Finalization of the One Big Beautiful Bill Act (OBBBA) on Independence Day (2025) created a rare opportunity for Tax Planning, as next year’s rules were laid out in advance. Generally, Congress delays several important decisions until late December, leaving financial planners and tax professionals scrambling to assist clients with their optimal path to reducing taxes. Score one for taxpayers everywhere, for now anyway.
Then some other stuff happened. Excessively fractious politics in Washington, D.C. resulted in a partial government shutdown. While that is nothing new, the duration of this conflict has already surpassed the old 35-day record. As of this writing, there is finally a glimmer of hope for a solution, as the Senate broke the filibuster during a long weekend session. That should pave the way for final votes in both the Senate and the House. President Trump has indicated that he would be willing to sign this Bill if passed.
Failure of elected officials to reach a budgetary compromise has left the country with decision paralysis. Data releases, which generally drive action in Congress, have been deferred, resulting in long postponements to necessary planning announcements. While we do have definitive items such as the (paltry 2.8%) January 1 Social Security COLA, as well as 2026 Income Tax Brackets, we have yet to be informed about many pertinent details. As financial advisors, our apparent “head start” on 2025/26 tax planning has been suspended.
The irony is not lost on us.
Glaring omissions from relevant information include 2026 contribution limits to company-sponsored Retirement Accounts, encompassing 401(k), 403(b), 457, and others. Most Plan participants would like to adjust their salary deferral contributions beginning January 1, and new rules for highly compensated employees will affect tax deductibility due to changes in the “catch-up contribution.”
IRA owners are also awaiting 2026 contribution limits, but have more flexibility, due to contribution dates that extend through tax filing day of the following year. Even so, we’d like to know in advance what those limits will be, so that we can plan for tax withholding and/or Quarterly Tax Deposits (Forms 1040-ES).
Significant announcements will be available shortly after the shutdown ends, which will hopefully be soon. As 2026 provisions are announced, we will report them in this Blog.
From the data released so far, 2026 does not appear to be shaping up to be an unusually taxpayer-friendly year. OBBBA prevented the expiration of the Tax Cuts and Jobs Act of 2017 (TCJA), and for that, we can all breathe easier. However, as the old expression goes, The Devil is in the details.” As we learn more details, you’ll be the next to know.
Since the days of President Ronald Reagan, the IRS has been directed to index the U.S. Tax Code to eliminate an insidious problem called bracket creep. For many years, inflationary increases in wages and salaries caused some taxpayers to cross into higher tax brackets, which were stagnant year after year. President Reagan noticed this phenomenon and worked with Congress to index tax brackets for inflation, preventing bracket creep.
What is the inflation rate for any given year? That question is assigned to the Bureau of Labor Statistics (BLS), part of the Treasury Department. Their annual Cost-of-Living Adjustment (COLA) estimate is used to adjust wages for millions of Americans, unionized or not. Accuracy is paramount for maintaining our daily living standards. Very few people believe we are well served by the BLS, because in the act of living day-to-day, we see prices of necessities rise faster than government reports admit. Many luxury goods rise even faster.
I have long argued for one single rate of inflation (and COLA) for each 12-month period. However, the IRS applies differing rates to various elements of the Tax Code, sometimes even within the same application. Inconsistent application of COLAs presents opportunity for unequal treatment of taxpayers.
This can be seen in the 2026 Tax Bracket adjustments. The lowest 2 brackets are being increased by about 4%, meaning that lower-income Americans can earn 4% more income without being penalized by creeping into a higher tax bracket. However, upper brackets are increasing only about 2.3%. For these people, a 4% increase in income can move them into a higher bracket. This kind of manipulation is generally designed to shift the tax burden to higher-income taxpayers. Shameful.
Not all COLA adjustments have been released yet, partly due to the current government shutdown. As numbers are finalized, we will report and comment in upcoming Blogs. We already mentioned the new tax bracket changes.
Significant changes for 2026 include a new process for deducting State and Local Taxes, or SALT, which had been limited since 2018 to $10,000 annually. For 2026, the SALT limit has been raised to $40,000, although the additional amount gets phased out at higher income levels. The net result affects very few taxpayers and does not address inflation for the rest of us.
Thanks to passage of the OBBBA, year-end 2025 tax planning is easier this year than most. Too often, Congress delays finalization of taxation rules until they are scrambling to catch their planes for the Holiday break. This leaves planners in a last-minute rush to do their best for clients.
We already know that Social Security recipients will receive a paltry 2.8% increase in monthly benefits, and that Medicare Parts B and D will cut into that increase. Hopefully, better news will be available in the near future.
