Although attendance was virtual this month, the annual Davos (Switzerland) World Economic Forum took place as usual. This year’s dog-and-pony show, which is always attended by carefully selected and invited uber-wealthy, self-important, so-called world leaders, produced noteworthy insight into U.S. Treasury Secretary Janet Yellen’s enthusiasm for John Maynard Keynes’ discredited economic theories. As if we didn’t get enough of her (and Keynes) while she served as FED chairman from 2014 to 2018.
At least Davos participants’ carbon footprint was significantly smaller this year, having grounded hundreds of private jets.
Students and proponents of Keynes have long existed in Washington, D.C., and regardless of my contrary opinion, they continue to believe that their results will improve over time and with new practitioners. Good luck with that.
Claiming a need to focus on increasing American productive potential, Secretary Yellen introduced 2022 Davos participants to a concept she dubbed “Modern Supply-Side Economics.” While I agree with the need for domestic capacity expansion and utilization, I strongly object to Yellen’s usurpation and bastardization of President Reagan’s “Supply-Side Economics.” By the way, Democrats hated the term “Supply-Side Economics,” and immediately substituted the moniker “Trickle-Down Economics,” which they derided for Reagan’s 8 presidential years.
With inflation running rampant, and the Biden Administration’s agenda faltering on Capitol Hill, Yellen is seeking to reframe the Administration’s economic agenda in a more expansive, optimistic way. But pretentious redefining of Reagan’s successful economic policy is simply smoke and mirrors.
Conservative economists (monetarist devotees of Milton Friedman) argue for lower taxes and reduced regulatory policies to unleash greater supply, while the Biden Administration focuses on Keynesian tax hikes and escalating spending to stabilize demand. Tax cuts and reduced regulations have been successful each and every time they were tried. Yellen knows that but prioritizes adherence to the Democrat party line.
“Our new approach is far more promising than the old Supply-Side Economics, which I see as having been a failed strategy for increasing growth,” Yellen said, arguing that tax cuts have failed to produce promised gains, and deregulation has been environmentally damaging. I wonder where Yellen was hanging out when she skipped her courses in U.S. history and Economics.
Yellen spent much of her career as a policymaker focused on solving the problem of insufficient demand in the economy. With her new comments, she acknowledges that America has the opposite problem right now. High demand is fueling current inflation due to a lack of supply. Her hypocrisy is as blatant as her plagiarism of Reagan’s proven economic theory. Remember, it is the trillions of unearned dollars of pandemic relief in the hands of consumers causing current demand-pull inflation.
The Biden Administration has argued for months that proposed “Build Back Better” legislation would decrease inflationary pressures and increase long-term economic growth. That ludicrous notion has failed to convince any elected Republican, as well as Sen. Joe Manchin (D-W.V.), the potentially decisive Senate vote. New Gobbledy-Gook from the Treasury Secretary probably won’t change Manchin’s mind, and definitely will not change mine.
Apparently, Secretary Yellen has not read or did not understand, the lessons of tax-cutters, including the Gipper, “W,” and Trump. Yellen’s speech doesn’t change economic or political realities on the ground. But it does signal a sea change in how Democrat economic policymakers attempt to sell their backward policies to an upset population. I miss Reagan and his ability to communicate, both at home and around the world.
Van Wie Financial is fee-only. For a reason.
In 1997, then-President Bill Clinton signed into law the Taxpayer Relief Act, (TRA) and with that signature was born the Roth IRA. Its namesake, Senator William Roth, was a Republican from (ready?) Delaware and Clinton was a notorious tax raiser. Somehow, the stars aligned, and TRA became the law of the land.
Twenty-three years earlier, Congress first authorized (Traditional) Individual Retirement Accounts (IRAs), and Americans slowly began to realize the benefit of pre-tax saving to enhance future retirement income. Similarly, Roth IRAs got off to a slow start, and over time have become popular because of their unique tax properties. Although the Roth IRA owner does not receive a current tax deduction for contributions, neither does he or she pay tax on later distributions, regardless of the growth in the account over time.
