Market update, Q4 2018: Happy New Year?

After spending much of the year seemingly on an upward escalator, global equity markets took a beating in the fourth quarter. Despite good economic indicators, policy tightening by the Fed and increasing concerns over future growth, especially in China, led to volatile markets and sharp declines in stock prices. It was a stark reminder that markets are forward-looking and unpredictable. Large-cap stocks in the S&P 500 declined 13.5% in the fourth quarter, erasing gains from the first three quarters, and ended the year down 4.4%. Stocks of smaller companies, represented by the S&P SmallCap 600, also dropped sharply, down 20.1% in the fourth quarter and ended the year with a loss of 8.5%.

International stock markets did no better. The MSCI Europe, Australasia, and Far East (EAFE) Index dropped 12.5% for the fourth quarter and finished the year down 13.8%. Concerns around the impact of the U.S. trade war with China negatively impacted investor sentiment.

Bonds were positive for the quarter as investors sought refuge from declining stock markets. The Barclays U.S. Aggregate Bond Index gained +1.6% in the fourth quarter, to end the year essentially flat.

The Financial Engines perspective.

2018 was a year where investor attitudes shifted suddenly. With a backdrop of strong GDP growth, employment gains, and solid earnings, the market rose for much of the year. But the fourth quarter changed the tune. Tightening policy moves by the Fed, an escalating trade war, and political turmoil in the U.S. and abroad all served to shift investor sentiment.

Markets are always trying to discern the future, and expectations can shift quickly. But, it’s important to put market returns in perspective. Remaining in a diversified portfolio at a risk level consistent with your goals is important to long-term success.

Have questions?

Financial Engines advisors are here to help.

©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
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Market summary: December 2018.

Stocks finish down after a turbulent December.

Uncertainty translated into a roller-coaster ride for markets in December. Please read on to find out what happened and how you can plan for your future.

What happened.

Stock markets took a roller-coaster ride in December. Large-cap stocks, measured by the S&P 500, moved by +/-1% on 10 of the 21 days markets were open. And there were some remarkable days: the index fell by 3.23% on one day and rose by 4.96% on another. By the end of the month, however, U.S. stock markets were down. The S&P 500 closed down 9.03%, with small- and mid-cap stocks falling by more. Overseas stocks fell less. Developed markets were down by 4.85% and emerging markets by 2.66% (MSCI EAFE and Emerging Markets Indices). These were helped by the dollar falling against other currencies. Bonds were a bright spot, with the Bloomberg Barclays Aggregate Index up 1.84%.

Why it happened.

Markets tend to be calmer when things are predictable — when news is slow. Uncertainty can lead to volatility, and December had plenty of it. Market participants were uncertain about trade and tariffs, the outlook for economic growth at home and abroad, the government shutdown, and the Federal Reserve’s plans for interest rates. When news was reported amid this uncertainty, markets moved strongly in response.

This volatility is certainly unsettling, and declines in stocks are unpleasant. Markets are unpredictable: No one knows what markets will do tomorrow, never mind next month or next year. But it’s important to remember why we invest in stocks in the first place.

What this means for you.

Financial Engines builds portfolios tailored to your situation and preferences. The higher your level of risk — because you’re a long way from retirement or you’ve told us you want to take risk — the more you could be affected by the fall in stocks in December. If your risk level is lower, this fall could be somewhat cushioned by your higher holdings of bonds. Either way, it is important that the information you provide us is up to date and complete. The new year is a great time to log in to your Financial Engines account, or call one of our advisors, to make sure we have the information we need to best meet your needs.

 

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©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

Market summary: November 2018.

After a bumpy month, stocks close up.

The market volatility that kicked up in October continued through November — but this time, most major categories of stocks ended in positive territory for the month. Read more to find out what happened and what it may mean for you.

 

What happened.

November was another turbulent month for the stock markets. The S&P 500, an index of large-cap U.S. stocks, moved up or down by more than 1% on eight of the month’s 21 trading days. Markets around the world saw similar gyrations. But after all the volatility, most major categories of stocks ended the month up.

The top-performing categories in November were emerging-market international stocks, up +4.12% (MSCI Emerging Markets Index), and domestic large-cap stocks, up + 2.04% (S&P 500). The laggard was international developed-market stocks, which closed the month down 0.13% (MSCI EAFE Index). Bonds were up +0.60% (Bloomberg Barclays Aggregate Index).

