Given the recent stock market volatility, it is important to re-evaluate your plan for your Stock Benefits (RSUs, ESPP, Stock Options) to take advantage of opportunities that may arise in this environment. 

A well-crafted strategy for your stock benefits should focus on:

1. Personal needs and situation

2. Maximizing the benefit

3. Minimizing taxes

4. Diversifying strategically

5. Incorporating the investing principle of “Buy Low + Sell High” (when available)

The Investing Principle of Buy Low + Sell High

A fundamental investing strategy is to buy stocks when they are undervalued and sell them once they’ve appreciated, allowing you to benefit from the price increase. While timing restrictions from stock benefits may limit this approach, it’s important to integrate it whenever possible.

Strategies for your stock benefits based on your timelines

How do you incorporate your personal situation and needs with an effective strategy during the current market volatility? We will dive into several strategies that address the needs for different time periods, since timelines are an even more important factor during volatile markets.

For short-term needs (2 years or less)

Stock compensation can provide funds for expenses beyond salary and bonus, such as tuition, home repairs, vacations, or tax bills.

1. First, consider selling recently purchased ESPP shares. Since you're buying these shares at a discount while the stock price is low, selling them for a gain doesn’t violate the “buy low, sell high” principle.

   Next, consider selling recently granted and vested RSUs. Like the ESPP strategy, these RSUs can help meet short-term cash needs. The main difference is that RSUs are often granted at a higher price—before a market downturn—so their current value may be lower than when they were granted. However, if the RSUs were granted recently, the price difference might be minimal, making them a more attractive option to sell.

For intermediate term needs (3-7 years) 

The intermediate term timeframe can be more challenging, since the answer isn’t clear and should depend on your risk tolerance.

• The safe approach: Sell existing RSU grants that will vest in the next 12 months. This strategy reduces your exposure to stock volatility but doesn’t fully align with the “buy low, sell high” principle, since RSUs may be worth less than their original grant price. However, future annual grants—typically part of your compensation—can help offset this by being issued at lower prices during a market downturn.

• The riskier approach: Hold all existing RSUs until the funds are needed, with the hope that the stock price recovers before then. This could allow you to better capitalize on the “buy low, sell high” strategy. The risk, however, is that the stock may not recover in time—or at all—leaving you potentially forced to sell at a loss when cash is needed.

• The balanced approach: To hedge your bets, consider combining both strategies: sell some RSUs now while holding others for potential future gains. This hybrid approach can offer peace of mind, helping you avoid second-guessing your decision if the market doesn’t move in your favor.

For long-term needs (8+ years)

Planning for long-term goals like retirement tends to be more straightforward.

• For vested RSUs and ESPP: Consider a strategy called Tax Loss Diversification, a variation of traditional tax loss harvesting. Tax loss harvesting involves strategically selling investments in non-retirement accounts to realize a loss, which can reduce your tax bill. You then reinvest that money into similar investments to stay in the market and benefit from potential recovery. With Tax Loss Diversification, the added benefit is that you're also shifting from concentrated stock (like your company shares) into a more diversified investment—such as an index fund with exposure to hundreds or thousands of companies. When the market is rising, diversifying can be painful due to the capital gains taxes involved, so it's wise to take advantage of a downturn as a window of opportunity.

• Stock Options, RSUs, and ESPP: Stock Options offer the greatest potential upside but also carry the highest risk, especially when they’re “underwater” (i.e., the stock price is below the option’s strike price, making them currently worthless). In these cases, the best move is often to wait and give the stock time to recover, maximizing the chance to capture that upside. For RSUs and ESPP shares that you intend to hold for long-term growth, the best approach is often patience—holding through downturns and waiting for both the stock price and the broader market to recover.

The Exception: Expiring Stock Options

Expiring stock options require timely decision-making due to looming deadlines. Your strategy should reflect your risk tolerance, the number of options involved, and how critical they are to your overall financial goals.

• Conservative approach: Sell all options now to avoid the risk of further price declines. This minimizes downside but also limits any potential future upside.

• Moderate approach: Sell portions of your options at predetermined dates over time, balancing risk reduction with the opportunity for gains.

• Moderately aggressive approach: Sell portions based on specific price targets. If those targets aren’t reached, you may need to sell the remaining options closer to expiration to avoid losing them entirely.

• Aggressive approach: Hold all options until close to expiration in hopes of a stock price rebound or significant upswing. This offers the most potential upside, but also the highest risk of loss if the stock doesn’t recover in time.

Market volatility may feel uncertain, but it also creates rare opportunities to make the most of your stock benefits. If you haven’t revisited your strategy recently, now is a great time to reassess and align your plan with the current market landscape.

Remember, there’s no one-size-fits-all approach. The right strategy depends on your company’s stock performance, your personal financial goals, risk tolerance, and overall circumstances. Use this moment to take control, make informed decisions, and turn today’s challenges into tomorrow’s gains.

For questions or more information about managing stock benefits during current conditions, please call (503) 905-3100 or contact us.

---

Disclosures: The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Comission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

---

Related Articles

This article explores how financial headlines influence investor behavior, often exacerbating emotional decision-making and undermining long-term investment outcomes. Drawing from behavioral finance research and investor psychology, the article argues that investors should adhere to a written investment plan rather than respond impulsively in the face of uncertainty and sensational news. Selected headlines from Bloomberg and CNBC illustrate the impact of the modern media environment on perception and behavior. The insights of Peter Lynch, Jack Bogle, and Warren Buffett are used to contextualize the long-standing wisdom of patience and discipline in investing.

The rise of financial anxiety

Today’s investors are inundated with a 24/7 news cycle that thrives on urgency. While access to information has never been easier, clarity has never been harder to maintain. Financial headlines are designed to capture attention, often through alarming or emotionally charged language. This reality presents a challenge for investors: distinguishing between signal and noise and avoiding making decisions rooted in emotion rather than logic or planning.

The emotional power of headlines

A review of today’s (4/24/25) major financial media illustrates the challenge. From CNBC, headlines such as:

Bridgewater hedge fund warns Trump policies could induce a recession
The S&P 500 formed an ominous ‘death cross.’ What history says happens next

frame the economic outlook in dramatic, even catastrophic terms. Similarly, Bloomberg ran with:

Odd Lots: Why the Real Tariff Pain Hasn’t Even Begun
One of Wall Street’s Biggest Bulls Slashes View as Tariffs Bite

Despite these headlines, the S&P 500 rose nearly 2% today, and tech stocks surged on strong earnings reports. This disconnect between the emotional tone of news coverage and actual market behavior is a classic example of availability bias—a cognitive distortion where individuals give undue weight to recent, vivid, or emotionally charged information (Tversky & Kahneman, 1973).

This behavioral response, driven by the availability of alarming headlines, often leads investors to abandon sound strategies in favor of reactive decisions. Yet history and experience warn us against this trap. As the following insights from some of the most respected minds in investing make clear, enduring success comes not from responding to noise but from adhering to a disciplined, long-term approach.

Wisdom from the investment greats

The dangers of reactionary investing are not new. Legendary investor Peter Lynch warned:

“Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.”

