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Protecting Your Parents

By Rich Arzaga, CFP®

A conversation with mom and dad about personal and financial matters is not easy for many families. But as parents get older, especially those in their 70s and 80s, we found with our clients that many parents appreciate the assistance of adult children. If this might be the case for you, the next question becomes, what type of support should you consider offering.

Estate Planning Documents

In general, fifty percent (50%) of all families do not have an estate plan. If you are receiving this message, you (and likely your friends and family) probably have complicated enough assets to qualify for needing an estate plan. Further, of the approximate fifty percent (50%) who do have an estate plan, about one-half of those plans are outdated or incorrect, and may likely cause challenges when executing. In short, there is a seventy-five percent (75%) chance your parents’ estate plan is out-of-sorts. Maintaining proper estate planning done is table stakes. You can help by encouraging parents, aunts, and uncles to visit an estate planning attorney. If you need a recommendation, we’re happy to offer you a few names to consider.

Identity Protection

Older Americans are subject to identity theft and could use your help. Consider the following:

  • Credit freeze. Credit bureaus offer this service. Creating a freeze is no charge. The cost for “Lifting” a freeze for specific credit inquiries is nominal – about $10 per service. My family has employed a credit freeze since this option became available in 2003-2004 and has gladly paid for the Lifts as needed. The credit freeze has been our family’s best approach to help prevent credit fraud. It gives me peace of mind that I have control of legitimate credit queries and new accounts.
  • Credit Reports. Review your parent’s credit reports with them to make sure all reported creditors are correct, and to update any other personal information. More importantly, resolve listings of creditors that are incorrect, and consider closing credit that is no longer needed.
  • Personal Information. Drivers licenses, State Identification Cards, Passports, and Social Security Cards. Consider securing in one place items that not regularly used. And ask to make copies for your records, then scan and secure these copies with an encrypted electronic service. For our clients, we offer an electronic vault called WealthVision that features encryption standards that exceed those of many banks. If you don’t work with us, ask your advisor if they offer a similar service.

Telemarketers

  • If not already set up, consider caller-ID for your parent’s home phone. Encourage your parents to let all calls they don’t recognize go to voice mail. This small idea should significantly reduce the risk of telephone scams. This same principal should apply to their cell phones.
  • Add a call blocking tool to the home phone. I don’t know of any service that is full-proof, but having something is a step in the right direction. I’m not entirely delighted with ours, so I if you come across one you have had success with, please let me know.
  • Your parents need to know the difference between someone they call and someone who call them. If they make the call, they know who that other person is. A person calling them with an emergency should be viewed as suspicious. If this happens, encourage your parents to call you or other family members to confirm or for help. Assure them that asking for a number to call back and waiting to confirm is prudent and safer for all family members. If the incoming caller insists and will not leave their name and number, then ask your parents to encourage them to call 911. And tell your parents about the call my mother-in-law received from a kid who started the call with “Grandma?” My mother-in-law filled in the blank and responded by using my daughter’s name, asking if this was her. Fortunately, she knew my daughter’s voice well enough to hang up. Very upsetting for everyone, but it could have been worse.

Technology

  • Cell phones, laptops, iPads. Check them all for updates and patches.
  • Passwords. Consider strengthening passwords and using a password manager to help your parents manage this. If a password manager becomes problematic (they often duplicate entries and cause confusion), using a password that is a combination of things in their life might be the solution. Example: first house address numbers + second home street name + current home city abbreviation + children’s birth years + the number of grandchildren or pets minus the number of previous marriages!
  • Social media. Ask your parents to list for you their various social media accounts and passwords. This idea becomes especially useful as they get too old or unable to use.

Be their advocate. This can include adding yourself to

  • conversations with vendors solving problems.
  • discussions with caregivers. Make sure to take notes.
  • visits with financial advisors. Our most rewarding meeting is with older clients who include their adult children. The synergy can be more productive than a meeting with the parents alone.
  • Ask to be listed as a contingent contact on financial accounts. This option is relatively new and required by financial institutions to be offered. Take advantage of it.

If there is any part of this you would like to explore, feel free to contact Cornerstone Wealth Management at 925-824-2880. We are happy to help if we can.

#ElderCare

#EstatePlanning

#HealthCare

#PersonalAdvice

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U.S. Economic Fundamentals Remain Solid

The Dog Days of Summer were on full display this past month, as a variety of concerns pushed stocks and bond yields lower. After reaching new record highs in late July, the S&P 500 Index dropped approximately 1.8% in August as trade concerns pressured investor sentiment around the world. Impacts of U.S.–China trade tensions reverberated throughout the economy and financial markets in recent weeks, including weakening global manufacturing data and plunging sovereign interest rates. As a result, safe-haven assets like gold, government bonds, and utilities outperformed in August.

Escalating trade tensions early last month dashed hopes of a quick resolution. Both sides need to show strength as China is dealing with protests in Hong Kong and preparing for the 70th anniversary of the People’s Republic of China this October, while President Trump is gearing up for the U.S. presidential election. While global manufacturing has borne the brunt of the trade damage, the latest round of tariffs will impact more consumer goods.

Fortunately, the U.S. consumer remains in good shape, bolstering the economy. The unemployment rate is low, wages are rising, and debt as a percentage of disposable income remains near four-decade lows. Personal spending has driven U.S. output, which during the first half of 2019 remained slightly above the average for the economic expansion. We believe the key to sustaining growth is renewed strength in business investment, which likely requires progress on trade.

The inverted U.S. Treasury yield curve reflects these uncertainties. An inversion occurs when short-term interest rates exceed longer-term rates and typically indicates pending economic weakness, or recession. Considering the relative strength of the U.S. economy and expected interest rate cuts from the Federal Reserve (Fed), we’re not convinced recession is imminent. Instead, we believe the shape of the yield curve reflects a run on U.S. Treasuries based on the global search for yield. More than $17 trillion in global sovereign debt offers negative yields, where lenders pay borrowers for the “privilege” of loaning them money.

Another message sent by the yield curve is that monetary policy is too tight given trade uncertainty, so the Fed needs to respond promptly with lower interest rates. Of course, we will have a recession someday, and now that we’re in the longest expansion ever, anticipation is high. Yet reviewing fundamentals, even with trade, we’re hard pressed to project contraction soon. It is conceivable, though, that a variety of global events, including the uncertainty of trade and the U.S. election, may cause businesses and consumers to “sit this one out” in the fourth quarter of 2020 and the first quarter of 2021. We assign odds of that recessionary scenario at 1 in 3.

In conclusion, fundamentals of the U.S. economy remain solid even as trade uncertainty weighs on investor sentiment. We would interpret the yield curve inversion as a signal that the Fed is too tight, not of imminent recession. Also keep in mind that stocks have historically performed well in the 12 to 18 months following inversions. We recommend suitable investors continue to focus on economic and market fundamentals while maintaining diversified portfolios. If you have any questions, please contact me.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

All performance referenced is historical and is no guarantee of future results.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Economic forecasts set forth may not develop as predicted.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. They are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, geopolitical events, and regulatory developments. The gold market is subject to speculation and volatility as are other markets.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This research material has been prepared by LPL Financial LLC.

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