Non-taxation of Roth IRAs, and now Roth 401(k)s, has fueled speculation over several years regarding potential future taxation of withdrawals from Roth accounts. Personally, I have long feared that Congressional avarice may one day lead to taxation of growth in Roth IRA accounts as withdrawals are made. Others fear that all withdrawals may become taxable events, but even this skeptic does not support that theory. Taxing withdrawn contributions would constitute a direct double-tax situation, which is distasteful to politicians.
Most arguments in favor of retaining Roth non-taxation status quo do not comfort me. My fears are based on the inability of Congress to even slow their spending and accumulating unsustainable national debt. Remaining are few options for Congress to close the annual budget deficit, so untaxed Roth appreciation attracts scrutiny.
Indirect taxation of Roth withdrawals has already begun, though in a clandestine manner. The SECURE Act was a response to the COVID-19 pandemic and included several changes to retirement accounts. Notably, SECURE removed the “Stretch IRA” provision for most non-spouse beneficiaries of IRA owners. Replacing the Stretch option (withdrawals allowed over the lifetime of an inheritor) is a 10-year requirement to drain the account completely. While not a direct tax on the inherited funds, tax-free growth is limited to 10 years, after which the money must be distributed to the inheritor. Further investment of withdrawn proceeds is then taxable sooner than in pre-COVID years.
Probabilities of future higher personal tax rates drive most Roth investors to trade current deductions for after-tax contributions by switching from Traditional IRAs and 401(k)s to Roth IRAs and 401(k)s. Everyone’s situation is different, and a thorough review of the possibilities with a professional financial planner will be helpful.
Experience indicates that my fears place me in a small minority of investors and advisors. Nonetheless, evaluate your possibilities before deciding.
Van Wie Financial is fee-only. For a reason.
Debt management and control is crucial for achieving long-term financial independence. Success seems out of reach for too many Americans, often because they are so far in debt. In our Financial Planning practice, we have guided more than a handful of clients through the process of relieving a debt load. While it is never easy, potential rewards outweigh the sacrifices required to achieve success.
Over the years, one popular method of debt reduction and payoff has occupied center stage. Dubbed Snowballing, the process involves listing your debts by size (don’t count your home mortgage) and concentrating on the smallest debt. The Snowball method pays only the mandatory minimum on all except the smallest debt balance. Then, pay everything you can on the smallest debt until paid off. Once the first debt is eliminated, apply the extra cash from the paid-off debt to the next smallest balance. Lather, rinse, repeat, until all debts are gone.
We recently discovered an article by our local “Consumer Warrior,” Clark Howard, in which he applied a term we had not previously heard, to another debt reduction method. The Avalanche method is similar to the Snowball method, except prioritizing of various debts is by interest rates. The Avalanche method pays above the minimum (as much as possible) on the debt with the highest APR (Annual Percentage Rate) until gone. Other debts are serviced with only required minimums. Once one is eliminated, more is paid on the next higher debt by APR, and the process repeats on lower rate debts until eliminated.
Which is better? We have always leaned toward the Snowball method, but Clark took the hypothetical to a new level. Using a real-life example, he calculated payoff time and expense, using both methods, and the financial winner in the test case was the Avalanche. Your mileage may vary, but the calculation method remains the same.
Not yet totally satisfied, Clark introduced a third method dubbed Blizzard, which is essentially a hybrid model. The Blizzard method begins with a Snowball and pays off a debt or two for confidence, cash flow, and momentum. At that point, the Blizzard method shifts to Avalanche strategy to finish the process. Blizzard has the benefit of realizing early rewards by eliminating the smallest debt(s) via Snowball, and then Avalanche often contributes favorable numbers in terms of total interest paid.
Saving money is an important goal, and none of the methods will work for you unless you control your own budget. Whether Snowball, Avalanche, or Blizzard, you don’t have to wait for the proverbial cold day on the First Coast to get started.
An individual’s relationship with money includes elements of personality, lifestyle, upbringing, priorities, etc. In order to effect significant change in behavior with money, an individual must confront the past with an eye to change. It can be done, and once redirected, many people become highly successful investors. Like all Financial Planning processes, setting realistic goals is the first step toward success.
