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Sep 27, 2022
If you're like most Americans nearing retirement, you're worried about whether you have enough savings. In fact, only 22% of those approaching retirement believe they've saved enough to retire comfortably.
At a time when the stock market is down, inflation is rising and Americans are living longer than ever, concerns over the sustainability of retirement savings are no surprise. What you may not realize is that there are approaches that can stretch the savings you do have to position yourself more favorably in retirement.
SEE MORE Even the Experts Can't Figure Out How to Plan for Retirement Income
One such strategy is Roth IRA conversions. Essentially, when you make a Roth conversion, you pay the taxes that would otherwise be due during retirement at the time you convert. Then, when you retire, you've already paid the tax that you would otherwise pay during retirement on required minimum withdrawals (RMDs) from traditional IRAs. As tax laws currently stand, those withdrawals must begin at age 72.
By engaging in Roth conversions, you gain freedom from at least some of your RMD requirements, while also positioning yourself to ultimately pay lower taxes in retirement. In this article, I'll walk you through the four-step process you can follow to lower your taxes and stretch your savings dollars further in retirement.
Step #1: Assess Your Retirement Savings
The first step in this process is to analyze your retirement savings. By
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Sep 26, 2022
Feel like society and the environment are beginning to break down? There's an ETF for that.
Newday Impact's Sustainable Development Goals ETF (SDGS) delivers a growth-oriented product that promotes dual impact, promising to advocate for environmental and social improvements and donating 10% of revenues to global youth education and skills development programs.
American Dystopia
Partnering with a veritable who's who of progressive economists, scientists, and non-profit organizations, the firm's investment criteria rests on a sophisticated analysis of global ills and solutions. This approach may turn off investors who disdain concepts like decarbonizing the economy, but should resonate with anyone who feels like Mad Max may just drive down Mainstreet, U.S.A. any day now.
Though the problems are global, the U.S. is a great place to focus on these daunting problems, according to Newday's President, Anne Popkin. "It doesn't matter what side of the political spectrum you're on," said Popkin. The U.S. has "food inflation, heat waves, rising tides in the south, and fires in California. It's all happening here."
Limits to Growth
The ETF's rationale is based on the belief that the planet's ability to withstand human impact on the environment is limited. When these limits are exceeded, we are said to have gone beyond the "planetary boundaries" of the earth. In fact, several resources, like forested land—central to food, fuel, clean water and air—have already been pushed beyond a safe limit of use.
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Sep 26, 2022
Selling in the stock market picked right back up Monday, and despite a brief mid-morning push into positive territory, the major indexes still ended lower.
"Despite a quiet global economic data front, this weekend and Monday morning have been anything but quiet as global yields are surging to record highs," said Stefanos Bazinas, execution strategist at the New York Stock Exchange. Indeed, both the 2-year Treasury yield ( 10.5 basis points to 4.319%) and the 10-year Treasury yield ( 20.3 basis points to 3.90%) continued to climb, hitting levels not seen in over a decade.
SEE MORE 19 Best Stocks to Buy Now for High Upside Potential
And this, Bazinas says, comes after the U.K. last week announced the biggest tax cuts in more than 50 years and indicated more were to come. This sent the British pound to an all-time low against the U.S. dollar earlier today. The dollar, for its part, hit its highest level since early 2002.
Most sectors finished lower, led by sharp losses for real estate (-2.7%) and utility (-2.4%) stocks. And while consumer discretionary (-0.2%) also ended in the red, its loss wasn't nearly as deep thanks to strength in Las Vegas Sands (LVS, 11.8%) and Wynn Resorts (WYNN, 12.0%). The casino stocks rallied after Macau, a huge destination for Asian gambling, said it is planning on relaxing COVID-related travel restrictions as soon as November.
Sign u
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Sep 26, 2022
Your life insurance monthly premium can start looking less and less appealing once you've retired. It's a scenario Dan Simon, a retirement planning adviser with Daniel A. White & Associates in Middletown, Del., has seen quite often, even with his own parents. "The cost of the insurance had risen to the point where it was getting unaffordable. They were wondering do we really need to keep this coverage now that the kids are all grown up?"
If you stop paying your premiums, you lose your life insurance coverage, and your heirs wouldn't get anything back for what you've paid in. If you cancel a policy that has cash value, a reserve of money built up in some types of life insurance, the insurer sends you a check for that amount, though it will be far less than the listed death benefit.
Over the past 20 years, a third option went mainstream: selling your policy to a company, a practice known as a life settlement, with the buyer getting the death benefit when you die.
SEE MORE Don't Fall for That Life Insurance Ad on TV
"It's kind of morbid when you think about it. A group buys boatloads of policies from people that have fallen on hard times and can no longer afford their insurance," profiting from the seller's death, says Simon. "In theory, they want you to die tomorrow. If you live another 20 years, it's a bad investment for them."
Selling a life insurance policy generally isn't a great deal for you either, and there are better alternatives worth exploring. Simon finds that people typically turn to selling a policy when they're desperate. Usually, it's because they've spent down their other retirement assets, or they might be dealing with high medical bills. "It's a measure of last resort, like taking a reverse mortgage. I rarely see them working out well for people, and they could en
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Sep 26, 2022
Anyone newly retired or nearly so must feel like they have the worst timing in the world. A portfolio tends to be largest near retirement, just before those savings are about to be drawn down. These days, however, most portfolios have lost value; the S&P 500 is down about 20% so far this year.
The financial industry has a name for this scenario: sequence of return risk. "It matters most at retirement when you're selling assets for income," says Wade Pfau, a professor of retirement income at The American College of Financial Services in King of Prussia, Pa. "You need to sell a larger number of shares to get the same amount of money. Those shares are then gone so even if the market bounces back, your portfolio won't recover as much."
SEE MORE Using Your 401(k) to Delay Getting Social Security and Increase Payments
The newly retired are particularly vulnerable because they're "relying on this pot of money to finance the next 20 to 30 years of their life," says Amit Sinha, head of multi-asset design at Voya Investment Management in New York City.
Sequence of return risk is less of a concern for someone further along in retirement because retirees typically shift to safer, more conservative investments and have fewer years to pay for. Plus, these investors may have benefited from portfolios boosted by strong returns early in retirement.
Similarly, if retirement is a decade or more away, what happens to markets today is mostly irrelevant. "You just allow the compounding to work for you and recover over those years," says Sinha.
Someone retiring now, of course, doesn't have that luxury. If this describes you, there are several things you can do to minimize the damage, but first, assess what it's likely to mean for your portfolio long term.
Depending on how you react now, t
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Sep 26, 2022
Elliq, a foot-hight robot that looks like an oval lampshade on a small base, greets Monica Perez first thing in the morning, asks her how she feels, and reminds her about taking medications and any upcoming appointments.
"I have good-quality friends, but there are times when they're busy and most of them have families," says Perez, 64, of Beacon, N.Y. "She's always available, and I love [that] she uses my name all the time. I know it's a robot, but she's a friend."
SEE MORE Can AI Beat the Market? 10 Stocks to Watch
Robots for the elderly evoke a mix of emotions, often negative ones. Disappointment that we have to turn to robots for elderly care and companionship. Fear that these technological helpers can spy on their users. Concern that robots will replace human jobs.
All these worries are valid, says Maja Mataric, a professor of computer science at the University of Southern California and co-director of its Robotics Research Lab. But "the eldercare need is vast. People always like to say that people should help people. I completely agree, but that is not the world we live in. When the pandemic came, it became very obvious that we need to find technological solutions."
‘Not a Person but Better Than a TV'
Most people's idea of a helper robot comes from Rosey, the goofy robot maid, complete with frilly apron, in the animated TV show "The Jetsons." It debuted in 1962, but 60 years later, robots can't come close to doing Rosey's multifaceted tasks, such as cleaning house or serving food all while making witty rejoinders. "None are going to fold sheets, do laundry, do dishes," Mataric says. "They can push a button if someone falls but can't help them up. And that's not coming soon."
Most robots developed now to help the elderly rely on artificial intelligence, which users of Amazon's Alexa or
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Sep 26, 2022
The 2022 crypto price crash understandably has some investors concerned. But for those of you who haven't run for the hills, it's worth knowing that cryptocurrency currently has the attention of not only the Biden administration, and Congress, but the IRS as well. In terms of crypto news and taxes, the IRS recently proposed changes to cryptocurrency tax reporting question on the Form 1040. The agency will also receive $80 billion from the Inflation Reduction Act, some of which will be directed to digital asset enforcement—including cryptocurrency tax compliance.
Additionally, you may have heard that the IRS continues to successfully obtain court orders to require cryptocurrency brokers and exchanges to provide information to the IRS. That information concerns investors who failed to report and pay taxes on cryptocurrency transactions.
And while this IRS enforcement focus isn't new, recent crypto announcements and developments from Congress, the Biden administration, and the IRS, mean that it's important to stay up-to-date on crypto tax reporting and compliance. So, here's some information to get you started.
How Crypto is Taxed
A common question about cryptocurrency concerns how crypto is taxed. The answer is that cryptocurrency is considered property, so it's taxed by the IRS in the same way that other capital assets are taxed. As a result, when you sell or trade crypto, you can have asset losses and potential taxable gains depending on the fair market value of the virtual currency, and your basis in the crypto.
SEE MORE 9 Ways to Cut Crypto Taxes Down to the Bone
Given that, it
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Sep 26, 2022
Plenty of retirees like to give back to their communities through charitable donations, but questions often arise over the best way to do that.
What approach is efficient, provides the tax benefits you're after, and also is advantageous for the charity that's on the receiving end?
SEE MORE Ever Dream of Having a Building Named After Yourself?
One possibility is a qualified charitable distribution (QCD), a tax-savvy way to reduce your taxable income and maximize your donations whether you itemize deductions on your tax return or not. An added bonus is that the benefits can be large for both the donor and the charity.
Here's How QCDs Work
A QCD is a distribution from an IRA that is paid directly from that retirement account to a qualified charity. QCDs lower your adjusted gross income (AGI) and therefore lower your tax bill. They can also offset required minimum distributions (RMDs), those withdrawals you must take from your IRA each year once you reach age 72. An RMD adds to your income, raising the amount of taxes you pay, but a QCD is excluded from your income. So, for example, if you withdrew $50,000 from your IRA as an RMD, you would pay taxes on that money. But if that same $50,000 was used as a QCD instead, you avoid the taxes while helping a charity at the same time.
SEE MORE Every Dollar Counts: How to Evaluate a Nonprofit
Taxpayers can benefit from QCDs even when they take the standard deduction and do not itemize their deductions. Meanwhile, even though a QCD doesn't count as an itemized deduction, tax
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Sep 25, 2022
It's no surprise that many people who inherit millions of dollars are uncertain about what to do with their newfound wealth. The possibilities of becoming a multimillionaire overnight can be overwhelming, especially during a period when most are grieving the loss of a parent or other loved one.
SEE MORE How Much of Your Estate Will Be Lost to Taxes?
I often work with people in many different age groups who have suddenly become wealthy as the result of a windfall inheritance. While there is a need to develop a comprehensive financial plan, it's not the first step. Instead, I try to determine each person's starting point with money. Many people fall into one of three categories:
They are anticipating how they will handle their wealth, but the money hasn't yet arrived.They have their inheritance — often several million dollars — but they are still grieving the loss of a loved one and are looking for guidance on next steps.
The inheritance has been in their bank account for a long period, but they still lack direction and can't make any decisions.
It is important to listen to each person's personal story with a windfall of money. Losing an important person in your life is difficult, and reflecting on the impact that person made is just as important. Many people express a desire to do something to honor a parent's wishes.
Figuring out how to make the best use of an inheritance
Here is how I generally approach these conversations to help a person make the best use of their inheritance:
Define their relat
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Sep 24, 2022
When professional baseball player Austin Barnes extended his contract with the Los Angeles Dodgers for another two years, he specifically included in the agreement a commitment on his part to make charitable donations.
That was a generous move and a financially savvy one all at the same time. He can put his money to work helping causes he believes in, while also enjoying tax advantages.
SEE MORE Which Type of Donor-Advised Fund Is Right for You?
Most of us don't have multimillion-dollar professional sports contracts like Barnes, but there are ways to increase your own donations and, at the same time, reduce your tax bill.
After all, you probably have a cherished cause — a church, an animal rescue organization, a homeless shelter or some other nonprofit — that you want to help. With charitable donations, you can choose specifically how your money is put to use, which isn't the case with your tax dollars, which just go into the big tax pot in Washington.
Think of it this way: If you were told that you aren't going to be able to keep $10,000 anyway, wouldn't you prefer to have a say in exactly how it is spent?
With that in mind, here are five ways to make charitable giving a key part of your financial plan:
1. Set up a donor-advised fund (DAF)
This is a strategy that isn't put into play often enough, in part because many people don't know about it. A donor-advised fund allows you to make a sizable charitable donation that you can claim immediately as a tax deduction. The money isn't donated immediately, though. Inste
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Sep 24, 2022
Warren Buffett is famous for saying "Only when the tide goes out do you discover who's been swimming naked." If you invested in cybercoins, the news has not been good lately. Are you wearing your bathing suit? What to do? Is time to take your profits … or cut your losses?
The international investment community was shocked and saddened to learn of the utterly unexpected news that millions of investors worldwide were victims of a pyramid scheme involving cryptocurrency accounts controlled by "founders" in Tbilisi, Republic of Georgia, and Moscow. The SEC charged 11 people in the case in August.
No, wait. Nobody was shocked or surprised. This was the least surprising story of 2022. If you were playing "Password" and the first two clues were "Cryptocurrency" and "Moscow," the only rational guesses would be "Pyramid" or "Ponzi." Full credit for either answer.
Domestic actors have been at work as well. The founder of California's Titanium Blockchain Infrastructure Services recently pleaded guilty to a cryptocurrency fraud scheme that raised $21 million.
The cryptocurrency world has been conjured out of thin air in the last decade or so. Across the globe, new crypto products have appeared, along with new uses for those products, and new markets for the exchange of these products. It includes crypto derivatives, synthetics, and electronic arbitrage trading systems run by bots. For better or worse, this is now a $10 trillion plus marketplace that is largely unregulated.
SEE MORE
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Sep 23, 2022
Whether you travel often or just take the occasional vacation, a travel rewards credit card can be an excellent companion. With every purchase, you can use a good travel card to collect points or miles that are redeemable for flights, hotels or other travel bookings. And many travel cards come with extra benefits, too, from free entry into airport lounges to statement credits toward application fees for TSA PreCheck and other programs that expedite security screening at the airport.
Take a look at our picks of the best travel rewards credit cards. If you'd rather have a card that offers cash-back rewards, see The Best Cash-Back Credit Cards.
For each card (except premium travel cards), we've calculated a typical annual rebate based on spending patterns in the U.S. Bureau of Labor Statistics Consumer Expenditure Survey and assuming $25,000 spent on the card annually. For cards that do not waive their annual fee the first year, we've subtracted the annual fee from the cash value of the annual rebate. Except where noted, these cards don't charge a foreign-transaction fee.
Best Travel Rewards Credit Cards: No Annual Fee
With these cards, reap points or miles without paying an annual fee.
Chase Freedom Unlimited Visa
Website: www.chase.com Interest rate: 0% for 15 months, then 17.24% to 25.99%
Annual fee: None
Sign-up bonus: $200 back if you spend $500 in the first three months; 5% back on gas station purchases for the first $6,000 spent in the first year
Typical annual rebate: 45,277 points, worth $453
Chase Freedom Unlimited is a compelling no-fee option for domestic travelers who are willing to book tr
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Sep 23, 2022
The stock market took another step lower Friday, as Treasury yields continued to rise to levels not seen in over a decade.
