Market Commentary Q3 2021

Fall’s bumpy ride and China in the news

Since the bottom of the COVID-induced market downturn in Spring 2020, it seems like the equity markets have only been going one way: up. However, analysts and investors are keenly aware that, on average, September is the worst month for the S&P 500 (U.S. large-cap stocks), and September 2021 was no exception. The S&P 500 fell 4.8% in September, its largest monthly drop since March 2020. However, the index still finished the third quarter up slightly by 0.6%, its sixth consecutive quarter of gains. Volatility re-entered the bond and equity markets during the third quarter, as well, driven by talk of higher inflation, U.S. Federal Reserve tightening, uncertainty surrounding the Democratic infrastructure and spending bills, possible higher taxes, and a potential U.S. government shutdown. As a result, investors began to sell Treasury bonds in earnest. U.S. core bonds ended the quarter down almost 2% year-to-date on a total return basis. The resulting climb in bond yields has become a headwind for U.S. mega-cap technology stocks, as well, whose long-term earnings become less valuable as yields go up. China’s overheated property market also caused ripples with news of a possible default by real estate developer China Evergrande on its debt. A potential collapse of Evergrande along with ongoing concerns in China of slowing economic growth, a government crackdown on large technology companies, and continued government interference in the equity markets sector led to negative returns in the third quarter for emerging market stocks. Your BFA Investment Committee reminds you of four things, however:

  1. As Scott McLeod’s recent webinar explained, volatility is normal and should be expected as we are overdue for some this year.
  2. Our fixed income portfolio goes beyond U.S. core bonds and uses managers with flexible mandates to take advantage of higher yields (non-investment grade corporate bonds), geography (international bonds), and to shelter taxable income when practical (municipal bonds).
  3. Equities including real estate investment trusts (REITs) have shown over time to be an effective inflation hedge.
  4. Our fund selection in the emerging market allocation has outperformed the index due to its focus on smaller and more value-oriented companies.

tax planning in the fourth quarter for client portfolios.

Mutual funds are required to distribute their realized capital gains by year-end, with most of those distributions occurring in December. We will analyze our client holdings for material distributions (i.e., 5% or more of net asset value) and may take action to avoid those distributions. We will also look for opportunities to harvest further capital losses in client portfolios. Given the specter of higher capital gain taxes, loss carryforwards have become even more valuable. These actions could save on taxes for you.

Financial Planning Concepts

4 tips to living the retirement of your dreams

Running out of money during retirement is a fear that nearly everyone faces at one time or another. Rest assured, your friends across the dinner table or on the golf course are just as concerned as you are (at least, at times) about not having enough. Even those you might consider “wealthy” have similar concerns. Nevertheless, there are specific strategies that successful retirees employ to protect and grow their retirement assets, live fulfilled, and have peace of mind. Here are four proven steps for a successful Retirement Plan:

  1. Make sure you always have an up-to-date Retirement Plan. Whether you are still working, saving, and preparing for retirement or living the retirement dream now, you should have a realistic Retirement Plan. By projecting your cash flows and considering portfolio growth and taxes, the best Retirement Plan does two things: First, it ensures that you can meet your expectations and have an action plan to do it. Second, it provides peace of mind by showing the long-term implications of your current actions. When you face your fears head-on, you find peace in knowing that you control your destiny. Your Retirement Plan is the only way to accomplish this goal.
  2. Manage your spending around your goal. If you are still working, your Retirement Plan defines what savings will be required to meet your standard of living during retirement. “Pay yourself first” by investing what your Plan requires before you start spending. If you are in retirement, use your Retirement Plan to help you develop a spending strategy. Unfortunately, bond yields and stock returns may be lower in the next few years. Knowing what you can spend by having a cash-flow-based plan is critical. The Plan will account for irregular expenses (car purchases, a home remodel, etc.) and help you control your spending to meet your long-term retirement goals.
  3. Manage your distributions during retirement. One of the easiest ways to maximize your retirement spending is by avoiding distributions during market declines. After a fall, allow your portfolio to recover before making your next withdrawal. Waiting will help ensure that you are always “selling high,” a key to a successful retirement strategy. Maintain an emergency fund or use a Home Equity Line of Credit as a spending cushion during market volatility.
  4. Protect your savings with insurance. There are many risks to your Retirement Plan, but you can protect yourself with insurance. Use “longevity insurance” to protect your income, long-term care insurance to cover unexpected medical expenses or life insurance to replace your spouse’s income. There are many new tools available to help you mitigate these risks.

Brown Financial Advisory is committed to helping you achieve your long-term goals by updating your Retirement Plan regularly and guiding you through the strategies you need to live the retirement of your dreams. Above all, we want you to have the peace of mind you deserve and are happy to help you get there.

Market Commentary Q2 2021

Market Growth and Earnings 

The U.S. stock market was positive through the second quarter of 2021, bolstered by the accelerating economic growth of the U.S. economy. JP Morgan reports that,

“Real GDP numbers for the first quarter showed a strong 6.4% annualized growth. However, April data for consumer spending, inventories, and durable goods orders reinforced our view that this growth is accelerating and that second-quarter growth could be over 10%.” 

Even if the economy should begin to slow in the second half of the year, it is not unreasonable to expect the fourth quarter to grow 7.5% over 2020. Amazingly, this would essentially mark a full recovery from the pandemic-induced recession.

When markets rise to new heights, as they have recently, investors become increasingly nervous that the stock prices may be unsustainable and susceptible to correction. Markets tend to be more fragile when valuations worsen due to the earnings of the underlying companies not keeping pace with the prices of the stocks. But so far this year, earnings have recovered remarkably and year-over-year earnings growth is expected to hit an all-time high. Many sectors in the U.S. economy continued to do well during the pandemic and still show healthy revenues. Other companies are showing signs of recovery. Additionally, some companies have shown increased efficiencies, allowing the increased revenues to result in wider margins and increased earnings per share. Although valuations are historically high in the U.S., strong company fundamentals are supporting the current stock prices.


However, looking ahead, growth in the U.S. stock market may be stifled by external forces. Wage costs, higher interest rates, inflation, and, potentially, higher corporate tax rates could negatively impact future growth. Many factors have led to higher inflation but none more significant than increased consumer spending pulling against systemic supply-chain interruptions across the economy. Economics 101 teaches that an increase in demand and a decrease in supply will often result in higher prices. And while reports of rampant inflation may be somewhat overblown in the short term, there has been a material increase in prices, a 4.9% increase in May. The increase was shocking but not entirely unexpected and was due to the state of the economy in May of 2020 and the significant improvements since then. However, more important is the annualized 2.5% increase in the CPI over the last two years. This means the average consumer has seen noticeable increases in costs of goods and services dating back to 2019. Some of these price increases should be transitory but economists suggest inflation could still be 3.0%-4.0% through the end of 2021 and could remain much higher in 2022 than the Fed’s former inflation target of 2.0%.

