Fourth Quarter – 2018

Quarterly Newsletter to Retirement Plan Participants

Market Update

It was a rough finish to a volatile year. During the last few months of 2018, investors were hit with a combination of factors — U.S.-China trade, the slowing economy, a Fed that is tightening through a combination of interest rate increases and unwinding of its balance sheet, Brexit, political uncertainty in the Eurozone and more recently the U.S. government shutdown – that led to a brutal selloff in stocks, ranging from 13 – 20%.

A year ago, the global economy was firing on all cylinders. Since then, the factors mentioned above have led investors to question growth prospects for the global as well as the domestic economy and earnings in 2019. As a result, prices have been reset dramatically – Apple, for example, dropped 31% from September 30 to year‐end, which had a significant impact on equity benchmarks as it represents the largest holding in various indices.

Our expectation is that the upswing in volatility that disrupted global markets last year will likely persist in 2019, driven by slowing economic momentum, tighter liquidity, and political risk. So, in all likelihood the wild swings we witnessed in Q4 will this year become more the norm than the exception, creating perhaps some angst but also an opportunity for long-term investors.

As we’ve discussed in previous newsletters, you benefit from market volatility as a 401(k) participant because dollar cost averaging allows you to buy low when the market is down. By maintaining your contributions, and growing them if possible, you stand a better chance of growing your nest egg with the ultimate goal of having a comfortable retirement.

Plan Update

EMBREE FINANCIAL works diligently with the 401(k) Investment Committee to provide you a best‐in‐class Retirement Savings Plan. Together, we regularly monitor investment performance, mutual fund quality, and plan costs.

Please  contact  us  at  312‐527‐5565  if you  have  any  questions  regarding your Plan, expenses, industry trends or your own retirement strategy.

Third Quarter – 2018

Quarterly Newsletter to Retirement Plan Participants

Market Update

One of the primary themes we’ve been emphasizing over the past few years has been the likelihood of higher interest rates, and the impact that could have on portfolio returns. As you can see from the arrow chart below, bond returns are in the red, and have been all year as the Fed has been raising rates in response to a stronger economy. When interest rates rise, bonds returns fall, and we expect rates to rise further into next year, which is why we’ve been advocating less bond exposure in portfolios, and more equities.

If you own a Target Date portfolio, your bond holdings vary based on your age. The older you are, the closer you are to retirement, which translates to more bonds in your portfolio. For example, if you are 40 years old, your target retirement is roughly 2045; that portfolio holds approximately 20% bonds, 80% stocks. The 2025 fund is closer to 40% bonds, 60% stocks. Generally speaking, bonds provide a buffer in volatile times for stocks, but can dampen returns when interest rates are rising.

Clients often ask us whether they are “on track,” given what they’ve saved and the size of their retirement nest egg. According to a recent Fidelity study, the
average 401(k) balance for 50 – 59 year olds is $174,200. For most people looking to retire with an income of $5 – 6K per month, that’s not enough. In simple terms, the table below provides rough “on track” guidelines for retirement savers:

• By age 30: Have the equivalent of your starting salary saved
• By age 35: Have two times your salary saved
• By age 40: Have three times your salary saved
• By age 45: Have four times your salary saved
• By age 50: Have six times your salary saved
• By age 55: Have seven times your salary saved
• By age 60: Have eight times your salary saved
• By age 67: Have 10 times your salary saved

These guidelines make it clear that the best approach is to save early, aggressively, and for a long period of time. Financial security means different things to different people, but for many, financial security means “Can I retire comfortably?” Working with an advisor or planner to model retirement income, taxes and expenses is an important step toward developing a game plan for spending, saving and investing. At EMBREE, we’re here to help. If you’d like to get “on track,” or are interested in creating a simple action plan, give us a call!

Plan Update

Please see the accompanying performance spreadsheet for updated returns on your
investments.

EMBREE FINANCIAL works diligently with the 401(k) Investment Committee to provide you a best‐in‐class Retirement Savings Plan. Together, we regularly monitor investment performance, mutual fund quality and plan costs.

Please contact us at 312‐527‐5565 if you have any questions regarding your Plan, expenses, industry trends or your own retirement strategy.

Market Returns YTD 2018

Please  contact  us  at  312‐527‐5565  if you  have  any  questions  regarding your Plan, expenses, industry trends or your own retirement strategy.

