3rd Quarter Newsletter 2022 – Here are 7 Signs The Economy Is Doing Better Than People Think
7 Signs The Economy Is Doing Better Than People Think
Consumer sentiment is depressed, and business owner optimism declined by 18 points in the four months between August and November. Amid the Covid-weary, inflation-battered economy, here are 10 signs the economy is doing much better than most consumers and businesses think.
The U.S. Leading Economic Index (LEI) has soared well beyond heights previously reached in modern history in recent months, and it surged again in November. The index of leading economic indicators is at an all- time high, suggesting the current economic expansion will continue into 2022 and may even gain some momentum in December and into the first quarter of 2022.
Don’t Let Financial Anxiety Bring Out Bad Investor Traits
2022 has been a bad year for investors. After hitting a record closing-price high of 4,796.56 on January 3, the Standard & Poor's 500 index fell into bear market territory on June 13.
Meanwhile, the 12-month Inflation rate soared to a 40-year high, and a Europe ban on buying Russian oil and gas could send energy prices higher and exacerbate Covid- related supply chain problems through the end of the year, further hindering consumer spending, which drives 80% of the U.S. economy.
Inflation, Russia, and the pandemic are risks and any one of them could send stocks tumbling again. It's a time of high financial anxiety. The drop in stock prices could resume.
IRA Strategies For 60- To 72-Years-Olds
Investments in IRAs are the main source of funding retirement income for a vast majority of Americans.
Your IRA is probably crucially important to your retirement success and may also play a role in your estate plan. Trouble is, the rules on IRAs have changed and so has the investment environment, and, as a result, taking a strategic approach is not so easy. Here is a very simplified explanation of strategic planning opportunities triggered under current estate and income tax rules.
The Rules
At age 72, the law requires you start taking money out of an IRA account annually. The required minimum distribution (RMD) is based on an actuarial table of life expectancy, which sounds complicated but don't get hung up on it. All you need to know is that your RMDs are based on your age.
RMDs get taxed. When you withdraw the RMD annually, you will need to pay income tax on the amount withdrawn. A key aspect of IRA strategic tax planning is minimizing withdrawals on IRA accounts to keep as much of your IRA as possible growing without being subject to income tax.
How The Rules Affect You
If you die at age 72 before beginning RMDs from a regular IRA, your family will not be required to take anything out of that regular IRA for 10 years. To be clear, assuming your heirs don't need all or any of the IRA assets you left them, they can escape any taxation of the growth on the IRA for 10 years. That's great! The trouble is, you're dead. This is not a strategy you want to plan on happening. You want to plan to live many years past age 72.
2022 Estate & Gift Tax Planning
The federal exemption from gift and estate taxes doubled from $5.5 million in 2017 to a whopping $11.2 million in 2018! and under current law, the exemption has been continuing to rise annually. Here's what you need to know if you have a multimillion-dollar estate.
In 2022, the exemption from paying gift, estate, and generation skipping taxes, is $12.1 million, and, under current law, it is scheduled to rise to almost $12.9 million in 2025! At the end of 2025, the exemption will be slashed in half! and individuals will only be entitled to a $6.5 million exemption from estate and gift taxes. To be clear, individuals with an estate of $6.5 million estate or more are going to be subject to tax on what they leave their children, according to the current Internal Revenue Code.
“Simplification” Of College Financial Aid Requires Attention Now
The Consolidated Appropriations Act (CAA) of 2021, signed into law December 27, 2020, by President Donald J. Trump, was a massive $2.3 trillion spending bill. At 5,593 pages, Wikipedia says, it was also "the longest bill ever passed by Congress."
Buried in CAA is a section on college-student aid dubbed "FAFSA Simplification." It reduces the number of questions on the Free Application for Federal Student Aid (FAFSA) form from 108 to 36. It affects your college funding financial plan starting in 2022.
A FAFSA form must be completed by current and prospective undergraduate and graduate college students to determine their eligibility for student financial aid for a given academic year. The form must also be submitted to determine eligibility for many scholarships and merit-based college funding programs, in addition to need-based college financial aid.
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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.