The Return Of Beers with Brad

After a two and a half year hiatus due to COVID-19, we were extremely excited to be back to host Beers with Brad on May 19th, 2022. It was great to gather with local centers of influence, peers, friends, and clients to discuss all the economic data we have been seeing and the market has been digesting. Not only did the event provide an open space for individuals to ask their own personal finance questions, but it was a great opportunity to network with local professionals and enjoy some beers.

For those of you who may own a small business and would like us to host a Beers with Brad for your employees to provide them the opportunity to learn about financial literacy and ask questions they may have about personal finance or their benefits at work, please email us at info@shermanwealth.com or schedule a complimentary intro call here to learn more. Due to the great outcome and positive feedback, we will be hosting another Beers with Brad on July 14th, 2022 At Launch Workplaces (9841 Washingtonian Blvd #200 Gaithersburg, MD 20878). Please rsvp to the link following or email ashley@shermanwealth.com. https://www.eventbrite.com/e/beers-with-brad-july-14-2022-tickets-347954359857 to RSVP.

What Are I-Bonds And Should You Buy Them?

In a rising interest rate environment, many of you may be thinking what vehicles you should be utilizing moving forward to invest your money. Given four-decade high inflation numbers, I-bonds are becoming an attractive way to invest your money while also protecting against inflation. So, for those wondering what I-bonds actually are, let’s take a look. 

I-bonds are bonds issued by the U.S. Treasury designed to protect investors’ savings from inflation risk and loss of purchasing power. These bonds are purchased directly from the US government, hold lower risk, provide more safety and are estimated to deliver a 9.62% annualized return starting next month. Given the current climate with inflation through the roof, if you have cash sitting around that is currently earning 0%, now might be a great time to consider purchasing some I-bonds for next few years.  

However, there are a few important details to note when considering I-bonds. There is currently a $10,000 per person limit on the amount you can invest each year into I-bonds. Your I-bonds will have a maturity of 30-years and cannot be redeemed for one full year. However, if you redeem your I-bonds before five years, you will inflict a withdrawal penalty of 3-month’s interest. So, keep in the mind that if you are considering investing in I-bonds, you should do so with the intention of keeping them invested for 5 years. Additionally, you can buy an extra $5,000 in I-bonds within your tax refund if applicable or eligible. 

If you have a long-term view about your investments and might have some cash you don’t need access to for a while, you should definitely check out I-bonds to protect the purchasing power of your cash. If you have any questions about your specific financial situation and how I-bonds may fit within your portfolio, email us at info@shermanwealth.com or schedule a complimentary intro-meeting here and we are happy to help.  

How Rising Interest Rates Will Impact Your Portfolio

As we’ve been discussing inflation and how to adjust your new budget accordingly, you might also be wondering how the continual rise in interest rates from the Federal Reserve will impact your wallet and investment portfolio. Let’s take a look. First, let’s start by digesting where interest rates come into play as they relate to your finances. Whether you have a savings account that earns interest, a mortgage or two, student or car loans, credit card debt and more, interest rates play a large role in each of these.

With rates being historically low for many years, many were taking the opportunity to refinance many of their loans and take advantage of a lower interest repayment. However, with the rise in rates from the Federal Reserve in order to slow down the economy and combat inflation, you might begin to think differently about your interest rates as a whole.

Now that rates are rising, loans, such as your mortgage, will be more expensive. So, if you are in the process of buying a home or refinancing, make sure you connect with your lender to see how the rise in rates will impact your situation. Furthermore, those of you with credit card debt will be seeing an even greater interest rate increase, so make sure you grab those zero percent interest rate credit cards or balance transfer options while they are still out there. 

As for student loans, if your student loans are at a fixed rate, which most are, this rise will not impact you. However, the Biden Administration just extended the federal student loan pause until September which will provide you with more time to prepare your budget for this additional payment. 

While rising rates will make some of your loans more expensive since you’ll be paying more in interest, they will have a positive impact on your savings account, accruing additional interest. If your emergency fund is in a traditional savings account, take this opportunity to open up a high-yield savings account to earn more interest on your savings fund. For more information on the perks of a high-yields savings account, check out our recent blog on why you should open one. For those curious about their investment accounts, especially given the recent market volatility we’ve seen over the last few years, the importance of a long-term oriented diversified portfolio is key. If you have further questions on how rising interest rates will impact your wallet, email us at info@shermanwealth.com or schedule a complimentary intro call here. 

Have You Had Regrets About Your Financial Decisions In The Last Year? You’re Not Alone

The COVID-19 pandemic has certainly had a large impact on the financial decisions of many individuals across the globe. The uncertainty of the pandemic along with continued times of extreme market volatility caused many to pull out of the market temporarily, or at least until things “returned to normal”. At Sherman Wealth, we are firm believers in “time in the market” over “timing the market”. Despite great market volatility and being spooked by unprecedented times in the world, sticking to your long-term financial plan is proven to give you the best output at the end of the rainbow. 

