Overview: Tune into this week’s episode of Launch Financial as we discuss the markets bracing up for the end of the second quarter and first half of the year. The stock market will digest lots of economic data through the rest of the week to close out the quarter. Stay tuned for a quarter in review next week.
Show Notes:
Overview: Tune into this week’s epiode of Launch Financial as we discuss the the stock market’s monster week last Friday, responding positevely to the Federal Reserve’s decision to pause interest rate hikes for the time being.
Show Notes:
Given the rollercoaster of volatility we’ve seen in the stock and bond markets over the last few years, we want to see how are you feeling as it relates to your investments and overall financial stability? As we near the end of the second quarter of 2023, it’s important to reflect on your emotions during the volatility and economic uncertainty we’ve faced and create a plan moving forward. We know last year was a hard year for many, watching their hard-earned savings and investments plunge up and down; however, as we see time and time again, the market does correct itself, so we are here to discuss the long-term nature of investing and the importance of looking at the bigger picture.
As you can see in the charts below, it is quite valuable to stay invested in the stock market for the long term, despite market crashes and corrections. We know that headlines in the news and day-to-day fluctuations can be scary and induce anxiety, but keep in mind your initial goals for investing and your time horizon. Many individuals try timing the markets, and we’ve actually seen many since the COVID-19 crash until now pull in and out of the market; however time in the market many times proves more prudent. If you are a long-term investor, try not to get too caught up in the day-to-day volatility, and rather the bigger picture and longer timeline. Although we do not know the direction the stock market will take in the future, as the chart depicts, time in the market instead of trying to time the market seems to be the better choice.
Another point to keep in mind is your risk tolerance and asset allocation. For those of you who have been feeling stressed or worried about your investment portfolio, now is a prudent time to meet with a financial professional to discuss your risk tolerance, asset allocation, and specific finances. It could be true that your asset allocation is not properly aligned with your risk tolerance, exposing your investments to either too much or too little risk. When you start thinking about investing, you also want to take a look at your short-and long-term goals so that you are making a decision on behalf of your larger financial picture.
We always recommend a mid-year financial check-up, so now is a great time to think about your emotions towards your investments and alter any parts that need change. It is also important to keep in mind that your investments are only a piece of your entire financial picture, so it’s a good idea to make sure your whole portfolio is well diversified and right for you. If you have any questions for us, we are here to help in any way we can. To reach our team, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here.
Overview: Tune into this week’s episode of Launch Financial as we discsus May CPI data, which slowed to the lowest levels since 2021, which will impact the Federal Reserve’s decision on the future of interest rates at thier meeting tomorrow.
Show Notes:
For those of you who have been following the markets and the current state of the economy, you know that the Federal Reserve has been hiking interest rates for months now to combat high levels of inflation. Living in this higher interest rate environment, many individuals have been seeking strategies to maximize their cash, including taking advantage of these high rates in vehicles such as high yield savings accounts, CDs, Treasury Bills, and I-bonds. As inflation is finally beginning to ease, let’s talk about how these vehicles will also change in response and what to look out for.
Next week on June 13, the U.S. Bureau of Labor Statistics will report the Consumer Price Index data for May, which will indicate what the Federal Reserve will do at their next meeting to interest rates. The Federal Reserve has hiked interest rates 10 times over the last year, and efforts to combat inflation has showed progress as inflation has definitely decelerated sharply since last summer, but core inflation remains in a close range.
As we have talked about a great deal over the last few months, high yield savings account rates have reached a 15-year high, with “top-yielding online savings account rates now just north of 5%, the highest since 2008, and much higher than last year’s 0.8%”, according to Bankrate.com. So, if you have yet to capture this higher yield and your money is still in a large money-center bank earning close to 0%, consider switching to maximize your savings. Given the uncertainty we have seen in the banking system, you also want to keep in mind the importance of FDIC-insured limits while still shopping around for the best interest rates.
Next, for those savers who have wanted to earn additional interest on their cash, they have been parking their money in I-bonds, Treasury Bills, and CDs, that have been earning over the 5% mark. However, in more recent weeks, with inflation easing, Series I bonds and Treasury bills are beginning to slip, with CDs still remaining attractive to savers. So, if you have cash sitting you’d like to earn risk-free interest on, lock up those 5%-range CDs before it’s too late. Of course, before locking up your cash into a CD, you need to make sure you address your time horizon and need for those dollars.
We know that current economic environment is ever-changing and the future of the banking system and economy is uncertain, but want you to maximize your savings and take advantage of all attractive financial opportunities available. As mentioned above, before jumping into anything or locking up your money in an investment vehicle with time restrictions, make sure you think about your goals, priorities, responsibilities, and needs. Now is a great time to think about working with a financial professional to spring clean your finances and plan for the rest of the year. If you have any questions about interest rate policy of your specific financial situation, email us at info@shermanwealth.com or schedule a complimentary intro call here.
Overview: Tune into this week’s episode of Launch Financial as we discuss the debt ceiling deal that was reached and set to resume student loan payments. Additionally, this month we are dicussing the importance of consolidation and condlidating old bank or retirement accounts. For more information, email info@shermanwealth.com.
Show Notes:
If you or anyone you know withdrew funds from retirement accounts during the early stages of the COVID-19 pandemic, it’s important to be aware of a time-sensitive deadline to pay back those amounts and unlock significant tax advantages. In March 2020, Congress passed the CARES Act, which allowed individuals to withdraw up to $100,000 from their retirement accounts, such as IRAs and 401(k) plans. These withdrawals, known as coronavirus-related distributions (CRDs), were intended to act as loans and provide financial support during the economic hardship caused by the pandemic. However, to fully benefit from the tax advantages, individuals must act quickly to repay the withdrawn funds within a specific timeframe, which is ending soon.
Under the CARES Act, individuals who took CRDs were granted several tax advantages. Firstly, the usual 10% penalty for early retirement withdrawals was waived. While income tax was still owed on CRDs, those who repaid some or all of the distribution had the opportunity to recover the paid taxes and convert the withdrawals into tax-free loans. These tax benefits were only available in 2020, making it crucial for individuals to take prompt action to maximize their savings. Those who withdrew funds had three year to repay the CRDs, starting from the day after they received the funds. So, for many people, the deadline is quickly approaching if they want to be eligible for the tax refund.
Recent data from Vanguard Group reveals that a significant number of individuals took CRDs in 2020. In fact, “approximately 6% of investors in workplace retirement plans, totaling around 268,000 people out of 4.7 million”, withdrew these funds. However, according to Vanguard’s latest data, “less than 1% of those who withdrew funds had repaid them by the end of 2021.” For those who want to capture tax benefits or re-invest those funds back into their retirement accounts, now is the time to pay it back. Those who repay part or all of their CRDs within the three-year deadline must file an amended tax return to claim a tax refund.
Given the approaching deadline and the potential for significant tax advantages, it is crucial for individuals who have taken CRDs to take prompt action. Assess your financial situation and determine if you can repay the withdrawn funds partially or in full. Seek guidance from a financial advisor or tax professional who can assist you in the repayment process and help you make informed decisions based on your specific circumstances. If you have any questions, email info@shermanwealth.com.
