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Retirement Contribution Limit Changes for 2022

With inflation on the rise, the IRS increased the 2022 contribution limits for some retirement accounts. Although a 2021 Congressional report found that only about 8.5% of defined benefit plan participants and 4.7% of individual retirement account (IRA) holders max out their contributions each year, increasing the amount you put aside for retirement may help your financial independence.1 Here is what retirement savers need to know about the increases allowed in 2022:

Changes to 401(k) Limits

For 2022, the 401(k) limit for taxpayers under age 50 has increased by $1,000, to $20,500.2 Those age 50 and older may make another $6,500 in “catch-up” contributions for a total maximum contribution of $27,000. This contribution amount is individual, which means a married couple may contribute a total of $41,000 to their 401(k)s plus $6,500 more for each person who is age 50 or older to a maximum of $54,000.1

Along with 401(k)s, this $20,500 contribution limit also applies to the 403(b), 457, and Thrift Savings plans available to government employees.

No Changes to IRA Limits

Though 401(k) limits increased, the IRS did not increase the contribution limits for traditional IRAs and Roth IRAs. These IRA limits remain the same, $6,000 for those age 49 and under and $7,000 for 50 and older.1

The deductibility of traditional IRA contributions depends on your household income, while your ability to contribute to a Roth IRA also depends on your income. And unlike the IRA contribution limits, these income thresholds have changed for 2022.

  • For single taxpayers covered by a 401(k), 457, or another workplace retirement plan, deducting the full amount ($6,000 or $7,000 limit for ages 50 or older) is available only if their 2022 income is under $68,000. Those earning between $68,000 and $78,000 may deduct a portion of the full IRA contribution. These income thresholds are a $2,000 increase from 2021.1
  • For married taxpayers filing jointly, who are both covered under a workplace retirement plan, the full IRA deduction is available if the total household income is under $109,000. Those earning between $109,000 and $129,000 may deduct a portion of the full IRA contribution. Those earning more than $129,000 cannot deduct any traditional IRA contributions.1
  • For married taxpayers filing jointly, where only one person is covered by a workplace retirement plan, both taxpayers may deduct the full IRA contribution if jointly they earn less than $204,000 in 2022, with the phase-out allowing a partial deduction for earnings between $204,000 to $214,000.1

IRA contributors whose income exceeds these limits may still contribute to a traditional IRA—they just cannot deduct this contribution. But when it comes to Roth IRAs, those whose income exceeds the contribution thresholds are barred from directly contributing to a Roth.

  • For single taxpayers or heads of household, the full Roth IRA contribution is available so long as their 2022 income is under $129,000.1
  • For married couples who file jointly, the Roth IRA income threshold starts at $204,000; those whose income exceeds $214,000 cannot contribute any amount to their Roth. Married taxpayers whose household income is between $204,000 and $214,000 may contribute a lower amount to a Roth IRA.1

Because over-contributing to an IRA or Roth IRA carries some financial penalties, work with a financial professional to not exceed the maximum allowed. It is important to know these limits and how they increased for the 2022 tax year.

 

1 https://www.investopedia.com/2022-401k-limit-rises-5208542

2 https://www.fa-mag.com/news/irs-raises-401-k—roth-contribution-limits-64793.html

 

Important Disclosures:

This material was created for educational and informational purposes only and is not intended as ERISA, tax, or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Investing involves risks including possible loss of principal.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

 

This article was prepared by WriterAccess.

LPL Tracking #1-05218522

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Can Corporate America Keep it Rolling?

Corporate America has been on quite a run. Coming into 2021, S&P 500 Index companies were expected to generate less than $170 in earnings per share. As 2022 begins, it looks like that number may end up higher than the latest LPL Research estimate of $205, one of the biggest earnings upside surprises ever and a big reason why stocks did so well last year. But 2021 earnings are not yet fully in the books. We have one more quarter to go, which we preview here.

Big Banks Kick Us Off

Fourth quarter earnings season kicks off this week with earnings from several big financials, including BlackRock, Citigroup, JPMorgan Chase, and Wells Fargo reporting on Friday, January 14. This week just seven S&P 500 constituents report, but another 40 will announce results the following week (January 17-21) and 99 the week after that (January 24-28).

We welcome the shift from the macro to the micro where companies can continue to showcase their ability to effectively manage through the pandemic challenges, notably the supply chain disruptions and labor and materials shortages that are pushing costs higher.

What To Expect

We expect another good earnings season overall in which companies continue to beat expectations in aggregate and produce solid growth. Consensus estimates are calling for a year-over-year increase in S&P 500 earnings in the fourth quarter of about 22% [Figure 1]. The long-term average upside surprise of around five percentage points makes 27% a reasonable target, but given earnings beat estimates by 12 percentage points last quarter, the number could be higher. Earnings growth approaching 30%, though slower than the third quarter’s nearly 40% clip, would be impressive given the challenging operating environment.

We see several reasons to remain optimistic for this earnings season. First, estimates have been rising. Since the end of October 2021, the consensus estimate for fourth quarter S&P 500 EPS has increased 3.3%.

