Weekly Market Commentary – December 10, 2018

We’re off to a slow start.
December is usually the best month of the year for the stock market. It has been since 1950, according to Randall Forsyth of Barron’s, but not so far this year.

Two issues made investors particularly uncomfortable last week which helped trigger a sell-off that pushed major U.S. stock indices lower.

  1. Fading optimism about an easing of trade tensions with China. It looked like the relationship between the United States and China might thaw, and Americans were feeling pretty optimistic about a trade truce. In fact, markets moved higher Monday in anticipation.

Unfortunately, on the same day that Presidents Trump and Xi Jinping shared a cordial dinner, the chief financial officer of a major Chinese telecommunications firm was arrested at the request of the United States. The Economist reported, “[The company] is a pillar of the Chinese economy – and Ms. Meng is the founder’s daughter. The fate of the trade talks could hinge on her encounter with the law.”

  1. A section of the yield curve inverted. Normally, Treasury yields are higher for longer maturities of bonds than for shorter maturities of bonds. Last week, yields on three-year and five-year bonds inverted, meaning yields for three-year bonds were higher than those for five-year bonds. Ben Levisohn of Barron’s explained:

“Usually when people talk about an inversion, they’re talking about the difference between two-year and 10-year Treasuries, or three-month and 10-year Treasuries, which have been useful, though not perfect, predictors of recessions and bear markets. Last week, though, everyone was talking about the three-year and the five-year Treasury inverting – something that usually doesn’t get much notice…And for good reason.”

Historically, these maturities have inverted seven times. In one instance, the country was already in recession. On the other six occasions, recession didn’t occur for more than two years. Barron’s reported the Standard & Poor’s 500 Index gained an average of 20 percent over the 24-month periods following these inversions.

Investors’ negative response to last week’s news may have been overdone. Financial Times reported European and Asian markets firmed up a bit Friday “…as buyers stepped back in after some savage falls on Thursday.”

About time and money.
Elizabeth Dunn, associate psychology professor at the University of British Columbia in Vancouver, Canada, and Michael Norton, associate marketing professor at Harvard Business School, have been studying whether people should spend money differently. Their goal is to figure out how to get the most happiness for the dollars spent. In Happy Money: The Science of Happier Spending, they explained their experiments:  “…We started doling out money to strangers. But there was a catch: rather than letting them spend it however they wanted, we made them spend it how we wanted…changing the way people spent their money altered their happiness over the course of the day. And we saw this effect even when people spent as little as $5…Shifting from buying stuff to buying experiences, and from spending on yourself to spending on others, can have a dramatic impact on happiness.”

In addition, buying time can improve happiness. How do you buy time? By paying someone else to do tasks you don’t like to do – cleaning, grocery shopping, home maintenance, and other tasks. This can relieve time pressure and free up time to do what you really want to do – and that can make you happier.

The authors suggest individuals ask a simple question before making any purchase: How will this purchase change the way I use my time? Make sure the answer aligns with the goal of having an abundance of time.

Weekly Focus – Think About It
“Happiness is when what you think, what you say, and what you do are in harmony.”
–Mahatma Gandhi, Leader of Indian independence movement

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

 

 

Sources:
https://www.barrons.com/articles/the-latest-jobs-report-will-tie-the-feds-hands-next-year-1544208693?mod=hp_DAY_1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_Barrons-Its_the_Stock_Market_Stupid-Footnote_1.pdf)
https://www.economist.com/finance-and-economics/2018/12/08/a-trade-truce-between-america-and-china-is-over-as-soon-as-it-began (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_TheEconomist-A_Trade_Truce_Between_America_and_China_is_Over_as_Soon_as_it_Began-Footnote_2.pdf)
https://www.barrons.com/articles/dow-drops-4-5-but-the-market-is-probably-overreacting-1544234320?mod=hp_DAY_6 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_Barrons-Dow_Drops_4.5_Percent_as_the_Market_Panics_Over_Everything-Footnote_3.pdf)
https://www.ft.com/content/2cda1c8a-f9be-11e8-8b7c-6fa24bd5409c (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_FinancialTimes-Trade_War_Concerns_Keep_US_Stocks_Under_Pressure-Footnote_4.pdf)
https://www.simonandschuster.com/books/Happy-Money/Elizabeth-Dunn/9781451665079 (Click on About the Author)
https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_Book_Excerpt-Happy_Money-The_Science_of_Happier_Spending-Footnote_6.pdf
https://www.brainyquote.com/quotes/mahatma_gandhi_105593

