February 25, 2020
Reminder: Make Your Tax Prep Appointment
Now is the ideal time to request an appointment that best fits your schedule; simply call 203‑967‑2231 or email us to line up a time.
Also, don’t forget to mention whether you still need to revisit your retirement plan thanks to the changes brought on by the SECURE Act. This week’s newsletter cites a detail concerning RMDs that has been left out of many reports; scroll down to read about it.
Risk on or risk off?
The coronavirus appears to have inspired two distinct schools of thought among investors. Some investors currently favor opportunities that are considered lower risk, like Treasury bonds and gold, because they’re concerned about the potential impact of the coronavirus on the global economy. Others are piling into higher risk assets, like stocks, that could benefit if central banks (like the United States Federal Reserve) take steps to stimulate economic growth, reported Randall Forsyth of Barron’s.
Currently, the Federal Reserve (Fed) is holding interest rates steady. The minutes of the January Federal Open Market Committee meeting indicated the Fed, “…generally saw the distribution of risks to the outlook for economic activity as somewhat more favorable than at the previous meeting,” reported Lindsay Dunsmuir of Reuters.
Last week, Fed Chair Jerome Powell said it was too soon to know whether the economic effects of the coronavirus on the U.S. economy would warrant a change in monetary policy.
During periods of uncertainty, like this one, the benefits of holding well-allocated, well-diversified portfolios become clear:
- By holding asset classes (e.g., stocks, bonds, and other asset types) that respond differently to the same market conditions, investors protect themselves from the poor performance of a single type of asset.
- By diversifying holdings within asset classes (e.g., investing in different parts of the world, investing in different industries), investors protect themselves against the poor performance of a single investment.
Choosing a well-allocated and diversified portfolio that aligns with your goals, objectives, and risk tolerance can provide peace-of-mind when markets are volatile.
Last week, major U.S. stock indices moved lower. Al Root of Barron’s reported, “The Dow Jones Industrial Average dropped 1.4 percent this past week, snapping two weeks of solid gains…The S&P 500 index dropped 1.2 percent for the week…The Nasdaq Composite dropped 1.6 percent on the week…”
The CBOE Volatility Index (VIX), known as Wall Street’s fear gauge, moved higher.
SECURE Act News: Some People Must Still Take Required Minimum Distributions at 70½
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law late in 2019. One of its provisions changed the rules for required minimum distributions (RMDs).
RMDs are the amounts owners of IRAs, 401(k)s, and other tax-advantaged retirement plan accounts must withdraw from those accounts every year to avoid tax penalties. In some cases, retirees take more than the required minimum amount, especially when they are using the funds for income.
Prior to passage of the SECURE Act, Americans were required to take RMDs in the year they reached age 70½. This rule continues to apply to anyone who reached age 70½ prior to 2020. The Internal Revenue Service (IRS) defines age 70½ this way: The date that is six calendar months after your 70th birthday.
Beginning in 2020, owners of tax-advantaged retirement accounts do not have to begin taking RMDs until the year in which they reach age 72.
While the SECURE Act changed the age for RMDs, Qualified Charitable Distributions (QCDs) from IRAs were not affected by the new law. QCDs still can begin at age 70½.
RMDs can be complex, especially for households that have several IRA and retirement plan accounts. It’s a good idea to consult with a financial or tax professional before making any RMD decision. If you would like to discuss the finer points of RMDs, or receive some assistance calculating RMDs, get in touch—call 203‑967‑2231 or email us. We’re happy to help.
Weekly Focus – Think About It
“Friendship… is born at the moment when one [person] says to another ‘What! You too? I thought that no one but myself…’”
—C.S. Lewis, writer and theologian
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
https://www.barrons.com/articles/the-bull-market-in-both-risky-and-safe-assets-51582333794?mod=hp_DAY_3 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-24-20_Barrons-The_Two-Day_Stock_Selloff_Hurts-Footnote_1.pdf)
https://www.barrons.com/articles/stocks-drop-on-the-week-but-still-look-bubbly-prepare-for-a-correction-51582334151?mod=hp_DAY_2 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-24-20_Barrons-Stocks_Drop_on_the_Week_but_Still_Look_Bubbly-Footnote_4.pdf)
http://www.cboe.com/vix (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-24-20_CBOE_Volatility_Index_Charts_and_Data-Footnote_5.pdf)
https://www.congress.gov/bill/116th-congress/house-bill/1865/text#toc-HA6E69DEA642642799C7E8CF1D7E50D72 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-24-20_Congress.gov-House_Bill_1865-Footnote_6.pdf)
https://www.barrons.com/articles/answers-to-your-questions-on-the-secure-acts-impact-on-iras-rmds-and-qcds-51578502801 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-24-20_Barrons-The_SECURE_Acts_New_Rules_are_Causing_A_Lot_of_Confusion-Footnote_9.pdf)
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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