Blog

Array
(
    [showposts] => 5
    [post_type] => post
    [post_status] => publish
)
WP_Query Object
(
    [query] => Array
        (
            [showposts] => 5
            [post_type] => post
            [post_status] => publish
        )

    [query_vars] => Array
        (
            [showposts] => 5
            [post_type] => post
            [post_status] => publish
            [error] => 
            [m] => 
            [p] => 0
            [post_parent] => 
            [subpost] => 
            [subpost_id] => 
            [attachment] => 
            [attachment_id] => 0
            [name] => 
            [pagename] => 
            [page_id] => 0
            [second] => 
            [minute] => 
            [hour] => 
            [day] => 0
            [monthnum] => 0
            [year] => 0
            [w] => 0
            [category_name] => 
            [tag] => 
            [cat] => 
            [tag_id] => 
            [author] => 
            [author_name] => 
            [feed] => 
            [tb] => 
            [paged] => 0
            [meta_key] => 
            [meta_value] => 
            [preview] => 
            [s] => 
            [sentence] => 
            [title] => 
            [fields] => 
            [menu_order] => 
            [embed] => 
            [category__in] => Array
                (
                )

            [category__not_in] => Array
                (
                )

            [category__and] => Array
                (
                )

            [post__in] => Array
                (
                )

            [post__not_in] => Array
                (
                )

            [post_name__in] => Array
                (
                )

            [tag__in] => Array
                (
                )

            [tag__not_in] => Array
                (
                )

            [tag__and] => Array
                (
                )

            [tag_slug__in] => Array
                (
                )

            [tag_slug__and] => Array
                (
                )

            [post_parent__in] => Array
                (
                )

            [post_parent__not_in] => Array
                (
                )

            [author__in] => Array
                (
                )

            [author__not_in] => Array
                (
                )

            [ignore_sticky_posts] => 
            [suppress_filters] => 
            [cache_results] => 1
            [update_post_term_cache] => 1
            [update_menu_item_cache] => 
            [lazy_load_term_meta] => 1
            [update_post_meta_cache] => 1
            [posts_per_page] => 5
            [nopaging] => 
            [comments_per_page] => 50
            [no_found_rows] => 
            [order] => DESC
        )

    [tax_query] => WP_Tax_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => AND
            [table_aliases:protected] => Array
                (
                )

            [queried_terms] => Array
                (
                )

            [primary_table] => wp_314_posts
            [primary_id_column] => ID
        )

    [meta_query] => WP_Meta_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => 
            [meta_table] => 
            [meta_id_column] => 
            [primary_table] => 
            [primary_id_column] => 
            [table_aliases:protected] => Array
                (
                )

            [clauses:protected] => Array
                (
                )

            [has_or_relation:protected] => 
        )

    [date_query] => 
    [request] => 
					SELECT SQL_CALC_FOUND_ROWS  wp_314_posts.ID
					FROM wp_314_posts 
					WHERE 1=1  AND wp_314_posts.post_type = 'post' AND ((wp_314_posts.post_status = 'publish'))
					
					ORDER BY wp_314_posts.post_date DESC
					LIMIT 0, 5
				
    [posts] => Array
        (
            [0] => WP_Post Object
                (
                    [ID] => 66152
                    [post_author] => 181953
                    [post_date] => 2022-11-30 14:06:34
                    [post_date_gmt] => 2022-11-30 20:06:34
                    [post_content] => Tom Fridrich, JD, CLU, ChFC, Senior Wealth Planner 

The end of the year offers an ideal opportunity to look both forward and back — reflecting on recent achievements, while setting goals for the upcoming months. For many of my clients, it's also a time to review their finances and identify moves that can help protect their tax bills. 

If you've had a particularly high-income year, you might be feeling especially confident about your finances, and yet facing the upcoming tax liability may come as a shock. Fortunately, there are several strategies that can combine two common money-related goals — reducing your tax burden while contributing to charity. 

What Is a “High-Income" Year?

When we talk about a high-income year, we're not referring just to a hefty raise from a promotion or a job change (although that is commendable and likely should invite some financial planning of its own). Here, we're talking about an unusual, often one-time spike in your income.  For example, you might have finalized the sale of your business and received a sizable one-time cash payment, rather than an installment payment over several years. Or maybe you sold property at the height of the market and realized an appreciation that exceeded the capital gains exemption or wasn't eligible for it. Or, you might have received an extraordinarily large bonus or want to exercise stock options that have recently vested. 

What Are the Tax Consequences of an Income Spike?

Obviously, most people appreciate that the higher their income, the higher the tax bill. And with ordinary income that is typically expected.  However, if you've been affected by one of these significant events, it can be painful to pay the extra taxes, especially when you recognize that this money flowing into your account is not an ongoing event.  Furthermore, while direct taxes are one thing, it might also trigger indirect consequences. A high-income year could mean you phase out of income credits that are necessary for your day-to-day life. Or it may make you ineligible for the Biden-Harris Administration's Student Debt Relief Plan, which is targeted only to those at a certain income threshold that you would otherwise qualify for.  If you're on Medicare, a high-earning year can increase your health insurance costs and make you subject to what we call “Dear Aunt IRMAA," which stands for “income-related monthly adjusted amount" and results in a surcharge in your Part B and Part D premiums. 

What Are the Benefits of Giving to Charity in a High-Income Year? 

Simultaneously, many people realize this windfall offers the chance to make a philanthropic donation in a way they've been unable to previously. Perhaps you've made smaller donations throughout the year or have tithed faithfully to a religious organization, but never felt as though you were in the position to make a more substantial gift — until now.  Thanks to this financial event, you can now make a bigger impact, while also reaping tax advantages. 

What Are Some Ways You Can Give to Charity in this High-Income Year? 

While you obviously could always make a direct cash gift to the organization of your choice, there are some other vehicles that might offer additional benefits. Here are three to consider: 
  • Donor-advised fund (DAF)
With a DAF, you make a charitable contribution to a fund that is held in a custodial account. While you make the donation and receive the tax deduction for the entire sum today, you don't have to select the end charities or how you want to allocate your funds. The money can sit in the DAF until you've determined where and at what pace you'd like to donate. Since the assets can still be invested, they may continue to grow for an even bigger impact.  A DAF is appealing because rather than making an immediate generous contribution to a group, you have the latitude to do more research or give a smaller amount and evaluate how the organization uses its money. I also see clients using it as a way to introduce their children to a philanthropic mindset by inviting them to be part of an annual conversation about where they'd like to donate.  You also can donate assets other than cash to a DAF, which makes them favorable for clients who have realized large stock gains. For example, if they purchased a portfolio for $10,000 that's now worth $100,000, they can donate the appreciated portfolio and avoid capital gains, while getting the deduction for the entire fair market value of $100,000. 
  • Qualified charitable distribution (QCD)
Clients who do not need the Required Minimum Distributions (RMD) from their 401(k) or individual retirement account (IRA) can donate it to charity and get the tax benefit as a QCD. This is especially useful for clients who take the standard deduction rather than itemizing, which would mean they otherwise wouldn't get tax relief.  While it might be too late to deploy this strategy this year, it's something to consider for 2023. Because your RMD is based on your account value as of December 31 of the prior year, we can come close to predicting what your future RMD will be and begin to plan the right strategies, including potentially donating it to avoid unexpected taxes. 
  • Charitable gift annuity
If you want to make a considerable donation now, but would benefit from receiving future income, you could look into a charitable gift annuity. This is a contract between you and the charity where you make a bequest, which provides a tax deduction, and then you also receive a stream of income from the charity. In return, the charity receives the asset up front and can use it immediately. However, not all nonprofits will accept this type of gift because it can be more involved to set up a payment stream. You can visit the American Council on Gift Annuities to find out more about how charitable gift annuities work and search for member organizations by name, type or geographic location.  With a charitable gift annuity, you claim taxes for the amount, minus the value of the payments that will eventually be made. So if you donate $30,000 with the expectation that $20,000 is the donation and the remaining $10,000 will be returned in payments, you would deduct the $20,000. 

Professional Advice Can Help You Make the Right Moves

While reducing your tax bill by donating to charity is an admirable act and often a wise financial strategy, always talk to a financial advisor before making any decisions. Since every person's situation is different, they can help you assess the tax risks and advantages and discuss options that align with your current financial position and goals.   Tom Fridrich is not affiliated with Cetera Advisor Networks LLC.  Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.  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] => Charitable Giving Strategies in a High-Income Year [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => charitable-giving-strategies-in-a-high-income-year [to_ping] => [pinged] => [post_modified] => 2022-11-30 14:15:16 [post_modified_gmt] => 2022-11-30 20:15:16 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=65498 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 66066 [post_author] => 90034 [post_date] => 2022-11-10 09:58:13 [post_date_gmt] => 2022-11-10 15:58:13 [post_content] => This week was midterm elections and we’ve had many questions about what it all could mean, which we’ll tackle in today’s blog. We consider it a great honor to vote, and while we may not know the final results of the election for days (or even months), what we do know is the election will probably impact the market. 2022 was one of the worst starts to a year ever for stocks, but we remain hopeful that a major low took place in the middle of October, which would be fairly normal given October’s propensity for being a bear market killer. One of our favorite tables we’ve shared this year is right here. The first few quarters of a midterm year tend to be quite weak when looking at a 4-year presidential cycle, which played out all too well this year. The really good news is some of the best quarters are upon us, so don’t lose faith quite yet.