Financial Planning Concepts

5 ways to improve your estate plan

It is common knowledge in the financial planning community that very few people LIKE working on their estate plans. And while the process may feel like a necessary evil, there are some fundamental steps you can take to help avoid a mess for your heirs after you are gone:

1. Review your estate plan with your attorney at least every 3-5 years.

A quick meeting with your attorney will keep your plan updated from both the personal and legal perspectives and provide a “tune-up” to ensure there are no surprises for your heirs. A regular review is the most crucial step in improving your plan since, of course, you cannot fix problems with your plan after you are gone.

2. Prepare a personal Net Worth Statement that includes the ownership of your assets and your beneficiary designations.

The Net Worth Statement is an essential tool for helping your Personal Representative settle your estate. It includes all your assets and all your liabilities listed by ownership. Simply knowing locations of accounts, account numbers, beneficiary designations, and ownership speeds up the settlement process and can also help avoid the risk of an account or insurance policy not being claimed and ultimately lost (or significantly delayed) in the process.

3. Regularly review the beneficiaries on all your accounts and add them when appropriate.

Naming beneficiaries on your accounts can be a powerful but sometimes dangerous planning strategy. Beneficiaries on retirement plans like 401(k)s, 403(b)s, and IRAs receive special tax treatment and the proceeds of those plans avoid the probate process when properly designated. Non-qualified accounts like bank accounts and taxable investment accounts also avoid probate when a beneficiary is added. However, a beneficiary designation may supersede the provisions of your will. Reviewing your beneficiaries and your will provisions together is the best way to use this powerful tool wisely.

4. Prepare a personal property list.

As most planners know well, families often break apart when trying to settle the sentimental items in an estate. Mom’s pie plate will always elicit more emotion than her checking account, and a well-crafted personal property list with designated heirs can help avoid the trouble that often arises. Talk with your heirs about your plans, gather feedback and write down everything you hope to designate. Most families do not expect the children to disagree, but unfortunately, it happens often. 

5. Prepare the next generation for the inheritance sooner rather than later.

Wealthy families often make a mistake when they depend on the estate plan to “teach” the heirs how to manage the wealth by creating trusts to limit access, appointing trustees, and using guardians to “protect” the heirs from the hazards of wealth.  “Shirtsleeves to shirtsleeves in three generations” is the adage that describes the curse in these families. Involve the children early and often and empower them with responsibility and challenges to help prepare them to take over the reins. Then, when you need help later, you can rely on your children to know exactly what to do. 

Market Commentary Q1 2021

An optimistic start to the new year

With a March 2020 COVID-induced market bottom in the rear-view mirror, global equity markets raced ahead over the next twelve months, setting new highs and finishing a solid first quarter of 2021. The S&P 500 index (U.S. Large Cap stocks) gained 56.4% over the past twelve months and 6% during the past three months. It set 17 new highs in the first quarter of 2021 alone and reached the 4,000 level for the first time. Mega-cap technology companies drove returns at first, part of the Work-From-Home trade that characterized so much of 2020. As the year wound down, it became apparent that the Democrat-controlled Federal government would make good on its promises of increased fiscal spending alongside continued monetary stimulus from the Federal Reserve.  With that uncertainty gone, prospects shot up for a much stronger U.S. economic recovery, and economically sensitive stocks such as U.S. Small-Caps assumed the leadership mantle. As measured by the Russell 2000, U.S. Small-Cap stocks were up 95% over the past year and up almost 13% for the past quarter. International stocks have a greater proportion of cyclical stocks than the U.S. market, which along with increased stimulus from overseas central banks/governments and a weaker dollar, pushed them higher. For the past twelve months, Foreign developed (Europe and Japan) gained 45%, while Emerging Market stocks returned 58%. U.S. real estate (equity REITs) made a strong comeback, as well, up almost 9% and 38%, respectively, for the past 3- and 12-months.

Bonds made headlines in the first quarter of 2021, but not in a good way. Afraid that inflation would pick up with strong economic growth, Treasury bond investors sold off the 10-year bond. This liquidation pushed its yield up to 1.75% at the end of the quarter, an increase of 0.84% and the biggest one-quarter gain since 2016. Prices for broader U.S. investment-grade bonds, including corporate bonds, declined as well, dropping 3.4% during the quarter. U.S. municipal and international bonds (USD hedged) held up much better.

What is your BFA Investment Committee’s outlook for the rest of the year?

Your BFA Investment Committee believes that forecasts for more robust global growth particularly bode well for equities outside of the U.S., which are already undervalued compared to U.S. stocks. Our clients should thus benefit from their allocations to foreign stocks. We will also continue to keep an eye on any rising prices for goods and services. U.S. households are flush with cash from fiscal stimulus.  Those savings, in addition to pent-up demand stemming from COVID-19 restrictions, could unleash inflationary pressures not seen for a long time. We also believe that the Federal Reserve may have to confront increasing bond yields. The Fed has been content to let market forces play out, but a steeper yield curve may force the Fed to push back more forcefully. Finally, our clients should benefit from a diversified fixed income portfolio, going beyond core bonds to take advantage of higher yields, geographical diversification, and the shelter of taxable income when practical. 

Financial Planning Concepts

Biden Tax Proposals – Forewarned is Forearmed!

U.S. tax rates today are among the lowest U.S. citizens have ever experienced. But the newly unveiled $2.3 trillion (with a “T”) infrastructure plan will require some significant revenue to offset the spending. Taxes are once again front and center, so it is time to revisit key components of President Biden’s proposed plan. Nothing is permanent yet but “forewarned is forearmed” and we want you to be ready.

1. Corporate tax increases seem most likely. The President has had a long-standing commitment to increase corporate taxes. The corporate tax rate could increase from 21% to 28% and there could be an increase in taxation of international corporate income earned by U.S.-based companies. These increases could take effect as early as January 2022. According to Forbes, analysts from Goldman Sachs have predicted that Biden’s entire tax plan would reduce 2022 earnings-per-share on the S&P 500 by 9%. 