Second, manufacturing activity has remained healthy based on purchasing managers’ surveys—the U.S. Institute for Supply Management (ISM) manufacturing index averaged a very strong 60.2 in the fourth quarter— in both the headline number and the new orders component. Additionally, in the December report there were signs of lower input prices and some easing of supply chain disruptions.

Third, we expect the COVID-19 Omicron variant to have limited impact on demand, i.e., revenue, in the quarter. The Bloomberg-tracked consensus forecast for gross domestic product (GDP) growth in the fourth quarter is 5.2% year over year. Add a consumer price index (CPI) increase of over 6% year over year and it’s easy to see how 12.7% revenue growth, the current consensus, is possible. Remember, higher prices end up as more revenue for someone, as higher costs are passed along to customers. That’s why equities have preserved their value through inflationary periods over time.

At the same time, there are some reasons to be concerned about less upside and more shortfalls. The Omicron variant did slow economic activity in December. And the ratio of negative pre-announcements to positives (1.7) has been more negative than the prior quarter’s ratio of 0.8, according to Refinitiv data.

What We’re Watching

Margins, margins, margins. We will continue to watch for signs of pressure on profit margins from rising costs of labor, materials, and transportation. We came away from third quarter earnings season with the impression that most supply chain issues would be resolved by midyear. Any information contrary to that could influence the market’s response to results and direction of analysts’ earnings estimates for 2022.

Wages are key. Wages are the single biggest component of companies’ costs, so we will be looking for confidence from companies that wage pressures are manageable. We anticipate higher wages will soon start to eat into profit margins, as productivity gains from technology investments (i.e., doing more with less) can only go so far. We would like to see more workers enter the labor force to help contain wage increases, which are already running above 4% annualized.

Ability to pass on higher costs. We’ll also be interested to hear companies’ comments on the stickiness of price increases. If customers are starting to balk at higher prices, we may see some impact on demand and therefore revenue in coming quarters.

Earnings Outlook For 2022

As we discussed in Outlook 2022: Passing the Baton, we expect a very favorable revenue environment in the coming year, with potential above-average economic growth and price increases. Revenue growth has historically been closely tied to nominal GDP growth (real “inflation–adjusted” GDP growth plus inflation). Our 4–4.5% real GDP growth forecast for next year, plus at least a few percentage points of inflation, puts 7% revenue growth in play, which is where consensus is currently.

But margins are the tricky part. If they are stable—no small task—then a double-digit percentage increase in S&P 500 earnings per share (EPS) is possible. That would put S&P 500 EPS near $230 in 2022 and well above our current forecast of $220 [Figure 2].

But higher costs from COVID-19-related supply chain disruptions and materials and labor shortages are unfortunately not going away anytime soon. Wages are on the rise (average hourly earnings in Friday’s employment report rose 4.7% year over year, well above the 4.2% that was expected). And COVID-19 is still slowing economic activity. So, we prefer to be a bit more cautious for now and keep our S&P 500 EPS below-consensus forecast at $220, about 7% above our already conservative 2021 estimate of $205.

We believe a continued economic expansion in 2023 as the impacts of COVID-19 fade, along with only a small potential hit from tax increases, will get us to $235 in S&P 500 EPS next year. That assumes a scaled-down version of Build Back Better with some tax increases passes. If it doesn’t, which we see as less likely, there won’t be any tax drag, introducing some upside potential to earnings next year.

Look for 5,000 On The S&P 500 in 2022

Despite the Fed’s accelerated tightening timetable, we continue to believe the S&P 500 will reach 5,000 in 2022. Earnings will have to do the heavy lifting to get us there with valuations elevated, though we believe a price-to-earnings ratio (P/E) in the 21–22 range is fair even if interest rates move modestly higher—that gets us to 5,000+ by year-end 2022.

As the market continues to adjust to tighter monetary policy and factors in the still uncertain path of COVID-19, more volatility is likely. But that doesn’t change our enthusiasm for stocks here, especially relative to bonds, powered by solid earnings gains, the likelihood that COVID-19 risks fade as the year progresses, and our belief that inflation will be manageable in the latter part of this year.

Jeffrey Buchbinder, CFA, Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial

______________________________________________________________________________________________

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. 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.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.

All index data from FactSet.

This research material has been prepared by LPL Financial LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed | Not Bank/Credit Union Deposits or Obligations | May Lose Value

RES-1000900-0122 | For Public Use | Tracking # 1-05229974 (Exp. 1/23)

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Suggestions for Staying Safe Online from the IRS

Tips to help children, teens and other vulnerable groups!

The Internal Revenue Service (IRS) is helping families, teens and senior citizens learn about the continued importance of protecting personal information in helping fight identity theft and tax fraud.

“The IRS is asking parents, families and others to be mindful of the pitfalls that can be found by sharing devices at home, shopping online and through navigating various social media platforms. Often, those who are less experienced can put themselves and others at risk by leaving an unnecessary trail of personal information for fraudsters.

Staying Safe Online

Here are a few tips for children, teens, and other vulnerable groups to protect their personal data:

Teach them to recognize and avoid scams. Phishing emails, threatening phone calls and texts from thieves posing as the IRS or legitimate organizations pose ongoing risks. Do not click on links or download attachments from unknown or suspicious emails.