The Calendar Is a Tailwind

The average midterm year since 1950 corrected 17.1% on average, the most out of the four-year presidential cycle. That’s the bad news, the good news is stocks gained 32.3% on average a year off those lows and have never been lower. Although we don’t know if October 12 is officially the lows or not (but we think it very well could be), there could be a lot of opportunity for bulls over the coming year. Here’s another look at the same thing, but breaking it down by each year. Should we be surprised that stocks have had a tough go so far in 2022? Maybe not, as this next chart shows the worst time for stocks is a midterm year under a new President. With the S&P 500 up only 2.4% on average these years, it helps put the disappointing year so far into perspective. Now check out what happens the following year, which might be something many investors could be smiling about soon enough. One of the most well-known investor axioms is “Sell in May and Go Away,” as those six months are some of the worst of the year. It played out this year, but what we don’t hear nearly as much about is how well stocks tend to do from November through April. Sure enough, looking at those six months during a midterm year and we find that stocks have been higher the past 18 times.

Election Aftermath

You might hear that certain sectors will do well if so-and-so wins, or that these sectors will do poorly if this-or-that happens. The truth is no one really knows. After President Trump won in 2016 it was widely assumed coal and steel would do great, the opposite happened. Then under President Biden green energy was to do great and dirty crude and coal would struggle – but, again, the opposite happened. It just isn’t clear cut. What is clear cut is stocks historically have done quite well the year after the midterms. As you can see in our last chart, the S&P 500 gained a year after the election every single time since World War II, with a very solid 14.1% average gain over that year. Why is this? Likely markets hate uncertainty and there is a lot of that leading up to a midterm election. But once the election is over the uncertainty is likely lifted. [post_title] => Let’s Talk About Midterm Elections and Your Investments [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => lets-talk-about-midterm-elections-and-your-investments [to_ping] => [pinged] => [post_modified] => 2022-11-10 10:02:06 [post_modified_gmt] => 2022-11-10 16:02:06 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=65431 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 66019 [post_author] => 181805 [post_date] => 2022-11-03 08:54:04 [post_date_gmt] => 2022-11-03 13:54:04 [post_content] => Kevin Oleszewski, Senior Wealth Planner ‘Tis the season to give. In fact, 37% of charitable giving occurs during the last quarter of the year — 20% of it in December alone, according to a survey conducted by the Blackbaud Institute. And while the holidays are traditionally a time to reflect on our blessings and help those less fortunate than ourselves, there's another factor influencing the timing of these donations — and that's the goal of minimizing a tax bill. Of course, any charitable donation should be driven by altruism and the desire to make a difference. The great news is that we're a generous society. Despite the uncertainty of the past few years, giving from individual donors remains on the rise. The Blackbaud Institute survey found giving increased 9% in 2021 over 2020, with overall giving rising 19% since 2019. However, there's nothing wrong with embracing the opportunity to help your own finances while helping others. While most donors give the conventional way, via a direct cash gift, there are other less traditional but impactful ways to give that can also provide a boost to your tax strategy.

Three Tax-Advantaged Donation Strategies to Consider

1. Create a donor-advised fund (DAF)

A DAF is an excellent way to achieve an immediate tax deduction without feeling obligated to give an entire gift at once. With a DAF, you contribute assets — cash, real estate, stock, even cryptocurrency — to a fund you establish through a custodial account, which then becomes a charitable account you personally control. Once open, you can start making gifts right away or you can leave the money in there indefinitely, potentially taking advantage of growth as you determine how you want to spend it. The entire amount of your initial donation to the DAF is deducted the year you establish it, even if you've yet to choose a charity. That makes it a savvy way to offset sky-high taxes you otherwise might owe in a year when you have a particularly high level of income. Here's an example: Let's say you intend to gift $10,000 a year over four years. You can put $40,000 into the DAF today and get the entire deduction, yet still maintain your regular schedule of making a $10,000 gift each year. This strategy also can protect you and your money in case the charity changes policies or otherwise aligns with activities or positions you disagree with. Although the gift to the DAF is irrevocable, you can redirect the remaining funds to other causes whenever you wish.

2. Use a qualified charitable distribution (QCD) from your individual retirement account (IRA).

If you are age 70 ½ or older, you can transfer money from your IRA to a charity as a qualified charitable distribution (QCD), which makes it tax-free up to $100,000 ($200,000 if you file jointly). That can be particularly handy for those who have to make Required Minimum Distributions (RMD), which is the minimum amount of money you must withdraw by law from any tax-deferred account, like an IRA or 401(k), starting at age 72. Reducing your IRA through charitable donations also reduces your overall taxable estate, which can eventually protect your beneficiaries from a tax hit. This strategy can also be a savvy way to eliminate the tax liability if you convert a traditional IRA to a Roth IRA, which some people prefer because the money in the Roth IRA will then grow tax free. Talk to your advisor about whether a conversion would make sense for your overall financial goals.

3. Donate valuable assets that aren't cash.

While most of us think of making donations to nonprofits in cash, there are other advantageous ways to support an organization. For example, donating stock that has appreciated allows you to do good for the charity and also potentially eliminate your capital gains burden. Here's how it works: Rather than liquidating the stock and owing the capital gains tax, you can donate the security directly to the organization to be eligible for a deduction of the full fair market value, up to 30% of your adjusted gross income (AGI). You also can donate items like vehicles, works of art, sports memorabilia or rare books, to name a few. Often, these are items that were bequeathed by another person yet don't hold value to you, personally. For example, a client of mine once donated valuable manuscripts to a university and received a sizable tax deduction. The benefit again with these nontraditional assets is you will receive the entire value as a tax deduction without having to absorb the capital gains tax you otherwise would owe. With a car (and potentially other goods depending on their value), work with the charity to determine the amount of the deduction. Often, especially in the case of a vehicle, a charity will sell the item, which means your deduction is based on the gross proceeds of the sale. There are exceptions, such as if the charity intends to use a vehicle for their own purposes — to deliver meals, for example. The IRS has a handy guide to all your questions about vehicle donation and how to determine the value of donated property. And always check with your accountant to ensure you are complying with all legal requirements.

Give Generously, but Also Wisely

No matter how you choose to give, here are three things to keep in mind.

Research the Charity Before Donating

Confirm the charity you've chosen is a 501(c)(3), which means it has tax-exempt status. Then evaluate other facets that are important to you, such as its financial health, key programs, results, and accountability and transparency policies. You can use a resource like Charity Navigator or GuideStar to compare various charities to find one that aligns with your goals.

Get the Requisite Paperwork

Always check with your tax planner to make sure you have the correct documentation should the IRS come knocking. Typically, contributions of money or goods will require a letter from the charity confirming how much of your gift was tax-deductible. Then verify you have the required forms. For example, you'll need to complete Form 8283 for noncash charitable contributions, and/or Form 1098 for contributions of motor vehicles, boats and airplanes. You also may need a written appraisal from a qualified appraiser depending on the value of the item. Always confirm with your tax preparer you have the most up-to-date version of the forms and the correct paperwork.

Time it Right

While it's always a good time to be generous, there are some years you might find it even more beneficial to achieve a tax deduction. Often, it's when you had a surprisingly high amount of income in one year — for example, if you sold your company. That's when conducting thoughtful tax planning can be vital to lessen the blow, and a philanthropic donation can be a key part of that. Remember that in order to qualify as a tax deduction, the gift must be paid before the end of the calendar year. Most individual itemizers can deduct up to 60% of their AGI to charity, and if your donation exceeds that, you can carry over the remainder for up to five tax years. However, note that tax laws and income brackets can change frequently so double-checking you're in compliance is always wise. Finding creative ways to donate can benefit both you and the charity. And as you retain the glow of doing something nice — and also receive a tax deduction — you are liable to agree that it is better to give than receive. Just remember to talk with your financial planner and accountant to ensure you're benefitting to the full extent possible. Converting from a traditional IRA to a Roth IRA is a taxable event. Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later. 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. Kevin Oleszewski is not affiliated with Cetera Advisor Networks, LLC. [post_title] => 3 Nontraditional Ways to Give That Still Qualify for a Tax Deduction [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 3-nontraditional-ways-to-give-that-still-qualify-for-a-tax-deduction [to_ping] => [pinged] => [post_modified] => 2022-11-03 09:04:29 [post_modified_gmt] => 2022-11-03 14:04:29 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=65396 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 65993 [post_author] => 181805 [post_date] => 2022-10-26 08:29:54 [post_date_gmt] => 2022-10-26 13:29:54 [post_content] => Kevin Oleszewski, CFP® Senior Wealth Planner As the tax year draws to a close, many high-income investors will look to reposition their portfolios to intentionally generate losses as a way to offset gains — an investment strategy known as tax loss harvesting. The goal? A net neutral tax position.

What Is Tax Loss Harvesting?

I sort of think of tax loss harvesting as the eharmony of investment planning. At its core, it's about matchmaking and there are three core steps to making it all work:
  • Step 1: You identify equities in your taxable accounts — stocks, mutual funds, bonds, as examples — that aren't performing well.
  • Step two: You single out those equities that have likely appreciated as much as they're going to, producing a gain that you're happy with.
  • Step three: You match up the loss and the gain — selling one investment at a loss to offset the capital gain generated by the sale of the investment you sold at a profit.

How Tax Loss Harvesting Works

Here's an example of how a high-income investor might put tax loss harvesting to work: Mrs. Investor buys 1,000 shares of XYZ stock at $100 a share. XYZ is now selling at $50 a share. In play: the sale of Mrs. Investor's business later in the year for a gain of $500,000. What does she do? She sells the shares in XYZ stock at a loss of $500,000 to offset the gain from the sale of her business. If it sounds a bit complicated, it is — and I wouldn't recommend repositioning your portfolio like this without involving your tax advisor and financial planner. There are many, many moving parts. For example, while a lot of people do tax loss harvesting at the end of the year, it can be done year-round. If there's a big dip in the market or a lot of volatility, this is a strategy that could be employed to an investor's advantage.

Who Can Benefit from Tax-Loss Harvesting?

It's worth noting that tax loss harvesting isn’t for everyone. People in lower tax brackets (10% and 12%) are taxed at ordinary income rates when they sell a stock they’ve held for at least one year and a day. So, their capital gain is actually zero. Who should consider tax loss harvesting? Investors in a tax bracket of 22% and up. If you think tax loss harvesting could be a good fit, the first thing you need to do is establish the cost basis of your investment — in other words, what you originally paid for it. Next, give your portfolio a hard look and think about the long-term effect of holding a particular investment. Everybody has an affinity for certain stocks.  My wife holds a stock that she will never ever sell, just because she loves that particular company so much.