2. Is your net worth greater than $3.5 million? Unified gift and estate tax exemption amounts could decrease from $11.58M to $3.5M for individuals and $23.16M to $7M for married couples. There is talk of doing away with several common estate planning strategies like GRAT’s, family limited partnership discounts, and limiting dynasty trusts and defective trusts, all very effective tools for high-net-worth families. Planning tip: Consider aggressively gifting now, since there are no claw-backs on the gifts. Review all trusts and estate plans and potential estate tax changes and consider setting up trusts now. Life insurance could help if illiquid assets exist in your estate and taxes remain a concern. 

3. Do you own taxable assets that have appreciated in value? The new plan could eliminate the step-up in basis at death and potentially create a taxable event at that time. While this could be the most challenging of all to pass, it could also be the most impactful. Planning tip: Consider “basis management” as an ongoing strategy to bring down gains in your portfolio, particularly if the step-up in basis is eliminated. This may include paying more attention to annual rebalancing, placing stocks that are anticipated to appreciate into retirement accounts and transferring low-basis stocks to lower-income family members (up or down). 

4. Is your income above $400,000? Watch for an increase of the top ordinary income tax rate for income over $400,000 to 39.6% from 37%. Planning tip: Consider all strategies to bring down income, including funding traditional retirement plans, opening profit sharing/defined benefit plans, bunching deductions, etc. There may be an increase in long-term capital gains rates from 20% to 39.6% on income $1,000,000 and over, plus the Medicare Tax of 3.8% on top of those amounts. 

5. Tax-deferred exchanges for real estate performed under IRC 1031 may no longer be available. IRC 1031 applies to like-kind real estate. Planning tip: Consider performing like-kind exchanges this year to defer the gains, but make sure that any transaction qualifies under any tax law changes. 

Market Commentary and 2021 Outlook

A new year and new look for this report

You will notice that your quarterly BFA report looks a little different than usual. As we mentioned last year, we have invested in a more robust portfolio accounting and reporting system. This new system gives us powerful reporting capabilities, and this report is just one example. Our goal in this report is to provide you information that reinforces our planning efforts and supplements your custodial statements’ content. This report will also tie in with the review reports you receive during your meetings with us. Let us know what you think!

What drove market returns in 2020?

The S&P 500 index (U.S. Large Cap stocks) gained 18.4% last year and set 33 new closing records in the process, driven in large part by mega-cap technology companies. U.S. Small-Cap investors, heartened by brighter prospects for economic growth and continued low interest rates, pushed the Russell 2000 up by 31.4% during the fourth quarter and 20% for the year. Foreign stocks finished the year in positive territory, as well, with Emerging Market stocks up over 18%. China and other Asian economies were the first to recover from the pandemic and drove the performance in international stocks. A weaker dollar in 2020 boosted foreign stock returns, too. Finally, investment- and non-investment-grade (i.e., high yield corporate) bonds across the globe were positive for the year, driven by price appreciation.

What is the outlook for 2021?

Your BFA Investment Committee believes that the global distribution of the COVID-19 vaccine will take longer than many investors are expecting. As a result, the rebound in economic activity will stall (but not decline) in the first quarter of 2021 and then accelerate during the rest of the year. It will be essential to remain balanced among growth and value stocks, both in the U. S. and abroad. Also, we believe that emerging market economies and particularly China will continue to be a bright spot in the global markets, especially if the U. S. tones down trade rhetoric under President Biden. We expect the Federal Reserve to keep fixed income yields, across the curve, at low levels. We have already diversified U. S. core bonds to include a fixed-income manager who has a flexible mandate so he can cautiously go where the yield is. Rebalancing your portfolio is vital, so we are doing another round this month to sell Equities and purchase Fixed Income to bring the Equity allocation back down to its target weight (i.e., sell high and buy low). Finally, we have had several clients ask if a Democratic-controlled Federal government will negatively affect their portfolio. We have managed situations like this before and are not concerned. Fortunately, we know that markets historically take in stride which party controls the Presidency and Congress. Your portfolio is well-positioned for whatever may happen, including any correction in U.S. Large Cap stocks in 2021.

Financial Planning Concepts

How should I plan for the policies of the new administration?

The Biden administration intends to hit the ground running on several policy changes that will directly impact your financial plan. Right now, it is impossible to know how Congress will view the policy changes and if he will have enough support. Nevertheless, some of the policies could significantly change how you pursue your financial plan and having a strategy in place now is critical. Here are 3 important considerations for your financial plan:

#1 Will my income taxes go up?

Probably, but maybe less than you think. First, Goldman Sachs believes the President will be focused on vaccine distribution and COVID relief stimulus that will slow the implementation of additional taxes early in 2021. However, there are a few things to remember, in case they get to the tax law changes this year: 1) The top tax tier above $400,000 per year is expected to rise to 39.6%. Remember, this is about what the rates were in 2016. 2) Payroll taxes will increase for those making more than $400,000 per year, as well. 3) For those who have income above $1MM, capital gains taxes will increase to ordinary rates. This is significant for those selling businesses and high-income households and will make investment-tax-planning more critical. 4) The State and Local Tax deduction cap is likely to be removed, reinstating this great tax deduction for those who pay property taxes, etc. 5) Finally, corporate taxes are expected to increase and a new minimum corporate tax instituted. All in all, we will not know until the proposals make it through Congress and the result could be much different than proposed. Just be prepared.

#2 Is inflation going rise?

The stimulus we have seen and the resulting increase in the money supply may fuel inflation for the first time in years. JP Morgan is predicting 3% inflation soon due to the pent-up demand. It may be necessary to update your inflation assumptions in your financial plan to reflect the new outlook and to maintain your equity exposure to combat the additional inflation.

#3 Is my estate plan at risk?

Biden is proposing changes to the estate tax system that will change the way capital assets are taxed and the number of estates that will pay estate taxes. First, they have proposed the elimination of the “step-up” in basis for inherited capital assets. This means that if there is any appreciation in an asset (stock, real estate, business, etc.) it will be taxable to the heirs at the original basis. This is a truly significant change to the current system. Also, they intend to lower the exemption amount that may be passed tax-free in your estate. The new amount may change back to $5MM per person or even to $3.5MM per person. When combined, these two changes could significantly increase the taxes to your heirs. If these changes occur, you will likely need to update your estate plan right away. We are conducting estate plan reviews now to prepare, so please let us know if you would like for us to review your plan.

Market Commentary Q3 2020

Global equity markets continued their recovery in the third quarter of 2020.