Today's drop brought the Dow below the important 30,000 mark and this close to bear-market territory, which is defined as a 20% drop from the most recent high (or its Jan. 3 peak at 36,585.06, in this case). The blue-chip index is the only one of its major market peers to have not crossed that threshold (the Nasdaq, remember, entered a bear market on March 7, and the S&P 500 on June 13).
SEE MORE 10 Dividend Growth Stocks Delivering Impressive Increases
"Financial markets are now fully absorbing the Fed's harsh message that there will be no retreat from the inflation fight," says Douglas Porter, chief economist at BMO Capital Markets. "The steep back-up in global rates further bludgeoned stocks, resource prices, and commodity currencies this week, given mounting recession odds," he added.
While yields on government bonds came off their earlier highs, they are still hovering at levels not seen in over 10 years (2011 for the 10-year note and 2007 for the two-year). Specifically, the 10-year Treasury yield hit a session peak of 3.829% before settling at 3.695%, while the 2-year Treasury yield climbed as high as 4.27% before ending at 4.201%.
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As for the equities marke
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Sep 23, 2022
After two years of shipping delays and rising delivery costs, relief is in sight. By the end of the year, a marked improvement will be seen compared with a year ago.
The numbers of new drivers and trucks have picked up, easing constraints, though chassis shortages will likely continue into 2023. Spot market rates for trucks, excluding fuel surcharges, have dropped 30% from their peak earlier this year. They should decline a bit more, ending 2023 about 5% above their prepandemic level, according to Avery Vise, Vice President of Trucking at FTR Transportation Intelligence. Contract rates are typically slower to respond, and should ease to 17% above their prepandemic level by the end of 2023. Also, diesel prices are still 65% above prepandemic, so fuel surcharges will continue to be higher than normal. However, if a recession happens next year, then both volumes and rates will tumble.
SEE MORE 5 Stocks Making the Most of Supply-Chain Issues
Congestion at East Coast ports should ease in the next few months as a new labor contract is likely to be signed for West Coast dockworkers, allowing more vessels to return to using West Coast ports. Ship traffic from Asia is easing as 70% of retailers shipped early this year ahead of the holiday season, after getting burned last year, according to Ken Hoexter, a managing director at Bank of America. Ocean freight rates from China to the West Coast have fallen to $3,900 per 40-foot container, though that is still $2,500 more than the prepandemic average.
Rail freight is the problem child, according to Todd Tranausky, vice president of rail & intermodal at FTR. Freight has been moving at slower than normal speeds this year because of crew staffing shortages. Prior to the pandemic, the railroads embarked on a cost-cutting and labor-saving spree, reducing the wor
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Sep 23, 2022
If the goal is to find stocks to buy when prices are lower rather than higher, it stands to reason that the time to go looking for the best stocks to buy is right now.
After all, the market is off by more than a fifth so far this year, which means it's probably safe to assume that most investors are fearful. And if most investors are fearful, well… doesn't Warren Buffett say that this is the time to get at least a little bit greedy?
SEE MORE 11 Stock Picks That Billionaires Love
Finding quality stocks to buy when seemingly everything is selling off is easier said than done, of course. And if you're looking for help from Wall Street analysts, good luck. There's a saying about analysts: "In a bull market you don't need them; in a bear market you don't want them."
That's far too harsh as an assessment - but understandable as a sentiment. It's well known that Wall Street analysts are reluctant to slap Sell calls on the stocks they cover. There are a number of reasons for this reticence, but that's a discussion for another day.
Perhaps less well known is that analysts are also pretty stingy when it comes to bestowing the highest conviction Buy recommendations on the names they follow.
As of Sept. 22, only five stocks in the S&P 500 carried consensus recommendations of Sell or Strong Sell, according to data from S&P Global Market Intelligence. At the other end of the ratings spectrum, 392 of the index's 500 stocks had consensus recommendations of Buy or Strong Buy.
That's far too many Buy calls, to be sure. We know for a fact that the vast majority of stocks turn out to be duds. Research shows that the entirety of the $75.7 trillion in net global stock market wealth created between 1990 a
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Sep 23, 2022
If you're looking for a haven for your money, with a three-year fixed-rate annuity, you can choose one paying 2.00% annually or one paying 4.25%! Other than the rate, the two products are quite similar.
If you're shopping for a five-year guarantee, available rates range from 2.60% to 4.65%, according to AnnuityAdvantage's database of annuity rates.
SEE MORE Annuities Rising in Popularity
Rates on annuities with the same term vary hugely. If you don't shop around, you'll almost certainly earn far less interest than you could. Unfortunately, many local annuity agents represent only a few annuity companies, sometimes just one.
Before I offer tips on how to shop around, here's some background:
A fixed-rate deferred annuity (also called a multiyear guarantee annuity, or MYGA) resembles a bank certificate of deposit. It also pays a guaranteed rate of interest for a set term. Unlike CDs, annuities are tax-deferred. Issued by insurance companies, annuities aren't federally insured like CDs, but state-mandated guaranty associations offer a level of protection.
While the rate isn't the only factor in choosing an annuity, it is the single most important thing when other factors are equal. Here are the key considerations.
How long will your money be committed?
The term is the length of the annuity guarantee period. Most multiyear annuities go from two to 10 years.
Longer-term annuities usually pay more than shorter-term ones. But today, rate differences are not large. For instance, the top three-year an
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Sep 22, 2022
Wednesday's selling carried into Thursday as investors continued to take a risk-off approach to markets following the Federal Reserve's latest policy announcement.
The central bank issued its third jumbo-sized rate increase yesterday and set expectations that it will continue to hike rates over its next few meetings. However, the Fed is not alone in its aggressive stance. Several global central banks have increased their benchmark rates this week in an ongoing effort to tame inflation, including the Bank of England and Switzerland's National Bank, which earlier today issued 50 basis point and 75 basis point rate hikes, respectively. (A basis point is one one-hundredth of a percentage point.)
SEE MORE 10 Best Marijuana Stocks to Buy Now
"Global equities are struggling as the world anticipates surging rates will trigger a much sooner and possibly severe global recession," says Edward Moya, senior market strategist at currency data provider OANDA. "Most of these rate hikes around the world are not done yet which means the race to restrictive territory won't be over until closer to the end of the year."
The reaction here at home was a selloff in bond prices, which sent yields on government notes spiking. The 10-year Treasury yield surged 19.2 basis points to 3.704% - its highest level since early 2011 - while the 2-year Treasury yield spiked 12.1 basis points to 4.116%, its loftiest perch since late 2007.
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As for stocks, the tech-heavy Nasdaq Composite
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Sep 22, 2022
With the congressional midterm elections only weeks away, here's how we think things will shake out.
In early spring, Republicans appeared well on their way to steamroll through the midterms and win back control of the House and Senate. Democrats were struggling to compete, weighed down by an unpopular president and sky-high inflation and gas prices.
But as the summer wore on, Democrats' prospects improved. Gas prices dropped, supply chain problems got better and the Supreme Court's decision to overturn Roe v. Wade energized their voters - all good news for the party. Some big-ticket Democratic bills that passed Congress in recent months also helped.
Meanwhile, several Republican candidates, particularly Senate hopefuls endorsed by former President Donald Trump, underwhelmed, both on the campaign trail and with fundraising. Senate Minority Leader Mitch McConnell (R-KY) even downplayed his party's chances of retaking the Senate, openly worrying about the "quality" of many GOP candidates.
On top of everything else, Trump's high-profile legal woes have been a drag on his party's midterm hopes.
SEE MORE Protect Your Retirement Income from Inflation
But momentum in politics is fickle and can swing back quickly. In recent weeks, Republican candidates have done better in midterm polls and improved on the campaign trail.
So it's increasingly likely that control of the next Congress in January will be split. We anticipate that Republicans still will take control of the House, though they'll likely net fewer seats in the 435-member chamber than we initially expected - 15, versus the 25 sea
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Sep 22, 2022
Are you thinking of retiring soon? Perhaps earlier than you had planned years ago? A potential hurdle could be the incentives set up by the Social Security Administration - they calculate your benefits to reward you for staying in the workforce.
But if you are looking to take an early retirement, you're not alone.
SEE MORE What If I Retired Today?
In the first 15 months of the COVID pandemic (March 2020-May 2021), about 2.5 million Americans retired. That was about twice the number of people who retired in 2019. This means there were essentially 1.2 million fewer people in the workforce over the age of 55 than would otherwise be expected.
First, find out what Social Security benefits you can expect
For anyone born in 1943 or later, your full retirement age, as defined by the Social Security Administration, is between age 66 and 67, based on your birth year. If you're contemplating retiring before that, it's important to know that the Social Security program has been orchestrated to incentivize beneficiaries to delay claiming benefits. Specifically:
If you start taking benefits at age 62, your Retirement Benefit will shrink by 25% to 30%, depending on your birth year. That's because your lifetime annual benefits are decreased by approximately 8% for each year prior to your full retirement age you start to claim them.Conversely, your lifetime annual benefits increase by 8% for each year past your full retirement year if
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Sep 21, 2022
Stocks spent most of Wednesday in positive territory, but went on a roller-coaster ride after the Federal Reserve, as expected, issued its third straight 75 basis point rate hike.
SEE MORE Hedge Funds' 21 Top Blue-Chip Stocks to Buy Now
The Fed's rate hike sparked plenty of chatter among Wall Street's experts, with the main focus on what the central bank plans to do next. Today's move brought the Fed's benchmark federal funds rate to between 3.0% and 3.25%, with projections from the 19 voting members of the Federal Open Market Committee (FOMC) targeting a range of 4.25% and 4.5% by year's end - a half-percentage point higher than where it was in June. Doing the math, that means rates need to rise another 1.25% over the central bank's remaining two meetings (in November and December).
"Today we heard and saw more of the same, and the market shouldn't be too surprised given the Fed and its officials telegraphed that more big hikes were in the cards for the foreseeable future," says Mike Loewengart, head of model portfolio construction at Morgan Stanley. "The market seems to have hoped beyond hope that they would hear some reference to an end to rate hikes on the horizon, but that's certainly not what we got today."
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And that, in turn, sent the major market indexes moving quickly from green to red in the immediate aftermath of the Fed's announcement. However, the wild ride wasn't over, with stocks temporarily bouncing back before ultimately ending lower. At the close, the
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Sep 21, 2022
The Federal Reserve served up a widely expected third consecutive jumbo rate hike when it concluded its regularly scheduled two-day meeting on Wednesday. Chair Jerome Powell and the rest of the Federal Open Market Committee (FOMC) raised the federal funds rate by 75 basis points. (A basis point equals 0.01%.)
SEE MORE 16 Dividend Kings for Decades of Dividend Growth
Although the move matched consensus expectations, a significant portion of the bond market - and plenty of traders and tacticians, for that matter - were bracing for a whopping 100 bp rate hike. Uncertainty over just how hawkish the Fed would reveal itself to be has cast a pall on equities over the preceding weeks, and so a rate hike of "only" three-quarters of a percentage point was actually met with some relief. Stocks sold off sharply when the Fed released its statement at 2 p.m. Eastern, but then drifted back into positive territory during Powell's press conference, which began a half-hour later.
Ultimately, however, the major indexes finished in the red. That's because the Fed's bottom line is that inflation is by no means under control. And while there might be ample anecdotal and emotional evidence pointing to the contrary, the economy is simply running too hot. An imbalance in supply and demand in the labor market and related strong real wage growth, snarled supply chains and a rising dollar are just some of the factors confounding monetary policymakers - not to mention corporate revenues and profit margins.
As we've
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Sep 21, 2022
Swiping your credit card is easy. But if you carry a balance, paying it off could be a challenge. Especially if you don't know your credit card's annual percentage rate (APR). And shockingly, a lot of people don't. In a December 2021 Bankrate study, 41% of cardholders carrying a balance didn't know their credit card APR. And with the Federal Reserve raising interest rates, knowing your APR is important now more than ever.
What is an APR?
Your credit card APR, or your interest rate, is how much extra money you'll pay on any balance you don't pay off in full at the end of each billing cycle. This rate is typically stated as a yearly rate, and it may be a fixed rate or a variable rate. Currently, the average APR for new credit cards is 21.59%. If you don't know your APR, you can find it in your credit card's terms and conditions.
SEE MORE The Best Cash-Back Credit Cards
Most credit cards operate on a variable rate, meaning the rate can change, often rising or falling in tandem with interest rates set by the Federal Reserve. When the Federal Reserve Board raises short-term interest rates, those increases affect interest rates on credit cards as well most other lending and savings products such as savings accounts, mortgages, home equity lines of credit and other loans.
How Does this Affect Me?
If you're carrying a balance on a high-interest-rate card, plan to pay it off as soon as possible, without adding any new purchases. If you receive a tax refund—and most taxpayers do—use that money to pay down debt. Even if the refund doesn't pay off the balance in full, the reduced t
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Sep 21, 2022
Although you can start collecting Social Security at age 62, you can get much higher monthly payments if you wait as long as age 70. But many people want to or must retire before 70. If you're one of them, consider a possible strategy, backed by recent research, to use your retirement savings to put off receiving Social Security.
Build a Social Security Bridge
New research from the Center for Retirement Research explores retiree appetite for a "bridge" between retirement and collecting Social Security benefits, specifically one where retirees tap 401(k) assets in an amount equivalent to what they'd draw from Social Security on a monthly basis. This stream of payments would continue until age 70 or until the money ran out.
Such an option appealed to a good number of survey respondents; nearly 27% said they'd use it to some extent, even with minimal information about plan details. Among respondents provided with more information on the option, the total climbed to 35%. Researchers also propose a formalized "bridge" plan that employers could offer using 401(k) funds.
SEE MORE Feeling Insecure About Social Security? You're Not Alone.
But why tap those funds? The answer is that any chance to delay collecting Social Security benefits means you'll receive a larger monthly check when you finally do start to draw benefits.
How Much Can You Increase Your Social Security by Delaying Benefits?
As a rule, retirees must decide for themselves when to begin claiming Social Security benefits.
If they can wait to collect, though
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Sep 21, 2022
The school year has begun, and teachers are dealing with the normal pressures of managing students and classrooms. But lately, there is additional stress for educators, ranging from teacher shortages to possible teacher strikes. And to top it off, inflation has increased the prices of classroom supplies that many teachers pay for out of pocket. But there is a little bit of good tax news for some educators—the federal tax deduction for teacher expenses is adjusted for inflation.
That means that for 2022, teachers like you, (and some counselors, principals, or other instructors) can deduct a little more at tax time for classroom expenses and supplies than you could before. So, here's what you need to know about the increased educator expense tax deduction for 2022..
How Much Can Teachers Deduct for School Supplies?
A common question is whether teachers can write off classroom supplies on their taxes. The answer to that is important because studies show that nearly 94% of teachers pay for their own classroom supplies, and reportedly teachers spent on average in 2021, anywhere from $500 to $750.
SEE MORE How Inflation Can Impact Your Taxes
So thankfully yes, some teachers and other educators can write off classroom supplies on their federal tax returns. And for 2022, the maximum educator expense deduction has risen to $300. That means that if you're an eligible educator (more on that later), you can deduct up to $300 of out-of-pocket classroom expenses for 2022 when your file your federal income tax return next year. And you don't have to itemize to claim the deduction.