Tax Loss Harvesting Top Considerations

There's no way around it: Emotion can be involved here — and shouldn't be. My advice? Your selection of investments to sell should be based specifically on tax loss harvesting reasoning — and not on anything else. You are looking at what has appreciated significantly or depreciated significantly. It's as simple as that. And when you replace the asset you've sold, it's generally a good practice to seek out something that will give you the same type of exposure in your portfolio so that your asset allocation remains unchanged. For example, if you sell stock in a particular soda company, a well‐known telecommunications company, or a popular technology company, you might consider looking at their competitors. Finally, keep this one important rule in mind: If, for example, you sell stock at a loss for tax purposes, you must wait 31 days to buy it again for it to still count as a loss. Anything short of that, and you will lose the deduction.

Have More Questions About Tax Loss Harvesting?

Talk to a qualified financial advisor to help you evaluate whether tax loss harvesting could be beneficial for you. If you don’t already have an advisor you can trust, give us a call. We’ll help you find someone who will put your needs first. Kevin Oleszewski is not affiliated with Cetera Advisor Networks, LLC. [post_title] => Considering Tax Loss Harvesting? What You Need to Know First [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => considering-tax-loss-harvesting-what-you-need-to-know-first [to_ping] => [pinged] => [post_modified] => 2022-10-26 08:35:21 [post_modified_gmt] => 2022-10-26 13:35:21 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=65373 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 65920 [post_author] => 47458 [post_date] => 2022-10-13 10:38:12 [post_date_gmt] => 2022-10-13 15:38:12 [post_content] => Last Friday, yet another strong payroll report was released with the headlines stating payrolls grew 263,000 in September and the unemployment rate fell to 3.5%. The first three charts below illustrate the strength and resiliency of the labor market this year. The last two are forward-looking indicators that bode well for continued employment gains.
  1. 3.8 million jobs created in 2022 (so far)

Payroll growth has certainly slowed over the last few months, from 537,000 in July to 315,000 in August and then 263,000 in September. But make no mistake: These are robust numbers, and the big picture is that 3.8 million jobs were created over the first nine months of 2022. Even if the economy created zero jobs over the next year, 2022 would be the 9th best year for job creation since 1940. And if the next three months saw another 500,000 jobs created, 2022 would end up as the 2nd best year behind 2021 (which was boosted by the COVID recovery).
  1. Unemployment rate falls to pre-crisis low (also the lowest since 1969)

Unemployment fell from 3.7% to 3.5% in September, going in the opposite direction of what Federal Reserve officials expect amid their interest rate hikes. The 3.5% rate matches the lowest it reached during the last expansion and is the lowest since 1969.
  1. Prime-age employment-population ratio close to pre-pandemic levels

While the unemployment rate is the most widely cited measure of labor market strength, another useful measure is the employment-population ratio. It is the proportion of the working-age population that is employed. The prime-age employment-population ratio, i.e., workers between the ages of 25 and 54, avoids some of the issues that may impact the size of the labor force (which is used to calculate the unemployment rate), such as an aging population and people leaving the labor force for other reasons. The good news is that the prime-age employment-population ratio is now at 80.2%, not far from the pre-pandemic high of 80.5%. The highest it got to during the 2003–2007 expansion was 80.3%. It did go higher in the late 1990s, indicating we may still have room for improvement.
  1. Initial unemployment benefit claims are near record lows

This is a popular leading indicator of the labor market that’s released weekly. Historically, a rise in initial claims for unemployment insurance benefits foreshadows a rise in the unemployment rate. Initial claims are currently drifting close to record lows (the latest was 219,000 as of Oct 1st). Even better news is the fact that “continuing claims” are around 1.36 million – the lowest level since the late 1960s and well below the pre-pandemic level of 1.8 million. Indicating that laid-off workers who file initial claims are quickly able to find a job, without continuing to receive unemployment insurance.
  1. Temporary help services employment continues to rise

This may be one you haven’t seen before, but it’s one I like to keep an eye on as a leading indicator for employment. Over the last few decades, employers have increasingly relied on temps to fulfill staffing needs, giving them more flexibility. When times are good and the economy is expanding, firms hire temps to ramp up quickly. And when times are bad, firms can scale down by letting temps go first, without laying off more experienced workers. We’ve seen temp employment fall prior to the start of the last four recessions. The current situation is very different, as temp help services employment has continued to rise, which is historically not something you would see if we were close to a recession. There you have it – five charts that highlight the strength of the labor market. Reach out to your advisor if you’d like to discuss what current economic conditions might mean for your unique situation.   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. The views stated herein are not necessarily the opinion of any other named entity. 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] => 5 Charts Showing the Strength of the Labor Market [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 5-charts-showing-the-strength-of-the-labor-market [to_ping] => [pinged] => [post_modified] => 2022-10-13 10:49:57 [post_modified_gmt] => 2022-10-13 15:49:57 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=65335 [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] => 66152 [post_author] => 181953 [post_date] => 2022-11-30 14:06:34 [post_date_gmt] => 2022-11-30 20:06:34 [post_content] => Tom Fridrich, JD, CLU, ChFC, Senior Wealth Planner  The end of the year offers an ideal opportunity to look both forward and back — reflecting on recent achievements, while setting goals for the upcoming months. For many of my clients, it's also a time to review their finances and identify moves that can help protect their tax bills.  If you've had a particularly high-income year, you might be feeling especially confident about your finances, and yet facing the upcoming tax liability may come as a shock. Fortunately, there are several strategies that can combine two common money-related goals — reducing your tax burden while contributing to charity. 

What Is a “High-Income" Year?

When we talk about a high-income year, we're not referring just to a hefty raise from a promotion or a job change (although that is commendable and likely should invite some financial planning of its own). Here, we're talking about an unusual, often one-time spike in your income.  For example, you might have finalized the sale of your business and received a sizable one-time cash payment, rather than an installment payment over several years. Or maybe you sold property at the height of the market and realized an appreciation that exceeded the capital gains exemption or wasn't eligible for it. Or, you might have received an extraordinarily large bonus or want to exercise stock options that have recently vested. 

What Are the Tax Consequences of an Income Spike?

Obviously, most people appreciate that the higher their income, the higher the tax bill. And with ordinary income that is typically expected.  However, if you've been affected by one of these significant events, it can be painful to pay the extra taxes, especially when you recognize that this money flowing into your account is not an ongoing event.  Furthermore, while direct taxes are one thing, it might also trigger indirect consequences. A high-income year could mean you phase out of income credits that are necessary for your day-to-day life. Or it may make you ineligible for the Biden-Harris Administration's Student Debt Relief Plan, which is targeted only to those at a certain income threshold that you would otherwise qualify for.  If you're on Medicare, a high-earning year can increase your health insurance costs and make you subject to what we call “Dear Aunt IRMAA," which stands for “income-related monthly adjusted amount" and results in a surcharge in your Part B and Part D premiums. 

What Are the Benefits of Giving to Charity in a High-Income Year? 

Simultaneously, many people realize this windfall offers the chance to make a philanthropic donation in a way they've been unable to previously. Perhaps you've made smaller donations throughout the year or have tithed faithfully to a religious organization, but never felt as though you were in the position to make a more substantial gift — until now.  Thanks to this financial event, you can now make a bigger impact, while also reaping tax advantages. 

What Are Some Ways You Can Give to Charity in this High-Income Year? 

While you obviously could always make a direct cash gift to the organization of your choice, there are some other vehicles that might offer additional benefits. Here are three to consider: 
  • Donor-advised fund (DAF)
With a DAF, you make a charitable contribution to a fund that is held in a custodial account. While you make the donation and receive the tax deduction for the entire sum today, you don't have to select the end charities or how you want to allocate your funds. The money can sit in the DAF until you've determined where and at what pace you'd like to donate. Since the assets can still be invested, they may continue to grow for an even bigger impact.  A DAF is appealing because rather than making an immediate generous contribution to a group, you have the latitude to do more research or give a smaller amount and evaluate how the organization uses its money. I also see clients using it as a way to introduce their children to a philanthropic mindset by inviting them to be part of an annual conversation about where they'd like to donate.  You also can donate assets other than cash to a DAF, which makes them favorable for clients who have realized large stock gains. For example, if they purchased a portfolio for $10,000 that's now worth $100,000, they can donate the appreciated portfolio and avoid capital gains, while getting the deduction for the entire fair market value of $100,000. 
  • Qualified charitable distribution (QCD)
Clients who do not need the Required Minimum Distributions (RMD) from their 401(k) or individual retirement account (IRA) can donate it to charity and get the tax benefit as a QCD. This is especially useful for clients who take the standard deduction rather than itemizing, which would mean they otherwise wouldn't get tax relief.  While it might be too late to deploy this strategy this year, it's something to consider for 2023. Because your RMD is based on your account value as of December 31 of the prior year, we can come close to predicting what your future RMD will be and begin to plan the right strategies, including potentially donating it to avoid unexpected taxes. 
  • Charitable gift annuity
If you want to make a considerable donation now, but would benefit from receiving future income, you could look into a charitable gift annuity. This is a contract between you and the charity where you make a bequest, which provides a tax deduction, and then you also receive a stream of income from the charity. In return, the charity receives the asset up front and can use it immediately. However, not all nonprofits will accept this type of gift because it can be more involved to set up a payment stream. You can visit the American Council on Gift Annuities to find out more about how charitable gift annuities work and search for member organizations by name, type or geographic location.  With a charitable gift annuity, you claim taxes for the amount, minus the value of the payments that will eventually be made. So if you donate $30,000 with the expectation that $20,000 is the donation and the remaining $10,000 will be returned in payments, you would deduct the $20,000. 