Ongoing thanks to Clark Howard for framing various topics in understandable terms, and for his willingness to get good information into public hands. His website is Clark.com.
Van Wie Financial is fee-only. For a reason.
For many Americans, the Holiday Season presents a perfect opportunity to improve chances of attaining true Financial Independence. Novice or experienced investor, this is a perfect time to improve your situation.
Personal tax refunds (in whole or in part) can be directed into an Individual Retirement Account (IRA). Open an account with your choice of custodians, and IRS will make the direct deposit. Your tax preparer can direct the refund to the IRA.
Do not invest in anything you don’t understand. Annuities, cryptocurrencies, NFTs, Life Insurance, and most individual stocks should be avoided by novice investors. Clever salespeople may attempt to steer you into “exciting opportunities for outsized returns.” As we say at Van Wie Financial, “If you can’t explain it to a 12-year-old in 5 minutes, don’t buy it.”
If you control your own income and expenses to a degree (small business owner, etc.) ask yourself if 2021 has been a great business year or not. What are your prospects for increased income and/or differing tax rates in 2022? Your answer may direct you to either accelerate or delay income and expenses to or from this year to the next year.
If you are legally required to take a Required Minimum Distribution (RMD) in 2021 but have not yet done so, do it immediately. The absolute deadline is midnight on December 31. Failure to take a timely RMD carries a 50% penalty, on top of the tax owed on the RMD. This year, everyone is busy, and you may have to make an insistent phone call to your account custodian in order to protect yourself from a severe penalty.
Review Beneficiary Designations on IRAs, various retirement accounts, and insurance policies. Family and personal situations change, so Beneficiary Designations must be reviewed, and updated if needed. Do you have a Will and/or a Living Trust? Make an appointment with an estate attorney if you need to update this aspect of your financial life. If you have a financial advisor, he or she should be able to help find one for you and coordinate the process.
Investors playing the home game (not using a professional advisor) should analyze their investment returns over the years. It is not important that you “beat the market.” However, if your returns are substantially under an average balanced portfolio, it may be time to consider hiring an advisor. We recommend finding a fee-only Certified Financial Planner® (CFP®) operating as a Registered Investment Advisor (RIA). Searches for qualified advisors are available online at sites such as the CFP® Board (letsmakeaplan.org) and the National Association of Personal Financial Advisors (NAPFA.org).
If your current advisor is not helpful in all areas of your financial life (investments, insurance planning, tax planning, retirement planning, estate planning, college funding, etc.) it may be time for a change. Now may present the perfect opportunity to begin a long-term relationship to facilitate eventual Financial Independence.
Van Wie Financial is fee-only. For a reason.
In August of 2017, we blogged about the dangers of owning physical gold and/or silver in an IRA, while storing the actual metals in your home. Back then, one could hardly avoid hearing commercials pushing gold and silver IRAs. Hold it in your hand, love it, cherish it, protect your assets, and succeed. All that, and purchase it with after-tax IRA dollars—what a deal!
IRS rules for IRAs include a strict prohibition on self-dealing. You cannot benefit from personal use of the assets in your IRA. Violations result in your IRA becoming instantly 100% taxable. A recent IRS decision confirmed the danger of trying to home base your physical IRA gold. As a result, a couple now owes $300,000 to IRS for storing gold in their home safe.
IRS allows the purchase of some forms of gold in an IRA, but it also specifies the special type of trustee that can custody the account. Specialized custodial accounts carry higher fees than do traditional IRA custodians. Unless and until IRS guidelines change, we would never own physical gold or silver in a home-custodied IRA.
Whenever our clients express an interest in owning precious metals, we prefer and suggest the electronic form of ownership. Several Exchange-Traded Funds (ETFs) exist, whereby investors can own precious metals by simply buying shares of the ETFs. These ETF assets are backed by physical commodities and can be held in taxable or tax-deferred accounts.
ETF-style ownership has several salient features. First, it has proven to be legal and penalty-free. Additionally, there is little or no emotional attachment to a share of an ETF. Selling shares allows the IRA owner to add or subtract small quantities instead of having to trade only high-value coins or bars. We do not believe that “buy and hold” for precious metals is necessarily a good long-term investment, as pricing fluctuates wildly over time. By paying attention, it is possible to buy low and sell high, then repeat at the next opportunity, based on price.
