Joel’s Published Column

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My Take

So many people I run into lately seem to be in a complete state of confusion regarding our current economy and the overall stock market. They can’t understand why the markets feel “okay” about such a politically incorrect, volatile and sometimes downright vile person in the Oval Office. My response to this sentiment lies in something that I’ve never done before; I’m going to quote myself from my November 2017 My City article: “The possibility of pro-economic growth policies could inspire animal spirits in the markets for hope of a brighter economic future.”

Americans have forgotten what strong economic expansion feels like.

Although many disagree with the President’s antics, capitalists couldn’t care less what he says – they care about what he is doing. Since taking office, President Trump has broadcasted his entire agenda: Business! Business! Business! He believes that the best path to economic freedom for the marginalized in America is to have extreme economic growth in which those who want to be employed can start down the path to financial freedom through the means of a good job.

Congress recently passed what I would consider to be the largest piece of Pro-Economic Growth legislature in our history – the tax reform act to cut the corporate tax rate from 35% to 21%. The entire theory behind this tax bill is that companies will be enticed to use the excess profits to invest in new property, plant, equipment and labor. A labor shortage will then attract more people back into the workforce as inflation sets in and wages start to increase. These economic forces will, hopefully, then create a self-fulfilling prophesy of more workers, more earnings and more demand for products. Will this work? I sure as heck hope so; because if it doesn’t, we’ll be paying off one huge tax bill for decades to come.

I’m going out on a limb here and predicting the President’s next steps.

I believe that he will very aggressively target an infrastructure-spending bill. This is the same spending bill that President Obama wanted, but was unable to get into place due to Republicans blocking his efforts. One might ask, “Infrastructure spending? That’s not a Republican thing to do,” and one would be right to ask. The key here is that President Trump isn’t a real Republican … he’s a businessman who saw a road to the White House through an angry Middle America. So, my prediction is that Donald Trump will use Universal Health Care and DACA as bargaining chips to get a $1 trillion infrastructure bill and build his “wall.” Three out four of these initiatives are democratic in nature, with of course the “wall” being for his ego. He would do this because he doesn’t care about debt like your average Republican claims to, and he knows that the spending bill would give the economy a huge shot in the arm. Heck, he may even throw in that he won’t run as a Republican in the 2020 Presidential election to get the entire Congress to vote for the measure. If he was able to cut corporate taxes, get a spending bill, universalize healthcare AND build his wall, all in four years – he may just drop the mic, walk offstage, go back to his old life and be a one-term president. Of course, not before saying, “You’re welcome, America.” Or, who knows … maybe he would keep his word and not run as a Republican, but square off against Oprah as an Independent. Well, now I’m just being crazy!

Hope your year’s off to a great start and I hope you enjoyed the fairytale ending of this crazy story.

A Recap of the Year that was 2017

Happy New Year!

As 2018 is now in full swing, I hear from a few different sources that we are in for a long and precipitous second half of winter. To summarize the year of 2017, I’d like to touch on a few different points. I may even offend some of our readers; but hey, being offensive was something brought back into the mainstream in 2017, right?

I work with many different types of clients, but in general, I can break them down into four groups: the Liberal Left, Democrat, Republican, and Conservative Right. Where any given client falls in this group typically determined what type of year they had.

Conservative Right clients likely feel as if they had an amazing year, that everything is getting back to normal and their long-held values are being re-instituted. The “Middle of The Road” Republican likes a lot of things going on, doesn’t really feel comfortable; but, hey – at least your stock accounts have been doing well. If you identify as a “Middle of The Road” Democrat, you typically can’t stand what’s going on, you long for the smoothness and tact of your past leader, you may even attend a protest march or two; but, hey … at least your stock accounts have been doing well (consolation prize, I guess). Lastly, you may be a member of my Liberal Left clientele if you feel like you’re having difficulty breathing, can’t sleep at night, and your TV never seems to change from the latest breaking CNN report. You may even be contemplating giving away your recent stock market gains to charity (yet to have anyone do this).

No matter where we fall on the spectrum, there are a few facts that have affected us all. One of those is that many of the economic numbers and unemployment rates have been coming in stronger than they were at this time last year. The stock market, as measured by the S&P 500* made all-time new highs in 2017. Genesee County’s housing market is finally back on track.

Kari Hartley, Owner of RE/MAX Town & Country in Flushing, MI, had this to say: “The Genesee County housing market has experienced aggressive gains throughout 2017. The inventory of homes for sale continues to be low, which has helped in the recovery of prices. Sellers are able to have a better experience with receiving favorable terms, many times receiving multiple offers on a property that is in good condition and priced well. Sellers are preparing their properties to engage buyers at their pricing points and buyers are also doing their part to make sure financing is in place before they begin the looking process. Mortgage companies are also playing their role to make sure the buyers are well qualified for the purchase. The market is reshaping itself, all for the better.”

Although there have been many economic gains this past year, we need to keep focused this year on what really matters. We need to remember that we can gain the whole world; but without love, it is going to be meaningless. Love for our family, love for our neighbor, and even love for our enemy is what will make all people have a successful 2018.

I wish you a very happy, prosperous, and LOVING New Year.

Charities and Year-end Giving

I hope all of My City’s readers had a wonderful Thanksgiving, as we all have much to give thanks for. As we move into the Christmas season, we often feel an urge to give a little extra during this time of the year, as it is a season revolving around the giving and receiving of gifts. One other thing that a lot of older investors associate with the year end, is what is called the Required Minimum Distribution.

