Darrell Financial Services,LLCEmily Darrell Mascio, CFPMark J. Darrell, CFP2200 Baltimore BoulevardFinksburg, MD 21048410-857-7610888-795-8954mark@darrellfinancial.com

September - October 2019Five Retirement Lessons from Today'sRetirees

Life Insurance with Long-Term Care Benefits

How can I teach my high school student theimportance of financial literacy?

Do I need to pay estimated tax?

Money Matters NewsletterA Solid Foundation For Your Financial Future

Market Strategies: Three Ways to Play Defense in Your Stock Portfolio

See disclaimer on final page

Hi Everyone,

We hope you are enjoying the final days ofsummer! This Fall is shaping up to beanother interesting one for investors. Willthe trade war with China continue to affectmarket volatility and the economy? Will theFed reduce interest rates? Regardless ofthe answers to these questions, having awell diversified portfolio will have youprepared. If you have any questions orconcerns about your investments, give uscall. We are standing watch!

We've prepared a great line-up of articlesfor you here. If they spark any questions orconcerns, give us a call. Also, pleaseconsider forwarding this newsletter to anyof your friends and family who might beinterested in our services. We wouldcertainly welcome the introduction!

Until next time, take care.

Mark Darrell, CFP

Emily Darrell Mascio, CFP

Defensive investmentstrategies share a commongoal — to help a portfolio betterweather an economicdownturn and/or bouts ofmarket volatility. But there aresome key differences,

including the specific criteria by which particularstocks are selected. If you are nearingretirement or just have a more conservative risktolerance, one of these defensive strategiesmay help you manage risk while maintaining arobust equity portfolio.

Tilt toward valueGrowth and value are opposite investmentstyles that tend to perform differently underdifferent market conditions. Value stocks areassociated with companies that appear to beundervalued by the market or are in anout-of-favor industry. These stocks may bepriced lower than might be expected in relationto their earnings, assets, or growth potential,but the broader market is expected toeventually recognize the company's fullpotential.

Established companies are more likely thanyounger companies to be considered valuestocks. These firms may be more conservativewith spending and emphasize paying dividendsover reinvesting profits. Unlike value stocks,growth stocks may be priced higher in relationto current earnings or assets, so investors areessentially paying a premium for growthpotential. This is one reason why growth stocksare typically considered to carry higher risk thanvalue stocks.

Seek dividendsWhereas stock prices are often unpredictableand may be influenced by factors that do notreflect a company's fiscal strength (orweakness), dividend payments tend to besteadier and more directly reflect a company'sfinancial position. Comparing current dividendyields, and a company's history of dividendincreases, can be helpful in deciding whether toinvest in a stock or stock fund.

The flip side is that dividend-paying stocks maynot have as much growth potential as

non-dividend payers, and there are times whendividend stocks may drag down, not boost,portfolio performance. For example, dividendstocks can be sensitive to interest ratechanges. When rates rise, the higher yields oflower risk fixed-income investments maybecome more appealing, placing downwardpressure on dividend stocks.

Temper volatilityAll stocks are volatile to some degree, butsome have been less volatile historically thanothers. Certain mutual funds andexchange-traded funds (ETFs) labeled"minimum volatility" or "low volatility" areconstructed with an eye toward reducing riskduring periods of market turbulence.

One commonly used measure of a stock orstock fund's volatility is its beta, which istypically published with other information aboutan investment. The U.S. stock market as awhole is generally considered to have a beta of1.0. In theory, an investment with a beta of 0.8might experience only 80% of losses during adownswing — and thus would have less groundto regain when the market turns upward again.

The return and principal value of allinvestments fluctuate with changes in marketconditions. Shares, when sold, may be worthmore or less than their original cost. Investing individends is a long-term commitment. Theamount of a company's dividend can fluctuatewith earnings, which are influenced byeconomic, market, and political events.Dividends are typically not guaranteed andcould be changed or eliminated. Low-volatilityfunds vary widely in their objectives andstrategies. There is no guarantee that they willmaintain a more conservative level of risk,especially during extreme market conditions.

Mutual funds and exchange-traded funds aresold by prospectus. Please consider theinvestment objectives, risks, charges, andexpenses carefully before investing. Theprospectus, which contains this and otherinformation about the investment company, canbe obtained from your financial professional. Besure to read the prospectus carefully beforedeciding whether to invest.

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Five Retirement Lessons from Today's RetireesEach year for its Retirement ConfidenceSurvey, the Employee Benefit ResearchInstitute (EBRI) surveys 1,000 workers and1,000 retirees to assess how confident they arein their ability to afford a comfortable retirement.Once again, in 2019, retirees expressedstronger confidence than workers: 82% ofretirees reported feeling "very" or "somewhat"confident, compared with 67% of workers. Acloser look at some of the survey resultsreveals various lessons today's workers canlearn from current retirees.