If you're married and you file jointly w
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Sep 21, 2022
Most people view debt as something to be avoided at all costs. But that's because most people don't use debt properly. A prime example of improper debt use is the credit card. People charge too much, fail to pay the card in full at the end of the month, then find themselves unable to pay down the debt without also paying exceedingly high interest, often for years.
However, some kinds of debt, such as a securities-backed line of credit, or SBLOC, can be helpful. They can even save or earn you money. SBLOCs are rolling lines of credit based on the value of assets in your accounts. They're excellent ways to use debt to your advantage.
How Securities-Backed Lending Works
Borrowing money by collateralizing securities held in after-tax investment accounts is called securities-backed lending. The interest rate will often be lower than other types of loans, and you'll generally get access to funds in just a few days.
SEE MORE 3 Dated Rules of Thumb Retirees Should Think Twice About
However, as with almost anything, there are caveats to taking out an SBLOC. While you can keep buying and selling securities in the collateralized account, you can't use the loaned money for other securities-based dealings, such as trading or buying. And setting up an SBLOC will make it more challenging to move those collateralized assets to a different firm.
As an example of how SBLOCs can benefit you, suppose you need $75,000 for a one-time purchase of a car or a once-in-a-lifetime vacation. A typical way to acquire it would be to sell assets in a retirement account. That presents a number of drawbacks:
First, your income for that year would increase by $75,000 and could put you in a
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Sep 20, 2022
Anxiety got the better of Wall Street on Tuesday, with the stock market tumbling ahead of tomorrow's policy announcement from the Federal Reserve.
Many of Wall Street's top minds are weighing in on how big the Fed rate hike will be. Among them is Brad McMillan, chief investment officer for Commonwealth Financial Network, who, like almost everyone, believes the central bank will hike rates by 75 basis points. A basis point is one-one hundredth of a percentage point.
SEE MORE 10 High-Paying Dividend Stocks Yielding 5% or More
"Where things get interesting is in the follow-up comments, where the market tries to parse what this means for the Fed's policy decisions through the rest of the year," McMillan says, referring to the press conference Fed Chair Jerome Powell will hold immediately after the announcement. "Expectations are very hawkish, and the Fed can come out just as expected and still be more dovish than expected. That likely limits the market downside from this meeting and just may provide some upside going forward."
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But today, investors envisioned higher rates ahead, which weighed on bond prices - and sent the 10-year Treasury yield up 7.2 basis points to 3.561%, its highest perch since 2011.
SEE MORE The White House Touts A Digital Dollar: What Does That Mean?
Broad selling was seen in the equities mar
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Sep 20, 2022
Investors have plenty of worries - chief among them inflation and a potential recession. But the engine that ultimately drives the stock market is corporate profits. As long as earnings growth stays on track, then corporate America—and by extension, your stock portfolio—remains on solid ground.
Which is why the recent earnings preview from FedEx (FDX) was so unnerving. While the official report for the quarter ended August 31 comes out Thursday, FedEx warned on September 15 that it would have bad news, with quarterly results severely impacted deteriorating economic trends in Asia, Europe and the U.S. FedEx stock was immediately penalized, and is down more than 20% since this pre-announcement.
The key question for every investor is whether the shipping giant is suffering from a company-specific malaise or whether FedEx's problems are a broad-market bellwether portending widespread doom. "FedEx is no ordinary economic actor, as its business literally touches every corner of the global economy" says Sheraz Mian, director of research for Zacks, an investment research firm.
A Downgrade for FDX
Analyst Colin Scarola, at investment research firm CFRA, suspects that part of the problem at FedEx is that it failed to adjust operations in its Express division (50% of revenues) as more international passenger flights, which transport some air freight as well, came back online after the pandemic-related slowdown, raising competition. "We don't doubt that some of the poor performance is related to ongoing global economic headwinds and high inflation worldwide. But the extent of the decline at Express leads us to believe that poor operational execution is also at play," says Scarola, who has
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Sep 20, 2022
Disruption. It's coming for the U.S. dollar in the form of digital currency. Last week the Biden administration detailed a broad plan for adopting a central bank digital currency (CBDC) in the coming years. The Departments of Energy, Commerce, the Treasury, and other agencies weighed in on how to manage and regulate a CBDC.
The government is reacting in part to the explosive growth of digital currencies. About three out of ten U.S. adults currently invest in some form of cryptocurrency, or "crypto," like Bitcoin or Ethereum. These digital "coins" rely on a decentralized network of computers to verify financial transactions, cutting out third parties like banks or credit cards.
The good, the bad, and the ugly of crypto
Advocates of crypto point to its affordability, efficiency, and its ability to reach consumers with little or no access to traditional banking services. With just a mobile phone or a crypto ATM, consumers can easily send and receive digital currency, even across international borders.
On the other hand, crypto is still largely unregulated and volatile. Investors in Bitcoin, for example, saw returns of over 70% in 2021, but the currency is down almost 60% year to date. And if you send your payment to the wrong account (called a "digital wallet") there may be no way to retrieve it. Crypto has also been used for money laundering, fraud, and to fund terrorism. Several
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Sep 20, 2022
The dividend yield on the S&P 500 has been hovering near its lowest level in roughly two decades for some time now, and while it's starting to move higher, it's still at a paltry 1.7%. So what are yield-hungry investors left to do?
Thankfully, there is no shortage of high-paying dividend stocks on Wall Street. And in a time of market volatility, like we've seen throughout 2022, quality income-paying names can be used as a defensive play in portfolios.
"We have continued to highlight the importance of dividends in the current backdrop, where we have seen wide performance spreads between dividend payers versus non-payers," says Jill Carey Hall, equity and quant strategist at BofA Securities. Looking specifically at small-cap stocks, Carey notes that "dividend yield has been the best-performing long factor" for the year-to-date.
However, not all dividend stocks are created equal, and it can be a dangerous practice for investors to simply chase yield. Many times, a company's high yield can be a sign of trouble in its underlying business.
With that in mind, we've selected 10 high-paying dividend stocks with yields of 5% or more. However, we didn't just randomly pick names, though. To put together a list of quality firms, we looked for companies with solid fundamentals, generous yields and backing from the analyst community. Investing in sturdy dividend stocks remains a favorite strategy on Wall Street and these ones are worth a closer look.
SEE MORE 16 Dividend Kings for Decades of Dividend Growth
Data is a
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Sep 20, 2022
The Federal Reserve's rate-setting committee kicks off its regularly scheduled two-day meeting on Tuesday, and it's all but certain to deliver yet another jumbo interest rate hike.
The great bulk of traders, investors, economists and strategists are forecasting a 75 basis point (bp) increase to the federal funds rate when Chair Jerome Powell and the rest of the Federal Open Market Committee (FOMC) wrap up their latest policy confab on Wednesday. (A basis point equals 0.01%, by the way.) The Fed will release its decision at 2:00 pm Eastern. However, as per usual, market participants are likely to be more keen on what Powell has to say at his post-proclamation press conference scheduled shortly thereafter.
SEE MORE 65 Best Dividend Stocks You Can Count On in 2022
The market has had plenty of time to digest another big rate hike, and it really should come as no surprise. Powell has never been one to mince words, for one thing. Besides, the latest readings on inflation showed that a number of key components of the consumer price index continue to expand at alarming rates.
Inflation, it seems, is by no means under control. The economy, despite feelings to the contrary, remains way too hot.
The question then isn't so much whether the Fed will hike by 75 bp later this week. (Although a not insignificant portion of the bond market is betting on a 100 bp hike.) Rather, the big unknown is where and when does the Fed's current policy of tightening end?
The Fed is striving to pull off everyone
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Sep 20, 2022
Amazon Prime Day has already taken place in 2022, in July. But Amazon, which earlier in 2022 raised its subscription rates, could be bucking tradition for the first time: A second two days of Amazon Prime Day-like deals is a strong prospect for October. That could mean a boost to Amazon's bottom line right before the holiday shopping season and loads of deals for shoppers looking to get a jump on their end-of-the-year holiday shopping.
SEE MORE Amazon Warehouse: Where Amazon Prime Returns Become Your Next Online Bargains
This new Amazon Prime benefit could also buoy the spirits of Prime members tired of seeing their perks slashed.
Earlier this year, multiple outlets reported Amazon was asking vendors to come up with lightning deals - popular items sold at a deep discount for a limited time - that could be attached to a "Prime Fall" event in October. Amazon has not announced a second Prime Day event for 2022 or confirmed a fall event.
However, the latest rumors say Amazon will steer clear of calling it "Prime Day" and will instead call the Oct. 11-12 event "Prime Early Access Sale" - "early
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Sep 20, 2022
Amazon Prime Day has already taken place in 2022, in July. But Amazon, which earlier in 2022 raised its subscription rates, is bucking tradition for the first time: A second two days of Amazon Prime Day-like deals is on for October, specifically Oct. 11-12, according to a Terms & Conditions document on Amazon's website. That could mean a boost to Amazon's bottom line right before the holiday shopping season and loads of deals for shoppers looking to get a jump on their end-of-the-year holiday shopping.
SEE MORE Amazon Warehouse: Where Amazon Prime Returns Become Your Next Online Bargains
This new Amazon Prime benefit could also buoy the spirits of Prime members tired of seeing their perks slashed.
Earlier this year, multiple outlets reported Amazon was asking vendors to come up with lightning deals - popular items sold at a deep discount for a limited time - that could be attached to a "Prime Fall" event in October. Amazon has not announced a second Prime Day event for 2022 or confirmed a fall event.
However, it now appears Amazon wi
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Sep 20, 2022
Amazon Prime Day has already taken place in 2022, in July. But Amazon, which earlier in 2022 raised its subscription rates, is bucking tradition for the first time: A second two days of Amazon Prime Day-like deals is on for October, specifically Oct. 11-12. It's called Amazon Prime Early Access. That could mean a boost to Amazon's bottom line right before the holiday shopping season and loads of deals for shoppers looking to get a jump on their end-of-the-year holiday shopping.
SEE MORE Amazon Warehouse: Where Amazon Prime Returns Become Your Next Online Bargains
This new Amazon Prime benefit could also buoy the spirits of Prime members tired of seeing their perks slashed.
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Sep 20, 2022
Residents and business in Puerto Rico affected by Hurricane Fiona, which began impacting the island on September 17, now have until February 15, 2023, to file and pay certain federal taxes. The IRS extended the deadlines after the island was declared a disaster area by the Federal Emergency Management Agency (FEMA). The tax relief applies to residents and businesses in all 78 municipalities who were affected by the hurricane.
SEE MORE 2022 Tax Calendar: Important Tax Due Dates and Deadlines
Various federal tax filing and payment due dates for individuals and businesses from September 17 to February 14 will be shifted to February 15, 2023. This includes extended 2021 personal income tax returns that would normally be due on October 17, 2022. They are now due on February 15, 2023. Payments for 2021 income taxes that were due on April 18, 2022, are not extended.
The tax relief also applies to the quarterly estimated tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns due on October 31, 2022, and January 31, 2023. Penalties on payroll and excise tax deposits due from September 17 to October 2 will also be waived if the deposits are made by October 3, 2022.
Victims of Hurricane Fiona in Puerto Rico don't have to contact the IRS to get this relief. However, if you receive a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, call the number on the notice to have the penalty abated.
SEE MORE
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Sep 20, 2022
When you've just lost your spouse, you may be dealing with the loss of your life companion, your partner and best friend. It can be an overwhelming time, and it may be difficult to see a light at the end of the tunnel, to a day when you might feel better and brighter about your emotional and financial future.
In times like these, it can be comforting to hear from women who have been there and made it to the other side.
Every year, women who lose their spouse are able to start fresh, move beyond the immediate and uncertain aftermath of this time, and begin living new lives. Here's a look at how five of Francis Financial's clients were able to get back on track after losing their partners.
SEE MORE From One Widow to Another: Words of Wisdom for Hope and Happiness
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Sep 19, 2022
Looking for a great cash-back credit card? You're hardly alone. In a survey from personal-finance site WalletHub, 79% of people said they are most interested in earning cash-back credit card rewards, a significantly higher percentage than those who prefer rewards points or miles.
SEE MORE Get a Handle on Your Credit Card Debt
To help you in your search, we have compiled a list of great cards that provide cash back on every purchase (or reward you with points that you can easily trade for cash at a strong value).
For each card, we've calculated a typical annual rebate based on spending patterns in the U.S. Bureau of Labor Statistics Consumer Expenditure Survey and assuming $25,000 spent on the card annually (unless otherwise noted). For cards that do not waive their annual fee the first year, we've subtracted the annual fee from the cash value of the annual rebate.
Best Cards for Flat-Rate Cash Back
These cards provide simple and strong cash-back rewards on all spending.
Wells Fargo Active Cash Visa
Website: www.wellsfargo.comInterest rate: 0% for 15 months, then 17.24% to 27.24%
Annual fee: None
Sign-up bonus: $200 back if you spend $1,000 in the first three months
Typical annual rebate: $500
This card provides 2% cash back on all purchases, making it a great card to slip into your wallet if you prefer simple, straightforward rewards. Ways to redeem your cash back include as a statement credit, cash at the ATM with a Wells Fargo debit or ATM card (in $20 increments), gift cards ($25 increments), or a credit to a qualifying Wells Fargo credit card, checking account or mortgage. A nice side b
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Sep 19, 2022
Looking for a great cash-back credit card? You're hardly alone. In a survey from personal-finance site WalletHub, 79% of people said they are most interested in earning cash-back credit card rewards, a significantly higher percentage than those who prefer rewards points or miles.
SEE MORE Get a Handle on Your Credit Card Debt
To help you in your search, we have compiled a list of great cards that provide cash back on every purchase (or reward you with points that you can easily trade for cash at a strong value).
For each card, we've calculated a typical annual rebate based on spending patterns in the U.S. Bureau of Labor Statistics Consumer Expenditure Survey and assuming $25,000 spent on the card annually (unless otherwise noted). For cards that do not waive their annual fee the first year, we've subtracted the annual fee from the cash value of the annual rebate.
Best Cards for Flat-Rate Cash Back
These cards provide simple and strong cash-back rewards on all spending.
Wells Fargo Active Cash Visa
Website: www.wellsfargo.comInterest rate: 0% for 15 months, then 17.24% to 27.24%
Annual fee: None
Sign-up bonus: $200 back if you spend $1,000 in the first three months
Typical annual rebate: $500
This card provides 2% cash back on all purchases, making it a great card to slip into your wallet if you prefer simple, straightforward rewards. Ways to redeem your cash back include as a statement credit, cash at the ATM with a Wells Fargo debit or ATM card (in $20 increments), gift cards ($25 increments), or a credit to a qualifying Wells Fargo credit card, checking account or mortgage. A nice side b
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Sep 19, 2022
The Federal Reserve was top of mind for investors Monday, with the central bank's next policy decision - a likely 75 basis-point rate hike - due out Wednesday. This led to back-and-forth trading for much of the session, though the major market indexes ultimately ended in positive territory today.
SEE MORE 16 Dividend Kings for Decades of Dividend Growth
While the economic calendar is relatively thin over the next few days, Wall Street will see a round of housing data in the leadup to the Fed announcement. Today, that was the release of the National Association of Home Builders (NAHB)/Wells Fargo housing market index, which showed builder confidence fell 3 points in September to 46, its lowest level since spring 2020. This was the ninth straight monthly drop in the index, and came amid a "combination of elevated interest rates, persistent building material supply-chain disruptions and high home prices [that] continue to take a toll on affordability," the report stated.
