As the year begins with volatile markets, investor sentiment is a bit shaken and all eyes are on China as the media’s darling. However, China is not the only country with rising debt issues as emerging market nations (in general) are facing rising debt as well. Currency is flooding out of China’s borders in anticipation of the inevitable devaluation of the Chinese yuan. Yet, this could bolster foreign spending, specifically in real estate outside of China. There are additional bright spots as well; the U.S. seems poised for growth (albeit slow) but growth nonetheless, and Japan has implemented negative interest rates in an attempt to discourage savings (believe it or not) and encourage spending to boost their respective economies. Listen in as Larry puts perspective on all these issues and more.
Economy
Inside the Economy with SH&J: January 18, 2016
As media headlines announce “plunging markets” and “warning signs of recession”, Larry Howes gives us the underlying details of the economy we are facing in 2016 and guides our expectations. He comments on the shrinking Federal deficit, consumer debt, and S&P 500 earnings. Why are Americans, on average, continuing to pay down debt, buy new cars, and increase personal savings? How has the interest rate increase affected the markets and consumers? Listen in and find out!
*Please note that during the commentary section, Larry mentions the $1.3 billion student loan market, which in reality is $1.3 trillion. Also, within the slide titled “The Fed trims its Bond-buying” Larry refers to liquidating $4.3 billion of the bond market when he meant to say $4.3 trillion.
Inside the Economy with SH&J: January 4, 2016
Larry Howes kicks off the New Year with his outlook on the economy in 2016. How did the interest rate increase in December affect mortgages? Will U.S. inflation reach the Fed’s target rate of 2%? What is expected from the U.S. economy and markets this year? What will happen to the U.S. dollar? What can we expect to see in Europe this year? Listen in as Larry addresses these questions and more!
Special Edition of Inside the Economy with SH&J: December 17, 2015
This week, we bring you a special edition of Inside the Economy with SH&J. As many of you are aware, the Federal Reserve increased interest rates on Wednesday for the first time since 2008. While the increase was a small one, only a quarter of a percentage point, it has caused media frenzy. In less than five minutes, Larry addresses the primary reasons behind this rate increase, what it could mean for inflation, mortgage rates, credit card interest, the housing market, Americans’ wallets, and more. Overall, Larry says the effects of this increase will be mostly positive. We will cover more on this topic during our next discussion on January 4th. Until then, have a wonderful holiday season and we look forward to reuniting with you in 2016!
Retirement Savings 101: 401(k)s, IRAs, Roths, Oh my!
Over the past two weeks we have compared Traditional IRAs to Roth IRAs and 401(k)s to Roth 401(k)s. Today we wrap up the series with a recap comparison to help guide you through the various ways to save for your retirement.
Traditional IRA
Established by: Individual
Contribution Limits: Up to $5,500 per year age 49 or below / $6,500 per year age 50 and above (limits adjusted annually)
Contributions: Pre-tax (unless non-deductible, then post-tax)
Matching Contributions: None
Distributions: Taxable and a 10% penalty unless 59 ½ or older (exceptions may apply)
Forced Distributions: Must start withdrawing funds at age 70 ½
Conversions/Rollovers: Can be converted to Roth IRA. Taxes paid during year of conversion. Deductible contributions can be rolled into a 401(k) if allowed by 401(k) plan.
Roth IRA
Established by: Individual
Contribution Limits: Up to $5,500 per year age 49 or below / $6,500 per year age 50 and above (limits adjusted annually)
Contributions: Post-tax
Matching Contributions: None
Distributions: Contributions may always be withdrawn tax and penalty free. Earnings prior to age 59 ½ are taxable and assessed a 10% penalty. Earnings after 59 ½ are tax-free unless the Roth IRA has been open less than 5 years in which case they are taxable and assessed a 10% penalty. (exceptions may apply)
Forced Distributions: None
Conversions/Rollovers: None
Traditional 401(k)
Established by: Employer
Contribution Limits: Employee may contribute up to $18,000 per year age 49 or below / $24,000 per year age 50 and above (limits adjusted annually)
Contributions: Pre-tax
Matching Contributions: Employer’s discretion
Distributions: Taxable and a 10% penalty unless
· If separated from service after age 55 or
· age 59 ½ or older (exceptions may apply)
Forced Distributions: Must start withdrawing funds at age 70 ½ unless still employed and not a 5% owner
Conversions/Rollovers: Upon termination of employment may
· Rollover to an IRA – not currently taxable
· Rollover to 401(k) if allowed by new employer – not currently taxable
· Convert to a Roth IRA – taxable event
· Distributed directly to owner – taxable event.
Roth 401(k)
Established by: Employer
Contribution Limits: Employee may contribute up to $18,000 per year age 49 or below / $24,000 per year age 50 and above (limits adjusted annually)
Contributions: Post-tax
Matching Contributions: Employer’s discretion (employer contributions are pre-tax dollars)
Distributions: Tax-free, but a 10% penalty plus taxes on earnings unless
· If separated from service after age 55 or
· age 59 ½ or older and the account has been open for at least 5 years (exceptions may apply)
Forced Distributions: Must start withdrawing funds at age 70 ½ unless still employed and not a 5% owner.
Conversions/Rollovers: Upon termination of employment may
· Rollover to a Roth IRA
· Rollover to a Roth 401(k) if allowed by new employer.
Which retirement savings account is right for you? For some, a 401(k) plus a Roth IRA may be the way to go. For others it might be a traditional IRA with a 401(k). Retirement saving decisions are as unique as you are.