Trade War Update

For about a week after Thanksgiving, market volatility was like the rest of us – sleepy and stuffed with turkey. The markets themselves took advantage, with the S&P 500, Nasdaq, and Dow all posting their biggest weekly gains in years.1 And on Monday, after President Trump announced a tariff “ceasefire” between the U.S. and China, the Dow rose 288 points.2

Just think of it as the calm before the storm.
On Tuesday, the Dow fell like an anvil in a Warner Bros. cartoon, dropping 799 points.3 Wednesday provided a brief respite, with the markets closed in honor of President George H.W. Bush’s passing. But on Thursday, gravity kicked in again. The Dow dived as much as 785 points early in the day, and the other major indexes slid, too.4

For years, investors watched happily as the markets rose higher and higher. But the last few months have been turbulent. It’s a reminder that volatility is simply an unfortunate fact of life. And like a thunderstorm on a day you hoped would be sunny, or road construction when you’re most in a hurry, volatility never comes at a good time.

Make no mistake, volatility can be frustrating – and even a bit scary. After all, when we talk about your investments, your portfolio, we’re not talking about some abstract concept. This is your money. Your retirement savings. Your hard-earned future. However, in my experience, the more we understand why something is the way that it is, the less scary it becomes. So, let’s examine the cause behind this week’s volatility before discussing what to do about it.

No New Tariffs – But Plenty of New Tensions
In this case, the cause of this week’s volatility is relatively simple: Trade.
You know, of course, that the United States and China have been engaged in a trade war for some time now. Each nation has levied billions in tariffs on the other’s products – and whenever a new salvo of tariffs is launched, the markets react by pulling back.

It’s not hard to understand why. Tariffs – essentially a tax on imported goods and services – often hurt businesses. That’s because higher tariffs often lead to higher prices, which in turn lead to higher expenses. For example, if companies must pay more for the raw materials they need, that can significantly eat into their own profits. This, in turn, can lead to shipping delays, supply chain problems, higher prices for consumers, a resulting loss of business, you name it. All these issues, of course, are then reflected in the stock prices of the various companies affected.

But this week’s volatility wasn’t caused by a new spate of tariffs. In fact, on Saturday, December 1, the U.S. and China actually agreed to a “ceasefire” on any new tariffs. President Trump agreed to maintain tariff levels at their current level and not raise them to 25% as he had previously promised. China meanwhile, promised to purchase a “substantial” amount of agricultural goods from the U.S.5

The markets love news like this, and promptly threw a party. As mentioned, the Dow rose 288 points on Monday largely in celebration.

But as so often happens after a party, the markets woke up on Tuesday with a hangover. Both the U.S. and China pumped the breaks, suggesting that discussions to end the trade war could certainly fail. And then investors remembered that there are still billions in tariffs already in place that are having a marked effect on many companies and industries.

The Dow fell almost 800 points.3
Trade war fears worsened on Thursday because someone got arrested. It sounds bizarre, but it’s true. Canadian law enforcement, by request of the United States, arrested a top executive at one of China’s biggest technology companies. It’s still unclear why, but the result is what we care about. In this case, the result was another major market drop. Why do the markets care? Because the arrest was a stark reminder of the tensions that still exist between the U.S. and China – tensions that will probably be exacerbated by this development.

But there’s another factor in play.
I said before that the markets have risen higher and higher over the years, but that the last few months have been turbulent. You’ve probably noticed in the news that pundits are raising the question more and more: When will the next bear market return? When will the next recession hit? When will the bull market officially be over?

When we’re not careful, we as human beings often transform our fears into a self-fulfilling prophecy. Right now, there seems to be a kind of fragility to the markets. People have been expecting volatility for months now, so it’s easy to interpret every bit of news as bad. Whether that’s right or wrong is something each person must decide for themselves. But it’s a fact that the only thing fear can create is more fear.

Fear is a virus – it infects, and it replicates. And the more volatile things become, the more volatility starts to look like a symptom of that virus.
Okay. So that’s why volatility struck so hard this week. The question is, what do we do about it?

