Market-Moving News[i]
Weekly Market Recap
For the recap with charts, click here.
This year’s heightened bond market volatility has kept investors on their toes. With the Fed starting its easing cycle in September – later than initially anticipated – concerns are now emerging about whether the cycle will end sooner than expected. Last week’s inflation report was in sharp focus as investors sought answers to three key questions: has inflation progress stalled, could proposed tariffs derail it and what might the Fed do next?
November's inflation readings matched expectations. Year-over-year headline inflation rose 0.1% to 2.7%, while core inflation, which better reflects underlying trends, flatlined at 3.3% for the third consecutive month. On the surface, this suggests stalling, but underlying details are more encouraging. As the chart of the week shows, core inflation is entirely being driven by core services, with core goods still in deflation on a year-over-year basis. Within core services, rents – which are responsible for more than half of core services inflation – have slowed to their weakest pace in more than three years, and new leases point to further moderation ahead. This suggests that inflation progress hasn’t truly stalled, with more cooling in the pipeline.
However, President-elect Trump’s proposed tariffs could reignite core goods inflation, derailing future progress. While the Fed has emphasized that it won’t preemptively adjust policy, and it may well cut rates by 25bps this week, this concern could impact its projections, signaling fewer rate cuts in 2025.
Overall, with so much uncertainty around tariffs and inflation, bond market volatility is unlikely to fade anytime soon.
The Week Ahead: Dec 16-20[ii]
- US Retail sales
- Home builder confidence
- Housing starts
- FOMC interest-rate decision (Wednesday)
- Jobless claims
- Q3 GDP (second revision)
- US leading economic indicators
- Core PCE
- Consumer sentiment
Philosophy Quote of the Week[iii]
Everlasting Good Health
“I tell you, you only have to learn to live like the healthy person does…living with complete confidence. What confidence? The only one worth holding, in what is trustworthy, unhindered, and can’t be taken away – your own reasoned choice.”
Epictetus, Discourses, 3.26.23b-24
As the Stoics say repeatedly, it’s dangerous to have faith in what you do not control. But your own reasoned choice? Well, for now that is in your control. Therefore it is one of the few things you can have confidence in. It’s the one area of health that can’t suddenly be given a terminal diagnosis (except for the one we all get the day we’re born). It’s the only one that remains pristine and never wears down – it’s only the user who quits it; never will it quit the user.
In this passage, Epictetus points out that slaves and workers and philosophers alike can live this way. Socrates, Diogenes, and Cleanthes lived this way- even when they had families and while they were struggling students.
And so can you!
Tax Tips[iv]
Distributions from Retirement Accounts
Sitting by the bonfire, with your favorite drink in your hand as you ponder the year gone and look forward to the New Year, your finances and how you plan them deserve some mindshare! While thinking of immediate and long-term needs, you always want to ensure that you have a well-planned retirement to secure your golden years.
For those nearing the age of 73, there is a little-known tax law called the Required Minimum Distribution (RMD). If you have money put away in IRAs, 401(k)s, or other retirement accounts, money must be distributed annually from them once you turn 73.
The Internal Revenue Service (IRS) requires that distributions be taken every year once you reach the age of 73 years old (75 for those born 1960 or later). You can wait until April 1 of the year after you reach 73 to take your RMD but there are some complications with taking a distribution that late. If you choose this you will be required to take two distributions in that year to make up for the distribution that you passed up at age 73.
How much to take depends on many factors:
- Marital status
- Difference in age of your spouse – if there is a 10+ year gap in ages a different table is used to comp0ute the RMD
- Compute the total amount of all retirement plans, divide it by the factor or number on the mortality table the IRS uses and presto you know what your annual RMD should be
- Rinse and repeat as necessary
For many taxpayers the value of their retirement accounts change every year. The value as of December 31 of the previous year is the number that is used to compute the RMD for the current year. This means that you must compute the total for all your retirement accounts on December 31, 2024 to determine what must be distributed by December 31, 2025.
