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The Bulletin

Financial tips, trends and insights to help you plan for the priorities—like your health, home, family, work, even leisure—that matter most to you

 

 

 

May 16, 2018

4 Gaps That Can Put Women at Financial Risk

$1,055,000—THAT’S HOW MUCH LESS a woman could earn over her lifetime, on average, compared with a man in a similar full-time position, assuming that she takes career breaks to provide care for her family. The ripple effects of the wage gap and the cost of caregiving, both of which contribute to that million-dollar deficit, are fairly well known. Three other factors are less well-known, however: the investing gap, the debt gap and the retirement gap can compound the financial challenges that many women face. Those are among the findings of Women & Financial Wellness: Beyond the Bottom Line, a new study by Merrill Lynch, in partnership with Age Wave.

Beyond these statistics, of course, there are other more positive stories to tell: Some younger women, in particular, have made great strides, with many out-earning men their age in similar jobs in a few specific fields,1 and single women today are the second largest group of homebuyers.2 By 2020—just two years from now—women are expected to control $22 trillion of wealth in the U.S.3

And yet, because women live longer, they are at greater risk of outliving their money. Only when you fully understand the financial implications of the wage gap, of taking career breaks, of living longer and of facing higher health costs, can you prepare to deal with them. There are things you can do to help bridge those gaps. Below are a few tips to consider.

We need to talk. Most men talk about money a lot, at the office or the gym. Women, not so much. In fact, 61% of the women surveyed for the Merrill Lynch/Age Wave report said they’d rather talk about their own death than about money—and 60% felt they didn’t know enough about investing to begin. “Just start talking about investing and your financial goals with other women,” says Lorna Sabbia, head of Retirement and Personal Wealth Solutions for Bank of America Merrill Lynch. “Talk generally leads to action.”

The investing gap. Despite their reluctance to talk about investing, it turns out women’s biggest financial regret is “not investing more,” says the Merrill Lynch/Age Wave report. Women feel less confident than men do about investing, by a margin of 52% to 68%,4 and as a result 71% of their assets remain uninvested, compared to 60% for men.5 Financial education builds confidence, suggests Sabbia. “Enroll in an online class, consult with an expert—whatever works best for you,” she says. “But don’t feel you have to be perfect, or know everything, before you begin investing. Just get started.” When women do invest, Sabbia adds, studies show that they tend to see higher returns, in part because they don’t buy and sell as frequently as men do and so avoid higher fees.6

“Don’t feel you have to be perfect, or know everything about investing, before you begin. Just get started.” —Lorna Sabbia, head of Retirement and Personal Wealth Solutions
for Bank of America Merrill Lynch

The wage gap. The fact that women, on average, earn 82 cents for every dollar a man in a similar job earns is well known—but its long-term implications are not.7 “That 18-cent difference adds up over time,” says Maddy Dychtwald, co-founder of Age Wave. Future raises and even Social Security benefits are lower as a result, and career interruptions to care for family take an additional toll. One thing that can help is asking for what you’re worth on your first job—and every one after that. The larger your paycheck the easier it is to invest some for your future. (Men, by the way, are eight times likelier than women to hold out for more money when receiving a job offer, according to research conducted by Linda Babcock, a professor at Carnegie Mellon.8)

The debt gap. Women hold about two-thirds of the student loan debt in the U.S., and, because of the wage gap, it can take them two years longer to pay off their loans, according to a 2017 report from the American Association of University Women.9 Talk to your advisor about consolidating your debt, suggests Sabbia. And check to see if you qualify for a federal repayment plan, which can cap monthly debt payments at 10% to 15% of your discretionary income.

The retirement gap. Women retire an average of two years earlier than men, with less in savings, notes the report. Women’s longer lives—and higher health-care costs—make it all the more important for women to start saving and investing early for retirement. Sabbia urges women to “familiarize yourself with resources, such as 401(k)s and Health Savings Accounts, that can offer tax advantages as you work toward building a more secure future. And develop a smart strategy for maximizing your income when you claim Social Security.

Most important, she says, “Find an advisor who understands women’s different life journeys—who really gets how things like the wage gap and career breaks can impact your progress toward your goals. And work those assumptions into your retirement projections.”

For more insights to help you bridge these gaps, download your copy of "Women & Financial Wellness: Beyond the Bottom Line" here.

1 “When Women Outearn Men,” Liberty Street Economics, August 5, 2015.
2 Home Buyer and Seller Generational Trends Report 2017, National Association of Realtors Research Department.
3 Women & Financial Wellness: Beyond the Bottom Line, a Merrill Lynch study conducted in partnership with Age Wave, 2018.
4 Women & Financial Wellness: Beyond the Bottom Line, a Merrill Lynch study conducted in partnership with Age Wave, 2018.
5 Global Investor Pulse Survey, BlackRock, 2016.
6 “Despite Setbacks, Women Investors Outperform Men,” US News and World Report, May 18. 2017.
7 Women & Financial Wellness: Beyond the Bottom Line, a Merrill Lynch study conducted in partnership with Age Wave, 2018.
8 Women’s Student Debt Crisis in the United States, American Association of University Women, 2016.
9 Women’s Student Debt Crisis in the United States, American Association of University Women, 2016.

 

 

April 12, 2018

Q&A: Fed Hikes, the Markets & Your Money

WHEN THE FEDERAL RESERVE (Fed) raised rates a few weeks ago, it was the first hike of the year. Last year, we had three hikes. How many more could we see in 2018, and how might they affect the markets and your finances? Below, Matthew Diczok, head of Fixed Income Strategy, Merrill Lynch Wealth Management, provides some answers.

