Market-Moving News[i]
V-shaped recovery
The major U.S. stock indexes rallied, posting weekly gains ranging from around 3% to 6% that were nearly equal in magnitude to the previous week’s steep losses. Much of September’s volatility has been driven by the information technology sector, which dropped 7% to start the month before gaining back 7% in the latest week.
Inflation moderation
Stocks rose after a Consumer Price Index reading provided one of the last data points for the U.S. Federal Reserve prior to its consideration of an interest-rate cut at a meeting scheduled to conclude on Wednesday. The inflation report showed that consumer prices rose at a 2.5% annual rate in August, down from July’s 2.9% figure and the lowest since February 2021.
Yields decline
Yields of U.S. government bonds extended their recent slide amid expectations of an interest-rate cut, and the yield of the 10-year U.S. Treasury bond sank to the lowest level since June 2023. Friday’s closing yield was 3.66%, down from a recent high of 4.70% in April.
Rising confidence
A monthly indicator that tracks U.S. consumer sentiment extended its positive momentum. Friday’s 69.0 preliminary figure from the University of Michigan’s Consumer Sentiment Index was up slightly from the 67.9 reading in August, when the gauge rose for the first time in five months. Consumers’ expectations of inflation over the next year remained at their lowest level since December 2020.
Gold record
The price of gold futures on Friday rose above $2,600 per ounce for the first time, extending a recent price surge for the precious metal. At the end of last year, gold was trading around $2,060; it eclipsed the $2,500 level for the first time on August 19.
Fed pivot ahead
At its two-day meeting concluding on Wednesday, the U.S. Federal Reserve is expected to deliver its first interest-rate reduction since early 2020. Fed Chair Jerome Powell reaffirmed market expectations for a cut when he declared in an August 23 speech that “the time has come for policy to adjust.” However, it remained uncertain as of Friday whether the Fed is more likely to implement a 0.25% cut or a bigger 0.50% reduction.
The Week Ahead: September 16-20
- Monday
- No major reports scheduled
- Tuesday
- Retail sales, U.S. Census Bureau
- Industrial production and capacity utilization, U.S. Federal Reserve
- Business inventories, U.S. Census Bureau
- Housing Market Index, National Association of Home Builders
- Wednesday
- U.S. Federal Reserve Board concludes two-day policy meeting; Fed Chair Jerome Powell holds press conference
- Housing starts, U.S. Census Bureau
- Thursday
- The Confidence Board Leading Economic Index for the U.S.
- Existing home sales, National Association of Realtors
- Weekly unemployment claims, U.S. Department of Labor
- Friday
- No major reports scheduled
Philosophy Quote of the Week[ii]
Anyone Can Get Lucky, Not Everyone Can Persevere
“Success comes to the lowly and to the poorly talented, but the special characteristic of a great person is to triumph over the disasters and panics of human life.”
Seneca, On Providence, 4.1
Tax Tips[iii]
The Taxpayer Advocate Service (TAS)
TAS is a separate department of the Federal Government and is not part of the IRS, even though it is located in IRS offices in major cities. It helps taxpayers who have been treated poorly or who are about to lose property or assets from the IRS due to levies, seizures, garnishments and liens. They might be the last line of defense between you and the IRS if you do not have a CPA, EA or attorney representing you.
TAS Tips to Educate You on How it Can Help
- TAS is an independent organization within the IRS and is your voice at the IRS.
- TAS helps taxpayers whose problems are causing financial difficulty. This includes businesses as well as individuals.
- You may be eligible for help if you’ve tried to resolve your tax problem though normal IRS channels and your issues are still unresolved, or you believe an IRS procedure isn’t working.
- As a taxpayer you have rights the IRS must respect. The IRS has adopted a Taxpayer Bill of Rights that every taxpayer has when interacting with the IRS:
- The Right to Be Informed
- The Right to Quality Service
- The Right to Pay No More Than the Correct Amount of Tax
- The Right to Challenge the IRS’s Position and be Heard
- The Right to Appeal an IRS Decision in an Independent Forum
- The Right to Finality
- The Right to Privacy
- The Right to Confidentiality
- The Right to Retain Representation
- The Right to a Fair and Just Tax System
- If you qualify for TAS help, you’ll be assigned to one advocate who will work with you at every turn.
