It’s easy to feel a lack of control amid today’s headlines, inundated with topics ranging from interest rates and inflation to the housing and stock markets. The common denominator amongst the stories that cross our news feed is that they are typically unaffected by what we do in our day-to-day lives. Some people may find that stressful, while others will bask in the freedom that knowledge gives. One thing that holds true though, is we have control over how we react to and handle the situations we are presented. Not only that, but we can capitalize on some of the opportunities the current environment provides. So perhaps it’s not the best time to drive a monster truck on a cross-country road trip, but it is an excellent time to consider converting qualified retirement assets to a Roth IRA, putting cash reserves to work or pulling out your estate documents and giving them a refresh.
Our clients are likely no stranger to the topic of Roth conversions. We have an entire blog post dedicated to their inner workings that you can read here if you would like a refresher. Essentially, converting to a Roth is considered with our clients during those years in retirement when the paychecks have stopped, Social Security hasn’t kicked in and required minimum distributions haven’t started. These lower-income years equal low tax years and are thus an opportunity to pull future tax liabilities into the present likely creating lower taxes throughout one’s lifetime. This is an especially timely consideration given invested qualified retirement accounts are valued lower in the current bear market. By converting now, investors capture future portfolio growth tax-free.
In the same vein, investors should also consider putting surplus cash to work now while the market is lower. Purchasing stocks at depreciated values allows for a great opportunity of significant growth over time. While investing directly in equities is an option, investors may be hesitant or feeling more conservative. Luckily there are other choices for the more risk averse. High-yield savings accounts are currently averaging upwards of a 2% return according to Bank Rate. Series I savings bonds issued by the US Treasury are providing a rate above 9%. The main caveats with Series I bonds are that they must stay invested for at least 1 year and only $10,000 worth can be purchased per year per taxpayer ID. And if you have significant cash assets, our fixed income team are experts with cash management, utilizing T-bills and other low risk instruments to keep your cash safe while providing a return greater than you would find from your traditional savings account.
Lastly, from a more overarching view, if the news is causing nervousness or anxiety, we can feel better by looking at the things we can control which have a long-term effect, namely updating our estate planning documents. Just as the world is in a constant state of change, so are our lives, and it’s important to ensure your estate documents reflect your current state. As we head into the end of the year, it’s a great time to give yourself the peace of mind that you have the people and documents in place in the way you intend.
As always, if you have questions about anything discussed here or if you have any other inquiries or thoughts, the Becker Wealth Planning team is just a phone call or email away. We are here for you and always happy to talk!