Q: So, Matt, how many more rate hikes might we see this year?

A: We expect that the Fed is going to raise rates between three and four times in total this year—currently, we think there will be two more hikes, supported by the Fed’s positive outlook on the economy, especially the strong job market. The main reason they might hold the line on hikes is if inflation stays persistently below the Fed’s inflation target of 2%. Some other things that would prompt the Fed to put the brakes on are significantly tighter bank lending standards, a surge in unemployment, or any unforeseen shock to the US or global economy—none of which we expect right now.

“We expect that the Fed is going to raise rates between three and four times in total this year.” —Matthew Diczok, head of Fixed Income Strategy,
Merrill Lynch Wealth Management

Q: What impact could rate hikes have on our finances?

A: Mortgage interest, as well as the interest consumers pay on credit card debt, could get slightly more expensive as rates continue to rise. From an investor perspective, the effect on stocks and bonds varies. Typically when rates are rising, the market value of existing bonds declines. So the price of the bond or bond funds you own will most likely drop. But you’ll be able to use the interest you earn on your existing bonds and the principal you receive at their maturity to purchase new bonds or reinvest in bond funds with higher yields. As for stocks, gradually rising rates generally signal a favorable economic environment and should not in and of themselves be a real headwind for equity markets.

Q: Does it still make sense to own bonds now that interest rates are rising?

A: Regardless of what happens with rates, bonds provide steady income, and bond prices are generally both less volatile than stock prices and may move in a different direction. They are an important component of a well-diversified portfolio. Watch Market Decode: Why Bonds (Still) Matter, Even When Rates Are Rising below for more insights on the potential impact of interest rate hikes on the bonds you own. Then schedule some time with your advisor to review the amount of diversification you have in your portfolio.

Transcript of Video

Investing involves risk including the possible loss of principal investment.
Investing in fixed income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa.
Investments in high-yield bonds (sometimes referred to as “junk bonds”) offer the potential for high current income and attractive total return, but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a junk bond issuer’s ability to make principal and interest payments.
Income from investing in municipal bonds is generally exempt from Federal and state taxes for residents of the issuing state. While the interest income is tax-exempt, any capital gains distributed are taxable to the investor. Income for some investors may be subject to the Federal alternative minimum tax (AMT).
Investments focused in a certain industry may pose additional risks due to lack of diversification, industry volatility, economic turmoil, susceptibility to economic, political or regulatory risks, and other sector concentration risks.

 

 

March 29, 2018

4 Ways to Invest in Women’s Equality

WOMEN’S HISTORY MONTH seems a good time to call attention to lingering issues of inequality—like a still-stubborn wage gap, and the unequal representation of women in management and government. Increasingly, people are looking for ways to put their money where their values are by investing in companies that support women’s equality. In fact, research from Veris Wealth Partners indicates that assets under management invested in support of gender equality—so called “gender lens investing”—have grown from $560 million to $910 million from June 2016 to October 2017 alone.1

So what is gender lens investing? “It’s not small, soft, and pink,” says Jackie VanderBrug, Investment Strategist in the Global Wealth and Investment Management Chief Investment Office (GWIM CIO). It's the deliberate integration of gender-based data into financial analysis, with the expectation of finding additional opportunities and uncovering and mitigating risks."

Let’s break that down. From a practical perspective, it means investing in:

  1. Businesses founded, run or funded by women. VanderBrug points to data by MSCI ESG Research that shows that from 2011 to 2016 U.S. companies with at least three women on their boards experienced 10% median gains in return on equity and 37% gains in earnings per share.2
  2. Companies whose policies encourage gender equality. More and more companies are taking steps to support equality. For instance, a company might choose to drop sexist stereotypes from its advertising, or offer STEM tuition reimbursements, knowing that women in STEM experience a smaller gender wage gap and earn 35 percent more than those in non-STEM occupations.3
  3. Companies that make gender equality—from top management to the ground floor—a priority. According to VanderBrug, companies that exhibit greater gender diversity not only among senior leadership but also in the rest of the workforce may experience better performance, reduced turnover and higher employee engagement, all predictors of higher earnings.
  4. Companies that produce products or services that benefit women. VanderBrug points to efforts by one company to create software that is free of gender biases, and she reminds investors that women in the U.S. control 73% of all household spending.4

Gender lens investing, says VanderBrug, is “a way to identify areas of opportunity in the search for enhanced investment returns."5 If you’re interested in exploring it further, VanderBrug recommends meeting with your advisor and asking how you might increase your portfolio’s exposure to the growing economic power of women.

For more data and insights on the role that gender lens investing can play in your portfolio, read “Why Gender Lens Investing Is Good for the World—and Your Portfolio.”

1 Gender Lens Investing: Investment Options in the Public Markets. Veris Wealth Partners, October 2017.
2 The Tipping Point: Women on Boards and Financial Performance,” MSCI ESG Research (2016).
3Women in STEM: 2017 Update; United States Dept. of Commerce.
4 “Women Want More,” HarperBusiness, 2009
5 Past performance is no guarantee of future results.

 

 

March 12, 2018

As principal and founder of The Washington Update, Mr. Friedman is not affiliated with Merrill Lynch. Opinions provided are his, do not necessarily reflect those of Merrill Lynch and may be subject to change. Neither Merrill Lynch nor its advisors provide legal, tax or accounting advice. Please consult your tax advisor about the insights provided here.

Under the New Tax Law, Will Anyone Still Itemize?