"We expect the other housing market releases this week (housing starts, existing home sales and building permits) will show similar weakness," says Raymond James economist Giampiero Fuentes. "Bad news continues to be good news for the Fed, as it indicates its tightening cycle is working to slow demand."
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In terms of sector performance, materials stocks ( 1.7%) were the leaders. Healthcare (-0.5%), meanwhile, lagged as COVID-19 vaccine makers like Pfizer (PFE, -1.3%) and Moderna (
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Sep 19, 2022
After suffering the worst six-month loss in over 50 years the S&P 500 and other indexes stabilized and then rallied for two months only to face more volatility to the downside.
It's very likely that the downturn we have been experiencing will get much worse and the bear market is likely not over.
And the problem this may create for stock investors is summed up in a quote by famed investor Peter Lynch: "You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready. You won't do well in the markets."
One Major Sign We're in a Recession
So, are we in a recession or not?
In the first two quarters of this year we have had two negative quarters of GDP, which is the "unofficial" definition of a recession. The official determination rests solely with the National Bureau of Economic Research - and only with the benefit of hindsight.
SEE MORE Stop Being Afraid of a Down Market
A safer bet may be to trust that the two quarters of negative GDP means we are likely in a recession. Charlie Bilello of Compound Capital Advisors pointed out that the last 10 times we've seen two consecutive quarters of negative economic growth going all the way back to 1947, the U.S. was indeed in a recession.
Seven Other Recession Red Flags Waving Right Now
Besides this pattern there are other red flags pointing to a further slowdown:
Housing has been a major driver of economic growth over the past two years but now appears to be slowing dramatically due to recent rate hikes, according to InvesTech Research.The National Association of Home Builders reported that both the Builder Confidence Survey and the Traffic of Prospective Buyer
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Sep 19, 2022
You're getting ready to retire, and you're thinking about your expenses. One expense you'd like to forgo is the premium you pay for the life insurance policy you bought decades ago. The question is: Are your only two options to pay the premiums or cancel your coverage? The answer is no, you usually have other alternatives.
Start assessing your options by first determining whether your policy is a term insurance plan or some kind of permanent insurance with cash values.
Term insurance
Term life insurance is generally the cheapest coverage, but it works like rent. When you're done "renting" the insurance, you leave with no equity. So, if you reach the end of the policy's term — for example, 20 years — you lose your insurance coverage. You still may have some options, though. Some term policies let you renew your coverage. You can continue your insurance, just at a higher premium. Generally, the cost increase is so high it's a deal killer. If you need the coverage, though, it may be worth it.
SEE MORE Other Uses for Life Insurance You May Not Know About
Term insurance policies often have conversion rights, meaning you can convert your term insurance policy into a permanent plan. The good news is this will continue your death protection for the rest of your life, but the bad news is you'll be paying a much higher ongoing premium. While this may sound like a non-starter as you face retirement, it may be a good idea if your life expectancy has been shortened because of a medical condition. The conversion privilege also allows you to change your soon-to-expire term policy into a permanent policy without you having to show insurability - no physicals or bloo
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Sep 18, 2022
Location, location, location is not just vital in real estate. Where you live also can have critical tax implications for your taxes, especially for married couples.
There are two very different kinds of property ownership law for married couples in the United States: common law and community property law. Numerous variances exist in the particulars of these property ownership styles across the many states, but some general rules apply in each case. Any state that is not a community property state is a common-law state.
SEE MORE Will Your Kids Inherit a Tax Bomb from You?
Community property states offer a distinct tax advantage for couples' assets when one spouse dies. But if you live in a common-law state, there's some good news: Several states have passed statutes empowering married couples living in any common-law state to establish a community property trust with a qualified trustee. The advantage they can gain is a step-up in cost basis at each death, something not previously available in common-law states.
Community property states
First, let's briefly discuss what "community property" means. Nine states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin — operate under community property laws, as does Puerto Rico. Under community property law, each member of a married couple owns one half of all the property, with all the rights of ownership. Usually, it is presumed that all property acquired during a marriage is community property, except property acquired by gift or an inheritance. But the law varies greatly among the community property states regarding some important matters — for instance, whether one spouse may identify some property as community property without the other spouse's consent and whether an unsecured creditor
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Sep 17, 2022
Let's say you purchase a used car from a dealership and later want to bring it back for a refund. Do you have the legal right to get your money back regardless of the reason? Does the "Three-Day Cooling Off Period" apply?
That's what "Mack" thought.
‘I Looked Under the Seats and Found Drug Paraphernalia!'
"I bought a used SUV two days ago and want to take it back to the dealer for a refund, but when I told them why they laughed at me and refused," Mack told me in a call recently.
When I asked if there was anything mechanically wrong with the vehicle, he replied, "No, it drives fine, but it is what I found under the front seats that scares me: dangerous drug paraphernalia." His tone of voice grew increasingly strident the longer we spoke.
And what was he looking for under the front seats?
SEE MORE PODCAST: Car-Buying in an Inflated Market with Jenni Newman
"For money or jewelry sometimes that winds up there, but instead I found vaping equipment! That's illegal! I don't know what other illegal items are in the car, and I want my money back! Also, don't I have three days to cancel the contract?"
I explained to Mack that while there is such a thing as a Three-Day Cooling-Off Rule, in most all cases - including this one - it doesn't apply to car purchases. And besides, in his state, mere possession of vaping hardware is not illegal. Unless he had the right to bring the car back for a refund - spelled out in the sales contract - the dealership could decline his request.
Car Buyers Shouldn't Believe the 3-Day Myth
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Sep 16, 2022
Ethereum, the world's second-most valuable digital currency by market capitalization, completed a long-awaited upgrade to its system on September 15.
The move, known in the cryptocurrency community as "The Merge", is expected to slash energy costs and lay the groundwork for more use of crypto technology in mainstream applications, including finance.
The upgrade was one of the most eagerly anticipated events in crypto's history. But the process is complicated. Here's what to know about it.
What is Ethereum?
Ethereum is a blockchain - a publicly-viewable, distributed ledger that verifies and records all transactions on the network. The platform was conceived by Russian-born Canadian programmer, Vitalik Buterin, in 2013. What sets apart Ethereum's blockchain from Bitcoin's is that it allows users to run "smart contracts." These are computer programs stored on the blockchain that automatically perform a chain of actions when certain conditions are met. This functionality has allowed many people to build a large network of financial institutions, such as decentralized exchanges and lenders, and even other digital tokens on the Ethereum blockchain.
What is ‘The Merge'?
The years-long effort has changed how transactions are verified on the Ethereum blockchain. In December 2020, Ethereum began running on two parallel blockchains, one using the legacy system to validate transactions and another blockchain using proof-of-stake for developers to test and improve. Thise merge combinesed the two blockchains into a single one using a proof-of-stake system for validations.
SEE MORE What Is Digital Fashion, And Why
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Sep 16, 2022
Stocks capped off a terrible week with another slide as a warning from one of Wall Street's bellwether firm's stoked concern about the U.S. economy.
SEE MORE 10 Electrifying EV Stocks Worth Watching
After Thursday's close, delivery giant FedEx (FDX, -21.4%) - whose financial results are often seen as a read on broader economic conditions - issued preliminary fiscal first-quarter earnings and revenue figures that were well below estimates. The company cited a recent acceleration in "global volume softness," and specifically pointed to "macroeconomic weakness in Asia and service challenges in Europe." FDX also withdrew its outlook for the full fiscal year, and said it is initiating several cost-cutting measures to offset the effects of lowered demand, including deferring staff hiring, closing 90 FedEx office locations and ending Sunday operations for several FedEx Ground locations. The company is slated on the earnings calendar to report its full quarterly results after next Thursday's close.
Wall Street's nerves were already frayed ahead of FedEx's financial warning, as this week's red-hot inflation reading all but assured another large rate hike from the Federal Reserve at next week's meeting. But an additional contributing factor to this week's massive volatility is likely today's quadruple-witching options expiration, which is when index futures, index options, stock options and individual-stock futures all expire at once. This happens four times a year - on the third Friday in March, June, September and December - and sometimes leads to heavy volume and erratic moves in
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Sep 16, 2022
I don't ignore my retirement accounts, but I consider myself mostly a set-it-and-forget-it investor. I prefer to pick an investment strategy, arrange automatic contributions and then sit back without tinkering much with my portfolio. For that reason, I used a target-date fund in my 401(k) when I had one (I'm self-employed now). My husband invests in a fund with a 2050 target date through his employer plan.
A target-date fund aims to create an appropriate investment mix for the investor's age and approximate retirement date. A fund designed for someone with many years until retirement includes a high proportion of stocks for growth. Over time, the fund regularly rebalances, allocating a greater percentage of assets to less-risky, income-producing investments, such as bonds, as retirement nears.
We're far from alone in our preference for target-date funds. Among 401(k) participants in their twenties, 54% of their assets were in target-date funds at the end of 2019, and investors in their thirties had 45% of assets in target-date funds, according to a study from the Investment Company Institute and Employee Benefit Research Institute. Many large employer plans automatically enroll employees and use target-date funds as the default investment choice.
SEE MORE PODCAST: The Pros and Cons of Target Date Funds with Tony Drake
Evaluating Your Plan.
Target-date funds are attractive for their simplicity. But if you're dissatisfied with your plan's target-date offerings or have the appetite to construct a customized portfolio, you can typically select among a menu of several other investment options. If you have decades to go until retirement, you may want to dedicate 80% to 90% of your portfolio to stocks. I
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Sep 16, 2022
Many of us have taken advantage of Amazon Prime's liberal return policy - in a good way, of course. We buy something online from Amazon, decide it isn't what we were expecting, then start the easy online process of returning the item. Your refund is usually applied to your payment method as soon as it's checked in to the shipper, say a UPS store.
SEE MORE Alternatives to Amazon Prime for Free Shipping and More
Have you ever wondered what happens to many of those returned, open-box items? Enter Amazon Warehouse, home of those returns and a lesser-known perk for everyone else to score a bargain - if you don't mind slightly used items (perhaps that indoor flying home surveillance camera wasn't someone's cup of tea).
Unlike Amazon Outlet with its plethora of overstock new items, Amazon Warehouse items have likely been in someone else's mitts, grubby or no
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Sep 16, 2022
Too many young professionals are leaving Uncle Sam an enormous tax gratuity. How are they doing this? By not taking full advantage of the triple tax benefits of a health savings account. I've yet to meet anyone who wants to pay more taxes. Many do not mind paying their fair share, but they do not want to leave a tip.
SEE MORE ‘I Can't Retire - I Need Health Insurance'
An early to mid-career professional with a high-deductible health plan (HDHP) could be missing out on six figures of lifetime tax savings. With open enrollment for health insurance around the corner, it's time to understand and utilize the benefits of your HSA.
What Qualifies as a High-Deductible Plan?
For 2023 a high-deductible health plan is defined by the IRS as one with a deductible not less than $1,500 for self-only coverage or $3,000 for family coverage, and for which the annual out-of-pocket expenses do not exceed $7,500 for self-only coverage or $15,000 for family coverage. Healthy young professionals are prime candidates for an HDHP. That is because many of them need minimal medical care; they visit the doctor annually and have no or few drug prescriptions.
Because their medical expenses are low, money contributed to a health savings account can be used to generate significant tax savings while also building a large health care nest egg.
What Are the Triple Tax Benefits of HSAs?
Contributing to a health savings account provides a triple tax benefit:
First, anyone who
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Sep 16, 2022
As college costs continue to rise, it's becoming increasingly difficult for students to pay for it themselves. The total student loan debt in the United States has risen to a staggering $1.75 trillion. This has led many parents and grandparents to want to help carry a portion of their child's or grandchild's college debt. They shouldn't jeopardize their own financial future by entering retirement with someone else's student loan debt, though.
SEE MORE Tax Breaks to Help You Pay for College
Even so, the number of adults over the age of 62 with student loan debt has reached a startling 2.4 million borrowers. If parents and grandparents plan on helping to pay for college, they need to plan ahead to stay debt-free in their golden years. There are many ways they can start planning now to help with college costs while still saving for their retirement.
529 plans offer tax advantages
529 plans are investment accounts that can be used to pay for education for a specific beneficiary. Choosing a 529 plan also comes with tax benefits. It will grow federal tax-free and will not be taxed when the money is taken out. It's important to note that you can use a 529 plan from any state to help cover education expenses in any other state. However, depending on the state you live in
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Sep 15, 2022
Thursday marked another day of choppy trading for stocks as investors considered a round of data that showed the U.S. economy remained resilient even in the face of the Federal Reserve's aggressive rate-hike campaign.
SEE MORE 16 Dividend Kings for Decades of Dividend Growth
Ahead of this morning's open, data from the Labor Department showed weekly jobless claims fell for a fifth straight week, underscoring strength in the labor market. Additionally, the Commerce Department said retail sales rose 0.3% month-over-month in August, beating economists' expectations for a slight decline in consumer spending.
"This [retail sales] report is not good for the Fed's goals of slower inflation," says José Torres, senior economist at Interactive Brokers. "The Fed would like to see consumers slow down their spending and debt accumulation to slow down inflation. Higher rates provide an incentive to save, not to spend, and that's part of the reason why tighter monetary policy brings down demand and inflation." As such, Torres says the market is not only expecting a 75 basis-point rate hike at next week's Fed meeting, but one at the November meeting too. (A basis point is one-one hundredth of a percentage point.)
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By the close, the market had taken a decisive turn lower as the 10-year Treasury yield jumped 3.5 basis points to 3.447%. The tech-heavy Nasdaq Composite suffered the worst of it, slumping 1.4% to 11,552. However, the S&P 500 Index (-1.1% to 3,901) and the Dow Jones Industrial Average (-0.6% at 30,961) also ended solidly in the red.
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Sep 15, 2022
Student loan debt is not just holding back young adults. It's increasingly an issue for older people, sending many of them into default and threatening retirement plans for some. In fact, people aged 60 and older are the fastest growing age segment of the student loan market, according to the Consumer Financial Protection Bureau.
And, according to the Federal Reserve Bank of New York, almost 23% of student debt was held by people aged 50 and older as of 2021.
An analysis from the CFPB found that 39% of consumers aged 60 and older who have student loan debt failed to take care of health care needs such as prescription medicines, doctors' visits, and dental care because they couldn't afford it, compared to 25% of older consumers without a student loan. And according to the Biden administration, a third of seniors with student debt was in default.
"This is a really big issue," says Erik Kroll, a certified financial planner whose company is called Student Loans Over 50, a subsidiary of Hilltop Financial Advisors, "This delays and destroys retirement dreams and adds a lot of stress and anxiety for someone. People in this age group with high balances, when I talk to them, are almost always embarrassed by the amount of loans they have, and it sometimes comes with a sense of hopelessness."
Paul S. Garrard, founder and president of PGPresents agreed: "I would say (it's) a significant challenge." He said it's a combination of old
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Sep 15, 2022
The economic banishment of all things Russian. Tariffs on Chinese imports. Pandemic-caused shortages of computer chips, bicycles, garage door parts and other imports. Brexit.
Just about everywhere you turn, you can see that the tectonic plates of the global economy have stopped converging and are starting to pull apart in ways that will determine new winners and losers, says Ethan Harris, head of global economics for Bank of America Securities. "Deglobalization is a gradual process, and in the long run, very important" to investors, he says, because it will have profound impacts on corporate profitability.