Jack Bogle, the founder of Vanguard, put it more bluntly:

“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible.”

And Warren Buffett offered perhaps the most elegant summation:

“The stock market is a device to transfer money from the impatient to the patient.”

These insights underscore the importance of focusing not on media narratives but on long-term goals and rational portfolio construction.

Recognizing the wisdom of these investment luminaries is a critical first step—but applying it consistently requires more than agreement; it requires structure. Investors need more than memorable quotes to overcome the behavioral impulses triggered by market volatility.

They need a written financial plan that serves as a behavioral compass, grounding decisions in clearly defined goals, timelines, and risk tolerance. Translating timeless investment principles into practical, repeatable actions makes the financial plan a vital tool for staying the course when emotions run high.

The role of a written financial plan

The antidote to reactionary behavior is a well-crafted financial plan that clearly articulates an investor’s purpose, time horizon, risk tolerance, and rebalancing strategy. Far from being a static worksheet, the plan functions as a behavioral anchor, offering clarity during periods of uncertainty and helping investors resist the temptation to respond emotionally to sensational headlines.

A thoughtfully structured financial plan does more than outline investment choices and target allocations. It proactively defines how to respond to market volatility, eliminating guesswork when clarity is most needed. Doing so transforms abstract wisdom into actionable discipline—bridging the gap between intention and execution.

Planning over panic

In a media landscape dominated by noise, fear, and speculation, the most effective investor response is not reaction—but preparation. Rather than chase headlines, successful investors rely on a carefully constructed financial plan and the discipline to follow it. Behavioral economics and decades of market data affirm that patience, consistency, and structure drive long-term success.

So, when the next wave of headlines warns of crisis or collapse, the wise investor doesn’t panic. They return to the plan—and stay the course.

For more information about our financial planning services, please call (503) 905-3100 or contact us.

References:

Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124–1131.

---

Disclosures: These market returns are based on past performance of an index for illustrative purposes only. Past performance does not guarantee future results. All investing involves risk, including the loss of principal.  Index performance is provided for illustrative purposes only and does not reflect the performance of an actual investment. Investors cannot invest directly in an index.

The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Comission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

---

Related Articles

Markets have been moving fast lately — in both directions

Down 10% in two days. Up almost the same the next. Three trading days: A full year’s worth of returns gone, and then mostly back again. 

Looking at the S&P 500 last week feels disorienting. And in a way, that’s the point.

View fullsize

This kind of movement makes people wonder if the system is broken. But this is exactly how markets work. They are brutally efficient at processing new information, whether it’s political, economic, or emotional.

Markets don’t wait for clarity. They move quickly on possibility, repricing risk in real time, regardless of how ready you feel. And when things are uncertain—when leadership seems unpredictable, policy is in flux, or the narrative changes overnight—the swings can be dramatic.

Fast drops, slow climbs — that’s the deal

Volatility is the price of admission for long-term growth. There’s a reason people say, “Markets take the stairs up and the elevator down.” Even looking at the last few years, gains usually build gradually, while losses often arrive quickly and unexpectedly.

Yet, over the decades, the odds have been in your favor. On average, the S&P 500 has risen in 52% of trading days, 73% of calendar years, and 94% of decades. (Source: Capital Group)

Three days of outliers over the last 25 years

New York Times

The sharp losses of April 3rd and 4th, followed by the rebound on April 9th, are outliers in magnitude but not in pattern. The biggest gains and losses tend to cluster together, and they often show up when they’re least expected. Selling after a big drop means missing the potential surge that follows. Buying after a big rally means forgetting what preceded it.

This isn’t a timing game. It’s a discipline game

Discipline doesn’t mean knowing what happens next. It means staying in the game when it feels like the rules are changing. It means resisting the urge to flinch when the noise gets loud.

The headlines will keep coming, and volatility will return. But the most reliable part of markets is that they change. The market may take the stairs up and the elevator down — but over time, it remains one of the most reliable places to grow long-term wealth.

Hold fast to your financial plan. Stay invested.

---

Disclosures: These market returns are based on past performance of an index for illustrative purposes only. Past performance does not guarantee future results. All investing involves risk, including the loss of principal.  Index performance is provided for illustrative purposes only and does not reflect the performance of an actual investment. Investors cannot invest directly in an index.

The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Comission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

---

Related Articles

We live in a world of complex economic forces, but at the heart of many of today’s big-picture challenges lies a simple truth: a country cannot indefinitely consume more than it produces. That is precisely what the United States has been doing for decades through the persistent and growing trade deficit.

This article is meant to educate, not alarm. To help all investors, professionals, and citizens better understand what is happening behind the scenes, why it matters to our long-term prosperity, and how thoughtful policy tools, including modernized tariffs, might help correct course.

Let us start with the core issue.

What is a trade deficit? 

A trade deficit occurs when a country imports more goods and services than it exports. Imagine your household spending more every month than it earns—you would need to make up the difference by drawing down savings or selling off parts of your home. That is essentially what the U.S. does year after year. We purchase foreign goods (such as cars, electronics, and clothing) in excess of what we sell abroad and must finance this gap by issuing debt or selling U.S. assets.

These assets include U.S. Treasury bonds, commercial real estate, stocks in American companies, and ownership stakes in U.S. businesses. That means other countries, such as China, Japan, Germany, and many others, are gradually gaining greater ownership of our economy.

 “Our net worth is being transferred abroad”

Legendary investor Warren Buffett put it bluntly over 20 years ago:

“Our country’s ‘net worth,’ so to speak, is now being transferred abroad at an alarming rate” (Fortune, 2003).

This quote deserves close attention.

Buffett does not talk about some abstract notion of wealth. He is referring to the tangible ownership of American assets—the land, companies, infrastructure, and financial instruments that make up our nation’s economic engine. When we finance our trade deficits, we are often doing so by selling these assets to foreigners or issuing IOUs (bonds) that must be repaid with interest over time.

Imagine a wealthy family that owns a large estate. Every year, to fund vacations and a high standard of living, they sell a few acres of land or take out a bigger mortgage. At first, it seems manageable. But over time, they no longer own the home outright. Their income now goes to paying interest, rent, or dividends to outsiders who bought what used to belong to them.

That is the picture Buffett (and others) paint of America’s trade behavior.

In real terms, this means future generations of Americans will be working to sustain themselves and sending investment returns overseas—to countries that now hold claims on our assets. As foreign ownership increases, so does the investment income flowing out of the U.S., thereby reducing our ability to reinvest in our own future.

The role of tariffs in correcting imbalances

This is where tariffs, when carefully designed and wisely implemented, can play a role—not as a weapon or political cudgel, but as a tool of balance.

Buffett originally proposed a market-based mechanism called Import Certificates, but the underlying principle is simple: If you want to buy more than you sell, you have to fund it—and at some point, that model breaks. A modest, broad-based tariff system could help bring trade into equilibrium, nudging us back toward producing more of what we consume and consuming more of what we produce.

This is not about isolating ourselves from the world. It is about aligning our consumption with our production, and ensuring that we do not gradually erode our national wealth through unchecked deficits.