IF YOU’RE ONE OF THE 30% OF TAXPAYERS accustomed to claiming individual deductions on your tax returns, your biggest question for the 2018 tax year may be whether or not to keep itemizing.

With the standard deduction nearly doubling to $24,000 for married couples ($12,000 for single filers), and new limits on individual deductions, the House Ways and Means Committee estimates that fewer than 10% of taxpayers will choose to itemize under the new tax law. While the changes won’t affect your 2017 returns due in April, it’s important to start thinking now about whether itemizing will make economic sense for 2018 and beyond, says noted tax expert Andrew Friedman1, principal and founder of The Washington Update.

The decision could affect everything from when you choose to have that elective surgery to how much you spend on a new home this year. “Unless your individual deductions exceed the standard deduction,” Friedman says, “you’re really not going to get a benefit from incurring individual expenses that might be deductible.” Below he shares more insights on when it might make sense to itemize.

Tip: Large expenses, such as for health care or charitable gifts, could make itemizing the way to go, says tax expert Andrew Friedman.

New limits. Deductions for state and local income and property taxes are capped at a total of $10,000. If you purchase a home, you can deduct interest on only $750,000 of mortgage debt, down from $1 million (existing mortgages are unaffected). Each of these limits makes it that much less likely that itemizing would exceed the value of the standard deduction, Friedman says.

When itemizing still pays. Large expenses, such as for health care or major charitable gifts, could make itemizing the way to go, Friedman adds. For 2017 and 2018, you can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (in 2019 that figure rises to 10%). As for giving, the law allows you to deduct donations totaling 60% of your annual income, up from 50%.

With a law as complex as this, the decision on whether or not to itemize is a personal one, Friedman says. Be sure to work with your tax specialist. And speak with your financial advisor about how the bill may affect your financial goals.

Get more tips and insights in  "Tax Reform & Your Life: What’s Changed?”  For a deeper dive, download the whitepaper "Tax Reform Accomplished: How Does the Legislation Affect Investors and Businesses?” by Andrew Friedman and Jeffrey B. Bush.

1Andrew H. Friedman, principal and founder of The Washington Update, is an outside tax authority, and is not affiliated with Merrill Lynch or any of its affiliates.
Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
Always consult your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy.
This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or financial instrument. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of issue.

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March 8, 2018

Women Get It: Financial Knowledge Is Power

THE HASHTAG FOR THIS YEAR’S International Women’s Day was #PressforProgress: progress on closing the wage gap, ending sexual harassment and achieving gender parity in business, in government, and everywhere else that men’s and women’s lives intersect. This annual celebration is designed to recognize the accomplishments of women (and they are many), but also to call attention to the progress that still needs to be made.

Movements like #MeToo, #TimesUp and #GirlsWhoCode have gained great visibility this year. Beneath all the headlines and the hashtags are women pursuing their careers, raising their families, and taking control of their finances. They recognize that with financial knowledge comes power—and the freedom to walk away from jobs that don’t pay well and colleagues who harass them; the freedom to invest in companies and candidates that support gender equality.

Women hold two-thirds of the $1.3 trillion in outstanding student loan debt in the U.S., according to a study by the American Association of University Women. For strategies on paying off your student loan debt, click here.

The wage gap widens with age, due to an accumulated loss of potential raises and promotions, as well as time spent out of the workforce to care for family. So how can you help to close that gap? Gender lens investing could help. Read more here.

But depending on where you live, you could be responsible for any debt taken on during your marriage. Your spouse’s existing debt could also be a roadblock if you apply jointly for a mortgage. Get tips for handling your finances when you tie the knot here.

According to 2016 research conducted by the Center for American Progress, a 26-year-old woman who takes five years off to care for her children could lose $500,000 or more in cumulative wages and retirement benefits over the course of her career. That’s a reduction of at least 19% in lifetime earnings. Get 5 questions to ask before becoming a stay-at-home parent here.

Women live five years longer than men, on average. One way that women can boost their income in retirement is to delay the age at which they start taking their Social Security payments. More tips here.

For International Women’s Day, we spoke with several Merrill Lynch advisors who devote their practices largely to serving women clients. They shared advice on the importance of financial empowerment, as well as some very personal stories about how they became interested in all things financial.

“A fascination with investments.” While many families spend Friday nights at the movies, as a young girl private wealth advisor Heather Goodbody was home watching PBS’s Wall Street Week with her parents. “I’ve always had a fascination with investments,” she says. “It was a regular discussion topic at our dinner table.”

Private wealth advisor Alyssa Moeder’s father also began teaching her about money at a young age—she bought her first stock at 16. But it wasn’t until September 11, 2001 that the lessons hit home. “My sister lost her husband on 9/11,” says Moeder. “She was not involved with her finances at all. That was really eye-opening for me. I was there to help, but it reinforced for me the importance of women being engaged in the family’s finances.”

“Girls want to understand the ‘why,’ not just the answer.” —Private Wealth Advisor Alyssa Moeder

“Hungry for information.” Financial knowledge is the key to independence, agree all the advisors we spoke with. “Learning can begin as soon as a young person starts earning an allowance,” says Goodbody. “After that, when a teenager enters the workforce, he or she should look at their first W-2. Sit down with someone to start truly understanding finances.”

“By age 25, young women should be investing as much as they possibly can,” says financial advisor Pamela Kiernan. Millennials are hungry for information, notes Moeder, who encourages her clients to bring their children in for meetings so that they can ask questions about money management. She’s often amazed by how much they already know. “Girls want to understand the ‘why,’ not just the answer.”

