Each year our federal government accesses the inflationary environment and makes a determination for those on Social Security as to how much, if any, of an inflationary adjustment is needed…. AKA Cola adjustment-
COLA Adjustment – Cost of Living Adjustment
Looking into 2019, those on fixed incomes with COLA or Cost of Living Adjustments, in MOST cases will see a 2.8% increase per the Social Security Administration and their flagship marker, the CPI or consumer price index…
This includes in most cases pension, and other fixed income types, as they usually (we have just run across a disconnect, but are not to the bottom of it yet) follow the same index – good for all.
Ok – so the good news for those receiving fixed income could be looked at as a minor detractor for those paying the new higher Social Security Tax amount – but hey, we are all in this together –
Here is the new Social Security Tax Maximum amount with a little historical perspective for your perusal:
In 2019, the new tax maximum (said another way- the amount of money you need to earn to max your Social Security Benefit) is $132,900!
RMD – AKA Required Minimum Distributions – the Governments’ mandate of distribution from our IRA (Pre-Tax) funds in order to finally occur taxes is upon us…..
RMD Season
In the coming weeks we will begin transferring mandated funds from our IRA/Qualified/Pre-Tax accounts to their directed destinations….
As a reminder this is so the US Government gets to take the taxes due …
IMPORTANT (Neat) Facts –
RMD $$ mandated amounts are determined by the value of applicable accounts on the last day of the prior year
Current year age is a necessary factor included in calculating the RMD – see below next, first time exception – each year of seasoning (getting older) we are forced to take more out of the applicable accounts – hey the IRS has never taxed us on these in many cases – it’s their time!
After tax contributions to a qualified account MUST be accounted for in order to avoid taxes – here are greater details and our taxpayer obligations on this – don’t overpay – the IRS is not tracking this and will not come to the rescue and lower your taxes
All of an individual’s accounts must be included/totaled/value (certain exceptions are made to those continuing to work) to ascertain the needed distribution
Any one account can be used to satisfy the needed distribution (you do not have to take a little from each account, making it easier from an organization standpoint) BUT you must take at least the minimum distribution
Failure to take the mandated distribution amount COULD result in a 100% tax – Break in – our experience has been the IRS is nice about this, but let’s not test them
The mandatory commencement date of RMD’s is the year AFTER you turn 70.5 years young, under current tax law…
If you accept this first year deferral, you will incur two RMD’s in the year you commence your first RMD…
Depending on the situation, it may be advisable to distribute your first year RMD a year early so as not to clump your taxable distribution….
Is your DOB between 7-1-47 to 6-30-48?
Then you turn 70.5 in 2018 and you CAN defer your RMD until 2019, however you will have two RMD’s next year — be careful, large distributions could toss you into an extra tax bracket.
Reach out if you have ANY questions, we have plenty of time, BUT the clock is ticking…
Our comments below, just barely hit the airwaves ….
“It was the Best of Times, it was the Worst of Times
As we look forward, the best part of the year “historically” lies just in our view as we finish the year. Using history as our guide, oddly the first month of the coming quarter has been the most treacherous. Not the time to get to overzealous or glum! “
What is surprising about these comments are that … SO FAR, they have been spot on .. I.e. NO SURPRISES –
Bounce and Re-Test
Using history again as our guide, rarely do market suddenly just go back up – what they do is get their feet under them at some level – called a Test and if they hold then they may be on better footing … This is from earlier in the year, but there are tons of repeat tests like this ….
We will be watching and give you more insights as they unfold…
Company Surprise – Honor
Shhhhh … coming to a newsstand near you (those in Dallas) is ….oh well we cannot say until NEXT FRIDAY- we will be yelling then…
Enough of the heavy stuff, its a Friday … have a good weekend.
The third quarter of 2018 is behind us and the original theme from the first month of the year seems still most appropriate, patience. After rocketing to an unsustainable trajectory in January, the excuse was an over use of a dangerous product, the reality looks to be, we just got too far ahead of ourselves and corrected harshly to a more reasonable trajectory. It was the Best of Times, it was the Worst of Times
As we look forward, the best part of the year “historically” lies just in our view as we finish the year. Using history as our guide, oddly the first month of the coming quarter has been the most treacherous. Not the time to get to overzealous or glum! Earnings Eventually Matter
In our Q4 2018 Capital Market Newsletter Article we discuss in detail the correlation of earnings and capital market movement. This obvious connection does not always hold true in the shorter term as aggressive emotions such as greed and fear overshoot constantly in both directions. Eventually the correlation re-connects and more normal heads prevail, making earnings growth and market growth work in tandem. Interest Rates
The fear of, or at least watching for, an inverted yield curve has grown in popularity. We discussed this item last quarter in great detail. Oddly, when many are looking for an event, it loses it’s predictability. We are not ignoring, and will continue to monitor, but we are concerned at a possible loss of predictively with the crowds of followers swelling. Predictive or not, the FOMC (Federal Open Market Committee) has been slow and open to interest rate increases, so far, and capital markets, the economy and participants are very happy with the increases and have digested them nicely.
Bonds, most effected by interest rates, and one of the safest asset classes tend to feel the headwinds most of higher interest rates. Higher, and increasing rates are initially a headwind, but once the increases stabilize, they become a tailwind, and increased yields push more money into our pockets. This cycle is no different, other than the fact that interest rates we so unprecedented low to begin with, this temporary headwind seems stronger than in other cycles, but it is really not. Look for more details on this subject again in our coming Newsletter.
Have a good start to fall!
Welcome to our Video and Audio Podcast Review of our Q 4 2018 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.
Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page
BREAK IN – Save the date for the Holiday Party
November 17th – Saturday before Thanksgiving – Dallas Athletic Club from 3-5 pm
In this hugely in depth article, first we discuss the effect of earnings eventually driving capital markets, but disconnects can occur. It can even be a good thing for Capital Markets to WAY underperform earnings, as they are this year because in brings valuations back in line.
Here is the key graph
Higher Rates, a Short Term Headwind, Eventually a Tailwind
With sustained lower rates over the last decade, memories have faded on the tugging headwinds that higher rates have – IN THE SHORT TERM – on the mandatory safety asset class of bonds.
Higher rates are a great thing as Bonds/Fixed Income Assets have a place for almost all investors due to their safety and liquidity.
Once the headwinds subside our fixed income investments will have ridden the yield curve higher and begin paying more income in the form of yield – into our pockets – Finally!
Too High of Rates Can Create Trouble
Too high of rates or an overshoot CAN create trouble … or a recession…
Our friends at JPMorgan – historically show that rate is about 5% – yea FIVE percent –
We disagree and think a lower level may now be this tipping point, due to the decade low interest rate level we have just experienced-
Current at two percent, we have a long way to go before getting too antsy
Inverted Yield Curve Update
So far to good- no inversion yet!
Financial Planning
This series of articles came out of no where and in like domino fashion, once one was done the next took form and fell into place-
App of the Quarter – Hardware
Our editor took the fancy picture out due to copyright fears, but our experience with the Firestick has been exceptional – Here are the highlights of our findings
Great Savings compared to just full service in many cases
Does not take as much internet speed as we thought
Hello and Welcome to our September 2018 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format as well as Video too!
Newbies – We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!
This is month two of our upgraded Laptop, which means a new recording system of Audio and Video — while still working the kinks out, we are getting the hang of it – Enjoy!
September 2018 Video
Financial Planning Tip (s) –
The Emergency Fund
In our post here, a shortened version of an article in the coming Newsletter, we review all, about a much needed Emergency Fund, and the levels for certain scenarios.
Reasons to be slightly bigger-
Possible Job Change – Need to be higher on emergency funds
New Family Member- Higher is better
New Home – Expect unforeseen expenses – they always occur (Has anyone ever built or bought a home in less time and for less money than they thought? Nope, it’s in our nature)
Salary Fluctuations i.e. Commissions – Error on the higher side of that emergency fund
Others dependent on you – Business owner, large family, solo income earners, college or wedding – Higher is better
Reasons for a normal to smaller Emergency fund-
Dual Similar Incomes – Lower Emergency fund is ok
Very stable Job – Smaller side of the living expenses will
Very fixed income stability – Pensions, Social, etc.
High Deductibles – Why to Consider
In this post, we discuss the reasons for considering a Higher Deductible lifestyle –
Break In – There are always situations that a High Deductible will not work, we are just pointing out the advantages, under the correct circumstances!
Auto Insurance: One of the best ideas to consider a high deductible – take a look here at the great examples of why.
Home Owners: Another great coverage to consider a higher deductible.
Health Insurance: Once again a good one, but certain situations can easily negate the advantages of this!
Capital Market Comments – Interest Rates and Bonds
Short Term Headwinds Of Higher Rates on Bonds
This busy chart gives a great picture of the short term effects of interest rates on bond. Coming from such an extended long period of unusually low rates, we are reminding ourselves along with everyone else, this is very normal phenomenon and will correct itself with time by putting extra dollars in our pockets in the form of higher yields.
Have a Great Day – Talk to you at the end of October!
The 23rd Annual (YES 23 YEARS!) J.K. Financial, Inc. Holiday Party
SAVE THE DATE
Saturday – November 17th, 2018
from 3-5 PM
We look forward to seeing everyone there and will send out formal invitations soon !
Tricky Spam Link – Fake Amazon
Our newest team member continues to jump into the water … even as we promise it is not cold… haha
Coincidentally .. with our IT folks on the line, Jen’s computer, just by chance began speaking to her and telling her to call Microsoft – Fake number of course –
IT folks quickly took over and fixed the problem — or did they?
A few minutes later after heading back towards amazon again for office supplies, the computer was chirping at us again…
Get this – a fake Google Ad Word hot link was jumping in front of the actual Amazon link – after a few repeat offenses, the link no longer came up – Maybe they used all the funds they had??? No matter, be careful, this was a crafty fake request – no damage though!
Feels like Fall Friday
It’s cool here, and looks to be for a few more days … enjoy your Friday and your weekend, lot’s of video’s coming at you next week – but that is next week!
Have a GREAT “Save the Date, Feels Like Fall Friday” Day!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
Background
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.
We are Surprised by NOT being Surprised … Company Surprise Announcement Next Week – Friday
Our comments below, just barely hit the airwaves ….
“It was the Best of Times, it was the Worst of Times
As we look forward, the best part of the year “historically” lies just in our view as we finish the year. Using history as our guide, oddly the first month of the coming quarter has been the most treacherous. Not the time to get to overzealous or glum! “
What is surprising about these comments are that … SO FAR, they have been spot on .. I.e. NO SURPRISES –
Bounce and Re-Test
Using history again as our guide, rarely do market suddenly just go back up – what they do is get their feet under them at some level – called a Test and if they hold then they may be on better footing … This is from earlier in the year, but there are tons of repeat tests like this ….
We will be watching and give you more insights as they unfold…
Company Surprise – Honor
Shhhhh … coming to a newsstand near you (those in Dallas) is ….oh well we cannot say until NEXT FRIDAY- we will be yelling then…
Enough of the heavy stuff, its a Friday … have a good weekend.
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Investing/Financial Planning, Market Comments
Tagged Retesting, Support