SPRING 2019

Last year, we discussed the pillars of our case for equit ies: low interest rates, low taxes and low inf lat ion. At that t ime, we felt those were st il l reasonably in place. As we begin 2019, we would make a case that those pillars remain intact . Due to the weakness in the equit y market as well as the oil market at the end of 2018, we have a lower yield on the 10-year Treasury as well as even tamer inf lat ion, even af ter the recent market run up. In addit ion, it appears that the Fed is less likely to hike as much as originally predicted for 2019—if at all . Furthermore, we received t wo other gif ts from the market decline. We have a more at tract ive valuation for equit ies as well as an increased level of pessimism (a contrarian indicator). The market ’s performance year-to-date has borne this out . All this being said, we would argue that the recent decline has created a more at tract ive environment for equit y ownership than the beginning of 2018. In other words, buy low; sell high. Here we go again, making a short-term predict ion when we know how hard that can be! The realit y is it shouldn’t mat ter in the long run.

During downturns, some investors begin to scratch their head and wonder if it ’s worth it . The answer is a resounding yes. As in any investment, you can’t have greater returns without volat ilit y. This is Investing 101. The reason to own equit ies is for a bet ter than safe

return. Most of us need this in order to meet our long-term object ives. The money we allocate to equit ies is for the long term. Cash and bonds are for short-term needs and defense. So what if our thesis in the above paragraph is wrong? Historically, you will st il l be rewarded over t ime. In fact , had one invested in the S&P 500 in December of 2007 on the eve of the Great Recession and held on through the end of 2018, the annualized return would now be 6.5% with dividends reinvested*—probably 5% or more per annum than risk-free investments! Unfortunately, painful declines are the price one has to pay.

As we enter the great unknown of the future, we quote Warren Buffet from his 1992 shareholder report: “…I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children, and also from grown-ups who behave in the market like children.” It is a bet ter use of t ime to accept that downturns will happen rather than trying to predict when they will occur.

As we enter 2019, we thank you for your trust in our team. We assure you that we are working hard to apply our best judgement to your part icular situation.

YOU CAN’T HAVE IT BOTH WAYS

One year ago, we wrote in this newsletter that the “potential reward at current levels is reduced while the risk has been increased.” At the close 2018, it ended up being the first down year for US equities since 2008. In hindsight, these might have been prescient words; however, we would be the first to acknowledge that predictions are not a great use of our time. As we enter 2019, we once again ponder the future while also reminding ourselves why investing in equities is worth the occasional pain and suffering.

1116 South Main StreetGreenville, SC 29601

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GREENVILLECome From Away | April 16–21 | peacecenter.orgArtisphere | May 10–12 | artisphere.orgBMW Charity Pro-am | June 3–9 | bmwusfactory.com/charity-golf

CHARLESTONCharleston Wine + Food Festival | March 6–10 | charlestonwineandfood.comCooper River Bridge Run | April 6 | bridgerun.comSpoleto Festival | May 24–June 9 | spoletousa.org

ATLANTAAmy Sherald Exhibition | January 31–May 18 | museum.spelman.eduRodgers + Hammerstein’s Cinderella | April 5–7 | foxtheatre.org83rd Annual Atlanta Dogwood Festival | April 12–14 | dogwood.org

CONTACT US We value your opinion. Have a question or topic that you would like to see addressed in this newsletter? Contact Anna Britton Madden at 864.467.9800 or annabritton.madden@nnpwealth.com.

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A new year brings a new opportunity to maximize savings. Consider increasing your contribution in 2019 to the limits listed below to help reach your savings goals. If you have any questions about how to make the most of your contributions, your advisor at NNP is happy to help you understand more.

RETIREMENT PLAN LIMITS

Traditional and Roth IRAs Contribution Limits $6,000

Age 50 and over Catch-up Contribution $1,000

SEP Contribution Limit

Up to 25% of eligible income $56,000

Elective Deferral Limits

401(k), 403(b), 457 and SARSEP $19,000 Age 50 and over Catch-up Contribution $6,000

SIMPLE elective deferral $13,000 Age 50 and over Catch-up Contribution $3,000

Defined Contribution Limit $56,000

Max Includable Compensation $280,000

EDUCATION

529 Plan per individual—before gift tax $15,000

529 Plan per couple—before gift tax $30,000

Accelerate 5 years of gifting into 1 year per individual $75,000

Accelerate 5 years of gifting into 1 year per couple $150,000

HEALTH SAVINGS ACCOUNT

Maximum Contribution

Single $3,500

Family $7,000

Age 55 and over Catch-up Contribution $1,000

Minimum Health Insurance Plan Deductible*

Single $1,350

Family $2,700

CONTRIBUTION LIMITS FOR 2019

TEAM

NEW

SJanuary was bittersweet for NNP, as we celebrated our partner, John Parrott, and his retirement. He will be missed, but we wish him well on his future endeavors!

NNP was proud to be a diamond sponsor for Meals on Wheels of Greenville’s Sweetheart Charity Ball. It was a spectacular evening benefiting a great organization!

The Tax Cuts and Jobs Act of 2017 has caused us to step back and revisit what has historically been the best practices for charitable giving. In years past, most donations were typically after-tax cash, highly appreciated securities, or a Qualified Charitable Distribution (QCD) from an IRA. In fact, deciding between the three was a somewhat closer call. Although opportunities to make tax efficient contributions still exist, doing it the old-fashioned way may no longer make the most sense. Going forward, we recommend considering the following strategies.

Due to the increased standard deduction, many taxpayers who previously itemized deductions are likely to discover that in many cases, a charitable gift will no longer provide a deduction. Certainly, the majority of donors still want to help their community, but it is prudent, when available, to also receive a tax benefit. If you will no longer be itemizing, it might be best to bunch multiple years of gifting into a single year. For example, if you typically contribute $10,000 per year to nonprofits, consider three year’s worth (or more) at one time, thereby creating the opportunity at least every three years to itemize.

What happens if you don’t want to give the charity three years of gifts all at once? The most efficient way to address this issue is through the use of Donor Advised Funds. With a

donor advised fund, you can make the contribution all at once and receive the deduction in that year. However, although you have given the money away, you control how, when and to whom you make the gifts. To get even more bang for your buck, you can gift highly appreciated securities to the fund. Donor Advised Funds can be found in most local communities or through major financial institutions such as Fidelity or Charles Schwab. They are easy to use, and the money can stay there indefinitely and even be invested like a 401(k) plan.

Finally, for those over 70 1/2 years old, we would strongly consider the Qualified Charitable Distribution (QCD). A QCD allows the IRA account owner to gift directly to a qualified charity. Any funds contributed via a QCD may be excluded from taxable income, thereby lowering taxable income. The QCD is especially effective for those who are not itemizing. The maximum annual gift allowed by a QCD is $100,000; any gifts made in excess of the current year RMD do not carry forward to offset future RMDs. Gifts must be completed by December 31. To simplify this gifting process, IRA check writing is available.

Gifting strategies have definitely changed. It is critical to consider the best course of action going forward. The team at NNP is ready to work with you and your tax advisor to assess the next step; give us a call!

We have filed the Annual Amendment of our Form ADV. Since the previous annual filing of the Form ADV Part 2A Brochure on February 20, 2018, we made a material change in revising the disclosure in Item 4 to indicate that no single individual or entity is considered a principal owner of the firm. There have been no material changes to our Privacy Policy. Both documents are available at your request or may be viewed and downloaded from our website at nnpwealth.com.

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