After a strong start to the year, the S&P 500 fell just over 3% during the final week of January causing the index to finish the month down 1.11%. The Dow Jones Industrial Average (DJIA) followed suit and ended the month down 2.04% after also falling over 3% in the final week.1 It was a tale of two halves to begin the year as the markets initially reflected optimism regarding a new stimulus package from the Biden Administration and positivity regarding the vaccine roll out. The optimism was curbed as retail investors sparked unforeseen volatility in the equity markets causing a slight de-risking in portfolios during the last week of the month.
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This year has been a rollercoaster ride. COVID has dominated the headlines and impacted every aspect of our lives. It has shut down businesses, schools, and workplaces. It’s changed the way we interact and socialize. And of course, it has deeply impacted the economy and the financial markets. It can be hard in 2020 to find the good news, but there actually are a few economic developments for which we can be grateful. There’s also quite a bit of uncertainty ahead of us. As we approach the end of 2020, now may be a good time to reflect on what has transpired over the past 11 months, and what steps you may need to take to prepare for what comes next. Below are three positive developments that you may want to consider as you prepare for 2021: The Markets Rebound COVID ended the longest bull market and longest economic expansion in history. The previous bull market started in 2009 and lasted for nearly a decade before crashing in just a few short weeks over February and January of this year.1 Between February 19 and March 23, the S&P 500 fell 33.93%. Since that point, though, the markets have surged. From March 23 through October 29, the S&P 500 is up 47.94% and is nearly back to its pre-COVID levels.2 As mentioned, though, there is still uncertainty ahead. The COVID pandemic is far from over. There’s also uncertainty about how the results of the election will impact the markets, the economy, and the country’s COVID response. While the market's rebound is a fortunate turn of events, there’s no guarantee that it will continue. Now is a good time to evaluate your strategy and lock-in any gains before another potential downturn occurs. A financial professional can help you explore options. GDP Surge In the second quarter, GDP fell by 31.4%, the largest quarterly drop in history. In the third quarter, it rebounded by 33.1%, the largest quarterly gain in history. That number easily beat the previous record of 16.7% in the third quarter of 1950.3 Much of the rebound was driven by the service industry and the reopening of much of the economy. Of course, the continuing rise in COVID cases may threaten the economic rebound. Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October.4 CARES Act Financial Flexibility The COVID pandemic and its economic fallout have created financial challenges for millions of Americans. While the government is still debating a second round of stimulus, the first round, known as the CARES Act, continues to provide financial flexibility for those facing difficulties.
As part of the CARES Act, you can withdraw up to $100,000 from your 401(k) or IRA without facing early distribution penalties. The taxes on the distribution can even be spread out over a three-year period.5 Granted, withdrawing money from your 401(k) or IRA isn’t the best strategy for your retirement. However, it is an added measure of flexibility that didn’t exist prior to this year and it could be a blessing if you’re struggling due to the COVID pandemic. The end of 2020 is approaching. It’s been a rollercoaster ride, but there have been some positive developments, especially in the second half of the year. Let’s talk about how to protect what you have and limit your exposure to future risk and uncertainty. Contact us today at Kincaid Financial Resources and let’s start the conversation. 1https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html 2https://www.google.com/finance/quote/.INX:INDEXSP 3https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html 4https://www.cnn.com/2020/10/28/health/us-coronavirus-wednesday/index.html 5https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20365 – 2020/8/20 The recovery in the financial markets hit some turbulence in October, as investors wrestled with anxiety about increasing COVID cases, doubts about a second round of stimulus, and uncertainty over the election. However, a surge in gross domestic product (GDP) in the third quarter may signal that the economy is on the rebound. Through October 28, all major indexes had mostly recouped most of their losses from the COVID crash in March. However, all were down for the month of October. Below is each index’s return from October 1 through October 28: S&P 500: -2.73%1 DJIA: -4.54%2 NASDAQ: -1.46%3 Here are the year-to-date returns of the major indexes: S&P 500: 0.40%1 