SEE MORE 16 Dividend Kings for Decades of Dividend Growth
Globalization refers to the increase of commerce across borders. U.S. companies prospered for decades as new markets opened for their goods and labor costs plummeted thanks to overseas production. Strategists at BofA have estimated that over the past 20 years, globalization has contributed more than half of what has been a robust expansion in profit margins. Globalization has also helped to deliver low-cost goods to American consumers.
But now, says market strategist Ed Yardeni, the pandemic and spreading political and military conflicts have stretched supply chains past the breaking point, prompting companies to bring many operations closer to home. "Deglobalization was almost inevitable," Yardeni says. U.S. companies are starting to "reshore" production back to the U.S., "near-shore" it to neighbors such as Mexico, or "friend-shore" it to allies such as Vietnam.
Investment firm Piper Sandler counted more than 900 announcements of companies either building or expanding manufacturing facilities in the U.S. in the 12 months ending in May of 2022. In 2012, there were only about 100 such announcements. Over the long term, companies
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Sep 15, 2022
After two years of a red-hot market, it's time real estate and mortgage professionals get ready for what could be a slowdown in their business.
Earlier this summer housing prices were on fire. Now there is talk of a "housing recession." Due in part to higher mortgage rates and more people vacationing this summer, U.S. existing home sales fell in July for the sixth straight month, the longest streak of declines in more than eight years.
SEE MORE Is Your Job Burning You Out?
One of my clients in the Midwest put his home up for sale recently and has had no interested buyers - none. A few months ago, we were certain it would sell in days. The plan was to sell the house and pay off their construction loan on their new home before it converted to a permanent mortgage. Now, that plan may need to change.
Several mortgage companies have already let go thousands of employees, and one company, Sprout Mortgage, based in East Meadow, N.Y., shut down in early July. Real estate brokerage companies, such as Compass and Redfin, have also slashed their workforce.
Real estate is cyclical, and while sales will not totally dry up, anyone tied to the industry should get their finances in order now in case the current downturn lasts another several months.
Here are a few moves to consider:
Build an Emergency Fund Twice as Big as a Salaried Worker's
No one wants to get caught borrowing money to pay their bills. While putting away enough money in a savings or money market account to cover six months of expenses is normal, it's best to plan for a longer period if you work in a cyclical industry.
Consider keeping six to 12 months of r
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Sep 14, 2022
Stocks stabilized Wednesday after Tuesday's hotter-than-expected inflation data sparked Wall Street's worst selloff in over two years.
Inflation remained in focus today with the early morning release of the producer price index (PPI) for August. Similar to yesterday's consumer price index (CPI), the PPI - which measures what suppliers are charging for goods and services - rose at a slower annual clip in August than it did in July. However, on a month-over-month basis, both PPI and core PPI, which excludes energy and food prices, were up from July's figures.
SEE MORE 12 REITs Flaunting Fast-Growing Dividends
"There is a divergence in headline and core inflation building, where headline is cooling and core is heating up," says Jamie Cox, managing partner at Harris Financial Group. "That's an odd phenomenon and likely influenced by the shift from goods to services post-pandemic. The Fed should proceed with caution and not hit the emergency brake on rate hikes."
While yesterday's selling was broad-based, today's action was more mixed. In terms of sector performance, real estate (-1.2%) and materials (-1.2%) were the biggest laggards, while energy ( 2.8%) outperformed as U.S. crude futures rose 1.3% to settle at $88.48 per barrel.
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As for the major indexes, the Nasdaq Composite ended up 0.7% at 11,719, while the S&P 500 Index ( 0.3% at 3,946) and the Dow Jones Industrial Average ( 0.1% at 31,135) also finished with mode
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Sep 14, 2022
You don't have to be all that old to remember the excitement of "outlet shopping" - hitting special shopping centers (or even whole towns - Freeport, Maine, anyone?) for deals on overstock, returned, or sometimes separate bargain-lines of product. It only makes sense that the nation's biggest online retailer, Amazon.com, would play this game with its own outlet - without the bricks and mortar (and ancillary candy and fudge vendors).
SEE MORE Alternatives to Amazon Prime for Free Shipping and More
As millions of Americans signed up for Amazon Prime weigh the benefits of Amazon Prime perks - (both the new one or two and the ones being taken away) against the recent membership price increase - Amazon Outlet is probably a reason to stick around.
These aren't used or second-hand items, and some are even quite high end (think Apple, Bose, Marmot and Pendleton). Amazon Outlet items are actual overstocks - Amazon bought too many of them - discontinued items, or just plain old clearance items. And they cut across a retail swath. That means you'll see clothing, kitchenware, home d
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Sep 14, 2022
Under our country's "pay as you go" tax system, Uncle Sam wants to collect his cut periodically throughout the year as you earn income. In most cases, the required taxes are paid through paycheck withholding (your employer sends in the payments). But if you're self-employed, have a side gig, or don't have taxes withheld from other sources of taxable income (e.g., interest, dividends or capital gains), then quarterly estimated tax payments to the IRS are typically required.
SEE MORE 2022 Tax Calendar: Important Tax Due Dates and Deadlines
Estimated taxes are paid in four equal installments — generally, one installment for each quarter of the year. The first payment for the 2022 tax year was due on April 18, 2022, while the second payment was due June 15. The third 2022 estimated tax payment, which is for income earned from June 1 to August 31, is due today (September 15, 2022)! If you're paying electronically, your payment must be submitted and received by midnight tonight.
Also, unless you live in a state with no income tax, you might owe state estimated taxes, too. Check with the state tax agency where you live for state estimate tax payment due dates.
Disaster Victims Get More Time to Pay Estimated Taxes
People and businesses impacted by certain natural disasters are typically given more time to file federal tax returns and pay federal taxes. This includes extensions for making estimate
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Sep 14, 2022
Under our country's "pay as you go" tax system, Uncle Sam wants to collect his cut periodically throughout the year as you earn income. In most cases, the required taxes are paid through paycheck withholding (your employer sends in the payments). But if you're self-employed, have a side gig, or don't have taxes withheld from other sources of taxable income (e.g., interest, dividends or capital gains), then quarterly estimated tax payments to the IRS are typically required.
SEE MORE 2022 Tax Calendar: Important Tax Due Dates and Deadlines
Estimated taxes are paid in four equal installments — generally, one installment for each quarter of the year. The first payment for the 2022 tax year was due on April 18, 2022, while the second payment was due June 15. The third 2022 estimated tax payment, which is for income earned from June 1 to August 31, is due on September 15, 2022 (that's tomorrow!).
Also, unless you live in a state with no income tax, you might owe state estimated taxes, too. Check with the state tax agency where you live for state estimate tax payment due dates.
Disaster Victims Get More Time to Pay Estimated Taxes
People and businesses impacted by certain natural disasters are typically given more time to file federal tax returns and pay federal taxes. This includes extensions for making estimated tax payments. For the third estimated tax payment for the 2022 tax year, victims o
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Sep 14, 2022
It probably comes as no surprise that ongoing economic fallout from the pandemic, including inflation, market volatility and the threat of a recession, have led millions of Americans to re-evaluate their retirement plans. New research from the Nationwide Retirement Institute® shows that two-thirds of Americans (66%) say they worry more now than they did before about their retirement income— that's a 10-point increase from 2021!
SEE MORE When You Claim Social Security Can Have Huge Implications for Your Spouse
In volatile moments like we're experiencing, it's easy to make emotional decisions with lifelong implications. Unfortunately, misconceptions about Social Security, which forms the foundation of almost every American's retirement income strategy, are all too common, according to the survey. The good news is with the right advice from a trusted financial professional, you can avoid unintended consequences that may come with an uninformed decision.
What People Are Getting Wrong About Social Security
About half (49%) of consumers believe if they file for Social Security early, their benefit will automatically go up once they reach their full retirement age — it won't. A sizable number of boomers (39%) who are not currently receiving Social Security plan on drawing from their benefits before their full retirement age, a decision that may cost them in the long run and should only be done with eyes wide open about implications for the future.
Misperceptions like this could make a huge difference in
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Sep 14, 2022
About 145 million American adults say that they own or have owned cryptocurrency. Statistically, that's more than half of your co-workers, neighbors and friends.
It's also about the number of Americans who own stocks.
Even though it's not regulated by a government agency, cryptocurrency is becoming mainstream. However, President Biden recently signed an executive order to address cryptocurrency risks with a whole-of-government approach that could make cryptocurrency even more attractive to investors as well as traditional banks and credit unions.
SEE MORE Crypto Has Been Through the Wringer in 2022: What Now?
For the near term though, cryptocurrency remains a volatile, speculative asset that will likely continue its gut-wrenching booms and busts. That's not to say that cryptocurrency doesn't belong in a well-diversified portfolio, but I recommend that my clients first educate themselves about cryptocurrency before deciding whether or not to invest.
As Warren Buffet said about investing in cryptocurrency: "I get into enough trouble with the things I think I know something about. Why in the world should I take a long or short position in something I don't know about?"
Here are some important concepts to get comfortable with.
How Cryptocurrency Works: The Basics
Say you order a new set of patio furniture online. A credit card company or p
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Sep 13, 2022
Stocks were crushed Tuesday as the latest inflation update showed consumer prices remained elevated in August - dashing hopes that price pressures had peaked.
Looking at the numbers, the Labor Department this morning said its consumer price index (CPI), which tracks what consumers are paying for goods and services, was up 8.3% year-over-year in August. While this was down from the annual increases seen in both June ( 9.1%) and July ( 8.5%), the core CPI, which excludes more volatile energy and food prices, was up 6.3% from the year-ago period - more than the 5.9% jump seen in each of the two prior months. And month-over-month, core CPI accelerated 0.6%, much quicker than July's 0.3%.
SEE MORE 16 Dividend Kings for Decades of Dividend Growth
"Like the payroll report a couple of weeks ago, today's CPI report showed that this year's trends of persistent inflation and an excessively tight labor market are taking longer to move towards the Fed's targeted levels than originally expected," says Rick Rieder, BlackRock's chief investment officer of global fixed income.
Today's data will give the central bank "fodder to make another historically large rate hike of 75 basis points [at next week's policy meeting]," Rieder said. "The Fed's desire to take a vacation from raising rates almost definitively can't happen until the holiday season, and maybe a bit longer now."
Dustin Thackeray, chief investment officer at Crewe Advisor, echoes this outlook. "With today's higher-than-expected CPI data, the Fed's goal of attempting a soft landing just got more difficult," he says. "In an attempt to maintain the price stability target, the Fed will need to continue its stance of aggressive rate hikes, balance sheet reduction and hawkish rhetoric."
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Sep 13, 2022
Congress is on a bit of a roll these days. Despite deep political divisions within the country, they've managed to send several major bills to the president's desk so far this year addressing semiconductor manufacturing, veterans' benefits, gun safety, climate change, and more. And they might not be done yet. Lawmakers in Washington are currently considering two separate bills that would make substantial changes to how Americans save for and are taxed in retirement. And one of the major areas of focus in these bills is reforming RMDs (i.e., required minimum distributions).
The SECURE Act, which was enacted in 2019, extended the age at which you must start taking RMDs from 70½ to 72. That was a big boost for seniors, who can now keep money in their tax-free retirement accounts longer. But that wasn't enough help for retirees in the eyes of many lawmakers. So, as soon as the ink was dry on the SECURE Act, a few key members of Congress began planning additional legislation to help more people save for retirement and hold on to their money longer in retirement.
Those efforts resulted in two bills that are now before Congress: the SECURE Act 2.0 and the EARN Act. The SECURE Act 2.0 was passed by the House of Representatives in March with a 414 to 5 vote. The EARN Act was introduced in the Senate in September. Both bills would make significant changes to RMDs, but there are differences in the two bills' RMD provisions.
SEE MORE The Basics of Required Minimum Distributions: 12 Things You Must Know About RMDs
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Sep 13, 2022
Halfway through a long, rocky hike in the Great Smoky Mountains, I realized I was in over my head.?Underprepared and overwhelmed, I felt done. Whether pushing ahead or turning back, I had 7 miles to travel. Just as I was questioning my life choices, my son suggested we call the park ranger station or even 911.
SEE MORE 2 Risks People Face If They Retire in Tough Economic Times
"Wow. What would that look like?" I thought. "Was I really in that bad of shape?" As tempting as a tap-out sounded, I was able to get by with an extra Gatorade and an energy bar instead of a rescue helicopter and an IV hookup.?Six hours later, legs battered, ego bruised, I finished the hike in the dark.
We all face moments of self-doubt and indecision. Sometimes we reset and sometimes we retreat. It's the same on the road to retirement — some of us feel stuck and others are striving. If you're rethinking your next planning move, don't panic! Instead, ponder: If I retired today, what would that look like?
If I retired today, what would my cost of living look like?
This part of the picture is not ideal. When you consider how incredibly fast the inflation rate rose from a long, comfortable period of lows to today's historic highs, pausing to evaluate current economic conditions may seem wise. In the span of just one year, the inflation rate notched its largest increase in 40 years in June with consumer prices up 9.1%. This was the biggest 12-month increase since the year that ended in November 1981, when the consumer price index reached 9.6%.
Whatever direction inflation goes from here, it's having an impact on us all, an
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Sep 12, 2022
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Links mentioned in this episode:
You Can Appeal a Medicare Premium SurchargeBonus Tax Refunds Will Be Sent Soon - Will You Get a Check from the IRS?
Watch Out! RMDs Can Trigger Massive Medicare Means Testing Surcharges
Is Your Retirement Portfolio a Tax Bomb?
Transcript:
David Muhlbaum: You've been told by plenty of people, us included, that saving for retirement is important. You've probably also heard that step one is putting aside salary in a 401(k) plan, if one is available to you, or some other retirement vehicle. But there's a catch. Saving for your retirement is a good thing, but in short, if you keep deferring the taxes, they'll likely bite you in the end. We'll talk to an expert in defusing what's s
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Sep 12, 2022
The stock market's recent rally continued Monday, with the major market indexes closing today at their highest levels since late August.
The gains came ahead of tomorrow morning's release of the August consumer price index (CPI) - the last key piece of economic data for the Federal Reserve to consider ahead of its policy meeting next week. "The U.S. consumer price index, to be released on Tuesday, will likely show that August prices rose at an 8.1% pace over the year, compared to the July print at 8.5%," says Jon Maier, chief investment officer at Global X ETFs. "If this number comes to pass, it will show that inflation is slowing some, albeit from very high levels."
SEE MORE Playing Favorites: 5 Top Stocks for Inflation
However, even with better CPI numbers, the Federal Reserve is likely "to continue on its path for another 75 basis-point hike later this month," Maier adds. "The Fed is in a tough spot because employment reports suggest labor demand and employment growth have not slowed that much due to Fed actions thus far."
Investor sentiment was also boosted by reports of Ukraine's successful counteroffensive against Russian troops in the country's northeastern Kharkiv region. "The start of the trading week was supposed to be all about the August inflation report, but Kyiv's sudden momentum has many hoping that this moment is a turning point with the war against Russia," says Edward Moya, senior market strategist at currency data provider OANDA.
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By the close, the Nasdaq Composite was up 1.3% at 12,266, the S&P 500 Index gained 1.1% to 4,110, and the Dow Jones Industrial Average
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Sep 12, 2022
Buttressing your resume with a new skill is one of the best ways to make a modest financial investment pay big returns. One study found that, depending on the skill and the worker's previous education and job, some holders of short-term (typically defined as taking 6-18 months) credentials earned 65% more than otherwise equivalent colleagues.
