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                    [post_date] => 2022-06-15 09:39:02
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                    [post_content] => It's almost impossible not to feel anxious at the dips and dives the stock market has been taking recently, compounded by relentless inflation-focused headlines. That's why you might be surprised to learn there's a lot of positive news to be had, despite the market uncertainty. 

Read on for three encouraging themes that illustrate the long-term benefits of the stock market and why now is the time to recommit to your financial plan. 

Let History Be Your Guide 

We'll start with the bad news, because it would be naïve to ignore certain realities. Yes, the market has just endured the worst start to the calendar year in decades. And yes, it's the first time in 60 years both stocks and bonds have declined simultaneously.  With that out of the way, let's turn to the favorable news. Although market pullbacks may continue for the foreseeable future, it's vital to keep in mind that these short spurts don't define the market over the long haul.  When viewed daily, markets advance approximately six out of every 10 days, and if you take a calendar-year perspective, the stock market has gone up far more often than it has gone down. It's reassuring to realize that fluctuations occur regularly, yet these slumps are usually overcome in short order.   In fact, while drawdowns are common, so are recoveries. 

Dig Deeper into What’s Causing Inflation 

 While inflation itself isn't positive, its story is far more than just higher gas prices and food costs.  Some of today's rising inflation is caused by an array of factors that may otherwise constitute a strong economy.    Again, we'll dispense with the bad news first. There are indeed some negatives propelling inflation, including the lingering effects of COVID-19, continued supply chain disruptions, the Russia/Ukraine conflict and the downstream impact of the stimulus payments during the depths of the pandemic that flooded the economy with money.   And while those are all hurdles to overcome, what many miss is that inflationary pressures also stem from beneficial market forces. Here are five less talked about positive contributors to today's inflation: 
  • Surging retail activity – As the pandemic wanes and the world reopens, consumers are eager to get back out there and spend, whether it's planning a well-earned vacation or enjoying an evening out with friends. Pent-up demand for goods and services – by all of us, at the same time – allows companies to raise prices. While that ultimately creates inflation, the root cause is a positive one: strong consumer spending. 
  • Increased home values – Skyrocketing housing prices are burdensome to those aiming to buy their first home or relocate to a highly desirable area. But they are music to the ears of the current lucky homeowners who have seen their equity swell. Along the way, many have refinanced at historically low interest rates, which means their net worth has also increased as home values rose.
  • Higher net worth – Those soaring home values are just one part of our prosperity.  2021 saw the biggest increase in Americans' net worth in history thanks to elevated asset prices and rising stock prices. Although we’ve given a bit back as the market dipped, it still represents bigger gains than any other year. 
  • Rising business spending – All that pent-up demand is fueling a commensurate ramp up for businesses as they aim to meet market interest. That leads to investments in new machinery, factories, inventory and, of course, talent.  This creates demand for goods and thus pressure on inflation.
  • Fastest-ever labor recovery – One sign of the health of the economy is how long it takes for the job market to recover – and the pace today is blistering. For comparison, it took at least six years after the most recent recession for jobs to become plentiful, and today the market has almost fully recovered in the two years since shutdowns were prevalent. Currently, there are approximately two available jobs for every unemployed American, which is the best ratio on record. By contrast, in 2010, there were four unemployed workers for every one available job.
All these factors are intertwined. Consumers are confident about their net worth and good jobs. Which means businesses need to ramp up production. Which leads to more great jobs that offer higher wages as businesses compete for staff. The result: We're spending our money quickly, which is leading to inflation.  And while accelerating rents and surging gas prices are a real burden for Americans, there are also some potentially positive aspects that are materializing alongside these higher prices. 

Remember, You're in It for the Long Haul 

Looking at the market day by day can incite elation, then despair. That's why it's important to note that it doesn't matter what happens on one day – it matters what happens on all the days. 

The longer your time horizon – that is, the time until you need to tap your accounts in retirement – the less likely you are to experience a negative return.   Consider this perspective: Since 1970, the average rolling annual period saw advancement from stocks around 80% of the time. However, over rolling 10-year holding periods, stocks are up over 92% of the time, and they're higher 100% of the time for all rolling 15-year periods. That means those with a greater than 10-year investing time horizon have an excellent chance of possibly achieving positive returns.  But here's a caveat: The cliché that it's not about timing the market, but time in the market is true. Since 1988, just missing a few of the best days in the market has resulted in significant lost opportunity in long-term returns. And over time, many of these best-performing days occur around and after a bout of market volatility, which underscores the importance of remaining committed to your investment plan.  Finally, remember that progress happens too slowly to notice, but setbacks happen too quickly to ignore. Here's what we mean: In 2008, the market quickly lost 38%. And it was a huge deal. Books were written about it, and Congressional hearings were held. The market then slowly tripled from 2009 to 2015, and hardly anyone noticed. The lesson is that sticking with your investment plan is the key to a solid financial future.  The market is built to recover, which is why investors should keep a long-term mindset. Stay focused and determined and always keep the big picture in mind. Slow and steady wins the race.   Your financial advisor is here for you.    Always remember: Your financial advisor is here for you in good times and bad. They can answer your questions and provide objective guidance to keep your mindset fixed on the longer term.   If you’re not working with an advisor, now is a great time to get support. Let us help you connect with a professional who will tailor your plan to your existing needs and long-term goals.     The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results. All investing involves risk, including the possible loss of principal.  There is no assurance that any investment strategy will be successful. [post_title] => Tips to Help You Stay Strong During Market Volatility [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => tips-to-help-you-stay-strong-during-market-volatility [to_ping] => [pinged] => [post_modified] => 2022-06-21 12:33:50 [post_modified_gmt] => 2022-06-21 17:33:50 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64991 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 64819 [post_author] => 182131 [post_date] => 2022-06-14 07:50:41 [post_date_gmt] => 2022-06-14 12:50:41 [post_content] =>
By
Craig Lemoine, Director of Consumer Investment Research   I often find college savings at the top of my pile of financial stressors. Unless I find a money tree in my backyard, my oldest child is going to turn 18 well before I retire. We all have different values surrounding the education of our children or grandchildren. Some of us want to pay as much of our children’s college costs as we can. Others may believe in the power of being self-made, while some families fall in between. I proudly fall in the middle. College costs continued to rise for the 2021/2022 academic year. The average annual tuition and fee cost for a public in-state university is $10,740, rising to $27,560 for an out-of-state school and cresting at $38,070 for private schools. These costs do not include living expenses, housing or optional fees. Fold in the extras of everyday living, and college costs grow to around $30,000 annually per in-state student. These numbers quickly scale, compound and backflip into being overwhelming. Using time value of money techniques helps provide a path to clarity. Assuming the costs mentioned above, the ability to earn slightly more than inflationary pressure (3.45%) while providing four years of college costs would require just over $110,300 set aside for a student beginning college next year. These costs increase for students going out of state, attending private schools or in higher-cost-of-living areas. Americans tend to pay for college through a combination of parents pitching in from their income (40%), college savings plan distributions (11%), scholarships and grants (25%), student loans (11%), children utilizing their income and assets (8%) and other resources (5%). Every student and their support network will find a unique path to paying for college. These percentages help provide a framework of developing your own college savings plan. Developing a college plan is the launching pad to determine how much to save and what types of accounts to use. My personal goal is to save enough to provide for each of my children’s first two years at a public, in-state university. Beginning their junior year, my kiddos will need to pay their own housing and living expenses. This goal reflects my values and income and strikes a balance with completing long-term goals. Everyone is going to have a different perspective and starting point for college planning. The most common tool used for reaching college savings goals is a 529 plan – 37% of American families reported using a 529 plan to pay college costs in the prior academic year, with average account distributions of just under $8,000. Usage of 529 plans was more common among parents using retirement accounts or other investment vehicles, and they have quickly become America’s preferred method of saving for college, with Morningstar reporting $363 billion dollars held across 61 state plans in 2020. Why do we love 529 plans? They provide investors with immediate diversification, age-weighted portfolios and low costs. These plans often come with a state-income tax deduction on contributions, provide tax-deferred growth and state oversight, and allow owners to change plan beneficiaries to family members tax-free. Plans can be opened by an adult (referred to as the account owner), who names a beneficiary. The owner of the account (generally a parent or grandparent) controls investment options and can name and change the plan beneficiary (generally a child). The plan beneficiary receives tax-favored distributions based on their educational expenses. There are two varieties of 529 plans: college savings plans and prepaid tuition plans. While every state offers the college savings plan option, not all states offer a prepaid tuition plan. Prepaid tuition plans provide the option of paying for future college credit hours at a fixed cost. The cost is often hefty, but the plan invests dollars with the goal of paying future college costs. Prepaid tuition plans are attractive to conservative investors with a nest egg to invest. College savings plans allow owners to choose investment options from a slate provided by the plan administrator. These plans feature age-weighted mutual fund portfolios that grow more conservative as a beneficiary approaches traditional college age. Owners can also choose traditional mutual fund options based on plan offerings. If the account is used to provide qualified education expenses for a beneficiary, distributions are income tax-free. Qualified expenses include:
  • College tuition
  • College fees
  • Required supplies and equipment
  • Computer and internet access
  • K-12 tuition and fees (up to $10,000)
College savings plans wilt when proceeds are used to provide non-qualified expenses. Non-qualified expense gains are taxed as ordinary income and, with little exception (exceptions include offsetting beneficiary scholarships, military service, disability or death), assessed a 10% penalty. Non-qualified 529 expenses include:
  • Travel expenses to and from college
  • Car payments and upkeep
  • Car insurance costs
  • Expenses associated with a cellphone
  • Fraternity, sorority or other club dues
  • An allowance, gifts or other support
Committing entirely to 529 accounts for your college savings plan guarantees you will be paying some costs out of your cash flow while children are in school, or will find yourself making tax-heavy distributions from the account. Taxable distributions raise owner income, which will possibly lower financial aid eligibility, creating a ripple of pain. A better approach may be a core and satellite strategy. The core of a college savings strategy remains a 529 plan, but the satellite can take many forms.
  • A rocky satellite is a Uniform Gift to Minors Act (UGMA) or Uniform Trust to Minors Act (UTMA) account. These accounts allow minors to begin investing along with a custodian. Custodians can purchase individual equities, bonds, cryptocurrency, mutual funds or real estate. The custodian rolls off the account at the child’s age of majority (18 or 21, based on state of residence), leaving the child as the sole owner of account assets. UTMA and UGMA accounts are great at passing wealth to children, but they do not make a strong satellite in a college savings plan. UTMA/UGMA accounts can reduce financial aid more than other options, though they may be subject to parent income tax rates, and a child will control account assets once they turn 18 or 21.
  • If your child works part-time, a Roth IRA in the child’s name is an outstanding college savings satellite. As long as children have earned income, they can make after-tax contributions to a Roth IRA up to $6,000 annually. The Roth IRA will grow tax-free and account basis (initial contributions) can be used at any time. Roth IRAs are not considered in a financial aid calculation. Roth accounts can be invested in a range of investment options, including individual equities, bonds, mutual funds and cryptocurrency. Roth IRAs pair as an extraordinary satellite to 529 accounts. Consider the following example:
Victoria, 14, spent her summer mowing yards, house sitting and dog walking. She recorded her income and expenses and earned $5,500 over the summer. Victoria’s parents then opened a Roth IRA for her and bought two shares of Stock A at $2,750 a share. Assuming Victoria continues working through high school and her parents continue contributing, then by the time she begins college, her Roth IRA would have eight shares of Stock A and her account would have a cost basis of $22,000 ($5,500 multiplied by 4 summers). Victoria can sell shares as needed to provide supplemental expenses, and can take up to $22,000 out of the account without incurring any penalty. Shares will (hopefully) continue to appreciate in value, and Victoria can make additional contributions to the account if she continues working.
  • If your child does not have any earned income, consider opening a parent-owned non-qualified brokerage account to help save for non-529 expenses. The account will be subject to tax on dividends, interest and gains, but there are no asset or usage restrictions. Consider growth equities to limit income tax exposure, and choose positions not offered by the larger 529 college savings plan. Non-qualified brokerage accounts make strong satellites when orbiting with a 529 account.
  • Exotic satellites include cash value life insurance policies, rental properties and other real estate. They may have higher costs and require a time commitment, but can pair nicely with a core 529 account balance.
Add the moon to your college savings plan. A financial adviser can help you personalize a core/satellite approach. Meeting with a financial planner can also help you set a course of action, decide on weekly savings targets and develop an asset allocation built around your college savings needs.   Craig is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig is in no way related to Cetera Advisor Networks LLC or its registered representatives. These examples are hypothetical only, and do not represent the actual performance of any particular investments.  Investments in securities do not offer a fixed rate of return.  Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Before investing, the investor should consider whether the investor's or beneficiary's home state offers any state tax or other benefits available only from that state's 529 Plan. [post_title] => 529s, Roth IRAs and Other Strategies for Your College Savings Plan [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 529s-roth-iras-and-other-strategies-for-your-college-savings-plan [to_ping] => [pinged] => [post_modified] => 2022-06-21 09:21:10 [post_modified_gmt] => 2022-06-21 14:21:10 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64988 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 64782 [post_author] => 182131 [post_date] => 2022-06-07 08:18:50 [post_date_gmt] => 2022-06-07 13:18:50 [post_content] => Craig Lemoine, Director of Consumer Investment Research   
  Ask kids what they think money is, and you get some interesting responses.  Over the last month, I asked my friends, family and neighbors if I could pose a question to their children about money. Their answers covered it all – insightful, surprisingly robust and hysterical.  Ellie (4): “Cash. It can pay for stuff, like Pop Tarts.” Kate (6): “It’s how you pay for what you want.”  Lily (6): “Money is something that you can use. It can really help you get something important or things you really wanted. If you have a friend over, ask them what they want. You have to agree on what you both buy.” JJ (8): “Money is paper, it has writing on it to tell you how much you have on it. And you should spend it wisely.”  Brady (10): “Money provides opportunities and the ability to explore something new.”  Amelia (12): “Green paper that’s backed by the government.”   Kellen (13): “Money is a waste of time, but it can bring happiness sometimes.”   Elizabeth (14): “Something you earn so you can spend.”  Chloe (15): “Money is a piece of valuable paper, backed by the government. You get paid by working.”  Spencer (16): “Money is a form of currency.”    Ryan (18): “The means by which you purchase goods and services. If someone asked me what to do with money, I’d tell them to save half and spend half on something you want.”   Two years ago, I realized that we had not done well teaching our children about money. Within one month, both an iPad and a Kindle Fire were left outside in the rain. The wet electronics are not my failure; my stinging failure was the quote that followed:  Daddy, you can just buy us new ones.”  I promptly took my girls outside to find the Money Tree.  My youngest ran from tree to tree with hope and anticipation.   Money is not natural to kids. They don’t learn how to budget along with crawling, though I wish they would. Parents are the primary source of financial literacy for children. While some schools are better than others at teaching financial literacy, parents remain the cornerstone of educating children about personal finances.    Some of us genuinely struggle talking about money. But teenagers who are educated about personal finance are more likely to have lower levels of credit card debt, experience less negative stress and are more likely to succeed in college than those with lower levels of financial literacy.  Money is ingrained in our everyday lives. Talking about money means talking about compassion, diversity, charity, privilege and so much more.  

Get Started Teaching Your Kids Money Management 

Fantastic nonprofit organizations such as Jumpstart, Junior Achievement, The National Foundation for Financial Education and Money Savvy Kids have thousands of templates and resources to help you start conversations about money with your kids. Consider the Million Bazillion and the Planet Money Podcast  as repositories of entertaining personal finance content. 