This distribution can be taken out at any time during the year. It is preferred to take money out every month, in order to not be hit with penalties at year-end. This is especially true if someone dies in the year, because in the year of death, the IRS may penalize the estate of the decedent, if at the end of the year, enough RMD was not distributed. The heir to the estate is then held accountable for this because if a taxpayer dies and the RMD for the year was not distributed by December 31, the beneficiary who inherits the IRA or retirement account must take the deceased taxpayer’s distribution by year-end and add it to the beneficiary’s income. This can really mess up the beneficiary’s tax situation.
While taxes are not required to be withheld from distributions, remember to submit estimated taxes by the deadline to pay for this additional income on your tax return. Your tax professional knows these rules so ensure you compute and distribute your RMD and any estimated income taxes before year-end deadlines.
Moreover, you can choose to have your RMD given to any qualified charity. If you choose this route, you pay NO taxes on the amount given to the charity.
Caution, the penalty for not meeting the RMD is an excise tax of 25% of the amount not withdrawn but only 10% if the RMD is timely corrected within two years.
For some taxpayers taking money out of a retirement account is something they dread because it means that you no longer have a choice, financially, to distribute funds from retirement accounts. This can happen when you find yourself in dire financial straits, like a pending home foreclosure. If you are under the age of 59.5 you could be penalized by the IRS for taking premature distributions. Depending on the type of retirement account you have, the penalty can range from 10-25%. There is penalty relief for those under 59.5 who withdraw or distribute money for very specific reasons:
- Death – monies paid to beneficiaries from retirement accounts
- Divorce – money paid to an ex-spouse as part of a divorce or Qualified Domestic Relations Order (QDRO)
- Disability – if you take money out because you are totally disabled
- Education – distributing money for education expenses for you or your dependents
- Medical expenses – medical expenses paid above 7.5% of your adjusted gross income
- Medical insurance if you are unemployed – paying your health insurance is allowed in the year you are unemployed for two months of longer
- You live in a Federal Declared Disaster Area – taking money out of retirement to replace items not covered by insurance
- Equal distributions over remaining life – taking money out of a retirement account equally over the remaining years of your life. The IRS uses a table to determine the minimum amount to be withdrawn, based on your age at the time you start withdrawing funds.
- Down payment on a home – you can withdraw up to $10,000 to buy a home if you have not owned one in the last two years
- Birth or adoption of a child – costs are allowed as an exception to the penalty, up to $10,000 per parent, total
- Paying back taxes to the IRS – due to a levy filed
- Distributions to qualified military – reservists called to Active Duty for deployments
- Rollovers from one retirement plan to another – allows you up to 60 calendar days to deposit funds into the new retirement plan
- Separation from work at 55 or later – allows you to retire early, take distributions from retirement plans and not be penalized
Here are six things you should also know about EARLY withdrawals from retirement accounts:
- An early withdrawal normally means taking money from your plan before you reach age 59.5.
- If you made a withdrawal from a plan last year, you must report the amount to the IRS. You may have to pay income tax as well as an additional penalty tax on the amount of withdrawal.
- The additional tax does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan. Or funds contributed to the plan that did not receive a tax deduction for doing it.
- A rollover is a type of nontaxable withdrawal. Generally, a rollover is a distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan. You usually have 60 calendar days to complete a rollover to make it tax-free.
- There are many exceptions to the 10% additional penalty tax. Some of the exceptions for retirement plans are different for each type of plan. See the above points or talk to your tax professional to see if any exceptions apply to your situation.
- If you make an early withdrawal, you may need to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored accounts with your federal tax return.
- Remember that you may be penalized up to 25% of the RMDs if you do not take out enough from your retirement account once you reach age 73.
Remember – always contact your tax professional for help! That’s what you pay them for!