Yes, tariffs raise prices—especially on imported goods. That is a cost worth recognizing. However, Buffett warns us not to be short-sighted:

“The pain of higher prices on goods imported today dims beside the pain we will eventually suffer if we drift along and trade away ever larger portions of our country’s net worth” (Fortune, 2003).

In other words, the bill comes due. The longer we delay, the more painful it will be to unwind the imbalance.

What does the modern data say?

Recent academic research offers critical insights into how tariffs function in today’s economy.

One study by Furceri, Hannan, Ostry, and Rose (2019) reminds us that, although economists overwhelmingly oppose protectionism, the public is less convinced, possibly because much research on tariffs is outdated or overly theoretical.

Their research examines the macroeconomic effects of tariffs using data from 151 countries over a 50-year period and finds that tariff increases reduce output, productivity, and consumption while increasing unemployment and inequality. These adverse effects are worse in advanced economies and during economic booms.

Tariffs have a limited impact on improving trade balances and can even lead to an appreciation of the exchange rate, offsetting their intended benefits. Overall, tariffs appear to be detrimental to economic welfare.

In another research article by Amiti, Redding, and Weinstein (2019), the authors conclude that in 2018, U.S. tariffs were almost entirely borne by American consumers and importers, rather than foreign exporters. Prices rose for many U.S.-made goods tied to these tariffs, and supply chains were disrupted. Consumers faced fewer product choices, and the overall economic cost was substantial, amounting to approximately $8.2 billion in lost efficiency and an additional $14 billion in costs passed on to consumers. These impacts aligned with basic supply and demand predictions.

The researchers believe their estimates are conservative, as they did not include other significant costs, such as lost product variety, companies reorganizing their supply chains, or the uncertainty caused by changing trade policies. Surprisingly, foreign exporters did not lower their prices to stay competitive, meaning Americans bore nearly all the costs of these tariffs. Why this happened remains a puzzle for future research.

So what do we make of this? Tariffs are not magic bullets. They are levers. Furthermore, like all levers, they require precise calibration. Used strategically and modestly—within a broader framework of trade policy—they may help correct imbalances, such as the persistent U.S. trade deficit. Used carelessly or punitively, they may do more harm than good.

Conclusion: Looking ahead

Warren Buffett’s warning in 2003 was not about politics—it was about sustainability. He argued that a nation cannot afford to consume more than it produces forever without losing control of its financial destiny. His solution was not isolationist, but strategic: to implement mechanisms, such as import certificates or well-designed tariffs, that could restore balance without undermining prosperity.

Today, academic research provides a clearer understanding of the costs and consequences of acting on that vision. Furceri et al. (2019) provide comprehensive macroeconomic evidence: tariffs tend to lower GDP, harm productivity, increase unemployment and inequality, and have little impact on improving trade balances. Amiti et al. (2019) demonstrate, in the U.S. context, that tariffs in 2018 were almost entirely borne by domestic consumers and importers, resulting in billions of dollars in lost efficiency and rising prices. Their conclusion? Tariffs reshaped supply chains and reduced product variety, ultimately burdening American consumers.

Together, these insights remind us that tariffs are not moral judgments—they are instruments. When used bluntly or reactively, they carry real costs. But used surgically, as part of a broader policy framework, they can still serve a purpose.

As we confront record trade deficits and rising foreign ownership of American assets, we are left with essential questions:

• Are we prepared to prioritize long-term national resilience over short-term consumer convenience?

• Can we modernize trade policy without repeating past mistakes?

• If not tariffs, what levers are we willing to pull to protect our economic independence?

Buffett’s voice echoes still: action is required. But today, that action must be informed by data, guided by principle, and measured by impact, not ideology.

References:

Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The impact of the 2018 tariffs on prices and welfare. Journal of Economic Perspectives, 33(4), 187–210.

Buffett, W. E. (2003, November 10). America's growing trade deficit is selling the nation out from under us. Fortune.

Furceri, D., Hannan, S. A., Ostry, J. D., & Rose, A. K. (2018). Macroeconomic consequences of tariffs (No. w25402). National Bureau of Economic Research.

---

---

Related Articles

Volatile markets test more than portfolios—they test patience. It’s easy to feel unsettled when headlines scream, and market volatility ensues. But the most important thing you can do as an investor is also the simplest: don’t let emotions get the best of you. 

In my nearly 30 years of advising clients, I’ve seen over and over again: the clients who succeed are the ones who manage their emotions, not just their money. The smartest thing you can do right now is stay calm and stay the course. The plan is working—even when it doesn’t feel like it. My experience has been that history has a way of rewarding those who stay calm, stay invested, and stay focused on their well-crafted financial plan.

At Human Investing, we believe that behavior, not timing or speculation, is what separates long-term success from short-term regret. For clients who have been with us for over 20 years, you’ve seen firsthand how a steady, disciplined approach can weather storms and grow wealth through them. For those new to our firm, please know that trust is the foundation of everything we do. We don’t just manage portfolios, we help guide people through uncertainty with clarity, care, and confidence.

To better understand the importance of maintaining a disciplined investment approach, it is helpful to examine five common psychological biases that often lead investors to deviate from sound decision-making. Drawing on both empirical research and professional experience, this section explores how emotional responses can override strategic thinking—particularly during periods of heightened uncertainty and market volatility—and outlines methods used to help clients remain focused on long-term objectives.

1. Loss aversion: When pain is louder than logic 

Researchers Kahneman, Knetsch, and Thaler (1991) discuss the psychological factors that drive loss aversion. Loss aversion is not just an investing concept; it’s a fundamental part of human psychology. Research shows that losses are felt about twice as painful as equivalent gains are perceived as pleasurable. In the brain, a $100 loss doesn’t just “sting”—it screams. And when markets drop, that emotional volume can drown out logic, strategy, and even years of sound advice.

This isn’t just a theory. I've seen it firsthand for a few decades—watching clients grapple with fear during the dotcom bust, the 2008 financial crisis, the 2020 COVID crash, and more recent volatility. In each case, the market eventually recovered. But those who let fear dictate their choices often miss the recovery, lock in their losses, and derail their long-term plans.

Here’s what makes loss aversion so dangerous: it feels rational. When the market drops 20%, the brain doesn’t think, “This is temporary.” It thinks, “Get out before it gets worse.” That impulse can feel like wisdom. But in reality, it's a trap.

The dislocation occurs when investors stop viewing a dip as part of the journey and begin to see it as the destination. Their long-term goals fade from view. The carefully designed plan becomes irrelevant. All that matters is stopping the pain.

But that short-term relief often comes at a prohibitive cost. Investors who sell at the bottom lock in their losses and are frequently too emotionally exhausted—or too afraid—to re-enter the market in time for the rebound. And rebound it almost always does. History shows that the market has consistently rewarded those who stay invested through downturns, not those who try to time their exits and re-entries.

2. Herding: When “everyone’s doing it” feels safer than thinking 

There’s a reason why stampedes are dangerous—not everyone in the crowd is running toward opportunity. Some are running from fear. 

In investing, we refer to this behavior as herding—the instinct to follow the crowd, particularly during times of uncertainty. Scharfstein and Stein (1990) were among the earliest to formally investigate and publish on the concept of herd mentality. We are indeed social creatures, hardwired to look to others for cues when we’re unsure. But in the markets, that instinct can be costly.

