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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
Exceptions To The New Rule On Inherited IRAs
Published Wednesday, January 29, 2020 at: 7:00 AM EST
Yet another new tax reform law went into effect in 2020 under the SECURE Act. In addition to ultra-high-net-worth individuals, the many millions of mass affluent Americans are likely to be impacted by the 470-page SECURE Act's retirement income tax provisions. The SECURE Act is a sweeping and substantive effort to make retirement income tax more sensible, a rare legislative action to win bipartisan support in Congress and the president's signature.
The new rules force heirs to withdraw everything from an inherited IRA over 10 years. Requiring heirs to deplete an inherited IRA over 10 years is a tax hike. Your IRA beneficiaries are no longer allowed to stretch out withdrawals over their expected lifespan.
Forcing heirs to pay tax on required distributions from an IRA over 10 years may result in your heirs paying additional income taxes annually during the 10-year withdrawal period. However, there are exceptions to the new 10-year rule for certain beneficiaries.
Spouses. Spouses can inherit your IRA with zero tax impact. A spouse who inherits an IRA is required to make withdrawals based on their actuarial life expectancy, which can be found in a table published by the IRS. Starting in 2020, a spouse who inherits an IRA may defer taking required minimum distributions (RMDs) until age 72 — not age 70½, as under the old law. An extra 18 months of tax deferral is significant. Deferring taxes for 18 months, when your IRA is hitting its peak value, lengthens the period of tax-free compounding just when a pre-retiree needs it. The stock market averaged a 3.9% quarterly return in the six quarters ended December 31st, 2019, despite a -13.5% in the fourth quarter of 2019, and no one can predict stock returns.
Minor Children of an Employee. Minor children of an employee who inherit a federally qualified retirement account, such as a 401(k), are exempt from the 10-year distribution rule. As long as the parent was an employee with a company's 401(k) plan, the child is not required to make distributions over 10 years.
Disabled. Disabled individuals who inherit an IRA are not subject to the 10-year required minimum distributions (RMDs) rule. Thus, they are eligible to take required minimum distributions based on more favorable terms.
Chronically Ill. Those suffering from a chronic illness are exempt from the 10-year rule.
Not 10 Years Younger. If an heir is not more than 10 years younger than the owner of the federally qualified plan account, the 10-year distributions rule will not apply.
The new RMD rules in the SECURE Act affect a hodgepodge of situations, reflecting Congress’s effort to make tax laws more compassionate and sensible. The specific situations are just one aspect of the SECURE Act’s wide-ranging effects. If you’re among the exceptions to the 10-year rule, please contact us with your questions.
This article was written by a veteran financial journalist. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.
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