such as paying bills and undertaking other routine tasks, should you become incapacitated. The health care power of attorney becomes effective if you’re incapacitated, but not terminal or in a vegetative state. Your designee can make medical decisions on your behalf — for example, agreeing to a surgical procedure recommended by your physician — if you’re unable to do so. But this person can’t officially make life-sustaining choices. That requires a living will.

Enlist expert help

As tempting as do-it-yourself legal document kits may seem, it’s much better to work with an attorney when drafting a living will, durable power of attorney and power of attorney for health care. These documents are too important to get wrong. Another tip: Discuss the details of your living will and other directives with your loved ones so they’ll know what to expect should they ever be required to act.

Finally, remember that these documents aren’t cast in stone. Revisit them if you’ve changed your mind about how you’d like life-sustaining decisions to be made or if your life circumstances (for example, you got married or your parents died) have changed.

Whether you’re in the process of making a retirement or estate plan, or intend to donate property to charity, you’ll need to know the value of your assets. Values of publicly traded securities are readily available, but for hard-to-value assets — such as closely held business interests, real estate, art or collectibles — an appraisal may be necessary.

Situations that call for an appraisal include:

Retirement planning. To enjoy a comfortable retirement, you’ll need to calculate the income that can support your lifestyle when you reach your desired retirement age. This means understanding the assets you have and appraising their value. Once you have this information, you may decide to move your retirement date up — or back.

Estate planning. Knowing the value of your assets is the only way to tell whether you’re potentially subject to estate or gift taxes and to identify appropriate estate planning strategies for minimizing or eliminating those taxes. In addition, understanding the value of your assets enables you to distribute your wealth fairly. For example, suppose you wish to divide your overall property equally among your children, but with different items going to each. That’s nearly impossible to do without appraisals of hard-to-value assets.

Appraisals may also be necessary to avoid running afoul of tax basis consistency rules. According to these rules, the income tax basis of inherited property equals the property’s fair market value as finally determined for estate tax purposes. The rules are intended to prevent your heirs from arguing that your estate undervalued the property, thus entitling them to claim a higher basis for income tax purposes. Appraisals can help ensure that your heirs receive the basis they deserve.

Gift disclosures. Generally, the IRS has an unlimited amount of time to challenge the value of gifts for gift and estate tax purposes, unless they’re “adequately disclosed.” If they’re adequately disclosed, the IRS is bound by a three-year statute of limitations. The best way to disclose the value of a gift is to include a qualified professional appraisal with a timely filed gift tax return.

Charitable donations. Charitable gifts of property valued at more than $5,000 (other than publicly traded securities) must be substantiated with a qualified appraisal by a qualified appraiser. This means that the appraiser meets certain education and experience requirements.

Without appraisals of your hard-to-value assets, it’s difficult to develop a realistic financial plan, treat your heirs fairly and avoid unwelcome tax liabilities. Asset values can fluctuate dramatically over time, so make sure you get updated appraisals periodically.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

When you leave a job, voluntarily or due to a layoff, you’re likely to have a lot on your mind. It’s all too easy to set aside decisions about your employer-sponsored retirement plan account for another day. But it’s usually important to act quickly. Whether you have a 401(k), 403(b) or 457(a) plan, here are your basic options when you leave a job.

Maintain the status quo

If your plan with your previous employer has a balance of at least $5,000, the plan must allow you the option to leave your money there. This is the simplest course of action in the short term, but not necessarily in the long term. Your ex-employer may restrict your ability to make changes to your portfolio, take distributions or update beneficiaries. As a nonactive participant, you may also incur higher fees and receive less-effective communications about plan changes than active employees do.

However, you may want to consult with your financial advisor before liquidating your holdings if your previous employer offers a hard-to-duplicate investment option. This might include a high-yielding guaranteed investment contract or a stable value option.

Roll it into your new plan

Rolling over your savings into your new employer’s plan can help you avoid potential downsides of staying with the old plan or trying to keep track of multiple plans. But before you take this step, review the investment options available in your new employer’s plan.

Also be aware of any fees or charges you may incur when rolling your old plan balance into your new employer’s plan. If there are fees, you might want to keep your existing savings in the old plan or roll your account balance into an IRA while contributing to your new employer’s plan.

If, on the other hand, a rollover into your new employer’s plan seems like the better option, confirm that the plan accepts rollovers. Assuming that’s the case, request a direct “trustee-to-trustee” rollover. Otherwise, your old employer will mail a distribution check to you, minus a mandatory 20% tax withholding. You then have just 60 days to deposit these funds in your new plan. You also must cover the 20% that was withheld for taxes with other funds to achieve a 100% rollover.

Finally, if you fail to meet this 60-day deadline, or if you don’t have the cash available to cover the taxes that were withheld, you must pay income tax on the amount that wasn’t rolled over. And if you’re under age 59½, you may incur a 10% early withdrawal penalty.

Transfer to an IRA

Transferring your retirement savings into an IRA offers several advantages. For one thing, an IRA typically provides a much wider array of investment options than most 401(k) plans do.

Most financial services companies will accept a direct transfer of your retirement savings, which can streamline the process and avoid potentially costly mistakes. In some cases, your assets can be transferred “in kind,” meaning you don’t need to sell certain investments to hold them in your IRA. Be aware, however, that you may be charged an annual fee after rolling your savings into an IRA.

Cash out

Unless you need the money to pay bills, consider the tax consequences before cashing out your retirement savings. Any distributions you take will be taxed as ordinary income, and, if you are under age 59½, you may have to pay an additional 10% penalty on any withdrawals.

There are exceptions to the penalties — for example, in cases of economic hardship or if you separate from service at age 55 or older. But even if you qualify for an exception, you’ll owe ordinary income tax on the distribution.

Remember priorities

When deciding what to do with your retirement account, remember this: Future financial security is Job One. Don’t let job-switching activities distract you from protecting your nest egg.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.