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Who doesn’t enjoy tying up year-end loose ends? The original SECURE Act was signed into law on December 20th 2019. Its “sequel,” the SECURE 2.0 Act, was similarly enacted at year-end on December 29th 2022.

Both pieces of legislation seek to reform how Americans prepare for retirement while juggling current spending needs. How, when, or will each of us retire? How can government incentives, regulations, and safety nets help more people safely do so—or at least not get in the way?

These are questions we’ve been asking as a nation for decades, across shifting socioeconomic climates. Throughout, a hard truth remains:

Employers and the government play a role in helping you save for and spend in retirement, but much of the preparation ultimately falls on you.

That’s America for you. The good news is, you get to call your own shots. The bad news is, you have to. Neither the original SECURE Act nor SECURE 2.0 has fundamentally changed this reality. SECURE 2.0 has, however, added far more motivational carrots than punishing sticks. Its guiding goal is right there in the name: Setting Every Community Up for Retirement Enhancement (SECURE). Following is an overview of its key components.

Note: Implementation for each SECURE 2.0 provision varies from being effective immediately, to ramping up in future years. Many of its newest programs won’t effectively roll out until 2024 or later, giving us time to plan. We’ve noted with each provision when it’s slated to take effect.

Below are a few provisions that may have an impact on your future financial planning:

  • Required Minimum Distributions (RMDs) pushed back in 2023 (Age 73 if born between 1951-1959, Age 75 if born in 1960 or after)
  • Elimination of RMDs for Roth accounts within employer-sponsored plans in 2024
  • Employers may deposit matching or profit-sharing contributions to Roth accounts, which would be taxable to employee in year of contribution in 2023
  • High wage earners (wages in excess of $145,000 in previous calendar year) will be required to use Roth account for catch-up contributions in employer-sponsored plans, which would be taxable to employee in year of contribution (beginning 2024)
  • 529-to-Roth IRA transfers – may be able to move unused 529 plan money into Roth IRA –subject to numerous restrictions and limits in 2024
  • Post-death option for surviving spouse beneficiary to delay RMDs until when deceased spouse would have reached RMD age – only applies if younger spouse pre-deceases older spouse in 2024
  • IRA catch-up contribution limit ($1,000) indexed for inflation starting in 2024
  • Increased employer-plan catch-up contributions when in 60’s – catch-up contribution limits will be higher (at least $10,000 and inflation adjusted) for those ages 60, 61, 62, and 63, starting in 2025
  • New QCD rules which start in 2024 include:
  • Maximum annual amount of $100,000 indexed to inflation
  • One-time $50,000 QCD allowed to charitable trust/charitable gift annuity

How else can we help you incorporate SECURE 2.0 Act updates into your personal financial plans? The landscape is filled with rabbit holes down which we did not venture in this article, with caveats and conditions to be explored. And there are a few provisions we didn’t touch on here. As such, before you proceed, we hope you’ll consult with us or others (such as your accountant or estate planning attorney) to discuss the details specific to you.

Come what may in the years ahead, we look forward to serving as your guide through the ever-evolving field of retirement planning. Please don’t hesitate to reach out to us today with your questions and comments.

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There have been so many big events competing for our attention…

Inflation is real, and needs to be managed. Heightened levels of market volatility across stock and bond markets alike may have left you once again wondering whether this time is different. Wider worries prey on our minds as well, such as the war in Ukraine; totalitarian aggression in other hot spots around the world, political discord at home, and natural disasters.

But it’s also important to remember, we’re biased to pay more attention to recent alarms than long-ago news. In the right context, this form of recency bias makes perfect sense. As we go about our lives, it’s often best to prioritize our most immediate concerns.

However, as an investor, if you overemphasize the news that looms the largest, you’re far more likely to damage your investments than do them any favors. You’ll end up chasing hot trends, only to watch them combust or fizzle away. Or you’ll jump out during the downturns, without knowing when to jump back in.