“I know so many 80-year-old widows who are completely money savvy and schooling their 50-year-old sons.” —Financial Advisor Pamela Kiernan

At the other end of the age spectrum, Kiernan says, “I know so many 80-year-old widows who are completely money savvy and schooling their 50-year-old sons.”

Women face some unique financial challenges as a result of the wage gap and the fact that they tend to live longer than men and often take years off from work to care for family. Test your knowledge of those challenges by reviewing the questions and answers in the slide show above. Then click through to articles that can provide you with insights to help you #PressforProgress toward your financial independence.

 

March 5, 2018

A Game Plan for Retiring Early

WE ALL HAVE DAYS WHEN WE DREAM ABOUT RETIRING EARLY, say at age 40 or 50. But the truth is, with people living (and working) longer, retiring at 60 or even 65 is considered “early” retirement these days. It’s also worth remembering that retiring early isn’t always something that happens by choice.

More than half of American workers retire earlier than expected, according to a 2017 Merrill Lynch study created in partnership with Age Wave, Finances in Retirement: New Challenges, New Solutions. The No. 1 reason, reports the study, is an unexpected health crisis. Other common reasons, says Cynthia Hutchins, director of Financial Gerontology at Bank of America Merrill Lynch, include layoffs or caregiving responsibilities.

Preparing to retire at any age requires more than just contributing to your 401(k). Below, Hutchins offers four tips to help you retire ready:

“Five years before retirement, meet with your financial advisor at least every six months to make sure you’re on track.”
—Cynthia Hutchins, director of Financial Gerontology at Bank of America Merrill Lynch

Save early—and often. “Starting as soon as you enter the workforce is ideal,” Hutchins says, but “it’s never too late.” Consider maxing out tax-advantaged accounts like a 401k, an IRA and a Health Savings Account (HSA).

Map out your retirement income. While saving and investing before retirement is key, coming up with a smart plan for turning those assets into an income stream may be even more important. Before you retire, speak with your financial advisor about a distribution strategy that can last throughout your retirement years.

Prepare for rising health care costs. Many people who retire early neglect to plan for the gap between retirement and eligibility for Medicare at age 65. “The average out-of-pocket costs for health care are $5000 to $6000 for a healthy 65-year-old each year,” Hutchins notes. And costs tend to rise as you grow older. Begin to estimate health care costs in retirement with your advisor and create plans to help cover medical bills and caregiving expenses for yourself and your spouse or other loved ones.

Connect with an advisor. “Five years before retirement, meet with your financial advisor at least every six months to make sure you’re on track,” Hutchins says. And if it turns out you’re not totally comfortable with the state of your retirement finances, work a few years longer.

That’s exactly what one client did. Even though she had hoped to retire at 40, Patricia postponed her retirement until she felt financially prepared for what’s ahead. “There were two things that really led me to the decision to retire eight years later than when we were contemplating,” she says. Listen to her story here.

Transcript of Audio

For audio clips, checklists, videos and other useful insights to help you retire when you want to, see our special feature “Tips, Stats—and True Stories—to Help You Retire Ready.”

Case studies are intended to illustrate brokerage products and services available at Merrill Lynch. You should not consider these as an endorsement of Merrill Lynch as an investment adviser or as a testimonial about a client's experiences with us as an investment adviser. Case Studies do not necessarily represent the experiences of other clients, nor do they indicate future performance. Investment results may vary. The investment strategies discussed are not appropriate for every investor and should be considered given a person’s investment objectives, financial situation and particular needs. Clients should review with their Merrill Lynch Financial Advisor the terms, conditions and risks involved with specific products and services.

 

February 20, 2018

3 Tips for Dealing with Market Volatility

AFTER ONE OF THE LEAST VOLATILE YEARS IN DECADES, most investors started 2018 wondering: “How much longer can this bull market last?” By the first week of February, they had an answer. Volatility resurfaced, big time, as the market entered a temporary “correction”—or 10% drop from a previous high—leaving many people a bit shaken and uncertain about what might come next.

As markets begin to show signs of recovery, the big question becomes: What should I do to manage my investments during these uncertain times? To help you deal with this uncertainty, we turned to Andrew Porter, director of Behavioral Finance at Merrill Lynch. He offered the following ideas.

Tune out the noise. The deluge of information we receive every day from our phones, TVs and computers might have something to do with increasing levels of uncertainty, says Porter. “We are inundated with new information all the time. There is no break. And that can be exhausting.” This information saturation—news alerts, stock tickers, tweets and posts—may lead to poor reactions. “We’re hardwired to want this amount of information, but not hardwired to deal with it,” he says. Consider blocking your smartphone’s push notifications and repurposing that time for reading print media or having an in-person conversation with someone you trust.

Train yourself to look longer-term. Porter asks, “If you use an app on your phone or computer to follow the stock market, is it showing you daily, weekly or monthly trending?” Experiment with setting it to “as long a time horizon as possible,” he advises. “That way you aren’t constantly processing a feed of changing information. Remember: The length of time you stay invested in the market is generally more important than market timing.”

Define your goals for investing. “Knowing what you want your money to achieve can help you through market movements,” Porter says. “Market volatility can mean different things for a near-term goal, like a home purchase, compared to a twenty-year retirement goal.” Consider talking over the following questions with your advisor:

  • Is my portfolio aligned to my purpose for investing?
  • What is a good schedule to review my goals and the progress of my investments?
  • If I feel an urge to take action, what choices could help me stay on track toward my goals?

