What all new and prospective homeowners need to know.

If you arrange a mortgage, your lender will want you to have homeowners insurance. This coverage is critical for protecting your home and personal property against various potential liabilities.

A homeowners insurance policy is actually a package of coverages. These policies commonly offer the following forms of protection:

*Dwelling coverage insures your house and any attached structures, including fixtures such as plumbing and electrical and HVAC systems, against damages.¹

*Other Structures coverage is included to compensate you for damage to structures unattached to the main dwelling on your property, such as a detached garage, tool shed, or fence.¹

*Personal Property coverage addresses damage to your personal possessions, such as your appliances, furniture, electronics, and clothes.¹

*Loss of Use coverage reimburses you for additional living expenses if you are unable to live in your home due to damages suffered.¹

*Personal Liability coverage is designed to pay out claims if you are found liable for injuries or damages to another party. As an example, say someone attends a barbeque held in your backyard, then stumbles over a tree root and breaks a wrist or an ankle.¹

*Medical Payments coverage pays the medical bills incurred by people who are hurt on your property, or hurt by your pets. This is no-fault coverage. If someone is hurt at your house, any resulting medical bills may be sent by that person to your insurer.¹

These coverages pertain only to losses caused by a peril covered by your policy. For instance, if your policy doesn’t cover earthquake damage, then losses will not be reimbursed.¹

The types of covered perils will depend on the type of policy you buy. Special Form policies are the most popular, since they insure against all perils, except those specifically named in the policy. Common exclusions include earthquakes and floods. Typically, flood insurance is obtained through the National Flood Insurance Program, while earthquake coverage may be obtained through an endorsement or a separate policy. Some homeowners are reluctant to buy flood or earthquake coverage; they think it is too expensive and may never be needed. The thing is, the future cannot always be guessed by looking at the past.²

Your policy will of course limit the amount of covered losses. If you have a valuable art collection or jewelry, you may want to secure additional insurance on those items.

When you scrutinize a policy, see if it insures your residence for replacement cost or actual cash value. Actual cash value is less preferable: it may not cover all your losses, as the value of your personal property can be affected by wear and tear, and your home’s value can be affected by housing market fluctuations. If your home is insured for replacement cost, then the insurance carrier will pay the expenses of using materials of similar kind and quality to rebuild or repair your home.³

As a last note, you may also want Umbrella Liability coverage. Do you consider yourself wealthy? You may find the liability limits on your current homeowners policy inadequate. For a greater degree of coverage, you might elect to complement it with an umbrella policy.⁴

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - https://www.iii.org/article/what-covered-standard-homeowners-policy [12/3/18]

2 - https://www.valuepenguin.com/types-homeowners-insurance [9/25/18]
3 - https://www.thebalance.com/replacement-cost-insurance-vs-actual-cash-value-4154015 [11/18/18]
4 - https://www.kiplinger.com/article/insurance/T028-C000-S002-why-you-need-an-umbrella-insurance-policy.html [9/25/18]

Watch out for crooks impersonating I.R.S. agents (and financial industry professionals).

Do you know how the Internal Revenue Service contacts taxpayers to resolve a problem? The first step is almost always to send a letter through the U.S. Postal Service to the taxpayer.¹

It is very rare for the I.R.S. to make the first contact through a call or a personal visit. This happens in two circumstances: when taxes are notably delinquent or overdue or when the agency feels an audit or criminal investigation is necessary. Furthermore, the I.R.S. does not send initial requests for taxpayer information via email or social media.¹  

Now that you know all of this, you should also know about some of the phone scams being perpetrated by criminals claiming to be the I.R.S. (or representatives of investment firms). 

Scam #1: “You owe back taxes. Pay them immediately, or you will be arrested.” Here, someone calls you posing as an I.R.S. agent, claiming that you owe thousands of dollars in federal taxes. If the caller does not reach you in person, a voice mail message conveys the same threat, urging you to call back quickly.¹

Can this terrible (fake) problem be solved? Yes, perhaps with the help of your Social Security number. Or, maybe with some specific information about your checking account, maybe even your online banking password. Or, they may tell you that this will all go away if you wire the money to an account or buy a pre-paid debit card. These are all efforts to steal your money.

