Over the summer, the U.S. markets continued their climb to record highs. While it was generally a quiet summer, the Federal Reserve’s Jackson Hole meeting in August was a highly anticipated event to discuss when bond purchase tapering and rate hikes would possibly begin. In the speech, Chairman Powell stated that tapering could potentially begin sometime this year, but rate hikes will remain a discussion for later. This was not overly surprising because the U.S. economy’s fundamentals are stable as earnings growth continues to remain strong, despite some moderation in other areas of the economy. Many global economies are also showing signs of stabilizing and growth is likely to continue to accelerate in Europe and parts of Asia into 2022. Despite the positive outlook, some valuations in the U.S. are becoming high, which is why we will be taking gains off many of our core U.S. holdings and using the proceeds for buying opportunities outside the U.S.
It’s time again for those of a certain age with IRAs or other retirement plans to begin thinking about the Required Minimum Distribution (RMD) for 2021. Last year, the RMD was suspended but not so for this year. The deadline for taking the RMD is December 31. There is a substantial tax penalty for failure to take the disbursement by that date. There have been changes to the age for required distributions: If born after June 30, 1949, you may wait until age 72 to begin. The distributions are taxable as regular income unless they are used for Qualified Charitable Donations. Schwab and other custodians offer the convenience of checks drawn on the IRA for the purpose of making a QCD. Be sure to confirm that there’s enough cash in your IRA to cover any checks written and be sure that the owner of the IRA is the check signer. If preferred, we can process a request for a Schwab-generated check payable to a qualified charity which will be mailed to the IRA owner for forwarding to the charity. Please call to request a book of checks or to request Schwab checks, keeping in mind that the check(s) must clear the account prior to December 31 in order for those amounts to be registered as RMD.
Travel plans, particularly out of the country, should include notifications to your credit/debit card vendors. For security reasons, financial institutions have added some new procedures which may result in denial of access to accounts for purposes of charges to a credit card or access to cash from an ATM site.
If you’ve moved or otherwise changed your mailing address, it’s important to be sure your financial accounts have that new information. When a mail forwarding order expires, the financial institution is notified of such by the USPS and accounts most likely will be restricted, meaning that no activity will be allowed in the account until the address of record has been updated. This is another security measure designed to protect account owners.
It is time to start thinking more seriously about any year-end tax planning moves. We recommend most of these be completed before October 15th. We will remind you again before then, but we are ready to assist you now! The following are ideas to consider and discuss with us and your tax advisor: (1) Gifting to Family– the max contribution per beneficiary in 2021 remains $15,000 ($30,000 for a married couple). If you are pondering making gifts to loved ones, we are ready to help complete these gifts sooner rather than later. Often, it is optimal to gift highly appreciated equities in your taxable account, particularly if your beneficiary is in a lower tax bracket; (2) Gifting to Charities – As stated above, if you need to take an RMD and you are charitably inclined, we recommend gifting to charities from your IRA. If you are pondering this, please let us know so that we can help you complete this by October 15th. If have not yet reached RMD age but you would like to gift to charity, we can guide you on gifting highly appreciated securities from your taxable account to your charity of choice. This allows you to avoid paying capital gains on the gifted shares while still taking the deduction on your taxes if you itemize; (3) Roth Conversion – given that tax rates are still historically low, 2021 remains a good year to consider more aggressive Roth conversions. We can work with you to determine if your total taxable income in 2021 allows for a Roth conversion. We will want to complete this by November 15th and should include a conversation with your tax advisor to verify your income and deduction estimates for this year.
Be well and have a wonderful week!