Dow, NASDAQ, S&P 500 Advance

Weekly Commentary — September 9th, 2019

The Week on Wall Street

Stocks rose last week, with help from two developments: the announcement of further U.S.-China trade talks as well as August hiring and manufacturing numbers that seemed to bolster the argument for a rate cut by the Federal Reserve.

The broad U.S. equity market, as represented by the S&P 500, added 1.79% during a 4-day trading week. The Dow Jones Industrial Average improved 1.49%; the Nasdaq Composite, 1.76%. Foreign shares tracked by the MSCI EAFE index gained 1.69%.[1],[2],[3]Read More »

Stocks Rally as August Ends

Weekly Commentary — September 3rd, 2019

The Week on Wall Street

Fears of an impasse in the U.S.-China trade dispute lessened last week. While additional U.S. tariffs on Chinese imports were scheduled to take effect on September 1, China’s government communicated that it would refrain from taking retaliatory measures for the moment.

U.S. stock benchmarks advanced during the week. The S&P 500 rose 2.79% across five trading days, and the Nasdaq Composite and Dow Jones Industrial Average respectively gained 2.72% and 3.02%. The MSCI EAFE international index added just 0.25%.[1],[2]Read More »

Tip of the Week: The Type of Client That I Serve

Transcript:

Hello! Once again, I’m Derek Merkler, a CERTIFIED FINANCIAL PLANNERTMProfessional and in today’s video, I want to share with you the type of client that I serve.

When I first started my business, I figured that I would help anyone that signed the dotted line. That was a big mistake!

I learned that some people want their advisor to be a scapegoat.  Others want a stock picker.

Others want someone who can predict market tops and bottoms… or predict the specific date that a recession will start.  The smartest people in the world with access to all of the data in the world can’t get that right! Why would I think that I can do better?

I remember meeting with one person who said “I have this investment where I get a guaranteed 10% return every year.  What do you have that will do better?”  After asking more questions, I realized that this “guaranteed investment return,” which came from illiquid real estate investments in Texas, was an illusion.

Meetings like that, along with some early clients that wanted to fight against my recommendations, help clarify in my mind the specific type of veteran that I want as a client.

These aren’t people who are going to brag at a cocktail party that they bought bitcoin… or gold right before it started going up.  Or that they need to show up at that party with the most expensive car.  Or that they KNOW for sure that an inverted yield curve will bring about a recession.

Those types of games are a waste of time and a distraction from the truly important aspects of financial planning: establishing a sound financial foundation and then saving and investing consistently in an investment portfolio that fits the PLAN.

It’s amazing how people will spend so much time debating the best way to invest $50 per month but won’t put any effort toward investing $500 per month instead.  Or debate fund choices within their TSP or 401k but won’t contribute enough to receive the employer match.

So, what type of person are you?

If you want an investment guru or someone who will promise higher returns with no risk, then we won’t be working together.

But if you are a military veteran who wants help organizing and focusing your finances and to develop your financial plan around building long-term wealth so that you can live your best life, send me a message.

Thanks for watching!

 

Thanks for watching!

Please visit my website at:

MilitaryFA.PXAdvisor.com 

Remember, the topics discussed in this video are for informational purposes only and that past results do not guarantee future performance. If you would like to discuss your financial situation, please email me at Derek.Merkler@Parsonex.com. 

Advisory services offered through Parsonex Advisory Services, Inc., 8310 S.Valley Hwy, Suite 110, Englewood, CO 80112. 303-662-8700.

 

 

China Announces More Tariffs

Weekly Commentary — August 26th, 2019

The Week on Wall Street

Traders assumed that the week’s biggest news event would be Federal Reserve Chairman Jerome Powell’s speech at the annual Jackson Hole banking conference. Instead, China seized the headlines by announcing new tariffs on U.S. goods.

Domestic stocks ended up lower for the week. The Nasdaq Composite fell 1.83%; the S&P 500, 1.44%; the Dow Jones Industrial Average, 0.99%. International stocks posted a weekly gain: the MSCI EAFE benchmark rose 0.96%.[1],[2]Read More »

Tip of the Week: Why I Prefer Roth Accounts

Transcript:

Hey, everyone! In this week’s tip of the week, I want to explain why I lean toward using Roth accounts, such as Roth IRAs and Roth 401Ks, as opposed to your traditional IRAs and 401ks as an investment and retirement tax shelter.  First, what’s the difference.  The primary difference is the tax treatment of money going in and coming out.  In your traditional IRAs and 401ks, you get a tax deduction when you put money into those accounts.  When you take the money out in retirement, it’s taxed as ordinary income.  In other words, if you take $10,000 out in retirement and your tax rate is 20%, well you really only receive $8,000.