DJIA: -8.14%2 NASDAQ: 21.04%3 What spooked the markets in October? There are a few factors, but as is the case with most things in 2020, COVID may be the primary factor. COVID Cases Ramp Up The COVID numbers are surging in the United States, suggesting that the end of the pandemic may be nowhere in sight. On Wednesday, October 28, the seven-day average for new daily cases hit an all-time high of 71,832, an increase of more than 20% in only a week.4 Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October.5 Thirty-six states had increases of at least 5% in COVID-related hospitalizations in the final week of October.4 The surge in cases is leading to a new round of business closures and regulations. Illinois recently stopped indoor dining at bars and restaurants.6 Investors may be spooked by the prospect of a second round of closures and its impact on the economy. A new report from Yelp found that 60% of businesses that were shutdown for COVID will never reopen.7 Stimulus Outlook The uncertainty of a second stimulus may also be a drag on the markets. In fact, Gary Cohn, former president and CEO of Goldman Sachs and former White House National Economic Council Director, says it is a primary factor driving the markets’ poor performance in October.8 He added in a recent interview that, “no one thinks we’re going to have stimulus until after the election,” and that, “we know that the markets do not like unpredictability.” He said that there was “100% probability” that stimulus won’t happen until after November 3rd, and possibly not until after the inauguration.8 Fund Flows Some recent data on mutual fund flows may provide insight into how investors feel about the financial markets. Through October 21, equity funds (including mutual funds and ETFs) saw net outflows for 11 consecutive weeks. That means more money flowed out of these funds than flowed into them.9 On the other side, taxable fixed-income ETFs have seen four straight weeks of net inflows. That may mean that investors are leaving equities for fixed income securities, even with interest rates near zero.9 GDP Surges in 3rd Quarter On a positive note, GDP surged by 33.1% in the third quarter, beating analyst expectations of 32%. The third quarter number is the largest quarterly GDP gain on record, easily beating the previous high of 16.7% in the third quarter of 1950.10
Of course, the third quarter surge comes after a 31.4% decline in GDP in the second quarter. Even with the increase in the third quarter, the economy is still projected to contract by 3.5% in 2020.10 The markets and the economy have rebounded, but the future is still uncertain. This may be a good time to explore options that can protect your assets and lock-in your gains. Contact us today at Kincaid Financial Services. We can help you explore these options and implement the right strategy to protect your financial future. Let’s connect today and start the conversation. 1https://www.google.com/finance/quote/.INX:INDEXSP 2https://www.google.com/finance/quote/.DJI:INDEXDJX 3https://www.google.com/finance/quote/.IXIC:INDEXNASDAQ 4https://www.cnbc.com/2020/10/28/covid-cases-hospitalizations-continue-to-surge-as-us-reaches-critical-point-in-pandemic.html 5https://www.cnn.com/2020/10/28/health/us-coronavirus-wednesday/index.html 6https://www.cnbc.com/2020/10/28/5-things-to-know-before-the-stock-market-opens-october-28-2020.html 7https://nypost.com/2020/09/17/majority-of-covid-19-business-closures-are-permanent-report/ 8https://finance.yahoo.com/news/stimulus-donald-trump-gary-cohn-markets-100-percent-probability-deal-wont-pass-before-the-election-214720697.html 9https://lipperalpha.refinitiv.com/2020/10/u-s-weekly-fundflows-insight-report-etf-and-fund-investors-focus-on-fixed-income-during-the-fund-flows-week/ 10https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20365 – 2020/8/20 It took just under five months for it to happen. On August 17th, the S&P 500 closed at 3389.78—an all-time record. That record is also significant because it means the index officially recouped all losses from the downturn that happened in March.1 This year has been a rollercoaster ride for investors. The S&P 500 dropped 33.92% from February 19 to March 23 as the COVID-19 pandemic hit the United States. Since March 23, the index has increased 51.51%, triggering a new bull market.2 However, a sharp increase in the stock market doesn’t mean the U.S. economy is out of the woods. In fact, other metrics would indicate that the economy is still struggling. In the second quarter, gross domestic product contracted at an annual rate of 32.9%, the largest quarterly contraction on record. That contraction is more than three times the previous record—a 10% contraction in 1958.3 Also, not all sectors of the stock market have participated in the recovery. The increase over the last five months has been fueled by growth in the Information Technology (IT) and Consumer Discretionary sectors, each of which are up more than 23% year-to-date. However, other