The S&P 500 index (U.S. Large Cap stocks) finished the third quarter up almost +9% and set a new record in the process. Year-to-date through September 30, the S&P 500 is up +5.6%. The largest technology companies comprise almost 25% of the index and drove returns. For example, Inc. is up +70.4% year-to-date while Apple Inc. is up +58.6% year-to-date. Other index components have more room to go to recover their losses from earlier in the year. Assuming every holding in the S&P 500 has equal weight, the index was up +6.8% for the quarter but down -4.8% year-to-date. U.S. Small Cap stocks gained +5% for the quarter. Equity gains were not limited to U.S. stocks, as Foreign developed (Europe and Japan) stocks were up almost +5%. Emerging market stocks outperformed their U.S. and foreign developed counterparts during the quarter, gaining +9.6%. A continued weakening of the U.S. dollar (-3.6% for the quarter) boosted Foreign stock returns. Non-investment-grade (i.e., high yield) U.S. corporate bonds continued their recovery, gaining almost 5% during the third quarter.

Finally, U.S. Core and International bonds were up +0.6% for the quarter. The 10-year Treasury yield barely nudged during the quarter, ending at 0.68%.

Here are the broad index returns through the Third Quarter of 2020*:

U.S. Large Cap Stocks +5.6% U.S. Real Estate -17.9% Allocation 30%-50% Equity +1.0%
U.S. Small Cap Stocks -8.7% U.S. Aggregate Bonds +6.8% Allocation 50%-70% Equity +1.3%
Foreign Developed Stocks -7.1% International Bonds (Hedged) +3.0% Allocation 70%-85% Equity -1.3%
Emerging Market Stocks -1.2%

What does the BFA Investment Committee think will drive volatility for the rest of the year?

We expect market volatility to pick up as we get closer to the U.S. Presidential and Senate elections. The markets do not like uncertainty, and the election results may not be final until days or months following the actual voting. While the markets may react negatively to these developments, we believe the reaction will be short-lived. Research shows that the political party in power, either in the Presidential or Congressional branch, is not a major market driver. We also expect an increase in market volatility if the U.S. government does not provide further fiscal stimulus. Chairman Jerome Powell of the U.S. Federal Reserve has been quite vocal about the fragility of the economic recovery and the need for ongoing fiscal stimulus in addition to the monetary stimulus provided by the Federal Reserve. Many investment analysts and economists expect Congress to reach a deal, even if it means doing so after the election.

Volatility could also pick up if the global economy, particularly the U.S., cannot sustain the recovery.

Most economists expect a significant bounce in third-quarter U.S. Gross Domestic Product (GDP). Still, there is concern that employment will not reach pre-pandemic levels for several years, and thus, consumer spending will taper off. However, the Federal Reserve has promised to continue its extremely supportive monetary policy. Global governments and central banks have learned valuable lessons from their initial responses to COVID-19 and should continue to act expeditiously to support their economies. Finally, work continues on a COVID-19 vaccine. Although there is uncertainty around when and how the vaccine will be safely distributed worldwide, unprecedented cooperation between global governments and private corporations has given both citizens and investors hope for economic activity accelerating to pre-pandemic levels. Given these challenges and opportunities, your BFA Investment Committee is cautiously optimistic and maintains its portfolio allocations and fund line-up. We are currently holding cash in place of U.S. high yield bonds, and it could be early next year before we re-enter the U.S. high yield corporate bond sector.

We will increase our focus on tax planning in the fourth quarter for client portfolios. Mutual funds are required to distribute their realized capital gains by year-end, with most of those distributions occurring in December. We will analyze our client holdings for material distributions (i.e., 5% or more of net asset value) and may take action to avoid those distributions. We will also look for opportunities to harvest further capital losses in client portfolios. Given the specter of higher capital gain taxes, loss carryforwards have become even more valuable. These actions could save on taxes for you.

You Are Not Alone

Is there any question that “The Year 2020” will go down as one of the most challenging times in history? Certainly not. But you may wonder why you feel so out of sorts. You should know that most of us are experiencing a nagging sense of disorientation about ourselves and the world around us. It is with good cause.

Consider the stressors we are all experiencing: The pandemic is resurging in many states when we thought the worst was behind us. Most of us are beyond tired of social distancing, and the uncertainty surrounding an effective vaccine seems to add little hope. To add insult to injury, the economy has suffered tremendously under the weight of social distancing strategies, is showing timid signs of recovery and there are millions out of work. While you may not personally experience it, you know it is there and you can feel it.

And now the election is here. The current state of politics in America creates its own burden of mental uncertainty. Deep inside, we all know that there are many things that need fixing in the U.S. and are eager to get something done. But collaboration is difficult in a winner-take-all, zero-sum game. Is there any real solution?

More than any other time, you should know that there is hope. In difficult times, you will hear people seek hope by quoting the Bible saying, “This too shall pass.” While somewhat accurate in sentiment, the phrase is not actually in the Bible. However, there is a scripture that says, “Rejoice in hope, be patient in tribulation, be constant in prayer.” Tribulation is inevitable but we can celebrate in that true hope of a better future; chances are, you are among the fortunate ones now. With patience (and a little time) we WILL see it pass. And through prayer, all of us can find peace, compassion, grace and, of course, hope.

Most of all, we need to care for one another, and we want you to know that we care about YOU. If you are inclined to get in touch and share your uncertainties about the future, we can promise a deep interest in your situation and your concerns. We may not have all (or any) of the answers. But there are times when a good conversation about what is important in life can result in better insights, and sometimes, a sense that we are not alone in our uncertainties.

We look forward to talking with you again soon!

*U.S. Large Cap=S&P 500, U.S. Small Cap=Russell 2000, Overseas Stocks=MSCI EAFE, Emerging Market Stocks=MSCI Emerging Markets, U.S. Bonds=Barclays Aggregate Bond Index, International Bonds=Barclays Global Aggregate ex-U.S. USD-Hedged, US Real Estate=MSCI US REIT: Data Source: Morningstar®. Allocations=Morningstar® U.S. Fund Allocation Categories: Data Source: Morningstar®. Index returns are for illustrative purposes only and do not represent actual performance of any investment. Client returns will differ from the results shown. Index performance returns do not include any management fees, transaction costs or expenses. The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. Indexes are unmanaged and one cannot invest directly in an index. Please review your allocation regularly and notify BFA immediately if your circumstances should change. The foregoing content reflects the opinions of BFA and is subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

What Does a Biden-Democratic Election Sweep Mean for Taxes?