A few things:
First, we need to remember that volatility is normal. In this case, we knew the trade war was far from over. We knew that at some point, it would cause the markets to collectively shudder. Knowing that it’s normal doesn’t make volatility fun. Again, who enjoys looking at the news and wondering what’s going to happen to their retirement savings? But it should make volatility a little less scary.

The second thing to do is remember that we have a long-term plan in place – a plan in which volatility is already factored in. We’ve laid out a specific path to those goals – and the plan assumes there will be bumps, setbacks, and even a wrong turn or two along that path. It really is like driving a car, if you think about it. Smart drivers give themselves extra time to reach their destination, so when they hit the inevitable detour or traffic jam, it doesn’t ruin their journey.

That’s what we’ve tried to do with your finances. Volatility – even prolonged volatility – is a detour, not a derailment.
The third thing to remember is that my team and I are constantly monitoring your portfolio. We’re not forecasters, trying to predict which way the markets will go next, because that’s a fool’s errand. Drivers who do that often end up going in circles. Instead, we watch your progress in real time, always asking if what’s happening now necessitates a course correction or not. Day-to-day swings in the markets rarely do, just like a pothole in the street doesn’t make you choose a different road. But should the road ever get too bumpy – bumpier than your portfolio can handle – we’re prepared to make changes.

Which brings us to the final thing you should do: Enjoy your holidays! Spend time with family. Go caroling. Argue about where to place the holiday decorations this year. Do all the things you’d rather be doing this time of year.

There’s really nothing good to say about the markets right now, or about the trade war. But here’s what I can say: Don’t stress about it. That’s my job. My team and I will keep monitoring the markets – and your portfolio – every single day. If we need to make any changes, we will let you know immediately. In the meantime, you concentrate on what really matters. Family. Friends. Spreading goodwill and cheer. And remember that if you have any questions or concerns, that’s why we’re here.

From all of us here at Research Financial Strategies, have a wonderful holiday season!

1 “Wall Street rises on trade hopes,” Reuters, November 30, 2018. https://www.reuters.com/article/us-usa-stocks/wall-streetrises-on-trade-hopes-sp-nasdaq-post-best-weeks-in-7-years-idUSKCN1NZ1EZ

2 “Dow rises 288 points on US-China trade ceasefire,” CNN Business, December 2, 2018. https://www.cnn.com/2018/12/03/investing/stock-market-today-dow-jones/index.html

3 “Dow Tumbles Nearly 800 Points as Trade Jitters Return,” Wall Street Journal, December 4, 2018. https://www.wsj.com/articles/dow-tumbles-nearly-800-points-as-trade-jitters-return-1543959007?tesla=y

4 “U.S. Stocks Fall Sharply on Arrest of Huawei CFO,” The Wall Street Journal, December 6, 2018. https://www.wsj.com/articles/s-p-futures-tech-stocks-tumble-after-huawei-cfo-arrest-1544075565

5 “Trump agrees to freeze higher tariffs,” CNN Politics, December 2018. https://www.cnn.com/2018/12/01/politics/trump-chinatariffs/index.html

Social Security Increases Benefits by 2.8% for 2019

The pay raise for Social Security recipients is the largest since 2012, and over 67 million Americans will see the increase in their payments beginning in January.

 The Social Security Administration has announced a cost of living adjustment (COLA) to recipients’ monthly Social Security and Supplemental Security Income (SSI) benefits. More than 67 million Americans will see the 2.8% increase in their payments beginning in January of 2019. The increase – the largest seen since 2012 – is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers and was put in place to ensure the purchasing power of these benefits isn’t eroded by inflation.

This figure is an increase from last year’s 2.0% adjustment. According to the Social Security Administration, on average, retired workers currently collect $1,420 a month in Social Security payments, or roughly $17,040 a year. The 2.8% COLA will add about $50 a month to those payments, or $600 for the year.

Keep in mind, all federal benefits must be direct deposited. So, if you haven’t already started receiving benefits, you need to establish electronic transfers to your bank or financial institution.

The agency also announced that for the first time, most people who receive Social Security payments will be able to view their COLA notice online through their “my Social Security” account, which can be created online at www.socialsecurity.gov/myaccount

Happy spending!