Roth accounts are the opposite.  Nothing changes with your taxes when you put money in, but you won’t owe taxes when you withdraw money from a Roth account in retirement.  So, in theory, the math is equivalent regardless of the choice: Roth or Traditional.  In theory, if you expect your marginal tax rate to fall in retirement, a traditional IRA or 401k will result in maximum wealth.  If you expect your marginal tax rate to increase in retirement, the Roth accounts will maximize your wealth.

And some people will use a fear-based technique to ingrain the expectation that tax rates must rise in the future to pay our growing national debt.   That perspective has merit, but I don’t put too much weight on it specifically.

Alright, with the background information out of the way, here are the four main reasons that I generally recommend Roth accounts over traditional retirement accounts.

 

 

You can access your Roth IRA contributions at any time without taxes or penalties.

While I don’t recommend that your IRA be used as an emergency fund, the rules of a Roth IRA allow you to withdraw your contributions without taxes or penalties, even before age 59.5.  Again, that’s contributions only, not earnings or investment returns.  For example, let’s say that you have a Roth IRA and have contributed $20,000 over the last four years and the account value is now $30,000 due to growth in your investments.  You could withdraw up to $20,000 from that account without taxes or penalties.

In contrast, a regular IRA withdrawal before ae 59 and a half will result in those funds being taxed as regular income with a 10% penalty added on top.

Even withdrawing from regular brokerage account can cause a taxable event if investments have capital gains.

 

Retirement withdrawals are not taxed.

Of course, tax-free retirement withdrawals are the primary differentiator of Roth 401ks and Roth IRAs versus the traditional counterparts.  There are multiple benefits to this arrangement.  First, it’s a hedge against future tax increases.  My typical clients are Veterans in their 20s, 30s, and 40s and their potential planning time horizon could be north of 50 years.  We really have no idea what is going to happen to tax rates in the intervening period.  Roth accounts reduce the impact of those changes.

The other important positive impact of tax-free retirement withdrawals is that they don’t trigger higher taxes on social security benefits.  Again, I have no idea how those rules will change in the future but, in the current arrangement, traditional IRA and 401k withdrawals can cause significant tax increases on social security benefits.

 

Access to Roth accounts is limited.

Contributions to Roth IRAs are not allowed for married couples whose Adjusted Gross Income is greater than $203,000 per year and for unmarried individuals with an AGI north of $137,000.  Those amounts are for 2019, by the way.  For many people, those income limits won’t be an issue.  But they might be for others, especially as they progress in their careers. The point here is that you may not always have the ability to contribute to a Roth IRA.

The other issue here is that many corporate retirement plans don’t offer a Roth option like a Roth 401k or Roth 403b.  Given that people will likely switch employers many times throughout their lives, there is a great chance that the next employer does not have a Roth option in its retirement plan.

 

Flexibility has value.

Finally, and the most often overlooked, is that Roth accounts, especially Roth IRAs, offer flexibility.  And flexibility has value.  We can access our contributions in a Roth IRA without taxes and penalties, so they aren’t locked up like in a traditional IRA.  And we don’t have to worry about the tax impacts of retirement withdrawals because there are none!

With traditional 401ks and IRAs where we pay taxes on withdrawals, we are left hoping that tax rates don’t go up, among other things.

It’s difficult to place a specific dollar value upon the flexibility offered by Roth accounts, but it’s there.  It would be nice if life followed a perfect script, but it rarely does.  For those times that life goes off-script, Roth accounts offer added flexibility where traditional accounts do not.

 

Bonus: One last thought. I want to reemphasize that financial planning is not really about squeezing out that last dollar or maximizing wealth absolutely.  Instead, it’s about helping clients live their best lives.  Many specific variables might result in tax-deductible IRA or 401k contributions being a better option than Roth contributions, especially in a year with higher than normal income.

But if you’re debating Roth vs traditional accounts and trying to precisely calculate which one is better, you may be focusing on the wrong things.

Thanks for watching! Please comment and let me know what you think! Until next time!

 

Credits:

Thanks for watching!

Please visit my website at:

MilitaryFA.PXAdvisor.com 

Remember, the topics discussed in this video are for informational purposes only and that past results do not guarantee future performance. If you would like to discuss your financial situation, please email me at Derek.Merkler@Parsonex.com.

Advisory services offered through Parsonex Advisory Services, Inc., 8310 S.Valley Hwy, Suite 110, Englewood, CO 80112. 303-662-8700.