Many investors are wondering what the implications are if voters place a Democrat in the White House and what it could mean if the House and Senate obtain a Democratic majority.

Voters casting their votes in the voting booth
Photo by Morning Brew on Unsplash

There are many changes that may come about should the above scenario come to fruition. However, before we begin, I’d like to note that we are not trying to make a determination about which set of tax laws are best. Since the current tax laws are already in place, we will be setting out to answer questions relating to the changes the proposed tax laws may enact. More specifically, we will focus on how these changes may affect your portfolio, your income tax liability, and your estate tax liability. Let us take a look at the changes you may see in each of these areas.

Effects on Your Portfolio

In 2017, corporate tax rates were cut from 35% down to 21%. Former Vice President Biden is targeting an increased corporate tax rate of 28%. In addition, his proposal would create a minimum tax of 15% on corporations with book profits of $100 million or higher. Currently, a company may have net profits, but after deducting the cost of investments, R&D expenses, etc., they pay very little or even no federal income tax. This “minimum book tax” is not in addition to the corporate tax rate. Rather, it is a minimum tax on profits.

Another law that came about through the Tax Cuts and Jobs Act (TCJA) is the Global Intangible Low Tax Income (GILTI). This new tax places a minimum 10.5% tax on foreign income contributed to intangible assets such as copyrights, patents, and intellectual property. Though many agree that the law isn’t fully working as intended, it was developed to deter companies from shifting these types of assets overseas where they may pay little to no tax on the income they generate. In Biden’s proposal, GILTI tax rates would double to 21%.

Should we see an increase in corporate tax rates, this would directly impact earnings. With a “book tax,” companies that fully expense investment costs or that receive R&D credits to lower their tax liability would now be subject to a minimum tax. In addition, many of the largest US companies listed on the S&P 500 derive half or more of their business from overseas markets. This, too, could mean a decrease in earnings as their tax liability increases. As these companies cope with additional taxation, there is the potential for their stock prices to weaken.

Photo by Markus Spiske on Unsplash

Effects on your income tax liability

Biden’s proposed tax plan comes with various changes, mostly to high income earners. His proposal shifts the marginal tax rate on the highest income filers from 37% to 39.6%. Long term capital gains and qualified dividends for those with gross income over $1 million would be taxed at the ordinary rate of 39.6%, which is nearly double the current highest rate of 20%. Anyone with income over $400,000 would be subject to a new Old-Age, Survivors, and Disability Insurance (Social Security) payroll tax –12.4% split equally between employee and employer. Business owners of pass-through entities earning more than $400,000 would lose their Qualified Business Income (QBI) deduction.

Some other changes include restoring the Pease limitation and capping itemized deductions to 28% of value, introducing renewable energy tax credits to individuals, expanding child and dependent care credits to $8,000 per child/dependent up to $16,000, and overhauling the deductibility of retirement plan contributions. This last change would provide a flat 26% refundable credit for every dollar contributed to a traditional retirement account (such as a 401(k), 403(b), IRA, or SIMPLE IRA) up to the maximum contribution amounts. The credit would be refunded directly to the retirement account. Since the credit is a flat percentage, those in higher tax brackets receive less benefit.

There are plenty of uncertain details around the proposed changes. One is the ordinary income taxation of long-term capital gains. What type of assets would be included in this new rule? Would a business owner who is selling her closely held business be required to pay ordinary income rates on all the proceeds? What about the sale of assets used in a trade or business or the sale of real estate that has been depreciated under current allowances? As always, we will have to wait to see how some of these questions are addressed.

Effects on your estate Tax liability

There are a couple of key changes that have support from the Democratic party that are almost certain to make their way into discussions should we see a Democratic majority.

First on the list is a reversion of federal estate tax exemptions to their pre-TCJA levels (around $5.5 million) or even to their pre-American Taxpayer Relief Act (ATRA) levels (around $3.5 million). This is a very stark contrast to the current $11.58 million exemption currently in place.

Next is the removal of the step-up in basis for assets passed to heirs upon death. Currently, when an owner dies and leaves the asset to the heir, the owner’s cost basis “steps up” to the current market value of the asset. The heir could then sell the asset and pay little to no capital gains tax. Without a step-up in basis, it would likely make it much more burdensome on the heir to prove the original cost basis for inherited assets. If the owner kept exceptional documentation while living, it may be okay. If not, be prepared for headaches.

Further, if the step-up in basis was eliminated and the estate tax exemption was lowered to its previous level, it could mean adding additional capital gains tax to an already high estate tax rate of 40%. The amount of wealth transferred to heirs may not be as high as expected.

tax form
Photo by Kelly Sikkema on Unsplash

What does it all mean?

Whenever there is change, there are always opportunities. When it comes to your investments, consider realizing some of your positions with low cost basis or even donating them to a charity. Use previous losses to offset the gains to the extent you can. Be prepared for the next shift in pricing. It may or may not come right away, but if you are sticking to your allocation and maintain your focus, you’ll weather the storm. In your estate, consider making gifts of assets to your children or heirs that are in lower tax brackets to remove the assets from your estate and avoid the higher tax liability. Think about utilizing life insurance to replace wealth lost to taxes or donated to charity.

In the end, regardless of the political atmosphere, we will press on. Don’t worry. You can have peace of mind knowing we are here to help guide you through your decisions.

Market Commentary Q2 2020

The equity markets made a dramatic recovery in the second quarter of 2020.

The S&P 500 index (U.S. Large Cap stocks) finished the second quarter up 21%, its biggest quarterly gain since 1998. As of the end of June, the S&P 500 was only 3% below its value at the beginning of 2020. The largest technology companies drove returns, although the rally became more widespread as the quarter progressed. U.S. Small Cap stocks did even better during the quarter, up 25.4%. Foreign developed (Europe and Japan) and Emerging market stocks had stellar quarterly returns, as well, up 14.9% and 18.1%, respectively. They outperformed their U.S. counterparts in late-May and June in part due to a weaker U.S. dollar boosting foreign stock returns. Even non-investment-grade (i.e. high yield) U.S. corporate bonds gained 9.6% during the quarter. These returns are remarkable given the world-wide economic downturn and global economies continuing to struggle with re-opening businesses given continued spikes in COVID-19. Additionally, racism and inequality protests around the world stole the headlines from COVID-19 during the quarter but the markets continued to march on.

U.S. Core and International bonds had an uneventful second quarter, gaining 2.9% and 1.8% respectively, and bond yields continue to be at historic lows. The 10-year Treasury yield is 0.66% on June 30th.