Many people likely disagree with our very conservative view on this subject, but in the absence of a verifiable change with the IRS, we cannot advise people to set up a home-based precious metals IRA.
For a more thorough education on the subject, simply execute an Internet search on a few keywords, such as “gold,” “IRA,” and “at home,” and you will find pages of information and opinion. Some websites contend that under a provision of the Pension Protection Act, it is legal for certain people to own IRA gold at home. When you read their disclaimers, you will draw a simple conclusion—you aren’t among them.
Van Wie Financial is fee-only. For a reason.
Every so often, I review my past Congressional Financial Wish List, both to see what happened since my last review, as well as to see what could be improved. Given political changes since my 2019 update, it seemed like a perfect time to review and update my list. Here’s what I found:
- Wish # 1 – Freeze personal income tax rates, which were lowered in 2018, to avoid reverting to the old (higher) rates after the year 2025
- Wish # 2 – Reduce Capital Gains tax rates, which were not modified in the past Administration (much to my dismay)
- Wish # 3 – Dramatically increase annual contribution limits for IRAs, which are currently only adjusted for (understated) inflation
- Wish # 4 – Repeal all Estate Taxes (“Death Taxes”) and Gift Taxes
- Wish # 5 – Eliminate the “progressive” income tax on Social Security Benefits, currently taxed up to 85%
- Wish # 6 – Eliminate the Alternative Minimum Tax (AMT), which was eliminated for corporations, but not for individuals
- Wish # 7 – Raise (further) the age for Required Minimum Distributions (RMDs) from all Retirement Accounts
- Wish # 8 – Make permanent the limited “above-the-line” deduction for charitable contributions, which currently stands at $300 per person
- Wish #9 – Index Capital Gains for inflation to avoid taxation on purely inflationary gains
- Wish #10 – Restore the tax deduction for fees paid to financial advisors, which was eliminated (in my estimation) discriminatorily
We could go on ad nauseum, adding such items as the implementation of the FairTax. However, restricting this discussion to reasonable probabilities is difficult enough. In our current (revenue-hungry) Administration, we see little likelihood for positive change, except, perhaps, for #7 and #8. Worse yet, we are likely to lose ground, especially on #2.
Maybe it will help if I send a copy of my list to the North Pole.
Van Wie Financial is fee-only. For a reason.
Last summer we looked at upcoming problems in the Social Security System, with an eye toward its pending insolvency. Today we look at what “solutions” have been proposed in Congress during this year. Remember that this problem has been staring our elected officials in the face for years. We fear that 2021 proposals constitute, at best, too little, too late. As usual.
The need for reform has been well documented throughout recent history. Originally overfunded by design, the System built up a sizable Trust Fund for future benefit payments. Congress spent the actual money in the Trust Fund, replacing it with a huge I.O.U. They “own” the problem.
Changing demographics have now rendered promised benefits unsustainable. Without changes, present and future Social Security beneficiaries will soon face a sharp reduction in benefits. Politicians understand that senior citizens vote in consistently high numbers. Keeping seniors happy is paramount for their re-election. So, how did Congress fare in the quest for restoring sustainability? Simple answer—poorly, again.
Summarizing 2021’s proposals introduced into both Houses of Congress these past 12 months, we found the following:
- Two proposals would restart the payroll deduction for Social Security above either $250,000 or $400,000 income levels, as the current payroll deduction stops for incomes above $142,800
- Proposed benefit increases for low earners, older retirees, students, and workers in general
- Expanded eligibility for Supplemental Security Income (SSI) benefits (note that the SSI portion of Social Security is actually a welfare program, and is funded by General Revenues, rather than payroll taxes)
- Requiring paper statements for many more participants and beneficiaries (unless waived by the participant)
- Ensuring that Social Security offices are fully staffed for phone calls
- Improving benefits for surviving disabled spouses
Implementation of all these proposals would bring a small increase in overall revenue to the System, but with more than offsetting costs. Reviewing the list of proposals leaves us wondering if Congress understands that the System is going broke. Americans understand, and they are demanding action.