So let’s take a look at some of the financial regrets young Americans have about their investing decisions over the last year. According to Fidelity Investments’ 2022 State of Retirement Planning Study, more than half of young adult investors halted saving for their retirements during the pandemic and nearly half said there is no point in saving until things return to normal.” While many of these individuals believed in pulling out of the market at the time, they now are wishing that they instead invested more instead. 

A recent study from MagnifyMoney found that “Some 57% of Gen Z investors and 50% of millennials regret how they invested in the last 12 months,” with many wishing they invested more money into the stock market, others wishing they didn’t sell assets when they did, and some wishing they had saved more as a whole. Those who didn’t save sufficiently during the pandemic or pulled assets out of the market during a crash are also now feeling unsure about whether they can handle another unexpected expense or event. As you can see from the data stated above, those who didn’t see the original March 2020 COVID-19 crash as an opportunity to stick to their long term plan or potentially even invest more, are now regretting those decisions. 

We know it’s easy to get spooked by the market, especially given the unprecedented events of the last few years. Now that it is financial literacy month, we wanted to take this opportunity to make sure to educate yourself on the benefits of long-term investing and recognizing behavioral biases that may be getting in the way of your financial decisions. We recently wrote a blog discussing how to identify behavioral biases and the “do’s and don’ts” during a market correction, so check that out if you find yourself having trouble sleeping at night because you are worried about your investments. Life is complicated, but your finances don’t have to be. If you start with the right foundation, such as creating a customized financial plan and stick to it, you’ll find yourself in a much better financial position in the long term. If you have questions about building your financial foundation or financial roadmap, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here. 

What’s The Secure Act 2.0?

On Tuesday March 29th, The House Of Representatives passed the Secure Act 2.0, a bill that is aimed to improve the retirement savings system for U.S workers. The legislation will now head to senate for its decision.

According to the House Ways and Means Committee Chairman Richard Neal, D-Mass., “H.R. 2954 will help all Americans successfully save for a secure retirement by expanding coverage and increasing retirement savings, simplifying the current retirement system, and protecting Americans and their retirement accounts,” he ahead of the Tuesday vote. “Too many workers reach retirement age without having the savings they need.”

According to a Wall Street Journal article, the bill proposes that “legislation would gradually increase the age at which savers must start taking withdrawals from 401(k)-type accounts and traditional individual retirement accounts to 73 next year, rising to 74 in 2030 and 75 in 2033.”  As of right now, people who have a retirement savings account must start withdrawals at age 72, so this will help those who wish to grow their money longer or may not need it quite yet.

In addition to the increased age to take RMDs, the new bill will allow older workers to make larger contributions to their 401(k)s. According to WSJ,  “people 50 and older can contribute an extra $6,500 a year to 401(k)-style retirement accounts, for a total of $27,000. The legislation would raise that to $10,000 a year starting in 2024 for people ages 62, 63 and 64. The bill would require catch-up contributions to be made after taxes. Under the legislation, starting in 2024, the extra $1,000 people 50 and older can contribute annually to an IRA would rise to account for inflation.” Again, this added benefit is a huge opportunity for individuals who maybe missed out on the early years of retirement savings.

This bill and the ultimate Senate decision could be huge for individuals, especially older ones, who want to boost and make the most out of their retirement savings by allowing them to maximize them in their later years. We will continue to follow updates from Senate on the progression and eventual implementation of this bill. If you have any questions for us, email us at info@shermanwealth.com.

2022 MCPS Business Pitch Challenge

On Thursday, March 24th, Brad Sherman was asked to judge the MCPS Business Pitch Challenge, which is an annual local challenge inspired by the show “Shark Tank”. Students from seven high schools participated in this year’s event, including Blake, Churchill, Gaithersburg, Northwest, Kennedy, Northwood, and Paint Branch. Students pitched their business ideas for a solution to an existing problem, improvement of an existing product, or they created a need for a product/service to a panel of local entrepreneur judges.

As an entrepreneur and small business owner, Brad Sherman was thrilled to support such a wonderful event for a second year in a row, promoting leadership, financial literacy, and creativity. With the lack of financial literacy around the world, this event was a great opportunity for students to start thinking financially and as an entrepreneur from a young age.

Congratulations to the first place winner this year from Blake High School and to all the teams who participated in this year’s event and presented their well-thought ideas.

For those who missed it, you can watch the youtube replay here. It was a great opportunity to support small businesses and entrepreneurs, as well as giving back to the community.  If you have any questions about the event, email ASKMCPS@mcpsmd.org or let us know at info@shermanwealth.com and we are happy to connect you with the right contacts.  Additionally, if you are a small business owner and are seeking consulting assistance, email us and we are happy to help.