Last Chance Planning Checklist[v]
Health and financial milestones for age 50 and beyond
From wellabe.com
Know how to prepare to live your best life during retirement
Saving for retirement is a lifelong process, but as you get closer to retiring, the pressure to save and make the most out of your nest egg increases. As you invest in your financial future, it’s crucial to invest in your health, too, so you can live long — and well — during retirement. These key retirement financial milestones and health screening tips for your 50s, 60s, and 70s can help you do just that.
Health and financial milestones in your 50s
Generally speaking, by the time you reach your 50s, you should have six times the amount of your annual salary saved for retirement. If that seems daunting, don’t worry. If you’re in your 50s or 60s and still working, you still have time to save.
If you’re a little behind plan, try honing your skills at stretching your dollars so you can save more. Adopting daily habits, like making your lunch instead of buying it at work to save money, will also allow you to stretch your savings in retirement.
50 years old
Catch-up contributions
Financial responsibilities like purchasing a house or raising children may have put a strain on your retirement savings in your 30s and 40s. This makes your 50s a great time to make up for lost time. At age 50, most retirement savings plans will allow you to make catch-up contributions to your Traditional or Roth IRA, 401(k), or other qualified plan.
Breast cancer screening
According to American Cancer Society guidelines, you should get a mammogram every year if you’re 45 to 54 years old. If you’re 55 or older, you can switch to a mammogram every other year or choose to continue yearly mammograms. Thanks to a new rule issued by the Food and Drug Administration (FDA) that went into effect Sept. 10, 2024, your doctor is now required to notify you if you have dense breasts, which make detecting cancer on mammograms more difficult. Based on that risk, your doctor may recommend more imaging with an ultrasound or MRI.
Colon cancer screening
If you haven’t started already (the American Cancer Society suggests 45 as the recommended colonoscopy age), it’s time to begin colorectal health screenings. While colonoscopies are the most common colon cancer exams, stool tests and virtual colonoscopies are now available, too. Talk to your doctor about the best option based on your health history, and he or she will place you on the appropriate colorectal health screening schedule.
Prostate cancer screening
Medical associations and cancer societies disagree on when and if men should have prostate cancer screenings later in life. Those who are against it say prostate cancer in older men grows so slowly that it’s unnecessary to put men through testing. But the majority agree that you should start discussing your family history and risks with your doctor at age 45-50 and decide together whether screenings are necessary for you.
Shingles vaccine
Adult vaccines generally begin to be introduced at age 50. The Centers for Disease Control (CDC) recommends a two-dose series at 50 years old.
Hepatitis vaccines
If you’re age 50 or older and are at high risk of contracting Hepatitis A or B, you should consider being vaccinated. Risks of Hepatitis A infection include traveling to countries where Hepatitis A is common, having close contact with an infected person, or using recreational drugs. Hepatitis B risks having a job that exposes you to human blood or other bodily fluids, sharing anything from a needle to a toothbrush with an infected person, being on kidney dialysis, traveling to countries where Hepatitis B is common, or having HIV.
COVID-19 vaccine
People ages 50 and older are considered to be at increased risk for complications from a coronavirus infection. The primary series for the Novavax, Moderna and Pfizer COVID-19 vaccines requires two shots, spaced a few weeks apart. Both Moderna and Pfizer have updated boosters; Novavax is expected to have a booster soon.
55 years old
During the year in which you turn 55, you’re allowed to increase Your contributions to your Health Savings Account (HSA) through your employer. If you're the account holder, and turned 55 or older by Dec. 31 of the tax year and are not enrolled in Medicare, you're eligible to contribute an additional $1,000 to your HSA for that year above your annual max. If your spouse is the account owner and is under 55, no catch-up contributions can be made. If you and your spouse have separate HSAs, each of you can make $1,000 catch-up contributions.
59 1/2 years old
This is a key retirement financial milestone. You can now access most retirement accounts, such as IRAs, 401(k)s, and 403(b)s, without a 10% additional penalty. And if you’re still working, you may be able to diversify by rolling funds from qualified plans to an IRA.