Professional Advice Can Help You Make the Right Moves

While reducing your tax bill by donating to charity is an admirable act and often a wise financial strategy, always talk to a financial advisor before making any decisions. Since every person's situation is different, they can help you assess the tax risks and advantages and discuss options that align with your current financial position and goals.   Tom Fridrich is not affiliated with Cetera Advisor Networks LLC.  Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.  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] => Charitable Giving Strategies in a High-Income Year [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => charitable-giving-strategies-in-a-high-income-year [to_ping] => [pinged] => [post_modified] => 2022-11-30 14:15:16 [post_modified_gmt] => 2022-11-30 20:15:16 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=65498 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 337 [max_num_pages] => 68 [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] => [allow_query_attachment_by_filename:protected] => [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 ) )

Charitable Giving Strategies in a High-Income Year

Tom Fridrich, JD, CLUⓇ, ChFCⓇ, Senior Wealth Planner  The end of the year offers an ideal opportunity to look both forward and back — reflecting on recent achievements, while setting goals for the upcoming months. For many of my clients, it’s also a time to review their finances and i …
Continue Reading!
Array
(
    [showposts] => 5
    [post_type] => news
    [post_status] => publish
)
WP_Query Object
(
    [query] => Array
        (
            [showposts] => 5
            [post_type] => news
            [post_status] => publish
        )

    [query_vars] => Array
        (
            [showposts] => 5
            [post_type] => news
            [post_status] => publish
            [error] => 
            [m] => 
            [p] => 0
            [post_parent] => 
            [subpost] => 
            [subpost_id] => 
            [attachment] => 
            [attachment_id] => 0
            [name] => 
            [pagename] => 
            [page_id] => 0
            [second] => 
            [minute] => 
            [hour] => 
            [day] => 0
            [monthnum] => 0
            [year] => 0
            [w] => 0
            [category_name] => 
            [tag] => 
            [cat] => 
            [tag_id] => 
            [author] => 
            [author_name] => 
            [feed] => 
            [tb] => 
            [paged] => 0
            [meta_key] => 
            [meta_value] => 
            [preview] => 
            [s] => 
            [sentence] => 
            [title] => 
            [fields] => 
            [menu_order] => 
            [embed] => 
            [category__in] => Array
                (
                )

            [category__not_in] => Array
                (
                )

            [category__and] => Array
                (
                )

            [post__in] => Array
                (
                )

            [post__not_in] => Array
                (
                )

            [post_name__in] => Array
                (
                )

            [tag__in] => Array
                (
                )

            [tag__not_in] => Array
                (
                )

            [tag__and] => Array
                (
                )

            [tag_slug__in] => Array
                (
                )

            [tag_slug__and] => Array
                (
                )

            [post_parent__in] => Array
                (
                )

            [post_parent__not_in] => Array
                (
                )

            [author__in] => Array
                (
                )

            [author__not_in] => Array
                (
                )

            [ignore_sticky_posts] => 
            [suppress_filters] => 
            [cache_results] => 1
            [update_post_term_cache] => 1
            [update_menu_item_cache] => 
            [lazy_load_term_meta] => 1
            [update_post_meta_cache] => 1
            [posts_per_page] => 5
            [nopaging] => 
            [comments_per_page] => 50
            [no_found_rows] => 
            [order] => DESC
        )

    [tax_query] => WP_Tax_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => AND
            [table_aliases:protected] => Array
                (
                )

            [queried_terms] => Array
                (
                )

            [primary_table] => wp_314_posts
            [primary_id_column] => ID
        )

    [meta_query] => WP_Meta_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => 
            [meta_table] => 
            [meta_id_column] => 
            [primary_table] => 
            [primary_id_column] => 
            [table_aliases:protected] => Array
                (
                )

            [clauses:protected] => Array
                (
                )

            [has_or_relation:protected] => 
        )

    [date_query] => 
    [request] => 
					SELECT SQL_CALC_FOUND_ROWS  wp_314_posts.ID
					FROM wp_314_posts 
					WHERE 1=1  AND wp_314_posts.post_type = 'news' AND ((wp_314_posts.post_status = 'publish'))
					
					ORDER BY wp_314_posts.post_date DESC
					LIMIT 0, 5
				
    [posts] => Array
        (
            [0] => WP_Post Object
                (
                    [ID] => 65239
                    [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 08:33:46
                    [post_modified_gmt] => 2022-05-26 13:33:46
                    [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
                )

            [1] => WP_Post Object
                (
                    [ID] => 64976
                    [post_author] => 90034
                    [post_date] => 2022-03-25 14:07:37
                    [post_date_gmt] => 2022-03-25 19:07:37
                    [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

[post_title] => Emerging Financially Healthy After a Gray Divorce [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => emerging-financially-healthy-after-a-gray-divorce [to_ping] => [pinged] => [post_modified] => 2022-03-25 14:07:37 [post_modified_gmt] => 2022-03-25 19:07:37 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=news&p=64886 [menu_order] => 0 [post_type] => news [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 53316 [post_author] => 55227 [post_date] => 2020-01-28 10:38:21 [post_date_gmt] => 2020-01-28 16:38:21 [post_content] => By Jamie Hopkins

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://lionsgatewm1.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] => 65239 [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 08:33:46 [post_modified_gmt] => 2022-05-26 13:33:46 [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] => [allow_query_attachment_by_filename:protected] => [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 ) )

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 …
Continue Reading!
Array
(
    [showposts] => 5
    [post_type] => market-commentary
    [post_status] => publish
    [tax_query] => Array
        (
            [0] => Array
                (
                    [taxonomy] => market_comm_categories
                    [field] => term_id
                    [terms] => Array
                        (
                            [0] => 126
                        )

                    [operator] => IN
                )

        )

)
WP_Query Object
(
    [query] => Array
        (
            [showposts] => 5
            [post_type] => market-commentary
            [post_status] => publish
            [tax_query] => Array
                (
                    [0] => Array
                        (
                            [taxonomy] => market_comm_categories
                            [field] => term_id
                            [terms] => Array
                                (
                                    [0] => 126
                                )

                            [operator] => IN
                        )

                )

        )

    [query_vars] => Array
        (
            [showposts] => 5
            [post_type] => market-commentary
            [post_status] => publish
            [tax_query] => Array
                (
                    [0] => Array
                        (
                            [taxonomy] => market_comm_categories
                            [field] => term_id
                            [terms] => Array
                                (
                                    [0] => 126
                                )

                            [operator] => IN
                        )

                )

            [error] => 
            [m] => 
            [p] => 0
            [post_parent] => 
            [subpost] => 
            [subpost_id] => 
            [attachment] => 
            [attachment_id] => 0
            [name] => 
            [pagename] => 
            [page_id] => 0
            [second] => 
            [minute] => 
            [hour] => 
            [day] => 0
            [monthnum] => 0
            [year] => 0
            [w] => 0
            [category_name] => 
            [tag] => 
            [cat] => 
            [tag_id] => 
            [author] => 
            [author_name] => 
            [feed] => 
            [tb] => 
            [paged] => 0
            [meta_key] => 
            [meta_value] => 
            [preview] => 
            [s] => 
            [sentence] => 
            [title] => 
            [fields] => 
            [menu_order] => 
            [embed] => 
            [category__in] => Array
                (
                )

            [category__not_in] => Array
                (
                )

            [category__and] => Array
                (
                )

            [post__in] => Array
                (
                )

            [post__not_in] => Array
                (
                )

            [post_name__in] => Array
                (
                )

            [tag__in] => Array
                (
                )

            [tag__not_in] => Array
                (
                )

            [tag__and] => Array
                (
                )

            [tag_slug__in] => Array
                (
                )

            [tag_slug__and] => Array
                (
                )

            [post_parent__in] => Array
                (
                )

            [post_parent__not_in] => Array
                (
                )

            [author__in] => Array
                (
                )

            [author__not_in] => Array
                (
                )

            [ignore_sticky_posts] => 
            [suppress_filters] => 
            [cache_results] => 1
            [update_post_term_cache] => 1
            [update_menu_item_cache] => 
            [lazy_load_term_meta] => 1
            [update_post_meta_cache] => 1
            [posts_per_page] => 5
            [nopaging] => 
            [comments_per_page] => 50
            [no_found_rows] => 
            [taxonomy] => market_comm_categories
            [term_id] => 126
            [order] => DESC
        )

    [tax_query] => WP_Tax_Query Object
        (
            [queries] => Array
                (
                    [0] => Array
                        (
                            [taxonomy] => market_comm_categories
                            [terms] => Array
                                (
                                    [0] => 126
                                )

                            [field] => term_id
                            [operator] => IN
                            [include_children] => 1
                        )

                )

            [relation] => AND
            [table_aliases:protected] => Array
                (
                    [0] => wp_314_term_relationships
                )

            [queried_terms] => Array
                (
                    [market_comm_categories] => Array
                        (
                            [terms] => Array
                                (
                                    [0] => 126
                                )

                            [field] => term_id
                        )

                )

            [primary_table] => wp_314_posts
            [primary_id_column] => ID
        )

    [meta_query] => WP_Meta_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => 
            [meta_table] => 
            [meta_id_column] => 
            [primary_table] => 
            [primary_id_column] => 
            [table_aliases:protected] => Array
                (
                )

            [clauses:protected] => Array
                (
                )

            [has_or_relation:protected] => 
        )

    [date_query] => 
    [request] => 
					SELECT SQL_CALC_FOUND_ROWS  wp_314_posts.ID
					FROM wp_314_posts  LEFT JOIN wp_314_term_relationships ON (wp_314_posts.ID = wp_314_term_relationships.object_id)
					WHERE 1=1  AND ( 
  wp_314_term_relationships.term_taxonomy_id IN (126)
) AND wp_314_posts.post_type = 'market-commentary' AND ((wp_314_posts.post_status = 'publish'))
					GROUP BY wp_314_posts.ID
					ORDER BY wp_314_posts.post_date DESC
					LIMIT 0, 5
				
