Economic Updates & Financial Articles

Economic Updates & Financial Articles

Economic Updates:

Retirement in Sight Newsletter:

Financial Articles:

 


Weekly Economic Update for 10/18/2021

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THE WEEK ON WALL STREET

A strong opening to the third-quarter earnings season sparked a late week, broad-based rally that helped stocks finish the week with solid gains.

The Dow Jones Industrial Average rose 1.58%, while the Standard & Poor’s 500 added 1.82%. The Nasdaq Composite index led, gaining 2.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 1.37%.1,2,3

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Are Capital Gains Taxes Changing?

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There are a lot of questions about President Biden’s Build Back Better plan and potential tax law changes, including an adjustment to capital gains taxes.

One of the proposals Congress is considering sets the top rate for taxing capital gains at 25%, up from 20% under current law. Another would raise the capital gains tax rate to 39.6% for taxpayers earning $1 million or more. Still another would make the change to capital gains tax retroactive, with a start date of April 2021.1,2

At this point, many ideas are being considered as legislators look for ways to raise revenue to help pay for the Build Back Better plan. Corporate tax rates, individual tax rates, estate tax rules also are on the negotiating table.

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Proposed Tax Changes in Congress

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Investors are watching the Build Back Better Act. This $3.5 trillion bill, refined through months-long negotiations, may be approaching a final vote in the House of Representatives. If the BBA becomes law, it would finance large-scale infrastructure projects, authorize a major expansion of parts of the country’s social safety net, and fund college education, grant, and entrepreneurial programs over the next ten years.1,2

This information is designed to provide general information on the subjects covered. It is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Remember that tax laws and tax rates are constantly changing.

The passage of the BBA would mean higher taxes for the wealthy and big businesses. To help pay for all these initiatives, the new law may raise the capital gains tax rate. Americans in the highest federal tax bracket (households earning $400,000 or more) would again face a 39.6% marginal income tax rate, up from 37%. Itemized deductions for taxpayers earning more than $400,000 might be capped at 28%. The country’s corporate tax rate would be lifted to 26% from the current 21%.2,3

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Cash Alternatives for Charitable Giving

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The year is winding down, and you may be thinking of giving. In fact, you may want to explore the different ways in which you can donate to a charity or non-profit organization, apart from just making a cash gift. Consider some of the alternatives.  

Keep in mind this article is for informational purposes only. It's not a replacement for real-life advice. Make sure to consult your tax and legal professionals before modifying your gift-giving strategy.

Donor-advised funds. DAFs are essentially charitable savings accounts. Some are created and run by 501(c)(3) non-profits. Others are offered by brokerages and banks.1,2

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The Social Security Administration Announces 2022 COLA

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On October 13, 2021, the Social Security Administration (SSA) officially announced that Social Security recipients will receive a 5.9 percent cost-of-living adjustment (COLA) for 2022, the largest increase in four decades. This adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Additionally, increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2021.1 

Biggest COLA Increase in Decades? While many predicted a bump of as much as 6.1% given recent movement in the Consumer Price Index (CPI), the announced 5.9% increase is still substantial. Some fear that rising consumer prices may dilute the impact of the increase with inflation currently running at more than 5 percent. While this remains to be seen, Social Security beneficiaries will no doubt welcome the largest adjustment in many years.1

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Retirement In Sight for October, 2021

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ROBOCALLS, ROBOTEXTS: PROTECT YOURSELF, AND YOUR MONEY

Are you getting more unwanted text messages on your phone than you used to get? That is partly the result of a good thing – robocalls have declined. Robotexts, however, have increased. As robotexts bilked Americans out of $86 billion in 2020, you want to be wary of even the most innocuous messages coming your way.

The number of robocalls fell by 29% from the end of June to the end of August, partly because the Federal Communications Commission required U.S. phone carriers to adopt Secure Telephone Identity Revisited and Signature-based Handling of Asserted information using toKENs (STIR/SHAKEN) by June 30. This is a blocking technology designed to foil caller ID spoofing (a tactic that 35-40% of robocalls employ). Faced with STIR/SHAKEN, spammers and scam artists have shifted their focus toward texts. If you get what seems to be a robotext, texting back STOP is not the answer. By doing that, you verify your phone number as a target for more robotexts (and your number could end up on a list of targeted numbers that may be sold to other marketers or cybercrooks). Instead, block and report the robotexts to your phone carrier. You can also forward robotexts to the Federal Trade Commission at 7726 (the keypad shorthand for the word SPAM); the FTC will then alert your phone service provider to the robotext.1

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Weekly Economic Update for 10/11/2021

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THE WEEK ON WALL STREET

The overhang of bumping against the federal debt ceiling was lifted last week with an agreement to extend the debt ceiling through early December, helping propel stocks to a weekly gain.

The Dow Jones Industrial Average increased by 1.22%, while the Standard & Poor’s 500 added 0.79%. The Nasdaq Composite index gained 0.09%. The MSCI EAFE index, which tracks developed overseas stock markets, was flat (+0.11%).1,2,3

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Will Fed Chair Powell Get a Second Term?

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Financial markets tend to function best when they have clear, strong leadership. When there’s concern about who’s the boss, markets can struggle.

Jerome Powell’s first term as Fed Chair ends in February 2022. Until the past few weeks, Wall Street overwhelmingly believed he would be nominated to a second term by President Biden.1

But Powell’s prospect for being renominated appears less certain than ever. During an appearance by Powell before the Senate Banking Committee in September, a prominent committee member stated that she would not support his nomination. Other senators have voiced concerns, but this was the first time that a key senator declared opposition.2

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Ready for Medicare Open Enrollment?

