"Helping You Navigate the Course to Financial Freedom"
 October 2016
The Elephant in the Room
Much of September's ups and downs was related to interest rate worries and chatter from various Federal Reserve officials about the direction of interest rates.
Table 1: Key Index Returns
3-year* %
Dow Jones Industrial Average
NASDAQ Composite
S&P 500 Index
Russell 2000 Index
MSCI World ex-USA**
MSCI Emerging Markets**
Source: Wall Street Journal, MSCI.com
MTD returns: Aug 31, 2016-Sep 30, 2016
YTD returns: Dec 31, 2015-Sep 30, 2016
I'll steer clear of the Fed in this month's letter, but I did want to go into a bit of detail on one item - what I sometimes like to refer to as the "elephant in the room."
You know, something that everyone at the cocktail party is aware of it, but we all decide it's best to pretend it's not there.
Today's elephant - the upcoming election.
No doubt, politics can fuel all types of emotions. We sometimes feel strongly about certain issues or certain candidates. It's not uncommon to think, "How can anyone see things differently than I do?!"
And that's when the fireworks begin.
So, recognizing that we all have our own political views and filters, including myself, I want to cautiously tiptoe into the minefield and help you see the election through the lens of the market. Admittedly, it's a very narrow lens, but it's the one I'm concerned about at the moment.
Your vote counts
The election is on everyone's mind, whether they admit it or not. I have to say in my own experience, it's the number one thing clients have wanted to discuss with me in the last month or so.
In what was the first of three scheduled debates, the two major candidates came to blows on September 26.
If you happened to see some of the snap polls that were conducted immediately following the debate, Hillary Clinton seemed to come out on top (CNN). Most professional pundits also saw it the same way.
But as a recent article in the NY Times (http://nyti.ms/2d19L9B) pointed out, the debate results seemed to indicate Wall Street, at least, fears a Trump presidency. While the first debate was in progress, financial futures (essentially projections of what traders believe will happen in the stock markets in the future) traded in lock step with the candidates' performances. As Clinton scored debate points, stock market futures went up.
The positive reaction extended into the next day, telling me that the professional investment community was pleased with Clinton's performance.
Let me explain why this might be the case, despite Trump's "pro business" stance.
As a observer who is interested in viewing the election through the prism of the market (admittedly a very narrow prism), the professional investment community sees continuity in a Clinton win, even if some in the community are more likely to subscribe to the economic and tax ideas of a Republican.
In This Issue

Rates on Federal Student Loans are Falling


As of August 2016, the rate on federal Direct student loans for undergraduates will be 3.76%, down from the 2015-2016 school year rate of 4.29%.  Although the rates on student loans reset annually for new loans, rates remain fixed for the life of the loan once taken out.  This rate applies whether the loan is based on financial need (subsidized) or not.

The rate on federal Direct loans made to graduate students will be 5.31%, down from 5.84%.  Rates for Plus loans, made to parents of undergraduates, is 6.31%, down from 6.84% the previous year.

While this trend of lower rates may not last, it certainly is good news for current students.  According to the Project on Student Debt, 2014 college graduates had an average of $29,000 in student loans from all sources.  Even a half point reduction in interest rates can result in savings of almost $850 over the 10 year life of the average loan.

And while students may be tempted to refinance federal loans with one of the newer financial technology firms like Sofi, they should remain cautious.  While some graduates with high salaries and top notch credit scores may benefit from such a move, private loans don't carry the protections and flexibility of federal loans, such as the ability to tie repayment amounts to your income, or even have your loans forgiven in some situations.

Call us if you have questions about your student loans.

It's that continuity that appeals to the desire for certainty. As I've mentioned many times in the past, traders and short term investors fear heightened uncertainty. It's the vagueness of some of Trump's ideas, coupled with his rhetoric, that fuels uncertainty.
Instead, it is more akin to the idiom, "Better the devil you know than the devil you don't," at least in the eyes of Wall Street.
This is not an endorsement of either candidate. Let me also emphasize, short-term market volatility shouldn't determine how you and I vote in November. The nation faces much more pressing issues.
I do, however, want to monitor important events that may create some ripples in the financial waters, even if those ripples are brief in nature.
That leads to my next point. Keep your eye on your longer-term financial plan. While we've seen very little volatility tied to the election to date, it's possible things could get a bit bumpy as we approach Election Day.
You've heard me reiterate time and time again: Markets go through choppy periods over the short term, but a disciplined approach is the straightest line to your financial goals.
In my lifetime we've had good presidents and bad. The nation survived. I expect that despite who is elected this November, we will survive. Perhaps even thrive.
As baseball great Yogi Berra was fond of saying and I'm fond of quoting, "It's tough to make predictions, especially about the future." But you have something to say about this future - so make sure your voice is heard and vote.
If you have any questions or would like to discuss any matters, please feel free to give me a call - even if it's just politics!

