It’s hard to believe we’ve come to the end of another year. Time passes much too quickly. And each year passes faster than the one before it – at least in our minds. I attribute this feeling to basic math. As we age, each year represents a smaller portion of our life. That makes it feel shorter in context. For example, our 10th year equates to 10% of our life. Our 50th year represents only 2%.
This will be the last edition of “Apprise’s Five Favorite Reads” for 2022. I hope you have had a good year and wish you a happy, healthy, and prosperous 2023. This week I have shared some articles that I think can help you finish your year on a strong note and get off to a good start in 2023 as well.
With this being the holiday season and a time for family and friends, I’m going to get right to this week’s stories. Happy New Year. I look forward to speaking with and sharing more content and ideas with you in 2023.
Here are the links to this week’s articles as well as a brief description of each:
1. 10 Key Things to Think About in Your New Year Financial Planning.
Many expect that the U.S. economy will enter a recession in 2023. Additional rate hikes may also be in store. That could make 2023 a challenging year. Why do I say could rather than should or will? The economy is unpredictable. We don’t know for sure what will happen. If you look back to last December, you’ll find most expected the market to rise this year. The inflation we’ve seen wasn’t on investor’s radar. The war between Russia and Ukraine wasn’t expected either. While we can’t do much to influence the global economy or geopolitical events, we can take steps to ensure our finances leave us prepared for whatever may happen in the year ahead. The first item on the list is one we remind clients about regularly. You should audit the beneficiaries on all your savings, insurance, and retirement plans and make sure the beneficiary is who you want it to be. (For more information, including a checklist, please check this blog.) Now would also be a good time to increase the withholding percentage for your retirement accounts. In 2023, you can save $22,500, up from $20,500 in 2022. Check the link for eight more suggestions.
2. End Your Year Intentionally with These 10 Questions.
We often feel excited as we get ready to start a new year. We make plans and resolutions. After the year begins our plans may fall by the wayside. We may resolve to make the same changes year after year. Instead of looking forward this article suggests that we shift our focus to review the year that’s ending before we start thinking about the year to come. This can allow us to savor our successes. It can also remind us that we can change. Consider both your successes and your regrets. We can appreciate what went right and think about what we can learn from our mistakes. Consider working through these questions before the year ends. I, for one, appreciated the exercise.
3. 2 Ways Retirees Can Defuse a Tax Bomb (It’s Not Too Late!).
While we are working and saving for retirement and other future goals, objectives, or desires, we accumulate assets. We follow one set of tax rules. When we stop working, we spend down the assets we’ve accumulated. Some don’t realize that we have to pay taxes when we pull money out of accounts such as our IRAs or 401k’s. Did you know you may be sitting on a tax “bomb” when you retire? If so, what can you do? The basic issue starts with the required minimum distribution(s) (RMD) you must take from your retirement account(s). The author suggests two ways you can meaningfully improve on the situation: asset location and Roth conversions. Asset location refers to considering the expected returns, growth potential, and overall income characteristics of different assets when determining which type of account – from a tax perspective – to hold them in. Considering an asset’s location, can reduce the overall amount of tax you pay as you withdraw money from your retirement accounts. Roth conversions may help you reduce the tax cost of withdrawing funds from your IRAs and 401k’s. They may also help reduce income-based Medicare surcharges. If you’d like some help determining how these strategies could benefit you, please schedule a free call.
4. Here’s the No. 1 thing that makes relationships successful, say psychologists who studied 40,000 couples.
The psychologists who contributed to this article studied more than 40,000 couples about to begin couples therapy. In a lab study, after only 15 minutes of observation, they predicted with 94% accuracy whether a marriage would last. What was one of the biggest determining factors? How often they turned toward rather than away from each other. What does that mean? How does it differ from turning either away or against? Why does turning toward provide a greater sense of connection? Read the article to learn more.
5. Sea Change.
Oaktree Capital’s Howard Marks does not write on a regular schedule. I shared a recent memo of his only two weeks ago. Marks provides the following definition of a sea change: “a complete transformation, a radical change of direction in attitude, goals …” Marks has 53 years of investment industry experience. He remembers only two sea changes during his career. The first related to the expansion of the bond market that allowed investment managers to buy bonds of almost any quality as long as they were compensated for the related risk. This led to a change in investor mentality resulting in risk not necessarily being something to be avoided. Instead it was considered relative to return and could be borne intelligently. The second related to the declining-interest rate environment that lasted for four decades. He wonders if we are experiencing a third. Investors can now potentially get solid returns from credit instruments. (See, for example, this blog.) This means they may no longer have to assume risk to achieve their overall return targets. I recommend that you check out the full memo. I think you’ll find it a worthwhile read.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