As with any big financial decision, we recommend talking to a professional. Financial planners can help guide you to the best decision for your retirement and create a custom plan tailored to your individual goals.
If you are interested in a complimentary consultation, give us a call today at 303.639.5100 or visit shwj.com.
*Research for this post done on IRS.gov
Inside the Economy with SH&J: December 7, 2015
Larry covers a lot of ground in our last discussion before the holidays: those in their 30’s may experience an upcoming economic event for the first time in their adult lives; an in-depth discussion on oil; and a look at Colorado’s hemp business. Larry also notes, “The longer the dollar stays up, the more it’s going to hurt the Chinese economy.” This discussion is full of interesting economic information. Listen in! Our Economic Discussions will return on January 4th. Have a safe and happy holiday season!
Making Sense of the Social Security Kill Bill
Early this November, Congress surprised many when they introduced the Bipartisan Budget Act of 2015 causing Financial Advisors to revisit ways to maximize cumulative Social Security benefits for their clients. With the passing of this budget deal, we see the end to two Social Security claiming strategies that have benefited many individuals – File and Suspend and the Restricted Application.
The new rules for File and Suspend will take effect with all applications filed after April 30, 2016. We will see the end of filing a Restricted Application for anyone who is turning 62 after December 31, 2015. This leaves a 6 month window for clients to review their situation with their financial advisor to determine how the changes will affect them, and if they can still take advantage of these strategies before they go away.
The File and Suspend strategy was commonly used by married couples to allow one spouse to begin collecting their spousal benefit at full retirement age while allowing the higher earning spouse to delay and then maximize their own benefit at age 70. Under the new rules, any suspension application filed after April 30, 2016 will also suspend all dependent and/or spousal benefits that would have been paid off of the suspended record. In other words, a worker must now collect their own benefit in order to trigger benefits for their spouse or dependents.
Restricted Applications for spousal benefits were often filed by couples who both wanted to delay collecting their own benefits while taking advantage of a spousal benefit in the meantime. The new rules now state that anyone turning 62 in 2016 or later will no longer be eligible to file a restricted application when they reach full retirement age. Individuals who will be 62 by the end of 2015 will remain eligible to file a restricted application when full retirement age is attained. The caveat – if this strategy depends on one spouse filing and suspending after April 30, 2016, the strategy will not work and further planning with your advisor may be beneficial.
For Example: Mark and Mary are both 63 and remain eligible to file a restricted application for spousal benefits at full retirement age. Mark wants to delay collecting his benefits until age 70. However, he will turn 66 after April 30, 2016 at which point the option to file and suspend is no longer available and spousal benefits will no longer be paid off a suspended benefit. Mark will either have to take his own benefit at age 66 to give Mary the option to file a restricted application for spousal benefits, or Mary will have to forego her spousal benefit allowing Mark to delay his own benefit and vice versa.
Individuals fortunate enough to have already implemented these strategies will not see a change to their current benefits. On the other hand, individuals born after 1953 will be unable to take advantage of either claiming strategy and are encouraged along with anyone who will be 62 by the end of 2015 or 66 before April 30, 2016 to meet with their financial advisor to determine the most optimal claiming strategy before the window closes.
Source: Savvy Social Security Planning for Boomers, Social Security ‘Loopholes’ Closing
5 Tips to Keep Holiday Spending Under Control
The holidays sneak up on us every year. Often we haven’t taken the time to plan how and what we will spend during the holiday season. Before you start shopping, take a look at our tips to help keep your spending in check and your post-holiday bank account happier.
1. Set a Limit
Take a look at your budget and set a limit for holiday purchases. Consider using cash for shopping so when the money is gone, it is gone. A better suggestion is to fund a holiday spending account throughout the year. That way, the money is already saved and ready to spend guilt-free by the time the holidays roll around.
2. Shorten Your List
Even Santa makes a list of who is naughty and nice. While you might not want to decide who receives gifts the same way Santa does, looking at your list is an important step in keeping your spending under control. If you have more than a handful of people you buy gifts for outside of your immediate family, it may be time to cut down. Instead of buying gifts for everyone, consider writing a personal note or dropping off homemade goods. Continue reading
Inside the Economy with SH&J: November 9, 2015
Larry Howes covered a gamut of information this week including the possibility of a Federal Reserve rate increase, consumer confidence, real estate, and oil’s slow recovery. His commentary led to many investigative questions from the team on everything from unemployment to Mexico’s supposed recovery and especially China. Larry discussed China’s “fundamental flaw” and went into depth on their unrealistic drive to become a consumer economy saying, “China wants to become a consuming economy, but you need income to be a consuming economy.” Don’t miss one of the best economic discussions the SH&J team has had in some time. Listen in!
Inside the Economy with SH&J: October 26, 2015
The dollar looks like it might weaken, Puerto Rico could have a political solution, and for the first time the Congressional Budget Office named the public federal government accounts holding 13.1 trillion dollars in debt — all topics covered this week. During the commentary, Larry said, “I’m also in the camp, along with several people, who think China is in a recession…” Listen in to hear what else Larry shared about China and the global economy in this week’s Inside the Economy with SH&J.
https://vimeo.com/143934427%20
Note: We apologize for the audio quality this week. We experienced some technical difficulties during recording and will be back up to snuff in time for our next release in 2 weeks.
Sharkey, Howes & Javer Blog 