When prices drop and headlines grow loud, it’s natural to wonder: “What does everyone else know that I don’t?” You see friends moving to cash, analysts shouting about doom, and articles predicting disaster. The pull to join the herd becomes magnetic. But the crowd is often most unified at the wrong time, buying high out of excitement or selling low out of fear.

Here’s the cognitive dislocation: when fear spreads, we confuse consensus with correctness. If enough people are panicking, their emotion starts to feel like evidence. But markets are not democratic. The loudest voices are not always the wisest, and just because many are moving in the same direction doesn’t mean it’s the right one.

3. Recency bias: When yesterday becomes forever 

Tversky and Kahneman (1974) laid the foundational research on recency bias. They determine that “…the impact of seeing a house burning on the subjective probability of such accidents is probably greater than reading about a fire in the local paper. Furthermore, recent occurrences are likely to be relatively more available than earlier occurrences (p. 1127).” 

Put differently, individuals often extrapolate recent market movements into the future, believing that a market decline will persist or that a rally will continue indefinitely. This cognitive distortion, known as recency bias, reflects the tendency to overweight recent experiences when forming expectations about future outcomes.

It’s a mental shortcut that makes sense on the surface. After all, if it’s been raining for three days, we naturally reach for an umbrella on day four. But in the markets, this shortcut becomes a trap.

The dislocation happens when investors confuse a recent event with a long-term trend. They think: “The market’s been down the last two months—maybe this time is different. Maybe it won’t recover.” Or: “Tech has been hot all year—maybe it always will be.” This kind of thinking leads to chasing what has already happened or fleeing from what is already priced in.

Here’s the problem: the market doesn’t move in straight lines. It zigs, zags, and surprises. The best days often follow the worst. Yet, when recency bias takes hold, investors tend to anchor on the latest data point and overlook the broader context.

I’ve witnessed this bias unfold in every major market event since 1996. This ‘cognitive dislocation’ was particularly acute during the downturn from 2000 to 2002, when markets declined by 10%, 10%, and then 20%. But those who were paralyzed by recency bias—those who assumed the storm would never end—missed the sunshine that followed.

4. Sentiment: When moods masquerade as markets

The market is often described as a voting machine in the short term and a weighing machine in the long term (Graham, 2006). That’s another way of saying: in the short term, emotion can drive price more than value. And that emotion, called market sentiment, can be just as contagious and unpredictable as the weather.

Sentiment isn’t about fundamentals. It’s about how investors feel about the future. When people feel optimistic, they see opportunity in every dip. When they feel anxious, even the strongest companies look shaky. This is where the dislocation happens: investors begin to substitute their mood for actual analysis.

In times of high sentiment, people often buy more than they should, take on more risk than they realize, or ignore warning signs. During low sentiment, they often underinvest, sell too soon, or abandon long-term strategies altogether—not because the plan changed, but because their feelings did.

I’ve witnessed this in action many times since 1996, particularly in 2008, when panic dominated sentiment, and many investors fled the market near the bottom. The truth is, markets don’t care how we feel. But our feelings often shape how we interpret the market. That’s why at Human Investing, we spend as much time helping clients manage their emotions as we do managing their investments. We help you separate how you feel from what’s actually happening.

Your plan is designed to withstand emotional swings. It assumes there will be times when the market is overconfident, and times when it’s too afraid. That’s why we don’t react to moods. We respond to goals. Because when you confuse sentiment for truth, your portfolio becomes a mirror of your emotions. But when you trust your plan, your portfolio becomes a reflection of your purpose.

5. Emotional echo chambers: When biases team up to derail you

If loss aversion, herding, recency bias, and sentiment were minor on their own, we might be able to brush them off. But they don’t stay in their lanes. These biases often compound, amplifying each other until an investor is no longer thinking clearly. That’s what we call an emotional echo chamber—a space where your own fears are repeated and reinforced until they sound like facts.

Here’s how it plays out:

• The market dips, triggering loss aversion—“I can’t afford to lose more.”

• You see others selling, which activates herding—“Everyone’s getting out. Maybe I should, too.”

• You assume the recent downturn is the new normal—recency bias—“It’s just going to get worse.”

• Your confidence drops, and negative sentiment clouds your judgment—“I don’t feel safe, so maybe I’m not.” 

Suddenly, your investment decisions are no longer tied to your long-term goals—a chorus of emotional responses drives them, each one echoing the others. This is the moment investors often make their biggest mistakes: abandoning well-designed plans, selling at market lows, or shifting strategies midstream out of fear.

I’ve seen this cycle emerge during every major downturn. What I’ve learned is this: when fear gets loud, clarity gets quiet. Investors don’t just lose money in these moments—they lose confidence, perspective, and peace of mind.

At Human Investing, our job is to help you break out of that echo chamber. We’re here to re-center you when everything feels off-balance, to remind you of the purpose of your financial plan, and to bring you back to your long-term vision when the short-term noise becomes deafening.

We believe that staying invested is not just a financial decision, it’s an emotional discipline. That’s why we design portfolios that align with your comfort zone and why we lead with planning. Because a sound financial plan doesn’t just grow your wealth, it protects your thinking.

When emotional noise is high, we help you find quiet confidence. When biases clash in your head, we help you hear your goals again. And most importantly, when you start to feel like you’re the only one holding steady, we’re here to remind you—you’re not.

Empirical evidence

If the five behavioral prompts are not enough to encourage you to focus on your plan, a 40-year perspective on market ups and downs can provide an essential viewpoint. 

Please see Figure 1 at the end of this document. In it, you’ll see the average intra-year drop for the S&P 500 is approximately 14%, based on historical data going back several decades.

This means that in a typical year, the market will experience a peak-to-trough decline of around 14%—even in years that end up positive overall.

Here’s a quick breakdown:

From 1980 through 2023, the S&P 500 had: 

• Positive returns in about 75% of those years

• But it still experienced an average intra-year decline of ~14%

Why it matters:

Many investors panic during temporary drops, thinking something abnormal is happening. In reality, a 10–15% drop in a given year is a feature, not a flaw, of long-term investing. It’s part of the process, not a sign to change course.

References:

Graham, B. (2006). The intelligent investor: The definitive book on value investing (Rev. ed., J. Zweig, Commentary). Harper-Business. (Original work published 1949)

Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1991). Anomalies: The endowment effect, loss aversion, and status quo bias. Journal of Economic perspectives, 5(1), 193-206.

Scharfstein, D. S., & Stein, J. C. (1990). Herd behavior and investment. The American economic review, 465-479.

Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases: Biases in judgments reveal some heuristics of thinking under uncertainty. science, 185(4157), 1124-1131.

---

Disclosures: These market returns are based on past performance of an index for illustrative purposes only. Past performance does not guarantee future results. All investing involves risk, including the loss of principal.  Index performance is provided for illustrative purposes only and does not reflect the performance of an actual investment. Investors cannot invest directly in an index.

The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Comission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

---

---

Related Articles

Most investors, at some point, experience moments when it feels like the world is shifting beneath them. This week is one of those times. 

