COVID, TAXES, & ECONOMIC UNCERTAINTY
With summer drawing to an end and thus far, a whirlwind of a year, we’re fielding a lot of questions regarding the current markets, the upcoming election impacts, potential future of tax rates, federal stimulus, low interest rates and plethora of other concerns. If any of these have come across your mind, you’re not alone.
Where do we even begin? First off, we love our community and are proud to be a part of it; we hope you are too! In the spring, we saw the effects of COVID-19 on the markets, interest rates, unemployment, etc. For retirement savers, we saw a large sell-off in the markets, with a very unexpected rebound, given the economic disruption and uncertainty. This has led many investors to take a second look at their portfolios and the risks they didn’t realize they were taking, bringing back fears from the not-so-distant Great Recession just over a decade ago. While that took equity market years and years to recover, the rebound in mid-2020 led many to start shifting to more conservative investments.
The “Catch-22” was that along with the market sell off, interest rates have also plummeted to record lows, which may be great for borrowers, like mortgage refinances, but not so great for savers. We saw conservative investments, like bonds and CD rates drop along with it, seemingly getting cut in half overnight. Fixed and Multi-Year Guarantee Annuities have followed but can still be a good place for “safe money”. Upon writing this, many MYGAs still have a 3-year rate of 2.5% and 4-year rate of approximately 3%, tax-deferred. While not historically appealing, this has become a topic of conversation.
Many have looked to alternatives, such as metals or real estate investments to provide real, tangible value for a portion of their portfolio. While many small and mid-cap individual stocks are still depressed, many have also found value in large cap growth and value U.S. stocks.
Another topic we have had recent conversations about are the historic low tax rates we currently find ourselves in to be a good planning tool for many to consider Roth IRA conversions and/or using life insurance both as tax-efficient planning methods for future income. While taxes are never a fun subject, the current rate schedule is set to expire in 2026, reverting to pre-2018 levels. With the federal government spending Trillion$ to battle to effects of the coronavirus, many analysts believe this is the lowest we may see taxes for the foreseeable future. This could be good news for your overall planning if you think your future tax rates could be higher.
Lastly, many have been forced out of their jobs and some, careers, approaching retirement. This lends itself to planning opportunities for 401(k) rollovers, and potentially an income-depressed year. This is a good time to review comprehensive income planning for the future or potential Roth IRA conversions.
As always, if you’d like a complimentary second opinion for your planning or a review, please reach out to Douglas Marion with Advanced Wealth Strategies. Feel free to call or text (704) 765-3653 or email Douglas@PlanWithAWS.com. Their local office is conveniently located at 19520 W. Catawba Ave, Suite 313. Their firm will put your best interests as priority.
Printed in Lakeside Living Magazine. September 2020
Investment Advisory Services offered through AlphaStar Capital Management, LLC., a SEC Registered Investment Adviser. AlphaStar Capital Management, LLC and Advanced Wealth Strategies, Inc. are independent entities. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level or skill or ability. Insurance products and services are offered through Advanced Wealth Strategies by individually licensed and appointed agents in various jurisdictions. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. The views presented here are the views of Advanced Wealth Strategies and does not necessarily represent the views of AlphaStar Capital Management, LLC. Advanced Wealth Strategies does not offer legal or tax advice.