2025 | January 27

The Markets

Stocks Mixed

The major U.S. stock indexes climbed for the second week in a row, and a rally on Thursday pushed the S&P 500 above the record high that it had set seven weeks earlier. The Dow and the NASDAQ recorded weekly gains of around 2% but remained around 1% below the records they set last month.

Expectations rose slightly as a second week’s batch of quarterly results came in. As of Friday, fourth-quarter net income was expected to rise by 12.7% compared with the year-ago quarter, based on S&P 500 companies that have already reported plus projections for those that haven’t yet released results. Such an outcome would mark the highest quarterly earnings growth rate in three years, according to FactSet.

U.S. consumer sentiment weakened in January for the first time in six months, based on Friday’s reading from a University of Michigan survey. Relative to the previous month’s survey, growing numbers of participants said that they expect inflation and unemployment will rise this year.

High interest rates continued to weigh on the U.S. residential real estate market in 2024, as the National Association of Realtors on Friday reported that existing home sales fell to the lowest full-year level since 1995. Last year’s total of 4.06 million home sales was down less than 1% from 2023’s total. 

It’s widely expected that the U.S. Federal Reserve will keep interest rates unchanged when it concludes a two-day meeting on Wednesday, although post-meeting comments from Fed Chair Jerome Powell could move markets. The Fed cut rates a full percentage point in its final three policy meetings of 2024, but the outlook for further cuts has been clouded by mixed readings on inflation.

Thursday’s scheduled release of the U.S. government’s initial estimate of fourth-quarter GDP is expected to show that the economy remained on a solid growth track. The pending result will follow the 3.1% annual growth rate that the economy posted in last year’s third quarter and a 2.0% figure in the second quarter.

Source: John Hancock Investment Management

Schwab Tax Forms

Planning for Required Minimum Distributions

If you save for retirement in a qualified plan, such as a 401(k) plan or an IRA, the government currently requires you to take withdrawals from these accounts during retirement. The withdrawals, known as required minimum distributions or RMDs, are taxable so it’s a good idea to plan ahead and avoid unexpected tax consequences.

Here is some basic information about RMDs. It is offered with the caveat that RMDs have complex rules, so talk to us or your CPA before taking action.

If your 73^rd birthday is in 2025, your first RMD must be taken by April 1, 2026. Your second RMD by December 31, 2026, your third RMD by December 31, 2027, and so on.

If you delay your first distribution until April 1, 2026, then you will need to take two RMDs in the same year.

If you have multiple 401(k) plan and IRA accounts, you typically must calculate the RMD for each one of them. You can, however, withdraw the entire amount from a single account.

If you’re still working at age 73, you don’t have to take an RMD from your workplace retirement plan account (as long as the plan allows it). This exception does not apply to traditional IRAs. You must take RMDs from traditional IRAs, even if you’re still working.

If you inherit an IRA from a spouse (after 2019) who already reached age 73, you will normally need to take an RMD for the year of death, if your spouse did not already take one. If your spouse dies before age 73, you may be able to keep the inherited account, roll it over into your IRA, or withdraw the money in a lump sum over a period of time.

If you inherit an IRA from someone other than your spouse (after 2019), usually the funds must be completely withdrawn from the account within 10 years. RMDs may be required if the person from whom you inherited the account was already taking RMDs. There are some exceptions.

If you miss an RMD deadline or you don't withdraw the full amount, penalties are steep. The penalty tax is 25% of the amount you failed to withdraw. If you correct the issue within two years, the penalty tax is lower.

If you own a Roth IRA or Designated Roth account in workplace plan, you do not have to take RMDs—unless you inherited the account. In that case, RMD rules usually apply.

Again, the rules governing RMDs are complex, and calculating RMDs is not always straightforward. If you would like help, or you have questions, please get in touch.

Phone: (615) 709-8709

Fax: (615) 505-3306

eMoney

Charles Schwab

Advyzon

Emily Triano

Operations Manager

emily@ajadvice.com

Maya Laws

Operations Associate

maya@ajadvice.com

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