WrapManager's Wealth Management Blog

The bull market in equities is aging but remains very much intact... For more than a year now, equity markets have enjoyed an unusual combination of low volatility and near-uninterrupted price gains due to a combination of accelerating economic growth, improving earnings, accommodative monetary policy and still-low inflation. Economic growth should continue to improve, but expectations have risen, which means positive surprises will be harder to come by. At the same time, central bank policy is slowly tightening, which could contribute to market volatility. Additionally, accelerating growth and tighter policy may finally trigger an uptick in inflation, especially in wage inflation given the low level of unemployment. Should this occur, we expect bond yields will climb, which could jolt other financial assets including equity markets. We don’t expect yields to rise unimpeded, but an ascending period of peaks and troughs looks likely. Read an excerpt of the complete commentary below, then download the entire investment commentary as a PDF. [+] Read More

Republicans on Capitol Hill are currently working to make major changes to the tax code, but one tax rule does not seem likely to change anytime soon: required minimum distributions (RMDs). For most of our lives, investors have the benefit of saving into IRAs, 401(k)s, 403(b)s, etc. with tax-deductible contributions and tax-free growth, but eventually the day comes when Uncle Sam gets his cut. That starting point when the IRS requires you to withdraw from your IRA or other retirement account for is by April 1 of the year following the calendar year in which you reach age 70½ (which is 6 months after your 70th birthday). For example, if you are retired and you turned 70 on June 30, 2017, then December 30, 2017 marks the day you reach 70 ½. That means you must take your first RMD for 2017 by April 1, 2018. Every year thereafter, you have until December 31 to get it done. [+] Read More

We see a mildly stronger U.S. dollar (USD) ahead... A key U.S. dollar index has depreciated roughly 7% this year. Some are betting on further declines; speculative short positioning is at three-and-a-half year highs in the futures market. We believe this positioning buildup led to an April break in the usual positive correlation between the USD and the U.S. yield premium over other developed markets. Yet we see the USD’s broad uptrend since mid-2014 slowly resuming as monetary policy divergence re-emerges. The Fed is normalizing rates while the European Central Bank and Bank of Japan maintain easier policies, and the positive correlation between the USD and yield premium has returned. Read an excerpt of Richard Turnill's weekly commentary below, or view the entire BlackRock weekly investment commentary here. [+] Read More

The traditional arch of a person’s financial life is generally to work, save, retire, collect Social Security and/or pension, and make withdrawals from IRAs/investment accounts to supplement retirement income. It’s a traditional arch, but it is also a steadfast one. However, did you know that you could actually continue working and collect Social Security at the same time? There are rules and stipulations for doing so, which we will get into below, but the short answer is that you can! This is good news, particularly given that an increasing percentage of people are choosing to work later into life, for a variety of reasons but mostly because they enjoy working and want to stay involved: [+] Read More

The Internal Revenue Service (IRS) has released their retirement plan limits for 2018. Lord Abbett believes the information provided to be an accurate statement of current rules; however, prospective investors should consult with an investment professional and/or tax advisor. Read on for a summary of changes, or view the entire document here. [+] Read More

With less than two months left in the year, time is running out to take actions that will apply to the 2017 tax year. By ‘actions’ we mean things like charitable giving, tax loss harvesting, and in the case of this post, gifting. Gifting and estate planning can be complex undertakings, due to the myriad of rules, strategies, and even loopholes involved. But the concept of gifting by itself can be rather simple: in 2017, you can give any number of people (it doesn’t matter how many) up to $14,000 in cash or other property without triggering any gift tax. If you include your spouse in the gift, that number jumps to $28,000. An example with actual numbers should underscore just how impactful gifting can be. Say for example that you and your spouse make annual gifts of $28,000 to each of your three children and seven grandchildren. Over a period of 5 years, you will have gifted $1,400,000 – which also reduces the value of your estate for tax planning purposes by $1,400,000. Assuming the federal estate tax rate of 40%, that could mean saving $560,000 in estate taxes (40% x $1,400,000). [+] Read More

Investors remain calm as equity prices move higher against a backdrop of very low volatility... Investor attention remained focused on Washington, D.C. last week. The Senate passed a budget resolution, while President Trump is set to announce who he will select as the next head of the Federal Reserve. These factors, combined with ongoing solid economic data, allowed the so-called reflation trade to continue as higher-risk financial assets gained ground. U.S. equities notched their sixth consecutive week of gains... Read an excerpt of the complete commentary below, or download the entire investment commentary as a PDF. [+] Read More

The White House released an outline for major tax reform in September. There are some ambitious goals in the plan: reduce seven individual tax brackets down to three, lower the corporate tax rate by 15%, eliminate the estate tax, nearly double the standard deduction while eliminating most itemized deductions, and much more. There could be some major changes ahead. But since so much remains up in the air as Congress debates the issue and actually writes the new law, it may not be worth diving into the details just yet. Instead, we’ll focus on a tax issue that is fast approaching for many investors: tax loss harvesting in preparation for your next tax filing. [+] Read More

Quizmaster, Doug Hutchinson, presents his quiz for the month. Here, Doug compares traditional IRA versus Roth IRA contribution strategies. Consider this Scenario: Your friend Max would like to contribute money to a retirement account and he is determining whether to contribute to a traditional IRA or a Roth IRA. Assume Max is eligible to contribute to either of these options. Max has a current income tax rate of 25% and he expects to face an income tax rate of 25% after he retires. [+] Read More