From Me to We and Other News

Good morning out there. We’re only into the second week of 2023 and already it seems like this will be another busy and eventful year. There’s lots of information that I’d like to share all at once. But in the spirit of brevity this morning’s post is a summary of more detailed content that I’ll be sending out over the next few weeks or so.

From Me to We –

My first inclination is to do things by myself. As you likely know, I left the brokerage world over eight years ago to start this firm on my own. I enjoy running long distances, often alone, and tend toward solo sports. It’s not “me against the world” or an ego problem (at least I hope not) that finds me preferring to work alone. I’m just wired for independence.

But of course that only gets you so far, and the complexities of business and life require more sets of hands.

My assistant-turned-paraplanner, Brayden, and I have been working together since 2018 and it’s been great helping him grow in his career. I’m happy to report that Brayden has just completed his relevant work experience requirement to become a Certified Financial Planner after previously passing the national board exam. Brayden will now be taking on more responsibility within the firm as a financial planner and in his place we’re bringing on a team of highly skilled virtual assistants. More to come on that and other operational details next week.

Secure Act 2.0 –

Just when you thought the Congress couldn’t tie its own Velcro… they passed the so-called Secure Act 2.0 and expanded the retirement savings landscape. This had been percolating for a while but snuck under the radar as part of an appropriations package that wasn’t signed into law until the final days of last year. I’ll be working on a better summary for a post a couple of weeks from now, but here’s some of the bigger news:

Required Minimum Distributions now begin at age 73 instead of 72. So if you’re turning 72 this year and were planning to start taking RMDs from your retirement accounts, you can wait until next year.

The main reason to wait is that it reduces your taxable income. Of course this only helps if you have other money to cover your spending needs. This isn’t the case for most people, but there are quite a few who are being forced into paying taxes unnecessarily due to the RMD rules.

These changes don’t impact folks who are already taking RMDs.

Another big change: if you were born in 1960 or later, your starting age is now 75.

Penalties for missing your RMD have been reduced from 50% to 25%, and perhaps to as low as 10% if you fix the problem quickly. In many ways the Act presents a kinder and gentler set of rules. More to come on this soon.

An update on I Bonds –

I Bonds were all the rage last year for good reason, at least superficially. The bonds pay an interest rate that gets reset as the Consumer Price Index (the generally accepted measure of inflation within the economy) changes. So it makes sense that as inflation was spiking, so would the rates on I Bonds, reaching as high as 9.6% last year.

But nothing is that simple for long. As inflation wanes so has the rate that I Bonds pay, currently about 6.9%. This sounds higher than the rates available on short- and medium-term Treasurys for example, of around 4.25% and 3.5%, respectively. (If those rates seem backwards, that’s an inverted yield curve for you.) Higher yes, but if CPI keeps trending lower I Bond rates will follow. They’re variable and are meant to be held longer-term, so we end up looking at an average rate over, say, five or more years that could be about the same as Treasurys.

So are I Bonds still a viable option for some of your hard-earned savings? The short answer is that it’s complicated. We’ll discuss that soon. In the meantime, the Treasury Direct website has a couple updated explainer pages that are pretty good.

Otherwise, I hope you and your family have been okay during the recent storms, flooding, power outages, and so forth. That’s a lot of water in a short time, so hopefully it goes a decent way to relieving drought conditions.

Have questions? Ask me. I can help.

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