The S&P 500 was essentially flat last week, despite a mid-week bump from the cut in interest rates by the Federal Reserve. Year-to-date, the index is up over 16%. This is coming on top of back-to-back runs of over 20% in 2023 and 2024. Largely driven by AI-fueled productivity gains and big tech, stocks have continued their bull run for a third year.
And continuing with open enrollment options, if your employer offers disability insurance, we recommend selecting the highest coverage option for long-term disability. This generally pays two-thirds of your salary until age 65 if you are unable to work due to an illness or accident. Some employers offer you the option of paying for the coverage with post-tax dollars. If this is an option, select that. If you do need to claim disability benefits, those benefits will then be tax-free.
Short-term disability usually begins seven days after an illness begins, or immediately after an accident, and lasts 90 days, which is when most long-term disability plans start. While we generally recommend choosing this coverage, if you have six months of living expenses saved in an emergency fund, you can self-insure.
Many employers also offer life insurance. If it’s free, you should absolutely take the coverage. Additional coverage can often be purchased separately, so if you are healthy, you should check with an independent agent to compare prices between your employer’s plan and a private policy. Private policies are also yours if you leave your job.
We are not big fans of accidental death and dismemberment policies, or AD&D. It’s like betting the farm you’re going out in a fiery blaze of glory. Same for cancer policies or specific illness policies. Unless you have a strong family history of the disease, or you work in a field with high rates of it, the odds are better if you just take that money and invest it every paycheck.
Pre-paid legal can be a great option if you do not currently have a will and other legal documents like a Power of Attorney. For things like pet insurance, we recommend comparing prices to private policies.
If you have a retirement plan at work, make sure you are contributing enough to receive the full match if possible. It’s free money. We like target date funds for the investments because it will automatically become more conservative as you age; it’s the ultimate set-it-and-forget-it investment.
Finally, some employers offer an ESPP, or Employee Stock Purchase Plan. This is almost always a good deal if your company is doing well. The typical plan allows you to set aside a percentage of income each paycheck. After a set period, usually six months, these funds purchase company stock at the lower of the start date or end date price and often with an additional ten to fifteen percent discount on top of that. You do have to hold this stock for two years to receive long-term capital gains tax treatment.
Your action item this week is to check the air pressure in your tires. As the weather cools, you can lose pressure, which makes your tires wear faster and also decreases fuel economy.
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CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.