Why it happened.

The month’s financial headlines were dominated by the Federal Reserve’s stance on future interest-rate increases and the direction of U.S./China trade policy. When news headlines suggested progress was being made in trade talks, stocks rose; when it appeared tensions had increased, stocks fell.

As for interest rates, the Fed indicated in early November the likeliness of continued hikes. Because this stance was expected, it garnered little market reaction. Later in the month, when Fed Chair Jerome Powell shifted to say that interest rates are just below “neutral” — suggesting they may not increase very much after all — markets reacted positively.

Why the response this time? Because markets tend to react to new information, not to what’s already known or anticipated. November was a good illustration of this: The month’s volume of news about topics important to the economy prompted markets to move up and down frequently.

Against the backdrop of market volatility, the U.S. economy continues to perform solidly. Growth remains strong at 3.5% per year; the unemployment rate is still low at 3.7% (although new unemployment claims increased slightly late in the month); and U.S. retail sales growth beat expectations as consumers bought more electronics and appliances.

What this means for you.

In November, your portfolio will probably have seen an increase in value — the more of your portfolio that’s invested in stocks versus bonds, the greater that return may have been. This would be the case if you’re further from retirement or you’ve told us you have a higher risk tolerance.

In this month’s sidebar, we look at how taking advantage of the low fund expenses in many workplace retirement plans can help returns over time. At Financial Engines, we select from among the investment options your employer provides to build you as cost-effective a portfolio as we can while tailoring it to your circumstances. To do this, it’s important that we know as much as possible about your personal situation and risk preferences. Please let us know of any changes by logging into your Financial Engines account or calling one of our advisors.

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©2018 Edelman Financial Engines. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

3 financial items to put on your end-of-year to-do list.

This time of year, our lives can become full of to-do lists — gifts to buy for loved ones, grocery runs to stock up for the next celebration, and let’s not forget the biggest to-do list of all: your New Year’s resolutions. With all the holiday whirl, however, it’s easy to forget about your financial to-do list. This year make sure you include these three important steps.

Max out your retirement savings plan contribution.

The maximum amount an individual can contribute to a 401(k) plan in 2018 is $18,500 if they’re under the age of 50 and $24,500 if they’re 50 or older. The maximum amount an individual can contribute to an IRA in 2018 is $5,500 if they’re under the age of 50 and $6,500 if they’re 50 or older. If you haven’t yet reached your contribution limit, try to direct some dollars into those accounts. Your future self will thank you.

Plan your charitable gifts.

Contributions are deductible in the year made. Thus, donations made via credit card before the end of 2018 count for 2018 even if the credit card bill isn’t paid until 2019. Also, checks count for 2018 if they are mailed in 2018. Contributions made by text message are deductible in the year your contribution is charged to your telephone or wireless account (even though you might pay the bill the following year).

Cash donations, regardless of the amount, must be proven by a bank record such as a canceled check or credit card receipt showing the name of the charity, or a written document from the organization showing its name, the date and the amount donated. For noncash donations worth $250 or more, including clothing and household items, get a receipt from the charity showing its name, date of the gift and a reasonably detailed description of the property. If a donation is left at a charity’s unattended drop site, keep a written record that includes that same information, as well as the fair market value of the property at the time of donation and the method used to determine that value.

Optimize taxes.

If you have a taxable brokerage account, your advisor can help you balance any losses with any gains you may have to help minimize the tax bill you’ll owe in 2019. Essentially, you’ll want to sell off taxable investments that have losses, which reduces the gain that other assets in your account may have produced throughout the year — which in turn can help shrink the amount of taxes you’ll pay on your gains for the year. Also known as “tax harvesting,” the process can be complex to do correctly, so you’ll want to seek the help of a professional to cross this item off your to-do list.

Lists can be an important part of staying on track at any time of the year, but they become especially important in December.

This year, don’t forget to include these key financial tasks on your to-do list. They may not be as festive as putting up lights or planning for the next holiday celebration, but they’ll ultimately be helpful in achieving a goal that can be enjoyable any time of year: financial security.

 

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Market summary: October 2018.