Second Quarter – 2018

Quarterly Newsletter to Retirement Plan Participants

Market Update

With all of the bluster and hand-wringing we’ve witnessed over the past six months, it’s pretty bizarre that portfolio returns are basically unchanged since last year. It’s actually quite remarkable that the headwinds – Fed rate hikes, tariffs, wage inflation, politics and now a stronger dollar – haven’t been more negative for stocks.

What’s also interesting is the divergence we’ve seen in the past six months – non-US stocks, emerging markets and bonds have taken a hit — down roughly 3%, 7% and 2%, respectively, while tech stocks and small caps have been on a roll — gaining close to 10% each.

For the past several years we have advocated a more aggressive approach for retirement savers, favoring stocks over bonds. We are still in that camp, although after ten years of zero interest rates, it is encouraging that short guaranteed bonds offer returns of 2 – 3%.

Our view is that the economy has momentum, and the expansion will continue, even though the pace of growth may slow. We don’t expect a prolonged, nasty trade war with China or the EU, but also recognize it could happen, and we’ll continue to watch for events that could provide dislocation and therefore opportunity. After last year’s impressive rally, it would not be at all surprising to see this year end with little to offer by way of stock market gains.

EMBREE  FINANCIAL  works diligently  with  the  401(k) Investment  Committee  to  provide you  a  best‐in‐class  Retirement Savings  Plan.    Together,  we regularly  monitor  investment performance,  mutual  fund  quality and plan costs.

Put Those Tax Savings to Work!

Recent shifts in federal tax brackets should mean more money in your pocket today. While everyone’s situation is different, the average tax payer is seeing an increase by roughly 3% in their after-tax take-home pay. In the wake of the Tax Cuts and Jobs Acts, it may make sense to contribute this extra amount to your plan, and maximize your savings in your retirement accounts, including IRAs. A little extra savings today can mean significant differences in your retirement nest egg!

Consolidate Old 401(k)’s

Savers today have many more cost-effective options to grow investments in an IRA or taxable account. For as little as $5,000 you can get started with a high-quality firm like Charles Schwab. The problem for most is the hassle of chasing down old plan money. We have assisted dozens of 401(k) participants in rolling old 401(k)’s into an IRA. Why not consolidate and simplify? We’re happy to help. Give us a call at 312-527-5565

Market Returns YTD 2018

Please  contact  us  at  312‐527‐5565  if you  have  any  questions  regarding your Plan, expenses, industry trends or your own retirement strategy.

First Quarter – 2018

Quarterly Newsletter to Retirement Plan Participants

Market Update

After a fabulous run in 2017, stocks have been a lot more volatile this year. Trade tensions, together with concerns about inflation and interest rates, have caused some fairly wild price swings in the past few months.

With all of the up and down movement, stocks finished essentially flat on the quarter. Bonds were down a bit because interest rates are ticking higher.

We still believe in the global growth story, and the positive corporate earnings momentum associated with it. We do not think the current tit-for-tat trade rhetoric will derail GDP growth or the secular bull market in equities, but do anticipate a tougher year overall. We also expect short-term volatility to present attractive opportunities, which will be to the benefit of long-term retirement plan investors.

With the markets volatile and the economy on solid footing, it is an excellent time for dollar cost averaging. Sharp swings in the market create opportunities to add to your holdings at lower prices. If you have received a year-end bonus or a salary increase in the past several months, consider increasing your contribution in order to grown your savings more aggressively.

EMBREE  FINANCIAL  works diligently  with  the  401(k) Investment  Committee  to  provide you  a  best‐in‐class  Retirement Savings  Plan.    Together,  we regularly  monitor  investment performance,  mutual  fund  quality and plan costs.

Grow After-Tax Savings, As Well

Take advantage of the Roth 401(k) if it’s available to you. The major difference between Roth and traditional pre-tax savings is the tax treatment when you ultimately spend the money. Roth distributions are tax free in retirement, whereas you must pay ordinary income tax when distributing traditional pre-tax savings.

The younger you are, the more beneficial Roth savings are. Compounding tax-free savings over a long period of time is a powerful way to accumulate wealth. If you are currently contributing 5% of your pay to the 401(k) pre-tax, consider adding  3 – 5% to the Roth as well. It will make a huge difference in retirement!

If you have any questions, or need help with any aspect of your retirement plan, please don’t hesitate to call us at 312-527-5565.

Market Returns: First Quarter 2018

Please  contact  us  at  312‐527‐5565  if you  have  any  questions  regarding your Plan, expenses, industry trends or your own retirement strategy.