EagleStone Tax & Wealth Newsletter – September 2020

Over the past five years, employer enthusiasm for telemedicine benefits has surged. Almost 9 out of 10 large employers now offer employees the opportunity to virtually visit their health-care providers.

Source: Mercer National Survey of Employer-Sponsored Health Plans 2019

Fraudsters and scam artists have always looked for new ways to prey on consumers. Many are now using their tactics to take advantage of consumers’ heightened financial and health concerns over the coronavirus pandemic. Federal, state, and local law enforcement have issued warnings on the surge in coronavirus scams and offer advice on how consumers can help protect themselves.

Here are some of the more prevalent coronavirus scams that consumers need to watch out for, along with some tips for protecting yourself from becoming the victim of a scam.

Fraudulent Treatments, Vaccinations, and Home Test Kits

The Federal Trade Commission (FTC) issued warnings about scam artists attempting to sell fraudulent products that claim to treat, prevent, or diagnose COVID-19. The FDA has warned consumers to be wary of companies selling products that are not authorized or approved by the FDA. You can visit fda.gov for more information.

Phishing Scams

Scammers have been using phishing scams related to the coronavirus pandemic to obtain personal and financial information. Phishing scams usually involve unsolicited phone calls, letters, emails, text messages, or fake websites that pose as legitimate organizations and try to convince you to provide personal or financial information. Once scam artists obtain this information, they use it to commit identity or financial theft.

Be wary of anyone claiming to be from an official organization, such as the Centers for Disease Control and Prevention or the World Health Organization. And remember that government organizations, such as the Social Security Administration and the Internal Revenue Service, will never initiate contact with you to ask for personal and financial information, such as your Social Security number. In addition, be on the lookout for nongovernment websites with domain names that include the words “coronavirus” or “COVID-19,” as they are likely to be malicious.

Coronavirus-Related Charity Scams

During the coronavirus pandemic, many charitable organizations have been established to help those affected by COVID-19. Unfortunately, scammers sometimes try to pose as legitimate charitable organizations in order to solicit donations from unsuspecting donors. Watch out for charities with names that are similar to more familiar or nationally known organizations such as the American Red Cross.

Before donating to a charity, make sure it is legitimate. Never donate cash, gift cards, or funds by wire transfer. The IRS website has a tool to assist you in checking out the status of a charitable organization at irs.gov/charities-and-nonprofits.

FTC COVID-19 Complaints
Over 60,000 complaints related to COVID-19 were reported to the Federal Trade Commission during the period between January 1 and June 3, 2020, with a total fraud loss of $45.32 million.

Source: Federal Trade Commission, 2020

Protecting Yourself from Scams

Here are some steps you can take to help protect yourself from becoming the victim of a scam, including a scam related to the coronavirus pandemic:

• Don’t click on suspicious or unfamiliar links in emails, text messages, social media feeds and instant messaging services.

• Don’t answer a phone call if you don’t recognize the phone number — let it go to voicemail and check later to verify the caller.

• Never download email attachments unless you can verify that the sender is legitimate.

• Keep device and security software up-to-date.

• Maintain strong passwords and use multi-factor authentication whenever possible.

• Never share personal or financial information via email, text message, or over the phone.

If you receive a fraudulent email, text or phone call, report it to the appropriate government agency such as the Federal Trade Commission or Internal Revenue Service and your local police department.

You have decided you need life insurance coverage and are considering buying a term policy. But you ask your financial professional, “Do I get any of my money back at the end of the term?” It’s possible, if you consider buying a special kind of term insurance called return of premium term insurance, or ROP.

How ROP Compares to Straight Term Insurance

In general, straight term insurance provides life insurance coverage for a specific number of years, called the term. The face amount of the policy, or death benefit, is paid to your beneficiaries if you die during the term. If you live longer than the term, or you cancel your policy during the term, nothing is paid. By contrast, an ROP term life insurance policy returns some or all of the premiums you paid if you live past the term of your policy and haven’t cancelled coverage. Some issuers may even pay back a pro-rated portion of your premium if you cancel the ROP policy before the end of the term. Also, the premium returned generally is not considered ordinary income, so you won’t have to pay income taxes on the money you receive from the insurance company. (Please consult your tax professional.)

A return of premium feature may be appealing if you want to have a return of some or all of your premium if you outlive the policy term. Yet the cost of ROP insurance can be significantly higher than straight term insurance, depending on the issuer, age of the insured, the amount of coverage (death benefit), and length of the term. But ROP almost always costs less than permanent life insurance with the same death benefit. While straight term insurance can be purchased for terms as short as one year, most ROP insurance is sold for terms of 10 years or longer.

ROP Considerations

It’s great to know you can get your money back if you outlive the term of your life insurance coverage, but there is a cost for that benefit. Also, if you die during the term of insurance coverage, your beneficiaries will receive the same death benefit from the ROP policy as they would from the less-expensive straight term policy.

When choosing between straight term and ROP term, you might think about the amount of coverage you need, the amount of money you can afford to spend, and the length of time you need the coverage to continue. Your insurance professional can help you by providing information on straight term and ROP term life insurance, including their respective premium costs.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable. Optional riders are available for an additional fee and are subject to contractual terms, conditions and limitations as outlined in the prospectus and may not benefit all investors. Any guarantees associated with payment of death benefits, income options, or rates of return are based on the claims paying ability and financial strength of the insurer.

Stock market volatility in 2020 has clearly reinforced at least one important investing principle: Short-term goals typically require a conservative investment approach. If your portfolio loses 20% of its value due to a temporary event, it would require a 25% gain just to regain that loss. This could take months or even years to achieve.

So how should you strive to accumulate funds for a short-term goal, such as a wedding or a down payment on a home? First, you’ll need to define “short term,” and then select appropriate vehicles for your money.

Investing time periods are usually expressed in general terms. Long term is typically considered 15 years or longer; mid term is between five and 15 years; and short term is generally five or fewer years.

The basic guidelines of investing apply to short-term goals just as they do for longer-term goals. When determining your investment mix, three factors come into play — your goals, time horizon, and risk tolerance. While all three factors are important, your risk tolerance — or ability to withstand losses while pursuing your goals — may warrant careful consideration.

Example:Say you’re trying to save $50,000 for a down payment on your first home. You’d like to achieve that goal in three years. As you’re approaching your target, the market suddenly drops and your portfolio loses 10% of its value. How concerned would you feel? Would you be able to make up that loss from another source without risking other financial goals? Or might you be able to delay buying your new home until you could recoup your loss?

These are the types of questions you should consider before you decide where to put those short-term dollars. If your time frame is not flexible or you would not be able to make up a loss, an appropriate choice may be lower-risk, conservative vehicles. Examples include standard savings accounts, certificates of deposit, and conservative mutual funds. Although these vehicles typically earn lower returns than higher-risk investments, a disciplined (and automated) saving habit combined with a realistic goal and time horizon can help you stay on course.

The FDIC insures CDs and savings accounts, which generally provide a fixed rate of return, up to $250,000 per depositor, per insured institution.

All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.