- The IRS has at least one local TAS office in every state, the District of Columbia, and Puerto Rico. You can call your advocate, whose number is in your local directory, in Publication 1456, on the IRS’s website at irs.gov/advocate or call toll-free at 877-777-4778.
- The TAS tax toolkit at taxpayeradvocate.irg.gov has basic tax information, details about tax credits (for individuals and businesses) and lots more!
- TAS also handles large-scale or systemic problems that affect many taxpayers.
- You can get TAS updates via Social Media.
- TAS exists to help you because you are dealing with a tax problem. The worst thing you can do is nothing at all!
Remember – always contact your tax professional for help! That’s what you pay them for!
Life Insurance Awareness Month[iv]
How Much Life Insurance Do I Need?
Written By
Updated: Jun 6, 2024, 2:00am
If you’re buying life insurance, one of your first questions is: How much life insurance do I need?
There are multiple ways to calculate the right life insurance coverage amount, but not all methods are optimal.
How Much Life Insurance Do You Need?
Your savings, debts, income and family situation all play roles in figuring out how much life insurance you need.
You want a death benefit amount that will provide funds to cover the items your family will need money for. For instance, if you want life insurance to replace your income if you were to die, you need a policy with a much higher death benefit than if you want a policy to simply pay for your final expenses and burial.
There are multiple formulas to figure out potential life insurance needs, including multiplying your income by 10 and the DIME (debt, income, mortgage and education) method. These methods don’t offer a full financial picture, though.
The DIME Method
DIME stands for Debt, Income, Mortgage and Education. The method has you add up these amounts:
- How much debt would you leave to other people? This could include credit card debt and student loans that aren’t forgiven at death.
- Multiply your income by the number of years you want to provide income replacement for your family. Some sites advise using the number of years until your youngest child turns 18, but we all know that kids often need financial help longer than that.
- Add your mortgage balance to your running total.
- Add an amount that covers tuition, room and board for each of your children who will go to college. Private four-year college costs an average of about $29,000 a year for tuition, fees and room and board, according to the U.S. Department of Education.
The DIME method is a good start for calculating a life insurance need, but it ignores existing financial resources that your family might tap for expenses. By itself, it could leave you over-insured.
Gender and Generation Gaps for Life Insurance
There is a substantial gender gap in life insurance ownership. While 47 million men need life insurance coverage, 56 million women need coverage, according to the 2024 Insurance Barometer Study from LIMRA and Life Happens.
Factoring In Workplace Life Insurance
Many employers offer group life insurance to employees. But, since you may leave your employer at some point, your life insurance should not be wholly tied to them. Purchasing at least some level of life insurance individually ensures you’ll have something in place if you lose your job or need to quit for some reason.
While some employer policies have a portability feature that allows you to take the coverage with you when leaving the job, you may end up getting repriced. If you are much older or have had a major health event since the insurance began, the premium could significantly increase for the same amount of insurance.
Group life insurance can often work well in conjunction with an individual policy to create an insurance ladder. Let’s look at the following example:
- Income: $100,000
- Life insurance need: $1,000,000
- Existing individual term life insurance: $500,000
- Employer provided insurance: 1x salary (in this case, $100,000)
Between the life insurance need and existing insurance, there’s a gap of $400,000. While having an individual policy for that amount is ideal, it’s often far easier to sign up via your employer, so many people do so. By signing up for 4x salary ($400,000), this person now has their full insurance needs met (assuming they don’t lose the workplace coverage).
If insurance needs decline over time, you can adjust their workplace life insurance downwards each year.
[i]https://www.jhinvestments.com/weekly-market-recap#market-moving-news, accessed 09.17.2024.
[ii] Holiday, Ryan. The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living. Kindle edition, page 278-279. Accessed 09.17.2024.
[iii] Hockensmith, Robert F. 52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money. Kindle edition, page 168-170, accessed 09.17.2024.
[iv]https://www.forbes.com/advisor/life-insurance/how-much-life-insurance-do-you-really-need/, accessed 09.17.2024.