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Medicare’s annual open enrollment period begins October 15 and ends December 7. During this time, current Medicare beneficiaries have the option to adjust their coverage for the coming year. Any changes to your plan will go into effect on January 1, 2022.1

This is an opportunity to reassess your current coverage and identify potential areas for improvement. Maybe you’ve recently changed medication, find yourself underutilizing coverage, or are in need of additional benefits.

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Will the IPO Market Heat Up?

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If the stock market outlook brightens, there are expectations for a bumper crop of initial public offerings to make their debuts over the next several weeks.

Somewhere between 90 to 110 IPOs are preparing to come public by the end of the year, which would make 2021 the biggest year for total capital raised since 2000.1

But a sluggish stock market may disrupt the best-laid plans. The Standard & Poor's 500 index lost nearly 5 percent in September—snapping its seven-month winning streak.2

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Monthly Economic Update for October, 2021

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U.S. Markets

The stock market hit a pocket of turbulence in September, with investors turning cautious amid Delta variant infections, slowing economic growth and ongoing policy debate in Washington.

The Dow Jones Industrial Average fell 4.29 percent while the Standard & Poor’s 500 Index lost 4.76 percent. The Nasdaq Composite dropped 5.31 percent.1

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Quarterly Economic Update for 3Q 2021

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THE QUARTER IN BRIEF

Overcoming rising Delta variant infections, a slowing economic expansion, and growing inflation worries, stocks raced higher through the course of the first two months of the third quarter, propelled by strong corporate earnings, the absence of compelling investment alternatives to stocks, and a “buy on the dip” investor mentality. Investors, however, turned more cautious in September, wary of the season’s rocky reputation, persistently high levels of COVID-19 cases, the length of time that the market has gone without a meaningful retreat, and the fiscal and tax policies under discussion in Washington, D.C.

Amid this caution and absent any positive catalysts, September turned volatile, with stocks retracing their earlier gains as seasonal weakness was exacerbated by the mounting financial difficulties of a debt-laden, large property developer in China and rising bond yields.

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Weekly Economic Update for 10/4/2021

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THE WEEK ON WALL STREET

Higher bond yields and a legislative stalemate in Washington, D.C., added up to losses for the week.

The Dow Jones Industrial Average declined 1.36%, while the Standard & Poor’s 500 lost 2.21%. The Nasdaq Composite index fell 3.20%. The MSCI EAFE index, which tracks developed overseas stock markets, shed 2.58%.1,2,3

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End-Of-The-Year Money Moves - 2021

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What has changed for you in 2021? For some, this year has been as complicated as learning a new dance. Did you start a new job or leave a job behind? That’s one step. Did you retire? There’s another step. If notable changes occurred in your personal or professional life, then you may want to review your finances before this year ends and 2022 begins. Proving that you have all the right moves in 2021 might put you in a better position to tango with 2022.

Even if your 2021 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your overall personal finances.  

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Roller-Coaster Week in Washington

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Debates over government debt, taxes, and infrastructure have captured the attention of the nation this week. All eyes are on Washington and Wall Street as these events play out, with potentially far-reaching consequences that seem to shift hour by hour.

Throughout September, the markets have reacted to legislative decisions that could raise taxes for some, as well as hotly contested measures to fund the government and raise the debt ceiling. Markets appear headed to some of their lowest monthly returns in over a year.1

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Weekly Economic Update for 9/27/2021

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THE WEEK ON WALL STREET

Stocks prices were whipsawed last week, dragged initially lower by financial contagion worries and later lifted by a supportive Fed policy statement.

The Dow Jones Industrial Average gained 0.62%, while the Standard & Poor’s 500 advanced 0.51%. The Nasdaq Composite index was flat (+0.02%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, ticked higher by 0.20%.1,2,3

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Fed Rescues September

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A funny thing happened in the investment markets the other day. September was living up to its reputation as a volatile month, but then the Federal Reserve came to the rescue. 

The Fed concluded its Federal Open Market Committee meeting on Wednesday, September 22. It announced that it might start tapering its monthly bond purchases soon, perhaps as early as November, and could raise interest rates sometime next year.1

Before the Fed news, the Standard & Poor’s 500 index was down nearly 4% for the month.2

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Fallout from the Chinese Property Market

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There’s a famous saying about a hurricane starting from a butterfly flapping its wings on the other side of the world. That “butterfly effect” is certainly happening in terms of the Chinese property market’s influence on financial markets around the world.

For America, the concern contributed to the worst single day for the S&P 500 since May of this year. With building on a decline in China, the effect is felt in related industries in the U.S., such as construction equipment and investment firms.1

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Are Your Taxes Going to Change?

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Most likely, you’ve heard what’s brewing in Washington, D.C., called by one of these names.

The Build Back Better Act. Or the $3.5 trillion budget reconciliation bill. Or the Jobs and Economic Recovery Plan for Working Families.1

Regardless of what name you’ve heard, one fact is clear: It is likely to be months before any action is taken. 

When bills are being worked on—especially one that’s this size—it’s a good time to take a quick Civics refresher. Right now, the bill is “in committee” with both the House of Representatives and the Senate. The committees are filling in the policy details and the exact financial figures, which can be a long process.2

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Weekly Economic Update for 9/20/2021

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THE WEEK ON WALL STREET

Stocks weakened ahead of this week’s Federal Reserve meeting and amid persistent concerns about the Delta variant’s impact on the economy.

The Dow Jones Industrial Average was flat (-0.07%), while the Standard & Poor’s 500 fell 0.57%. The Nasdaq Composite index lost 0.47% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 0.65%.1,2,3

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Annual Financial To-Do List

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What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

Can you contribute more to your retirement plans this year? In 2022, the contribution limit for a Roth or traditional individual retirement account (IRA) is expected to remain at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible.1

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The Underutilized Benefits of a Health Savings Account

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Healthcare can be one of the priciest yet essential parts of life’s journey. And yet, many struggle to utilize the financial tools that may help. Take Health Saving Accounts (HSAs), for example.

