Social Security Archives | CD Wealth Management

Year-End Review: How the New Tax Law Could Impact Your Taxes

Earlier this year, President Trump signed the “One Big Beautiful Bill” into law, reinforcing many provisions from the 2017 Tax Cuts and Jobs Act, along with other significant tax changes. As we approach the end of the year, here’s a summary of the law’s permanent and temporary changes — and what they mean for you.

Permanent Changes

The following provisions will become a permanent part of the tax code:

• Seven tax brackets remain, with a top rate of 37% and a bottom rate of 10%.
• The mortgage interest deduction remains at its current limit of $750,000 for joint filers ($375,000 for single filers).
• The State and Local Tax (SALT) deduction will increase to $40,000 and then revert to $10,000 in 2030. The higher SALT cap will phase out for incomes over $500,000.
• The standard deduction increases to $15,750 for single filers and $31,500 for joint filers, indexed for inflation after 2025.
• Lifetime gift and estate tax exclusions increase to $15 million for single filers and $30 million for filers who are married and filing jointly, indexed for inflation going forward.
• Child Tax Credit will increase to $2,200 per child starting in 2025.
• Non-itemizers can claim a deduction for charitable contributions of up to $1,000 ($2,000 for couples) starting in 2026.

Promo for an article titled Your Year-End Financial Checklisty: Moves to Make Before 2025 Ends.

Temporary Provisions (4 Years)

The legislation includes some temporary deductions and credits that are valid for the 2025-2028 tax years only.

• Tip and overtime deductions: Workers can deduct up to $25,000 in qualifying tip income and $12,500 in overtime pay ($25,000 for joint filers). These deductions phase out with income over $150,000 ($300,000 for joint filers).
• Additional deduction for seniors:Those over the age of 65 will get an additional $6,000 deduction that begins to phase out at an income of $75,000 for single filers and $150,000 for joint filers. This is in addition to the $2,000 deduction for single filers and $3,200 for joint filers.
• Vehicle loan interest deduction: Auto buyers can deduct up to $10,000 of loan interest for purchased vehicles whose final assembly took place in the U.S. The deduction would apply for single taxpayers with adjusted gross income of $100,000 or less ($200,000 for people filing jointly).

Promo for an article titled Before You Sell for a Loss, Make Sure You Know the Wash-Sale Rule.

Additional Provisions

• New savings account: Parents and relatives can now contribute up to $5,000 a year to a new savings account for minor beneficiaries, called Trump accounts. Initially acting like a non-deductible IRA, contributions can be made until the beneficiary reaches the age of 18. Then, the account would effectively convert to a traditional IRA. Additionally, parents of children born between Jan. 1, 2025, and Dec. 31, 2028, would qualify for $1,000 in federal money to start the account.
• Expanded 529 plan uses: Acceptable uses include miscellaneous expenses such as testing fees, tutoring outside the home, and educational therapies, as well as tax-free withdrawals for recognized postsecondary credential programs.
• Broader HSA eligibility: More health plan types and participant categories are included.
• Social Security taxes: The legislation did not eliminate taxes on Social Security benefits, which remain taxable up to 85% for individuals with income greater than $34,000, or $44,000 for a couple. However, the $6,000 deduction for those 65 and older may help offset taxes on Social Security benefits for some over the next four years.

Key Individual Tax Changes

As you review the new tax legislation, it may be the perfect time to review your financial planning needs as well. This includes revisiting your investment portfolio, assessing tax planning opportunities, reevaluating retirement goals, and managing your wealth transfer and legacy plans.

As we learn more about the Trump Savings accounts and other aspects of the bill, we will continue to communicate and educate.

This summary of the new legislation contains merely a portion of the items that may apply to your family. We are always happy to meet and discuss any of the above to ensure that you remain on track with your financial profile and your goals.

Promo for an article titled Here's Why the Stock Market is the Best Place to Build Wealth.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy heading. We are anticipating and moving to those areas of strength in the economy and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the proven disciplines of diversification, periodic rebalancing, and forward-looking strategies, while avoiding reliance on stale retrospective data.

It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.

Source: Kestra Investment Management

Here’s What History Tells Us About the Impact of the Government Shutdown

Government shutdowns are typically more of a political standoff than an economic crisis. As lawmakers approach the Sept. 30 fiscal year deadline, negotiations often devolve into a blame game and a test of endurance. With no stopgap measure in place this year, a shutdown began Oct. 1, forcing federal agencies to halt operations and leaving both parties pointing fingers. It’s worth noting that shutdowns have occurred under both Republican and Democratic leadership.

The immediate concern is that the monthly jobs report and inflation readings could be delayed, complicating the Federal Reserve’s outlook on interest rates. Beyond that, a shutdown affects “nonessential” government functions, leading to furloughed workers and paused services, which may cause short-term economic ripples.

Since the first shutdown in 1981, the government has closed 10 times, most recently in 2018. In recent years, Congress has often relied on last-minute, short-term measures to keep the government open, usually with little lasting impact on markets or the broader economy.

Government Shutdowns

There have been 10 government shutdowns since 1980. Other funding gaps have occurred, but the gaps were either too short or occurred over a weekend, so affected agencies did not begin to shut down before Congress restored funding.

How could a shutdown affect bonds and credit rating?