Volatility returns to the stock market.

Back in September, the S&P 500 didn’t move by more than 1% on any given day. But during October, the S&P 500 gained or lost more than 1% on 10 of the trading days in the month. Read more to find out why volatility returned to the stock market during October and what it may mean for you.

What happened.

After reaching new all-time highs in September, the stock market pulled back in October. Volatility returned to most markets, similar to the episode that unfolded earlier this year. Stocks and bonds, at home and abroad, generally ended lower for the month, but a rally at the end of the month helped to ease some of the uncertainty.

Large cap stocks, represented by the S&P 500, dropped 6.84%. The MSCI EAFE Index, which tracks developed market international stocks, dropped 7.96%. The bond market experienced some bumps, too, as the Bloomberg Barclays Aggregate Bond Index fell by 0.79%.

The historically riskier investments like U.S. small-cap and emerging-market stocks experienced some of the most extreme volatility during the month. The U.S. small-cap S&P 600 fell by 10.48% and emerging-market stocks, as defined by the MSCI Emerging Markets Index, dropped by 8.71%.

This past month was similar to the phase that the stock market went through back in February and March. While both periods saw the stock market trend lower, the nature of the day-to-day gyrations were extreme. The S&P 500, for instance, moved up or down by more than 1% on 10 out of the 23 trading days in October

Why it happened.

Trying to understand the specific causes of short-term fluctuations is often an exercise in futility. But in October, there seemed to be two major stories that may have influenced markets.

Ongoing worries about trade tensions with China, and the impact this conflict might have on economics and corporate profits, might have been one of the main drivers of volatility in October. The impact of the trade tensions on corporate profits came into focus this past month as companies began reporting financial results for the third-quarter.

Generally, corporate earnings reports were positive with many companies exceeding expectations. But some major firms, such as Amazon and Caterpillar, reported disappointing revenues and, perhaps more importantly, lowered expectations for the coming quarter. Part of this might have been attributed to the escalating trade tensions between the U.S. and China.

A second story that might have contributed to volatility during the month was the continued rise in interest rates. The U.S. economy grew by +3.5% in the third quarter, but this strong growth contributed to concerns about the Federal Reserve raising interest. The worry is the Fed could raise rates faster than had been previously expected.

Volatile phases in the markets, like this last month, can feel unsettling. During these stretches, it can be helpful to keep your sights set on your long-term goals and to remember that risk is part of investing.

It might also be helpful to remember that just a few months ago, the market reached a new all-time high. Of course, this was during the recovery through the summer, after the last stretch of volatility this past spring. In this month’s sidebar, we offer some perspective on dealing with volatile markets.

What this means for you.

It’s likely that your portfolio experienced a negative return in October. If you’re worried or feeling anxious about your portfolio, now might be a good time to revisit your risk tolerance. This is a measure of how comfortable you are with the risk in your portfolio.

If you don’t know what your risk tolerance is, we can help you determine your comfort level and build a personalized portfolio from the investment options in your employer’s 401(k) retirement plan. Along with finding a comfortable risk level, we can consider when you want to retire and with how much, along with other information that you provide about your situation.

The more you can share about what you want to achieve, the better we can help with a personalized financial plan to help you reach your goals. Please log into your Financial Engines account or call one of our planners to make sure we have the information we need to help you stay on track and find a risk tolerance that you’re comfortable with.

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©2018 Edelman Financial Engines. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

Coping with medical bills.

A trip to the hospital can fill your mailbox with stacks of bills from the doctor, pharmacy, labs, emergency room, and more. Handling this paperwork can add stress to an already trying situation.

Here are some things you can do to keep your medical bills from piling up faster than you can pay them.

Know before you go.

  • Understand your policy’s rules and benefits before you have any medical procedures performed, if possible.
  • Make sure you know why all procedures or tests are being done.

Get organized.

Keep everything. Hang on to all receipts, insurance forms, bills, and anything else related to your medical care.

Organize. Keep track of your bills by making a file for each provider, arranged by service date.

Itemize. If you don’t receive itemized bills, request them. Errors are common, so review every bill when you receive it. A simple mistake, like an incorrect computer code, can be costly.