In recent years, data security, identity protection, and asset preservation topics have played a prominent role in society. Unfortunately, these problems prevail due to the relentless pursuit of our assets by an ever-increasing number of “Bad Guys” lurking in the shadowy corners of the Internet. One of the goals of this Blog is to educate our readers in the art of staying safe at minimal cost and disruption of daily routines.
A couple of years ago, I first reported on a little-known Credit Rating Bureau called Innovis, having learned of its existence from Jacksonville’s “Consumer Warrier,” Clark Howard. Clark is familiar to many local talk radio listeners, and he is recently back on the topic with new information. I thank Clark for his updated information and suggestions.
Just when you thought we had the credit freeze topic covered, there are additional agencies we need to contact for our individual and collective complete safety and security. The “big three” (Experian, Equifax, and TransUnion), plus Innovis, account for 95% of online protections. I desire 100% safety, both for me and for all of you. Several smaller and lesser-known agencies are now active, and some deserve our personal attention. Consolidation in the credit reporting industry has created a few important agencies out of a hoard of small (and generally less influential) outfits, heretofore mostly unknown.
A list of new credit freeze suggestions includes LexisNexis, Clarity Services, ChexSystems, and if you have not already done your freeze at Innovis, include that in the new list. All of these are easily reached through a simple Internet search, and once there, instructions are available online to complete your credit protection journey.
It is important to note that the credit freeze process applies to individuals, rather than couples or households. For each freeze you implement, be sure to separately cover both spouses, if married. You will want to have available copies of your driver’s license(s).
As our mothers pounded into our heads over decades, “An ounce of prevention is worth a pound of cure.” These online tasks are tedious and ever-changing, but each one adds to the probability of you (and your spouse) remaining safe from the prying eyes of Internet thieves. Being thorough requires a comprehensive credit freeze process, to include Experian, Equifax, TransUnion, Innovis, LexisNexis, Clarity Services, and ChexSystems. Don’t be the next victim of identity theft.
Before we go, I’ll remind everyone to sign up for the free home title protection service provided by most County Register of Deeds Offices. Call us if you have any questions. A little one-time effort beats a monthly expense in my book.
None of our suggestions today will cost you a red cent. Don’t delay.
October has a reputation for being a “bad month” to be in the market. Does this allegation hold up in practice?
For answers, I turned to Forbes’ description of the “October Effect,” which simply states that the stock market allegedly declines in October. Given some of October’s history, it is not surprising that investors respond negatively to the mention of our 10th month. Halloween and market crashes both present scary scenarios for many Americans.
First, we’ll look at some of October’s “greatest hits” on Wall Street. Many of the scariest declines in the market occurred in the month of October, including the “Panic of 1907,” the “Crash of 1929,” and one big event during my personal experience, “Black Monday in 1987,” on which day (the 19th of October) the S&P500 Index dropped 22.7%. 2007 also saw October begin the so-called “Financial Crisis,” which lasted about 18 months, during which the S&P500 Index dropped by about half. Households lost more than $16 trillion in Net Worth.
In each case, economic conditions caused the drops, not the calendar.
Those unsettling events left a lasting stain on the reputation of an otherwise beautiful month, when temperatures and humidity fall to stimulating levels, and Mother Nature puts on her annual color show throughout much of the country. They also contribute to a misguided Wall Street axiom that states, “Sell in May and Go Away.” Don’t tell July about that one, as July generally delivers gains.
Despite the common fears and past events in October’s history, the stock market, on average, rises (erratically) during the month. Among our historically positive market months, the average return in October is the smallest. For my part, I find any monthly market increase satisfactory, no matter how slight. Up is up, and October leads into the generally most profitable months. No one can predict when a year-end rally may begin, and anyone who misses the start squanders a chunk of the usual increase.
What many investors attribute to the “October Effect” is likely based on the “Big V,” for Volatility. Historically, October is the most volatile month of the year. Short-tempered investors are frequently frightened into making stupid moves (Forbes’ term), selling into volatility, and missing out on the upswings.
Today’s lesson is the same one we have touted for decades – get into the market in an intelligent manner, and remain invested, no matter how much it hurts some days. Assuming your investments are long-term (as they should be), the rewards last a lifetime.