If you just need to learn a new skill, there are plenty of free options, including online classes available through your public library or on platforms such as Coursera, edX, FutureLearn, LinkedIn and Udemy. And many colleges offer free auditing opportunities to groups such as veterans or those over age 60.
SEE MORE How to Invest $1,000: Buy Fractional Shares (of Great Companies)
But if you want to prove to employers that you've really mastered a new skill, you'll need a certificate or credential program that requires you to pass proctored tests. Almost all of those come with a cost.
And just like any other investment, these are no slam-dunk. One recent study found that about half of the short-term credential programs accredited to award federal financial aid failed to increase earnings enough for students to recoup their costs within five years. And Credential Engine, a nonprofit that is monitoring the field, says that there are now more than 967,000 different credential programs - a number that can overwhelm prospective students.
The experts suggest winnowing by these three factors:
Field: A recent analysis of thousands of job postings by labor market analytics firm Lightcast
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Sep 12, 2022
President Biden signed the Inflation Reduction Act into law on August 16. The massive climate, energy, tax, and healthcare package contains numerous clean energy incentives including tax credits for the purchase of new and used electric vehicles. But you may not have heard that the new law also revives the tax credit for electric vehicle charging stations and equipment that had expired in 2021. There are some changes to the prior charging station tax credit that you will want to be aware of, so that you can potentially use the tax break for your own EV charger.
What is the Tax Write Off for EV Chargers?
The federal tax credit for electric vehicle chargers originally expired on December 31, 2021. However, the Inflation Reduction Act's Alternative Fuel Refueling Property tax credit extends the EV charger tax incentive ten years—through December 31, 2032.
SEE MORE EV Tax Credits Are Changing: What's Ahead
So, what does that mean for you? Essentially, if you install an EV charging station at home, the tax credit under the Inflation Reduction Act is 30% of the cost of hardware and installation, up to $1,000. Also, beginning in 2023, the tax credit for business and home installations, will apply to other EV charging equipment like bidirectional (i.e., two-way) chargers.
Businesses that that install new EV chargers or EV charging equipment can also benefit from a tax incentive of up to 30% of the total cost of equipment and installation. But they will have to meet certain labor and construction requirements to be eligible to claim the full incentive.
Before the Inflation Reduction Act, the limit on the amount of the EV charger tax credit for businesses was $30,000 (which still applies to projects completed before the end of 2022). However, under the new law, if you complete the business installa
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Sep 12, 2022
Editor's note: This is the final part of a seven-part series. It dives more deeply into the third strategy for defusing a retirement tax bomb, which is Roth conversions. If you missed the introductory article, you may find it helpful to start here.
Because they offer tax-free qualified withdrawals, Roth IRAs and Roth conversions can be a critical strategy for defusing the retirement tax bomb that traditional IRAs, 401(k)s and other pre-tax savings accounts can set you up for in retirement.
A Roth conversion is when you transfer money out of a pre-tax retirement account into an after-tax Roth. Typically, every dollar you convert is taxed as ordinary income, unless the pre-tax account was also funded with after-tax dollars.
SEE MORE Don't Move to Another State Just to Reduce Your Taxes
Here's the problem though: Most people who are facing a retirement tax bomb and are still working probably have high incomes and are in a high marginal tax bracket. The last thing they want is a Roth conversion, which adds to their income and would be taxed at high tax rates.
Instead, this is a good strategy to consider in low-income years, especially for people who retire early in their 50s and early 60s who may have several years to do conversions before Medicare means testing surcharges, Social Security income and RMDs kick in. Many of my clients do several years of annual Roth conversions starting early in retirement.
Three Windows for Roth Conversions
The first window for Roth conversions is the years before enrolling in Medicare, but recal
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Sep 12, 2022
A lot of retirement guidance I have read lately continues to treat baby boomers the same as the rest of the investor public. Even after the first six months of 2022, when the traditional 60/40 stock/bond portfolio sank more than 20%.
I may not dispute the traditional approach for investors who are 25, 35 or 45 years old and accumulating savings for retirement or the kids' college education. As we know, markets historically rebound, and younger investors with time to recover from market corrections have the benefit of dollar cost averaging.
SEE MORE Find Out in 5 Minutes If You Have Enough to Retire
But boomers entering or already in retirement have different needs than all the "Gens" that have come after them: They may not be able to wait around for their depressed accounts to grow again. For boomers, income is the important consideration — income that stays steady and grows over the decades of retirement.
Where to find income
Economic downturns always provide winners along with the many losers, and annuity payment contracts (also called income annuities) — which with rising interest rates have increased the payouts on new contracts — are the current winners. As of August 15, 2022, new purchases of income annuities at certain ages are providing 20% to 50% (depending on the income start age) more than at the beginning of the year, and that could go up even further. They're almost the mirror image of mortgage interest rates, which are also going up.
How much do you think a 20% increase in annuity payments is worth? Just imagine that your starting Social Security benefit you could claim next year went up from $3,000 to $3,600 per month. Would that get your attention
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Sep 11, 2022
Cryptocurrencies, or digital assets, have gone through a lot of turmoil so far in 2022. Since their high-water mark in late 2021, major assets like Bitcoin and Ethereum have seen dramatic pullbacks in prices. These pullbacks created a chain reaction in other areas of the digital asset market, which ultimately led to the bankruptcy of several crypto platforms - and a crash that wiped out the value of a few large cryptocurrencies.
Many coins have seen massive price drops since their all-time highs and have not recovered. As an investor, how should you approach crypto now?
Crypto basics & recent tumbles
First, a brief synopsis of crypto and recent major events:
The blockchain technology used to trade cryptocurrencies has been hailed as a game-changer for the future of currency. Users can "confirm transactions without a need for a central clearing authority," which democratizes access to the economy, especially for those who have historically not had access to financial institutions. Cryptocurrencies like Bitcoin, Ethereum and other coins or tokens are simply an alternative form of payment known as digital currencies. While potential drives crypto's allure, so does speculation. And even though crypto has been lauded as "inflation-proof," its recent tumbles affect their market value rapidly.
SEE MORE Crypto in My 401(k)? In One Way It Makes Sense, But on the Other Hand …
One of the major events that occurred recently was the dramatic collapse in value of
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Sep 10, 2022
Personal values play an important role in many aspects of our lives and have become more prominent recently in how we think about and manage our finances. More and more investors are asking how they can support the causes they care about through their financial decision-making.
SEE MORE Kiplinger ESG 20: Our Favorite Picks for ESG Investors
Charles Schwab's latest Modern Wealth Survey found that 69% of Americans say that supporting causes they care most about is a top consideration when it comes to their financial decisions. If you count yourself among them, consider starting with a financial plan to ensure you stay on track toward your long-term goals while also staying true to your personal values.
Define your saving and spending goals
The best way to start is by translating your dreams into concrete financial goals. Identify your most important goals and commit to saving toward each. Write things down so you can build confidence, stay focused and refine your plan over time while prioritizing both your own financial wellness and the greater good.
For example, we recently had a client looking for ways to maximize her charitable donations with a limited budget. After pinpointing the causes that she connected with most - the environment and medical research - we laid out a three-year charitable-giving budget. This helped her stay on track with her long-term plan while mixing in creative ways to give back, including ongoing gifts through a donor-advised fund supporting cancer research and volunteering for weekend river cleanups.
SEE MORE
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Sep 09, 2022
The Saver's Credit helps lower- and middle-income Americans who contribute to a retirement plan by cutting up to $1,000 ($2,000 for married couples) off their tax bill when they file their annual tax return. It's also a particularly good incentive to get young people started early on saving for their golden years.
SEE MORE 401(k) Contribution Limits for 2022
But the Saver's Credit as it exists today could be in for some significant changes - particularly with respect to how it's paid. The EARN Act, which was recently introduced in the U.S. Senate, would basically convert the credit into a government matching program for retirement plan contributions. Other revisions would be made, too. If passed, the new rules would take effect in 2027.
While it's too early to tell if the proposed changes will eventually be enacted into law, there is bipartisan support for major improvements to current retirement saving plans and incentives. So, depending on how the politics play out, there's a decent chance that we'll see improvements to the Saver's Credit in one form or another in the near future - and they very well could be the modifications included in the EARN Act.
The Current Saver's Credit
Currently, qualified taxpayers who contribute to a retirement plan (e.g., a 401(k), traditional IRA or Roth IRA) can claim the Saver's Credit on their tax return. For 2022, single filers and married couples filing a separate return with adjusted gross income of $34,000 or less are eli
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Sep 09, 2022
Stocks continued their push higher Friday, with today's gains helping the major market indexes snap a three-week losing streak.
SEE MORE 12 REITs Flaunting Fast-Growing Dividends
There was nothing particularly new today to boost investor sentiment. Both the economic and earnings calendars were thin. And early afternoon speeches from Kansas City Fed President Esther George and Fed Governor Christopher Waller echoed the hawkish tone struck by central bank officials in recent weeks. It could just be that Wall Street has come to terms with the fact that the Fed will almost certainly issue a third-straight 75 basis point rate increase at its policy meeting later this month. Or perhaps investors are simply taking advantage of bargains from the late-August selloff.
Whatever the reason, today's rally was broad-based, with all 11 sectors finishing higher. Leading the pack was communication services, which jumped 2.8% on strong gains for components Meta Platforms (META, 4.4%) and Netflix (NFLX, 2.7%). Energy ( 2.5%) also outperformed as U.S. crude futures bounced 3.9% to $86.79 per barrel.
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As for the major indexes, the Nasdaq Composite's 2.1% rally to 12,112 outpaced its peers. Still, the S&P 500 Index ( 1.5% to 4,067) and the
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Sep 09, 2022
The impact investing platform, Kiva (www.kiva.org), was designed to do just that. A U.S. non-profit that has lent over $1.7 billion to small businesses and individuals, Kiva investors crowdfund loans to entrepreneurs who often lack access to banking services. Loans typically cover the cost of buying a machine to increase food or textile production, supplies for expanding a small general store, or seeds for farmers.
Kiva was originally designed to benefit people in low-income countries but expanded to the U.S. in 2011. That means you can invest in a weaving coop of Indigenous women in Guatemala, or a mother of five in Atlanta hoping to expand her beauty products business.
The most important question is whether Kiva delivers positive impact and high-quality loans. The organization certainly engages in best practices for its industry. Kiva has garnered the highest rating (four out of four stars) from Charity Navigator. Kiva partners with grassroots organizations that often provide financial literacy and other services, helping borrowers avoid over-indebtedness. And Kiva carefully vets these partners. Many loans are also matched by foundations or banks.
SEE MORE 40 Ways to Earn Extra Cash in 2022
Determining the actual benefit of impact loans is tricky though; most impact investment firms point to their default rates and partner quality. Determining how many borrowers have improved their income, health, or education i
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Sep 09, 2022
The impact investing platform, Kiva (www.kiva.org), was designed to do just that. A U.S. non-profit that has lent over $1.7 billion to small businesses and individuals, Kiva investors crowdfund loans to entrepreneurs who often lack access to banking services. Loans typically cover the cost of buying a machine to increase food or textile production, supplies for expanding a small general store, or seeds for farmers.
Kiva was originally designed to benefit people in low-income countries but expanded to the U.S. in 2011. That means you can invest in a weaving coop of Indigenous women in Guatemala, or a mother of five in Atlanta hoping to expand her beauty products business.
The most important question is whether Kiva delivers positive impact and high-quality loans. The organization certainly engages in best practices for its industry. Kiva has garnered the highest rating (four out of four stars) from Charity Navigator. Kiva partners with grassroots organizations that often provide financial literacy and other services, helping borrowers avoid over-indebtedness. And Kiva carefully vets these partners. Many loans are also matched by foundations or banks.
SEE MORE 40 Ways to Earn Extra Cash in 2022
Determining the actual benefit of impact loans is tricky though; most impact investment firms point to their default rates and partner quality. Determining how many borrowers have improved their income, health, or education i
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Sep 09, 2022
Roboadvisers, those automated investment advice services offered by banks, brokerages and other financial firms, promise low-cost, computer-driven investment management geared to your goals.
Although $1,000 is not enough to get started at Charles Schwab (it's a heavy-weight competitor in robos, but its Intelligent Portfolio service requires $5,000 to open an account), it's plenty for SoFi. The fintech company's digital advice service, called SoFi Invest, has a $1 minimum and there's no annual management fee. What's more, SoFi's digital service wins top marks as best overall robo adviser from the Robo Report, a quarterly publication from Backend Benchmarking, a Martinsville, N.J.-based advisory firm, that measures the performance, among other things, of 15 roboadvisory services.
SEE MORE 11 Stock Picks That Billionaires Love
SoFi's program is similar to other robo services. You answer a quick online survey that touches (lightly) on your goal, financial situation and risk tolerance. Then an algorithm spits out a recommended diversified portfolio for you that holds a smattering of exchange-traded funds that are appropriate to your investment timeline.
Competitor Wealthfront has a $500 minimum, and charges 0.25% in annual management fees. Wealthfront's robo portfolios have performed better than peers over the past three and five years, according to the Robo Report, thanks in part to a 10% allocation to
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Sep 09, 2022
Among the lowest-priced investing options this fall are small cap stocks - often defined as companies whose total market capitalization (stock price times number of shares) runs from $300 million to $2 billion.
The Russell 2000, an index that tracks the 2,000 smallest public companies, was trading at a price-to-earnings ratio, based on estimated earnings, ranging from 15 to 20 this summer, the lowest range in more than a decade. That discount is one big reason Ed Clissold, Chief U.S. Strategist for Ned Davis Research, turned bullish on small caps this summer. "Small-caps could be in the early stages of a multi-year run of outperformance," he says.
History is certainly encouraging. The sector strongly outperformed the last time small cap stock prices were so low - in the run up to the 2001 recession. If you bought a fund tracking the Russell 2000 index around the March 2001 start of that recession, by March of 2005 you'd have gained a cumulative total return of 42%. The large cap Russell 1000 index had only started recouping its losses by then and was up just 6%.
There are plenty of other reasons to take a flyer on small caps. Clissold believes they will disproportionately benefit from trends such as deglobalization and a strengthening dollar because small caps tend to be more U.S. focused. And several academic researchers have found that over the very long run, small cap stocks tend to gain more than those of large companies.
All this might make savvy investors suspicious: If that's all true, why are small caps so unloved now?
Four big reasons: Small caps are more volatile than
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Sep 09, 2022
Among the lowest-priced investing options this fall are small cap stocks - often defined as companies whose total market capitalization (stock price times number of shares) runs from $300 million to $2 billion.
The Russell 2000, an index that tracks the 2,000 smallest public companies, was trading at a price-to-earnings ratio, based on estimated earnings, ranging from 15 to 20 this summer, the lowest range in more than a decade. That discount is one big reason Ed Clissold, Chief U.S. Strategist for Ned Davis Research, turned bullish on small caps this summer. "Small-caps could be in the early stages of a multi-year run of outperformance," he says.
History is certainly encouraging. The sector strongly outperformed the last time small cap stock prices were so low - in the run up to the 2001 recession. If you bought a fund tracking the Russell 2000 index around the March 2001 start of that recession, by March of 2005 you'd have gained a cumulative total return of 42%. The large cap Russell 1000 index had only started recouping its losses by then and was up just 6%.
There are plenty of other reasons to take a flyer on small caps. Clissold believes they will disproportionately benefit from trends such as deglobalization and a strengthening dollar because small caps tend to be more U.S. focused. And several academic researchers have found that over the very long run, small cap stocks tend to gain more than those of large companies.