Review. Ask these questions when you get your bill:

  • Is your personal and insurance information correct?
  • Were you charged more than once for the same service?
  • Were you charged for something you refused or didn’t receive?
  • Is there anything that seems unreasonably high or questionable?

Don’t ignore the explanation of benefits form. This paperwork comes from your insurance company. It shows your medical services and dates provided. It also shows how much you and your plan will pay. If you don’t understand what you owe and why, call your insurance company and find out.

What if you think there’s a mistake?

Medical bills and the payment process can be complicated — services provided by different departments may be billed at different times, and insurance claims can lag behind the statements you receive from your provider. This is why it’s so important to keep your bills organized and review them for mistakes. Depending on the type of error you find, here’s what you should do:

Charged twice or billed for services you didn’t receive? Contact the medical billing office. Explain why you believe there has been a mistake, and ask them to correct the error. Give them a reasonable amount of time to correct the mistake, but be sure to follow up and make sure it was in fact fixed. Ask for the name of the person you talk to, and, if possible, get their direct extension so you can follow up with them personally.

Insurance not paying your bills, or covering less than you expected? Review the claim with your insurance company. Explain why you think they are wrong and what actions are needed to get it fixed. If they did make a mistake, find out when the claim will be updated, and when the hospital will receive payment. If you have to take action (for example, if they need more information from you in order to make a determination), understand exactly what it is that they need you to do and when you have to do it. Confirm the conversation with your insurance company representative through a letter or e-mail, and keep copies for your files.

Insurance claim denied? Get a written explanation of denial. If your claim is denied, make sure your insurance company explains in writing exactly why they won’t cover your costs. Then, use the insurance company’s appeal process as soon as possible to dispute it if you think you’ve been wrongly denied.

What if you just can’t pay?

First and foremost, don’t stick your head in the sand! Ignoring bills won’t make them go away — and can cause more problems you’ll need to deal with down the road. If you can’t pay your medical bills, contact your medical provider to work out a payment plan.  Many providers also have financial counselors on staff who can help you understand your options. If you find yourself behind on bill payments, keep the following tips in mind as well:

Maintain your credit rating. Try to keep the bill from being turned over to a collections agency to avoid damage to your credit. Don’t expect an agency to call your insurance company or vice versa. You’ll need to stay in contact with both, and keep them updated. If you have a past-due bill in collections because your claim was denied, keep working with your insurance company until it’s settled — the collection agency won’t do this for you. You should, however, write to the collections agency and explain the situation so that it’s documented with your account. Try setting up a long-term payment plan with the agency. That may stop them from reporting negative information about you to the credit bureaus.

Don’t let your health insurance coverage lapse. You may think you’re better off redirecting your monthly premium payments to cover your medical bills, but if something happens again, your financial problems will only get worse. Also, your recent illness may be considered a pre-existing condition that prevents you from getting coverage when you apply for a new policy.

Look for ways to save on your health insurance premiums. Talk to your insurance agent about increasing your deductible or co-payment amount. If you have a child in college, see if it has a low-cost health insurance plan that would allow you to take your child off your plan. Finally, a secondary plan might pay medical bills not covered by your primary plan. For example, your spouse’s group plan may give you some benefits. Or, if Medicare is your primary insurance, you may have a secondary policy through a retirement plan, another group plan, or an individual plan.

Managing your health can be challenging, and managing the bills that come along with it can seem overwhelming. If you take the actions above, however, you can improve your chances of staying financially fit.

 

Disclosure:
Part of this content has been contributed by Broadridge Investor Communication Solutions, Inc.
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Celebrating open enrollment season.

It’s the most wonderful time of the year – open enrollment season! While it may not necessarily produce as many warm and fuzzy memories as Thanksgiving or other holidays, open enrollment season is still something to look forward to. Setting up your benefits correctly can help you make the most out of your money in the coming year.

If you’re enrolling through your employer, find out their open enrollment timeframe, as many employers’ open enrollment seasons come to a close well before the end of the year.

Understand your plan.

Don’t just look at the total price of each plan – be sure you understand all the details of what it covers. Some less-expensive plans might seem like a good idea based on the price, but could ultimately backfire if you end up getting sick or injured and need care. That’s not to say those plans can’t make sense. These types of plans might be the right choice for healthy people who rarely need medical treatment. Before you sign up for anything, look at more than the price to make sure you’re clear on what is and isn’t covered.