Budget in the Open 

Budget in front of the kids. Talk about spending and savings openly. They may not participate in the process, but talking in the open takes away the taboo of not discussing money. As children become older, let them help make some family budgeting decisions. Making safe choices around money builds the confidence and discipline to make wise independent choices about money as they get older.  

Practice Choices in the Moment 

The next time you make a gift purchase, set a budget and let the kids choose. If my plan is to spend $20 on a birthday gift, I’ll hand cash to my girls and let them pick. As a result, we have some fantastic conversations about math, budgeting and priorities in the middle of Target.  

Demonstrate Work Ethic and Hustle 

I don’t pay an allowance for daily chores, but I am open to giving the girls opportunities for making money by going above and beyond. In financial services, we often hear, “You can’t teach hustle.” But making hustle fun when children are young goes a long way to carrying that work ethic as they are adults.  

Have Conversations with Kids About Money Priorities 

On my birthday, I received a card from a family member with a $100 bill in it. I showed the girls what $100 looked like and didn’t think much more about it. A few weeks later, one of them saw a commercial for a Barbie Dream House and, despite my best objections, stated “Daddy, you have enough money to buy it, don’t you remember?” We had a wonderful conversation about the house, Happy Meals, the dogs and dance class. The same money must pay for all our costs, and maybe they could begin saving for this two-story bungalow on their own.  

Teach Kids to Budget with Give, Spend, and Save 

I’ve seen envelopes, mason jars or piggy banks work toward instilling a greater financial understanding. Provide each child with three places they can store money. 
  • The first jar for giving is money kids can use to enhance the world around them. Use money from the jar regularly to provide an offering to a place of worship, gift to a food pantry or donation homeless shelter, museum or charity meaningful to your family.  
  • Label the second jar spending and give your children discretion over how to use it. Providing control helps instill the power of choices, small lessons in missing out and scarcity.  
  • The saving jar is for mutually agreed upon goals between parents and children. As they get older, saving might mean a down payment toward a vehicle or offsetting college costs.  

Talk About Credit Cards 

I almost always pay with my credit card while shopping with my kids. I try to be very clear about what a credit card is: I’m borrowing money from the bank to pay the grocery store, and I will have to pay the bank back later from my paycheck. We pass a bank on the way to school, and every now and then the girls initiate a conversation to ask if I have paid the bank back yet. Six may be young age to instill the lesson that credit cards are for convenience and not credit, but some progress is better than no progress.  

Talk About Bank Accounts, Venmo, PayPal and Whatever Comes Next

Open bank accounts with your minor children. Teach them how to check the balance and reconcile receipts. Share about overdraft fees and learn about the tools they are using. Most of my students use Venmo. While instant cashless transaction apps are new, they also require budgeting, goal setting and conversations.  

Teach Kids Responsible Investing

Find companies, toys, shoes or amusement park empires your children enjoy. Most public companies have the ability to open dividend purchase plans (DPPs) or dividend reinvestment plans (DRPs) directly through their websites. As children evolve past putting money in a savings jar, encourage them to buy individual shares. DPP and DRP programs generally allow parents to open accounts alongside their children (Uniform Gift to Minors Accounts or Uniform Trusts to Minors Accounts). Dividends paid by these stocks will accumulate, building excitement about stocks and investing and helping children develop a critical eye.   Setting our children up with realistic expectations about investing can help shield them from taking huge risks on trading apps and crypto platforms when they hit college.  

You Are Going to Mess Up – and That’s OK

Parents get to be imperfect. We get tired, overwhelmed and stressed out about money. There isn’t one perfect money script to use with kids. While we all come from different backgrounds and experiences, we all have stories to share with our children about money. Talk about money and invite children to participate in household discussions.   The part of the Money Tree story I often leave out is the true conclusion. After taking my girls outside to find the Money Tree, I waited a few minutes, lifted my arms in the shape of a tree and shouted, “The Money Tree is right here!” It was possibly the most “Dad” moment of my life, but not one that expresses my values.  Sometimes even adults can use some help with understanding money. Learn how financial planning can help!      Craig is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig is in no way related to Cetera Advisor Networks LLC or its registered representatives.  [post_title] => Where is the Money Tree? How to Teach Kids About Money, Credit Cards, Saving, Investing, Venmo and More [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => where-is-the-money-tree-how-to-teach-kids-about-money-credit-cards-saving-investing-venmo-and-more [to_ping] => [pinged] => [post_modified] => 2022-06-07 08:42:11 [post_modified_gmt] => 2022-06-07 13:42:11 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64964 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 64736 [post_author] => 181953 [post_date] => 2022-06-02 10:07:35 [post_date_gmt] => 2022-06-02 15:07:35 [post_content] => Tom Fridrich, Senior Wealth Planner    You’re in a good position in your life. You’ve built up your wealth, perhaps from a successful business or working in corporate America. You might feel it’s time to start winding down and that you’re in a place where you’re figuring out whether to transfer some of those assets to the next generation.  The question then becomes whether you want to gift to your heirs during your lifetime, or to leave an inheritance to them after your death.  There are several elements of this decision to consider that vary based on your circumstances. Perhaps you have a large estate that will expose you to estate taxes. Maybe you own multiple pieces of real estate that you rent out and use for personal use that have appreciated in value over the years. Or perhaps you own  investments and stocks that you want to offload. You might even have a family business you are looking to retire from and exit or sell.  In all those cases, does it make sense to transfer some of those interests to the next generation now or after death? We’ll explore that decision in this article and the tax implications of both choices – for both you and your heirs. 

Exploring the Decision

Just because you have a certain asset that might make sense in theory to consider transitioning, does it make sense economically to do it now? Can you afford to give it away? Should you give it away or sell it? If you do decide to give it away, do you want to gift large amounts or make smaller annual gifts?  The decision to give now or later depends on whether it makes economic sense for you to do so. If it does, then it’s a good idea to explore. The economics of it are a big factor. If you need to keep those assets in your estate to cover your own expenses, then it’s likely not a good idea.  For example, if you have a family business or asset that comprises a high percentage of your family’s net worth and it’s the sole thing providing your family income or much of your estate, it might not be a good idea to give ownership stakes to your heirs just yet.  In that case, it might make more sense to keep that wealth in your estate – whether it be investments, stocks, land, a vacation home or real estate – so that the net worth of the estate can continue to grow, which can lead to more future giving. 

Gifting to Heirs During Life

If you deem it a good economic decision to gift during your life, the second thing you need to explore is control. If you’re thinking about gifting during your lifetime, you have to be comfortable with relinquishing control. That can be the most challenging aspect – whether it’s a business or real estate that’s been in the family, are you willing to give up control of that asset?  The reason this is difficult is that we enjoy having control over our assets, and we might not be ready to give up that control. In theory, you might think, "Why not give assets away? The kids are getting older." While we might have good reasons to gift during our lifetime, our heirs might not be ready, gifting might cause conflict or you might not see a good solution. If you hold onto the asset, then you can avoid these potential issues.  Gifting a business is perhaps the most complicated asset to consider giving away. Who should receive it – a family member, or a nonfamily member who has worked in the business for years? Should it even be a gift, or do you need some consideration to help fund your retirement? If you give it to the kids, which one should receive it – or should it go to all of them equally? These questions are not easily answered but should be considered, among other things, when deciding how to transfer a business.   However, if you are just trying to decide if general gifting is a good idea for your family, there is a way to evaluate your heirs to see if they are ready to handle the gifts. You can first establish a goal for what you want to see them use the money for – charitable causes, self-improvement, entrepreneurship – and then communicate that to them. Be clear that you want to see them do something specific with the money, and then evaluate how they do. If you feel they did well with the first round of giving, you can decide whether to continue the giving or to help them improve. 

Gift and Estate Taxes

Both sides of the decision come with taxes – whether it be gift taxes or estate taxes.  The IRS has the Uniform Estate and Gift Tax Exemption amount, which in 2022 is $12.06 million, up from $11.7 million in 2021. This means you could give away $12.06 million in your lifetime tax-free; however, anything you give above that amount, even at death, is going to be subject to estate taxes. You could also hold on to that $12.06 million and give it as a bequest when you die.  Essentially, the IRS doesn’t care when you give your assets away, but you’ve got $12.06 million you can give away gift tax- and estate tax-free. With that in mind, one ideal situation for giving assets away during your lifetime is a highly appreciating asset that you could continue to grow outside your estate.  For example, if you give $10 million away and it grows, that growth is now part of somebody else’s estate. Whereas if you keep it and its value increases to $30 million, that growth is now part of your estate, and it will be subject to gift taxes if you gift it later and estate taxes if you bequeath it at death. 

Income Taxes and Basis

Another example is the case of giving a child or grandchild who is in a lower tax bracket your assets such that the income will be taxed at their lower rate, instead of your higher rate. Let’s look at real estate as an example. Maybe you own an office building and are leasing it out. It might be in a part of the country where commercial real estate is increasing in value quickly. You could transfer it to your daughter so she can own and manage it and receive the monthly lease payments.  Your daughter would manage the leases and everything that comes with that, and then the income would go to her. That income is going to be lower, but it is no longer being reported by you and she receives your basis in the property as well.   When you gift or pass down an asset during life to reduce estate and income taxes, the downside is carryover basis, which means the basis remains the same as when it was held by you.  For example, say that same commercial real estate we talked about earlier was valued at $8 million, and at the time it was transferred, your basis is $2 million. You’ve gifted $8 million, effectively using up $8 million in your gift tax exemption. Now it’s part of your daughter’s estate. Let’s say it appreciated to $18 million – her basis is only $2 million, and when she sells that real estate, she’s now got a $16 million gain she has to report.  If she pays capital gains taxes on that gain, which is currently 23.6%, that is $3.8 million in taxes.  If you give assets away, ideally you would identify assets that are appreciating quickly to get that growth out of your estate. However, the downside is if you gift that asset to a child, the growth occurs out of your estate, but the basis carries over to the child. The positive of holding on is the step-up in basis, which is the fair market value of the asset at the time of the owner’s death.    The step-up in basis is a great way to avoid paying taxes when the recipient of the asset decides to sell. If the recipient sells shortly after receiving the asset at death, then there may be little or no growth in the value of the asset.   For example, let’s say that instead of gifting the commercial real estate from the previous example, you decide to hold onto it until death. It is valued at $18 million and included in your estate, so you are likely to owe estate taxes with that kind of wealth and the exemption at $12.06 million. So, you would pay 40% on the amount above $12 million, which comes to $2.4 million.  However, if the daughter inherits the building at death, her basis in the property is no longer $2 million, but the fair market value of the property, which is $18 million. If she decides to sell the property right away for $18 million, then her gain is $0 because her basis was $18 million, and the sale price was $18 million. So, with the gifting strategy, she owed $3.8 million, but with this strategy, she owes nothing. A nice win for her, but you paid $2.4 million in estate taxes.  You could also identify assets where you have a high basis in relation to the value of the property, because that basis carries over. Let’s say I have stock that hasn’t appreciated. I bought it for $100,000 and it’s currently valued at $110,000. I want to transfer that stock because the value is close to my basis. I transfer it over to my daughter, and she gets it and says, “That stock is great, but I don’t see the value in it, and since I’m in a lower tax bracket I am going to sell it, realize some gain and put it elsewhere.”   If I were to hold onto that stock until I die, the step-up in basis isn’t going to get me very far, nor will it get my daughter very far at that point. Therefore, in this case, it might be an asset that you gift away to allow the next generation to better position themselves to build wealth. 

Gifting and the Annual Gift Tax Exclusion

The annual gift tax exclusion stipulates that you can give anyone up to $16,000 a year that’s exempt from taxes, up from $15,000 in 2021. If you are married, your spouse can also give $16,000, for a total of $32,000.  This allows individuals to give $16,000 (or $32,000 for couples) away to anyone without paying any federal gift taxes. It’s a great way to lower the amount of your estate if you think you might have an estate tax problem, as well as to watch your loved ones benefit from your giving, instead of waiting until death.  One of the benefits of lifetime giving is you can see what your kids and grandkids do with those assets. How do they manage them? Are they investing? Or are they wasting them? Does it make sense to transfer greater wealth? By giving in your lifetime, you can get a feel for who does a better job with the opportunity and to see how they manage those gifts.  There are also some gifts that don’t count toward the annual gift tax exclusion. Some of those include paying for a child’s or grandchild’s tuition or paying for medical bills. You must pay the tuition straight to the school or the bills straight to the medical facility, and you don’t have to report those for gift taxes.  

A Professional Can Help

This is a complicated decision and one that is best made with the help of a trusted financial professional. Each person’s situation is unique, and exploring what would be the best course for you is key.   Get in touch with your financial professional today to help ensure you’re making the right choice for you.    For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. [post_title] => To Give Now or Give Later? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => to-give-now-or-give-later [to_ping] => [pinged] => [post_modified] => 2022-06-02 10:29:10 [post_modified_gmt] => 2022-06-02 15:29:10 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64956 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 64732 [post_author] => 182109 [post_date] => 2022-06-01 14:37:02 [post_date_gmt] => 2022-06-01 19:37:02 [post_content] => Burt White, Chief Strategy Officer   So far, 2022 is off to one of the worst ever starts of a year for stock returns. And the reasons are numerous and front of mind for us all: an unexpected war in Ukraine, the lingering impacts of COVID-19, the highest inflation rates in 40 years and the prospects for a contentious midterm election right around the corner.  Given all that uncertainty, equity prices in 2022 have seen greater levels of volatility and have dropped into correction territory for the first time since the initial onset of the COVID-19 pandemic in early 2020.  However, this rising collection of market uncertainty comes at a stark contrast to the continued relative strength of the U.S. economy, which remains buoyed by strong consumer spending, the healthiest job market in decades and increased confidence for companies to invest in their business.   So why is there such a difference between the good news about the U.S. economy and the bearishness of the stock market?  The likely cause for most of this uncertainty is a result of three inflection points the market is assessing. These inflection points are raising the blood pressure of the market, but we believe they will work themselves out over the near-term. So what are these three inflection points, and how might they unfold going forward? 

COVID-19 Shifts from a Pandemic to Endemic

COVID has caused an incalculable amount of destruction in the world. The loss of life, the economic impact on businesses, the canceled opportunities and memories with friends and family – it’s been a tough two years.   But what we are likely going through right now is the inflection point of COVID going from a pandemic – widespread, uncontrolled infectious disease – to an endemic, where the virus may remain a significant health threat but becomes more seasonal and predictable, similar to other communicable diseases.   The reopening of the world post-pandemic is one of the major reasons inflation is surging. The combination of businesses trying to get back up to speed after being shuttered during the early portions of the pandemic mixed with the pent-up demand of American consumers ready to spend on new homes, cars and travel has created an imbalance in supply and demand that is putting pressure on prices for everything from eggs to airfare to housing. And the result is the highest inflation rates in four decades.   But much of this inflationary pressure appears to be transitory – the mix of pent-up demand and a business environment still reopening – and it should begin to sort itself out over time as businesses adjust to the endemic phase of COVID. 

Policies Shift from a Tailwind to a Headwind

Another inflection point is the shift from government aid to a hawkish and tightening fiscal policy. Fiscal spending, which provided trillions in aid, has come to an end. And now, monetary policy from the Federal Reserve – which had long kept interest rates near zero – is reacting to tighter financial conditions.  The Fed has already raised rates twice this cycle, including a rare 50 basis-point increase for the first time since May 2000. Rates have been near zero since 2008 – outside of a quick rise in 2017-19 – though historically that’s far from the norm.  It’s this shift from accommodating fiscal policies to more restrictive ones that has the market feeling uncertain. But these steps are necessary to rein in inflation. Rates that were too low and deficit spending that was too high contributed to the current inflationary environment. As this shift plays out, markets should become more comfortable with the revised policy and experience lower volatility. And while individuals may bet more money from interest under this shift, corporations likely will not, which should slow down the economy. 

