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Joe Lucey

The Election and The Economy

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The Election’s Market Impact

With polls indicating a very tight presidential race, investor skepticism loomed as last week’s election approached, driven largely by concerns over potential delays in confirming a clear winner. Fortunately, results came sooner than expected and with a decisive outcome. In response, markets were propelled higher. The surge in stock prices has been attributable to Donald Trump’s win, as it is believed his administration will promote pro-growth domestic policies and relatively easier regulation. However, the market rally may just as well have been a sigh of relief over a clear outcome. 

While stock performance statistics vary under different presidential administrations, much of the market’s happenings are beyond the control of any one President or Congress. Any political party taking credit for market performance tends to be oversimplified.

How The Trump Presidency May Affect Your Portfolio

So, what might a Trump presidency mean for your portfolio and financial planning? It may be too early to make precise predictions, but there are a few assumptions we can make based on his campaign.

Government spending, national debt, and tax policy come to mind as significant factors. While Trump’s administration may be perceived as pro-business, his first term revealed a tendency toward increased government spending, driving up the national debt. This has played out recently with a rise in government bond yields. U.S. Treasuries no longer carry the perceived safety they used to thanks to rapidly rising debt levels, pushing bond yields higher as investors seek compensation for added risk. Given these dynamics, in our view, bonds may not provide the most favorable returns over the next several years nor the same amount of safety or diversification in investment portfolios as they have over the past several decades. We remain very optimistic in our stock market outlook. The current bull run may slow, but we do not foresee any reason for it stopping, absent an unforeseen, large-scale event.  

Great attention should also be paid to tax policy. The tax cuts initiated during Trump’s first term in office as part of the Tax Cuts and Jobs Act of 2017 are set to expire at the end of next year. With Congress likely to be in step with the President, there’s potential for these cuts to be extended or made permanent. However, this does not mean that taxes will remain lower indefinitely. Under its current trajectory, the debt will eventually become crippling, and at some point, the bill will come due. The most probable way for the federal government to bring in more revenue is to raise taxes since spending cuts seem unlikely.

Looking Ahead

With the election now in our rear-view mirror, we turn our attention to the year ahead. The stock market has delivered strong returns throughout 2024, and we fully anticipate that stocks will maintain positive momentum, continuing to rally through year-end. The Federal Reserve’s expected interest rate cuts next year would further ease monetary policy, providing a stock market tailwind. However, if inflation rebounds—a strong possibility if government spending continues or new tariffs are imposed—the Fed may be forced to reverse course.

While the market has soared in the short time since the election, it is important to stay focused on the long term. Stock market performance tends to have a very weak correlation with which political party is in office. Instead, focus on how specific actions taken by elected leaders may impact your retirement planning and broader financial strategy. As always, to look specifically at your portfolio, and for example, how taxes and bond yields may impact it, give us a call: 952-460-3290.

Nathan Zeller Secured Retirement

Nate Zeller

Chief Investment Strategist
Secured Retirement

Don’t Let These Tax Traps Ruin Your Retirement

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Retirement planning requires a lot of different elements. Investments, tax planning, income planning, and more. Many people dedicate their focus towards managing their investment returns, and while that’s important other factors that can have an even bigger impact on their nest egg get overlooked. One huge factor is taxes.

Taxes could be your largest expense in retirement. Developing strategies around them is key to best positioning your retirement future. To mitigate the negative impact that taxes might have on your retirement savings, be aware of these common tax traps before you start planning that retirement party.

Retirement Tax Trap #1: Claiming Social Security Could Increase Your Tax Bill

Claiming your Social Security benefits could be one of the most important financial decisions of your life. How and when you claim Social Security could impact far more than just the amount of your benefits check. It could also trigger paying taxes on as much as 85% of your benefits.

Don’t make your decision solely based on maximizing your benefits. Instead, consider how it could impact your taxes, Medicare premiums and spousal benefits.

Retirement Tax Trap #2: Withdrawals from Your IRA and 401(k) Are Taxable

Contributing money to your IRA and 401K is easy. But withdrawing this money in retirement is complicated and confusing.

Remember, you must pay taxes when you withdraw this money in retirement. And Required Minimum Distributions will further complicate matters. When you turn 73, “RMD’s” force you to start withdrawing money from these accounts, whether you want to or not. And this could result in paying more and more taxes every year.

The solution? Start planning for RMDs in your 60s to minimize their impact on your tax bill.

