Are we at an Economic Crossroads?

August 2023 - Are we at an Economic Crossroads

How much should you pay for a share of Apple stock today (ticker: APPL)? Is it, $200? Is it, $130?

The answer depends on who YOU are.

• Do you have a 30-year time horizon?
• Are you a day trader?
• How long are you looking to hold the specific investment?
• Do you need to take the risk?

Many investors look to someone else to take cues from and often, that "someone else" is playing a different game. They have a different time-horizon, different goals and a completely different household situation. Few people take the time to chart a personalize course. Our process, Purpose Built Planning, combines asset management, financial planning, and tax services to help our clients bring their dreams into focus.

If you would like to engage in our Purpose Built Planning process, reach out at (865) 379-8200 or email us at info@lecontewealth.com.

Recently, I helped a client analyze upcoming changes to her retirement plan after a company merger and uncovered an obscure rule that was buried deep in the SECURE 2.0 Act. This little-known rule (Section 603) will have a significant impact on many employees over the age of 50 and force changes in how companies provide retirement plans for their employees.

Historically, employees over age 50 could annually make tax deductible catch-up contributions to their retirement plan accounts. In 2023, that amounts to $7,500 in addition to the $22,500 annual maximum that all employees can contribute to a company plan. Congress changed that rule beginning in January of next year (2024). In 2024, the catch-up contribution for high earners (those that make $145,000 or more in 2023) will be forced to contribute their catch-up amount ($8,000 in 2024) to a Roth option in their employer retirement plan. The money will then grow tax-free in the Roth account, but they will pay income tax on that contribution in the current year rather than deferring it to later years. Earners that make $144,999 or less will not be affected by this new rule change and can continue to defer catch up contributions on a pre-tax basis.

The Rothification of these catch-up contributions not only creates change for many employees over age 50, but also creates immediate problems for employers as well. The Rothification of these catch-up contributions not only creates change for many employees over age 50, but also creates immediate problems for employers as well. 

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Kevin Painter
Managing Partner
LeConte Wealth Management

Happy 10th Work-A-Versary, Jean!

For an entire decade, Jean has contributed her talents and decication to our shared mission. She has been an integral part of our successes, playing a crucial role in maintaining our compliance program. We appreciate her attention to deail, the care she provides to each client, and the positive influence she brings to our workplace. Here's to (hopefully) another decade!!

Help us congratulate her!

Regardless of political views and the principle of having to pay back borrowed money, the Supreme Court ruled on June 30th to block President Joe Biden's student debt cancellation plan. As a result, interest will start accruing on loans beginning September 1st (for the first time in over three years), with payments beginning the following month! Approximately 44 million people have federal student loans, with the average monthly payment totaling more than $300. With this monthly expense affecting so many, it begs the question if this will have a meaningful impact on the economy over the next 12 months. That is yet to be determined.

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Wes McNeillie, CFP

Tax and Planning Specialist
LeConte Wealth Management

Recently published on financial friction

 >Avoiding Financial Stress

Jon Dockery
Managing Partner
LeConte Wealth Management

 >Exploring the SECURE 2.0 Act: Key Provisions for 2024

Alex Willard
Client Advisor
LeConte Wealth Management 

Economy in focus

Each month, new economic data is leaked into all media outlets for public consumption. The tough part is, it's hard to know what to lend your attention to and how to make sense of it. In this section, we will be highlighting occasional data points and will give a short commentary on the highlighted points. So here goes our first edition:

The data points: 

• The Fed hiked rates for the 11th time at the end of July, moving the Fed Funds Rate to 5.25-5.50%. This is now the highest rate since January 2001.
• US Bonds are down 13% over the last 3 years, which is the worst 3-year return in history.
• Investors are now earning their highest yields on cash since January 2001.

Commentary:

The Federal Reserve has raised interest rates a total of 11 times since March 2022. Presently, the Fed funds overnight rate, stands at 5.25%-5.50% - the highest level observed since January 2001. This situation has inflicted hardships on institutions and bond investors, sparking the most extended three-year decline in bond values in recorded history - a challenging situation indeed.  

However, amidst these developments, it's noteworthy that due to the elevated rates, investors are presently accruing higher returns on their cash holdings than at any point since January 2001 (5.55% yield on 6-month Treasuries on 8/23/2023). Looking ahead, the combination of increased rates and the Federal Reserve's endeavors to mitigate inflation presents favorable prospects for bond investors.