A shutdown does not affect the government’s ability to pay its debt to bondholders, nor does it have an impact on its borrowing costs or creditworthiness. Treasury interest payments and Social Security would continue to be paid, and the Treasury would conduct its regularly scheduled bond auctions.

A prolonged shutdown could potentially affect prices of some bonds issued by corporations that rely on contracts with the government for a significant portion of their revenue, but that would be temporary.

Rating agencies such as Moody’s already downgraded the debt earlier this year, and while further downgrades are possible, they are not likely. If it does happen, a downgrade could raise borrowing costs for the government in the future and push up interest rates.

How could a shutdown affect stocks?

Over the last 45 years, the government shutdowns we’ve seen have had little impact on investors, consumers or financial markets. History shows us that the market understands that while these short-lived political dramas make headlines, they don’t have a meaningful impact on corporate earnings. And earnings are the primary driver of stock prices.

That is not to say we couldn’t see an uptick in volatility, especially after a period of strong returns since mid-April. During previous government closures, stocks have been positive half the time, and six months later, they have been higher 70 percent of the time.

S&P 500 Returns Around Government Shutdowns

Chart showing the S&P 500 effect of shutdowns during, three months later and six months later. — *Sources: Congressional Research Service, Morningstar, Edward Jones. Past performance does not guarantee future results.*

How could a shutdown affect the economy?

Furloughed workers are guaranteed to receive back pay once funding resumes. President Trump’s threat to fire federal workers complicates matters, but many view it as a strategic pressure tactic aimed at pushing Democrats to advance the stopgap bill already passed by the House.

From an economic perspective, we expect a short-term slowdown in growth but a quick recovery once operations resume. Government spending doesn’t disappear; it’s simply delayed or displaced. Because the federal government plays a significant role in purchasing goods, providing services and driving economic activity, a prolonged shutdown could dampen overall output. Still, while the impact grows with the length of the disruption, the broader economic damage will probably be minimal.

The bottom line: Stay the course.

Concerns about a shutdown may trigger some market volatility. History has shown that the impact is short-lived, and we do not expect a shutdown to alter the outlook for the economy or federal markets.

Rather than worry about the impact of a shutdown, investors should focus on avoiding the temptation to overreact or make decisions based on fear and uncertainty. As always, the key is to stick with the plan that is already in place and not make changes in response to headlines.

Promo for an article titled The Most-Searched Questions That Lead Investors to Our Articles.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Sources: Capital Group, Fidelity, Edward Jones, U.S. House of Representatives

What to Expect Now That the ‘Big Beautiful Bill’ Has Become Law

On July 4, President Trump signed the “One Big Beautiful Bill” into law, which cements most of the tax cuts embedded in the 2017 Tax Cuts and Jobs Act (TCJA), along with some significant additional tax changes.

However, the primary question remains: What will be the long-term impact of this bill on the deficit? Let’s uncover what is inside this new tax law.

Permanent Changes

The following provisions will become a permanent part of the tax code, initially introduced in the original Tax Cuts and Job Act.

• The seven tax brackets with a top rate of 37% and a bottom rate of 10% will remain the same.
• The mortgage interest deduction will remain at its current limit of $750,000 in mortgage debt for joint filers ($375,000 for single filers).
• The State and Local Tax (SALT) deduction had been capped at $10,000. This will increase to $40,000 and then revert to $10,000 in 2030. The higher SALT cap will phase out for incomes over $500,000.
• The standard deduction will be made permanent and increase to $15,750 for single filers and $31,500 for joint filers. These amounts will be indexed for inflation after 2025.
• The lifetime gift and estate tax exclusions will increase to $15 million for single filers and $30 million for those who are married and filing jointly. The exclusions will be indexed for inflation going forward.
• The Child Tax Credit will be permanent and will increase to $2,200 per child starting in 2025.
• Those who do not itemize deductions can claim a deduction for charitable contributions of up to $1,000 ($2,000 for couples) starting in 2026.

Temporary Provisions (4 Years)

The legislation includes numerous temporary deductions and credits that are valid for tax years 2025 to 2028 only.

• Workers can deduct up to $25,000 in qualifying tip income and $12,500 in overtime pay ($25,000 for joint filers). These deductions phase out with income over $150,000 ($300,000 for joint filers).
• People who are 65 or older will get an additional $6,000 deduction that begins to phase out at an income of $75,000 for single filers and $150,000 for joint filers. This is in addition to the $2,000 deduction for single filers and $3,200 for joint filers.
• The new law allows for a deduction of up to $10,000 of loan interest for purchased vehicles whose final assembly took place in the U.S. The deduction would apply for single taxpayers with adjusted gross income of $100,000 or less ($200,000 for people filing jointly).

What Else Is New?

Other additions include a savings account for children and expanded usage for health savings accounts and 529 plans.

• Parents and relatives can now contribute up to $5,000 a year to a new savings account, called Trump accounts. Initially acting like a non-deductible IRA, contributions can be made until the beneficiary reaches the age of 18. Then, the account would effectively convert to a traditional IRA. Additionally, parents of newborns born between Jan. 1, 2025, and Dec. 31, 2028, would qualify for $1,000 in federal money to start the account.
• The legislation expands the use of 529 funds to include miscellaneous expenses such as testing fees, tutoring outside the home, and educational therapies, as well as tax-free withdrawals for recognized postsecondary credential programs.
• The legislation also broadens HSA eligibility by including more health plan types and participant categories.

