Posts made in March 2019

Tax Tips – Pensions and Annuities – What’s Taxed?*

Depending on the types of retirement benefits you receive, they could be taxable. Here are some basics:

Fully Taxable Payments
The pension or annuity payments that you receive are fully taxable if you don’t have an investment in the contract because:

  • You didn’t contribute anything to your pension or annuity
  • Your employer didn’t withhold contributions from your salary
  • You have received all your contributions tax-free in prior years

Partially Taxable Payments
If you made after-tax contributions to your pension or annuity, your pension payments are partially taxable. You don’t pay taxes on the portion of the payment that’s a return of the after-tax amount you paid.

Additional 10% Tax on Early Distributions
Receiving pension or annuity payments before age 59½ may subject you to an additional 10% tax on early distributions. The additional tax doesn’t apply to the portion of a distribution that is tax-free or distributions made:

  • As a part of a series of substantially equal periodic payments beginning after your separation from service
  • Because you’re totally and permanently disabled
  • On or after the death of the plan participant or contract holder
  • After your separation from service and in or after the year you reached age 55

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[10]

[10] www.irs.gov/taxtopics/tc410

Dow, S&P, Nasdaq All Rise – WEEKLY UPDATE – MARCH 18, 2019

The Week on Wall Street
The big story last week was the sudden grounding of Boeing 737 Max 8 and 9 passenger jets in dozens of countries. The financial effects of this ban could potentially impact the airline industry and segments of the economy for months.[1]

While the news created a headwind for the Dow Industrials, stocks managed to post solid gains for the week. The Nasdaq Composite rose 3.12%; the S&P 500, 2.46%; the Dow, 2.25%.[2][3][4] 

Bullish sentiment was also evident overseas. Looking at the MSCI EAFE index, international stocks advanced 1.93%.[5] 

Trade Meeting Delayed
Wall Street expected President Trump and Chinese President Xi to discuss trade issues this month. Thursday, Bloomberg reported that their talk had been postponed, with no firm date ahead.[6]  

Muted Inflation
The latest Consumer Price Index showed just a 1.5% rise in overall consumer costs in the year ending in February.

This number does not suggest an overheating economy. During a 60 Minutes interview last week, Federal Reserve Chairman Jerome Powell said the central bank did “not feel any hurry” to make a rate move.[7] 

Tax Tip
If you turned 70½ last year, April 1 is your final deadline to receive your initial Required Minimum Distribution (RMD) from a traditional IRA, SEP-IRA, SIMPLE IRA, or employer-sponsored retirement plan. If you take your initial RMD from these retirement accounts this year, you must receive your second RMD from them by December 31, 2019.[8] 

[1] www.cnbc.com/2019/03/13/boeing-shares-fall-after-report-says-us-expected-to-ground-737-max-fleet.html

[2] quotes.wsj.com/index/SPX

[3] quotes.wsj.com/index/DJIA

[4] quotes.wsj.com/index/NASDAQ

[5] quotes.wsj.com/index/XX/990300/historical-prices

[6] www.bloomberg.com/news/articles/2019-03-14/china-u-s-said-to-push-back-trump-xi-meeting-to-at-least-april

[7] www.reuters.com/article/us-usa-economy-inflation-idUSKBN1QT1MF

[8] www.irs.gov/newsroom/tax-time-guide-seniors-who-turned-70-and-a-half-last-year-must-start-receiving-retirement-plan-payments-by-april-1

Tax Tips – Reconstructing Your Records After a Natural Disaster

Fire, hurricanes, and earthquakes – sometimes disaster strikes before we can get prepared. Making an emergency preparedness kit with food, supplies, radio, prescriptions, and important documents is your best bet before a disaster happens. Getting your records together and providing an accurate account of losses after a disaster will help with general tax purposes and will also be required for obtaining federal assistance, grants, loans, or insurance reimbursements. Here are a few tips:

  • Take photos and/or video as soon as possible after the disaster.
  • Contact title, escrow, or banks to get copies of needed documents. Your real estate broker may have these records as well.
  • Research comparable homes in your neighborhood for value.
  • Review insurance policies; they can contain a base value for replacement.
  • If you made improvements to your home, contact the contractor for verification of costs.
  • You can check the county assessor’s office for old records.

Reconstructing your records will help you to get re-established should your home be affected by a disaster.

Tip adapted from IRS.gov[9]

[9] www.irs.gov/newsroom/reconstructing-records-after-a-natural-disaster-or-casualty-loss-irs-provides-tips-to-help-taxpayers

Stocks Dip on Growth Concerns – WEEKLY UPDATE – MARCH 11, 2019

The Week on Wall Street
As in February, investors spent most of the first full trading week of March hoping for new details in U.S.-China trade negotiations. While they waited, stock benchmarks drifted downward. From Monday’s open to Friday’s close, the S&P 500 lost 2.55%, while the Dow Industrials took a 2.66% fall, and the Nasdaq Composite weakened 3.12%. The MSCI EAFE index tracking developed markets outside the U.S. and Canada fell 1.09%.[1][2][3][4]

Why did stocks lose momentum? In a hint that global economic growth might be slowing, the European Central Bank abruptly reduced its 2019 Gross Domestic Product forecast for the eurozone from 1.7% to 1.1%. A disappointing reading on U.S. hiring also raised questions.[5] 

Perplexing Jobs Data
According to the Department of Labor, the economy generated only 20,000 net new jobs in February. This was the smallest monthly gain since September 2017. Nevertheless, the unemployment rate fell to 3.8%, while underemployment declined sharply to 7.3%. (These decreases could reflect furloughed federal employees returning to work.) The average wage rose 3.4% in 12 months, the largest year-over-year increase in a decade.

Harsh winter weather may have impeded hiring last month, and February’s payroll growth could be revised in the Department of Labor’s next report.[6]   

Earnings Season Recap
The fourth-quarter reporting season is all but over. FactSet notes that the S&P 500 has seen earnings growth of 13.4% in Q4, marking the fifth straight quarter with a double-digit rise.[7] 

Final Thought
Stocks lost ground last week, breaking a long string of weekly advances. The extended rally partly reflected optimism that the U.S.-China trade dispute would soon be resolved, but a deal may or may not happen. The week offered a reminder that Wall Street sees both ups and downs. Day-to-day market fluctuations should not cause you to alter your long-term approach.

[1] quotes.wsj.com/index/SPX

[2] quotes.wsj.com/index/DJIA

[3] quotes.wsj.com/index/NASDAQ

[4] quotes.wsj.com/index/XX/990300/historical-prices

[5] www.cnbc.com/2019/03/07/stock-market-us-china-trade-jobless-claims-in-focus.html

[6] www.usatoday.com/story/money/2019/03/08/jobs-report-just-20-000-added-february-economists-expected-181-000/3098383002/

[7] insight.factset.com/earnings-insight-q418-by-the-numbers-infographic