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Special Edition: Fed rate increase; NAPFA announcement; Year-end reminders  

We wanted to send out this "Special Edition" newsletter to briefly cover three events:

1) The Federal Open Market Committee, as anticipated, has increased rates for the first time in over 9 years.

2) A press release that was put out recently by the National Association of Personal Financial Advisors (NAPFA), announcing our acceptance. If not familiar with NAPFA, the press release explains why we are so honored and excited for inclusion to this highly respected organization. 

3) Reminder to take certain actions if needed before the end of the year.

The Federal Open Market Committee (the Fed), announces first rate hike in over 9 years
 
The Fed has just announced a rate increase of the federal funds rate of a quarter of one percent: Since 2008, as most of us know, returns on short-term bonds have been at or near zero percent, which is a consequence of the Fed keeping the Federal Funds rate (the rate at which it will lend banks virtually unlimited amounts of money short-term) at 0.125%. The last increase was in June of 2006, going from 5% to 5.25%. It then decreased from that rate in a little more than two years, to close to the zero rate that we have experienced thus far. The average Fed Funds rate has historically been 3.5% to 4.0%, so this had been a considerable amount of stimulus.

As the markets react there are a few things to keep in mind.  First, despite the headlines soon to be blaring from every financial section of every paper in the country, the rate increase is very modest, going up a quarter of a percent, from .125% to .375%. This is a small first step in a long journey toward the long-term average.  After this increase, the Fed will evaluate the consequences before deciding to make future changes. Future increases are expected to be a quarter percent at a time. If the economy slows, or if there are signs that inflation is falling below the Fed's 2% annual target, it could delay the next move by months. The Fed wants to be cautious of going to fast and avoiding any kind of serious economic pullback, especially as a repercussion of any increases. 

In the short term, what will this increase mean to the consumer? Most likely, the areas that will see the biggest effect are in increases for credit card rates, and home equity and car loans. Mortgage rates will likely also rise, though with this increase expected, many banks have factored it in, though we can see an increase as they will look to the next possible increase. 

What will happen next? With this news, and end of year selling and re-positioning of portfolios, there may be some more volatility the last two weeks of the year in the markets. However, this rate increase has been in the works for quite a while, and a number of economists view this as a step back to "normalcy". For investors, the value of Fixed Income investments (bonds) may go down in price as rates increase. However as rates increase more, and those investments mature, it allows for that money to be re-invested at a higher rate than before an increase. For companies that need to borrow cash, as rates go up they need to pay more for borrowing funds. Likewise the same for the United States, which borrows money through its' sale of Treasuries.  

Bottom line: We have been at record low interest rates for years, and over the long term, it is a benefit for us to cautiously move to an interest rate environment to what could be maintained on a more sustained basis.   
National Association of Personal Financial Advisors (NAPFA) Press Release
For the full Press Release, click here. Below is the text of the press release:

CHICAGO, IL  - Chris Congema of Landmark Wealth Management, LLC at the main office in Melville, NY and satellite office in Brooklyn, NY has been accepted for membership in the NATIONAL ASSOCIATION OF PERSONAL FINANCIAL ADVISORS (NAPFA). With membership, Congema becomes affiliated with an organization of more than 2,400 of the most-qualified financial advisors in the nation who deliver objective, Fee-Only advice.
 
Membership in NAPFA and the NAPFA-Registered Financial Advisor designation are available only to Fee-Only financial advisors who meet NAPFA's stringent membership qualifications. Those standards require advisors to receive compensation only directly from their clients, to act in clients' fiduciary interests at all times, and to provide comprehensive planning services. In addition, NAPFA has some of the profession's most rigorous education and training requirements. All candidates for membership are required to submit a complete comprehensive financial plan for a full-scale peer review. Furthermore, NAPFA's continuing education requirements exceed those of any other association of financial advisors.
 
"I congratulate Chris for demonstrating his dedication to provide effective, transparent, client-centered services by upholding the high standards that NAPFA sets for all its members," said NAPFA Chair Bob Gerstemeier.
 
In contrast to most financial professionals, NAPFA members receive no commissions or other rewards for selling financial products. Those forms of compensation create potential conflicts of interest that may serve to undermine an advisor's objectivity and fiduciary responsibility. It is for this reason that all NAPFA members must sign the Fiduciary Oath that explicitly promises "to place the clients' interests first." 
 
Mr. Gerstemeier continued: "By offering true fiduciary care to our clients, NAPFA members are leading the charge toward a financial planning community that rivals other professions in its desire and ability to foster consumer trust. We welcome Chris to our ranks and look forward to his contributions to our organization."
 
For more information about Fee-Only financial planning and NAPFA, visit www.napfa.org or call toll free 1-800-366-2732. 
 
About NAPFA
Since 1983, The National Association of Personal Financial Advisors (NAPFA) has provided Fee-Only financial planners across the country with some of the strictest guidelines possible for professional competency, comprehensive financial planning, and Fee-Only compensation. With more than 2,400 members across the country, NAPFA has become the leading professional association in the United States dedicated to the advancement of Fee-Only financial planning.
 
For more information on NAPFA, please visit  
www.napfa.org
 
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Year-end Reminders 
Deadline for Required Minimum Distributions (RMDs) : Individuals who are 70½ or older must take an RMD from their IRA and/or their QRP for the 2015 tax year. All RMDs must be withdrawn by December 31, 2015, with the exception of RMDs of those who turned or will turn 70½ during this calendar year; these individuals may defer their first distribution until April 1, 2016. Please note - deferring it may be to your disadvantage as the individual will also need to make another RMD in 2016. 
Deadline for Establishing a 2015 QRP: Qualified Retirement Plans for 2015 must be established by December 31, 2015.
Deadline for Roth IRA Conversions: For those that are looking to convert all or part of an existing IRA to a Roth, if wanted to be done for 2015, most firms need the paperwork in good order at least a week before the end of the year.
Charitable contributions by donating investments: To get credit for donating in the 2015 calendar year, most firms need the paperwork in good order at least to do the transfer at least 2 weeks before the end of the year. 

On the Investment Horizon
Upcoming Key Dates on the Economic Calendar 
  • First Friday of each month: Unemployment report for the prior month, released at 8:30AM.
  • Friday, December 25: Stock market closed in observance of Christmas.
  • Friday, January 1: Stock market closed in observance of New Year's Day.
  • Monday, January 18: Stock market closed in observance of Martin Luther King, Jr. Day. 
  • Tuesday January 26 - Wednesday, January 27: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM. 
  • Monday, February 15: Stock market closed in observance of President's Day. 
  • Tuesday March 15 - Wednesday, March 16: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM. 
  • Wednesday, March 16 at 2:30PM: Fed Chair Janet Yellen to hold her quarterly press conference to explain the FOMC's latest quarterly economic projections. 
  • Friday, March 25: Stock market closed in observance of Good Friday. 

If you desire an appointment, have any questions on any of this material, or any other financial subjects may relate to your own financial circumstance, please reach out to us at the contact information below:

 

 

Sincerely,

 

 


Brian Cohen, CCO; email: brian@landmarkwealthmgmt.com; phone: 631-923-2487
Joe Favorito, CFP®; email: jfavorito@landmarkwealthmgmt.com; phone: 631-930-5336

Direct office email: info@landmarkwealthmgmt.com 



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