Investment Market Update | Student Loans

Objective Financial Advice

Dear Jean,

Welcome to the fall edition of our newsletter! We hope you're able to enjoy the cooler weather and all the fun of the changing seasons!

The investment markets are on all of our minds right now! As of the end of the day yesterday (10/18), the S&P 500 is down almost 21% so far this year. International stocks are off about 25%. And Bloomberg US Aggregate bond index is down about 15.6%*. It’s a challenging time to be an investor. Clients we’ve been talking with are doing an amazing job staying the course. They know that the cost required to benefit from the long-term growth of the investment markets is tolerating periods of volatility like this. We have lots of perspective and actionable ideas in the newsletter to help you make the most of the situation.

Social Security recently released their upcoming cost-of-living adjustment for current recipients: 8.7%. This is the largest increase since 1981. We are clearly still feeling the effects of inflation, but we are starting to see slower increases in some areas of the economy.

We also expect to see 2023 retirement plan contribution limits introduced soon. Be on the lookout for some opportunities to add more to your retirement plan as these limits are adjusted for inflation. H.S.A. contributions for 2023 will be $3,850 (previously $3,650) for self-only and $7,750 (previously $7,300) for family coverage.

In our last newsletter, we encouraged you to shop around for high yield savings accounts and to consider CDs. If you were unimpressed by the CD rates your bank offers, consider turning your attention to your investment custodian for a noncallable brokered CD.

We are continuing to grow our financial planning team. Geselle Avalos has joined our team as a part-time financial planning analyst after completing her internship with us this past summer. Megan Coyne, CFP®, is our newest financial planner. You can find out more about these two ladies here. We are interviewing now for our Summer 2023 Financial Planning Intern.

Please read on for other actionable planning ideas and last quarter's investment market review. Please note that our office will be closed on Tuesday, November 15th for our annual Team Building Day. We will also be closed for Thanksgiving (Thursday and Friday, November 24th - 25th), Christmas (Friday and Monday, December 23rd - 26th), New Year's Day (Monday, January 2nd), and MLK Day (Monday, January 16th). We plan to send the next newsletter out in mid-January. We'd love to hear from you on questions or suggestions for topics you’d like to see covered in the future.

Actions to Take in a Declining Market

Feeling like you're just "along for the ride" in this temporary market downturn? There may not be much to do other than ride it out, but first consider some of the options below:

Did you recently inherit an IRA? If you don't need the funds and are subject to the 10-year rule, a market downturn could be an opportunity for you to distribute funds this year and reinvest in a brokerage account. This could be beneficial in reducing your overall tax burden for distributions on the account.

This same principal applies for Roth conversions. If you're able to pull money out of a tax-deferred account while it's down, pay the taxes from outside funds, then reinvest in an after-tax account and wait for the upswing... this market downturn might just provide you with a tax planning opportunity.

Do you have an expensive fund or a concentrated position in a taxable account you've been wishing to vacate? Now may be your opportunity. If the position is at a loss, you may be in a good position to exchange for something comparable. Even if your undesirable position isn't at a loss, you may still be able to "harvest" losses in another position to offset the gain. You can take a loss up to $3,000 against your income each year if you don't have capital gains to offset. If your loss exceeds this amount, you can carry the loss forward to future tax years. Be mindful of wash sale rules. If you're selling your employer's stock, this is particularly important if you participate in your company's employee stock purchase plan (ESPP).

When investments are on sale, it can also be therapeutic (and financially beneficial!) to send a little extra contribution to your investment account if you have the cash available. You get to buy more shares for the same dollar amount as compared to when the markets were doing better.

If you have questions about ways to try to take advantage of this market downturn, please reach out to us. We'd love to help find a good deal for you!

Student Loans Corner

With Halloween right around the corner, we also have an important deadline when it comes to student loans... the limited Public Service Loan Forgiveness (PSLF) waiver. To qualify, you must have Direct loans and have been employed with a qualifying employer. If you've been employed by a not-for-profit or government employer at any point since 2007, we encourage you to take a few moments to see if you might be eligible for this part of the student loan forgiveness before time runs out on October 31st.