Here are the broad index returns through the Second Quarter of 2020*:

U.S. Large Cap Stocks -3.1% U.S. Real Estate -19.0% Allocation 30%-50% Equity -2.7%
U.S. Small Cap Stocks -13.0% U.S. Aggregate Bonds 6.1% Allocation 50%-70% Equity  -3.6%
Foreign Developed Stocks  -11.3% International Bonds  2.3% Allocation 70%-85% Equity -6.7%
Emerging Market Stocks -9.8%


Why are equity investors so optimistic?

The unprecedented intervention by global central banks and governments to assist businesses and individuals during the pandemic have given investors the confidence to re-enter risk assets such as equities and corporate credit. Along with familiar interest rate cuts and quantitative easing programs, central banks like the U.S. Federal Reserve have implemented “new” tools such as the outright purchase of bond exchange-traded funds (ETFs). Global governments have also responded with massive stimulus spending. In fact, most economists and investment analysts expect a second-round of stimulus from the U.S. Congress by the end of summer. Time will tell.

Investors are also anticipating a speedy recovery and an effective vaccine but could be disappointed. Unfortunately, business re-openings are having spotty success and the unemployment rate is not expected to be back to pre-recession levels for another couple of years. Additionally, many health care professionals, health care stock analysts, and economists do not believe that a vaccine is imminent. It could still be another 8-10 months before a vaccine is ready and available for global distribution. Cautious optimism is likely best right now.

What is the BFA Investment Committee’s outlook and strategy lately?

We believe that current U.S. equity valuations are excessive and that volatility in equities will increase as reality sets in for investors. Data suggests that this will be a much?more drawn out recovery than originally expected. Thus, we are anticipating a correction (i.e. 10% or more drop in value) by year-end in US equities. We are currently holding cash in lieu of U.S. high yield bonds and it could be early next year before we re-enter the U.S. high yield corporate bond sector. Also, we believe that Emerging markets, particularly those in Asia, are poised to outperform U.S. and foreign developed stocks. They should continue to benefit from positive structural changes, including participation in “new economy” sectors such as digitalization and technology and from revamped regional trade agreements which will help smooth out bumps in the supply chain. Valuation discounts of emerging market equities to U.S. equities are at all?time highs and the portfolio is weighted appropriately.

The recovery in equities during the second quarter gave us the opportunity to identify those Equity allocations that had grown above their maximum weights. We sold Equities and purchased Fixed Income to bring the Equity allocation back down to its target weight (i.e. sell high and buy low) and to protect the gains that you have recently realized. We also added a new investment-grade bond fund in U.S. core bonds that should boost yield in our fixed income portfolios while maintaining that sector’s role as ballast for the portfolio.

Finally, as a fee-only fiduciary firm, we always have your best interest at heart and believe in full disclosure of our compensation. To this end, we have included a copy of our new Client Relationship Summary, on file with the SEC and in plain English, which provides a summary of our relationship with you, our clients. Please review it and let us know if you have any questions. Also, please let us also know if there are any changes in your financial situation or investment objectives or if you wish to impose, add, or modify any restrictions to your accounts.

As 2020 rolls on, we know that a number of uncertainties in the markets, economy, and political landscape continue to exist. Please know that your BFA Investment Committee continually monitors these landscapes and will make any adjustments as necessary. If you have any questions or need reassurance, please let us know. We look forward to talking with you again soon!

*U.S. Large Cap=S&P 500, U.S. Small Cap=Russell 2000, Overseas Stocks=MSCI EAFE, Emerging Market Stocks=MSCI Emerging Markets, U.S. Bonds=Barclays Aggregate Bond Index, International Bonds=Barclays Global Aggregate ex-U.S. USD-Hedged, US Real Estate=MSCI US REIT: Data Source: Morningstar®. Allocations=Morningstar® U.S. Fund Allocation Categories: Data Source: Morningstar®. Index returns are for illustrative purposes only and do not represent actual performance of any investment. Client returns will differ from the results shown. Index performance returns do not include any management fees, transaction costs or expenses. The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; thus an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than return data quoted herein. Indexes are unmanaged and one cannot invest directly in an index. Please review your allocation regularly and notify BFA immediately if your circumstances should change. The foregoing content reflects the opinions of BFA and is subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

401(k) Employer Matching: What You Don’t Know Might Hurt You

It’s common to hear that you should contribute enough money to your company’s 401(k) or 403(b) plan to receive the employer’s match if there is one. It’s good advice as it typically results in “free” money being contributed towards your retirement. However, what if you are planning to maximize your contributions ($19,500 in 2020)? Does the timing of your contributions affect your employer’s match? Could you be leaving “free” money on the table?

calculator and woman sitting at computer
Photo by Charles on Unsplash

The answer to this question is tricky. Let’s begin by looking at a simple scenario that we can build upon.

Base Scenario: Contributing enough to receive the match

You currently earn a base salary of $100,000 and are paid monthly which results in a paycheck of $8,333. In addition, your employer will match 100% of your contributions up to 6% of your gross pay each month. To get the full match, you contribute 6% ($500) of your paycheck each period. This results in annual contributions of $12,000 (Your $6,000 + Employer’s $6,000 match). You’ve received your employer’s full match.

Base Scenario | Salary: $100,000
Month Payroll % Contribution Amount Match up to 6% Employer Employer YTD
1 $8,333 6% $500 100% $500 $500
2 $8,333 6% $500 100% $500 $1,000
3 $8,333 6% $500 100% $500 $1,500
4 $8,333 6% $500 100% $500 $2,000
5 $8,333 6% $500 100% $500 $2,500
6 $8,333 6% $500 100% $500 $3,000
7 $8,333 6% $500 100% $500 $3,500
8 $8,333 6% $500 100% $500 $4,000
9 $8,333 6% $500 100% $500 $4,500
10 $8,333 6% $500 100% $500 $5,000
11 $8,333 6% $500 100% $500 $5,500
12 $8,333 6% $500 100% $500 $6,000
$6,000 $6,000


Scenario #2: Maximizing your contributions

Now, let’s say you plan to maximize your retirement contributions for the year ($19,500). Instead of contributing 6%, you now contribute 19.5% per paycheck or $1,625. Your employer still matches the first 6% ($6,000) of contributions so you end the year with $25,500 of total contributions. As with the base scenario, you have received the full employer’s match. All is well.