In 2019, 55% of those with HSAs that did not record a distribution also did not receive either employee or employer contributions. This suggests that the lack of distributions are due to account holders becoming disengaged from their accounts, rather than not having access to this cost-saving financial tool.1

And yet, for those looking to help manage the financial impact of healthcare, a Health Savings Account (HSA) may be just the ticket.

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Weekly Economic Update for 9/13/2021

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THE WEEK ON WALL STREET

In a quiet week of news, stocks moved lower amid simmering concerns over the Delta variant’s effect on the progress of economic reopening.

The Dow Jones Industrial Average declined 2.15%, while the Standard & Poor’s 500 dropped 1.69%. The Nasdaq Composite index fell 1.61% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.63%.1,2,3

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The Best, the Brightest, and Inflation

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If you are feeling a bit confused about the direction of inflation, you’re in good company. Some of the best and brightest economists in the country are having a tough time getting their arms around the current inflation trends.

The most recent Producer Price Index reading came in above economists’ estimates at a record level of 8.3% compared with a year earlier. Producer prices can be an indicator of future price changes at the consumer level.1

One way to gauge inflation is to watch the people responsible for managing inflation – the Federal Reserve’s Board of Governors. In recent weeks, several governors have indicated they are comfortable with how the economy is recovering. So comfortable that they appear ready to slightly change course with monetary policy in the next few months.2

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Making Sense of Seemingly Inconsistent Numbers

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It can be incredibly difficult to make sense of data. A report coming from one body may tell you one thing, and another report might seem to offer a wholly different perspective.

Such is the case with August’s jobs numbers from the Department of Labor. There was a vast difference between the number projected in surveys of economists (720,000) and the number we received: a 235,000 increase for nonfarm payrolls. Adding to the confusion, the unemployment numbers dropped in the same period: from 5.4% to 5.2%.1

You might be better versed in these matters than the average person. For example, you might understand that these numbers are calculated differently, and with totally disparate factors considered. That accounts for how unemployment can decrease, yet jobs numbers come in so low. 

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The September Effect

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The stock market notched its 7th straight month of gains in August, and the Standard & Poor's 500 index has set 53 new highs so far in 2021.1

During August, stocks rallied as investors looked past the increased number of COVID-19 Delta  variant cases and barely reacted when the Federal Reserve said it might begin tapering its monthly bond purchases by year-end. 

But it's a new month, and you should expect to see an article or two about what's called the "September Effect." September is when many professional investors end their fiscal year, which can lead to some overall market weakness.2

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Retirement In Sight for September, 2021

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POSSIBLE CHANGES FOR CATCH-UP CONTRIBUTIONS

Since 2002, Americans aged 50 and older have been permitted to make annual "catch-up" contributions to popular retirement accounts – but according to Vanguard’s 2021 How America Saves report, just 15% of retirement savers do. One factor may be the limits on these contributions. Many pre-retirees who are old enough to "catch up" would like to contribute considerably more to their retirement plans, as they need to ramp up their rate of saving.

Proposed legislation making its way through Congress could allow people over 60 to make larger yearly catch-up contributions to some of the most popular types of workplace retirement plans. Essentially, there are variations of the same bill circulating in Washington. The Senate version would let those 60 and older make annual catch-ups of up to $10,000 to employer-sponsored retirement plans. The House version also has a $10,000 annual maximum, but the enlarged catch-ups would have to be after-tax contributions. An after-tax contribution does not reduce your current taxable income by an equivalent amount, but it may help reduce your income tax burden during retirement. With many seniors needing to save more – much more – before they conclude their careers or sell their businesses, any new laws allowing larger catch-up contributions could be a benefit.1

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Weekly Economic Update for 9/6/2021

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THE WEEK ON WALL STREET

Stocks were mixed last week amid conflicting economic data and continued spread of Delta variant infections.

The Dow Jones Industrial Average slipped 0.24% during the five trading days. But the Standard & Poor’s 500 tacked on 0.58% and the Nasdaq Composite index rose 1.55%. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.51%.1,2,3

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Monthly Economic Update for September, 2021

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U.S. Markets

Signs of an improving labor market, strong corporate earnings, and more clarity from the Fed on its tapering plans propelled stocks to multiple record highs during August. 

The Dow Jones Industrial Average gained 1.22 percent while the Standard & Poor’s 500 Index rose 2.90 percent. The Nasdaq Composite led, picking up 4.00 percent.1

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Could Custodial IRAs Help Young Adults Buy Homes?

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Individual Retirement Arrangements (IRAs) are for retirement saving, right? Absolutely. Is that their only purpose? Not necessarily.

Imagine using an IRA not only to save, but to facilitate a home purchase. This would obviously be a tall order for an adult, given current home values, yearly IRA contribution limits, and the priority of amassing retirement savings. How about for a child, though? Could an IRA help them out?

This thought has led some families to open custodial Roth IRAs. You can start a Roth IRA on behalf of a child, as long as that child has “earned income” (that is, income from either a W-2 job or some kind of self-employment). The IRA belongs to the child, but until the child becomes an adult, you (or some other adult) act as the IRA’s custodian.1,2

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Reevaluate Your Work-Life Balance This Labor Day

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More than just a bookend to the summer season, Labor Day is a celebration of workers' contributions to the well-being of our country and the economy.