Yesterday’s News
How do we defend against recency bias? It can help to place current events in historical context. Do you remember what investors were worrying about a year, several years, or several decades ago? If you experienced some or all of these events first-hand, you might recall how you felt at the time, before we had today’s hindsight to inform our next steps:

  • 2021: The Taliban takes control in Afghanistan, while a “ragtag army” of online traders led by Roaring Kitty storms Wall Street.
  • 2020: COVID-19 shuts down economies worldwide. Civil unrest rides high across a gamut of socioeconomic concerns, and a divisive U.S. presidential election looms large.
  • 2018: Two U.S. government shutdowns occur—in January and again at year-end, with the latter lasting more than a month.
  • 2017: The year-end Tax Cuts and Jobs Act (TCJA) upends U.S. tax code.
  • 2016: The Brexit referendum and U.S. presidential election deliver surprising outcomes.
  • 2015: A long-simmering Greek debt crisis erupts.
  • 2013: A 16-day U.S. government shut-down occurs in the fall.
  • 2012: The U.S. narrowly averts plummeting over a fiscal cliff.
  • 2011: For the first time, the U.S. federal government credit rating is downgraded by one of the major rating agencies from AAA to AA+, and the Occupy Wallstreet movement is born.
  • 2008: Wall Street broker and former NASDAQ chair Bernie Madoff is arrested for fraud.
  • 2007: The Great Recession and global financial crisis begins. 2001: The 9/11 terrorist attacks send global markets reeling. An accounting scandal at Enron culminates in the energy giant’s bankruptcy.
  • 1999: The dot-com bubble bursts; the Y2K bug spurs massive, worldwide computer reprogramming.
  • 1990: Iraq invades Kuwait. 1980: U.S. inflation peaks at 14.8%; Americans are marching in the streets over the price of groceries. Also, the U.S. Savings and Loan crisis begins, ultimately costing taxpayers an estimated $124 billion.
  • 1973: An OPEC oil embargo “fueled bedlam in America.”

Investment Mainstays
These are just a few examples. They don’t include the market’s endless stream of lesser alarms that are easy to dismiss in hindsight, but often generated as much real-time storm and fury as the more memorable events.

The point is, there’s always something going on. And even as global markets persist, we forget or rewrite our memories, until they’re no longer available to inform our current resolve.

In the face of today’s challenges and tomorrow’s unknowns, we advise looking past recent trends, and focusing instead on a handful of investment basics that have stood the test of time. They may seem unremarkable compared to the breaking news. But when has “buy low, sell high,” or “a penny saved is a penny earned” become a bad idea once all the excitement is over?

It’s always important to take a step back and reflect. Stay tuned for more in our Investing Basics series!

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Conrad Siegel’s Tracy Burke, CFP®, ChFC® and Catherine Azeles, CFP®, RICP® share an overview of the investment world. Together, they take a look at what the market did during the last quarter, what we can expect moving forward, and what this all means for you.

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Over the years, during times of market turbulence, you have heard us say “stay the course” or “don’t make short-term trades with long-term money”. Following a disappointing first half of the year and a particularly brutal June, markets sharply reversed course in July. Proving yet again that timing the market is nearly impossible. Underperforming asset classes often surge surprisingly, just when we’re most convinced they never will. Broad U.S. stock indexes ended July with their best monthly returns since 2020—up over 9% for the S&P 500, while the tech-heavy Nasdaq Composite surged 12%.

Market Pricing: Compared to What?
Why the dramatic turnabout this July, even as national and global headlines remain relatively bleak? Efficient market theory would suggest, it’s not whether the news is good or bad, but whether it’s better or worse than what we’ve been collectively bracing for. As The Wall Street Journal senior columnist James Mackintosh wrote:

“The drumbeat of gloom this year drove down prices, but also meant that even-worse news was required to drive them down more. When everything looks grim, the slightest break in the clouds looks like a new day.”