These tips, along with regular conversations with your advisor, can prevent you from overreacting to uncertainty—or volatility—as well as helping you to become a more confident investor. “A clearly-defined process can provide stability and perspective to help you make more thoughtful decisions.”

For regular insights on managing your investments through fluctuating markets, visit “Dealing with Volatility: What You Need to Know Now.”

 

 

December 21, 2017

Tips for Talking Money with Your Financial Advisor in the New Year

SCHEDULING TIME WITH YOUR FINANCIAL ADVISOR might seem like one item too many on your to-do list right now. But a financial review could give you a chance to prepare for what 2018 may bring. “You call a financial advisor to get advice on how you’re positioned financially and how to reposition going forward,” says Mary Ann Bartels, head of portfolio strategy for Merrill Lynch Wealth Management. “This time of year is perfect for that.” And with tax reform in the picture, there’s a lot more to discuss.

We asked Bartels and Niladri Mukherjee, director of Portfolio Strategy for PBIG and International, Bank of America Global Wealth and Investment Management, for tips to help you make the most of this year-ahead meeting.

“You call a financial advisor to get advice on how you’re positioned financially and how to reposition going forward. This time of year is perfect for that.”
—Mary Ann Bartels, head of portfolio strategy, Merrill Lynch Wealth Management

Get personal—start the conversation with what’s happening in your life. “Talk about any changes—including marital status and health—that might affect your future goals,” says Bartels. If you are part of a couple, try to bring both people into the conversation. “Spouses and partners who are not intimately involved with making the financial decisions should become involved,” Mukherjee says. “Finances affect the whole family.”

Look at how your investments performed in 2017: Bartels points out that 2017 has been a remarkable year for equity performance. “Now is a good time to look at your asset allocation,” she notes, “because your stock portfolio has likely appreciated.” As a result, the percent you have invested in stocks versus bonds or other investment categories may have shifted beyond the risk level you’re comfortable taking. By revisiting your investment choices, you can see if they’re still appropriate for your goals and adjust accordingly —in a tax-efficient way, if possible.

Talk about risks and opportunities in the coming year: After the surprising lack of volatility in 2017, Bartels says, it may make a return in 2018. “Interest rate hikes, tax cuts, the geopolitical situation, continuing innovation in various industries all have a potential impact on the markets and should be part of the conversation as you review your investing approach for the coming year.” Also, keep in mind that tax reform has major implications for the financial decisions you make in almost every area of your life, adds Bartels, and should be discussed with your advisor.

Don’t forget to schedule your next appointment: “We live in a fast-paced world,” Mukherjee says, “so it’s important to keep the dialogue going.” By having regular conversations, your advisor can help keep you informed about your progress towards your financial goals. “The business and profit cycle, what central banks are doing, where valuations are attractive, the direction of interest rates—that’s what our advisors focus on when making investment recommendations in order to help clients differentiate the noise from the fundamentals,” says Mukherjee.

For continuing updates on tax reform and its impact on your financial life, visit our Washington Update page.

 

 

December 12, 2017

Try This Twist on Home Movies: Capture What Your Family Values Most

THE HOLIDAYS ARE A TIME FOR SHARING—not just gifts, but family lore. How your grandparents met. The summer Dad swam across Lake Winnipesaukee, on a dare, for charity. The app cousin Sarah created while on maternity leave—that’s now a multimillion-dollar business.

“Every family has favorite stories that live on from generation to generation,” says Stacey Allred, head of the Center for Family Wealth, Merrill Lynch Wealth Management. “And most of them contain a moral that reveals a lot about your family’s values and the way you’ve been raised.” A combination of social codes, financial practices and traditions, these values are a key part of your family’s legacy.

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“Nowadays, nearly everyone has a smartphone or digital camera, which makes it so much easier to capture and share important memories and the essence of what your family stands for.” —Stacy Allred, head of Merrill Lynch’s Center for Family Wealth

In years past, families might have chosen to write down their core purpose in a mission statement of sorts, and some still do. “Nowadays, nearly everyone has a smartphone or digital camera, which makes it so much easier to capture and share important memories and the essence of what your family stands for.” Doing so can provide an invaluable guide to the next generation.

To capture conversations around your family’s values, Allred suggests asking about your parents’ or grandparents’ definition of success. “You’ll find it goes way beyond the financials,” she says. You can also reach out to your Merrill Lynch advisor for “value cards”—bulleted statements and prompts—to help kick-start and steer these conversations. “It’s one thing to say, ‘Our family values generosity’,” says Allred. “It’s quite another to say, ‘Here’s why and how’.”

For more tips on how to capture your family’s favorite memories—and core values—on video this season, check out videographer Steve Pender’s tips, above.

For more insights on talking with your family about values and money across the generations, read Aging and Your Wealth.

 

Steve Pender and Family Legacy Video are not affiliated with Bank of America Corporation.

 

 

November 23, 2017

No Time Like the Present to Teach Your Kids About Giving

BLACK FRIDAY TRADITIONALLY KICKS OFF the holiday shopping season. Americans spent $1 trillion on holiday gifts in 2016—and that amount is expected to increase this year, according to the U.S. Commerce Department. But a cultural backlash against such frenzied seasonal consumerism is building—this year, in fact, some major retailers are closing their doors on Black Friday, giving their employees an extra day to spend with family. And some shoppers are turning to charitable giving in the name of family and friends, instead of buying gifts.