Scenario #2 | Salary: $100,000
Month Payroll % Contribution Amount Match up to 6% Employer Employer YTD
1 $8,333 19.50% $1,625 100% $500 $500
2 $8,333 19.50% $1,625 100% $500 $1,000
3 $8,333 19.50% $1,625 100% $500 $1,500
4 $8,333 19.50% $1,625 100% $500 $2,000
5 $8,333 19.50% $1,625 100% $500 $2,500
6 $8,333 19.50% $1,625 100% $500 $3,000
7 $8,333 19.50% $1,625 100% $500 $3,500
8 $8,333 19.50% $1,625 100% $500 $4,000
9 $8,333 19.50% $1,625 100% $500 $4,500
10 $8,333 19.50% $1,625 100% $500 $5,000
11 $8,333 19.50% $1,625 100% $500 $5,500
12 $8,333 19.50% $1,625 100% $500 $6,000
$19,500 $6,000

Scenario #3: Receiving a bonus and maximizing your contributions

Because you did such a great job last year, your employer tells you that you will be receiving a $10,000 bonus in January. Since your overall compensation is now $110,000, you do the math ($19,500/$110,000) and decide to lower your monthly contribution from 19.5% to a little under 18%. Your first contribution for the year is $3,250 and the rest are $1,477. At the end of the year, you have maximized your contributions and received the full employer’s match $6,600 ($110,000 x 6%).

Scenario #3 | Salary: $100,000; January Bonus: $10,000
Month Payroll Percent Amount Match up to 6% Employer Employer YTD
1 $18,333 17.73% $3,250 100% $1,100 $1,100
2 $8,333 17.73% $1,477 100% $500 $1,600
3 $8,333 17.73% $1,477 100% $500 $2,100
4 $8,333 17.73% $1,477 100% $500 $2,600
5 $8,333 17.73% $1,477 100% $500 $3,100
6 $8,333 17.73% $1,477 100% $500 $3,600
7 $8,333 17.73% $1,477 100% $500 $4,100
8 $8,333 17.73% $1,477 100% $500 $4,600
9 $8,333 17.73% $1,477 100% $500 $5,100
10 $8,333 17.73% $1,477 100% $500 $5,600
11 $8,333 17.73% $1,477 100% $500 $6,100
12 $8,333 17.73% $1,477 100% $500 $6,600
$19,500 $6,600

At this point, you may be wondering why the answer to the original question was “tricky.” So far, things have been pretty straightforward and, in each scenario, you’ve managed to receive your employer’s full match. That’s about to change.

Scenario #4: Contributing your entire bonus in January

Upon learning you will be receiving a bonus, you decide to leave your monthly contribution rate at 19.5% and contribute your entire bonus to your 401(k) in January. Now, your first contribution of the year is $11,625, the next four are $1,625, and the last one is $1,375. You maximize your contributions by the end of June and are excited because starting in July you won’t have to make any more contributions and your take-home pay will be much higher. That sounds great, but you find out at the end of the year that your employer only contributed $3,600. How could that be? Where is the other $3,000?

Here’s where things get tricky. Many employers only match contributions on a per period basis. In these scenarios, the periods are monthly. This means that each month the employer looks at the compensation for that month and contributes up to 6% of that amount. Even though you contributed $11,625 in January, your employer could only contribute up to 6% of your pay for that period or $1,100. Your employer continued to match each of your other contributions ($500/period), but after six months, you were no longer contributing; therefore, the employer had nothing to match.

Scenario #4 | Salary: $100,000; January Bonus: $10,000
Month Payroll % Contribution Amount Match up to 6% Employer Employer YTD
1 $18,333 63.41% $11,625 100% $1,100 $1,100
2 $8,333 19.50% $1,625 100% $500 $1,600
3 $8,333 19.50% $1,625 100% $500 $2,100
4 $8,333 19.50% $1,625 100% $500 $2,600
5 $8,333 19.50% $1,625 100% $500 $3,100
6 $8,333 16.50% $1,375 100% $500 $3,600
7 $8,333 0.00%
8 $8,333 0.00%
9 $8,333 0.00%
10 $8,333 0.00%
11 $8,333 0.00%
12 $8,333 0.00%
$19,500 $3,600.00

Scenario #4 isn’t the only time this could happen. If your income is high enough, it may result by simply setting your contribution percentage too high for the year—which would also cause your contributions to stop before year-end.

Luckily for some, not all employers make contributions in this way. Many retirement plans have provisions that allow the employer to look back at an employee’s income and contributions over the entire year and make an additional contribution so that the percentage of compensation matched aligns with the annual compensation.

In Scenario #4, a provision like this would have allowed the employer to make a $3,000 contribution at year-end—bringing the total contribution to $6,600.

If you aren’t sure how your plan is structured, be sure to ask your plan provider. Don’t miss an opportunity to increase your retirement contributions.

It’s FAFSA® Season!

man discussing something on computer screen with young adult
Photo by NeONBRAND on Unsplash

October is here; school is well underway; and, for parents with high school seniors, it’s time to start planning for college! October 1st marks the beginning of FAFSA® season. Not familiar with the term “FAFSA®?” That’s okay! Today, you will learn the basics of what you need to know.

What is the FAFSA®?

FAFSA® stands for the Free Application for Federal Student Aid. This form, created by the office of Federal Student Aid—a part of the U.S. Department of Education, is designed to determine which forms of federal student aid are available to students currently enrolled or preparing to enroll in higher education programs. By completing the FAFSA®, you will learn whether or not you qualify for 3 things:


A grant is a form of financial aid that does not have to be repaid. They are usually based on need and are primarily provided by the federal government, state governments, colleges, or non-profit organizations.

Work-Study Programs

Federal Work-Study programs provide students with part-time jobs while they are enrolled in school. These jobs may be on or off-campus and they allow students to earn money to help pay for their education. 

Federal Student Loans

These loans are administered by the federal government and allow eligible students and parents to borrow money to assist with educational expenses. There are various types of loans available, but there are two types that are most common—Direct Subsidized Loans and Direct Unsubsidized Loans.

Direct Subsidized Loans

Direct Subsidized Loans are available to undergraduate students and are based upon financial need. While in school, the U.S. Department of Education pays the interest on the loan. Once the student graduates, he or she assumes responsibility for the loans.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are available to undergraduate and graduate students and are not based on financial need. Unlike the Direct Subsidized Loans, the student is responsible for interest at all times, though they are not required to make a payment while enrolled.

man filling out form
Photo by Helloquence on Unsplash

When should I complete the FAFSA®? 