Labor Day was first celebrated on Sept. 5, 1882, in New York City, in accordance with the Central Labor Union. On June 28, 1894, President Grover Cleveland declared Labor Day a national holiday. Now, the first Monday in September is annually dedicated to the hard work and achievements of American workers.1

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The FAFSA Simplification Act

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As a parent or grandparent, you know firsthand the challenges of funding a child’s education. The Free Application for Federal Student Aid (FAFSA) Act was passed at the end of 2020 and has changed some of the qualifications for students to receive financial aid.

These changes will affect those applying for financial aid for the 2024-2025 school year. You’ll notice these changes on October 1, 2023, which is when the FAFSA opens for the 2024-2025 school year.1

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The Need for Power of Attorney

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The point of the POA. A power of attorney (POA) is a legal instrument that delegates an individual’s legal authority to another person. If an individual is incapacitated, the POA assigns a trusted party to make decisions on his or her behalf. 

There are nondurable, springing, and durable powers of attorney. A nondurable power of attorney often comes into play in real estate transactions, or when someone elects to delegate their financial affairs to an assignee during an extended absence. A springing power of attorney “springs” into effect when a specific event occurs (usually an illness or disability affecting an individual). A "durable" power of attorney allows an assignee, or agent, to act on behalf of a second party, or principal, even after the principal is not mentally competent or physically able to make decisions. Once a principal signs, or executes, a durable power of attorney, it may be used immediately, until it is either revoked by the principal or the principal dies.

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Weekly Economic Update for 8/30/2021

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THE WEEK ON WALL STREET

The stock market powered to record levels last week amid talk of Fed tapering and a deceleration in new Delta variant cases.

The Dow Jones Industrial Average gained 0.96%, while the Standard & Poor’s 500 increased 1.52%. The Nasdaq Composite index led, picking up 2.82%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.39%.1,2,3

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401(k) Millionaires

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Your workplace retirement account can play a critical role in your overall retirement strategy. However, some have gone further with the accounts than others, especially recently. 

CNBC reported on findings that place 401(k) accounts at all-time highs, with some even joining the much-desired “two comma club” of 401(k) millionaires. Average 401(k) balances jumped 24% from the previous year to $129,300. Also on the rise were overall contributions, with 12% increasing their contributions since last year and 37% of employers placing new employees into workplace plans. The study discovered a record 412,000 401(k) plans with million-dollar balances; overall Individual Retirement Account (IRA) millionaires reached 342,000, another record.1

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Weekly Economic Update for 8/23/2021

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THE WEEK ON WALL STREET

Stocks turned lower last week amid the increasing probability of a Fed tapering, mixed economic data, and growing concerns about the economic impact of the Delta variant.

The Dow Jones Industrial Average slumped 1.11%, while the Standard & Poor’s 500 lost 0.59%. The Nasdaq Composite index slipped 0.73%. The MSCI EAFE index, which tracks developed overseas stock markets, surrendered 2.94%.1,2,3

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The Fed Can't Keep a Secret

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If you have a secret, don’t tell anyone at the Federal Reserve Bank. They may leak the story before you’d like.

In early August, multiple regional Federal Reserve Bank presidents hit the speaking tour. They made headlines by suggesting that the economy is strong enough to justify tapering the Fed's monthly bond purchases. As you may remember, the Fed began buying $120 billion in Treasury and mortgage-backed securities in July 2020 to help support the economy.1

But now it appears the Fed presidents were just telling tales out of school. 

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Distracted America

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Over the last year, many have seen their lives impacted by the COVID-19 pandemic. The ways in which we work, live, and communicate have drastically changed, to say the least.

It’s difficult to predict what other aspects of life may alter before we’re through this period of history. Still, data has emerged that suggests the way we relax has already adapted. In response to a steady media diet of troubling or sad news, it seems we’re all looking for a distraction.

Your Own Silver Screen - Consumer spending on subscription streaming rose by 21% to $12.2 billion in the first six months of 2021, suggesting we’re watching more media at home than ever.1

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Weekly Economic Update for 8/16/2021

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THE WEEK ON WALL STREET

Looking past inflation figures and Delta variant trends, stocks last week found a way to climb higher and set fresh record highs in the process.

The Dow Jones Industrial Average rose 0.87%, while the Standard & Poor’s 500 advanced 0.71%. The Nasdaq Composite index was flat (-0.09%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.77%.1,2,3

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Mixed Signals on Inflation

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Are you having a tough time keeping track of inflation's mixed signals? You’re not alone.

Consumer prices in July climbed at their fastest rate since August 2008. Worse, producer prices, which can be an indicator of future price changes at the consumer level, rose at the highest rate since tracking began.1

However, in recent weeks, the stock market has shrugged off the inflation news, believing that the worst is over and rising prices will moderate in the future.

It’s important to remember that the stock market is a discounting mechanism, which means it’s always looking forward. Put another way, the stock market’s price today represents all available information about current and future events. How far forward is the stock market looking? Most would agree it’s “discounting” activity six to nine months into the future.2

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Will Air Travel Problems Persist?

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The airline industry plotted a course for recovery in 2021, but recent difficulties may have put that plan into a holding pattern.

While major airlines checked in with improving financial results for the second quarter, both they and smaller carriers have seen a number of complications. Technical issues, the latest storm season, and staffing issues have led to thousands of cancellations in recent weeks.1,2

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A Wall of Worry

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Have you ever heard the Wall Street expression, "markets climb a wall of worry?"

It's the idea that financial markets are constantly on edge. Traders fret about how long a market rally can continue before it runs into trouble. Worry shifts from one news event to the next as traders attempt to build a case whether it's time to go "risk-off" with a portfolio strategy.1

If you're looking for something to worry about, you've got plenty of choices these days: the Delta variant, inflation, jobs, vaccines, Fed policy, taxes, unemployment, and so on. There's no shortage of headlines to help boost investors up the wall.

