This is an unusual year-end tax planning season. The pace of federal tax law reform has increased in the four decades and accelerated since the pandemic.
It’s only mid-September, but please begin to think about year-end tax planning. This is an unusual year for tax planning. Not only has the stock market been volatile but new rules about distributions from IRAs and federally qualified retirement plans (QRPs) – such as 401(k), 403(b) and defined benefit plans –became effective this year, and the newly-enacted Inflation Reduction Act also adds some planning opportunities.
In case you missed it, sweeping new rules on distributions from IRA And Qualified Retirement Plans (QRPs) went into effect at the beginning of 2022.
This is a heads up for anyone deciding on how to designate beneficiaries of an IRA based on advice from an IRA custodian call-center employee.
The unusual financial economic events of the last couple of years have caused great financial disappointment for some Americans.
The extreme financial effects of the COVID-19 pandemic seemed unprecedented to most investors. Over the past two years, Americans witnessed a sudden stop financial crisis in March 2020, the injection of nearly $10 trillion of monetary and fiscal stimulus within a matter of months, and an unanticipated burst of inflation that caught even the Federal Reserve off guard. The truth, however, is that these events seem anomalous only because many historical parallels have disappeared from our collective memory. In fact, there are no living Americans who recall the two most relevant events — the onset of World War I in July 1914 and the post-World War I/Great Influenza inflation of 1919-1920.
Inflation cooled in June, according to Labor Department data. Compared to the +9.1% inflation rate in the 12 months through June 30, the consumer price index (CPI) in the 12 months through July 31 increased by +8.5%. The Standard Poor's 500 rallied +2.1%.
In the three tumultuous months of the second quarter, the Federal Reserve of Atlanta’s algorithm for estimating quarterly economic growth was far more accurate than consensus forecasts by leading economists. That’s unusual.
Volatility in the stock market has increased. Recently we actually hit some down days of -3.6% and -4% in the stock market. That shakes people up. But remember why you bought stocks.
By our count, the bear market of 2022 is the latest of more than 20 market crises that came and went since 1957.
- Read More
Inflation Declined And Stocks Rallied Today
Published Thursday, August 11, 2022 at: 9:28 AM EDT
Inflation cooled in June, according to Labor Department data. Compared to the +9.1% inflation rate in the 12 months through June 30, the consumer price index (CPI) in the 12 months through July 31 increased by +8.5%. The Standard Poor’s 500 rallied +2.1%.
However, just because inflation cooled in July and may even have peaked does not mean the worst of the financial economic turbulence is behind us. For long-term retirement investors and individuals building family wealth for the next generation, it’s prudent to expect current conditions to worsen.
Long- term investors must always deploy assets fully mindful that the timing of the next stock market decline or surge is virtually impossible to predict. However, predicting that the U.S. will grow after the current turbulence subsides is easier and that fundamental economic driver should serve as the linchpin in a strategy to build wealth.
A bear market began on June 13, when the Standard Poor’s 500 stock index closed more than -20% lower than its all-time closing high on January 3. By the close on June 16, the S&P 500 stock price bottomed out with a loss of about -23%. That’s a much smaller loss than typical bear markets in the recent past of 30, 40, or -50%.
In addition, if the Federal Reserve raises lending rates by 75 basis points on September 28, as is widely expected, then the yield curve will be inverted, which means that 90-day Treasury Bills would yield more than 10-year Treasury Bonds. Inverted yield curves in modern history have usually been followed within months by a recession and bear market.
Remember, investing is only one aspect of planning for retirement and building intergenerational wealth. Are you integrating strategic tax and financial planning with your investments?
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.
©2022 Advisor Products Inc. All Rights Reserved.