Last Call To Fund Your Traditional & Roth IRA For 2021

Spring has arrived which means it’s time to get out your spring cleaning checklist. That doesn’t just mean yard work and old clothes, but your finances too! A great place to start is to fund your Traditional and Roth IRA accounts for 2021. The deadline for these contributions is April 18, so make sure to act fast if you plan to fund these accounts. Below you will find further details from the IRS website on this deadline.

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“The Internal Revenue Service reminds taxpayers they may be able to claim a deduction on their 2021 tax return for contributions to their Individual Retirement Arrangement (IRA) made through April 18, 2022.

An IRA is a personal savings plan that lets employees and the self-employed set money aside for retirement and can have tax advantages. Contributions for 2021 can be made to a traditional or Roth IRA until the filing due date, April 18, but must be designated for 2021 to the financial institution.

Generally, eligible taxpayers can contribute up to $6,000 to an IRA for 2021. For those 50 years of age or older at the end of 2021, the limit is increased to $7,000. Qualified contributions to one or more traditional IRAs may be deductible up to the contribution limit or 100% of the taxpayer’s compensation, whichever is less. There is no longer a maximum age for making IRA contributions.

Those who make contributions to certain employer retirement plans, such as a 401k or 403(b), an IRA, or an Achieving a Better Life Experience (ABLE) account, may be able to claim the Saver’s Credit. Also known as the Retirement Savings Contributions Credit, the amount of the credit is generally based on the amount of contributions, the adjusted gross income and the taxpayer’s filing status. The lower the taxpayer’s income (or joint income, if applicable), the higher the amount of the tax credit. Dependents and full-time students are not eligible for the credit. For more information on annual contributions to an ABLE account, see Publication 907, Tax Highlights for Persons With Disabilities. PDF

While contributions to a Roth IRA are not tax deductible, qualified distributions are tax-free. Roth IRA contributions may be limited based on filing status and income. Contributions can also be made to a traditional and/or Roth IRA even if participating in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA-based plan).

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools at IRS.gov. This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax (For Individuals)”

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For further information about the April 18 contribution deadline, check out the IRS website here. As mentioned prior, spring time is here which constitutes a great time to get your finances in order and make a financial plan. Whether that begins with getting those 2021 contributions in or not, let us know if you have any questions as we are happy to help. Email info@shermanwealth.com or schedule a complimentary intro call here.

How The Fed & Rising Interest Rates Will Affect Your Wallet

We know many of you have been anticipating the Fed Meeting that occurred earlier this week. What you may be wondering now is how the hike in interest rates will affect your wallet and your future financial situation. Check out the transcription from our Fed Meeting episode of Launch Financial below or listen here! 

Brad: Good afternoon and welcome to a Federal Reserve Meeting special episode of Launch Financial, joined, as always, by Ashley. Ashley, how’s it going? 

Ashley: Not much everything’s going well, we’ve got some big news to talk about.

Brad: Big news. First Federal Reserve rate hike since 2018, way before you were following economic policy, I’m sure, but hard to believe it was that long ago. Folks are not used to a rising interest rate environment, as the American consumer and markets have been kind of conditioned to a falling interest rate economy since 2018, as we mentioned. 

Brad: Obviously, we know we had emergency said cuts during COVID. We want to talk about what it means for the markets, the economy and of course, your wallet, how it impacts you, the consumer and investor. Fed Chair Jerome Powell, speaking now with the 10-year treasury yield at 2.2%, which is the highest since about 2019. 

Brad: We just want to unpack what that means. So those of you with credit card debt, you should see an even greater interest rate increase, we’ve talked about this for quite some time. So if there’s a zero percent offer on your credit card and you have a balance or if you’re thinking about making a big purchase, grab those zero percent interest rate credit cards while they’re still out there. 

Brad: Now Auto loans. A lot of folks are having an issue buying a car, as we’ve talked about for some time. We do think that this will impact your auto loan, so we don’t know what the direct impact to the consumer will be, but figure about a quarter of a percent as the Federal Reserve continues to raise rates. In fact, they are talking about doing seven rate hikes throughout the course of the year. So this is more of a preparation now. If you haven’t been preparing since we talked about this a couple of months ago, the Federal Reserve has telegraphed this move and it shouldn’t be that much of a surprise. I think it’s more of a surprise that they want to do seven more this year to get it to about 1.8 percent. 

Brad: So for mortgages, we saw the average 30 year fixed mortgage rate move a full percent since November. That’s a dramatic move. The market’s been digesting this news for quite some time, so that’s something that if you haven’t refinanced or you’re still in the market for a home, make sure you’re double checking with your lender to see what impact this will have on your purchasing ability and your monthly payments. 