Teach them which information to protect. Keeping data secure and only providing what is necessary minimizes online exposure to scammers and criminals. Birthdates, addresses, age, financial information such as bank account and Social Security numbers are among things that should not be shared freely.

Teach them about public Wi-Fi networks. Connection to Wi-Fi in a mall or coffee shop is convenient but not necessarily safe. Hackers and cybercriminals can easily intercept personal information over public Wi-Fi. Always use a virtual private network when connecting to public Wi-Fi.

Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Remember to encrypt sensitive files such as tax records stored on computers. Be sure all family members have comprehensive protection especially if devices are being shared. Use strong, unique passwords for each account.

Remember, the IRS does not use text messages or social media to discuss personal tax issues, such as those involving tax refunds, stimulus payments or tax bills. For more information, visit the Tax Scams and Consumer Alerts page on IRS.gov.

 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by FMeX.

LPL Tracking #1-05213606

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Stock Market Outlook 2022: Another Good Year?

We expect solid economic and earnings growth in 2022 to help U.S. stocks deliver additional gains next year. If we are approaching—or are already in—the middle of an economic cycle with at least a few more years left (our view), then we believe the chances of another good year for stocks in 2022 are quite high. We believe the S&P 500 could be fairly valued at 5,000–5,100 at the end of 2022, based on an EPS estimate of $235 for 2023 and an index P/E between 21 and 21.5.

Most of this content was taken from Outlook 2022: Passing the Baton

We expect solid economic and earnings growth to help stocks deliver gains in 2022. When forecasting stock market performance, we start with the economic cycle. We believe we are currently approaching—or are already in—the middle of an economic cycle with at least a few more years left. Historically, if this holds true, then we believe the chances of another good year for stocks in 2022 are quite high, which is an important added factor for our positive outlook for stocks next year [Figure 1].

The Mid-Cycle Push

Looking more closely, in a mid-cycle economy, recession fears do not typically cause stocks to fall in a given year, nor do stocks typically surge as investors celebrate emerging from the prior recession. Over the past 60 years, the S&P 500 Index was up an average of 11.5% during the 30 mid-cycle years we identified, with gains in 80% of those years [Figure 2].  As you can see, stocks rose during most of these mid-cycle years, with 1966 and 1977 being the only two years with double-digit losses.

The Fed, which we expect to start raising interest rates in early 2023, can also help us gauge the cycle because the central bank typically begins to raise rates when the economy is exhibiting mid-cycle characteristics. That also characterizes 2022 as a likely mid-cycle year. Historically, stocks have done very well during the 12 months leading up to the Fed’s initial rate hike, with gains in each of the past nine instances and an average gain of 15%. Although the timetable for the initial Fed rate hike has been moved forward several months, we expect stocks to follow this mid-cycle pattern and potentially deliver double-digit gains next year as the economy continues to expand at a solid pace.

Earnings are the Anchor

An expanding economy is a great start, but stocks fundamentally derive their value from earnings. On the top line, the environment for companies to grow revenue next year should be excellent, with potential for above-average economic growth and some pricing power from elevated inflation. Revenue growth has historically been well correlated to nominal GDP growth, which is simply real GDP growth (the inflation-adjusted number that’s normally reported) plus inflation. Our 4–4.5% real GDP growth forecast for next year plus perhaps 3% inflation (about the consensus forecast for the increase in the Consumer Price Index) puts a 7% revenue increase in play.

With stable profit margins and increasing share buybacks likely next year, a double-digit percentage increase in S&P 500 earnings per share (EPS) is a possibility. But COVID-19-related supply chain issues and materials and labor shortages are risks that could lead to higher costs in 2022, potentially weighing on profit margins. Many companies warned of such pressures during third-quarter earnings season. As a result, we are forecasting slightly below-average S&P 500 earnings growth in the 6-7% range in 2022 to $220 per share.

At this point it is unlikely that higher corporate taxes will eat into any of those earnings gains next year, as they have reportedly been pushed out into 2023 in negotiations for President Biden’s social spending package.

Valuations May Not Provide an Assist

Forecasting a year ahead is tough enough, but predicting where stocks might be at the end of 2022 actually requires us to look ahead to 2023. The 2023 earnings outlook will determine where valuations are likely to be at the end of 2022.

Strong earnings gains in 2021 have prevented the price-to-earnings ratio (P/E) for the S&P 500 from going much above 20. In fact, stocks are actually more reasonably priced as 2022 approaches than they were at the start of 2021, because 2021 earnings are tracking more than 20% above the estimate when the year began. While a 21 P/E is above the long-term average of around 16, we believe still low interest rates justify current valuation levels. But P/E multiple expansion will likely be difficult if interest rates rise in 2022, potentially leaving earnings growth as the primary driver of any stock market gains.

S&P 500 Index Knocking on the Door of 5,000?