Remember doctors and prescriptions.

Do you regularly see any specific doctors or other specialists? Similarly, do you take any brand-name prescription drugs? If so, you’ll want to double-check the policy you’re considering to see whether these doctors and medications are covered. If they’re not, you could end up paying quite a hefty price out of your own pocket.

Know your options.

Even if your employer offers insurance policies, you don’t necessarily have to purchase coverage through them. Under the Patient Protection and Affordable Care Act, if your coverage is deemed “unaffordable,” which means you’re paying more than 9.5% of your adjusted gross income for your policy, you can purchase coverage through a healthcare exchange instead. In addition, depending on your wages, you may be eligible for Medicaid.

If the deadlines pass and you don’t have coverage, you’ll pay a penalty. In 2017 and 2018, it was $695 for each adult over the age of 18 without coverage, with fees for households that include children under the age of 18 maxed at $2,085, or 2.5% of taxable income, whichever is more.[1]

The penalty will be eliminated beginning in 2019; however, if you weren’t covered in 2018, you’ll still pay a fee when you file your taxes in 2019.

Open enrollment season with healthcare exchanges is already underway.

Be aware of deadlines.

Open enrollment for all healthcare exchanges, where you can purchase health insurance policies made available by the Patient Protection and Affordable Care Act, runs from Nov. 1 to Jan. 31. If you want your coverage to begin right on Jan. 1, experts recommend you sign up no later than Dec. 15.[2] Of course, there are circumstances that allow you to file outside of this time window, such as having a baby or moving to a new state, but in general, be sure to get your paperwork in before the deadline passes.

If you really want to make the most of the season, talk with an expert about your options, such as a human resources professional at your company or an insurance agent — and use it as a time to think about other financial festivities as well, such as retirement investments. Cheers to the season — happy planning!

 

[1] https://www.healthcare.gov/fees/

[2] https://www.healthcare.gov/quick-guide/dates-and-deadlines/

Market update, Q3 2018: Another solid quarter.

Despite continuing political tensions and bitter disagreements over trade policy, equity markets delivered strong performance in the third quarter of 2018. At the macro level, economic conditions remain excellent, with growing earnings, improved sentiment, and robust job growth. Large-cap stocks in the S&P 500 gained +7.7% for the quarter and are up +10.6% year to date. Small-cap stocks, represented by the S&P 600, gained +4.7% in the third quarter. As expected, the Federal Reserve (Fed) continued its policy of gradual short-term interest-rate hikes, but this did little to dampen equity-market enthusiasm.

Unlike the second quarter, developed-market international stocks also had positive returns. The MSCI Europe, Australasia, and Far East (EAFE) Index gained +1.4% for the third quarter but was still modestly negative for the year. Emerging-market stocks were down 1.1% for the quarter.

Bonds were again flat for the quarter, despite additional rate hikes by the Fed. The Bloomberg Barclays U.S. Aggregate Bond Index finished where it started three months ago. For the year, bonds remained down 1.6%. The yield curve remains relatively flat as inflation expectations continued to be muted.

The Financial Engines perspective.

The third quarter had no shortage of newsworthy events. An escalating trade war with China dominated economic headlines, although its effect on the economy has been modest so far. The record bull market in equities continues, but for how long, no one can be sure. A contentious midterm election is on the horizon, and any number of events could trigger new market volatility. Maintaining a broadly diversified portfolio is crucial to achieving your long-term goals and protecting against unexpected market moves.

Have questions?

Our advisors are here to help.

 

©2018 Financial Engines. All rights reserved. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Financial Engines, LLC. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
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Market summary: September 2018.

Markets are mixed while the U.S. economy stays strong.

We saw mixed returns from stocks here at home and abroad, with foreign stocks performing a bit better than domestic. Bonds were down slightly in what turned out to be a rather calm month — the S&P 500 didn’t move by more than 1% on any day in September. Read more to find out why markets behaved as they did last month and what it may mean for you.

What happened.

