Bi-Weekly Market Insights 9-28-22 End of the Year To-Do List

Hi {Firstname},

Opinion

We are coming up on the end of year To Do’s in the world of finance, so as a reminder, here are some (not all) topics and things to keep in mind.

IF YOU HAVE KIDS or GRANDCHILDREN:

Make sure to make your contributions to your 529 plans by Dec 15th. Many custodians are on limited staff late in the year and you run a BIG risk of not getting your contribution credited in time if you wait until Dec 31st.

• Max contribution per beneficiary (one owner and one beneficiary per account) is $16,000 per donor, per beneficiary.
• Contribution Amount for max tax credit of $1,000 for Indiana’s plan is $5,000 per tax return. Not per account.

Q: Can kids have multiple 529 accounts?

• Yes, just do not forget to make sure that the max contribution limit is obeyed regardless of the number of accounts they have.

Q: Can you use 529 accounts to pay for private HS?

• Yes, depending on which state you are in.

Q: Can you contribute lump sums or does it have to be monthly?

• Either way is fine.

IF YOU TURNED 72 in 2022:

You are required to take a RMD (Required Minimum Distribution) from your Traditional IRA by April 1st of 2023 to avoid a penalty. Do NOT wait until March 31st to put in that request as you are running the risk of not getting it recorded in time and will incur an IRS penalty.

• If you have multiple IRA accounts, then you can choose to take each RMD from its own account or combine the RMD’s and take it from a single account, does not matter.
• If you miss the April 1st deadline, you will be assessed a 50% penalty on the amount of the RMD.
• This does NOT apply to ROTH IRA’s
• If you are still employed FULL TIME, you are not required to take your RMD until you are part-time or separated service fully.
• If your money is still inside your 401K / 403B / 457B plan from work and you are retired, then you must take that RMD from that account separately based on it’s December 31st value of 2021.
• If you have an inherited IRA (beneficiary IRA), then it’s RMD cannot be taken from any other IRA.

IF YOU ARE 73 OR OLDER IN 2022:

Your RMD is based on your Dec 31st balance of your IRA and will be required to be taken by year’s end. DO NOT wait until December 31st to put in your request or you will miss your deadline and incur a penalty.

Each year, your RMD amount will change based on 2 factors.

1. Value at year end of previous year.
2. The percentage of your RMD based on your age. Each year, the % increases.
   1. If you miss the deadline, you will incur a penalty of 50% of the RMD amount for that year.

SOLO-401K: (this is not tax advice, consult your tax advisor)

If you have a SOLO-401K, you have until December 31st to make employee contributions. Employer matching contributions can be made until April 15th of 2023.

• If you are under age 50, your maximum allowable contribution as the employee is $19,500.
• If you are over age 50, your maximum allowable contribution as the employee is $19,500 + $6,500 catch up.
• Maximum allowable amount of Employer profit share/matching contribution is 25%
• Maximum allowable total cannot exceed $61,000 for those over age 50 not counting catch-up contributions.

SEP IRA: (this is not tax advice, consult your tax advisor)

• If you have a SEP IRA, you have until April 15th to contribute. Your maximum contribution is $61,000 or 25% of your Net Earnings (if you are a sole-P or LLC), whichever is less.
• This plan does NOT allow for any employee contributions, only employer which explains the deadline being tax day and not December 31st.

Sources:

http://smartasset.com/investing/529-plan-contribution-limits

http://www.irs.gov/retirement-plans/retirement-plans-faqs-regardingrequired-minimum-distributions

http://www.irs.gov/retirement-plans/one-participant-401k-plans

http://www.irs.gov/retirement-plans/retirement-plans-faqs-regardingseps#contributions

http://www.irs.gov/retirement-plans/self-employed-individualscalculating-your-own-retirement-plan-contribution-and-deduction

General Market Commentary

Last week, Fed Chair Powell said the U.S. would not tame inflation without economic pain. This week heightened recession fears and sent stocks broadly lower.

The Dow Jones Industrial Average dropped 4.00%, while the Standard & Poor’s 500 lost 4.65%. The Nasdaq Composite index fell 5.07% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 3.05%.^1,2,3

Yields Surge, Stocks Tumble

Last week’s meeting of the Federal Open Market Committee (FOMC) proved unsettling for the financial markets. It wasn’t only the widely expected announcement of another rate hike but a more hawkish message that rates may be heading higher for longer than anticipated. Fed officials indicated that any policy change might be further off than investors had contemplated.