    [posts] => Array
        (
            [0] => WP_Post Object
                (
                    [ID] => 66143
                    [post_author] => 90034
                    [post_date] => 2022-11-28 09:26:30
                    [post_date_gmt] => 2022-11-28 15:26:30
                    [post_content] => A More Positive 2023

Stocks continued to move higher last week, with the Dow back above 34,000 and officially closing at a new seven-month high along the way. After energy led the rally, several other sectors, including financials, health care, materials, and industrials are now participating and showing strength. This is encouraging and makes us more confident with our call that the bear market ended in mid-October.
  • We’re moving into a period that is traditionally strong for equities.
  • The consumer still looks healthy, and easing inflation will help.
  • Minutes from the Federal Reserve’s last meeting suggest the pace of rate hikes will slow.
  • Recession odds are higher, but that is not our base case.
More to consider as we head into 2023:
  • Year three of the presidential cycle (also called a pre-election year) is the best for stocks, with the S&P 500 up 16.8% on average since 1950.
  • Of the past 13 recessions, not one started in a pre-election year.
  • When the S&P 500 has closed lower during a midterm year (such as will likely happen this year), it was higher the following year every time (8 for 8) and up a very impressive 24.6% on average since 1950.
A Healthy Consumer Last week, a strong retail sales report boosted economic growth expectations for the fourth quarter. But the big question is whether consumer spending will remain strong in 2023. This is important because consumption, or lack thereof, will determine whether the U.S. will experience a recession over the next 12 months. Consumer spending accounts for 70% of GDP, so that’s pretty much the ball game. We believe the consumer is in a strong position for several reasons. Most consumers spend out of their wages, so it helps to look at overall income in the economy. The chart below shows the year-over-year growth in aggregate weekly earnings, i.e., weekly earnings across all workers, which can be attributed to three sources:
  • Employment growth: As more people become employed, overall income in the economy increases, driving more spending. Employment growth has been strong recently.
  • Hours worked: As people work more, they earn more and overall incomes go up. The number of hours worked has been falling in recent months, but that’s mostly a reversal from the significant jump during the pandemic.
  • Average hourly earnings: As workers earn more, overall incomes go up. Average hourly earnings have been hot over the past year, but they have slowed recently.
Aggregate earnings growth has slowed this year, from 11% to 8%. However, it is still higher than the pre-crisis pace of just under 5%. Employment growth will likely slow in 2023. Payroll gains have averaged about 289,000 over the past three months, but even half that number would create solid income growth comparable to pre-pandemic levels. Consumers Still Have Excess Savings Between April 2020 and July 2021, consumers saved an estimated $2.3 trillion over and above the pre-crisis trend. Much was due to fiscal policy, such as stimulus checks and expanded unemployment benefits. However, for the top 25% of earners, it was almost entirely due to reduced spending amid the pandemic. Over the past year, consumers have drawn down these excess savings by an estimated $800 billion. But savings are still high. Most of these excess savings are held by the top 50% of income earners. Inflation tends to hit lower-income workers harder, which means they probably had to draw on more of their excess savings to fund purchases. But the consumer got a big break recently in the form of retreating gas prices. Gas prices are now almost back to where they were on the eve of Russia’s invasion of Ukraine. In a sense, just like higher gas prices were effectively a tax on incomes, falling gas prices are akin to a tax cut. Consumers Still Have Borrowing Capacity  Credit card spending is rising, which is not surprising. Prices are higher and consumers are spending more (even adjusted for prices). But more important than total debt is the debt service burden for households, which is close to record lows. The chart below shows households’ debt service as a percent of disposable income. As of the end of the second quarter, this metric was at 9.6%, well below the pre-pandemic average of 11.2%. Also, credit utilization rates are still low. Consumers have yet to tap into their credit cards and home equity lines of credit to the same extent as before the pandemic hit. Utilization rates are also well below average levels over the past few decades. Easing Inflation is Positive for Consumers Excess savings were drawn down this year because income gains were not keeping up with prices. But as inflation eases, real incomes will likely start rising again, and the rate at which that excess savings pot gets depleted should slow down. Of course, the other side of more robust real incomes is that demand will be strong, which could keep inflation on the higher side. However, we on the Carson Investment Research Team believe inflation will ease due to idiosyncratic downward pressure, as the same forces that boosted inflation reverse. This should ease pressure on the Fed, and it looks like Fed members are recognizing that they’ve already done a lot by raising rates as much as they have. Minutes from the Fed’s November meeting suggest most officials favor a slowdown in the pace of interest rate increases. All in all, the consumer is in a good position as we go into 2023, raising the likelihood that consumption will remain strong over the next year — and that should help avoid a recession despite the rapid pace of interest rate hikes in 2022.   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 – 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. The NASDAQ 100 Index is a stock index of the 100 largest companies by market capitalization traded on NASDAQ Stock Market. The NASDAQ 100 Index includes publicly-traded companies from most sectors in the global economy, the major exception being financial services. Ryan is a non-registered associates of Cetera Advisor Networks. Compliance Case # 01565296 [post_title] => Market Commentary: A More Positive 2023 [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-a-more-positive-2023 [to_ping] => [pinged] => [post_modified] => 2022-11-28 09:40:32 [post_modified_gmt] => 2022-11-28 15:40:32 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65489 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 66137 [post_author] => 90034 [post_date] => 2022-11-21 10:24:17 [post_date_gmt] => 2022-11-21 16:24:17 [post_content] => It is Thanksgiving week, so we want to review a few reasons for investors to be thankful. Yes, it has been a tough year. But things are looking better, and we expect more improvement in 2023. Gridlock Can Be Good The first reason to be thankful is stocks have continued to rally off their October lows, and now we have another potential positive: gridlock.
  • Stocks continue to rally amid various concerns.
  • Gridlock in Washington could be another positive for stocks.
  • The U.S. consumer remains quite healthy — a reason to be thankful.
  • More positive signs point to inflation peaking and rolling over.
Midterm voting is over. While the official results aren’t quite in yet, we do know Congress will be split. As of now, Democrats hold 50 seats in the Senate, which means they will maintain control, while Republicans gained their 218th seat in the House, which means they will hold a slim majority. The bottom line is neither Democrats nor Republicans have large majorities in either chamber; in fact, they are both near historical lows. There’s an old saying that ‘gridlock is good’ for the markets, as Washington can’t do much when no one can agree. The chart below shows the S&P 500’s performance during the years of divided government since 1950. The average return for stocks was a very solid 15.7%, with only 1981 falling significantly and 2011 breaking even. The other years saw solid returns, suggesting gridlock indeed could be positive for the markets. Lastly, Republicans have a narrow majority in the House. At the time of this report, they are expected to have a three-seat majority, the narrowest margin their party has held since 2001 and 2002. We reviewed years with narrow margins and found they generally lead to larger gains. When the House majority is held by fewer than 20 seats, the S&P 500 has gained a median of 19.5% since World War II. Additionally, the first year of a new Congress with a narrow majority, which in this case would be 2023, has been higher nine of the past 10 times. The U.S. Consumer Remains Strong The next reason to be thankful is the consumer remains extremely strong. In fact, the consumer’s strength in the face of numerous obstacles is one of the biggest surprises of the year. Last week, October retail sales rose 1.3%, beating expectations for a 1% jump. Prior months were revised higher as well. One significant reason was stronger gasoline sales, which was a function of prices at the pump rebounding. But sales were also strong across most other areas, including auto sales, restaurant and bar sales, online spending, and even building materials. One way to account for higher prices across several of these categories is to look at “real retail sales,” i.e., sales adjusted for prices. Real sales rose 0.8% in October, which is the fastest pace in eight months. Real sales had slowed in the summer (May-August), but they are picking up again — a sign of rising “real” incomes thanks to a pullback in inflation. Real sales are now up 3% from December 2021 through October. And in real terms, consumers are spending 10% more than expected if we just extended the pre-pandemic trendline. That’s massive! Since consumer spending makes up nearly 70% of the U.S. economy, real sales offer another clue that a recession is not right around the corner. Many have been sounding the alarm, but with a consumer this strong we don’t see a recession on the horizon. And that’s definitely something to be thankful for. More Good News on Inflation As we noted last week, inflation at the consumer level is coming down quicker than expected. Used cars, apparel, and medical insurance all saw solid improvements. Additionally, rent and food inflation are finally showing signs of slowing as well. These sectors were significant contributors to the massive inflation spike. Last week also produced good news from inflation at the producer level. That’s positive for consumers, because if it costs less to produce goods, companies can sell them for lower prices. In fact, the Producer Price Index (PPI) in October fell 0.5% after falling significantly the last few months. The year-over-year pace is now about 11%, having decelerated from a peak of 19% in March 2022. It still has further to go to return to the pre-pandemic pace of about 2%, but the trend is very encouraging. All of this means less pressure on the Fed to continue its extremely aggressive stance on hiking rates to slow inflation. The Fed has given the patient a lot of medicine, and with real signs of improvement Fed members might pause to let the medicine work its magic. In fact, we think the odds of the Fed pausing rate hikes early next year are increasing greatly.   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 – 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. The NASDAQ 100 Index is a stock index of the 100 largest companies by market capitalization traded on NASDAQ Stock Market. The NASDAQ 100 Index includes publicly-traded companies from most sectors in the global economy, the major exception being financial services. Ryan and Sonu Varghese are non-registered associates of Cetera Advisor Networks. Crypto-Currencies, Digital Assets and other Block-Chain related technology (such as Bitcoin, Ethereum, NFTs and others) are not securities, not regulated, and not approved products offered by Cetera Advisor Networks LLC. Crypto-currencies and other block-chain related non-securities products cannot be recommended, offered, or held by the firm. Compliance Case # 01559707 [post_title] => Market Commentary: Gridlock Can Be Good [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-gridlock-can-be-good [to_ping] => [pinged] => [post_modified] => 2022-11-21 10:31:01 [post_modified_gmt] => 2022-11-21 16:31:01 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65478 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 66076 [post_author] => 90034 [post_date] => 2022-11-14 10:47:20 [post_date_gmt] => 2022-11-14 16:47:20 [post_content] => On the heels of a huge month for stocks in October, the bull continued to soar in November, as the S&P 500 had its best week since June and the NASDAQ had its best week since March. Sparking much of the rally was news that inflation has likely peaked and is finally slowing. We’ll discuss that more below, but the bottom line is this could be a major catalyst for a continuation of the rally. We noted recently that many bear markets have ended in October, and we continue to think the odds are above average that it happened once again.
  • Better-than-expected inflation data opened the door to more dovish monetary policy from the Federal Reserve.
  • Goods deflation buys time for services to ease, especially rents.
  • Stocks had a huge week on the back of softer inflation, even as crypto currencies imploded.
  • Midterm election results surprised, and the results are still uncertain.
  • Monetary policy remains the overarching concern.