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Weekly Economic Update for 8/9/2021

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THE WEEK ON WALL STREET

Overcoming jitters about the Delta variant and the reintroduction of mask requirements, stocks climbed higher on strong employment data and a fresh batch of strong corporate earnings.

The Dow Jones Industrial Average rose 0.78% while the Standard & Poor’s 500 advanced 0.94%. The Nasdaq Composite index gained 1.11% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, picked up 1.61%.1,2,3

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How U.S. Savings Bonds Work

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Did you buy U.S. Savings Bonds decades ago? Or did your parents or grandparents purchase them for you? If they’re collecting dust in a drawer, you may want to take a look at them to see if any of your bonds have matured. If your bonds have matured, that means they are no longer earning interest, and it also means you may want to consider cashing them in.1

This article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your tax professional when you’re considering any move with a U.S. Savings Bond.

You want to keep track of the maturity dates, the yields and the interest rates on your bonds, as that will help you to figure out what bond to redeem when. Fortunately, you’re able to check the maturity dates online now so it’s relatively easy to determine if it's time to cash-in your bonds.2

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Direct Indexing

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“Indexing” is a familiar phrase in investment jargon, and a familiar concept. Money managers structure certain investment vehicles to contain all of the stocks within a particular Wall Street index, such as the Standard & Poor’s 500 stock index. This equity exposure may fit the investment strategy for some investors depending on their risk tolerance, time horizon and goals.  

“Direct indexing” is a variation on this idea. The goals are the same: to match the performance of an index. The methodology differs, however. Instead of buying one investment designed to mirror the composition of an index, the investor buys shares of each stock within the index.

Why would an investor go to such lengths? To start, the pursuit of tax efficiency. Direct indexing can also lead to a more customized portfolio, giving an investor more ability to add and subtract companies that do or do not align with that investor’s values or market objectives.1

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The Cost Of A Gold Medal

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The 2020 Tokyo Olympics wrap up with closing ceremonies on August 8, and it’s been an Olympic games like no other. We’ve watched the world’s finest athletes go for the gold. Which leads many to wonder: what exactly goes into a gold medal, and how much are they worth?

Solid gold: In the inaugural 1896 Olympics, winners were awarded silver medals, with second-place finishers receiving bronze medals. The gold medal debuted at the 1904 St. Louis Olympics, and they were solid gold. This trend only continued until 1912.1,2

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Retirement In Sight for August, 2021

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CAN HAVING THREE GOOD FRIENDS PROMOTE A HAPPY RETIREMENT?

We can reasonably say that the more money you retire with, the more potential you have to enjoy retirement. Now, what about friendship? If you maintain some strong friendships and an active social circle after age 60, can that make a big difference in the quality of your "second act"?

You may need only two or three close friendships to experience a positive effect. The challenge is that friendships are harder to maintain these days. Social media lets us keep in touch, but it can also be a facile, arm's-length substitute for the quality time we spend together in person. Dan Buettner, a National Geographic Fellow who studies longevity data in different cultures, writes in his book Blue Zones that Americans average 1.7 close friends today, compared with three in the 1990s. Wes Moss, a financial columnist for the Atlanta Journal-Constitution, contends that the happiest retirees have an average of 3.6 close friends (he has been researching retiree friendships for a book of his own). At financial news websites, articles sometimes warn retirees that when they walk away from the office, their daily social "safety net" will disappear and they will feel alone. While these warnings may make for good clickbait, they discount the fact that some of our closest friendships involve people we don't work with. Two, three, or four good friends may make our retirements feel that much richer.1

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Monthly Economic Update for August, 2021

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U.S. Markets

Last month, the stock market posted a solid gain, overcoming investors’ fears of higher inflation and an increase in COVID-19 cases. 

The Dow Jones Industrial Average picked up 1.25 percent, while the Standard & Poor’s 500 Index gained 2.27 percent. The Nasdaq lagged, climbing 1.16 percent.1

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Weekly Economic Update for 8/2/2021

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THE WEEK ON WALL STREET

The stock market posted small losses last week despite a very strong showing by corporate America.

The Dow Jones Industrial Average slipped 0.36%, while the Standard & Poor’s 500 lost 0.37%. The Nasdaq Composite index dropped 1.11% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, jumped 1.51%.1,2,3

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Chinese Stocks Under Pressure

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With overseas investments, we remind people that, “international markets carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risk, foreign taxes and regulations.”

The “political risks” and “regulations” portions of this common disclosure have been on full display in recent weeks in China.

Chinese technology and education stocks have been under pressure as Chinese regulators continue their push to rein in large companies for reasons that include data security, corporate behavior, financial stability, and curtailing private-sector power.1

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Teenage Wage-Land

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Summer jobs are a perennial aspect of the American workforce. It’s a time when teenagers are filling out applications and, in many cases, earning wages of their own for the first time. But some of what we’ve become accustomed to may be changing.

In May, leading into the summer months, 33.2% of working-age teenagers (16-19) were part of the workforce. The hospitality industry, including restaurants and hotels, is an industry still struggling in the wake of COVID-19. They have faced particular challenges in staffing, and has turned to hiring younger employees in particular.1

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Weekly Economic Update for 7/26/2021

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THE WEEK ON WALL STREET

Overcoming a COVID-related economic growth scare, stocks moved higher amid a week of strong corporate earnings reports.

The Dow Jones Industrial Average rose 1.08%, while the Standard & Poor’s 500 gained 1.96%. The Nasdaq Composite index soared 2.84% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dipped 0.20%.1,2,3

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A Roaring Start to Earnings Season

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Corporate earnings season has begun, and the results are turning heads on Wall Street.