The Four-Year Presidential Cycle Hits its Mid-Point

Political ads are dominating the airwaves in states holding primaries, as is rhetoric from both sides of the aisle that things are bad and need changing. Expect even more political adds in October and November. These ads bring more than just ramped-up political tensions – this inflection point also drives uncertainty in markets regarding the future path of policy and the makeup of decision-makers. As a result, the second year of the four-year presidential cycle is usually the most volatile as it leads up to the midterm elections.  The good news is that after this midterm election inflection point, history shows that some of the best periods of equity returns often occur. In fact, the best three quarters on average of the four-year presidential cycles since 1970 have materialized post-midterm elections. 

 Volatility is Normal and Healthy

It’s important to note that market volatility is both commonplace and healthy, especially after the greater-than-100% rally in stocks following the pandemic lows just over two years ago. And while market dislocations are never pleasant, they have rewarded patient, long-term investors with attractive entry points. In fact, of the 33 market corrections since 1980, 90% of them saw gains over the following year – averaging around 25%.  Our view remains that we are near or even past the peak of inflation, and with a limited but swift series interest rate hikes, the Fed can curb inflation further while creating a soft landing for the economy. Furthermore, as these shifts inflection points unfold during the rest of 2022, we expect equity markets to stabilize and reverse course.    Burt White is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Burt White is in no way related to Cetera Advisor Networks LLC or its registered representatives. This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated herein are not necessarily the opinion of any other named entity. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. [post_title] => The 3 Inflection Points Behind the Stock Market’s Dip [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => the-3-inflection-points-behind-the-stock-markets-dip [to_ping] => [pinged] => [post_modified] => 2022-06-10 08:09:22 [post_modified_gmt] => 2022-06-10 13:09:22 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64953 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post_count] => 5 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 64839 [post_author] => 182109 [post_date] => 2022-06-15 09:39:02 [post_date_gmt] => 2022-06-15 14:39:02 [post_content] => It's almost impossible not to feel anxious at the dips and dives the stock market has been taking recently, compounded by relentless inflation-focused headlines. That's why you might be surprised to learn there's a lot of positive news to be had, despite the market uncertainty.  Read on for three encouraging themes that illustrate the long-term benefits of the stock market and why now is the time to recommit to your financial plan. 

Let History Be Your Guide 

We'll start with the bad news, because it would be naïve to ignore certain realities. Yes, the market has just endured the worst start to the calendar year in decades. And yes, it's the first time in 60 years both stocks and bonds have declined simultaneously.  With that out of the way, let's turn to the favorable news. Although market pullbacks may continue for the foreseeable future, it's vital to keep in mind that these short spurts don't define the market over the long haul.  When viewed daily, markets advance approximately six out of every 10 days, and if you take a calendar-year perspective, the stock market has gone up far more often than it has gone down. It's reassuring to realize that fluctuations occur regularly, yet these slumps are usually overcome in short order.   In fact, while drawdowns are common, so are recoveries. 

Dig Deeper into What’s Causing Inflation 

 While inflation itself isn't positive, its story is far more than just higher gas prices and food costs.  Some of today's rising inflation is caused by an array of factors that may otherwise constitute a strong economy.    Again, we'll dispense with the bad news first. There are indeed some negatives propelling inflation, including the lingering effects of COVID-19, continued supply chain disruptions, the Russia/Ukraine conflict and the downstream impact of the stimulus payments during the depths of the pandemic that flooded the economy with money.   And while those are all hurdles to overcome, what many miss is that inflationary pressures also stem from beneficial market forces. Here are five less talked about positive contributors to today's inflation: 
  • Surging retail activity – As the pandemic wanes and the world reopens, consumers are eager to get back out there and spend, whether it's planning a well-earned vacation or enjoying an evening out with friends. Pent-up demand for goods and services – by all of us, at the same time – allows companies to raise prices. While that ultimately creates inflation, the root cause is a positive one: strong consumer spending. 
  • Increased home values – Skyrocketing housing prices are burdensome to those aiming to buy their first home or relocate to a highly desirable area. But they are music to the ears of the current lucky homeowners who have seen their equity swell. Along the way, many have refinanced at historically low interest rates, which means their net worth has also increased as home values rose.
  • Higher net worth – Those soaring home values are just one part of our prosperity.  2021 saw the biggest increase in Americans' net worth in history thanks to elevated asset prices and rising stock prices. Although we’ve given a bit back as the market dipped, it still represents bigger gains than any other year. 
  • Rising business spending – All that pent-up demand is fueling a commensurate ramp up for businesses as they aim to meet market interest. That leads to investments in new machinery, factories, inventory and, of course, talent.  This creates demand for goods and thus pressure on inflation.
  • Fastest-ever labor recovery – One sign of the health of the economy is how long it takes for the job market to recover – and the pace today is blistering. For comparison, it took at least six years after the most recent recession for jobs to become plentiful, and today the market has almost fully recovered in the two years since shutdowns were prevalent. Currently, there are approximately two available jobs for every unemployed American, which is the best ratio on record. By contrast, in 2010, there were four unemployed workers for every one available job.
All these factors are intertwined. Consumers are confident about their net worth and good jobs. Which means businesses need to ramp up production. Which leads to more great jobs that offer higher wages as businesses compete for staff. The result: We're spending our money quickly, which is leading to inflation.  And while accelerating rents and surging gas prices are a real burden for Americans, there are also some potentially positive aspects that are materializing alongside these higher prices. 

Remember, You're in It for the Long Haul 

Looking at the market day by day can incite elation, then despair. That's why it's important to note that it doesn't matter what happens on one day – it matters what happens on all the days. 

The longer your time horizon – that is, the time until you need to tap your accounts in retirement – the less likely you are to experience a negative return.   Consider this perspective: Since 1970, the average rolling annual period saw advancement from stocks around 80% of the time. However, over rolling 10-year holding periods, stocks are up over 92% of the time, and they're higher 100% of the time for all rolling 15-year periods. That means those with a greater than 10-year investing time horizon have an excellent chance of possibly achieving positive returns.  But here's a caveat: The cliché that it's not about timing the market, but time in the market is true. Since 1988, just missing a few of the best days in the market has resulted in significant lost opportunity in long-term returns. And over time, many of these best-performing days occur around and after a bout of market volatility, which underscores the importance of remaining committed to your investment plan.  Finally, remember that progress happens too slowly to notice, but setbacks happen too quickly to ignore. Here's what we mean: In 2008, the market quickly lost 38%. And it was a huge deal. Books were written about it, and Congressional hearings were held. The market then slowly tripled from 2009 to 2015, and hardly anyone noticed. The lesson is that sticking with your investment plan is the key to a solid financial future.  The market is built to recover, which is why investors should keep a long-term mindset. Stay focused and determined and always keep the big picture in mind. Slow and steady wins the race.   Your financial advisor is here for you.    Always remember: Your financial advisor is here for you in good times and bad. They can answer your questions and provide objective guidance to keep your mindset fixed on the longer term.   If you’re not working with an advisor, now is a great time to get support. Let us help you connect with a professional who will tailor your plan to your existing needs and long-term goals.     The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results. All investing involves risk, including the possible loss of principal.  There is no assurance that any investment strategy will be successful. [post_title] => Tips to Help You Stay Strong During Market Volatility [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => tips-to-help-you-stay-strong-during-market-volatility [to_ping] => [pinged] => [post_modified] => 2022-06-21 12:33:50 [post_modified_gmt] => 2022-06-21 17:33:50 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64991 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 322 [max_num_pages] => 65 [max_num_comment_pages] => 0 [is_single] => [is_preview] => [is_page] => [is_archive] => [is_date] => [is_year] => [is_month] => [is_day] => [is_time] => [is_author] => [is_category] => [is_tag] => [is_tax] => [is_search] => [is_feed] => [is_comment_feed] => [is_trackback] => [is_home] => 1 [is_privacy_policy] => [is_404] => [is_embed] => [is_paged] => [is_admin] => [is_attachment] => [is_singular] => [is_robots] => [is_favicon] => [is_posts_page] => [is_post_type_archive] => [query_vars_hash:WP_Query:private] => 6b5c18c1252b6c6a9f5f8613c74e0017 [query_vars_changed:WP_Query:private] => [thumbnails_cached] => [stopwords:WP_Query:private] => [compat_fields:WP_Query:private] => Array ( [0] => query_vars_hash [1] => query_vars_changed ) [compat_methods:WP_Query:private] => Array ( [0] => init_query_flags [1] => parse_tax_query ) [tribe_is_event] => [tribe_is_multi_posttype] => [tribe_is_event_category] => [tribe_is_event_venue] => [tribe_is_event_organizer] => [tribe_is_event_query] => [tribe_is_past] => )

Tips to Help You Stay Strong During Market Volatility

It’s almost impossible not to feel anxious at the dips and dives the stock market has been taking recently, compounded by relentless inflation-focused headlines. That’s why you might be surprised to learn there’s a lot of positive news to be had, despite the market uncertainty. 
Continue Reading!
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                    [post_content] => By Erin Wood, Senior Vice President, Financial Planning and Advanced Solutions

Just a few years ago, Rose retired with a decent-sized 401(k). With some careful budgeting and a part-time job, her retirement finances were on track. Rose was looking forward to traveling, reigniting her passion for photography and spending time with her son and her grandkids.

The pandemic changed everything. Her son contracted COVID-19 in the early days of the pandemic. His health deteriorated quickly and he died at only 35 years old. He didn’t have life insurance. A gig worker without a 401(k), he had very minimal retirement savings.

Rose’s grandchildren, ages 2 and 6, joined the more than 140,000 U.S. children under the age of 18 who lost their primary or secondary caregiver due to the pandemic from April 2020 through June 2021. That’s approximately one out of every 450 children under age 18 in the United States.

Rose’s ex-daughter-in-law battles drug addiction and had lost custody of the kids during the divorce, so Rose became the children’s primary caregiver. She quickly discovered that caring for young children as an older adult is more physically challenging than when she raised her son, so she made the difficult decision to leave her part-time job to have the energy to care for her active grandchildren. She wants to do everything for these kids who have lost so much — but it puts her financial security at risk.

Sadly, she is far from alone.

Read the full article
                    [post_title] => COVID’s Financial Toll Isn’t What You Think
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                    [post_content] => By: Erin Wood, CFP®, CRPC®, FBS®, Senior Vice President, Financial Planning, Carson Group

 

Laura and Caroline are in their late 50s. Friends since meeting at a playgroup for their toddlers, both were in long-term, seemingly happy marriages. Laura married her high school sweetheart right after they graduated from college and worked as an RN while her husband attended medical school. When their first child was born, Laura decided to become a stay-at-home parent. She just celebrated sending her last child off to college and was looking forward to enjoying an empty nest with her husband.

Already established in her career as an accountant for a large insurance firm, Caroline married a bit later, at 33. Today, she’s a financial controller for the same firm. Her spouse owns his own landscaping business. Caroline is the high-wage earner in the family.

Unfortunately, both women are now surprised to be facing a “gray” divorce: a divorce involving couples in their 50s or older. Each will need to make some tough choices as they deal with the emotional devastation of unraveling a long-term marriage. Although my focus as a financial planner is to help my clients find their financial footing during and after divorce, I also encourage clients to build a strong network of family and friends as well as a therapist or clergy person to offer critical emotional support during this time.

Read full article on Kiplinger.com

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Roth conversions can be a powerful tax and retirement planning technique. The idea behind most Roth conversions is to take money from an IRA and convert it to a Roth IRA. Essentially, you’re paying taxes today instead of paying taxes in the future.

The Tax Cut and Jobs Act lowered taxes for many Americans and with the SECURE Act Roth IRAs became even more powerful as an estate planning vehicle to minimize taxes, so it’s a convenient time to take advantage of Roth conversions. However, Roth conversions can come with some issues. Before you engage in one, be aware of these common problems as it can be hard to undo the transaction.

Conversions After 72

IRAs and Roth IRAs are both retirement accounts. It’s easy to assume Roth Conversions are best suited for retirement, too. However, waiting too long to do conversions can actually make the entire process more challenging. If you own an IRA, it’s subject to required minimum distribution rules once you turn 72, as long as you had not already reached age 70.5 by the end of 2019. The government wants you to start withdrawing money from your IRA each year and pay taxes on the tax-deferred money. However, Roth IRAs aren’t subject to RMDs at age 72. If you don’t need the money from your RMD to support your retirement spending, you might think, “I should convert this to a Roth IRA so it can stay in a tax-deferred account longer.” Unfortunately, that won’t work. You can’t roll over or convert RMDs for a given year. So, if you owe a RMD in 2020, you need to take it and you cannot convert it to a Roth IRA. Despite the fact you can’t convert an RMD, it doesn’t mean you can’t do Roth conversions after age 72. However, you need to make sure you get your RMD out before you do a conversion. Your first distributions from an IRA after 72 will be treated as RMD money first. This means, if you want to convert $10,000 from your IRA, but you also owe an $8,000 RMD for the year, you need to take the full $8,000 out before you do a conversion. Full article on Forbes   [post_title] => 3 Roth Conversion Traps To Avoid After The SECURE Act [post_excerpt] => Roth conversions can be a powerful tax and retirement planning technique. The idea behind most Roth conversions is to take money from an IRA and convert it to a Roth IRA. Essentially, you’re paying taxes today instead of paying taxes in the future. [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 3-roth-conversion-traps-to-avoid [to_ping] => [pinged] => [post_modified] => 2020-02-28 16:01:10 [post_modified_gmt] => 2020-02-28 22:01:10 [post_content_filtered] => [post_parent] => 0 [guid] => https://divi-partner-template.carsonwealth.com/?post_type=news&p=53316 [menu_order] => 0 [post_type] => news [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 51325 [post_author] => 6008 [post_date] => 2019-12-06 10:26:33 [post_date_gmt] => 2019-12-06 16:26:33 [post_content] => By Jamie Hopkins People plan on having a good day, a good year, a good retirement and a good life. But why stop there? Why not plan for a good end of life, too? End of life or estate planning is about getting plans in place to manage risks at the end of your life and beyond. And while it might be uncomfortable to discuss or plan for the end, everyone knows that no one will live forever. Estate planning and end of life planning are about taking control of your situation. Death and long-term care later in life might be hard to fathom right now, but we can’t put off planning out of fear of the unknown or because it’s unpleasant. Sometimes it takes a significant event like a health scare to shake us from our procrastination. Don’t wait for life to happen to you, though. Full article on Kiplinger [post_title] => 10 Common Estate Planning Mistakes (and How to Avoid Them) [post_excerpt] => Estate planning and end of life planning are about taking control of your situation. Death and long-term care later in life might be hard to fathom right now, but we can’t put off planning out of fear of the unknown or because it’s unpleasant. Don’t wait for life to happen to you, though. [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 10-common-estate-planning-mistakes-and-how-to-avoid-them [to_ping] => [pinged] => [post_modified] => 2020-02-28 16:02:24 [post_modified_gmt] => 2020-02-28 22:02:24 [post_content_filtered] => [post_parent] => 0 [guid] => https://divi-partner-template.carsonwealth.com/?post_type=news&p=51325 [menu_order] => 0 [post_type] => news [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 63308 [post_author] => 273 [post_date] => 2019-11-11 16:27:38 [post_date_gmt] => 2019-11-11 21:27:38 [post_content] => By Jamie Hopkins

Everyone’s heard the stories of celebrities who died without a proper estate plan in place. It’s been a hot topic in the last few years with Prince and Aretha Franklin serving as unfortunate faces of the phenomenon. But it’s not just freewheeling entertainers. Abraham Lincoln – a lawyer by trade – didn’t have one either, which leads me to say something you’ve probably never heard anyone say: don’t be like Abraham Lincoln.