Stocks have risen consistently during the six-month period from November through April of a midterm year, going back to World War II. One year after the midterm election, the market has also been higher every time. Conditions aren’t perfect, and we are aware of the many worries, including the fact that we don’t know who will control the House of Representatives yet. But the stock market is a discounting machine, and it has priced in a lot of bad news. Should we get any more good news on inflation, the war in Ukraine, or the economy, the rally could have plenty of legs left. A Very Encouraging Inflation Report, Including Goods Deflation (Finally) The October inflation report was probably the best one we’ve seen in about 15 months, especially because it contained so many encouraging signs. Let’s walk through it. Headline inflation rose 0.4% in October, as expected. Core inflation, which strips out volatile food/energy prices, and is arguably more important for the Fed, surprised. It rose 0.3% in October, below expectations for a 0.5% jump. This was the lowest monthly increase since September 2021. Headline inflation is up 7.8% over the past year. That’s high, but it has come down from 9.1% in June. The deceleration stems largely from falling energy prices. As the chart below shows, the lighter red bars have accounted for a smaller portion of inflation over the past few months. The chart also shows that food prices (dark red bars) continue to account for a large chunk of inflation.  But we got a break here as well. “Food at home,” i.e., groceries, which make up close to 9% of the inflation basket, rose just 0.4% in October. That’s the lowest in more than a year and well below the average 0.7% monthly increase that occurred over the first nine months of 2022. The Goods Deflation We’ve Been Waiting For Private inflation data has shown decelerating prices for goods outside of energy and food. At Carson, our chief market strategist, Ryan Detrick, wrote recently about collapsing used car prices. Retailers have been telling us for a while that they’re discounting items as well. We’ve just been waiting for the official inflation data to catch up, and it looks like that’s finally happening. A broad list of goods, including used cars, saw prices fall in October, which is what makes it even more encouraging. The items below make up about 11% of the inflation basket (and 14% of the core basket). Falling household goods prices probably reflect the slowdown in residential activity, as home sales collapse amid higher mortgage rates. Are Rents Breaking? The best part about goods deflation is it offsets high services inflation. As the chart below shows, vehicles (blue bars) are now below the zero line for the second month in a row. We also got good news in the form of medical care services, which was a function of falling health insurance premiums. The largest sector of the inflation basket is shelter, including rents on primary residences and “Owners’ Equivalent Rent” (OER), which is the “implied rent” that owner-occupants would have to pay if they were renting their homes. The latter is also determined using rents of equivalent homes. In other words, OER is effectively a measure of rents, and altogether rents make up a whopping 40% of the core inflation basket. Rents have been rising, putting a lot of upward pressure on core inflation. As shown in the previous chart, housing (gray bars) grew larger and larger over the past year. However, market rents have decelerated quite rapidly over the last few months. The problem is this movement hasn’t shown up in the official inflation data because of methodological reasons (we wrote about this quite extensively). But the official rental data may be beginning to turn. Rent of primary residences rose 0.7%, and OER rose 0.6% in October. These are smaller increases than what we’ve seen over the previous couple of months. Make no mistake, a 0.7% rise is still a lot — it translates to an annualized pace of 9%, which is why the Fed is really worried about it. But hopefully the October report is a sign that the official data is beginning to turn lower. A Soft Inflation Print Acts as a Pressure Release Valve The softer-than-expected core inflation print was the catalyst for the S&P 500 Index gaining 5.5% on the day the inflation report was released, marking its best day since April 2020. The chart below shows some historical perspective for days that saw more than 5% gains. One year later, markets were up 91% of the time, with an average return of almost 28%. The market’s response shows how much negativity and expected hawkishness from the Fed has been priced in. A soft report was like a pressure release valve. We Need Time, and the Inflation Data Bought Us Time One month does not make a trend, but the October inflation report was still very positive. Several leading indicators have shown decelerating prices. (We’ve written about this here and here.) The official data is clearly lagging, but the timing of the inflection point was uncertain. And it looks like we may have just gotten it. This report is important for two main reasons: Firstly, the goods deflation in October offset the upward pressure from strong price increases in services, which is primarily rents. It effectively buys time for official rental data to catch up to the private data, which are showing a rapid decline in rents. Two, it buys time for the Fed. If this was yet another hot inflation print, that would have put enormous pressure on the Fed to go for a 75 bps (0.75%) increase in December. But now it looks like a 50 bps increase is the most likely scenario, assuming the November CPI report doesn’t surprise us by coming in hot. Investor expectations have shifted significantly. The probability of a 50 bps hike has gone from a near coin flip (57%) to 85%. An interesting point Fed Chair Jerome Powell made a couple of weeks ago was that improved inflation data is not a precondition for slowing the pace of rate hikes. Instead, it’s the terminal rate that matters. The terminal rate is the highest rate the Fed will hike up to this cycle, and at the September meeting, Fed members released projections estimating it to be around 4.6%. Markets have expected this number to move close to 5% when the Fed releases new projections at its December meeting. If the October inflation numbers had come in hot, there would have been a lot of pressure on Fed officials to take the terminal rate projection well above 5%. But this report eases that pressure, and investors are currently looking at a terminal rate just shy of 5%. We also saw a marked downshift in policy rate expectations one to three years from now. That makes sense. If inflation decelerates quickly, then rates don’t have to be as high as previously expected. Of course, a lot will happen between now and then. This is why we focus on the near term as far as investor expectations and Fed projections go. They can change significantly. Last week was a big one with some major events, including the midterm elections and the crypto mess. But we were once again reminded that the overarching concerns right now are the Fed’s next steps, and for that, look to inflation.   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 – 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. The NASDAQ 100 Index is a stock index of the 100 largest companies by market capitalization traded on NASDAQ Stock Market. The NASDAQ 100 Index includes publicly-traded companies from most sectors in the global economy, the major exception being financial services. Ryan and Sonu Varghese are non-registered associates of Cetera Advisor Networks. Crypto-Currencies, Digital Assets and other Block-Chain related technology (such as Bitcoin, Ethereum, NFTs and others) are not securities, not regulated, and not approved products offered by Cetera Advisor Networks LLC. Crypto-currencies and other block-chain related non-securities products cannot be recommended, offered, or held by the firm. Compliance Case # 01550993 [post_title] => Market Commentary: A Big Bounce [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-a-big-bounce [to_ping] => [pinged] => [post_modified] => 2022-11-14 11:01:56 [post_modified_gmt] => 2022-11-14 17:01:56 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65444 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 66032 [post_author] => 90034 [post_date] => 2022-11-07 12:35:58 [post_date_gmt] => 2022-11-07 18:35:58 [post_content] => As expected, the Federal Reserve raised the federal funds rate by 0.75% to the 3.75-4% range on Wednesday. This was the fourth successive 0.75% hike. The initial market focus was on a new line inserted in the official statement, wherein the Fed nodded in the direction of decelerating the pace of rate hikes. Markets reacted positively to this, but Chair Jerome Powell was quick to remind investors that the level of rates matters more than the pace to get there. And Fed officials think the level (or “terminal rate”) should be higher than what they thought it should be in September. That immediately sent stocks into sharp negative territory.
  • The Federal Reserve raised rates by 0.75% for the fourth consecutive time.
  • The Fed nodded in the direction of decelerating the pace of rate hikes, but rates are likely to keep climbing.
  • Some stock market weakness after a huge October is normal, but November is still a strong month historically.
  • Stocks have been higher a year after midterm elections ever since World War II.
  • The employment picture remains strong, with 263,000 jobs created in October.
  • Wage growth is slowing, and that should ease the Fed’s concerns about wages driving persistent inflation.
However, none of this was new news. Fed members projected the terminal rate to be around 4.6% at their September meeting, and markets were quick to price that. Then, in mid-October, a hot inflation report sent expectations even higher. Expectations for the terminal rate crept up to above 5% prior to last week’s meeting, and they haven’t moved much since then, even after Powell’s comments. Investors are clearly ahead of the Fed now, as they expect updated terminal rate projections at the Fed’s December meeting to come in around 5-5.2%. All in all, we’re probably looking at another 1-1.25% worth of rate increases over the next four to six months. But the Fed may very well slow the pace down, perhaps raising rates by “only” 0.5% at its December meeting. Midterm Elections are Here As the midterm elections have approached, we’ve received numerous questions on the potential impact. On the Carson Investment Research team, we encourage clients not to mix politics with investing. We know that investors who stayed out of the markets because they disliked previous administrations missed out on significant gains. As past elections have shown, the party that lost the prior presidential election is typically more motivated and gains seats in the Senate and House. Should this pattern hold again and the Republicans take both chambers of Congress, stocks will likely benefit as divided government bodes well for the markets. A Democratic president and Republican-controlled Congress has seen the S&P 500 gain more than 16% on average during the calendar year. This occurred in the late 1990s under President Bill Clinton. If the Democrats keep control of the Senate, the market impact is about a coin flip. But the good news is a Democratic president with a split Congress is also a bullish scenario. The overall picture, and good news, is the year following a midterm election has been positive in 20 out of 20 years since WWII, with an average return of 14.1%. While it is not guaranteed to happen again, the outlook based on history is positive. The Carson Investment Research team recently chatted with Libby Cantrill from PIMCO on the firm’s new podcast, Facts vs Feelings. Libby is an expert who helps investors understand the intersection of politics, policy, and markets. A Tale of Two Employment Reports The October payroll report offered a mixed picture. Two headline numbers stand out:
  • Nonfarm payrolls rose by 261,000, which was more than an expected increase of 200,000.
  • The unemployment rate rose to 3.7%.
The first headline suggests that employment is strong and the economy is resilient to higher interest rates, so far. That means we could see the Fed push interest rates even higher than what’s currently expected. The logic: strong employment = higher incomes = more spending = persistent inflation, and so more rate hikes are needed to reverse this process. The second headline suggests the labor market is weakening. That means the Fed should be on track to pause soon, as weak employment should eventually result in lower inflation. What’s important to understand is the two headline numbers come from two different employment reports. The so-called “establishment survey” is where the nonfarm payrolls data (along with hours worked and wages data) come from. It’s a survey of about 131,000 non-agricultural businesses and government agencies, representing about 670,000 worksites. The other survey is the household survey, and that is where the unemployment rate comes from, along with several other ratios, including the labor force participation rate and the employment-population ratio. It’s a survey of about 60,000 households and gathers information on employment, unemployment, and other labor-force-related data (age, education, part-time/full-time jobs, etc.). The household survey is smaller than the establishment survey, and as a result the numbers tend to be more volatile. It also tends to be more useful to track ratios such as the unemployment rate, and another advantage is it doesn’t get revised. The establishment data can get revised, and we’ve seen large revisions to payrolls in the past, often months or years later. In the October report, the unemployment rate rose because the household survey showed the number of unemployed persons rose. The survey also showed the number of employed workers fell by 328,000, which is completely opposite of what the establishment report showed (+261,000). That’s a massive difference of almost 600,000. But this is not unusual, as the chart below illustrates. As the chart shows, the difference between employment gains reported by the two surveys was larger in April and June of this year. In April, nonfarm payrolls rose by 368,000, while the household survey reported employment fell by 353,000. In June, nonfarm payrolls rose by 293,000, but the household survey saw employment falling by 315,000. It goes the other way, too. In January, the household survey saw employment rise by 1.2 million, while nonfarm payrolls rose “only” 504,000. However, both surveys reveal a similar picture over time. Over short periods of time, one survey can accelerate much faster than the other. During the height of the pandemic (Mar-Apr 2020), the household survey reported significantly more job losses than the establishment survey: 25.5 million vs. 22 million. But the household survey caught up and even ran ahead of the establishment survey through January of this year. Now the establishment data is powering ahead while the other slows. So, is the job market weak or not? That’s the big question. Given the volatility of the numbers in the household survey, I tend to put more weight on the establishment data, with the caveat that establishment payroll data can be revised, although markets (and the Fed) react to current data. A more nuanced view is the employment situation is clearly slowing. But 261,000 jobs created in a month is still very strong. In fact, over the 20 years through 2019, a period that covered two economic expansions, the average monthly job gains in months when payrolls grew was about 182,000. And over the three years prior to the pandemic (Mar 2017-Feb 2020), payroll growth averaged about 186,000 per month. Now, the unemployment rate has increased to 3.7%, but one month does not make a trend. The same thing happened in August when the unemployment rate rose from 3.5% to 3.7% before falling back to 3.5% in September. What Matters (to the Fed) is Wage Growth A key piece of information in the payroll reports is average hourly earnings. This is the mechanism through which the Fed believes it can (and needs to) pull down inflation. From the Fed’s perspective, weakening the labor market will reduce income growth, and that should ultimately reduce spending power and inflation. Wage growth is in a clear downtrend. Average hourly earnings ticked slightly higher for private workers last month, but over the past three months it’s grown at an annualized pace of 3.9%, well below the past year’s pace and not much above the pre-pandemic pace of 3.1%. In fact, for production and non-supervisory workers, who tend to spend more of their incomes, the three-month pace of wage growth has fallen to 4.3%, down from 7.5% at the end of last year and approaching the pre-pandemic rate of 3.4%. The good news is wage growth appears to be slowing even as employment remains strong. This is the “soft landing” scenario: wage pressure and inflation easing without a breakdown of the labor market, which runs counter to what the Fed believes will (and should) happen. Hopefully, easing wage pressure means the Fed doesn’t have to ratchet rates higher and higher. We just need inflation to cooperate, and that depends on a lot more than wages.   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 – 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. The NASDAQ 100 Index is a stock index of the 100 largest companies by market capitalization traded on NASDAQ Stock Market. The NASDAQ 100 Index includes publicly-traded companies from most sectors in the global economy, the major exception being financial services. Compliance Case # 01543039 [post_title] => Market Commentary: A Dovish Statement Reversed by a Hawkish Powell [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-a-dovish-statement-reversed-by-a-hawkish-powell [to_ping] => [pinged] => [post_modified] => 2022-11-07 12:44:14 [post_modified_gmt] => 2022-11-07 18:44:14 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65411 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 65998 [post_author] => 90034 [post_date] => 2022-10-31 09:19:52 [post_date_gmt] => 2022-10-31 14:19:52 [post_content] => Stocks ended another strong week, continuing the trend of buyers stepping up in October. Several years have seen October kill off bear markets, and 2022 may join that list. In fact, the only two years that started off worse for the S&P 500 than 2022 were 1974 and 2002, and both of those vicious bears ended in early October.
