Winter 2018

TO: Clients,Friends and Associates

FROM: Swarthmore Financial Advisors, Ltd




On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. This new legislation represents the most sweeping overhaul of the federal tax code since 1986. Several individual tax provisions have been changed for 2018 and will expire in 2025. While the initial objectives were to simplify the tax code and reduce tax burdens for middle-class taxpayers, the final version favored the wealthiest taxpayers and significantly reduced corporate tax rates. Simplification remains unclear until 2018 tax returns are filed next year.

Savings from reduced corporate taxes are expected to produce more jobs and higher wages. However, some corporations may choose to apply the tax savings to capital expenditures, debt reduction, and/or increased dividend distributions. Regardless of the resulting economic impact, the tax reduction will significantly increase the federal deficit over the next several years. The political impact of this legislation remains to be seen, asRepublicans believe that passage of this new law will benefit their party in the upcoming midterm elections. However, if Democrats gain enough seats in November, some of the new tax provisions could be targets for amendment or repeal.

The new law also directs the IRS to amend withholding tables for earned income, which should result in increased take-home pay for workers. However, we caution that reduced payroll tax withholding could also reduce anticipated tax refunds next year, or worse yet, create an unexpected tax liability for some employees. Once the new tables are issued, we welcome clients to contact us for a review of their 2018 income tax projections.

QUOTE OF THE DAY: “Everybody gets so much information all day long that they lose their common sense.” Gertrude Stein


The Pennsylvania Department of Banking and Securities requires us to offer the most recent version of our Investment Advisor Registration Form to all of our clients on an annual basis. To review our Disclosure Form, please call our office to request a current copy.


As we prepare for another tax season, we summarize some general income tax information along with new provisions which are effective January 1, 2018:

There are seven tax brackets and seven rates. The range of income for each bracket is a little wider and the rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. Short-term capital gains will be taxed as ordinary income, while long-term capital gains and qualified dividends will taxed at a rate of 0%, 10% or 20%, based on total taxable income. Personal exemptions previously allowed for all filers and dependents were repealed. The standard deduction increases to $12,000 for singles, and doubles to $24,000 for joint filers. Itemized deductions will no longer have an overall dollar limitation for upper-income earners, but limitations on state and local income and sales taxes, mortgage interest, medical expenses, charitable contributions and other miscellaneous deductions could result in more taxpayers choosing to take the new, higher standard deduction. The elective deferral limit for 401(k), 403(b), and457 plans increases to $18,500, with an additional “catch-up” contribution of $6,000 for participants age 50 and older this year. SIMPLE IRA deferral limits remain at $12,500 or$15,500 if age 50 or older. The contribution limits for traditional and Roth IRAs remain at$5,500 or $6,500 for taxpayers reaching age 50 or older in 2018.


Investors were pleased with equity returns in the 4th quarter and many enjoyed their best investment returns in years. Low volatility ruled as tax reform passed, corporate earnings were solid and inflation remained in check. Growth stocks outperformed value, and large and mid-cap stocks outperformed small caps. International equities also delivered strong returns as the global economy improved, and emerging markets outperformed the developed markets. The prospect of larger deficits seemed to depress bond prices as yields increased. In December, the Federal Reserve raised rates for the third time in the year and is expected to complete three more increases in 2018.

Investment returns so far this year continue to generate favorable results. Stock indexes are regularly reaching new all-time highs and analysts seem confident that impressive stock gains will continue, although some believe that the pace will slow down. The unemployment rate has fallen to a level that many economists are calling “full employment”.It’s too early to tell, but if lower corporate tax rates produce the anticipated economic growth, we may be looking at another Happy New Year!

Benchmark performance as of December 31, 2017:

IndexQtr 4 1Year 5Year tO Year

Dow Jones




S&P500 6.64% 21.83% 15.79% 8.50%
NASDAQ 6.27% 28.24% 17.98% 10.04%
MSCI-EAFE 4.23% 25.03% 7.90% 1.94%

Autumn 2017


Clients, Friends and Associates

Swarthmore Financial Advisors, Ltd.




Social Security Administration recently announced that a 2.0 percent cost-of-living adjustment (COLA) will be applied to 2018 benefits for more than 61 million Social Security beneficiaries. The inflation rate, as measured by the Consumer Price Index (CPI-W), has risen minimally over the last 5 years.

