The S&P 500 was significantly down last week, based both on increased Covid cases and election volatility. In contrast, the economic data is positive. Unemployment claims are decreasing, the third quarter set a record for economic growth as measured by GDP, and both consumer spending and earnings are beating expectations. Remember that investing is a long-term proposition. For this short-term volatility, make sure your seat belt is buckled, close your eyes, and try to ignore the fact that your stomach is hovering a foot above your head.
You have an important decision to make this time of year as well. That’s right, it’s open enrollment time for most of us, and we have some thoughts on benefit selections for 2021.
If your employer offers disability benefits, we generally recommend taking the most coverage you can for both short- and long-term disability. If you have the option of paying for this coverage with post-tax money, do that as well. If you need benefits, and you’ve paid the premiums with after-tax money, the benefits will be tax-free.
Life insurance is more of a toss-up. You generally need life insurance if there is someone else who is relying on your income, like a spouse or child. If you have health concerns and are unable to purchase an individual policy, purchasing through your employer is a good deal. If you are healthy, it may make sense to price policies that you own directly, and whose premiums are locked in for 10 or more years. We generally don’t recommend Accidental Death & Dismemberment policies, as these are more of a bet that you’ll go out in a fiery blaze of glory.
The biggest question is health insurance. I am a huge fan of High Deductible Health Plans, or HDHPs. While they have a large deductible, the premiums are generally lower. The best part is that you gain access to a Health Savings Account, or HSA. For family, you can put away $7,100 a year. Money goes into the HSA pre-tax and, if used for qualified medical expenses, comes out tax-free. The best part is that the money carries over if not used, and you can invest funds inside the account. Given that you can expect to spend about $150,000 in retirement on medical costs, having a tax-advantaged way to save for those now can make a big impact on your retirement.
If choosing a health insurance plan is confusing, call your financial advisor and ask to sit down and review your options. Health insurance is a big part of a financial plan. We’re also happy to help here at CovingtonAlsina, because planning is what we do.
Have more questions? We have some great resources, including calculators, videos and articles on our website at covingtonalsina.com, or visit our Facebook page to learn about our line-up of educational events.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, consult with your attorney, accountant, and financial advisor or tax advisor prior to investing.