sectors, particularly Financials and Energy, are negative on the year. In fact, of the 11 S&P 500 Sectors, five are still negative on the year.4 The 4th Quarter is historically the best quarter for S&P 500 performance, with the index up an average of 3.51% from October through December over the past 30 years.5 However, 2020 is not like other years. There are factors and risks that could threaten the market’s recovery. Below are a couple things to watch as the year comes to a close: ElectionWe’re only a couple months away from the election, as if 2020 needed more uncertainty. Everyone has their own preferred candidate. However, some investment managers are saying the real risk isn’t one of the candidates winning, it’s an unclear outcome. Bridgewater Associates, which manages more than $140 billion, recently told clients the real risk is if there is “material concern over the legitimacy of the process.” Analysis of recent options transactions show that many investors are taking protective stances through January 2021, possibly an indication they are concerned about post-election volatility.6 However, UBS notes that post-election volatility is often short-lived. They point to the most recent example of an election with an unclear winner—the 2000 election between Al Gore and George W. Bush. During that time, the S&P 500 fell around 6% in the weeks after the election as litigation mounted. However, those losses were erased as soon as the election reached resolution.7 COVIDOf course, the other major risk to the economy and financial markets in the fourth quarter is developments related to COVID. The pandemic is now in its seventh month. As of mid-August, the death toll in the United States exceeded 168,000, with more than 5 million confirmed cases.8
The development of a vaccine in the fourth quarter could deliver a boost to the economy. The government has implemented Operation Warp Speed, an initiative to deliver 300 million vaccines by January. Moderna has a vaccine in phase 3 trials, but it is uncertain whether the company will be able to meet the government’s target date.8 Ready to protect your portfolio from fourth quarter uncertainty? Let’s talk about it. Contact us today at Kincaid Financial Resources - You can reach us here. We can analyze your needs and goals and implement a plan. Let’s connect soon and start the conversation. 1https://www.cnbc.com/2020/08/17/stock-market-futures-open-to-close-news.html 2https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_iyc9X5L9Eq6E9PwPt8m4mAM1:0 3https://www.npr.org/sections/coronavirus-live-updates/2020/07/30/896714437/3-months-of-hell-u-s-economys-worst-quarter-ever 4https://www.cnn.com/2020/08/17/investing/premarket-stocks-trading/index.html 5https://stockanalysis.com/average-monthly-stock-returns/ 6https://www.foxbusiness.com/markets/2020-election-wall-street-stock-market 7https://fortune.com/2020/08/18/trump-biden-stock-market-2020-election-contested-results-what-could-happen-investors/ 8https://www.washingtonpost.com/nation/2020/08/19/coronavirus-covid-live-updates-us/ This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20365 – 2020/8/20 As the COVID-19 pandemic stretches into its seventh month, leaders in Washington are debating a second stimulus bill. On August 8, President Trump signed executive orders that extended the federal unemployment benefit, but reduced the amount from $600 per week to $400. The orders also suspended the payroll tax through the end of the year, and suspended interest on federal student loans.1 However, even as President Trump signed the orders, Republicans and Democrats continued to negotiate terms for a second stimulus package. Democrats support a $3 trillion package known as the HEROES Act, while Republicans have their own $1 trillion HEALS Act.1 It’s unclear whether the final bill will include direct stimulus payments to Americans. Both Republicans and Democrats have endorsed the idea. However, it’s difficult to predict at this point what stimulus payments may be included in the final legislation. Market UpdateDespite the uncertainty surrounding COVID, the election, and the overall economy, the financial markets continue to climb. After suffering deep losses earlier in the year, two of the three major market indexes are in positive territory. Through August 10, all index year-to-date returns are:
S&P 500: 3.53%2 DJIA: -2.57%3 NASDAQ: 22.24%4 While the markets have mostly recovered from their losses earlier in the year, volatility can strike at any time. That’s especially true should the COVID pandemic worsen or if the economy suffers continued damage. There also may be increasing uncertainty as the election approaches. If you're concerned about risk, let’s talk about it. There are a wide range of strategies and tools we can implement to minimize risk and help protect your financial future. Let’s connect today and discuss your needs, goals and concerns. At Kincaid Financial Resources - You can reach us here. , we welcome the opportunity to help you implement the right strategy for your objectives. 1https://www.forbes.com/sites/advisor/2020/08/10/does-trumps-executive-order-mean-theres-no-second-stimulus-check-coming/#170371841d71 2https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_N64yX_KZKca7tQawrZbwAg1:0 3https://www.google.com/search?q=INDEXDJX:.DJI&tbm=fin&stick=H4sIAAAAAAAAAONgecRozC3w8sc9YSmtSWtOXmNU4eIKzsgvd80rySypFBLjYoOyeKS4uDj0c_UNkgsry3kWsfJ6-rm4Rrh4RVjpuXh5AgAzsV5OSAAAAA#scso=_h64yX9HyDLOO9PwPrMKg2Ac1:0 4https://www.google.com/search?q=NASDAQ:NDAQ&tbm=fin&stick=H4sIAAAAAAAAAONgecRoyi3w8sc9YSmdSWtOXmNU4-IKzsgvd80rySypFJLgYoOy-KR4uLj0c_UNzKtyzQyKeRaxcvs5Brs4Blr5AQkAEbRSnEgAAAA#scso=_7a0yX-q3AcyxtQbPt7HICg1:0 This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20363 – 2020/8/20 The United States set a somber record on Thursday, July 16, 2020, with more than 75,000 new COVID-19 cases. In fact, the U.S. set new single-day COVID-19 records 11 times between June 17 and July 16. Dr. Anthony Fauci predicts the country will soon top over 100,000 new cases each day.1 COVID-related deaths are also increasing in some states. Florida set its single day record for COVID deaths on July 16, with 156. Nine other states also set single-day death records the same week.1 The resurgence in coronavirus cases has led some states to enact new measures. More than half of all states now have some kind of mask mandate. California has even rolled back its reopening, closing bars, indoor dining, gyms, and more.2 What does this mean for the economic recovery? And what does it mean for your financial future? It’s impossible to predict what will happen in the short-term, but knowing where things stand today may help you make important decisions with your strategy. Stock MarketThe stock market continues to rally in spite of the increasing COVID numbers and the return of restrictions. As of July 16, the S&P 500 is nearly back to even for the year. In fact, it’s up 43.71% since hitting a low 2237 on March 23.3 NASDAQ set a record-high on July 9 when it reached 10,617.4 The continued gains are good news for investors, especially after the sharp decline in March. However, that decline also shows us just how quickly the market can turn, especially if state governments introduce new orders that close businesses. If you’re concerned about another potential downturn or future risk, this could be the right time to explore risk-protection strategies. For example, products like annuities allow you to participate in a portion of the market upside but also protect you against losses. A financial professional can help you determine which risk-management strategy is right for you. UnemploymentWhile the number of new unemployment claims has declined for 15 consecutive weeks, unemployment numbers are still much higher than they were pre-COVID. In February, there were approximately 200,000 new unemployment claims each week. That number exploded to 6.867 million new claims in one week in late March. While new claims have declined since that point, they’re still more than double their level during the height of the Great Recession in 2009.5 StimulusIn March, the government passed the CARES Act, which, among other things, provided direct stimulus payments to many Americans. A recent study found that 74% of recipients had used all of their stimulus payments within four weeks.6
As the coronavirus pandemic continues to impact Americans, Congress is considering a second round of stimulus payments. In May, the House of Representatives passed the $3 trillion HEROES Act to provide a second round of direct stimulus payments.6 In an interview in mid-July, Treasury Secretary Steve Mnuchin indicated that a second round of stimulus payments was a possibility, even if it doesn’t align exactly with the HEROES Act. Senate Leader Mitch McConnell and President Trump have also recently expressed their willingness to negotiate a second stimulus package. While stimulus payments may provide a nice boost, they’re not a replacement for long-term strategy. At Kincaid Financial Resources, we can help you analyze your needs and goals and implement strategies to limit your risk exposure. Let’s connect soon and start the conversation. You can reach us here. 1https://www.nytimes.com/2020/07/17/world/coronavirus-updates.html 2https://www.theguardian.com/us-news/2020/jul/15/california-coronavirus-shutdown-businesses-restaurants 3https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_Ap0RX4PNDdvRtAbPobiYBQ1:0 4https://www.cnn.com/2020/07/09/investing/stock-market-supreme-court-trump/index.html 5https://finance.yahoo.com/news/coronavirus-jobless-claims-unemployment-week-ended-july-11-175149759.html 6https://amp.usatoday.com/amp/112232064 This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20279 - 2020/7/21 What are the biggest expenses you’ll face in retirement? Healthcare? Housing? Travel? All of those costs could be significant, but one of the biggest could be taxes. That’s right. Just because you’re done working, doesn’t mean you’re done paying taxes.