Most people want to plan for a good life and a good retirement, so why not plan for a good end of life, too? Let’s look at four ways you can refine your estate plan, protect your assets and create a level of control and certainty for your loved ones.

1. Review Beneficiary Designations

Many accounts can pass to heirs and loved ones without having to go through the sometimes costly and time-consuming process of probate. For instance, life insurance contracts, 401(k)s and IRAs can be transferred through beneficiary designations – meaning you determine who you want to inherit your accounts after you die by filing out a beneficiary form. You can often name successors or backup beneficiaries, and even split up accounts by dollar amount or percentages between beneficiaries with these forms. Full article on Forbes [post_title] => 4 Ways To Improve Your Estate Plan [post_excerpt] => Most people want to plan for a good life and a good retirement, so why not plan for a good end of life, too? Let’s look at four ways you can refine your estate plan, protect your assets and create a level of control and certainty for your loved ones. [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 4-ways-to-improve-your-estate-plan [to_ping] => [pinged] => [post_modified] => 2020-02-28 17:02:59 [post_modified_gmt] => 2020-02-28 22:02:59 [post_content_filtered] => [post_parent] => 0 [guid] => https://retirementextender1.carsonwealth.com/insights/news/4-ways-to-improve-your-estate-plan/ [menu_order] => 0 [post_type] => news [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post_count] => 5 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 64691 [post_author] => 90034 [post_date] => 2022-05-26 08:18:44 [post_date_gmt] => 2022-05-26 13:18:44 [post_content] => By Erin Wood, Senior Vice President, Financial Planning and Advanced Solutions Just a few years ago, Rose retired with a decent-sized 401(k). With some careful budgeting and a part-time job, her retirement finances were on track. Rose was looking forward to traveling, reigniting her passion for photography and spending time with her son and her grandkids. The pandemic changed everything. Her son contracted COVID-19 in the early days of the pandemic. His health deteriorated quickly and he died at only 35 years old. He didn’t have life insurance. A gig worker without a 401(k), he had very minimal retirement savings. Rose’s grandchildren, ages 2 and 6, joined the more than 140,000 U.S. children under the age of 18 who lost their primary or secondary caregiver due to the pandemic from April 2020 through June 2021. That’s approximately one out of every 450 children under age 18 in the United States. Rose’s ex-daughter-in-law battles drug addiction and had lost custody of the kids during the divorce, so Rose became the children’s primary caregiver. She quickly discovered that caring for young children as an older adult is more physically challenging than when she raised her son, so she made the difficult decision to leave her part-time job to have the energy to care for her active grandchildren. She wants to do everything for these kids who have lost so much — but it puts her financial security at risk. Sadly, she is far from alone. Read the full article [post_title] => COVID’s Financial Toll Isn’t What You Think [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => covids-financial-toll-isnt-what-you-think [to_ping] => [pinged] => [post_modified] => 2022-05-26 08:33:22 [post_modified_gmt] => 2022-05-26 13:33:22 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=news&p=64940 [menu_order] => 0 [post_type] => news [post_mime_type] => [comment_count] => 0 [filter] => raw ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 6 [max_num_pages] => 2 [max_num_comment_pages] => 0 [is_single] => [is_preview] => [is_page] => [is_archive] => [is_date] => [is_year] => [is_month] => [is_day] => [is_time] => [is_author] => [is_category] => [is_tag] => [is_tax] => [is_search] => [is_feed] => [is_comment_feed] => [is_trackback] => [is_home] => 1 [is_privacy_policy] => [is_404] => [is_embed] => [is_paged] => [is_admin] => [is_attachment] => [is_singular] => [is_robots] => [is_favicon] => [is_posts_page] => [is_post_type_archive] => [query_vars_hash:WP_Query:private] => 8bbea74eca9b0e937ac286f0d22d32a8 [query_vars_changed:WP_Query:private] => [thumbnails_cached] => [stopwords:WP_Query:private] => [compat_fields:WP_Query:private] => Array ( [0] => query_vars_hash [1] => query_vars_changed ) [compat_methods:WP_Query:private] => Array ( [0] => init_query_flags [1] => parse_tax_query ) [tribe_is_event] => [tribe_is_multi_posttype] => [tribe_is_event_category] => [tribe_is_event_venue] => [tribe_is_event_organizer] => [tribe_is_event_query] => [tribe_is_past] => )

In the News

In the News

COVID’s Financial Toll Isn’t What You Think

By Erin Wood, Senior Vice President, Financial Planning and Advanced Solutions Just a few years ago, Rose retired with a decent-sized 401(k). With some careful budgeting and a part-time job, her retirement finances were on track. Rose was looking forward to traveling, reigniting her passion …
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                    [post_content] => The S&P 500 spent only a short time below the 20%-decline threshold, before jumping back above it last week. U.S. large-cap stocks rallied 6.5% based on optimism that inflationary pressures are starting to respond to higher interest rates.