Of course, even as the financial press announced the strong monthly returns, there have been plenty of pundits pointing out how fleeting any “recovery” might be. After all, most of the same challenges we’ve been facing all year remain alive and unwell, which makes it easy for forecasters to convincingly call for copious doom and gloom ahead.

They may even be correct. But once again, we caution against betting on it either way.

What Does the Data Say?
If expert forecasts were useful, we should see evidence that trading on them can improve your portfolio returns. Instead, a recent analysis by Morningstar’s John Rekenthaler reinforces existing data suggesting just the opposite is true.

Rekenthaler compared returns across five asset allocation fund categories for the 10 years ending December 2021. Four of the five fund categories were strategic stock/bond funds with a static equity exposure of between 15% to 85%. So, for example, funds with 85% equity exposure kept their 85% exposure across the entire decade, and so on.

The fifth fund category was for tactical asset allocation funds with the freedom to shape-shift their equity exposure in response to market news. “Tactical investing” is a fancy name for market-timing.

If anyone could stage a successful market-timing campaign, it should be professional fund managers and their legions of high-end market analysts. Instead, for the decade ending 2021, the tactical fund category did outperform asset allocation funds that were mostly invested in fixed income (with lower-expected returns). But they significantly underperformed fund categories mostly invested in equities.

Tactical funds also had a nasty habit of disappearing entirely, which probably prevented their worst returns from even showing up in the results (even though real people lost real money in them). Survivorship rates among strategic funds were between 66%–74%, whereas the tactical funds only survived about 53% of the time.

Rekenthaler also looked at whether investors could have done well by identifying the few “winning” tactical funds ahead of time. He demonstrated that the funds’ relative rankings were so random from one year to the next, there was no way to do that. If anything, past outperformance suggested slightly worse returns moving forward.

Stranger Things
So, are we predicting a happily-ever-after for 2022? Hardly. Then again, you never know; stranger things have happened.

Instead, because we don’t know, we diversify. And we wait. Markets have been rewarding patient and disciplined investors through the decades, we intend to continue doing the same. Let us know if we can help you manage an investment portfolio ideally structured to sustain you, your family, and your wealth through the perpetual uncertainty that lies ahead.

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Article Video

Conrad Siegel’s Tracy Burke, CFP®, ChFC® and Catherine Azeles, CFP®, RICP® share an overview of the investment world. Together, they take a look at what the market did during the last quarter, what we can expect moving forward, and what this all means for you.

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There’s been a lot of talk about recessions lately: Whether one is near, far, or perhaps already here. Whether we can or should try to avoid it. What it even means to be in a recession, and how it’s related to current market turmoil.

To put market and recessionary concerns in perspective, it might help to describe six ways a recession resembles a bad mood. There are some intriguing similarities!

  1. 1. There Is No Precise Definition.
  2. We all know what a bad mood feels like. But there is no clear definition for a nebulous mix of real and perceived setbacks, and how they’re going to affect us.

Likewise, there is no single measure to tell us exactly when a recession is underway or when it’s over. Instead, recessions can trigger, and/or be triggered by a number of interconnected economic signals. These usually include a declining Gross Domestic Product (GDP), along with rising unemployment, sinking consumer confidence, gloomy retail forecasts, disappointing corporate balance sheets, a bond yield curve inversion, stock market declines, and similar combinations of objective and subjective events.

In the U.S., the National Bureau of Economic Research (NBER) defines a recession as follows (emphasis ours):

“A recession is a significant decline in economic activity that is spread across the economy and that lasts for more than a few months.”

Rather vague, isn’t it? That’s intentionally done. Similarly, the World Bank Group has stated, “Despite the interest in global recessions, the term does not have a widely accepted definition.”

2. You Usually Can’t Spot One Except in Hindsight.

How do you know when you’re in a bad mood? Often, you don’t, until you’re looking back at it.

Recessions are similar. Since a widespread downturn must linger for a while before it even qualifies as a recession, the NBER only declares one after it’s underway. For example, in July 2020, the NBER announced we’d been in a recession for two months between February April 2020. This was triggered, of course, by the abrupt arrival of the global pandemic. It was the shortest U.S. recession to date, and already over by the time we officially acknowledged it.

