We’ve seen some bank failures over the course of the last week and there are questions about systemic risk throughout the entire system. The Fed continues to be hawkish on interest rates. Is this the beginning of something bigger? A big economic downfall that we all need to prepare for? We are going to give you our thoughts on what we think is going to transpire, and how to position your portfolio.
On the Tipping Point, today, we’re going to talk about SECURE Act 2.0. There are huge tax benefits available to you that you might not know about. We’re going to give you the rundown to make sure that you’re on your path to financial independence.
The SVB collapse is not like the great financial crisis.
Silicon Valley Bank was catering to start-ups and the tech community – the area that’s been getting hit the hardest by the Fed taking the punchbowl away. But tech is only one component of the economy. It’s not the overall economy. We think tech is in a rolling recession right now. But if you look at the overall economy, it’s still relatively strong. This is a classic run on the bank.
Never have money in a bank that’s not insured over $250,000 – you can move money around so easily to get a better return on your money.
”Bob and I can attest, we started our firm during the great financial crisis, man, it was dire out there. People weren't spending money.Ryan Payne
People were losing jobs left and right. Now it's just a whole different environment.
Will this cause the Fed to pivot?
Most of the strategists are now saying no increase for Fed funds next week.
Hopefully, this is the beginning of the end for the Fed with its tightening policy. With the bank collapse, we have something broken now. And clearly, you don’t want to keep pushing those interest rates up and up and up, so you actually derail the overall economy. I don’t think that’s the Fed’s goal here.
”A lot of our clients are saying, hey, I could get a treasury yielding 5% ...why don't we just invest our money in that? But what happens in a year if rates have gone down, they need to reinvest their money.Chris Payne
It’s a really good opportunity to buy stocks.
Ignore the noise.
Inflation’s coming down, interest rates are cooling off and the job market’s hot. Meanwhile, companies are going to buy back close to a trillion in stock this year. Valuations are reasonable. This is a very good time to be an investor. You don’t want to just put your head in the sand or park your money in short-term treasuries and CDs. You’ve got a great opportunity to invest for the long term.
We believe the 10-year Treasury peaked at 4.25% back in October
When you look at the valuation of stocks, there are two things to consider – earnings and interest rates. If interest rates are coming down and we’re going to have a soft landing or no landing in the economy, we’re going to have good earnings. So that makes stocks, while they’re down right now, a really good opportunity to buy.
”You've got a great opportunity to invest for the long term.Ryan Payne
The Tipping Point
SECURE Act 2.0
The biggest adjustment in 20 years
There are a lot of great tax benefits within this new act that everyone should know about:
- The gift tax exclusion was raised from $15,000 to $17,000
- The limits for 401k, IRA, and Roth IRA contributions have all gone up this year
- You can donate up to $100,000 of your RMD directly to a charity and not pay taxes on that money
- The RMD age increases to age 73 – giving you more time to take money out before then and convert it to a tax-free Roth IRA
- Up to $35,000 of leftover money from your 529 college plan – can now be rolled into a Roth IRA for the beneficiary
”Somebody my age, can do a catch up, can put as much as $30,000 a year into their 401k, their 403b, their Roth..Bob Payne
”This is huge because for most of you, your retirement accounts become a ticking tax time bomb.. you probably put a ton of money into these retirement accounts because there's great tax benefits. But you've got to pay when the money comes out.Ryan Payne
Hidden Facts of Finance
Boosting personal income in 2023 is the 8.7% COLA increase received by 70 million Americans in their Social Security benefits that started in January. That adds up to another 117 billion and additional pretax personal income this year.
Despite a bear market, S&P 500 dividends last year grew to a record $562.9 billion.
The Securities and Exchange Commission fined the Mormon Church and its asset manager Ensign Peak Advisors $5 million for setting up 13 shell companies across the U.S. to hide its largest holdings from 1997 to 2019. The Wall Street Journal estimated in 2019 that the Mormon portfolio was as large as $100 billion.
In 1994, Warren Buffett’s Berkshire Hathaway completed its seven-year purchase of 400 million shares of Coca-Cola that they still own today. The total cost is $1.3 billion. The cash dividend that Coke received back in 1994 was $75 million a year by the end of last year. That same dividend is now $704 million a year.