September was a mixed month for stocks both at home and abroad. Foreign equities fared better: Developed-market stocks were up +0.87% and emerging-market stocks were down 0.53% (MSCI EAFE Index and MSCI Emerging Markets Index), while at home, large-cap stocks were up +0.57% and small caps were down 3.17% (S&P 500 and 600). With interest rates creeping up, bonds were down 0.64% (Bloomberg Barclays Aggregate Bond Index). In U.S. markets, September was another calm month: The S&P 500 didn’t move up or down by more than 1% on any day.

Why it happened.

Once again, saber rattling over trade affected markets, primarily in emerging markets that are more trade dependent. Those stocks fell sharply several times early in September as the U.S. threatened more tariffs. Some big up days followed when the tariffs were imposed at lower-than-expected rates.

The Federal Reserve raised short-term interest rates by 0.25% in September — the third increase this year — and signaled further rises are on the way. The federal funds rate is now at a range of 2% to 2.25%. As this hike was widely anticipated, it didn’t seem to unsettle markets.

We also saw more good news about the job market, with wages rising at the strongest rate since the Great Recession and the unemployment rate sticking at 3.9%.

Having reached the end of the third quarter, this is a good time to look back at the year so far. The big winner has been U.S. small caps, up +14.54% this year; the biggest detractor is international emerging-market stocks, down 7.68% year to date. In 2017, which was a banner year for all major classes of stocks, it was the reverse: Small caps returned the least (+13.23%) and emerging markets the most (+37.28%). This reversal illustrates the relative risk, generally speaking, of these types of stocks in comparison to U.S. large caps and international developed-market stocks. Their inherent risk is why we tend to include relatively small amounts of U.S. small caps and international emerging-markets in the portfolios we build.

As always, we emphasize the importance of investing for the long term. It’s been 10 years since Lehman Brothers went bankrupt, which was a key moment in the financial crisis. In this month’s sidebar, we look at what’s happened since and the lessons we may learn.

What it means for you.

In September, different markets moved in different directions, so your diversified portfolio is likely to be only slightly up or down. We build your personalized portfolio from the investment options in your employer’s 401(k) retirement plan. In addition to evaluating the available investments, we consider your risk preference, how long you have until retirement, and the other information you give us about your situation.

The more you tell us about yourself — your goals, other retirement assets, and how comfortable you are with risk — the better we can tailor your investments to your unique situation. Please log into your Financial Engines account or call one of our advisors to make sure we have the information we need.

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©2018 Financial Engines. All rights reserved. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Financial Engines, LLC. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

Healthcare costs in retirement.

Retirement is a life phase rooted in the American psyche — it’s something we work toward our whole lives. After decades of the daily grind on the job, when retirement rolls around, we want to be able to relax and do what we’ve always dreamed of doing — be it traveling the world, taking up new hobbies, or simply enjoying time with family.

When we dream about retirement, we don’t typically envision those golden years dominated by steep medical bills and financial stress. Yet, whether you realize it or not, medical care can consume a large portion of your retirement budget.

Most people think that they can rely on Medicare to take care of their medical expenses during retirement, but that’s not the case. In fact, a recent report1 by the Employee Benefit Research Institute (EBRI) showed that Medicare beneficiaries will need substantial savings to make up for gaps in the coverage.

Here are a few important takeaways from the report;

  • In 2017, a 65-year-old man needs $73,000 in savings and a 65-year-old woman needs $95,000 if each have a goal of having a 50 percent chance of having enough savings to cover premiums and median prescription drug expenses in retirement. If they want a 90 percent chance of having enough savings, the man needs $131,000 and the woman needs $147,000.  
  • A couple with median prescription drug expenses needs $169,000 if they have a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement. If the couple wants a 90 percent chance of having enough savings, they need $273,000. 
  • For a couple with drug expenses at the 90th percentile throughout retirement who want a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings is $368,000 in 2017. 

And with the retiree share of healthcare costs likely to go up in the future, it’s more important than ever to plan for these expenses in retirement.

If you are planning for or approaching retirement, be sure you understand the impact of healthcare expenses on your retirement strategy. If you don’t know how paying for health care could affect your retirement or whether you’re saving enough for your future needs, try talking to a financial professional. You need a plan to help you afford future medical expenses and thus help limit the negative impact those costs can have on the retirement you’ve been dreaming about.

1 Employee Benefit Research Institute, Notes, December 20th – Vol. 38, No. 10
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