Key Points for the Week 
  • The S&P 500 bounced off recent lows, rallying 6.5% last week.
  • Interest rates moved slightly lower as expectations for inflation declined.
  • Existing home sales fell 3.4% last month while new home sales jumped 10.7%.
The optimism was partly driven by reassuring consumer expectations for inflation. The University of Michigan consumer sentiment data reported inflation expectations fell from 5.4% to 5.3% for the next year and dropped from 3.3% to 3.1% for the next five years. That data indicates inflation expectations are not becoming as firmly established in the economy as many feared. Purchasing Manager Index data for goods and services both declined in the U.S., adding support to the idea interest rate increases are slowing activity. Both manufacturing and services data remain above 50, meaning they are expanding. The manufacturing index fell to 52.4 from 57 in May and reached a 23-month low. Services dipped from 53.4 to 51.6, which is the lowest reading in five months. High home prices and higher financing costs are slowing housing activity. Existing home sales fell 3.4% last month and have fallen 8.6% in the last year. New home sales jumped 10.7% last month but have still fallen 5.9% in the last year. As we note in the next section, home affordability has fallen with higher rates, but sales should benefit from ongoing demographic trends (Figure 1). Global stocks did not jump as much as U.S. stocks did last week. The MSCI ACWI added 4.8%. The Bloomberg U.S. Aggregate Bond Index surged 0.6% as lower inflation expectations supported bond prices.  The Core Personal Consumption Price Deflator will provide additional perspective on inflationary pressures when it is released on Thursday. Figure 1 Figure 2 Housing and Interest Rates People will complain the military is always well-prepared to fight the last war. Investors should be careful who they criticize because we can often act the same way. Some are comparing today’s housing market to the market leading up the Great Recession. The 2008 financial crisis was driven by exorbitant demand for housing and loose lending standards that imperiled many banks. 2022 is a much different market, and in today’s update, we’ll explore some of the important differences. A recent piece by the home loan buyer Freddie Mac (yes, the one that needed additional government support during the housing crisis) highlights some of the key trends that have caused housing prices to jump so rapidly in recent years (Figure 2) and why higher interest rates may not do as much damage to the housing market as some feared (Figure 1). The piece cites four factors:
  • “Record low mortgage rates in 2020 and 2021 and the race to beat future increases;
  • Limited supply from underbuilding and below average distressed sales;
  • An increase in first-time homebuyers due to favorable age demographics; and
  • Increased migration from high-cost cities to areas that already had a housing shortage.”
When the Federal Reserve cut interest rates in response to the pandemic, homeowners rushed to refinance and homebuyers took advantage of low rates to move. The surge of demand for new homes encountered a housing market with the fewest homes for sale since the statistics inception in 1993. The supply situation was further constrained because pandemic aid shrunk the number of distressed sales. Great for those families, but it also cut off another source of supply. The market would normally respond by building more homes, but rapidly increasing timber prices in the early stage of the pandemic limited supply and slowed the ability to start new projects. Another powerful force for home demand was the number of millennials at the prime age to purchase their first home. There are more than 46 million 25-34 year-olds in the U.S., about 6.5 million more than in 2006. Given the strong employment market prior to COVID, millennials were in a good position to buy homes. Many millennials still haven’t purchased a home. From 2012 to 2022, the number of renter households ages 25-44 doubled from 1.75 million to 3.5 million, and the trend is still moving higher. Potential demand for housing remains robust. Another part of this trend was a preference for mid-sized metro areas from the largest markets. Those markets had already experienced increased demand prior to the pandemic, especially in the South and Mountain West. Other pandemic-related factors fed into these same themes. Moving away from big cities became more attractive as large cities lost some advantages during COVID lockdowns. Working from home increased the demand for larger and remodeled houses, which were more affordable in smaller cities. The report emphasized the purchase of homes for rent is only a moderate factor in housing demand. Large corporate purchases of homes have increased, but the overall investor share of home sales was 27.6% in December 2021, only 0.9% higher from two years earlier. Given this environment, how will mortgage rates over 6% affect the market? Our expectation is home price appreciation will slow. Higher rates increase the total cost of a home, and buyer demand should slow down just as cities are starting to reopen. The trend away from the largest cities will likely continue. Demand should stay relatively strong given the demographic trends and as long as there isn’t a deep recession. For those still thinking about the housing crisis of 2008, there are some important differences. As long as unemployment remains fairly low, foreclosures and short sales should increase only gradually as consumers remain well-positioned to make payments. The average credit score on a new loan is approximately 775 in today’s environment. In the housing crisis the average was closer to 700. Some have noted an increase in the number of homes under construction and compared it to 2008. The difference is many of these homes are already sold and supply chain constraints have prevented their completion. The deep challenges of 2008 seem unlikely given the strength of the market and the financial security of the buyers. Last month’s 10.7% increase in new home sales, after a recent decline, is a good indication demand remains robust. The net effect should be a slowing market with demographic factors and geographic preferences supporting prices in many areas. Investors in homes or homeowners looking to sell should not expect the rapid price gains of the last couple years to continue. A more likely trend is for price gains to slow toward historical trends, with continued variability based on geographic region.   - This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. S&P 500 INDEX The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Bloomberg U.S. Aggregate Bond Index The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. Khater, Sam and Ralph DeFranco. FreddieMac. 6/09/22. https://www.freddiemac.com/research/insight/20220609-what-drove-home-price-growth-and-can-it-continue Khater, Sam and  Kristine Yao. 06/22/22. https://www.freddiemac.com/research/insight/20220622-pursuit-affordable-housing-migration-homebuyers-within-us-and-after-pandemic University of Michigan Consumer Sentiment 06/22. http://www.sca.isr.umich.edu/ S&P Global 06/23/22. https://www.pmi.spglobal.com/Public/Home/PressRelease/8fd15c4803fd4399bea8d16e1dc06422#:~:text=S%26P%20Global%20Flash%20US%20Services,slowdown%20and%20only%20modest%20overall Census Bureau. 06/24/22.3 https://www.census.gov/construction/nrs/pdf/newressales.pdf New York Fed 05/22. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2022q1.pdf Compliance Case #01413571 [post_title] => Market Commentary: S&P 500 Rallies 6.5%, Lifting Market Above Bear Level [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-sp-500-rallies-6-5-lifting-market-above-bear-level [to_ping] => [pinged] => [post_modified] => 2022-06-27 09:55:13 [post_modified_gmt] => 2022-06-27 14:55:13 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65012 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 64859 [post_author] => 90034 [post_date] => 2022-06-21 10:03:38 [post_date_gmt] => 2022-06-21 15:03:38 [post_content] => The S&P 500 dropped 5.7% last week and is now 22.3% off its peak. This decline pushed the index of large-cap U.S. stocks into a bear market, which is defined as a 20% or greater drop from its peak. Volatility remained elevated, and the S&P 500 has now moved by 1% or more 60 times this year. Key Points for the Week
  • The S&P 500 entered a bear market by closing more than 20% below its all-time high.
  • The Federal Reserve raised rates 0.75% as the central bank plays catch up after leaving rates too low for too long.
  • U.S. retail sales slowed 0.3% last month in response to heightened inflation, while industrial production remained strong. Even with the decline, retail sales are up 8.1% from last year.
Much of the decline can be traced to the Federal Reserve raising rates 0.75%, signaling the central bank views more rapid action as necessary to tamp down inflationary pressures. With the hike, the Fed’s benchmark fund rate has a range of 1.5%-1.75%. It was the first time since 1994 that the Fed has raised 0.75% in one meeting. The Fed also raised its expectations for interest rates in each of the next three years, suggesting additional rate hikes should be expected (Figure 1). Some economic data indicate the pressure on prices might be edging lower. Producer prices rose 0.8% last month but only 0.5% when food and energy is excluded. While up 10.7% in the last year, that is 0.9% lower than it was two months ago. Retail sales fell 0.3% last month. Consumers are pulling back from purchases in the face of higher prices. Global stocks moved similarly to U.S. stocks last week. The MSCI ACWI also fell 5.7%. The Bloomberg U.S. Aggregate Bond Index shrank 0.9% as bond prices fell in response to the expectation of higher rates. A host of Purchasing Manager Index reports will be released this week and will help identify if economic activity remains strong. Figure 1 Figure 2 Bearing up to the Pressure We are back in a bear market. After a couple of close escapes, the S&P 500 broke through the down-20% threshold and entered a bear market early last week. Unlike the COVID bear market in early 2020, this decline has taken a while. The S&P 500 peaked on Jan. 3, 2022, and has slid 22.3%, including dividends, from that peak. The decline has accelerated in recent months with the S&P 500 falling 18.6% in the second quarter. Why did the markets drop? Inflation and the Fed’s interest rate hikes were the primary causes. Markets moved into last week still trying to digest the larger-than-expected inflation report from the previous Friday. The news didn’t go down easy and expectations for a 0.75% rate hike started to increase. Those expectations were fulfilled on Wednesday, when the Fed raised rates 0.75% for the first time since 1994. The Fed moved aggressively because it delayed tightening monetary conditions and is trying to catch up (Figure 1). In its official statement, the Fed recommitted itself to getting inflation back down to 2 percent. By increasing rates, the Fed will make borrowing more expensive, and less borrowing makes the economy expand more slowly, reducing demand and allowing prices to decline. The Fed faces a difficult challenge because rapid interest rate hikes can harm key segments of the economy and markets don’t have time to adapt to changing expectations. Markets dropped last week partly due to concerns the Fed will keep raising rates rapidly and push the economy into recession sometime next year. Fears of a recession next quarter seem overblown given the continued strength in labor markets. The Fed isn’t the only central bank battling rapidly rising prices. Inflation is a global phenomenon and many countries have been increasing rates. Last week Switzerland and England both raised rates. The 0.5% increase in Swiss rates was a surprise to many while the English raised rates by 0.25% for the fifth straight meeting. Previously, the European Central Bank announced it would raise rates at its July meeting. Given all this information, what should investors expect from the market? In the short term, markets are expected to stay volatile. There have already been 60 moves of 1% this year and those are likely to continue given the uncertainty. Inflation data, such as the Personal Consumption Expenditures Pride Deflator (PCE) and the Consumer Price Index, will likely have outsized impact. We will be paying close attention to communication from Fed governors about the future direction of rates. We’ll also be watching energy prices closely. Producer and consumer prices were pushed higher because of energy prices, and we expect prices in other areas indirectly affected by higher energy costs to rise. In the intermediate term, the odds favor the patient investor. Averaging all the bear markets since 1955, stocks have increased 6.1% in the three months after a decline of more than 20%. The S&P 500 has increased an average of 19.5% one year after entering a bear market (Figure 2). Markets often rally after entering bear markets because investors reach a point of high pessimism. During declines, it is easy to identify the challenges market face. The case for why things will improve is often more nuanced and less vivid. Yet, based on historical performance, the most realistic assumption is the market will recover eventually and patience is often the most important investor virtue. Anything you can do to stretch out your time horizon can help make investing less challenging and more rewarding. Please let us know if there is anything we can do to help you. - This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. S&P 500 INDEX The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Bloomberg U.S. Aggregate Bond Index The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. The Federal Reserve 06/15/2022. Federal Reserve issues FOMC Statement.https://www.federalreserve.gov/newsevents/pressreleases/monetary20220615a.htm ING Snaps. 06/16/2022. Swiss National Bank raises rates by 50 bps.https://think.ing.com/snaps/swiss-national-bank-raises-rates-by-50bp/#:~:text=The%20SNB%20has%20revised%20its,the%20first%20quarter%20of%202024. Eliot Smith. 06/16/2022.https://www.cnbc.com/2022/06/16/bank-of-england-hikes-rates-for-the-fifth-time-in-row-as-inflation-soars.html Census Bureau. 06/15/2022. Advance Monthly Sales for Retail and Food Services May 2022.https://www.census.gov/retail/marts/www/marts_current.pdf BLS. 06/14/2022. Producer Price Index News Release Summary.https://www.bls.gov/news.release/ppi.nr0.htm Sylvan Lane. The Hill. Fed hikes by 75 basis points for first time since 1994.https://thehill.com/homenews/3524517-fed-hikes-rates-by-75-basis-points-for-first-time-since-1994/#:~:text=The%20Federal%20Reserve%20announced%20Wednesday,discouraging%20May%20surge%20in%20inflation. Compliance Case #01408268 [post_title] => Market Commentary: Fed Raises Rates by 0.75%, Market Moves Into Bear Territory [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-fed-raises-rates-by-0-75-market-moves-into-bear-territory [to_ping] => [pinged] => [post_modified] => 2022-06-22 07:48:34 [post_modified_gmt] => 2022-06-22 12:48:34 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65005 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 64843 [post_author] => 90034 [post_date] => 2022-06-15 13:58:05 [post_date_gmt] => 2022-06-15 18:58:05 [post_content] => Fueled by inflation readings that have remained stubbornly elevated, the stock market, measured as the S&P 500 Index, entered bear market territory at market close on June 13, 2022.  A bear market represents a decline in equity values by more than 20%. And while crossing this arbitrary threshold of 20% has garnered a lot of media attention, the double-click into understanding the context of equity volatility can help to increase investors’ confidence to remain committed to their investment plan. The most important thing to remember is that the phrase “it’s different this time” is one of the most dangerous phrases in investing. Downturns and bear markets are caused by different things and called different names, but the single-most durable investment truth is the long-term resiliency of capital markets and economic growth. Sparking the current downdraft in stocks was the May reading of the Consumer Price Index (CPI) data – the most widely followed proxy for consumer inflation – coming in higher than expected. The CPI rebound undercut an expected trend towards the moderating of inflation. The headline inflation rate of 8.6% was the highest since 1981, driven predominately by accelerating food and energy costs. Food and energy prices have been adversely impacted by Russia’s invasion of Ukraine, two countries that play a vital role in the commodity supply chain. Despite the headline result, there was some positive news sitting inside the inflation report. Namely, Core CPI, which excludes the volatile food and energy components, increased a more tolerable 6.0% over the last year and the annual rate actually declined from the previous month. The post-pandemic reopening of the world is one of the major reasons that inflation is surging. The combination of businesses trying to get back up-to-speed after being shuttered through the pandemic (picture a car that hasn’t started in a year trying to get going again), mixed with the pent-up demand of Americans ready to upgrade the homes we’ve been confined to, go on a vacation, or get a proper haircut is creating an imbalance of supply and demand that is putting pressure on prices of everything from eggs to airfare to housing. The result? The highest inflation rates in four decades, sparking concern that’s driven markets into bear market territory. And while crossing into bear market territory is a headline-grabbing event, it’s important to note that it’s just an arbitrary line in the sand and we’ve been here before. Moreso, history shows that bear markets – particularly those not associated with a recession – mark a potentially close proximity to near-term market bottoms. There’s a lot we can garner from prior bear-market periods that helps to place volatile periods like this into context and provide some cautious optimism to what the future might bring. While this current market volatility is the eleventh bear market since 1950, it’s only the fourth to occur outside of a recession. This non-recessionary characteristic is a vital factor, as these versions of bear-market periods are usually shallower and lead to a swifter recovery than the majority of declines that occur during recessionary times. For example, bear markets that occur outside of recessions average a 28% decline versus the 39% average decline during recessions. With this current stock market volatility already pricing in the majority of the typical non-recessionary bear decline, cautious optimism remains that the market is approaching a likely bottoming level – especially given the continued strength of most elements of the U.S. economy, including strong consumer spending and the best labor market in decades. Additionally, the full attention of the Fed to aggressively use monetary policy to turn the tide of inflation is in effect. Another encouraging sign is once a bear market begins, recoveries are often closer than we anticipate. In only three of the last thirteen bear markets since 1950 (including three near bear markets), stocks moved further lower a year later. And each of these were associated with a major recession – something that is not where we are today. The other ten times, markets recovered significant following the bear market crossover. Importantly, amongst five previous non-recessionary bear markets, similar to the economic conditions we are currently experiencing, all posted one-year gains over 23% and averaged 30% advances in aggregate. While there are many things still to unfold for the market and the economy, we do not anticipate a recession on the near-term horizon, and thus view these historic trends to be the most likely paths for market conditions to follow. Declining markets are always troubling to go through. But combining a longer-term perspective, mixed with past market behavior, can help provide important rational and fact-based context – as opposed to the emotional responses that get too many investors turned around. What’s important to note is that despite all these market drawdowns, headline-grabbing bear market periods, and recessionary periods that occur on average every six years or so, markets have always weathered these challenges over the longer-term.  Evidence is that all-time highs for stocks were just over six months ago, and stocks have historically climbed every single wall-of-worry presented before. And with a long-term perspective, it is likely that stocks will be there again. The reality is that markets, like most things in life, are more fragile and susceptible to short-term fears than we ever imagined – but more resilient than we often give them credit for. The reason, as the wise investment parable states, is that progress happens too slowly to notice, but setbacks happen too quickly to ignore. As an example, during the Great Recession of 2008 the market quickly lost 56%. It was an enormous deal. Books were written about it, and Congressional hearings were held. But the recovery over the next few years was powerful; the market tripled in value and barely anyone ever noticed. Emotion is ignited by pain, fear, and suddenness, which makes market volatility hard to navigate. It’s easy to identify the challenges that sit right before us, but the case for how things will improve is often harder and more nuanced. History has proven that challenges faced by the market are managed, mitigated, or innovated away with a longer-term vantage. Today’s challenges are no different. The reality is that markets are built to recover, which is why remaining steadfast to a long-term mindset and following a thoughtful investment plan is the key to a solid financial future.     This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Burt White is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Burt is in no way related to Cetera Advisor Networks LLC or its registered representatives. [post_title] => Special Market Commentary: S&P 500 Slips Into a Bear Market. Now What? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => special-market-commentary-sp-500-slips-into-a-bear-market-now-what [to_ping] => [pinged] => [post_modified] => 2022-06-21 12:18:10 [post_modified_gmt] => 2022-06-21 17:18:10 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=64995 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 64813 [post_author] => 90034 [post_date] => 2022-06-13 09:48:44 [post_date_gmt] => 2022-06-13 14:48:44 [post_content] => The S&P 500 dropped 5.1% last week as investors digested new inflation data released on Friday. May’s Consumer Price Index (CPI) report showed a reacceleration of inflation after a brief reprieve in April. Headline CPI increased 8.6%, which is the fastest pace since December 1981. The primary drivers of inflation were energy and food prices. Gasoline prices increased 4.1% in May, a big reversal from the 6% decline in April. Food prices, primarily from grocery store spending, climbed 1.4%. Key Points for the Week
  • The Consumer Price Index, a measure of inflation, increased a higher-than-expected 8.6% in May, the fastest pace since December 1981. Core CPI, which excludes food and energy prices, rose 6%, down from 6.2% in April.
  • The U.S. trade deficit fell 19.1% in April as imports fell and exports increased.
  • Stocks and bonds declined as markets prepared for the Federal Reserve to hike interest rates further to control inflation.
Core CPI, which removes the effects of food and energy, decreased slightly from 6.1% to 6% but remained stubbornly high. The primary driver was vehicle prices with used car prices increasing 1.8% since April. Markets responded to the higher inflation read by pricing in more aggressive rate hikes, which hurt both stock and bond indices. The S&P 500 declined 5% for the week, once again testing bear-market territory, falling 17.6% so far this year. At the time of publishing early Monday morning, stocks had extended their losses and were poised to decline more than 20% from their highs. Bonds, as measured by the Bloomberg U.S. Aggregate Bond Index, declined 0.9% to bring their year-to-date total to -8.9%. The U.S. trade deficit fell 19.1% in April. U.S. imports declined sharply, following several months of businesses briskly increasing inventory in the wake of supply-chain disruptions. Meanwhile, exports continued to grow through April, thanks to more food shipments, which jumped sharply, the strong performance of industrial supplies, and capital goods. Still, the trade deficit in April remains large compared to pre-pandemic levels. This continues to reflect the strength of the U.S. economy compared to other major economies, which is a trend economists expect to continue for the foreseeable future. The big event this week will be the Federal Open Market Committee meeting, in which the Fed is expected to increase the federal funds rate by 0.5% for the second meeting in a row. The market will be paying attention to Chair Jerome Powell’s comments on expectations for the July and September meetings. Figure 1 Persistently High Last month, it looked like inflation pressures were starting to subside. Gas prices declined by 6%, food price increases were starting to slow, and vehicle prices had fallen for three straight months. The FOMC set the stage for 0.5% rate increases for June and July, but there was some indication the Fed would pause hikes in September if inflation moderated further. Unfortunately, consumer price increases reaccelerated in May. Headline inflation increased 1%, which brought the yearly number to +8.6%, the highest level since December 1981 (see Figure 1). Energy prices led the way as WTI crude oil increased from around $105 per barrel to $115. Gas and natural gas prices increased right along with it. Overall, energy prices only account for 7% of the weight in the basket but accounted for 25% of the gain. Food prices were another big contributor, increasing 1.2% in May. Grocery store prices generated the most pressure, increasing 1.4% versus a 0.7% increase for eating out. The stubbornness of core CPI, which removes the impact of energy and food, was most disappointing. Automobile prices were main drivers, especially as used cars climbed 1.8% since April. This was the first time used car prices increased since January and is a sign the sector continues to struggle with supply constraints, particularly in microchips. Vehicle inventories are only 17% of the levels they were prior to the COVID-19 pandemic. The main reason for the Fed’s “transitory” thesis last year was members expected supply-chain constraints would ease and consumer behavior would normalize after the pandemic ended. This has occurred to a degree, but not nearly as quickly as experts thought. The war in Ukraine and the COVID shutdown in China have extended the supply chain issues. At the same time, there is some evidence that demand for goods in the U.S. is falling, which caused some prices to fall. The report showed a decline in prices of some goods, such as major appliances (-2% month over month), bedroom furniture (-1.6% month over month), and sporting goods (-0.2% month over month). Also, several major retailers have indicated they have a lot of inventory built up, which will likely lead to price cuts over the summer. But this good news wasn’t nearly enough to offset the large price increases in other parts of the economy. One of the side-effects of elevated inflation is consumer debt is beginning to rise again. During the pandemic and its after-effects, borrowers had begun to pay off debt as they received government stimulus checks and had fewer ways to go out and spend money. At the same time, personal savings reached levels not seen since World War II. Now, with no further stimulus checks and consumers experiencing higher inflation, revolving credit crossed the record high last seen in February 2020, reaching $1.1 trillion. This spending could be a good sign for the economy as consumers seem comfortable adding to their debt but could also be a concerning trend for personal balance sheets, especially if the jobs market reverses course and becomes tighter. This week the market will be paying close attention to the Federal Open Market Committee meeting, in which it’s widely expected that Jerome Powell and the rest of the Federal Reserve governors will approve a 0.5% increase to the federal funds rate. While there shouldn’t be a surprise there, special attention will be paid to any hints at a change from the projected 0.5% increase in July and any comments on expectations for September. The market already responded last week to expectations that rates will increase, but additional clarity from the Fed will be helpful to establish a direction for the market moving forward. It's also important to acknowledge that talk of a recession has picked up recently. The Fed has a difficult job of trying to bring down inflation by raising interest rates just enough without turning economic growth negative. The good news is the economy still appears strong — consumer demand is high, unemployment is low, and the economy has added more than 1 million jobs in the past three months. Stubborn inflation has raised a concern that additional interest rate hikes will pressure markets now and the economy in the future. Last week’s performance reflects those concerns. It also reflects concerns the decline in some speculative investments may trigger short-term selling pressures across markets. Last week’s decline and subsequent weakness in pre-market indicators this week suggest the S&P 500 may decline more than 20% from its previous peak. While some short-term traders may be pushed into selling based on short-term concerns, now is a good time to take advantage of your longer horizon. If you are nervous, check with your advisor and see if this short-term volatility has had any effect on your long-term plan.   - This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. S&P 500 INDEX The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Bloomberg U.S. Aggregate Bond Index The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. CME Group, CME Fed Watch Tool, June 13, 2022. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html U.S. Bureau of Labor Statistics, Consumer Price Index Summary, June 10, 2022. https://www.bls.gov/news.release/cpi.nr0.htm BEA, “U.S. International Trade in Goods and Services, April 2022,” June 7, 2022. https://www.bea.gov/news/2022/us-international-trade-goods-and-services-april-2022 CNBC, “Credit card balances spike to $841 billion after stimulus checks helped reduce debt,” June 9, 2022. https://www.cnbc.com/2022/06/09/credit-card-balances-spike-after-stimulus-checks-helped-reduce-debt.html Compliance Case # 01400538 [post_title] => Market Commentary: Inflation Pressures Remain High, S&P Dips Again [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-inflation-pressures-remain-high-sp-dips-again [to_ping] => [pinged] => [post_modified] => 2022-06-21 11:43:04 [post_modified_gmt] => 2022-06-21 16:43:04 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=64971 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 64756 [post_author] => 90034 [post_date] => 2022-06-06 09:28:27 [post_date_gmt] => 2022-06-06 14:28:27 [post_content] => The S&P 500 dropped 1.2% last week as a strong employment report was a little “too good” and raised concerns of more interest rate hikes in the future. The U.S. economy added 390,000 jobs in May, based on the establishment survey. Job growth is slowing, but it remains well above the level required to provide jobs for new workers entering the labor force for the first time. Key Points for the Week
  • The U.S. economy produced 390,000 new jobs last month and the unemployment rate remained at 3.6%.
  • Average hourly earnings increased 0.3% last month, reflecting moderate wage pressures in the economy.
  • Stocks and bonds declined as markets focused more on the likelihood of additional rate hikes than the generally positive jobs report.
The corresponding household survey also contained good news. Unemployment dropped to 3.6% and the percentage of people employed rose 0.1% to 60.1%. Average hourly earnings remain contained, rising 0.3% for the second consecutive month. The JOLTS survey, which measures job openings, indicated available positions dipped slightly but stayed above 11 million. The large number of unfilled positions is another indication the labor market is “too good.” The Federal Reserve would view additional declines in the number of openings as a positive step that reduces the pressure to raise rates. The trend towards lower openings may have already started as some technology companies have announced plans to slow hiring or lay off staff. Global stocks also declined last week. The MSCI ACWI sagged 0.5%. The Bloomberg U.S. Aggregate Bond Index gave back 0.9% of its recent gains. The Consumer Price Index will be the big data release of the week and provide further indication of how quickly consumer prices are increasing. Figure 1 A Little Too Good Last week the market reacted negatively to a very positive employment report. As mentioned above, the S&P 500 dipped 1.2%, giving back a portion of the previous week’s 6.6% rally. Markets were higher last week, through Thursday, but declined enough on Friday to turn the gains into a loss. The market decline was precipitated by concerns the Fed would raise interest rates more than desired in response to the strong jobs data. The employment situation in the U.S. definitely favors the employee more than in recent decades. There are more than 11 million job openings in the U.S., and for inflation to get under better control, this number needs to move lower. The lack of workers in a period of heightened demand has contributed to higher inflation. But more people are joining the labor force, which means the supply of goods reaching stores and services that are in short supply can now be provided.  Some people taking new positions are entering the workforce for the first time, but others are returning after being away. The employment-population ratio increased from 60.0% to 60.1%. Although a more rapid increase would have been better, the data show people are steadily returning to the labor force. Prime-age employment (25-54) ticked up to 80%, which is in line with peaks seen in 2006 and 2020. Average hourly earnings increased 0.3%, which roughly matched the previous month. In the last 12 months, hourly earnings have increased 5.2%, a monthly rise of more than 0.4%. Higher wages can lead to inflation becoming more entrenched than it already is, so a 0.3% rise suggests wage inflation is close to the long-term target. Amid many strong data points, there are signs the labor market is starting to slow to more manageable levels. The JOLTS survey for April indicated openings fell 455,000 to 11.4 million. After frequent records, the job opening trend is moving in the right direction. Retail trade openings experienced the biggest declines, and retail employment also fell in the May report. Large retailers mentioned in their earnings reports that they were overstaffed, so a decrease in that one sector isn’t surprising. Another positive trend is more companies are announcing a reduction in job openings and even some layoffs. Given how low unemployment is, having some companies lay off workers likely helps reduce inflationary pressures even as it is difficult for the workers and their families. Our view is the data last week should have been viewed more positively. Job growth is moderating toward a level that is neither too hot nor too cold. May had the lowest number of new jobs created in the last 13 months yet was strong enough to indicate the economy is performing well. The market rightly raised its expectations for interest-rate hikes by elevating the probability of three more 0.5% increases in the next three meetings. The data show the economy is stronger than anticipated. That strength also means a recession is less likely and the risk of a recession is pushed into the future. The decline in unfilled positions and the increase in the number of people working are positive trends that indicate progress toward a better balance between the demand and supply of labor. Sometimes the market gets too focused on the Fed keeping rates low or looking at weaknesses in the report. This jobs report indicates the economy remains healthy and key data points are moving in the right direction. - This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. S&P 500 INDEX The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. MSCI ACWI INDEX The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set. Bloomberg U.S. Aggregate Bond Index The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html https://www.bls.gov/news.release/pdf/empsit.pdf https://asia.nikkei.com/Business/Startups/Tech-startup-layoffs-top-20-000-amid-big-funding-chill https://www.reuters.com/markets/us/us-tech-sector-sees-highest-job-cuts-may-since-dec-2020-report-2022-06-02/ https://www.wsj.com/articles/the-companies-cutting-staff-freezing-hiring-or-slashing-costs-see-the-list-11652389460 https://www.bls.gov/news.release/jolts.nr0.htm Compliance Case #01393143 [post_title] => Market Commentary: Positive Jobs Report Raises Hopes, but Stocks and Bonds Dip [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-positive-jobs-report-raises-hopes-but-stocks-and-bonds-dip [to_ping] => [pinged] => [post_modified] => 2022-06-06 14:47:12 [post_modified_gmt] => 2022-06-06 19:47:12 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=64961 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post_count] => 5 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 64900 [post_author] => 90034 [post_date] => 2022-06-27 09:32:22 [post_date_gmt] => 2022-06-27 14:32:22 [post_content] => The S&P 500 spent only a short time below the 20%-decline threshold, before jumping back above it last week. U.S. large-cap stocks rallied 6.5% based on optimism that inflationary pressures are starting to respond to higher interest rates. Key Points for the Week
  • The S&P 500 bounced off recent lows, rallying 6.5% last week.
  • Interest rates moved slightly lower as expectations for inflation declined.
  • Existing home sales fell 3.4% last month while new home sales jumped 10.7%.
The optimism was partly driven by reassuring consumer expectations for inflation. The University of Michigan consumer sentiment data reported inflation expectations fell from 5.4% to 5.3% for the next year and dropped from 3.3% to 3.1% for the next five years. That data indicates inflation expectations are not becoming as firmly established in the economy as many feared. Purchasing Manager Index data for goods and services both declined in the U.S., adding support to the idea interest rate increases are slowing activity. Both manufacturing and services data remain above 50, meaning they are expanding. The manufacturing index fell to 52.4 from 57 in May and reached a 23-month low. Services dipped from 53.4 to 51.6, which is the lowest reading in five months. High home prices and higher financing costs are slowing housing activity. Existing home sales fell 3.4% last month and have fallen 8.6% in the last year. New home sales jumped 10.7% last month but have still fallen 5.9% in the last year. As we note in the next section, home affordability has fallen with higher rates, but sales should benefit from ongoing demographic trends (Figure 1). Global stocks did not jump as much as U.S. stocks did last week. The MSCI ACWI added 4.8%. The Bloomberg U.S. Aggregate Bond Index surged 0.6% as lower inflation expectations supported bond prices.  The Core Personal Consumption Price Deflator will provide additional perspective on inflationary pressures when it is released on Thursday. Figure 1 Figure 2 Housing and Interest Rates People will complain the military is always well-prepared to fight the last war. Investors should be careful who they criticize because we can often act the same way. Some are comparing today’s housing market to the market leading up the Great Recession. The 2008 financial crisis was driven by exorbitant demand for housing and loose lending standards that imperiled many banks. 2022 is a much different market, and in today’s update, we’ll explore some of the important differences. A recent piece by the home loan buyer Freddie Mac (yes, the one that needed additional government support during the housing crisis) highlights some of the key trends that have caused housing prices to jump so rapidly in recent years (Figure 2) and why higher interest rates may not do as much damage to the housing market as some feared (Figure 1). The piece cites four factors:
  • “Record low mortgage rates in 2020 and 2021 and the race to beat future increases;
  • Limited supply from underbuilding and below average distressed sales;
  • An increase in first-time homebuyers due to favorable age demographics; and
  • Increased migration from high-cost cities to areas that already had a housing shortage.”
When the Federal Reserve cut interest rates in response to the pandemic, homeowners rushed to refinance and homebuyers took advantage of low rates to move. The surge of demand for new homes encountered a housing market with the fewest homes for sale since the statistics inception in 1993. The supply situation was further constrained because pandemic aid shrunk the number of distressed sales. Great for those families, but it also cut off another source of supply. The market would normally respond by building more homes, but rapidly increasing timber prices in the early stage of the pandemic limited supply and slowed the ability to start new projects. Another powerful force for home demand was the number of millennials at the prime age to purchase their first home. There are more than 46 million 25-34 year-olds in the U.S., about 6.5 million more than in 2006. Given the strong employment market prior to COVID, millennials were in a good position to buy homes. Many millennials still haven’t purchased a home. From 2012 to 2022, the number of renter households ages 25-44 doubled from 1.75 million to 3.5 million, and the trend is still moving higher. Potential demand for housing remains robust. Another part of this trend was a preference for mid-sized metro areas from the largest markets. Those markets had already experienced increased demand prior to the pandemic, especially in the South and Mountain West. Other pandemic-related factors fed into these same themes. Moving away from big cities became more attractive as large cities lost some advantages during COVID lockdowns. Working from home increased the demand for larger and remodeled houses, which were more affordable in smaller cities. The report emphasized the purchase of homes for rent is only a moderate factor in housing demand. Large corporate purchases of homes have increased, but the overall investor share of home sales was 27.6% in December 2021, only 0.9% higher from two years earlier. Given this environment, how will mortgage rates over 6% affect the market? Our expectation is home price appreciation will slow. Higher rates increase the total cost of a home, and buyer demand should slow down just as cities are starting to reopen. The trend away from the largest cities will likely continue. Demand should stay relatively strong given the demographic trends and as long as there isn’t a deep recession. For those still thinking about the housing crisis of 2008, there are some important differences. As long as unemployment remains fairly low, foreclosures and short sales should increase only gradually as consumers remain well-positioned to make payments. The average credit score on a new loan is approximately 775 in today’s environment. In the housing crisis the average was closer to 700. Some have noted an increase in the number of homes under construction and compared it to 2008. The difference is many of these homes are already sold and supply chain constraints have prevented their completion. The deep challenges of 2008 seem unlikely given the strength of the market and the financial security of the buyers. Last month’s 10.7% increase in new home sales, after a recent decline, is a good indication demand remains robust. The net effect should be a slowing market with demographic factors and geographic preferences supporting prices in many areas. Investors in homes or homeowners looking to sell should not expect the rapid price gains of the last couple years to continue. A more likely trend is for price gains to slow toward historical trends, with continued variability based on geographic region.   - This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. S&P 500 INDEX The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Bloomberg U.S. Aggregate Bond Index The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. Khater, Sam and Ralph DeFranco. FreddieMac. 6/09/22. https://www.freddiemac.com/research/insight/20220609-what-drove-home-price-growth-and-can-it-continue Khater, Sam and  Kristine Yao. 06/22/22. https://www.freddiemac.com/research/insight/20220622-pursuit-affordable-housing-migration-homebuyers-within-us-and-after-pandemic University of Michigan Consumer Sentiment 06/22. http://www.sca.isr.umich.edu/ S&P Global 06/23/22. https://www.pmi.spglobal.com/Public/Home/PressRelease/8fd15c4803fd4399bea8d16e1dc06422#:~:text=S%26P%20Global%20Flash%20US%20Services,slowdown%20and%20only%20modest%20overall Census Bureau. 06/24/22.3 https://www.census.gov/construction/nrs/pdf/newressales.pdf New York Fed 05/22. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2022q1.pdf Compliance Case #01413571 [post_title] => Market Commentary: S&P 500 Rallies 6.5%, Lifting Market Above Bear Level [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-sp-500-rallies-6-5-lifting-market-above-bear-level [to_ping] => [pinged] => [post_modified] => 2022-06-27 09:55:13 [post_modified_gmt] => 2022-06-27 14:55:13 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65012 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 111 [max_num_pages] => 23 [max_num_comment_pages] => 0 [is_single] => [is_preview] => [is_page] => [is_archive] => 1 [is_date] => [is_year] => [is_month] => [is_day] => [is_time] => [is_author] => [is_category] => [is_tag] => [is_tax] => 1 [is_search] => [is_feed] => [is_comment_feed] => [is_trackback] => [is_home] => [is_privacy_policy] => [is_404] => [is_embed] => [is_paged] => [is_admin] => [is_attachment] => [is_singular] => [is_robots] => [is_favicon] => [is_posts_page] => [is_post_type_archive] => [query_vars_hash:WP_Query:private] => 4988683a7012c9995754a9c3eb333ba2 [query_vars_changed:WP_Query:private] => [thumbnails_cached] => [stopwords:WP_Query:private] => [compat_fields:WP_Query:private] => Array ( [0] => query_vars_hash [1] => query_vars_changed ) [compat_methods:WP_Query:private] => Array ( [0] => init_query_flags [1] => parse_tax_query ) [tribe_is_event] => [tribe_is_multi_posttype] => [tribe_is_event_category] => [tribe_is_event_venue] => [tribe_is_event_organizer] => [tribe_is_event_query] => [tribe_is_past] => )