The legislation does not eliminate taxes on Social Security benefits, which remain taxable up to 85% for individuals with income greater than $34,000, or $44,000 for a couple. However, the $6,000 deduction for those 65 and older may help offset taxes on Social Security benefits for some over the next four years.

Key Individual Tax Changes

Chart outlining the changes to tax law from the Big Beautiful Bill. — *Source: CNBC*

As you review the new tax legislation, it may be the perfect time to review your financial planning needs as well. This includes revisiting your investment portfolio, assessing tax planning opportunities, reevaluating retirement goals and managing your wealth transfer and legacy plans.

Promo for an article titled Transparency over Illusion — the case for liquid investments.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Sources: CNBC, Fidelity, Schwab

Revisiting the Year’s Most Valuable Insights for Our Clients

As 2024 draws to a close, we wanted to take this occasion to look back at the articles we’ve produced for our clients so far this year and share the 10 most popular pieces, in case you missed any of them — or if you want to revisit and share them with friends and family.

Every two weeks, we thoughtfully craft these pieces with our clients in mind, broaching subjects we think are relevant and interesting. This is not syndicated content. We want you to find value in these letters — especially in times like these.

1. Understanding How a Living Trust Can Help Your Estate Planning

Senior couple, documents and sign contract for life insurance or home mortgage. Discussion, signature and retired elderly man and woman signing legal paperwork for will or loan application together.

June 20: A living trust is a flexible, popular tool that allows the estate to avoid probate and lets you control asset distribution after your death. Read more

2. Another Milestone for the Dow: What Could Happen Next?

Stock market data with uptrend vector. 3d render.

May 23: The Dow’s rise to 40,000 is a reminder that when it comes to investing, patience is the key. Read more

3. Here’s Why Investors Shouldn’t Panic Over the Market’s New Year’s Hangover

Jan. 12: We talk regularly about not timing the market, and we don’t see these circumstances any differently. Read more

4. Election Advice for Investors: Ignore the Noise, Focus on the Big Picture

Oct. 31: Presidential elections historically have had very little impact on the stock market. Read more

5. What Investors Should Know About This Week’s Market Pullback

financial stock market graph chart of stock market investment trading screen.

Aug. 8: Remember that volatility is normal and that the market does not go up in a straight line. Read more

6. The Market’s Recovery Puts August Pullback in the Rearview Mirror

Businesswoman in suit drawing stock analytics interface on virtual screen. Business and financial success concept.

Aug. 22: More often than any other month, August is when we tend to see out-of-the-blue volatility in the stock market. Read more

7. Here’s How We’re Rebalancing the Portfolio as We Enter the Second Quarter

Smiling mature couple meeting with bank manager for investment. Beautiful mid adult woman with husband listening to businessman during meeting in conference room in modern office. Happy middle aged couple meeting loan advisor to buy a new home.

March 15: We think much of the pain from rising interest rates is behind us — and the key to navigating volatility remains being in a diversified portfolio. Read more

8. Investor Outlook: A Strong May, the First 100 Trading Days and 4 Scams to Watch

Male manager businessmen are looking at the tablet screen with the company's financial information and he is tense about the performance.

June 6: S&P 500 companies are enjoying their best earnings season in almost two years. Read more

9. The Fed’s Next Move: What Could Rate Cuts Mean for Investors?

Federal Reserve Chairman Jerome Powell speaking on stage.

Sept. 5: Investors who stay only in short-term investments may risk an opportunity to lock in higher yields. Read more

10. How To Make the Biggest Impact With Your Charitable Donation

Green donate button on the keyboard close-up. blurred in motion background.

Sept. 19: Giving can offer a financial benefit for you and your family — as well as the intangible rewards that come with helping others. Read more

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

The Bull Market, a Big November & 2025 Inflation Adjustments

November was a big month for stocks! The Dow closed above 45,000 for the first time, and the S&P 500 hit 6,000 for the first time. Small-cap stocks rose almost 11% during the month.

Optimism over lower taxes, a stronger economy and strong earnings were the likely reasons for the month’s great showing. So far in 2024, the S&P has made 56 new all-time highs. The S&P is up more than 25% for the year — and for the first time since 1998, it’s up more than 20% in back-to-back years.

The current bull market is 26 months old and up more than 70% from lows in mid-October 2022. The good news is that once previous bull markets get to this point, there can still be additional room to go higher. Over the past 50 years, five other bull markets have lasted more than two years. The shortest lasted five years, and the longest lasted more than 12 years.

Bull Markets Beyond Their Second Birthday

Chart showing the duration of bull markets since 1950. — *Source: FactSet, Carson Investment Research 12/6/24*

Here are some fun market tidbits to end the year:

1. The “Santa Claus rally” is the typically encouraging period that includes the last five trading days of December and the first two trading days of the new year.
2. December typically is the S&P 500’s second-best month in an average election year, trailing only November.
3. On average, December is the third-best month, behind April and November.
4. Going back to 1950, December has been positive 75% of the time.

