Playing Hurt

Playing Hurt

 

‍May 2022 - Playing Hurt

What to do When Market Hits hard

 April was a terrible month for stock investors. Bond investors weren't spared either. The worst performing mutual fund in Denso's 401K was down more than 12% in just one month. What is your plan to play hurt? How can you stay in the game when your wallet is bleeding red? 

Wes McNeillie
CERTIFIED FINANCIAL PLANNER
 

 

 


 

Change Ahead: What could a “SECURE Act 2.0” do for you?

Coming off a tax season where many of my clients owed tax with their return for the first time in many years, it is nice to see a new bill in Congress that will be beneficial to Americans in their pursuit of retirement security. In 2019, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) became the law of the land, and it provided some significant changes to the retirement plan landscape. Less than 3 years later, Congress appears to be ready to take these new rules even further. The House of Representatives recently approved, with a vote of 414 to 5, a second bill commonly referred to as “SECURE Act 2.0“. It is now on to the Senate, but it is widely expected that a new law will pass sometime this year. With these new rule changes, we should seize on the opportunities provided to make retirement easier or possibly more beneficial.

 


While there are multiple benefits and changes included in the new bill, we feel that there are two items that will significantly impact our clients. I’ll give a short explanation of those below:


Required Minimum Distributions (RMDs)


The original SECURE Act raised the age for starting RMDs from 70 ½ to 72. With that original change, there was almost immediate conversation of whether that age would eventually increase to 75. SECURE Act 2.0 proposes to raise the age to 75 over the next decade. As of 2023, the age would increase to 73. Then there would be a pause until 2030 at which time the age would increase to 74, and then another increase to 75 in year 2033. This would provide more time for tax-deferred growth but would likely result in larger RMDs at these later ages.


The bill also proposes to relax the penalty for failure to take the correct amount of RMD. The current penalty is 50% of the amount that should have been taken, but the new law would reduce that penalty to 25% and possibly 10% if the error was corrected in a “timely” manner.


Jon Dockery, CPA

Managing Partner

LeConte Wealth Management

 


Series I Bonds: Should you Start the Clock?

If you’ve filled up your gas tank, purchased groceries or really purchased just about anything over the past year, you’ve felt your wallet get a little thinner. My co-worker, Wes McNeillie, just recently wrote a blog post titled Time-Tested. If you read it, you’ll remember he referenced our world is “going through another chaotic time with the war in Ukraine, inflation at levels not seen since the early 1980’s, and the Federal Reserve beginning to raise interest rates to combat inflation.” These factors remain true, prompting investors to jockey their positions and ultimately leading investment markets to plunge across the board.

Foreign to many, according to the U.S. Treasury, an I bond is a low-risk investment backed by the U.S. Treasury and “is a security that earns interest based on both a fixed rate and a rate that is set twice a year (every 6 months) based on inflation.” The interest will accrue for up to 30 years. Upon redemption of the bond, the purchaser gets back the face value (original investment), plus the accumulated interest.

***Side Note: The Bureau of Labor Statistics’ latest Consumer Price Index (CPI) and Producer Price Index (PPI) data announcements mid-month came in at increases of 8.5% and 11.2% year-over-year. These numbers are the worst they’ve been in 40+ years.

Alex Willard, Investment Adviser Representative
LeConte Wealth Management


The Rites of Spring

We can see the flowers in bloom and the leaves beginning to reappear on the trees here in East Tennessee. We’re also reminded of the changing season as we see that pesky yellow layer of pollen on our newly washed cars. We anticipate the longer days and welcome the warmer temperatures. We are putting away our sweaters and searching for swimsuits and shorts (even if they may be a bit tighter than we remembered thanks to holiday treats at Thanksgiving, Christmas, and Easter).

 

We plant flowers in our lawn beds, fill feeders with seeds for the chirping birds, and enjoy watching a loved one play spring sports outdoors. We may even do some spring cleaning and wash windows, reorganize the pantry, or clean out junk drawers.


But as you go through these rituals during the changing seasons, let’s not forget to spruce up your own investments. April is Financial Literacy Month and as the financial markets change more in value than Dogwood Winter temps, here are a few ideas to help make your financial life shine.


  • Inventory your assets. Do you know where all your investment accounts are located and how they are invested? Maybe it’s an old 401k or a Roth IRA you started when you were 20 years old. With market volatility, now would be a good time to see where it is and how it’s doing.

  • Update your beneficiary designations. You may have had another child, gotten married or had another life-changing event that requires looking at insurance policies and IRAs to ensure that they are going to be left to those you want.

  • Evaluate your tax return. If you’ve recently filed your return, did you take advantage of all the deductions you could have in 2021? Use this time to review and plan for ways to make changes if you can in 2022.

  • How’s your budget looking? As we clean out and tidy up in the Spring, it’s also a good time to revisit your budget. Are you saving enough for your goals? Are you spending more than you’re making? Use this time to ask those questions and evaluate where you are.

 

I often quote the three axioms of financial planning that are applicable not only in the Spring, but all throughout the year:


Spend less than you make.

Save as much as you can.

Don’t do anything stupid.

As you sort through those winter clothes and wash your car (again!) because of the spring pollen, pay attention to those financial items as well. It may prove more beneficial than you think.

Kevin Painter,
Managing Partner
LeConte Wealth Management

 


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