The latest rate hike caused bond yields to rise, with two-year and ten-year Treasury note yields touching levels not seen in over a decade. Global central banks moved in tandem with the Fed, as the Bank of England, Swiss National Bank, and Norway’s Norges Bank, among others, also hiked rates.^4,5

Another Rate Hike

In its effort to cool inflationary forces, the Federal Reserve raised interest rates by 0.75% last week—the third consecutive rate increase of that size. Projections by FOMC members suggested that interest rates may increase by as much as 1.25 percentage points before year-end.⁶

The FOMC also projects that unemployment will rise to 4.4% by December 2023. This projection is up from its current level of 3.7%, and that core inflation will be 4.5% by year-end. In June, Fed officials projected core inflation would be at 4.3% by year-end. They also indicated that interest rates may reach as high as 4.6% in 2023, without any rate cut likely until 2024.⁷

This Week: Key Economic Data

Tuesday: Durable Goods Orders. Consumer Confidence. New Home Sales.

Thursday: Jobless Claims. Gross Domestic Product (GDP).

Friday: Consumer Sentiment.

Source: Econoday, September 23, 2022

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Wednesday: Cintas Corporation (CTAS), Paychex, Inc. (PAYX).

Thursday: Micron Technology, Inc. (MU), Nike, Inc. (NKE).

Source: Zacks, September 23, 2022

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

“People are like stained-glass windows. They sparkle and shine when the sun is out, but when the darkness sets in, their true beauty is revealed only if there is a light from within.”

– Dr. Elisabeth Kübler-Ross

Tax-Deductible Educator Expenses

The educator expense deduction allows eligible teachers and administrators to deduct part of the cost of technology, supplies, andtraining from their taxes. In this case, an “eligible educator” is a taxpayer that is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide. They must work at least 900 hours a year at a school that provides elementary or secondary education.

In 2022, educators can deduct up to $300 of trade or business expenses not reimbursed by their employer, a grant, or another source. Some examples of covered expenses include:

• Professional development course fees
• Books
• Supplies
• Computer equipment
• Other classroom equipment
• Personal protective equipment (masks, disinfectant, etc.)

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁸

Choose In-Season Produce This Fall

Eating healthy is essential to keep you and your family feeling good as the days get shorter and the temperature drops. One of the easiest ways to incorporate fresher, riper produce into your meals is to buy in-season items. Generally, in-season produce, harvested at the right time, is full of flavor and nutrition. Plus, sometimes fruits and veggies cost less when they're in season!

Here are some healthy picks that are in-season during the fall:

• Apples
• Beets
• Brussels Sprouts
• Carrots
• Cauliflower
• Pumpkin
• Winter squash
• Raspberries
• Celery

What are some of your favorite fall produce items?

Tip adapted from the US Department of Agriculture⁹

Alexandra’s mom had four children. The first one was named May, the second was named June, and the third was named August. What was the fourth child's name?

Last week’s riddle: We all have one, and even though it often demands an answer, it offers no question. What is this everyday item? Answer: A phone.

Sunken Tamblingan Temple, Ubud, Bali, Indonesia.

Footnotes and Sources

1. The Wall Street Journal, September 23, 2022

2. The Wall Street Journal, September 23, 2022

3. The Wall Street Journal, September 23, 2022

4. The Wall Street Journal, September 22, 2022

5. CNBC, September 22, 2022

6. The Wall Street Journal, September 21, 2022

7. CNBC, September 21, 2022

8. IRS.gov, February 24, 2022

9. SNAP-Ed Connection, U.S. Dept. of Agriculture, June 1, 2022

Investing involves risks, and investment decisions should be based on your own

goals, time horizon, and tolerance for risk. The return and principal value of

investments will fluctuate as market conditions change. When sold, investments may

be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not

materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered

representative of their respective markets. Index performance is not indicative of the

past performance of a particular investment. Indexes do not incur management fees,

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performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally

considered representative of large-capitalization companies on the U.S. stock market.

Nasdaq Composite is an index of the common stocks and similar securities listed on

the NASDAQ stock market and is considered a broad indicator of the performance of

technology and growth companies. The MSCI EAFE Index was created by Morgan

Stanley Capital International (MSCI) and serves as a benchmark of the performance

of major international equity markets, as represented by 21 major MSCI indexes from

Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an

unmanaged group of securities that are considered to be representative of the stock

market in general.

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