Brad: Next up we have student loans that might be tied to LIBOR or T-bills. Of course, most student loans are at a fixed rate, so anything with a fixed rate, of course, won’t be impacted. And then, of course, we have home equity lines of credit. A lot of people have been tapping into their homes to do projects and other things. Remember that those are directly tied to the prime rate. So, at your next statement, you will see an impact there of your prime plus a certain adjustment. That means that your interest rate just went up by 0.25 percent or 25 basis points, as it’s been indicated in the news, so lots to unpack here. We will continue to follow all these moves for you, as we always do. Ash, anything you want to add in this emergency press conference? 

Ashley: Yeah, I think it’s just important to keep an eye out for these different things you mentioned above. We also saw that jobs and wages might be impacted as well as we have been in a fast wage growth environment with a lot of job openings. So people are saying that might change as well. Also, it is important to note that savings accounts will be impacted as well with higher interest rates, so keep an eye out for all of this and let us know if you have any questions or thoughts. 

Brad: Great. And we’re also watching the yield curve, an indicator of future recessions, which is flattening out. We will be following all these things and more, let us know as Ashley said, if you have any questions that may directly impact you and your money. 

If you have any further questions about the impacts of the Fed raising interest rates, email us at info@shermanwealth.com or schedule a complimentary 30-minute meeting here. 

 

A Note To Women Out There Who Are Feeling Financially Stressed-You Are NOT Alone

Did you lose your job in the last year because of the coronavirus pandemic? Did you quit your job to care for your children who were virtually learning at home and needed care? Are you divorced or widowed and feeling financially strapped? Do any of these scenarios hit home? Well you should be reassured to know that you are not alone. Women all over the globe are feeling the same way you are. Just know that there is help out there waiting for you.  

As you can see in the chart above from the Washington Post, women along with non-white Americans feel less financially fit since the pandemic has started. Although you may feel like you are in too deep or too far beyond repair, that’s not the case. At Sherman Wealth, we help  women in the same situation as you. No matter your situation, positive or negative, we can help educate you, repair your financial situation, and get you back on track for financial success. 

As a young independent woman now approaching the second year of my first job post-college, I can say first hand how far financial education has brought me and how empowered I now feel about my financial future. Whether you are starting with a large lump sum or just getting started, taking control of your finances and educating yourself on the “smart” things to do at each stage in your life can progress you towards financial independence. Sherman Wealth is here to teach you those important steps to take in order to reach your financial goals faster and more efficiently. We all make financial mistakes, but it’s important to learn from them and move on proactively and effectively. 

So, to all you women out there who don’t know what direction to go in next, reach out to us and let us help you make smarter decisions so you can be financially independent and one step closer to making your financial dreams come true. If you are interested in attending a women’s financial fitness seminar or local event to learn some of these great tips, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here. 

Here Are Some Signs To Re-Visit Your Estate Plan

We know that thinking about estate planning can be daunting and is not the most exciting conversation to have with your spouse; however, it’s extremely important. As we’ve been talking about discussing money with your spouse, estate planning conversations are a great one to throw in the mix. So, what are some triggers that should facilitate you and your partner updating your will or trust? Here are a few key factors to look out for when deciding whether or not to update your will or trust. 

Changes in marital status, health status, tax code, and having children might be obvious reasons for revisiting your will, but keep in mind that you can update your will at any time, and not solely due to one of these triggers. You may want to change the beneficiaries of your trust, alter the designated guardian of your children and powers of attorney, or just make sure you are protected in accordance with the laws of your particular state. Even though these decisions are quite tough to make on the surface, working with an estate and trusts attorney will make this process much more seamless. 

Another factor that is oftentimes overlooked is forgetting to update your will when your bank is bought by or sold to another firm. If you had chosen a bank to be your executor, and the bank was sold, you may have a new executor that you are not familiar or comfortable with. It is crucial to stay on top of who is in charge of your financial choices in the event you and your partner are unable to do so yourselves. Another trigger is a change in your family situation. As life goes on, circumstances change and someone who was once fit to make these decisions may no longer be the right choice. Remember, open communication is key and will help make these changes and updates operate smoothly. 

If you need to get started on your estate planning or even just want to make sure you are on the right track, check out our estate planning checklist that will guide you in getting started. Digitizing your financial life and some of these tasks will help you stay on top of your estate planning and financial plan. We recently recorded a podcast episode with Head of Trusts and Estates Practice at BBS&G, Adam Moskowitz, as he shared the ins and outs of estate planning and how it is NOT just for the “wealthy”. If you have any further questions or would like to be connected with someone to help you and your family work through this process, email us at info@shermanwealth.com as we are happy to help and get you to the right place. If you would like to schedule a complimentary 30-minute intro call, you can do so here!