Santa brings gifts — and not always in the form of market returns. The IRS recently released its inflation adjustments for 2025 related to personal income tax, retirement contributions, estate taxes and Social Security benefits. While these changes won’t affect tax returns due in April, they will be very helpful in planning for 2025.

Personal Income Tax

The standard deduction is increasing in 2025, which could mean a bigger tax break for you. The new standard deduction for 2025 is:

• Married filing jointly: $30,000, an increase of $800
• Single taxpayers and married individuals filing separately: $15,000, up $400
• Heads of Households: $22,500, an increase of $600
• In addition, retired married couples (both age 65+) filing jointly, will receive an additional standard deduction of $3,200 ($1,600 each)! This may make it more difficult to itemize deductions in 2025. We will want to keep this in mind with charitable giving to consider a bunching strategy.

For tax year 2025, the top tax rate remains 37% with income greater than $751,600 for married filing jointly ($626,350 for single taxpayers). The other tax brackets are:

• Incomes over $501,050 for married filing jointly ($250,525 for single): 35%
• Incomes over $394,600 for married filing jointly ($197,300 for single): 32%
• Incomes over $206,700 for married filing jointly ($103,350 for single): 24%
• Incomes over $96,950 for married filing jointly ($48,475 for single): 22%
• Incomes over $23,850 for married filing jointly ($11,925 for single): 12%
• Incomes less than $23,850 for married filing jointly ($11,925 or less for single): 10%

Retirement Savings Contributions

The 401(k)-contribution limit is increasing by another $500 to $23,500. The maximum contribution for certain profit-sharing plans is increasing to $70,000.

Traditional and Roth IRA contribution limits are staying the same at $7,000. In 2025, for those under the age of 50, the cap will remain at $7,000. Married couples with income below $236,000 will be able to make a full Roth contribution in 2025 ($150,000 for those who are single). Phaseout ranges are changed for 2025; couples with income over $246,000 will not be eligible to contribute to a Roth IRA.

While catch-up contributions for participants 50 and older will remain at $7,500, the IRS is introducing a new super catch-up contribution limit for older employees. Beginning in 2025, individuals age 60-63 can contribute an additional $3,750 to their employer-sponsored retirement plans, for a total catch-up amount of $11,250.

The backdoor Roth IRA option remains a viable choice. The first step is to contribute to a Traditional IRA; this is a non-deductible contribution. After the traditional IRA contribution is completed, you can convert those funds to a Roth IRA.

If the original contribution to a traditional IRA was not deductible, then the conversion of that amount is non-taxable. However, any growth on that amount between the contribution and the conversion dates would be taxable. Completing the backdoor Roth transaction can be a tricky process, and you will want to consult your financial advisor and CPA.

Please make sure you adjust your 401(k) plan to account for the increased contribution limit.

Social Security

Social Security benefits will increase 2.5% in 2025, an average increase of almost $48 per month. This adjustment is smaller when compared to the 5%-8% increases that were in response to higher inflation in recent years.

Estate Taxes and Gifting

The gift tax annual exclusion is increasing from $18,000 to $19,000 for 2025, the fourth consecutive year that the gift limit has increased. Individuals can gift up to this amount to any number of individuals in 2025 without incurring gift tax or using any of the taxpayer’s lifetime exemption. Married couples can use this exemption, allowing them to gift up to $38,000 annually to each recipient in 2025.

In addition, the lifetime exemption amount increased about $380,000 per person, to $13.99 million per individual. This increase means that a married couple can shield a total of $27.98 million from federal estate or gift tax. This exemption is still set to sunset by about 50% at the beginning of 2026. Remember, however, that certain kinds of planning strategies can take months or even years to implement.

Promo for an article titled How to Make the Biggest Impact With Your Charitable Donation.

The end of the year is a perfect time to review your financial planning needs. This includes reviewing the investment portfolio, assessing year-end tax planning opportunities, reviewing retirement goals, and managing your legacy plans. The above changes for 2025 may apply to you and your family. We are happy to meet to discuss any of the above to ensure that you remain on track with your financial goals.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Sources: Baird, Carson, Fidelity, Schwab

Here Are the IRS Adjustments You Need to Know as You Plan for 2024

Only a month ago, stocks were in correction mode and fear was everywhere. Economists and emotional investors worried aloud about a new bear market and a recession on the horizon.

How quickly the narrative changes.

November saw a complete reversal, with stocks having their best month of the year. The S&P 500 finished November up 8.9%, one of its best monthly returns ever!

What led to this rally? Investor sentiment had become very pessimistic, as often is the case when stocks are in a correction mode. All it took for the market to rally was a little spark, and that spark came in the form of encouraging inflation data.

The market now believes that the Fed is probably through raising rates, and the likelihood of interest rate cuts next year has increased. There may be more good news on the horizon as well: History shows us that no month has been stronger than December. The chart below shows us that since 1950, the market in December has been positive 74% of the time with an average gain of 1.4%.

December Is Higher More Often Than Any Other Month

S&P 500 average monthly performance and how often each month is higher (1950-present)

Santa’s financial gifts are not always in the form of market returns. The IRS recently released its inflation adjustments for 2024 related to personal income tax, retirement contributions, estate taxes and Social Security benefits. While these changes won’t affect your tax return that’s due in April, they will be helpful in planning for 2024.

