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Secure Act 2.0: Now You Can Rollover a 529 to Roth IRA

  So, in the last couple of videos we’ve talked about the Secure Act 2.0. Today, we’re going to talk about an intergenerational gift from Washington DC that’s buried into this act and it’s the 529 to Roth sleight of hand. Effective 2024, these new rules, which are slightly complicated, suggest that if you have kiddos and you don’t have a 529, get one and put a dollar in and you’ll see why. Because now $35,000 of unused funds in a 529 can now be rolled over into a Roth IRA for the beneficiary. In the past, the concern has been what do we do if we overfund? Will there be a withdrawal penalty? That concern has now flipped to, “Oh, wouldn’t it be nice to have too much money, up to $35,000, and be able to roll it into a Roth IRA for the kid?” Now, there’s a lot…

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Secure Act 2.0 Extends IRA Required Minimum Distributions

  Secure Act 2.0. This is the second in the series of videos talking about all the goodies in the latest Secure Act with regards to IRAs and other retirement accounts. The big conversation for today is how are the new required minimum distributions going to affect you and your family? The good news is, we already had the required minimum distribution age bump up from 70 and a half to 72. Now, in 2023, if you haven’t already started required distributions, that age increases to 73. If you’ve already started distributions, you have to follow the current schedule that you’re on, but 73 is nice. The good news is, those who are under 63 will be able to use the 2033 rule, where you don’t even start required minimum distributions until you’re 75 years old. So those who are just barely reaching Social Security age or younger, you’re looking…

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A Recap Of 2022: An Extreme Year For Investors and Making 2023 A Great Year!

  Today we’re going to talk briefly about some of the bright spots on the horizon for 2023, recap some of the highlights of last year, and finally talk about the new Secure Act and all the goodies that are embedded in that law. So as we know, 2022 was one of the worst year for portfolios, in fact since 1937 by some measures. And that’s because not only was it a bear market in stocks, but also bonds were down 17%. In fact, it was the worst performance in the history of the Morningstar Core Bond Index. That’s pretty bad.  Some of the accompanying charts show the pain quite graphically. We have, however, seen the pendulum swing from growth to value. My Partner, Sarah, wrote a white paper titled “The History and Future of Value Investing”.  You’ll find the link to the document HERE. Whether or not the value…

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Will 2023 Be A Return To Normalcy?

  Since the Great Depression in 1926, we haven’t seen such awful returns for balanced investors. 12 month returns this year, for people who are 100% in stocks, were actually better than those who are 50/50, 60/40. The bonds are the problem. Diversified portfolios have had a stunningly difficult year. Stocks didn’t have a great year, but bonds really failed to cushion the blow. We’re very fortunate with our portfolios that we reduced the duration, the weighted average maturity of the bond portfolios, so our clients haven’t suffered anything like the average for a 60/40 investor. But despite that, it’s been a bad year, and we know why: the era of cheap money is over. It’s been going on for over a decade. Alan Greenspan, Ben Bernanke, all of these people, if ever the market turned down, print a little more money. Interest rates were low; we could get away…

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Unfamiliar Territory For Bondholders

  Bonds. Let’s talk bonds. Interest rates are climbing, and that translates to bondholder losses. You’ve seen them on your statement, but we are getting increased yields. So, what’s the bottom line? Inflation has caused interest rates to climb. The fed’s fighting it relentlessly, and when interest rates climb, bond yields are expected to go up with them. And when bond yields are expected to go up, fixed income bonds lose value. This is textbook material. Interest rates go up, bonds lose value. So, with interest rates, there’s been an interesting phenomenon. Long term bond rates are not going up as much as we would expect, same with intermediate, given the severity of the hikes. What this means is that the losses actually could be worse, and they’re not. It also means that the market feels these rates are coming back down, and that inflation is going to be under…

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Is Risk Avoidance Even Possible In This Environment? No, But Smart Risk Selection Options Exist.

After the depleting drop off of the last few weeks, this morning we’ve enjoyed a little bit of a rally in the markets. Of course, the famous question is, is this really just a dead cat bounce? Well, markets price in the future, so have they done pricing it in? Really, nobody knows. So let’s switch the conversation from returns to risk. Today’s world is very much one of risk selection rather than risk avoidance. What do I mean by that? Well, let’s explain by differentiating the different asset classes that are out there and discuss the risk associated with each and every one of them. Your typical risk-free asset is cash. When we talk about putting cash under the mattress, we’re thinking, “Okay, that’s safe.” Of course, if you took $100 in 1920, threw it under a mattress, today, I don’t know what it’s worth, 10, 20 bucks? It…

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Today’s Inflation Update: A Great Opportunity to Rebalance

  What a great day to rebalance. The market's down. It's 1:00 PM. It's down 3% for the S&P 500. Why did the market react as it did? So consumer price point numbers came out for August, and prices were up 8.3% year over year. It's actually a slight deceleration from the month previously due to a 10% drop in gas prices. However, what the market really cares about is core inflation. And core inflation came in at 6.32% versus about 6.1 for estimates, and I think it was 5.8% the month before. So core inflation is still gaining steam. That means it's pretty much guaranteed that at the next Federal Open Market Committee, there's going to be another 75 basis point rate hike. When there's a 75 basis point rate hike, interest rates go up across the board. Treasuries are already going up in anticipation, and when yields go...
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A Technical Recession… What Does That Mean?

  Last week, it was announced that we’re actually in a recession. Is it a technical recession? Just how bad is it? There’s a lot of different definitions of recession and the most technical one is “two successive quarters with negative GDP”. That’s the technical definition that has been met. However, most definitions include some combination of the following: high interest rates and/or high inflation, along with a drop in GDP and a significant rise in unemployment. We haven’t really run into high interest rates (by historical standards) yet. Without a doubt, in the short term we have high inflation. What we’re hoping is that the Fed’s on this, and this is a speed bump. To be determined of course. Much more important, unemployment at the end of the last quarter was 3.6%. Now in February 2020, we had historically low unemployment. It was 3.5%. So for most people, this…

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9.1% Inflation! What, If Anything, Can You Do About It?

  The latest Consumer Price Inflation Index suggests 9.1% inflation. How bad is that and what, if anything, can we do about it? The Consumer Price Index is 9.1%, that’s record-setting. We haven’t seen anything like that in 40 years. It was a 40-year peak in May for inflation, but it’s actually two numbers. You’ve got the CPI and you’ve got the core, and the core number actually dropped from 6% to 5.9%. This is very important because we’ve stripped out energy and food. Now you’re saying, “Yeah, but I’m putting a lot of gas in my car. I’m spending a lot of money.” You’ve probably noticed gas prices have slightly eased off. The reason they strip these out is because when it comes to food and it comes to gas, those are very reactive to changes in prices. High prices crush demand, so they’re not as accurate. Much more…

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3/4% Rate Hike The Greatest In 28 Years. Will We Be Able To Avoid Recession?

  We just had a 3/4% rate hike, the biggest hike in 28 years. Will taming inflation ensure a recession? Right now there’s a multi-front war going on against inflation. Finally, after a lot of planning and discussion and debate, the troops have finally been engaged in battle. First and foremost, of course we know about the 75 basis point hike. The Fed funds rate is 1.5%. That’s just a fancy name for the short-term safe money interest rate and it is the basis on which all other interest rates are built upon. We’re however only halfway to the goal of 3% and we were as low as zero after the pandemic. In fact, by 2023, it’s going to go up to 3.75%. So, this party’s not over yet. This is affecting interest rates all along the yield curve, which is the fancy way of saying mortgage rates are going…

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