5,000 on the S&P 500 will be a nice round number for investors to celebrate. But will that celebration take place in 2022 or later? If we assume S&P 500 EPS growth in 2023 stays around its long-term average, implying roughly $235 in EPS, while the P/E stays about where it is between 21 and 21.5, the S&P 500 could be fairly valued at 5,000–5,100 at the end of 2022. Note, however, that stocks can stay above (or below) fair value for an extended period of time due to market sentiment, so we would not necessarily view reaching that target as a sell trigger. If interest rates stay lower for longer and support P/E multiple expansion, stocks could potentially exceed this target by year-end 2022. But if profit margins face more intense pressure than anticipated, possibly from wages, earnings may have a hard time growing at all in 2022.

The Race Continues in 2022

Prospects for above-average economic growth and accompanying earnings gains in 2022 point to another potentially good year for stock investors. While the pandemic is not completely behind us as the COVID-19 Omicron variant spreads rapidly (though with a high proportion of mild cases), and there are several other risks to watch, particularly inflation, stocks have historically done well in mid-cycle economies. We do not expect 2022 to be an exception.

Ryan Detrick, CMT, Chief Market Strategist, LPL Financial
Jeff Buchbinder, CFA, Chief Equity Strategist, LPL Financial

______________________________________________________________________________________________

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. 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.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.

All index data from FactSet.

This research material has been prepared by LPL Financial LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed | Not Bank/Credit Union Deposits or Obligations | May Lose Value

RES-984450-1221| For Public Use | Tracking # 1-05223960 (Exp. 12/22)

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Three 2021 Market Lessons for 2022

In many ways, 2021 was a typical year for markets, but it also reinforced some basic market lessons that are hard to learn, even if they are not new. As we launch into the New Year, we’re highlighting three 2021 market lessons that we think may matter for 2022: 1) equity valuations are a poor timing mechanism, 2) structural forces have a large influence on interest rates and may keep them relatively low, and 3) politics and markets don’t mix.

Welcome to the New Year for markets, when year-to-date returns all reset to 0% and the year ahead is still a blank slate. No doubt, 2022 will provide its usual mix of ordinary market behavior and unexpected surprises. While these surprises can’t be forecasted, we can say with near certainty that we’ll have some. At the same time, markets have patterns that tend to repeat, even if the emphasis is different from year to year. As we head into the New Year, we’re taking a look back at 2021 and drawing out three lessons that we think will matter for 2022.

Valuations Aren’t a Short-Term Market Timing Mechanism

At the start of 2021 we heard concerns that broad U.S. markets were overvalued using many traditional valuation metrics, such as the price-to-earnings ratio (PE). In addition, compared to the U.S., international stocks (both developed and emerging markets) looked relatively cheap. But as shown in Figure 1, the S&P 500 surged higher in 2021, performing well above its historical average, while international equities lagged behind the U.S., with weakness in emerging markets in particular. Once again, valuations were a weak short-term timing mechanism.

At the start of 2021, the PE for the S&P 500 was historically elevated at almost 22.5 on forward earnings according to FactSet data. At the same time, interest rates were extraordinarily low, which makes stocks attractive relative to bonds and increases the present value of future earnings. On top of that, an extraordinarily strong year for corporate earnings helped stocks “grow into” their valuations, with the PE actually falling to nearly 21 by the end of the year despite strong stock market gains. Sentiment is often the primary culprit for allowing valuations to remain elevated, and it did play a role in 2021, but market fundamentals were even more important. If investors favored stocks in 2021, it was more about a sizable upside surprise in earnings growth than elevated optimism.

The underperformance by international equities this year, which may have surprised some, also reminds us that valuations are not a timing tool. International stocks have been more attractively valued than U.S. stocks for quite some time and yet, they’ve underperformed consistently for over a decade. We believe valuations should be used in combination with technical analysis, which helps measure both sentiment and captures collective market wisdom, to help inform investment decisions. Signals from the charts have helped us side-step some of that performance drag. Also, keep in mind that Europe and Japan are more value-oriented markets than the U.S., so growth-style leadership here at home makes it very difficult for these international markets to keep up.

We continue to favor the U.S. over developed international markets for 2022 because of the relatively healthier U.S. economic growth outlook and strong U.S. dollar, but international equities may become increasingly attractive as COVID-19 restrictions are removed globally.

Structural Forces Continue to Weigh on Interest Rates

If someone had told you at the start of 2021 that inflation (as measured by the Consumer Price Index) would be up close to 7% over the year while real gross domestic product (GDP) would grow near 5.5% and asked you where the 10-year Treasury yield would be at the end of the year, most market experts would likely guess well above the approximately 1.50% where we ended the year.

It’s true 2021, by many accounts, wasn’t a very good year for core fixed income investors—although that was largely to be expected. Coming into the year, interest rates were still amongst the lowest they have ever been and we thought they were headed higher—and they did. As such, returns for core fixed income investors, as measured by the Bloomberg U.S. Aggregate Bond Index, were negative for the year for only the fourth time in the index’s history dating back to 1976.

However, after a 70 basis point (0.70%) increase in the 10-year Treasury yield by mid-March, which led to one of the worst starts to the year ever for core bonds, yields have largely remained range bound. One of the main reasons interest rates have stayed as low as they have this year was the amount of foreign interest in our markets. Despite relatively low yields in the U.S., many foreign investors are still better off investing in U.S. fixed income markets. With approximately $13 trillion in negative yielding debt globally (it’s still crazy to think that you have to pay a country/company to own its debt), even modestly positive yielding debt is an attractive option. This has certainly helped keep interest rates from moving significantly higher—a likely headwind to higher rates in 2022 as well.