All this might make savvy investors suspicious: If that's all true, why are small caps so unloved now?
Four big reasons: Small caps are more volatile than
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Sep 09, 2022
Buy expensive stocks - or build a whole portfolio - on the cheap. Fractional shares, increasingly available at online brokers including Schwab, Fidelity and Robinhood, allow you to buy a portion of a stock you might not otherwise be able to afford. You can even put together a portfolio of stock snippets, giving you a diversified ownership stake in the best of corporate America, even if you're just starting out and your budget is limited.
SEE MORE 11 Stock Picks That Billionaires Love
Say you had $1,000 to invest and wanted to buy stock in NVR (NVR), a homebuilder recently rated Strong Buy by investment research firm CFRA. You'd be out of luck, considering the shares recently traded for about $4,200 a pop. But at Schwab, for example, you'd be able to buy what the company calls a Stock Slice - a single slice or up to 30 slices at a time of any S&P 500 stock for as little as $5 per slice, commission-free. With Fidelity's Stocks by the Slice program, you can access more than 7,000 U.S. stocks and exchange-traded funds (ETFs) for as little as $1.
You can also trade fractional shares at Robinhood and InteractiveBrokers, each with programs starting at $1. Eligible stocks and ETFs at Robinhood trade for more than $1 per share and have a market value of more than $25 million. InteractiveBrokers allows trading in U.S. and European stocks and ETFs. Vanguard is testing fractional trading of Vanguard ETFs for launch later this year. The rules and eligible investments for fractional share-buying differ by broker, so be sure to compare options.
SEE MORE
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Sep 09, 2022
The IRS has granted victims of the recent severe storms in Arizona more time to file various individual and business tax returns and make tax payments. Specifically, victims of the storms on July 17 and 18, 2022, have until November 15, 2022, to file and pay tax returns and payments due between July 17 and November 14.
SEE MORE 2022 Tax Calendar: Important Tax Due Dates and Deadlines
The tax relief is available to anyone in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. At this point, only affected taxpayers who live or have a business in the Salt River Pima-Maricopa Indian Community qualify for the extensions, but the IRS will offer the same relief to any taxpayers in other Arizona localities designated by FEMA later.
The IRS will also work with other people who live outside the disaster area but whose tax records are in the disaster area. Call the IRS at 866-562-5227 if you face this situation. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.
Deadlines Extended
The deadlines that are pushed back include extended 2021 personal income tax returns that were supposed to be due on October 17, 2022. However, payments for 2021 income taxes that were due on April 18, 2022, are not extended. In addition, Arizona storm victims in the designated area get more time to make the estimated tax payments due on September 15, 2022.
SEE MORE
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Sep 09, 2022
Dreaming of an early retirement? You're not alone. In the midst of the pandemic, the number of retirees 55 and older grew by 3.5 million according to the Pew Research Center. But it's not just those over 50 looking to retire, according to a recent study by Northwestern, millennials are twice as likely to be thinking about early retirement as Gen Zers and three times as likely as Gen Xers.
An early retirement sounds nice, though there are challenges. Consider you may be forgoing additional savings, your Social Security benefits may be impacted if you stop contributing, and with life expectancy increasing over the years, you may have to rely on your savings for longer than if you waited. But if you really want to get serious about early retirement, then I suggest taking a careful, thoughtful approach. After all, you only want to retire once - you will want to get it right the first time.
Here to help get you started are a few suggestions I share with my clients who want to retire early.
1. Retire with a realistic picture of your income and expenses
Estimating retirement expenses is tricky, given all the unknowns. In my experience, I see retirement spending generally stays about the same in the first few years of retirement. Clients are the most active in this phase, given all the travel and bucket list items they want to accomplish. Spending eventually levels off, and usually declines later in life. Housing, health care, caring for adult children, taxes and travel make up the bulk of the typical retiree's budget in my experience.
SEE MORE
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Sep 09, 2022
Effective retirement planning reaches beyond investments and the numbers related to various accounts a person owns. First, it's about understanding the scope of one's future financial needs and goals. And from that framework, it's about putting all areas of the plan together so that they complement one another and function as an integrated whole.
SEE MORE Find Out in 5 Minutes If You Have Enough to Retire
Sometimes the financial world can seem segmented to clients, with professionals designated as experts in just one area of the plan — investments, insurance, taxes, estate planning, etc. But holistic financial planning includes and ties together every aspect pertinent to the retirement strategy. It analyzes and seeks to optimize each part of a person's plan by making those pieces work together congruently.
One way to think about holistic planning is that most people have several pieces that comprise their retirement puzzle, and they all need to fit together to form a complete picture. But I find when talking about holistic planning in seminars, it's eye-opening for people because they really haven't thought about it in that context. Here are the fundamental elements in most people's retirement situations:
Social SecurityTax planning
Medicare
Investments (401(k) plans, Roth IRAs, nonqualified accounts, etc.)
Income plan (mapping out a strategy for how to use your money)
Estate plan
All those pieces need to function together. You can't maximize your situation if you're looking at each of those aspects in a vacuum.
Putting the pieces together: Starting with Social Security
You have to view Social Security in the context of three of the bullet points mentioned above: investments, income plan and tax planning. You also have to figure out how
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Sep 08, 2022
Robocalls can be relentless: Is your car warranty about to expire? Can we make you a great offer to buy your house? Have you seen these irregularities with your Amazon account? Are you aware your utilities are about to be shut off?
In 2021 alone, phones in the U.S. were pummeled by more than 50 billion robocalls, according to YouMail, a robocall blocking and analysis company. That's more than 150 calls for every person in the country. In July, that number was 3.8 billion.
The result? Many of us just don't answer our phones unless we recognize the number.
SEE MORE How to Avoid a Summer of Scams - Expert Tips to Help Aging Parents
The damage done can have serious consequences, intended and not. In addition to fraudulent marketing, ignoring unknown numbers could prove dangerous - take the hiker lost on a mountain in Colorado who was reported to have ignored repeated telephone calls from Lake County Search and Rescue because they didn't recognize the number. Consequently, the hiker didn't even know anyone was searching. It's a behavior common to most of us. A 2019 Consumer Reports survey found that 70% of Americans don't answer the phone if they don't recognize the number.
Are Robocalls Legal?
In general, unless a company has your written permission, it is against the law to contact you via robocall, espec
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Sep 08, 2022
Stocks kept investors on edge for most of Thursday, swinging between positive and negative territory throughout the session as investors sized up global central bank headlines.
Kicking things off was an early morning decision from the European Central Bank (ECB) to hike its key interest rate by an unprecedented 75 basis points. A basis point is one one-hundredth of a percentage point.
SEE MORE The Best Online Brokers and Trading Platforms, 2022
"Stuck between a rock and a hard place, ECB policymakers felt they had little option but to go ultra-big with the rate rise to try and cut the rope on inflation and spark a fall from its ascent," says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. She adds that it couldn't have come at a worse time. "With energy prices so elevated, bringing an end to the price spiral is going to be far from easy, and the ECB is warning that fresh hikes will be on the way."
Back at home, Federal Reserve Chair Jerome Powell this morning doubled down on the hawkish tone he struck in a late-August speech in Jackson Hole, Wyoming. Speaking during a virtual conference hosted by the Cato Institute, Powell indicated that the Fed is firmly committed to fighting inflation and will be as aggressive as it needs to be in order to do that. "It is very much our view, and my view, that we need to act now forthrightly, strongly, as we have been doing, and we need to keep at it until the job is done," he said.
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These two events sparked a wild ride for investors, but at the close, the major market indexes were in the green. The Dow Jones
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Sep 08, 2022
Many farmers are facing a critical retirement decision. The traditions of yesterday are often changing, and their children may no longer want to follow in their parents' footsteps. The challenges are many. However, there are options available.
In 1971, I began my farming career at the tender age of 9 in the Skagit Valley, 60 miles north of Seattle. Crop farming was my gig; rouging spinach, sorting tulips, picking strawberries, raspberries and cucumbers alongside the migrant workers from Mexico. When I was old enough, I was driving picking machines with a dozen kids lying on boards over a conveyor belt, or driving an open tractor pulling a green pea combine while traveling about 1 mile in four hours.
SEE MORE Keeping Property in the Family with LLCs and Partnerships
Today, at the age of 59, I realize that I've been preparing this article for 50 years. During 12-hour shifts on the open tractor, it rained, often. My family could not afford proper rain gear, so a plastic lawn bag with holes punched out for my head and arms provided quite well. Working six of these shifts every seven days gives a teenager time to reflect. That's when I decided farming was very hard and I wanted an easy office job someday!
Challenges for Farmers Today
A huge debt of gratitude is owed to the men and women who feed the world. You face unprecedented challenges:
Mother NatureInconsistent commodity prices
Lack of access to labor
Global competition with lower costs of operations
Lack of resources to compete with larger corporate farming technology
Next-generation (family) choosing a different career path
You are at an age where you need to slow down or retire completely
Potential income tax law changes
Inheritance and estat
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Sep 08, 2022
Editor's note: This is part six of a seven-part series. It dives more deeply into the second strategy for defusing a retirement tax bomb, implementing asset location. If you missed the introductory article, you may find it helpful to start here.
Most investors have heard of asset allocation, but asset location is another story - and it could help investors with large tax-deferred savings reduce their tax bills in retirement.
SEE MORE When It Comes to Your RMDs, Be Very, Very Afraid!
Asset allocation refers to how a portfolio is allocated to various asset classes that have different historical investment returns and standard deviations. The simplest example is a stock-bond allocation, such as a 60% stock, 40% bond allocation, which is a common allocation for retirees. But there are dozens of more granular asset classes that can be managed as well, for example, U.S. large cap stocks or international small cap value stocks. Asset allocation is critical to effectively diversify your portfolio and reduce risk.
Asset location is different portfolio management strategy: one that few clients I meet have heard of. Few financial advisers implement it as well. Asset location seeks to minimize taxes by placing different asset classes in specific tax buckets (taxable, pre-tax, tax-free).
Putting Asset Location into Practice
In a nutshell, here's how asset location works:
Typically, you want to place investments with low expected returns, such as bonds, into tax-deferred accounts.Place investments with high expected returns, such as small value or emerging market st
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Sep 07, 2022
Stocks closed higher Wednesday as bargain hunters swooped in following a lengthy stretch of losses for the major indexes.
Today's positive price action came as the 10-year Treasury yield eased back from yesterday's two-month high, finishing down 6.7 basis points at 3.273%. A basis point is one-one hundredth of a percentage point.
SEE MORE Kip ETF 20: The Best Cheap ETFs You Can Buy
And the buying persisted even after Federal Reserve Vice Chair Lael Brainard said in an early afternoon speech that the central bank is "in this for as long as it takes to get inflation down." The Fed will meet later this month, with the market largely pricing in the probability of a third straight 75 basis-point rate hike.
Nearly all sectors finished higher, with utilities ( 3.1%) and consumer discretionary stocks ( 3.1%) leading the charge. The one outlier was energy, which slumped 1.2% as U.S. crude futures tumbled 5.7% to $81.94 per barrel - their lowest close since Jan. 11, according to Dow Jones Market Data - amid expectations of slowing global economic growth. "Oil's breakdown today is a bigger shot across the bow, pointing to further struggles ahead in our opinion," says Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott. "We believe the commodity can break below $80 from here, targeting the mid-$70s range in the weeks ahead."
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As for the major indexes, the Nasdaq Composite jumped 2.1% to 11,791 - snapping its seven-day losing streak, its longest one since 2016. The S&P 5
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Sep 07, 2022
The IRS announced that victims of the water crisis in Mississippi (including Jackson, Miss.) that started on August 30, 2022, will have more time to file various individual and business tax returns and make tax payments. Specifically, impacted taxpayers will have until February 15, 2023, to file and pay tax returns and payments due between August 30 and February 14.
SEE MORE 2022 Tax Calendar: Important Tax Due Dates and Deadlines
The tax relief is available to anyone in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. At this point, only affected taxpayers who live or have a business in Hinds County (which includes Jackson, Miss.) qualify for the extensions, but the IRS will offer the same relief to any taxpayers in other areas designated by FEMA later.
The IRS will also waive fees for obtaining copies of previously filed tax returns for taxpayers affected by the water crisis. When requesting copies of a tax return or a tax return transcript, write "Mississippi Water Crisis" in bold letters at the top of Form 4506 (copy of return) or Form 4506-T (transcript) and send it to the IRS.
The IRS will also work with other people who live outside the disaster area but whose tax records are in the disaster area. Call the IRS at 866-562-5227 if you face this situation. This also includes relief workers affiliated with a recognized government or philanthropic organization, and anyone visiting the area who was killed or injured as a result of the disaster.
Deadlines Extended
The deadlines that are pushed back for Mississippi wa
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Sep 07, 2022
There's no way to sugarcoat this: Small and midsize businesses should be scared to death about the consequences of the Inflation Reduction Act. Unless they provide goods and services to the green energy industry, the law's unforeseen consequences could increase their operating expenses in two ways. Here's what to expect — and how to prepare.
SEE MORE Audit-Proof Your Small Business
The Inflation Reduction Act is essentially a climate change law with some health care benefits. While the new legislation doesn't include any direct tax increases on small and midsize businesses, some of its provisions have the potential to raise costs for these companies significantly.
First Reason Why Cost of Business Could Be Going Up
For one, your chances of being audited may be going up. The new bill substantially expands the Internal Revenue Service's budget: More than half of the $80 billion increase in the IRS budget over 10 years will be used to beef up enforcement through new technology and new hires. That means more audits for companies that are the least able to financially manage them. I worry for businesses that gross $5 million or less since they usually don't have excess funds to pay a lawyer $50,000 to fight the IRS if their matter proceeds to court.
In a letter to the Senate, the agency's commissioner said, "These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans." Even so, with the hire of new auditors, it's likely that people with little or
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Sep 07, 2022
One of the most unique things about my job is seeing people at all different stages of life. I've seen more people change jobs, retire, get married, get divorced, have kids, have grandkids, etc. than most people you know. After more than two decades in the business of helping people navigate their finances and lives, I've pretty much seen it all.
SEE MORE COVID's Financial Toll Isn't What You Think
I tell you this simply to point out that my job comes with a perspective that most people don't get to see. I simply see people go through every stage of life thousands of times, making important decisions and big moves along the way.
The past several months I have seen more people shake up their lives with major changes than in any other period I have ever witnessed. I'm calling it "The Great Change."
The Great Change
Here is what I have observed: I have run more financial plans for what it looks like if people quit their jobs, take new jobs, get divorced, or move somewhere random than any other period in my 20-plus year career. Last week alone I ran three updates of plans — two people wanting to switch jobs and one wanting to separate.
The interesting thing about them all is when asked why, their answers were all eerily similar. They all said something like, "I can stay in my current situation, but you know what? That won't make me happy." One of my best friends, a successful entrepreneur, told me he is worn out and wants to get out of the rat race to follow his passion for cars. To many, these thoughts and changes were foreign two years ago — not today though, not with the "Great Change" among us.
The two things that virtually every one of the people I've come across this year says are:
They could stay in their current situation if they must.They really just want to be happy.
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Sep 06, 2022
It was a choppy start to the short trading week, with stocks spending time in both positive and negative territory Tuesday. Bears gained the upper hand in the afternoon, though, with the three major indexes ending another day in the red.
SEE MORE The ESG Investing Backlash
Although this week's economic calendar is fairly thin, data from the Institute for Supply Management (ISM) this morning showed that activity in the services sector ticked up to 56.9% in August - the highest level since April - from July's 56.7%.