Market Commentary

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                    [post_content] => Published by Kevin Oleszewski

As the end of the year approaches, we start to think more and more about our tax picture. What boxes can we check to reduce our taxable income?

Tax-loss harvesting is one such approach. A tax-efficient way to rebalance your portfolio, tax-loss harvesting can help you offset earnings and get back to your target allocation. Tax-loss harvesting is traditionally thought of as an end-of-year event, because it can help you minimize your tax bill.

Consider tax-loss harvesting now, before you ring in the new year. And as you head into 2022, revisit this tax-efficient tactic at least quarterly to make the most of this strategy. 

Here’s what you need to know about tax-loss harvesting, including the wash sale rule.

What Is Tax-Loss Harvesting?

Tax-loss harvesting is a strategy that lowers your taxable earnings after you sell taxable investments and use those losses to offset the gains you have to claim as income. It can also allow you to push your capital gains further out, allowing you to save on your taxes in future years when your tax bill might be higher.  For example, if you sold some of your investments this year at a loss, but your portfolio is doing well, you can lower your taxable income by claiming that loss. Also, if your losses exceed your gains, you can claim up to $3,000 on your taxes to offset ordinary income.  Let’s look at a specific, strategic and tax-efficient example. Say you have stock in Verizon that you want to sell and purchase stock in another cell phone company, AT&T. If you had a big loss in Verizon, you want to capture that loss while maintaining exposure to a cell phone company. Or, you might want to sell Verizon stock while it’s down to lower your tax footprint and soon after repurchase, because you believe it will rebound. A savvy investor might turn to either of those strategic scenarios. But before you move on this strategy, remember the wash sale rule.

The Wash Sale Rule

Let’s talk about the wash sale rule for a minute. This Internal Revenue Service (IRS) rule prevents you from taking a tax deduction for a security sold in a wash sale.  A wash sale occurs when you sell or trade securities at a loss and you also do three things within 30 days before or after the sale: 
  • Buy a substantially identical security
  • Acquire substantially identical securities in a fully taxable trade
  • Acquire a contract or option to buy substantially identical securities
Essentially, you want your allocation to stay the same. You don't want the savings on the tax to change your asset allocation. You have to be especially mindful of swapping a holding for a similar holding so you don’t trigger the wash sale rule. So, going back to the Verizon and AT&T example, say you want to buy back the Verizon stock instead of purchasing AT&T – you have to wait at least 31 days to buy it back or you can’t claim the loss.

Who Should Engage in Tax-Loss Harvesting?

Generally, tax-loss harvesting is ideal for people in higher tax brackets since the idea is to help lower tax bills.  A group of researchers from MIT and Chapman University found that tax-loss harvesting yielded a tax alpha, or outperformance by using available tax-saving strategies, of 1.10% per year from 1926 to 2018.  However, it could also be useful for people in a lower tax bracket, since you could carry those losses forward to times when you might have a higher tax bill, like if you get a higher-paying job or the government raises tax rates.  Tax-loss harvesting will play a huge role in planning if we move into a higher-tax environment. Higher tax rates call for investors to pay closer attention to tax efficiency of their taxable accounts.  There are certain situations in which you should consider tax-loss harvesting: 
  • Your investments are subject to capital gains tax. 
  • You are able to use tax-deferred retirement plans to postpone paying taxes until you retire. 
  • You anticipate you’ll change tax brackets. 
  • You invest in individual stocks. 

Questions to Ask Your Advisor About Tax-Loss Harvesting

If you don’t yet have an advisor, and you’re in the process of interviewing one, you should ask them to tell you about their process of rebalancing portfolios. They should explain to you how they do so and in what type of account they do so.  Here are a few more questions you can ask: 
  • Do you do tax-loss harvesting? 
  • How does tax-loss harvesting fit into your overall investment philosophy? 