On March 4th, the president implemented new tariffs: 

• 25% on imports from Mexico and Canada (except Canadian energy, which faces a 10% tariff). 

• An additional 10% tariff on imports from China.  

Markets reacted predictably: the stock market dropped, volatility spiked, and headlines shouted.
 
And even as I write this, the situation continues to evolve. Markets are adjusting, policymakers are responding, and uncertainty remains. But while the news cycle moves quickly, the principles of sound investing remain the same. 

Why do tariffs make investors nervous?

At their core, tariffs increase costs for businesses, which can squeeze profit margins. And if there’s one thing markets care about, it’s profits. 

We read many perspectives on the global economy, and Dr. David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, has been a consistent voice of reason for over a decade. Known for his practical insights, Dr. Kelly asserts that tariffs result in "higher prices, slower economic growth, reduced profits, increased unemployment, greater inequality, lower productivity, and heightened global tensions." 
 
Investors aren’t just reacting to tariffs. They’re reacting to the unknown: 

• How long will these tariffs remain in place?

• Are they just a negotiation tactic? 

• Is this a temporary period of volatility, or the beginning of a longer cycle? 

Markets don’t panic about what they know—they panic about what they don’t.

Investing is messy. It always has been. 

Market downturns often feel like a unique crisis. But history tells a different story. 
 
Recessions, inflation spikes, political uncertainty, trade wars, interest rate hikes—these challenges are not new. The market has faced them all before. And yet, over time, it has moved higher. 
 
As noted by author Seth Godin, “The future is messy, and the past is neat. It's always like that.” 

The importance of perspective

Market downturns feel different when you’re living through them. The news feels bigger. The risks seem higher. The headlines are scarier.  
 
This feeling is amplified after strong market years, when investors feel they have more to lose—at least on paper. In 2023 and 2024, the S&P 500 delivered a total return of nearly 58%, propelling more investors into the ranks of "401(k) millionaires," according to Fidelity. 

It’s natural to feel anxious about market fluctuations, but fear is never a sound investment strategy.  

A strong financial plan is built specifically for you — your goals, your risk tolerance, and your timeline. More importantly, it’s designed with the understanding that markets are unpredictable and often messy. By accounting for uncertainty upfront, your plan provides a steady framework, allowing you to stay the course during volatility instead of reacting to short-term fluctuations. 
  
As John Bogle, the founder of Vanguard, wisely put it, “The stock market is a giant distraction from the business of investing.” 
  
Bad news drives headlines, but bad news should not drive investment decisions. Market downturns are inevitable, but they are also temporary. 

Reasons to sell? There will always be more.

There has never been a time in history when you couldn’t find a reason to sell. 
 
Recessions. Political chaos. Interest rate hikes. Pandemics. Trade wars. Every one of these events made investors think, “Maybe this time is different.” 
 
And yet, over time, the market has rewarded patience, discipline, and long-term thinking. 

View fullsize

Morgan Housel, author of The Psychology of Money, puts it best: "Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control. A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy." 

What can you control?

While headlines will continue to change, wise investors focus on what they can control: 

1. Maintain an emergency fund. The best way to endure volatility is to have enough cash to cover the unexpected. 

2. Manage your news consumption. Headlines are designed to capture attention, not provide perspective. 

3. Hold enough short-term bonds and cash so that you’re never forced to sell long-term investments during even the longest downturn. 

4. Maintain a diversified approach to your portfolio. Lately, the market has been driven by just a handful of the biggest companies. However, as of March 4th, a globally diversified portfolio has outperformed the S&P 500 year to date. 

5. Stay focused on the long game. Your success as an investor won’t be determined by what happens in the next week or month. It will be determined by how you navigate market noise over decades.

What should you do now?

If you have a financial plan, now is a great time to revisit it. These moments of uncertainty are exactly what your plan was built for. 

If you don’t have a plan, this is a reminder of why you need one. A well-structured investment strategy helps you stay focused when markets get messy. 

At Human Investing, we help investors build financial plans that are designed for the long term; plans that account for uncertainty, so you don’t have to react to every headline. 

If you’re feeling unsure about the road ahead, let’s talk. The best investors aren’t the ones who predict the future—they’re the ones who are prepared for it.

References:

Kelly, D. (2025, March 3). The trouble with tariffs. J.P. Morgan Asset Management. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/notes-on-the-week-ahead/the-trouble-with-tariffs/   

Housel, M. (2020). The psychology of money: Timeless lessons on wealth, greed, and happiness. Harriman House. 

---

Disclosures:

These market returns are based on past performance of an index for illustrative purposes only. Past performance does not guarantee future results. All investing involves risk, including the loss of principal. Index performance is provided for illustrative purposes only and does not reflect the performance of an actual investment. Investors cannot invest directly in an index.

The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

The opinions expressed by third-party individuals, including Dr. David Kelly, Seth Godin, Morgan Housel, and John Bogle, are their own and do not necessarily reflect the views of Human Investing or its affiliates. Their inclusion is for illustrative and educational purposes only.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Commission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

---

Related Articles

An Analysis of Investment Advisor Representatives and Bureau of Labor Statistics Data: Determining the Percentage of Financial Advisors Acting as “True Fiduciaries”

In the financial services industry, the concept of acting as a fiduciary—putting the client’s best interests ahead of all else—has become a litmus test for ethical practice. However, determining how many financial professionals truly operate under a fee-only fiduciary model reveals a significant gap between perception and reality.

Industry Snapshot: Financial Professionals in the U.S.

According to the Bureau of Labor Statistics (2023), the financial services landscape in the United States includes:

• 513,000 financial services sales agents, encompassing roles such as stockbrokers and commodities traders.

• 321,000 personal financial advisors, offering financial planning and investment guidance to individuals.

Together, these figures total 834,000 professionals engaged in roles that directly or indirectly affect individuals' financial outcomes.

Investment Advisor Representatives: A Subset

Among these professionals, 77,468 individuals are registered as Investment Advisor Representatives (IARs), according to the Financial Industry Regulatory Authority (FINRA, 2022). IARs are often seen as closer to the fiduciary standard due to their regulatory obligations. However, even within this group, a significant portion still earns commissions.

• A recent analysis by Welsh (2024) indicates that 47% of IARs receive commissions, leaving only 53% as truly fee-only fiduciaries.

• Applying this percentage, the total number of fee-only IARs is approximately 41,958 individuals.

The True Percentage of Fee-Only Fiduciaries

To contextualize this figure, let’s consider the broader pool of financial professionals (advisors and brokers). Dividing the number of fee-only IARs (41,958) by the total number of financial professionals (834,800) yields a striking conclusion:

Only 4.92% of financial professionals operate as fee-only fiduciaries.

This percentage has seen growth from an estimated 2% in 2018 (Mantell, 2018), reflecting progress but also underscoring the rarity of this practice in an industry dominated by commission-based models.

References:

Bureau of Labor Statistics. (2023). Occupational Outlook Handbook. U.S. Department of Labor: Securities, Commodities, and Financial Services Sales Agents.