"This is the most recent piece of data to suggest the economy remains resilient and as such the market takeaway is that this gives the Fed more room to continue raising rates," says Michael Reinking, senior market strategist for the New York Stock Exchange. "Futures markets are now pricing in a 75% chance of a 75 basis-point hike later this month from a coin flip late last week." A basis point is one-one hundredth of a percentage point.
In reaction to today's ISM data, the 10-year Treasury yield rose to its loftiest level since mid-June. This, in turn, weighed on shares in the communication services (-1.3%) and technology (-0.6%) sectors, with names such as streaming giant Netflix (NFLX, -3.4%) and chipmaker Intel (INTC, -2.8%) seeing notable declines.
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As for the major indexes, the tech-heavy Nasdaq Composite fell 0.7% to 11,544, its seventh straight loss.
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Sep 06, 2022
Divesting from ESG
Over the past two decades, the financial community has largely come to accept that environmental, social and governance (ESG) factors may influence a company's profitability and stock performance. In the past year, however, some governors have politicized ESG investing, dubbing it "woke" and banning this investment style from their state pension funds. It seems the culture wars are coming to investing.
Why the Sudden ESG Backlash?
The U.S. economy is on the path to a major transformation, powered less by fossil fuels and more by climate-friendly energy sources like wind and solar. The fossil fuel industry may publicly acknowledge the need to decrease greenhouse gas emissions to mitigate climate change, but the industry remains resistant behind the scenes. As a result, ESG investors have pushed the industry to disclose more hard data on how it will manage this transformation. This effort culminated in draft requirements for public companies to report more broadly on their greenhouse gas emissions with the Securities and Exchange Commission. Citing issues like the cost of extra reporting, the attorneys general in 21 red states wrote comments in August protesting the draft rule.
A second reason for the backlash is the success of shareholder resolutions targeting companies with poor reporting or performance on climate change and
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Sep 06, 2022
A bear market accompanied by market volatility has led to shifting perceptions of what constitutes a secure retirement, according to a new national poll by Kiplinger and retirement services company Athene. Top concerns of retirees and near-retirees include a possible recession, the financial security of Social Security, the cost of health care and inflation.
A majority of respondents say that having more guaranteed income in retirement would ease their concerns about running out of money. Even so, an overwhelming majority of current retirees report high levels of satisfaction and happiness. And retirees are generally confident about their financial future, with 70% reporting they expect to have enough income to live comfortably, and 66% saying they are confident they will not run out of money in retirement. However, preretirees are less sanguine. Less than 55% of respondents not yet retired expressed confidence that they will not run out of money at some point.
The poll targeted retirees and pre-retirees with a net worth of at least $100,000; the respondents' median household net worth (excluding primary residence) was $369,979 for retirees and $322,506 for pre-retirees. The relatively high net worth is one likely reason financial confidence in this survey is higher than reflected in other retirement-confidence surveys.
Retirees are a bit more positive about stock market volatility than preretirees. Nearly half (49%) of retirees are concerned that stock market volatility could cause serious economic hardship in retirement (versus 64% of preretirees). Some 68% of retirees say they are doing nothing (and waiting) in response to volatility this year (versus 60% of preretirees).
Among retired respondents, 83% have already claimed Social Security benefits, with a mean claiming age of 63. For 43% of these respondents, Social Security provides 50% or more of their annual retirement income. Top sources of stable income for current retirees (be
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Sep 06, 2022
Is it true that many young professionals don't know how to save money?
I recently had dinner with an old college friend. I was expecting to catch up on friends, family and our careers, but it was clear he wanted some basic financial information.
Knowing I advise young professionals on their finances, he zeroed in on the following questions: "How much should I save, and how do I know if my savings plan is on track?"
SEE MORE Millennials Want a Different Kind of Retirement
Many highly talented and bright young individuals - often earning six figures, receiving an annual bonus and holding stock options - often struggle with how to spend and save their money. My advice is to develop a process that focuses on three fundamental ideas that anyone can use.
Control Savings and Spending by Paying Yourself First
Putting together a budget and tracking spending are useful tools - but they can be tedious and hard to sustain. Instead of starting with expenses, I begin by allocating the desired amounts of money to various savings and investment accounts.
I set up automated contributions to my 401(k) retirement account, Roth Individual Retirement Account (IRA) and after-tax brokerage accounts. Once that money is set aside, I have total peace of mind knowing I can afford to spend what's left and still be on track to hit my financial goals.
If, like me, you make the majority of day-to-day purchases on your credit card, another easy way to spot-check spending is making sure you can pay your credit card bill in full each month without tapping your savings.
Don't get me wrong - developing a detailed budget is a valuable exercise when done periodically. And it's parti
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Sep 06, 2022
Editor's note: This is part five of a seven-part series. It dives more deeply into the first strategy for mitigating a retirement tax bomb, which is to shift retirement savings from pre-tax to after-tax accounts, including Roths and HSAs. If you missed the introductory article, you may find it helpful to start here.
If you're facing a retirement tax bomb, there are three main strategies to defuse it: shifting retirement savings from pre-tax accounts to Roth and HSA accounts, implementing asset location, and executing Roth conversions.
I consider shifting your savings to be the first line of defense, because it's the easiest solution to implement. However, to really get the job done, you'll likely need to implement all three strategies.
There are two flavors to shifting savings, one uses Roth retirement accounts, while the other uses health savings accounts (HSAs).
Shift Retirement Plan Contributions from Pre-Tax to Roth
Perhaps the easiest solution to implement is simply changing your retirement plan contributions from pre-tax to Roth. You'll lose the tax deduction in the current year, and you may have to explain to your accountant why you made the change. However, any company match is tax-deferred, so even if you switch to 100% Roth, the employer match and your investment return means the tax-deferred account will still grow.
SEE MORE Find Out in 5 Minutes If You Have Enough to Retire
Many of my clients aren't aware they have a Roth option in their 401(k)/403(b), or they mistakenly think they can't contribute to one because of i
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Sep 05, 2022
If a car dealer lets you take a car out for a test drive and it suffers catastrophic engine and transmission damage, are you responsible for the repair charges?
Note, I didn't say, "Because of something that you did wrong," rather, that it experienced a breakdown that occurred while you were driving the vehicle.
SEE MORE PODCAST: Car-Buying in an Inflated Market with Jenni Newman
Confused? So, too was my reader, "Alissa" who lives in a suburb of Los Angeles, not far from one of most picturesque and yet dangerous sections of freeway on Interstate 5, which connects Southern California with the Central Valley.
Known as the Tejon Pass, often called the Grapevine, it is a steep 5½ mile, 6% grade at the northern end of the pass that makes national news every winter when it is shut down due to ice and snow, stranding thousands of motorists and big rig drivers.
In summer, it can destroy a vehicle's engine and transmission if they are in poor condition. It has two runaway truck ramps. All of that said, coming down I-5 is one of the most dramatic drives I know of and never tire of the experience.
Found the ‘Ideal' Used Compact Sporty Car
"I was looking for a low-mileage, automatic, sporty car from Detroit and found a 2013 model year that I thought was ideally priced at $15,000 at a car dealership in Los Angeles. They photocopied my ID and driver's license, handed me the keys and said, ‘While this particular model is no longer being manufactured, it was seen as Detroit's answer to BMW and Mercedes. Take it anywhere you like.'
"I have family who live in the Central Valley and know the Grapevine like the back of my hand. After reaching the summit at about 4,000 feet, I began my descent, and shifted into a lower gear as I have always done. This is called ‘engine breaking'
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Sep 04, 2022
Making sure that your estate planning documents are implemented as early as possible is extremely important. One of the biggest challenges that clients encounter during the process is deciding who to appoint as their trustees, powers of attorney, health care surrogates and executors.
Below are some practical tips to help guide you in your decision making.
1. Give preference to those who have the most time to devote and live nearby
Lots of my clients have very accomplished children who are successful business owners, professionals or leaders in their trade or occupation. The most successful people might not always be the best choice since these individuals sometimes run tighter schedules and have less time to devote to helping you with your affairs than others. In addition, maybe certain children have more kids and other obligations than others. This is important to take into account.
SEE MORE You're Not Too Young for an Estate Plan: 7 Essentials for Your 20s and 30s
Additionally, give preference to people who are closer in proximity to you. It is certainly easier for them in terms of being your power of attorney and health care surrogate. However, being nearby can matter less for trustees and executors.
2. Do not make arbitrary designations
Another mistake I see a lot is selecting an individual based on arbitrary characteristics. You see this a lot when someone appoints a particular child just because they are the oldest. Perhaps there is one son or daughter, and they appoint that person based on gender.
Selecting an agent is very important. There are a lot of factors to consider, but you should not select individuals based
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Sep 03, 2022
The construction industry is booming, and there doesn't appear to be an end in sight. That's great news if selling your small business is anywhere on your radar.
As someone who has built a successful business, maybe you have started to think about the next phase of your life. That could be pivoting into a new career or getting ready for retirement. Either way, selling a small business is an exciting step but it takes intention and preparation.
SEE MORE 3 Ways to Increase the Enterprise Value of Your Family Business
If you're considering selling your business to employees or a family member, then you have one of the key components of the sale in place. You've got a potential buyer! Having a buyer already in mind changes the process. You probably won't have to hire (or pay) a business broker, and you won't have to go through the process of marketing your business or vetting interested parties.
It's still important to ensure you're mentally prepared for the transition and that you've gotten everything to navigate the sales process successfully.
Selling a Small Business to Employees or Loved Ones
For contractors and other small-business owners, selling what you've worked so hard to build can be bittersweet. It's exciting to move to the next phase of your life, but you want to know that your business is going to end up in the right hands.
Selling to a key employee or family member can be a very fulfilling experience. They already understand what you do, and in the case of key employees, they know the ins and outs of your busi
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Sep 02, 2022
Stocks jumped out of the gate Friday after the release of the August jobs report. But enthusiasm from the few investors that stuck around ahead of the long holiday weekend didn't last, with all three indexes ending in the red.
SEE MORE Hedge Funds' 21 Top Blue-Chip Stocks to Buy Now
The Labor Department this morning said the U.S. added 315,000 new jobs in August, well below July's 526,000. Also in the jobs report: the unemployment rate edged up to 3.7% from 3.5%; the labor participation rate, or the number of people actively seeking work, improved to 62.4% from 62.1%; and average hourly earnings - a key measure of labor cost inflation - was up 5.2% year-over-year, same as it was in July.
"Friday's jobs data provided some moderate relief, with payrolls almost landing precisely on consensus at 315,000 in August," says Douglas Porter, chief economist at BMO Capital Markets." While no doubt a solid advance - and completely inconsistent with recession chatter - other aspects of the report sent some calming signals." Porter points to steady wage growth, an increasing labor force and the rising unemployment rate that suggest "the extreme tightness in the job market may be beginning to moderate - almost exactly what the Fed doctor ordered."
Still, the major indexes, after being up more than 1% each around lunchtime, swung lower in afternoon trading after news reports indicated Russian energy giant Gazprom will indefinitely suspend operations of a natural-gas pipeline to Germany.
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By the close, the Nasdaq Composite was down 1
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Sep 02, 2022
If you're a retiree (or near retiree) who isn't worried about inflation, you're either fabulously wealthy or not paying attention. Even for super savers, inflation is retirement kryptonite. To keep up with rising costs, you may be forced to take larger withdrawals from your portfolio, increasing the risk that you'll outlive your nest egg. And if inflation is accompanied by a bear market, as it is now, those withdrawals can leave a permanent hole in your portfolio.
More than 70% of individuals age 50 and older are concerned that inflation will cause serious economic hardship during their retirement, according to a recent national poll Kiplinger conducted with Athene, a retirement services company. Although you can't control the inflation rate—or the stock market—you can take steps to protect your retirement security.
The 4% Rule for Retirement Withdrawals
One of the most perplexing questions facing retirees is this: How much can I withdraw from my savings each year without running out of money? For many, the answer has been to use the 4% rule, developed by William Bengen, an MIT graduate in aeronautics and astronautics who later became a certified financial planner.
Here's how it works: In the first year of retirement, withdraw 4% from your IRAs, 401(k)s and other tax-deferred accounts (which is where most workers hold their retirement savings). For every year after that, increase the dollar amount of your annual withdrawal by the previous year's inflation rate. For example, if you have a $1 million nest egg, you would withdraw $40,000 the first year of retirement. If inflation that year is 2%, in the second year of retirement you would boost your withdrawal to $40,800.
Although the 4% rule has held up well since it was introduced in 1994, Bengen acknowledges that a period of high inflation could threaten his formula. And this past year illustrates why: Using the above example, if you retired this year and withdrew $40,000 fr
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Sep 02, 2022
While the fall equinox is still a few weeks away, the unofficial end of summer - also known as Labor Day - is upon us. That means a three-day weekend for investors and traders. The stock market is closed for 2022's Labor Day, which falls on Monday, Sept. 5, this year.
For those that may be interested, the bond market is closed for the holiday, too.
Unlike some market holidays, however, there are no early hours ahead of Labor Day. The New York Stock Exchange (NYSE), Nasdaq Stock Market and bond market all have regular trading hours on Friday, Sept. 2.
SEE MORE Hedge Funds' 21 Top Blue-Chip Stocks to Buy Now
Also note that a thin earnings calendar typically accompanies the Labor Day holiday.
As a reminder: Labor Day is a longstanding holiday in the U.S. that celebrates the American worker. The holiday was first adopted by Oregon in 1887, and seven years later, was made a national holiday across the U.S.
Dozens of other countries have a similar celebration called International Workers' Day that falls on the first day in May.
The following is a schedule of all stock market and bond market holidays for 2022. Note that regular trading hours for the New York Stock Exchange (NYSE) and Nasdaq Stock Market are 9:30 a.m. to 4 p.m. Eastern on weekdays. The stock markets close at 1 p.m. on early closure days; bond markets close early at 2 p.m.
2022 Market Holidays
DateHoliday
NYSE
Nasdaq
Bond Markets*
Monday, Jan. 17
Martin Luther King Jr. Day
Closed
Closed
Closed
Monday, Feb. 21
P
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Sep 02, 2022
Nobody likes a down stock market - or do they?
Almost every conversation I have had with clients this year included some amount of fear over where the markets are and where they are headed. The concerns range from losing a few more percentage points (possible) to losing 100% of their money (absurd). If an investor in a moderate portfolio lost all their money because the stock market went to zero, you would have much bigger things to worry about than your money. There wouldn't be anything to buy with it anyway. You'd need to learn farming skills ASAP, because there would be no more stores to buy anything from. The world would have, for all intents and purposes, ended. So clearly this is not a rational fear.
SEE MORE The Good News About Recessions for Investors
On the other hand, could the markets drop to a level we saw before the July/August rally? Sure, it could. It could even go a bit lower.
The issue isn't that the market could go lower at any given point, the issue is what will it ultimately do? The answer to that question in the past has always been that it moved higher - eventually. As we know, markets go both up and down, but they have always trended higher. This time and the next 10 after it will ultimately be no different, regardless of the reason it goes down.
Bear Market Statistics Offer Reassurance
Since 1950, we have seen 11 bear markets (defined as a drop of at least 20% from its most recent high). The average duration of those bear markets was 13 months, and the average drop in the markets was -33%. By comparison, during that same time period, bull markets have lasted 67 months on average and experienced a total return of 265%. *
SEE MORE
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