This is over-the-phone extortion, plain and simple. The demand for immediate payment gives it away. The I.R.S. does not call up taxpayers and threaten them with arrest if they cannot pay back taxes by midnight. The preferred method of notification is to send a bill, with instructions to pay the amount owed to the U.S. Treasury (never some third party).¹ 

Sometimes the phone number on your caller I.D. may appear to be legitimate because more sophisticated crooks have found ways to manipulate caller I.D. systems. Asking for a callback number is not enough. The crook may readily supply you with a number to call, and when you dial it someone may pick up immediately and claim to be a representative of the I.R.S., but it’s likely a co-conspirator – someone else assisting in the scam. For reference, the I.R.S. tax help line for individuals is 1-800-829-1040. Another telltale sign; if you ever call the real I.R.S., you probably wouldn’t speak to a live person so quickly – hold times can be long.¹

Scam #2: “This is a special offer to help seniors manage their investments.” Yes, a special offer to become your investment advisor, made by a total stranger over the phone. Of course, this offer of help is under the condition that you provide your user I.D. and password for your brokerage account or your IRA.²  

No matter how polite and sweet the caller seems, this is criminal activity. Licensed financial services industry professionals do not randomly call senior citizens and ask them for financial account information and passwords – unless they want to go to jail or end their careers.

Scam #3: “I made a terrible mistake; you must help me.” In this scam, a caller politely informs you that the U.S. government is issuing supplemental Social Security payments to seniors next year. Do you have a bank account? You could enroll in this program by providing your account information and your Social Security number.

Oh no, wait! The caller now tells you that they’ve made a huge mistake while inputting your account information – and your account was accidentally credited with a full payment even though you were not enrolled. The distraught caller will now attempt to convince you that they will lose their job unless you send over an amount equal to the lump sum they claim was mistakenly deposited. If you refuse, the caller may have a conversation with a “boss” who demands that money be withdrawn from your account.

Scam #4: “The I.R.S. accidentally gave you a refund.” In this sophisticated double-cross, thieves steal your data, then file a phony federal tax return with your information and deposit a false refund in your bank account. Then, they attempt to convince you to pay them the money, claiming they are debt collectors working for the I.R.S. or I.R.S. agents.

Should anyone call and try to trap you with one of these scams, hang up. Next, report the caller ID and/or callback number to the I.R.S. at This email address is being protected from spambots. You need JavaScript enabled to view it. with the subject line “I.R.S. Phone Scam.” You can also notify the Department of the Treasury (treasury.gov) and the Federal Trade Commission (ftccomplaintassistant.gov); list “I.R.S. Telephone Scam” in the notes. Regarding scam #4, if you really do receive an erroneous federal (or state) tax refund, you should notify your tax professional about it as soon as you can and arrange its return. You may also need to close the involved bank account if you sense you have been victimized.^1,3

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - irs.gov/newsroom/irs-continues-warning-on-impersonation-scams-reminds-people-to-remain-alert-to-other-scams-schemes-this-summer [5/31/18]

2 - money.usnews.com/money/retirement/aging/articles/2018-05-09/10-financial-scams-to-avoid-in-retirement [5/9/18]

3 - forbes.com/sites/kellyphillipserb/2018/02/13/irs-issues-urgent-warning-on-new-tax-refund-scam-and-its-not-what-youd-expect [2/13/18

That truth must always be recognized.                   

When financial markets have a bad day, week, or month, discomforting headlines and data can swiftly communicate a message to retirees and retirement savers alike: equity investments are risky things, and Wall Street is a risky place.

All true. If you want to accumulate significant retirement savings or try and grow your wealth through the opportunities in the markets, this is a reality you cannot avoid.

Regularly, your investments contend with assorted market risks. They never go away. At times, they may seem dangerous to your net worth or your retirement savings, so much so that you think about getting out of equities entirely.

If you are having such thoughts, think about this: in the big picture, the real danger to your retirement could be being too risk averse.

Is it possible to hold too much in cash? Yes. Some pre-retirees do. (Even some retirees, in fact.) They have six-figure savings accounts, built up since the Great Recession and the last bear market. It is a prudent move. A dollar will always be worth a dollar in America, and that money is out of the market and backed by deposit insurance.

This is all well and good, but the problem is what that money is earning. Even with interest rates rising, many high-balance savings accounts are currently yielding less than 0.5% a year. The latest inflation data shows consumer prices advancing 2.3% a year. That money in the bank is not outrunning inflation, not even close. It will lose purchasing power over time.^1,2

Consider some of the recent yearly advances of the S&P 500. In 2016, it gained 9.54%; in 2017, it gained 19.42%. Those were the price returns; the 2016 and 2017 total returns (with dividends reinvested) were a respective 11.96% and 21.83%.^3,4

Yes, the broad benchmark for U.S. equities has bad years as well. Historically, it has had about one negative year for every three positive years. Looking through relatively recent historical windows, the positives have mostly outweighed the negatives for investors. From 1973-2016, for example, the S&P gained an average of 11.69% per year. (The last 3-year losing streak the S&P had was in 2000-02.)⁵

Your portfolio may not return as well as the S&P does in a given year, but when equities rally, your household may see its invested assets grow noticeably. When you bring in equity investment account factors like compounding and tax deferral, the growth of those invested assets over decades may dwarf the growth that could result from mere checking or savings account interest.