So what is the key takeaway from 2021? Despite increased inflationary pressures not seen since the 1980s (when 10-year Treasury yields averaged over 10% for the decade), there is still a huge global demand for safety, income, and liquidity in portfolios and that has kept interest rates (and spreads) from moving much higher. While yields for U.S. core fixed income may seem low, the role it plays in portfolios is still an important one.

Politics and Investing Don’t Mix

This is one lesson we likely knew before the year began, but 2021 provided another strong example of why politics and investing don’t mix, both for broad markets and for the market impact of more specific policy.

For example, when President Biden was elected, one of the sectors most expected to suffer was traditional energy. The bear case for energy was that Democratic policies towards fracking and the fossil fuels industry would further harm one of the worst performing sectors over the past decade. In contrast, the solar industry was expected to benefit from an acceleration towards renewable and clean energy sources.

Well, what happened? The complete opposite. The S&P 500 Energy Sector was by far the top performing sector of the year, up more than 50%, while the MAC Global Solar Energy Index, a basket of stocks focused on solar energy, fell nearly 30%. And this isn’t the only time in recent history we have seen the energy sector returns upend traditional thinking. When President Trump was elected back in 2016, the two consensus sector winners from his presidency were expected to be energy and financials due to deregulation. However, from the date of the 2016 Presidential election to the 2020 election, energy stocks were cut in half while the financials sector returned less than half that of the broader market. Forecasters had the policy right and the business impact was generally as expected, but nevertheless it seemed small from a pure market perspective compared to other drivers influencing sector returns.

Speaking more broadly, stocks have done extremely well over the past decade, with little regard or correlation to which party has held the White House or Congress, and we believe investors would do well to remember that in 2022 as midterm elections begin to dominate the news cycle. It’s not that policy prognostications are incorrect or that policy doesn’t matter. Rather, when it comes to markets there are larger economic forces in play that typically matter a lot more.

What Lies Ahead in 2022

We do not expect 2022 to simply be a repeat of 2021. We’ve moved further toward the middle of the economic cycle, inflation is likely to decrease rather than increase, and economic momentum will probably slow. But perhaps most importantly, the policy support from central banks and governments that have helped global economies bridge the economic fissures left by COVID-19 will likely begin to fade, leaving the economy to stand increasingly on its own two feet while putting more emphasis on the aggregate decisions of businesses and households. (For a broad overview of our expectations for 2022, see our Outlook 2022: Passing the Baton.) But for all the differences, we expect some important lessons learned in 2021 to matter in 2022, and as the year evolves we’ll continue to monitor and share the market signals that will help shape the market environment in the New Year.

Barry Gilbert, PhD, CFA, Asset Allocation Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial
Jeffrey Buchbinder, CFA, Equity Strategist, LPL Financial
Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial

______________________________________________________________________________________________

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. 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.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.

All index data from FactSet.

This research material has been prepared by LPL Financial LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed | Not Bank/Credit Union Deposits or Obligations | May Lose Value

RES-994650-1221| For Public Use | Tracking # 1-05227512 (Exp. 1/23)

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Tax Prep Checklist: Everything You Need to Be Ready for Tax Season

Regardless of whether you prepare your taxes yourself or use a professional’s services, it’s a good idea to gather the information and documentation you need well in advance of your actual tax filing date. Below, we’ve listed some key information you need when preparing this year’s taxes.

Your Personal Information

The personal information you may need to file taxes may contain information from your prior year’s return, including:

· Your Social Security Number (SSN), along with SSNs for your spouse, if applicable, and any dependents

· Last year’s Adjusted Gross Income (AGI) if you’re e-filing your taxes and need to confirm your identity

· Any tax filing PIN you may have.

Your Income Information

Your tax return typically requires documentation for all the taxable income you received the previous year.

· W-2 forms

· 1099 forms

o 1099-MISC for contract employees

o 1099-K for those who receive payment through a third-party provider like Venmo or Paypal

o 1099-DIV for investment dividends

o 1099-INT for investment interest

o 1099-B for transactions handled by brokers

· Receipts, pay stubs, or any other documentation on income that isn’t otherwise reflected.

Your Deduction Information

Next, gather information on deductions that help reduce your overall tax burden. These include, but aren’t necessarily limited to:

· IRA and other retirement contributions

· Medical bills

· Property taxes

· Mortgage interest

· Educational expenses like college tuition or student loan payments

· State and local income taxes or sales taxes

· Charitable donations

· Dependent care expenses

· Classroom expenses (for teachers)

There are other state-specific deductions that may apply to your situation.

Your Tax Credit Information

Credits may further decrease your tax burden. Unlike deductions, which may lower your taxable income, tax credits simply credit you a portion of what you’d otherwise owe. Some available tax credits may include:

· Earned Income Tax Credit

· Child Tax Credits

· Dependent Care

· American Opportunity and Lifetime Learning Tax Credits

· The Saver’s Credit

Often, the information needed to receive these tax credits may be duplicative of other tax information. For example, having your retirement contribution records handy may support both an IRA deduction and the Saver’s Credit (if you qualify). Having your child’s SSN may allow you to fill out the Child Tax Credit section and the dependent care deduction. The more income- and deduction-related information you have in one spot, the more streamlined your tax prep process should be.