A Financial Calendar for the Fourth Quarter 
The fourth quarter is chock full of dates and deadlines important to your financial well-being. Here are a few key dates you need to mark on your calendar for the remaining months of 2016:
Oct. 15 - Dec. 7: Medicare Open Enrollment
Now is the time for Medicare-eligible individuals to take a fresh look at their Prescription Part D and Medicare Advantage coverage. Premiums for such plans can change every year. Prescription plan formularies (the list of covered drugs) and the prices paid for covered drugs, typically change every year - make sure the drugs you take will be covered by your plan in 2017. If not, shop for a new plan at https://www.medicare.gov/find-a-plan/questions/home.aspx.
Medicare Advantage plans can also change the list of providers available in their network, as well as the cost and additional benefits. Participants should receive a notice from their current provider on what changes will be taking place for 2017.
Nov. 1 - Jan. 31: Affordable Care Act (ACA) Open Enrollment
While the majority of individuals have health insurance through Medicare or their employer, many receive their coverage directly through individual plans with insurance carriers.
2017 looks to bring many (mostly negative) changes to the individual marketplace. While carriers are not required to provide details until Nov. 1, many have already announced their intentions to drop out of the individual marketplace. In New Jersey, for example, only 2 providers remain in the Healthcare Exchange for 2017, down from the 5 carriers providing coverage in 2016. Less competition also means higher rates and less generous coverage. And while open enrollment lasts until Jan. 31, for those who require coverage to begin on Jan. 1 2017, most likely their enrollment deadline will be Dec. 15 or even earlier.
Preparation is the key here - make sure you know how you've used healthcare in the past and how you anticipate using it in the future. Remember in the past many web-based enrollment programs were overwhelmed in the initial days of open enrollment, so your window of opportunity to compare and analyze offerings may be even shorter. You can find out more about your options at www.healthcare.gov.
Nov. 8: Election Day
Vote! And don't be surprised if the markets react strongly, one way or the other. But remember - elections in and of themselves don't typically have long lasting effects. It's the policies implemented in the weeks and months after the new administration comes in that will determine the longer term direction of the markets.
Dec. 1 -31: Mutual Fund Distribution Season
Mutual funds must distribute any capital gains incurred during the year to its shareholders. This is typically done in the last quarter of the year, most often in December. Note that a fund doesn't need to be a great performer to have a large distribution in December - if one has been UNDER-performing, and thus losing clients/assets, it may have to sell investments to raise the cash to cover large redemptions.
If your investments are in a tax-qualified account (401k or IRA), this won't be much of a concern for you, as only distributions from these accounts are taxed as ordinary income, regardless of the source. However, if your mutual funds are held in a non-qualified (taxable) account, you may have to pay taxes on these capital gain distributions, even if you haven't redeemed any mutual fund shares yourself! Call us if you have concerns about taxation and your own holdings.
Dec. 31: Required Minimum Distribution Deadline
You MUST take distributions annually from your IRAs and company retirement plans once you reach age 70 ½, based on a combination of your age and the total amount of your retirement investments as of the end of the previous year. RMDs are also a must if you inherit an IRA.
You don't have to take a distribution from EACH account, but you must take the total amount required from at least one account before December 31 of each year. Penalties for not taking the required distribution are steep - up to 50% of the required distribution amount! So make sure you're on top of this requirement.
Dec. 31: 529 Plan Distribution Deadline
Tax-free distributions from 529 plans can only be taken in the same calendar year as qualified education expenses were incurred. So if you are paying Spring 2017 tuition in December of 2016, you want to make sure you withdraw reimbursement funds from the 529 plan in 2016, not 2017 (although the IRS is working on rules to allow a 3-month window into the next year, these rules are not yet in place).
These are just a sampling of the many deadlines associated with the end of the year. If you have any questions about your own situation, please give us a call.

Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA), Member FINRA, SIPC. Supervising office at 678-954-4000. Financial planning offered by Compass Wealth Management LLC. Leslie Beck and Martin Siesta are registered representatives and investment advisor representatives of SFA, which is otherwise unaffiliated with Compass Wealth Management. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary.  Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.  For more information visit www.compasswealthmanagement.net