Many sources of retirement income, like Social Security, pensions, and retirement account distributions, are taxable. That doesn’t even include the wide range of other taxes you could face, like property taxes, sales tax, and more. Taxes may be a part of life, but they can also be a drain on your retirement. Every dollar you pay in taxes is a dollar that can’t be used to support your lifestyle and fund your goals. Fortunately, you can take action to reduce your tax burden and maximize your retirement income. Below are five steps to consider as you approach retirement: 1) Use a Roth IRA. A traditional IRA is an effective savings vehicle for retirement. You get tax-deferred growth, and potentially tax deductions for your contributions. However, a traditional IRA can also create tax issues in retirement. All distributions from a traditional IRA are taxed as income. If you use an IRA to accumulate a sizable nest egg, you could face taxes on much of your income in retirement. The alternative is a Roth IRA. In a Roth IRA, you don’t get tax deductions when you make a contribution. However, your distributions in retirement are tax-free, assuming you are at least age 59 ½ and you have held the Roth for at least five years. As a married couple, you cannot contribute to a Roth if your income is greater than $196,000 in 2020. For a single person, that limit is $124,000.1 Otherwise, you can contribute up to $6,000 this year, or up to $7,000 if you’re 50 or older.2 You can also convert your traditional IRA to a Roth. This means paying taxes on the traditional IRA amount. However, after the conversion, you can grow the remaining assets in the Roth on a tax-free basis and take tax-free distributions in retirement. 2) Be strategic about Social Security distributions. Social Security will likely play a role in your retirement income puzzle. However, taxes will impact the net amount you receive from Social Security. The extent that your Social Security benefit is taxed depends on a number called your “combined income.” Combined income is your adjusted gross income plus nontaxable interest plus half of your Social Security benefit.3 If you are single and your combined income is between $25,000 and $34,000, up to 50% of your benefits could be taxable. If you earn more than $34,000, up to 85% of your benefits could be taxable.3 For married couples, if your combined income is between $32,000 and $44,000, up to 50% of your benefits could be taxed. If you earn more than $44,000, up to 85% of your benefits could be taxed. The key to reducing your combined income is to reduce your adjusted gross income. Non-taxable income is not included in that number. So, for example, you could maximize your Roth IRA to minimize your adjusted gross income. You could also delay Social Security until age 70 to increase your benefit, and draw down your taxable accounts, like a traditional IRA, before Social Security starts. 3) Consider downsizing. Simply moving to a new home could reduce your taxes. Property taxes may be a major tax burden depending on your home. If you no longer need a large home, consider moving to something smaller that has a lower value and thus lower property taxes. You also may look at a neighboring community that has a lower property tax rate. 4) Relocate to a more tax-friendly state. Another option is to move to another state completely. Some states are more tax-friendly for retirees than others. For example, Alabama doesn’t tax Social Security benefits and has a relatively low sales tax rate.4 Florida is another option as it doesn’t have a state income tax.5 Do your research and you may find a new home that is appealing and saves you money. 5) Use an HSA to pay for medical costs. Fidelity estimates that the average 65-year-old couple will pay $285,000 out-of-pocket for health care expenses in retirement.6 If you’re using taxable distributions from an IRA or 401(k) to pay those costs, the impact on your savings could be even greater. One strategy to minimize the tax burden is to use a health savings account (HSA) to pay for healthcare costs. In 2020, individuals can contribute up to $3,550 to an HSA. Families can contribute up to $7,100.7 You can invest and allocate those funds to match your goals and risk tolerance. The assets grow on a tax-deferred basis as long as they stay in the account. When you’re ready to use the funds, you can take tax-free distributions to pay for qualified healthcare expenses like premiums, deductibles, copays, and more. By using a tax-free source to pay for healthcare costs, you reduce the amount you need to take from taxable accounts, like an IRA or 401(k). That, in turn, reduces your overall tax burden. A financial professional can help you determine if an HSA is right for you. Ready to develop your retirement tax strategy? Let’s talk about it. Contact us today at Kincaid Financial Resources. We can help you analyze your needs and develop a plan. You can reach us here. 1https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020 2https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits 3https://www.ssa.gov/benefits/retirement/planner/taxes.html#:~:text=Learn%20Apply%20Manage-,Income%20Taxes%20And%20Your%20Social%20Security%20Benefit,on%20your%20Social%20Security%20benefits.&text=between%20%2425%2C000%20and%20%2434%2C000%2C%20you,your%20benefits%20may%20be%20taxable. 