The Required Minimum Distribution (RMD) is a required amount that people who have attained the age of 70.5 need to withdraw from their retirement accounts. For some investors, this RMD has become very substantial, to the tune of tens of thousands of dollars.

Many investors don’t really even want to take these distributions, and the main reasons for that is that are:

  1. they don’t need the money at that point in time, and
  2. they have to pay taxes on these funds that they don’t want in the first place.

Being that it’s the season of giving, I would like to share what I believe to be a very valuable tool that older investors have when it comes to charitable giving and their RMD. It is the strategy of utilizing the Qualified Charitable Distribution (QCD). Many people who are over 70.5 years old will give to their favorite 501c3 organizations (charities) either on a weekly, monthly, or annual basis. For these people, the QCD could really help them to decrease their annual taxable income.

The IRS defines a QCD this way: “Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70.5 or over, that is paid directly from the IRA to a qualified Charity.* If you would like more information on this, you can see the IRS.gov website and search Pub, 590-B.

What is great about this QCD is that it meets the RMD and also makes it so that the distribution is not included in the individual’s income. Not only does it avoid the taxation at the individual level, but the charity receiving the funds also does not have to pay taxes on this distribution. Essentially, no one is required to pay taxes on this distribution, and the only entity not benefiting from this QCD is the government – which, at this point, I think most people involved in this type of transaction would be happy about.

In summary, if you are an investor over the age of 70.5, have retirement income, and are currently making charitable donations, you should really consider utilizing the QCD as the most tax-efficient way to get those assets to the charities that you want to support.

I wish you all a very Merry Christmas, Happy Holidays and a Happy New year!
 

*irs.gov

Giving Thanks and Paying Yourself First

As we roll into the one-year mark since the 2016 Presidential Election, we have much to be thankful for. The stock market as measured by the S&P 500* recently closed at its highest level ever recorded. The unemployment rate is at 4.2% as measured by the Bureau of Labor statistics. Genesee County’s housing market has returned to pre-financial crisis levels.

Clients ask me if these stats really have to do with our current President or not. My response is often, “It doesn’t hurt that the only thing President Trump cares about is business and the economy.” I won’t give him credit for everything; but, I believe the American capitalist’s animal spirits have awakened. They’re making business decisions based on the new reality that businesses and the economy will remain the Trump Administration’s primary focus. Whether this administration lasts another six months, three years, or seven years, it seems Trump hopes to be known as the “pro-business President”.

So, as I think through who will benefit from our pro-business President, it leads me to the same answer: people who own things could benefit most from this administration. Who has benefited so far? Homeowners, and business owners all seem to be in the same boat in terms of things being better than they were a year ago. Some are lucky enough to be homeowners or a business owners; but I’m hoping that the majority have taken our previous advice about paying yourself first, and have started putting money away in their retirement accounts.

As a friendly reminder, one option to start saving for retirement is in a company-matching 401k or 403b account. With these employer-sponsored plans, your employer can match your contribution up to a certain percentage of your income. For many employers, one “safe harbor match” is to match 100% of the first 3% of employee income, and then 50% of the next 2%. It works out to a 4% match if the employee puts in 5%. That’s an 80% match! This is before the funds are put to work in any type of markets as long-term investments.

If you don’t have access to employer-sponsored plans like 401ks or 403bs, then almost everyone has access to Individual Retirement Accounts (IRA). There are two types: the ROTH IRA and the traditional IRA. The Roth IRA is typically beneficial for those in lower income tax brackets who believe they will be in a higher tax bracket during retirement. The traditional IRA that can benefit those currently in a higher tax bracket. They can deduct contributions now, while they are in a higher bracket, and then withdraw it during retirement, when they are in a lower one.

My opinion is the business environment and economic environment may be on the cusp of a very long-term expansionary period. Obviously, there will be economic recessions in the future; but, the one consolation prize, due to this current crazy administration, could be a very positive tailwind for the business community. Owners of things could well benefit from this administration’s policies. We need to seriously consider paying ourselves first to ensure that we don’t miss the boat. If you need help finding a starting place, get with a financial advisor who can help you get on the right path.

*bigcharts.com

Pension Rollovers

Do you know where your Pension Plan is?

Many people know they have a pension plan, but they’re not quite sure how it works, how stable it is, or exactly how their money is invested. The details are often hazy.
Pension plans are also called “defined benefit” plans because they provide a predetermined, continuous income for retirement. This fixed payout is generally determined by factors such as your exit salary and your seniority or longevity at work. Government pension plans commonly require employer contributions, though union and private pension plans may not.

If you do not have a pension plan:

It may be worthwhile to find out if your employer offers one. Ask for the details, and be sure to find out at what point you become eligible. It’s typical for an employee to gain eligibility after three to five years.

If you have a pension plan:

It’s important to keep tabs on it and make sure you understand it. For example – do you know if your plan is stable? Increasingly, employers are terminating pension plans and either directing pension assets into annuities or issuing lump-sum payouts to workers.

If you were in a pension plan that was terminated,

or if you had a pension plan with a former employer that has since gone out of business, contact the Pension Benefit Guaranty Corporation (www.pbgc.gov). This is an agency of the federal government created to protect pension plan assets.
If you are more than five years away from retirement it may seem too soon to bother tracking down pension plan details, but it’s never too soon to start.
It’s important to get all the information you can about your plan, and once you have that information, you need to keep up with it.

After all, your retirement may depend on it.

If you have further questions, or if you’re ready to start planning for your retirement, be sure to contact your Financial Advisor.