Current sources of retiree incomeLet's start with a breakdown of the percentageof retirees who said the following resourcesprovide at least a minor source of income:

• Social Security: 88%• Personal savings and investments: 69%• Defined benefit/traditional pension plan: 64%• Individual retirement account: 61%• Workplace retirement savings plan: 54%• Product that guarantees monthly income:

33%• Work for pay: 25%

Lesson 1: Don't count on work-relatedearningsPerhaps the most striking percentage is the lastone, given that 74% of today's workers expectwork-related earnings to be at least a minorsource of income in retirement. Currently, justone in four retirees works for pay.

Lesson 2: Have realistic expectationsfor retirement ageBuilding upon Lesson 1, it may benefit workersto proceed with caution when estimating theirretirement age, as the Retirement ConfidenceSurvey consistently finds a big gap betweenworkers' expectations and retirees' actualretirement age.

In 2019, the gap is three years: Workers saidthey expect to retire at the median age of 65,whereas retirees said they retired at a medianage of 62. Three years can make a bigdifference when it comes to figuring out howmuch workers need to accumulate by their firstyear of retirement. Moreover, 34% of workersreported that they plan to retire at age 70 orolder (or not at all), while just 6% of currentretirees fell into this category. In fact, almost40% of retirees said they retired before age 60.The reality is that more than four in 10 retireesretired earlier than planned, often due to ahealth issue or change in their organizations.

Estimating retirement age is one area whereworkers may want to hope for the best butprepare for the worst.

Lesson 3: Income is largely a result ofindividual savings effortsEven though 64% of current retirees havedefined benefit or pension plans, an even largerpercentage say they rely on current savingsand investments, and more than half rely onincome from IRAs and/or workplace plans.Current workers are much less likely to havedefined benefit or pension plans, so it is evenmore important that they focus on their ownsavings efforts.

Fortunately, workers appear to be recognizingthis fact, as 82% said they expect theirworkplace retirement savings plan to be asource of income in retirement, with more thanhalf saying they expect employer plans to playa "major" role.

Lesson 4: Some expenses, particularlyhealth care, may be higher thanexpectedWhile most retirees said their expenses were"about the same" or "lower than expected,"approximately a third said their overallexpenses were higher than anticipated. Nearlyfour out of 10 said health care or dentalexpenses were higher.

Workers may want to take heed from this dataand calculate a savings goal that accountsspecifically for health-care expenses. They mayalso want to familiarize themselves with whatMedicare does and does not cover (e.g., dentaland vision costs are not covered) and thinkstrategically about a health savings account ifthey have the opportunity to utilize one at work.

Lesson 5: Keep debt under controlJust 26% of retirees indicated that debt is aproblem, while 60% of workers said this is thecase for them. Unfortunately, debt can hinderretirement savings success: seven in 10workers reported that their non-mortgage debthas affected their ability to save for retirement.Also consider that 32% of workers with a majordebt problem were not at all confident abouthaving enough money to live comfortably inretirement, compared with just 5% of workerswho don't have a debt problem.

As part of their overall financial strategy,workers may want to develop a plan to paydown as much debt as possible prior toretirement.

EBRI consistently finds thatsetting a savings goalincreases the level ofconfidence among today'sworkers. Despite that fact,just 42% of surveyrespondents have tried todetermine a total retirementsavings goal, and less thanone-third have tried tocalculate how much theymay need for medicalexpenses. Of those whohave calculated a totalsavings goal, 34% havefound they will need $1million or more to retirecomfortably.

Source: 2019 RetirementConfidence Survey, EBRI

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Life Insurance with Long-Term Care BenefitsIf you are concerned about the high costs oflong-term care but don't want to purchasetraditional long-term care (LTC) insurance, youmight consider two strategies that combinepermanent life insurance coverage withlong-term care benefits.

Keep in mind that any payouts for covered LTCexpenses reduce (and are usually limited to)the life insurance death benefit that would go toyour heirs, and benefits can be much less thanthose of a traditional long-term care policy.

Accelerated death benefit (ADB) riderAn ADB rider attached to a permanent lifeinsurance policy allows the insured to beginreceiving benefits while he or she is still living,under specific circumstances.

In the past, ADB riders only paid when apolicyholder was diagnosed with a terminalillness. However, more insurers now offer ridersthat start paying when a policyholder isdiagnosed with a chronic illness, is permanentlydisabled, or needs to enter a nursing home.

Although some policies may include an ADBrider at little or no cost, ADB riders aregenerally optional and will increase thepremium.

Hybrid life—LTC policyThis type of policy combines permanent lifeinsurance and long-term care coverage. Manysuch policies require a substantial up-frontpremium, but buyers don't have to worry aboutfuture rate increases or the issuer canceling thepolicy.

For the same premium, a hybrid policy typicallyhas a smaller death benefit than a life policywith an ADB rider. However, the LTC coverageis more generous than an ADB rider.

Benefits under a hybrid policy typically beginwhen the policyholder needs help with two ormore activities of daily living such as eating,bathing, and dressing.