4https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=2 5https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=4 6https://www.cnbc.com/2019/04/02/health-care-costs-for-retirees-climb-to-285000.html 7https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-2020-hsa-contribution-limits.aspx This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20277 - 2020/7/20 The first half of 2020 has been a rollercoaster ride. The COVID-19 pandemic completely altered our way of life and threw the economy into a tailspin. Most states have started the reopening process, but there is still significant uncertainty about the long-term impact of coronavirus and how long the pandemic will continue. Federal Reserve Chairman Jerome Powell recently said the economy faces a “long road” to recovery, and predicted the process may take through 2022.1 While the recovery may be a long-term journey, there have been some signs of hope in recent months: Stock Market ReturnsThe stock market had been enjoying the longest bull market in history before the coronavirus pandemic hit.2 The bull market came to an abrupt end starting in late February. On February 20, the S&P hit a high of 3373. From that point through March 23, the S&P fell to 2237, a decline of 33.7%.3 However, since that time, the market has increased to 3115 through June 18. That’s an increase of 39.25%. The S&P is nearly back to its pre-COVID levels.3 Of course, it’s impossible to predict the future direction of the markets. Just because the market has been on an upswing doesn’t mean it will continue. A spike in cases or a second round of shutdowns could send the markets back into a decline. UnemploymentThe pandemic has driven unemployment to record-high levels. Through mid-June, the country had 13 consecutive weeks with more than 1 million new jobless claims. Prior to the coronavirus pandemic, the record for a single week was 695,000 in May 1982.4 The good news is that jobless claims have been declining. At the beginning of the pandemic, weekly jobless claims exceeded 6 million. In fact, up until late-May, they exceeded 2 million. So while jobless claims remain at record highs, they are on the decline. The amount of continuing claims has also dropped from 25 million in early May to just over 20 million in early June.4 Consumer SpendingConsumer spending was impacted significantly by the COVID-19 pandemic. That’s not surprising, given most states were effectively shut down for two months. In April, consumer spending dropped by 16.4%, a record monthly decline.5
In May, consumer spending set another record—this time for biggest monthly increase. The figure rose by 17.7%, driven by large increases in clothing (188%), furniture (+90%), sporting goods (+88%), and electronics (+55).5 Consumer spending by itself doesn’t mean the economy is on the path to recovery. There are still plenty of uncertainties in the economy. However, it is a good sign that consumer spending is nearly back to its pre-pandemic levels. This is uncharted territory for all of us. The situation and data changes so fast that it’s impossible to project where the economy may be headed. A comprehensive strategy that aligns with your goals and risk-tolerance can keep you on track to meet your long-term objectives. Let’s connect today and talk about your concerns, questions and challenges. At Kincaid Financial Resources, we can help you develop and implement a strategy. Contact us today and let’s start the conversation. You can reach us here. 1https://www.marketwatch.com/story/fed-sees-rates-near-zero-through-2022-says-asset-purchases-will-continue-2020-06-10 2https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html 3https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_hL3sXpOQHsnWtAal04OQCA1:0 4https://www.cnbc.com/2020/06/18/weekly-jobless-claims.html 5https://finance.yahoo.com/news/consumer-spending-comes-back-with-a-vengeance-in-may-morning-brief-100600715.html This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20195 - 2020/6/22 It’s hard to find good news in today’s economic environment. COVID-19 single-handedly brought an end to the longest bull market in history and ushered in record-setting unemployment. If you’re like millions of others in the country, you’ve lost income or possibly even your job. You also may have lost savings due to market volatility. Given that the coronavirus pandemic is still ongoing, there’s no telling how the economy or the financial markets may respond through the rest of the year. Even in down years, there are still opportunities to improve your financial future. Below are three such moves to consider in your strategy Fund a Roth IRA.In 2020, you can contribute up to $6,000 to a Roth IRA, or up to $7,000 if you are 50 or older.1 A Roth can be helpful because you can take tax-free withdrawals from it after age 59 ½, assuming you’ve held the account for at least five years. Not everyone can use a Roth. If you’re a married couple making more than $206,000 or a single person making more than $139,000, you can’t contribute to a Roth IRA.2 However, if a pay cut has pushed you below the income limits, you could use this time to open a Roth. Convert your IRA to a Roth.Another option is a Roth conversion. This is a process that converts a traditional IRA into a Roth. You pay taxes on your IRA balance and then the net amount is deposited into a new Roth IRA. You face a current tax liability, but you get potentially tax-free income in retirement. It may make sense to do a Roth conversion during a down year, when your income is reduced. You may be in a lower tax bracket and will thus face a lower tax bill on the conversion. A financial professional can help you explore this option. Dollar-cost average.Dollar-cost averaging is a strategy that can be helpful at all times, but especially during volatile periods. You contribute the same amount of money at regular intervals, like once per month. That money is then invested in a predetermined strategy.