If that wasn't the student loan debt relief you were thinking of, you're still in the right place. You have even more time (December 31, 2023) to apply for the one-time student debt relief of up to $20,000. This relief option is open to everyone based on income requirements. We encourage you to see if you qualify for this option here.

If you've been enjoying the moratorium on your student loan payments, be sure you're working this back into your budget starting January 1, 2023 as this looks to be the last extension on previously frozen payments.

Investment Market Update

While July gave us a nice boost to start off the third quarter, the months that followed showed us that the stock market rally, while a nice break, was to be short-lived.

The S&P 500 lost -4.88% last quarter coming in at -23.87% for the year through September 30**. Small cap stocks lost slightly less this quarter at -2.19%, but haven't quite caught up for the year (-25.1% year-to-date). Large cap value stocks lost more than these other two U.S. stock funds at -5.62% for the quarter. Even still, value stocks have lost the least this year at -17.75%.

Developed market stocks lost -9.36% for the quarter, losing nearly doubling the S&P 500. Emerging markets stock lost more than developed markets stock this past quarter at -11.57%.

The US aggregate bond index lost -4.75% for the quarter. This is not surprising as the relationship between interest rates and bond fund prices are inverse. Shorter-term bond funds lost less at -1.54% for the quarter. With the Federal Reserve stating that they will continue to raise rates as inflation persists, why would we keep our bond holdings? Well, if you're investing for anything other than the short-term, consider this article from Vanguard. Not all of a bond fund's returns come from the price. In fact, most of a bond's returns are not price returns, but are income returns.

If you are looking for a short-term place to park some cash, you can benefit from rising interest rates in the form of CDs. We are recommending brokered CDs for many of our clients who are in the distribution phase. This is a great way to earn a little extra money without the risk of being invested in this volatile market. Just be mindful of the $250,000 FDIC coverage limit per depositor per insured bank to protect your money in the unlikely event of a bank's failure.

Has it been a few years since you updated your plan?

With rising inflation and a market downturn, it's important to check back in to make sure your goals are keeping up with inflation. Every fall, we receive the updated cost-of-living adjustment. That's good news for Social Security recipients, but for most retirees, this is not the only piece of the pie. If it's time for a check-up, we can help you determine a sustainable spending level in retirement. For those saving for future goals, making sure your plan reflects their current costs is important to staying on track.

Perhaps you're overdue for an annual rebalance back to your target asset allocation and now it feels like it's too late. We can work with you to determine any changes that might need to be made to your portfolio.

**Source for investment returns is Morningstar as of September 30, 2022. S&P 500 TR USD for S&P 500. Russell 2000 TR USD for small cap stock. Russell 1000 Value TR USD for large value stocks. MSCI EAFE NR USD for developed international markets. MSCI EM NR USD for emerging markets stock. Bloomberg US Agg Bond TR USD for the US aggregate bond index. Bloomberg US Government 1-3 Yr TR USD for short-term bonds.

Securing Your Digital Life

Our lives have become increasingly more digital. With our most personal transactions now being conducted online, we have to be more diligent than ever to make sure we are protecting this fairly new digital part of our lives. Financial planner, Beth Shurtz, shares a few things you can start implementing today to help keep yourself better protected from cybercrime.

Investment Volatility Is Personal

Jean Keener shared in a blog this summer how she thinks about investment volatility. Investment professionals like to talk about volatility in the investment markets. They talk about it like it’s a uniform feature that affects all investors equally. But it’s not. Volatility is personal. You have more control than you might expect. See how to exercise control over your personal volatility.

Address:

1692 Keller Parkway

Keller, TX 76248

Ph: 817-993-0401

Fax: 817-993-0002

Get In Touch!

*Source for investment returns is Morningstar as of October 18, 2022. S&P 500 TR USD for S&P 500. MSCI EAFE NR USD for developed international markets. Bloomberg US Agg Bond TR USD for the US aggregate bond index.