Historically, voters tend to punish politicians who offer realistic fixes. Perhaps we are our own worst enemies. That is not a welcome thought.
Van Wie Financial is fee-only. For a reason.
Saving money is the quickest and easiest way to make more money. Just don’t run headlong into the refi process without doing your due diligence and bracing yourself for a bumpy ride. Remember that refinancing lasts for a long time, but it comes at a hefty price that can be paid upfront or over time. And don’t try to hide anything financial, they will find your closet skeletons.
Van Wie Financial is fee-only. For a reason.
Step 1 is Suitability:
- The refi process is not free, and not everyone is eligible for a beneficial refinancing
- Potential economic rewards must be determined before taking the leap
- Interest rates–both your current rate and prevailing market rates–need to be compared
- Considering the remaining term of your existing mortgage, would the costs justify the savings?
- Determine your priorities, i.e., shorter payoff term, lower interest rate, reduced payments, fixing a variable rate, taking cash out, elimination of PMI, etc.
- Establish all parameters for a loan, then proceed as though they can all be met
- Determine your credit score (FICO), which you can obtain from any of the 3 large Credit Bureaus: Experion, Equifax and Transunion
- Until April 20, 2022, through com, all three are offering weekly credit reports free of charge
- If your FICO score is above 760, you should receive a preferred interest rate, and if not, you might pay a somewhat higher interest rate
- Should your credit score need improvement, there are methods available online to help you add points
- Establish a relationship with a reputable mortgage broker, credit union, bank, or online mortgage originator
- Discuss all fees and closing costs with your selected mortgage professional to determine the best combination for you
- Get an appraisal with a lender-acceptable appraiser
- When a selection has been made and the lender is on board, lock in the interest rate, and get it writing
- Complete the formal application and start gathering financial data
- There will be a home inspection, and repairs are nearly always required, so plan ahead
- Any mortgage lender will give you a comprehensive list of documents and data required for closing the loan, and you will need to furnish each and every one of them
- In many cases, a competent Financial Advisor can assist with data gathering
- Be patient, as we have seen refis that didn’t go to closing because the applicant got fed up with the process and simply walked away
- If your Suitability, Discovery, and Goal Setting processes tell you that the process is worthwhile, it will most likely get you through the tedium and rigor of the process
- Prior to closing, read all documentation, check the numbers, and try to avoid surprises
Saving money is the quickest and easiest way to make more money. Just don’t run headlong into the refi process without doing your due diligence and bracing yourself for a bumpy ride. Remember that refinancing lasts for a long time, but it comes at a hefty price that can be paid upfront or over time. And don’t try to hide anything financial, they will find your closet skeletons.
Van Wie Financial is fee-only. For a reason.
Interest Rates have come off their lows, and home prices are up sharply. Is this a good time to refinance your mortgage? We say it is, but as with all things financial, complexity is high, mistakes can be costly, and there is no “do-over” option. Planning before executing can save you time, trouble, and cash. Approach the refi process as a fee-only financial planner approaches a complete Financial Plan.
Step 1 is Suitability:
- The refi process is not free, and not everyone is eligible for a beneficial refinancing
- Potential economic rewards must be determined before taking the leap
- Interest rates–both your current rate and prevailing market rates–need to be compared
- Considering the remaining term of your existing mortgage, would the costs justify the savings?
- Determine your priorities, i.e., shorter payoff term, lower interest rate, reduced payments, fixing a variable rate, taking cash out, elimination of PMI, etc.