Bureau of Labor Statistics. (2023). Occupational Outlook Handbook. U.S. Department of Labor: Personal Financial Advisors.

Financial Industry Regulatory Authority. (2022). 2022 FINRA industry snapshot. Financial Industry Regulatory Authority.

Mantell, R. (2018, March 19). Is it time to adopt a uniform fee-only standard for financial advice? The Wall Street Journal.

Welsh, J. (2024, October 31). What role do commissions now play for advisors? Investment News.

---

---

Related Articles

Understanding the Rules, Risks and Special Tax Incentives

As a Nike employee, it is common to have a desire to participate in the success of the company.  For many, this opportunity exists within the Nike 401(k) by investing retirement funds in Nike stock.  Even though it is available, is it a good idea and if so, how much is appropriate?  We will explore the rules, risks, and special tax incentives that exist within the plan.

The Nike Plan Rules and Limitations

1. Future Investments in the Nike Stock Fund are limited to a maximum of 10%, which includes Employee Contributions, Nike Matching, and Rollovers.

2. Existing Investments in the Nike Stock Fund:

   1. You can fully diversify out of Nike stock at any time by moving the dollars to a different available investment fund(s).

   2. If you want to increase your amount in the Nike Stock Fund from other existing investment funds, Nike will only allow it if the Nike Stock will be 20% or less of your overall account balance.

   3. Even though Nike places the 20% limit on transfers, there is no limit on the total amount of stock you can accumulate in the Nike Stock Fund. If you accumulate more than 20%, you can still contribute up to 10% to the Stock Fund.

Why the limitations on Nike Stock Fund within the RSP 401(k)?

You can see by the rules and limitations that Nike wants to encourage participation in the stock but in a responsible manner. It allows you to regularly contribute small amounts over time but with a cap of 10% at that time. It wants to discourage employees from making quick short-term decisions to move a large portion of their retirement savings into the Stock Fund by limiting that to 20%. To balance all of this out, it leaves an unlimited upside for the stock to grow in the 401(k) by having no overall limit in the value. Nike created guardrails to limit the risk and make sure that investment in Nike Stock is a long-term decision.

Understanding the Risks

Risk #1: Concentrated Stock Risk

Any stock or portfolio of stocks is subject to one type of risk known as Market Risk, which affects the entire stock market. Examples of factors that can create Market Risk are changes in interest rates, government regulations, taxes, and wars.

There is an additional risk that can affect you when you hold a large amount in a single stock. This risk is known as Company Risk, and it is related to the financial viability of that specific company. The emergence of new trends, technology, or even a scandal can decimate or take down an entire company. Examples of companies that have experienced this type of risk are Enron, Sears, Blockbuster, and AOL. This type of risk can be mitigated by diversifying and owning multiple stocks or investing in a diversified stock mutual fund or exchange-traded fund (ETF).

Risk #2: Employment Risk

If a company ever begins to struggle financially, the ramifications can likely be seen in the elimination of jobs and lower bonus’ for employees since they are tied to company performance. At the same time, the stock price of the company will typically drop, impacting the personal savings of anyone owning that stock. The effect of a stock price drop in your personal savings can become magnified if it happens simultaneously with losing your job or the elimination of your bonus.

How much Nike stock is too much?

The first step is to assess your overall exposure to Nike stock. Depending on the level at Nike, employees have access to different forms of Nike stock as part of the benefits package. It is common for Nike employees to accumulate a significant amount of Nike stock through benefits in the form of ESPP, Stock Options or Restricted Stock Units (RSUs). If you incorporate any Nike stock owned in your 401(k) and compare that to any other investments (retirement accounts, cash, real estate), what percentage of your assets are in Nike stock? So once you know the percentage, what is the right percentage for you?

Diversification and the “Rule of Thumb”

In the financial services industry, there is a rule of thumb that states that you should not own more than 5% or 10% of your overall investment portfolio in one single stock since it can create a significant amount of risk related to that Company Risk described earlier in this article. There definitely is prudence to this rule of thumb, but it can be challenging for employees to follow this “rule of thumb” strictly because of the stock benefits provided by Nike.

When It Can Make Sense to Exceed the Rule of Thumb

Part of maximizing your time at Nike is to take advantage of the benefits that are provided. Nike stock benefits all include a special incentive when compared to normal Nike stock. Whenever you consider risk, it should be evaluated in relation to the potential reward, so the higher the risk, the higher the reward should be for it to be a worthwhile investment. These incentives from the Nike benefits increase the reward so it can justify taking the additional risk of owning a concentrated amount of one stock.

The GAME-CHANGING Incentive for Owning Nike Stock in Your 401(K)

Net Unrealized Appreciation (NUA)

There is a unique tax strategy that exists within the Nike 401(k) that can make owning Nike stock more advantageous. The strategy is known as “Net Unrealized Appreciation” or “NUA” and applies to qualified retirement plans where you own company stock within the plan.

Net Unrealized Appreciation is the difference between what you have contributed (average cost basis) to the Nike Stock Fund and what it is worth today. Essentially, it is the growth above your contributions to the Nike Stock Fund.

The IRS has a provision that allows you to potentially receive a preferential tax rate on the NUA amount when you distribute Nike Stock from your 401(k) if you follow very specific rules. This preferential tax rate can save you between 13-37% in income taxes on the NUA amount depending on your specific situation.

When you make pre-tax contributions to your 401(k), future distributions will be taxed as Income when you take withdrawals from that account. If you follow the NUA Strategy steps, you would distribute all or part of the Stock Nike Fund as Nike Stock, pay taxes as Income on the contribution (Average Cost Basis) portion only. All growth of the Nike Stock (NUA) would be subject to a lower preferential tax rate of Capital Gains, which you can delay until you want to sell the Nike stock.

How to take advantage of the NUA strategy:

1. Nike stock must be transferred out of the 401(k) in-kind and cannot be sold before transfer.

2. The entire Nike 401(k) balance must be distributed in a single tax year. This could mean that the Non-Nike stock portion could be rolled into an IRA.

3. The distribution of the entire account can only be made after a “triggering event,” which are Death, Disability, Separation from Service, or Reaching age 59 ½.

As a future tax planning strategy, you could wait to sell the NUA Nike stock until you were in a low enough tax bracket and potentially have No Federal Capital Gains tax on the NUA amount.  The most common timeframe for this opportunity is after retirement and before age 73, when Social Security income and required minimum distributions from your IRAs can force you into a higher tax bracket.

The final and most important consideration is how your Nike stock exposure fits into your overall financial plan.  If you have a financial plan to show you how dependent your financial future is on Nike stock, this can help you make the most well-informed decision on your overall Nike stock exposure.

If you want to know more about incorporating Nike stock within your 401(k), please get in touch.

You can schedule time with me on Calendly, e-mail me at marc@humanvesting.com, or call or text me at (503) 608-2968.

---

---

Related Articles

When it comes to a company’s stock, earnings are at the heart of its value. A company’s earnings represent its profitability—the actual money it makes after covering all costs—and this bottom line directly influences its stock price. Understanding earnings is key for investors because they reveal how well a company is performing today and provide insight into its potential growth. Let’s break down what earnings really mean and how they impact the value of the stocks you own.