  • The October rally continues, with the Dow approaching one of its largest gains ever.
  • Historical returns indicate the next six months could be very strong.
  • Earnings season has been strong overall, but some high-profile tech misses are getting all the headlines.
  • Economic growth picked up in the third quarter, with GDP rebounding to 2.6% after two negative quarters.
  • There is marked divergence under the hood. Strong services consumption is being countered by falling housing activity amid surging mortgage rates.
Tech has lagged recently, and many big names have disappointed during this earnings season. While financial news is focused on tech’s underperformance, many other sectors are experiencing positive earnings growth, suggesting the economy is likely stronger than most economists think. The Dow is up more than 14% in October, marking the best October return ever and potentially the best month since 1976. The good news is huge monthly gains are not typically followed by poor performance. Historically, stocks tend to do quite well after big months. Since World War II there have been 11 months in which the Dow rose at least 10%, and a year later stocks had gained another 16% on average. In other words, big moves like October’s surge tend to take place closer to the start of a bull market, not the end. The Best Six Months Are Finally Here History tells us that midterm-election years can be rough for stocks, especially early in the year. However, the months following the election are some of the best of the entire four-year presidential cycle. In fact, November through April during a midterm year has been higher each of the past 18 years. We are optimistic a major market low is taking place currently, and this is yet another clue that better times could be coming. Remember, the stock market doesn’t look in the rearview mirror; it is always looking forward. Just because the past has been poor doesn’t mean the future will follow suit.   Earnings Dominated by Negative Tech Headlines Just about half the companies in the S&P 500 have reported earnings for the third quarter, but some large tech misses have dominated headlines. Technology makes up a significant part of the S&P 500 index, but other important sectors have done well. The energy sector reported several positive earnings surprises. While energy makes up just about 5% of the index, it is the biggest contributor to the S&P 500’s revenues and earnings. Also notable is the airlines industry reported a profit of $3 billion in the third quarter compared to a loss of $731 billion a year ago. That’s a reflection of strong consumer spending on the services side, even as goods consumption has slowed. The blended profit margin for the S&P 500 is 12%, which is higher than the five-year average of 11.3% and only slightly below last quarter’s 12.2%. Economic Growth Picked Up, But Much Goes on Behind the Data On the face of it, the third quarter GDP report was very positive, with growth rebounding to 2.6% quarter-over-quarter (annualized). This pushed back the question of whether the economy is in a recession, although many of these numbers can and will be revised in the future. But make no mistake, growth has slowed considerably this year. The economy grew 0.1% over the first three quarters of 2022, compared to 4.1% over the last three quarters of 2021. As with much of this data, it’s always useful to look under the hood. In this case, a breakdown of how the various major components of GDP contributed to growth in the third quarter: The biggest single contributor to GDP growth was “net exports,” which is exports minus imports. Exports surged 14% during the quarter (annualized rate) even as goods imports fell by almost 9%. Foreigners bought more U.S. goods and services as Americans cut back on goods spending. This category tends to be volatile, so it’s advisable to view it in a broader context. The numbers came down to two competing stories: services versus residential investment, i.e. housing. As the chart above shows, goods consumption was a drag on GDP growth in the third quarter. Spending on goods fell about 1%, mostly driven by fewer purchases of cars, gasoline, and groceries. But consumers did spend — they just spent a lot on services. While services spending slowed from a torrid 4.6% pace in the second quarter, that was never sustainable. For perspective, the 2.8% pace in the third quarter is well above the average pace of services spending prior to the pandemic (about 1.7%). On the other side was residential investment, which makes up only about 3% of GDP. It completely negated the strong services number by falling a whopping 26% over the third quarter! The reason is clear — an aggressive Federal Reserve hiking rates to get on top of inflation. Interest rate increases have led to a surge in mortgage rates, which in turn has led to a complete reversal of housing activity. Residential investment consists of three main components: home construction (single-family and multi-unit), improvements/renovations, and broker commissions/other costs related to sales. As the chart below shows, each of these components crashed last quarter, especially single-family construction as builders pulled back and brokers’ commissions as sales activity fell. Housing activity is plunging, and expect that to continue as mortgage rates rise above 7%. The good news is that decline is currently being countered by spending on services, powered by rising incomes and strong balance sheets.   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 – 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. The NASDAQ 100 Index is a stock index of the 100 largest companies by market capitalization traded on NASDAQ Stock Market. The NASDAQ 100 Index includes publicly-traded companies from most sectors in the global economy, the major exception being financial services. Compliance Case # 01535775 [post_title] => An Incredible Month for the Markets [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => an-incredible-month-for-the-markets [to_ping] => [pinged] => [post_modified] => 2022-11-01 10:52:43 [post_modified_gmt] => 2022-11-01 15:52:43 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65388 [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] => 66143 [post_author] => 90034 [post_date] => 2022-11-28 09:26:30 [post_date_gmt] => 2022-11-28 15:26:30 [post_content] => A More Positive 2023 Stocks continued to move higher last week, with the Dow back above 34,000 and officially closing at a new seven-month high along the way. After energy led the rally, several other sectors, including financials, health care, materials, and industrials are now participating and showing strength. This is encouraging and makes us more confident with our call that the bear market ended in mid-October.
  • We’re moving into a period that is traditionally strong for equities.
  • The consumer still looks healthy, and easing inflation will help.
  • Minutes from the Federal Reserve’s last meeting suggest the pace of rate hikes will slow.
  • Recession odds are higher, but that is not our base case.
More to consider as we head into 2023:
  • Year three of the presidential cycle (also called a pre-election year) is the best for stocks, with the S&P 500 up 16.8% on average since 1950.
  • Of the past 13 recessions, not one started in a pre-election year.
  • When the S&P 500 has closed lower during a midterm year (such as will likely happen this year), it was higher the following year every time (8 for 8) and up a very impressive 24.6% on average since 1950.
A Healthy Consumer Last week, a strong retail sales report boosted economic growth expectations for the fourth quarter. But the big question is whether consumer spending will remain strong in 2023. This is important because consumption, or lack thereof, will determine whether the U.S. will experience a recession over the next 12 months. Consumer spending accounts for 70% of GDP, so that’s pretty much the ball game. We believe the consumer is in a strong position for several reasons. Most consumers spend out of their wages, so it helps to look at overall income in the economy. The chart below shows the year-over-year growth in aggregate weekly earnings, i.e., weekly earnings across all workers, which can be attributed to three sources:
  • Employment growth: As more people become employed, overall income in the economy increases, driving more spending. Employment growth has been strong recently.
  • Hours worked: As people work more, they earn more and overall incomes go up. The number of hours worked has been falling in recent months, but that’s mostly a reversal from the significant jump during the pandemic.
  • Average hourly earnings: As workers earn more, overall incomes go up. Average hourly earnings have been hot over the past year, but they have slowed recently.
Aggregate earnings growth has slowed this year, from 11% to 8%. However, it is still higher than the pre-crisis pace of just under 5%. Employment growth will likely slow in 2023. Payroll gains have averaged about 289,000 over the past three months, but even half that number would create solid income growth comparable to pre-pandemic levels. Consumers Still Have Excess Savings Between April 2020 and July 2021, consumers saved an estimated $2.3 trillion over and above the pre-crisis trend. Much was due to fiscal policy, such as stimulus checks and expanded unemployment benefits. However, for the top 25% of earners, it was almost entirely due to reduced spending amid the pandemic. Over the past year, consumers have drawn down these excess savings by an estimated $800 billion. But savings are still high. Most of these excess savings are held by the top 50% of income earners. Inflation tends to hit lower-income workers harder, which means they probably had to draw on more of their excess savings to fund purchases. But the consumer got a big break recently in the form of retreating gas prices. Gas prices are now almost back to where they were on the eve of Russia’s invasion of Ukraine. In a sense, just like higher gas prices were effectively a tax on incomes, falling gas prices are akin to a tax cut. Consumers Still Have Borrowing Capacity  Credit card spending is rising, which is not surprising. Prices are higher and consumers are spending more (even adjusted for prices). But more important than total debt is the debt service burden for households, which is close to record lows. The chart below shows households’ debt service as a percent of disposable income. As of the end of the second quarter, this metric was at 9.6%, well below the pre-pandemic average of 11.2%. Also, credit utilization rates are still low. Consumers have yet to tap into their credit cards and home equity lines of credit to the same extent as before the pandemic hit. Utilization rates are also well below average levels over the past few decades. Easing Inflation is Positive for Consumers Excess savings were drawn down this year because income gains were not keeping up with prices. But as inflation eases, real incomes will likely start rising again, and the rate at which that excess savings pot gets depleted should slow down. Of course, the other side of more robust real incomes is that demand will be strong, which could keep inflation on the higher side. However, we on the Carson Investment Research Team believe inflation will ease due to idiosyncratic downward pressure, as the same forces that boosted inflation reverse. This should ease pressure on the Fed, and it looks like Fed members are recognizing that they’ve already done a lot by raising rates as much as they have. Minutes from the Fed’s November meeting suggest most officials favor a slowdown in the pace of interest rate increases. All in all, the consumer is in a good position as we go into 2023, raising the likelihood that consumption will remain strong over the next year — and that should help avoid a recession despite the rapid pace of interest rate hikes in 2022.   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 – 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. The NASDAQ 100 Index is a stock index of the 100 largest companies by market capitalization traded on NASDAQ Stock Market. The NASDAQ 100 Index includes publicly-traded companies from most sectors in the global economy, the major exception being financial services. Ryan is a non-registered associates of Cetera Advisor Networks. Compliance Case # 01565296 [post_title] => Market Commentary: A More Positive 2023 [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => market-commentary-a-more-positive-2023 [to_ping] => [pinged] => [post_modified] => 2022-11-28 09:40:32 [post_modified_gmt] => 2022-11-28 15:40:32 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?post_type=market-commentary&p=65489 [menu_order] => 0 [post_type] => market-commentary [post_mime_type] => [comment_count] => 0 [filter] => raw ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 129 [max_num_pages] => 26 [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] => [allow_query_attachment_by_filename:protected] => [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 ) )

