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Slick TV ads often make financial planning and wealth management sound simple, but it’s usually not. Managing wealth requires knowing a lot about highly technical topics, like taxes, government regulations, and finance as well as history, psychology and how to communicate with loved ones about sensitive issues. This article highlights some of the knowledge needed to manage wealth and why it’s often so daunting without the help of an independent personal financial advisor who is familiar with your situation.
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Understanding The Federal Reserve Mandate To End Inflation
The Federal Reserve System, the nation’s central bank, has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but that was not always the case. In fact, the Fed’s bias toward maximizing employment was a critical driver of the stagflation that plagued the U.S. in the late 1960s and 1970s. Recognizing the need to balance price stability and maximum employment, in 1977, Congress revised the Federal Reserve Act.
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Fed Governor Kugler Details Inflation And Economic Outlook
The 12-month inflation rate, as measured by the personal consumption expenditures (PCE) index, was 2.6% in December, down from its peak of 7.1% in June 2022, and the six-month rate for PCE inflation was even lower, at 2%, which is the target rate set by the Federal Reserve.
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Why Rates May Not Be Cut Until June
The cost of a loan to buy a home, car, college education, and achieve the American Dream is staying the same for now. As expected, Federal Reserve Chairman Jerome Powell said the central bank did not lower loan rates following the Fed’s Wednesday, Jan. 31, 2024, policy meeting.
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Practical Suggestions For Achieving Your 2024 Resolutions
New Year’s resolutions usually fail because they‘re often too hard to achieve. After six months, only 10% of people who make resolutions achieve them or remain committed to them, , according to a study by Dr. Mark Griffiths, a Chartered Psychologist and Distinguished Professor of Behavioral Addiction at the Nottingham Trent University. What can you do to make financial, medical, or other personal resolutions more likely to be achieved?
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A Sign Of Progress In Solving U.S. Economic Problems
The Federal Reserve appears to be pulling off a feat most experts did not believe it could: ending its aggressive inflation-fighting campaign of 11 interest rate hikes without tipping the U.S. economy into a recession.
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Fed Keeps Rates Unchanged; Expects Easing In 2024
To promote transparency and free markets, the Federal Reserve System began publishing the opinions of the 19 U.S. central bankers that decide interest rate policy.
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Have You Logged Into Your Social Security Account?
Have you logged in to your Social Security account? Creating an online account at SSA.gov is an important first step in understanding your retirement income situation. However, only about 60 million of the 160 million individuals in the U.S. labor force who have Social Security accounts have created a way to access the Social Security Administration’s website.
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The Great Fake Out Of 2023 Is Poised To Extend Into 2024
All year long, the economy and stock prices have fooled experts and consumers, outperforming expectations month after month.
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Test Your Financial Planning IQ
The five questions below are a challenge meant to allow you to assess your knowledge of investing, tax and financial planning. If you have been following our news stream, this quiz draws on familiar ground. The answers are below.
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Planning Briefs
What Are The 3 R's Of Roth IRAs?
Published Tuesday, October 24, 2017 at: 7:00 AM EDT
It's not reading, 'riting, and 'rithmatic, but when it comes to Roth IRAs, it pays to know the three R's: Roth conversions, rechacterizations, and reconversions. Understanding the rules for all of these could save you thousands of tax dollars.
Unlike with traditional IRAs, for which some of your contributions could be tax-deductible, money that goes into to a Roth IRA never is. However, after five years, the money coming out of a Roth is tax free. To qualify for that benefit, withdrawals must be made after age 59½, because of death or disability, or to buy a first home (up to a lifetime limit of $10,000).
But you just can't change a traditional IRA into a Roth IRA, or vice versa, by waving a magic wand. Here's a quick primer on Roth conversions, recharacterizations, and reconversions.
1. Roth IRA conversions. If you move funds from a traditional IRA into a Roth IRA, you'll be taxed on the amount you transfer in the year of the conversion. Essentially, the transfer is treated as a taxable distribution. For instance, if you convert $100,000 from a traditional IRA to a Roth, that's considered $100,000 of ordinary income that will be taxed at rates reaching as high as 39.6%.
To ease the pain of the conversion, you might do it in stages. That not only spreads out the tax hit but also may reduce it by keeping you in lower tax brackets.
2. Recharacterizations. Suppose that after a conversion the value of the assets in your account drops dramatically. Because you were taxed on the assets' value when it was higher, you might want to "undo" the conversion. If you meet the deadline, you can do this through a recharacterization.
When a rechacterization is completed, it's as if the conversion never occurred. The deadline is the due date for your tax return for the year of the conversion plus any allowable extension. For example, for a conversion you made in 2017, you have until October 15, 2018—April 15 plus a six-month extension—to recharacterize the Roth.
3. Reconversions. Finally, what happens if you change your mind again and want to go back to a Roth? It can be done through a reconversion.
However, the rules for reconversions are a little trickier. The earliest date you can reconvert is one of the following, whichever comes later:
- The beginning of the tax year following the tax year of the conversion;
- The end of the 30-day period beginning on the day of the recharacterization.
Beyond that date, moving money to a Roth from a traditional IRA is treated like a first-time conversion.
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