Apprise’s Five Favorite Reads for the Week of September 19, 2021

Neon Sign with Words Use Your Brain
Articles discussing pandemic-related shortages, bad life habits & your brain, cognitive benefits of working longer, avoiding multitasking, and the sustainability of Social Security.
I’m happy to report that after quarantining at home for 10 days, our son who came down with covid is back in school. Other than a loss of smell, he only suffered from minor symptoms. It was still a little scary when we learned he had covid. Sending him back to school and free of any major complications was a great relief.
While his vaccine did not stop him from getting covid, at least it helped prevent any major complications. We’re happy that he’s back in school, which is where he should be.
Proposed Tax Legislation
I started my career working for Deloitte as a tax professional. I often tell the story about what happened when new tax legislation was proposed. Soon after, certain members of the firm would write their analysis of the proposed law changes, and their potential impact. On most occasions, the legislation failed to pass. Because of this experience, I rarely take strong actions related to proposed legislation.
I do expect some type of legislation to pass this year. Will it be the same as what was recently proposed? Some of it will. Some of it won’t. Since I know it can affect clients, I am paying attention. As proposed, some of the legislation could have a material impact on some retirement-related tax strategies. Here are some key issues to watch:
· Individual tax rates could increase. Where possible, it could make sense to accelerate income into 2021.
· Long-term capital gains rates could increase. Under the proposed legislation, the higher rates would take effect immediately.
· Prohibition of conversions on after-tax amounts. The ability to implement strategies such as the “Backdoor Roth IRA” or Mega-Backdoor Roth IRA) would go away if the proposed rules become law. In addition, Roth conversions might not be allowed for high-income taxpayers beginning in 2032.
· Increased required minimum distributions (RMDs) for high-income taxpayers and huge retirement accounts. This legislation appears to be a response to the news of Peter Thiel’s $5 billion Roth IRA. The proposed rules would create new RMDs for single filers making $400,000 or more and joint filers making at least $450,000. It would also apply to retirement accounts worth more than $10 million, regardless of age.
· A reduction in the unified credit amount for estate and gift taxes. The estate tax exemption doubled to more than $11 million after the passage of the Tax Cut and Jobs Act in 2017. That change was set to sunset at the end of 2025. The current proposal would scale the exemption back to $5 million – indexed for inflation – in 2022 and future years.
· The expanded child tax credit would be extended. The American Rescue Plan, signed into law expanded this credit to provide help to more families. The proposed legislation would continue this credit through 2025 in a two-step process.
I would like to stress again that these are only proposed changes. Nothing is final until it is signed into law. If you have any questions related to this legislation, please schedule a free call. I would be happy to discuss it.
Investment Commentary
The S&P 500 Index closed Thursday at 4498.98. The S&P has rallied sharply after closing at 4,354.19 on Tuesday. Concerns about China Evergrande Group, a Chinese property developer, contributed to the market’s weakness. Tuesday’s close was the lowest since July 20th. The market jumped higher after the Federal Reserve’s policy update on Wednesday. Investor optimism that Evergrande’s losses could be contained also helped drive the rally over the last two days. 2021 continues to be another great year for investors. We only have one week left until the third quarter’s end. The S&P is up 1.2% this month and 3.5% quarter-to-date. It’s also 18.4% higher so far this year.
At the same time, considerable uncertainty remains. Concerns about the Delta variant and the rate of covid cases remain. We also face economic uncertainty. The outcome of the potential changes to tax law could also impact the market. Plus, there is uncertainty related to the economy and inflation.
Against this backdrop, it’s important to stick to your process and not let the emotions of fear and greed drive your decision-making.
Here are the links to this week’s articles as well as a brief description of each:
1. The World Is Still Short of Everything. Get Used to It. The pandemic has led to many product-related shortages. Items such as computer chips and construction materials have been in short supply. Many expected these problems would be fixed by now. While you can find some products more easily now, shortages for others remain. “Normalcy might be another year or two away.”
2. 7 Bad Life Habits That Can Hurt Your Brain. Whether or not they are intentional, many of our habits can damage the most powerful organ in our bodies – our brains. Changing even one of these habits could change how our brain works. It could also help us age healthier and better. Remember that it’s never too late to start. Even those with memory issues can benefit by eliminating or modifying harmful behaviors. This article goes beyond listing some habits that could damage your brain health. It also offers some suggestions on how to change them. If you suffer from headaches or increased forgetfulness, or other similar symptoms, some of these habits could be the cause.
3. Putting off Retirement May Keep Your Brain Sharp in Older Age. Many people think of early retirement in a positive light. But that could be the wrong way to think about it. According to the study cited in this article, postponing your retirement can actually benefit your cognition and thinking skills. The study found benefits for those who work up to age 67. Its findings held across genders, education levels, and job fields.
4. Instead of Multitasking, Go All in on Your Tasks. I often hear people say they can multitask successfully. I used to believe I could, too. Our brains can’t focus on multiple things simultaneously. Trying to multitask reduces our efficiency. As suggested in this article, try focusing on one specific thing at a time. Choose to single task rather than multitask. The article shares some useful tasks to make this easier.
5. Can Young People Still Count on Social Security? When talking to clients and prospects, I am often asked questions related to Social Security benefits. Many of them center around claiming strategies. It’s not uncommon to be asked whether we can count on receiving benefits in the future. The Social Security Administration releases an annual report detailing the program’s financial condition. This year’s report stated that by 2033 there will no longer be enough money to fully cover the payouts. That’s one year sooner than last year’s report. Should we be worried? The author of this article is not that worried. I’m not either. Why? It’s an important program. The SSA projects that by 2033 taxes will still cover more than three-quarters of payouts. While it’s at least possible we could see reduced benefits, it’s hard to believe they would go away altogether. It could also be political suicide to change the system in a way that upsets voters.
Our practice continues to benefit from referrals from our clients and friends. Thank you for your trust and confidence.
We hope you find the above posts valuable. If you would like to talk to us about financial topics including your investments, creating a financial plan, saving for college, or saving for retirement, please complete our contact form. We will be in touch. You can also schedule a call or a virtual meeting via Zoom.
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