Connect With a Financial Advisor

While we tend to focus on tax-loss harvesting now at the end of the year, it could be a beneficial strategy all year, especially as we gear up to potentially enter a higher-tax era. But it’s imperative that you discuss this with your financial professional to determine the frequency and timing of tax-loss harvesting for your particular situation.  Reach out to our team today to discuss your financial plan and how tax-loss harvesting can fit into your strategy. Kevin Oleszewski is not affiliated with Cetera Advisor Networks LLC. Any information provided by Kevin is in no way related to Cetera Advisor Networks LLC or its registered representatives. [post_title] => Any Time is Tax-Loss Harvesting Time [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => any-time-is-tax-loss-harvesting-time [to_ping] => [pinged] => [post_modified] => 2021-12-15 12:31:47 [post_modified_gmt] => 2021-12-15 18:31:47 [post_content_filtered] => [post_parent] => 0 [guid] => https://retirementextender1.carsonwealth.com/insights/monthly-newsletters/any-time-is-tax-loss-harvesting-time/ [menu_order] => 0 [post_type] => monthly-newsletters [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 64118 [post_author] => 6008 [post_date] => 2021-12-02 11:02:48 [post_date_gmt] => 2021-12-02 17:02:48 [post_content] => Many people have the idea that tax planning is only about paying less money right now, and that’s not the case. Tax planning is about paying less money over time. There are many avenues to do that. As we’re nearing the end of 2021, it’s prime time to get your finances in order for the upcoming tax season, and hopefully this article can help you figure out how to pay less money over time. In this article, we’ll focus on a few areas for your end-of-year tax planning: tax-loss harvesting and rebalancing, charitable giving, retirement plan contributions and Roth conversions.

Tax-Loss Harvesting and Rebalancing

Rebalancing your portfolio in the most tax-efficient way is key. You want to make sure you are pairing up gains and losses. In other words, if you have gains in your portfolio, you should pair them with losses to offset or minimize your tax exposure.  I recently wrote about this strategy, tax-loss harvesting, which is essentially a method that helps you lower your taxable earnings after selling taxable investments and using those losses to offset the amount of gains you have to claim as income. Tax-loss harvesting can also let you push your capital gains further out, allowing you to save on your taxes in future years when your tax bill might be higher.

Charitable Giving

Giving directly to a charity is good for your soul, but maybe not for your tax bill, especially if you aren’t itemizing. You won’t get to deduct the full donation if you aren’t itemizing, but you’ll still get a $300 above-the-line deduction.  Since the standard deduction for 2021 is so high – $25,100 for married filing jointly and $12,550 for single filers – more taxpayers have chosen to take it over itemizing deductions. CNBC reported that 16.7 million households claimed itemized deductions on their 2018 income tax returns, down from 46.2 million in the 2017 tax year.  There are two avenues to explore charitable giving this time of year: establishing a donor-advised fund and making qualified charitable distributions from your IRA.  A donor-advised fund allows you to bunch your charitable contributions this year so that you’ll be able to get a tax break. For example, you can bunch your charitable contributions for the next five years – say $10,000 a year – into a DAF and still be able to take the full tax deduction this year. This $50,000 donation will definitely get you over the standard deduction.  If you want to get more in-depth on donor-advised funds, check out our blog post on DAFs and charitable remainder trusts.  Qualified charitable distributions (QCDs), on the other hand, are good for people who have to take required minimum distributions (RMDs) but don’t need the money. QCDs allow you to donate $100,000 per taxpayer (so a married couple can donate $200,000) per year to a charity directly from your IRA if you’re over age 70½. The benefit here is you don’t have to pay income tax on that amount while also satisfying your RMD.

Establish and Contribute to Retirement Accounts

If you’ve taken a break from contributing to your retirement account, now is the time to catch up if you are able. The maximum amount you could donate this year is $19,500. If you are a small business owner and have yet to set up a retirement account, doing so by the end of the year is a good idea. First, you’ll want to explore which option is right for you. For example, if you don't foresee yourself going over the $6,000 contribution limit for traditional IRAs, that would be a good option for you. But if you anticipate you’ll contribute more than that, the SEP IRA or solo 401(k) are also both viable vehicles. These two options have different rules. For example, SEP IRAs are more cost-effective to set up and you can contribute 25% of your qualified business income or $58,000, whichever is less for 2021. So for example, if you’re self-employed and your qualified business income is $100,000, you can donate $25,000. With a solo 401(k), the contribution limit is $58,000 plus a $6,500 catch-up contribution or 100% of earned income, whichever is less for 2021. So long as you establish your solo 401(k) by year end (December 31, 2021), you have until your company’s tax return deadlines (including extensions) to make contributions.

Roth Conversions

Roth conversions are when you transfer money from a traditional IRA and convert it to a Roth IRA, which is a taxable event. Essentially, you would pay taxes on that conversion as it becomes part of your taxable income now, versus paying taxes on that money in the future. Let’s look at an example: Say you have $50,000 in an IRA and you want to transfer it into a Roth IRA. Your taxable income will now be $50,000 more than it would have been before. You and your financial professional need to evaluate whether this would be a good idea for your situation. There are many benefits to doing the Roth conversion. First, we don’t know what is going to happen with taxes in the future, so if you anticipate you’ll be in a higher tax bracket next year, you can do your Roth conversion now and take advantage of this low-tax-rate environment. Second, Roth IRAs don’t have RMDs, so you won’t be required to take from this bucket in retirement.  Also, you don’t have to pay taxes on the earnings from the Roth IRA if you meet certain IRS criteria. And since you’re contributing after-tax dollars, you can withdraw your contributions tax- and penalty-free.  Lastly, Roth IRAs are a tax-efficient asset to leave to heirs. While they still must draw down the account in 10 years, when they do inherit the funds and draw down, it’s not a taxable event.  One more thing to keep in mind when doing a Roth conversion: pay the taxes on it with cash, your taxable investment account or a trust account, instead of paying with the conversion.

In Conclusion 

Planning what you’re going to serve for the holidays might be top of mind right now, but you want to make some space for your tax planning so you can maximize your savings. Taxes are inevitable, and good tax planning will help you pay less over time. It’s imperative that you connect with your trusted financial professionals to make the best tax plan for your unique situation. Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Re-balancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional. [post_title] => Areas of Focus for End-of-Year Tax Planning [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => areas-of-focus-for-end-of-year-tax-planning [to_ping] => [pinged] => [post_modified] => 2021-12-02 13:52:36 [post_modified_gmt] => 2021-12-02 19:52:36 [post_content_filtered] => [post_parent] => 0 [guid] => https://retirementextender1.carsonwealth.com/insights/monthly-newsletters/areas-of-focus-for-end-of-year-tax-planning/ [menu_order] => 0 [post_type] => monthly-newsletters [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 64014 [post_author] => 6008 [post_date] => 2021-11-04 09:14:03 [post_date_gmt] => 2021-11-04 14:14:03 [post_content] => Each person’s relationship with charitable giving has an origin story. Maybe it was when your grandmother would cook dinner for people in your community who were less fortunate. Or you were required by parental contract to give up a certain percentage of your allowance to the church collection basket. No matter how it started, now you’re grown and you are still a charitably-minded individual who wants to give to causes you care about. You’re not the only one. Charitable giving, giving back through volunteering and donations soared during the COVID-19 pandemic, as exemplified by these statistics:
  • 88% of affluent households gave to charity in 2020 (according to Bank of America and the Indiana University Lilly Family School of Philanthropy).
  • Americans gave $471.44 billion in 2020, up 5.1% from 2019 (according to the National Philanthropic Trust).
  • Giving in every sector increased, but especially gifts that benefit the public/society (up 15.7%), the environment and animal rights (up 11.6%) and individuals (up 12.8%) (according to the National Philanthropic Trust).
  • 86% of affluent households maintained – and in some cases increased – giving, despite uncertainty caused by the pandemic (according to the National Philanthropic Trust).
If you are part of this increased giving trend – or want to be – among the tools available to you for your charitable giving are donor-advised funds and charitable remainder trusts. While both of these tools play a role in charitable giving – in that they both provide long-term resources for charitable causes – they are quite different. We’ll give you an overview of both, when they might be the appropriate choice and some tips for getting started with each.

Deeper in the DAF

A donor-advised fund (DAF) is a tool that can help you maximize your charitable giving. Essentially, you make an irrevocable contribution to the DAF of either cash or other assets, like appreciated securities. While there is no startup cost associated with a DAF, the initial contribution with some DAFs is at least $5,000. The DAF is sponsored by a 501(c)(3) nonprofit organization, which subsequently owns those assets and handles all the administrative tasks and the grant administration process. Some DAFs allow the financial advisor of your choice to manage the investments in your DAF so make sure you know all of the requirements as DAFs vary. Although you recommend where the money is donated to, the sponsor has the final say-so as to where the money goes. While you may get a tax deduction at the time of the original donation to the DAF, you cannot deduct the amount again when the money is distributed from the fund to the qualified charity. National Philanthropic Trust reported that grantmaking from DAFs to qualified charities increased 93% between 2015 and 2019. With DAFs, no mandatory amount has to come out of the fund. Their popularity has grown in recent years, making them the fastest-growing philanthropic vehicle, due to their flexibility and ease of use. If you were never one for the limelight or the credit, another benefit of the DAF is that you can make anonymous charitable gifts. Some restrictions with DAFs, according to the National Philanthropic Trust, include that donors can’t:
  • Advise grants be made to individuals.
  • Receive goods in exchange for donation.
  • Advise grants be used for tuition.
DAFs are a good tool to use when you want to leave a legacy or pass on your values while also giving more meaning to the wealth you’ve built. DAFs are good if you’re passionate about helping others and donating to charitable causes. If you’re having a hard time picturing it, DAFs can be likened to a checking account that holds the monies that can be distributed later on to various charitable organizations. You can even have your loved ones take over being the successor manager of some DAFs upon your passing.

Cracking the CRT

A charitable remainder trust is an irrevocable trust established to provide annual payments to current beneficiaries – which can be you – with the remainder balance distributed to a charity. CRTs are a little bit different from DAFs, as they are a trust, customized to your situation and more of an estate planning tool. Essentially, you have your attorney create a trust, you determine what asset you’re going to put into it and your professionals will run the numbers to determine the current and remainder payout parameters. The lifetime beneficiary payout has to be at least 5% of the trust assets, but cannot exceed 50%. The chosen charity must receive at least 10% of actuarial value of the assets initially transferred to the CRT at the end of its term. Keep in mind that if the assets you donate are not cash or publicly traded securities, they may need to be appraised. The type of appraisal you get depends on the type of asset it is. For example, if you are contributing art to your CRT, you will need an art appraiser. Your financial professional can help you figure out which type of appraisal to get. There are two types of CRTs:
  • Charitable Remainder Unitrust (CRUT): distributes a fixed amount each year, but no additional contributions can be made.
  • Charitable Remainder Annuity Trust (CRAT): distributes a fixed percentage on the balance of trust assets, but additional contributions can be made.
Your professionals can help you figure out which type of CRT is the best fit for your situation. Regardless of what type of CRT you use, note that there are fees associated with setting up the trust, including legal fees. With the CRT, there is a mandatory amount or percentage of the trust assets that has to come out annually to the beneficiary or beneficiaries, as noted above, and there are expenses associated with the administration of the CRT. Those expenses could include paying the trustee to administer the trust and the cost of the filing of a tax return for the trust. CRTs have a definite endpoint. Payments can stretch anywhere from 20 years to life, but at some point they stop. And also unlike DAFs, gifts from CRTs are not given anonymously. CRTs are great if you have highly appreciated assets and you want to have a defined stream of cash flow for you or your beneficiaries.  The good news is that both CRTs and DAFs offer tax benefits to you in the form of income tax deductions and capital gains tax deferral or avoidance. Both allow for an immediate tax deduction but the amount of the deduction depends on your specific tax situation, and also what type and how long you have owned the asset or assets that you are contributing. In the case of the CRT you receive an immediate tax deduction on the present value of the assets that will eventually go to charity, several charities or your DAF. Also, in most cases, capital gains tax on appreciated assets can be completely avoided or deferred when assets are transferred into the CRT or DAF and then sold. CRTs and DAFs can be used together. This happens if you want to set up a DAF as the charity to receive the assets at the end of the term of the CRT.

Working with a Professional is Key

The main reason people give to charity is because they want to help a cause, which is also among the reasons people employ these tools. But there are also benefits to using these tools, nuances you should be aware of and pitfalls to avoid. Your financial advisor can help you determine the right solution and also run point with your other professionals, like your CPA or attorney, to craft the ideal solution for your unique situation. This piece is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. [post_title] => Tools for the Charitably Minded: Donor-Advised Funds and Charitable Remainder Trusts [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => tools-for-the-charitably-minded-donor-advised-funds-and-charitable-remainder-trusts [to_ping] => [pinged] => [post_modified] => 2021-11-04 09:14:03 [post_modified_gmt] => 2021-11-04 14:14:03 [post_content_filtered] => [post_parent] => 0 [guid] => https://retirementextender1.carsonwealth.com/insights/monthly-newsletters/tools-for-the-charitably-minded-donor-advised-funds-and-charitable-remainder-trusts/ [menu_order] => 0 [post_type] => monthly-newsletters [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 63943 [post_author] => 6008 [post_date] => 2021-10-07 09:02:07 [post_date_gmt] => 2021-10-07 14:02:07 [post_content] => There’s a scene in the TV show Friends where Rachel gets her very first paycheck as a waitress at Central Perk. “Who is FICA and why is he getting all my money?” she poses to the gang. Some people age 65 and older might have a similar sentiment when they get their Social Security check and see a chunk missing that’s gone to IRMAA. “Who is IRMAA and why is she getting some of my money?” you might ask. IRMAA is your income-related monthly adjustment amount, which you pay on top of both your Medicare Part B (medical coverage) and Part D premiums (prescription coverage). We’re going to get into the subject of IRMAA in this article, as well as give you some pertinent background information necessary to understand it. We’re also going to offer you some planning tips and common mistakes to avoid.

What Is IRMAA?

When we set up retirement plans for clients, oftentimes we'll send them a worksheet and ask them to work through and itemize all their monthly expenses. Typically, when we do this with somebody who is about to retire, they’ll list their dining-out trips, their Netflix and other streaming subscriptions, but they’ll forget their health insurance costs. Many people have the misconception that all Medicare is free because they’ve paid into it all their working lives. We have to tell them that’s only partially correct. You may be getting your Medicare Part A for free, but you must pay for your Medicare Part B (medical coverage) and Medicare Part D (prescription coverage) and, based on your income, your income-related monthly adjustment amount for both Part B and Part D. IRMAA is an extra surtax you pay based on your income. I was working on a financial plan the other day for clients who are high net worth individuals. Because of their current income and projected income, we had to add an extra $400 per person per month for IRMAA to their budget. This created some discussion. The clients thought they were good with a $6,000 per month budget. But then we added on this IRMAA piece, which is essentially an additional $9,600 per year ($800 per month) – an amount that could’ve gone to a travel fund or annual gifts to family members. According to Medicare.gov, Medicare Part B premiums (which already include IRMAA) for 2021, plus Part D IRMAA surcharges based on income from 2019, are as follows:
  • Monthly premium of $207.90 + $12.30 IRMAA per person for single filers making between $88,000 and $111,000, and for married filing jointly filers who made between $176,000 and $222,000.
  • Monthly premium of $297.00 + $31.80 IRMAA per person for single filers making between $111,000 and $138,000, and married filing jointly filers who make between $222,000 and $276,000.
  • Monthly premium of $386.10 + $51.20 IRMAA per person for single filers making between $138,000 to $165,000, and married filing jointly making between $276,000 and $330,000.
  • Monthly charge of $475.20 + $70.70 IRMAA per person for single filers making between $165,000 and $500,000, married filing jointly making between $330,000 and $750,000, and married filing separately making between $88,000 and $412,000.
  • Monthly charge of $504.90 + $77.10 IRMAA per person for single filers making $500,000 and above, married filing jointly making $750,000 or above, and married filing separately making $412,000 or above.