Of the 120 companies in the S&P 500 index that reported numbers as of Friday, July 23, 89% of them beat the Street’s earnings-per-share estimates by an average of nearly 21%.1

The robust results are leading Wall Street analysts to raise estimates for the third and fourth quarters as well as the first-quarter 2022.1

Earnings season occurs four times a year, and it’s the time when a majority of publicly traded companies release their quarterly financial reports. Companies often go into great detail about their business, and some provide guidance about what lies ahead.

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Weekly Economic Update for 7/19/2021

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THE WEEK ON WALL STREET

Despite a good start to earnings season and some solid economic data, worries of slower second-half economic growth led to a pullback in stock prices last week.

The Dow Jones Industrial Average fell 0.52%, while the Standard & Poor’s 500 lost 0.97%. The Nasdaq Composite index sank 1.87% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was flat (-0.06 %).1,2,3

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A 6.1% Bump in Social Security?

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The news keeps getting better for Social Security recipients.

It's now projected that benefits will increase 6.1% in 2022, up from the 4.7% forecast just two months ago. That would be the most significant increase since 1983.1,2

It’s all about inflation. Social Security cost of living adjustments (COLA) are based on the consumer price index, which rose 5.4% in June — its largest 12-month increase since 2008. The official announcement is expected in October and, once it’s confirmed, the revised payment will go into effect in January 2022.3

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Billionaires in Space

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It’s long been an aspirational target for entrepreneurs. It literally goes beyond “blue sky,” in terms of location, to a place no business has gone before: Outer Space!

Longtime space enthusiast and entrepreneur Richard Branson became the first person to travel to space using a self-funded vehicle. While the trip was brief, with Branson releasing an aspirational message during the few minutes of weightlessness afforded, it served to allow him brief bragging rights. Jeff Bezos, the recently retired billionaire executive, is about to launch his space effort, scheduled to launch July 20, the fifty-second anniversary of the Apollo 11 moon landing.1,2

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Weekly Economic Update for 7/12/2021

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THE WEEK ON WALL STREET

Stocks managed small gains as investors wrestled with concerns over economic growth prospects and a rise in COVID-19 infections.

The Dow Jones Industrial Average picked up 0.24%, while the Standard & Poor’s 500 gained 0.40%. The Nasdaq Composite index added 0.43%. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.78%.1,2,3

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The Quiet Fall in Bond Yields

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With all the attention given to inflation, stock prices, and job reports, it’s been easy to overlook the remarkable move in the bond market during the past few months.

The yield on the 10-year treasury closed at 1.37% on Friday, July 9, down from its 2021 high of 1.74% in late March.1

What’s behind the quiet fall in bond yields?

One explanation may be that reopening sentiment has turned a bit more cautious as the Delta variant of COVID-19 spreads globally. Another view is that overseas investors are buying Treasuries, effectively lowering yields.2,3

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Oil Prices Hit Six-Year High

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On July 6, oil prices reached a six-year high of $76.98 a barrel. This benchmark came as the Organization of the Petroleum Exporting Countries (OPEC) and allies failed to reach an agreement regarding an increase in production.1

This rise in cost follows a year in which OPEC and allies cut production amidst the COVID-19 pandemic. As a surge in demand rises, production has yet to ramp up to pre-pandemic levels. This idea of “demand being greater than supply” should sound familiar, as we’ve seen similar economic trends in everything from semiconductors to lumber and cars.

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The Pros and Cons of Early Retirement Plan Rollovers

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Did you know you may be able to take your 401(k), 403(b), or 457 plan and roll it into another type of retirement account while you are still working? Let’s look at how these rollovers can happen and the pros and cons of making them. 

To start, some basics. Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income, and if you take one before age 59½, a 10% federal income tax penalty commonly applies. In addition, 20% of the withdrawn amount is withheld for tax purposes. Generally, once you reach age 72, you must begin taking required minimum distributions.1

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Conducting Your Mid-Year Financial Checkup

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With June officially behind us, it’s time to face the facts: we’re headed toward the second half of 2021. While there’s still plenty of time to enjoy the rest of summer, we encourage you to slow down and check up on your financial well-being.

Review your budget: Your spending habits likely look different now than they did in 2020, but did you adjust your yearly budget accordingly? The second half of the year can be expensive, between the holiday season and back-to-school spending. Take some time now to prepare.

Check your credit score: If you plan on moving, purchasing a car, or taking out a personal loan this year, you’ll want your credit score in good shape. Your score could have been impacted by recently accrued debt, late payments, hard credit inquiries, identity theft, and more.

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Retirement In Sight for July, 2021

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IS FINANCIAL HEALTH A FACTOR IN YOUR OVERALL HEALTH?

Data from a newly released Harris Poll of more than 1,000 U.S. workers suggests that a majority of pre-retirees might answer "yes" to that question. Sixty-six percent of respondents to the poll identified their financial health as a component of their overall well-being. In fact, financial health ranked up near physical health (74%) and mental health (70%). Fifty-seven percent of those polled saw a relationship between all three factors, holding the opinion that their money, their lifestyle, and their health were integrated holistically, with each factor impacting another.

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Quarterly Economic Update for Q2-2021

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THE QUARTER IN BRIEF

The second quarter began by building on the first-quarter’s gains, with stretches of sideways trading and incremental increases that led to multiple record highs over the course of the three months. Encouraging economic data, a strong corporate earnings season, and the broadening of the nation’s economic reopening was juxtaposed by heightening inflation fears, a short-lived spike in bond yields, and a simmering anxiety over potential changes in Fed monetary policy.

With 99% of the companies in the S&P 500 index reporting, 86% reported a positive earnings surprise, with an average earnings growth rate of 61.0%, the highest since the fourth quarter of 2009.1

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Monthly Economic Update for July, 2021

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U.S. Markets

Stocks moved higher last month as investors looked past accelerating inflation and the Fed’s pivot on monetary policy.