Retirement Tax Trap #3: Failing to Diversify for Taxes

Most people understand investment diversification, but few think about diversifying their tax exposure. Many individuals have too much of their retirement savings in tax-deferred accounts, which can lead to big tax headaches down the road.

To minimize your tax burden, aim to have a balance of accounts in three categories: taxed always, taxed later and taxed rarely. If you have too many eggs in one basket, it could spell serious financial trouble in retirement.

Retirement Tax Trap #4: Missing the ROTH IRA or 401(k) Conversion Window

A Traditional IRA or 401K allow tax-free contributions. But you must pay taxes when you withdraw this money in retirement unless you convert some, or all your traditional IRA or 401K to a ROTH.

A ROTH IRA or 401K doesn’t allow tax-free contributions (that’s the catch), but you pay zero taxes when you withdraw money in retirement. ROTH accounts are not subject to RMDs either. That means you get tax-free growth, which could add up to tens of thousands of dollars in retirement (possibly more).

A financial advisor can help you determine whether a ROTH conversion is right for you.

Take Control of Your Retirement Taxes

The good news? You have more control over how much you pay in taxes during retirement than at any other point in your life. But lowering your tax bill doesn’t happen automatically—it requires proactive planning. By addressing these tax traps early, you can set yourself up for a more tax-efficient, stress-free retirement. To set yourself up, give us a call: 952-460-3290.

The Fed Made Its Move: Rate Cuts and Market Momentum

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The Rate Cuts and The Economic Future

The Federal Reserve finally did it—they cut interest rates for the first time in four years. Before their meeting, it was widely expected that a cut was coming, but there remained some mystery as to the cut’s size. While only a quarter-point cut was anticipated, they opted for a more aggressive half-point cut in a move similar to their inflation-combatting tactics. Pre-announcement speculation suggested that a half-point drop would signal concerns about the economy weakening—a bad sign for markets. However, the stock markets reacted oppositely, rallying sharply after the cut was announced.

Looking ahead, two more quarter-point rate cuts are currently expected in 2024 as well as a series of four quarter-point cuts in 2025. In 2026, it’s expected that two further cuts will follow.  This would bring the Fed Funds rate down to around 3%. While we don’t necessarily agree with the anticipated magnitude of the expected cuts, we can assume that they are directionally accurate – short-term rates are likely to move lower in the next year or two. 

Meanwhile, inflation remains slightly above the Fed’s 2% target, with the consumer price index and personal consumption expenditures lingering around 2.5% and continuing to trend downward. It is possible the Fed could pause rate cuts or even reverse course and raise rates if inflation happens to take hold again. However, their aggressive half-point cut suggests they feel confident that the economy is softening and lower rates are warranted.

Stock Market Snapshot

Despite indications of a slowing economy, the stock market seems virtually unstoppable and continues to provide robust returns. The S&P 500 returned over 5% in Q3 and is now up more than 20% year-to-date. We remain cautious as valuations remain stretched. Certain areas of the market look more attractive than others, depending on sector and market capitalization. We expect small caps – companies requiring loans to grow – to outperform large caps in the coming months as interest rates continue to decline.

In terms of fixed income, interest rates for terms longer than three months have already adjusted, so we don’t anticipate much further downward movement. While fixed income has posted solid returns this year, future gains may be somewhat limited. With shorter-term rates dropping, investments in money markets and T-bills will earn lower interest and therefore garner fewer “real” returns when inflation and taxes are considered. Now could be a good time to explore other options for income and safety, whether that means locking in current rates or considering alternative strategies with better potential returns.

Election Effects

Many may be concerned about how next month’s election will affect the economy, but historically elections have a limited impact on the markets. This year should be no different. The election outcome may affect different sectors, but the overall market impact is likely to be muted. However, markets dislike uncertainty, so a post-election rally could occur once the results are in.

The Bottom Line

If you are concerned about the stock market and seeking returns beyond what fixed-income investments can offer, this may be an opportune time to explore strategies participating in market upside while limiting downside impacts. Many investors have become complacent after enjoying the strong returns of the stock market since the beginning of 2023. We will caution risks abound; do not put your retirement plan in jeopardy by taking on an inappropriate amount of risk – whether it be too little or too much. Call us if you would like to review your portfolio and ensure you remain on track to enjoy a worry-free, secure retirement: 952-460-3290.

Nathan Zeller Secured Retirement

Nate Zeller

Chief Investment Strategist
Secured Retirement

Financial Fears Haunting You?