- Establish all parameters for a loan, then proceed as though they can all be met
- Determine your credit score (FICO), which you can obtain from any of the 3 large Credit Bureaus: Experion, Equifax and Transunion
- Until April 20, 2022, through com, all three are offering weekly credit reports free of charge
- If your FICO score is above 760, you should receive a preferred interest rate, and if not, you might pay a somewhat higher interest rate
- Should your credit score need improvement, there are methods available online to help you add points
- Establish a relationship with a reputable mortgage broker, credit union, bank, or online mortgage originator
- Discuss all fees and closing costs with your selected mortgage professional to determine the best combination for you
- Get an appraisal with a lender-acceptable appraiser
- When a selection has been made and the lender is on board, lock in the interest rate, and get it writing
- Complete the formal application and start gathering financial data
- There will be a home inspection, and repairs are nearly always required, so plan ahead
- Any mortgage lender will give you a comprehensive list of documents and data required for closing the loan, and you will need to furnish each and every one of them
- In many cases, a competent Financial Advisor can assist with data gathering
- Be patient, as we have seen refis that didn’t go to closing because the applicant got fed up with the process and simply walked away
- If your Suitability, Discovery, and Goal Setting processes tell you that the process is worthwhile, it will most likely get you through the tedium and rigor of the process
- Prior to closing, read all documentation, check the numbers, and try to avoid surprises
Saving money is the quickest and easiest way to make more money. Just don’t run headlong into the refi process without doing your due diligence and bracing yourself for a bumpy ride. Remember that refinancing lasts for a long time, but it comes at a hefty price that can be paid upfront or over time. And don’t try to hide anything financial, they will find your closet skeletons.
Van Wie Financial is fee-only. For a reason.
Interest Rates have come off their lows, and home prices are up sharply. Is this a good time to refinance your mortgage? We say it is, but as with all things financial, complexity is high, mistakes can be costly, and there is no “do-over” option. Planning before executing can save you time, trouble, and cash. Approach the refi process as a fee-only financial planner approaches a complete Financial Plan.
Step 1 is Suitability:
- The refi process is not free, and not everyone is eligible for a beneficial refinancing
- Potential economic rewards must be determined before taking the leap
- Interest rates–both your current rate and prevailing market rates–need to be compared
- Considering the remaining term of your existing mortgage, would the costs justify the savings?
- Determine your priorities, i.e., shorter payoff term, lower interest rate, reduced payments, fixing a variable rate, taking cash out, elimination of PMI, etc.
- Establish all parameters for a loan, then proceed as though they can all be met
- Determine your credit score (FICO), which you can obtain from any of the 3 large Credit Bureaus: Experion, Equifax and Transunion
- Until April 20, 2022, through com, all three are offering weekly credit reports free of charge
- If your FICO score is above 760, you should receive a preferred interest rate, and if not, you might pay a somewhat higher interest rate
- Should your credit score need improvement, there are methods available online to help you add points
- Establish a relationship with a reputable mortgage broker, credit union, bank, or online mortgage originator
- Discuss all fees and closing costs with your selected mortgage professional to determine the best combination for you
- Get an appraisal with a lender-acceptable appraiser
- When a selection has been made and the lender is on board, lock in the interest rate, and get it writing
- Complete the formal application and start gathering financial data
- There will be a home inspection, and repairs are nearly always required, so plan ahead
- Any mortgage lender will give you a comprehensive list of documents and data required for closing the loan, and you will need to furnish each and every one of them
- In many cases, a competent Financial Advisor can assist with data gathering
- Be patient, as we have seen refis that didn’t go to closing because the applicant got fed up with the process and simply walked away
- If your Suitability, Discovery, and Goal Setting processes tell you that the process is worthwhile, it will most likely get you through the tedium and rigor of the process
- Prior to closing, read all documentation, check the numbers, and try to avoid surprises
Saving money is the quickest and easiest way to make more money. Just don’t run headlong into the refi process without doing your due diligence and bracing yourself for a bumpy ride. Remember that refinancing lasts for a long time, but it comes at a hefty price that can be paid upfront or over time. And don’t try to hide anything financial, they will find your closet skeletons.
Van Wie Financial is fee-only. For a reason.
As we wind down 2021, as with every year in the Financial Planning business, we assess year-end financial needs and procedures to minimize taxes and to prevent penalties. One of our unique challenges for 2021 is the reinstatement of Required Minimum Distributions (RMDs), which were eliminated last year due to the pandemic. Aside from being easy to forget the RMD requirement following a year’s reprieve, Congress made rule changes that affect investors of certain ages.