3. Sometimes, We Get Stuck for a While.

Hopefully, your bad moods come and go, resulting in more good times than bad. But sometimes, one misfortune feeds another until you feel gridlocked. It may take a while before improved conditions, a more upbeat attitude, or a blend of both help you move forward.

Similarly, recessions can become a self-fulfilling prophecy. As Nobel Laureate and Yale economist Robert Shiller describes, “The fear can lead to the actuality,” in which economic conditions might feed inflation, which inverts the bond yield curve, which signals a recession, which shakes corporate and consumer confidence, which leads to unfortunate reactions that further aggravate the challenges. And so on. When this occurs, a recession and its related financial fallout may last longer than the underlying economics alone might suggest.

4. They’re Inevitable.

It’s never fun to be in a bad mood, but we can all agree they’re part of life. It would be unhealthy, exhausting even, if we were endlessly giddy every minute of every day.

Similarly, nobody celebrates a recession. But it helps to recognize they aren’t aberrations; they are part of natural economic cycles. Recessions can sometimes help rein in runaway spending, earning, and pricing for companies, consumers, and creditors alike.

For example, in our current climate, we may enter into a recession (or already be in one) as a byproduct of the interest rate increases, aimed at warding off rising inflation, amidst the backdrop of lingering supply side issues and global economic sanctions against Russia. If we can avoid a recession, all the better. But if it’s going to take a modest one to reduce inflation, it may be the preferred, if challenging choice at this time.

5. Experience Helps.

When we’re youngsters, we have little perspective to help us realize we won’t be miserable forever just because we’re unhappy in the moment. As we mature, we learn to temper our moods, and seek support if we do get stuck in a rut.

The same can be said about recessions, and similar challenges. It’s been more than a decade since the Great Recession; and more than 40 years since the U.S. last experienced steep inflation. As such, many investors have had little first-hand experience managing such turbulent times.

It may help to acknowledge we’ve been here before. The U.S. has endured nearly three dozen distinct recessions dating back to the 1850s, with an average length of 17 months. Some were considerably longer. Every recession eventually ends, with economies and markets thriving thereafter. Dimensional Fund Advisors research team shows us, one-, three- and five-year average cumulative returns after significant U.S. stock market declines dating back to July 1926 have all been positive, rewarding investors who placed their faith in future expected returns. Since markets are ultimately driven by the underlying growth in global commerce, we can expect similar aggregate performance moving forward in domestic and international markets alike. Consider these words of wisdom from one of the most experienced investors of all, Warren Buffett,:

“Periodic setbacks will occur, yes, but investors and business managers are in a game that is heavily stacked in their favor. … Since the basic game is so favorable, I believe it’s a terrible mistake to try to dance in and out of it based upon the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.”

6. You Can’t Change Others, But You Can Change Yourself.

When you’re in a funk, it doesn’t matter whether it’s due to one or many unfortunate events, or “just because.” There’s ultimately only one person who can change your mood: yourself.

The same is true for your response to recessions, bear markets, and other external events standing between you and your financial wellbeing. Life is filled with causes and effects over which we have no control, especially with respect to our investments. And yet, there are many small, but mighty acts we can take to contribute to the positive outcomes we wish to see in our homes, our nation, and the world And, we can invest wisely. This means taking charge of your personal wealth by focusing on the drivers you can control, and ignoring the greater forces you can’t. For example:

  • We can’t avoid recessions. But we can channel our inner Warren Buffett to look past today’s risks, and retain an appropriate amount of market exposure in pursuit of our long-term financial goals.
  • We can’t avoid bear markets. But we can avoid generating unnecessary losses by panicking and selling low.
  • We can’t avoid inflation. But we can establish a thoughtful budget to track our income and spending, with a plan in place for making adjustments as warranted.

As always, we’re here to help. How can we be of service to you and your family? Don’t hesitate to be in touch.

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