The benefit of this is that you buy more shares when prices are low and fewer shares when prices are high. This reduces your overall cost, which increases your potential for growth. Again, a financial professional can help you implement a dollar-cost averaging strategy. We can help you determine the right strategy in this volatile time. Contact us today at Kincaid Financial Resources so we can help you develop a plan. Let’s connect soon and start the conversation. You can reach us here. 1https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits#:~:text=For%202020%2C%20your%20total%20contributions,less%20than%20this%20dollar%20limit. 2https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020 This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20199 - 2020/6/22 The economic fallout from the coronavirus pandemic continues, even as states start to reopen restaurants, retail stores, and other businesses. The crisis brought an end to the bull market that started in 2009 and threatens to usher in a recession.1 What does the future hold for the stock market and the economy? When will the economy recover? And how will this crisis impact your retirement and your financial future? It’s impossible to definitively answer those questions. In many ways, this event is unprecedented. We don’t know how long the virus will present a threat, so it’s impossible to predict how or when the economy may recover. However, it is possible to make adjustments to your strategy to minimize risk and take advantage of potential opportunities. It’s also helpful to keep in mind the long-term nature of the economy and the financial markets. Nothing lasts forever, including recessions and bear markets. Stock Market PerformanceThe financial markets have been a rollercoaster since the onset of the pandemic. On February 19, the S&P 500 closed at 3386. On March 23, it closed at 2237, a drop of 33.93%. Since that time, the market S&P has climbed to 2863 as of May 15.2 It’s important to remember that the stock market isn’t the same as the economy. A drop in the stock market doesn’t necessarily signal a recession, just like a rise doesn’t necessarily spell an economic recovery. It’s also helpful to remember that bear markets are a natural part of investing. They aren’t always caused by global pandemics, but they do happen. There have been 16 bear markets since 1926. On average, they last 22 months and are followed by a 47% gain in the year following the market’s lowpoint.3 We can’t predict when the market will hit its low point, or if it already has, but if history is any guide, the market will recover at some point. economic newsWhile the stock market has bounced back somewhat since its March decline, the overall economic news continues to be negative. More than 36 million people have filed for unemployment since late March. In 11 states, more than a quarter of the workforce is unemployed.4
In the first quarter, the economy contracted for the first time since the 2008 financial crisis. GDP declined by an annualized rate of 4.8%. That’s not as steep as the GDP decline of 8.4% annualized decline in 2008. However, it’s possible the economy could face a greater decline in the second quarter. Consumer spending, which accounts for 70% of GDP, fell by an annualized rate of 7.6% in the first quarter. That’s the steepest drop for that metric since 1980.5 While states may be starting the reopen process, there is still significant uncertainty surrounding the crisis and the economy’s future. The good news is you can take action to minimize risk. Contact us today at Kincaid Financial Resources- You can reach us here. We can help you analyze your goals and needs and implement a strategy. Let’s connect today and start the conversation. 1https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html 2https://www.google.com/search?safe=off&tbm=fin&sxsrf=ALeKk01UjyvpIcf62vDAgyulZ3dZuL1GWg:1589832165005&q=INDEXSP:+.INX&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyevq5uEYEB1gp6Hn6RQAAItD1MEkAAAA&sa=X&ved=2ahUKEwikycWrmr7pAhWWU80KHfhUBrcQlq4CMAB6BAgBEAE&biw=1536&bih=754&dpr=1.25#scso=_JerCXv0o9o70_A-NwLLYBg1:0 3https://www.fidelity.com/viewpoints/market-and-economic-insights/bear-markets-the-business-cycle-explained 4https://www.nytimes.com/2020/05/14/business/economy/coronavirus-unemployment-claims.html 5https://www.npr.org/sections/coronavirus-live-updates/2020/04/29/847468328/tip-of-the-iceberg-economy-likely-shrank-but-worst-to-come This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Investment and Insurance Professional and does not necessarily represent the views of the presenting professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities. 20093 - 2020/5/19 |
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