Personal Income Tax

The standard deductions are increasing in 2024, which potentially means a bigger tax break for you. The new standard deductions for 2024 are:

• Married filing jointly: $29,000 (an increase of $1,500)
• Single taxpayers and married individuals filing separately: $14,600 (an increase of $750)
• Heads of households: $21,900 (an increase of $1,100)

For the 2024 tax year, the top tax rate remains 37% for those with income greater than $731,000 for married filing jointly ($609,300 for single taxpayers). Here are all of the brackets:

Chart showing the tax rate for different income levels in 2024.

In addition, retired married couples over 65 who file jointly will receive an additional standard deduction of $3,100 ($1,550 each)! This may make it more difficult to itemize deductions in 2024. We will want to keep this in mind when planning charitable giving and considering a bunching strategy.

Retirement Savings Contributions

The contribution limit for a 401(k) is increasing by $500 to $23,000, and maximum contribution for certain profit-sharing plans is increasing to $69,000. For the second year in a row, limits for contributions to traditional and Roth IRAs are increasing. For those under the age of 50, the cap will be $7,000 in 2024, up from $6,500.

Married couples with income below $230,000 will be able to make a full Roth contribution in 2024 ($146,000 for those who are single). However, phaseout ranges are unchanged, so couples with income over $240,000 will not be eligible to contribute to a Roth IRA.

The back-door Roth IRA option remains a viable option. The first step is to contribute to a traditional IRA; this will be a non-deductible contribution. After the traditional IRA contribution is completed, you can convert those funds to a Roth IRA (if the original contribution to a traditional IRA was not deductible, then the conversion of that amount is non-taxable).

However, any growth on that amount between the contribution and the conversion dates would be taxable. Completing the back-door Roth transaction can be a tricky process; you will want to consult your financial advisor and CPA.

Please make sure you adjust your 401(k) plan to account for the increased contribution limit.

Social Security

Social Security benefits will increase 3.2% in 2024, an average of almost $60 more per month. This represents the third-largest increase since 2011 but remains well below the 8.7% increase last year.

Estate Taxes and Gifting

The gift tax annual exclusion is increasing from $17,000 to $18,000 for 2024. This is the third consecutive increase to the gifting limit. You can gift up to this amount to any number of individuals in 2024 without incurring gift tax or using any of the taxpayer’s lifetime exemption. Married couples can use this exemption, allowing them to gift up to $36,000 annually to each recipient in 2024.

In addition, the lifetime exemption amount increased about $700,000 per person, to $13.61 million per individual. This increase means that a married couple can shield a total of $27.22 million from federal estate or gift tax. This exemption is set to sunset by about 50% at the beginning of 2026. Remember, however, that certain kinds of planning strategies can take months or even years to implement.

The end of the year is a perfect time to review your financial planning needs. This includes reviewing the investment portfolio, assessing year-end tax planning opportunities, reviewing retirement goals, and managing your legacy plans. The above changes for 2024 may apply to you and your family. We are happy to meet to discuss any of the above to ensure that you remain on track with your financial goals.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Sources: Baird, Carson

Promo for an article titled How to Prepare Your Finances for a More Prosperous 2024.

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS. Investor Disclosures: https://bit.ly/KF-Disclosures

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

Fidelity Investments and Fidelity Institutional® (together “Fidelity”) is an independent company, unaffiliated with Kestra Financial or CD Wealth Management. Fidelity is a service provider to both. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by CD Wealth Management and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered service mark of FMR LLC. Fidelity Institutional provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.

What’s In the Debt-Ceiling Deal, and What Happens Next?

On Wednesday, the House of Representatives approved The Fiscal Responsibility Act, the deal President Biden and Speaker Kevin McCarthy reached over the holiday weekend to raise the debt ceiling. The measure now goes to the Senate, which could approve it before the weekend.

Treasury Secretary Janet Yellen has said federal funds could run out by June 5 unless Congress acts to raise the debt ceiling. As we have written before, this is not the first time this issue has been a matter of contention; in fact, a split Congress like the one we have now has agreed to increase the ceiling 24 times before.

Increases to the Debt Ceiling Under a Split Congress Are Normal

How many times the debt ceiling increased based on the makeup of Congress (1959-present)

Chart showing debt-ceiling increases by Congressional party. — *Source: Carson Investment Research 5/6/2023, @ryandetrick*

What’s in the bill?

• Debt limit extension to 2025: The core of the deal is a suspension of the debt ceiling until Jan. 1, 2025, after the next presidential election. If it’s necessary at that time, the Treasury Department can again use extraordinary measures to pay the bills for months.

• Spending limits: The agreement includes spending caps for the next two years. In fiscal 2024, it would limit military spending to $886 billion and nonmilitary discretionary spending to $704 billion. In fiscal year 2025, those numbers would both increase by a moderate amount. Most importantly, there are no cuts to Social Security or Medicare.

• Student loans: The deal ends President Biden’s freeze on student loan repayments by the end of August and restricts his ability to reinstate such a moratorium. Borrowers will be required to resume paying their student loan bills 60 days after June 30.

• Other cuts: The bill would rescind about $28 billion in unspent COVID relief funds. It also would eliminate $1.4 billion in IRS funding.

What happens next?