What are earnings?

Earnings are the net income or profit for a business. Publicly traded companies report their earnings every three months in a document called the “net income statement,” which they must submit to the SEC (Securities and Exchange Commission). To find a company’s earnings, you can look up their 10-Q or 10-K filings on the SEC website.
 
Earnings are reported quarterly and are typically compared to the previous quarter and the same quarter from the previous year to show how profits are growing or shrinking. Companies will also release annual earnings, summarizing their financial year. There are also earnings calls where company leaders (like the  CEO or CFO) will discuss recent financial results, and provide guidance for the future.

What determines earnings?

Earnings start with total revenue (the money a company brings in). Then, all the costs are subtracted to see how much profit remains. Some of the main cost categories:

• Cost of Good Sold (COGS): Raw materials and labor to make the product

• Sales, General, and Administrative (SG&A): All the costs to keep the company running not involved in making the product. Think human resources, accounting, or marketing

• Depreciation: This tracks the decrease in value of physical items (like machines) over time.

• Amortization: This is the decrease in value of non-physical items (like patents) over time.

• Interest: This is what a company pays on its loans (outstanding bonds)

How should I think about earnings?

Think of earnings as a pie. The total size of the pie represents a company’s total profits. Each slice of the pie shows how much profit belongs to each share of stock. Earnings per share (EPS) measures the profit each share would get if the earnings were divided up evenly. For example, Nike (NKE) had $1.051 billion in net income in August 2024, resulting in EPS of $0.70 per share. Meanwhile Ford (F) had a higher $1.831 billion in net income June 2024. Because Ford has more shares outstanding than Nike, EPS came out lower at $0.456 per share.
 
When evaluating how expensive a single company stock is, investors look at the Price to Earnings (Price/Earnings or P/E) ratio. It’s a measure of how much someone is paying for every dollar of profit at the company. If you expect the company to grow a lot, you should be willing to pay a much higher P/E ratio than for a stable, established company that isn’t expected to grow. Looking at the P/E ratio is a much better way to get a sense of if a company is cheap or expensive. Stock prices reflect both the total earnings and future growth expectations (i.e. the size of the pie) and the number of shares out there (i.e. how big is each piece of the pie).

How do earnings impact stock prices?

Most publicly traded companies have earnings expectations, which is the average of what the professional analysts who track the company expect earnings to be for the next quarter (and beyond). Companies that exceed expectations have a positive surprise, and usually see their stock price go up in response. Conversely, companies that miss earnings (i.e. report lower earnings than expected, or reduce growth expectations) usually see their stock price decline.
 
Stock market reactions to earnings can sometimes seem unpredictable. For example, a company will beat earnings (i.e. report higher earnings than the analysts expected), but they didn’t beat earnings by as much as they did last quarter, so the stock price drops. Expectations can be so low for some companies any positive earnings surprise sends the stock soaring.

Many critique earnings as a measure of stock price. It’s possible to change accounting practices where the reported earnings number is higher, but the increase is more to do with changes in accounting policies than actual business activity. Extreme cases of manipulation can lead to fines and forcing companies to reissue earnings.

What do earnings do for me, the investor?

Earnings represent the company’s profits, which can benefit investors in two main ways:

1. Reinvest back into the company: typically done by growing companies, sometimes the best use for extra cash is to put more money back into the company to grow

2. Payout to investors: typically done by stable, established companies. The stockholders are the owners of the company, so the company returns the earnings to the investors in the form of dividends or stock buybacks

In traditional finance theory, the reason you own stock in a company is that your ownership means you will get the earnings returned to you in the form of dividends. Theoretically, any change in stock price is a change in the expected total dividends you’ll receive over the life of the company. While there can be lots of noise around stock prices (economic outlook, new leadership, etc.), ultimately the expectations around earnings (and thus dividends to investors) is the root of stock price fluctuations.
 
Whether your own stocks individually or through a broadly diversified fund, understanding how earnings impact stock price can be a helpful way to evaluate their long-term opportunity.

---

---

Related Articles

As the person who manages most of the financial decisions in your household, it's natural to want to ensure your spouse is financially secure if you're no longer around. The financial burden on a widow can be overwhelming, especially with the lesser-known tax implications that often follow the death of a spouse. By planning ahead, you can safeguard your spouse from unnecessary financial stress.

Taking a few proactive steps now can help shield your spouse from these challenges and give them peace of mind. This guide will walk you through the financial implications of losing a spouse and what you can do today to ensure you preserve your assets for their well-being.

There are two common tax shocks you want to get ahead of:

Tax shock #1: The “survivor's penalty”

After a spouse dies, the widow is often left facing what’s called the "survivor’s penalty," which refers to higher taxes that result from a change in filing status. While you may currently file taxes jointly as a married couple, your spouse would be required to file as a single taxpayer after your death. This change can increase their tax bill substantially.

Here’s why this matters:

• Higher Marginal Tax Brackets: After your passing, your spouse’s income could fall into a higher tax bracket due to the narrower brackets for single filers compared to married couples.

• Reduced Standard Deduction: In 2024, the standard deduction for married couples filing jointly will be $29,200, but for single filers, it will be just $14,600. This reduction will increase the amount of income subject to taxes.

Looking ahead, it’s important to note that individual tax brackets are set to revert to pre-2018 levels in 2026, further increasing the tax burden on your spouse if you’re no longer here.

Tax shock #2: Hefty taxes on IRA distributions

If your spouse inherits your retirement accounts, such as an IRA, they’ll also face higher taxes due to Required Minimum Distributions (RMDs). These distributions are considered ordinary income, and combined with their new single filing status, could push them into an even higher tax bracket! The larger your IRA, the bigger this tax burden becomes.

What may seem like a well-planned nest egg now could become a source of financial strain later on due to taxes. By understanding this, you can take steps now to lessen the impact on your spouse’s financial future.

Firsthand example from a retired couple

When Spouse #1 and Spouse #2 file jointly, both receive Social Security and must take Required Minimum Distributions (RMDs) from their retirement accounts. Let’s look at their income and tax bill while filing as Married Filing Jointly (MFJ):

Now, if Spouse #1 passes, Spouse #2 becomes the sole taxpayer, facing a shift to the Single filing status. Spouse #2 is still required to take the same RMD amount as the beneficiary of the retirement accounts and claims Spouse #1’s higher Social Security benefit under the survivor benefit rules. However, Spouse #2 cannot receive both Social Security payments, so Spouse 2’s income is reduced. Here’s what their tax situation would look like:

Despite an almost 16% drop in income, Spouse #2's tax bill increases by over 30%, showing the impact of the survivor’s penalty on income and tax liability.

This example highlights why it’s essential to plan ahead to help lessen the financial burden on surviving spouses.

Four strategies to protect your spouse from a heavy tax burden

Fortunately, there are several strategies you can use to reduce the tax burden on your spouse in the future:

1. Complete Tax Projections: To best plan for the future and make calculated decisions, it’s necessary to understand your expected lifetime tax bill. A comprehensive tax projection will identify your current and future tax rates, potential gaps, and overall lifetime tax obligations. This helps you make informed decisions today.