At some point, putting too little into investments and too much in the bank may become a risk – a risk to your retirement savings potential. At today’s interest rates, the money you are saving may end up growing faster if it is invested in some vehicle offering potentially greater reward and comparatively greater degrees of risk to tolerate.

Having a big emergency fund is good. You can dip into that liquid pool of cash to address sudden financial issues that pose risks to your financial equilibrium in the present.

Having a big retirement fund is even better. When you have one of those, you may confidently address the biggest financial risk you will ever face: the risk of outliving your money in the future.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - valuepenguin.com/average-savings-account-interest-rates [10/4/18]

2 - investing.com/economic-calendar/ [10/11/18]

3 - money.cnn.com/data/markets/sandp/ [10/11/18]

4 - ycharts.com/indicators/sandp_500_total_return_annual [10/11/18]

5 - thebalance.com/stock-market-returns-by-year-2388543 [6/23/18]

How global returns and proper diversification are affecting overall returns.

“Why is my portfolio underperforming the market?” This question may be on your mind. It is a question that investors sometimes ask after stocks shatter records or return exceptionally well in a quarter.

The short answer is that while the U.S. equities market has realized significant gains in 2018, international markets and intermediate and long-term bonds have underperformed and exerted a drag on overall portfolio performance. A little elaboration will help explain things further.

A diversified portfolio necessarily includes a range of asset classes. This will always be the case, and while investors may wish for an all-equities portfolio when stocks are surging, a 100% stock allocation is obviously fraught with risk.

Because of this long bull market, some investors now have larger positions in equities than they originally planned. A portfolio once evenly held in equities and fixed income may now have a majority of its assets held in stocks, with the performance of stock markets influencing its return more than in the past.¹

Yes, stock markets – as in stock markets worldwide. Today, investors have more global exposure than they once did. In the 1990s, international holdings represented about 5% of an individual investor’s typical portfolio. Today, that has risen to about 15%. When overseas markets struggle, it does impact the return for many U.S. investors – and struggle they have. A strong dollar, the appearance of tariffs – these are considerable headwinds.^2,3

In addition, a sudden change in sector performance can have an impact. At one point in 2018, tech stocks accounted for 25% of the weight of the S&P 500. While the recent restructuring of S&P sectors lowered that by a few percentage points, portfolios can still be greatly affected when tech shares slide, as investors witnessed in fall 2018.⁴

How about the fixed-income market? Well, this has been a weak year for bonds, and bonds are not known for generating huge annual returns to start with.³

This year, U.S. stocks have been out in front. A portfolio 100% invested in the U.S. stock market would have a 2018 return like that of the S&P 500. But who invests entirely in stocks, let alone without any exposure to international and emerging markets?³

Just as an illustration, assume there is a hypothetical investor this year who is actually 100% invested in equities, as follows: 50% domestic, 35% international, 15% emerging markets. In the first two-thirds of 2018, that hypothetical portfolio would have advanced just 3.6%.³

Your portfolio is not the market – and vice versa. Your investments might be returning 3% or less so far this year. Yes – this year. Will the financial markets behave in this exact fashion next year? Will the sector returns or emerging market returns of 2018 be replicated year after year for the next 10 or 15 years? The chances are remote.

The investment markets are ever-changing. In some years, you may get a double-digit return. In other years, your return is much smaller. When your portfolio is diversified across asset classes, the highs may not be so high – but the lows may not be so low, either. When things turn volatile, diversification may help insulate you from some of the ups and downs you go through as an investor.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - seattletimes.com/business/5-steps-to-take-if-the-bull-market-run-has-you-thinking-of-unloading-stocks/ [8/25/18]

2 - forbes.com/sites/simonmoore/2018/08/05/how-most-investors-get-their-international-stock-exposure-wrong/ [8/5/18]

3 - thestreet.com/investing/stocks/dear-financial-advisor-why-is-my-portfolio-performing-so-14712955 [9/15/18]

4 - cnbc.com/2018/04/20/tech-dominates-the-sp-500-but-thats-not-always-a-bad-omen.html [4/20/18]