One constant, however, is that failure to comply with RMD rules will result in tax penalties of 50% of the RMD value not taken. Something that has changed is the nationwide labor shortage of workers in nearly every business. Financial custodians are not exempt from labor shortages, so transaction requests (including RMDs) should be filed early this year.
Upon receiving money from RMDs, many investors purchase additional investments in (taxable) brokerage accounts. Anyone with mutual funds in a taxable account needs to be aware of certain dates announced annually by the fund. By law, dividends, interest, and capital gains earned in the fund must be distributed to shareholders at least annually. This normally happens late in the year, and important dates to remember can be found on the website of the fund or the fund family.
Distributions are taxable events, whether paid in cash or reinvested in more shares of the fund. “Buying a Dividend” refers to the purchase of mutual fund shares shortly before the distribution is made. Distributions do not create value, as the gains have already been built into the share price. Investors who purchase new shares prior to the Ex-Dividend Date will receive the Distribution. For many investors, those Distributions will be unwanted due to taxes. It is up to the investor to avoid this situation by delaying the purchase until at least the Ex-Dividend Date, which is the first day the purchaser will not be entitled to this year’s Distribution.
Due to excellent market conditions this year, Distributions are expected to be larger than normal.
For example, we checked Oakmark Funds for 2021, and found the ex-Dividend Date is 12/16/21, and the Pay Date is 12/17/21. Distribution amounts have not yet been announced. Whatever the amount of the Distribution, it will be taxable to owners prior to the Ex-Dividend Date. If this would negatively affect your tax situation (Tax-Deferred Retirement Accounts are not affected), delay the purchase until at least the Ex-Dividend Date.
Van Wie Financial is fee-only. For a reason.
Despite frequent and boisterous claims from the Biden Administration regarding being “transitory,” inflation continues to worsen. Last week, we were treated to new monthly and annual inflation numbers; both exceeded even the highest estimates from so-called experts. Congress and the Administration continually stoke the inflationary fire with bad policy, excessive spending, and excuses. What should we expect?
Good news is generally released in Washington, D.C. early in the day. Reporters then scramble to get their scoop into the public domain, helping any Administration they support. The bad news is treated in a manner that at best could be called clandestine. Late on Fridays, following the close of business, and in the dark of night, unpleasant news is quietly slipped into certain government websites, where only diligent media discover the truth.
So it was this past Friday when the Center for Medicare & Medicaid Services (CMS) announced 2022 pricing for Medicare Parts A, B, and D. Naturally, the news provided another metaphorical inflation nail in the coffin for Senior Citizens. The Biden Administration is plagued by inflation of their own making, and their responses are woefully inadequate.
- Consumer Price Index (CPI, the overall price level) increased over the past 12 months by +6.2% and continues rising
- Social Security Benefit Payments for 2022 are increasing 5.9% (in fairness, that was an accurate inflationary estimate when it was announced, which happened just before the last superheated numbers drove annual inflation up to 6.2%)
- Income Tax Brackets are indexed to avoid “Bracket Creep,” which is caused by Cost-of-Living Adjustments, or COLAs, rising faster than the indexing of Income Tax Brackets by IRS
- Medicare Payments also increase annually (using a COLA) to reflect inflation, but Medicare premiums are rising, not 3.1%, nor 6.2%, not the originally leaked 7+%, but 14.55%, due to a last-minute increase to cover a new Alzheimer’s drug called Aduhelm
- Medicare’s Income Related Monthly Adjustment Amounts (IRMAA), reflect increased Medicare premiums for higher-income Americans, yet IRMAA bracket adjustments do not reflect actual inflation
- Chained CPI is a new and different measure of COLA for Social Security Recipients, supposedly providing a more accurate accounting of items routinely purchased by older Americans, but it further understates costs and under compensates benefits
Any thinking person would be hard-pressed to comprehend any “fairness” in the current system. From the above explanation, it appears that government policy is, “Heads I win, tails you lose.” One year at a time, the effect is relatively nominal but compounded over time, it will ruin the Middle Class as we know it today. Government of the people, by the people, and for the people, has been cast aside in favor of an even Bigger Government.
Are you better off than you were 10 months ago? Be afraid, America; be very afraid.
Van Wie Financial is fee-only. For a reason.