2. Partial Roth IRA Conversions: Converting part of your traditional IRA into a Roth IRA over time can help reduce the tax impact on your spouse later. While you’ll pay taxes on the conversion now, the Roth IRA’s future growth will be tax-free, meaning less taxable income for your spouse when they inherit it.

3. Take Advantage of the Step-Up in Basis: For non-retirement investments, your spouse can benefit from a "step-up in basis." This allows the cost basis of assets to reset to their value at the time of your death, potentially eliminating capital gains taxes if they were to sell those assets. Understanding this advantage can save your spouse from an unexpected tax bill down the road.

4. Naming Non-Spouse Beneficiaries: Another option to reduce taxes is to name non-spouse beneficiaries for some of your retirement accounts, such as your children and grandchildren. While this can lessen the tax burden for your spouse, it’s essential that these non-spouse beneficiaries understand the new withdrawal rules set by the SECURE Act. This law requires that non-spouse beneficiaries fully distribute inherited IRA funds within 10 years, which could trigger substantial tax liabilities for them if not carefully planned. Additionally, consider adding a qualified charity as a beneficiary to your IRA for a tax-free transfer gift.

You can start planning ahead with your spouse now

Planning for your spouse's financial future can be an impactful gift. While it may be uncomfortable to think about what happens if you're no longer here, taking proactive steps now will ease your spouse’s transition during a difficult time. Here are a few key actions to consider:

Have Regular Financial Discussions: Make sure your spouse understands your financial plan, knows how to manage accounts, and is familiar with where to find important documents.

Work with a Fiduciary Financial Advisor: A financial advisor can help you develop a plan tailored to your family’s situation. By understanding your overall financial situation, an advisor can provide guidance now and assist your spouse when you're no longer there. They can also help with tax projections, Roth conversions, beneficiary updates, and staying ahead of tax law changes.

Create a Clear, Organized Estate Plan: Ensure your estate plan is up to date, including wills, trusts, health care directives, power of attorney, and beneficiary designations. This will help prevent unnecessary complications for your spouse during an already challenging time.

Be Proactive About Taxes: By planning for your spouse’s future tax obligations, you can reduce the “survivor’s penalty” and give your spouse more financial security.

You’ve worked hard to provide for your family, and planning for your spouse’s financial future if something happens to you is a vital part of that legacy. While it may seem difficult to know the "right" time to prepare, we can't predict the future. Whether you're already in retirement or facing a serious diagnosis, projecting out scenarios can make all the difference for your spouse’s security.

Don’t wait until it’s too late—start planning now to protect your loved one from unnecessary financial strain.

---

---

Related Articles

There is good news for retirement accounts! The IRS has increased the contribution limits for the upcoming year. As you can see below, there are many notable changes that will allow investors to save more money.

One important update for 2025 is that under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in eligible retirement plans.

How do these changes impact your savings in the upcoming year? Are there any changes you should be making? Use this link to schedule a time to meet one-on-one with our team. We look forward to working with you in 2025!

---

---

Related Articles

Social Security remains a cornerstone of American retirement planning, yet it’s often shrouded with concern and misinformation. As the dialogue about its future grows increasingly pessimistic, many people question its reliability and role in their retirement income plans. Understanding the current state of Social Security is crucial for making informed decisions about your financial future.

Perception vs. Reality:  The Role of the Trust Fund

Much of the anxiety around Social Security comes from media reports highlighting the shrinking trust fund. This often leads to the mistaken belief that the program is on the verge of collapse. But the real issue isn’t mismanagement—it's demographics. As baby boomers retire and people live longer, benefits are outpacing payroll tax revenues.

Historically, Social Security operated on a pay-as-you-go basis. Since 2010, however, benefits have exceeded payroll tax collections. To bridge the gap, the Social Security Administration (SSA) has been tapping into the trust fund, a practice that will continue until the fund is expected to run out by 2033[i]. While this sounds alarming, it doesn't mean Social Security will vanish.

Misunderstandings About Insolvency

A common misconception is that the depletion of the trust fund means Social Security will go bankrupt and cease to exist. In reality, even after the fund is exhausted, payroll tax revenues will still cover approximately 79% of retirement benefits[ii]. This isn’t a doomsday scenario; it’s a call for strategic policy adjustments.

Fixing the Funding Gap – Potential Reforms

The SSA has proposed several solutions to address Social Security’s funding gap. Here are some of the most viable strategies:

1. Increase Social Payroll Tax – Projections show Social Security's long-run deficit is 3.5% of covered payroll earnings[iii]. Raising payroll taxes by this amount—1.75 percentage points each for employees and employers—could secure full benefits through 2098, with a one-year reserve at the end.

2. Increase the Social Security Wage Base—In 2024, the first $168,000 of earned income is taxed at 6.2% each for employees and employers; self-employed individuals will pay 12.4%.[iv] Increasing the Social Security wage base can help address the shortfall.

3. Increase Full Retirement Age (FRA): Currently set at age 67 for individuals born in 1960 and beyond, the FRA dictates when retirees can claim full retirement benefits without reduction. Each one-year increase in the FRA equates to roughly a 7% cut in monthly benefits for affected retirees. Raising the FRA to 70 would reduce benefits by nearly 20% at any given claiming age.[v] This change aligns with historical precedent, as the FRA was originally 65 for most of Social Security’s history.  

4. Invest in Equities: The SSA could explore investment strategies to enhance returns, following successful models utilized by other countries like Canada or systems such as the US Railroad Retirement System.                    

These measures would require political compromise but could ensure the program’s sustainability and continued support for retirees.

Planning for a Reduced Benefit Scenario

Amid ongoing discussions about Social Security reforms, it’s essential to hope for the best but prepare for the worst—acknowledging the potential for reduced benefits if corrective actions fail to shore up funding. The looming risks of benefit cuts necessitate careful consideration alongside other retirement planning factors, including life expectancy, additional income streams, risk tolerance, inflation, and potential spousal benefits.

Consider your Options in an Ever-evolving Social Security Landscape

Despite the challenges and negative perceptions, Social Security is not on the brink of collapse. With informed decisions and potential policy adjustments, the program can continue to support retirees for many years. It's crucial to stay informed and consider the evolving landscape of Social Security in your retirement planning. We’re here to support you. Contact us to meet with an advisor and learn more about your options.

Sources

[i] Social Security Administration. (2024). The 2024 OASDI Trustees Report. https://www.ssa.gov/oact/tr/2024/

[ii] Munnell, Alicia H. 2024. "Social Security's Financial Outlook: The 2024 Update in Perspective" Issue in Brief 24-11. Chestnut Hill, MA: Center for Retirement Research at Boston College.

[iii] SSA, The 2024 OASDI trustees report. p.17.

[iv]Social Security Administration. (2024). Contribution and benefit base. https://www.ssa.gov/oact/cola/cbb.html

[v] Springstead, G. R. (2011). Distributional effects of accelerating and extending the increase in the full retirement age (Policy Brief No. 2011-01). Social Security Administration. https://www.ssa.gov/policy/docs/policybriefs/pb2011-01.html) 

---

---

Related Articles