The Democratic-controlled Senate will consider the bill and could vote on it before the weekend. If the bill fails, the U.S. would be in threat of immediate default with less than a week remaining until June 5. Even if the bill passes, it is possible that the U.S. debt rating will receives a downgrade, like we saw in 2011.

From a stock market perspective, the deal in its current form does not include enough spending cuts to tip the economy into a recession, nor does it add enough spending to increase inflation worries. The chart below shows where the S&P 500 was trading 90 days before and after the “X” date in the last 11 debt-ceiling crises. In all but two instances, the S&P was higher 90 days later. This reiterates our stance against trying to time the market, instead staying invested for the long-term.

On Average, Stocks Moved Higher After Past Debt Crises

In most cases, stocks gained both before and after a debt-ceiling crisis was resolved; 2011 was an unusually volatile example.

Chart showing stock market performance before and after a debt-ceiling crisis.

The markets and the economy are likely to avoid an enormous crisis. There are two plausible scenarios going forward – either the imminent passage of the bill, or a failure to pass the bill, leading to a market correction and then quick passage of the bill. Either way, the debt ceiling will get raised and default will be avoided.

That does not mean that the U.S. credit rating will avoid a downgrade. If that were to happen, the markets could see a repeat of 2011 — and as seen in the chart above, even after an agreement was reached, the market sold off almost 20% from its peak.

It is important to remember that it is hard to say exactly when everything will be resolved and that as part of the planning process, we plan for the unexpected. A default or downgrade could usher in a period of increased market volatility. If that were to play out, we will continue to discuss what we can control in times like these, which is our emotions, and not what happens in Washington. We will continue to follow the long-term investment plan.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Sources: Bloomberg, Carson, Fidelity

Promo for an article titled The Importance of Compound Interest and Tax Planning on Your Portfolio.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

What You Need to Know to Get Ready for Tax Season

No one likes tax season, but there are some steps you can take to reduce the headaches and make things easier for you and your CPA. Your preparer should tell you when they need all the information to finalize or to extend your return before the deadline. If you are asked to complete a questionnaire, there’s a reason why: Those documents cover most (if not all) of what you will need to provide for your return to be complete and accurate.

Most of life’s major events seem to have a tax impact: marriage, divorce, births, deaths, home purchase or sale, new business, inheritance, etc. Your preparer’s questionnaire is designed to ensure you don’t forget to include anything important. Be sure to review all the questions they ask, as things change from year to year.

As we approach April 15, here are some ways to make tax season go more smoothly — and a list of documents you might need.

Documentation Reported to IRS

• W-2s: If you work for an employer, you will have a W-2 that shows how much you earned and how much was deducted for taxes and other withholdings.
• 1099-NEC (MISC): If you are a contract employee, you can expect to receive this form.
• 1099-INT and 1099-DIV: If you earned interest from savings or investments, you may receive this form. The 1099-DIV reports dividends and distributions from investments. Sources for 1099s include bank interest, brokerage accounts, stock dividends and sales, sale of real estate, Social Security and 529 distributions, to name a few.
• Consolidated 1099: This brokerage tax form will show income from dividends, both qualified and non-qualified, as well as any capital gains and losses that occurred during the year.
• 1099-R: If you take a distribution from your retirement account, you will have a 1099-R that shows the amount of distribution and amount of taxes withheld.
• 5498: This form reports your total annual contributions to an IRA account and identifies the type of retirement account you have.
• 1098: If you own a home and pay mortgage interest, you will receive this form from your lender, showing the amount of interest that was paid and that can be deducted.
• 1098-T: If you have a dependent in college, you will receive this form that reports how much qualified tuition and expense was paid during the year.
• K-1: If you have any limited partner investments, you will receive a K-1 that shows each partner’s share of the partnership’s earnings, losses, deductions and credits. Examples include trusts, partnerships, and S Corporations.

Information Not Reported to the IRS That Requires Recordkeeping

• Business income and expenses.
• Charitable contributions, including donor-advised funds and qualified charitable distributions. Remember, when you make a donation to a qualified charity from a donor-advised fund or from your IRA (if you are over age 70½), you are not eligible for a charitable deduction at that time. You received a deduction when you added monies to the donor-advised fund, and you are reducing your taxable income when made from the IRA.
• Real estate taxes.
• Contributions to 529s, HSAs and IRAs.
• Medical expenses.
• Estimated tax payments.

Old Files You Should Retain

• In most cases, you should plan on keeping tax returns — along with W-2s, 1099s, records supporting itemized deductions and other documents — for a period of at least three years following the date you filed or the due date of your tax return.
• Keeping tax returns for the three-year period is tied to the IRS statute of limitations. The IRS generally has only three years from the filing date or due date of the return to assess additional taxes.
• In some cases, you may need to hold onto your records longer than three years:
— Keep tax forms for retirement accounts, such as IRAs, until seven years after the account is zeroed out.
— If you file a claim for worthless security or bad debt, you must keep those records for seven years.
— If you buy or sell property, you should keep property records until the statute of limitations expires for the year in which you disposed of the property.

Maintaining good records and approaching tax season efficiently can have other benefits; being proactive and comprehensive can help you minimize taxes. Along with your CPA, CD Wealth Management can help you develop tax strategies that will pay off now — and well into the future. Once you have filed your taxes, it is beneficial to provide your financial advisor with a copy of your return.