In 2019, on the Van Wie Financial Hour radio program, we reported on a spreading phenomenon known as “FIRE,” short for “Financial Independence Retire Early.” In cult-like instructional guides, FIRE proponents attempt to entice people into a utopian world of carefree decades of cushy retired life, beginning in early or middle-age. To me, this is a component of a “Big Lie” Americans are being fed on a daily basis by money-grubbing “influencers.” Far too many of these “financial experts” are in their businesses for the simple reason that they sell expensive newsletters to unsuspecting people.
The FIRE movement tells people they can retire at age 35, 40, 50, or even 60. My study of information on FIRE from the zealots (who claim to have all the answers) reveals that a successfully retired FIRE candidate must go to WORK! We’re not talking about volunteering, but a real paid endeavor; even a “side hustle” or “gig work.” Apparently, when doing something you enjoy, it is not considered by FIRE to constitute work, much less a new career. Instead, it is supposed to provide some kind of self-fulfillment, justifying the cut in pay. Think of it as a paid hobby. Some, like me, call it working.
I have a better idea. My concept is called “DREC,” short for “Delay Retirement Extend Careers.” DREC offers a path toward the real financial goal of most people – true Financial Independence. It does this the old-fashioned way, by working longer, making more money, and enjoying life and family along the way. FIRE too often requires sacrificing a fulfilling family life.
Under DREC, a young worker who enjoys his or her occupation and career path should set a retirement goal of complete Financial Independence. Physical age is only relevant for insurance planning and Social Security claiming purposes. Many people work later into life these days – on purpose!
Not enjoying your current job? Change it now, and work until you are financially prepared to (completely) retire.
Wasting years, while skimping and saving pennies toward an unrealistic and artificial FIRE goal, makes for unhappy and unsuccessful lives. People will always require food, clothing, shelter, and a wide variety of expensive non-luxuries (including taxes). Financial Independence requires our nest eggs to be sufficient to cover a lifetime of expenses, hopefully including some non-essentials. You only live once, so have a good time.
DREC (Delay Retirement Extend Careers) will yield a significant improvement in your probability of achieving true Financial Independence. If your only goal is early retirement, chances are you’ll be working forever, only not by choice. FIRE may be trendy, but DREC is practical.
Affordable real estate for young Americans has been at historic lows in recent years, due to the double whammy of inflated home prices and high mortgage interest rates. Elevated mortgage rates are slow to decline, but the process is underway. As if to contradict the rudimentary law of supply and demand, new home sales in August jumped an “unexpected” 20.5% nationwide.
There must be a reason, and of course, there is a rationale for so many sudden buyers. When homebuilders are faced with a softening market, they pull a few rabbits out of their collective hard hats. Price reductions are being offered, and builders have been financially creative with their offerings. Providing fewer upgrades from “builder quality” reduces builders’ costs, and buyers are loving the resultant lower prices. Many builders are offering creative financing options, including mortgage interest rate “buy-downs” for the first few years.
Ultimately, the real estate market will be best stimulated by a general reduction in interest rates. Mortgage rates are not directly impacted by Federal Reserve (FED) actions, but as the FED eases monetary policy, mortgage rates will follow the trend. The first rate cut in this cycle has been implemented, and more will follow. Mortgages will become less expensive over the next several months, and smart buyers will capitalize on the friendlier rate environment.
Buyers and sellers alike must pay attention to interest rate fluctuation. Timing a real estate transaction for maximum personal benefit is tricky work, as the goals of buyers and sellers often conflict. Deals are made, and sales get completed, only when buyers and sellers are both satisfied, if not ecstatic.
Buyers need to remember that their monthly payments are changeable later by refinancing, while sellers experience a “one and done” transaction. In my view, buyers have the financial advantage over time. It would be a mistake to pass on a home you love without considering the probability of a refinancing possibility in a reasonable amount of time.
Potential buyers should be attuned to creative financing available at any time in the rate cycle. Regardless of the buyer’s intention to stay in the home for a short or long period, an Adjustable-Rate Mortgage (ARM) should be considered. Initial interest rates on ARMS are lower than those of Conventional 30-year fixed mortgages. In subsequent stages of a softening interest rate market, ARMS can be refinanced when the time is right.
Every month spent paying a lower ARM interest rate lines the pockets of the homeowner. Savings accrue until the mortgage is refinanced, hopefully at a significantly lower rate. Once the lower rate is locked in for 15 or 30 years, the overall lifetime cost of the home purchase will be minimized.
One Big Beautiful Bill (OBBBA) is now the law of the land, and within its hundreds of pages are many changes, most of which are positive for America’s taxpayers. Under OBBBA, many tax credits for energy saving items are expiring at year-end, and should be understood while they remain available. To qualify for a tax credit, work must be completed and paid for before December 31, 2025.