With an optional continuation-of-benefits rider,payouts for covered LTC expenses couldcontinue for a specified period or your lifetime,even if they exceed the death benefit.

Financial flexibilityAnother advantage of these strategies is thatpolicyholders can tap into the cash value of thepermanent life policy during retirement if moneyis needed for income or emergencies. Loansand withdrawals will reduce the policy's cashvalue and death benefit.

Other considerationsIt would be wise to explore your LTC optionswhile you are healthy. If you consider a a lifeinsurance policy with an ADB rider or a hybridlife-LTC policy, you should have a need for lifeinsurance and evaluate the policy on its meritsas life insurance.

The cost and availability of life insurancedepend on factors such as age, health, and thetype and amount of insurance purchased. Inaddition to the life insurance premiums, othercosts include mortality and expense charges. Ifa policy is surrendered prematurely, there maybe surrender charges and income taximplications.

Any guarantees are contingent on the financialstrength and claims-paying ability of the issuinginsurance company. Riders are subject to thecontractual terms, conditions, and limitationsoutlined in the policy, and may not benefit allindividuals.

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Darrell FinancialServices, LLCEmily Darrell Mascio, CFPMark J. Darrell, CFP2200 Baltimore BoulevardFinksburg, MD 21048410-857-7610888-795-8954mark@darrellfinancial.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019

Securities and Investment AdvisoryServices offered through FoundersFinancial Securities, LLC. MemberFINRA/SIPC and RegisteredInvestment Advisor.

Do I need to pay estimated tax?Taxpayers are required to paymost of their tax obligationduring the year by having taxwithheld from their paychecksor pension payments, or by

making estimated tax payments. Estimated taxis the primary method used to pay tax onincome that isn't subject to withholding. Thistypically includes income from self-employment,interest, dividends, and gain from the sale ofassets. Estimated tax is used to pay bothincome tax and self-employment tax, as well asother taxes reported on your income tax return.

Generally, you must pay federal estimated taxfor the current year if: (1) you expect to owe atleast $1,000 in tax for the current year, and (2)you expect your tax withholding and refundabletax credits to be less than the smaller of (a)90% of the tax on your tax return for the currentyear, or (b) 100% of the tax on your tax returnfor the previous year (your tax return for theprevious year must cover 12 months).

There are special rules for farmers, fishermen,and certain high-income taxpayers. If at leasttwo-thirds of your gross income is from farmingor fishing, you can substitute 66-2/3% for 90%in general rule (2)(a) above. If your adjusted

gross income for the previous year was morethan $150,000 ($75,000 if you were marriedand filed a separate return for that year), youmust substitute 110% for 100% in general rule(2)(b) above.

If all of your income is subject to withholding,you probably don't need to pay estimated tax. Ifyou have taxes withheld by an employer, youmay be able to avoid having to make estimatedtax payments, even on your nonwage income,by increasing the amount withheld from yourpaycheck.

You can use Form 1040-ES and its worksheetsto figure your estimated tax. They can help youdetermine the amount you should pay for theyear through withholding and estimated taxpayments to avoid paying a penalty. The year isdivided into four payment periods. After youhave determined your total estimated tax for theyear, you then determine how much you shouldpay by the due date of each payment period toavoid a penalty for that period. If you don't payenough during any payment period, you mayowe a penalty even if you are due a refundwhen you file your tax return.

Withholding and estimated tax payments mayalso be required for state and local taxes.

How can I teach my high school student the importanceof financial literacy?Even though your child is justin high school, he or she maystill have to deal with certainfinancial challenges. Whether

this involves saving for an important purchaselike a car or learning how to use a credit cardresponsibly, it's important for your high schoolerto have a basic understanding of financialliteracy concepts in order to manage his or herfinances more effectively.

While financial literacy offerings in schools haveincreased in popularity, a recent study reportedthat only 17 states require high school studentsto take a personal finance course before theygraduate.1 Here are some ways you can teachhigh school students the importance of financialliteracy.

Advocate saving. Encourage your children toset aside a portion of any money they receivefrom an allowance, gift, or job. Be sure to talkabout goals that require a financialcommitment, such as a car, college, and travel.As an added incentive, consider matching thefunds they save for a worthy purpose.

Show them the numbers. Use an onlinecalculator to demonstrate the concept oflong-term investing and the power of compoundinterest. Your children may be surprised to seehow fast invested funds can accumulate,especially when you match or contribute anadditional amount each month.

Let them practice. Let older teens becomeresponsible for paying certain expenses (e.g.,clothing and entertainment). The possibility ofrunning out of their own money might makethem think more carefully about their spendinghabits and choices. It may also encourage themto budget their money more effectively.

Cover the basics. By the time your childrengraduate from high school, they should at leastunderstand the basic concepts of financialliteracy. This includes saving, investing, usingcredit responsibly, debt management, andprotection planning with insurance.1 Survey of the States, Council for EconomicEducation, 2018

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