For beneficiaries under full retirement age and still working, the earned income limit increases to $1,420 per month, or $17,040 per year. Annual earnings in excess of this limit will result in a reduction of $1 Social Security benefits for every $2 in earnings above the limit. Upon reaching full retirement age, employees are no longer subject to benefits limitations, since no earnings test is applied. For 2018, the payroll tax rates stay unchanged, but the wage base subject to Social Security tax increases to $128,700, and the maximum monthly benefit will now be $2,788.

“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”
John Bogle


Tom has been selected as a Philadelphia Five Star Wealth Manager and will be listed in the December issue of Philadelphia Magazine. The list is compiled by surveying registered financial services professionals and companies in the Philadelphia region to evaluate industry standing and client retention rates. Only wealth managers with qualified professional education and credentials having at least five years of experience are considered.

The evaluation process and results are driven by research focusing on ten objective eligibility and evaluation criteria that are associated with providing quality service to clients. Professional conduct is also reviewed for each wealth manager to ensure that candidates are in good ethical standing with a favorable regulatory history. Less than 15% of those reviewed were selected this year. We are pleased to be included on the 2017 list, and thank all our loyal clients and associates for your continued support and confidence in our services.



The recent Equifax data breach has increased the potential for identity theft for many of us. This incident alone is estimated to affect over 143 million Americans, while millions of individuals have also had their private identification data compromised by computer hacking scams. Equifax has created a dedicated website at to assist consumers with defending against identity theft.

We recently received a valuable publication from Charles Schwab and Co. Inc. titled, How to Respond to a Data Breach.A timeline of recommended actions is provided for Schwab account holders who are victims of cybercrimes, but all of us can benefit from this guidance. We have enclosed a copy of this flyer for your review.

The PA Department of Banking and Securities has developed a guide for consumers titled Protecting Yourself Online, The guide provides several practical tips and resources and can be found at Each of these resources clearly reminds us to be diligent about protecting ourselves from increasing threats of identity theft.


The third quarter continued to provide market increases and record highs across most sectors as investors enjoyed continued portfolio growth. The economy is growing, the unemployment rate is dropping, inflation is in check and the Fed has begun to retire bonds and reduce the US balance sheet. All’s well, right? Well, many investors are concerned that the equity markets may be running out of gas and a correction could be right around the corner. Others believe that the passage of a national budget and enactment of a tax reform package may send stock values on an extended upswing.

Whatever the case, the sage of Vanguard, John Bogle warns us about tolerating a correction (see Page 1). We would add that those who can tolerate a significant decline in equity values might consider these tips to avoid a detrimental overreaction:

Maintain a cash position to cover short-to-intermediate term spending
Maintain an appropriate balance of stocks, bonds and cash
Steer clear of herd mentality
Keep in touch with us

Best wishes for a happy and healthy holiday season!

Benchmark performance as of September 30, 2017:
IndexQtr 3YTD1 Year5 Year10 Year

Dow Jones4.94%13.37%22.38%10.77%4.89%
S&P 5004.48%14.24%18.61%14.22%7.44%

Summer 2017


Clients, Friends and Associates

Swarthmore Financial Advisors, Ltd.



Many of us have owned U.S. Savings Bonds at one time or another. Some might have been personal purchases and others might have been received as gifts upon childbirth, birthdays, weddings and other occasions. These bonds were purchased for half of their face value and gradually increased in value due to the accrual of interest income. If held for long periods, they eventually exceeded their face value and continued to grow, year after year. However, some owners are not aware that the bonds have a final maturity and stop earning interest at that point.

Rates of interest varied, depending on the year the bonds were issued, but Series E and then Series EE bonds all carried a 30-year maturity. By now, all Series E bonds have matured and have stopped earning interest but can still be redeemed. Similarly, Series EE bonds may also have matured---if they were issued over 30 years ago.

We advise owners of these Savings Bonds to check their dates of issue. If paper bonds have stopped earning interest, owners can redeem them at their local bank or send them to the U.S. Treasury Department in Minnesota. If the bonds are held in electronic form, they can be redeemed through the TreasuryDirect website. Keep in mind that earned income is subject to Federal income tax, but is exempt for state and local tax. For further information, please visit the TreasuryDirect website at, or call toll-free at 1-844-284-2676.