Residential Energy Credits provide long-term savings from decreased energy consumption, but that may not be the only benefit. In recent years, we (personally) have replaced our residential HVAC units with higher SEER-rated heat pumps and variable speed fans. As a result, the comfort level in our home is vastly improved, while our outlay for monthly electric bills decreased.
From our own records, I compared our summer electric bills from 2010 against this year, using the months of July, August and September. This year’s bills averaged 57% less than those from 2010, despite increases in the price of kilowatt hours. To be fair, we have also replaced most light bulbs with LEDs, but those savings likely provided a small portion of the overall decrease.
Exterior doors and windows are eligible for tax credits, as are skylights. Rooftop solar systems are as well, though the payback period on many of these is quite long. Efficient water heaters, including tankless and electric or gas heat pump styles, may also qualify, and all will save money. (We also switched to LP tankless water heaters, and our LP bills were dramatically reduced.)
Changing out an electric panel may also qualify, and adding insulation is always an effective money saver, often accompanied by improved comfort. Both are eligible for Residential Energy Credits this year.
Residential Energy Credits must adhere to strict guidelines. Understanding the rules is the responsibility of each taxpayer, and a good place to begin discovery is on the Energy Star website (energystar.gov). Claiming tax credits for which you qualify is done on IRS Form 5695, available on irs.gov.
Attention to detail is important, as the rules are strict. However, with the impending expiration of tax credits, anyone who has been contemplating making upgrades should begin immediately to see if their intended upgrades qualify. Remember, a tax credit is a one-for-one dollar savings, rather than a tax deduction. With current budget problems in Washington, Congress is unlikely to extend these expiring credits any time soon.
Potential Electric Vehicle (EV) buyers are not alone in facing a deadline, but the subsidy for EVs is very large, and expiring at the end of September, 2025 (today). The credit may still be claimed by purchasers who have signed a contract by then, even if delivery has not been made. Whether these subsidies will be renewed is anyone’s guess, but there are plenty of savings available to homeowners in the remaining weeks of 2025.
When politics meets economics (which happens far too often), someone is bound to get his or her feelings hurt. Starting at noon on January 20, 2025, and running continuously until Wednesday, September 18, 2025, Jerome Powell, the Chairman of the Federal Reserve (FED), has been on a political collision course with the President of the United States, Donald J. Trump.
The “Mutual Dis-Admiration Society” these two have developed has been on public display for several months, and it’s not over yet. Neither of the individuals involved deserves sole blame for where our economy stands right now, nor with our current inflation. Their jobs are to improve the state of the economy.
President Trump wants interest rates much lower to stimulate business, so the economy will flourish. The FED has a dual responsibility, to both the economy and the rate of inflation, presenting often-conflicting goals. In my opinion, this is a flaw in the very concept of the FED, which Thomas Jefferson opposed with his massive political clout. During his lifetime and beyond, Jefferson’s side kept winning, and the U.S. had no Central Bank. That changed in 1913, when circumstances changed, and Congress authorized a Central Bank.
Regardless of any reader’s opinion on that subject, airing in public the dirty laundry of political and economic policy is never pretty. This particular spat provides visual evidence that political conflicts should be negotiated behind doors, with results made public after final decisions are made.
Enough with the infighting – the FED has now made their pronouncement regarding the current direction of interest rates (down). All Americans are affected to some degree, and investors should now plan their strategies. Following a decade or so of near-zero interest rates, savers have lately been relishing higher returns in the Money Market, on CDs, and on High-Yield Savings. The FED’s recent interest rate reduction of one-quarter point will not make a great deal of difference, but more cuts are coming, and each reduces low-risk money-making opportunities.
For the risk-averse, buying longer-term CDs will lock in today’s interest rates during this FED easing cycle. Other investors may want to increase the bond portion of their portfolio mix, as bond prices rise in reaction to interest rate cuts. We prefer using bond mutual funds to diversify holdings and take advantage of rising prices on existing bonds already held in the funds.
Whenever interest rates change, winners and losers are created. During this FED rate easing cycle, investors (creditors) should implement portfolio changes, while borrowers (debtors) will be better able to afford major purchases that rely on financing, including home mortgages and auto loans.
Whichever side you are on, be pro-active while making your adjustments, and the long-term result will tilt in your favor.
Last week, we blogged about two Powerball winners “forced” to split a grand prize of nearly $1.8 billion. Assuming they each choose the lump sum option, as almost all winners of large sums do, they will need to manage a level of wealth unimaginable to most Americans. Unless either winner has an unusually extensive background in finance and investing, this means they will be starting from scratch (pun intended). Lots of “scratch” involved here, to be sure.