Remember, tax planning is not just a once-a-year event. We want to ensure you that we are evaluating the landscape for tax changes and strategies that may help save future dollars and keep money in your pocket.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market.

That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Sources: IRS, Carson, Baird

Promo for an article titled The Fed Raised Rates Again — Here's What That Means for Investors

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

Year in Review: Our 10 Most Popular Articles from 2022

We wanted to take this occasion to look back at the content we’ve produced this year and share the 10 most widely read pieces of 2022 in case you missed any of them — or if you want to revisit and share them with friends and family.

Every week, we thoughtfully craft these letters with our clients in mind, broaching subjects we think are relevant and interesting. This is not syndicated content. We want you to find value in these letters — especially in times like these.

1. Before You Sell for a Loss, Make Sure You Know the Wash-Sale Rule

Investors may have seller’s remorse, but capturing losses to offset current taxes or future gains is a prudent strategy | May 5

A young woman is surrounded by monitors & their reflections displaying scrolling text & data.

When you sell an investment that has a loss in a taxable account, you may be eligible for a tax benefit. The wash-sale rule prevents investors from selling at a loss, then buying back the “substantially identical” investment within a 61-day window and being able to claim the tax benefit. This rule applies to stocks, bonds, mutual funds, exchange traded funds (ETFs) and options. Read more >

2. Midterm Elections are Right Around the Corner. What Does This Mean for the Market?

Midterm election years are historically more volatile than the rest of the presidential cycle | July 21

Close-up US midterm election badges with Stars and Stripes in blue and red. The text Midterm Election in the center.

Depending on which party controls Congress, U.S. fiscal policy may change after the election. However, economic fundamentals — and not election results — play the greatest role in stock market performance. Read more >

3. Understanding the Importance of Market Liquidity

As the Fed injects less money into the economy to slow down inflation, liquidity is being reduced, which can lead to outsized market moves | Feb. 10

computer screen showing performance of stocks over time

Over the last few years, liquidity has been a major driver in the stock market. In a liquid market — one that is not dominated by selling — the bid price and ask price are close to each other. As a market becomes more illiquid, such as during a sell-off like we saw last month, the spread between the bid and ask prices grows — meaning prices become less stable and transparent. Read more >

4. Here’s Why Today’s Housing Market Is Different from 2008

Home prices are rising, but the underlying drivers of the current market are different from the Great Financial Crisis | July 1

Lending has been in favor of those with much higher credit scores. Household balance sheets are in much better shape, and the percentage of one’s disposable income spent on mortgages is at an all-time low. Read more >

5. The Case for Staying Invested, Even When the Market Declines

The instinct to flee when the market starts to fall can have a major negative impact on the portfolio’s long-term health | Feb. 17

Investors who sit on the sidelines risk losing out on periods of market appreciation that follow the downturns. From 1929 through 2020, every decline of 15% or more in the S&P 500 has been followed by a strong recovery. Read more >

6. Don’t Let the Word ‘Recession’ Scare You: Here’s What History Has to Say

Recessions are normal occurrences in the economic cycle. In fact, we’ve already had three this century. Here’s what you should know | June 10

Just because the U.S. economy may have a recession does not mean it will be 2008 all over again and the stock market will experience similar pain. The stock market is a leading economic indicator, but most often it has already started to recover by the time the economy is officially in recession. Read more >

7. You’ve Inherited an IRA. What Happens Next?

The SECURE Act effectively ended the Stretch IRA, but it did not eliminate the need for financial planning when it comes to distributions | April 14

Inherited IRA memo on the color paper and calculator.

Under current law, you have 10 years to deplete the entire value of the IRA. However, if you wait until the 10th year to take the entire distribution and the IRA has experienced significant growth, you may be in the highest tax bracket, having to pay almost 40% in taxes for that one year. Read more >

8. What You Need to Know About Web 3.0 and the Metaverse

Social attitudes and norms are changing and adapting to the new era of the internet | Jan. 20

It will take many years for the metaverse to be fully formed and for the experiences to become part of the daily world. However, it appears the train has left the station, with social media and video game companies leveraging their large user bases to build the foundation of the metaverse. Read more >

9. What Does a Stronger U.S. Dollar Mean for You?

For the first time in nearly two decades, the exchange rate between the euro and the dollar is roughly the same | July 14

Benjamin Franklin peeking through euro banknotes

The parity in the two currencies comes after the euro has plunged almost 20% in value over the last 14 months compared to the dollar. This year, the U.S. dollar has gained against most major currencies, as the Fed’s interest rate hikes have made the dollar a safe haven for investors worldwide who are seeking protection against surging global inflation. Read more >

10. An Introduction to NFTs: What You Should Know About Digital Art

Like any collectible, an NFT’s value is based entirely on what someone else is willing to pay for it | Feb. 24

There are tens of thousands of NFTs in existence, representing a variety of topics, such as music, art and sports. Like any piece of art, beauty is in the eye of the beholder. Read more >

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Promo for article titled Year End Market Predictions: Separating Fact from Fiction

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

Your Wealth Management Checklist to Help You Put 2022 to Bed

We are in the homestretch for 2022. It is the perfect time to review some year-end planning strategies to ensure your wealth plan reflects changes in your circumstances or goals, the current tax environment and the economic landscape. The end of the year is an important time for making financial decisions that can have an impact in the year ahead — and for years to come.