The Dow Jones Industrial Average slipped 0.07 percent, but the Standard & Poor’s 500 Index rose 2.22 percent. The Nasdaq Composite led, gaining 5.49 percent.1

Inflation Report

The May Consumer Price Index came in above expectations. Prices increased by 5 percent for the year-over-year period—the fastest rate in nearly 13 years. Despite the surprise, markets rallied on the news, sending the S&P 500 to a new record close and the technology-heavy Nasdaq Composite higher.2

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Weekly Economic Update for 7/5/2021

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THE WEEK ON WALL STREET

Strong employment reports and rising consumer confidence sent the stock market broadly higher last week.

The Dow Jones Industrial Average rose 1.02%, while the Standard & Poor’s 500 picked up 1.67%. The Nasdaq Composite index gained 1.94%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.42%.1,2,3

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Thinking About Summer Travel Plans

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Summertime rouses our desire to hit the road (or the airport) and travel. Here are a few things you’ll want to consider before you take off.

Employment Issues for Airlines: Airlines have canceled hundreds of flights due to staffing issues, part of an industry-wide work shortage. If you intend to fly this summer, plan for delays, cancellations, and other complications.1

High Gas Prices: The national average for gasoline prices hit $3.09 per gallon in June. As the summer months continue and hurricane season approaches, even higher prices are expected.2

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Ways to Fund Special Needs Trusts

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If you have a child with special needs, a trust may be a financial priority. There are many crucial goods and services that Medicaid and Supplemental Security Income might not pay for, and a special needs trust may be used to address those financial challenges. Most importantly, a special needs trust may help provide for your disabled child in case you're no longer able to care for them.

Remember, using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

In preparing for a special needs trust, one of the most pressing questions is: when it comes to funding the trust, what are the choices?

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Weekly Economic Update for 6/28/2021

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THE WEEK ON WALL STREET

Stocks reached new all-time highs last week as markets staged a strong rebound from the previous week’s declines.

The Dow Jones Industrial Average rose 3.44%, while the Standard & Poor’s 500 picked up 2.74%. The Nasdaq Composite index increased 2.35%. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.97%.1,2,3

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Economic Lessons from Used-Car Inflation

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Inflation is defined as the general upward price movement of goods and services in an economy. The key word is “general.” Inflation tends to be uneven and affects the price of some items more than others.

If you’ve been in the market for a used car, you’ve learned a critical economic lesson about the “uneven” side of inflation. The overall rate of inflation has been 5% for the past 12 months. Meanwhile, the average price of a used car is up 30% from a year ago.1,2

Various factors drive used car prices, but most of the trouble links to the global microchip shortage.3

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Insurance When You Marry After 40

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When you marry, you buy life insurance. Right? You buy it out of consideration for your spouse, and also realize that in the event of either your untimely death or your spouse’s untimely death, your household could be left with one income to shoulder expenses that may not lessen.

These days, people are marrying later in life. Take first marriages, for example. A recent study by the Pew Research Center says the median age for marriage in America is now 30 for men and 28 for women, compared to respective median ages of 23 and 21 in 1968. Today, 16% of us are waiting until at least our late forties to marry.1,2   

Maybe you are marrying after age forty, or thinking about it. That might call for other insurance considerations besides having life insurance policy. Whether you are marrying for the first time or the second, third, or fourth time, your earnings and net worth may be much greater than they were ten, twenty, or thirty years ago, and you also may have some age-linked or business-linked insurance priorities.

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The Cryptocurrency Conundrum

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Recently, you may have seen a number of major cryptocurrencies fall thanks to a continuing sell-off that began last week. In fact, over $250 billion was lost in the crypto market alone.1

It may be tempting to view this as another volatile moment in the crypto markets, but there’s more at work here than a temporary trend towards selling.

Prior to this moment, over 50% of the world’s cryptocurrency was mined in China using custom-built computers with a high hashrate. Hashrate, or the rate at which calculations can be performed, is a crucial factor for those who “mine” cryptocurrency. The higher the hashrate, the more calculations that can be completed per second, and the more cryptocurrency that can be mined.2

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Weekly Economic Update for 6/21/2021

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THE WEEK ON WALL STREET

New messaging from the Federal Reserve on interest rates and inflation last week led to a broad retreat in stock prices.

The Dow Jones Industrial Average dropped 3.45% while the Standard & Poor’s 500 lost 1.91%. The Nasdaq Composite index slipped 0.28% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.64%.1,2,3

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The Fed Acknowledges Inflation

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At its June meeting, the Federal Reserve confirmed what many of us have suspected for some time: prices are rising. In fact, prices are climbing faster than many expected. In response, the Fed raised its inflation expectation to 3.4%, up from its March projection of 2.4%, effectively raising its inflation expectation by 42%.1

The Fed’s course correction on inflation expectations and planned interest rate hikes unsettled the financial markets, with further volatility felt after St. Louis Fed President James Bullard said that the first interest rate hike could be as soon as 2022.2

The Fed also indicated that two interest rate hikes in 2023 were likely, despite signals last march that rates would remain unchanged until 2024.3

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Summer Travel is Back!

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One of the most anticipated comebacks of 2021 isn’t an athlete, rock star, or movie franchise. It’s summer travel, and it appears to be back with a vengeance.

Travel agents are working 14-hour days to meet the needs of eager travelers. People aren’t just taking road trips, either; airports are reporting being at 80% of pre-COVID capacity, while the TSA screenings reached two million for the first time since the pandemic. While these reports may be slightly less than pre-COVID, they also reflect an industry working to meet demand in the midst of new safety requirements, many of which place limits on the number of passengers and indoor occupancy at airport gates.1,2

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The FAFSA Simplification Act

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As a parent or grandparent, you know firsthand the challenges of funding a child’s education. The Free Application for Federal Student Aid (FAFSA) Act was passed at the end of 2020 and has changed some of the qualifications for students to receive financial aid.