In last week’s post, we elucidated the need for personal safety for lottery winners. Today, we discuss the monetary and investing aspects of Sudden Wealth.
Media reporting on winners is designed to attract a large audience, looking for computer clicks and web page headlines. Media hustlers are determined to garner maximum attention, so they report the largest numbers possible. In real life, after taking the lump sum option, $1.8 billion is more like $820 million.
Taxes come next, imposing a 37% Federal Income Tax Rate. Note that only 24% will be withheld prior to receiving the winnings, with the balance due in cash the following year’s April 15th. Both will pay “Obama Care Tax,” and both will be subject to large IRMAA (Income-Related Monthly Adjustment Amounts) surcharges (for life, unless they blow the windfall).
From the Missouri winner will be extracted State Income Tax, where the maximum tax rate is 5%, and applies to the actual winnings of $410 Million. That depletes the winning prize by another $20.5 million or so. Of course, what’s left is still impressive.
Net winnings must be protected and invested. In all likelihood, new winners will not have a pre-established safe place for their funds to be electronically transferred and will need to make provisions prior to claiming their winnings. Before opening any accounts, owners must exercise due diligence to discover what degree of protection is afforded by the receiving institutions.
For reference, the Federal Deposit Insurance Corporation (FDIC) insures only $250,000 per account. Bottom line – winners need professionals, working with large financial organizations, to ensure that funds will be protected.
Once funds are safely deposited, a few suggestions from our experience may prove insightful. First, pay all your own bills, which is an easy way to track your spending. Next, don’t throw huge investment money into the market all at once. Develop and implement an investment plan and procedure that is time-phased.
Above all else, ignore the “noise” from your family and “friends.” You don’t owe a penny to anyone, except for pre-existing debt. Be nice, not stupid.
If you ask members of America’s wealthiest families how to remain wealthy for generations, most will mention one simple and profound guideline – Don’t spend the principle. My recent Internet search on “lottery winners who went broke” yielded 1,380,000 results. Don’t make it 1,380,001.
Saturday night, September 6, 2025, is a date that will long be remembered by two Powerball ticket holders, one in Missouri and the other in Texas. The prize they will split (sorry, winners, you will have to share) is estimated at nearly $1.8 billion (that’s 1,800 Millions of Dollars). After my initial disappointment that there were no Florida winners, my concerns fell to the winners’ situations.
Having spent 2+ decades as a professional financial advisor, I have learned firsthand about errors made, and dreams shattered, among people experiencing “Sudden Wealth.” While only one example of Sudden Wealth (inheritance is another), today we are talking about lottery winners. Over the years, we have had several direct experiences with Sudden Wealth (not our own), through our financial advisory business. Contact with Sudden Wealth presents a learning experience, one which I hope the new winners get educated very quickly.
Among non-winning lottery ticket purchasers, the worst cases we see (and hear about) are in a group that spends their working years “planning for a windfall” by purchasing lottery tickets. These people “know” that eventually their numbers will be the right ones, and a cushy retirement awaits. They are, of course, wrong, eventually becoming old, broke, and miserable.
Having had the unusual good fortune of getting involved with winners of staggering lottery prizes and substantial inheritances, I must also report that money can buy happiness, at least for the right people. The secret lies in planning for the windfall, once notification of its imminent arrival is received.
This may sound strange to some people, but the last action when becoming a large lottery winner should be making any public announcement. Media people will discover and divulge names and locations; you won’t have to do anything except stay quiet, while immediately finding and procuring yourself a safe environment. This satisfies the highest priority for winners – personal safety.
Second in priority (but also critical) is the security of the actual money. With each of Saturday’s winners expecting a pre-tax windfall of about $410 million (assuming they select the lump sum option), they need a plan for custody of funds with maximum security and insured coverage. Federal Income Tax owed by each will be in the 37% bracket, or about $152 million, but only 25% will be withheld. The balance is owed as of the next April 15, and must be preserved.
Finding a personal “Dream Team” of advisors is a necessity for any substantial Sudden Wealth recipients. We recommend starting with a qualified Certified Financial Plannerâ, operating as a fee-only Registered Investment Advisory, or RIA. Add a trusted attorney and CPA, and you have a good start.
Planning on sudden wealth, whether through gambling or inheritance, is never an acceptable retirement plan. But not planning for the windfall, once notified of its pending arrival, is equally dangerous.