First, a quick look back at 2022. From a market perspective, this has been a year that won’t be forgotten soon. Here are a few high-level takeaways:

• Bear markets happen. This will not be the last bear market we encounter. The key is to stay invested. Survive the bear market to reap the benefits of the bull markets that follow.

• Things can change quickly. For most of the last decade, we had a zero inflation and zero interest rate environment, but the economy slammed on the brakes — and rates rose drastically. For investors, 2021 was one of the best years and 2022 was one of the worst. However, bull markets can appear just as quickly as a bear markets.

• We went from TINA to TARA. For many years, there was no alternative to stocks (known as TINA, or There is No Alternative). Now, we are seeing TARA (There Are Reasonable Alternatives) with higher interest rates, bonds provide attractive opportunities and money market rates are soon to be over 4%.

• Investing is not easy. We are coming off an incredible decade for the stock market, yet it’s easy for investors to focus on how bad the last 10 months feel. Is that feeling worse than a good 10 years? Greed and fear are timeless. As billionaire investor Seth Klarman commented, “The stock market is the story of cycles and the human behavior that is responsible for overactions in both directions.”

As we prepare to put this year behind us, we recommend that you review the checklist below for planning strategies to consider and discuss.

Income Tax Strategies

Traditional year-end planning focuses on deferring income to a future year and accelerating deductions into the current year.

1. If you anticipate your marginal income tax bracket to increase, you may consider accelerating income into 2022 and deferring deductions to 2023.

2. If you anticipate being in a lower tax bracket next year:
• Defer income to postpone paying the tax and have that income at a lower bracket, if possible.
• Bunch your medical expenses in the current year to meet the percentage of your adjusted gross income to claim those deductions if you itemize on your tax return.
• Make your January mortgage payment in December so you can deduct the interest on this year’s return.

Tax-related Investment Strategies

1. Tax loss harvesting is the strategy of selling securities at a loss to offset a capital gain liability, either for today or in the future.
• Harvest losses by selling taxable investments. You must wait at least 31 days before buying back a holding sold for a loss to avoid the IRS wash-sale rule.
• Harvest gains by selling taxable investments if you have a tax loss carry forward.

2. Ensure that you have satisfied your required minimum distributions (RMD).
• If you fail to take your RMD, this may result in a 50% penalty.
• If you own an inherited IRA, a RMD may be required separately for that account as well.

Retirement Planning Strategies

1. Maximize your IRA contributions. You may be able to deduct annual contributions of up to $6,000 to your traditional IRA and $6,000 to your spouse’s IRA ($7,000 if over the age of 50).

2. Make a Roth IRA contribution if under the applicable income limits.

3. Consider increasing or maximizing your 401(k) contribution. Boosting contributions to your 401(k) can lower your adjusted gross income while increasing your retirement savings.

4. Consider making contributions to a Roth 401(k) if your plan allows.

5. Consider setting up a Roth IRA for each of your children who have earned income during the year.

Gifting Strategies

1. Consider making gifts up to $16,000 per person as allowed under the federal annual gift tax exclusion. You can give up to $16,000 this year to as many people as you want without triggering gift taxes. Payments made directly to educational and/or medical institutions on behalf of your intended beneficiary do not count towards your annual exclusion amount or against your lifetime estate tax exclusion.

2. Create a donor advised fund for an immediate income tax deduction and provide immediate and future benefits to charity over time.

3. If you already have a donor advised fund or want to donate to a charity, consider gifting appreciated assets that have been held longer than one year to get the fair market value income tax deduction while avoiding income tax on the appreciation.

4. If over the age of 70½, consider making a direct transfer from an IRA to a public charity. The distribution is excluded from gross income, and you can give up to $100,000 as a tax-free gift from your IRA that may fully satisfy RMD requirements.

5. Consider combining multiple years of charitable giving into a single year to exceed the standard deduction threshold. This is called “bunching.” The chart below shows how the bunching strategy can reduce taxes if executed properly.

Hypothetical example of a married couple with no children.

Chart explaining the idea of bunching in context of charitable giving — *Standard deduction amounts are for married filing jointly status.*

Wrapping up 2022 and Planning for 2023

1. Discuss major life events with CD Wealth Management to confirm you have clarity in your current situation.

2. Communicate with your CPA to provide capital gains and investment income information for a more accurate year-end projection.

3. Check your Health Savings Account (HSA) contributions for 2022. If you qualify, you can contribute up to $3,600 (individual) or $7,200 (family) and an additional $1,000 catch up if over the age of 50.

4. Double-check your beneficiary designations for retirement plans, IRAs, Roth IRAs, annuities, life insurance policies, etc.

5. If you do not already have identity theft protection, consider purchasing a service to help protect you and your family.

The end of the year is a perfect time to review your financial planning needs. This includes reviewing the investment portfolio, assessing year-end tax planning opportunities, reviewing retirement goals, and managing your legacy plans. The checklist above includes just some of the items that may apply to you and your family. We are happy to meet to discuss any of the above to ensure that you remain on track with your financial goals.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

Sources: BNY Mellon, Baird, CNBC, Schwab

Promo for an article titled Year-End Market Predictions: Separating Fact from Fiction

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.