Your Tax Payment Information

Finally, gather and provide information on how much you’ve already paid in taxes, whether through estimated tax payments, income withholdings, or both. This helps you quickly calculate your total amount due once you’ve entered your income, deduction, credit, and withholding information.

 

 

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking # 1-05206790

 

 

Source: https://www.nerdwallet.com/article/taxes/tax-deductions-tax-breaks

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Five Wealth-Building New Year’s Resolutions

At the beginning of each year (and regularly throughout) take stock of your finances. Here are five areas to periodically review to increase financial independence and build wealth.

Review Subscription Services

The number of people who have cut cable in favor of subscription streaming options has tripled in the last seven years. While these streaming services may seem less costly than cable, having half a dozen or more adds up quickly. Make a list of your subscriptions, the renewal dates, and the cost. Cancel any nonessentials.

Manage Your Interest Rates

Interest rates for everything from mortgages to auto loans remain low but may rise in the future if inflation continues. Investigate lowering the interest rate on your auto loan, researching credit card companies to see about 0 % APR offers, and/or refinancing your mortgage to lower your interest rate or shorten your term.

Audit Your Investing Costs

Few people know off the top of their head the plan administration fees or expense ratios associated with their 401(k)s, investment retirement accounts and other investments. Paying a 1 to 2 % fee on an investment may require it to outperform options with lower fees in order to have the same return. It is worth looking at the expense ratios of your investments to see whether there are more inexpensive ways to access the same underlying investments.

Begin Estate Planning

No matter how young you are, it is never too early to make provisions for what happens after you are gone. Having a written will, life insurance, and even prepaid burial expenses may ease the burden on your surviving loved ones. This strategy mitigates the risk that your dependents have financial hardship in your absence. Your estate plan does not need to be complex; you may even be able to create one yourself using templates or legal forms online. Thinking through these tough choices during a time of reflection may help you maintain confidence no matter what the coming year holds.

Set At Least One Financial Goal

Whether you want to increase your savings rate, reign in expenses, earn more, or payoff your mortgage, setting one or more concrete financial goals gives you something to work toward.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

This article was prepared by WriterAccess.

 

LPL Tracking #1-05209421

 

 

Source:

https://www.forbes.com/sites/tonifitzgerald/2021/05/27/the-number-of-cord-cutters-and-cord-nevers-has-tripled-since-2014/?sh=d775b9d1f12c

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3 Financial Moves to Consider Before Ringing in the New Year

Although you don’t have to wait until January to begin working on your financial goals, a new year may bring a much-needed fresh start on your spending and saving goals. Read on for three financial moves you may want to consider before ringing in the New Year.

Open a Health Savings Account (HSA)

If you have a high-deductible health plan (HDHP), taking advantage of an HSA may provide you with one of the most tax-advantaged accounts available. As long as funds are spent on qualifying healthcare expenses, an HSA typically offers tax-free contributions, tax-free growth, and tax-free withdrawals. For 2022, you can contribute up to $3,650 (if you have individual coverage) or $7,300 (if you have family coverage).1 These contribution limits increase by $1,000 for those who are age 55 or over, which means you may contribute $4,650 for individual coverage or $8,300 for family coverage.

Decide Between a Traditional or a Roth IRA

Even if you contribute to a 401(k) at work, individual retirement accounts (IRAs) offer some distinct advantages over an employer-sponsored 401(k). Not only are these accounts typically portable, allowing you to move them to the retirement custodian of your choice, but they may also serve as a rollover account for your old 401(k)s if you leave your employer.

Like a 401(k), a traditional IRA allows you to deduct your contributions (if you don’t exceed certain income limits) from your taxable income, reducing your overall tax bill. When you withdraw IRA funds in retirement, you typically pay taxes on them then. A Roth IRA, on the other hand, allows you to make post-tax contributions and then withdraw them tax-free in retirement.

Get a Quote on Refinancing Your Mortgage

The higher your interest rate, the higher your monthly payment, which means that reducing your interest rate is one of the most effective ways to make a parcel of property more affordable.

Between increases in real estate values throughout the country and these low interest rates, refinancing to a lower rate may help you eliminate private mortgage insurance, lower your monthly payment, or even allow you to pay off your loan sooner. You may also qualify for a cash-out refinance, which may help free up some extra cash to make home improvements, pay off other debt, purchase a new car, or even buy an investment property.

 

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

 

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals

prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

 

This article was prepared by WriterAccess

LPL Tracking #1-05224925

1 https://www.moneytalksnews.com/contribution-limits-for-this-tax-free-account-to-rise-again/ 2 https://www.cnet.com/personal-finance/mortgages/current-mortgage-rates-for-sep-17-2021-rates-decreased/

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LPL Research Discusses Outlook 2022 & the Coming Year

We believe pent-up demand, gradual improvement in supply chain challenges, solid labor force growth, and productivity gains will all contribute to another year of above-trend economic growth in 2022. COVID-19-related risks remain and the potential for a policy mistake may be elevated as the economy moves towards normalization, but we think the overall environment will be supportive of business growth and ultimately equity markets

The U.S. economy bounced back from its worst year since the Great Depression in 2020 with one of the best years of growth in nearly 40 years in 2021. A combination of record stimulus, a healthy consumer, an accommodative Federal Reserve (Fed), vaccinations, and reopening of businesses all contributed to the big year.