Market Commentary

Market Commentary

Market Commentary: A More Positive 2023

A More Positive 2023 Stocks continued to move higher last week, with the Dow back above 34,000 and officially closing at a new seven-month high along the way. After energy led the rally, several other sectors, including financials, health care, materials, and industrials are now participati …
Continue Reading!
Array
(
    [showposts] => 5
    [post_type] => monthly-newsletters
    [post_status] => publish
)
WP_Query Object
(
    [query] => Array
        (
            [showposts] => 5
            [post_type] => monthly-newsletters
            [post_status] => publish
        )

    [query_vars] => Array
        (
            [showposts] => 5
            [post_type] => monthly-newsletters
            [post_status] => publish
            [error] => 
            [m] => 
            [p] => 0
            [post_parent] => 
            [subpost] => 
            [subpost_id] => 
            [attachment] => 
            [attachment_id] => 0
            [name] => 
            [pagename] => 
            [page_id] => 0
            [second] => 
            [minute] => 
            [hour] => 
            [day] => 0
            [monthnum] => 0
            [year] => 0
            [w] => 0
            [category_name] => 
            [tag] => 
            [cat] => 
            [tag_id] => 
            [author] => 
            [author_name] => 
            [feed] => 
            [tb] => 
            [paged] => 0
            [meta_key] => 
            [meta_value] => 
            [preview] => 
            [s] => 
            [sentence] => 
            [title] => 
            [fields] => 
            [menu_order] => 
            [embed] => 
            [category__in] => Array
                (
                )

            [category__not_in] => Array
                (
                )

            [category__and] => Array
                (
                )

            [post__in] => Array
                (
                )

            [post__not_in] => Array
                (
                )

            [post_name__in] => Array
                (
                )

            [tag__in] => Array
                (
                )

            [tag__not_in] => Array
                (
                )

            [tag__and] => Array
                (
                )

            [tag_slug__in] => Array
                (
                )

            [tag_slug__and] => Array
                (
                )

            [post_parent__in] => Array
                (
                )

            [post_parent__not_in] => Array
                (
                )

            [author__in] => Array
                (
                )

            [author__not_in] => Array
                (
                )

            [ignore_sticky_posts] => 
            [suppress_filters] => 
            [cache_results] => 1
            [update_post_term_cache] => 1
            [update_menu_item_cache] => 
            [lazy_load_term_meta] => 1
            [update_post_meta_cache] => 1
            [posts_per_page] => 5
            [nopaging] => 
            [comments_per_page] => 50
            [no_found_rows] => 
            [order] => DESC
        )

    [tax_query] => WP_Tax_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => AND
            [table_aliases:protected] => Array
                (
                )

            [queried_terms] => Array
                (
                )

            [primary_table] => wp_314_posts
            [primary_id_column] => ID
        )

    [meta_query] => WP_Meta_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => 
            [meta_table] => 
            [meta_id_column] => 
            [primary_table] => 
            [primary_id_column] => 
            [table_aliases:protected] => Array
                (
                )

            [clauses:protected] => Array
                (
                )

            [has_or_relation:protected] => 
        )

    [date_query] => 
    [request] => 
					SELECT SQL_CALC_FOUND_ROWS  wp_314_posts.ID
					FROM wp_314_posts 
					WHERE 1=1  AND wp_314_posts.post_type = 'monthly-newsletters' AND ((wp_314_posts.post_status = 'publish'))
					
					ORDER BY wp_314_posts.post_date DESC
					LIMIT 0, 5
				
    [posts] => Array
        (
            [0] => WP_Post Object
                (
                    [ID] => 64602
                    [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://lionsgatewm1.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] => 64578 [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://lionsgatewm1.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] => 64475 [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://lionsgatewm1.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] => 64422 [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://lionsgatewm1.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] => 64327 [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://lionsgatewm1.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] => 64602 [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://lionsgatewm1.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] => [allow_query_attachment_by_filename:protected] => [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 ) )

Newsletters

Newsletters

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 …
Continue Reading!