Laying the Groundwork and Planning Tips

To give you a more robust picture of IRMAA, let’s examine some things that might impact the amount you will owe. Right now, Roth conversions are in the news because people are concerned about impending tax hikes. Roth conversions bump up your adjusted gross income (AGI), and that will impact your IRMAA. Many clients come to us thinking they are diversified from an investment standpoint – however, they might not have thought about tax diversification. If you look at the tax triangle, on one side are tax-deferred accounts like 401(k)s and IRAs, which are typically the easiest ways to save. On another side, you have taxable money, like brokerage accounts – clients will typically start building those up after they’ve built up some of those tax-deferred buckets. On the third side, you have the tax-free bucket, which includes Roth IRAs, Roth 401(k)s and the like. Under the current rules, you won’t have to pay taxes when you pull money out from the third side of the triangle. Many clients find themselves overweighted in tax-deferred money. Regardless of whether somebody is retiring with $500,000 or $5 million, I have yet to see a client retirement picture that has more tax-free money than tax-deferred money. This is relevant to the IRMAA conversation because movement of money among these three sides of the triangle – as well as pulling money from any of them – has implications on your modified adjusted gross income used to determine how much you pay in IRMAA. For example, because a Roth conversion moves money from a tax-deferred vehicle to a tax-free vehicle, it’s seen as income reported on your 1099-R. When your income is bumped up, your adjusted gross income and your modified adjusted gross income also bump up, which is what IRMAA is tied to. IRMAA looks back two years in arrears. In other words, your 2022 coverage will be based on your 2020 income. So the time to start planning for it is at age 63, two years before you have to enroll in Medicare. If you’re thinking of Roth conversions now, it may impact your IRMAA two years down the road.

Avoid Common Mistakes with IRMAA Planning

There are three common mistakes you might make when it comes to IRMAA planning. Be sure to steer clear of these: Not factoring it into your retirement budget. It’s easy to skip over how much your health insurance is going to cost. IRMAA is a significant addition to your monthly budget. It can potentially add up to $1,000 per month, in addition to what you’re already planning. If you’re on a fixed income, this could make a big difference – especially if you’re in a higher income bracket during retirement. Making sure you account for IRMAA in your retirement roadmap and monthly expenses is important. Not realizing how much income you’ll have in retirement. I have had some clients who make more in retirement than they did while they were working. However, the sources of their income are fixed, so they don’t have the ability to decrease them – like pension, Social Security or required minimum withdrawals from tax-deferred accounts, which increase every year. Many clients realize that they’ve done well and saved up, which leads to their income going up in retirement – but also has an adverse consequence on their IRMAA adjustment. Not having a plan for where you’re pulling income from. Pulling $200,000 from cash vs. pulling $200,000 from an IRA has very different tax consequences that could impact IRMAA adjustments. In your working years, you get used to getting a paycheck and knowing where your income is coming from. But in retirement, you have to create your own income by turning assets into income. This could get a little confusing. It’s important to consult a professional so that you can plan. If you need some guidance specific to your own situation, call your financial professional. This piece is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Converting from a traditional IRA to a Roth IRA is a taxable event. [post_title] => Who is IRMAA and Why Is She Getting My Money? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => who-is-irmaa-and-why-is-she-getting-my-money [to_ping] => [pinged] => [post_modified] => 2021-10-07 09:02:07 [post_modified_gmt] => 2021-10-07 14:02:07 [post_content_filtered] => [post_parent] => 0 [guid] => https://retirementextender1.carsonwealth.com/insights/monthly-newsletters/who-is-irmaa-and-why-is-she-getting-my-money/ [menu_order] => 0 [post_type] => monthly-newsletters [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 63849 [post_author] => 6008 [post_date] => 2021-09-02 08:25:43 [post_date_gmt] => 2021-09-02 13:25:43 [post_content] => Are you healthy? Or are you anticipating some hefty medical bills coming up? Or do you want to save money in a tax-advantaged way for future medical expenses? If so, a health savings account (HSA) might be a good choice. An HSA is a tax-favored savings and investment account that’s used for qualified health care expenses and tethered to high-deductible health plans (HDHPs). There are three tax benefits to HSAs: The first is that contributions are pre-tax if they’re coming through payroll, and if they’re not made pre-tax, the account owner will get a tax deduction; second, the growth on the account – interest or returns – is tax-free; and third, if distributions are made to pay for qualified health care costs, those come out tax-free. Outside of tax benefits, you could also get a contribution into the account from your employer when you sign up for an HSA. HSAs could also potentially play a role in retirement planning, to the extent that people are fortunate enough that they don’t use the HSA regularly. There’s an opportunity to build up that account over the years and take out the funds tax-free to pay medical expenses later in life when those costs are higher. Maybe you’re considering an HSA, or maybe you already have one. Either way, you can learn from this article how to avoid common mistakes and other ways to maximize your HSA.

Who are HSAs For?

First of all, you have to meet some criteria before you can get an HSA. According to Benefit Resource, those criteria are that you:
  • Be covered in a qualified high-deductible health plan
  • Can’t be claimed as a dependent on someone else’s taxes
  • Can’t be enrolled in Medicare
  • Can’t be covered by a non-qualified health plan
In addition to these, the ideal candidates for HSAs are people who: 1. Want to allocate assets for medical costs in the future. Do you want to start planning for how to fund medical costs in the future? 2. Only go to the doctor for routine checkups. Are you relatively healthy and only go to the doctor for preventative care? 3. Are anticipating high medical costs in a single year. If you’re on the other end of the spectrum and are going to have high medical bills, an HDHP with HSA might make sense because your deductible gets capped and total out-of-pocket medical costs – including premiums – could be lower than with other medical plans. Take a family of four who all have deviated septums. If all of them need septoplasties in the same year, an HSA might be good for them. According to eMedicineHealth, depending on where and what services you get, the average cost of a septoplasty is $8,131. For this family of four, the total cost for their septoplasties is $32,524. With an HDHP, the out-of-pocket costs for 2021 are capped at $7,000 for individuals and $14,000 for families. So that family with the deviated septums will only have to pay $14,000 out of pocket, which they can pay with their HSA. Bear in mind that those out-of-pocket limits are going to rise to $7,050 for individuals and $14,100 for families in 2022.

Common HSA Mistakes to Avoid

The first way to maximize your HSA is to avoid common mistakes. There’s room for making mistakes with HSAs because they’re flexible. Here are some to avoid:
  • Confusing HSAs with FSAs. People might be more familiar with flex spending accounts. Unlike with FSAs, when you put money into an HSA, you don’t have to use it that year – you can just let it sit and grow as long as you save your receipts. With HSAs, the entire amount you contribute can be rolled over year after year. Also, HSAs are portable, meaning you can take them with you when you change jobs or retire.
  • Not keeping your receipts. Save receipts whether you have an HSA debit card or not, because at the end of the year when you’re filing your taxes, the IRS will get a document from your HSA custodian detailing how much money went in and how much went out. You want to ensure you keep receipts should there be a tax issue.
  • Not having outside assets to cover medical care. Getting started with an HSA might be a challenge – if you don’t get the HSA funded right away and you have a medical expense early on, you might need to pay for it with assets outside of the HSA. Not having those backup funds upfront is a common mistake people make.
  • Banking on not needing medical care. The Mayo Clinic reports that people wanting to save more in their HSA sometimes forgo medical treatment. You should get medical treatment when you need it. You also can’t predict medical emergencies. Some years, you will be able to stack money in your HSA; other years, you might use everything you put in. The good news is if you do have a medical emergency, the out-of-pocket contribution is capped with HDHPs. Also, it’s nice that you still get that triple tax benefit even if you don’t get the long-term growth.

Ways to Maximize Your HSA

If you have an HSA, there are four ways to maximize it:
  • Maximize your contributions to your HSA. The maximum contribution limits for 2021 are $3,600 for self-only coverage or $7,200 for family coverage. For 2022, those limits are $3,650 for self-only coverage and $7,300 for family coverage. Also, if you are 55 and older, you can contribute up to $1,000 additional dollars each year.
  • Be aware of the investment options available. If you are in a position to invest funds in your HSA, find out if that option is available to you. HSA plans differ, and some plans have an opportunity to invest the way you do with regular investment accounts. Also be aware that, as with any investment, there is risk.
  • Have the cash flow to pay medical costs. If you are able, paying your medical costs with your cash flow or other accounts can allow your HSA to grow for the long-term. It’s also a must to have some assets outside your HSA while you’re building up the account. Keep in mind the out-of-pocket limits mentioned above.
  • Work with your financial advisor. As with everything, you need intentional planning based on your situation. Among the best ways to maximize your HSA is to work with your advisor to put together a plan specific to you.
Even if you meet all the criteria for an HSA this year, medical care is a unique, personal decision, and the direction you go with it can change from one year to the next. This piece is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. [post_title] => Got an HSA? Learn How to Maximize It [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => got-an-hsa-learn-how-to-maximize-it [to_ping] => [pinged] => [post_modified] => 2021-09-02 08:25:43 [post_modified_gmt] => 2021-09-02 13:25:43 [post_content_filtered] => [post_parent] => 0 [guid] => https://retirementextender1.carsonwealth.com/insights/monthly-newsletters/got-an-hsa-learn-how-to-maximize-it/ [menu_order] => 0 [post_type] => monthly-newsletters [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post_count] => 5 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 64166 [post_author] => 6008 [post_date] => 2021-12-15 12:31:47 [post_date_gmt] => 2021-12-15 18:31:47 [post_content] => Published by Kevin Oleszewski As the end of the year approaches, we start to think more and more about our tax picture. What boxes can we check to reduce our taxable income? Tax-loss harvesting is one such approach. A tax-efficient way to rebalance your portfolio, tax-loss harvesting can help you offset earnings and get back to your target allocation. Tax-loss harvesting is traditionally thought of as an end-of-year event, because it can help you minimize your tax bill. Consider tax-loss harvesting now, before you ring in the new year. And as you head into 2022, revisit this tax-efficient tactic at least quarterly to make the most of this strategy.  Here’s what you need to know about tax-loss harvesting, including the wash sale rule.

What Is Tax-Loss Harvesting?

Tax-loss harvesting is a strategy that lowers your taxable earnings after you sell taxable investments and use those losses to offset the gains you have to claim as income. It can also allow you to push your capital gains further out, allowing you to save on your taxes in future years when your tax bill might be higher.  For example, if you sold some of your investments this year at a loss, but your portfolio is doing well, you can lower your taxable income by claiming that loss. Also, if your losses exceed your gains, you can claim up to $3,000 on your taxes to offset ordinary income.  Let’s look at a specific, strategic and tax-efficient example. Say you have stock in Verizon that you want to sell and purchase stock in another cell phone company, AT&T. If you had a big loss in Verizon, you want to capture that loss while maintaining exposure to a cell phone company. Or, you might want to sell Verizon stock while it’s down to lower your tax footprint and soon after repurchase, because you believe it will rebound. A savvy investor might turn to either of those strategic scenarios. But before you move on this strategy, remember the wash sale rule.

The Wash Sale Rule

Let’s talk about the wash sale rule for a minute. This Internal Revenue Service (IRS) rule prevents you from taking a tax deduction for a security sold in a wash sale.  A wash sale occurs when you sell or trade securities at a loss and you also do three things within 30 days before or after the sale: 
  • Buy a substantially identical security
  • Acquire substantially identical securities in a fully taxable trade
  • Acquire a contract or option to buy substantially identical securities
Essentially, you want your allocation to stay the same. You don't want the savings on the tax to change your asset allocation. You have to be especially mindful of swapping a holding for a similar holding so you don’t trigger the wash sale rule. So, going back to the Verizon and AT&T example, say you want to buy back the Verizon stock instead of purchasing AT&T – you have to wait at least 31 days to buy it back or you can’t claim the loss.

Who Should Engage in Tax-Loss Harvesting?

Generally, tax-loss harvesting is ideal for people in higher tax brackets since the idea is to help lower tax bills.  A group of researchers from MIT and Chapman University found that tax-loss harvesting yielded a tax alpha, or outperformance by using available tax-saving strategies, of 1.10% per year from 1926 to 2018.  However, it could also be useful for people in a lower tax bracket, since you could carry those losses forward to times when you might have a higher tax bill, like if you get a higher-paying job or the government raises tax rates.  Tax-loss harvesting will play a huge role in planning if we move into a higher-tax environment. Higher tax rates call for investors to pay closer attention to tax efficiency of their taxable accounts.  There are certain situations in which you should consider tax-loss harvesting: 
  • Your investments are subject to capital gains tax. 
  • You are able to use tax-deferred retirement plans to postpone paying taxes until you retire. 
  • You anticipate you’ll change tax brackets. 
  • You invest in individual stocks. 

Questions to Ask Your Advisor About Tax-Loss Harvesting

If you don’t yet have an advisor, and you’re in the process of interviewing one, you should ask them to tell you about their process of rebalancing portfolios. They should explain to you how they do so and in what type of account they do so.  Here are a few more questions you can ask: 
  • Do you do tax-loss harvesting? 
  • How does tax-loss harvesting fit into your overall investment philosophy? 

Connect With a Financial Advisor

While we tend to focus on tax-loss harvesting now at the end of the year, it could be a beneficial strategy all year, especially as we gear up to potentially enter a higher-tax era. But it’s imperative that you discuss this with your financial professional to determine the frequency and timing of tax-loss harvesting for your particular situation.  Reach out to our team today to discuss your financial plan and how tax-loss harvesting can fit into your strategy. Kevin Oleszewski is not affiliated with Cetera Advisor Networks LLC. Any information provided by Kevin is in no way related to Cetera Advisor Networks LLC or its registered representatives. [post_title] => Any Time is Tax-Loss Harvesting Time [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => any-time-is-tax-loss-harvesting-time [to_ping] => [pinged] => [post_modified] => 2021-12-15 12:31:47 [post_modified_gmt] => 2021-12-15 18:31:47 [post_content_filtered] => [post_parent] => 0 [guid] => https://retirementextender1.carsonwealth.com/insights/monthly-newsletters/any-time-is-tax-loss-harvesting-time/ [menu_order] => 0 [post_type] => monthly-newsletters [post_mime_type] => [comment_count] => 0 [filter] => raw ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 27 [max_num_pages] => 6 [max_num_comment_pages] => 0 [is_single] => [is_preview] => [is_page] => [is_archive] => [is_date] => [is_year] => [is_month] => [is_day] => [is_time] => [is_author] => [is_category] => [is_tag] => [is_tax] => [is_search] => [is_feed] => [is_comment_feed] => [is_trackback] => [is_home] => 1 [is_privacy_policy] => [is_404] => [is_embed] => [is_paged] => [is_admin] => [is_attachment] => [is_singular] => [is_robots] => [is_favicon] => [is_posts_page] => [is_post_type_archive] => [query_vars_hash:WP_Query:private] => 33360e3352fab1dda1687c7ecea517e1 [query_vars_changed:WP_Query:private] => [thumbnails_cached] => [stopwords:WP_Query:private] => [compat_fields:WP_Query:private] => Array ( [0] => query_vars_hash [1] => query_vars_changed ) [compat_methods:WP_Query:private] => Array ( [0] => init_query_flags [1] => parse_tax_query ) [tribe_is_event] => [tribe_is_multi_posttype] => [tribe_is_event_category] => [tribe_is_event_venue] => [tribe_is_event_organizer] => [tribe_is_event_query] => [tribe_is_past] => )

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Any Time is Tax-Loss Harvesting Time

Published by Kevin Oleszewski As the end of the year approaches, we start to think more and more about our tax picture. What boxes can we check to reduce our taxable income? Tax-loss harvesting is one such approach. A tax-efficient way to rebalance your portfolio, tax-loss harvesting can he …
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