“The holidays provide the perfect opportunity to teach your children the power of giving,” says Stacy Allred, head of the Center for Family Wealth, Merrill Lynch Wealth Management. “In a society that touts consumerism, philanthropy is a great antidote.” So much so, in fact, that six years ago, the United Nations Foundation declared the Tuesday after Thanksgiving “Giving Tuesday.” Last year charitable donations on that day also increased from the previous year, reports the Foundation.

Transcript of Video

“Becoming an effective giver is a skill that must be developed, and it’s nice if you can start early.” —Stacy Allred, head of the Center for Family Wealth

Over the years, many Merrill Lynch clients have asked Allred for tips to help them foster generosity in their children. “Becoming an effective giver is a skill that must be developed, and it’s nice if you can start early,” Allred says. “Think of the toddler who’s very focused on herself—those 'me' years. As you’re giving her a gift, you could ask her to go choose a toy that she no longer needs and give that away.”

Reinforcing the importance of helping others can be as simple as going around the dinner table every night and asking, “What did you do to give back today?” It doesn’t have to be about money, Allred notes. “Did you open a door for someone, give them a smile, ask if you could do something for them?”

In the video above, Allred offers more practical tips for teaching kids of all ages how they can practice generosity and, through little acts of selflessness, make a big difference in the world around them.

Click here for more important money conversations to have with your family as you spend time with them over the holidays.

 

 

November 9, 2017

A New Report Uncovers the Financial Costs of Caregiving

MOST OF US KNOW SOMEONE who is a caregiver. Many of us (40 million, in fact) are caregivers, providing 37 billion hours of support to family members coping with the realities of aging and illness. Twenty million new caregivers joined their ranks last year, so chances are good that you, too, could become a caregiver (if you’re not already one).

Those are just some of the eye-popping stats revealed in a new report, “The Journey of Caregiving,” produced by Merrill Lynch in partnership with Age Wave, a thought leader in the study of aging and its implications for society.

While many previous studies have looked at caregiving’s physical and emotional challenges, very few have explored its financial costs. “Many caregivers find they have to dip into their savings or take on debt to cover expenses,” notes Cynthia Hutchins, director of Financial Gerontology for Bank of America Merrill Lynch.

Very few studies have explored the financial costs of caregiving. “Many caregivers find they have to dip into their savings or take on debt to cover expenses.”
—Cynthia Hutchins, director of Financial Gerontology

““We found that 92% of caregivers are financial caregivers, providing help paying the bills, managing investments, handling insurance forms, preparing taxes and monitoring bank accounts,” says Ken Dychtwald, CEO and founder of Age Wave. “When we delved into the many ways that caregiving can upend financial plans, it became evident that financial advice tailored to caregivers’ needs is required—and, in fact 66% of the people we surveyed said they could benefit from such help.”

One other striking statistic: Nearly half of financial caregivers don’t have the legal authorization to manage their loved ones’ finances, according to Gallup Polls and the AARP. “If you’re in the position of helping a family member with their finances, make sure they put a durable power of attorney in place, giving you the authority to do so,” suggests Hutchins. “It could go a long way in preventing family conflict.”

Merrill Lynch also has a Client Contact Authorization Form that can identify you as the person an advisor should contact if any financial problems arise in an aging loved one’s account. “This can be very helpful in the early stages of the caregiving journey, before you’re fully involved in the financial aspects of caregiving,” notes Hutchins.

Despite the many challenges, caregivers find tremendous satisfaction in their role: 91% are grateful to be able to provide care and most would gladly take on the role again, according to the report.

“I think that when I look back—when my parents are gone someday—I'll be glad for the time we had, and the way our relationship changed as they grew older,” said one caregiver who participated in the study.

DOWNLOAD THE STUDY to learn more about the costs of caregiving and how you can prepare—and share this study with someone you know who is a caregiver.

 

 

October 19, 2017

Need Help Deciphering the Markets? This Series Is for You

“YOU’VE PROBABLY HEARD ABOUT ‘EMERGING MARKETS’ over the years —maybe a news story about a debt or currency issue in one country or political unrest in another. But when it comes to investing in them, your first thought might be, ‘Thanks, but I think I’ll wait ’til they’re done emerging.’” With that, Nick Giorgi, an investment strategist in the Chief Investment Office at Bank of America Global Wealth & Investment Management, launches into the first of a new series of videos called Market Decode.

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The goal, says Giorgi, “is to demystify investing.” He explains, “It can sometimes seem to the average investor that people in wealth management speak a foreign language: puts, calls, sectors, asset allocation. Our aim with this series is to translate how the markets work into the kinds of conversations you might have with your colleagues at the watercooler. Or over dinner with friends.”

Market Decode will feature Giorgi and other strategists from the Chief Investment Office offering straightforward explanations and sharp insights into timely financial and economic topics. It’s designed to help you make well-informed investing decisions that can help you pursue your goals.

“Our aim is to translate how the markets work into the kinds of conversations you might have with your colleagues at the watercooler. Or over dinner with friends.”
—Nick Giorgi, investment strategist, Chief Investment Office, Bank of America Global Wealth & Investment Management

First up, Giorgi “decodes” emerging markets—24 countries around the world that are projected to grow twice as fast as the U.S. this year and next, according to the Chief Investment Office. Along the way, he investigates a phenomenon known as “home country bias,” or the tendency for investors to tilt their portfolios strongly toward domestic assets, which helps explain some people’s reluctance to invest in this sector.

Up next is “Market Decode: Some (Surprising) Ways to Invest in Tech.” “Keep your eye out for it and others in this series,” says Giorgi, “and talk with your advisor about the ideas we’ll be covering.”

For more investing insights from our Chief Investment Office, visit ml.com/insights.