Health and financial milestones in your 60s
One of your financial milestones by age 60 should be accumulating at least eight times your annual salary for retirement. You may also want to consider hiring us to guide you through key decisions, like determining when to start claiming benefits and what health insurance coverage to buy before and after Medicare.
60 years old
RSV vaccine
The CDC recommends people ages 60 years and older discuss with their healthcare providers whether the Respiratory Syncytial Virus (RSV) vaccines released by GSK and Pfizer in fall 2023 are right for them. Older adults are at high risk for severe RSV illness, especially adults with chronic heart or lung disease, weakened immune systems, or those living in nursing homes or long-term care facilities. The CDC estimates that every year, RSV causes approximately 60,000–160,000 hospitalizations and 6,000–10,000 deaths among older adults.
Survivor’s benefit
If you’ve lost your spouse, you become eligible at 60 to collect Social Security survivor’s benefits if your spouse was eligible and you haven’t remarried before your 60th birthday. If you collect survivor’s benefits before your full retirement age, they’ll be reduced, but they won’t impact your individual benefits. You can switch to your benefit at age 62 if it’s higher. Any benefits collected before age 65 are subject to an earnings limit, so any earned income may reduce benefits.
62 years old
Social Security eligibility
The month following your 62nd birthday, you become eligible to collect Social Security individual or spousal benefits. The individual benefit will be about 30% less than the full benefit and it will be subject to the earnings limit, so earned income may reduce benefits.
Health insurance before Medicare
You won’t be eligible for Medicare until the month during which you turn 65, so you’ll need to continue on your employer-sponsored health plan or search for alternative insurance if you’ve retired.
If you’re a pre-Medicare retiree, you should look closely at your employer plan or Affordable Care Act (ACA) plan to make sure the coverage is meeting your needs. If it isn’t, you can consider supplemental coverage, such as hospital indemnity and dental insurance. These supplements will minimize coverage gaps and withdrawals from your retirement savings to cover expenses, especially if you utilize hospital indemnity riderrs and use an in-network provide from a dental network.
Hearing test
The bad news: One in three people in the U.S. between the ages of 65 and 74 has hearing loss. The good news: Most are treatable. So start early with hearing tests at age 60 (or earlier if you notice you’re struggling to hear conversations, the TV, live performances, and more).
65 years old
Medicare
You become eligible for Medicare during the month of your 65th birthday. If you haven’t been collecting Social Security benefits since age 62, you should apply for Medicare Part A three months in advance of your 65th birthday to avoid a gap in your health insurance coverage. If you don’t plan to continue using your employer-sponsored health plan, you should also apply for Medicare Part B. If you choose to usea Medicare Advantage Plan instead of original Medicare, you’ll also want to purchase it at this time.
Supplemental insurance
Medicare Part A covers hospital expenses, and Part B is basic health insurance that covers medically necessary services and preventative care. Neither covers everything, so you’ll want to consider Medicare Supplement insurnce to cover potentially expensive out-of-pocket costs, like coinsurance, copayments, and deductibles. You’ll need to buy two separate Medicare Supplement policies if you and your spouse need coverage because a Medicare Supplement policy only covers one person.
Medicare Supplement insurance is not the same as Medicare Advantage, which provides a different avenue to get Medicare Part A and B benefits. You can’t use a Medicare Supplement policy and Medicare Advantage plan at the same time. But you can supplement your Medicare Advantage coverage with hospital indemnity and dental insurance
Pneumonia vaccine
Risk for catching pneumonia, a severe infection of the lungs, has been found to be more common for those over age 65 because of lower immune system strength and higher risk for other conditions, such as heart disease, that can increase severity. As a result, the CDC has added the pneumonia vaccine to the adult vaccine schedule at 65 years old.
Osteoporosis screening
Osteoporosis is currently estimated to be a major public health threat for almost 54 million U.S. women and men aged 50 and older. Among the 54 million, more than 80% are women. To catch any potential bone break risks early, annual bone densityi health screenings recommended from age 65 (50 to 64 years old for those who have a parent who has broken a hip).
