Roth Conversions: What are they and when do they make sense?

A Roth conversion is the process of moving traditional IRA dollars, which are taxed when withdrawn, to a Roth IRA which can be withdrawn tax free. Benefits of a Roth conversion Tax-free income in retirement Ability to pass assets tax-free to heirs Lower Required Minimum Distribution (RMD) For example, you have a traditional IRA with a $100,000 balance as of 12/31 in 2021 and you turn 72 in 2022. Your RMD for 2022 would be roughly $3,600. But let’s say…

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Inflation – Where are we Headed?

Over the past four decades, inflation has been a non-issue. Until now. While hovering around 2% for decades, inflation rates jumped to 6.2% in October 2021. Higher than it has been for over 30 years. 10 – Year Inflation Rate The Investopedia website says, “Inflation is a decrease in the purchasing power of money, reflected in a general increase in the prices of goods and services in an economy.” Prices of goods and services have indeed been rising. Lumber prices…

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Student Loans – Due in 2022?

The Department of Education announced in early August the final extension of the student loan payment pause until January 31, 2022. With this comes relief measures for eligible loans including: Suspension of loan payments 0% interest rate Stopped collections on defaulted loans Even with the extension, this highlights the need to plan for the resumption of loan payments for student loan borrowers in February 2022. Here are a few important questions every borrower should ask themselves soon to be ready…

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Book Review: The Psychology of Money – by Morgan Housel

Rare is the book that is at once wise and entertaining. The Psychology of Money is such a book. It is full of new perspectives about the modern world of finance. Its essays add greatly to our understanding of how to successfully negotiate our relationship with money. Housel writes in a clear and accessible style offering many fascinating stories to illustrate his points. The book consists of 20 brief chapters about a range of topics such as: Getting Wealthy vs.…

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Is it Time for Inflation?

Those of us over a certain age may have a foggy memory of times when the prices of goods and services rose at a rapid and destabilizing pace. Inflation has ceased to be much of an issue for almost 40 years. The Federal Reserve Board, which sets the all-important Federal Funds rate on which most other interest rates are based, pushed that rate up to nearly 20 percent in 1980 to slow down the economy, ending the out-of-control inflation of…

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How to Avoid a Spending Hangover after the Holidays

The holidays are right around the corner and for most Americans that means the beginning of a hectic holiday season. Here are some pointers so that you can make the gift buying season easier for your wallet and your stress level. 1. Create a budget and stick to it. Make a list of all of the people you need to buy for this year, set a spending limit for each gift, and then follow it! 2. Use credit cards in…

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The Great Disconnect

“There really isn’t any doubt that financial markets remain broken and divorced from reality.” – David Rosenberg Rosenberg Research Economic Research for Informed Investing “Never before have I seen a market so highly valued in the face of overwhelming uncertainty…” – James Montier GMO Investments and Asset Management Stock Prices In early September the U.S. stock market (as measured by the S&P500) hit a new all-time high. Stock prices are now almost 11% higher than they were on January 1,…

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COVID Scams

As if dealing with business shutdowns, wearing masks, and the general annoyance that this pandemic has brought us wasn’t enough, now we have to worry about more scams. Hackers and thieves have resorted back to some good old-fashioned tricks, but there are some new ones popping up that might surprise you. Do not respond to texts, emails, or calls about checks from the government. Some new scams are offering “help” to get an expedited stimulus check. The government doesn’t work…

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Personal Finance Applications

Having an easy to manage spending plan is the cornerstone for financial success. It’s important to know your cash inflows and outflows so that you make the most of your hard-earned cash. Knowing how much you spend on categories like groceries, eating out, or gas can help you identify areas where maybe you are spending too much. This can help you direct funds towards something else that has importance to you, such as saving for retirement, a new home, or…

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An Unconventional Approach

A widely held belief in both academia and the investment industry is that a person should have as much of their money in stocks as they can tolerate because stocks have provided the highest returns over long periods of time. Most people cannot handle the erratic volatility of an all stock portfolio so many advisors say “let’s do 60% in stocks and 40% in bonds” in order to make things a bit more palatable. “60/40” has come to be the…

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