In what amounted to the shortest recession on record, only two months in March and April 2020, the economy came roaring back to produce what is currently expected to be over 5% GDP growth in 2021, more than making up for the 3.4% drop in GDP in 2020. Of course, there have been hiccups along the way. You can’t shut down a $20 trillion economy and then expect it to get going again without warming up first. Supply chain backlogs, materials and labor shortages, and higher prices all held the economy back to varying degrees. The good news is, demand is still very strong, and as the backlogs unwind (which could take years in some cases), we expect above-trend economic growth and see low risk of a recession in 2022.

As the U.S. economy moves more to mid-cycle, our 2022 forecast is for 4.0–4.5% GDP growth in 2022 [Figure 1]. While a slowdown from 2021, it’s still a very solid number. We expect inflation to tame from 2021 levels to a potential run rate under 3% by the fourth quarter with core inflation numbers lower, a step in the right direction, although it may still be on an upward trajectory the early part of the year.

Globally, Europe and Japan were hit especially hard by the pandemic in 2021. But as COVID-19 cases potentially fall globally, those areas could be ripe for better economic growth in 2022. Meanwhile, emerging market economies may disappoint as growth in China could be constrained by regulatory crackdowns.

Time For A Handoff

Fiscal and monetary policy played big roles in the economic recovery in 2021, but we see 2022 playing out as a handoff—from stimulus bridging a pandemic recovery to an economy growing firmly on its own, with consumer demand, workforce gains, productivity, small businesses expansion, and capital investment all playing parts in the next stage of economic growth.

You have to give the U.S. consumer credit for continuing to drive the economy forward, and 2022 shouldn’t change that. Don’t forget, it took retail sales only five months to get back to pre-COVID-19 levels after the lockdowns in March and April 2020. Bottlenecks and the Delta variant surge have done little to slow an eager consumer. With likely still low interest rates, increased equity in people’s homes, nearly $3 trillion in money markets (retail and institutional), and another $3.5 trillion in excess liquidity in bank accounts, the consumer should remain quite healthy in 2022.

Like every other time in history, those who adapt will survive. Businesses have already started to adapt to the new world, which may help productivity increase in 2022, as output-per-hour (productivity) potentially starts to accelerate again. Productivity allows for stronger growth and can help contain inflation, since more goods and services are produced. The 1970s was known as a time of high inflation, but it was also a time of very low productivity—fortunately a scenario we don’t see happening this time around.

Another key to the economic transition may be capital expenditures (capex). These include business investment in property, plants, buildings, technology, and equipment. These investments could boost overall productivity and overall output, but might take time to build, so the results could be years away in some cases. Additional capex spending would be one of the best ways to see if corporate America is indeed over the shock of the pandemic and ready to invest for future growth opportunities. Standard and Poor’s data shows capital expenditures are expected to have grown an impressive 13% in 2021 and likely even more in 2022. In fact, the capex rebound in this recovery has already been faster than previous downturns, with plenty of room to go in our view. And it isn’t just a U.S. theme, as 2021 was likely the best year for European capex since 2006, and the global chip shortage has led to major investments in Japan and South Korea as well.

The Everything Shortage

2021 was the year nearly everything was in a shortage, and it all translated to added inflationary pressure. Record numbers of ships waiting at ports, a lack of materials, unfilled job openings, higher commodity prices, a lack of truck drivers, major backlogs, and supply chain disruptions all added to the larger price increases seen essentially across the board in 2021.

While we do believe these pressures will steadily decrease over the next year and inflation will eventually settle back to 2–2.5%, it will likely be a gradual process. While inflation is broadly elevated, some key core elements remain more stable, and we believe these will be the center of gravity over time for some of the more volatile price changes we’ve seen. Still, supply chains may take a year or two to be fully addressed, depending on the product and the scale of the problem. Despite challenges around supply chains, hiring, and prices, if the demand is there it should help drive continued improvement as businesses adapt to address challenges. That is likely to leave us with a positive economic backdrop for at least 2022, and maybe much longer, despite current inflation levels.

How Much Time Left?

Let’s face it, this wasn’t your average recession. Some industries actually did better during the pandemic, while segments of other industries were severely constrained. Spending patterns shifted. Stimulus was delivered quickly on a massive scale. How strange did that make it? This was the first recession in history that saw FICO scores go up. Recessions are necessary to wash out the excesses, but some imbalances weren’t worked off this time around. For this reason, we think this economic expansion could be mid-cycle much sooner and likely won’t be as long as the record 10 years we saw last cycle. The average expansion since World War II has been just over five years, suggesting there are still potentially several years of growth remaining, especially since we don’t see typical recessionary warning signals right now. Far from it, we anticipate above-trend growth in 2022. But we’ll be on watch early.