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Fall’s cool air is winding its way through our cities, the leaves are starting to change, and Halloween is already approaching. Come the 31st, you’ll find my wife and I bundled up, handing out candy to the trick-or-treaters of the neighborhood. 

I always like to see which character is the most popular costume in a given year. Will it be Taylor Swift? Deadpool or Wolverine? Beetlejuice? We’ll see!

While this season brings its share of chills and thrills, visions of goblins and ghouls aren’t likely what’s keeping you up at night. Volatile markets, inflation, and rising interest rates have created a climate of uncertainty capable of sending shivers down anyone’s spine.

Being in the stock market can feel a little too much like being in a haunted house attraction at times – you never quite know what’s lurking around the corner. One moment, everything’s calm, and the next, your stomach drops.

But here’s the thing: while headlines over market turmoil may terrify you in the short term, a well-planned financial strategy can be your long-term protection.

Remember, even during the most volatile times, markets do tend to recover. Corrections are part of normal market gyrations. By focusing on long-term goals, diversifying your investments, and maintaining discipline, you can avoid the tricks and focus on the treats of steady, strategic growth. 

With the right team behind you, you have the opportunity to stay the course or make smart adjustments when the market dips, while others cower in fear.

So, in the wake of a topsy-turvy financial time, know that unsettling market news doesn’t have to haunt your financial future. Putting the right plan in place allows you to face the unknown with confidence and enjoy the sweet rewards of disciplined investing. 

You don’t have to lay awake at night fearing what’s next for you. By working with us you’re building a secure retirement. Schedule your consultation today:  952-460-3290.

Cup of Joe

CUP OF JOE

From Joe Lucey, Founder of Secured Retirement

There’s something about sitting down with a steaming cup of coffee that always kicks my day into high gear. And it’s not just because of the caffeine it sends coursing through my veins.

Throughout my career, some of my biggest revelations have come to me in conversation with my mentor over a cup of joe. Good conversation and personal connection can pick you up in a special way. It’s that feeling that I’m hoping to bring to you with my series, your Cup of Joe.

5 Critical Retirement Questions Every Couple Should Answer

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Have you ever had a disagreement with your spouse about money? Surely not! Never! Right? Alright, come clean; it is one of the top issues couples argue about after all. 

Whether you bicker about spending or have larger discussions about investments, getting on the same page about finances is, of course, a good idea. Without a clear, shared vision, money can become the elephant in the room, silently causing tension that could lead to bigger issues down the road. Here are five essential questions to help guide a conversation with your other half.

1. How Will You Spend Your Money in Retirement?

You may have one vision for retirement, while your spouse has another. It’s important to discuss these differences early. What do you plan to spend on together as a couple? What personal endeavors do you each want to pursue? Create a detailed budget that factors in income, savings, and potential healthcare costs. Unpleasant as it is to consider, one of you may outlive the other and/or face higher medical expenses.

2. How Much Risk Are You Willing To Take On?

Asset allocation and diversification remain pillars of retirement planning. A properly diversified portfolio – one that mirrors your appetite for risk – could help protect you in times of market downturn. Are you on the same page with your spouse about how much risk to be taking? This is a very common trouble spot with couples we meet. Between the two of them, they have a different idea of how they should be invested. Most clients we see are in one of two camps: Taking on far more risk than they realize, or taking on far more risk than they need to at this stage of the game. Ask yourselves: Is the potential upside in the market worth the risk at this stage of your lives?

3. What’s Your Social Security Strategy?

Social Security is a critical piece of your retirement income plan, but many couples overlook how their claiming strategy impacts their long-term finances. Don’t just take benefits at face value. Consider survivor and spousal benefits, taxes, and Medicare premiums. A personalized Social Security analysis can help you avoid costly mistakes and ensure you’re maximizing your benefits. Every couple’s situation is different. Most Americans take their social security benefits at face value. And they wind up leaving tens of thousands, if not hundreds of thousands of dollars on the table.

4. How Will You Plan for Longevity?

Today, people are living well into their 80’s and 90’s. And it’s not uncommon to know of someone who is over 100 years old. In fact, many seniors aren’t just surviving in their older years – they’re thriving. And the statistics keep improving every year. The longer you live means the longer you have to make your money last in retirement. Additionally, women live longer than men. In fact, 85% of centenarians … are women! And because of this, 90% of women will be solely responsible for their own finances at the end of their lives. Make sure your retirement plan accounts for this longevity and that your money lasts as long as you do.

