Dear Clients, Partners, and Friends,

As we approach the end of the year, we want to remind each of you to think about tax planning. It is a good time to look back at 2023 to make sure you know where you are from a tax perspective. There is still time to do some tax planning before the end of the year.

This year we have clients who have had liquidity events or just a profitable year in the various entities they own.

We would be delighted to run a tax estimate for you. Please let us know if that is something you would like us to do.

In addition, as you are all aware, the Fed has raised interest rates a few times in the last year. These interest rates do cost us some additional interest expense on any variable interest rate debt we may have.

But it can also have some positive impact when you look at interest income on CDs and fixed rate alternatives. 

I recently spoke with Chris Jeffers, who is the Director of Hext Wealth Management, and he provided me with an update on the current interest rate environment and a couple of fixed income alternatives. Over the past year the Fed has raised interest rates numerous times. This has a negative effect on bond prices and many bond funds have struggled. For example, one of the largest Intermediate Govt/Corp Bond funds, the Vanguard Intermediate Term Bond fund was down 13.31% in 2022 and year-to-date it is down .29%.

Another option to bonds that can provide stability and higher yields at this time are CDs. We have not seen CD rates this high in multiple decades. Chris indicated that we could help clients lock in rates ranging from 5.40% to 5.65% for periods ranging from 3 months to 12 months.

At some point the Fed will tap the breaks on raising rates and yields will decline on CDs over time.

Chris mentioned another option that allows investors to lock in higher rates for a longer period and do so on a tax-deferred basis: Multi-Year Guaranteed Annuities (MYGA). MYGAs pay higher fixed rates for guaranteed periods ranging from 3 to 10 years. During the guaranteed period the annuity offers tax-deferred growth, i.e., the interest earned is not taxable until you withdraw the money.

Chris added that “allocating part of an investment portfolio to higher yielding CDs and/or a MYGA can help take a lot of stress off an investor’s portfolio in order to meet their income and return goals”.

Please let us know if you would like to discuss these options or would like additional information.

Sincerely,

Greg Hext

CEO

www.hextfinancialgroup.com