These are trying times. Despite the strains of pandemic, home schooling, work furloughs, and entire families sitting at dining room tables on laptops… there are still BIG decisions and “leaps of faith” to be made. Namely,
Annual Healthcare Enrollment (deadlines looming)
401k contributions by year-end amidst a year of zany cash flows
Kids’ high school enrollments (these have changed for lots of people)
College semester enrollment and tuition payments
Home improvements like, “Do I add a home office?”… and more.
Don’t even get me started on – “Do I know who my beneficiaries are?” or “When do I start taking Social Security?”
As we approach the end of the weirdest year ever, nearly everyone wants 2020 to be O-V-E-R (unless you love birthdays, and your birthday is between now and December 31st).
The year-end countdown has begun, and soon it will be too late to make certain positive changes to your 2020 tax situation. Several of these items, if addressed now, could make a big or small difference to your 2020 tax filing, AND add to your savings.
It is only fair that if there was an edition two weeks ago titled “Biggest Losers” there be an accompanying edition, “Biggest Winners.” Because there are A LOT of winners out there. But the financial and news media do not sell advertising talking about winners.
Here are the most obvious Winners, especially financially speaking:
Upon recently personally experiencing the multiple shocks of:
Minimal amounts of people at rush hour in one of the typically busiest cities and train stations in the world,
Open parking spaces and empty parking lots at one of the busiest train lines in the world,
No lines at Starbucks in the typically busiest city in the world…
… I started thinking bigger-picture about who will be most deeply affected in the intermediate-term by the virus pandemic and the resulting slow-downs, shut-downs, cuts, and service eliminations. Near the top of the list of business types and job types negatively affected are (obviously),
Talking taxes on a Friday is a lot easier than talking taxes on a Monday! Believe it or not, at this time of year it is smart to be talking taxes no matter what. Preparation and planning are the name of the game.*
The issue of higher FUTURE taxes is critical to clients of all income levels – especially those in higher tax brackets – and all ages. You will hear me repeatedly hammering home this “tax trap” issue – with the research and collaboration from my sources to back it up.
Here is some “good” news when it comes to taxes and tax strategies: the Roth IRA, Roth IRA conversion and Roth 401k are alive and well for now. The “good” part is that for nearly ALL reading this, you ARE eligible for both the Roth IRA conversion and the Roth 401k (if your company offers a Roth 401k) even if you are in the higher/highest income brackets or own a business! And these strategies can be employed NOW for 2020 and 2021.
By now, most investors know that in late February of this year through mid-March the stock markets kind of crashed. It was a matter of 31 days from February 20th to March 23rd….not that I had to look that up or anything.
It was swift and ugly. And then, the stock markets both suddenly and slowly recovered, hitting it big in April and then gradually reaching new all-time records by September. Hmmmm… how does that work? Is it “free markets”? More buyers than sellers? Individuals throwing money at stocks?
“Do I go to all cash at least until after the election?”
More than a few people have asked me this question over the past several months. Even more people have probably asked themselves this question. The answer, if historical data of the S&P 500 index is a guide, is a firm NO.
The chart above illustrates the impact of missing just the 25 best days in the market, the 15 best, 5 best and 1 best day. The days are NOT CONSECUTIVE, they are random best days. If missed, the majority of stock market gains are missed.
Stocks are now officially virtually “the only game in town.” As of Thursday’s announcement by the US Federal Reserve, their benchmark interest rate will remain at near-zero for the foreseeable future. The “foreseeable future” has been indicated as at least 2022 and perhaps beyond. The “benchmark interest rate” set by the Fed dictates interest rates on most money markets, bonds, and CDs – and most mortgages. This discussion is focused on bonds, CDs, and money markets versus stocks.
“Elephant in the room,” “ticking time bomb”…whatever you wish to call it, there is an issue currently present but not talked about nearly enough. The issue hits a nerve with nearly everyone – investor/saver or not. The issue is taxes – more specifically future taxes on retirement savings. Unfortunately, the issue has become so politicized that its true impact has almost been forgotten.
Back in 2016, I discussed part of this topic in TGIF 2 Minutes. (Click Death & Taxes to read.) At that time, the focus was soaring healthcare costs.
From the TGIF 2 Minutes Archives earlier this year PRE-coronavirus…
Earlier this year in February things were GOOD! The economy was cranking, unemployment was low, wages were up, and it was a somewhat perfect time of the year to set goals. Think: it was pre-tax filing time and after the holidays.
Fast forward to today… the world has changed. Our savings have been tapped in the pandemic — and new savings and other goals need to be reset! While the kids may now be going back to school (followed by maybe not??) using this precious time to set just a handful of goals can pay off toward achieving those goals.