5. How Will You Cover Health Care and Long-Term Care Costs?

Health care and long-term care costs are often overlooked but can be the biggest financial strain in retirement. Plan now so a health issue doesn’t turn into a financial disaster later. By making retirement decisions with a joint outcome in mind, money can last longer and both spouses can look forward to a more secure retirement.

By answering these five questions together, you can ensure a more secure and harmonious retirement. Couples who plan with a joint approach are better equipped to manage their finances, minimize risks, and make the most of their golden years. Retirement should be a time to enjoy life – not stress about money. Taking the time to get on the same page now will allow you both to retire confidently, with peace of mind for the years ahead. And if you need a mediator to weigh in on the right move for you, give us a call: 952-460-3290.

Proactive Retirement Planning: Are You Prepared Enough?

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When it comes to retirement planning, you’re either proactive—addressing challenges before they happen—or reactive, leaving yourself vulnerable without a plan for taxes, healthcare, or income. Taking a proactive approach gives you greater control over your future. Below, you’ll find four areas of retirement planning worth evaluating. Are you set up proactively for retirement? Read on to see how well you’re set up with these proactive strategies.

1. A Forward-Looking Tax Plan

Taxes can be one of the biggest challenges in retirement, especially when you’re living on a fixed income. Tax planning, not just preparation, is key. You need a strategy for when and how you withdraw money from tax-deferred accounts like your IRA or 401(k) to avoid an unexpected tax burden. Most people don’t realize that they could be creating a tax time bomb. The IRS wants their cut, so when you withdraw that money, you must pay taxes. 

Required Minimum Distributions (RMDs) are mandatory once you reach a certain age, and failure to comply can result in hefty penalties. Social Security benefits can also be taxed, potentially up to 85%, a fact many retirees overlook.

What To Do:

  • Tax diversification: Spread your assets across accounts that are taxed now, taxed later, and taxed rarely (like a Roth IRA).
  • Roth conversions: Converting part of your traditional IRA to a Roth can reduce future RMDs and the taxes on your withdrawals.
  • Tax-loss harvesting: Offset capital gains by selling underperforming assets at a loss.
  • Charitable contributions: Donations to qualified charities can reduce your taxable income. However, this is typically best when all of your itemized deductions exceed the standard deduction you would receive for your filing status.

2. Lifetime Income

Retirement requires a consistent income to maintain your lifestyle. It’s the only thing that could help ensure your money lasts as long as you do. Years ago, this income was a “three-legged stool” supported by Social Security, pensions, and savings. Today, pensions are rare, and many people rely solely on Social Security and personal savings.

With increasing longevity – more people are living to 100 and beyond than ever before – retirees face the risk of outliving their savings. Add to this low interest rates on savings accounts and skyrocketing healthcare costs, and income planning becomes more crucial than ever.

You might think that those most likely to go broke in retirement are people with limited means. But that’s not the case. It can happen to middle-class families, and even to those who are wealthy. Nobody’s exempt.

What To Do: Diversify your sources of income to ensure your money lasts as long as you do. Regularly review and update your income plan to adjust for market conditions, inflation, and life expectancy.

3. Social Security Optimization

Social Security may seem straightforward, but how and when you claim your benefits can have a significant impact on your retirement. And, frankly, how to claim them and when to do so have become more confusing than ever before. You could unknowingly trigger an avalanche of taxes and increase Medicare premiums. Claiming too early or making a wrong decision about spousal benefits can cost you tens, if not hundreds, of thousands of dollars.

What To Do:

  • Maximize your benefit timing: Delay claiming Social Security to increase your monthly benefit. Waiting until full retirement age or later can boost your income significantly.
  • Coordinate spousal benefits: Strategize with your spouse to optimize benefits, ensuring you both receive the maximum payout and avoid forfeiting valuable spousal benefits.

4. Asset Allocation & Rebalancing

A well-diversified portfolio is key to protecting your retirement savings from market downturns. The market is unpredictable, and long bull markets often end in corrections. Regularly rebalancing your assets to match your risk tolerance helps shield you from significant losses. If your current advisor isn’t meeting with you to make proper adjustments at least once a year, you may want to look for a second opinion.

What To Do: Meet with your financial advisor regularly to adjust your asset allocation as markets fluctuate. This proactive step can guard your portfolio from unnecessary risk.

So, based on these standards, are you proactively preparing for retirement? Do these strategies sound like things you’re doing? Or are you setting yourself up to scramble when it arrives? These proactive strategies can strengthen your retirement plan and help avoid common pitfalls.

To refine your strategies, give us a call today at 952-460-3290. We’re eager to help you live comfortably in your golden years.