When you think of October, what comes to mind? A time of fall foliage, leaves turning vibrant colors, a time to harvest in preparation for the long winter, and a time to prepare for the new year.
We think of the purpose of financial planning in a similar way. When you get to the Autumn of your life, if you have not tilled the soil and planted the seeds, you may not have harvested enough to get you through the seasons of your life.
October is recognized as National Financial Planning month. We are here to support your planning needs for the seasons of your life.
October 2024
Capital Markets
Expect Interest Rate Volatility as the Federal Reserve Pivots
PlumTree Financial is excited to share the September 9, 2024, LPL Econ Market Minute video presented by Dr. Jeffrey Roach, LPL Financial's Chief Economist. In the video, Dr. Roach discusses volatility expectations in light of Federal Reserve policy changes. He also shares his insights on the labor market, comparing full-time versus part-time (or temporary) employment. To hear the full two-minute Expect Interest Rate Volatility as the Fed Pivots video, click below.
What you should know about the SECURE 2.0 Act and July’s IRS clarifications...
In September, the PlumTree Financial team attended a call with Mr. Ed Slott. Mr. Slott is one of the most widely recognized industry experts on all things retirement. On this call, Mr. Slott highlighted some of the most important changes in the Setting Every Community Up for Retirement Enhancement 2.0 Act (SECURE 2.0 Act) and the Internal Revenue Service (IRS) rules issued in July. In this article, we summarize some of these features, especially as they pertain to Individual Retirement Accounts (IRAs) and Required Minimum Distributions (RMDs).
Why does this matter to you?
As we are near the end of 2024, time is running out to process RMDs and to take advantage of planning opportunities for the year, such as Roth conversions. Here are a few things to consider based on the finalized 2024 SECURE 2.0 Act and subsequent IRS rulings:
Inherited IRAs
If you inherited a traditional IRA, you are required to take minimum distributions for years 1-9 based on your life expectancy. The final balance must be taken in year 10.
“10-Year Rule"
The “Stretch Rule” was replaced by the "10-Year Rule". The "10-Year Rule" limits the post-death distribution period to 10 years for designated beneficiaries. Exceptions to the “10-Year Rule” are the following: 1) Surviving Spouse, 2) Minor Children, 3) Disabled, 4) Chronically Ill, and 5) Non-Spouse Beneficiary not more than 10 years younger than the decedent.
Roth IRA Beneficiaries
By the end of year 10, Roth IRA beneficiaries must distribute all money from inherited IRAs. Note that no RMD distributions are required in years 1-9, which means that the assets can grow during that time period tax free. This is an important clarification issued by the IRS and presents planning opportunities that we will discuss in a future newsletter or by request.
Increased Age
On January 1, 2023, the age at which IRA account owners must start taking RMDs increased from age 72 to 73. It will further increase to age 75 for individuals who turn 75 after 2032.
Reduced Penalties
If you miss a withdrawal, the IRS has reduced the excise tax rate from 50% to 25%. Note: It could be as low as 10%, if corrected within 2 years.
Qualified Charitable Distribution (QCD)
In 2024, the annual limit for QCD increased from $100,000 to $105,000 to adjust for inflation.
401(k)/403(b) Updates
Employers adopting new 401(k)/403(b) plans are required to automatically enroll eligible employees with a contribution rate of at least 3%. Note that you may be eligible for automatic portability services through your employer.
PlumTree Financial typically refrains from political commentary, but we will make an exception here. We believe automatic enrollment is a move in the right direction and encouraging plan participation is the right thing for society. Start saving early!
The SECURE 2.0 Act also included a number of other provisions for our 401(k) retirement plans sponsors. We have been communicating those changes with our plan clients and will be in touch as they go into effect.
Questions? Reach out to the PlumTree Financial team to review your IRA strategy. Depending on your situation, there may be steps that can be taken now that may produce better results for your beneficiaries down the road.
Serving as the perfect transition between long summer days and the refreshed, productive energy of fall, Greg and I finished up the summer by attending LPL Financial’s Focus 2024 Conference in San Diego, CA. The Focus 2024 Conference brought together more than 9,000 financial professionals for three days of dynamic learning and collaboration.
A key theme of the conference was the importance of adaptability in the face of challenges and a rapidly changing environment. We came back with fresh ideas and practical strategies we are implementing at PlumTree Financial. Keynote speakers Mr. Apolo Ohno, Olympic gold medalist, and Mr. Jon Dorenbos, former NFL player and magician, are athletes who exemplify resilience with inspiring personal stories of overcoming challenges.
Mr. Ohno and Mr. Dorenbos emphasized that difficulties can be the foundation for personal strength and transformation. They asked us to shift our perspective from seeing obstacles as setbacks to viewing them as opportunities for growth. Their stories reminded us that transformation and reinvention are not without challenges and made me reflect on how many times the big life decisions clients face, such as transitioning into retirement, deciding to move to a different state, or selling their business, are significant moments of reinvention with a surplus of challenges. The PlumTree Financial team's involvement in these life-defining decisions imparts a massive sense of responsibility and honor to our work. In return, we hope our guidance makes navigating the stressful moments something that feels enriching and exciting rather than something diminishing.
In addition to hearing from these fantastic speakers, we also heard from LPL Financial's top leaders. Out of hundreds of speakers and breakout sessions we could attend, Greg and I focused on specific learning tracks. Greg focused on wealth and investment management, while I focused on process and service improvement. From those sessions, here is what I found most interesting and applicable to our clients:
AI Technology—According to many headlines, Artificial Intelligence (AI) is either a magic wand to solve all our problems or the doom of humanity. A more balanced view is to see AI as a technology designed to augment and enhance our human experience. During these sessions, we learned how AI is being used to provide better security to accounts and transactions as well as how the technology can be used to make better investment decisions.
Communication – Good communication begins with improving our team processes and how we support our clients. A presenter at the conference shared that, on average, humans capture about 25% of what is said in a conversation. Here are a few tips on how to increase the amount we capture in a conversation and make that interaction productive for both parties:
-At the beginning of a conversation, minimize distractions, such as thinking of what to say next or having your own agenda. Instead, go into the conversation with a sense of curiosity about what the other person has to say.
-Try to avoid multitasking. Keep your attention focused on the person you are speaking with. Focused attention is especially relevant when talking on the phone or via Zoom.
-Repeat to the person what you heard and understood to ensure you agree with what was said.
Lastly, the impact of giving back was explored in various forms during the conference. An excellent reminder for all of us is how contributing to the well-being of others benefits not only those we help but also enriches our lives. Helping others benefits our community and increases our happiness—and we can all benefit from a bit more happiness in our lives and in the world.
Upcoming Events
October 2, 2024 | 12pm EST
Avoiding Medicare Mistakes
Identifies Medicare enrollment regulations and timelines based on recent changes
Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.
The opinions, statements and forecasts presented herein are general information only and are not intended to provide specific investment advice or recommendations for any individual. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. There is no assurance that the strategies or techniques discussed are suitable for all investors or will be successful. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Any forward-looking statements including the economic forecasts herein may not develop as predicted and are subject to change based on future market and other conditions. All performance referenced is historical and is no guarantee of future results.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.
Investing in stock includes numerous specific risks including the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time. The prices of small and mid-cap stocks are generally more volatile than large cap stocks.
Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield.
All information is believed to be from reliable sources; however, PlumTree Financial makes no representation as to its completeness or accuracy.