These changes will affect those applying for financial aid for the 2023-2024 school year. You’ll notice these changes on October 1, 2022, which is when the FAFSA opens for the 2023-2024 school year.

529 plans from grandparents are no longer counted as cash against financial aid. One of the most confusing parts of the FAFSA process was how to account for cash funding. While the FAFSA doesn’t require 529 accounts owned by grandparents to be disclosed, families are required to disclose cash support that the student receives. This cash support may then include money from a 529 account. If students received money from these accounts, the student was still expected to disclose these disbursements as cash, and very often, financial aid needs and options were reduced.1

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Inflation & the Real Rate of Return

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The real rate of return is an important personal finance concept to understand.

It’s the rate of return on your investments after inflation. The real rate of return indicates whether you are gaining or losing purchasing power with your money.

So with inflation checking in at a 5% annual rate, does that mean any investment with less than a 5% rate of return is losing purchasing power?1

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Weekly Economic Update for 6/14/2021

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THE WEEK ON WALL STREET

Stocks ended the week mixed as investors appeared to shrug off a hotter-than-expected inflation report.

The Dow Jones Industrial Average slipped 0.80%, while the Standard & Poor’s 500 advanced 0.41%. The Nasdaq Composite index led, tacking on 1.85%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.31%.1,2,3

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Are You Ready for the Second Act of the Secure Act?

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Recently, you may have seen headlines regarding the Securing a Strong Retirement Act, also referred to as the second version of the SECURE Act, or SECURE Act 2.0.

As the bill moves from the House of Representatives to the Senate, many hopeful investors are anticipating further retirement support as the majority of the bill stems from the original SECURE Act of 2019. However, it’s worth noting that the bill may change drastically before being signed into law. With that in mind, here are some potential benefits of the Securing a Strong Retirement Act.

Required Minimum Distributions (RMD): For those who contribute to a 401(k) or IRA, the Securing a Strong Retirement Act may allow you to wait until age 74 to start taking RMDs from your retirement accounts.1

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Retirement In Sight for June, 2021

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COULD A SECOND SECURE ACT TWEAK RETIREMENT RULES?

When the Setting Every Community Up for Retirement Enhancement (SECURE) Act became law in 2019, it altered retirement plan contribution and distribution rules. There may be an encore. The Securing a Strong Retirement Act of 2021, nicknamed SECURE Act 2.0, has bipartisan support on Capitol Hill, and public policy analysts widely believe it will become law either this year or next.

This new bill proposes to raise the starting age for required minimum distributions from retirement plans from 72 to 75. (The age threshold would rise gradually over a ten-year period.) The penalty for a missed RMD would be halved, from 50% to 25%. The new law would allow employers to auto-enroll workers in retirement savings plans, and let them offer small financial perks to employees to stimulate plan contributions. Employers could even adjust matching contributions in view of a plan participant's student loan burdens; if student loan payments are stopping a worker from fully funding their retirement account, the company match would be permitted to increase in response. Retirement savers aged 62 and older would have a chance to make larger catch-up contributions to retirement plans. Investment choices would broaden for certain types of retirement savings accounts. Companies with 50 or fewer workers could offset more of the start-up expenses for retirement credits using new tax credits. The bill would also authorize a nationwide lost-and-found website for old retirement plans, making it easier for people to find and make decisions with past retirement balances.1

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Weekly Economic Update for 6/7/2021

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THE WEEK ON WALL STREET

A strong, but not too strong, employment report sparked a rally on the final day of trading, propelling stocks to a modest gain for the week.

The Dow Jones Industrial Average climbed by 0.66%, while the Standard & Poor’s 500 added 0.61%. The Nasdaq Composite index increased by 0.48%. The MSCI EAFE index, which tracks developed overseas stock markets, edged up 0.10%.1,2,3

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A COLA with Your Social Security?

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If there is a "silver lining" to all the inflation talk, it may be that Social Security benefits are expected to see a larger-than-normal increase in 2022.

Preliminary estimates call for a 4.7% cost-of-living increase (COLA) in Social Security benefits next year, which would be the highest since 2009. Benefits rose 1.3% in 2021.1

The Social Security Administration makes its official announcement in January 2022. The Bureau of Labor Statistics bases its annual adjustment on the Bureau of Labor Statistics data in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W.2

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A Seven-Year High for Gas Prices

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Over Memorial Day weekend, gasoline prices hit the highest for this holiday weekend since 2014.1

With the Colonial Pipeline outage in the rear-view mirror and an ever-increasing number of adults vaccinated, formerly cooped-up motorists made the most of what America has to offer. The average price jumped to $3.04 per gallon ($1.08 higher than last year’s lockdown prices) and oil prices have continued to demonstrate high demand in the week following. The Wall Street Journal noted a two-year peak on June 1, indicating prices exceeding 2019’s records.1,2

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Recovering from COVID

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With COVID, there were some who believed that progress on this health issue was a necessary precondition to economic recovery. 

In recent weeks, we have seen some promising trends emerge on the health front. The CDC is reporting the provision of 295 million vaccinations; 51% of Americans have had at least one injection.1

That confidence is starting to work its way into the economy as more people feel safer venturing out and making plans for the future.

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Monthly Economic Update for June, 2021

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U.S. Markets

Stocks traded in a narrow range in May, with technology and other high-valuation companies under selling pressure.

The Dow Jones Industrial Average gained 1.93 percent while the Standard & Poor’s 500 Index rose 0.55% percent. The Nasdaq Composite, home for many technology and high-growth companies, dropped 1.53 percent.1

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