|
Man maintains his balance, poise, and sense of security, only as he is moving forward.
~ Maxwell Maltz
| |
|
2022 was a dizzying year as markets and the global economy continued to find themselves out of balance due to the aftereffects of the COVID-19 pandemic and the policy response to it. If 2022 was about recognizing imbalances that had built in the economy and starting to address them, we believe 2023 will be about setting ourselves up for what comes next as the economy and markets find their way back to steadier ground. The process of finding balance may continue to be challenging and we may even see a recession, but underlying fundamentals could create opportunities in stock and bond markets that were difficult to find in 2022.
| |
|
We would do well to remember that while rainbows follow the rain, stock prices are leading indicators. In other words, they fall in advance of recessions AND are likely to rise before economic growth resumes. It is for this reason that the money required for short-term needs (12 to 18 months) should remain liquid and the balance diversified across a high-quality mix of assets. The latter offer the best prospect of keeping pace with long-term inflation and dollar depreciation.
| |
|
Debt Ceiling
The current debt limit of USD 31.381 trillion was last raised in December of 2021. Congress has raised or suspended the ceiling 79 times since 1960 and is likely to do so again. We believe negotiations around doing so may prove ill-timed and cause short-term collateral damage – higher borrowing costs, weakening consumer confidence and volatile market prices. Our focus and fortitude may again be called upon. We stand ready to guide you.
| |
|
Secure Act 2.0
As you may know, Congress passed SECURE 2.0 as part of the fiscal 2023 spending package. This bipartisan retirement security legislation may present opportunities for your retirement savings strategy. What follows is a brief overview highlighting some of the key changes, as well as some additional detail regarding the specific provisions. Contact us if you would like to discuss how these changes may benefit you.
- Starting January 1, 2023, the age for Required Minimum Distributions will be 73. If you turned 72 in 2022 or earlier, you must continue to take scheduled withdrawals. After ten years, in 2033, the RMD age will again rise to 75.
- The penalty for failing to take the minimum distribution is reduced from 50% to 25%.
- Beginning next year, in 2024, Roth accounts within employer plans will be exempt from the RMD requirements.
- Beginning next year, in 2024, and assuming fifteen years as a 529 education account beneficiary, excess 529 assets may be rolled over to a Roth IRA in that beneficiary’s name. The rollover will be subject to the lesser of Roth annual contribution limits (without regard to income) or the aggregate amount contributed to the 529 account over the previous five years (earnings included). The aggregate lifetime rollover limit is $35,000.
- In 2023, the retirement plans catch-up contribution limit for those over 50 is $7,500. Starting in 2025, catch-up contributions for those ages 60-63 will increase to the greater of $10,000 or 50% more than the regular catch-up contribution amount in 2024. Catch-up contributions will be indexed for inflation starting in 2025.
- Beginning next year, in 2024, for those with incomes exceeding $145,000, all catch-up contributions must be made on a Roth, or after-tax basis.
- Employer matching contributions will be allowed to be Roth. Moreover, SEP and SIMPLE IRA’s will now be able to be Roth.
- Student loan payments will be treated as Employee Elective Deferrals for purposes of employer matching contributions.
We encourage you to consult your tax advisors prior to taking advantage of one or more of the new provisions.
| |
Outlook - Stocks
- The S&P 500 is coming into month-end with a return of 4.6%. A positive return for January implies the index would hit the trifecta, which includes 1) a positive return for the Santa Claus Rally period, 2) a positive return for the first five days of January, and 3) a positive monthly return in January.
- This unique seasonality indicator has only been hit 31 times since 1950. During these periods, the S&P 500 has added, on average, 12.3% to January’s gain. This would bring the average gain this year to over 17%. This sounds like a big gain, and it is, but keep in mind the average gain in the third year of the four-year presidential cycle is 16.8%, and the average year following a down year is up 15%.
- By no means is seasonality flawless, as pricing patterns are historical tendencies and not a guarantee of future results. Within LPL Research, we view seasonal data as one input, among many, within our decision-making process.
| |
HSA Accounts
Are you making good use of an HSA? Health Savings Accounts are a powerful and under-utilized financial tool available to many American workers and they are triple tax-advantaged, meaning:
- Contributions are made pre-tax.
- Account balances can be invested and experience tax-free growth.
- Distributions are tax-free when used for eligible healthcare expenses.
You are eligible for an HSA if you or your spouse have a high-deductible health insurance plan. 2023 contribution allowances are $7,750 and $3,850 for families and individuals respectively, and participants aged 55 and older can contribute $1,000 more. Contributions can be made by plan participants, employers, or both. Also beneficial, unlike Flexible Savings Accounts (FSA's), your HSA balance does not need to be tapped in the current year and can accumulate over time, and your balance is portable much like an IRA.
Considering the magnitude of healthcare expenses throughout life and during retirement, it is beneficial to utilize this powerful tool. HSA's offer the tax savings, growth, and portability necessary to support your health and long-term wellness. Ask us about them when you next visit.
| |
Identity Protection
To prevent misuse of your personal information if stolen, a credit freeze is a useful tool. The Federal Trade Commission provides information on how to freeze your credit so others will not be able to open new accounts in your name. The three credit bureaus most widely recognized are Equifax, Experian, and TransUnion. For details visit: www.consumer.ftc.gov
| |
|
A New Season
ALENA Wealth remains grateful for your partnership and trust. We understand you have other sources for guidance and so we strive to help you make better decisions.
When we last communicated over Thanksgiving, we spoke of anticipating a new and better season. We are optimistic that businesses, tested by a global pandemic and ensuing economic challenges, will emerge stronger and more innovative. Change is in the air.
Alan, Lena, Joe, Kathryn, Mike and Cathy
| |
|
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including the potential loss of principal. No strategy can assure success or protects against loss".
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
ALENA Wealth LLC is a Registered Investment Advisor
Securities offered through LPL Financial, Member FINRA/SIPC
| | | | |