Age-related eye disease screening
The American Academy of Opthalmology reocmmends having screenings for age-related eye diseases every one to two years if you are age 65 or older. Age-related eye diseases include glaucoma, cataracts, diabetic retinopathy, and macular degeneration.
66-67 years old
Full retirement age
Also known as “normal retirement age,” full retirement age is no longer 65 years old for everyone. The 1973 Social Security Amendments aised the full retirement age for people born in 1938 or after, and it’s been adjusted periodically since. For example, if you were born between 1943 and 1959, your retirement age is 66, and if you were born in 1960 or later, your retirement age is 67. Refer to the Social Security Administration’s Retirement Age Calculator find out when you qualify for full retirement.
Estate planning
Unfortunately, one financial milestone no one wants to think about but is very necessary is estate planning. It not only designates your wishes, but it alleviates financial stress on your loved ones after you’re gone. We will walk you through each step — from gathering necessary documents to learning the best time to buy life insurance.
Health and financial milestones in your 70s
70 years old
Life expectancies are much longer than in the past, but health care prices are rising. It’s important in your 70s to maintain the savings you’ve acquired and abate extra expenses to stretch your retirement funding. Focus on eliminating debts, such as mortgage and credit cards, and evaluate the levels of risk in your investment portfolios. If you haven’t already, research long-term care insurance options.
Monitor blood pressure, cholesterol, eyesight, dental health, and weight
While certain health screenings, such as colonoscopies, mammograms, and pap smears, no longer need to be performed routinely in your 70s if previous results have been normal, it’s crucial to continue to monitor your overall health to prevent disease, maintain safe driving and walking conditions, and avoid expensive issues, like root canals. Visit your doctor for an annual physical and health screenings, such as blood pressure, cholesterol, and weight. Keep up with twice-a-year dental cleanings and ask your optometrist how often you should schedule exams.
70 ½ years old
A Qualified Charitable Distribution (QCD) allows individuals aged 70½ or older to donate directly from their Individual Retirement Account (IRA) to a qualified charity, offering significant tax advantages. It’s a strategy designed to help retirees meet their philanthropic goals while reducing taxable income.
Key Features of a QCD:
- Eligibility: QCDs are available to individuals who are at least 70½ years old. The distribution must come from a traditional IRA. Roth IRAs are typically not used because their distributions are generally tax-free. SEP and SIMPLE IRAs can also qualify if they are inactive (not receiving employer contributions).
- Annual Limit: The maximum annual QCD amount is $100,000 per individual. If filing jointly, each spouse can donate up to $100,000 from their respective IRAs.
- Qualified Charities: Donations must be made directly to 501(c)(3) organizations eligible to receive tax-deductible contributions. Contributions to donor-advised funds, private foundations, or certain supporting organizations are not eligible.
- Direct Transfer Requirement: To qualify as a QCD, the funds must go directly from the IRA to the charity. If the IRA owner withdraws the money first and then donates it, the distribution will be treated as taxable income.
73 years old
The year when you turn 73 (75 for those born 1960 and later) is referred to as the “first distribution year” and required minimum distributions (RMDs) must begin if you haven’t started collecting them at age 62 or your full retirement age. Visit the IRS's RMD page learn about specific requirements for all types of accounts.
[i]https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf. Accessed 12.16.2024. See page 2 for important disclosures.
[ii]https://www.marketwatch.com/economy-politics/calendar. Accessed 12.02.2024.
[iii] Holiday, Ryan. The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living. Kindle edition, page 372. Accessed 12.16.2024.
[iv] Hockensmith, Robert F. 52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money. Kindle edition, page 216-220. Accessed 12.16.2024.
[v]https://www.wellabe.com/blog/financial/health-and-financial-milestones-for-age-50-and-beyond, accessed 12.16.2024.