Broker Check

Monday Money Report

| April 03, 2023

Last week, the S&P 500, which is just 500 of the largest companies in America, was up about 3%. The Bureau of Economic Analysis reported that the Core Personal Consumption Expenditures price index, which is the Federal Reserve Bank’s preferred measure of inflation, has declined to a year-over-year of 4.6%.[1]  Core PCE excludes the more volatile energy and food categories.

While inflation is coming down and fears of bank failures are lessening, tax bills are starting to roll in. It’s not too late to make a couple of changes that could impact your 2022 taxes. If you are eligible, you can still make contributions to your IRA for last year. If you own a business, which can include a side hustle, you may be able to contribute to a SEP IRA. And, if you had a High Deductible Health Plan, you can still contribute to your Health Savings Account. These things can all reduce your tax bill and are available until the tax filing deadline.

Other tax news includes all the changes made in the Secure 2.0 legislation that recently passed.  Required Minimum Distributions were pushed out even further, up to age 75 depending on your birth year.  That may not be a good thing, though. Delaying withdrawals from your retirement accounts could result in large required distributions later in life, with higher tax brackets and even Medicare means testing. Having a retirement income distribution plan that incorporates taxes and Medicare is critical.

The law also allows 529 account owners to contribute leftover funds to the beneficiary’s Roth IRA. There are a number of rules and restrictions around this, but if you have money in a 529 that you don’t need for school and don’t want to pull out due to the taxes and penalties, this can be a good strategy. If you’ve listened to us for a while, you know that I’m a firm believer in starting Roth IRAs for kids at age 14, or as soon as they begin earning income.  That income can include baby sitting or lawn mowing money, too.

The legislation also allows more Roth options in retirement plans. While many of the changes take effect immediately, it will take time for plan administrators and custodians to update their systems. Once that’s done, if your employer has a Roth 401(k), you would be able to have the employer match paid into the Roth account. Remember you have to pay taxes on that match now, instead of waiting until you pull it out in retirement. If you have wages over $145,000, and are eligible for the catch-up contribution, that will automatically go into the Roth account; you do not have the option of putting the catch-up contribution into the traditional, or pre-tax, account. The law also allows SEP and SIMPLE accounts to offer Roth options.

Another new addition is access to a small amount of your 401(k) for emergencies. While many of you may not think being able to pull out $1,000 from your retirement account is a big deal, remember that the average American can’t cover an unexpected $400 expense. If you’ve been auto-enrolled in your retirement plan at work, that forced savings could be what allows you to repair your car, and keep your job, and be able to pay your rent. If used as intended, this could be life changing for Americans of modest means.

Secure 2.0 has made sitting down with your financial advisor more important than ever, as you incorporate these changes into your financial plan.

Your action item this week is to do some spring cleaning. Clutter adds stress to our lives and results in overspending, as we replace things we can’t find, or eat out instead of cooking.

Follow us on Facebook and check out our website at for more information and great resources.

Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.

[1] Market Watch US Stocks Open Higher by Christine Idzelis 3/31/23