 

 

October 5, 2017

Student Loan Debt: The $1.5 Trillion IOU

TWENTY MILLION COLLEGE STUDENTS started their freshman year this fall—and seven in 10 are likely to leave with debt. They’ll have lots of company: As of June 2017, Americans collectively owe $1.5 trillion in student loan debt, making it the second-largest source of consumer debt after mortgage loans, according to Merrill Lynch’s Chief Investment Office.

“Deciding which repayment plan is right for you requires hard choices and a solid strategy.”
—Jean Kim-Wall, director and wealth strategist at Merrill Lynch’s Strategic Wealth Advisory Group

How much individual graduates owe is partly dependent upon where they go to school: In Utah, for instance, the average student loan debt for the class of 2016 was only $19,975, while in New Hampshire it was $36,367, reports the Institute for College Access and Success, which surveyed more than 1,000 public and nonprofit four-year colleges in September of this year.

Finding the Right Pay-Back Plan for You

There are a number of repayment options available to graduates with federal student loan debt. They include a 10-year repayment plan, a graduated repayment plan with payments that start low and steadily increase, and various income-based plans. Those who work for the government or in the nonprofit sector may also be eligible for the Public Service Loan Forgiveness Program. If you owe private loans, the issuing bank sets the repayment terms.

“Deciding which repayment plan is right for you requires hard choices and a solid strategy,” says Jean Kim-Wall, director and wealth strategist at the Strategic Wealth Advisory Group at Merrill Lynch. “For instance, having lower monthly payments and more time to pay off your loan may sound tempting, but you’re likely to pay more in interest over the life of the loan.” For that reason, she says, “even if you’re eligible for an income-driven plan with a lower monthly payment, it may not be your best choice. If you can afford to pay more, do.”

Here are three more tips from Kim-Wall.

  • ✔  First, "try to pay the interest on your loans while you’re in school to prevent your principal from growing during your college years."
  • ✔  Also, “pay back the loan that has the highest interest rate first.”
  • ✔  Finally, consistency is key, since “regular payments show future lenders that you have discipline.”

 

Headed to grad school next? Read “The Basics Q&A: Paying Off Grad School Debt.”

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Got kids? Start saving!

  • Check out this webcast: "Your Financial Guide to College Planning.”
  • Use this college planning calculator to estimate how much you may need to put aside each month.

 

 

SEPTEMBER 21, 2017

Time to Get Smart About Artificial Intelligence

IT WAS THE “CHECKMATE” HEARD ‘ROUND THE WORLD: Twenty years ago, a computer called Deep Blue outsmarted the reigning world chess champ, and artificial intelligence, or AI, suddenly became more real than a sci-fi movie plot. Today, AI’s potential goes far beyond games, shaking up entire economic sectors—and people’s lives.

AI, defined as “the development of computer systems able to perform tasks normally requiring human intelligence,” already can be seen in the form of digital assistants, unmanned drones and facial recognition systems. And AI-driven products aimed at reducing operating costs, improving decision-making and enhancing consumer services are in the works across a range of industries. (See video below.)

Investors with deep pockets are taking note. Just this past year, AI startups raised a record $5 billion globally—a near-tenfold increase over the 2012 level, according to CB Insights.

What’s speeding up development—and investor interest? Ehiwario Efeyini, senior research analyst, U.S. Trust, Bank of America Private Wealth Management, offers three compelling reasons:

  • Intuitive Machine Learning. The traditional approach to programming computers has relied on system engineers writing vast sets of instructions. But that’s changing. New machine learning techniques allow computers to adapt to new situations on their own.
  • Unprecedented Quantities of Data. The vast amount of data now available from social media uploads, connected devices, digital transactions, health records and more can be crunched and analyzed as never before to program software that responds more accurately to the world.
  • Exponential Increases in Chip Speed. The use of graphical processing units (GPUs)—with their thousands of processing cores—makes it possible to run large numbers of similar operations at the same time. And tech companies are racing to build even faster “quantum computers” with chips that manipulate data using quantum mechanics.

What AI Could Mean for the Average Investor
Many real-world applications are still at the early stages, points out Efeyini. But over the coming years, you can expect AI software and related products to gain more widespread industrial and consumer adoption. “The biggest beneficiaries should be providers of AI-enabling technology and industries that gain the most in product enhancement from improvements in AI performance.”

Learn more about ““The Rise of the Machines” here. To read up on other timely market trends, check out the latest insights from Merrill Lynch’s Chief Investment Office below.

 

AUGUST 31, 2017

The Best Gift You Can Give Your Family

IN THE CATEGORY OF THINGS NO ONE WANTS TO TALK ABOUT, illness and death rank right up there. But putting steps in place now to spell out your health care and estate planning wishes could be one of the best things you can do for yourself—and your family.

“You take care of your family all your life. Preplanning for the time when you’re no longer here, or able to articulate your wishes, is just an extension of that—and a very caring gift,” says Cynthia Hutchins, director of Financial Gerontology at Bank of America Merrill Lynch. Here’s how to begin.

"You take care of your family all your life. Preplanning for when you’re no longer here is an extension of that—and a very caring gift.” —Cynthia Hutchins, director of Financial Gerontology

Start a “Big Picture” Conversation
As early as possible, meet with your loved ones, your financial advisor and estate attorney to begin translating your values into a long-term plan. Do you have a living will, which spells out your wishes to medical providers and your family? Is your estate structured in a way that will minimize the tax hit on your heirs? You might even want to think about planning your own funeral to take the pressure off your loved ones.