Risks and Market Implications

Our baseline economic outlook would likely provide a positive backdrop for equity markets, supporting further earnings gains while productivity gains potentially help offset some of the margin pressure from wage growth. At the same time, there are clear risks to our view. Handoffs can be fumbled and with inflation running hot and risks around COVID-19 still in play, the potential for a policy mistake is elevated. And while we’ve made substantial progress against COVID-19, ranging from vaccines to treatments to public health policy, we don’t yet have full clarity on how it will continue to impact the economy. Nevertheless, our baseline is a continued move toward normalcy as the choices of businesses and households play a bigger role in determining the shape of the expansion.

Ryan Detrick, CMT, Chief Market Strategist, LPL Financial
Barry Gilbert, PhD, CFA, Asset Allocation Strategist, LPL Financial

______________________________________________________________________________________________

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

 

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. 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.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

 

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.

All index data from FactSet.

This research material has been prepared by LPL Financial LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed | Not Bank/Credit Union Deposits or Obligations | May Lose Value

RES-977801-1221| For Public Use | Tracking # 1-05221199 (Exp. 12/22)

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Retirement Mistakes to Fix Before the Holidays

Spend as much time planning for retirement as you do for the holidays!

Some people spend more time planning their holiday gatherings than preparing for their golden years. As a result, basic steps in retirement planning are overlooked. Here are a few of the top mistakes people make that are crucial to saving.

Not specifying goals. Many people say something like, “I want to retire in my 60s.” Fine, but pinpointing the age when you want to retire is just one piece of the puzzle. Additional key questions to answer:

  • How much do you need to retire?
  • How much have you saved already?
  • Will your investments generate enough income to meet your retirement goals?

An example of a specific retirement goal is: “I want to retire at 62 with $2,000,000 of investable assets that yield approximately $110,000 a year of income, including my pension and Social Security.”

Focusing on desired rather than needed returns. Don’t obsess with how much your portfolio can make and what your friends make investing. How much return your portfolio generates may mean little. More important is identifying how much you need to make to live comfortably in retirement. How much income do you need each month to survive? To live as well as you do now, or better?

How does your investment income complement your other retirement income sources, such as pensions and Social Security? Stop focusing on the rumored 10% return that big-time investors claim to make and start focusing on what you may actually need.

Not regularly reviewing portfolios. When did you last open your account statement? When did you last sit down with your financial advisor and review your investments and 401(k)?

If you did either in the last 365 days, that’s a start. Many investors don’t know the rate of return in their primary accounts.

You need to know what goes on with your investments. It is recommended you discuss your investments with your financial advisor at least twice a year.

Ingesting too much financial news. The media is not your financial advisor. Its objective is to sell advertisements.

Underestimating one’s lifespan. Advances in medicine keep people alive longer. According to the National Institute on Aging, “The rising life expectancy within the older population itself is increasing the number and proportion of people at very old ages.”1

According to Fidelity’s 20th Annual Retiree Health Care Cost Estimate, the average couple should expect to spend $300,000 on health care and medical expenses during retirement – yet half of the pre-retirees surveyed believe they will only need approximately $50,000.2 Among other findings related to health spending in later years:

  • 82% of Americans say that the pandemic has had some impact on their retirement plans. One in five (22%) of those within 10-years of retirement will be accelerating their timeline to exit the workforce.3
  • 80% of these individuals are under the age of 65, meaning they will likely need to bridge their health care options before eligibility for Medicare is available.3

Although health care is often a top stressor when thinking about retirement, 58% of those surveyed say they have devoted little or no time considering what they need to cover in retirement.3

Statistics suggest that a proactive approach in saving and investing may help people of all ages to better prepare for their future health care needs.

Failing to check beneficiaries. Consider this story of three brothers who received an inheritance from their recently deceased mom. The money came from the mom’s individual retirement account but the brothers also learned that she held an annuity three times larger than the IRA.

The mom’s will named all three brothers as equal beneficiaries. What mom didn’t know, or forgot: Her annuity named the oldest son the sole beneficiary even though her will divided the money equally between the three siblings.

The annuity superseded the will and the oldest brother got all the money.

The siblings knew mom wanted the money split three ways so of course, the oldest brother split it equally, right? Wrong. He took the entire $1,000,000 annuity and bought an airplane.

Check your beneficiaries. Review your 401(k)s, annuities, and life insurance policies. It can take less than 10 minutes to mitigate potential trouble, heartache, and misuse of your retirement money during and after your last years.

This holiday season, be the person who spends as much time planning for retirement as planning the festivities.

 

1 https://go.gale.com/ps/i.do?p=AONE&u=googlescho lar&id=GALE|A429270370&v=2.1&it=r&sid=AONE&asid=99507783

2 https://www.plansponsor.com/health-care-costs-retirement-remain-top-stressor/

3 https://sponsor.fidelity.com/bin-public/06_PSW_Website/documents/Cost_of_healthcare-in_ret_Fidelity_2021_RHCCE_NR.pdf

 

Important Disclosures

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This material was created for educational and informational purposes only and is not intended as legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

This article was prepared by RSW Publishing.

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