I'm very excited to share with you our newsletter! We will be sending this out quarterly at a minimum, but maybe more often depending on what we have to share. In no way does this replace our personal communication with you. We enjoy that more than anything and are always excited to speak with each and every one of you.
The newsletter will provides updates on the economy, markets, new technology, services, and features that will help us better serve you. We are trying to think of a catchy name for it, but haven't come up with anything yet. The market and economy updates will be high level. As we stated in a recent email, if you enjoy being immersed in the details, we are sharing more often (and with more granularity) on our social media platforms. You can follow them here if you'd like:
You may have noticed that on my email signature, social media, etc, I have added CFP® to my name. This stands for CERTIFIED FINANCIAL PLANNER™, and is the highest certification one can obtain in the financial planning field. I am very proud and excited about this, and I firmly believe that obtaining this has made me better at my job and how I provide recommendations to all of you. The certification requires an intense study course, 8 hour exam, experience requirement, sample financial plan review, a background check, and an ethical attestation as a fiduciary.
Town Capital in the News
I'm not sure if we'll make the final cut, but there is a possibility we'll be featured in the Wall Street Journal within the next few months. We responded to a media request from them regarding Retiree Income Strategies, and would be honored if they chose us. We'll let you know!
We are always on the lookout for better ways to serve you, and an important part of that mission is technology. The ability to cherry pick the best technology for each particular need is probably one of the biggest advantages we have as a small firm. We do not have to use the clunky, outdated, all inclusive software that the big guys have, just because corporate said so. Outdated methods and technology typically results in a sub-par financial plan for you, the client. Here are some new technologies we have adapted to better your experience.
Implementation of "Income Lab" for Retirement Income Optimization and Monitoring
It is no secret that we are a huge fan of flexible and tapered spending strategies for retirement income.
To recap, here is what that means:
Tapered Spending: Planning on spending varying amounts in retirement (i.e. front loading retirement income for your GO years) vs. planning on spending the same amount every year, which is unrealistic.
Flexible spending: Separating needs, wants, and wishes to identify the income that may need adjusted if market or economic conditions warrant, but overall provides more retirement income over a lifetime.
Income Lab is an add-on technology we recently implemented (not replacing any of our current software, but compliments nicely). It is a dynamic retirement income planning and monitoring solution developed by Dr. Justin Fitzpatrick and Dr. Derek Tharpe. Instead of explaining in words, we made this short video for you to check it out.
Implementation of FeeX for Held Away Accounts
Through FeeX, we now have the ability to implement portfolios and rebalance your Employer Sponsored Plans (i.e. 401ks) directly. This is done through their platform, without sharing your login info with us. This eliminates the inefficiency of constantly trading statements back and forth. There is a fee for this, as FeeX charges us a fee for its services.
Implementation of FastLink powered by Yodlee
We ask that all of our clients take advantage of this new feature. FastLink allows you to link your outside accounts to our financial planning software, MoneyGuideElite. For example, an outside retirement account, brokerage account, mortgage, auto loan, etc, can all be linked and tracked live time in the software. Again, this is much more efficient (and less annoying) than me asking what your mortgage balance is a couple times a year. Here is a video showing how to link. If you do link something, send me an email and let me know, so I can then delete the duplicate manual account already in there.
Economy and Market Update
You may have noticed recent volatility in the stock market. There are some very specific reasons for that. You may also have seen changes in your portfolio as well. This was intentional due to the increase in probability of moving to a new quadrant of the economic cycle. There are a lot of factors driving the recent (and most likely continued) stock market volatility and performance, but the two main drivers are economic growth slowing and inflation slowing. Growth had nowhere to go but up following COVID. Inflation skyrocketed to record highs due to supply chain issues and printing a lot of money. Those two combined had left us in Reflation (growth up, inflation up) for the past 18 months. Combine that with low bond yields, and stocks become very, very appealing.
But, the most recent economic data shows growth and inflation slowing. You can see this in corporate earnings, sales data, restaurant attendance, etc. Inflation is still going up, but it's growth rate is slowing. After being so high for quite some time, the market interprets this as deflation. This combo results in a shift from Reflation to Disinflation / Deflation.
This typically results in below average performance in the stock market. It particularly hurts the tech sector and commodities.
To make matters worse, the Fed has been threatening to raise rates during this economic and inflationary slowdown. This IS a policy mistake, that statement really isn't debatable. Why are they doing it? In my opinion, because they said they were going to for the past 6 months, and don't want to change strategy mid-stream. Raising interest rates into an economic slowdown has always resulted in the slowdown accelerating. If you're wondering if rates are rising already, just Google mortgage rates from this month vs last.
This does not mean that the stock market drops 20% tomorrow. Recessions typically start with volatility, up and down (choppy) markets, a last push for oil prices (oil made a new high yesterday), and a few "fake-outs" that may make you second guess it is coming.
This is not a reason to panic at all.
If you're saving for retirement, any stock market pullback presents an opportunity to buy cheaper for the long term.
If you are retired, your portfolio already reflects this. During your financial planning, we stress tested your portfolio multiple times including several recessions throughout your retirement. You plan is built for this.
What if we're wrong?
This is a possibility That is why we don't make all-in "bets" or drastic and irrecoverable changes in any portfolio. We always rebalance portfolios within ranges according to your cash flow needs and risk tolerance. When conditions are favorable, you'll be on the high end of your tolerance, when they're not, you're on the low end. If the Fed does not end up raising rates, you will still participate in the upside. As a retiree, remember, the game is different than when you were working. You don't get a second chance. You don't have more time to save. So we Protect First, Grow Second to ensure you can continue do all the fun things we planned for. Missing a little upside is not detrimental, but major drawdowns present a challenge. Small changes make a big difference over the course of a retirement.
Don't let this spook you. They call it an Economic Cycle for a reason, this is a natural part the process. If you want to talk about it, please let me know.
Taxes, 2022 Updates Numbers, etc
Attached to this post are our annual PDFs that contain tax brackets, 401k/IRA contribution limitations, and a lot of other great info for your reference.
Also, 1099s will be available on TD Ameritrade no later than Feb 18th. If you do not see your 1099 posted by then, please let me know.
I want to thank all of you for your continued support and trust!