Assign Roles
Next, “think about what you would want to happen in different scenarios,” says Hutchins. This means naming those who’ll carry out your wishes, including the person you want to make health-care decisions for you if you can no longer do so, as well as an executor, trustee and guardian, if you have minor children. Be sure to check in with them to make sure they’re comfortable with any responsibilities you’ve given them.

Create a “Family Album”
“Your financial advisor can work with you to create a “family album,” a document that contains all the possible things your heirs may need to know about or get their hands on,” Hutchins says. That includes things like the title to your car, deed to your house, account numbers, online passwords, and contact information for everyone from attorneys to accountants.

The following useful resources, including a new and very comprehensive paper on “Aging and Your Wealth,” will help you get started having these important, but difficult conversations. The checklist “Loss, Legacy and Looking Ahead,” can provide your family with useful step-by-step financial direction—from dealing with probate issues to investment decisions. Share them today.

 

AUGUST 3, 2017

10 Midyear Market Lessons—and What to Make of Them

“WHILE SIX MONTHS HARDLY MAKE A TREND,” the first half of 2017 offers investors some interesting insights into the remainder of the year, says Joseph Quinlan, head of Market & Thematic Strategy in Merrill Lynch's Global Wealth & Investment Management Chief Investment Office (GWIM CIO). He and the GWIM CIO team take the pulse of the markets, tracking 10 developing trends in these recent CIO Weekly Letters, “Lessons at Midyear,” Part I and Part II, and in the CIO July Monthly Letter.

Test your knowledge of the markets by taking our True or False quiz below. Then tune in to our “Midyear Market Check: Are You Ready for the Opportunities Ahead?” webcast for insights and answers from Chris Hyzy, chief investment officer, Global Wealth & Investment Management; Karin Kimbrough, head of Investment Strategy, Merrill Lynch Wealth Management; and Niladri (Neel) Mukherjee, director of Portfolio Strategy, Private Banking & Investment Group and International.

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JULY 13, 2017

2 Times You Should Never Tap Your Home Equity

IT’S BIG. IT’S EXPENSIVE. And it’s many people’s largest asset. While your home may be the place where you lay your head and dream at night, it can also play a huge financial role in your life.

Making those monthly mortgage payments is a little like “enforced savings,” says David Steckel, head of Mortgage Product Strategy, Global Wealth & Investment Management. Your home’s value shouldn’t be overlooked as you build your financial strategies for the future—and the equity you hold in it is one resource you can draw upon to help you cover certain current expenses.

There are some expenses that you should never use your home equity for. Why put that place where you raise your family at risk, after all?

The simplest way to do so is through a home equity loan or line of credit, says Steckel. Many people turn to one of these to help them pay for major home renovations, for instance. But there are some expenses that you should never use your home equity for. After all, why put at risk that place where you raise your family and dream at night? Here, Steckel, gives his thumbs up—and down—on seven uses you might be considering.

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JUNE 22, 2017

Online College Degrees: Are They Worth the Money?

ONCE CONSIDERED A POOR SUBSTITUTE for the real thing, online higher-ed degrees are moving into the mainstream. These days they’re fully embraced by high-quality public and private not-for-profit institutions, which collectively serve 70% of all online students.1 Even the Ivy League is in on the action. And an increasing number of students are turning to online courses for their undergrad and grad degrees. Online M.B.A., anyone?

While the cost per credit tends to be similar for both online and on-campus students, their other advantages may be hard to ignore. The flexibility of being able to study at night and work by day that online programs offer students, as well as the cost efficiency of learning remotely (no housing or travel expenses to consider) make them a tempting option, says Richard Polimeni, director of Education Savings Programs at Bank of America Merrill Lynch. “Both federal aid and 529 accounts can be used to cover eligible expenses for online students,” he explains.

“Both federal aid and 529 accounts can be used to cover eligible expenses for online students.”
—Richard Polimeni, director of Education Savings Programs at Bank of America Merrill Lynch

As for how employers perceive these “virtual” degrees, “there’s a growing awareness that online or on-the-ground doesn’t matter. What matters is the institution,” says Dr. Joshua Kim, director of digital learning at the Dartmouth Center for the Advancement of Learning. If you’re looking to join the ranks of online degree seekers, Kim suggests that you consider the following.

Take a test run. One advantage of online education is that many courses are now offered à la carte. Taking an online course or enrolling in a multicourse certificate program can help you evaluate whether an online degree track is right for you.

Check out the reputation of the program—and opportunities for networking. Make sure the school you’re interested in is accredited by using this search tool from the Department of Education. “Keep in mind that it’s not just the degree that’s valuable—it’s the network,” says Kim. When researching programs, look for notices of group work and opportunities to meet in person. Pursuing an online degree at an in-state institution may also help build your network by making it easier to meet with classmates and professors in person. This might explain why more than half of online students attend programs in their state.2

Do your homework on the instructors. Online degrees may give you access to professors who are professionals working in your field. But a program run entirely by adjuncts should be a red flag, says Kim. “A good professor will be responsive and work hard to create a community among the online students, whether it be through discussions, a blog or group project work,” adds Debra Greenberg, director, Retirement and Personal Wealth Solutions at Bank of America Merrill Lynch, who teaches marketing as an adjunct professor at Rider University.

 

1,2WICHE Cooperative for Educational Technologies, “Distance Education Enrollment Report,” 2016.

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1 Andrew H. Friedman, principal and founder of The Washington Update, is an outside tax authority, and is not affiliated with Merrill Lynch or any of its affiliates.

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