QUOTE OF THE DAY: 'There is no fun doing nothing when there is nothing to do." Jerome K Jerome

As required by both SEC and FTC Privacy Regulations, we are enclosing our current Privacy Policy for your records. Annually, we will provide a copy to all existing clients, but will notify you timely if any modifications or revisions are implemented.



Recently, the Centers for Disease Control and Prevention reported that American males have a life expectancy of 76, while American women have a life expectancy of 81. As of 2014, over 70,000 Americans were age 100 or older and this number is projected to exceed 1 million by 2050. Living healthier lifestyles, using more effective drugs and having access to improved surgical techniques should continue to increase longevity. So, the goal of avoiding running out of money continues to be the #1 financial planning challenge.

According to a research report by Investment News, advisers state that not saving enough for retirement, spending too much in retirement, and unexpected medical expenses are some of the risks to financial security commonly seen in retirement planning. While some clients decide to work beyond normal retirement age, problems may persist if spending is not addressed. .

We provide a baseline retirement projection for all of our clients as a starting point for planning. Through subsequent discussions of goals and objectives, living expenses, health status and family mortality history, we explore the personal philosophy of each client and provide appropriate investment and insurance recommendations to arrive at a reasonable expectation of financial security in retirement. Of course, these projections are revised regularly as circumstances change and time marches on. As always, our pg strategies are tailored for each client and are presented in an objective and independent manner.


Positive corporate earnings drove stock prices up in the second quarter. Large cap stocks outperformed mid-and small cap stocks, and growth fared better than value as the domestic economy continued to expand. Foreign stocks also delivered strong results, while emerging markets attracted more global capital after enjoying another quarter of solid growth. With inflation in check and most economic indicators reflecting encouraging data, the Federal Reserve is expected to hold interest rates steady, posstbly through the end of the year.

Some analysts believe that an extended stalemate with Obamacare, the budget and tax reform will adversely affect economic growth. Conversely, if the political agenda moves these issues forward, corporate earnings are expected to grow, providing more stimulus for economic expansion. We are regularly reminded that a market correction is overdue, yet most economists agree that the global economy is stable. We do not hear much warning about a recession, so we wish for any correction to be relatively mild and off in the distance.

Benchmark performance as of June 30, 2017:
Index Qtr 21 Year5 Year10 Year

Dow Jones3.32%19.07%10.64%4.76%
S&P 5003.09%17.90%14.63%7.18%


Spring 2017


Clients, Friends and Associates

Swarthmore Financial Advisors, Ltd.


The Social Security Administration has issued a Fraud Advisory to alert citizens about the latest telephone impersonation scheme. Usually, the fraudulent calls contain a recorded message stating that the person's Social Security account, Social Security number and benefits have been suspended, then directing the person to call a non-SSA phone number to resolve the matter. Unsuspecting citizens are then informed of a warrant for their arrest and directed to make an immediate payment to avoid further penalties.

Acting Inspector General Gale Stallworth Stone is advising citizens to avoid returning calls of a suspicious nature and to refrain from making any payments over the phone via gift cards, debit cards or credit cards. If citizens are unclear about the nature of the call, they are directed to call their local Social Security office or the SSA's toll-free customer service number at 1-800-772-1213.

Quote of the Day:

"It's tough to make predictions, especially about the future." Yogi Berra

Market Update

Investors enjoyed the continued post-election upswing in the equities market as the 1st quarter progressed, only to see markets taper off with a Fed interest rate increase and the collapse of the healthcare reform process in March. However, the major indexes all produced gains for the quarter, yet many foreign equities outperformed domestic stocks. Consumer confidence has been strong but spending has slowed. Additional interest rate increases are anticipated later this year. At this point, corporate earnings and market values will continue to increase if the Gross Domestic Product (GDP) can pick up the pace.

So, will the Trump team reform healthcare, fix the tax code, reduce government regulations and stimulate the economy? Like Yogi said, "it's tough to make predictions..."
Benchmark performance as of March 31, 2017:
IndexQtr 11 Year5 Year10 Year

Dow Jones4.56%16.84%9.36%5.28%
S&P 5006.07%17.17%13.30%7.51%

Contact our investment advisory firm in Media, Pennsylvania, to create a personalized financial plan.