 

 

Source: Social Security Administration

Weekly Market Commentary – December 3, 2018

Hold on to your hats!
Recently, stocks have delivered a wild ride. During Thanksgiving week, U.S. stock markets took investor uncertainty on the chin, suffering a 3.8 percent drop, which was the worst performance in eight months. Then, last week, stocks reversed course. The Standard & Poor’s 500 Index and the Nasdaq Composite delivered their strongest weekly gains in seven years, reported Ben Levisohn of Barron’s.

So, what changed?
Two things appear to have influenced investors last week:

The Federal Reserve may be becoming more dovish on interest rates. Comments made by Fed Chair Jerome Powell were interpreted to mean the Fed could stop raising the fed funds rate after December. Thomas Franck of CNBC reported:

“Powell on Wednesday said that rates were ‘just below’ the level that would be neutral for the economy – meaning they would neither speed up nor slow down economic growth. The comment diverged from a previous remark from Powell that rates were a ‘long way’ from the bank’s aimed neutral level.”

Some analysts have pondered whether recent rate hikes have been a mistake that will lead to recession.

Trade tensions between the United States and China could be resolved. President Trump and President Xi Jinping will have a confab following the Group of 20 (G-20) meeting in Buenos Aires. Randall Forsyth of Barron’s offered this insight:
“The best case that can be reasonably expected is for a truce to be declared between the United States and China, to allow talks to continue over the thorny issues of trade barriers and intellectual property. And, equally important, to avoid the consequences of the imposition of even more draconian tariffs on the world economy.”

There is little doubt volatility feels a lot better when share prices move higher than when they move lower. While uncertainty remains elevated, we may see additional jolts up and down. It may be a good idea to ensure your portfolio is well allocated and diversified. Holding diverse assets and investments won’t prevent losses during downturns but it can help minimize losses as investors pursue of long-term financial goals.

Four Fabulous holiday gift ideas for your pet…If you’re a pet owner – and most Americans are – you may be looking for the perfect holiday gift for your dog, cat, bird, bunny, or reptile. Some pet owners will spring for a heated pet bed, a sparkling holiday sweater, or a new grooming set. Others may opt for a decadent pet treat.

Here are some of the indulgences available for today’s pets:

  • A stay at a luxury cat hotel. Why not give your favorite cat the holiday of his or her dreams? Five star catteries have been established in Yorkshire and Kuala Lumpur (and, possibly, elsewhere). The VIP package in England includes, “…bedtime stories, catnip experience, relaxing Spa package, or a juicy prawn plate from [the] a la carte menu.”
  • A relaxing day at the guinea pig spa. The British really know how to spoil their pets. Guinea pigs who travel to the English countryside can receive, “…the full works: a body massage with oils; full shampoo, condition, and blow-dry; haircut and styling; feet and ear massage; nails trimmed and filed; and even a photo shoot of the transformed pet.”
  • A case of pooch hooch. Breweries and pubs around the world have begun to accommodate our desire to share all aspects of our lives with our faithful canine companions. Patrons can bring their pets to the bar and buy them a drink or a case of dog beer. According to VinePair.com, “Dog beer is non-alcoholic, un-carbonated, and doesn’t contain hops. It does contain malt extract, along with a bevy of other healthy-for-dogs ingredients, so you might think of it like a nutritional homebrew, without the fermentation.”
  • A few bottles of feline wine. You know how it is. The hounds are happy with dog grog, but cats have more refined tastes. They may prefer a pack of ‘MosCATo’ or ‘Pinot Meow’ – and now they can have it. One animal wine provider described its mission this way: “Our cat wine and dog wine creations started like any other radical idea…a product designed to help bridge the social divide between humans and their pets.” What better way to ring in the New Year?

Don’t fret if you haven’t found just the right gift yet. Pets are usually appreciative of whatever you give them.