Now! It’s important to get a jump on the application process and complete it as soon as possible. Why? 

First, the form can be somewhat challenging if it’s your first time completing it. There are various pieces of information that are needed such as tax returns, banking and investment statements, and more. Completing the form can be done in one sitting, but it often takes multiple days to get everything sorted and verified before submitting.

Second, there are three key deadlines: the College’s Deadline, the State’s Deadline, and the Federal Deadline.

Many colleges have a set amount of funds that are set aside each year for student aid. These funds are often awarded on a first come, first served basis. So, if you submit your FAFSA® early, your chances of being awarded student aid are likely to go up. In addition, many states have their own financial aid programs. These programs, similar to college programs, often have a limited amount of funding available that is awarded until funds are depleted.

Finally, it may take several weeks for your form to be processed and for you to receive your Student Aid Report (SAR), which is a summary of your FAFSA®. Colleges also receive this form and use it to determine your eligibility for aid. In some cases, you may receive a notice with your SAR that you have been selected for verification. This means that the office of Federal Student Aid or your college is requesting additional information to verify the information on your FAFSA® is correct. Going through this step could add another few weeks to the process and delay the award notification from the college.

Why should I complete the FAFSA®?

Simply put… college is expensive. Completing the FAFSA® gives you the best opportunity to maximize your student aid. With so many colleges and state programs basing their scholarships, grants, and other forms of aid on the information they receive from the FAFSA®, not completing it could severely limit your funds received.

Hint: Even though you may think your financial situation is “too good” for you to qualify for student aid, don’t be fooled. “In fact, most people are eligible for federal student aid” (

Another reason to complete the FAFSA®, especially early on, is that it then allows you to focus on everything else that needs to be done before the start of the school year. You’ll have more time to:

  • Submit college applications
  • Apply for scholarships
  • Research degree plans and coursework
  • Create a budget to determine how much aid you actually need

Finally, it will make it much easier to compare colleges and determine the one that’s the best fit for you. You will know how much it costs to attend each school, how much free aid you have been offered, what scholarships you qualify for, and whether or not there is a shortfall in funding. Knowing these things will allow you to make an informed decision that you feel confident in.


Now is the time to complete the FAFSA® form. If you know which colleges you are interested in attending, reach out to their financial aid administrator to find out when their deadlines are. If one is sooner than the others, use that as your target date for completion. Don’t wait until the federal deadline and potentially miss out on free money! To get started, head on over to the Federal Student Aid office website and check out their guidelines for filling out the FAFSA®.

If you are still in the college planning stage or you are in your first FAFSA® season and need some help mapping out the costs of college and how to pay for it, please schedule a free introductory call with one of our financial planners. We’d love to help you understand your options!

5 Tips for Protecting Your Credit from the Capital One Data Breach

Every day seems to present an opportunity for a new data breach at some large financial institution. The most recent news occurred this week when Capital One released the following message (in part):

Date: July 29, 2019

“Capital One Financial Corporation (NYSE: COF) announced today that on July 19, 2019, it determined there was unauthorized access by an outside individual who obtained certain types of personal information relating to people who had applied for its credit card products and to Capital One credit card customers.

“Based on our analysis to date, this event affected approximately 100 million individuals in the United States and approximately 6 million in Canada.

“The largest category of information accessed was information on consumers and small businesses as of the time they applied for one of our credit card products from 2005 through early 2019. This information included personal information Capital One routinely collects at the time it receives credit card applications, including names, addresses, zip codes/postal codes, phone numbers, email addresses, dates of birth, and self-reported income.

“Beyond the credit card application data, the individual also obtained portions of credit card customer data, including:

  • Customer status data, e.g., credit scores, credit limits, balances, payment history, contact information
  • Fragments of transaction data from a total of 23 days during 2016, 2017 and 2018

“No bank account numbers or Social Security numbers were compromised, other than:

  • About 140,000 Social Security numbers of our credit card customers
  • About 80,000 linked bank account numbers of our secured credit card customers

“We will notify affected individuals through a variety of channels. We will make free credit monitoring and identity protection available to everyone affected.”

If you find your information has been compromised (or even if it hasn’t), here are Five Tips to help protect your credit and identity:

  1. Request a copy of your credit report today.

You are allowed to request a free copy of your credit report once a year from each of the three credit reporting agencies: Equifax, Experian, and TransUnion —at:

You can do this every 122 days by rotating among the agencies. Look for suspicious accounts or activity that you don’t recognize—such as someone trying to open a new credit card or apply for a loan in your name. If you DO see something, visit: to find out how to mitigate the damage.

  1. Monitor your online statements.

The credit report won’t tell you if there has been money stolen from a bank account or suspicious activity on your credit card.  Unfortunately, you’ll have to turn this into a habit.  In most cases, theft happens over time, starting with small amounts stolen from across your accounts.

review online accounts
Photo by Sergey Zolkin on Unsplash
  1. Place a credit freeze and/or fraud alert on your account with all the major credit bureaus by

You can put a fraud alert, for free, by contacting one of the credit agencies, which is required to notify the other two.  This will warn creditors that you may be an identity theft victim, and they should verify that anyone seeking credit in your name is really you. The fraud alert will last for 90 days and can be renewed.

Consider putting a freeze on your credit. A freeze blocks anyone from accessing your credit reports without your permission—including you. This can usually be done online, and each bureau will provide a unique personal identification number that you can use to “thaw” your credit file if you need to apply for new lines of credit sometime in the future. Fees to freeze your account vary by state, but commonly range from $0 to $15 per bureau. You can sometimes get this service for free if you supply a copy of a police report (which you can file and obtain online) or affidavit stating that you believe you are likely to be the victim of identity theft.

  1. Consider signing up with a credit monitoring service.

Many Americans have opted to sign up for a credit monitoring service, which won’t prevent fraud, but WILL alert you when your personal information is being used or requested. In most cases, there is a cost involved, but Capital One appears to be offering protection for free for those affected.

  1. Opt out of prescreened credit offers.

ID thieves like to intercept offers of new credit sent via postal mail.  If you don’t want to receive prescreened offers of credit and insurance, you have two choices: You can opt out of receiving them for five years by calling toll-free: 1-888-5-OPT-OUT (1-888-567-8688) or by visiting:

To opt out permanently, you must return a signed Permanent Opt-Out Election form, which will be provided after you initiate your online request.

It appears that data breaches are a part of the world we live in but it doesn’t take much to ensure that you are a bit more protected. Please let us know if there is anything we can do to help.