Weekly Focus – Think About It
“Owners of dogs will have noticed that, if you provide them with food and water and shelter and affection, they will think you are a god. Whereas owners of cats are compelled to realize that, if you provide them with food and water and shelter and affection, they draw the conclusion that they are gods.”
–Christopher Hitchens, author and journalist

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

 

Investment advice offered through Research Financial Strategies, a registered investment advisor.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* Consult your financial professional before making any investment decision.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

 

Sources:

https://www.barrons.com/articles/s-p-500-notches-its-best-week-in-seven-years-1543625065 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-03-18_Barrons-S_and_P_500_Up_4.8_Percent-Notches_Its_Best_Week_in_7_Years.pdf)
https://www.cnbc.com/2018/11/30/bond-market-fed-minutes-g-20-summit-and-us-china-trade-in-focus.html
https://www.brookings.edu/blog/up-front/2018/10/12/wessels-economic-update-are-the-feds-interest-rate-hikes-a-mistake/
https://www.barrons.com/articles/what-this-market-really-needs-from-the-g20-1543593590 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-03-18_Barrons-What_this_Market_Really_Needs_from_the_G-20-Footnote_4.pdf)
https://www.theingsluxurycathotel.co.uk/v-i-p/
https://www.thetimes.co.uk/article/guinea-pigs-in-blankets-z59hck96s
https://vinepair.com/articles/best-dog-beer-guide/
https://www.apollopeak.com/pages/about-us
https://www.goodreads.com/quotes/tag/pets

End of Year Financial Tips

I guess I do not have to remind you that the end of the year is quickly approaching? Holiday lights are popping up around the neighborhood and retailers are rolling out their seasonal displays. And it is only a matter of time before your social media feeds are flooded with daily reminders as well.

With all this holiday cheer in mind, I have compiled a list of end of the year tips. Whether you’re currently working and saving for retirement, approaching retirement, or embarking on new post-retirement adventures, here are some core tax, planning, and financial housekeeping things to do.

  • Be sure you have taken your RMD for the year.  Remember, RMD stands for Required Minimum Distribution.  This starts when you hit 70 ½ and goes until you pass away (actually, it could go longer with inherited IRAs, but that is for another conversation).  RMDs are not terribly difficult to calculate if you want to do it yourself.  However, be sure to take it, otherwise the penalty is 50%!
  • If you have a CPA prepare your taxes, give them a call to make sure there are not any end-of-the-year tax moves they may recommend.
  • Empty out your Flexible Spending Account (FSA), unless your employer allows some of the unused funds to be rolled over.  Please don’t confuse this with a Health Savings Account (HSA), as the FSA is geared more toward immediate health-related expenses, and includes a use-it or lose-it feature for the calendar year.
  • Consider charitable giving. Keep track of your donations to charities in all forms—and consider strategies that may qualify you for larger tax deductions.
  • Just in case you inherited an IRA, you may have RMDs to deal with here as well.
  • If someone who was RMD eligible passed away during the year and did not take out all their RMDs, you need to complete this by paying them out to the beneficiaries.  Again, 50% penalty if not done.
  • If you haven’t maxed out your 401k/403b/457 this year and can afford to, reach out to your benefits department to see if you can contribute more the last few paychecks of the year so it is maxed out.
  • It is a good idea to check your credit report for errors at least once a year to help catch fraud or reporting mistakes
  • Speaking of maxing out retirement plans, be sure to increase your plan contribution rates for next year when the retirement plan savings rates bump up.
  • Charitable IRA Contributions also need to be made by the end of the year.  This is where you can take your RMD (up to $100,000), and direct it to a charity of your choice.  If fulfills your RMD requirement and is not taxed to you.  Just make sure it goes directly to the charity.  You do NOT want it to come to you first and then you give it to the charity.
  • Be sure to check the beneficiary information on your plans.  If you have not updated the beneficiary information recently, it is a best to ensure it is up to date.  This includes contingent beneficiaries also.
  • While you are on a roll, check your personal information on all of your statements too.  You know, like the home address, phone number and current email addresses.

Take the time to give your finances a year-end checkup. Do you want to feel in control of your money and on top of things?  Doing this before year-end allows you ample time to take the necessary steps to potentially save on 2018 taxes and set up your investments for success in 2019—without putting a damper on your holiday cheer.

There are important financial housekeeping tasks that you can tackle at any time of the year, like repricing your car insurance or checking your credit reports.  But December 31 only comes once a year, and there are many key financial deadlines to meet before then.  So, get started now, and use the year-end to make tax-smart moves that can help set you up for a prosperous new year.

End of Year Financial Tips, Rockville, Financial Advisor, Bethesda, Investment Advisor, Retirement, Gaithersburg, Retirement Advisor, Potomac, Retirement